benefits http://www.wisebread.com/taxonomy/term/2730/all en-US How to Make Sure You Don't Run Out of Money in Retirement http://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-make-sure-you-dont-run-out-of-money-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/nest_made_of_american_currency_horizontal.jpg" alt="Nest Made of American Currency Horizontal" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>An annuity is a stream of fixed payments that's guaranteed, often for as long as you live. Having an annuity can make retirement more secure, but it's hard to recommend them as investment vehicles, because almost every annuity on the market is a terrible investment. They tend to be sold by salesmen, so they're often loaded with fees. And, because being upfront about the fees would make them hard to sell, these fees are obscure (often outright hidden) and are typically different for every product, making it especially hard to comparison shop. (See also: <a href="http://www.wisebread.com/dont-know-what-annuities-are-you-might-be-missing-out?ref=seealso" target="_blank">Should You Get an Annuity?</a>)</p> <p>But my experience these past few years &mdash; helping older relatives with their finances, and starting to take the little pension I earned as a software engineer &mdash; has given me a new perspective on annuities. Having an annuity is more than just nice: It's wonderful! It's just <em>buying</em> them that's usually terrible.</p> <p>Fortunately, there are a few that are worth buying. You don't hear about them often, because they don't siphon off a big chunk of your investment to pay a salesman, so salesmen don't push them.</p> <h2>Why annuities are great</h2> <p>It used to be that anyone with a good job retired with an annuity in the form of a pension. This is how I've gotten my recent experience with just how great it is to have an annuity: All my older relatives are now receiving pensions.</p> <h3>You never outlive your income</h3> <p>The main thing that's great about an annuity is that having one means you're never going to be broke. Even if you overspend and run down your savings, even if the stock market crashes or you make terrible investment decisions and your investment portfolio takes huge losses, you'll still get that monthly check for as long as you live.</p> <p>You don't <em>need</em> to have an annuity to arrange that &mdash; you can live off capital in a way that makes it last the rest of your life &mdash; but an annuity makes it much easier.</p> <h3>They can raise your income</h3> <p>The other thing that's great about an annuity is that it can, at least potentially, be more money to live on. See, the only safe way to live off capital is to just spend the income from your investments. But that's not much money (especially these days).</p> <p>If you knew how long you were going to live, you could spend down your capital so that you'd die with just enough money to pay off your last month's bills. But since you don't know how long you're going to live, you have to make a conservative estimate, holding back enough capital so that you won't go broke even if you live to 100. (Of course even that might not be enough. What if you live to 114?)</p> <p>The company that provides your annuity has a much easier job. They don't need to know whether you'll live to 97 or kick the bucket at 67. They count on the fact that the average person will live an average life span. They can arrange the terms of the annuities so that the payouts don't exhaust the total pool until the last person dies. The fact that some people die the month after their pension starts means that there's enough money to pay for the people who go on to live for decades.</p> <p>Offset against that is the fact that the company that's providing your annuity needs to make a profit, and it also needs to hold back a reserve against the possibility that it'll get unlucky and a bunch of their customers will live longer than average &mdash; but both of those factors are relatively small.</p> <h2>Annuitize, but how much?</h2> <p>If you accept the idea that you probably ought to have an annuity of some size, the next question is: How big should the annuity be?</p> <p>At one extreme, you could just annuitize all your money &mdash; take all your savings and investments (except your checking account and your emergency fund) and buy an annuity. Then you'd know what your income would be for the rest of your life and you could budget for it.</p> <p>I recommend against that. There are many reasons why it's <a href="http://www.wisebread.com/on-the-importance-of-having-capital" target="_blank">worth having some capital</a>. Your capital earns an investment return and it also provides a measure of safety as a backup to your emergency fund. It makes it possible to fund expenses beyond your bare-bones budget. Perhaps most important, having some capital saves you money in all kinds of different ways &mdash; because you have funds on hand, you can take advantage of deals, you can avoid high-interest borrowing, and you have money to put down a large security deposit in cases where that will save you money.</p> <p>At the other extreme, you could annuitize none of your money and just live off your capital. I've just explained the downsides to that.</p> <p>You want to be somewhere in the middle. With a modest annuity, you're protected from running your income down to zero, and yet you can preserve some amount of capital.</p> <p>My advice is this: You should annuitize <em>enough to cover your rock-bottom expenses</em>, the lowest amount you could live on indefinitely. That way, you're putting yourself in a position where you can be sure you can get by no matter what happens to your investments, while preserving enough of an investment portfolio to fund your other life goals &mdash; travel, making a major purchase, leaving an estate to your heirs, etc.</p> <p>Before you start shopping for annuities, be sure to take into account any annuities you already have. But unless you're old, and even then only if you had a pretty good job at a pretty big company for many years, you probably aren't going to have a great pension. (If you're only kind of old, and worked at a pretty big company for a few years before they all phased out their traditional pensions in the early 2000s, maybe there's a small pension waiting for you. If so, that's great. Even if it's not enough to live on, it's a very positive contribution to your retirement income.)</p> <p>However, most people reading this probably won't get a good pension.</p> <p>Fortunately, there is an annuity you very likely do have.</p> <h2>The annuity you already have</h2> <p>You almost certainly already have an annuity in the form of a national pension scheme, such as Social Security. The amount of Social Security you will get depends on your own employment history. For most people, it will provide a large fraction of the &quot;rock-bottom expenses&quot; I recommend you cover with an annuity, but you can generally expect there to be some gap.</p> <p>If you have an employer-sponsored pension, even a small one, it may well cover the gap. If you don't, I recommend that you cover it with an annuity that you buy.</p> <h2>How to buy an annuity</h2> <p>As I said at the beginning, most of the annuities you can buy are terrible investments, but there are good ones. It is possible to buy an individual annuity and get an OK deal. It's just hard because the companies that sell them make it virtually impossible to compare one annuity to another.</p> <p>This is especially true for the sorts of annuities that are most like a pension: The ones set up so you make a payment every month starting in your 30s or 40s, then get a check every month starting when you're 65.</p> <p>Those are called deferred annuities (because you defer getting your money until age 65), and they're always terrible. They always have what are called &quot;back-end&quot; fees &mdash; money that the salesman gets to keep when you figure out that you've made a terrible deal and want to get (some of) your money back. The rules on back-end fees are always different.</p> <p>To make it even harder, these sorts of annuities are usually bundled with some sort of life insurance (supposedly so that if you die before you retire your estate won't &quot;lose&quot; all the money paid into the annuity) &mdash; and of course the details of those insurance policies are always different as well.</p> <h3>Comparison shopping</h3> <p>It is possible to buy an annuity in a way that does allow you to compare them. Don't buy one with monthly payments. Instead, save and invest the money in the stock market yourself during your working years. Then, when you're ready to retire, buy what's called a &quot;single premium immediate annuity&quot; &mdash; you put up a big chunk of money today, and then start receiving monthly payments immediately that last for the rest of your life. (The monthly payments, of course, should equal the gap you identified between your Social Security and your rock-bottom budget.)</p> <p>That is something that's easy to compare: How much do you have to pay today for a stream of income that starts next month and lasts the rest of your life? You can get a few quotes and pick the best deal.</p> <p>These sorts of annuities usually don't have the life insurance policy that supposedly protects against your dying before you start taking payments, because the payments start immediately. That's good. Bundling in life insurance just makes it harder to compare prices. If you need life insurance, buy a life insurance policy separately.</p> <p>Be very careful of letting them include any sort of survivor benefit, because that can also make the annuities harder to compare (although as long as the rules are exactly the same, it is at least possible). One alternative, if you need a survivor benefit, is to buy a life insurance policy that will pay off enough for your spouse to buy his or her own annuity.</p> <p>As an aside, let me mention that the annuity salesmen among you are going to jump in and point out that you're giving up an important tax advantage if you only consider an immediate annuity. This is technically true, but in fact is pretty unimportant. Let me just say this: If you are maxing out your 401(k), <em>and</em> your IRA, <em>and</em> your Roth IRA, there is an opportunity to tax shelter a bit more money through an annuity contract. In practice, I'm willing to bet that the tax advantage will never equal the fees you're going to end up paying.</p> <p>If you do save your money in a 401(k) or IRA, there are tax rules for using that money to buy your annuity. Follow the rules and you won't owe any taxes when the money is used to buy the annuity. You will, however, pay taxes on the annuity payments when you receive them (just like you would if you'd taken distributions from the tax-deferred plan directly).</p> <h3>Where to buy</h3> <p>Pretty much any life insurance company will sell you an annuity, but I only know of two places to get a good one: Vanguard and TIAA-CREF. (There used to be a third, but Berkshire Hathaway got out of the business a few years ago.)</p> <p>The main problem with buying directly from an insurance company is just that their annuity sales operations are organized around their annuity salesmen, who will immediately start trying to sell you something that's more profitable (to them) than a single premium immediate annuity &mdash; that's the step you avoid by going through Vanguard or TIAA-CREF. (They also have enough buying power to get especially good rates, because they bring in large numbers of customers.)</p> <p>If you're sure you can bear up under the sales pressure, there's no reason not to get quotes directly from the insurance companies. (Just because I don't know of any other good places to buy one doesn't mean there aren't any.) Insurance companies that sell annuities will be very easy to find &mdash; just do an internet search for information about annuities and you'll get a dozen ads for them and for online tools to compare their offerings.</p> <p>You're handing over a large fraction of your wealth and counting on the insurance company to be around for the rest of your life, so you want to have considerable confidence in the financial soundness of the company you pick. I would not consider any company rated less than A by the insurance grading firm A.M. Best, and I'd be happier with one rated A+.</p> <h3>Buy when rates are high</h3> <p>To buy an annuity, you have to put up a pretty sizable chunk of cash. (Vanguard quotes the cost today to a 65-year-old male buying a single premium immediate annuity of $1,000 a month for the rest of his life as being $180,052.)</p> <p>Unless you're rich, the cost of an annuity that covers your rock-bottom expenses is going to be a large fraction of your entire retirement savings &mdash; which is OK, because it's going to be a large chunk of your entire retirement income.</p> <p>The insurance company that sells you your annuity is going to invest that sizable chunk of cash in a portfolio of stocks and (mostly) bonds, and then use the dividends from those stocks and (mostly) the interest payments from those bonds to pay your annuity. Because of this, an annuity is much cheaper when interest rates are high.</p> <p>If you bought an annuity right before the financial crisis, you made out very well. If you wanted to buy one in the past eight or nine years, you probably found that they were incredibly expensive. But in the current era of rising interest rates, annuities are becoming more affordable again.</p> <p>Still, if you're approaching retirement age, understand that there is no rush. Figure out your rock-bottom expenses &mdash; and then live with that budget as an experiment. Maybe you'll find that you'll need more than that in retirement. Maybe you'll actually need less. Do some comparison shopping. Take your time. Then, when you've got a pretty good handle on the expense of your retirement lifestyle, at a time when interest rates are up a bit and you're ready to quit working, go ahead and buy that annuity.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-safe-investments-that-arent-bonds">9 Safe Investments That Aren&#039;t Bonds</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-about-the-easiest-way-to-save-for-retirement">What You Need to Know About the Easiest Way to Save for Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-stocks-and-bonds-that-will-profit-from-the-fed-rate-hike">10 Stocks and Bonds That Will Profit From the Fed Rate Hike</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-3-rules-every-mediocre-investor-must-know">The 3 Rules Every Mediocre Investor Must Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement annuities benefits bonds fees interest rates investment vehicles life insurance pensions stocks Fri, 26 May 2017 08:30:09 +0000 Philip Brewer 1953940 at http://www.wisebread.com 5 Questions to Ask Before You Start Claiming Your Social Security Benefits http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-511524588 (1).jpg" alt="Couple asking questions before claiming social security benefits" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to a 2016 poll conducted by Gallup, 59 percent of retirees rely on Social Security payments as a major source of income. Odds are that you, too, will need Social Security benefits to cover at least <em>some </em>of your living expenses after you retire. Because of this, you'll want these benefits to be as large as possible when retirement actually arrives.</p> <p>Here are five key questions to ask before you start taking your Social Security benefits.</p> <h2>1. Are you willing to take a smaller monthly benefit for the rest of your life?</h2> <p>Taking Social Security benefits before your full retirement age will cost you in the form of a lower monthly payout. This payout will remain at this lower level for the rest of your life.