Retirement http://www.wisebread.com/taxonomy/term/417/all en-US 6 Retirement Products That Aren't Worth Your Money http://www.wisebread.com/6-retirement-products-that-arent-worth-your-money <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-retirement-products-that-arent-worth-your-money" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/financial_nest_egg_000061502802.jpg" alt="Finding out which retirement products aren&#039;t worth your money" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Saving for retirement is actually quite simple. But there are many products out there that make it seem more complicated than it actually is. Others simply cost more than they're worth.</p> <p>As you approach retirement age, you may hear about all kinds of ways to ensure that you have enough money to continue to live comfortably. But steering clear of the following products may ultimately help you keep more money in your pocket.</p> <h2>1. Variable Annuities</h2> <p>A variable annuity might make sense for those approaching retirement, but generally doesn't for those who are already retired. That's because the idea behind a variable annuity is that you invest a sum of money and get a stream of income at a future date. Try to access your money early, and you might pay a penalty. Current retirees are better off with an immediate payout annuity, which requires you to pay an up-front lump sum, and then provides regular payments immediately. It's worth noting that variable annuities can have fees of as much as 3.5%, according to Kiplinger.</p> <h2>2. Reverse Mortgages</h2> <p>We've all seen the ads on television, and the concept seems simple enough: You use the equity in your home to help fund your retirement via a guaranteed income stream. Reverse mortgages are a legitimate retirement product, but there are downsides, including high closing costs and fees. Plus, the equity in your house won't last forever, and by tapping it, you leave less for your heirs when they inherit the home. (See also:&nbsp;<a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage">5 Downsides of a Reverse Mortgage</a>)</p> <h2>3. Long-Term Care Insurance</h2> <p>It's daunting to think about the costs of your care as you age. Assisted living and nursing home care can cost anywhere from $40,000 to $90,000 a year. A long stay in a nursing home might mean you'll outlast your savings and leave very little to your family.</p> <p>An insurance policy for long-term care might seem like a good investment, but it's important to know that the premiums can run upwards of $2,000 annually for a healthy couple at age 60. If your golden years are healthy and more independent than you expected, you may pay more in premiums than what your care would cost. Retirees are likely better off investing well and trying to save as much as possible for their retirement &mdash; unless they have good reason to believe they'll make use of long-term care facilities or services.</p> <h2>4. Whole Life Insurance</h2> <p>On the surface, whole life insurance seems like a swell product: You get life insurance along with some tax-free growth. But whole life insurance is generally more expensive than term life insurance, and the investment returns are usually less than what you might find elsewhere.</p> <h2>5. Junk Bonds</h2> <p>It certainly makes sense for retirees to have bonds in their portfolios, but they should steer clear of these types of high-yield bonds, which don't perform particularly well unless the economy is doing great. And if the economy is doing poorly, they could be crushed. If you're close to retirement and still looking for yield, take a look at stable dividend stocks instead. If you want safety, go with lower-risk bonds or cash.</p> <h2>6. Non-Traded REITs</h2> <p>Real estate investment trusts (REITS) can be great investments for retirees, because they offer high dividend income with low volatility. However, there are some REITs that are public, but not traded on any public exchange. The Financial Industry Regulatory Authority has issued a warning about these products, because upfront fees are high, and they are often difficult to sell. If you want real estate in your portfolio, look to some of the larger REITs like Simon Property Group or Boston Properties, or find a good REIT mutual fund or ETF.</p> <p><em>Where are you keeping your retirement funds?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/6-retirement-products-that-arent-worth-your-money">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-know-what-annuities-are-you-might-be-missing-out">Don&#039;t Know What Annuities Are? You Might Be Missing Out</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-unexpected-expenses-for-retirees-and-how-to-manage-them">9 Unexpected Expenses for Retirees — And How to Manage Them</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-retirees-are-using-annuities-instead-of-early-social-security">Why Retirees Are Using Annuities Instead of Early Social Security</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-do-i-need-to-retire-how-much-can-i-spend">How much do I need to retire? How much can I spend?