Retirement en-US 7 Ways to Keep Your Retirement Funds From Disappearing <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-ways-to-keep-your-retirement-funds-from-disappearing" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="mature couple finances" title="mature couple finances" class="imagecache imagecache-250w" width="250" height="124" /></a> </div> </div> </div> <p>More than one-third of Americans have <a href="">no retirement savings</a>.</p> <p>This shocking figure should provide a wake up call and set you on your course to better prepare for retirement. Even if you haven't started yet, it's never too late. (See also: <a href="">This Is the Basic Intro to Having a Retirement Fund That Everyone Needs to Read</a>).</p> <p>No matter the size of your retirement account, here are seven effective strategies to help you keep your retirement account from disappearing.</p> <h2>1. Borrow as Little as Possible From a Retirement Fund</h2> <p>Sometimes finding good financing options can be difficult. That's when you may start eyeing your 401(k) for a loan. While you may think that it is easy to pay those funds back, statistics show that's not the case. Every year Americans default on about <a href="">$37 billion in 401(k) loans</a>.</p> <p>If you are unable to pay back your 401(k) loan within five years, you're hit with a double whammy:</p> <ul> <li>The unpaid balance becomes an early withdrawal from your 401(k), receives a 10% early distribution tax penalty from the IRS, and becomes taxable income as well.<br /> &nbsp;</li> <li>You cannot make up for those contributions to your retirement account. Every year you have a contribution limit, and if you don't use it, you lose it!</li> </ul> <p>There are very, very few instances in which you should borrow from your retirement fund. One of those few instances is when you need a down payment for a home purchase. (See also: <a href="">This Is When You Should Borrow From Your Retirement Account</a>)</p> <h2>2. Set Up an Emergency Fund</h2> <p>26% of Americans have <a href="">no emergency savings</a>.</p> <p>This is a major reason retirement disappears. You need to plan ahead and have enough saved up to cover your income for at least six months. In 2014, only 40% of Americans are able to save enough to cover at least three months. Don't become part of that statistic and start saving today towards a rainy day.</p> <p>Having an emergency fund does away with the need to tap your retirement accounts. Your nest egg should be your very last resort for money before retirement. However, don't just stop with maintaining an emergency fund: Create a detailed plan of action for when disaster strikes. (See also: <a href="">Emergency Plan: Better Than an Emergency Fund</a>)</p> <h2>3. Avoid Early Withdrawal Penalties</h2> <p>In 2010, penalized 401(k) withdrawals hit a <a href="">record high of almost $60 billion</a>. Taking early withdrawals (also known as distributions) puts a heavy toll on your nest egg. Not only are you responsible for the applicable income taxes, but also you have to pay the 10% additional early distribution tax.</p> <p>Fortunately, the IRS does provide some <a href=",-Employee/Retirement-Topics&mdash;-Tax-on-Early-Distributions">exceptions to the 10% additional tax on early distributions</a>. For example, you can withdraw early without penalty:</p> <ul> <li>From eligible IRA, SEP, Simple IRA, and SARSEP plans for qualifying higher education expenses for your spouse or immediate family members;<br /> &nbsp;</li> <li>From eligible retirement plans, including 401(k) plans, for unreimbursed medical expenses exceeding 10% of your income; and<br /> &nbsp;</li> <li>Up to $10,000 from eligible traditional IRA plans for <a href="">first-time home purchases or substantial home improvements</a>.</li> </ul> <p>While there exceptions to the 10% additional tax, there are no exceptions to applicable income taxes, including capital gains. Consult your financial advisor before attempting any early withdrawals from your retirement accounts.</p> <h2>4. Minimize Management Fees</h2> <p>Talking about retirement plan managers, you need to check how much you are paying in plan management fees. According to an <a href="">AARP study on 401(k) participants</a>, about three in five Americans are unaware of how much they are paying in fees for their retirement accounts, and almost one in three is unsure of the impact of fees in their retirement savings.</p> <p>A good rule of thumb is that your total expense ratio should be no more than 1%. For example, if you have $30,000 in retirement savings, your total management expense should be no more than $300. If you're getting charged more than that, it is time to dump that plan and look for more reasonable alternatives.</p> <p>If you have several retirement accounts from previous employers, evaluate if it makes sense to roll over all those balances into your retirement account with the smallest management fees. Before initiating the rollover, review all applicable fees and eligibility rules.</p> <h2>5. Stop Playing the Market</h2> <p>When you hear about &quot;a hot stock tip,&quot; you should walk away. Like Benjamin Franklin said, the only sure things in life are death and taxes. Nearly half of 401(k) plan owners don't know what their <a href="">best investment options</a> are.</p> <p>There are several problems with playing the market on your own.</p> <ul> <li>Most retirement plans charge fees for every transaction that you make. Remember that you want to <em>minimize </em>fees.<br /> &nbsp;</li> <li>Trying to juggle your day job and the stock market may cause a lot of unneeded stress.<br /> &nbsp;</li> <li>The average actively managed mutual fund returns <a href="">approximately 2% less per year than the stock market</a>. And these are the pros that do it for a living!</li> </ul> <p>Keep in mind at all times that getting to your retirement goal isn't a sprint; it's a marathon.</p> <h2>6. Participate in Employer-Sponsored Plans</h2> <p>If you have the option of signing up for an employer-sponsored retirement program, do it. Nine in 10 Americans participating in <a href=";content_id=5362">employer-sponsored retirement plans</a> actually save for retirement. Trying to save on your own is much harder and requires a lot of self-discipline. This is why only two in 10 Americans are able to have a nest egg without an employer-sponsored plan.</p> <p>There are two additional benefits to participating in employer-sponsored plans. First, some of them match your contributions. The <a href="">average employer match is 4.5% of pay</a> to a retirement account. Don't leave free money on the table. Second, <a href="">more than half of companies offer some type of investment advice</a>. This is valuable and free information to make more informed decisions about your retirement strategy.</p> <h2>7. Consider Annuities</h2> <p>Why?</p> <ul> <li>Some types of annuities guarantee a steady stream of income.<br /> &nbsp;</li> <li>Like retirement plans, annuities allow you to defer taxes until retirement.<br /> &nbsp;</li> <li>Unlike retirement plans, annuities have no contribution limits.<br /> &nbsp;</li> <li>Some annuities offer upside income potential, while guaranteeing your original investment or a minimum return on your investment to your beneficiaries in case of your death.<br /> &nbsp;</li> <li>Annuities allow older individuals to make additional catchup contributions.</li> </ul> <p>There are different types of annuities, so make sure to review and understand the applicable rules, such as required initial investments and applicable fees. Talk with your financial advisor about whether or not annuities make sense with your retirement planning strategy. (See also: <a href="">Don't Know What Annuities Are? You Might Be Missing Out</a>)</p> <p><em>What are other useful strategies to avoid a disappearing retirement? Please share in comments below!</em></p> <a href="" class="sharethis-link" title="7 Ways to Keep Your Retirement Funds From Disappearing" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Damian Davila</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement 401(k) annuity investing retirement planning Mon, 20 Oct 2014 13:00:06 +0000 Damian Davila 1237800 at 6 Thoughts Everyone Has Their First Day of Retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-thoughts-everyone-has-their-first-day-of-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="man thinking" title="man thinking" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's a major milestone in anyone's life: retirement. You spend so many hours dreaming about just what you'll do with the time, that when it happens, you often aren't prepared for the reality of it. Retirement isn't always the answer to the unfulfilled life that many expect it to be, however, and some even struggle with the new way of life. (See also: <a href="">12 Things You Don't Know About Retirement</a>)</p> <p>Getting a handle on the new feelings can take time. Here are a few of the initial reactions to the new season, along with some tips for keeping everything in perspective.</p> <h2>1. What Will I Do With All the Time?</h2> <p>Going from a full-time career to no job at all can be a jarring experience, one that can even feel like a loss to some. In addition, &quot;Many new retirees are concerned about how they will fill up their new found free time after retiring,&quot; says Hank Coleman, publisher of the popular site, <a href="">Money Q&amp;A</a>. &quot;It can be beneficial for new retirees to take retirement for a test drive. You may want to consider a mini-retirement for a few months before you take the plunge full-time. Maybe you have a hobby or a side business that you want to pursue. Use some of your vacation days before retiring to try out what you'll be doing when you finally cut the work cord for good.&quot;</p> <h2>2. How Can I Stay On Track With My Nest Egg?</h2> <p>Outliving your retirement savings is a legitimate concern for many, and it's one that shouldn't be overlooked. Even if you've done the math and are confident that you can make your savings last, it's best to continue using a budget and assess your progress at least every six months. Check in with your accounts at the end of each year, and see how tax changes, new Medicare laws, or other legislation could positively or negatively affect your monthly living expenses. Make adjustments as needed.</p> <h2>3. Should I Stay or Should I Go?</h2> <p>If your retirement plans included getting away, or possibly even moving, it may be tempting to do so right away. Like any expensive or life-changing decision, however, it's always good to go into it informed. And while plenty of websites are always stating their opinions on the top locations to retire, the logistics of uprooting your home in your retirement years can be stressful. Things to consider &mdash; in addition to cost of living or climate &mdash; should include proximity to the family that may care for you in your older years. (See also: <a href="">5 Incredible Places to Retire Abroad That Anyone Can Afford</a>)</p> <h2>4. Who Am I Now?</h2> <p>If you took pride in your career, or simply identified with your occupation for so long that you don't have a world outside of it, it may be tempting to consider yourself as &quot;just a retiree.&quot; It's not necessary to consider yourself so closely tied to your profession &mdash; or lack of. Start to take inventory of your gifts, skills, and character traits outside of your 9-to-5; you may be surprised to find that you can have an identity built on the kind of person you are, despite having just considered yourself the sum of our working years.</p> <h2>5. How Will This Affect My Relationships?</h2> <p>&quot;When a man retires, his wife gets twice the husband but only half the income.&quot; &mdash; Chi Chi Rodriguez&quot;</p> <p>This vintage joke never gets old, and it couldn't be truer. One of the toughest adjustments to retirement happens when couples find they instantly have more hours in their day to spend together. For the entrepreneur or couple who works with their significant other already, it's not as dramatic as the office worker who now gets to see their partner for an additional 50 or 60 hours a week. Don't feel that you have to spend it all together, however; many couples find that having separate hobbies well into their retirement is the key to a happy rest of their lives together.