</p> <p>You can determine how much of a hit you'll take claiming benefits early by visiting the Social Security Administration's <a href="https://www.ssa.gov/planners/retire/retirechart.html" target="_blank">retirement planner site</a>. As the site shows, if you start taking your Social Security payments before you hit your full retirement age, your monthly benefit will be lower.</p> <p>How much lower? If your full retirement age is 67 and you start taking your benefits at 62, your monthly Social Security payment will be reduced by about 30 percent. If you start taking them at 64, they'll be lower by about 20 percent. Even if you start taking them one year earlier at 66, they'll still be lower &mdash; by about 6.7 percent a month. And remember, this is for the rest of your life.</p> <p>As you can see, claiming benefits early can significantly reduce the amount of money you receive each month. Let's say you are slated to receive $1,000 a month in Social Security benefits and your full retirement age is 67. If you started taking your benefits at age 62 &mdash; the earliest you can take them &mdash; your monthly benefit would fall to $700.</p> <h2>2. Can you continue working?</h2> <p>While retiring early reduces your monthly Social Security benefits, working past your full retirement age actually increases them.</p> <p>The Social Security Administration says that if you delay receiving your Social Security benefits until you hit 70, your monthly payment will be 32 percent higher than if you had retired at full retirement age.</p> <p>Say your full retirement age is 66, and you'd receive $1,000 from Social Security every month starting at that age. If you wait to start claiming your benefits until you turn 70, your monthly payment would rise significantly to $1,320. You'd just have to determine whether you could hold off on receiving those payments until your 70th birthday.</p> <h2>3. How much have you saved for retirement?</h2> <p>Most people can't survive on Social Security benefits alone during their retirement years. Instead, they rely on a mix of savings from different sources &mdash; everything from 401(k) plans, to IRAs, to annuities.</p> <p>How much you've saved for retirement will play a key role in how early you should take your Social Security benefits. If you've saved a significant amount of money for retirement, you might not need as large a monthly Social Security payment to meet your retirement goals. But if you haven't saved much, you might need that larger benefit payment. At the same time, working for a few extra years might help you boost your retirement nest egg, at least by a bit.</p> <h2>4. How healthy are you?</h2> <p>While there are financial upsides to waiting to claim your Social Security benefits, there are also times when this doesn't make sense. Often, this depends on your health.</p> <p>If you're not healthy, you might need to retire early for your physical wellbeing. And while it's impossible to predict how long you'll live after retiring, if you're suffering from health problems, your post-retirement life might not last as long. Retiring as early as possible, and claiming those Social Security benefits earlier, might then be the best choice. (See also: <a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age?ref=seealso" target="_blank">3 Reasons to Claim Social Security Before Your Retirement Age</a>)</p> <h2>5. What kind of retirement do you want?</h2> <p>How do you plan to spend your retirement years? Are you looking forward to quiet days spent with your grandchildren, reading books, and pursuing a hobby? Or do you want to travel the world?</p> <p>If you're looking for a lower-key, less-costly retirement, taking your benefits early &mdash; and receiving smaller Social Security payments &mdash; might make sense. But if you want a busier, more extravagant retirement, holding off until full retirement age, or later, might be the smarter choice.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">3 Reasons to Claim Social Security Before Your Retirement Age</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over">5 Sobering Facts About Social Security You Shouldn&#039;t Panic Over</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement benefits early retirement full retirement age health Teaser: income social security Mon, 08 May 2017 09:00:08 +0000 Dan Rafter 1940328 at http://www.wisebread.com 10 Work Perks You Can't Get as a Freelancer http://www.wisebread.com/10-work-perks-you-cant-get-as-a-freelancer <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-work-perks-you-cant-get-as-a-freelancer" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-511733684.jpg" alt="Woman learning work perks she can&#039;t get as a freelancer" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>In some industries, the number of gig economy workers is growing faster than the number of payroll employees. Working as a freelancer certainly does have its advantages, the biggest of which are flexibility, freedom, and the ability to experience variety in your work.</p> <p>But if you find yourself staring at the walls of your cubicle, daydreaming about escaping the 9-to-5 and finding freedom as a freelancer, don't overlook the perks you could be getting at your regular job, right now. It may not be so easy to leave these things behind.</p> <h2>1. Stable income</h2> <p>One of the biggest benefits of a regular 9-to-5 job is the steady paycheck. As a salaried employee, you can plan your budget based on a stable stream of income. As a freelancer, your income can vary significantly from one month to the next. A few slow weeks can throw your finances into disarray, so you'll need to shift your entire budgeting strategy to make sure this doesn't happen. (See also: <a href="http://www.wisebread.com/the-smart-way-to-budget-on-a-freelance-income?ref=seealso" target="_blank">The Smart Way to Budget on a Freelance Income</a>)</p> <h2>2. 401(k) match</h2> <p>Many traditional employers offer matching contributions to 401(k) plans. In other words, when you make a contribution to your retirement fund out of each paycheck, your employer will also contribute something. This is free money, and can total thousands of dollars each year. In the gig economy, you won't get this kind of assistance building your retirement fund. You'll need to make efforts to save for retirement all on your own, such as with an IRA or solo 401(k). (See also: <a href="http://www.wisebread.com/a-simple-guide-to-retirement-plans-for-the-self-employed?ref=seealso" target="_blank">A Simple Guide to Retirement Plans for the Self-Employed</a>)</p> <h2>3. Retirement counseling</h2> <p>Employers frequently offer training or educational programs to help workers plan their retirement investment strategy. Often, they'll even provide free access to financial planners to answer questions. Freelancers are on their own to figure out the road to retirement, and consulting with financial pros will have to come out of your own pocket.</p> <h2>4. Health Savings Account</h2> <p>A valuable benefit that many people miss out on is participating in a health savings account. Every paycheck, you can contribute pretax dollars to be used for health-related expenses. Some health savings accounts allow the funds to be placed in investments where the money can grow until it is needed. As a freelancer, you may be able to set up your own health savings account, but you will need to do a lot more research than someone who simply signs up for an established program through their 9-to-5. (See also: <a href="http://www.wisebread.com/how-an-hsa-saves-you-money?ref=seealso" target="_blank">How an HSA Saves You Money</a>)</p> <h2>5. Paid vacation and holidays</h2> <p>Paid time off is an undisputed benefit of a regular 9-to-5. As a freelancer, you don't earn a paycheck while on vacation or holiday. If you want time off, you take time off from earning any income, too. This can certainly put a damper on enjoying your down time.</p> <h2>6. Making connections</h2> <p>As a 9-to-5 employee, you'll have opportunity to build relationships with the coworkers and senior-level staff you see every day. These connections can give you a special level of access to approach and meet other influential people in your company. Plus, it never hurts to have a few people to chat with as you pass the day. Freelancers can still find plenty of opportunity to network, but they'll need to go out of their way to make it happen. It won't be as simple as showing up to work.</p> <h2>7. Tech support and replacement</h2> <p>I have thousands of dollars worth of computer equipment sitting on my desk. It gets supported, maintained, and upgraded by my employer. As a freelancer, you are on your own to buy and support your technology needs. Do you need a special monitor? You'll need to shell out for one. Is your computer too old to do the job? The replacement comes out of your pocket. If something breaks? The repairman will be billing you directly.</p> <h2>8. Training, certification, and professional development</h2> <p>Companies often invest in their employees by providing training or certification programs to help them be better workers. Staying up-to-date on skills, technology, and industry trends is incredibly useful to the employees as well, and makes them more valuable in the marketplace. Freelancers will need to find, purchase, and commit to their own training. It can be very easy to rest on your laurels and let your skills become outdated, especially with no boss insisting you keep learning.</p> <h2>9. Awards and recognition opportunities</h2> <p>It looks great on a resume to list awards and other work honors that you have received. Many employers have some form of &quot;employee of the month&quot; or similar recognition. You may not be able to stock your resume with such accolades if you go out on your own. At the very least, you'll have to seek out and apply for awards, where you'll likely be up against a much larger pool of talent.</p> <h2>10. Employee discount programs</h2> <p>Another perk that businesses offer their employees is discounts on products and services. These can range from cellphone plans, to personal computer purchases, to fitness club memberships &mdash; even discounts on concert and amusement park tickets. As a freelancer, you'll miss out on these discounts.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/10-work-perks-you-cant-get-as-a-freelancer">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-lucrative-side-hustles-for-city-dwellers">15 Lucrative Side Hustles for City Dwellers</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-questions-you-should-always-ask-in-an-exit-interview">8 Questions You Should Always Ask in an Exit Interview</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/they-offered-you-a-promotion-and-no-pay-raise-now-what">They Offered You a Promotion and No Pay Raise. Now What?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-a-side-hustle-can-advance-your-career">8 Ways a Side Hustle Can Advance Your Career</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-get-work-experience-without-having-a-job">How to Get Work Experience Without Having a Job</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income 9-to-5 benefits employment freelancing gig economy pros and cons self employment side jobs work perks Mon, 08 May 2017 08:30:07 +0000 Dr Penny Pincher 1940327 at http://www.wisebread.com 12 Times Your Credit Card Has Your Back http://www.wisebread.com/12-times-your-credit-card-has-your-back <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-times-your-credit-card-has-your-back" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-635966572.jpg" alt="Woman learning times her credit card has her back" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Many of us view credit cards as much more than just a way to pay for things. They can help us accrue miles and status in rewards programs, <a href="http://www.wisebread.com/5-best-credit-cards-with-free-airport-lounge-access?ref=internal" target="_blank">get us into airport lounges</a>, and even help us snag hard-to-get theater reservations.</p> <p>But did you know that calling your credit card company can be like calling your dad when things go wrong? Glitzy perks like <a href="http://www.wisebread.com/what-do-the-concierge-services-from-credit-cards-really-provide?ref=internal" target="_blank">concierge service</a> get most of the attention, but the perks that kick in when things go wrong may actually be the most valuable. Let's look at services some credit cards offer when you're in an accident, have a problem with a purchase, or are facing other dire straits. (See also: <a href="http://www.wisebread.com/10-awesome-credit-card-perks-you-didnt-know-about?ref=seealso" target="_blank">14 Awesome Credit Card Perks You Didn't Know About</a>)</p> <p>(As you might imagine, credit cards place restrictions on all of these benefits, such as per-claim and per-year reimbursement ceilings. If you need access to one of these benefits, consult your card agreement and/or call customer service.)</p> <h2>1. Return protection</h2> <p>You buy a beautiful rug. When you get it home, you realize it's way too big for your room. Now the retailer won't take it back. What do you do?</p> <p>If you're using a <a href="http://www.wisebread.com/how-to-return-items-through-your-credit-card-if-the-store-refuses?ref=internal" target="_blank">card with return protection</a>, you can file a claim and get reimbursed for some or all of the purchase. One typical limitation: no holiday decorations (so don't even think about returning your Christmas tree in January).</p> <h2>2. Extended warranty</h2> <p>You buy a grandfather clock with a one-year warranty. As your luck would have it, 53 weeks later, the thing stops working. If you purchased it with a card that <a href="http://www.wisebread.com/how-free-extended-warranties-work-on-credit-cards?ref=internal" target="_blank">offers extended warranty coverage</a>, any repairs covered under the original warranty may now be paid for by your credit card's extended protection. Make sure to call the card issuer before you pay for any repairs.</p> <h2>3. Purchase security</h2> <p>You buy a new bike, and the next day, it's stolen! Your homeowners insurance won't help, since the cost of a replacement is lower than your deductible. Are you out of luck? Maybe not.</p> <p>If you bought the bike with a <a href="http://www.wisebread.com/how-credit-cards-protect-your-purchases-from-damage-or-theft?ref=internal" target="_blank">card that offers purchase security</a>, and you submit all the required documentation, you could get reimbursed for the stolen bike. Besides theft, purchase security can cover damage due to fires, plumbing leaks, vandalism, and a number of other threats. Most cards require you to file the claim within a certain window &mdash; generally within 90 days of the incident.</p> <h2>4. Price protection</h2> <p>This has got to be one of the most underutilized protections that credit cards offer. Make a mental note to save all of your receipts and try it this year!</p> <p>You splurge on new TV. A month later, you see the same TV advertised for hundreds of dollars less. Instead of throwing the remote at the screen, call up the credit card you used to buy it and ask if they offer <a href="http://www.wisebread.com/how-to-get-a-price-match-through-your-credit-card?ref=internal" target="_blank">price protection</a>, which could get you a full or partial refund of the price difference, subject to per-item and annual limits. One typical restriction is that the lower price must appear in a printed ad, not just online.</p> <h2>5. Travel insurance</h2> <p>You are planning to fly your family to Paris, but your daughter breaks her leg and you have to cancel at the last minute. The tickets are nonrefundable. If you purchased them with a <a href="http://www.wisebread.com/6-types-of-travel-insurance-credit-cards-include-that-you-didnt-know-about?ref=internal" target="_blank">card offering travel insurance</a>, the policy might reimburse you for the flights you can't use.