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-the-50-rule-can-save-you-money">4 Ways the 50% Rule Can Save You Money</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement annuities insurance junk bonds REITs reverse mortgages Tue, 19 Jan 2016 14:00:03 +0000 Tim Lemke 1638138 at http://www.wisebread.com 5 Reasons Women Might Retire With More Wealth http://www.wisebread.com/5-reasons-women-might-retire-with-more-wealth <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-reasons-women-might-retire-with-more-wealth" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_money_pink_000007951788.jpg" alt="Learning reasons why women might retire with more wealth" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We hear a lot about how women might be shortchanged in terms of earnings, but there are also plenty of ways women can excel financially. From potentially stronger savings and investment habits, to longer lifespans, women enjoy some serious wealth-building advantages, as well. Here are five reasons women might retire with more wealth.</p> <h2>1. More Women Are Gaining Higher Education</h2> <p>In fact, women are handily defeating men in the college game. Because women are more likely to <a href="https://www.washingtonpost.com/news/storyline/wp/2014/12/11/women-are-dominating-men-at-college-blame-sexism/">graduate from college</a> than their male counterparts, they enter the workforce in better shape. Sure, women are more likely to enter lower-paid areas of the education and health sectors, but they are also breaking into business and <a href="https://www.washingtonpost.com/news/morning-mix/wp/2015/04/14/study-finds-surprisingly-that-women-are-favored-for-jobs-in-stem/">STEM programs</a> at an increasing rate.</p> <p>While college loan debt can slow down your plans to save, the correlation between college and increased earnings is still present. The trick is to start investing as soon as you begin to see your margin of expendable income widen, ideally before age 30.</p> <h2>2. Women Are Living and Working Longer</h2> <p>That's right: Women typically live longer, and thus have more healthful years during which they may work. That means continuing to work in later years &mdash; when earnings may be higher, and more returns from compound interest on savings enjoyed. It also means a postponed retirement, which allows your investments to grow for longer.</p> <p>Check out this handy guide to <a href="http://www.wisebread.com/how-much-should-you-have-saved-for-retirement-by-30-40-50">reaching your investing goals</a>.</p> <h2>3. Women Are Better Savers at all Income Levels</h2> <p>The road is full of unexpected hurdles to saving, and expensive emergencies are all but inevitable. The good news for female workers is that women are <a href="https://institutional.vanguard.com/iam/pdf/GENDRESP.pdf?cbdForceDomain=true">better at saving</a> than men in general. If that weren't enough, the same study showed that women are also better at managing their 401K accounts than men.</p> <p>It still takes discipline, however, to work this psychology to your advantage. Make specific goals and stick to them.</p> <h2>4. Forgoing Children Could Mean More Savings</h2> <p>On the fence about starting a family? According to the 2014 census, 48% of women between the ages of 18 and 44 <a href="http://www.huffingtonpost.com/2015/04/09/childless-more-women-are-not-having-kids-says-census_n_7032258.html">do not have children</a>. Clearly, women are increasingly waiting to have kids, or deferring the option altogether.</p> <p>Consider that this may mean more money for those women down the line. Delaying kids can mean more time to solidify your career and earnings, amass savings, and reduce debt before the financial pressures of kids arrive. If you are a 20- or 30-something still weighing the options, avoiding the fate of the <a href="http://www.pewsocialtrends.org/2013/01/30/the-sandwich-generation/">sandwich generation</a> might be a deciding factor in postponing or entirely forgoing children.</p> <h2>5. Women Are Less Likely to Make Risky Trades</h2> <p>In addition to being better savers, more educated, and having more working years in which to save, women are also less likely to gamble their savings in poor investments. Women are generally <a href="http://www.nextavenue.org/do-women-and-men-differ-retirement-savers/">more risk averse</a> than men.</p> <p>That said, there is no reason not to learn how to pick more varied investments and take a slightly higher risk (hopefully for greater rewards) every now and then. Try listening to these <a href="http://www.wisebread.com/the-5-best-money-podcasts">great money podcasts</a> to pick up tips and stay up to date with the market.</p> <p>Women enjoy a variety of natural advantages when it comes to earning and managing money. The key is making full use of them to strengthen your financial roadmap.