Retirement http://www.wisebread.com/taxonomy/term/417/all en-US 4 Ways to Help Your Adult Kids and Still Save for Retirement http://www.wisebread.com/4-ways-to-help-your-adult-kids-and-still-save-for-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-ways-to-help-your-adult-kids-and-still-save-for-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/girl_in_shopping.jpg" alt="Girl in shopping" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's natural to want to help your adult children financially, whether it's giving them cash for a down payment on a home, or helping them pay off their student loan debt.</p> <p>But don't make the mistake of shorting your own retirement funds while doing this. Your financial priority should be saving enough for <em>your </em>after-work years. If you want to help your adult children, too, that's fine &mdash; but only if you can afford to, and only if you set limits.</p> <p>Here are several rules you should follow when giving your grown children financial assistance.</p> <h2>Check your budget first</h2> <p>Student loan debt continues to grow for young people. According to data from the Federal Reserve Bank of New York, the national outstanding student loan debt stood at $1.36 trillion as of Sept. 30, 2017.</p> <p>It's tempting for parents to help their children with monthly student loan payments, especially if their children are recent grads still trying to find good jobs. But before you start helping your kids pay back those loans, take a close look at your own household budget to make sure that you can afford to help.</p> <p>Your budget should include the money you bring in each month and the money that goes out, including your spending on variable items like groceries, entertainment, and dining out. It should also include the money you need to put away each month for your retirement. If helping your children financially will cut into those retirement savings, either don't provide the help, or offer your adult children a smaller amount of money.</p> <p>If you discover that helping out will bust your budget altogether, don't do it. Hurting your own financial situation won't help anybody. (See also: <a href="http://www.wisebread.com/are-you-ruining-your-retirement-by-spoiling-your-kids?ref=seealso" target="_blank">Are You Ruining Your Retirement by Spoiling Your Kids?</a>)</p> <h2>Consider giving loans, not gifts</h2> <p>Sometimes the best way to give your adult children financial support is to ask that they pay you back over time. Don't feel bad about helping your children with a loan instead of a gift &mdash; it's not unreasonable to ask your kids to pay you back, perhaps on a monthly repayment schedule that they can afford. If your children can't afford to pay you back now, agree that they will start repaying you once they land a better-paying job.</p> <p>If your adult kids are buying a home, giving them money gets a little more complicated. If you <em>gift</em> your children money for a down payment, they will need to be able to prove to their mortgage lender that the money is a gift, and provide a letter detailing that it does not need to be paid back.</p> <p>Then, there's the issue of gift tax liability: The annual gift tax exclusion is $15,000 per recipient. Giving your child anything beyond that means you will have to report it on Form 709 of your taxes. However, that doesn't mean you'll pay the gift tax right away. You can apply the gift toward your lifetime exclusion of $5.6 million in combined estate/gift tax exemption. Also note that <em>each</em> parent could gift $15,000 to their child <em>and</em> $15,000 to their child's spouse for a total of $60,000, before having to report the gifts to the IRS.</p> <p><em>Loaning</em> your adult children a large sum for a down payment will also come under scrutiny by the IRS. If a formal arrangement is not made, and interest is not being paid, the IRS will view the funds as a gift and subject it to the gift tax rules outlined above. For a loan, a promissory note between you and your adult children should lay out the terms, including interest rate, repayment schedule, and any collateral. The interest rate on the loan should be at least as high as the applicable federal rates set by the IRS, or there could be further tax complications.</p> <p>Of course, if you can't afford to either loan or give your child money for a down payment, don't. Instead, encourage your kid to hold off on purchasing a home until they have saved enough money to cover the down payment on their own. (See also: <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=seealso" target="_blank">4 Easy Ways to Start Saving for a Down Payment on a Home</a>)</p> <h2>Expect something in return</h2> <p>If you're helping your adult children financially, it's OK to expect something in return. Adults still living in their parents' home should be expected to pay at least a token amount of monthly rent. They should also help pay for groceries and utility bills.</p> <p>Asking for rent or other payments isn't selfish on your part. Instead, you're reinforcing that your adult children are, indeed, adults. Being an adult comes with financial responsibilities, and it's an important lesson for your kids to learn. You don't have to charge a lot of rent, but charge something. Doing so could be one step toward turning your children into financially responsible adults. (See also: <a href="http://www.wisebread.com/7-money-conversations-parents-should-have-with-their-adult-kids?ref=seealso" target="_blank">7 Money Conversations Parents Should Have With Their Adult Kids</a>)</p> <h2>Spell out wants versus needs</h2> <p>Finally, make sure that when you help your adult children financially, you are helping them with something they truly need versus something they want. It's one thing to help your kid pay their student loans. It's another to help them buy the latest smartphone. It's OK if your children don't have the most powerful laptop or an expensive car. They can get those things after they've saved and built up their own financial health.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-ways-to-help-your-adult-kids-and-still-save-for-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-to-do-if-youre-retiring-with-debt">What to Do If You&#039;re Retiring With Debt</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/are-you-ruining-your-retirement-by-spoiling-your-kids">Are You Ruining Your Retirement by Spoiling Your Kids?</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-help-your-adult-children-become-financially-independent">How to Help Your Adult Children Become Financially Independent</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/7-money-conversations-parents-should-have-with-their-adult-kids">7 Money Conversations Parents Should Have With Their Adult Kids</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-of-the-fastest-ways-to-go-broke-in-retirement">4 of the Fastest Ways to Go Broke in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Family Retirement adult children budgets charing rent down payments giving money kids loaning money wants vs needs Tue, 06 Feb 2018 09:00:06 +0000 Dan Rafter 2093195 at http://www.wisebread.com 7 Surprising Ways Retirement Has Gotten Easier http://www.wisebread.com/7-surprising-ways-retirement-has-gotten-easier <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-surprising-ways-retirement-has-gotten-easier" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/for_the_love_of_dance.jpg" alt="For the love of dance" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you read the financial headlines, you'll get the sense that retirement may be a disaster for many Americans. With a decline in employer-provided pensions and uncertainty over the future of government benefits, many older Americans are rightfully concerned about whether they will be able to retire comfortably.</p> <p>But there is considerable evidence that the experience of retiring is actually much better than in the past. Medical advancements are helping people live longer, and technology is helping to keep seniors connected to the world. And there are more resources for retirees than ever before. (See also: <a href="http://www.wisebread.com/how-to-overcome-these-4-common-retirement-fears?ref=seealso" target="_blank">How to Overcome These 4 Common Retirement Fears</a>)</p> <p>Let's examine these ways in which retirement has improved.</p> <h2>1. It's lasting longer</h2> <p>There was a time not too long ago when people would work into their 60s and pass away within a decade or so. But these days, it's not uncommon for people to retire at age 60 and live another 30 years or more. Statistics from the Social Security Administration show that the average 65-year-old man will live another 19 years in retirement, up from 15 years two decades ago. That's a lot of time to travel, connect with the grandkids, and pursue all of the hobbies and interests you've been neglecting. While this longer retirement places pressure on people to save more, it's obviously a boon to seniors who have worked hard and deserve a lengthy retirement. (See also: <a href="http://www.wisebread.com/5-ways-american-retirement-is-changing?ref=seealso" target="_blank">5 Ways American Retirement Is Changing</a>)</p> <h2>2. Your living options are better</h2> <p>As the population has gotten older, there has been a recognition that older citizens need different kinds of living arrangements that offer them support while still preserving independence. There is now a whole growing industry surrounding assisted living and elder care that involves more than just nursing homes. Older people have the option of living at home with some help, or moving into special communities that allow them to live freely while having access to care as they need it. In many cases, older people can move into a community while they are still healthy and active, and remain there as they begin to need more care. While some of these arrangements can be expensive, they have allowed many seniors to maintain an active lifestyle and remain connected socially well into their retirement years. (See also: <a href="http://www.wisebread.com/a-granny-pod-may-be-the-smartest-way-to-care-for-an-elderly-parent?ref=seealso" target="_blank">A Granny Pod May Be the Smartest Way to Care for an Elderly Parent</a>)</p> <h2>3. The internet has kept us connected</h2> <p>Seniors can FaceTime with their grandkids. They can watch YouTube videos to get gardening or cooking tips. They can use the internet for genealogy research, and share photos of their travels. There are even dating apps for older singles. While technology is moving fast and not always user-friendly for seniors, our new connected way of life has benefited older Americans by expanding their options for activities and keeping them less isolated. The Pew Research Center this year reported that 58 percent of seniors feel that technology has had a positive benefit on society, and nearly half say broadband internet access is an important thing to have.</p> <h2>4. Travel is easier</h2> <p>While it's true that airport security has made air travel more hectic in recent years, there are other aspects of travel that have gotten easier for seniors. The internet has made booking flights and hotels effortless, and competition among online travel sites has made it easier to find great prices. The explosion of the cruise industry has been great for seniors, and touring companies have become smarter about accommodating the various needs of older travelers. The World Economic Forum also noted that transportation infrastructure improvements worldwide has made traveling easier for seniors over the years. (See also: <a href="http://www.wisebread.com/6-ways-travel-in-retirement-keeps-you-young?ref=seealso" target="_blank">6 Ways Travel in Retirement Keeps You Young</a>)</p> <h2>5. Health care is better</h2> <p>Yes, there are still problems with our health care system. But there's no mistaking that we've made great progress over the years in identifying and treating many ailments and diseases. We've also made it easier for seniors to access and afford care. Consider that before 1965, older Americans did not have access to Medicare to help pay for care and treatments, and it was not until 2006 when a prescription drug benefit became available. All of this has not only helped many people live longer, but maintain a more active and healthy lifestyle deep into retirement. (See also: <a href="http://www.wisebread.com/follow-these-5-steps-to-full-health-care-coverage-in-retirement?ref=seealso" target="_blank">Follow These 5 Steps to Full Health Care Coverage in Retirement</a>)</p> <h2>6. It's no longer all or nothing</h2> <p>It used to be that retirement was a 100 percent proposition. It was either work full-time, or not at all. Now, seniors can ease their way into retirement, or even stay merely semiretired, thanks to the growth of freelance work and the &quot;gig&quot; economy. The internet has opened up more opportunities for freelance writing and consulting. Uber, the popular ride sharing company, estimates that 25 percent of its drivers are over age 50. And retailers including Amazon are increasingly seeking seasonal help that might offer opportunities for older people. (See also: <a href="http://www.wisebread.com/6-great-retirement-jobs?ref=seealso" target="_blank">6 Great Retirement Jobs</a>)</p> <h2>7. People are looking out for you</h2> <p>In the last half century or so, there's been growth in the number of organizations advocating for older citizens. There's the American Association of Retired Persons (AARP), which has become one of the most powerful advocacy groups in the country. There's the Village to Village Network, which encourages the formation of thriving communities for seniors. Meanwhile, local governments have formed agencies specifically dedicated to the lives of senior citizens in their communities. While there is always debate about whether we can do more for older citizens, there's no doubt that resources have become more plentiful and available over the years.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F7-surprising-ways-retirement-has-gotten-easier&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F7%2520Surprising%2520Ways%2520Retirement%2520Has%2520Gotten%2520Easier.jpg&amp;description=7%20Surprising%20Ways%20Retirement%20Has%20Gotten%20Easier"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/7%20Surprising%20Ways%20Retirement%20Has%20Gotten%20Easier.jpg" alt="7 Surprising Ways Retirement Has Gotten Easier" width="250" height="374" /></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-surprising-ways-retirement-has-gotten-easier">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/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it">5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)</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-retirement-struggles-nobody-talks-about-and-how-to-beat-them">5 Retirement Struggles Nobody Talks About — And How to Beat Them</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/13-financial-steps-to-take-before-retiring-abroad">13 Financial Steps to Take Before Retiring Abroad</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-actions-women-can-take-right-now-to-get-their-retirement-on-track">5 Actions Women Can Take Right Now to Get Their Retirement On Track</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/heres-how-far-1-million-will-actually-go-in-retirement">Here&#039;s How Far $1 Million Will Actually Go in Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement aarp elderly health care improvements life span lifestyle long term care longevity seniors technology travel Fri, 26 Jan 2018 10:00:10 +0000 Tim Lemke 2091492 at http://www.wisebread.com 8 Things Millennials Can Do Right Now for an Early Retirement http://www.wisebread.com/8-things-millennials-can-do-right-now-for-an-early-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-things-millennials-can-do-right-now-for-an-early-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/this_team_is_built_for_success.jpg" alt="This team is built for success" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you're young, it's hard to think of retirement planning as a priority. You have barely entered the workforce; now you have to think about what to do when you've <em>stopped</em> working?