</p> <p>The same policies might also provide a lump-sum payment if you are injured (or killed) on the trip, as well as also cover the expense of buying new clothes or belongings if your bag arrives a few days later than you do. Some policies will even replace baggage that's permanently lost.</p> <p>Restrictions abound. I recently tried to use this coverage when I had to cancel an Airbnb stay due to an Amtrak delay (which was in turn due to flooding). The agent at my credit card company told me their policy would only cover airline tickets or fees, not lodging. However, other cards state that they cover the cost of lost tours and lodging as well as airfare. (See also: <a href="http://www.wisebread.com/the-5-best-premium-credit-cards?ref=seealso" target="_blank">The Best Premium Credit Cards</a>)</p> <h2>6. Roadside assistance</h2> <p>Like with AAA, a card that offers this benefit may dispatch someone to your house to jump start your car, or they may tow you from the side of the highway to the nearest repair shop. Check the fine print; there may be limitations on how far they will tow you or how many times a year you can use the service for free. (See also: <a href="http://www.wisebread.com/best-credit-cards-for-road-trips?ref=seealso" target="_blank">Best Credit Cards for Road Trips</a>)</p> <h2>7. Rental car damage waiver</h2> <p>Many <a href="http://www.wisebread.com/what-does-car-rental-insurance-really-cover-on-your-credit-card?ref=internal" target="_blank">credit cards offer rental car insurance</a>. If you're paying for a rental in full using one of these credit cards, you can decline the damage waiver offered by the rental company.</p> <p>With this perk, your credit card's rental coverage is secondary to your personal auto insurance. For example, let's say you are in such a hurry to get on the road in your rented PT Cruiser that you accidentally drive right through the exit gate, causing thousands of dollars in damage to the car. If you used a card that offers a collision damage waiver, you'll first need to file a claim with your auto insurer. From there, your card may cover the deductible as well as any fees the rental car company charged. Your auto insurance will pay the rest.</p> <p>If you don't have personal auto insurance, any credit card that offers secondary coverage will become primary, and should cover the whole cost of an accident. It's extra important to note restrictions in this case, since the out-of-pocket costs for anything the service doesn't cover could be really high. There may be limits on how long of a rental period this covers, as well as on the kind of vehicle it covers or even the countries you are covered in. Most importantly, these policies don't cover personal injury or liability, so you'll need to purchase some kind of liability coverage as well.</p> <h2>8. Primary rental car insurance</h2> <p>A few cards offer this benefit, which is better than the standard collision damage waiver because it acts as a primary auto insurance policy for your rental car. This means that if you swerve to avoid a wombat on your Australian vacation and accidentally total the Holden Caprice you rented, you don't have to file a claim with your auto insurance. This could save you on rates in the future.</p> <h2>9. Airline fee credits</h2> <p>I've made some very expensive mistakes booking air travel. One time, when calling an airline to ask if I could change a flight because I'd booked the wrong day, I found out that the change fee was more than the cost of the ticket. If I had booked the flight using a card that reimburses me for airline fees, the ticket might have been salvageable. Instead, I had to abandon it and buy a new, more expensive ticket.</p> <p>This benefit typically comes with cards that have higher annual fees, and has an annual limit, such as $200 in fee reimbursements each year. Besides change fees, they're typically good for other costs, such as baggage fees, airline lounge passes, and upgrades to seats with extra legroom. (See also: <a href="http://www.wisebread.com/travel-perks-you-didnt-know-your-credit-card-had?ref=seealso" target="_blank">12 Travel Perks You Didn't Know Your Credit Card Had</a>)</p> <h2>10. Identity theft hotline</h2> <p>If your credit card offers this service, you can call for help if you're ever a victim of this obnoxious crime. Typical services include sending you the form you need to file with the credit bureaus, having the credit bureaus place an alert on your account, and providing you with form letters you can use to cancel checks or other accounts. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=seealso" target="_blank">Best Credit Cards that Offer Free Credit Scores</a>)</p> <h2>11. Assistance in a travel emergency</h2> <p>You're in another country. You don't speak the language. You wake up in the middle of the night with unbearable stomach pains. What do you do?</p> <p>If you hold a card that offers travel assistance, you can call their international hotline, where they may direct you to the nearest appropriate hospital, and get a translator or U.S. doctor on the phone if necessary. They may even arrange for money to be wired to you, or send messages home to your family. If the emergency is of a legal nature, they can connect you to a lawyer &mdash; or a bail bond provider, if necessary. They're not going to pay for your doctor or lawyer or post your bail, but they can make the connection.</p> <h2>12. Trip delay reimbursement</h2> <p>The first leg of your international trip goes fine, but when you arrive at the gate in Taipei, you find out that your flight to Beijing is canceled until tomorrow. The airline offers no hotel vouchers. Where are you supposed to stay, on the terminal floor?</p> <p>Good news: If you booked the trip with a card that offers trip delay coverage, your hotel and meals may be a reimbursable expense.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/12-times-your-credit-card-has-your-back">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-steps-to-picking-the-best-airline-credit-card-for-the-most-rewards-value">5 Steps to Picking the Best Airline Credit Card for the Most Rewards Value</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-reasons-to-always-use-your-credit-card">4 Surprising Reasons to Always Use Your Credit Card</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-airline-or-travel-rewards-credit-cards-the-better-deal">Are Airline or Travel Rewards Credit Cards the Better Deal?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-with-annual-fees">Best Credit Cards With Annual Fees</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/comparing-miles-which-airline-loyalty-program-is-better">Which Airline Loyalty Program Has the Best Value for Their Miles?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards benefits extended warranty identity theft miles perks price match protections purchase protection reimbursements rewards travel insurance Fri, 05 May 2017 09:00:09 +0000 Carrie Kirby 1940326 at http://www.wisebread.com 5 Sobering Facts About Social Security You Shouldn't Panic Over http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-sobering-facts-about-social-security-you-shouldnt-panic-over" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-639428420.jpg" alt="Learning social security facts you shouldn&#039;t panic over" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Most people tend not to think about Social Security until they are in a position to collect benefits. Unfortunately, letting Social Security be something you worry about &quot;later&quot; can cause costly problems &mdash; both for you as a beneficiary, and for the program as a whole.</p> <p>Here are five sobering facts about Social Security that you should know now so that you will be prepared for potential issues in the future. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <h2>1. The Social Security Trust Fund may be entirely depleted by 2034</h2> <p>Social Security is set up as a direct transfer of funds from current workers to current beneficiaries. However, when the taxes coming in to pay for Social Security exceed the expenses for the program, the surplus is placed in the Social Security Trust Fund, where it earns interest. As of 2010, Social Security expenses have exceeded the tax revenue, and the Social Security Administration has had to dip into the Trust Fund in order to pay out all promised benefits. As of 2013, the Trust Fund began losing value, and it is projected to be <a href="https://www.ssa.gov/oact/trsum/" target="_blank">entirely depleted by the year 2034</a>.</p> <p>When the Trust Fund runs out of money, the projected tax revenue will cover only 79 percent of promised benefits. This means anyone who is entitled to a $1,500 monthly benefit will only receive $1,185.</p> <h3>Why you shouldn't panic</h3> <p>While the coming depletion of the Social Security Trust Fund is troubling, the problem is neither new nor imminent. It's also important to note that the United States is the only country in the world that attempts to predict the 75-year longevity of its social insurance funds, which means we are in a position to do something about the anticipated shortfall. Over the next couple of decades, it is likely that our government will make relatively small changes to the Social Security program in order to make up the 21 percent anticipated shortfall that will occur once the Trust Fund has run dry.</p> <p>However, it is smart for current workers to recognize that Social Security should not be heavily relied upon for a financially secure retirement.</p> <h2>2. The average Social Security retirement benefit is $1,360 per month</h2> <p>As of January, 2017, the average benefit for a retired beneficiary is <a href="https://www.ssa.gov/news/press/factsheets/colafacts2017.pdf" target="_blank">$1,360 per month</a>, which doesn't go very far if that is your only source of income. In addition, beneficiaries who are signed up for Medicare Part B (which is the Medicare medical insurance) will see $134 deducted from their Social Security benefit check for the Part B premium.</p> <p>While very few retirees live solely on their Social Security benefits, these benefits do constitute at least half the income of 71 percent of single seniors and 48 percent of couples. And for a whopping 43 percent of singles and 21 percent of married couples, Social Security benefits represent 90 percent or more of total income.</p> <h3>Why you shouldn't panic</h3> <p>What you need to remember is that you have a great deal of control over how much of your budget your Social Security benefit will represent. If you diligently save for retirement, then receiving an &quot;average&quot; benefit of $1,360 will provide a nice financial cushion on top of your retirement portfolio. While $1,360 is tough to live on by itself, having it available on top of your necessary expenditures would be a wonderful supplement.</p> <h2>3. Cuts to Social Security benefits may be coming</h2> <p>President Trump promised during his campaign that there would be no cuts to current payments for Social Security or Medicare beneficiaries. However, although the White House has made it clear that current beneficiaries' payments are safe, it will not rule out the possibility of making cuts that will affect future beneficiaries. Some of the changes that have been proposed include:</p> <ul> <li>Raise the full retirement age for workers who reach age 62 in 2023, gradually increasing it from the current age of 66 to age 69.<br /> &nbsp;</li> <li>Change the formula for calculating benefits for retirees becoming newly eligible in 2023 in phases over 10 years. The changes would slightly increase benefits for below-average earners and slightly decrease benefits for above-average earners.<br /> &nbsp;</li> <li>Beginning December 2018, change the calculation of the cost-of-living adjustment (COLA) to a chained consumer price index (CPI) calculation, which will reduce the amount of money beneficiaries receive in their annual COLA. The current formula for determining the COLA uses something called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is a useful index for tracking the inflation of all goods, but it does not take into account the fact that many consumers make substitutions when prices go up. (For instance, if the price of beef rises, many consumers will buy chicken or pork instead.) A chained CPI calculation takes these sorts of substitutions into account, so its inflation rate is calculated at approximately 0.3 percentage points lower than the CPI-W rate.<br /> &nbsp;</li> <li>Eliminate the earnings test beginning in January 2019. This test reduces benefits for beneficiaries who are younger than Social Security's full retirement age (currently age 66), are currently receiving Social Security benefit payments, and have income from wages or self-employment that exceed $16,920 per year in 2017.<br /> &nbsp;</li> <li>Eliminate federal income taxation of Social Security retirement benefits as of 2054 and later, phased in from 2045 to 2053.</li> </ul> <h3>Why you shouldn't panic</h3> <p>Although making cuts to future beneficiaries' payments is hardly something to cheer about, we do need to recognize that it is much more important to protect the benefits of current beneficiaries. Since current beneficiaries generally cannot go back to work or cut expenses, they are much more vulnerable to cuts in payments than current workers are. In fact, the proposed switch to a chained CPI calculation for COLA may be burdensome to current beneficiaries, since it has been proposed for December 2018, thereby affecting those who have already retired.</p> <p>What current workers need to do is plan for their Social Security to be an addition to their retirement savings. Then, if these changes and cuts do come to pass, you will not be worried about losing important income.</p> <h2>4. High earners don't pay as much into Social Security</h2> <p>Social Security is paid for through a payroll tax of 6.2 percent for workers and 6.2 percent for their employers, making the total tax contribution 12.4 percent of gross income. However, workers and their employers do not pay Social Security taxes on earnings above $127,200.</p> <p>While $127,200 is a pretty significant chunk of change, it does mean that very high earners get a break once they are earning that amount. The reasoning behind this earnings cap is to maintain the connection between contributions paid in and benefits received. Since Social Security benefits are paid progressively, lower-income beneficiaries receive a higher percentage of their pre-retirement income in benefits than do high-income beneficiaries. The more money that high-income earners pay into Social Security, the less of a return they see on their contributions.</p> <p>The progressive nature of Social Security benefits is the reason why it is unlikely that there will ever be a complete elimination of this earnings cap, even though the program could certainly use the funds that such a cap elimination would represent. However, even if we were to increase the earnings cap to $229,500 &mdash; which would return taxation to the same level it was in the early 1980s &mdash; we could make a major dent in the coming benefits shortfall.</p> <h3>Why you shouldn't panic</h3> <p>Although raising taxes is never popular, there is some indication that our government is working to bring the earnings cap closer to early 1980s levels. In 2016, the earnings cap was set at $118,500, which was the same as the 2015 earnings cap. Raising it to $127,200 represents a 7 percent increase.</p> <h2>5. 