It’s happened. After a nearly unanimous passage in the U.S. House of Representatives, the SECURE Act (Setting Up Every Community for Retirement Enhancement Act) finally made its way through Congress. The legislation was “attached” to a bipartisan spending bill in the Senate with the goal of avoiding another government shutdown.
The president signed the SECURE Act into law on December 20th, 2019. With many provisions having gone into effect on January 1st, 2020, it will have big implications for retirement and taxes. As a result, retirees and working-age retirement savers can start seeing major changes as early as 2020.
All of that being said, the SECURE Act brings the most sweeping changes to the U.S. retirement system in a decade. Because of that, there is bound to be some confusion about what the act actually does and how it might affect people’s own retirement standard of living.
Here is a broad overview of some major changes to retirement, taxes, and financial planning that come with the SECURE Act now becoming law. Read More
Calculating how much income you will need for retirement isn’t necessarily an easy task. Your health expenses will probably increase, but your mortgage payments may decrease or stop. Meanwhile, other expenses might continue to change over time.
Of course, you likely won’t have to deal with payroll taxes as much. Chances are you will also see expenses tied to employment, from transportation to a professional wardrobe, decline as well. But other costs may appear in retirement, from pursuing long-sought hobbies to traveling or spending more time with loved ones.
Although you may not even know where to start when trying to estimate how much retirement money you will need, there are a few rules of thumb that you can follow to help get you started. Read More
People are living longer than before, leading many to ask: “How long could my retirement really last?” In generations past, retirement represented a relatively short period of time in most peoples’ lives. They would work until they were 60 or 65 and then live perhaps a few more years before passing away.
But this has become a thing of the past. Today, some retirees could live for as long as another 30 years after they finish with their careers. Many of them are now travelling around the world, starting new businesses, or doing charity work.
The answer to this question will depend upon many factors, such as your projected longevity, financial resources, and current health. If you come from a family of long-lived forebearers, then you may have a good chance of living that long yourself. If you smoke or drink heavily, then your lifespan may not last as long as it would if you quit doing those things.
Thanks to advances in medicine, technology, and wellness, people’s lifespans are longer than before. The National Vital Statistics Report from the Department of Health and Human Services revealed that the average American’s lifespan has increased by 30 years over the past century. Read More
Uncle Sam can be one of your key partners in your retirement saving. If you have money in a traditional IRA or an employer-sponsored retirement plan, then that money automatically receives tax-deferred status in the eyes of the IRS. Other accounts like SIMPLE IRAs and SEP-IRAs also benefit from this tax-favorable treatment.
Generally, your contributions to those accounts are tax-deductible. The money inside the account grows tax-deferred, or without taxes on the earnings over time, as long as withdrawals aren’t taken.
But you can’t enjoy this tax-deferred growth forever. Required minimum distributions are one way that Uncle Sam ultimately collects his tax dues.
Once you reach your early 70s, the IRS sets required minimum distributions (or RMDs) for you, and when you start . You will be required to start pulling a certain amount of money out of your traditional IRAs and qualified plan balances every year.
The same goes for other kinds of IRAs with pre-tax money status. And this money will be taxed at your top marginal tax bracket, regardless of how long it’s been in the account.
Before wide-ranging retirement reform called the SECURE Act was passed, the age for starting required minimum distributions was 70.5. However, the SECURE Act, passed in 2019, moved the starting age for RMDs to 72 for those born on July 1, 1949, through and including December 31, 1950.
Then the SECURE Act 2.0, passed in 2022, backed up the starting age for RMDs to 73 for those born on January 1, 1951, through and including December 31, 1959. This RMD starting point is slated to rise to 75 in 2033, for that matter, unless the law is changed yet again.
There is no capital gains treatment available for traditional IRAs and qualified plans, save for one exception. The sale of company stock held inside a 401(k) plan can be spun off and sold separately under the Net Unrealized Appreciation (NUA) rule. Read More
Retirement planning is, in many ways, a guessing game. You can’t be sure of exactly how long you will live. How much income you will need might not be clear. And you don’t know if you will need long-term care support.
