401(k) http://www.wisebread.com/taxonomy/term/3831/all en-US How to Face 4 Ugly Truths About Retirement Planning http://www.wisebread.com/how-to-face-4-ugly-truths-about-retirement-planning <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-face-4-ugly-truths-about-retirement-planning" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-155373418.jpg" alt="Learning ugly truths about retirement planning" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Most working Americans still have a long way to go to ensure a comfortable, financially secure retirement. But, with consistency and dedication, retirement planning can be a feasible project. Let's review some of the ugly truths of retirement planning, and the strategies you can use to conquer them. (See also: <a href="http://www.wisebread.com/7-things-financial-advisers-wish-you-knew-about-retirement?ref=seealso" target="_blank">7 Things Financial Advisers Wish You Knew About Retirement</a>)</p> <h2>1. Employer matches require work</h2> <p>While people often like to think of employer matches as free money, the truth is that you do need to do some &quot;work&quot; to earn those matches.</p> <p>First, your employer may require a minimum period of employment or contribution to your retirement account before you become eligible for employer contributions. According to a Vanguard analysis of 1,900 401(k) plans with 3.6 million participants, 27 percent of employers <a href="http://money.usnews.com/money/retirement/articles/2015/06/29/how-does-your-401-k-stack-up" target="_blank">require a year of service</a> before providing any matching contributions. And that waiting period may be on top of the waiting period to be eligible for an employer-sponsored 401(k) in the first place.</p> <p>Second, once you're eligible for the employer match, you may have to contribute a minimum percentage from each paycheck yourself to get it. According to Vanguard, 44 percent of employers required a 6 percent employee contribution to get the entire 401(k) match on offer.</p> <p>Third, only 47 percent of surveyed employers provide immediate vesting of employer contributions. Since only moneys in your retirement account that are fully vested truly belong to you, you may have to wait up to six years to get to keep it all. If you part ways with your employer earlier than that, you may have to say goodbye to some or all of those employer contributions. (See also: <a href="http://www.wisebread.com/15-retirement-terms-every-new-investor-needs-to-know?ref=seealso" target="_blank">15 Retirement Terms Every New Investor Needs to Know</a>)</p> <h3>How to handle it</h3> <p>Find out the applicable rules for employer contributions under your employer-sponsored retirement account. Ask about the waiting period for eligibility, how much you should contribute to get the full employer match, and what is the applicable vesting schedule for employer contributions. This way you'll know how to make the most (and keep the most!) of any employer contributions.</p> <h2>2. Full retirement age is higher than many of us think</h2> <p>According to the 2016 Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI), one in every two American workers expected to retire <a href="https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf" target="_blank">no later than age 65</a>.</p> <p>The problem with that plan is that only those with born in 1937 or earlier have a full retirement age of 65. Your full retirement age is the age at which you first become entitled to full or unreduced retirement benefits from the Social Security Administration (SSA). Retiring earlier than your full retirement age decreases your retirement benefit from the SSA.</p> <p>For those born 1960 or later, full retirement age is 67. If this were your case, retiring at age 62 or age 65 would <a href="https://www.ssa.gov/planners/retire/retirechart.html#chart" target="_blank">decrease your monthly benefit</a> by about 30 percent or 13.3 percent, respectively. (See also: <a href="http://www.wisebread.com/13-crucial-social-security-terms-everyone-needs-to-know?ref=seealso" target="_blank">13 Crucial Social Security Terms Everyone Needs to Know</a>)</p> <h3>How to handle it</h3> <p>If you're one of the 84 percent of American workers expecting Social Security to be a source of income in retirement, then you need to keep track of your retirement benefits. There are two ways do this.</p> <p>First, since September 2014, the SSA mails Social Security statements to workers at ages 25, 30, 35, 40, 45, 50, 55, and 60 and over, who aren't yet receiving Social Security benefits and don't have an online &quot;my Social Security&quot; account. Here is a <a href="https://www.ssa.gov/myaccount/materials/pdfs/SSA-7005-SM-SI%20Wanda%20Worker%20Near%20retirement.pdf" target="_blank">sample of what those letters look like</a>. Second, you could sign up for a my Social Security account at <a href="http://www.ssa.gov/myaccount" target="_blank">www.ssa.gov/myaccount</a> and have access to your Social Security statement on an ongoing basis.</p> <p>Through either one of these two ways, you'll get an estimate of your retirement benefit if you were to stop working at age 62 (earliest age you're eligible to receive retirement benefits), full retirement age, and age 70 (latest age that you can continue delaying retirement to receive delayed retirement credits). That way you can plan ahead for when it would make the most sense to start taking your retirement credits.</p> <h2>3. Retirement accounts have fees</h2> <p>One of the most common myths about 401(k) plans is that they don't have any fees. The reality is that both you and your employer pay fees to plan providers offering and managing 401(k) plans. One study estimates that 71 percent of 401(k) plan holders <a href="http://www.aarp.org/work/retirement-planning/info-02-2011/401k-fees-awareness-11.html" target="_blank">aren't aware that they pay fees</a>.</p> <p>While an annual fee of 1 to 2 percent of your account balance may not sound like much, it can greatly reduce your nest egg. If you were to contribute $10,000 per year for 30 years in a plan with a 7 percent annual rate of return and an 0.5 percent annual expense ratio, you would end up with a balance of $920,000 at the end of the 30-year period. If the annual expense ratio were to increase to 1 percent or 2 percent, your final balance would be $840,000 or just under $700,000, respectively.</p> <h3>How to handle it</h3> <p>One way to start minimizing investment fees is to pay attention to the annual expense ratio of the funds that you select.</p> <ul> <li>When deciding between two comparable funds, choose the one with the lower annual expense ratio. Research has shown that funds with a lower expense ratio tend to better performers, so you would be minimizing fees <em>and </em>increasing your chances of higher returns.<br /> &nbsp;</li> <li>Explore index funds. For example, the Vanguard 500 Index Investor Shares fund [<a href="https://finance.yahoo.com/q?s=vfinx" target="_blank">Nasdaq: VFINX</a>] has an annual expense ratio of 0.14 percent, which is around 84 percent lower than the average expense ratio of funds with similar holdings. The Admiral version of this equity index fund has an even lower annual expense ratio of 0.05 percent.<br /> &nbsp;</li> <li>Check the prospectus of your funds for a schedule of fees. From redemption fees to 12b-1 fees, there are plenty of potential charges. Review the fine print of any fund that you're considering investing in and understand the rules to avoid triggering fees. For example, you may need to hold a fund for at least 65 days to prevent triggering a redemption fee. (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso" target="_blank">Watch Out for These 5 Sneaky 401(k) Fees</a>)</li> </ul> <h2>4. 401(k) loans are eating away nest eggs</h2> <p>According to the latest data from the EBRI, 23 percent of American workers <a href="https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf" target="_blank">took a loan</a> from their retirement savings plans in 2016. On top of the applicable interest rate on your loan, you'll also be liable for an origination fee and an ongoing maintenance fee. Given that origination fees range from <a href="http://www.nber.org/papers/w17118.pdf" target="_blank">$25 to $100</a> and maintenance fees can go up to $75, 401(k) loans are one expensive form of financing. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account?ref=seealso" target="_blank">5 Questions to Ask Before You Borrow From Your Retirement Account</a>)</p> <p>Additionally, when you separate from your employer, the full unpaid balance is due within 60 days from your departure. If you don't pay back in time, that balance becomes taxable income, triggering potential penalties at the federal, state, and local level. One penalty that always applies is the 10 percent early distribution tax for retirement savers under age 59-1/2.</p> <h3>How to handle it</h3> <p>Don't borrow from your retirement account. Studies have shown that 401(k) borrowers tend to come back for additional loans, increasing their chances of default. One study found that 25 percent of 401(k) borrowers came back for a <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html" target="_blank">third or fourth loan</a>, and 20 percent of 401(k) borrowers came back for <em>five </em>or more loans. Borrowing from your retirement account should be a very last-resort option because there are few instances when it's worth it. (See also: <a href="http://www.wisebread.com/this-is-when-you-should-borrow-from-your-retirement-account?ref=seealso" target="_blank">This Is When You Should Borrow From Your Retirement Account</a>)</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/how-to-face-4-ugly-truths-about-retirement-planning">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/7-traps-to-avoid-with-your-401k">7 Traps to Avoid With Your 401(k)</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/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</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-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What?</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-things-financial-advisers-wish-you-knew-about-retirement">7 Things Financial Advisers Wish You Knew About Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions employer match fees full retirement age loans nest egg social security ugly truths Fri, 07 Apr 2017 08:00:13 +0000 Damian Davila 1922316 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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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/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> 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 7 Traps to Avoid With Your 401(k) http://www.wisebread.com/7-traps-to-avoid-with-your-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-traps-to-avoid-with-your-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-163904271.jpg" alt="Finding traps to avoid with your 401(k)" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>More and more Americans are choosing an employer-sponsored 401(k) as their preferred way to build up their nest eggs. As of 2014, an estimated 52 million Americans were participating in a 401(k)-type plan.</p> <p>When used properly, a 401(k) can be a powerful tool to save for your retirement years, but there are a couple of crucial pitfalls that you have to watch out for. From high fees to limited investing choices, here is a list of potential downsides to 401(k) plans &mdash; and how to work around them.</p> <h2>1. Waiting to set up your 401(k)</h2> <p>Depending on the applicable rules from your employer-sponsored 401(k), you may be eligible to enroll in the plan within one to 12 months from your start date. If your eligibility kicks in around December, you may think that it's fine to wait until the next year to set up your retirement account.</p> <p>This is a big mistake for two main reasons.</p> <p>First, contributing to your 401(k) with pretax dollars allows you to effectively reduce your taxable income for the current year. In 2017, you can contribute up to $18,000 ($24,000 if age 50 or over) to your 401(k), so you can considerably reduce your tax liability. For example, if you were to contribute $3,000 between your last two paychecks in December, you would reduce your taxable income by $3,000. Waiting until next year to start your 401(k) contribution would mean missing out on a lower taxable income!</p> <p>Second, your employer can still contribute to your 401(k) next year and make that contribution count for the current year, as long as your plan was set up by December 31 of the current year. Your employer contributions have to be in before Tax Day or the date that you file your federal taxes, whichever is earlier.