</p> <p>But if you are of the millennial generation, the road to a comfortable retirement should begin now. And with the right moves, you may even be able to retire early. Consider these financial moves to supercharge your retirement plan.</p> <h2>1. Develop a net worth mindset</h2> <p>One of the keys to saving for a comfortable retirement is to focus on accumulating things that grow in value while reducing your liabilities.</p> <p>This means earning and saving as much money as possible while eliminating debt. It means investing and watching your money grow, through things like stocks and real estate. It means avoiding spending money on things that will lose financial value or have no value to begin with.</p> <p>This mindset will help you develop a high &quot;net worth,&quot; calculated by how much your assets exceed your liabilities. You can't retire unless you have a high net worth, and you can't get there unless you make the right financial choices &mdash; especially at an early age. (See also: <a href="http://www.wisebread.com/6-money-moves-to-make-if-your-net-worth-is-negative?ref=seealso" target="_blank">6 Money Moves to Make If Your Net Worth Is Negative</a>)</p> <h2>2. Open an IRA</h2> <p>If you have any earned income at all, you can open an individual retirement account (IRA), which allows you to invest in almost anything and enjoy tax savings along the way. With a traditional IRA, any money you invest is deducted from your taxable income. With a Roth IRA, contributions are taxed upfront, but any investment gains can be withdrawn tax-free when you retire. You will pay a penalty and taxes if you withdraw money before you turn 59&frac12;.</p> <p>These retirement accounts can be powerful saving vehicles if you have the discipline to set aside as much money as you can. The earlier you invest, the more time your money has to grow. (See also: <a href="http://www.wisebread.com/5-retirement-accounts-you-dont-need-a-ton-of-money-to-open?ref=seealso" target="_blank">5 Retirement Accounts You Don't Need a Ton of Money to Open</a>)</p> <h2>3. Put money in a 401(k)</h2> <p>If you are employed by a company, there's a good chance that you have access to a 401(k) or similar plan. Don't ignore your human resources representative when they hand you a stack of plan documents urging you to sign up.</p> <p>A 401(k) plan allows you to invest in a variety of mutual funds and other investments, and your company will often match your contributions up to a certain amount. Money you contribute is deducted from your taxable income. You should invest as much as you can into your 401(k), but it's imperative that you at least contribute enough to get the maximum in matching funds. Your contributions, coupled with the matching funds, can add up to millions of dollars by the time you decide to retire. (See also: <a href="http://www.wisebread.com/401k-or-ira-you-need-both?ref=seealso" target="_blank">401K or IRA? You Need Both</a>)</p> <h2>4. Open a taxable brokerage account</h2> <p>There's no rule that says all your investments need to be in retirement accounts. Regular taxable brokerage accounts don't have the same tax advantages as IRAs or 401(k) plans, but they do offer other perks, chiefly the flexibility to withdraw money whenever you want it. This is especially key for someone looking to retire before age 59.</p> <p>Taxable brokerage accounts can be used to accumulate dividend stocks, bonds, or other investments that provide income that will allow you to retire early. (See also: <a href="http://www.wisebread.com/7-investment-accounts-all-30-somethings-should-have?ref=seealso" target="_blank">7 Investment Accounts All 30-Somethings Should Have</a>)</p> <h2>5. Get a side hustle</h2> <p>To accumulate enough money for an early retirement, you'll need a healthy and steady income. If your day job doesn't quite pay enough, look for other ways to generate cash. This may mean freelance writing or playing guitar at local coffee shops. Maybe it's tutoring math, working as a DJ, or doing ASMR videos on YouTube.</p> <p>If you're young, you have energy and freedom, and the ability to make some cash on the side. Earn it, invest it, and watch it help you retire for good from work at an early age. (See also: <a href="http://www.wisebread.com/14-best-side-jobs-for-fast-cash?ref=seealso" target="_blank">14 Best Side Jobs For Fast Cash</a>)</p> <h2>6. Learn to budget</h2> <p>It's simple: The only way to invest money is to save it, and the only way to save it is to spend less than you earn. This may be easier said than done, especially if you aren't making a lot of money early in your career. But it needs to happen.</p> <p>Start by tracking your spending so you know precisely where your money is going. Then create buckets for various categories of spending (rent, food, entertainment, etc.). Budgeting requires focus and discipline, but can be fun &mdash; and ultimately rewarding &mdash; when you see your savings grow. (See also: <a href="http://www.wisebread.com/9-ways-staying-on-budget-can-be-fun-really?ref=seealso" target="_blank">9 Ways Staying on Budget Can Be Fun (Really!)</a>)</p> <h2>7. Tackle that debt</h2> <p>You may have student loans. As a result, you may also have credit card debt. If this is weighing you down, it's time to do something about it or an early retirement will be impossible.</p> <p>Begin by going after some of the most onerous debt first &mdash; usually, this is the credit card debt with the highest interest rate. Once the debt is eliminated, you can begin to focus on actually saving and investing, rather than simply making ends meet. (See also: <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=seealso" target="_blank">The Fastest Method to Eliminate Credit Card Debt</a>)</p> <h2>8. Get insured</h2> <p>The ability to retire early is as much a product of avoiding disaster as accumulating wealth. It's hard to save and invest aggressively if you find yourself saddled with tens of thousands of dollars in medical bills, or expenses to replace items lost when your apartment flooded.</p> <p>You may think that health insurance is a waste of money because you are young and in good shape. You may think that you're a good driver and don't need comprehensive auto insurance. But if you truly want to gain financial independence and work toward an early retirement, you must be properly insured. Even if you have insurance now, review your policies to make sure you're covered at the right levels. Fail to do this, and you may find a single disaster will send your financial future off track. (See also: <a href="http://www.wisebread.com/15-surprising-insurance-policies-you-might-need?ref=seealso" target="_blank">15 Surprising Insurance Policies You Might Need</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F8-things-millennials-can-do-right-now-for-an-early-retirement&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F8%2520Things%2520Millennials%2520Can%2520Do%2520Right%2520Now%2520for%2520an%2520Early%2520Retirement.jpg&amp;description=8%20Things%20Millennials%20Can%20Do%20Right%20Now%20for%20an%20Early%20Retirement"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/8%20Things%20Millennials%20Can%20Do%20Right%20Now%20for%20an%20Early%20Retirement.jpg" alt="8 Things Millennials Can Do Right Now for an Early Retirement" width="250" height="374" /></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-things-millennials-can-do-right-now-for-an-early-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-biggest-ways-millennials-risk-their-retirements">5 Biggest Ways Millennials Risk Their Retirements</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-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-questions-all-rookie-investors-should-ask">6 Questions All Rookie Investors Should Ask</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-financial-perks-of-being-in-your-20s">The Financial Perks of Being in Your 20s</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-alternatives-to-a-401k-plan">5 Alternatives to a 401(k) Plan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401(k) budgeting compound interest extra income insurance IRA millennials net worth saving money side gigs taxable brokerage accounts young adults Wed, 24 Jan 2018 10:00:05 +0000 Tim Lemke 2084738 at http://www.wisebread.com How to Claim Social Security Benefits While Living Abroad http://www.wisebread.com/how-to-claim-social-security-benefits-while-living-abroad <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-claim-social-security-benefits-while-living-abroad" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/senior_happy_couple_taking_selfie.jpg" alt="Senior happy couple taking selfie" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The benefits of being an American do not stop at the border, which is excellent news for retirees looking to live abroad. In particular, expatriates are free to collect their Social Security benefits while living abroad in an adopted country. (See also: <a href="http://www.wisebread.com/13-financial-steps-to-take-before-retiring-abroad?ref=seealso" target="_blank">13 Financial Steps to Take Before Retiring Abroad</a>)</p> <p>While Uncle Sam will forward your Social Security benefit checks to whatever sunny beach on a foreign shore that you choose to retire to, it is important for you to understand just what you'll have to do to make sure the claiming process goes smoothly. Here's everything you need to know about claiming your Social Security benefits while living the retired life abroad.</p> <h2>You can't take Medicare with you</h2> <p>Let's start with the bad news: Medicare does not pay for any care you receive abroad. That's because Medicare coverage is specific to American medical providers and does not cover service outside of the United States.</p> <p>Many retirees living abroad may still choose to enroll in Medicare so that they can return to America in case of a serious medical issue. There are severe financial penalties for enrolling in Medicare after the initial enrollment period (the three months before, the month of, and the three months after you turn 65), which means it may be worth your while to enroll in Medicare if there is any possibility you will return to the U.S.</p> <p>That being said, it's quite possible that you will be eligible for low-cost, high-quality health care coverage in your adopted home. Many countries extend their health care services to foreign residents, and one of the potential benefits of retiring abroad is the possibility of cheaper and better health care. (See also: <a href="http://www.wisebread.com/4-affordable-retirement-spots-with-world-class-health-care?ref=seealso" target="_blank">4 Affordable Retirement Spots With World-Class Health Care</a>)</p> <h2>But Social Security benefits are pretty portable</h2> <p>All Social Security recipients are now required to accept their benefits electronically, which is quite a boon to retirees living abroad. This means you can either have your benefits directly deposited into a foreign bank account based in your new home, or you can have the money deposited into an American bank account that you have maintained while abroad.</p> <p>Some countries require foreign residents to open a local bank account and have a regular direct deposit into that account. Social Security benefits offer an ideal method for fulfilling this obligation.</p> <p>If you live in a country without such a requirement, you may choose to simply maintain your U.S. based bank, in part because many retirement destinations are all about paying in cash. Everyone from utility providers to grocers to dentists only accept cash, which makes maintaining your home bank much simpler. As long as you can withdraw funds from an ATM or banking office in your new home, there's no need to set up a new bank account or have your Social Security benefits routed elsewhere.</p> <h2>Restrictions apply to certain countries</h2> <p>There are two countries in the world that Uncle Sam will not send your Social Security benefits to: North Korea and Cuba. The United States Department of the Treasury has imposed sanctions on these countries which makes it impossible for American expats to receive their benefits while living there. The Social Security Administration will withhold your benefits payments while you are living in either of these two countries, but you can access your withheld money as soon as you move to a country where the U.S. will send payments.</p> <p>You will also generally not be able to access your Social Security benefits while living in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. The Social Security Administration may be able to make exceptions for certain eligible beneficiaries who make their homes in these countries (such as appearing in person at a U.S. Embassy or U.S. Consulate every six months).</p> <h2>Rules are different if you're not a U.S. citizen</h2> <p>American citizens are always eligible to receive their Social Security benefits while living abroad. However, non-U.S. citizens who are eligible to receive Social Security benefits (because they paid into the system or are dependents of someone who paid into the system) have a limit to the amount of time they may receive their benefits while away from American soil. Noncitizens will receive their benefits for six months while living abroad, after which point the Social Security Administration will stop payments. Payments will be reinstated after the noncitizen has returned to the U.S. and stayed there for a full calendar month.</p> <p>There are some exceptions to these rules, which is why the Social Security Administration has created a <a href="https://www.ssa.gov/international/payments_outsideUS.html" target="_blank">Payments Abroad Screening Tool</a> to help you figure out if you will continue to receive your Social Security benefits while living abroad.</p> <h2>Don't forget about the tax man</h2> <p>Just because you're living abroad doesn't mean you can forget about paying the tax man. This is especially important for retirees who are receiving Social Security benefits, since your benefits can be garnished to pay taxes you owe. American expatriates need to understand their tax requirements so they don't accidentally cause themselves a major financial problem.</p> <p>To start, in addition to the 1040 form that every American has to fill out each year, expats living abroad may also need to complete Form 2555 to declare foreign earned income (income you receive from a job), Form 1116 to declare a foreign tax credit, and Form 8938 to declare specified foreign financial assets (such as assets you hold in foreign bank accounts, brokerage accounts, mutual funds, and unit trusts).</p> <p>The reporting threshold to the IRS for specified foreign financial assets is $200,000 for single filers living abroad, and $400,000 for married couples. However, you are also required to report foreign assets greater than $10,000 to the Department of the Treasury, using FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). Failure to file with the Department of the Treasury can result in stiff penalties of up to 50 percent of the balance of the account, and possible criminal charges.