Retirement Planning Blog

A Surprising Number of Retirees Admit Struggling with Taxes

A Surprising Number of Retirees Admit Struggling with Taxes

Woulda. Coulda. Shoulda.

That is how a surprising number of retirees feel about their tax planning. In a recent study by Nationwide Retirement Institute, staggering proportions of retired Americans wished they had done more to prepare for their sometimes-surprising tax bills.

Over the course of the “Retirement Income and Tax Planning Consumer Survey,” researchers asked people in different life stages about their preparedness for paying taxes in retirement.

The survey was revealing. An estimated 60% of future retirees, 70% of recent retirees, and 75% of those retired for more than 10 years said they are only “somewhat knowledgeable” or “not at all knowledgeable” about tax planning in retirement.

That’s right. Three of every four people retired for at least a decade still admit to feeling less than certain about planning for taxes in retirement. Read More

Social Security Benefits Are Getting a Nice Boost in 2019

Social Security Benefits Are Getting a Nice Boost in 2019

Good news, Social Security beneficiaries! Every year in mid-October, the Social Security Administration announces any cost-of-living adjustments to benefits – or “COLAs.” On October 12, the agency said that Social Security recipients would see a 2.8% COLA in 2019.

Until now, the 2018 cost-of-living adjustment had been the largest bump-up in benefits since 2012. What accounted for the heftier increase this year?

A rise in the cost of energy products, not to mention an increasing cost of shelter, were big inflationary contributors, according to experts. Both of those cost categories have heavy weightings within the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the Department of Labor index on which COLAs are based.   

For Social Security beneficiaries, the increased benefit payouts will start in January 2019. People receiving SSI benefits will see the increase on December 31, 2018. Read More

Retirement Planning Options for Small Business Owners

Retirement Planning Options for Small Business Owners

As a small business owner or an entrepreneur, you are used to taking the lead. But there is one frontier you may still need to master… the future of your retirement. That is a matter of doing what you can to ensure all your hard work leads to your ideal retirement lifestyle.

While a 401(k) plan is the dominant retirement bedrock for employed Americans, small business owners are in a different boat. You are your own employer.

So whether you have zero or 100 employees, you must make the choice to act toward building a strong financial future for yourself. Depending on the workplace benefits of your organization, you may also impact those aiding you in your entrepreneurial dream.   

And Social Security benefits can help, but only to a point. A motivating factor for building up retirement savings is the fact that, as an entrepreneur, you bring home a certain level of income. Portfolio holdings, personal assets, and savings most likely will play into your needs as a high-income household, as Social Security can only go so far.    

Not only that, chances are you make more than the income limit placed by Social Security. For 2019, the maximum amount of taxable earnings is $132,900, up from $128,400 in 2018.

And what is another focal point for small business owners? An overreliance on their business as their retirement safety net. But time and again, historical data has shown this to be true: It’s risky to put all of your eggs – namely, your retirement and financial comfort – into one basket. Read More

Is a 401(k) In-Service Withdrawal Right for Your Situation?

Is a 401(k) In-Service Withdrawal Right for Your Situation?

If you have contributed for a long time to a 401(k) plan, chances are you have built up considerable assets. You are to be commended for this effort. It takes discipline and focus to accumulate wealth over time.

Having reached this point, you may now want to explore options outside of your plan. If you are past your late 50s, you might have an opportunity with an in-service withdrawal. Many people with 401(k) accounts assume that their funds are locked tight until they retire.

What they don’t know is that they might be able to access their funds while still working at their employer. This mechanism is formally called an in-service withdrawal.

But what exactly is an 401(k) in-service withdrawal, under what conditions can you take one, and what consequences are there for doing so? Read More

How Can Market Downturns Affect Your Retirement Income?

How Can Market Downturns Affect Your Retirement Income?

For skiing enthusiasts, the concept of ups-and-downs is quite exhilarating. Just the thought of cutting powder on tall, sloping moguls can make even the “hard cores” blush.

But as recent market volatility reminds us, the goodwill doesn’t apply to ups-and-downs in every situation. Sometimes it can bring just the opposite.    

Earlier this month on Morningstar, Director of Personal Finance Christine Benz observed how equity market down-spurts can disrupt a retirement portfolio.

Portfolio losses might not matter as much as when people are younger, as they have time to recover – and to grow past the point when portfolio asset values dipped. In fact, Benz writes, for those with many years to retirement (or under age 50), “not taking full advantage of the historical outperformance of riskier asset classes is a bigger risk than being too conservative.”

But as retirement draws near, some flight to safety may well be a prudent course of action. Benz explains: “At that life stage, you’re much more vulnerable to what retirement planners call sequence of return risk. That means that if you encounter a calamitous equity market early on in retirement and need to spend from the declining equity portfolio, that much less of your investments will be left to recover when stocks finally do.”