</p> <h3>How to work around it</h3> <p>If you meet the requirements to participate in your employer-sponsored 401(k) toward the end of the year, make sure to set up your account by December 31st. That way, you'll be ready to reduce your taxable income for the current year through your own contributions and those from your employer before their applicable deadline (December 31 and Tax Day or date of tax filing (whichever is earlier), respectively).</p> <h2>2. Forgetting to update contributions</h2> <p>When you set up your 401(k), you have to choose a percentage that will be deducted from every paycheck and put into your plan. It's not uncommon that plan holders set that contribution percentage and forget it. As your life situation changes, such as when you get a major salary boost, marry, or have your first child, you'll find that your contributions may be too big or too small. (See also: <a href="http://www.wisebread.com/5-times-its-okay-to-delay-retirement-savings?ref=seealso" target="_blank">5 Times It's Okay to Delay Retirement Savings</a>)</p> <h3>How to work around it</h3> <p>To keep a contribution level that is appropriate to your unique financial situation, revisit your percentage contribution every year and whenever you have a major life change. Don't forget to also check whether or not you elected an annual increase option &mdash; a percentage by which your contribution is increased automatically each year &mdash; and adjust it as necessary.</p> <h2>3. Missing out on maximum employer match</h2> <p>Talking about contributions, don't forget that your employer may contribute to your plan as well. In a survey of 360 employers, <a href="https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/bigger-401k-matches.aspx" target="_blank">42 percent of respondents</a> matched employee contributions dollar-for-dollar, and 56 percent of them only required employees to contribute at least 6 percent from paychecks to receive a maximum employer match.</p> <h3>How to work around it</h3> <p>Employers require you to work a minimum period of time before starting to match your contribution. Once you're eligible, meet the necessary contribution to maximize your employer match. One estimate puts the average missed employer contribution at $1,336 per year. This is free money that you can use to make up for lower contribution levels from previous months or years.</p> <h2>4. Sticking only with actively managed funds</h2> <p>When choosing from available funds in their 401(k) plan, account holders tend to focus on returns. There was a time in which actively managed funds were able to deliver on their promise of beating the market and delivering higher-than-average returns. That's why 401(k) savers often choose them.</p> <p>However, passively managed index funds &mdash; funds tracing an investment index, such as the S&amp;P 500 or the Russell 2000 &mdash; have consistently proven that they can beat actively managed funds. Over the five past years, only 39 percent of active fund managers were able to beat their benchmarks, which is often an index. That's why over the same period, investors have taken $5.6 billion out of active funds and dumped $1.7 trillion into passive funds.</p> <h3>How to work around it</h3> <p>Find out whether or not your 401(k) offers you access to index funds. Over a long investment period, empirical evidence has shown that index funds outperform actively managed funds. Review available index funds and choose the ones that meet your retirement strategy. (See also: <a href="http://www.wisebread.com/3-steps-to-getting-started-in-the-stock-market-with-index-funds?ref=seealso" target="_blank">3 Steps to Getting Started in the Stock Market With Index Funds</a>)</p> <h2>5. Chasing high returns instead of lower costs</h2> <p>When reading the prospectus of any fund, you'll always find a disclaimer warning you that past returns aren't a guarantee of future returns. So, why are you holding onto those numbers so dearly? As early as 2010, investment think tank Morningstar concluded that a fund's annual expense ratio is the only reliable indicator of future investment performance, even better than the research firm's well-known star rating.</p> <p>And guess what kind of funds have the lowest annual expense ratios? Index funds! For example, the Vanguard 500 Index Investor Shares fund [Nasdaq: <a href="https://finance.yahoo.com/quote/VFINX?p=VFINX" target="_blank">VFINX</a>] has an annual expense ratio of 0.16 percent, <a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0040&amp;FundIntExt=INT" target="_blank">which is 84 percent lower</a> than the average expense ratio of funds with similar holdings. If your 401(k) gives you access to lowest cost <a href="https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&amp;FundId=0540" target="_blank">Vanguard Admiral shares</a>, you would shed down that annual expense ratio even further to 0.05 percent.</p> <h3>How to work around It</h3> <p>When evaluating a fund in your 401(k), look for comparable alternatives, including index funds. To maximize the growth of your nest egg, chase funds with lower annual expense ratios and investment fees. Regardless of their performance (which tends to be better anyway!), you'll minimize your investment cost. (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso" target="_blank">Watch Out for These 5 Sneaky 401(k) Fees</a>)</p> <h2>6. Not periodically rebalancing your portfolio</h2> <p>Even when choosing index funds, you still need to periodically adjust your portfolio. Let's assume that you follow this investment recommendation from Warren Buffett for your 401(k): <a href="http://www.berkshirehathaway.com/letters/2013ltr.pdf" target="_blank">90 percent in a low-cost index fund</a>, and 10 percent in government bonds. (See also: <a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett?ref=seealso" target="_blank">The 5 Best Pieces of Financial Wisdom From Warren Buffett</a>)</p> <p>Depending on the market, your portfolio allocation may be way off as early as one quarter. If the S&amp;P 500 were to have a huge rally, you may now be holding 95 percent of your 401(k) in the index fund. That would be much more risk that you may be comfortable with, so you would need to take that 5 percent and put it back into government bonds. On the other hand, holding 85 percent in government bonds would make you miss your target return for that year. Forgetting to <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio?ref=internal" target="_blank">rebalance your portfolio</a> once a year when necessary is one easy way to derail your saving strategy.</p> <h3>How to work around it</h3> <p>Many 401(k) plans offer an automatic annual rebalancing feature. Review the fine print of this feature with your plan and decide whether or not it's suitable for you. If your plan doesn't offer an automatic rebalancing feature, choose a date that makes the most sense to you and set it as your day to rebalance your portfolio every year.</p> <h2>7. Taking out 401(k) loans</h2> <p>Treating your 401(k) as a credit card is a bad idea for several reasons. Doing this:</p> <ul> <li>Creates additional costs, such as origination and maintenance fees;<br /> &nbsp;</li> <li>Becomes due in full within 60 days of separating from your employer;<br /> &nbsp;</li> <li>Turns into taxable income when not paid back, triggering potential penalties from the IRS and state and local governments; and<br /> &nbsp;</li> <li>May quickly turn into a bad habit: <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html" target="_blank">25 percent of 401(k) borrowers</a> go back for a third or fourth loan, and 20 percent of them take out at least five loans.</li> </ul> <h3>How to work around it</h3> <p>Treat your 401(k) as a last-resort source of financing. There are very few instances when you should <a href="http://www.wisebread.com/this-is-when-you-should-borrow-from-your-retirement-account?ref=internal" target="_blank">borrow from your retirement account</a>. Make sure that you go through all of your credit options and include the opportunity cost of foregoing retirement savings, including potential taxes and penalties, when comparing a 401(k) loan against another type of loan.</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/7-traps-to-avoid-with-your-401k">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-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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-warren-buffett-says-you-should-invest-in-index-funds">Why Warren Buffett Says You Should Invest in Index Funds</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/8-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</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/15-retirement-terms-every-new-investor-needs-to-know">15 Retirement Terms Every New Investor Needs to Know</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-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) actively managed funds contributions employer match employment fees index funds loans rebalancing Thu, 23 Mar 2017 09:00:15 +0000 Damian Davila 1909973 at http://www.wisebread.com Watch Out for These 5 Sneaky 401K Fees http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/watch-out-for-these-5-sneaky-401k-fees" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_nest_egg_000006292825.jpg" alt="Learning which 401K fees to look out for" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>No matter how diligent you are at socking away money into your 401K, you could still be contributing less than you think, thanks to hidden fees and plan costs. According to a study from AARP, about three in five Americans are unaware of how much they're paying in <a href="http://assets.aarp.org/rgcenter/econ/401k-fees-awareness-11.pdf">401K plan fees</a>.</p> <p>Excessive 401K fees can eat away your returns. Let's assume that a worker invests $5,000 every year over a 35-year period in a 401K plan with an annual return of 4.9%. She would end up with $423,000 at the end of period assuming an annual fee of 0.5% of the total balance, and with $345,000 at the end of the period assuming an annual fee of 1.5% of the total balance.</p> <p>To claim back control of your retirement account, here are five 401K&nbsp;fees to look out for.</p> <h2>1. 12b-1 Fee</h2> <p>Owing its name to the Securities and Exchange Commission (SEC) Rule 12b-1, a 12b-1 fee is a charge from a mutual fund to cover marketing, distribution, and administration expenses.</p> <p>The original intent with this rule was to encourage mutual funds to invest in marketing so that more people would buy into the mutual fund. In theory, the more assets that a mutual fund can buy, the better the economies of scale. Unfortunately, the empirical evidence from the SEC shows that mutual funds with 12b-1 fees have higher expense ratios than those without those fees, and that the services rendered to earn the fees don't enhance the fund's performance.</p> <p>By law, 12b-1 fees can range between 0.25% and 1% of a fund's net assets. Given that these fees have shown no benefit to investors, you should try to choose funds that don't charge 12b-1 fees at all. If all your available investment options charge such a fee, go with the one that charges closest to the minimum 0.25%.</p> <h2>2. Redemption Fee</h2> <p>A front-end load is one of many sneaky <a href="http://www.wisebread.com/4-sneaky-investment-fees-to-watch-for">investment fees to watch out for</a>. Front-end load funds have such a bad rap that many investment firms have started advertising no-load fund options.</p> <p>However, there can be a catch. While no-load funds won't charge you for loading shares, those funds can charge you a fee for unloading your shares too soon. Known also as an exit fee, back-end load, or contingent deferred sales charge, a redemption fee is applied to an investor that exits a fund too soon. How soon is too soon? The minimum holding period ranges from 30 days to one year, so make sure to check your fund's prospectus.</p> <p>Here are two useful rules of thumb when evaluating redemption fees:</p> <ul> <li>The average minimum holding period to avoid a redemption fee is 65 days, so avoid funds that require you to hold onto your fund much longer than that. While your nest egg should be a last resort fund, you shouldn't be penalized for accessing your money when in need.<br /> &nbsp;</li> <li>The SEC limits redemption fees to 2%. However, some funds may charge as low as 0.01%. The lower the redemption fee, the better.</li> </ul> <h2>3. Exchange Fee</h2> <p>Diversification is a useful investment strategy to lower your market risk. For example, it's generally better to split your investment into three significantly different assets than to &quot;put all your eggs in one basket.&quot; If one of your investments tanks, you still have two to fall back on.