</p> <p>You may also owe taxes to your adopted country, so be sure to understand the tax laws of your new home and file taxes accordingly. (See also: <a href="http://www.wisebread.com/9-things-to-know-before-retiring-abroad?ref=seealso" target="_blank">9 Things to Know Before Retiring Abroad</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-claim-social-security-benefits-while-living-abroad&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Claim%2520Social%2520Security%2520Benefits%2520While%2520Living%2520Abroad.jpg&amp;description=How%20to%20Claim%20Social%20Security%20Benefits%20While%20Living%20Abroad"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20to%20Claim%20Social%20Security%20Benefits%20While%20Living%20Abroad.jpg" alt="How to Claim Social Security Benefits While Living Abroad" width="250" height="374" /></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/how-to-claim-social-security-benefits-while-living-abroad">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/9-things-to-know-before-retiring-abroad">9 Things to Know Before Retiring Abroad</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-i-saved-enough-for-a-down-payment-while-working-in-china">How I Saved Enough for a Down Payment While Working in China</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/retire-for-half-the-cost-in-these-5-countries">Retire for Half the Cost in These 5 Countries</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/dont-let-these-expenses-spoil-your-retirement-abroad">Don&#039;t Let These Expenses Spoil Your Retirement Abroad</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/13-financial-steps-to-take-before-retiring-abroad">13 Financial Steps to Take Before Retiring Abroad</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Travel americans benefits citizens expats living abroad overseas regulations rules social security taxes Wed, 24 Jan 2018 09:30:08 +0000 Emily Guy Birken 2090875 at http://www.wisebread.com Which of These 9 Retirement Accounts Is Right for You? http://www.wisebread.com/which-of-these-9-retirement-accounts-is-right-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/which-of-these-9-retirement-accounts-is-right-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/time_to_invest_for_retirement.jpg" alt="Time to invest for retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You might think that the simplest way to put away money for retirement would be to save or invest your money as you see fit &mdash; without reporting your contributions to anyone, and without following any special rules. The problem with following a freestyle retirement plan like this is taxes. You would pay full income taxes on the money that goes into your account, and you would pay capital gains taxes as your investment grows.</p> <p>Fortunately, there are many retirement savings plans out there that can reduce your tax burden now and in the future, all while avoiding capital gains tax. And while there are many types of retirement accounts, you can &mdash; and should! &mdash; contribute to more than one. The 2018 contribution limit for traditional and Roth IRAs is $5,500 ($6,500 if you're age 50 or older). For 401(k) plans, the current contribution limit is $18,500 (plus an additional catch-up contribution of $6,000 if over age 50). (See also: <a href="http://www.wisebread.com/which-retirement-account-is-right-for-you?ref=seealso" target="_blank">Which Retirement Account Is Right for You?</a>)</p> <p>Here are some of the most popular tax-advantaged retirement plan options.</p> <h2>1. Traditional IRA</h2> <p>Contributions made to a traditional IRA are tax-deductible, which can reduce your current year income tax bill. However, you will have to pay income tax when you withdraw funds starting at age 59&frac12;. If your income is high now and you will be in a lower tax bracket after retirement, contributing to a traditional IRA may be a good move.</p> <h2>2. Roth IRA</h2> <p>Contributions to a Roth IRA are post-tax, so contributing to one of these accounts won't reduce your tax bill upfront. But when you withdraw the funds in the future, you won't have to pay income tax. A Roth IRA can be favorable if you are a young investor in a low tax bracket now. Also, if you are concerned that tax rates could go up in the future, contributing to a Roth IRA allows you to pay a known tax now versus a potentially higher tax in the future when you withdraw funds. (See also: <a href="http://www.wisebread.com/6-reasons-every-millennial-needs-a-roth-ira?ref=seealso" target="_blank">6 Reasons Every Millennial Needs a Roth IRA</a>)</p> <h2>3. Traditional 401(k)</h2> <p>Employees can contribute wages to a 401(k) investment account as elective salary deferrals. The traditional 401(k) account works much like a traditional IRA where income can be contributed before taxes, but you will have to pay income tax on future withdrawals. Some employers provide matching contributions to 401(k) plans, and if you are not participating enough to obtain that match, you are leaving free money on the table. Keep in mind, however, that employer plans have fewer investment options than traditional IRAs, and that there may be limits on whether you can withdraw employer contributions early in, for example, a hardship distribution. (See also: <a href="http://www.wisebread.com/401k-or-ira-you-need-both?ref=seealso" target="_blank">401K or IRA? You Need Both</a>)</p> <h2>4. Roth 401(k)</h2> <p>The Roth 401(k) is an alternate 401(k) plan where employees can contribute after-tax funds. As with a Roth IRA, the Roth 401(k) allows you to pay a known tax <em>today</em> at your current tax bracket instead of an unknown tax rate in the future. A Roth 401(k) is also an attractive option to younger workers who are in a lower tax bracket now and who have a lot of time for funds to grow. If your employer offers matching funds, again, try to contribute at least the minimum required amount to receive the match. (See also: <a href="http://www.wisebread.com/7-things-you-should-know-about-your-401k-match?ref=seealso" target="_blank">Things You Should Know About Your 401(k) Match</a>)</p> <h2>5. SEP IRA</h2> <p>An SEP (Simplified Employee Pension) plan allows business owners &mdash; often the self-employed &mdash; to contribute to traditional IRAs on behalf of themselves and any employees they have. An SEP IRA has many of the same rules as a traditional IRA, but the employer is required to make all contributions to the SEP IRA, and employees can't make any.</p> <p>An SEP IRA allows employers to adjust how much they contribute to an employee's account depending on the company's cash flow that year. Contributions cannot exceed the lesser of 25 percent of the employee's compensation, or $55,000, in 2018.</p> <p>Money contributed to an SEP IRA is tax-deductible for the current year, and is subject to income tax when withdrawn in retirement. (See also: <a href="http://www.wisebread.com/the-sep-ira-is-how-the-self-employed-do-retirement-like-a-boss?ref=seealso" target="_blank">The SEP-IRA Is How the Self-Employed Do Retirement Like a BOSS</a>)</p> <h2>6. SIMPLE IRA</h2> <p>A SIMPLE (Savings Incentive Match Plan for Employee) IRA is a retirement savings plan for businesses of any size, although it is still aimed at small businesses. A SIMPLE IRA allows employees to invest in their own accounts, in addition to receiving employer contributions of 1-3 percent of the employee's compensation. An employee may contribute up to $12,500 to a SIMPLE IRA in 2018.</p> <p>Contributions made to a SIMPLE IRA (by both the employer and employee) are tax-deductible upfront and subject to income tax rates upon withdrawal.</p> <h2>7. 403(b) plans</h2> <p>A 403(b) plan, also known as a tax-sheltered annuity or TSA plan, is similar to a 401(k) &mdash; but is offered by public schools and 501(c)(3) tax-exempt organizations. Like 401(k) plans, 403(b) plans may be offered in either a traditional tax-advantaged or after-tax Roth version. (See also: <a href="http://www.wisebread.com/403b-vs-401k-how-are-they-different?ref=seealso" target="_blank">403(b) vs. 401(k): How Are They Different?</a>)</p> <h2>8. Payroll deduction IRAs</h2> <p>Payroll deduction IRAs allow employees or even self-employed workers to automatically contribute to a traditional or Roth IRA through payroll deductions. The employees set up the account and then let the employer know how much they'd like to contribute from each paycheck. This is perhaps the simplest retirement program that a business can establish for its employees.</p> <h2>9. HSA &quot;IRA&quot;</h2> <p>A HSA (health savings account) is available to those who are enrolled in a high-deductible health plan (HDHP). An HSA allows you to contribute pretax funds into a savings or investment account, and you can withdraw funds tax-free at any time for qualified health expenses. Once you reach age 65, money left in an HSA basically acts like a traditional IRA &mdash; there is no restriction that the funds must be spent on health expenses, but they will be subject to income tax upon withdrawal. (See also: <a href="http://www.wisebread.com/how-an-hsa-could-help-your-retirement?ref=seealso" target="_blank">How an HSA Could Help Your Retirement</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhich-of-these-9-retirement-accounts-is-right-for-you&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhich%2520of%2520These%25209%2520Retirement%2520Accounts%2520Is%2520Right%2520for%2520You_.jpg&amp;description=Which%20of%20These%209%20Retirement%20Accounts%20Is%20Right%20for%20You%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Which%20of%20These%209%20Retirement%20Accounts%20Is%20Right%20for%20You_.jpg" alt="Which of These 9 Retirement Accounts Is Right for You?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/which-of-these-9-retirement-accounts-is-right-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-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/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</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-reasons-every-millennial-needs-a-roth-ira">6 Reasons Every Millennial Needs a Roth IRA</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) 403(b) company match contributions health savings account HSA IRA retirement plans Roth tax advantaged taxes Wed, 24 Jan 2018 09:00:06 +0000 Dr Penny Pincher 2090876 at http://www.wisebread.com 5 Ways Longevity Is Changing Retirement Planning (And What to Do About It) http://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-680410686.jpg" alt="how longevity is changing retirement planning" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There's no doubt about it: People are living longer and need more money to support their extended life spans. In the U.S. alone, the average life expectancy has reached the mid-80s for people turning 65 today, though it's not unusual for someone to live well into their 100s.</p> <p>Longer life spans should be a reason to rejoice &mdash; after all, it means additional memories and experiences that come with having more time on earth. However, living longer also brings legitimate concerns about saving enough money to support such a long stay.</p> <p>If you're uncertain that you'll have enough money to enjoy a retirement of 30 or 40 years, you should start planning now. Take a look at how living longer could affect your retirement income and what you can do to prepare for it.</p> <h2>1. You need to save more money</h2> <p>Much of the financial advice for retirement hasn't considered a retirement period that could last 30 or 40 years. If people aren't advised to save enough during their career, they'll likely have a smaller nest egg that will be depleted much faster. In the case of a long life span, saving the typical 10 to 15 percent of income traditionally recommended for retirement probably won't be enough.</p> <p>You should consider working with a financial planner to discuss the prospects of a longer retirement. Get solid numbers on your potential cost of living to cover various scenarios. Calculate what you could need 20, 30, and even 40 years after you leave the working world, and figure out the amount of money you should be saving to cover those scenarios. (See also: <a href="http://www.wisebread.com/how-to-face-these-7-scary-facts-about-retirement-saving?ref=seealso" target="_blank">How to Face These 7 Scary Facts About Retirement Saving</a>)</p> <h2>2. Your investments may need longer exposure to risk</h2> <p>There are a couple of ways your investing strategy may change with a longer life span. For one, you may find yourself using catch-up contributions and may opt to max out every retirement vehicle you can as early as your 40s and 50s.</p> <p>Then, there's the idea of allocation and risk. Morgan Ranstrom, CFA of Trailhead Planners, says that moving away from equities into bonds may no longer be a good strategy. &quot;It may be necessary to maintain more stock and/or risk exposure in a retiree's investment portfolio to reduce the risk of outliving their money,&quot; he says.</p> <p>An investment adviser can help you create a reasonable asset allocation plan that considers a longer retirement period. Make sure you have a rebalancing plan for each stage of your life, from pre-retirement through 20 or 30 years post-retirement. Seeing these scenarios, with possible outcomes, will give you an idea of how to adjust your investment strategy both now and later on in life. (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p> <h2>3. You'll need more insurance</h2> <p>Michael Dinich, professional estate and tax planner, points out that, &quot;Many universal life policies were funded at a level that would only guarantee coverage until mid-80s.&quot; Extending policies for older retirees can be extremely costly, leaving people without coverage when they need it most.</p> <p>In addition to life insurance, longer life spans could increase the need for long term care insurance. This type of insurance can help cover nursing home costs. Getting this insurance in your 50s or 60s can be expensive, but it will be significantly cheaper than if you wait until you're older. (See also: <a href="http://www.wisebread.com/the-best-age-to-buy-long-term-care-insurance?ref=seealso" target="_blank">The Best Age to Buy Long-Term Care Insurance</a>)</p> <p>Check your existing insurance policies to find additional products that may cover your needs. For example, some policies can be converted partially or completely once the term expires so they last longer. There may also be hybrid products that cover a combination of life, burial, and long term care. The key is to check into these options early to prevent being ineligible at an older age.</p> <h2>4. You may need to work longer</h2> <p>Living longer means you may need to keep working longer to continue growing your retirement savings. Kevin Langman, financial planner at Finovo, says he sees clients with a more fluid concept of their working careers. &quot;Instead of working to a set date and stopping,&quot; he explains, &quot;we see careers going through stages, with a few decades of full-time work followed by a shift to more part-time and passion-fueled work.&quot;</p> <p>Just because you may need to work later in life doesn't mean it has to be stressful or you have to languish in a job you dislike. Investigate ways to extend your career in a way you don't dread &mdash; maybe turn a passion or hobby into a side gig. Langman encourages his entrepreneurial clients to explore residual income options like, &quot;products and services that can continue to generate income even once they are not working on them full-time anymore.&quot; (See also: <a href="http://www.wisebread.com/6-great-retirement-jobs?ref=seealso" target="_blank">6 Great Retirement Jobs</a>)</p> <h2>5. You'll need to account for inflation</h2> <p>Brian Saranovitz, of Your Retirement Advisor, says that planning for inflation can be tricky such a long way out. He says, &quot;In some cases, retirees will need to create an inflation-adjusted retirement income for 25, 35, or possibly more years.&quot; With such a far-out horizon, it can be hard to pinpoint exactly how much inflation will affect an asset base.</p> <p>Work closely with your retirement planner or investment adviser to control the effects of not only inflation, but other forces that can erode assets quickly like taxes and market volatility. Some options include exploring alternative investments and insurance products to increase the effectiveness of your portfolio. (See also: <a href="http://www.wisebread.com/4-ways-to-protect-your-retirement-from-inflation?ref=seealso" target="_blank">4 Ways to Protect Your Retirement From Inflation</a>)</p> <p>Roger Whitney has been a financial adviser for 27 years. He sums up the idea of a longer retirement in this way: &quot;Traditional retirement planning worked for our parents. They lived retirement on the park bench of life. The modern retiree will likely live longer, be more active, and spend more in retirement. They'll still be on the playground.