And what if a portfolio has gone into reverse mode? “Your only choice to mitigate sequence of return risk–assuming your stock portfolio is in the dumps and you don’t have enough safe investments to spend from–will be to dramatically ratchet down your spending,” Benz says. “Needless to say, that’s not something most young retirees are in the mood to do.”     Read More

This Nobel Prize-Winning Physicist Sold His Medal to Help Cover Medical Expenses

This Nobel Prize-Winning Physicist Sold His Medal to Help Cover Medical Expenses

Photo Credit: Associated Press. All rights reserved, source link.

Nobel laureates are certainly top achievers. In 1988, Leon Lederman won a Nobel Prize for his work in physics. Apart from award-winning research into subatomic particles, he is famous for coining the infamous name of the Higgs bosin: the “God particle.”

Lederman passed away in a nursing home in Idaho on October 4. He was 96, according to the Associated Press. The AP describes him as a “giant in his field who also had a passion for sharing science.”

While Lederman’s contributions to science speak volumes, another striking story of him emerges from a past headline by NBC News.

And what happened? In 2015, the physicist was forced to auction his Nobel medal so he and his family could cover healthcare expenses. The medal sold for $765,000. It was a winning bid of $633,335 plus a buyer’s premium that drove the medal to its $765k sell price.

It’s yet another example of how high-cost retiree healthcare needs can change the financial situation of any of us. Read More

Fixed Annuity Sales Rise to Near-Record Levels

Fixed Annuity Sales Rise to Near-Record Levels

Rising interest rates and an easing regulatory environment are contributing to near-record levels of fixed annuity sales. It’s good news for people who might rely on these fixed contracts for guaranteed income or protection. A strong marketplace can lend to new innovations, contract benefits, and contract features.

In the second quarter of 2018, total fixed annuity sales reached $33.7 billion, an 18% increase over second quarter 2017 sales. That figure shattered the quarterly benchmark, according to the LIMRA Secure Retirement Institute (LIMRA), a financial industry research firm.

Year-to-date, total fixed annuity sales were $60.9 billion, 9% higher than the first half of 2017, LIMRA reported.

Why all the excitement and elevated interest in fixed annuities? Two possible reasons – rising interest rates and relaxing regulatory pressures on financial markets.

“These products offer a unique value for retirees and pre-retirees seeking protected accumulation and guaranteed lifetime income features,” says Todd Giesing, LIMRA’s annuity research director, in an interview with InvestmentNews. “Clearly, with the Department of Labor’s (DOL) fiduciary rule vacated and the prospect of continued rising interest rates, demand for this product is high.” Read More

How Much is the Average Retirement Income for Retired Americans?

How Much is the Average Retirement Income for Retired Americans?

Do you know what the average retirement income is in the United States? A typical retiree household brings in $49,097 annually before taxes. The Bureau of Labor Statistics (BLS) defines retiree households as those led by someone who is 65 or older.

And what about their spending? On average, a retiree household spends roughly $49,542 per year, which is slightly more than the average retirement income mentioned earlier.

Meanwhile, the average annual pre-tax income for all U.S. households is $73,573. And as for household spending across all age groups, the BLS estimates average expenditures to be $60,060 annually. Read More

Don’t Let This Happen to You in Retirement

Don't Let This Happen to You in Retirement

If you have already created a confidence-boosting retirement plan, congratulations! You are on track to achieving the rewarding retirement of your dreams.

But what happens if you put this necessary task off? If you take a “someday” approach to stopping to assess your needs in retirement and exploring strategies and solutions that can help you achieve them?

It’s not hard to find out. You may even have watched people you know and care about struggle financially in their golden years. A time in their lives that was supposed to be free of financial pressures — or at least relatively, so we think — instead forces them to make unpleasant choices just to stay afloat.

Most often, poor financial decisions (or a lack of planning) — fueled by the emotional pressures of life changes or financial stressors — tip that first domino that can begin to topple a care-free retirement.

It takes discipline in matters of money and financial planning to ensure your money works for you, instead of the other way around.

Because you don’t want to find yourself going down the wrong path to retirement, consider these consequences of not taking action to create a plan that can provide you benefits such as reliable income for life. Read More

What You Need to Know About the Thrift Savings Plan

What You Need to Know About the Thrift Savings Plan

Are you part of the majority of federal civilian employees in the Federal Employees’ Retirement System? Or maybe you are a member of the uniformed services. If so, you probably have access to the Thrift Savings Plan, one of the workplace benefits that people receive as United States government employees.  

The Thrift Savings Plan (TSP) is a 401(k) like plan for federal workers. It allows you to contribute to your retirement fund and receive a matching contribution from your federal agency.

According to recent statistics, over 5 million people participate in the TSP, which has more than $500 billion in assets under management.

One common issue for many federal employees is they don’t understand their TSP accounts and what it can offer them. If you find it hard to navigate, no sweat. Here’s a quick rundown of some must-know facts about your Thrift Savings Plan account that can be of benefit. Read More

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