</p> <h2>6. Is This It?</h2> <p>Retirement should be celebrated, but for many, it also gets them thinking about death. The final years of life &mdash; whether they be just a few, or more than 30 &mdash; can be met with anxiety and uncertainty. (See also: <a href="">Don't Let Poor Health Kill Your Retirement Fund</a>)</p> <p>One way to combat the tensions and worry that some new retirees face is to made a proactive plan toward preventative health care and finding hobbies that can prolong life. Activities around exercise, healthy foods, or relieving stress can be enjoyable well into old age, and they are just the sort of things that can help make the later years vibrant, too. Look for other retirees to share these experiences with; signing up for a seniors cooking class, for example, can give life skills for meeting upcoming health challenges and can introduce you to new faces to spend those work-free days with.</p> <p><em>Are you retired? What did you think on your first days of retirement?</em></p> <a href="" class="sharethis-link" title="6 Thoughts Everyone Has Their First Day of Retirement" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Linsey Knerl</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement retirement planning retiring where to retire Wed, 08 Oct 2014 13:00:04 +0000 Linsey Knerl 1227988 at Best Money Tips: Top 10 Retirement Planning Mistakes <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-top-10-retirement-planning-mistakes" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="retirement planning stress" title="retirement planning stress" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="">Best Money Tips</a> Roundup! Today we found some stellar articles on retirement planning mistakes, money rules that nobody will ever teach you, and budgeting on a variable income.</p> <h2>Top 5 Articles</h2> <p><a href="">Top 10 Retirement Planning Mistakes &mdash; Are You Making Any of Them?</a> &mdash; Are you making the retirement planning mistake of not saving enough? What about waiting too long to start saving? [Christian PF]</p> <p><a href="">The Secret Money Rules That Nobody Will Ever Teach You</a> &mdash; Chances are, no one will teach you that you should always live within your means. [Studenomics]</p> <p><a href="">Budgeting on a Variable Income</a> &mdash; It is vital to gather all your bills and track your spending when you budget on a variable income. [Kylie Ofiu]</p> <p><a href="">The One Person Responsible for Your Financial Decisions</a> &mdash; Remember that financial advice, no matter how reasonable, is not one size fits all. [Mighty Bargain Hunter]</p> <p><a href="">6 Ways to Keep Your Top-Performing Millennials on Board</a> &mdash; Creating opportunities for international travel can help companies keep millennials on board. [Women &amp; Co]</p> <h2>Other Essential Reading</h2> <p><a href="">How to Get Off the Grid</a> &mdash; To get off the grid, consider trying to grow your own food. [NarrowBridge Finance]</p> <p><a href="">Getting Old Sucks. We Can't Stop Father Time, But We Can Prepare Physically, Emotionally and Financially</a> &mdash; Are you taking advantage of how the tax code can help you in retirement? [Don't Mess With Taxes]</p> <p><a href="">4 Ways to Reduce Financial Stress</a> &mdash; If you want to reduce financial stress, create a budget and earn more money. [Sweating the Big Stuff]</p> <p><a href="">37 Creative Uses for Your Magic Eraser</a> &mdash; Use your magic eraser to remove stains on dishes and clean the inside of your oven. [PopSugar Smart Living]</p> <p><a href="">20 Mostly Free Ways to Enjoy Fall With Your Family</a> &mdash; Enjoy fall with your family without breaking the bank by making hot apple cider and visiting a local farm. [Parenting Squad]</p> <a href="" class="sharethis-link" title="Best Money Tips: Top 10 Retirement Planning Mistakes" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Ashley Jacobs</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement best money tips Mistakes retirement Wed, 24 Sep 2014 19:00:05 +0000 Ashley Jacobs 1219314 at Why One-Third of Americans Haven't Saved for Retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-one-third-of-americans-havent-saved-for-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="old man frustrated" title="old man frustrated" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>More than a third of <a href="">Americans haven't started saving for retirement</a>, according to a recent report by Interestingly, it's not just young workers who aren't banking their bucks. The survey found that more than a quarter of those aged 50 &ndash; 64 haven't started saving for retirement, either. (See also: <a href="">10 Easy Ways to Supercharge Your Retirement</a>)</p> <p>While it's true that the current generation of retirees and pre-retirees are more likely to have a pension plan to cushion their financial burden, the results point to a staggering conclusion. A large number of Americans &mdash; regardless of age &mdash; are unprepared to take financial responsibility for retirement. So, what's holding us back?</p> <h2>1. We're Living Paycheck to Paycheck</h2> <p>One-third of American households <a href="">live paycheck to paycheck</a>. Of those families, 66% are middle class and have a median income of $41,000.</p> <p>It's difficult to save for retirement when disposable income is limited, but if you manage to do it, most employers offer a match on your 401(k) contributions. An employer match can add a substantial boost to your retirement account balance. (See also: <a href="">Trick Yourself into Saving More of Your Biweekly Paychecks</a>)</p> <h2>2. We Procrastinate</h2> <p>It's tempting to put big decisions off and wait for the next big raise, until the next bill is paid off, or until the kids are through college. The problem, <a href="">as defined by one financial journalist</a>, is that savings levels aren't all that different between new workers and those already retired.</p> <p>Putting an end to procrastination can have a monumental effect on your end balance. According to recent research from the Employee Benefit Research Institute, 401(k) participants who consistently contributed to their accounts over the five years ending in 2012<a href=""> saw a healthy 6.8% average annual uptick</a> in their collective balances, even despite a 34.7% drop during the financial crisis of 2008.</p> <p>Further, the earlier you start, the easier it is to build substantial savings. In his analysis of the poll results, Greg McBride, CFA and Bankrate's chief financial analyst says, &quot;the power of compounding is most evident over long periods of time, and having a longer period of time for your retirement savings to grow and compound makes today's contributions much more impactful.&quot; (See also: <a href="">This is Why You Can't Postpone Planning for Your Retirement</a>)</p> <h2>3. We Don't Have a Retirement Plan at Work</h2> <p>Even if you don't have access to an employer-sponsored retirement savings option, don't let that keep you from having a plan of your own. According to the Employee Benefit Research Institute study noted above, those with a plan are 72% likely to feel very or somewhat confident about their prospects for retirement. Those without a plan, meanwhile, are 69% more likely to feel not at all or not too confident about retirement.</p> <p><a href="">Those without a plan</a> can benefit from several plans such as the traditional IRA, Roth IRA, MyRA, or a traditional brokerage account.</p> <h2>4. We're in Denial</h2> <p>Some workers assume they can maintain their current workload for the remainder of their lives and so choose to forego or limit retirement savings. While later-life retirements are increasing in frequency, the assumption that one can work until death doesn't account for uncontrollable factors like an unexpected job loss or medical issue.</p> <p>Even among those who are saving, many are not saving enough. In <a href="">a recent article</a>, one finance giant CEO tagged the average retirement contribution level at 6% while suggesting that 10% would be better. (See also: <a href="">6 Harmful Money Beliefs That Are Keeping You Poor</a>)</p> <p>Low or nonexistent contribution levels indicate that many workers aren't taking the time to figure out just <a href="">how much they'll need in retirement</a>. Being aware of your end goal number is the first step to getting financially prepared for retirement &mdash; at every age.</p> <p><em>Are you among the one-third of Americans who haven't saved for retirement?</em></p> <a href="" class="sharethis-link" title="Why One-Third of Americans Haven&#039;t Saved for Retirement" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Alaina Tweddale</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Debt Management Retirement 401(k) retirement saving Tue, 23 Sep 2014 13:00:06 +0000 Alaina Tweddale 1218886 at 10 Unexpected Things You Should Consider When Picking Where You Retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-unexpected-things-you-should-consider-when-picking-where-you-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="senior couple touring" title="senior couple touring" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Retirement often brings about relocation &mdash; possibly to a warmer area, a place with better health care, a quieter community, or just wherever Sal and Judy ended up. What a nice couple!</p> <p>Retirees often focus on things like hospitals, access to national parks, closeness to family, or an established community of senior citizens &mdash; and rightly so. Yet, while these factors will play a major part in the quality of a retiree's life, they aren't the only ones that should be considered.</p> <p>What about other factors that we don't immediately associate with where we're going to retire? Are we being too minimal when we consider the &quot;ideal&quot; location? Perhaps there should be a more comprehensive list of considerations when it comes time to choose the ideal retirement spot. (See also: <a href="">5 Incredible Places to Retire Abroad That Anyone Can Afford</a>)</p> <p>In essence, your retirement location should consider need, but it should also consider preferences and personality. What do you enjoy doing and what kind of atmosphere do you feel the most relaxed in?</p> <p>Here are a few things that if given some forethought, might impact where you decide to settle.</p> <h2>1. Tax Friendliness for Retirees</h2> <p>Tax policies for retirees (and in general) differ from state to state, so if you're on the fence about which part of the country you want to live in, this might be enough to tip you one way or the other. For example, <a href="">Florida and Alaska</a> have no state income tax, inheritance tax, or estate tax. There are also some helpful exemptions for retirees depending on the state.</p> <h2>2. Airport Proximity</h2> <p>If you plan to do a lot of traveling, consider the proximity of where you live to a larger airport. You can view all of the United State's airport locations on the <a href="">NCDOT website</a>.</p> <h2>3. Access to the Big City</h2> <p>Most retirees prefer to have some separation from big city life. If you do plan to live in a more quiet and rural area, consider how often you might want to visit a bigger city for entertainment, shopping, and just getting out. If you think you'll make that drive frequently, look for the <a href="">best rural spots</a> that give you easy driving access to a bigger city.</p> <h2>4. The Restaurant Scene</h2> <p>An active and diverse restaurant scene can really improve your retirement experience, giving you a variety of places to eat and plenty of excuses to have a night out. You'll need to do some local research to find the more unique places. The <a href="">Restaurant Finder app</a> will allow you to search areas ahead of time.</p> <h2>5. The &quot;Tourism Factor&quot;</h2> <p>A lot of places that are retiree friendly (take <a href="">The Villages</a> in Florida for example) are also active tourist destinations. While some people are attracted to that atmosphere, others prefer to avoid it.</p> <h2>6. Projected Town Growth</h2> <p>Small towns can grow quickly these days as communities that were once little more than a road and woods have become busy streets lined with businesses. If this is something you want to avoid, it can be tough to predict, though targeting more rural areas that are a sizeable distance from bigger cities is a good way to start. You can also do some research on sites like Forbes to get a feel for projected <a href="">population growth and development</a> over the next few years.