&quot;</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Ways%2520Longevity%2520Is%2520Changing%2520Retirement%2520Planning%2520%2528And%2520What%2520to%2520Do%2520About%2520It%2529.jpg&amp;description=5%20Ways%20Longevity%20Is%20Changing%20Retirement%20Planning%20(And%20What%20to%20Do%20About%20It)"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Ways%20Longevity%20Is%20Changing%20Retirement%20Planning%20%28And%20What%20to%20Do%20About%20It%29.jpg" alt="5 Ways Longevity Is Changing Retirement Planning (And What to Do About It)" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/aja-mcclanahan">Aja McClanahan</a> of <a href="http://www.wisebread.com/5-ways-longevity-is-changing-retirement-planning-and-what-to-do-about-it">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/4-ways-to-protect-your-retirement-from-inflation">4 Ways to Protect Your Retirement From Inflation</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-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-roadblocks-to-retirement-and-how-to-clear-them">7 Roadblocks to Retirement (And How to Clear Them)</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/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</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/9-threats-to-a-secure-retirement">9 Threats to a Secure Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement inflation insurance long term care longer life span longer retirement longevity nest egg old age risk saving money stocks Mon, 22 Jan 2018 09:30:09 +0000 Aja McClanahan 2091126 at http://www.wisebread.com 5 Questions Retirees Should Ask Before Starting a Small Business http://www.wisebread.com/5-questions-retirees-should-ask-before-starting-a-small-business <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-questions-retirees-should-ask-before-starting-a-small-business" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_working_in_florist_shop.jpg" alt="Woman working in florist shop" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Retirement is a time to kick back, slow down, and do all of the things you didn't have time to do during your &quot;clock-punching&quot; years. But for an increasing number of retirees, becoming an entrepreneur is the new thing to do after leaving the workforce.</p> <p>In fact, the Bureau of Labor Statistics reported in 2015 that the self-employment rate among retirement-aged workers (65 and older) was the highest of any age group, at just over 15 percent.</p> <p>However, before diving headfirst into the pool of startups, here are a few questions you need to ask yourself before starting a small business in retirement.</p> <h2>1. What do you have to lose?</h2> <p>Unfortunately, in business, failure is a very real option. According to the Bureau of Labor Statistics, 50 percent of new businesses don't survive past five years. And if your business fails, you need to be able to survive. You must count the costs before you begin.</p> <p>Answering the question, &quot;What do I have to lose?&quot; will help you assess and determine your risk tolerance and accurately scale your business. It will help you develop a business model that works for your lifestyle, interests, financial status, and physical health.</p> <p>If you retired and are looking forward to leaving the world of nine-to-five, it makes no sense to start a business that operates primarily during these hours. If your health is beginning to deteriorate, doing work that is physically demanding with lots of heavy lifting or repetitive motions may not be the way to go. Be sure you keep your needs and limitations in mind before you begin. (See also: <a href="http://www.wisebread.com/8-common-myths-about-starting-a-small-business?ref=seealso" target="_blank">8 Common Myths About Starting a Small Business</a>)</p> <h2>2. How will you finance the business?</h2> <p>The adage, &quot;It takes money to make money&quot; is the truth when it comes to starting a business. You must understand that you may have to shell out &mdash; depending on the industry &mdash; large sums of money up front. Taking on huge amounts of debt, or any debt for that matter, during retirement is a tremendous risk and should be avoided if possible.</p> <p>If your business requires a large amount of upfront capital, you need a plan for getting your hands on funds. Dipping into your retirement stash to pay business expenses is not recommended by most financial advisers. You may need to scale back your business plan, take on a partner, or allow others to become investors. You may even need to delay starting the business for a year or two and reduce your living expenses to help set aside funds to get the business going.</p> <p>Another financial surprise that comes with new ventures is the hidden costs associated with starting a business. Again, these costs are contingent on the business type, size, and the area in which you live. Things like insurance, professional fees, permits, licenses, attorneys &mdash; and everyone's worse nightmare, taxes &mdash; can derail the business before it gets off the ground, and significantly impact your retirement nest egg. Do your homework to see which fees apply to your business in your area and plan accordingly.</p> <h2>3. How much time and energy will it take?</h2> <p>Nurturing a business in its infancy requires, time, energy, and a ton of diligence. Starting a single proprietorship with no staff, no outside financing, no products, and no facility will take a couple of months. If you factor in hiring staff, securing a bank loan, and purchasing product, the time it takes for your business to be up and running could be six months or more. And while you do have more time now that you are retired, you must understand that time affects your bottom line.</p> <p>Counting the cost of becoming an entrepreneur doesn't just mean finances, it also includes sweat equity. Retirement is a different season of life and, depending on your particular circumstances and the industry you enter, you could be making a bigger time commitment than you expected.</p> <p>Be sure you understand the marketplace and all of the &quot;small&quot; jobs that go into running a business &mdash; especially if you are doing it alone or with minimal staff. What will you do if your computer crashes or your printer breaks down right before an important meeting? Figure out what can you afford to outsource and what you can you do yourself. And most importantly, be sure you can commit the time and energy it takes to make your business successful.</p> <h2>4. What can you do before you retire?</h2> <p>If starting a business is something you know you want to do before you retire, you should do as much ground work as possible before giving up your income. It's even advisable to launch the business <em>before </em>you retire.</p> <p>Starting a business while working a full-time job is tough (speaking from experience here), but it does have its advantages. It makes you budget your time and start small. You have to go at a slower pace, which is a good thing. You are able to learn the intricacies of the business, establish relationships, and make mistakes within a controlled environment.</p> <p>If starting a business while working your regular gig is too much, see if you can shadow, intern, volunteer, or work part-time for a similar business. You can also establish your small business framework &mdash; write your business plan, become an LLC, and get any necessary licenses, permits, or certifications &mdash; so you are ready to go as soon as you retire. It is also advisable that you save, save, save to help offset startup costs, minimize debt, and to keep from disturbing your retirement funds. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p> <h2>5. What am I giving up?</h2> <p>Becoming an entrepreneur in retirement is a great way to indulge in your passion, spend your time and energy meaningfully, and earn some extra cash. But being your own boss comes at a cost. The biggest expense that comes with starting a business in your sunset years is opportunity cost.</p> <p>Opportunity cost is the cost of what you're giving up while choosing to do something else. Things like spending time with the grandkids, taking tropical vacations, or even establishing a college fund for the grands or giving your kids the down payment on their dream home are all things you may have to forgo, at least for a time. (See also: <a href="http://www.wisebread.com/how-to-find-your-new-identity-after-retirement?ref=seealso" target="_blank">How to Find Your New Identity After Retirement</a>)</p> <p>Before you make your decision, be sure you thoroughly count all of the costs. Pay a visit to your financial adviser, and discuss your options and sketch out a solid financial plan. Hold yourself accountable, know when to scale back, and know when to walk away.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-questions-retirees-should-ask-before-starting-a-small-business&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Questions%2520Retirees%2520Should%2520Ask%2520Before%2520Starting%2520a%2520Small%2520Business.jpg&amp;description=5%20Questions%20Retirees%20Should%20Ask%20Before%20Starting%20a%20Small%20Business"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Questions%20Retirees%20Should%20Ask%20Before%20Starting%20a%20Small%20Business.jpg" alt="5 Questions Retirees Should Ask Before Starting a Small Business" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/denise-hill">Denise Hill</a> of <a href="http://www.wisebread.com/5-questions-retirees-should-ask-before-starting-a-small-business">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/8-common-myths-about-starting-a-small-business">8 Common Myths About Starting a Small Business</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/10-fundamentals-of-naming-a-small-business">10 Fundamentals of Naming a Small Business</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-budget-consistently-without-a-steady-paycheck">How to Budget Consistently Without a Steady Paycheck</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/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</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-tax-mistakes-freelancers-need-to-stop-making">5 Tax Mistakes Freelancers Need to Stop Making</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Retirement capital expenses pros and cons questions self employment small business owners startups Wed, 17 Jan 2018 09:30:08 +0000 Denise Hill 2085768 at http://www.wisebread.com 7 Things You Should Know About Your 401(k) Match http://www.wisebread.com/7-things-you-should-know-about-your-401k-match <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-things-you-should-know-about-your-401k-match" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_with_401k_nest_egg.jpg" alt="Piggy bank with 401(k) nest egg" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you are working and have access to a 401(k) plan from your employer, you may have heard references to a &quot;company match&quot; on contributions. What does this mean? It means that your employer is helping you save for retirement by matching the money you contribute, up to a certain amount.</p> <p>These matching funds can be a very powerful way to save money over time, and it's important take advantage of a company's full 401(k) match if you can. Every company has different policies regarding these matching funds, and things can often be confusing for new investors. Here are some key things to know.</p> <h2>1. The match is free money</h2> <p>A 401(k) match is not a bonus based on your job performance. It's not a payment made in lieu of your salary. It's truly a contribution from your company to help you save for your retirement, which you can use to invest in a variety of mutual funds and other investments.</p> <p>There's only one catch, which is that you need to direct a portion of your own money into the 401(k) plan first. That's why they call it a match. Some employers will automatically sign you up for the 401(k) plan and set aside a certain percentage of your salary as a contribution each pay period. (Don't worry &mdash; you can always adjust that amount.) If you are unclear on how much you should contribute to your 401(k), try to at least put aside enough to get the maximum company match. If you miss out on the full match, you are missing out on free cash that could add up to tens of thousands of dollars or more over time. (See also: <a href="http://www.wisebread.com/how-to-tell-if-your-401k-is-a-good-or-a-bad-one?ref=seealso" target="_blank">How to Tell if Your 401K Is a Good or a Bad One</a>)</p> <h2>2. Companies match differently</h2> <p>There is no standard or required way for employers to match 401(k) contributions. Some companies are very generous and match every dollar you contribute, no matter how much you put in. Others will match only a very small percentage. Matching contributions can change if a company is doing better or worse financially. When searching for a job, learning about a company's matching policy can help you decide whether you want to work there. Think of the 401(k) plan as part of a company's overall benefits package.</p> <p>A company's match may also offer some insight into the overall health of the firm. If a company recently stopped matching contributions, that's a red flag that the company may be in trouble.</p> <h2>3. There is often a &quot;vesting&quot; period</h2> <p>Many employers will begin matching contributions as soon as you begin working there, but you may have to give back those matching funds if you leave the company after a specific time. For example, if you've been setting aside 5 percent of your salary into your 401(k) and your company is matching that, you don't necessarily get to keep the company's contributions right away. You may have to wait one year, three years, or even longer to keep that money permanently. This is called a <em>vesting period</em>.</p> <p>About half of employers offer immediate vesting, according to one Vanguard survey. But others have different vesting schedules. Some will allow you to keep a portion of company contributions after a certain amount of time, and increase that total annually until you are fully vested. (Example: 20 percent vested in year one, 40 percent vested in year two, etc.)</p> <p>Vesting schedules and policies can be confusing and can change, so be sure to read your 401(k) plan documents carefully. And if your company does have a vesting period for its 401(k) match, try to avoid leaving before that time is up, as doing so could result in you forfeiting thousands of dollars plus any future investment gains. (See also: <a href="http://www.wisebread.com/8-critical-401k-questions-you-need-to-ask-your-employer?ref=seealso" target="_blank">8 Critical 401(k) Questions You Need to Ask Your Employer</a>)</p> <h2>4. Contribute more, get more</h2> <p>Here's a brain teaser for you: If Company A makes a dollar-for-dollar match on all employee contributions up to 4 percent, and Company B matches contributions up to 8 percent at 50 cents on the dollar, which company is contributing more?</p> <p>The answer is that they are both contributing the same amount. The difference, however, is that Company B is using its matching funds to incentivize workers to contribute more of their own money. If you take advantage of Company B's full match, you will have more money in total because your own contribution will be higher. Contributing more yourself will also save you money because those funds are deducted from your taxable income.