10,000 baby boomers are retiring every day</h2> <p>Social Security works pretty well when the ratio of workers to retirees is balanced. Unfortunately, the extra-big generation known as the baby boomers is putting the program out of whack. The 76 million members of that generation began reaching age 62 (the earliest you may take Social Security benefits) as of 2008, and they are just going to keep retiring &mdash; at a rate of <a href="https://www.washingtonpost.com/news/fact-checker/wp/2014/07/24/do-10000-baby-boomers-retire-every-day/?utm_term=.56b6dff4374c" target="_blank">10,000 per day</a>.</p> <p>This huge retirement boom could potentially put an enormous burden on our Social Security program, especially considering the increased life expectancy of this generation as compared to their parents and grandparents.</p> <h3>Why you shouldn't panic</h3> <p>While it's true that approximately 10,000 baby boomers are going to be retiring every day until 2034 (when the last of the boomers will reach age 70, which is the latest you would want to start taking Social Security benefits), there is more to this story than just their retirement.</p> <p>First, it's important to remember that we've known the boomers would be retiring en masse for quite some time. Policymakers began to plan as early as 1983, when Congress raised the full retirement age.</p> <p>Second, the boomers are the workers who built up the Social Security Trust Fund, so they will be beneficiaries of the money they themselves contributed through taxes.</p> <p>Finally, as of 2015, <a href="http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/" target="_blank">millennials had overtaken the boomers</a> as the largest living generation in the U.S. With such a large group of young workers in the workforce, we should be able to handle the financial cost of 10,000 boomers retiring each day.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-falling-for-these-6-social-security-myths">Stop Falling for These 6 Social Security Myths</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">3 Reasons to Claim Social Security Before Your Retirement Age</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement beneficiaries benefits facts full retirement age government social security ssa supplemental income taxes trust fund Thu, 04 May 2017 08:00:08 +0000 Emily Guy Birken 1938308 at http://www.wisebread.com 8 Questions You Should Always Ask in an Exit Interview http://www.wisebread.com/8-questions-you-should-always-ask-in-an-exit-interview <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-questions-you-should-always-ask-in-an-exit-interview" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/women_work_discussion_516896268.jpg" alt="Woman asking questions during her exit interview" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Exit interviews are common when someone is leaving a job. And usually, the onus is on the employer to ask the questions. If you're taking a new job offer, they may want to know why you're leaving, or what they could have done to keep you around. If you're being let go, they'll want to make sure you know everything about the package you're receiving, and your legal options.</p> <p>Rarely do people talk about the questions <em>you</em> should ask in your exit interview. Here are eight that can provide invaluable answers.</p> <h2>1. Will my feedback be anonymous?</h2> <p>If you have some important issues to get off your chest, this is a very important question to ask beforehand. You don't want to tear into an awful boss or coworker, only to find out that it has gotten back to them. You may even want to consider if it's worth the risk at all; if you work in similar fields, your paths may cross again in the future.</p> <p>Despite this, you may feel a moral obligation to tell HR all about the problems that certain coworkers caused, for the sake of the people who are left behind. If you must spill the beans, ask this question before you say anything negative or controversial about anyone. You may even want to write something down that can go on record &mdash; minus your name, of course.</p> <h2>2. What did I do well during my time here?</h2> <p>You can phrase this question however you feel most comfortable, but what you're looking for here is feedback on your strengths. What did you do that made a difference to the company? Were you a rock star at certain things? Were you highly prized in areas you didn't even consider?</p> <p>All of this can be great information to take with you to your next job. You may have thought that speaking up in meetings about potential issues with a project was a cause for grief. But it turns out that people really valued you asking those &quot;Devil's Advocate&quot; questions, as it helped with the development of otherwise unconsidered issues. This kind of feedback can really bolster your performance in your next position.</p> <h2>3. Do I have the option to come back here one day?</h2> <p>It may seem like an odd question to ask &mdash; after all, you're probably leaving the company for very good reason. However, &quot;boomerang&quot; employees can be common in some industries, especially if you're leaving to relocate out of state and may one day return. If you're leaving on good terms, this probably won't be an issue. If you're leaving because things went sour with certain people, it may be tricky to return until they, too, have left. If you're being laid off, you should be given the option to apply for other job openings that match your skill-set in the future.</p> <h2>4. What could I have done better?</h2> <p>No one is perfect. Even an employee that is being begged to stay will still have some areas that could use improvement. Now is the time to find out what those shortcomings are, as this will help you become an even better employee for your next company.</p> <p>Don't take any of this feedback personally. You asked the question, and you need to be an adult about the answers you get. Even if things take a turn, and you suddenly find out someone you respected was constantly complaining about you behind your back, just take it in stride. Fix what you think needs fixing, and ignore the petty stuff.</p> <h2>5. Can I use you as a reference in the future?</h2> <p>It may seem like a no-brainer that they'll say yes, especially if you were a good employee, but many companies frown on their staff providing references for ex-employees. If someone from that company provides a glowing reference for a person who turns out to be unreliable, a thief, a sexual predator, or anything else negative, it can come back on the business and bite them.</p> <p>The HR department's job in any company is to look out for the business, not the people who work there. So, if you think you may want to use them as a future reference, ask before you put their name down. Otherwise, they'll typically verify your dates of employment, and that's about it.</p> <h2>6. When can I expect my final paycheck, and how much will it be?</h2> <p>Your final paycheck may not be issued to you on a regular pay period. It may also include unused vacation days, and depending on your company, unused personal days, sick time (although that's rare), and a portion of the annual bonus you were set to receive.</p> <p>Not only do you want to ask about the final total, but when you can expect to receive that amount, and whether it will be a live check or a bank deposit. If the numbers don't add up, say something now. If they don't have final totals yet, make sure you have the phone number of the person in the payroll department.</p> <h2>7. Is there any kind of noncompete in place?</h2> <p>If you were given an employee handbook when you first started, this may be covered in there. But, roles and responsibilities within an organization vary greatly between departments, so now is a good time to clarify. It's possible that you will be asked not to have any contact with your current clients or vendors for at least a year or two, especially if you will be looking to poach current accounts from your company.</p> <p>Legally, you may not have anything to worry about, as this is typically more of a courtesy. How you handle this, of course, is entirely up to you. At the end of the day, you have to do what's right for you and your family, and if there's nothing in writing to stop you approaching people, it's your call. And of course, if they approach you without any prompting, that's another ballgame entirely.</p> <h2>8. What about a severance package and health benefits?</h2> <p>If you're being laid off, your company may have a set severance package in place. Many businesses offer two weeks of pay for every year of service, up to a cap of their choosing. Others give you a set figure (anywhere from a week to a year) regardless of your time there.</p> <p>You'll also need to know what's happening with your health benefits. Unlike most other countries, health benefits are tied to employment in the U.S. and losing coverage can be costly (or even deadly). Will the company continue covering your health insurance, and if so, for how long? What about COBRA? These are important questions to ask, and if they won't continue coverage, ask for more money in your severance to help cover the costs.</p> <p>If you are planning to leave your company soon, make sure you have at least some of these questions ready for your exit interview. And if you suffer a layoff, please remember to ask about your severance and benefits. Good luck!</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/8-questions-you-should-always-ask-in-an-exit-interview">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-fun-ways-to-leave-your-job">10 Fun Ways to Leave Your Job</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-you-must-do-before-you-quit-your-job">5 Things You Must Do Before You Quit Your Job</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-career-tips-you-wish-you-could-give-your-younger-self">7 Career Tips You Wish You Could Give Your Younger Self</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/11-financial-moves-to-make-the-moment-you-get-fired">11 Financial Moves to Make the Moment You Get Fired</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-deal-when-you-hate-your-new-job">How to Deal When You Hate Your New Job</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income benefits employment exit interview feedback human resources job hunting Job Interview layoffs quitting severance Fri, 28 Apr 2017 08:31:04 +0000 Paul Michael 1936196 at http://www.wisebread.com Why Tax Day Is April 15 and Other Weird Financial Deadlines http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-tax-day-is-april-15-and-other-weird-financial-deadlines" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-175261184.jpg" alt="Learning why Tax Day is on April 15" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>April is one of the finest months of the year. The sun breaks through the clouds, the cherry blossoms bloom, and the promise of warm weather beckons.</p> <p>So of course, the IRS, in its infinite wisdom, decided to place Tax Day right smack dab in the middle of all of this riotous spring beauty.</p> <p>Though I have always believed that the placement of Tax Day in mid-April is proof of the federal government's grim sense of humor, there is actually some method to their madness &mdash; both for this, and all other seemingly arbitrary financial dates and deadlines.</p> <p>Here are the reasons behind some of the most head-scratching financial dates in the United States.</p> <h2>Why is Tax Day on April 15?</h2> <p>Paying federal income taxes is actually a relatively new phenomenon in American history. The first time an income tax was levied on Americans was in 1861 in order to help pay for the Civil War. In 1872, the law surrounding the tax was repealed after opponents successfully argued that federal income tax was unconstitutional.</p> <p>Fast forward to February 3, 1913, when Congress adopted the 16th amendment to the constitution, which allows for federal income tax. Congress also determined the first due date for filing 1913 taxes would be March 1, 1914 &mdash; one year and a couple of weeks later. March 1 offered an easy-to-remember due date that gave citizens just over a full year to get used to being taxpayers, gather up their receipts into the early 20th century version of a shoe box, and file their first returns.</p> <p>Then in 1918, the due date was moved to March 15, for reasons that no one in Congress saw fit to explain or write down.</p> <p>Congress again moved the filing due date in 1955, this time to the now-familiar date of April 15. According to the IRS, the date change helped to spread out the tax season workload for IRS employees.</p> <p>However, there may be a slightly more mercenary reason for the date change: According to Ed McCaffery, a University of Southern California law professor and tax guru, by the mid 1950s, the income tax was applying to increasing numbers of middle class workers, which meant the government had to issue more refunds. &quot;Pushing the deadline back gives the government more time to hold on to the money,&quot; McCaffery claimed in Fortune magazine. And the longer the government holds onto taxes that have been withheld but are destined to be refunded, the more interest it earns on the money.</p> <h3>Okay, so why is Tax Day on April 18 this year?</h3> <p>If you look at an April calendar for 2017, you'll see that April 15 falls on a Saturday this year, which means we get a little extension, since Tax Day can't fall on a weekend. However, you might be confused as to why we get an extension to Tuesday, April 18, instead of Monday, April 17.</p> <p>The reason for our extra day is a Washington, D.C. holiday known as Emancipation Day. Though only Washington, D.C. observes this holiday, a federal statute enacted decades ago states that holidays observed in our nation's capital have a nationwide impact.</p> <h2>Why was 65 chosen as full retirement age for Social Security?</h2> <p>When the Social Security Act was officially adopted in 1935, the age of 65 was chosen as the standard retirement age for beneficiaries. Why was that age chosen as the proper time for full retirement? Why not 63 or 67 or 70?</p> <p>There are a couple of persistent myths out there about this choice, but they are nothing more than misconceptions:</p> <h3>Myth #1: People would die before collecting</h3> <p>The age of 65 was chosen so that people would not live long enough to collect benefits. According to life expectancy actuarial tables from 1930, the average life span was 58 for men and 62 for women, which would make it seem as if Social Security was designed to never make a payout to beneficiaries. However, this myth stems from an unfamiliarity with actuarial tables, which offer an average of <em>all </em>life spans, starting from birth. High infant mortality in the 1930s lowered the overall rate of life expectancy, but anyone who made it to adulthood had a much better chance of reaching age 65 and collecting benefits.</p> <h3>Myth #2: Bismarck was 65</h3> <p>The age of 65 was chosen because Otto von Bismarck &mdash; the author of the world's first old-age social insurance program upon which our Social Security program was partially based &mdash; was 65 when Germany adopted his program. This myth is false on several counts. Bismarck was actually 74 when the German system was adopted, and Germany initially set the retirement age at 70. Germany's retirement age was not lowered to 65 until 1916, at which point Bismarck had been dead for nearly two decades.</p> <h3>The truth behind 65</h3> <p>The actual reason why 65 was chosen as the initial full retirement age for Social Security is pretty boring. The Committee on Economic Security, which Franklin D. Roosevelt created to propose Social Security legislation, conducted a comprehensive analysis of actuarial studies, domestic private pension systems in America, and the social insurance experience in other countries. Based upon that research, the committee recommended 65 as the standard retirement age for Social Security.