</p> <p>Before you fire up the online dashboard of your 401K and transfer money from one fund to another, check for applicable exchange fees within your retirement plan. Even worse, some 401K plans may tack on additional load and redemption fees when you exchange between funds.</p> <h2>4. Individual Service Fee</h2> <p>On top of your plan's administrative fee, your 401K may incur individual service fees related to features that you opted into. You may incur individual service fees when:</p> <ul> <li>Taking a loan from your 401K account;<br /> &nbsp;</li> <li>Executing participant investment directions;<br /> &nbsp;</li> <li>Opting for a clause to terminate a contract with your employer before the contract's expiration date; or<br /> &nbsp;</li> <li>Choosing an investment option that includes an insurance component (e.g. annuity).</li> </ul> <p>There are many other types of individual service fees. Keep in mind that some individual service fees that are paid indirectly from the investment options you have chosen may not be listed in your quarterly 401K statement.</p> <h2>5. &quot;Other&quot; Fee</h2> <p>Along with those other fees, 401K plans can have a miscellaneous fee category for listing anything that is neither a sales charge nor an account maintenance charge.</p> <p>Some examples of other fees are:</p> <ul> <li>Custodial expenses;</li> <li>Legal expenses;</li> <li>Recordkeeping expenses;</li> <li>Furnishing statement expenses;</li> <li>Toll-free telephone service fees;</li> <li>Transfer agent expenses; and</li> <li>Other administrative fees.</li> </ul> <p>Depending on the terms of your plan, another fee may be a percentage of your assets invested in the fund or a flat fee.</p> <h2>The Bottom Line</h2> <p>Do your due diligence before choosing funds within <a href="http://www.wisebread.com/7-signs-your-401k-is-underperforming">your 401K plan</a>. To get a full picture of your investment options, you need to go beyond their average returns. The two key documents that you need in order to find out more about applicable fees are the Summary Plan Description and the Annual Report.</p> <h3>Summary Plan Description (SPD)</h3> <p>Upon joining the 401K plan, you receive a copy of your SPD. You will receive an updated copy every five years if there are significant changes or every 10 years if there are no changes.</p> <h3>Annual Report (Form 5500 Series)</h3> <p>Every year you should receive a copy. If not, you can examine a free copy from the <a href="http://www.efast.dol.gov">Department of Labor</a>.</p> <p><em>Do you know what fees your 401K is charging you? Are they fair?</em></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/watch-out-for-these-5-sneaky-401k-fees">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/how-to-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</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/7-things-financial-advisers-wish-you-knew-about-retirement">7 Things Financial Advisers Wish You Knew About Retirement</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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</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 401(k) Hidden fees investments returns Mon, 28 Sep 2015 13:00:40 +0000 Damian Davila 1568872 at http://www.wisebread.com 7 Signs Your 401(k) is Underperforming http://www.wisebread.com/7-signs-your-401k-is-underperforming <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-signs-your-401k-is-underperforming" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_reviewing_contract_000015199733.jpg" alt="Woman finding ways to tell if her 401(k) is underperforming" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've been diligently putting money away through your company's retirement plan, and are hopeful that the mutual funds in your 401(k) will accumulate enough cash for you to retire comfortably some day. But how do you know if your account is performing as well as it could?</p> <p>An <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">underperforming 401(k)</a> can cost you thousands of dollars in retirement income, so it's important to understand where it may be lacking.</p> <p>Here are seven ways to tell if your 401(k) is not up to snuff.</p> <h2>1. The Underlying Indexes Are Performing Better</h2> <p>You may have your 401(k) invested in funds that are meant to mirror certain indexes, such as the S&amp;P 500 or Russell 3000. In general, your overall investment returns should be in line with these indexes. If they aren't, then you may want to evaluate what you are paying in fees (see below), or consider switching to a fund that is better managed.</p> <h2>2. You've Never Rebalanced</h2> <p>You may think you have the ideal investment mix, but it's important to remember that your original investment choices may have shifted in proportion over time due to your portfolio's growth. For example, let's say you decided to place 60% of your money in domestic stocks, and 40% in international. But if domestic stocks grow more quickly, over time, that may turn into a 70/30 split. Reallocating your existing investments to reflect your investment choices will usually help you achieve greater growth.</p> <h2>3. You Pay a Lot in Fees</h2> <p>Many people don't realize that most 401(k) plans come with fees. There are fees to administer the plan, fees to manage the funds, fees for record keeping, and a variety of other things. Generally speaking, fees should not represent more than $1 for every $100 in your account, or a total of 1%. If you are primarily invested in index funds, anything more than .20% is high. Even the slightest fee can represent thousands of dollars in lost savings over the life of a plan.</p> <h2>4. Your Plan Administrator Uses Only Its Own Funds</h2> <p>If the company administering the 401(k) plan insists on offering only its own funds, that could be a problem. Those funds might be fine, but studies show they are often not the best funds available and administrators are less likely to <a href="http://www.barrons.com/articles/SB50001424052748704836204578354421066445066?autologin=y">dump those funds</a> when they underperform.</p> <h2>5. You Aren't Getting the Maximum Match From Your Employer</h2> <p>If you're not certain what percentage of each paycheck to put into your 401(k), you should at least contribute the minimum required for your maximum company match. This amount varies, but it's often between 3% and 5% of your salary. If you don't take advantage of the company match, you're leaving free money on the table.</p> <h2>6. You're Trying to Time the Market</h2> <p>One of the best things about 401(k) plans is that money is usually deducted straight from your paycheck, so you can contribute a consistent amount into specific funds without much work. But if you decide to adjust your contributions according to market fluctuations, you might be messing with a good thing. Trying to time the market is rarely effective. The average 401(k) investor hangs on to investments for about three years, when they should be staying the course for at least five.</p> <h2>7. You Live in the South</h2> <p>If you live below the Mason-Dixon Line, you might find that your 401(k) is a little sluggish. According to BenefitsPro, six of the top 10 states with the <a href="http://www.benefitspro.com/2015/01/29/top-10-states-with-underperforming-401ks?t=trends&amp;page=2&amp;page_all=1">most underperforming 401(k) plans</a> are located in the south. This includes Alabama, Mississippi, Tennessee, South Carolina, Georgia, and Florida. In many of these states, more than 10% of all plans were considered low performing. Check with your HR department or plan administrator for a better understanding of your investment choices.</p> <p><em>How is your 401(k) doing?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/7-signs-your-401k-is-underperforming">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/intimidated-by-retirement-investing-get-professional-help">Intimidated by Retirement Investing? Get Professional Help!</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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</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/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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) 403(b) company matches mutual funds underperforming Thu, 03 Sep 2015 15:00:12 +0000 Tim Lemke 1541994 at http://www.wisebread.com 4 Reasons Early Retirement Might Be Financially Risky http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-reasons-early-retirement-might-be-financially-risky" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000017275515.jpg" alt="Learning why early retirement might be a financial risk" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>&quot;The money's no better in retirement &mdash; but the hours are!&quot; So goes a popular saying.</p> <p>Maybe that's why many dream of retiring early. A March 2015 study of Americans with investible assets of $1 million or more found that that most of them planned to <a href="http://money.usnews.com/money/retirement/articles/2015/04/07/tales-of-early-retirement-the-path-3-people-took">retire by age 56</a>, and a whopping 20% of them by age 40.</p> <p>However, early retirement &mdash; even for those with a $1 million nest egg &mdash; might be financially risky. Here are four reasons why.</p> <h2>1. Reduced Social Security Benefits</h2> <p>Nine out of 10 Americans age 65 or older <a href="http://www.ssa.gov/news/press/basicfact.html">receive Social Security benefits</a>. For those that receive Social Security, they count on those payments to cover about 38% of their income during retirement.</p> <p>While you can start receiving your Social Security benefits as early as age 62, you should wait a couple more years. For those born in 1960 or later, you would <a href="http://www.ssa.gov/oact/ProgData/ar_drc.html">receive only 70%</a> of your full retirement benefit by retiring at age 62.</p> <p>To receive your full retirement benefit, you need to retire by your full retirement age (age 67 for those born 1960 or later) as determined by the Social Security Administration. However, by waiting until age 70 to retire, depending on your year of birth, you can receive up to 132.5% of your full retirement benefits. (See also: <a href="http://www.wisebread.com/4-exciting-affordable-american-cities-to-retire-in?ref=seealso">4 Exciting, Affordable American Cities to Retire In</a>)</p> <h2>2. Early 401(k) Withdrawal Penalties</h2> <p>By socking away as much as possible and taking advantage of employer matches, you can build such a strong 401(k) plan, you'll be tempted to retire in your late 50s.</p> <p>Hold that thought.</p> <p>In 2014, 401(k) plans were <a href="https://www.ici.org/policy/retirement/plan/401k/faqs_401k">18% of the $24 trillion</a> in U.S. retirement assets. From 2004 to 2010, penalized 401(k) withdrawals increased from <a href="http://business.time.com/2013/01/23/cash-leaking-out-of-401k-plans-at-alarming-rate/">$36 billion to about $60 billion</a>. If this trend continues, then retirees may not receive the full share of their 401(k) plans.</p> <p>Taking early distributions from your 401(k) before you reach age 59&frac12; is a bad idea for several reasons:</p> <ul> <li>On top of applicable income taxes, you're liable for a 10% additional tax on those early distributions.<br /> &nbsp;</li> <li>To avoid that 10% tax penalty, you would have to take retirement payments under a <a href="http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments">substantially equal periodic payments</a> program, which are not only very complicated to set up, but can also cause cash crunches.<br /> &nbsp;</li> <li>All of your outstanding loans from your 401(k) plan become taxable income and are also subject to the additional 10% early distribution tax.<br /> &nbsp;</li> <li>Outstanding 401(k) loan balances can't be rolled into any eligible retirement plan.</li> </ul> <p>This is just one of the many <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">dumb 401(k) mistakes</a> smart people make.</p> <h2>3. Subpar Nest Egg</h2> <p>By deciding to retire early, you can say goodbye to a bigger nest egg.</p> <p>Assuming you were contributing $400 every month to your 401(k) with a 5% rate of return compounded annually, here are some examples of how much you would forego by retiring early:</p> <ul> <li>One year earlier: $4,929.03</li> <li>Three years earlier: $15,538.77</li> <li>Five years earlier: $27,236.01</li> <li>Seven years earlier: $40,132.21</li> <li>10 years earlier: $61,996.82</li> </ul> <p>The bigger your monthly contribution and the higher your plan's rate of return, the larger your nest egg&hellip; could have been! And let's not forget that these calculations don't include additional contributions:</p> <ul> <li>Employer matches (average American foregoes $1,336 per year or extra 2.4% in retirement savings);<br /> &nbsp;</li> <li>Potential windfalls (e.g. commissions, end-of-year bonuses); and<br /> &nbsp;</li> <li>Catch-up contributions starting age 50 (<a href="http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Catch-Up-Contributions">$6,000 per year</a> in 2015).