</p> <h2>5. Matching money doesn't count against contribution limits</h2> <p>The IRS places a limit on the amount of money you can contribute to a 401(k) each year. For 2018, that limit will be $18,500. It's important to note that this limit only applies to money that the <em>individual </em>contributes. Money from the company match does not count against this total. Thus, the total amount of money from all sources going into your 401(k) each year could be much more than the IRS limit. Feel free to contribute as much as you can, take advantage of the full company match, and watch your savings grow. (See also: <a href="http://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future?ref=seealso" target="_blank">6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future</a>)</p> <h2>6. Sometimes the match comes as company stock</h2> <p>In some cases, employers will contribute all or part of a 401(k) match in the form of company stock. While free company stock is better than nothing, it's risky to have it comprise too much of your savings. Your employer already pays your salary, so your financial security is already tied to the company's success. Past employees of Enron and other failed companies can attest to the risk of having too much of their savings tied up in company stock.</p> <p>If you receive company stock in your retirement plan, consider adjusting your investment mix so company stock doesn't comprise more than 5 to 10 percent of your portfolio. (See also: <a href="http://www.wisebread.com/7-things-you-need-to-know-about-investing-in-company-stock?ref=seealso" target="_blank">7 Things You Need to Know About Investing in Company Stock</a>)</p> <h2>7. It doesn't pay to front load your contributions</h2> <p>Let's say it's January and you just got a big pay raise, a bonus, or both. You may be tempted to throw as much money as you can into your 401(k) at that point. If your employer matches based on pay period, you may miss out on matching funds if you max out your contributions early.</p> <p>So for example: Let's say you earn $200,000 annually and choose to set aside 30 percent of your income per month in the first few months of the year. And let's say your company matches all contributions up to 5 percent of your salary per pay period. Under this scenario, you will have maxed out your contributions by April and won't be able to contribute any more for the rest of the year. Meanwhile, your employer has only contributed up to the maximum company match for those first few months. In this case, your company will have put in about $3,332 when you would have received $10,000 in matching funds if you had spread the contributions out.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F7-things-you-should-know-about-your-401k-match&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F7%2520Things%2520You%2520Should%2520Know%2520About%2520Your%2520401%2528k%2529%2520Match.jpg&amp;description=7%20Things%20You%20Should%20Know%20About%20Your%20401(k)%20Match"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/7%20Things%20You%20Should%20Know%20About%20Your%20401%28k%29%20Match.jpg" alt="7 Things You Should Know About Your 401(k) Match" width="250" height="374" /></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-things-you-should-know-about-your-401k-match">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/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-401k-in-2017-heres-whats-new-for-you">Your 401K in 2017: Here&#039;s What&#039;s New for You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</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-reasons-every-millennial-needs-a-roth-ira">6 Reasons Every Millennial Needs a Roth IRA</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions employers investing matching stocks vesting periods Wed, 17 Jan 2018 09:30:05 +0000 Tim Lemke 2085770 at http://www.wisebread.com Yes, You Still Need an Emergency Fund in Retirement http://www.wisebread.com/yes-you-still-need-an-emergency-fund-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/yes-you-still-need-an-emergency-fund-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/donation_jar_overflowing_with_american_money.jpg" alt="Donation jar overflowing with American money" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You know how important it is to build an emergency fund while you're working. But here's what you might not know: You need to keep that emergency fund well-stocked with savings even after you retire.</p> <p>An emergency fund might be even <em>more</em> important once you leave the working world. You won't have a regular salary to fall back on in retirement if an unexpected expense pops up. One costly car repair or medical bill can set you back and cause a lot of financial problems.</p> <p>While you're working, you should keep anywhere from six months' to a year's worth of daily living expenses in this fund. That way, if you lose your job, you'll have money available to pay your daily living expenses while you search for a replacement. You need to do the same during your retirement.</p> <h2>How an emergency fund changes in retirement</h2> <p>Social Security payments often complicate the emergency fund equation in retirement. That's because you are guaranteed these payments each month. When you're working, there is always a danger that you'll lose your job and your paycheck will disappear. That won't happen with your Social Security benefits. An emergency fund won't ever have to replace this source of income.</p> <p>By the time you reach retirement, you should also know how much other income you can rely on each month. Most of this will probably come from the retirement savings you've built up over time. You should have created a retirement budget listing how much money you'll have available each month when factoring in withdrawals from these savings and Social Security payments. (See also: <a href="http://www.wisebread.com/heres-how-you-should-budget-your-social-security-checks?Ref=seealso" target="_blank">Here's How You Should Budget Your Social Security Checks</a>)</p> <p>What you might not be as certain about are your monthly living expenses. Retirement isn't cheap, and that's where an emergency fund comes in. This liquid savings can help you cover unexpected emergencies that could otherwise break your monthly budget.</p> <p>The challenge, of course, is in estimating how much you should keep in that fund at any given time. There is no magic formula. And how much you'll need depends largely on your health and your housing situation.</p> <h2>The costs of retirement</h2> <p>The most recent Merrill Lynch <em>Finances in Retirement Survey</em> says that the average cost of retirement is $738,400.</p> <p>A good chunk of that cost can be attributed to health care. A recent report from Fidelity found that a healthy 65-year-old couple retiring in 2017 could expect to pay $275,000 throughout their retirements in health care and medical expenses. That figure is rising, with the number 6 percent higher in 2017 than it was a year earlier. (See also: <a href="http://www.wisebread.com/heres-how-far-1-million-will-actually-go-in-retirement?ref=seealso" target="_blank">Here's How Far $1 Million Will Actually Go in Retirement</a>)</p> <p>The challenge with health care costs is that you can't control them. You might be healthy when you hit retirement, but there's no guarantee that your health won't decline. Without an emergency fund to cover unexpected medical bills, you risk wiping out a huge chunk of your retirement savings that may be budgeted for other things.</p> <p>Then there's housing. You might have paid off your mortgage and plan to remain in your home. That's ideal &hellip; for now. As you age, you might need assisted living, which certainly isn't inexpensive. And if you enter retirement with a monthly mortgage payment, that can be a huge expense.</p> <p>Even if you do live in your current home without a mortgage payment, you can still expect to pay for property taxes, repairs, and maintenance. And if your home has aged along with you, chances are it may take some extra TLC (and cost) to be maintained. (See also: <a href="http://www.wisebread.com/9-unexpected-expenses-for-retirees-and-how-to-manage-them?Ref=seealso" target="_blank">9 Unexpected Expenses for Retirees &mdash; And How to Manage Them</a>)</p> <p>This is why it's so important to maintain an emergency fund in retirement. Much like when you were working, your goal should still be to keep that fund stocked with enough to cover six months' to a year's worth of daily living expenses in case the worst should happen.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fyes-you-still-need-an-emergency-fund-in-retirement&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FYes%252C%2520You%2520Still%2520Need%2520an%2520Emergency%2520Fund%2520in%2520Retirement.jpg&amp;description=Yes%2C%20You%20Still%20Need%20an%20Emergency%20Fund%20in%20Retirement"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Yes%2C%20You%20Still%20Need%20an%20Emergency%20Fund%20in%20Retirement.jpg" alt="Yes, You Still Need an Emergency Fund in Retirement" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/yes-you-still-need-an-emergency-fund-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-retiring-with-debt-isnt-the-end-of-the-world">Why Retiring With Debt Isn&#039;t the End of the World</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/heres-how-you-should-budget-your-social-security-checks">Here&#039;s How You Should Budget Your Social Security Checks</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-financial-moves-now-that-youll-regret-when-you-retire">5 Financial Moves Now That You&#039;ll Regret When You Retire</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-overcome-these-4-common-retirement-fears">How to Overcome These 4 Common Retirement Fears</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-financial-moves-you-should-make-five-years-before-retirement">5 Financial Moves You Should Make Five Years Before Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement emergency funds health care housing costs income maintenance medical bills mortgages social security Wed, 17 Jan 2018 09:00:06 +0000 Dan Rafter 2085674 at http://www.wisebread.com 7 Easiest Ways to Catch Up on Retirement Savings Later in Life http://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/investing_money_for_retirement_in_piggy_bank.jpg" alt="Investing money for retirement in piggy bank" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to a survey by the Employee Benefit Research Institute, three in 10 workers report that preparing for retirement causes them emotional distress. Why? Well, because most people feel they are sorely behind when it comes to retirement savings.</p> <p>The Economic Policy Institute reports that baby boomer families, on average, have just a little over $160,000 saved for retirement. With longer life spans, inflation, and increasing health care costs, it's possible that many retirees won't have enough to comfortably sustain their retirements.</p> <p>If you feel behind with your retirement savings, you may be panicking. However, there's hope for you. If you're open to suggestions, a few smart moves will help you catch up on savings even late in the game. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps Late Starters Must Make</a>)</p> <h2>1. Change your mindset</h2> <p>One of the best ways to take the pressure off catching up with retirement savings is to change your mindset.</p> <p>Rob Hill, owner of financial advisory firm R. Hill Enterprises, Inc., helps people plan for retirement and other stages of life. He says that in order to catch up with your savings, you need to first be more flexible with your idea of retirement. &quot;The first thing I would suggest is not looking at retirement as an age, but rather a financial position,&quot; he says.</p> <p>Hill explains that focus can ease anxiety and make a catch-up goal more feasible for some. He explains, &quot;The goal of retirement is not a pile of assets, it is cash flow that makes retirement possible.&quot;</p> <p>If you look at retirement in this light, you may discover you have more retirement runway than you thought and that building up your nest egg is a little more possible.</p> <h2>2. Make catch-up contributions</h2> <p>If you're over 50 years old, you can contribute more than usual to your 401(k). For 2018, employees within the age guidelines can contribute $18,500 plus a catch-up contribution of $6,000, for a total of $24,500. This approach can be even more helpful if your employer offers a match.</p> <p>Kevin Ward, of Park Elm Investment Advisors, notes another way to save: an IRA &mdash; either a traditional IRA or a Roth IRA. &quot;Aside from your employer-sponsored plan, you can save $5,500 in an IRA,&quot; he says. &quot;For those over 50, there is an additional catch-up contribution of $1,000, for a total of $6,500.&quot; (See also: <a href="http://www.wisebread.com/6-ways-meeting-the-2018-401k-contribution-limits-will-brighten-your-future?ref=seealso" target="_blank">6 Ways Meeting the 2018 401(k) Contribution Limits Will Brighten Your Future</a>)</p> <h2>3. Contribute to a health savings account (HSA)</h2> <p>Though HSAs were created as savings vehicles for health care expenses, there are some tax advantages and treatments that can make this type of account a supplemental retirement option. In order for you to open an HSA, you must have a qualified health care plan, like a high deductible health plan (HDHP).</p> <p>Shobin Uralil, founder of HSA management platform Lively, says placing money in an HSA has many benefits and &quot;loopholes&quot; that make this a great addition for retirement savings.</p> <p>&quot;You can save pretax money and then use pretax dollars to pay for qualified out-of-pocket medical expenses,&quot; he says. &quot;After the age of 65, you can use HSA funds for anything you want, not just qualified out-of-pocket medical expenses.&quot;</p> <p>It's also worth noting that HSAs have no mandatory distributions in retirement so you can save into your 70s, 80s, and beyond. This is helpful for anyone behind on retirement saving and needing more time to save. (See also: <a href="http://www.wisebread.com/how-an-hsa-could-help-your-retirement?ref=seealso" target="_blank">How an HSA Could Help Your Retirement</a>)</p> <h2>4. Be frugal</h2> <p>You might be excited about the idea of saving more money, but wondering how you'll actually achieve those higher savings rates. Your best bet is to reduce your current lifestyle expenses. Of course, you'll want to adjust your spending to a level that is comfortable for you. But keep in mind the ultimate goal of having enough money to support your retirement.</p> <p>The options for saving money are unlimited. With some creativity and motivation, you should be able to find some frugal habits that will help you make your savings goals &mdash; everything from downsizing your home, to eating out only once per month. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?Ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p> <h2>5. Postpone collecting Social Security</h2> <p>This is another strategy that can help you earn more income during retirement. The Social Security Administration reports that postponing Social Security benefits past your full retirement age can boost future payments by up to 8 percent for every year the income is deferred until age 70.</p> <p>Tom Foster, national spokesperson at MassMutual, works with financial advisers and employers to educate them about 401(k) plans. He recommends postponing Social Security benefits because the returns are pretty significant if you can hold off. He notes, &quot;Few investment strategies net such a return, never mind one with a guarantee.&quot; (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <h2>6. Keep working</h2> <p>A 2013 Georgetown University study estimates that there will be as many as 55 million job openings by 2020 due to baby boomers retiring and leaving the workforce. So the chances are, there will be plenty of demand for those who want to stick around and work longer.</p> <p>Fortunately, we live in a wonderful time where the internet allows people to work longer, under flexible conditions from almost anywhere in the world. If you can keep working longer, it will add to your potential to save up even more money. (See also: <a href="http://www.wisebread.com/4-creative-remote-jobs-that-can-supplement-your-retirement-income?ref=seealso" target="_blank">4 Creative Remote Jobs That Can Supplement Your Retirement Income</a>)</p> <h2>7. Keep investing</h2> <p>It used to be that people drastically reduced their investment portfolios in anticipation of their &quot;golden years.