</p> <p><em>Are you taking steps to secure your retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amanda-meadows">Amanda Meadows</a> of <a href="http://www.wisebread.com/5-reasons-women-might-retire-with-more-wealth">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">7 Penalty-Free Ways to Withdraw Money From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-set-up-an-ira-to-build-wealth">How to Set Up an IRA to Build Wealth</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-steps-for-a-womans-financial-self-defense">6 Steps for a Woman&#039;s Financial Self-Defense</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement education gender IRA savings 401k women Thu, 31 Dec 2015 14:00:03 +0000 Amanda Meadows 1629244 at http://www.wisebread.com Best Money Tips: Smart Retirement Strategies for Women http://www.wisebread.com/best-money-tips-smart-retirement-strategies-for-women <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-smart-retirement-strategies-for-women" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/smart_woman_thinking_000080192057.jpg" alt="Woman using smart retirement strategies for women" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found smart retirement strategies for women, DIY cleaning products that you can make for pennies, and lessons we can learn from Jedi Master Yoda.</p> <h2>Top 5 Articles</h2> <p><a href="http://www.kiplinger.com/slideshow/retirement/T037-S001-smart-retirement-strategies-for-women/index.html">9 Smart Retirement Strategies for Women</a> &mdash; If you're a stay-at-home parent with no outside income, you can still open a spousal IRA or Roth IRA as long as your spouse has a paying job. [Kiplinger]</p> <p><a href="http://www.popsugar.com/smart-living/DIY-Cleaning-Products-28901279">Make These 69 DIY Cleaning Products For Pennies</a> &mdash; Stop wasting your dollars on store-bought dish soap! Make your own at home and personalize the scents with essential oils. [PopSugar Smart Living]</p> <p><a href="http://www.dumblittleman.com/2015/12/15-lessons-can-learn-jedi-master-yoda.html">15 Lessons You Can Learn From Jedi Master Yoda</a> &mdash; Yoda teaches that to grow, you need to unlearn what you have learned. Your attitude and perspective need to change if you want to make progress. [Dumb Little Man]</p> <p><a href="http://www.lifehack.org/350330/50-small-things-that-make-up-a-perfect-day">50 Small Things That Make Up A Perfect Day</a> &mdash; When you're having a bad day, doing one of these small things can make it better. [Lifehack]</p> <p><a href="http://www.experian.com/blogs/news/about/achieve-financial-goals/">Creating Financial Goals You&rsquo;ll Actually Achieve</a> &mdash; Join Experian's #CreditChat tomorrow at 3 p.m. EST for a discussion on creating smart financial goals. [Experian]</p> <h2>Other Essential Reading</h2> <p><a href="http://www.csmonitor.com/Business/Saving-Money/2015/1226/After-Christmas-sales-What-to-expect-this-year">After Christmas sales: What to expect this year</a> &mdash; If you hurry, you may still be able to snag great deals on electronics like cameras and audio equipment! [The Monitor]</p> <p><a href="http://adebtfreestressfreelife.com/housekeeping-tips-for-the-domestically-challenged/">Housekeeping Tips for The Domestically Challenged</a> &mdash; Don't compare the state of your home to someone else's. Be kind to yourself and just do the best you can. [A Debt Free Stress Free Life]</p> <p><a href="http://timemanagementninja.com/2015/12/10-things-to-get-done-when-no-one-is-in-the-office/">10 Things to Get Done When No One is in the Office</a> &mdash; Take advantage of a quiet workplace to tackle admin tasks that usually don&rsquo;t get done due to interruptions and higher priorities. [Time Management Ninja]</p> <p><a href="http://productivitytheory.com/how-to-recognize-when-a-coworker-needs-help/">How to Recognize When a Coworker Needs Help</a> &mdash; Don't ignore odd behaviors. Your co-worker may be struggling but not sure how to ask for help. Make it clear you're concerned and want to give support if you can. [Productivity Theory]</p> <p><a href="http://parentingsquad.com/5-ways-to-start-the-new-year-off-right-as-a-family">5 Ways to Start the New Year Off Right as a Family</a> &mdash; Plan fun adventures as a family! They don't have to be expensive trips; try monthly outings to local events, morning hikes, scavenger hunts, or evening plays. [Parenting Squad]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amy-lu">Amy Lu</a> of <a href="http://www.wisebread.com/best-money-tips-smart-retirement-strategies-for-women">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-steps-for-a-womans-financial-self-defense">6 Steps for a Woman&#039;s Financial Self-Defense</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-women-might-retire-with-more-wealth">5 Reasons Women Might Retire With More Wealth</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">12 Surprising Things Women Should Know About Retirement Planning</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-should-you-have-saved-for-retirement-by-30-40-50">How Much Should You Have Saved for Retirement by 30? 40? 50?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-things-people-who-retire-early-do">9 Things People Who Retire Early Do</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement best money tips retirement strategies women Tue, 29 Dec 2015 20:00:04 +0000 Amy Lu 1629155 at http://www.wisebread.com How Much Can You Afford to Risk In a Play Money Account? http://www.wisebread.com/how-much-can-you-afford-to-risk-in-a-play-money-account <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-much-can-you-afford-to-risk-in-a-play-money-account" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_measuring_funds_000068915471.jpg" alt="Man learning how much to keep in his play money account" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Do you have a &quot;play money&quot; account &mdash; a self-directed brokerage account that you invest in for fun or to take greater risks? If you do, you're not alone. But be careful: Don't let the fun of testing out your own investment strategies make you short more important accounts such as your IRA, 401K, or <a href="http://www.wisebread.com/is-building-an-emergency-fund-always-a-good-idea">emergency fund</a>.