Category: Financial and taxes in retirement
Updated Dec. 22, 2019 - The SECURE Act was passed by both houses and signed by the President. See: SECURE Act on 401(k)s and IRAs Signed into Law.
May 25, 2019 -- The Democratic lead House of Representatives passed a bill this week, the Secure Act of 2019, that would make major changes to 401(k) plans. If it goes into law those changes could have a very positive effect on retirees and people who hope to retire someday. Since neither the Senate nor Pres. Trump seem to have any major objections, the bill seems to have a very good chance of becoming a reality.
The law has come into being as a reaction to a number of factors including a recognition of the growing importance of 401(k) plans, as well as the increasing longevity of Americans dependent on those plans for their financial security. Here are some of the many changes in the Secure Act of 2019, which passed by a whopping 417-3 margin:
Required Minimum Distributions (RMDs) not required until age 72 (currently required at age 70 and 1/2)Granting companies with 401k plans permission to offer annuities as an investment optionEmployers must disclose on 401(k) statements the amount of sustainable monthly income the employee's balance would supportPart time workers would be allowed to participate in 401(k) plansUnaffiliated companies could band together to offer 401(k) plans
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Published on May 24, 2019
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Category: Financial and taxes in retirement
May 4, 2019 -- Were you born before Jan. 2, 1954? Are you married? Not already claiming a Social Security retirement benefit?
If you answered yes to all of these questions, time is running out on a very valuable Social Security claiming strategy, the Restricted Benefit option. In brief, this option allows you (or your spouse) to collect a spousal Social Security benefit while preserving the right to collect on your own benefit later. If you turn 66 this year, now is the time to think about taking it.
The key point for eligibility to take the Restricted Benefit is being born before Jan. 2, 1954. If you were born after that date, the term "deemed filing" applies to you when you apply for Social Security retirement benefits, and you are not eligible for the Restricted Benefit option.
Photo by fotografierende from Pexels
In addition to your birth date, the two additional questions we asked at the beginning also apply. Are you married? If you are not, it doesn't work because you have no spouse to claim a spousal benefit on. If you are already receiving Social Security benefits, it is too late to reverse that decision. So you answered yes to all three questions - great - the Restricted Benefit might be for you.
But first, a little background.
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Published on May 4, 2019
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Category: Financial and taxes in retirement
April 26, 2019 — The Social Security Trustees annual report is out, which shows some small changes in the status of Social Security. This year, 2019, will be the last time that the amount paid out…
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Published on April 25, 2019
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Category: Financial and taxes in retirement
April 22, 2019 -- Have you been wondering how your retirement investments and strategies stack up to other people in your situation? Do you make the same types of investments as others... use a financial advisor... think you saved enough? Well, thanks to the almost 500 members who took the time to contribute their valuable data and insights to last week's "The State of Your Retirement Portfolio" survey, you will know the answers to a lot of these questions. Special thanks to all contributors to the survey - we appreciate you giving back to this community!
As promised, here is a detailed report on the survey. It includes a link to 100 interesting Member comments to the survey. And you will find a list of all our previous survey reports at the end of the article.
BackgroundThis is the second time we have asked for data about your retirement investments and expectations. Here are the highlights from the most recent 14 question poll, with comparisons to the 2015 survey results when available. Detailed findings for each question are listed below that.
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Published on April 21, 2019
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Category: Financial and taxes in retirement
April 12, 2019 — It is always interesting to compare how we handle things vs. our peers and neighbors. So while it is not considered polite to discuss your finances and how you handle them, it is an important subject, and one that should not be ignored. Please fill out…
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Published on April 12, 2019
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Category: Financial and taxes in retirement
April 8, 2019 -- Your Social Security benefit is one of the pillars of your retirement. To make the most of it you need to make smart choices on how and when you take it. Make a wrong move based on misinformation or lack of knowledge, and it could cost you and your spouse tens of thousands of dollars in the years ahead. This article will go over a few of the areas that seem to trip up the most people. To help answer these questions we used information from the very helpful SSA.gov website. Use these examples to help inform your own decisions, along with your own careful research.
