You’re ending a marriage. The last thing on your mind is what it will cost you to split the retirement account.
No matter how big your retirement-savings shortfall, all is not lost. Tax-advantaged savings accounts offer some of the most attractive ways to play catch-up, experts say, and yet many savings laggards don’t fully employ them. With an individual retirement account, the annual contribution limit rises to $6,500 from $5,500, giving latecomers an extra $1,000 in tax-advantaged savings.
The problem is, it's difficult to account for personal factors such as health, life expectancy or retirement lifestyle in the future. It also might seem daunting to determine for people who don't understand how compound investment returns and tax-advantaged retirement savings accounts can help even small savings grow significantly over time. Rather than confront a seemingly impossible savings goal, working through retirement is many people's solution.
The employee contribution limits for 401(k) plans and individual retirement accounts will stay the same this year as in 2016 — $18,000 for workers under 50 and $24,000 for those 50 and older. The saver’s credit is worth between 10 and 50 percent of 401(k) contributions up to $2,000 (individuals) or $4,000 (couple). The income limit for heads of household will be $46,500 this year, a change from $46,125 last year.
The federal government is increasingly taking money out of Americans’ Social Security checks to recover millions in unpaid student debt, a trend set to accelerate as more baby boomers retire. The government has collected about $1.1 billion from Social Security recipients of all ages to go toward unpaid student loans since 2001, including $171 million last year, the Government Accountability Office said Tuesday. The report highlights the sharp growth in baby boomers entering retirement with student debt, most of it borrowed years ago to cover their own educations but some used to pay for their children’s schooling.
On Thursday, Rep. Sam Johnson, a Republican from Texas and chair of the Social Security subcommittee, introduced legislation to significantly cut Social Security. For most workers, the bill would cut Social Security benefits substantially. As Michael Linden, associate director for tax and budget policy at Center for American Progress, pointed out on Twitter, a letter from Social Security’s Office of the Actuary calculated workers making around $50,000 would see checks shrink by between 11% and 35%.
Contributor Mark Miller takes a look at retirement-related issues that could see action in Washington in the coming year.
By Ronnie Cohen (Reuters Health) - Poverty cuts an average of almost 10 years off American men’s lives and seven off women’s, a new study shows. Then they examined longevity, smoking, obesity, childhood poverty and other health information from the richest and poorest places. Men in the poorest spots died on average nearly 10 years earlier, at 69 years old, than men in the wealthiest ones, and women in the poorest places died on average seven years sooner, at 76 years old, the research team reports in the American Journal of Public Health.
A new rule that proponents say will protect retirement savers from conflicted advice and inflated fees is looking more likely to be delayed or repealed in the coming months in the wake of Donald Trump’s victory in the presidential election. The Labor Department’s so-called fiduciary rule, set to take effect April 10, 2017, requires brokers and others who give retirement advice to act in clients’ best interests. Previous rules required that brokers’ advice merely had to be “suitable” for a retirement investor.
Charitable donations are an easy way to get a tax deduction, and the most obvious way to make a donation is to write a check. According to the IRS, a donor claiming a deduction of $250 or more is required to obtain and keep a written acknowledgment for a charitable contribution, so be sure to get a donation receipt. Your tax bracket depends on your income.
Here's how to make the most of your Medicare benefit. Hospital care is covered by Medicare Part A. Medicare Part B is medical insurance that covers doctor's visits and outpatient services. Medicare Advantage Plans or Medicare Part C are an alternative to traditional Medicare offered by private insurance companies, typically with different premiums and restrictions.
Republican Donald Trump's victory in the U.S. presidential race puts a new rule on retirement advice in limbo, even after Wall Street's biggest wealth management firms have spent millions preparing for it, lawyers and analysts said on Wednesday. The U.S. Department of Labor fiduciary rule, which is set to start taking effect in April, is meant to promote the best interests of retirement savers by eliminating conflicts of interest for brokers. The financial services industry has tried to stop the rule in the courts, arguing that the Labor Department overreached and that the rule would result in high costs that will ultimately make small accounts unprofitable.