</p> <h2>Why is 59&frac12; the minimum age to take distributions from tax-deferred retirement accounts?</h2> <p>When it comes to tax-deferred accounts like 401(k)s and traditional IRAs, you are not allowed to take distributions until you have reached the magical age of 59&frac12;. Otherwise, you will owe a 10 percent early withdrawal penalty on the amount you withdraw, in addition to the ordinary income tax you'll owe whenever you take a distribution.</p> <p>So why is the IRS asking you to celebrate half-birthdays when you're nearly 60 years old? Congress used the age of 59&frac12; as the earliest withdrawal age because life insurance actuarial tables consider you to be 60 years old once you have reached the age of 59 and six months &mdash; and at the time that the rules were put in place, 60 was a relatively common age for retirement.</p> <h2>Why must you begin taking required minimum distributions from tax-deferred retirement accounts at age 70&frac12;?</h2> <p>Of course, the IRS is not just about picking random minimum ages for when you <em>can </em>take distributions from tax-deferred retirement accounts &mdash; they also have a random age for when you <em>must </em>take distributions from those accounts.</p> <p>Since the money in your tax-deferred account was placed there before you paid taxes on it, Uncle Sam does want you to eventually pull the money out again so he can get his cut of the money in the form of taxes. That means the IRS requires each account holder to begin withdrawing money during the year that they reach age 70&frac12;. This is called the required minimum distribution (RMD).</p> <p>But unlike the 59&frac12; rule, 70&frac12; does not actually mean your half-birthday. The IRS makes a distinction between those individuals born in the first half of the year and those born in the second half. If your birthday falls between January 1 and June 30, you have to take your first RMD during the calendar year you turn 70. But if your birthday falls between July 1 and December 31, then you don't officially have to take your first RMD until the calendar year you turn 71.</p> <p>Describing this year as being when you are 70&frac12; is actually shorthand, since some folks will be taking their first RMD the year they turn 70, and some will be taking their first RMD the year they turn 71.</p> <h2>Why does Social Security think New Year's babies were born in the previous year?</h2> <p>Unless you happen to have a January 1 birthday, you might not know about this odd piece of Social Security dating. But according to the Social Security Administration, individuals born on the first of the year are considered to have birthdays in the previous year. So Social Security will group someone with a January 1, 1954 birthday with beneficiaries who were born in 1953.</p> <p>This can actually make a big difference when it comes to some Social Security benefits, particularly when those benefits are eliminated. For instance, in 2015 Congress ended the restricted application strategy for any beneficiary born after 1953. The restricted application let applicants specify which Social Security benefits they did <em>not</em> want to apply for, even if they were eligible for all of them. So, for example, beneficiaries who reached full retirement age could claim a spousal benefit while continuing to let their own grow. Beneficiaries who were born on January 1, 1954 were grouped with those with 1953 births &mdash; which means anyone born on January 2, 1954 had rotten luck in terms of using the restricted application.</p> <p>Why does Social Security extend a year 24 hours past the time the rest of us do? This odd birth year dating occurs because the Social Security Administration groups beneficiaries who have birthdays on the first of the month with beneficiaries born in the previous month. This grouping allows first-of-the-month babies to have a little more leeway when it comes to deadlines and other requirements. In order to be completely fair with the first-of-the-month grouping, January 1 babies are then considered to have been born in the previous year.</p> <h2>The government is not entirely lacking in sweet rhyme and pure reason</h2> <p>The financial dates that we all must adhere to may seem like ridiculous and arbitrary decisions, but there was some thought put into them. Those thoughts might only make sense to the people that made the decisions, but at least we know they weren't throwing darts at a calendar.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Here&#039;s How Your Taxes Will Change When You Retire</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Taxes 401(k) ages benefits dates distributions finance facts full retirement age IRA IRS social security tax day trivia Wed, 29 Mar 2017 08:00:22 +0000 Emily Guy Birken 1914689 at http://www.wisebread.com Here's How Your Taxes Will Change When You Retire http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-your-taxes-will-change-when-you-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-508211721.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>When most people dream about their retirement, they focus on the places they'd like to travel, the hobbies they'd like to spend time on, and the people they will see more of. Pondering how to deal with taxes in retirement generally does not enter into these sorts of reveries.</p> <p>While everyone should plan for the good stuff in retirement, it's also important to recognize the less fun aspects of retiring &mdash; like taxes. If you are prepared for the financial side of retirement, then you'll be better able to enjoy your time.</p> <p>Here's what you need to know about how your taxes will be different post-retirement.</p> <h2>Understanding Your Tax Bracket</h2> <p>Before discussing how your taxes change in retirement, it's a good idea to understand both what your tax bracket is and what that means for the amount of money you owe. As of 2017, these are the federal tax brackets for ordinary income:</p> <p><strong>Tax Rate &nbsp; &nbsp; Married Filing Jointly &nbsp; &nbsp; &nbsp; &nbsp;Most Single Filers</strong><br /> 10% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $0&ndash;$18,650 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$0&ndash;$9,325<br /> 15% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $18,651&ndash;$75,900 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$9,326&ndash;$37,950<br /> 25% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $75,901&ndash;$153,100 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$37,951&ndash;$91,900<br /> 28% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $153,101&ndash;$233,350 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$91,901&ndash;$191,650<br /> 33% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $233,351&ndash;$416,700 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$191,651&ndash;$416,700<br /> 35% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $416,701&ndash;$470,700 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$416,701&ndash;$418,400<br /> 39.6% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$470,701+ &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $418,401+</p> <p>What these tax brackets describe is your marginal tax rate, which is the rate you pay on the highest portion of your income. For instance, if you are single and fall in the 25% tax bracket, you are not taxed 25% on all of your income. You are taxed 25% on any income above $37,950, you are taxed 15% on any income between $9,326 and $37,950, and you are taxed 10% on any income below $9,325.</p> <h2>The Tax You Will No Longer Pay in Retirement</h2> <p>Let's start with the good news. There is one type of federal tax that retirement income and Social Security income are both exempt from. That's the Federal Insurance Contributions Act (FICA) tax, which funds Social Security and Medicare.</p> <p>Employed individuals see 6.2% of their gross earnings taxed for Social Security through FICA (and their employers also kick in 6.2%, making the total tax contribution 12.4% of each earner's gross income). In addition to Social Security, FICA also collects 1.45% of your gross income for Medicare Part A.</p> <p>Once you retire and you are no longer earning income from employment, then all of your income will be exempt from FICA &mdash; even any income you take from tax deferred accounts, such as 401K accounts or traditional IRA accounts. That's because your contributions to these accounts were already subject to FICA taxes, even if you funded the account with pre-tax dollars.</p> <h2>The Taxes You Will Owe on Tax-Deferred Accounts</h2> <p>Tax-deferred accounts, like 401Ks and traditional IRAs, allow workers to set money aside before Uncle Sam takes any income tax (although FICA taxes are deducted before the money is placed in such accounts). That money grows tax-free, and once the account holder reaches age 59&frac12;, they can take distributions from it without any penalty.</p> <p>However, the money will then be considered ordinary income and taxed accordingly. So that means a single retiree's $30,000 distribution from their IRA will place them in the 15% tax bracket, and they will owe $4,033.75:</p> <p>10% of $9,325 = $932.50</p> <p>15% of $20,675 = $3,101.25 ($30,000 - $9,325 = $20,675)</p> <p>$932.50 + $3,101.25 = 4,033.75</p> <p>The other important thing to remember about tax-deferred accounts is that you will have to take required minimum distributions (RMDs) once you reach age 70&frac12;. That's because the IRS does not want you to hold onto the money, tax-free, forever. Once you reach 70&frac12;, you must take the RMD amount every year, or owe the IRS 50% of the amount you should have withdrawn. The RMD is calculated based on your date of birth, the balance of each tax-deferred account as of December 31 of the previous year, and one of three <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets" target="_blank">IRS distribution tables</a>, and it is taxed as ordinary income.</p> <h2>No Taxes on Roth IRA and Roth 401K Distributions</h2> <p>The Roth versions of IRAs and 401Ks are also tax-advantaged, but the tax burden is front-loaded. That means you invest after-tax dollars into your Roth account, the money grows tax-free, and any distributions taken after you have reached age 59&frac12; and have held the account for at least five years are completely tax-free.</p> <p>This is one of the reasons why many retirement experts recommend investing in both traditional and Roth tax-advantaged accounts, because it offers you tax-savings both during your career and once you reach retirement.</p> <h2>Capital Gains Taxes</h2> <p>Any investments you have made outside of tax-advantaged accounts &mdash; such as stocks, bonds, mutual funds, and real estate &mdash; are taxed as capital gains, which is great news for many investors.</p> <p>That's because long-term capital gains tax rates, which apply to assets you have held for a year or longer, are quite low. For any investor in the 10% or 15% tax bracket, long-term capital gains taxes are a very favorable 0%. Investors in the 25% through 35% tax bracket will only owe 15% on long-term capital gains, while those in the 39.6% tax bracket owe 20% on long-term capital gains.</p> <p>Short-term capital gains, on the other hand, are taxed at your ordinary income tax rate, as is the interest on your savings account and CDs, as well as dividends paid by your money market mutual funds.</p> <h2>Taxes on Your Social Security Benefits</h2> <p>Up to 85% of your Social Security benefits may be subject to income tax in retirement. The higher your non-Social Security income in retirement, the more likely it is that you'll owe taxes on your Social Security benefit.</p> <p>The way the IRS determines whether your benefits are taxable is by calculating something known as provisional income. The formula for determining the provisional income is: one-half of your Social Security benefits, plus all your other income, including tax-exempt interest. (While tax-exempt interest is included in this calculation, tax-free distributions from a Roth IRA are not.)</p> <p>This means that the more money you take from your retirement accounts, the more of your Social Security benefits are considered taxable.</p> <h2>Taxes on Pensions and Annuities</h2> <p>Pensions from both private companies and the government tend to be taxed as ordinary income, unless you also contributed after-tax dollars to your pension.</p> <p>As for annuities, the tax on your annuity will depend partly on how you purchased it. For instance, if you used pre-tax dollars (like from an IRA) to purchase your annuity, then your annuity payments will be taxed as ordinary income. However, if you purchased the annuity with after-tax dollars, then you will only be taxed on interest earned. With each annuity check you receive, a portion will be considered non-taxable principal, and a portion will be interest that is taxed at your ordinary income tax rate.</p> <h2>Diversifying Your Taxes</h2> <p>Most people recognize that diversifying investments is a sound strategy for growing wealth. However, it's also a good idea to diversify your taxes &mdash; that is, make sure you will not be paying all of your taxes at the same time.</p> <p>Many workers only contribute to tax-deferred retirement accounts, which means they will be facing large tax bills in retirement. It makes more sense to understand when and how you will owe taxes on your various sources of retirement income, and try to diversify the tax burden.</p> <p>Taking a small tax hit now, by investing a Roth account or making other investments with post-tax dollars, will help make sure you are not overwhelmed by your tax burden once you retire.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">7 Penalty-Free Ways to Withdraw Money From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Taxes 401k benefits capital gains distributions FICA IRA medicare social security tax brackets tax changes tax-deferred accounts Thu, 09 Mar 2017 10:30:37 +0000 Emily Guy Birken 1902767 at http://www.wisebread.com 3 Ways More Money in Retirement Might Cost You http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-ways-more-money-in-retirement-might-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-622064048.jpg" alt="Learning how more money in retirement might cost you" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>You might think that there is no such thing as too much money in retirement. After all, without a steady income from working, you need your retirement nest egg to last you throughout your golden years. So more money must be better, right?</p> <p>Well, as The Notorious B.I.G. once said, the more money we come across, the more problems we see &mdash; even in retirement. While I would never discourage anyone from saving as much as they can for retirement, it is a good idea to recognize what kinds of additional problems a large retirement portfolio could cause you.</p> <p>Here's what you need to know about the potential pitfalls of having more money in retirement:</p> <h2>1. You Will Owe Taxes on Tax-Deferred Retirement Accounts</h2> <p>According to the Bureau of Labor Statistics, as of December 2016, <a href="https://www.bls.gov/opub/btn/volume-5/pdf/defined-contribution-retirement-plans-who-has-them-and-what-do-they-cost.pdf" target="_blank">44% of all workers</a> were participating in a tax-deferred defined contribution plan, such as a 401K or an IRA. These types of retirement accounts allow workers to put pretax dollars aside for their retirement, where the money grows tax-free. Once you reach age 59&frac12;, you may withdraw money from such tax-deferred accounts without penalty.