&quot; In order to reduce the risk of losing the principal amount of their savings, a retiree might be prompted to go with a very conservative investing strategy by keeping their assets in cash, bonds, or a combination of both.</p> <p>Nowadays, people are living and working longer and may be able to invest and save more aggressively for longer periods of time.</p> <p>Cliff Caplan, CFP at Neponset Valley Financial Partners, suggests that people needing to save more should continue to invest for growth. &quot;Establish and continually fund a growth-oriented account that can benefit from lower long-term capital gains treatment,&quot; he says. &quot;Dollar cost averaging can also be used to reduce volatility in a portfolio.&quot; (See also: <a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50?ref=seealso" target="_blank">7 Reasons to Invest in Stocks Past Age 50</a>)</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520To%2520Travel%2520More%2520With%2520a%2520Full-Time%2520Job.jpg&amp;description=7%20Easiest%20Ways%20to%20Catch%20Up%20on%20Retirement%20Savings%20Later%20in%20Life"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20To%20Travel%20More%20With%20a%20Full-Time%20Job.jpg" alt="7 Easiest Ways to Catch Up on Retirement Savings Later in Life" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/aja-mcclanahan">Aja McClanahan</a> of <a href="http://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">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/which-of-these-9-retirement-accounts-is-right-for-you">Which of These 9 Retirement Accounts Is Right for You?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</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-youre-making-all-the-right-moves-for-retirement">8 Signs You&#039;re Making All the Right Moves for Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-save-for-retirement-when-you-are-unemployed">How to Save for Retirement When You Are Unemployed</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-roadblocks-to-retirement-and-how-to-clear-them">7 Roadblocks to Retirement (And How to Clear Them)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) catching up contributions cutting expenses HSA IRA late starters risk saving money social security stocks Tue, 16 Jan 2018 10:00:06 +0000 Aja McClanahan 2085769 at http://www.wisebread.com What to Do if You're Laid Off Before You Retire http://www.wisebread.com/what-to-do-if-youre-laid-off-before-you-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-if-youre-laid-off-before-you-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/desperate_fired_businessman_overwhelmed_with_thoughts.jpg" alt="Desperate fired businessman overwhelmed with thoughts" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You had a plan. You were going to work for a few more years, and head gracefully and gleefully into retirement. But your company didn&rsquo;t cooperate. You&rsquo;ve found yourself laid off, and wondering what to do next.</p> <p>The job market is tough for older people, and if you are a few years away from your intended retirement date, you may be unsure of the best next steps. Can you retire early? If not, what jobs are out there for people your age? Do you even want to work full-time anyway?</p> <p>Everyone&rsquo;s situation is different, but there are options for older people who find themselves laid off before their planned retirement.</p> <h2>Look for a new full-time job</h2> <p>There&rsquo;s no question that folks over 50 may have a tough time in the job market. Ageism exists, especially in fields where employers assume young people will have more technical skills. But it&rsquo;s entirely possible to find a new position, and there are companies that will value the experience and knowledge of an older worker.</p> <p>The American Association of Retired Persons (AARP) names several great jobs for people over 50, including accountant, personal trainer, landscaper, and interpreter. Just keep in mind that it may take weeks or even months to land a position you want. This is why it&rsquo;s important to maintain an emergency fund with at least three to six months' worth of living expenses.</p> <h2>Find a fun part-time job</h2> <p>Recently, my family and I went to Pittsburgh and took a tour of the ballpark. Most of the tour guides were older men who appeared excited to be there, and the team seemed to appreciate the knowledge and enthusiasm they brought to the job.</p> <p>If you feel like you need to work to stay busy and bring in some dollars, but don&rsquo;t need to work full-time, try to find something that channels your passion. Maybe it&rsquo;s working outside doing landscaping or lawn care. Perhaps it&rsquo;s doing home improvement work, or tutoring students in English. If you can find something you enjoy and get paid for it, that may be better than landing a full-time job. (See also: <a href="http://www.wisebread.com/6-great-retirement-jobs?ref=seealso" target="_blank">6 Great Retirement Jobs</a>)</p> <h2>Seek consulting gigs</h2> <p>While companies aren&rsquo;t always eager to hire older workers on a full-time basis, they have been known to rely on them for expertise on a contract basis. Companies still must rely on older workers who have institutional knowledge and some specific experience. In fact, it&rsquo;s not unheard of for workers to be laid off only to return as a consultant, doing similar work. (I once met a guy who was brought back and found himself sitting at his same old desk!)</p> <p>If you do find yourself laid off, consider marketing your services on a contract or as-needed basis. You may be surprised at how lucrative some of these opportunities are, and you will have some job flexibility that may help you phase into retirement for good.</p> <h2>Adjust your budget</h2> <p>The good news about being laid off when you are older is that your living expenses are generally lower. But you&rsquo;ll still need to reduce your spending if you find yourself without a job. Track all of your expenses and see where you can cut costs. Savings may come from canceling your cable TV subscription, or reducing your food budget. You may save money on gas and other car expenses if you aren&rsquo;t working. You&rsquo;d be surprised where you can find ways to cut costs, and you may even find that you will be comfortable with a lower standard of living, allowing you to retire for good. (See also: <a href="http://www.wisebread.com/6-ways-you-can-cut-costs-right-before-you-retire-0?ref=seealso" target="_blank">6 Ways You Can Cut Costs Right Before You Retire</a>)</p> <h2>Go ahead and retire</h2> <p>Perhaps you planned to stop working at 63, but you were laid off at 59. You may think you need to keep working to hit your retirement savings goal, but you might be much closer than you think. Maybe your savings goal was larger than necessary and you&rsquo;re actually right on target. Perhaps you only need to make modest adjustments to your standard of living, like reducing your spending for a few years, or adjusting your investment strategy to boost your income now while still growing your nest egg.</p> <p>You may find yourself retired early, but those few years may not make much of a difference. If you have a financial adviser, talk with them about how to make your money work for you <em>now </em>and last a little longer. Your adviser may also be able to help you avoid any penalties and taxes from withdrawing money from your retirement accounts early. (See also: <a href="http://www.wisebread.com/5-ways-to-handle-a-forced-early-retirement?ref=seealso" target="_blank">5 Ways to Handle a Forced Early Retirement</a>)</p> <h2>Check if you can collect Social Security</h2> <p>Let&rsquo;s say you find yourself laid off at age 62. The good news is that you are old enough to begin receiving Social Security benefits, though your payments will not be as high as they would be if you waited another five years (until your full retirement age). At age 62, you&rsquo;ll receive about 70 percent of the maximum monthly benefit.</p> <p>If you can wait until you are older to collect, you&rsquo;ll end up receiving more benefits in the long run. But even a partial benefit is better than nothing, and may allow you to retire early. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits?ref=seealso" target="_blank">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a>)</p> <h2>Identify passive income sources</h2> <p>If you are unable to find a new job or unsure if you want to return to the workforce, it may be time to get creative in how you make money. It&rsquo;s entirely possible to earn money without a &ldquo;real&rdquo; job, if you know where to look. Adjusting your investment portfolio to earn money from dividend stocks is a popular option among older Americans. With dividends, companies pay a portion of their income to shareholders, and returns can be much higher than interest from the bank.</p> <p>Real estate can offer a passive income source as well. If you have the funds to buy an investment property, consider renting it out and earning money from tenants. (Just keep in mind there may be some work and expense associated with ownership.)</p> <p>If you are computer savvy, you may be able to make money from blogging or hosting videos on YouTube. This content can earn you money from advertising long after you&rsquo;re done producing it.</p> <p>The job market may be tougher for older citizens, but that doesn&rsquo;t mean you can&rsquo;t earn money. And who knows? Some of these sources may be able to continue to bring you income even after you retire for good. (See also: <a href="http://www.wisebread.com/5-ways-to-make-passive-income-online?ref=seealso" target="_blank">5 Ways to Make Passive Income Online</a>)</p> <h2>Start a business</h2> <p>Maybe you spent your work life wishing you could be your own boss, but the stars never quite aligned. Perhaps now is the time to take the plunge and become an entrepreneur. There&rsquo;s obviously some risk in starting a business, but you may be at a point in your life where you have some money saved and relatively low living expenses. You may have years of work experience that you can bring to the table to get the business launched, and you can now set your own work schedule.</p> <p>Your business doesn&rsquo;t necessarily have to involve starting the next Amazon.com. It might be something more low key, like a math tutoring business, a small handyman company, or selling handmade items.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhat-to-do-if-youre-laid-off-before-you-retire&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhat%2520to%2520Do%2520if%2520You%2527re%2520Laid%2520Off%2520Before%2520You%2520Retire.jpg&amp;description=What%20to%20Do%20if%20You're%20Laid%20Off%20Before%20You%20Retire"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/What%20to%20Do%20if%20You%27re%20Laid%20Off%20Before%20You%20Retire.jpg" alt="What to Do if You're Laid Off Before You Retire" width="250" height="374" /></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/what-to-do-if-youre-laid-off-before-you-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-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-plan-for-a-forced-early-retirement">How to Plan for a Forced Early 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/8-things-millennials-can-do-right-now-for-an-early-retirement">8 Things Millennials Can Do Right Now for an Early 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/6-things-you-need-to-do-if-youre-retiring-in-2018">6 Things You Need to Do if You&#039;re Retiring in 2018</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-retiring-with-debt-isnt-the-end-of-the-world">Why Retiring With Debt Isn&#039;t the End of the World</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-handle-a-forced-early-retirement">5 Ways to Handle a Forced Early Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement budgeting consulting entrepreneurship forced retirement laid off loss of income part-time jobs passive income side gigs social security Fri, 12 Jan 2018 09:30:09 +0000 Tim Lemke 2074049 at http://www.wisebread.com 5 Things Every Small Business Owner Needs to Know About Employee Retirement Accounts http://www.wisebread.com/5-things-every-small-business-owner-needs-to-know-about-employee-retirement-accounts <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-every-small-business-owner-needs-to-know-about-employee-retirement-accounts" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_hanging_open_sign_on_door.jpg" alt="Woman hanging open sign on door" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Among small businesses, employer sponsored 401(k) plans seem to have gotten a bad rap. According to the United States Government Accountability Office, between 51 and 71 percent of small business employees don't have access to a workplace retirement savings plan.</p> <p>There is a misconception that retirement plans are just for huge companies. However, this isn't true, and offering a retirement savings plan is the biggest step that a small business can take to increase workers' retirement savings. Let's review some of the many reasons why offering an employer-sponsored retirement account is a great idea for small businesses of all types. (See also: <a href="http://www.wisebread.com/8-common-myths-about-starting-a-small-business?ref=seealso" target="_blank">8 Common Myths About Starting a Small Business</a>)</p> <h2>1. Employees may prefer a retirement plan over a salary increase</h2> <p>According to a 2015 Glassdoor survey, 31 percent of workers valued a workplace retirement account, such as a 401(k) or pension plan, over an increase in pay. This makes sense; several studies have shown that workers benefit from automatic paycheck deductions to contribute to a workplace retirement plan. The Employment Benefit Research Institute found that two-thirds of employed workers not currently saving for retirement say they would be likely to start if automatic paycheck deductions ranging from 3 to 6 percent were used by their employer. By offering a retirement plan, small businesses may be able to attract more talent.</p> <h2>2. There are low-cost options available</h2> <p>Many small-business owners have the misconception that their only option to set up a workplace retirement plan for their employees is to pay an annual 1.5 to 2 percent fee to a provider. But nowadays, business owners have access to many lower cost options. Here are three examples of 401(k) providers for small businesses and their schedule of fees for employers:</p> <ul> <li> <p><a href="https://captain401.com/pricing/" target="_blank">Captain 401</a>: $499 setup fee; monthly cost starting at $120 plus $4 per employee.</p> </li> <li> <p><a href="https://www.employeefiduciary.com/401k-plan-pricing" target="_blank">Employee Fiduciary</a>: $500 setup fee for new plans; $1,500 annual fee plus a custody fee of 0.08 percent of plan assets.</p> </li> <li> <p><a href="https://www.myubiquity.com/retirement/plans/expressk/" target="_blank">Ubiquity</a>: $495 setup fee; monthly cost starting at $115 plus other transaction service charges.</p> </li> </ul> <p>Besides providing lower costs, choosing a third-party plan provider allows you to delegate certain plan responsibilities, such as implementing nondiscrimination testing for retirement plans (in layman's terms, making sure that a company isn't favoring specific employees when making contributions). This lets you focus more on core activities of your business.</p> <h2>3. Eligible small businesses can claim tax credits</h2> <p>Those fees to set up and run a retirement plan may be tax deductible. If your small business employed 100 or fewer individuals who were compensated at least $5,000 in the preceding year, and your business hasn't offered a workplace retirement plan in the past three years, it may be eligible for the Credit for Small Employer Pension Plan Startup Costs.