How much you earn and your age when you sign up play a big role in how much you will receive from Social Security. Workers who familiarize themselves with the Social Security rules will be better able to maximize their payments. Pay close attention to these aspects of the program when making Social Security decisions.
Financial advisors managing 401(k)s and individual retirement accounts will be required to act in the best interest of their clients beginning in April 2017. There will also be several small tweaks in the rules regarding who qualifies for tax breaks for saving in retirement accounts. Here's a look at some of the important ways retirement benefits will change next year.
Indeed, 401(k)s and their menus of funds often are so complex that employees investing in them incur administrative, record-keeping and adviser fees. The 401(k) was “invented by accident,” as a Morningstar report says. Then it morphed into a savings plan when companies decided to get out of the pension business.
What will you receive in Social Security benefits compared with the taxes you pay in? By one estimate, the turning point is currently around $65,000 for a single worker and double that for couples earning similar pay. This question has come up since the Social Security Administration last week announced a payroll-tax increase affecting 12 million higher-income workers.
The future could be a lot less happy than the past.
A my Social Security account allows you to review your contributions to the Social Security program. You can also get a personalized estimate of how much you will receive if you claim Social Security at various ages. Periodically reviewing your Social Security statement allows you to make sure your earnings are recorded correctly and to factor the likely payout into your retirement plans.
As life transitions go, retirement ranks way up there among the most challenging, both financially and emotionally. After a lifetime of work, you may have mixed emotions about retirement -- looking forward to not working but nervous about leaving your work identity behind. Because retirement can be so stressful, Jeff Vollmer, a financial adviser with Hyde Park Wealth Management in Cincinnati, advises clients to begin planning 5 years in advance.
If Social Security is going to be your only or a major source of retirement income, it's particularly important to maximize your monthly payments. Here's how to make sure your Social Security payments will cover your retirement expenses. Housing is likely to be one of your largest expenses in retirement.
Low return forecasts aren't a reason to skip investing, but they do have an impact on saving and withdrawal rates and asset allocation.
If you're part of the sandwich generation, you're taking care of your child and have an aging parent. If one or both need financial support, it can be pretty tough to save for your retirement. The dilemma is quite common, since nearly half (47 percent) of adults in their 40s and 50s have a parent age 65 or older living in their home and are either raising a young child or financially supporting a grown child (age 18 or older), according to the Pew Research Center.
Nearly 60% of those polled for TIAA’s recently released 2016 Lifetime Income Survey said they’re confident they’ll be able to turn their savings into income that can support them in retirement. Unfortunately, fewer than half of the people surveyed know how much they have in those accounts or have tried to assess how much retirement income their savings can actually generate. Here are three key questions you should ask yourself to ensure your planning reflects a realistic assessment of your retirement prospects.
Saving for retirement is especially difficult when you earn a small salary. Here's how to begin building wealth for retirement when you have a modest income. Find out how much you need to save to get the maximum possible 401(k) match, and then make every effort to deposit that amount in your retirement account.
Living off of current yields is just one way to extract the cash flow you need.
Asset allocation, time horizons, and taxes can complicate withdrawal-rate planning.
Note: This article is part of Morningstar’s September 2016 Retirement Matters Week special report. While retirees are often counseled to estimate that they’ll spend 75% to 80% of their working incomes in retirement, a paper by Morningstar’s head of retirement research, David Blanchett, demonstrated that there can be huge variations in income-replacement rates among retirees–with factors such as pre-retirement income and savings rates serving as key swing factors. Based on Blanchett’s findings, higher-income, higher-saving households may well need just 60% (or even less) of their pre-retirement income during retirement, while lower-earning, lower-saving households may need closer to 90%.