</p> <p>The potential trouble comes from the fact that any distribution you take from your tax-deferred account is taxable as ordinary income. This means that you will be taxed on that income in the same way you would be taxed on the same amount of income from a job. Because of the taxes you will owe on your distributions, the money in your tax-deferred retirement account is worth less than the dollar amount.</p> <p>Since many workers anticipate having a lower tax bracket in retirement than they do during their career &mdash; that is, they expect to have a much lower retirement income than career income &mdash; it makes sense to put off the taxes they will pay on the money in their 401K or IRA until after retirement. However, for anyone who manages to create a large retirement portfolio from a modest salary during their career, the tax burden in retirement will be much larger.</p> <h2>2. Required Minimum Distributions May Force You to Withdraw Money You Don't Want</h2> <p>If you put money aside into a tax-deferred account, the IRS will want to see its cut of the money eventually. For that reason, the IRS requires each account holder to begin withdrawing money during the year that he or she reaches age 70&frac12;. There is a minimum amount you must withdraw, and the IRS levies a stiff penalty for failing to do so &mdash; you will owe 50% of the amount that should have been withdrawn.</p> <p>In addition, the required minimum distribution is calculated based on your date of birth, the balance of each tax-deferred account as of December 31 of the previous year, and one of three <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets" target="_blank">IRS distribution tables</a>. That means your required minimum distribution must be recalculated each year using your new end-of-year balance from the previous year and your new distribution period according to the IRS distribution table. Getting the amount wrong can be potentially costly, and if you have a great deal of money in your tax-deferred accounts, you will be required to take more money than you necessarily want to access in one year.</p> <p>Don't forget, this required minimum distribution is also taxed as regular income (as we discussed above), so in addition to potentially withdrawing money you don't want, you will also owe taxes on the amount that you are required to withdraw.</p> <h2>3. You Will Be Taxed on Your Social Security Benefits</h2> <p>Many people are unaware of the fact that up to 85% of their Social Security benefits may be subject to income tax in retirement. The higher a retiree's non-Social Security income, the more likely it is that they will owe taxes on their Social Security check.</p> <p>The way the IRS determines whether your benefits are taxable is by calculating something known as provisional income. The formula for determining the provisional income is: One-half of your Social Security benefits, plus all your other income, including tax-exempt interest. (While tax-exempt interest is included in this calculation, tax-free distributions from a Roth IRA are not.)</p> <p>Your provisional income is compared to an upper and lower base amount to determine how much of your Social Security benefits are taxed, if any. If you file as single, then your lower base amount is $25,000. If your provisional income is above that amount, then you owe taxes on 50% of your Social Security benefits. The upper base amount for single filers is $34,000. If your provisional income is above that amount, then you owe taxes on 85% of your Social Security benefits.</p> <p>What this means is that the more money you take from your retirement accounts, the more of your Social Security benefits are considered taxable.</p> <p>For instance, if you are single and you take $38,000 from your IRA in retirement each year, then you are in the <a href="https://taxfoundation.org/2017-tax-brackets" target="_blank">25% tax bracket</a> and you owe taxes on 85% of your Social Security benefits since your income is above the upper base limit. If you decide to withdraw an additional $1,000 from your IRA one year, your additional $1,000 in income will cause $850 more of your Social Security income to be considered provisional income, making it subject to taxation at your marginal tax rate of 25%. You'll owe $462.50 on your $1,000 withdrawal ($1,850 x 25% = $462.50) between your IRA taxes and your Social Security benefit taxes.</p> <h2>More Money in Retirement Is a Good Problem to Have</h2> <p>Though having a large nest egg may cause some headaches after your retirement, it's important to remember that this is a better problem to have than facing retirement <a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement" target="_blank">without enough savings</a>. Just recognize that large amounts of money need to be properly managed and you need to stay on top of your financial life post-career. You can handle each of the financial problems that you may see with a larger retirement portfolio, as long as you are aware of them and prepared for them.</p> <p> &nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Here&#039;s How Your Taxes Will Change When You Retire</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">7 Penalty-Free Ways to Withdraw Money From Your Retirement Account</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Taxes 401k benefits contributions income IRA social security tax brackets tax-deferred Wed, 08 Mar 2017 10:00:10 +0000 Emily Guy Birken 1901333 at http://www.wisebread.com 3 Reasons to Claim Social Security Before Your Retirement Age http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-reasons-to-claim-social-security-before-your-retirement-age" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-538053186.jpg" alt="Man claiming social security before retirement age" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>When it comes to Social Security, the usual advice is to hold off on taking benefits as long as possible. While most people could claim benefits as early as age 62, your monthly benefit amount will grow each year that you wait up to age 70. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <p>However, there are some situations where taking benefits as soon as possible may be the better way to go. Here are three such scenarios.</p> <h2>1. You Need the Money</h2> <p>If you can't find a job, or simply don't have enough savings to live on, claiming Social Security benefits at age 62 may be your only option.</p> <p>Just keep in mind that if you do find a job, there are <a href="https://www.ssa.gov/planners/retire/whileworking.html" target="_blank">limits to how much you can earn</a> without impacting your Social Security benefits. In years when you are younger than your &quot;full retirement age&quot; (65&ndash;67, depending on when you were born), for every $2 you earn above $16,920, your Social Security benefits will be reduced by $1.</p> <h2>2. Longevity Doesn't Run in Your Family</h2> <p>One way to evaluate the impact of claiming Social Security benefits at various ages is to run what's known as a break-even analysis.</p> <p>When you claim as early as possible, your monthly benefit amount will be smaller than it would have been if you claimed later. However, the head start that early claiming provides means that if you claim benefits at a later age, even though the monthly amount is higher, it'll take a number of years before you've broken even with the total amount you would have received by claiming earlier.</p> <p>For example, here's a look at a friend's estimated monthly Social Security benefits and how they vary depending on when he claims benefits:</p> <ul> <li>$1,529 if claimed at age 62</li> <li>$2,273 if claimed at his full retirement age of 67</li> <li>$2,873 if claimed at age 70</li> </ul> <p>If he claims benefits beginning at age 62, by the end of the year that he turns 67, he will have received a total of over $100,000. If he waits until age 67 to begin taking benefits, it will take him until approximately age 78 before his accumulated benefits would overtake the total he would have received if he had started taking benefits at age 62.</p> <p>If he didn't expect to live to age 78, it would make sense to claim benefits earlier. Of course, that's a tough call. Even in families when one or both parents die early, some of their kids live far longer.</p> <p>To find out your own estimated Social Security benefits, create an account on the Social Security Administration's website.</p> <h3>Run Your Own Break-Even Analysis</h3> <p>Unfortunately, there isn't an easy way to run your own break-even analysis. The Social Security Administration used to have a calculator on its site designed for this purpose, but took it down because they felt it was encouraging too many people to claim early.</p> <p>One workaround is to run various scenarios with <a href="https://www.calcxml.com/do/ins07" target="_blank">this calculator</a>. As a starting point, enter your &quot;current age&quot; as 62, enter your estimated age of death in the &quot;retirement age&quot; field, enter the annual age-62 benefit amount in the &quot;your current annual income&quot; field (the SSA website lists benefits in monthly amounts, so be sure to multiply by 12), and then use the &quot;annual salary increase&quot; field to enter an estimated inflation rate (Social Security benefits are adjusted for inflation each year; use a relatively low amount &mdash; somewhere between 1% and 2%).</p> <p>Then run the same analysis, but change your &quot;current age&quot; to your full retirement age and change &quot;your current annual income&quot; to the annual amount of your full retirement age benefit.</p> <h2>3. You Have Plenty of Money Already Saved for Retirement</h2> <p>If you have enough money to live on regardless of your Social Security benefits, that may be another reason to take Social Security benefits as early as possible. You could use the money to invest, buy a <a href="http://www.wisebread.com/is-long-term-care-insurance-worth-it?ref=internal" target="_blank">long-term care insurance policy</a>, or buy a <a href="http://www.wisebread.com/term-vs-whole-life-insurance-heres-how-to-choose?ref=internal" target="_blank">life insurance policy</a>.</p> <p>It's true that you should think very carefully before claiming Social Security benefits at age 62. There's a hefty increase in the monthly benefit amount for each year that you wait. And if you're married, keep this in mind: When you die, your spouse will be able to choose to take the higher of their benefit or your benefit. If you had been the higher earner, by waiting as long as possible before claiming your benefit, that will be very helpful to your spouse once you're gone.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over">5 Sobering Facts About Social Security You Shouldn&#039;t Panic Over</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement benefits full retirement age income longevity savings social security Wed, 01 Mar 2017 10:30:37 +0000 Matt Bell 1898659 at http://www.wisebread.com 8 Ways a Side Hustle Can Advance Your Career http://www.wisebread.com/8-ways-a-side-hustle-can-advance-your-career <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-ways-a-side-hustle-can-advance-your-career" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-635977934.jpg" alt="Man learning ways a side hustle can advance his career" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Some people call it moonlighting. Others call it a &quot;hobby that pays.&quot; Whatever you call <a href="http://www.wisebread.com/earn-extra-income-with-these-15-creative-side-gigs?ref=internal" target="_blank">your side hustle</a>, it's not just something that can bring in a little extra cash. A side hustle can be a valuable addition to your main career, giving you skills and connections you would never normally acquire.</p> <p>So the big question is, if you don't yet have a side hustle&hellip;will these eight benefits inspire you to get one? (See also: <a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job?ref=seealso" target="_blank">15 Ways to Make Money Outside Your Day Job</a>)</p> <h2>1. Learn Valuable Project-Juggling Skills</h2> <p>Handling several projects at once may well be part of your current career. However, once you add in the additional work from your side hustle, you go from being a moderate juggler to a master of the art.</p> <p>With a side job, your schedules might clash. And when that happens, you can't really tell your boss that you can't do the work because you have an extracurricular project on your plate. With a main career and a side hustle, you become an expert in time management and scheduling. You also learn, quite quickly, how much you can take on without burning out. These are all skills that will do you well in your main career.</p> <h2>2. Enjoy More Freedom at Work</h2> <p>A side job means additional money that isn't coming from your main career. While this has many benefits (the more different streams of revenue you have, the better), it also gives you something other people in the same role may not have &mdash; freedom.</p> <p>The lure of money, or a promotion, can often make people do things they wouldn't like to do, but will anyway because of the need for additional income. If you already have that additional money from another source, you can say no to some of the projects you aren't interested in. You can speak up in meetings without fearing that your pay raise may be on the line. In fact, some people have discovered that this actually helps their career, with their newfound ability to be honest and confident actually helping them get a raise or promotion they otherwise would have missed out on.</p> <h2>3. Stand Out From the Crowd</h2> <p>This is a hirer's market, in almost every industry. Demand for jobs is outpacing supply, and when that happens, you quickly become engaged in a battle to be noticed. Why you? Why your resume? There are dozens, if not hundreds, to choose from.</p> <p>Well, a side hustle can add much needed diversity and drive to your list of skills. Think about it. Two very similar people come for an interview, say for an account executive position. One has the usual skills, and the typical career path. The other has the same, but then you notice that they also have written articles for an industry magazine, and given speeches at major marketing events. On top of that, they have their own successful drop shipping business on eBay. One is clearly a go-getter, and can handle the pressure well. Plus, they have way more experience outside of work.</p> <h2>4. Add More Strings to Your Bow<strong> </strong></h2> <p>Aside from simply standing out to prospective employers, your additional experience from side jobs can have a real impact on your current position. For example, someone may start at a junior position in a firm, with the very narrow set of skills that are required for that role. However, by taking on a side job, perhaps in a field quite different from their chosen profession, they may find themselves with brand-new abilities that really help. A lawyer who takes a side job doing acting in local commercials, or voice over work, suddenly finds that he or she has become a much more skilled orator in the courtroom.</p> <p>This happens often in the fields of advertising, marketing, and public relations, too. Look for jobs that may not initially seem to fit, but have qualities that could reach into your chosen career. You may be surprised at the benefits.</p> <h2>5. Get a Great Confidence Boost</h2> <p>Success breeds confidence. If you become successful in your side hustle, it will seamlessly start to affect your main career. And so it should. If you were doing &quot;just okay&quot; in your main career, but suddenly found great success in your side job designing websites, or selling your own jewelry collections on Etsy, your confidence will get a much-needed boost. It won't take long for that confidence to influence your current role in your main gig.