Even so, prudence dictates that we have some roadmap for these unknowns. It’s better to plan for these contingencies. Otherwise, you could wind up in financial trouble at some point in your retirement years.
Here are five financial fails to avoid in retirement so you will be better prepared when you retire. Read More
As the end of the year approaches, now is an excellent time for you to schedule a meeting with your financial advisor. An annual review of your financial situation is an ideal reason to come together.
Not only can you review the financial progress that you made during the year. Your annual review meeting also provides the opportunity to go over your investment portfolio, insurance coverage, and overall financial plan. It’s a crucial moment to see whether any changes are needed, especially if your circumstances have changed somehow.
Of course, money matters and retirement are a moving target. So, you can also set new goals and update your estate plan if necessary.
All of that being said, if you do have a meeting on the books, you might be unsure of the “ballpark” questions to ask your advisor during your financial review. Below are four questions to help guide your discussion and make the most of your annual review meeting time. Read More
Ah, the holidays… an annual time of food, fellowship, and fun with family, friends, and loved ones. Everyone returns home and catches up on all of the family happenings over the past year.
But the holidays can also be stressful and fast-paced, as people have cookies to bake, presents to wrap, and shopping to do. Not only that, they may have various other year-end projects at home or at work. Those who have lost loved ones or who hurt in other ways might also find these times unbearable, since the holiday season tends to be an emotional period.
Even so, it’s still an ideal time for families to get together and discuss their financial concerns with their loved ones.
Why? Because people usually aren’t as preoccupied by work and day-to-day matters at this time of year. The holiday festivities may be one of the few times when everyone is together. There are also many decisions that must be made before the year ends. Read More
Several factors come into play when you plan for your retirement. Your age, longevity, and the returns that you will earn from your retirement portfolio are just a few. In some form or fashion, all of those can play into your target retirement age.
But one frequently overlooked factor is the day that you will stop working. You may think that you will keep working until you are 70. Nevertheless, this is often an overestimation of how long you will stay in the workforce.
The fact is that you will probably not continue to work for as long as you think you will. That might be due either to health factors or the need to care for parents (or maybe other elderly family members).
This factor can substantially impact your retirement plans by either forcing you to forego retirement goals such as traveling and hobbies or live a significantly diminished lifestyle. Read More
As you gear up for retirement, you may have heard of “safe money solutions.” Are they right for you? It’s an important question, especially since retirement planning is more difficult than it’s ever been in history.
Past generations could count on company pensions that would pay them every month without fail until they died. But the disappearance of these pensions, coupled with the increase in longevity for retirees, has left many people with more questions than answers.
While Social Security will cover at least some of their expenses, most retirees will have to rely on income from their own investments and savings to make up the difference.
However, what many call a bewildering amount of financial choices in today’s market can leave people feeling frustrated.
According to the Investment Company Institute, nearly 120,000 regulated investment funds are available to retirement savers today. And what about other options? There are more annuities than hedge funds available, which doesn’t even begin to cover the universe of countless other instruments that can be tapped for retirement goals. Read More
As you gear up for crucial retirement decisions such as Social Security, you may have heard of “full retirement age.” The Social Security Administration refers to full retirement age as “normal” retirement age. This is the age at which you will receive 100% of your monthly retirement benefit.
But full retirement age isn’t the same for everyone. For those born before 1943, this is age 65. For those born after that year, full retirement age can range from 66 to 67 years old.
This matters for eligible recipients because choosing when they begin receiving benefits is one of the most important retirement decisions that they might make. Making the right choice can make a difference of tens, or even hundreds of thousands of dollars, in the lifetime benefits they are paid.
You can start taking Social Security benefits once you turn 62, but your benefit will be permanently reduced by 30% or more. You will have to wait until you reach your full retirement age to get your full benefit.
And if you delay collecting benefits until after your full retirement age? Then you can increase the amount you receive by about 8% per year until age 70. Waiting to take your benefits at 70 will increase your monthly benefit about one-third more than your regular full benefit. Read More