</p> <h2>7. Agriculture</h2> <p>Farmer's markets and access to fresh food are good for your health and offer a small town sense of community. Some places are known for their agricultural prowess, so perhaps they should be on your short list.</p> <h2>8. Traffic</h2> <p>You've spent your entire life dealing with an awful commute, so do you really want it to continue when you retire? The best way to know for sure is by visiting a place during the busy driving times (Friday night, Saturday, holiday weekends), and by simple word of mouth.</p> <h2>9. Weather</h2> <p>With extra time to get out and do some sightseeing you wouldn't want those activities being constantly hampered by extreme temperatures or bad weather. Consider places with more yearly warm weather or a more moderate climate.</p> <h2>10. Availability of Part-Time Work</h2> <p>An increasing number of retirees are opting to continue working in a part time job. This is often to continue in a profession, put in the time, or to supplement retirement savings. Whatever your reasoning, if you plan to work part time it may have a big impact on where you retire.</p> <h2>A Comprehensive Approach</h2> <p>It's important to take your time when you're choosing a retirement location and to be sure you've got a list of considerations that encompasses everything that's going to impact your lifestyle as a retiree; In other words, a comprehensive approach.</p> <p>Family, health and finances are certainly the core issues, but don't dismiss your own preferences and what your day-to-day life is going to look like. Those things will matter, so take the time to get them right.</p> <p><em>Did you retire to a different area? What factors played a role in the decision-making process? If you're currently weighing your options, what factors are you considering? Let me know in the comments below.</em></p> <a href="" class="sharethis-link" title="10 Unexpected Things You Should Consider When Picking Where You Retire" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Mikey Rox</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement city life retirement retirement community taxes Fri, 25 Jul 2014 13:00:02 +0000 Mikey Rox 1167640 at Best Money Tips: The Retirement Edition <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-the-retirement-edition-0" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="retirement" title="retirement" class="imagecache imagecache-250w" width="250" height="143" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="">Best Money Tips</a> Roundup! Today we found some of the best articles from around the web on retirement!</p> <h2>Top 5 Articles</h2> <p><a href="">All You Need to Know About Saving for Retirement</a> &mdash; When you start saving for retirement, try to save 10%-15% of your income. [Get Rich Slowly]</p> <p><a href="">5 Ways to Avoid Outspending Your Income in Retirement</a> &mdash; Planning for longevity can help you avoid outspending your income in retirement. [Len Penzo dot Com]</p> <p><a href="">4 Quick Tips for Maximizing Your Retirement Savings</a> &mdash; To maximize your retirement savings, minimize your account fees. [Credit Sesame]</p> <p><a href="">5 Tips for Starting a Retirement Account When You Get Your First Job</a> &mdash; If you just landed your first job, make it a point to try to max out your company match. [Bargaineering]</p> <p><a href="">Work Longer and Prosper</a> &mdash; Sometimes working longer can mean the difference between a comfortable retirement and one where you are forced to skimp. [Kiplinger]</p> <h2>Other Essential Reading</h2> <p><a href="">Retiring Soon? Don't Make These 8 Mistakes</a> &mdash; If you are retiring soon, don't underestimate your costs or celebrate with a big purchase. [Money Talks News]</p> <p><a href="">Retirement Saving: Size Isn't the Only Consideration</a> &mdash; When thinking about retirement savings, consider where you live and social security projections. [Five Cent Nickel]</p> <p><a href="">Average Retirement Savings by Age &mdash; How Does Your Savings Stack Up?</a> &mdash; To get your retirement savings above average, open an individual retirement account. [Good Financial Cents]</p> <p><a href="">What's Your Number? Retirement Number, That Is</a> &mdash; One of the most popular ways to figure out how much you need to save for retirement is to set a savings goal of 11 times your working salary. [PopSugar Smart Living]</p> <p><a href="">Should Parents Invest in Roth IRAs?</a> &mdash; Money invested in a Roth IRA grows tax-free, but is taxed upfront. [Parenting Squad]</p> <a href="" class="sharethis-link" title="Best Money Tips: The Retirement Edition" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Ashley Jacobs</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement best money tips retirement Mon, 14 Jul 2014 19:00:04 +0000 Ashley Jacobs 1146778 at This One Thing Will Get You to $1 Million (Tax-Free!) <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-one-thing-will-get-you-to-1-million-tax-free" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="retirement savings" title="retirement savings" class="imagecache imagecache-250w" width="250" height="146" /></a> </div> </div> </div> <p>We're surrounded by financial advice, often in the form of lists containing 10 (or 25! or 50!) things you can do to help solve a particular problem. While much of this information is useful, it can also be overwhelming. Where do you begin? On what things should you focus your efforts?</p> <p>I'd suggest starting with the end in mind &mdash; with your ultimate goal &mdash; and let that guide you to the highest priority activities to help you achieve it. For most of us the end goal is financial independence, and that requires accumulating enough wealth to no longer rely on income from a job. (See also: <a href="">How Cash Flow Allocation Helps You Retire</a>)</p> <p>Okay, here's where focusing on the highest impact activities comes in. For most Americans, only two financial items generate around 80% of their wealth: real estate and retirement savings. Let's tackle one of them, retirement savings. If you get that one thing right then hundreds of other, lower impact activities won't matter much.</p> <h2>Retirement Savings</h2> <p>So let's begin. What are some typical sources of retirement savings?</p> <ul> <li>Your employer (in the form of a 401(k), 403(b) or similar program, or in rare instances a pension).<br /> &nbsp;</li> <li>The government (Social Security retirement payments).<br /> &nbsp;</li> <li>Yourself.</li> </ul> <p>Unfortunately, the first two sources are becoming increasingly uncertain, so let's narrow our focus even further, on the one retirement savings source where you have complete control: Yourself.</p> <p>IMPORTANT! Before proceeding, I would strongly suggest that if your employer offers a matching 401(k) or similar program that you contribute an amount that gets you the maximum match. What we're addressing in this article will <em>supplement</em> that 401(k) savings plan, if you're lucky enough to have one.</p> <p>Alright, so what one thing that you have control over can get you to $1 million in retirement savings, tax free? Drum roll, please&hellip;.</p> <h2>It's a Roth IRA</h2> <p>Contribute $200 per month into a Roth IRA (where earnings on the account and withdrawals after age 59&frac12; are tax-free).</p> <p>That's it! Simple, isn't it?</p> <p>Actually, yes, it is simple. That's the beauty of it. But it does require meeting a few conditions.</p> <h3>1. Invest the Money in Stocks</h3> <p>You have the option of putting your Roth IRA contributions to work in one or a combination of investments such as bonds, treasuries, CDs, money market funds, and stocks. Unlike bonds, treasuries, and especially CDs or money market funds, stock market returns have historically outpaced inflation by a comfortable margin. Over the past 50 years stock funds invested in large companies have yielded a return of 9.2%. Over the past <a href="">20 years it's been 7.9%</a>. For our purposes, to be conservative I will assume an average return of 7.5%.</p> <h3>2. Stick With It!</h3> <p>Religiously. Even obsessively, if that's what it takes. Make that $200 contribution without exception every month until it becomes automatic. In fact, setting it up as an automatic transfer from each paycheck is the best way to go. That way you never see the money and therefore never miss it.</p> <h3>3. Wait</h3> <p>This is where the magic occurs. After contributing long enough you'll reach a threshold, where your total saved amount starts to achieve a dramatic upward trajectory due to compounding.</p> <h2>The Power of Compounding</h2> <p>To illustrate the magical power of compounding, consider the story of the king and the court jester. Legend has it that a long, long time ago a court jester's heroic act saved his king. The king was so moved by the jester's bravery that he offered to give the jester anything he wanted. The jester asked for one cent, doubled each day for a month. &quot;That's all?&quot; said the king. The wish was granted. (See also: <a href="">10 Easy Ways to Supercharge Your Retirement</a>)</p> <p>Halfway through the month the balance grew to only $164. But during the final week it started its rapid rise &mdash; it passed the threshold &mdash; and spiked upwards, ending the month at over $5.3 million.</p> <p><img width="605" height="303" src=" Chart.png" alt="" /></p> <p>As you can see in graph, it took some time for the small initial amount to grow. Eventually, though, the balance grew large enough so that with each doubling it started shooting up very rapidly. That's the threshold you want to reach. But to do so you need to start early &mdash; i.e. NOW!</p> <h2>How Long Will It Take?</h2> <p>So, how long are we talking about to reach this magic threshold? If you start at age 21 and your $200 monthly Roth IRA contributions grow at 7.5%, then you will reach $1 million, tax-free, at age 67, which is the current target age for receiving full Social Security retirement benefits if you were born after 1960.</p> <p>What if you were to start saving at age 31 instead of 21? Then your total will only be $360,000. Big difference. That's because you didn't quite reach the threshold where compounding really starts to kick in. But still not bad.</p> <p>Now I'm guessing that not everyone who reads this is 21 years old, so you're probably thinking &quot;What can I do to make up for lost time?&quot; Here are some ideas:</p> <ul> <li>At $200 per month your total annual contribution will be $2,400 but for most households the maximum annual Roth contribution is $5,500, so if you can afford it double your monthly contribution until you're caught up.<br /> &nbsp;</li> <li>If you have money in a savings account, consider transferring up to $3,100 from it to supplement your $2,400 annual amount.<br /> &nbsp;</li> <li>You can reach your annual contribution limit by transferring money from a tax-deductible account (such as a traditional IRA) to a Roth in the same year. (Check with a financial or tax professional to be sure you understand the rules for this kind of transfer.)<br /> &nbsp;</li> <li>Getting a tax refund? Put all or a portion of it into the Roth account.<br /> &nbsp;</li> <li>Take advantage of the Roth IRA &quot;float&quot; period, which allows you to count contributions made until April 15th towards the previous year's total.<br /> &nbsp;</li> <li>Over time, as your earnings grow and you can afford more than $200 per month, increase that monthly contribution by $50 or $100 or more. Consider having all or part of your annual raise in salary automatically added to your monthly Roth contribution.</li> </ul> <p>At a time when a slew of financial information and advice seems to be coming at us from all directions it's easy to feel overwhelmed. You don't need to be. Take back control by keeping things simple and focusing on this one activity. As you approach your golden years and reach the threshold, you'll be glad you did.</p> <p><em>Have you taken this one simple step toward putting aside money for retirement?</em></p> <a href="" class="sharethis-link" title="This One Thing Will Get You to $1 Million (Tax-Free!)" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Keith Whelan</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Investment Retirement 401(k) compound interest investing Roth IRA saving Mon, 14 Jul 2014 09:00:05 +0000 Keith Whelan 1157120 at Don't Let Poor Health Kill Your Retirement Fund <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/dont-let-poor-health-kill-your-retirement-fund" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="retirement health" title="retirement health" class="imagecache imagecache-250w" width="250" height="151" /></a> </div> </div> </div> <p>Poor health can destroy your finances in retirement if you fail to build both a healthy retirement fund and a healthy retirement body.</p> <p>Research shows that physical and financial health are closely linked. In a 2002 University of Michigan study, <a href="">married couples with excellent health averaged $500,000</a> in net worth, about three times that of married couples with poor health who had an average of $164,000. (See also: <a href="">10 Easy Ways to Supercharge Your Retirement</a>)</p> <p>When it comes to costs, many Americans may underestimate how much money they'll spend on health care in their golden years. Over half of the respondents to a Fidelity Investments Retirement Savings Assessment survey say they'll need about $50,000. But Fidelity predicts an average couple will <a href="">need more than $220,000</a> over the course of their retirement &mdash; just for health care!</p> <p>Indeed, retirees now spend more on health care than they do on food, and at the present rate, health care will be retirees' largest expense after housing.</p> <p>So to help you prepare, start thinking hard about the following steps.</p> <h2>Building a Healthy Retirement Budget</h2> <p>Investment broker Fidelity recommends <a href="">taking these four steps</a> to prepare for health care costs in retirement.</p> <h3>1. Set a Savings Goal</h3> <p>Set an annual savings goal of 10% to 15% or more of your income, including 401(k) plans and IRAs. Consider saving part of any raises, bonuses, or tax refunds and increasing contributions to savings plans by 1% every year.</p> <h3>2. Go on Auto-Pilot</h3> <p>Sign up for automatic savings plans with your financial services company. Use the automatic increase feature in your 401(k) plan if it's offered.</p> <h3>3. Use Health Care Savings Accounts</h3> <p>HSAs, offered through employers, offer a triple tax advantage. Contributions and investment earnings accumulate tax-free and roll over year to year if not spent. Distributions for qualified medical expenses are not subject to federal taxes. (See also: <a href="">How to Choose a Health Insurance Plan</a>)</p> <h3>4. Understand Medicare Options</h3> <p>Most people qualify for Medicare hospital insurance, or Part A, at age 65 and don't pay for the coverage if they paid Medicare taxes while working, according to Fidelity.</p> <p>However, you pay monthly premiums for Medicare medical insurance, or Part B, which covers doctor visits and other medical services. Plus, there's no limit on out-of-pocket expenses.</p> <h3>4. Understand Unbundled Vs. Bundled Coverage</h3> <p>Unbundled coverage involves using Medicare Part A and Part B along with Veterans benefits, former employer retiree plans or purchasing supplemental, or Medigap, insurance from a private insurance company. That route may be best if you want to fill in gaps in coverage and keep the original Medicare coverage. You can use any doctor or facility you like but may pay higher premium. The policies don't include prescription coverage so you'll need to buy Medicare Part D to cover prescription drugs.</p> <p>Bundled coverage is Medicare Advantage or Managed Care plans, privately managed plans that combine Medicare Parts A and B, and supplemental coverage you purchase. They often include prescription coverage and can offer lower premiums or better benefits. Simpler than unbundled coverage, it requires just one ID card.</p> <p>The disadvantage is that it can limit you to only network providers.</p> <p>Medicare's website offers a <a href="">useful tool</a> for comparing supplemental insurance in your state.</p> <h2>Building a Healthy Retirement Body</h2> <p>Maintaining a healthy lifestyle and being informed during your working years is key to your financial fitness in retirement. Here's ten actions to take now to improve your health in the future (some pulled from health care insurer Aetna's excellent website, <a href="">Plan For Your Health</a>):</p> <h3>1. Know Your Cholesterol</h3> <p>Cholesterol has a big impact on heart health. Healthy cholesterol levels are 200 milligrams per deciliter (mg/dL) or <a href="">lower for total cholesterol</a>, 100 mg/dL or lower for LDL cholesterol, and 60 mg/dL or higher for HDL (or &quot;good&quot;) cholesterol, and 150 mg/dL or lower for triglycerides (fat).</p> <h3>2. Don't Smoke</h3> <p>Smoking raises blood pressure, increases fatty plaque in arteries, and increases chances for heart attacks.</p> <h3>3. Check Your Blood Sugar</h3> <p>Have your blood sugar level tested once a year. High blood sugar levels indicate higher chances of diabetes, which in turn means higher odds for other health problems.</p> <h3>4. Eat Right</h3> <p>Eat high-fiber foods, fruits, vegetables, legumes and whole grains. Apples can decrease the risk of cancer, according to <a href="">AARP</a>. A handful of nuts a day may help prevent both heart disease and cancer. Beans and lentils are good for your colon, garlic fights off digestive-tract cancers, and curry has ingredients that may offer protection against brain tumors. (See also: <a href="">Eating at the Intersection of Cheap and Healthy</a>)</p> <h3>5. Exercise Daily</h3> <p>Daily exercise reduces the ill-effects of aging, such as worsening eyesight and less bone density. Even 10 minutes of exercise a day helps, writes James Rouse, a naturopathic physician and host of &quot;<a href="">Optimum Wellness</a>.&quot; The many simple exercise options, he says, include going for walking, dancing, bicycling, playing water volleyball, or jumping on a trampoline.</p> <h3>6. Be Friendly</h3> <p>Stress builds up if you keep your feelings bottled inside. Talk to your friends and family and ask for support. If you don't have a good support system, work to develop one to have someone to talk to when you're upset.</p> <h3>7. Relieve Pressure</h3> <p>To prevent or manage high blood pressure, use less salt, limit alcohol and caffeine, quit smoking, mind your cholesterol, and exercise daily. Besides making you unhappy, too much stress can increase your heart rate and raise your blood pressure. Try meditation, deep breathing, muscle relaxation, listening to relaxing music, or picturing pleasant scenes.</p> <h3>8. Take Health Tests</h3> <p>Women should have a Pap smear annually until age 65, a mammogram annually starting at age 50, a bone density test to guard against bone thinning, <a href="">advises Dr. Mehmet Oz</a>, host of &quot;The Dr. Oz Show.&quot;</p> <p>Men should have a prostate-specific antigen, or PSA, test at age 50 for a baseline reading, followed by yearly testing. Both men and women should have a colonoscopy at age 50, then once every 10 years.</p> <h3>9. Watch Your Weight</h3> <p>Over 60% of American adults are overweight and a third are obese. An average woman of 5 feet 4 inches is obese at 175 pounds. An average man of 5 feet 9 inches is obese at 196 pounds, says Dr. Oz. Measure your waist above your hip bone and below your rib cage. It should be less than half your height.</p> <h3>10. Beware the Sun</h3> <p>Use sunscreen and reapply it every two hours when you're in the sun, Dr. Oz advises. Men should remember their ears and scalp where they're more prone to skin cancer than women. Wear sunglasses in bright sun to help ward of failing eyesight in latter years.</p> <p><em>How are you planning for health care costs in retirement? Please share in comments!</em></p> <a href="" class="sharethis-link" title="Don&#039;t Let Poor Health Kill Your Retirement Fund" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Michael Kling</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Health and Beauty Retirement aging fitness Health investing retirement retirement fund Fri, 04 Jul 2014 13:00:04 +0000 Michael Kling 1153231 at If You Want Your 401K to Grow, Stop Doing These 6 Things <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/if-you-want-your-401k-to-grow-stop-doing-these-6-things" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="401k savings" title="401k savings" class="imagecache imagecache-250w" width="250" height="156" /></a> </div> </div> </div> <p>Are you counting on your 401(k) to fund your dream retirement? If so, make sure you're not making the following common mistakes. By avoiding these pitfalls, you'll ensure that you end up with the most money possible. (See also: <a href="">Optimize Your IRA and Your 401(k)</a>)</p> <h2>Stick to the Default Contribution Percentage</h2> <p>If your employer automatically enrolls you in your 401(k), that's a great thing. More employees usually end up participating in the plan than if they had to sign up on their own. Sticking to the default contribution rate, however, is not that good. The <a href="">average default contribution rate</a> for plans with automatic enrollment is just 3.4%.</p> <p>There are two reasons why this won't help your 401(k) grow.</p> <h3>1. Too Low to Earn the Full Employer Match</h3> <p>This may not be the amount that'll get you the full matching contribution from your employer. On average, most workers would need to contribute an average of 5.1% of pay to get the full match their employers are offering. The employer match is extra money your employer will give you for free, as long as you contribute your own money first. Since you're entitled to this money as part of your compensation package, it wouldn't be wise to pass it up.</p> <h3>2. Falls Short of the Contribution Limit</h3> <p>This may not be the amount that'll get you contributing up to the full <a href=",-Employee/Retirement-Topics---401%28k%29-and-Profit-Sharing-Plan-Contribution-Limits">IRS contribution limit</a>. The contribution limit is the most amount of money you can invest in a single year. And the more money you put in now, the more money you'll have later. In 2014, you can contribute a maximum of $17,500. If you're age 50 or over, this amount increases to $23,000.</p> <p>In order to contribute at the 3% rate and still reach the maximum of $17,500, you'd need to be making about $590,000 per year. So if your salary is less than that, find ways to contribute more than 3%. Because the more money you invest now, the more you'll have later.</p> <h2>Stick to the Default Fund Choice</h2> <p>If your employer automatically enrolls you in your 401(k), they may also choose the fund you're invested in. Sometimes, this isn't the best choice.</p> <p>Check to see if the default fund is either a money market or stable value fund. If it is, you may want to switch to another fund. These funds aren't designed to really grow your money. Instead, their purpose &mdash; as their name suggests &mdash; is simply to keep the value of your money stable.</p> <p>Better investment choices include stock and bond index funds. For more help on choosing the best fund, check out <a href=";camp=1789&amp;creative=390957&amp;creativeASIN=0470067365&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=V3ISWB6EAGPEJZLJ">The Bogleheads' Guide to Investing</a>.</p> <h2>Put Too Much Money in Your Company's Stock</h2> <p>Professionals recommend no more than 5% to 10% in a company's stock. And there's a good reason why.</p> <p>Remember what happened to Enron? Employees who put most of their retirement funds in their company stock not only lost their jobs &mdash; they also <a href="">lost their retirement money</a>.</p> <p>Rather than investing most of your money in your company's stock, it's better to ensure that your money is properly diversified.</p> <h2>Borrow From Your 401(k)</h2> <p>The main reason not to do this is because if you take out a loan from your 401(k), then that money is no longer working towards your retirement needs. In other words, you lose the power of <a href="">compounding</a>.