</p> <p>Now, you have a little more steam in your stride. You're a little surer of your abilities, and your decisions. Before you know it, the success you found in your side job is being dwarfed by the successes you're having at work.</p> <h2>6. Open Up New Opportunities</h2> <p>Any time you move in professional circles outside of your main career, you are opening new doors for opportunity. If you have been in one company, and one role, for a long period of time, your contacts and business networks may be stagnant. They're good. But they're not growing. They're just the same &quot;business as usual&quot; leads.</p> <p>However, your side job can open up dramatically different networks. And while you may think that the two cannot combine, don't be so sure. It's entirely possible to meet someone who has an interest in what you do as a main career, but who found you because you make awesome beer, or provide a killer cake baking service. Great business connections can come from all walks of life. They don't all have to come from the same pond.</p> <h2>7. Give Yourself a Second Career to Explore</h2> <p>A career now is not the same as a career 60 years ago. No one these days can expect to start at a company in a junior position and leave at retirement age with a gold watch and a big party.</p> <p>Employment rules have changed. Technology is moving faster than any of us can really comprehend. And it is dangerous to have only one set of skills for one career. Your side hustle can be a huge benefit here. It can give you skills you would never get through your main career, and should the worst happen, you may be able to turn that side hustle into a full-time job. It's quite possible the job you do now, for a bit of extra money, will be your life preserver in a few years' time.</p> <h2>8. Find Fulfillment and Do What You Love<strong> </strong></h2> <p>They say that if you do a job you love, you'll never work a day in your life. &quot;They&quot; don't all live in the real world. Most of us are not fortunate enough to do a job we love, day in, day out. There may be moments of joy, but often, it's a matter of going through the motions and waiting for the clock to wind down.</p> <p>With a side hustle, you really can love what you do. Sure, it brings in a little money, but it can provide much greater benefits than that. It can be a creative outlet, or a way to meet new people, and enjoy new experiences. If you've always wanted to paint murals, but work in a bank&hellip;do both! If you love being a kids' entertainer, do parties on weekends. You can find fulfillment, if you really look for the opportunities.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/8-ways-a-side-hustle-can-advance-your-career">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-turn-your-stress-into-money">8 Ways to Turn Your Stress Into Money</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-lucrative-side-hustles-for-city-dwellers">15 Lucrative Side Hustles for City Dwellers</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job">15 Ways to Make Money Outside Your Day Job</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-even-ordinary-people-can-become-paid-models">5 Ways Even Ordinary People Can Become Paid Models</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/can-you-really-make-a-living-as-an-ebook-writer">Can You Really Make a Living as an Ebook Writer?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career Building Extra Income advantages benefits confidence freelancing fulfillment revenue streams side hustle side jobs small businesses success Wed, 08 Feb 2017 10:30:32 +0000 Paul Michael 1888337 at http://www.wisebread.com Why Your Group Life Insurance Is Not Enough http://www.wisebread.com/why-your-group-life-insurance-is-not-enough <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-your-group-life-insurance-is-not-enough" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-516008468.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've done it &mdash; you've finally landed a job that offers amazing benefits such as free life insurance. While employer-offered life insurance (also called group life insurance) is worthwhile, it shouldn't be your only source of insurance.</p> <h2>How Do I Get Group Life Insurance?</h2> <p>Many employers will offer a free level of life insurance for employees. Depending on your place of work, this can cover anywhere from $25,000 to your base pay. Since this is a free option, all employees should sign up for the benefit. It's free money if something were to happen to you. However, don't let that be your only coverage. (See also: <a href="http://www.wisebread.com/5-reasons-why-life-insurance-isnt-just-for-old-people?Ref=seealso" target="_blank">5 Reasons Why Life Insurance Isn't Just for Old People</a>)</p> <h2>Is Group Life Insurance Enough?</h2> <p>If you are single, a $25K &mdash;$50K check sounds like a nice chunk of change for your parents or other loved ones you leave behind. However, in most cases &mdash; yes, even for single people &mdash; it's simply not enough. Final expenses can be greater than you think. Funerals can range in price, but a recent survey by the National Funeral Directors Association found a median price of $7K.</p> <p>Furthermore, if your private student loans, mortgage, or car loans have a co-signer, then that co-signer will be stuck with your debt after you die. To avoid this, you can either remove co-signers from loans through refinancing, or purchase term life insurance that will cover the cost of your remaining debt.</p> <p>For healthy, young individuals that do not need much coverage, term life insurance rates are very affordable, with some policies costing less than $20 a month. But for individuals who are married and/or have children, you'll likely need more coverage, To calculate how much coverage you need, add up the following:</p> <ul> <li>Funeral cost;<br /> &nbsp;</li> <li>Cost of paying off any debt not forgiven upon death;<br /> &nbsp;</li> <li>Time you want your loved ones to have income and not worry about work &mdash; for example, even if your spouse works full-time in a successful career, they might need several months to grieve your loss;<br /> &nbsp;</li> <li>Future college costs or other child-rearing expenses.</li> </ul> <p>For many families, the total will be around seven to 10 times your annual paycheck.</p> <h2>Can I Get Supplemental Life Insurance Through an Employer?</h2> <p>Many employers will offer supplemental life insurance for purchase. Since you are purchasing the policy through your employer, it could be slightly cheaper than purchasing individual life insurance. However, your company technically owns the policy. Therefore, if you quit or are fired, your group life is gone, too. Some employers will give you the option to continue carrying the policy after you leave, but it will be at a higher price.</p> <h2>Individual Life Insurance Versus Group Life Insurance</h2> <p>While signing up for free group life insurance is a must, it is much better to sign up for supplemental term life insurance individually. The policy will stay with you even if you move jobs. Furthermore, you can lock in a low premium now when you are still young and healthy.</p> <p>Say you were to secure a low-cost policy with your employer's group life insurance at the young age of 25. Your rates should be quite low. Now fast forward eight years. You want to quit your job and have your own term life insurance policy. You will still get a great rate because you are under 40, but your monthly premium will be more at 33 than it was at 25.</p> <p>To sum it all up, cash in on your employer's free group life insurance perk, but also secure term life insurance when you are still young. This will allow you to lock in the best rate possible.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/why-your-group-life-insurance-is-not-enough">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-should-single-people-get-life-insurance">When Should Single People Get Life Insurance?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/term-vs-whole-life-insurance-heres-how-to-choose">Term vs Whole Life Insurance: Here&#039;s How to Choose</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/new-job-dont-make-these-7-mistakes-with-your-benefits">New Job? Don&#039;t Make These 7 Mistakes With Your Benefits</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-times-when-its-okay-to-drop-insurance">6 Times When It&#039;s Okay to Drop Insurance</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/meet-wise-breads-financial-planning-expert-jeff-rose-cfp">Meet Wise Bread&#039;s Financial Planning Expert, Jeff Rose, CFP!</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance beneficiaries benefits coverage dependents employers life insurance premiums Tue, 31 Jan 2017 11:00:10 +0000 Ashley Eneriz 1877983 at http://www.wisebread.com 5 Great Retail Jobs for Working Parents http://www.wisebread.com/5-great-retail-jobs-for-working-parents <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-great-retail-jobs-for-working-parents" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-458589277.jpg" alt="Costco is a good place for parents to work" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>'Tis the season, as in, the 4th quarter of the calendar year! That magical time when seasonal retail employees are needed the most, and hired en masse to meet the demand from Black Friday through January. If you have kids, try these five great retail gigs for working parents.</p> <h2>1. Patagonia</h2> <p>The best retailer for working parents could very well be Patagonia, the clothing and gear brand beloved by trekkers and puffy-vest fans everywhere. Why? They have <a href="http://time.com/money/4546719/patagonia-onsite-child-care/">free on-site child care</a> for employees. You read that right! This also means that 100% of employees return to their post after their maternity leave.</p> <p>So how do you climb your way into that gig? Well, it's not so much a seasonal gig as it is a job in their headquarters, which is in Ventura, CA. Not such a bad relocation, though.</p> <h2>2. Lands' End</h2> <p>In similar step with Patagonia, another purveyor of outdoorsy goods Lands' End also provides lots of benefits to workers. In addition to many citing its company culture as safe, fair, and open, they also boast some competitive benefits, including: <a href="http://www.landsend.com/jobs/life-at-lands-end/real-benefits/">health insurance</a>, 401K, subsidized on-site food services, a wellness center &ndash;&ndash; all great benefits for parents. Time to apply for a position now!</p> <h2>3. Wegmans</h2> <p>That's right, the supermarket chain known across the East Coast for great food and service is also a great employer. Wegmans is number four on the <a href="http://fortune.com/best-companies/wegmans-food-markets-4/">Best Companies to Work For list in 2016</a>. </p> <p>Why are they so great? Wegmans covers 85%-100% of employees' and their dependents health insurance. Many employees are even offered dental insurance. Plus, if you're a college student, they help <a href="https://jobs.wegmans.com/benefits">pay your tuition</a>. If you live in the Northeast and are looking for a job, this would be a good one. Plus, they make really delicious doughnuts.</p> <h2>4. Staples</h2> <p>Need a chain store with more locations, and most likely to be near your home? Staples is a very good option. </p> <p>Staples employees get an Aetna <a href="http://www.stapleslivewell.com/SitePages/Welcome.aspx">health insurance plan</a> for a deduction of $30 per paycheck, or $60 for those with dependents. Workers also get short-term disability insurance, and access to a service that can pair them with financial services and child care. Not too shabby!</p> <h2>5. Costco</h2> <p>If it wasn't already hard to avoid spending money at Costco, everyone's favorite bulk-everything retailer is also famously good to its employees. <a href="https://www.costcobenefits.com/">Employee perks</a> for America's second-largest retailer include: choosing your own health plan if you work over 24 hours per week, a 401K plan, an FSA account to use <a href="http://www.wisebread.com/dont-miss-out-on-this-easy-way-to-pay-for-child-care">pretax income for child care</a>, and an employee care program that includes access to mental health, and financial professionals.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amanda-meadows">Amanda Meadows</a> of <a href="http://www.wisebread.com/5-great-retail-jobs-for-working-parents">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/can-you-really-make-a-living-in-the-gig-economy">Can You Really Make a Living in the Gig Economy?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-reasons-paid-parental-leave-is-essential-for-moms-and-dads">5 Financial Reasons Paid Parental Leave Is Essential for Moms and Dads</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-side-jobs-for-people-who-are-good-with-money">6 Side Jobs for People Who Are Good With Money</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/17-part-time-jobs-to-do-while-your-kids-are-at-school">17 Part-Time Jobs to Do While Your Kids Are at School</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-companies-with-the-best-employee-discounts">8 Companies With the Best Employee Discounts</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income Family Job Hunting benefits employers insurance part-time job retail retail job side gig side jobs working parent Thu, 01 Dec 2016 11:30:11 +0000 Amanda Meadows 1844262 at http://www.wisebread.com Get Your Money Sooner by Starting 2016 Tax Prep Now http://www.wisebread.com/get-your-money-sooner-by-starting-2016-tax-prep-now <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/get-your-money-sooner-by-starting-2016-tax-prep-now" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_work_clock_485696494.jpg" alt="Woman getting money sooner by starting tax prep" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Good news, U.S. taxpayers!</p> <p>In 2017, Tax Day is pushed back to Tuesday April 18th, because April 15th falls on a Saturday and the Emancipation Day holiday (anniversary of the signing of the Compensated Emancipation Act by President Abraham Lincoln) is pushed to Monday April 17th. Residents of Maine and Massachusetts get an extra day to file federal taxes because Patriots Day falls on April 18th, 2017.</p> <p>However, getting a head start on your return is a better strategy than waiting until April 18th or 19th, depending on your state of residence. From increasing the take-home from your remaining paychecks for the year to making the most out of a bonus check in the first few weeks of 2017, let's review five reasons why it pays off to prep for the 2016 tax season now.</p> <h2>1. Avoid Withholding More Than You Need To</h2> <p>Nearly eight out of 10 U.S. tax filers <a href="http://money.cnn.com/2015/01/13/pf/taxes/taxpayer-refunds/">get tax refunds</a>. This isn't good for two reasons. First, those individuals have to get throughout the year with fewer dollars. The average <a href="https://www.irs.gov/uac/newsroom/filing-season-statistics-for-week-ending-oct-21-2016">refund for the 2016 tax season</a> was $2,777, or roughly $230 per month. Wouldn't an extra $230 per month for a full year provide more breathing room in your budget and help you pay down high-interest debt faster? Second, the IRS pays you no interest on the refund from your current year. Now, that's a double whammy.</p> <p>To find out whether or not you have already withheld enough for this tax season, use the <a href="https://www.irs.gov/individuals/irs-withholding-calculator">IRS Withholding Calculator</a> and find out how to adjust your Form W-4. Chances are that you will be able to take home more money from your last paychecks from 2016 and avoid having to put those holiday purchases on credit.