</li> </ul> <h2>4. Higher Chance of Empty Retirement Fund</h2> <p>There's good news and bad news.</p> <p>First, the good news: Americans are living longer. In 1990, the life expectancy for men and women were age 71.8 and 78.8, respectively. Nowadays, those number are <a href="http://www.ssa.gov/planners/lifeexpectancy.html">age 84.3 and 86.6</a>, respectively. Our life expectancy is so good that about 10% of current 65-year old Americans will live past age 95!</p> <p>Now, the bad news: a longer life expectancy means that your nest egg may run out. For many years, $1 million used to be the goal for most retirement plans. If you make withdrawals from your nest egg using the suggested 4% annual rate, you will <a href="http://www.bankrate.com/finance/retirement/retirement-statistics-1.aspx">run out of retirement funds</a> within 25 years. Under this scenario, by retiring early by age 55, you could run out of retirement monies by age 80!</p> <p>Adapting to a very thrifty lifestyle (&quot;What? No summer cruise to the Bahamas!&quot;) may not be possible for some early retirees. Especially those who worked really hard to build up those $1 million nest eggs.</p> <p>The reality is that early retirement requires careful planning and persistent saving. To prevent such a retirement catastrophe, many registered investment advisors are recommending Millennials set a goal of <a href="http://money.usnews.com/money/retirement/articles/2011/09/15/gen-ys-2-million-retirement-price-tag">at least $2 million</a> for their retirement savings. (See also: <a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning?ref=seealso">5 Facts Millennials Should Know About Retirement Planning</a>)</p> <p><em>Do you know any stories about people who successfully retired early? Please share them in the comments below</em><strong><em>.</em></strong></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/4-reasons-early-retirement-might-be-financially-risky">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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</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/how-to-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</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/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) early retirement millennials nest egg social security Mon, 24 Aug 2015 13:00:26 +0000 Damian Davila 1531825 at http://www.wisebread.com 10 of the Coolest Sayings About Saving http://www.wisebread.com/10-of-the-coolest-sayings-about-saving <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-of-the-coolest-sayings-about-saving" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/happy_woman_piggy_bank_000067054473.jpg" alt="Woman hearing the coolest sayings about saving" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Don't downplay the importance of frugality: <a href="http://www.wisebread.com/save-100s-next-month-with-these-10-grocery-shopping-tips">Saving money</a> is the single best thing you can do to secure your future.</p> <p>If you're having a tough time tightening the purse strings, taking a look at 10 of the coolest sayings about saving money can put things in perspective.</p> <h2>1. &quot;Money looks better in the bank than on your feet.&quot; &mdash; Sophia Amoruso</h2> <p>Spending your money on clothes, shoes, and accessories might make you the fashion queen or king among your friends, but a fabulous wardrobe isn't going to cover the cost of an unexpected expense. Fashion trends come and go, but financial stability never goes out of style. You can look good without compromising your savings account if you learn how to be a savvy, budget-minded shopper.</p> <h2>2. &quot;Don't tell me what you value, show me your budget, and I'll tell you what you value.&quot; &mdash; Joe Biden</h2> <p>Joe Biden isn't one to bite his tongue &mdash; and with regards to why some people can't get ahead, this quote hits the nail on the head. You might say saving for the future and building an emergency fund are important, but if your budget shows you're spending more on entertainment than growing your 401(k) or savings account, you need to adjust your priorities.</p> <h2>3. &quot;A bargain ain't a bargain unless it's something you need.&quot; &mdash; Anonymous</h2> <p>We've all been guilty of buying something we didn't need just because it was on sale. It's easy to justify this bad habit. But in actuality, we're wasting money that could otherwise be put toward a financial goal like growing our savings or paying off debt. Before every impulse buy, ask yourself: <em>Do I need this item?</em> If not, leave it in the store and deposit the money you would have spent into your savings account.</p> <h2>4. &quot;Saving requires us to not get things now so that we can get bigger ones later.&quot; &mdash; Jean Chatzky</h2> <p>The need for instant gratification is real and it gets a lot of people in hot water. People with spending problems unknowingly rob themselves of the opportunity to acquire better things in the future. Think about it. You can't buy a home without a down payment, and you can't save a down payment unless you're willing to curb your spending and make sacrifices. So whenever you feel the urge to spend, think about your future plans and decide whether the purchase is worth delaying your goal.</p> <h2>5. &quot;Beware of little expenses; a small leak will sink a great ship.&quot; &mdash; Benjamin Franklin</h2> <p>This saying perfectly explains the effect seemingly little expenses can have on our personal finances. Tracking your spending might reveal you're wasting money every week on things you don't really need. Spending $2 a day for coffee and $3 for lunch adds up quickly. That's $100 a month or $1,200 a year that could go toward growing your savings.</p> <h2>6. &quot;Stop buying things you don't need, to impress people you don't even like.&quot; &mdash; Suze Orman</h2> <p>I absolutely love this quote. Many people won't admit to this behavior, but given how some people go into debt and sacrifice their savings accounts in order to impress others with their bigger homes, nicer cars, and the latest fashions, it's a quote everyone needs to hear. If you feel you have to maintain an elaborate lifestyle to impress a specific group of people, you need new friends. So what if you don't own the best of everything. Learn how to live on less and you'll acquire something a lot of people don't have &mdash; a bigger bank account.</p> <h2>7. &quot;You can be young without money, but you can't be old without it.&quot; &mdash; Tennessee Williams</h2> <p>This quote reminds us that the time to plan for retirement is when we're young and have energy to work. Saving when we're younger might mean fewer vacations, cheaper housing, and discount shopping. But it also ensures enough income to live comfortably in our later years when we can't work as much. If you haven't already, explore retirement options. Enroll in your employer's 401(k) plan or open an individual retirement account.</p> <h2>8. &quot;Save one-third, live on one-third, and give away one-third.&quot; &mdash; Angelina Jolie</h2> <p>I think it's cool when rich people give savings advice &mdash; and it's even cooler when they follow their own advice. Some people don't grasp the benefit of living beneath their means. But if you're able to live on just a fraction of what you earn, you'll have an opportunity to save a greater percentage every month, plus have money available to give back to your community or donate to your favorite charity. Of course, it's easier for rich people to live off a third of their income, but even if you have to adjust the percentage to fit your unique circumstances, this quote is a simple reminder to spend less than you earn.</p> <h2>9. &quot;Get rich slow, or get poor fast.&quot; &mdash; Anonymous</h2> <p>I once heard someone say, &quot;I'm always going to be broke, so what's the point in trying to save.&quot; Coincidentally, this person is also the first to buy the newest electronic gadgets no matter the cost, and his wardrobe takes up three closets. Just from my observation, if he would put as much energy into saving as he does shopping, he wouldn't be broke. Similarly, you have a choice. You can either commit to saving and allow your money to grow slowly over time, or you can spend everything you earn and have nothing meaningful to show for it.</p> <h2>10. &quot;If saving money is wrong, I don't want to be right.&quot; &mdash; William Shatner</h2> <p>Saving money is cool, and don't let anyone tell you differently. Some people might try and derail your savings plan by tempting you to spend outside your budget, or they might snicker because you never shop without a coupon or discount code. This money saying is one of the best because no matter how much we earn, we should never stop looking for bargains.</p> <p><em>Have you heard any cool savings sayings? What money-savvy words do you live by? Let me know in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/10-of-the-coolest-sayings-about-saving">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/stop-making-these-7-basic-budget-mistakes">Stop Making These 7 Basic Budget Mistakes</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/12-personal-finance-skills-everyone-should-master">12 Personal Finance Skills Everyone Should Master</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/9-money-secrets-of-the-amish">9 Money Secrets of the Amish</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-improve-your-finances-using-social-media">How to Improve Your Finances Using Social Media</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-everyday-money-tasks-youve-been-doing-wrong">12 Everyday Money Tasks You&#039;ve Been Doing Wrong</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Budgeting 401(k) advice famous inspirational quotes saving money Mon, 13 Jul 2015 17:00:11 +0000 Mikey Rox 1484702 at http://www.wisebread.com 7 States With the Lowest Taxes for Retirees http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-states-with-the-lowest-taxes-for-retirees" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/island_beach_000022850516.jpg" alt="States with lowest taxes for retirees" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For retirees living on fixed incomes, taxes can be burdensome and impact quality of life during retirement. Many <a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">financially savvy retirees</a> move to states like Florida, not just for the sunshine, but to reap the economic benefits of low taxation. Florida is one of seven no-income tax states and makes the list of states with a marginal federal and state tax rate of under 25%.</p> <p>Consider these seven states with the lowest retirement tax burden.</p> <h2>1. Alaska</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/bear_alaska_000034056692.jpg" width="605" height="340" alt="" /></p> <p>Sure, Alaska is a little lacking in the sun and warm weather many retirees seem to favor, but the state's lenient tax policies might make you want to pick up and move there, anyhow. State residents are exempt from retirement income tax, and only 24 of its 164 municipalities levy a property tax. And it gets better: Those 65 years and older residing within one of these 24 communities are exempt from property taxes on the first $150,000 of their home's assessed value. To top it all off, there is either no or low sales tax. Of the 107 municipalities reporting sales tax, the rate ranges from a low 1%&ndash;7% (typically 2%&ndash;5%).</p> <h2>2. Florida</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/miami_beach_florida_000037761516.jpg" width="605" height="340" alt="" /></p> <p>While Florida residents enjoy no tax on retirement income, they can't escape the burden of property taxes. Florida ranks 23 out of 50 of states with the highest property tax rates. Miami Dade County, with it's sprawling luxury oceanfront condos that attract wealthy foreign investors, ranks highest with an average 1.02% of median home value, while property taxes in densely populated Dixie County (population: 16,422) are the lowest at .51% of median home value. Residents 65 years and older qualify for a $50,000 property tax exemption on their properties. Sales taxes in Florida aren't astronomical &mdash; at 6% since 1988, but they can swing as high as 7.5%.</p> <h2>3. Nevada</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/nevada_000025827739.jpg" width="605" height="340" alt="" /></p> <p>Far removed in spirit from the glitz and glamor of the Las Vegas Strip, many retirees set their sights on the city's quieter suburbs. The state's tax burden ranks second-lowest in the nation. Nevada has no income or inheritance tax and the cost of living is relatively low compared to neighboring states. Plus, the Nevada housing market has not fully rebounded from the 2008 crisis, which means home buyers can still get a good deals.