</p> <p>Also, if you leave your job, you'll generally be required to repay the loan balance <a href="">within 60 days</a>. If you don't, the unpaid balance is considered as defaulted. This means you'll need to pay a 10% penalty on top of owing income taxes on the defaulted amount if you are not at least age 59 &frac12;. (See also: <a href="">This Is When You Should Borrow From Your Retirement Account</a>)</p> <h2>Cash Out If You Leave Your Job</h2> <p>By cashing out, you not only get taxed and penalized, but similar to borrowing, you also lose the earnings that money could have generated.</p> <p>Worst of all, you probably <a href="">won't even get all of your money</a>: If you haven't reached age 59 &frac12;, your employer is required to withhold 20% for the IRS. On top of that, you'll need to pay a 10% early withdrawal penalty.</p> <p>So for every $1,000 you cash out, you would only receive about $700. The other $300 would go to the IRS.</p> <h2>Settle for High Fees</h2> <p>Most employees don't realize it, but there are costs associated with investing in your 401(k).</p> <p>These include fees to pay brokers, accountants, administrators, and fund managers just to name a few.</p> <p>How much can all of this add up to?</p> <p>In <a href=";camp=1789&amp;creative=390957&amp;creativeASIN=0767929845&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=27ZD3XFCFMBL4UQV">Fight For Your Money</a>, David Bach found that when you add in these fees and hidden charges, the average 401(k) plan actually costs employees between 3% and 3.5% of what they've got invested each year.</p> <p>So what should you do?</p> <p>Ask your company or 401(k) provider for a breakdown of the fees you're being charged. If they are much more than 3%, <a href="">complain</a>.</p> <p>By ensuring that you don't make these mistakes, you'll increase your chances of building a nice, large nest egg for your retirement.</p> <p><em>Are you making any of these 401(k) mistakes? Any others we should be aware of? Please share in comments!</em></p> <a href="" class="sharethis-link" title="If You Want Your 401K to Grow, Stop Doing These 6 Things" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Darren Wu</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement 401(k) investment IRA retirement taxes Mon, 30 Jun 2014 09:00:05 +0000 Darren Wu 1150361 at 12 Things You Didn't Know About Retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-things-you-didnt-know-about-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="retirement" title="retirement" class="imagecache imagecache-250w" width="250" height="145" /></a> </div> </div> </div> <p>It's nice to get out of the rat race.</p> <p>However, once you hit retirement you have to learn to get along with way less &quot;cheese.&quot; With <a href="">less than half of Americans</a> having ever thought about how much money they need for retirement, it is clear that several people are still clueless about retirement. (See also: <a href="">This Is the Basic Intro to Having a Retirement Fund That Everyone Needs to Read</a>)</p> <p>If you consider yourself a know-it-all in retirement matters, here is a list of 12 things about retirement that may shock you.</p> <h2>1. Some May Not Retire At All</h2> <p>If you think that most people retire at age 65, think again. Back in 1991, only about 11% of workers expected to retire after age 65. Fast forward to 2014 and 33% of workers expect to retire after age 65 and <a href="">10% don't plan to retire at all</a>. Attitudes are changing and more Americans are considering semi-retirement during their golden years.</p> <h2>2. $1 Million Is Not Enough</h2> <p>For several years, financial advisors have used $1 million as a rule of thumb for your target retirement fund. As life expectancy improves, this target may be too low. With men and women reaching ages <a href="">84 and 86</a> respectively, $1 million nest eggs may run out. Considering a 4% annual withdrawal, a $1 million retirement fund may last you only <a href="">about 25 years</a>. The Social Security Administration projects that about 10% of 65 year olds will even live beyond 95.</p> <h2>3. Gen Y Needs to Save $2 Million</h2> <p>Here is some bad news for those born in the early 1980's and later. <a href="">Many registered investment advisors</a> recommend members of Gen Y have a retirement savings goal of at least $2 million. Inflation, higher student debt, more expensive health care, and longer life expectancy are major causes for this radical increase. The key to saving $2 million for retirement is starting early. Assuming a 7% average annual return, you'll need to save $510 per month if you start at age 20. If you start age 40, you'll need to put away $2,270 every month. (See also: <a href="">Retirement Planning If You're Under 30</a>)</p> <h2>4. Full Retirement Age Is 67</h2> <p>When reading the fine print from your retirement accounts, an age that appears a lot is 59 &frac12;. This is the age at which most retirement accounts allow you to start taking withdrawals without any penalty. This is not the case for social security benefits. The <a href="">full retirement age</a> for those born 1960 and later is 67.</p> <p>This means that if you decide to retire before age 67, you are entitled to reduced social security retirement benefits. For example, if you retire at 65, you get about 13.3% less than you would at age 67. On the other hand, if you decide to retire past age 67 you are entitled to <a href="">delayed retirement credits</a>, which boost your benefits slightly. Delayed retirement credits reach a cap at age 70.</p> <h2>5. Almost Half of Americans Have Less Than $10,000 Saved for Retirement</h2> <p><a href="">46% of all American workers</a> have less than $10,000 saved for retirement and 29% of all American workers have less than $1,000 saved for retirement. If you fall under either of these categories, get your retirement strategy together. (See also: <a href="">10 Easy Ways to Supercharge Your Retirement</a>)</p> <h2>6. Employer-Sponsored Plans Increase the Likelihood You'll Save</h2> <p>Here is some good news: Those workers that participate in retirement plans at work are 45% more likely to save than those that don't. According to data from the Employee Benefit Research Institute, those saving for retirement at work are more likely to have saved at least $50,000.</p> <h2>7. Self-Employed Can Save for Retirement</h2> <p>Freelancers, independent contractors, and small business owners can save for retirement, too. The best options are <a href="">one participant 401(k)'s</a> and <a href="">Simplified Employee Pensions</a> (SEP's), which both have higher caps than Roth or Traditional IRAs. Under both retirement accounts, you can put away up to 20% of your net self-employment earnings with a cap at $51,000, as of 2013. Most financial firms can offer a SEP, but fewer can offer a one participant 401(k). Contact your financial institution for more details for eligibility requirements and rules.</p> <h2>8. Older Workers Can Save $5,500 Extra for Retirement</h2> <p>It is never too late to start saving for retirement. The IRS gives all workers age 50 or older the chance to make catch-up contributions of <a href=",-Employee/Retirement-Topics-Catch-Up-Contributions">$5,500 every year</a> to their retirement accounts. These catch-up contributions are the best way to give your nest egg a much needed boost.</p> <h2>9. Married Couples Save More</h2> <p>When it comes to retirement planning, married couples are doing better than singles. Unmarried men and women are just as likely to have ever saved for retirement and to be currently contributing to a retirement account. However, those <a href="">probabilities double for married workers</a> and their spouses. Nearly 75% of married of married couples are currently saving for retirement. These statistics prove that two heads think better than one.</p> <h2>10. Children Can Contribute to an IRA</h2> <p>That's not a typo. Little Jimmy can start putting away that lemonade stand money into a traditional IRA, even if he's just age 10. You can open a traditional IRA, a Roth IRA, or an Education IRA for your children and they can <a href="">contribute up to $2,000 per year</a> from their income. While you will have custodial control over your kid's account until she reaches legal age, you have to eventually turn over the rights to her. Make sure to discuss with her the implications of early withdrawals.</p> <h2>11. Non-Working Spouses Can Have Retirement Funds, Too</h2> <p>If you file taxes jointly with your spouse and have non-working spouse, you can fund your spouse's traditional or Roth IRA. The working spouse can contribute up to $5,500 per year to the non-working spouse's account, and up to $6,500 when over age 50.</p> <h2>12. IRAs Are Protected From Bankruptcy Proceedings</h2> <p>Under the <a href="">Bankruptcy Abuse Prevention and Consumer Protection Act</a> (BAPCPA) of 2005, the first $1 million of traditional IRAs and Roth IRAs are protected in case of bankruptcy. The amount protected is adjusted every 3 years to current cost of livings standards and, as of 2013, it stands at $1,245,475. There is no protection cap for employer-sponsored retirement plans, such as 401(k)s, 403(b) profit sharing plans, and 457(b) deferred compensation plans.</p> <p><em>Did anything here surprise you? Please share in comments!</em></p> <a href="" class="sharethis-link" title="12 Things You Didn&#039;t Know About Retirement" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Damian Davila</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement 401(k) IRA retirement facts social security Wed, 25 Jun 2014 21:00:04 +0000 Damian Davila 1147194 at This Is Why You Can't Postpone Planning for Your Retirement (And How to Start) <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/this-is-why-you-cant-postpone-planning-for-your-retirement-and-how-to-start" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="retirement" title="retirement" class="imagecache imagecache-250w" width="250" height="151" /></a> </div> </div> </div> <p>It's no secret that for today's workers, the burden for retirement planning has shifted from employer to employee. What many savers don't realize is that the costs associated with retirement are much higher than many workers expect. Over a 30 year retirement, a $2 million nest egg could provide just $66,000 per year in income. That's without accounting for inflation and the decreasing value of the dollar each year. (See also: <a href="">How to Calculate Future Value and Why It Matters</a>).</p> <p>Traditional retirement safety nets are quickly diminishing and the majority of Americans today are worried about <a href=";utm_medium=email&amp;utm_campaign=syndication&amp;utm_content=morelink&amp;utm_term=All%20Gallup%20Headlines%20">not having enough money</a> to fund their golden years.</p> <p>First, let's look at why they are wise to be worried. Then let's look at what can be done about it.</p> <h2>Why You Need to Be Saving for Retirement</h2> <ul> <li> <p>Today, <a href="">only 17% of U.S. companies offer a defined benefit pension plan</a> and that number is shrinking &ndash;&ndash; fast. Even companies that do offer a pension are pulling back by grandfathering in current employees while offering new hires a standard defined contribution plan like a 401(k), instead. In other words, your chances of finding a company to fund your retirement today are slim and they're getting slimmer every year.</p> </li> <li> <p>The average Social Security beneficiary receives a mere <a href="">$1,230 a month in retirement benefits</a>. How far could $14,760 per year take you?</p> </li> <li> <p>Even worse, it's estimated that the Social Security trust fund will be depleted in about 20 years. Unless a reform package is approved by then, Social Security retirement benefits will probably decrease by about 25% in coming years. (See also: <a href="">Is Social Security Just a Grand Ponzi Schem?</a>)</p> </li> <li> <p>The full retirement age for <a href="">Social Security benefits</a> is on the rise. For upcoming retirees it's age 65, but it goes up to age 67 for those born after 1960. It's expected that the benefits age will rise even further, too, possibly to age 70.