The complexity of the system, its evolution and a shift in demographics that threatens its solvency have created confusion over what Social Security can and will deliver . Social Security benefits are primarily based on two variables: your highest earnings over 35 years and your age when you file for benefits. The maximum benefit for someone retiring at full retirement age (66 for people born in 1943 through 1954) in 2016 is $2,639 a month.
For many people, retirement — never mind early retirement — seems out of reach. Social Security alone isn’t enough to have you living the good life during your golden years, and as we’ll discuss later, you’ll want to put off taking that money as long as you can. Once your rainy-day fund is full, put that 10 percent you’re not spending into a dedicated retirement fund.
The average interest rate on a six-month certificate of deposit was 9.1% in 1970 and 13.4% in 1980. But two decades worth of declining interest rates have dragged yields way down, dramatically compounding the challenge for retirees. The bucket approach to retirement-portfolio management, pioneered by financial-planning guru Harold Evensky, aims to meet those challenges, effectively helping retirees create a paycheck from their investment assets.
The typical investor has two long-term goals: retirement and kids' college expenses. "Retirement savings needs to outweigh college savings," says David Hryck, a tax attorney and personal finance expert with the Reed Smith law firm in New York. "The biggest issue is the fact that you can borrow for college, whereas you can't borrow for retirement," says Oscar Vives Ortiz, a planner with First Home Investment Services in Tampa Bay/St. Petersburg.
Involuntary retirement—or the possibility that you may be forced to exit the workforce sooner than you wanted—is a more common problem than you may think, and one that can wreak significant havoc with your post-career lifestyle. Some 46% of retirees polled for the Employee Benefit Research Institute’s 2016 Retirement Confidence Survey said they left their jobs before they had planned, usually because of a health issue or company downsizing or restructuring. One practical and effective way to minimize the effect of having to retire prematurely is to make a concerted effort to boost the size of your nest egg while you’re still working.
The following six steps tie together portfolio maintenance and rebalancing, RMDs, and more.
As a financial professional, I get a lot of questions. Deciding the right age to take your Social Security benefits can be tricky. Although conventional wisdom says to delay taking your benefits for as long as possible, according to the Center for Retirement Research, nearly 40% of retirees file for Social Security as soon as they turn 62, the earliest age at which the Social Security Administration (SSA) allows you to claim your benefits.
Two-thirds of 401(k) participants polled for a recent J.P. Morgan Asset Management report said they could better plan for retirement if their employers helped them “understand their numbers”—that is, get a handle on such specifics as how much they should be saving and how much money they should have in retirement accounts to ensure a secure post-career life. Here are four key numbers that can make retirement planning less daunting and at the very least get you going in the right direction until you come up with a more customized plan. Indeed, this report from the Boston College Center for Retirement Research estimates that’s how much the typical U.S. household should save each year in order to maintain its pre-retirement living standard in retirement.
The risks of oversaving and underspending are real, too.
While nearly all of the major cash and cashlike instruments have done a good job of protecting investors’ capital over time, investors seeking an ironclad guarantee of principal preservation will want to focus on FDIC-insured investments. Building on 2010 rules passed in the wake of a large money market fund breaking the buck–or letting its net asset value drop below $1–during the financial crisis, the money market fund rules going into effect this year specifically aim to address the risk of heavy investor redemptions from a portfolio with constrained liquidity. Specifically, the rules require certain types of money market funds to use a “floating” net asset value, as well as to impose fees or install “gates” to stem outflows in periods of constrained liquidity.
Three well-known U.S. universities, MIT, New York University and Yale, have been accused of charging millions of dollars in excessive fees to participants in their retirement plans, according to federal civil lawsuits filed on Tuesday. The complaints against the three universities accuse them of breaching their fiduciary duties by causing the plan participants to pay millions of dollars in unreasonable and excessive fees for record keeping, administrative and investment services. In the Massachusetts Institute of Technology complaint, Fidelity Chief Executive Officer Abigail Johnson is singled out because she sits on the school's board of trustees.