</p> <p>There's nothing wrong with having such an investment account. Not only can they be fun, but they can also teach consumers whether their investment ideas have merit or if they are more likely to flop. The problem comes when consumers become so focused on their &quot;play money&quot; that they invest to the detriment of their other accounts.</p> <p>So how much is too much to invest in such an account? That depends on your individual financial situation. But here are some guidelines for how much you should be investing in your other, essential accounts before you drop big bucks on &quot;play money.&quot;</p> <h2>Emergency Fund</h2> <p>Life is filled with unexpected expenses, and some of them are big. Your car's transmission fails? That could be a thousand-dollar repair. Your hot water heater goes on the fritz? Get ready for an unexpected multi-hundred-dollar replacement.</p> <p>That's where an emergency fund comes in. As its name suggests, the dollars in this fund are reserved for those unexpected expenses. Not having an emergency fund can be trouble: If you don't have the dollars to cover that new furnace, the odds are high that you'll place that expense on a credit card.</p> <p>And what if you lose your job? An emergency fund can help cover your daily expenses while you search for new work.</p> <p>Financial experts recommend that consumers build an emergency fund that can cover at least six months of normal daily expenses. If your fund is larger, that's even better. The smart move, then, is to make sure that you have a sizable emergency fund saved up <em>before </em>you set aside any dollars for a &quot;play money&quot; account.</p> <h2>Retirement Accounts</h2> <p>How much will you need for retirement? That depends largely on the type of retirement you want to live. If you want to travel the world, you'll need more money than if you simply want to spend more time with your grandchildren. Don't shortchange your retirement years by investing too much in a &quot;play money&quot; account and too little in an IRA or 401K.</p> <p>It can get complicated determining how much money you'll need to save for retirement each year. But there are a few general rules of thumb that you can use to determine how much money you'll need after you leave the workforce.</p> <p>Financial planners have long recommended that retirees plan on spending from 60% to 90% of their most recent after-tax annual income each year of their retirement. As an example, say you were earning $50,000 each year immediately before your retirement at an effective tax rate of 15. You were then living on $42,500 in income after taxes each year.</p> <p>If you decide that you'd like to live on 85% of this amount each year in retirement, you'd need $36,125 in income every year you are not working. You can get this income from a variety of sources, including everything from Social Security payments to pension income to withdrawals from your savings.</p> <p>Again, make sure that you are saving as much as you need for retirement before you start a &quot;play money&quot; account. If your employer offers a 401K plan, withdraw the maximum amount from each of your paychecks to fund it. If you can't afford to do this, then you can't afford a &quot;play money&quot; account, either.</p> <p><em>Do you have a play money account?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-much-can-you-afford-to-risk-in-a-play-money-account">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/learn-how-to-invest-with-these-5-stock-market-games">Learn How to Invest With These 5 Stock Market Games</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-steps-for-a-womans-financial-self-defense">6 Steps for a Woman&#039;s Financial Self-Defense</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-the-right-percentage-of-cash-for-your-portfolio">What&#039;s the Right Percentage of Cash for Your Portfolio?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement emergency funds play money risk savings Mon, 07 Dec 2015 14:00:27 +0000 Dan Rafter 1618545 at http://www.wisebread.com 5 Important Things to Know About Your 401K and IRA in 2016 http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016 <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-important-things-to-know-about-your-401k-and-ira-in-2016" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2016_money_finances_000078468345.jpg" alt="Learning important changes coming to your 401K in 2016" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We can all agree that investing in a 401K, IRA, or Roth, while being a scary proposition at times, is quite frankly the best use of our money for saving long term. Retirement might be a long way off for you, but it's important to stay on top of the changes that take place for these accounts each year. They could shift your overall direction of planning for your financial future.