</p> </li> <li> <p>Medical expenses are, um, expensive. According to a recent AARP Health Newsletter, a couple retiring at age 65 could need $240,000 to pay <a href="">out-of-pocket medical costs</a>. This amount assumes the couple is eligible for Medicare coverage (early retirees are not) and doesn't include the high cost of long-term care. Otherwise, the costs go up. (See also: <a href="">This Is What It Really Costs to Get Sick</a>)</p> </li> <li> <p>If you want to retire early, your medical expenses will be even higher. Much higher. That's because medicare coverage doesn't kick in until age 65 and health care options are limited for those between the ages of 50 and 64. In his book <a href=";camp=1789&amp;creative=390957&amp;creativeASIN=1402229240&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=TZFLARLFYHACE346">20 Retirement Decisions You Need to Make Right Now</a>, Certified Financial Planner Ray E. Levitre says, &quot;this age group&hellip; is most likely to be denied coverage or be hit with high insurance premiums that are hard to swallow.&quot; Private health insurance premiums can range between $500 and $1000 per month, per person (or more). Without proper health coverage, a heart attack, trauma, or cancer can easily cost between $25,000 and $50,000 per year.</p> </li> <li>Life expectancies are longer &mdash; much longer &mdash; than they used to be. Fifty years ago, the <a href="">average life expectancy</a> for men was 66.6 years. Today the average 65-year-old man can expect to live until age 84 and one out of every four lucky retirees will live past age 90 (and one in 10 past age 95!).</li> </ul> <h2>How You Should Be Saving for Retirement</h2> <p>With modern retirements lasting up to and above 30 years, it's no wonder so many companies have rolled back their pension plans. All those extra retirement years are exciting, yes, but they're also expensive to fund. What's a present-day worker to do? (See also: <a href="">10 Easy Ways to Supercharge Your Retirement</a>)</p> <h3>Know How Much You Should be Saving</h3> <p>There are countless <a href="">retirement calculators</a> online. Run your numbers through one to find out your risk of running out of money before retirement ends. Once you know what you need to save to offset a shortfall, it's that much easier to get started. (See also: <a href="">How Much Money You'll Need to Retire</a>)</p> <h3>Start Saving as Early as Possible</h3> <p>Treat your retirement savings like you would any other bill: Budget for it and put the dough away each month, as if it were a necessary expense (because really, it is). The earlier you start, the more you can take advantage of compound earnings and, ultimately, the less you'll have to sock away in the long run. Here's a look at what you'd need to save, starting at different ages, to retire with $2 million (assuming an average annual increase of 7% per year and retirement at age 65).</p> <ul> <li>Start at age 20 and you'll have to save $510 per month.</li> <li>Start at age 30 and you'll have to save $1,050 per month.</li> <li>Start at age 40 and you'll have to save $2,270 per month.</li> <li>Start at age 50 and you'll have to save $5,600 per month.</li> </ul> <p>The saver who started at 20 saved only $245,000 (the rest of the balance is a result of compound investment earnings). The saver who starts at age 50, on the other hand, will save $1,008,000 to get to $2 million at retirement. (See also: <a href="">The 5 Most Important Financial Lessons People Learn in Their 20s (Did You?)</a>)</p> <h3>1. Take Advantage of Your 401(k) Match</h3> <p>Many employers offer some type of matching provision on their retirement plan. That match is part of your benefits, and if you're not taking advantage of it, you're essentially handing part of your salary back to your employer. If you don't know if your employer offers a match on your 401(k) (or other retirement plan offered by your employer), call your HR manager right away. Two common employer matching programs include a 100% match on the first 3% you contribute or a 50% match on the first 6% you contribute. (See also: <a href="">How to Make the Most of Your 401(k)</a>)</p> <p>Here's how they work.</p> <ul> <li> <p>100% match on first 3% &mdash; This means that if you contribute 3% of your salary to your 401(k), your employer match the equivalent of 3% of your salary in your retirement plan. If you make $50,000 per year, that's $1,500 in free money.</p> </li> <li> <p>50% match on the first 6% &mdash; If you contribute 6% of your salary to your 401(k), your employer will match the equivalent of 3% of your salary in your retirement plan (fifty cents for every dollar you put in yourself). You're required to contribute for money in the plan, but it's still $1,500 in free money (assuming a $50,000 annual salary).</p> </li> </ul> <h3>2. Fund Your IRA (and Your Spouse's IRA, Too)</h3> <p>Once you've reached the max of your employer's matching contribution limit, stop contributing to your employer's retirement plan (at least for now &mdash; see below). The reason to switch to an IRA at this point is because you can open an IRA anywhere, meaning your investment options are unlimited. Investment experts overwhelmingly recommend a low-cost, diversified portfolio like the <a href="">target date and life cycle funds</a> available through companies like Vanguard or TIAA-CREF. (See also: <a href="">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a>)</p> <p>You can put up to $5,500 per year away in your IRA ($6,500 if you're age 50 or older). Traditional IRA contributions are tax deductible so long as you make less than $60,000 per year (96,000 if you're married, filing jointly). Roth IRA contributions are not deductible but all investment earnings accrue tax free, meaning you'll pay no taxes on your distributions once you retire. To contribute to a Roth IRA your income must be below $114,000 for the year ($181,000 if you're married, filing jointly).</p> <p>If you have a non-working spouse, you can open a separate IRA for him or her as well at the same annual limit of $5,500 ($6,500 if he or she is over age 50). Their account is subject to all the same income eligibility rules.</p> <h3>3. Max Out Your 401(k)</h3> <p>Once you've maxed out your IRA(s), it's time to head back to your 401(k) and contribute as much of your income as you can, up to the $17,500 annual cap. You won't get a company match on these additional contributions, but the tax benefit of contributing on a pre-tax basis can be more lucrative than parking your money in a taxable account.</p> <h2>What Can Be Done to Offset a Retirement Funding Shortage?</h2> <p>Okay, so what happens if you haven't started saving early enough and your retirement funds don't look like they'll be sufficient? You have a few options.</p> <h3>Plan to Work Longer</h3> <p>If you can't save as much as you'll need to retire comfortably at age 65, you can always plan to work a few years longer. (See also: <a href="">Will You Ever Be Able to Retire?</a>)</p> <h3>Reconsider Your Retirement Lifestyle</h3> <p>Perhaps your retirement years will be more spartan than you originally expected or you'll retire in another, less expensive, part of the world. (See also: <a href="">5 Incredible Places to Retire Abroad That Anyone Can Afford</a>)</p> <h3>Develop a Second Income Stream</h3> <p>Get a second job, freelance from home, sell your stuff on eBay, or whatever else you can think of to generate extra cash to pad your retirement account. (See also: <a href="">You Can Earn More Money. Here's How</a>)</p> <h3>Start Saving Creatively</h3> <p>Find creative ways to save more money like by regularly shopping your insurance plans, canceling your cable, or nixing the expensive cell phone plan.</p> <p><em>How are you planning for your retirement and what strategies have been most successful for you? Tell us about it in the comments below.</em></p> <a href="" class="sharethis-link" title="This Is Why You Can&#039;t Postpone Planning for Your Retirement (And How to Start)" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Alaina Tweddale</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement 401(k) investing IRA retirement saving savings Thu, 19 Jun 2014 11:00:03 +0000 Alaina Tweddale 1145124 at 6 Things You Might Do on Your First Day of Retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-things-you-might-do-on-your-first-day-of-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="retirement" title="retirement" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Besides saving, planning, and being practically prepared for when you end the working phase of your life, how will it actually feel? What will you be thinking? What will you <em>do</em>?</p> <p>Most of us who start planning early, though we're diligently preparing for that time, can't fathom what it will be like to actually hang up our careers and have time to &quot;putz&quot; around the house.</p> <p>Ending such a large part of your life, your work, is almost sure to bring about some predictable feelings and emotions.</p> <p>Here's a taste of what those thoughts might revolve around, and what you might do.</p> <h2>1. Get a Part-Time Job</h2> <p>If you haven't already made plans, this is likely to be the first thing on your to-do list.</p> <p>Having free time is something that is often longed for by those who have little or none of it. Yet the reality we face as adults is that free time is deceptively attractive, yet tends to let us down. Once we get it, we're restless and in need of something to keep us busy.</p> <p>A part-time job with easy hours, possibly in something you're already experienced with can be a great way to ease out of the workforce and into your retirement.</p> <h2>2. Spend Time (and Possibly Money) on Your Hobbies</h2> <p>One of the best perks of retirement is the opportunity it affords you to do something you love.</p> <p>A loose schedule, fewer demands on your time, and a predictable budget will have you thinking about whatever it is that you've always wanted to do but only got to enjoy in small portions during your working years. (See also: <a href="">10 Awesome Money-Making Hobbies</a>)</p> <p>Fishing rods, hunting gear, mountain bikes, cookbooks, a full bookshelf, a garden, or whatever else you've longed to spend your time on will finally get some attention.</p> <p>Your first day of retirement could spent, at least in part, planning how to engage these activities more often.</p> <h2>3. Miss the Routine of Going to Work</h2> <p>It sounds strange, but even the most difficult jobs can have a kind of comforting routine to them and will often cause sadness or frustration when they're gone.</p> <p>What's more, if you liked your job and have just left for good, then you'll almost certainly experience some disappointment on that first day. You'll miss going to work.</p> <p>Isn't that part of most life changes though?</p> <p>Even if the change is good and you have all this new time for yourself and for the things you love, not going to work will be tough at first.</p> <p>Yet you'll adjust and acclimate and won't be able to imagine going back.</p> <h2>4. Start Exercising More Often</h2> <p>You might have long prepared yourself to face the reality of old age, as you aren't likely to be younger than 55 (probably older) by the time you retire.</p> <p>But that isn't likely to stop you from spending some <a href="">more time maintaining your health</a>.</p> <p>According to what your body permits, regular exercise will be far more appealing with extra time to spare and the leisure to get to the gym or your local health club. Particularly if you were an active person before retiring, your health can be a hobby in itself.</p> <h2>5. Keep a Tighter Budget</h2> <p>Depending on your streams of income, retiring means your available spending money will be fixed and predetermined. Thus living expenses will need to be more closely watch and monitored so that you don't run short. (See also: <a href="">How Cash Flow Allocation Helps You Retire</a>)</p> <p>That alone can be a completely new feeling, as you're relying on income that you've either already earned, or that you're getting in the form of social security or a pension.</p> <p>How can you stretch it then?</p> <p>You stretch it by managing your expenses and keeping a cap on what you pay out. Just because you aren't working doesn't mean you're not managing money.</p> <h2>6. Feel a Sense of Relief</h2> <p>Despite all the difficult emotions and the changes, having your entire working career behind you will undoubtedly be visited by a sense of relief; a deep and relaxing exhale.</p> <p>You've finished a major portion of life's race and the rest is mostly a cool down phase.</p> <p>Life still moves, but at a much slower pace.</p> <p>This should be a relief to you, both in a physical sense and an emotional sense, making your life far more relaxing than it had been previously.