</p> <h2>4. South Dakota</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/south_dakota_000012547520.jpg" width="605" height="340" alt="" /></p> <p>The tax structure in the Midwestern state of South Dakota is one of the most favorable in the country. South Dakota does not levy a tax on retirement income, inheritances, and estates. Sales taxes are relatively low compared to other areas in the region at 4%, but it can swing as high as 6% in some municipalities. The median home price is roughly $126,000. The only downside to retiring in South Dakota is it's inclement winter weather, but it's great in the summer, especially if you love the outdoors.</p> <h2>5. Texas</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/texas_scenery_000038884690.jpg" width="605" height="340" alt="" /></p> <p>Good ole' Texas, the Lone Star State &mdash; and my hometown state. Texas is a great place to live for a number of reasons. But the number one is that there's no tax on personal income. The sales and use tax is a bit on the high-end at roughly 8.25%. Property taxes vary by county and range from $0.24 to $0.50 per $100 valuation with median home prices at $160,000 in Dallas and $158,000 in Houston. Persons 65 and older qualify for a $10,000 homestead exemption for school taxes, in addition to a $15,000 exemption for all homeowners.</p> <h2>6. Washington</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u11/washington_000006960866.jpg" width="605" height="341" alt="" /></p> <p>Washington, with its vast terrain and beautiful landscapes, has no income tax. The sales tax rate is 6.5% &mdash; as high as 9.5% in some areas. Property taxes vary by county with King County residents paying the most &mdash; around $4,507 per year and Lewis County residents paying the least &mdash;around $474 per year. The median home value is $270,400. If you decide to make Washington your primary residence, as a person 65 and up, you could qualify for <a href="http://www.dor.wa.gov/Content/FindTaxesAndRates/PropertyTax/IncentivePrograms.aspx">additional property tax exemptions</a>.&nbsp;</p> <h2>7. Wyoming</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u11/wyoming_000026149821.jpg" width="605" height="340" alt="" /></p> <p>Wyoming ranks first on the Tax Foundation's 2015 Business Tax Climate Index because of no tax on personal or corporate income, low sales tax of 4%, and low property tax. Median home prices are $103,000. And though the cost of living is already low, the state of Wyoming has no excise tax, which means you won't pay an additional levy on items like food and gasoline.</p> <p>Two other states worth considering are New Hampshire and Tennessee. The state of New Hampshire has no income tax and 0% sales tax, but there's a 5% tax on dividend and interest income and property taxes are the third highest in the nation. Tennessee does not impose income tax but has what's called a &quot;hall tax&quot; of 6% on dividend and interest income. And its sales tax of 7%, as high as 9.75% in some municipalities, ranks highest in the nation due to the complexity of local and special purpose taxes that are levied in addition to the sales and use tax.</p> <p><em>What low-tax retirement destinations are you considering?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">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/the-10-worst-states-for-retirees">The 10 Worst States for Retirees</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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do">If You&#039;re Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do</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 401(k) cost of living fixed incomes moving social security taxes Tue, 23 Jun 2015 13:00:18 +0000 Qiana Chavaia 1460740 at http://www.wisebread.com 6 Retirement Rules You Should Be Breaking http://www.wisebread.com/6-retirement-rules-you-should-be-breaking <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-retirement-rules-you-should-be-breaking" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_gardening_000022104123.jpg" alt="Woman breaking common retirement rules" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are there right and wrong ways to retire? While that's a relative question, there are retirement rules that are in your best interest to follow &mdash; and those you might want to break. Consider these six <a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">retirement rules</a> you might be better off ignoring.</p> <h2>1. Depending on a Pension or Social Security</h2> <p>Counting on a pension or Social Security to help you ride out your retirement years? That's probably not the best strategy to have, considering that very few companies still offer pensions (though you'd know if yours does) and Social Security is still in crisis (so much so that it might be bankrupt and not even exist by the time you retire). That's not to mention that inflation is likely to outpace your per-month payouts in the off chance that you do receive these income sources.</p> <p>You may need to think of other ways to fund your retirement &mdash; and it's in your best interest to start planning for it now (or better yet, <em>yesterday</em>).</p> <p>Brent Cumberford, founder of the personal-finance blog&nbsp;<a href="http://www.vosa.com">VOSA</a>, offers a few suggestions.</p> <p>&quot;Start your own retirement accounts; invest in business to generate a second &mdash; and third and fourth &mdash; stream of income; and hustle to make some extra money on the side to kick start your retirement savings,&quot; he says.</p> <p>Putting in the extra time and effort early on to pad your retirement account for later means you might actually be able to enjoy those golden years.</p> <h2>2. Withdrawing From Your Retirement Fund or Social Security Right Away</h2> <p>Even if you have plenty of money in your retirement fund (or think you do, as is the likelier scenario), that doesn't mean you should start withdrawing from it the day after your retirement party. Proceed with caution in this case and remember that you still have a long life ahead of you.</p> <p>&quot;One retirement rule that no longer makes sense is the one that suggests a 4% annual withdrawal rate on your retirement portfolio,&quot; observes personal finance expert David Bakke of MoneyCrashers. &quot;Americans are living longer these days, and if you go by that rule you might outlive your money. Your best bet is to withdraw as little as possible in the beginning and adjust your strategy as you see how things are progressing as you get acclimated to living off of your retirement money.&quot;</p> <p>Bakke says that waiting to withdrawal money from Social Security has its benefits too, as you may receive a larger annual Social Security benefit when you wait.</p> <h2>3. Going Full Retirement Because You Think You Have To</h2> <p>Just because the government says you can retire at age 65 doesn't mean that you have to resign the rest of your life to whiling away the hours. Instead &mdash; if you're still willing and able &mdash; consider semi-retirement. It's the best of both worlds really: You can still contribute to society as a part-time member of the workforce, and you can enjoy more leisure time as a result of your shorter work schedule.</p> <p>More and more older Americans are opting for semi-retirement, in fact. Some are even opting for a new career path altogether. Continuing to work at least part-time past retirement age will not only help you feel like you still have something to offer the world, but it also helps you to continue to actively build your retirement fund &mdash; or at least maintain it at its current level.</p> <p>Elle Kaplan, CEO and founder of an asset management firm, touches a bit more on the financial benefits of semi-retirement.</p> <p>&quot;How would a semi-retirement change your financial reality?&quot; she asks. &quot;Take two months and track the money coming in and going out. Keep track of what you spend and all your bills. This will give you a clear sense of where you stand. Next, figure out what your Social Security payment is going to be each month in retirement. The Social Security Administration will provide this information and tell you how much you'll get based on what age you retire. Working even a few more years can have a huge impact.&quot;</p> <h2>4. Waiting Until You're 65 to Retire</h2> <p>Retirement age is typically specified at 65 years old in the United States. But to heck with that! Wouldn't you like to retire earlier?</p> <p>Of course, you'll probably need to strike it rich &mdash; or live <em>very</em> meagerly &mdash; in order to hang up your work boots in advance of the government-issued go-ahead. But maybe not. Have you ever thought about short-term mini-retirements? Ever even heard of the concept?</p> <p>&quot;Obviously it would be awesome if everyone could earn a fortune, retire young, and travel the world, but it's not going to happen for everyone,&quot; Cumberford says. &quot;What can happen for almost everyone is short-term mini-retirements, a concept spoken about in greater detail by Tim Ferriss in&nbsp;<a href="http://www.amazon.com/gp/product/0307465357/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0307465357&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=YIR4QCCLJFO4ATW3">The 4-Hour Workweek</a>. Saving money specifically for a short sabbatical, or even just an extended vacation while keeping your current employment can typically be negotiated. Think five weeks in Southeast Asia, or a summer backpacking across Europe. With the virtually endless amount of airline and hotel points that can be earned through travel hacking, even far away places can be very affordable.&quot;</p> <p>As someone who has hosted lots of Australian guests who are allotted at least six weeks vacation every year, I'm not only envious, but also in favor of the idea of short-term mini-retirements. While they're working to live, we Americans are living to work (well into our golden years), and that's an outlook that could use some rethinking. Shouldn't we enjoy a high-quality lifestyle throughout our lifetime instead of when we're darn near dead?</p> <h2>5. Clinging to the Family Home</h2> <p>For many of us, our homes hold a lot of memories that make it hard to part with the house &mdash; even after the kids are grown and gone. But as you enter retirement, it's not a great idea to hang on to a large space with high utilities or even a mortgage that will become more and more difficult to manage as you age. The alternative is to downsize, of course, such as a smaller house or apartment, or even alternative-living situations that may suit you even more &mdash; like an RV, for instance.</p> <p>Janet Groene, author of&nbsp;<a href="http://www.amazon.com/gp/product/007178473X/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=007178473X&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=P2WLK6WDV5V7MKUB">Living Aboard Your RV, 4th Edition</a>, lived in an RV for 10 years before settling in Florida, and she's a staunch advocate for the nomad lifestyle.</p> <p>&quot;By selling out and moving into an RV, retirees fulfill their dreams of travel and at the same time live comfortably in a fully equipped home on wheels while scouting for the right place to settle down in retirement,&quot; she encourages.</p> <h2>6. Heading South for the Winter</h2> <p>Snowbirding &mdash; the practice of northerners spending the winter in warmer climates and summers at home &mdash; is common among retirees. But isn't that just a little too passé for today's generation of leisure seekers? Mark Koep, founder of CampgroundViews.com, thinks so. Like Groene, he wants retirees to think about their living options and arrangements more in depth so they don't automatically relegate themselves to a lifestyle that isn't necessarily fulfilling.</p> <p>&quot;The old idea of snowbirding ignores the freedom and adventure that modern retirees seek,&quot; he says. &quot;Instead retirees should consider boondocking &mdash; camping in Bureau of Land Management and Forest Service lands for free &mdash; and discount membership clubs to travel and explore more destinations.