</p> <p>Using Form 881, eligible small-business owners can claim a credit of up to $500 for qualified setup and administration fees, and costs to educate employees about the plan for each of the first three years of the plan. You can start claiming the credit in the tax year before the tax year in which the plan becomes effective, and you may carry it back or forward to other tax years if you can't use it in the current year.</p> <p>Just remember that whatever plan expenses you use toward this credit, you can't use as business expense deductions.</p> <h2>4. Employer contributions are tax-deductible</h2> <p>In 2017, the Employee Benefit Research Institute found that nearly 73 percent of workers not currently saving for retirement would be at least somewhat likely to start if contributions were matched by their employer. The good news for employers is that the IRS usually allows them to deduct these matches, subject to contribution limits on qualified employee plans (including the employer's own plan).</p> <ul> <li> <p>Defined contribution plan: An employer can deduct contributions to an employee retirement plan, up to 25 percent of the employee's annual salary. In 2017, no more than $270,000 of an employee's annual salary could be used when calculating that 25 percent.</p> </li> <li> <p>Defined benefit plans: The IRS recommends hiring an actuary to figure out your deduction limit based on the rules of your defined benefit plan.</p> </li> </ul> <p>Remember that all deferred employer contributions, including earnings and gains, are tax-free for employees until distributed by the small-business plan. This is why an employer contribution is so valuable.</p> <p>Let's assume that an employee and your small business have a 20 percent and a 10 percent tax rate, respectively. If you were to give that employee a $4,000 raise, he would only actually see $3,200 of that and your small business would pay $400 in taxes. On the other hand, with a $4,000 employer contribution to the employee's plan, the employee gets the full $4,000 now and the employer gets to deduct the $4,000 as a business expense.</p> <h2>5. Some states provide their own retirement plans</h2> <p>Across the nation, many states have launched, or are preparing to launch, state-sponsored plans to help workers save for retirement. Here are a few examples:</p> <ul> <li> <p>California: The <a href="http://www.treasurer.ca.gov/scib/" target="_blank">California Secure Choice</a> program (scheduled for soft launch in late 2018) will offer a retirement savings option to millions of workers employed by small businesses (under 100 employees) who don't have access to a retirement plan.</p> </li> <li> <p>Connecticut: Nearly 600,000 workers lack access to a workplace retirement plan in the state of Connecticut. The <a href="http://www.ctdol.state.ct.us/retirement%20authority/" target="_blank">Connecticut Retirement Security Program</a> (currently in planning stages) will aim to offer retirement plans to private sector workers without a retirement option through their employer.</p> </li> <li> <p>Oregon: <a href="https://www.oregonsaves.com" target="_blank">OregonSaves</a> launched in November 2017 and aims to offer workers employed by small businesses of less than 100 people a retirement savings plan. The program is expanding in &quot;waves,&quot; with the next wave planned for spring 2018.</p> </li> </ul> <p>Depending on the state that your small business operates in, you may have to address whether or not your small business will offer a workplace retirement plan soon.</p> <p>For example, let's say you have a small business in Oregon. OregonSaves is planning its next registration &quot;wave&quot; for spring 2018 for small businesses with 50 to 99 employees. If your business is<em> not </em>offering a retirement plan, you'll have to start enrolling employees in the state program (unless the employees opt out) on May 15, 2018. Following suit, small businesses that employ 20 to 49 workers will have to enroll on December 15, 2018.</p> <h2>The bottom line: Take action today</h2> <p>As a small-business owner, it makes sense to take a look at offering a retirement savings plan to your employees. This is a perk that employees value, is available through lower cost options, and provides tax breaks to both employees and employers.</p> <p>In the near future, your employees may have to enroll in a state-sponsored retirement plan depending on whether or not you offer a workplace retirement plan. Offering an employer-sponsored retirement plan is an effective way to attract and retain the best talent and demonstrate that you have your employees' best interest in mind.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-things-every-small-business-owner-needs-to-know-about-employee-retirement-accounts&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Things%2520Every%2520Small%2520Business%2520Owner%2520Needs%2520to%2520Know%2520About%2520Employee%2520Retirement%2520Accounts.jpg&amp;description=5%20Things%20Every%20Small%20Business%20Owner%20Needs%20to%20Know%20About%20Employee%20Retirement%20Accounts"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Things%20Every%20Small%20Business%20Owner%20Needs%20to%20Know%20About%20Employee%20Retirement%20Accounts.jpg" alt="5 Things Every Small Business Owner Needs to Know About Employee Retirement Accounts" width="250" height="374" /></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-things-every-small-business-owner-needs-to-know-about-employee-retirement-accounts">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/which-of-these-9-retirement-accounts-is-right-for-you">Which of These 9 Retirement Accounts Is Right for You?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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-benefits-of-carrying-a-mortgage-into-retirement">5 Benefits of Carrying a Mortgage Into Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-you-should-know-about-your-401k-match">7 Things You Should Know About Your 401(k) Match</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-critical-401k-questions-you-need-to-ask-your-employer">8 Critical 401(k) Questions You Need to Ask Your Employer</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Retirement 401(k) benefits business expenses contributions employees small businesses tax deductions Thu, 11 Jan 2018 09:30:10 +0000 Damian Davila 2085310 at http://www.wisebread.com What Every Retirement Saver Should Know About Required Minimum Distributions http://www.wisebread.com/what-every-retirement-saver-should-know-about-required-minimum-distributions <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-every-retirement-saver-should-know-about-required-minimum-distributions" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_and_time_background.jpg" alt="Money and Time Background" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You may be aware of the fact that contributing money to a tax-deferred retirement account, like a traditional IRA or a 401(k), means you get to put money aside before it is taxed. This reduces your current tax burden and gives you a great incentive to save for retirement.</p> <p>Unfortunately, Uncle Sam will eventually want his cut of that money. That's where required minimum distributions (RMDs) come in.</p> <p>The good news is that you have until age 70&frac12; before you have to worry about RMDs. But it's still important to understand how RMDs work and what to expect before you get to that age milestone.</p> <h2>What is a required minimum distribution?</h2> <p>Deferring taxes is great for the taxpayer, but the IRS can't afford for taxpayers to defer their taxes indefinitely. Individuals with tax-deferred retirement accounts have to actually withdraw money &mdash; and thereby pay taxes &mdash; or else those taxes will never get paid.</p> <p>Everyone holding a 401(k) or IRA account (with the exception of Roth IRAs) must begin withdrawing money from those accounts during the year they reach age 70&frac12;. This ensures that account holders have enough time to allow their money to grow without permanently sheltering their money from federal taxes.</p> <p>The IRS has established minimums that you must withdraw each year after reaching age 70&frac12;. If you fail to withdraw the proper RMD, you face a stiff penalty: The IRS will take 50 percent of the amount you should have withdrawn.</p> <h2>Calculating your RMD</h2> <p>It's also important to note that you are responsible for calculating and withdrawing the correct RMD each year &mdash; and the calculations aren't necessarily easy. Even if the custodian of your IRA or 401(k) does the math and paperwork for you, you are the responsible party in the IRS's eyes.</p> <p>So how do you figure out your RMD? You need to start with three pieces of information:</p> <ol> <li> <p>Your date of birth.</p> </li> <li> <p>The balance of each tax-deferred account as of Dec. 31 of the year <em>before </em>the year in which you turn 70&frac12;.</p> </li> <li> <p><a href="https://www.irs.gov/pub/irs-tege/uniform_rmd_wksht.pdf" target="_blank">The IRS distribution table</a>.</p> </li> </ol> <p>This IRS distribution table calculates your life expectancy based on your age. The table gives you a number that corresponds to the number of years the IRS expects you to live.</p> <p>For instance, let's say a retiree was born on February 4, 1948, and will turn 70 in the first half of 2018. This retiree has a single IRA, with a balance of $250,000 at the end of 2017 (the calendar year before the year in which she turns 70&frac12;). To calculate her RMD, she'd look up her age (70) on the IRS distribution table to find the distribution period, which in this case is 27.4. She would then divide her IRA balance by the distribution period for her 2018 RMD:</p> <p style="text-align: center;">IRA balance / Distribution Period = RMD</p> <p style="text-align: center;">$250,000 / 27.4 = $9,214</p> <p>To keep on the right side of Uncle Sam, she will need to withdraw a minimum of $9,214 from her $250,000 IRA in 2018. But remember, the operative word is &quot;minimum.&quot; Account holders can always take more than their RMD if they choose to do so.</p> <h2>Why am I celebrating my 70&frac12; birthday?</h2> <p>While 70&frac12; may seem like an arbitrary number, there is a lot of thought put into this milestone age. The IRS makes a distinction between people born in the first half of the year, and those born in the second half. If your birthday falls between July 1 and Dec. 31, you don't officially have to take an RMD until the year you turn 71.</p> <p>This means that those with birthdays in the first half of the year take their first RMD the year they turn 70, and those with the later birthday take their first RMD the year they turn 71 &mdash; which averages out to 70&frac12;. (See also: <a href="http://www.wisebread.com/6-age-milestones-that-impact-your-retirement?ref=seealso" target="_blank">6 Age Milestones That Impact Your Retirement</a>)</p> <h2>Required beginning dates</h2> <p>To offer retirees a little more time to get their ducks in a row, the IRS does not require account holders to take their first RMD until April 1 of the year <em>following</em> the one in which you reach age 70&frac12;. That April 1 deadline is known as the required beginning date. The year in which that date falls depends on whether you have a birthday in the first or second half of the year.</p> <p>So, our Aquarian born Feb. 4, 1948 will turn 70&frac12; on Aug. 4, 2018. But remember, those born in the first half of the year calculate their RMD based on the year <em>before </em>they turn 70. So while she can wait to take her first RMD until April 1, 2019, at that point she'll calculate that RMD based on her age of 70 (which was her age as of Dec. 31, 2017), as well as her account balance as of Dec. 31, 2017.</p> <p>The first year following the year in which you reach 70&frac12; you will usually have <em>two </em>required distribution dates. Besides the April 1 date we just discussed, you'll also have to take another withdrawal by Dec. 31 of that same year. For our Aquarian, that means she will have to take a second RMD by Dec. 31, 2019. This RMD will be calculated based on her 2019 age of 71 and her account balance as of Dec. 31, 2018. This distribution catches her up on her requirements, and during all subsequent years, she is only required to take one RMD.</p> <p>The required beginning date is similar for anyone with later birthdays. Let's say you're a Virgo with an Aug. 31, 1948 birthday. You'll turn 70&frac12; on Feb. 28, 2019, which means you won't have to take your first RMD until April 1, 2020, and you'll calculate the amount based on your age of 71 (which is your age as of Dec. 31, 2018) as well as your account balance as of Dec. 31, 2018 &mdash; the year before you turned 70&frac12;. In addition to the April 1, 2020 distribution you will also have to take your 2020 RMD by Dec. 31, 2020, which you will calculate based on your age then of 72, and your account balance on Dec. 31, 2019.</p> <h2>Figuring out your required beginning date</h2> <table> <tbody> <tr> <td> <p><strong>If your birthday falls between Jan. 1 and June 30</strong></p> </td> <td> <p><strong>If your birthday falls between July 1 and Dec. 31</strong></p> </td> </tr> <tr> <td> <p>Your required beginning date is April 1 of the calendar year you turn 71.</p> </td> <td> <p>Your required beginning date is April 1 of the calendar year you turn 72.</p> </td> </tr> <tr> <td> <p>You will use the age of 70 to calculate your first RMD amount.</p> </td> <td> <p>You will use the age of 71 to calculate your first RMD amount.</p> </td> </tr> <tr> <td> <p>Your second RMD is due by Dec. 31 of the calendar year you turn 71.</p> </td> <td> <p>Your second RMD is due by Dec. 31 of the calendar year you turn 72.</p> </td> </tr> </tbody> </table> <h2>How your RMDs are taxed</h2> <p>Since the entire exercise of taking RMDs is about making sure you pay the income taxes you owe, it's important to understand how your distributions will be taxed.</p> <p>Your RMDs will be taxed as regular income at your applicable federal tax rate for the tax year for which you are making the withdrawal. This, in fact, may be the easiest-to-understand aspect of RMDs.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fwhat-every-retirement-saver-should-know-about-required-minimum-distributions&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FWhat%2520Every%2520Retirement%2520Saver%2520Should%2520Know%2520About%2520Required%2520Minimum%2520Distributions.jpg&amp;description=What%20Every%20Retirement%20Saver%20Should%20Know%20About%20Required%20Minimum%20Distributions"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;">&nbsp;<img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/What%20Every%20Retirement%20Saver%20Should%20Know%20About%20Required%20Minimum%20Distributions.jpg" alt="What Every Retirement Saver Should Know About Required Minimum Distributions" width="250" height="374" /></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/what-every-retirement-saver-should-know-about-required-minimum-distributions">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/6-age-milestones-that-impact-your-retirement">6 Age Milestones That Impact Your 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/which-of-these-9-retirement-accounts-is-right-for-you">Which of These 9 Retirement Accounts Is Right for 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/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/if-you-want-your-401k-to-grow-stop-doing-these-6-things">If You Want Your 401K to Grow, Stop Doing These 6 Things</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-common-retirement-regrets-you-can-avoid">3 Common Retirement Regrets You Can Avoid</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) age 70 ½ IRA IRS penalties required minimum distributions rmds taxes Wed, 10 Jan 2018 09:30:11 +0000 Emily Guy Birken 2084542 at http://www.wisebread.com 4 False Assumptions That Could Threaten Your Retirement Years http://www.wisebread.com/4-false-assumptions-that-could-threaten-your-retirement-years <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-false-assumptions-that-could-threaten-your-retirement-years" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/i_need_you_signature_here.jpg" alt="I need your signature here" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I'm sure it isn't news to you that many people are not saving enough for retirement. For some, there just doesn't seem to be enough money to pay the bills <em>and </em>save. However, for others, faulty assumptions may be to blame.