</p> <h2>Mixed Emotions</h2> <p>Some people look forward to retirement, even from a young age. Others find it scary, intimidating and an unfriendly reminder of the quickness by which life passes.</p> <p>But like all stages and changes life brings, it has both benefits and drawbacks; pros and cons.</p> <p>Thus your first day of retirement is going to be a complex set of mixed emotions. Some of these will be positive and joyful, while others will be negative and hard to process. A lot of it depends on your personality, health and how you feel about what you accomplished.</p> <p>You can look forward to the positive and be prepared for the negative.</p> <p>We're privileged to live in a time when we don't have to work ourselves into the ground to survive.</p> <p>So the opportunity of retirement itself is worth being thankful for.</p> <p><em>Have you retired? What were some of the thoughts that ran through your head when it was all new to you? Please share in comments!</em></p> <a href="" class="sharethis-link" title="6 Things You Might Do on Your First Day of Retirement" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Mikey Rox</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement hobbies retirement side jobs Fri, 13 Jun 2014 09:00:22 +0000 Mikey Rox 1142649 at 10 Easy Ways to Supercharge Your Retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-easy-ways-to-supercharge-your-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="senior" title="senior" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>The majority of Americans today are worried about not <a href=";utm_medium=email&amp;utm_campaign=syndication&amp;utm_content=morelink&amp;utm_term=All%20Gallup%20Headlines%20">having enough money for retirement</a>, according to a recent Gallup survey. It's no wonder, either, as retirement safety nets like pension plans and social security benefits are quickly diminishing. In the future, only those who have taken charge of their retirement plans will have a chance at living out those golden years in comfort. (See also: <a href="">Retirement Planning If You're Under 30</a>)</p> <h2>The Basics</h2> <h3>1. Build Your Emergency Fund</h3> <p>On the surface, putting aside 3&ndash;6 months of expenses in an emergency fund doesn't seem to have much to do with building a retirement fund. Even so, having to raid your retirement account to pay for unexpected car or roof repairs can come with stiff tax penalties. Plus, you want your money compounding in your account, where it can be doing some of the heavy lifting for you. (See also: <a href="">2 Investing Concepts Everyone Should Know</a>)</p> <h3>2. Cut Back on Expenses</h3> <p>If you're not sure where to find the money to fund your retirement plan, start looking for ways to cut back. Buy a cheaper car, dine out less often, cut impulse spending, or cancel subscription services. Small amounts compounded over long timeframes can add up to a healthy nest egg. Just $70 per month, for example, would add up to $160,000 in 35 years, assuming an average investment return of 8% per year. (See also: <a href="">7 Unnecessary Expenses You Can Cut Out Today</a>)</p> <h3>3. Start Early</h3> <p>When if comes to investing, time is your best ally. The math behind compound interest shows that those who start early don't have to save nearly as much as those who start later in life. The Simple Dollar ran the numbers to see how much an investor would have to put away per month to <a href="">retire with $2 million</a> (assuming a 7% average annual return).</p> <ul> <li>Start at age 20, and you'll have to save $510 per month.</li> <li>Start at age 25, and you'll have to save $725 per month.</li> <li>Start at age 30, and you'll have to save $1,050 per month.</li> <li>Start at age 35, and you'll have to save $1,530 per month.</li> <li>Start at age 40, and you'll have to save $2.270 per month.</li> <li>Start at age 45, and you'll have to save $3,480 per month.</li> <li>Start at age 50, and you'll have to save $5,600 per month.</li> </ul> <p>The best part for young savers? That hypothetical saver who started at age 20 put away only $245,400. That amount compounded over 45 years to <em>2 million dollars</em>. In contrast, the saver who started at age 50 had to put away almost four times as much &mdash; $1,008,000 &mdash; to save the same amount for retirement.</p> <h3>4. Pay Off Credit Card Debt</h3> <p>Here's another piece of advice that doesn't seem to directly impact your retirement balance, but it really does. Paying off short-term debts frees up your monthly payments so they can be used to further pad your retirement plan. You'll also save on all those annoying and costly interest payments. (You could be paying more in interest per month than you are to your principal balance, if you're still paying the minimum due each month!) Pay yourself with that money instead. Your credit card CEO already has enough stashed away in his retirement fund. (See also: <a href="">How Much Does Your Credit Card Debt Cost You</a>)</p> <h2>Now, Let's Fund It</h2> <h3>5. Max Out Your 401(k) Employer Match</h3> <p>Once you've freed up some funds, you can use the available tax-advantaged retirement programs to your advantage.</p> <p>The first stop for most investors is their company sponsored 401(k). If your employer offers an employee match on contributions, grab it. In other words, invest in your plan up to the amount of the match (e.g., if your employer offers a 100% match on the first 3% contributed, you should be contributing at least 3%; if your employer offers a 50% match on the first 6% contributed, you should be contributing at least 6%). Contributing up the company match is the equivalent of getting a pay raise. The only catch is that is has to go directly into your retirement fund (which is actually a pretty great thing).</p> <h3>6. Fund Your IRA(s)</h3> <p>The annual IRA contribution limit for 2014 is $5,500 ($6,500 if you're 50 or older). Contributions to a traditional IRA are tax deductible for the year the contribution is made. A contribution to a Roth IRA, meanwhile, is not deductible, but all earnings are tax free when you withdraw them in retirement.</p> <p>The rule of thumb is generally to fund the Roth option if you expect your tax bracket at retirement to be higher than the one you're in today (which will generally be the case for young people with successful careers ahead of them). Some experts assume income tax rates will only rise and suggest the Roth option may be best for everyone. Your tax advisor can help you decide which is right for you.</p> <p>To fully fund a Roth IRA in 2014, income limits must be below $181,000 for a married couple filing jointly and $114,000 for a single filer. To fully deduct traditional IRA contributions your income must be below $96,000 if you're married and filing jointly or $60,000 if you're a single filer. Check out the IRS matrixes for <a href=",-Employee/2014--IRA-Contribution-and-Deduction-Limits---Effect-of-Modified-AGI-on-Deductible-Contributions-If-You-ARE-Covered-by-a-Retirement-Plan-at-Work">traditional IRAs </a>and <a href=",-Employee/Amount-of-Roth-IRA-Contributions-That-You-Can-Make-for-2014">Roth IRAs</a> for full details, including phase out ranges.</p> <h3>7. Income Too High? There's an IRA Workaround</h3> <p>You can still benefit from the tax advantages of a Roth IRA even if your income exceeds the contribution limits. Anyone, regardless of income level, can contribute to a traditional IRA and then immediately convert that traditional IRA to a Roth IRA. After the conversion, you'll receive all the benefits of the Roth IRA, namely tax-free growth on investment earnings. There is one catch, however. If you already own a traditional IRA, you'll have to convert your entire balance, not just the amount contributed for the year. That means you'd owe ordinary income taxes on the entire converted balance. In short, don't make this move unless you have the funds available to cover the taxable event.</p> <h3>8. Your Non-Working Spouse Can Have an IRA, Too</h3> <p>Even at-home parents can save for retirement. A working partner can open a spousal IRA for a non-working spouse and contribute an additional $5,500 per year ($6,500 if over age 50) in a separate account for the spouse. (Income limits still apply.)</p> <h3>9. Max Out Your 401(k)</h3> <p>Once you've fully funded your IRA(s), come on back to your 401(k) and contribute as much as you can, up to the $17,500 annual cap. You won't get a company match on these additional contributions, but the tax benefit of contributing pre-tax can be more lucrative than parking your money in a regular, taxable account.</p> <h2>Once You Save It, Don't Spend It</h2> <h3>10. Don't Borrow From Your 401(k) or Take Money From Your Roth IRA</h3> <p>Taking money out of your 401(k) means you miss out on potential market returns and forego your employer's match, until your loan is repaid. Plus, you'll need to repay the loan within 60 days in the event of a job loss. If you don't, the IRS will treat your loan as a distribution, meaning you'll owe ordinary income tax on the loan amount plus a 10% early distribution penalty. Also, once the money has been out of your account for 60+ days, it can't be put back in.</p> <p>There are certain qualified distributions allowable for Roth IRA funds, including to buy or build a first home. Although not taxable, these distributions aren't necessarily a good idea. Any money taken out won't earn investment gains and won't be available as income when you retire. Just because you can, doesn't mean you should. (See also: <a href="">10 Worst Ways to Pay off Your Credit Card Debt</a>)</p> <p>The retirement landscape is changing and tomorrow's successful retirees will be those who take charge today and pay off debt, max out their tax-advantaged retirement plans, and keep their plans funded (and do any necessary borrowing elsewhere).</p> <p><em>How ready do you feel for retirement? What retirement planning strategies have you enacted? Please share in comments!</em></p> <a href="" class="sharethis-link" title="10 Easy Ways to Supercharge Your Retirement" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Alaina Tweddale</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement investing saving Fri, 30 May 2014 08:12:18 +0000 Alaina Tweddale 1141045 at 6 Tax Moves You Need to Make Right Now <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-tax-moves-you-need-to-make-right-now" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="thinking" title="thinking" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>With tax day thankfully behind us for another year, the last thing you probably want to think about right now is&hellip; taxes! But this is the ideal time to plan ahead for a less &quot;taxing&quot; April 15th next year. Here are the best moves to make right now. (See also: <a href="">The 10 Worst Tax Moves You Can Make</a>)</p> <h2>1. Estimate Your Taxes</h2> <p>If you're like most taxpayers, you probably got <a href="">a refund</a> this year. That may have felt like a nice bonus, and it's okay if you treat it as forced savings that may not have happened otherwise. However, getting money back means you overpaid your taxes. And with the average refund weighing in at over $2,800, that's a hefty overpayment.</p> <p>While you have to pay your taxes, you <em>do not</em> have to overpay. To estimate what you'll really owe in federal taxes this year, grab a copy of the return you just filed and pencil in what your numbers are likely to look like this year. Or just visit the <a style="text-decoration:none;" href="">IRS Withholding Calculator</a>, and run some numbers that way.</p> <p>Next, look at how much federal tax currently is being withheld on your paychecks, multiply it by the number of checks you'll receive this year, and compare it to your estimates. If you're on a path to overpay again this year, contact your employer's HR department and ask to have less withheld from your paycheck. Or, if you're self-employed, lower your quarterly estimated payments accordingly.</p> <p>Now do the same thing with your state taxes, although your state probably doesn't have an online calculator. So, print a form from your state's Department of Revenue or Secretary of State's office website and run the numbers manually.