&quot;</p> <p><em>Do you have other retirement rules we should be breaking? Let us know in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">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/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</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-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</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/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</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-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do">If You&#039;re Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) pensions rules savings social security Wed, 17 Jun 2015 11:00:11 +0000 Mikey Rox 1454606 at http://www.wisebread.com 8 Reasons Why Your Retirement Cost Calculations May Be Wrong http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-reasons-why-your-retirement-cost-calculations-may-be-wrong" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_piggy_bank_000018686866.jpg" alt="retirement cost calculations that might be wrong" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Saving for retirement is tricky, in part because you don't really have a clear idea of how much money you'll need when you stop working. There are many variables to consider, and a lot of our assumptions about the <a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">cost of retired life</a> may also be incorrect.</p> <p>The best way to deal with this uncertainty is to simply save and invest as early and as much as you can. But in the meantime, be aware of these reasons why your retirement cost calculations may be off.</p> <h2>1. Your Overall Expenses May Be Less Than You Think</h2> <p>There's a common assumption that people should save enough to &quot;maintain their current lifestyle.&quot; But the reality is that most people start to spend less as they get older. The Bureau of Labor Statistics reports that a <a href="http://www.bls.gov/cex/22014/midyear/age.pdf">person's expenses</a> peak between ages 45 and 54 at about $62,000 annually. Then, expenses start to decline. Those older than 65 spend about $42,000 a year, on average. And those older than 75 spend just $35,000 annually.</p> <h2>2. Your Might Pay Off Your Mortgage</h2> <p>When calculating your future living expenses, are you assuming that you'll eventually own your home free and clear? BLS statistics show that while only 19% of homeowners between ages 45 and 54 live mortgage-free, that figure jumps to 35% among people aged 55 to 64. Meanwhile, two-thirds of all homeowners over 75 are living free of house debt.</p> <h2>3. You Eat Less as You Age</h2> <p>While it's nice to assume that you'll be dining on lobster tail and caviar in retirement, the truth is that older Americans decrease their food expenditure as they age. A typical person at age 50 spends roughly $8,000 annually on food, according to BLS, dropping to $5,400 by age 65. Older people also dine out less. An average 50-year old will spend $3,279 on food away from home. That will drop to just over $1,300 by age 75.</p> <h2>4. You'll Drive Less</h2> <p>Think you'll be going on a plethora of road trips in retirement? Statistics show that older people actually drive less over time and spend far less on car purchases and automotive maintenance. An American's average expenditure on transportation peaks between ages 35&ndash;44 at just under $11,000 annually. That drops to $6,700 by age 65 and $4,800 by age 75.</p> <h2>5. You're Calculating Your Social Security Payments Incorrectly</h2> <p>When you use the Social Security calculator provided by the Social Security Administration's website, you will usually receive three numbers. The first is based on age 62, or early retirement. Another is based on age 66 (full retirement), and a third number is based on age 70 (maximum benefit.) To calculate your payments correctly, you must be honest about when you think you'll need to begin collecting. It's also worth noting that some observers don't even <a href="http://www.forbes.com/sites/johnwasik/2014/06/11/why-you-shouldnt-trust-social-securitys-lowball-estimate/">trust the government's calculations</a> in the first place.</p> <h2>6. Social Security Payments May Be Adjusted in the Future</h2> <p>Younger Americans may be faced with the reality that Social Security benefits may change by the time they reach retirement age. The government openly states that by 2033, payroll taxes will only cover 77 cents for every dollar of scheduled benefits. Rest assured that whatever we <em>think</em> we'll be getting in benefits by the time we retire, the reality will change between now and then.</p> <h2>7. Your Investment Returns Won't Be as High as You Assume</h2> <p>Younger investors tend to assume that the stock market will grow at an average of about 9% per year, but may forget that investment returns could be less in later years as they move to more conservative investments. As you approach retirement age, it makes sense to put more of your money in bonds, cash, and other stable vehicles. But it's important to remember that this may impact the total amount you save.</p> <h2>8. You Are Not Calculating the Correct Length of Retirement</h2> <p>There's a rule of thumb that assumes each person should plan for a 30-year retirement. But this number is based on an average, not each individual. If you have many family members that lived into their late 90s, you may need to save more to make your money last. It's also important to extend the length of your retirement if you retire at a relatively young age. Someone who retires at age 50, for instance, could see a retirement of 40 years or more.</p> <p><em>How are you calculating your retirement needs?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">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/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</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/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</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 401(k) expenses savings social security Mon, 08 Jun 2015 11:00:12 +0000 Tim Lemke 1444656 at http://www.wisebread.com 5 Facts Millennials Should Know About Retirement Planning http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-facts-millennials-should-know-about-retirement-planning" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/young_group_employees_000064329039.jpg" alt="Millennials that should know facts about retirement planning" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Millennials never seem to get a break.</p> <ul> <li>14% of 25 to 34-year-olds are still living at home with their parents.<br /> &nbsp;</li> <li>In 2013, the median annual income was $30,000 and $35,000 for full-time Millennial women and Millennial men, respectively.<br /> &nbsp;</li> <li>Just 36% of Americans under the age of 35 own a home, according to the Census Bureau.</li> </ul> <p>Don't kill the messenger, but the retirement outlook for Millennials is looking a bit tougher than earlier generations'. There are clear signs that what our retirement looks like and how we save for it is much different from our grandparents' (or even parents') experience. Here are five warning signs that Millennials need to take note of.</p> <h2>1. High Student Loan Debt</h2> <p>Back in 2012, college seniors graduated with an average debt of <a href="http://ticas.org/content/pub/student-debt-and-class-2012">$29,400 per borrower</a>. That number is almost $4,000 higher for the Class of 2014. In 2014, a college graduate owes an average of <a href="http://blogs.wsj.com/numbers/congatulations-to-class-of-2014-the-most-indebted-ever-1368/">$33,000 in student loans</a>.</p> <p>To put those statistics in perspective: Only 45% of Class of 1993 graduates had debt, and their average debt was $15,000 in inflation-adjusted dollars.</p> <p>More and more Millennials are borrowing to pay for college. In 2000, 60% of graduating students had schools loans. Last year, that percentage grew to over 70%. The problem with high student loan balances is that they effectively diminish your potential to save for retirement.</p> <p>Let's assume that you graduate with a standard 10-year loan and pay $2,400 for each of those 10 years. If you were to have invested those dollars in an index fund with a 5% return compounded annually, you would have ended with $30,998.14 available in your nest egg at the end of 10 years.</p> <p>Remember that your twenties and thirties are your most important years for retirement saving because those years offer the longest timeframe to earn compounded returns. Keep those student loan balances in check.</p> <h2>2. Low Financial Literacy</h2> <p>Only 24% of Millennials are able to answer correctly four or five questions on a five-question <a href="https://www.finra.org/sites/default/files/14_0100%201_IEF_Research%20Report_CEA_3%206%2014%20%28FINAL%29_0_0.pdf">financial literacy</a> quiz. On the other hand, 48% of Baby Boomers and 55% of members of the Silent Generation are able to do that.</p> <p>While more Millennials are attending college, they are less financially literate than older generations. This low level of financial literacy makes Millennials ill-prepared to make critical financial decisions:</p> <ul> <li>Only 7% of employers offer traditional pensions plans. Forced to rely more on 401(k) plans to save for retirement, Millennials need to make many decisions, such as what funds to invest in and how much to contribute.<br /> &nbsp;</li> <li>43% of Millennials use expensive forms of borrowing, such as pawnshops and payday lenders. Only 21% of Boomers and 8% of the Silent Generation use those lending options.<br /> &nbsp;</li> <li>According to a 2012 National Financial Capability Study, 34% of Millennials engage in three or more costly credit card behaviors over a 12-month period. In contrast, only 24% of Boomers and 13% of the Silent Generation engage in such behaviors.</li> </ul> <p>Grandpa is taking you to (finance) school. Take action: Set up a meeting with a certified financial planner to develop a retirement plan, and talk with your employer about your company's retirement accounts.</p> <h2>3. Low Savings Level</h2> <p>Only 61% of Millennials label themselves &quot;savers,&quot; according to a 2013 Wells Fargo survey.</p> <p>When you're not saving for retirement, you're getting further and further away from your nest egg's goal. A common rule of thumb from financial advisors is that you should have a $1 million target for retirement.</p> <p>Consider these two scenarios:</p> <ul> <li>If you were to start putting away $361 every month at age 20 in an index fund with a 6% return, you would be about $100 short of $1 million by retirement age 65.<br /> &nbsp;</li> <li>If you were to start 20 years later at age 40 and still would like to retire by age 65 with a $1 million nest egg, you would need to put away $1,430 per month on that same retirement account.</li> </ul> <p>However, grandpa's rule of thumb of $1 million may no longer be enough. More and more registered investment advisors recommend Millennials to set a <a href="http://money.usnews.com/money/retirement/articles/2011/09/15/gen-ys-2-million-retirement-price-tag"><em>$2 million retirement goal</em></a>. The main reason is that Americans are living longer.</p> <p>The Social Security Administration projects that about 10% of 65-year-olds will even <a href="http://www.ssa.gov/planners/lifeexpectancy.html">live beyond 95</a>. Life expectancy is likely to be even higher for Millennials once they reach age 65. Assuming a 4% annual withdrawal rate, a $1 million nest egg would run out in 25 years.</p> <p>So, start maximizing your contributions to your 401(k) and take advantage of your employer's matching program, if available. In 2015, the IRS allows you to put away up to $18,000 for retirement. Once you turn age 50, you can start making catch-up contributions to get closer to your retirement goal.</p> <h2>4. Lower Starting Salary</h2> <p>More than 60% of Millennials <a href="http://time.com/?post_type=money_article&amp;p=3855869?xid=tcoshare">don't negotiate salary</a> when receiving their first job offers.</p> <p>Every single generation has heard that &quot;this is the worst possible year to graduate.&quot; At least I did when I got my Bachelor of Commerce back in 2002, then again when I received my Masters in Educational Technology in 2007, and yet again when I completed my MBA in 2009. (Disclaimer: I graduated debt free all three times!)</p> <p>Don't think that negotiating your first salary puts you at a disadvantage with other applicants:</p> <ul> <li>80% of students and grads who <a href="http://www.nerdwallet.com/blog/recent-grad/negotiating-salary-study/">negotiate a higher salary</a> are at least partially successful.<br /> &nbsp;</li> <li>90% of employers have never retracted an offer because entry-level applicant tried to negotiate salary.<br /> &nbsp;</li> <li>Only 34% of female grads negotiate salaries, while 44% of male ones do. However, both genders have the same 80% rate of success.<br /> &nbsp;</li> <li>75% of employers could raise a starting salary by 5% to 10%.</li> </ul> <p>Don't leave money on the table when negotiating salary for your first job. You'll regret it just a few years later and again during retirement.</p> <h2>5. Missing Out on Company Matches</h2> <p>Millennials are getting hit with a double whammy.