Choices...and Decisions
It is up to you to apply for Social Security retirement benefits. If you don't apply, you won't get them. You have your first option to start receiving retirement benefits when you turn 62. Taking them then gives you the smallest monthly payment, but it is money in your bank account now. You can apply at any time from age 62 on, but your monthly benefit will go up for every month you wait to claim (benefits are capped at age 70).
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Published on April 7, 2019
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Category: Financial and taxes in retirement
February 10, 2019 -- If you have been reading this Blog for awhile you know that fixing Social Security is one of our pet issues. In 2034, if nothing is done, the system will start to fail the millions of Americans who are counting on Social Security for their retirement. Yet prior to last week, no politician we know of had done anything to get the reform process going.
"The Social Security 2100 Act" was introduced into the U.S. House of Representatives and the Senate in late January. Representative John B. Larson, a Democrat from Connecticut, is the sponsor, and he has 200 lawmakers supporting it. As written, the bill has several interesting features, most of which we approve. It would be the most significant reform of Social Security since 1983.
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Published on February 9, 2019
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Category: Financial and taxes in retirement
January 29, 2019 -- Perhaps you have heard of the FIRE movement, which stands for Financial Independence, Retire Early. The idea is to retire in one's late 30s or early 40s by a combination of aggressively cutting down on spending and amassing retirement savings. There are hundreds of thousands of millenials, many of them in the hi-tech sector, who are enthralled with this idea. In many ways the movement is an outgrowth of the old "What is your number" question - as in how much money do you have to have in the bank before you think you can tell your boss to take this and sh*ve it! But for all of its devotees, there are many financial experts who warn that FIRE is not either feasible or safe. Here is what that smoke is all about.
One expert believes that is just not possible to accumulate a large enough pile of savings to be able to safely pull off an early retirement. Suze Orman, the popular financial guru, thinks you need $5 million to be able to pull off retirement. She thinks FIRE could be "the biggest (financial) mistake" of a lifetime. Mitch Tutman dismisses her figure as too high, saying you can do it with $1 million. Either way, it is the rare person who can scrimp and save enough to get to any one of those levels by the age of 40.
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Published on January 28, 2019
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Category: Financial and taxes in retirement
Note: This is Module 2 in our Online Retirement Planning 101 Series. See end of article for full list.
January 26, 2019 -- The overwhelming #1 suggestion for our Retirement 101 series was "How to Retire on Less than $1 million" (smaller numbers were suggested to). Certainly most retirees find themselves in this predicament. Living on Social Security plus maybe some small savings is not a recipe for a happy retirement - unless you take drastic steps!
Over the years in many articles we have outlined some of the tactics you can apply to make the best of this situation. But even if you fortunate to be well fixed financially in retirement, you still might be able to profit from a few of these ideas.
Exercise #1: Figure Out Your budget (this applies to everyone!).
Until you have a good idea of what your retirement expenses will be and how they match up to your income, you can't really start planning. While not difficult to do, it is a critical step to head off what could be a disaster - running out of money way before you are ready to check out. This budget worksheet in csv format contains most of the items you need to consider when developing a budget - just input them into a spreadsheet, by hand or on a computer.
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Published on January 25, 2019
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Category: Financial and taxes in retirement
December 11, 2018 -- December 31 is the deadline for taking a Required Minimum Distribution (RMD) from your 401(k) or IRA if you are older than 70 and 1/2 (but if you turned 70 and 1/2 this year you have until April 1). Fines for not doing so are steep - 50% of the required distribution not taken. Because it might take several days for your financial firm to handle the distribution, it is definitely time to make sure you do this now!
Tax savings available
For people with substantial income and retirement saving balances, the taxes on an RMD can be significant - because it is treated as ordinary income. If you already have pension, investment income, and Social Security income, the RMD could tip you into a higher bracket. But there is an easy way not to pay taxes on up to $100,000 of your annual RMD.
You can take a Qualified Charitable Distribution (QCD) by directly transferring funds from your IRA custodian to a qualified
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Published on December 10, 2018
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