</p> <h2>2. Spread Out Tax Liability</h2> <p>Of course, using the IRS Withholding Calculator may reveal that you're behind your estimated tax liability. In that case, finding out earlier allows you to take several steps to avoid a huge lump-sum payment next year. Here is your game plan:</p> <ul> <li>Adjust your filing status, number of allowances, and number of dependents on Form W-4 according to the instructions from the IRS Withhold Calculator to increase withholding on the next few paychecks;<br /> &nbsp;</li> <li>Input an additional amount, if any, you want withheld from each paycheck on line six of Form W-4; or<br /> &nbsp;</li> <li>Submit an additional estimated tax payment with the fourth voucher from <a href="https://www.irs.gov/pub/irs-pdf/f1040es.pdf">Form 1040-ES</a> due on January 17, 2017.</li> </ul> <h2>3. Boost Retirement Account Contributions</h2> <p>In 2016, you can contribute up to $18,000 ($24,000 when age 50 and over) to your 401K and up to $5,500 ($6,500 when age 50 and over) to your IRA. The catch is that all of your contributions to an employer-sponsored retirement account must be turned by your last paycheck. Even though you can technically submit contributions to your employer-sponsored retirement account until December 31, 2016, your last paycheck may fall on, let's say, December 23rd.</p> <p>If you know that you still have a lot of room before you hit the maximum contribution limit for your 401K, you're in time to increase the contribution percentage from your paycheck for the remainder of the year. Act fast because some employers may make changes effective anywhere from one to four weeks.</p> <p>In the event that you don't have a retirement account, find out whether or not you're eligible to set one up by December 31, 2016. As long as you set up your 401K or IRA by this date, any contributions to your retirement account that your employer makes through a commission check or bonus next year before Tax Day or the day that you file your return, whichever is earlier, reduce your taxable income for 2016! (See also: <a href="http://www.wisebread.com/6-smart-things-to-do-with-your-bonus?ref=seealso">6 Smart Things to Do With Your Bonus</a>)</p> <h2>4. Get Your Refund Faster</h2> <p>The IRS issues tax refunds generally in <a href="https://www.irs.gov/refunds/tax-season-refund-frequently-asked-questions">less than 21 calendar days</a>. By submitting your tax return earlier, you're increasing your chances of getting your return processed faster. By February 5, 2016, the IRS had received 26,670,000 returns and processed 26,133,000 of those returns. That's a 97.98% processing rate &mdash; not too bad. Fast forward to April 22, 2016, the number of returns received by the IRS ballooned to 136,528,000 and the processing rate drops by 3%. The early (tax) bird gets the worm (faster).</p> <p>Completing your federal return early also helps you get your state refund faster. Remember that this year many states increased the required processing time due to new tax fraud prevention procedures. For example, the Hawaii State Department of Taxation increased the processing window from six to eight weeks to <a href="http://khon2.com/2015/04/08/state-tax-refunds-delayed-further-by-new-fraud-prevention-procedures/">approximately 10 to 14 weeks</a>.</p> <p>To help increase the odds of a faster refund, opt to file your return electronically, whenever possible, and receive your refund via direct deposit. (See also: <a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make?ref=seealso">8 Tax Return Mistakes Even Smart People Make</a>)</p> <h2>5. Prevent Tax Identity Theft</h2> <p>Last but not least, a key benefit of preparing and submitting your 2016 tax return early is that it prevents tax-related identity theft. Here's a sample. As of February 29, 2016, the IRS had identified <a href="https://www.treasury.gov/tigta/auditreports/2016reports/201640034fr.pdf">31,578 fraudulent tax returns</a> involving identity theft. Just six days later, the number of identified fraudulent tax returns increased by over 10,500!</p> <p>When it comes to filing your return, every single day counts. The longer you wait, the higher your chance in becoming the next victim of tax-related identity theft.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/get-your-money-sooner-by-starting-2016-tax-prep-now">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Top Three Tax Facts to Know for 2016</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-most-common-tax-questions-for-beginners-answered">The 7 Most Common Tax Questions for Beginners, Answered</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-you-should-file-your-taxes-as-soon-as-possible">8 Reasons You Should File Your Taxes as Soon as Possible</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-tax-return-mistakes-even-smart-people-make">8 Tax Return Mistakes Even Smart People Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Taxes benefits early filing identity theft IRS refunds tax day tax prep Tax Season taxpayers withholdings Wed, 30 Nov 2016 11:00:07 +0000 Damian Davila 1843962 at http://www.wisebread.com Stop Falling for These 6 Social Security Myths http://www.wisebread.com/stop-falling-for-these-6-social-security-myths <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stop-falling-for-these-6-social-security-myths" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/social_security_card_76556001.jpg" alt="Learning to stop falling for social security myths" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Over 166 million taxpayers pay into Social Security, which pays benefits to over 65 million Americans. As with any program as large and sprawling as Social Security, myths about how it works can run rampant &mdash; and since the facts tend to require more than a sound bite to explain, those myths become entrenched in our collective consciousness as fact.</p> <p>But not only are these Social Security myths untrue, believing them can cause you to make poor decisions about your Social Security benefits. Here are six of the most common and harmful myths about Social Security, debunked:</p> <h2>1. The Government Is Raiding the Social Security Trust Fund</h2> <p>You will often hear people complain about how untrustworthy our government is, and offer the fact that Congress &quot;raids&quot; the Social Security Trust Fund as proof. While it is true that the Trust Fund is where excess Social Security taxes are placed for future beneficiaries, and it is also true that the government uses money in this account to pay for government programs, it is simply not true that the fund is being &quot;raided.&quot;</p> <p>Here's what's going on. Money placed in the Social Security Trust Fund may sound like it is being put in a vault somewhere for the safekeeping of future beneficiaries. But that's not how money works. Not only would that be a security risk, but the money in such a vault would lose value to inflation. In order to maintain and increase the value of the trust fund, the money must be invested in government programs.</p> <p>Think of it this way: Any time you invest money commercially &mdash; whether by putting it in an interest-bearing bank account or by buying stocks or bonds &mdash; you are probably aware that the institution is immediately spending the money you have invested. The private institution spends your investment with the understanding that it will earn profits and be able to pay you back, with interest.</p> <p>The government is no different. It spends money invested in the Social Security Trust Fund on infrastructure, military spending, government salaries, welfare, and the like, knowing that those investments will earn interest. But unlike a private institution, this kind of government spending is backed by the full faith and credit of the U.S. government.</p> <p>The government's spending of money from the Social Security Trust Fund is just as valid a use of invested money as is the lending and spending that a bank or corporation does with investors' money.</p> <h2>2. Social Security Is Going Bankrupt</h2> <p>This myth is based on a kernel of truth &mdash; specifically, Social Security benefit payments exceed payroll tax revenues and have done so since 2010. In order to maintain promised benefits, Social Security has had to dip into the Social Security Trust Fund. As of 2013, the Trust Fund began losing value, and it will become entirely depleted by 2037.</p> <p>This is the point at which most analysis stops, and that is why you will often hear the myth that Social Security is circling the drain. But it is impossible for Social Security to go bankrupt, because it was always designed as an immediate transfer of funds from current workers to current beneficiaries. (When there were more workers than beneficiaries, excess taxes were placed in the Trust Fund. This was the case until 2009). The program does not count on a specific pool of money, but on the tax revenue of current workers.</p> <p>That being said, once the Trust Fund is depleted, tax revenue is only expected to pay for approximately 79% of promised benefits. This is the shortfall you will hear experts referring to when discussing the future of Social Security. But it does not spell the end of the program. It is just a shortfall that we need to find a way to make up.</p> <p>Social Security was created specifically so it could be changed and tweaked to meet the changing needs of Americans &mdash; changing needs like this anticipated shortfall. We might have little faith in Washington right now, but it is specifically the job of our government to make changes to Social Security to deal with this coming shortfall. Eventually, they'll get around to it.</p> <h2>3. It's the Baby Boomers' Fault We're in This Mess</h2> <p>There are plenty of articles out there that place the blame for Social Security's financial woes squarely at the feet of the baby boomer generation &mdash; the largest-ever generation of Americans, born between 1946 and 1964. There are 76 million baby boomers, and having that many people retire over a couple of decades places an enormous burden on Social Security. Since our system is based upon an immediate transfer from current workers to current retirees, having the boomers retire all at once puts too many retirees into the equation.</p> <p>But the boomers' retirement is hardly a surprise. They've been around for six or seven decades now, and we have seen this mass boomer retirement phase coming for many years. According to Virginia P. Reno and Joni Lavery in the Social Security brief <a href="https://www.nasi.org/usr_doc/SS_Brief_022.pdf">Can We Afford Social Security When Baby Boomers Retire?</a>, &quot;Policymakers began to plan as early as 1983, when Congress lowered the cost of Social Security benefits for boomers and later generations by raising the age at which unreduced retirement benefits will be paid.&quot;</p> <p>Believe it or not, our government has been trying for quite some time to prepare for this moment. Part of the reason we had such a surplus in the Social Security Trust Fund was because of our preparation for the mass retirement of the boomer generation. We are far better prepared for the boomers than many doomsayers might have you believe.</p> <h2>4. Waiting for Benefits Means You Risk Not Getting Your Fair Share</h2> <p>It is possible to take Social Security benefits as early as age 62, although your benefits will be permanently reduced by up to 25% to 30 percent by taking them early. Wait until your full retirement age (66 for individuals born between 1943 and 1954, rising to age 67 for anyone born in 1960 or later), and you will receive your full benefits. If you can wait until age 70, you will receive delayed retirement credit equal to approximately 8% per year between your full retirement age and 70.</p> <p>If you calculate the break-even analysis on your Social Security benefits, it often looks like you're better off by taking early benefits. Early, reduced benefits offer you more lifetime benefits for nearly 15 years into the break-even analysis.</p> <p>The problem with this thinking is that the only way for you to &quot;win&quot; these calculations is to die young. It would actually be far worse for you to take early benefits and then live a long life on a reduced income. It is much smarter to delay your benefits as long as possible to provide yourself with the largest benefit you can get.</p> <h2>5. Immigrants Are Taking Social Security Benefits They Didn't Pay For</h2> <p>This myth is an election year favorite, and it conflates Social Security benefits with Supplemental Security Income (SSI) benefits. Social Security benefits are only available to beneficiaries who either paid into the system themselves, or who are the dependents of those who paid into the system. If you have not paid any Social Security payroll taxes (or you haven't been the dependent of someone who has), you are not getting Social Security benefits. Period.</p> <p>SSI, on the other hand, is a welfare program designed to provide aid to the elderly and disabled, and SSI benefits are paid through general governmental revenues. Immigrants are eligible to collect SSI benefits, but only if they show the same level of extreme need as any other SSI beneficiary.</p> <h2>6. Privatizing Social Security Would Make the System Fairer</h2> <p>The possibility of privatizing Social Security is a common suggestion for fixing many of the problems inherent in such a large government program. These suggestions often promise that privatization will be cheaper for the government, more lucrative for beneficiaries, and fairer for everyone since you will get out what you put in.</p> <p>Unfortunately, none of those three promises would be true. Social Security is a very efficiently run program, with administrative expenses totaling less than 1% of the program's budget. But creating and maintaining individual investment accounts would be incredibly expensive, since it would incur broker commission fees and/or mutual fund management fees, which would either come from the program budget or individual investors.</p> <p>In addition, it is unlikely that the majority of beneficiaries would be able to improve upon their Social Security &quot;return on investment&quot; through investment accounts, since humans are notoriously irrational investors. Social Security benefits are guaranteed, while investment returns are not.</p> <p>Finally, attempting to create pay-for-what-you-get fairness in a social insurance program like Social Security is a non-starter. The intention of Social Security is to provide guaranteed income to the elderly, the disabled, and their families, by spreading the cost of that income over all of society. Strict fairness in such a system would leave our most vulnerable citizens in abject poverty or worse. It's also important to note that the transition costs of privatizing Social Security have been estimated at nearly <a href="http://www.ncpssm.org/Document/ArticleID/14">$5 trillion over the first two decades</a>. Those costs would need to be paid by current workers, who would potentially be paying into their privatized accounts and still be paying taxes that go toward current beneficiaries &mdash; which would feel incredibly unfair.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/stop-falling-for-these-6-social-security-myths">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-11"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over">5 Sobering Facts About Social Security You Shouldn&#039;t Panic Over</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">3 Reasons to Claim Social Security Before Your Retirement Age</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Retirement baby boomers benefits Congress full retirement age government immigrants myths privatized social security ssi Mon, 07 Nov 2016 10:30:29 +0000 Emily Guy Birken 1827091 at http://www.wisebread.com