</p> <p>Consider the statements below. Have you ever thought or said such things? If so, they might be keeping you from saving as much as you should for your later years.</p> <h2>1. &quot;I'll be able to earn income as long as I'd like to.&quot;</h2> <p>A growing number of today's workers are planning to keep working past the typical retirement age. However, their plans don't square with the experiences of today's actual retirees.</p> <p>According to the latest Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI), 38 percent of today's workers expect to retire at age 70 or later, or never retire. How does that compare with today's retirees? Just 4 percent actually left the workforce that late.</p> <p>Among retirees who left the workforce earlier than planned, EBRI says many did so &quot;because of a hardship, such as a health problem or disability.&quot; Others retired early because of &quot;changes at their company.&quot;</p> <p>This same expectation/reality gap can be seen in the number of workers who plan to work for pay <em>after</em> they retire. Some 79 percent say that's their intention whereas just 29 percent of current retirees have <em>actually</em> worked for pay.</p> <p>What should you do? Instead of counting on paid work in your later years, plan financially to retire at the typical retirement age. At the same time, keep your vocational skills current so you <em>could</em> keep working if you'd like to and are able to.</p> <h2>2. &quot;Inflation will always be low.&quot;</h2> <p>If you want to do a checkup on your retirement savings, you may be tempted to take your total nest egg and divide it by the number of years you think you might live. This will give you an idea of how much money you'll have each year to cover your annual costs. When you have enough to get by, you might assume you're &quot;set.&quot;</p> <p>There's just one problem with that approach, which people often forget about: inflation. While the cost of living has only been increasing at a relatively moderate rate in recent years, even a 2 percent rise means $500 worth of groceries today will cost about $600 in 10 years. And who knows how long inflation will stay low?</p> <p>That's why keeping your entire nest egg in an account that today pays a fraction of 1 percent is ill advised. Given our longer life spans, it's generally best to invest a portion of your nest egg in stocks. (See also: <a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement?ref=seealso" target="_blank">10 Signs You Aren't Saving Enough for Retirement</a>)</p> <h2>3. &quot;I'll always be healthy.&quot;</h2> <p>When you're in good health, it's hard to imagine ever becoming seriously ill. Heart attacks, strokes, cancer, and dementia only happen to other people, right?</p> <p>That assumption may explain why so many people are ignoring resources that could be used to help pay health care expenses later in life. EBRI found that only 13 percent of account holders contributed the full allowable annual amount to their health savings account in 2016. Meanwhile, according to The LTC Financing Strategy Group, only 16 percent of eligible people over age 65 have a long-term care insurance (LTCI) policy. Cost certainly is a factor in these decisions, but an assumption of continued good health may play a role as well.</p> <p>What to do? Face the facts. You probably won't always be as healthy as you are today. According to the National Association of Insurance Commissioners, over half the people turning 65 are expected to need long-term care at some point in their remaining years.</p> <p>If you are using a health savings account in conjunction with a high-deductible health insurance policy, consider boosting your contributions with the intent to carry a large balance into retirement. (See also: <a href="http://www.wisebread.com/how-an-hsa-could-help-your-retirement?ref=seealso" target="_blank">How an HSA Could Help Your Retirement</a>)</p> <p>Also, think about your family history. Did your parents or grandparents have any significant health issues at a relatively young age? If you experience a similar problem, how would you handle the cost? Especially if there's a history of dementia in your family, consider picking up some long-term care insurance. (See also: <a href="http://www.wisebread.com/is-long-term-care-insurance-worth-it?Ref=seealso" target="_blank">Is Long Term Care Insurance Worth It?</a>)</p> <h2>4. &quot;If I ever do become seriously ill, my kids will be there for me.&quot;</h2> <p>What if you <em>do </em>experience a debilitating illness &mdash; one that leaves you needing help with some of the activities of daily living? If you're like most people, you'll probably prefer to avoid living in a nursing home, but what other options would you have?</p> <p>Think about your children. How old will they be when you are 80 or 90? Will they be available, or will they be busy building their careers, raising their own kids, or both? Are they likely to live near you?</p> <p>Counting on your adult kids to help care for you may be counting on too much. Here again, a long-term care policy may be in order. Most of today's LTCI policies will help cover the cost of a nursing home <em>and </em>in-home care.</p> <p>Among the many threats to a financially secure retirement, the difficulty many of us have envisioning the circumstances we'll face in the future is one of the most significant. It can lead to faulty assumptions that, in turn, can leave us unprepared for our later years. The good news is, if we realize early enough that we hold these false assumptions, we can change them and correct course so that we are financially secure in our later years.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F4-false-assumptions-that-could-threaten-your-retirement-years&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F4%2520False%2520Assumptions%2520That%2520Could%2520Threaten%2520Your%2520Retirement%2520Years.jpg&amp;description=4%20False%20Assumptions%20That%20Could%20Threaten%20Your%20Retirement%20Years"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/4%20False%20Assumptions%20That%20Could%20Threaten%20Your%20Retirement%20Years.jpg" alt="4 False Assumptions That Could Threaten Your Retirement Years" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/4-false-assumptions-that-could-threaten-your-retirement-years">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/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</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-ways-to-protect-your-retirement-from-inflation">4 Ways to Protect Your Retirement From Inflation</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-couples-are-shortchanging-their-retirement-savings">4 Ways Couples Are Shortchanging Their Retirement Savings</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-plan-for-a-forced-early-retirement">How to Plan for a Forced Early Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement adult children caregivers early retirement family health problems health savings accounts income inflation long term care insurance Wed, 10 Jan 2018 09:00:08 +0000 Matt Bell 2080478 at http://www.wisebread.com How to Avoid These 3 Investment Worries That Will Derail Your Retirement http://www.wisebread.com/how-to-avoid-these-3-investment-worries-that-will-derail-your-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-avoid-these-3-investment-worries-that-will-derail-your-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_chances_0.jpg" alt="Retirement chances" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Wall Street analysts often describe bull market investors as climbing a &quot;wall of worry.&quot; The point being that even during good times, many investors find plenty to fret about. When these worries keep you from investing in your retirement, you run the risk of derailing your future.</p> <p>Let's take a closer look at three common investing-related concerns that could keep you from saving enough for your later years, along with some ideas for moving forward despite your fears.</p> <h2>1. Fear of investing in general</h2> <p>Of all the aspects of managing money, investing is the one that frightens people the most. At first glance, that's understandable. Just look at what happened during the Great Recession. From October 2007 until March 2009, the U.S. stock market fell by more than 50 percent.</p> <p>Think about that. If you had $100,000 invested at the beginning of that horrible stretch, you ended it with less than $50,000. That experience was enough to drive some people out of the market completely, and keep them out.</p> <p>How can you conquer your fear of investing? One way is to adopt the mindset of a long-term investor, not a short-term trader.</p> <p>Investors understand two important facts. First, the market doesn't move in a straight, smooth path. They expect to experience many ups and downs. Second, the longer you stay invested, the better your chances of making money.</p> <p>For example, according to a Morningstar analysis, of all the one-year U.S. stock market investment holding periods from 1926 to 2016, 26 percent showed a loss. Widen your perspective to all five-year periods, and just 14 percent showed a loss. And when you stretch your view to 15-year periods, none showed a loss.</p> <p>How would a long-term perspective have helped an investor who put money in the market at the beginning of 2007? Someone who started that year with $100,000, held on through the brutal downturn, and kept holding on, would have ended 2016 with nearly $200,000. (See also: <a href="http://www.wisebread.com/4-simple-ways-to-conquer-your-fear-of-investing?ref=seealso" target="_blank">4 Simple Ways to Conquer Your Fear of Investing</a>)</p> <h2>2. Fear of 401(k) plans</h2> <p>Pity the poor 401(k) plan. Critics complain of high fees, and they say it's unreasonable to expect participants to know how much to contribute or what to invest in.</p> <p>It's true that some plans <em>are </em>filled with excessively high-cost investment options. However, the more recent trend has been for plans to add low-cost index funds. If you work for a larger company, you may be able to see an evaluation of your plan's fees via <a href="https://www.brightscope.com/" target="_blank">Brightscope</a>. If they seem high, talk with someone in your human resources department and ask about having some lower-cost investment options added to the plan. (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 401K Fees</a>)</p> <p>To figure out how much to contribute, use one of the many free online tools that are available, such as <a href="https://www.fidelity.com/calculators-tools/fidelity-retirement-score-tool" target="_blank">Fidelity's Retirement Score</a> calculator. Estimating how much you <em>should </em>be saving in order to be adequately prepared for retirement will help make the distant goal of retirement more tangible and may motivate you to contribute more than you are now.</p> <p>As for deciding what to invest in, many 401(k) plan providers offer target-date funds, which make investing very simple. Just choose the fund named for the year closest to the year of your intended retirement date, such as the Fidelity Freedom 2040 Fund or the Vanguard Target Retirement 2045 Fund. Such funds are designed with the mix of stocks and bonds the fund company has deemed appropriate for someone your age. They automatically adjust that mix over time, becoming more conservatively invested as you near retirement age. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-about-the-easiest-way-to-save-for-retirement?ref=seealso" target="_blank">What You Need to Know About the Easiest Way to Save for Retirement</a>)</p> <h2>3. Fear of missing out (FOMO)</h2> <p>Does it seem like everyone around you is making money by investing in something you're not quite sure you understand? In the late '90s, it was the stocks of online companies, which kept zooming even though the companies were far from profitable. Remember Pets.com or Webvan?</p> <p>Today's investment craze is cryptocurrencies. Every day seems to bring a new story about Bitcoin investors who doubled their money or more <em>in hours</em>. But what exactly <em>is </em>a cryptocurrency? Could you explain it to a sixth grader in a few simple sentences?</p> <p>Investing in something you don't understand because of the <a href="http://www.wisebread.com/are-you-letting-fomo-ruin-your-finances?ref=internal" target="_blank">fear of missing out</a> has great potential to do more harm than good. What to do instead? Take a lesson from Sarah Stanley Fallaw. As founder of DataPoints, a company that studies the factors that enable people to build wealth, she's continuing the work her late father, Thomas Stanley, popularized in the best-selling book he co-authored, <em>The Millionaire Next Door</em>. One of the factors she has identified centers on what <em>not </em>to do, which she describes as <em>social indifference</em>:</p> <p style="margin-left: 40px;">&quot; &hellip; Those who ignore trends have higher net worth, regardless of their age, income, and percentage of wealth that they inherited,&quot; she told MarketWatch in 2016. &quot;Building wealth means ignoring what others are doing, which may be more challenging today than in the 1990s.&quot;</p> <p>So, just because <em>everyone </em>seems to be piling into Bitcoin doesn't mean you have to. At very least, take the time to understand what you're investing in and why. (See also: <a href="http://www.wisebread.com/what-is-cryptocurrency-anyway?ref=seealso" target="_blank">What is a Cryptocurrency Anyway?</a>)</p> <h2>It comes with the territory</h2> <p>If investing gives you pause, welcome to the human race. Because the markets are unpredictable and can be volatile in the short-run, most investors feel some fear, at least occasionally. But that doesn't mean you have to let it keep you from investing for your later years. The suggestions above should help.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-to-avoid-these-3-investment-worries-that-will-derail-your-retirement&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%2520to%2520Avoid%2520These%25203%2520Investment%2520Worries%2520That%2520Will%2520Derail%2520Your%2520Retirement.jpg&amp;description=How%20to%20Avoid%20These%203%20Investment%20Worries%20That%20Will%20Derail%20Your%20Retirement"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20to%20Avoid%20These%203%20Investment%20Worries%20That%20Will%20Derail%20Your%20Retirement.jpg" alt="How to Avoid These 3 Investment Worries That Will Derail Your Retirement" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/how-to-avoid-these-3-investment-worries-that-will-derail-your-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-easiest-ways-to-catch-up-on-retirement-savings-later-in-life">7 Easiest Ways to Catch Up on Retirement Savings Later in Life</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-simple-ways-to-conquer-your-fear-of-investing">4 Simple Ways to Conquer Your Fear of Investing</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-you-need-to-know-about-the-easiest-way-to-save-for-retirement">What You Need to Know About the Easiest Way to Save for Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-get-the-most-from-your-employer-s-automated-retirement-plan">5 Ways to Get the Most From Your Employer’s Automated Retirement Plan</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-things-millennials-can-do-right-now-for-an-early-retirement">8 Things Millennials Can Do Right Now for an Early Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) cryptocurrency fear of missing out fears FOMO risk target date funds worries Mon, 08 Jan 2018 10:00:06 +0000 Matt Bell 2083334 at http://www.wisebread.com