</p> <ul> <li>42% of workers earning less than $40,000 per year don't take full advantage of their employer match.<br /> &nbsp;</li> <li>35% of workers age 25 and 30% of workers age 30 don't maximize their employer match.</li> </ul> <p>The average U.S. worker foregoes $1,336 per year or an extra 2.4% in retirement savings. This means, that about $24 billion in matching contributions are left on the table every year. The combination of lower income level and younger age makes Millennials more prone to miss out on contributions to their retirement accounts.</p> <p>No matter your employer's match level, it's free retirement money. If you find it difficult to meet the <a href="http://time.com/money/2791164/how-much-income-to-save-for-retirement/">10%&ndash;15% suggested contribution</a> to your retirement account, then contribute enough so that your employer match fills the gap.</p> <h2>The Bottom Line</h2> <p>Meeting your retirement goal may feel overwhelming at times. These statistics should be a well-needed wake up call to realize that saving for retirement is not like it used to be. They're just a diagnostic &mdash; not a prognostic.</p> <p>Still, Millennials should be happy that we have more time to save for retirement than older generations. Let's take advantage of this edge and take corrective steps now.</p> <p><em>Millennials, what are you doing to save for retirement?</em></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/5-facts-millennials-should-know-about-retirement-planning">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/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</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-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</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-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</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/12-surprising-things-women-should-know-about-retirement-planning">12 Surprising Things Women Should Know About Retirement Planning</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-ways-to-strengthen-your-finances-before-retirement">5 Ways to Strengthen Your Finances Before Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) debt financial literacy millennials savings Thu, 28 May 2015 21:00:08 +0000 Damian Davila 1438459 at http://www.wisebread.com Follow These 5 Steps to Full Health Care Coverage in Retirement http://www.wisebread.com/follow-these-5-steps-to-full-health-care-coverage-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/follow-these-5-steps-to-full-health-care-coverage-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/money_medicine_000044118320.jpg" alt="How to avoid healthcare shortage in retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you sure you'll be able to afford healthcare in retirement? Positive?</p> <p>Consider this: A recent report analyzing the rising <a href="http://www.hvsfinancial.com/PublicFiles/Data_Release.pdf">out-of-pocket Medicare costs</a> estimated that people retiring 10 years from now will spend $9 of every $10 they receive from Social Security on health care, in the form of copays, supplemental insurance premiums, prescription drugs, and things not covered by Medicare such as visits to the dentist.</p> <p>This means that the cost of medical care is something everyone should factor into their <a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">retirement saving plan</a>. But this is no ordinary expense &mdash; there are specific strategies for saving for health care that can put you in a much better position in your golden years.</p> <h2>1. Maximize Your Social Security Benefits</h2> <p>&quot;The number one thing people should do &mdash; most people aren't aware of this &mdash; is optimize Social Security,&quot; says Ron Mastrogiovanni, founder of HealthView Services, which issued the alarming report.</p> <p>The main way to maximize benefits is to wait as long as possible to start receiving Social Security. A couple retiring 10 years from now at age 65 will receive $142,000 less in lifetime benefits than they would if they worked until age 67, he said.</p> <p>&quot;If you're capable of working, why would you throw away $142,000?&quot; Mastrogiovanni says.</p> <h2>2. Start a Roth IRA</h2> <p>&quot;Under Medicare, they have something called means testing; the more you earn, the more you pay,&quot; Mastrogiovanni says. &quot;Here's the kicker: Those income brackets are not indexed to inflation.&quot; That means that if the government doesn't adjust the income at which retirees are considered affluent, many middle earners of today will end up paying more once they retire.</p> <p>But not all retirement income is counted in this calculation. Money drawn from a traditional 401(k) counts, but money drawn from a Roth IRA or a Roth 401(k) doesn't. So if your regular 401(k) is building up towards a high income in retirement, you might want to divert some of your contributions to a Roth, or convert the account to a Roth, to keep your income below the level where you'll be considered an affluent retiree.</p> <h2>3. Consider a Health Savings Account</h2> <p>Health savings accounts are not generally considered a retirement savings vehicle &mdash; they are meant to help people pay high medical care deductibles with certain insurance plans. But Medicare expert Katy Votava advocates saving excess contributions to HSAs for retirement health care needs.</p> <p>&quot;You can put in significant money and it grows tax free. Most people don't need to spend their full health savings account every year to meet their full health insurance needs,&quot; Votava says.</p> <h2>4. Consider Long-Term Care Insurance</h2> <p>The high out-of-pocket costs outlined in the HealthView report do not include the cost of nursing homes or other long-term care, but those are obviously a major concern when looking at lifetime health care costs. Some advisors recommend purchasing insurance that would protect your savings if you go to a nursing home, while others warn against it. This Wall Street Journal report explores both sides of the <a href="http://www.wsj.com/articles/SB10001424052702303425504577352031401783756">long-term care insurance issue</a>.</p> <h2>5. Purchase the Right Supplemental Plan</h2> <p>Your parents or grandparents may not have had to pay anything out of pocket once they qualified for Medicare, but people retiring now and in the future need <a href="http://www.medicare.gov/supplement-other-insurance/medigap/whats-medigap.html">supplemental insurance</a> to cover the copayments, coinsurance, and deductibles that Medicare doesn't cover. You'll also have to pay for a <a href="http://www.medicare.gov/supplement-other-insurance/medigap/medigap-and-part-d/medigap-plans-and-part-d.html">prescription drug plan</a>. Choosing the right plan can be so complicated that many people turn to consultants like Votava to help them figure out which to pick. Before signing up for a plan, make sure it covers your doctors and your medications, because not all plans cover everything, Votava warns.</p> <p><em>What are you doing to ensure sufficient health care coverage in retirement?</em></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/follow-these-5-steps-to-full-health-care-coverage-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-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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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/how-to-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</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/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</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/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance Retirement 401(k) healthcare HSA medical social security Thu, 14 May 2015 15:00:09 +0000 Carrie Kirby 1416618 at http://www.wisebread.com How to Enjoy Retirement If You Haven't Saved Enough http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-enjoy-retirement-if-you-havent-saved-enough" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_couple_vacation_000038250840.jpg" alt="Retired couple taking cheap vacation" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you ready to retire, but haven't managed to save enough yet?</p> <p>In fact, the U.S. Census Bureau of Labor Statistics says that although the average retirement age is 62, many seniors are retiring at age 65 or older, and a large percentage &mdash; roughly 80% &mdash; still will not have saved enough by then. Of them, about a third will depend entirely on Social Security benefits. If you're within five years of calling it quits but haven't saved enough to retire, here are a few steps that may bring retirement closer within reach.</p> <h2>1. Wait Until You're 65</h2> <p>Wait until you're age 65 or older before you start collecting Social Security benefits, as the longer you wait, the larger your benefit. Use Bankrate's Social Security <a href="http://www.bankrate.com/calculators/retirement/social-security-benefits-calculator.aspx">benefit calculator</a> to estimate your future payments.</p> <h2>2. Don't Wait to Downsize</h2> <p>Consider selling your home and investing the profits. Downsize to a lower-cost senior living community or condominium in an area where your property taxes will be affordable. You can also inquire about school parcel tax exemptions that allow seniors to apply for tax exemption from taxes imposed by local school districts.</p> <h2>3. Move to a No Tax State</h2> <p>Move to a state with no income tax on pension, Social Security, or dividend income. Florida, Nevada, New Hampshire, Pennsylvania, Washington, and Wyoming are among the states that do not tax that income.</p> <h2>4. Accept Government-Sponsored Medical Insurance</h2> <p>Medicare provides adequate health insurance coverage for doctor's visits, emergency care, assisted living, etc., but does not cover prescription drugs, dental, or vision care. For this, you will need add-on coverage like those offered by Medicare Advantage and Supplemental Insurance (Medigap). Consult with your insurance provider prior to retirement to ensure you can afford proper health insurance coverage. If you can't, inquire about government subsidies or senior plans offered by the likes of <a href="http://www.aarp.org/">AARP</a>.</p> <h2>5. Max-Out Retirement Accounts</h2> <p>By now you should be fully funding all of your retirement accounts and making any catch-up contributions. The 2015 catch-up contributions for IRAs total an additional $1,000 ($6,500) and $6,000 ($24,000) for your 401(k). As they are the most tax advantageous, make sure you are fully funding these accounts over the next few years preceding your retirement.</p> <h2>6. Diversify Using Bonds and ETFs</h2> <p>As you are nearing retirement age, you will want to gradually rebalance your portfolio so that it has less of volatile investments like stocks, and more of safer investments such as bonds and exchange-traded funds, or ETFs.</p> <h2>7. Join AARP</h2> <p>The benefits of joining AARP are endless. For those unfamiliar, AARP is the popular senior citizens advocacy group. The annual membership fee is only $16 and is discounted even further when years are bought in bulk. Members receive invaluable discounts on dining, travel, roadside assistance, auto insurance, health benefits, and more. This is a program that's definitely well worth signing up for.</p> <p><em>Are you prepared for retirement? What are you doing to get ready?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-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-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/7-things-financial-advisers-wish-you-knew-about-retirement">7 Things Financial Advisers Wish You Knew About 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/how-to-face-4-ugly-truths-about-retirement-planning">How to Face 4 Ugly Truths About Retirement Planning</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/choosing-a-retirement-account-whats-available-and-what-s-best-for-you">Choosing a Retirement Account: What&#039;s Available, and What’s Best for 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/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) aarp investments IRAs saving money social security Fri, 01 May 2015 15:00:25 +0000 Qiana Chavaia 1400950 at http://www.wisebread.com How to Start Saving for Retirement at 40+ http://www.wisebread.com/how-to-start-saving-for-retirement-at-40 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-start-saving-for-retirement-at-40" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_fund_jar_000020745280.jpg" alt="Retirement fund you should start adding to over 40" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Perhaps you missed the memo urging you to start saving for retirement in your 20s or 30s. Or, if your situation is anything like mine, you started a family early or didn't find your passion in life until you were in your 30s.