</p> <h2>2. Increase Your Retirement Savings</h2> <p>If you got a big refund this year and plan to follow the advice we just discussed, put some or all of your new monthly surplus into a tax-advantaged retirement savings plan, such as a 401(k) or IRA. That'll strengthen your future financial security and may also reduce your tax bill.</p> <p>At more and more workplaces, employees have a choice between participating in a traditional 401(k) or a Roth 401(k) &mdash; or a traditional or Roth 403(b) if you work for a tax-exempt organization such as a school, charity, or government organization. The main difference between a traditional and a Roth retirement plan is how taxes are treated. With a traditional plan, every dollar you contribute reduces your taxable income. You get the tax break now, and then pay taxes on your contributions and earnings when you withdraw the money in retirement.</p> <p>With a Roth, your contributions do not reduce your taxable income, but when you withdraw money from the account in your later years you can do so tax-free.</p> <p>In general, the decision comes down to a comparison between your tax rate today and an educated guess about your tax rate when you retire. When you're in the early years of your career, chances are your salary isn't very high, so your tax rate isn't very high. You may be better off with a Roth. But if you're on the higher end of the earnings spectrum, you may be better off with a traditional 401(k). If that's you, increasing your contributions this year will lower your tax bill.</p> <p>In 2014, you are eligible to contribute $17,500. Those age 50 and older can contribute another $5,500.</p> <p>If you don't have access to a 401(k), the same advice applies to investing in a traditional or Roth individual retirement account (IRA), although the contribution limits are much lower &mdash; $5,500, and another $1,000 if you are 50 or older.</p> <h2>3. Save for Your Health Care</h2> <p>There are two primary ways to save on taxes when saving for health care costs.</p> <h3>Open a Health Savings Account</h3> <p>An increasingly popular way to pay for health care is to pair a high-deductible health insurance plan with a <a href="">health savings account</a> (HSA). The high deductible gets you a relatively low insurance premium. You then you cover the deductible and other out-of-pocket health care expenses by making tax-deductible contributions to an HSA. For individuals, a health insurance plan with a deductible of $1,250 qualifies you for an HSA. For families, the deductible must be at least $2,500. Individuals can then make tax-deductible contributions into an HSA of up $3,300; families can contribute $6,550. One great benefit of an HSA is the ability to roll over unused funds from one year to the next.</p> <h3>Participate in a Flexible Spending Account</h3> <p>If you don't qualify for a health savings account, your employer may offer a flexible spending account (FSA) for out-of-pocket health care costs. This one is a little trickier and not as advantageous as an HSA. Like an HSA, contributions into an FSA reduce your taxable income, but the maximum you can contribute is $2,500 per year, and your employer can only allow you to roll over $500 of unused funds from one year to the next. That means you have to be careful in estimating how much you may spend on health care costs for the coming year.</p> <h2>4. Buy a House</h2> <p>Of course, there are other considerations than taxes when buying a house (like making sure you can actually <em>afford</em> to <a href="">buy a house</a>!), but you may be surprised to find that owning doesn't cost much more, if at all, than renting. That's because you can deduct mortgage interest and property taxes. Print a copy of <a href=",-Itemized-Deductions">Schedule A from the IRS</a>, add up your qualifying itemized deductions, and see if it comes to more than your standard deduction ($6,100 for individuals, $12,200 for married couples filing jointly). If so, plug those numbers into the estimates you ran earlier in figuring this year's tax bill and see how home ownership may impact your cash flow.</p> <h2>5. Shore Up Your Emergency Fund</h2> <p>Paying taxes can be painful enough. Paying tax penalties is even worse. And yet, the IRS took in $5.7 billion in <em>penalties</em> from people who withdrew money from their IRA or 401(k) before age 59&frac12;. Some of the early withdrawals can be chalked up to lack of knowledge about better alternatives, such as rolling over your balance penalty- and tax-free into an IRA when leaving your employer. Some of it is due to a lack of other savings. To avoid treating retirement savings as an emergency fund, <a href="">build a real emergency fund</a> by stocking a savings account (online banks typically pay the best interest) with three to six months' worth of essential living expenses.</p> <h2>6. Save for College</h2> <p>Finally, if you have a college-bound child, saving through a 529 plan <em>may</em> reduce your taxes. Every state offers such a plan. While there are no federal income tax deductions available for contributions, some states offer state tax benefits to residents who use their state's plan. Of those, some allow you to take deduction, which lowers your taxable income. Even better, some provide a tax credit, which lowers your tax bill dollar for dollar. Find out what your state offers by searching on the name of your state and &quot;529 plan&quot; or visit <a href=""></a>.</p> <p><em>What steps have you taken to make the tax laws work in your favor?</em></p> <a href="" class="sharethis-link" title=" 6 Tax Moves You Need to Make Right Now" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Matt Bell</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement Taxes retirement saving taxes Thu, 22 May 2014 08:12:26 +0000 Matt Bell 1140110 at 5 Incredible Places to Retire Abroad That Anyone Can Afford <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-incredible-places-to-retire-abroad-that-anyone-can-afford" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="" alt="beach" title="beach" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>The idea of retiring to some far-flung locale replete with warm weather, ample shoreline, and a favorable exchange rate is an attractive notion to many people. Indeed, searching for the hot new country in which to buy retirement property has become something of a sport for many folks in their golden years. It seems that on an almost annual basis, some previously unheralded nation pops up that looks like an attractive option to relocate to. And with the economy squeezing the retirement dollar of a large portion of the U.S. middle-class, there are many who simply have no other option than to retire in another country.</p> <p>So for those intrepid retirees looking to plant the flag abroad, here are five attractive nations in which to do so. (See also: <a href="">Best Travel Rewards Credit Cards</a>)</p> <h2>Turkey</h2> <p><img width="605" height="341" src="" alt="" /></p> <p>This picturesque Mediterranean country sits on the doorstep to Asia and provides many of the features expats look for in a new home, namely a rich culture, beautiful beaches, stunning landscapes, and that aforementioned attractive exchange rate. The Turkish currency remains the lira, and those from the U.S. can enjoy a nearly 2-1 exchange rate. Some estimates even place the <a href=";country2=United+States">cost of living</a> for those from the U.S. at one-third of what it is back home. (See also: <a href="">5 Amazing, Cheap Places to Live as an Expat</a>)</p> <p>This translates into low prices on real estate as well. Even in the capital city of Istanbul, it is possible to <a href="">find an apartment</a> for sale between $20,000-$40,000 and a house for between $100,000-$200,000 dollars. Prices are often even less in the smaller towns and villages that dot Turkey's landscape. So between the cost of living, a favorable exchange rate, and bargain real estate prices, many retirees should be able to <a href="">purchase a home in Turkey</a>.</p> <h2>Ecuador</h2> <p><img width="605" height="340" src="" alt="" /></p> <p>For the last few years, Panama has been on many older folks' radar as a retirement destination. But what it has in terms of natural beauty and a low cost of living is at least matched in Ecuador. This South American gem offers everything from volcanoes and jungles to beaches and even the Galapagos Islands (although you can't actually retire there). From the capital city of Quito to the expansive beaches of Guayaquil, there are a number of prime spots in which to find <a href="">retirement property</a> in this little country.</p> <p>As for the economy, Ecuador adopted the U.S. dollar as its official currency, so expats needn't worry about currency exchange issues. And with estimates putting <a href="">Ecuador's inflation</a> below 4%, things should remain stable for the foreseeable future. Those who do relocate here will find that they can live on a pittance, often finding that their <a href="">budget</a> doesn't need to exceed $300-$400 per week.</p> <h2>Thailand</h2> <p><img width="605" height="340" src="" alt="" /></p> <p>Those who don't mind a bit of a jaunt to their retirement destination (Thailand is about an 18-hour flight from New York) can choose this country to kick back in. Visitors from Europe and Australia have long touted the affordability of this Southeast Asian hotspot, and it's about time Americans learned about these virtues, too. A person (or even a couple) can get by on a budget of about $1,800 per month including rent, and that even allows for splurging and the occasional beach getaway.</p> <p>There are a number of destinations within Thailand, but most folks choose to hang their hats in either the capital city of Bangkok or the more relaxed environs of<a href=""> Chiang Mi</a>. In Bangkok, residents can take advantage of rich street food for less than $1 or dine at many four-star restaurants even while adhering to a strict budget. Those with medical needs can rest easy knowing that the country has a superb health care system that is also inexpensive, and folks here can see a specialist for about $50 per visit. On the other hand, Chiang Mai is only a few hours drive from the capital, but it may as well be a different world. Noted for its lush mountainous landscapes peppered with the occasional Buddhist temple, residents can take advantage of the temperate climate and laid-back lifestyle while still enjoying cheap prices.</p> <h2>Colombia</h2> <p><img width="605" height="341" src="" alt="" /></p> <p>Right next door to Ecuador sits this lush Caribbean country, and more and more foreigners are discovering it each and every year. That's because Colombia no longer enjoys the <a href="">reputation for violence</a> that plagued it in decades past.&nbsp;That's good news for tourists and retirees alike. Those who want a second home here have many attractive <a href="">real estate options</a> to choose from. And considering the average monthly salary in the country is around US $300, expats can easily get by on less than $2,000 per month and live high on the hog in doing so.</p> <h2>Malaysia</h2> <p><img width="605" height="340" src="" alt="" /></p> <p>If Thailand doesn't strike a chord, retirees can opt for another Southeast Asian expat haven &mdash; Malaysia. Consistently ranked in International Living's annual Global Retirement Index, this country offers the affordability of Thailand (folks can live a pseudo-luxurious lifestyle for around $1,700 per month) as well as the stellar health care system. And since the most of the country's doctors have studied in Europe, England, or the States, it's no problem finding an English-speaking physician. Emigres can even import their vehicles and furniture into the country duty free. One other incentive to move here is called<a href=""> Malaysia My Second Home</a>, a 10-year resident visa that can be acquired by making a down payment and proving a certain income per month.</p> <p><em>Have you considering retiring abroad? Where?</em></p> <a href="" class="sharethis-link" title="5 Incredible Places to Retire Abroad That Anyone Can Afford" rel="nofollow">ShareThis</a><br /><div id="custom_wisebread_footer"><div id="rss_tagline">Written by <a href="">Chris McMurphy</a> and published on <a href="">Wise Bread</a>. Read more <a href=""> articles from Wise Bread</a>.</div></div> Retirement Travel expat retirement retiring overseas travel Mon, 19 May 2014 08:12:20 +0000 Chris McMurphy 1139650 at