</p> <p>Fortunately, it's not too late to start saving for retirement, because you're likely earning more today than you did a decade ago. You should be able to start saving now and still retire with a hefty nest egg. But first, you must take some essential steps.</p> <h2>1. Evaluate Your Savings Potential</h2> <p>Be realistic. Sure, we all wish we could save $5,000 per month, but can you <em>actually </em>achieve this based on your earnings and expenses? Remember, no savings amount is so small that it won't positively impact your goals. Save what you can, even if it's only a few hundred dollars per month. There are always ways to push your savings goals further by <a href="http://www.wisebread.com/the-first-step-to-budgeting">establishing a budget</a>, <a href="http://www.wisebread.com/10-great-home-based-side-business-ideas">creating a side business</a>, <a href="http://www.wisebread.com/this-is-how-you-downsize-your-home-and-start-living-a-better-life">downsizing your life</a>, or all of the above.</p> <h2>2. Set a Financial Goal</h2> <p>How much do you need to retire? Start by taking an assessment of where you are financially and where you need to be. How much money do you need to live comfortably in retirement? Do you anticipate a need for $25,000, $50,000 per year, or maybe more? It may be that you have to postpone your retirement by a few years while you make a few adjustments and implement a quick-fix plan to catch up with your goals.</p> <h2>3. Create a Plan</h2> <p>Any good financial plan should begin with an honest assessment of your goals and the steps you'll take to get there. Try using a <a href="http://www.aarp.org/work/retirement-planning/retirement_calculator.html">retirement calculator</a> to determine how much you'll need to save each month in order to retire by your desired date.</p> <p>You may be surprised by how much money you'll need to save, but don't fear the challenge. Consider working longer, finding a second income, or downsizing your lifestyle to enable progress toward your savings goals.</p> <h2>4. Bias Your Portfolio Towards Stocks</h2> <p>Because stocks offer higher returns than other, less aggressive investments, and you're playing a bit of catch-up, you will want to take on more risk by favoring these over bonds or other more conservative investments. As you grow nearer to retirement, you can take a more conservative investment approach.</p> <h2>5. Max-Out Retirement Accounts and Catch-Up Contributions</h2> <p>Max out your retirement accounts. Take full advantage of employer-sponsored accounts whether your employer offers match contributions, or not. If you don't already have one, open an Individual Retirement Account (IRA) and make the maximum contribution of $5,500. At retirement, given your account has been open at least five years, you can make withdrawals absolutely tax-free.</p> <p>If you're over the age of 50, the government allows you to make <a href="http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Catch-Up-Contributions">catch-up contributions</a> to your 401(k) or IRA plans, thus enabling you to save even more tax-deferred money for retirement.</p> <h2>6. Take Your Retirement Savings to New Heights</h2> <p>If you need to boost your savings in order to meet your goals, consider falling back on your business consulting skills, or any other skill you've developed throughout your career, and using it to create a second income. Freelancers, independent contractors, and small business owners can deduct many of their expenses.</p> <p>There's also a retirement savings incentive for being self-employed. The self-employed can set-up retirement accounts that allow both employer and employee contributions. For 2015, annual plan contributions for a SEP-IRA is up to $52,000, SIMPLE IRA is up to $12,500 plus an employer contribution of 3% of income, and the Solo 401(k) is up to $53,000.</p> <p>The IRS allows the self-employed to make contributions to both an IRA and 401(k). That's a lot of savings towards retirement.</p> <p><em>What steps are you taking toward retirement savings after age 40?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/how-to-start-saving-for-retirement-at-40">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/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</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-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</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/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</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-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</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/choosing-a-retirement-account-whats-available-and-what-s-best-for-you">Choosing a Retirement Account: What&#039;s Available, and What’s Best for You?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) budgeting downsizing financial planning IRAs savings stocks Tue, 28 Apr 2015 11:00:29 +0000 Qiana Chavaia 1397574 at http://www.wisebread.com 5 Ways to Boost Your Odds of Retiring Early http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-to-boost-your-odds-of-retiring-early" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/guy_computer_000025658945.jpg" alt="Man trying to boost his odds of retiring early" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The <a href="http://crr.bc.edu/briefs/the-average-retirement-age-an-update/">average age of retirement</a> stands today at 62 for women and 64 for men. But if you're like many Americans, you'd probably much prefer to have your feet in the sand and a piña colada in hand well before you reach your 60s. No matter your age, it'll be pretty hard to pay for that oceanfront real estate and tiki bar tab if you haven't set aside enough savings.</p> <p>Fortunately, your dreams of a comfortable, early retirement can still come true &mdash; so long as you're willing to do some heavy duty planning, smart saving, and savvy investing. Read on for our roundup of the best tips and tricks for retiring early &mdash; without winning the lottery.</p> <h2>1. Set a Savings Goal</h2> <p>First thing's first: You need to calculate how much money you'll need to stockpile before you can quit your day job. Be forewarned &mdash; it'll likely be a number that will make your jaw drop. But even if it seems totally unattainable, rest assured that it's not. Let's say you'd like to retire at 48 &mdash; a plum 15 years earlier than the average American. Take your pre-retirement income and multiply it by the number of expected years of life you'll have in retirement; in this case, we'll say it's 48 x 31 (this assumes you're going to live to be 79, the average life expectancy for an American).</p> <p>For example, if you're living off a $70,000 salary now, you'll need to save $2.2 million before you can ditch your nine-to-five. On average, retirees spend between 65% and 95% of their<a href="http://www.forbes.com/sites/fidelity/2015/03/23/are-you-on-track-for-the-retirement-you-want-infographic/?sr_source=lift_polar"> pre-retirement income</a>, so this calculation shoots a little high. But since you very well may live a decade or two longer than the average Joe, it's better to have a bigger cushion than no cushion at all.</p> <h2>2. Live Frugally</h2> <p>If you want to achieve a comfortable, early retirement, one way of getting there is by living frugally. That means forgoing name brand clothing, coupon-less meals at restaurants, salon visits, and airplane travel. Buying used cars only &mdash; or giving up cars, altogether and instead riding a bike or public transit. (See also: <a href="http://www.wisebread.com/the-two-biggest-mistakes-people-make-when-starting-to-live-frugally?ref=seealso">The Two Biggest Mistakes People Make When Starting to Live Frugally</a>).</p> <p>If this sort of lifestyle sounds foreign to you, you may want to begin by crafting a carefully detailed budget that will set you up to achieve your long-term retirement savings goal. If all of this sounds exactly like the way you don't want to live out your younger years, frugal living as a road to early retirement quite simply may not be for you.</p> <h2>3. Start a Business &mdash; Then Let Someone Else Run It for You</h2> <p>If you've got an entrepreneurial bone in your body, you might want to explore launching your own business as a means of achieving early retirement. Whether it's a food truck or a marketing and consulting firm, the idea is to launch the business and work it until it's profitable enough that you can hire someone else to run the day-to-day operations while you kick back in that beach chair and watch the money pour in. Alternatively, the sale of your business could fund your retirement. Nearly 40% of small business owners say they are <a href="http://www.guardianlife.com/glife11pp/groups/camp_internet/@stellent_camp_websites/documents/document/sbo-retirement-readiness.pdf">poised to retire earlier</a> than they had anticipated. (See also: <a href="http://www.wisebread.com/starting-your-dream-business-is-easier-than-you-think-heres-how?ref=seealso">Starting Your Dream Business Is Easier Than You Think &mdash; Here's How</a>)</p> <h2>4. Get Yourself a Pension</h2> <p>The beauty of the pension plan: It's sort of like earning a salary, only without having to put in the work. And although many industries are phasing out these plans, about one in four large employers still offer some sort of <a href="http://www.towerswatson.com/en/Insights/Newsletters/Americas/Insider/2014/retirement-in-transition-for-the-fortune-500-1998-to-2013">pension to new hires</a>, according to a recent study. At the top of the list are companies in the insurance, utilities, energy, transportation, and food and beverage industries. Government is another sector where pensions are alive and well. Many municipalities still offer firefighters, police officers, and public works employees pensions that include overtime and saved vacation in the final calculation. The result is that some workers can retire with a pension that's <a href="http://www.ctpost.com/local/article/Crushed-by-town-pensions-1413396.php">higher than their former salary</a>. Imagine that.</p> <p>Alternatively, Apple, Google, Microsoft, and other big-name employers in the <a href="http://money.usnews.com/money/retirement/slideshows/10-industries-with-the-best-retirement-benefits/10">information industry</a> offer workers an average retirement benefit contribution of $2.76 per hour worked. That's huge. Also, these tend to be pretty high-paying jobs, which means employees have more flexibility to make larger contributions to their own retirement savings, in addition to what the company chips in.</p> <h2>5. Make Smart Investments</h2> <p>The best time to start investing is now. Case in point: If you start maxing out your IRA contributions at age 25, you will have saved $1.6 million by the time you're 70. But if you were to start at 35, you'd save about half that sum. Clearly, a few years can make a huge difference. Now, if you're not investment savvy, there are tons of tools available to help you figure out where to put your money.</p> <p>One of the best and easiest is an automated investment advisor, such as FutureAdvisor, that specializes in retirement planning. With <a href="http://track.flexlinks.com/a.ashx?foid=1029882.978749&amp;fot=9999&amp;foc=1&amp;foc2=941565">FutureAdvisor</a>, you can get your 401(k), IRA, and other accounts analyzed, plus receive recommendations on how to improve your existing investments &mdash; absolutely free of charge. Then, if you're impressed with the results and want to hire FutureAdvisor as your investment manager, there's a monthly fee of either $9 or $19, depending on the value of your assets. Rest assured, all of FutureAdvisor's investment recommendations are made with the goal of setting you up for the most comfortable retirement years possible.</p> <p><em>What other steps are you taking to ensure an early retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brittany-lyte">Brittany Lyte</a> of <a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">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/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</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-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</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/12-surprising-things-women-should-know-about-retirement-planning">12 Surprising Things Women Should Know About Retirement Planning</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/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</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-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Investment Retirement 401(k) pensions savings Tue, 14 Apr 2015 09:00:42 +0000 Brittany Lyte 1379696 at http://www.wisebread.com