</p> <p>Here is a list of what will and won't change for your 401K and IRA in 2016.</p> <h2>No Change</h2> <p>Before we look at what's new, let's look at what's staying the same.</p> <h3>1. Contribution Limits</h3> <p>&quot;No change&quot; usually implies something good is happening because it's consistent. In this case, no change for contribution limits means that you are limited to the same amount of money you could put away in 2015 for 2016. In 401K plans, that is $18,000 for people under the age of 50 &mdash; and in IRA and Roth plans, the contribution max will remain at $5,500 for those age 50 or younger.</p> <p>This may not seem like a big deal, but over time the ability to put away less for your retirement means that you will need to earn more on your money that is already invested. According to Vanguard 401K data, only about 10% of participants put away the max every year. There's no escaping the truth that the more you put away, the better off you are going to be in the long run.</p> <h3>2. 401K/IRA Combo</h3> <p>Many people believe that you can only have a 401K or an IRA, but not both. That simply isn't true. In fact, having a separate IRA and a 401K can be a smart financial strategy. The downside of having both is that depending on your income, you may or may not be phased out of deducting your contributions to both plans.</p> <p>In 2016, the income limitations will stay the same. If your adjusted gross income is between $61,000&ndash;$71,000 for single and head of household, or between $98,000&ndash;$118,000 for married couples, your deductible amount for contributions to your IRA will be phased out. If your income is lower, you will receive the full deduction. If your income is over those limits, you won't be able to deduct any portion of your contributions.</p> <h2>Change</h2> <p>And here are the details set to change &mdash; make sure you update your contributions to match.</p> <h3>3. Roth Income Threshold Limits Increase</h3> <p>Roth plans are very popular, especially with the Millennial demographic. They work in reverse of an IRA. Your contributions are made on an <em>after-tax</em> basis, but your distributions in retirement are tax-free. The objective is that you will be in a higher tax bracket when you retire, hence why you will ultimately save money on taxes that would've been due if you had an IRA. Roth plans have their own contribution income limits and are quite generous. In 2016, the contributions income threshold limits will increase by $1,000.</p> <h3>4. IRA for Non-Working Spouse</h3> <p>What about those spouses that don't work, but still want to contribute to an IRA? In 2016, IRA income limits will increase for spouses without retirement accounts by $1,000.</p> <p>If your spouse contributes to a <a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">retirement account</a> at work, but <em>you</em> don't work, you can set up your own IRA and contributions will be tax deductible up to $184,000 for couples filing jointly. Your contributions begin to phase out from $184,000&ndash;$194,000, and are completely phased out above that income level (meaning they wouldn't be tax deductible). You can always still contribute up to the IRA contribution max, but you just wouldn't receive the deduction.</p> <h3>5. Saver's Credit</h3> <p>The saver's credit is arguably one of the most overlooked tax credits. It rewards lower income individuals and families for saving for their retirement in any retirement plan. If you qualify for this credit, it is worth anywhere from 10%&ndash;50% of the contributed amount &mdash; up to $2,000 for individuals and $4,000 for couples. The credit is available to singles with an income under $30,750, and for couples, under $61,500.</p> <p>Make sure your accountant is aware if you qualify for this credit so you can take advantage of this great benefit. Consider it the government's matching program for your retirement contributions.</p> <p><em>How's your 401K doing?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/shannah-game">Shannah Game</a> of <a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-choose-a-roth-401k-or-a-regular-401k">Should You Choose a Roth 401k or a Regular 401k?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/optimize-your-ira-and-401k">Optimize Your IRA and 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-easy-steps-to-take-for-a-better-401k">3 Easy Steps to Take for a Better 401k</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-you-must-open-a-roth-ira-before-april-15">4 Reasons Why You Must Open a Roth IRA Before April 15</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 401k contributions IRA Roth saver's credit taxes Tue, 01 Dec 2015 14:00:24 +0000 Shannah Game 1617390 at http://www.wisebread.com 9 Unexpected Expenses for Retirees — And How to Manage Them http://www.wisebread.com/9-unexpected-expenses-for-retirees-and-how-to-manage-them <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/9-unexpected-expenses-for-retirees-and-how-to-manage-them" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/grandparents_with_grandchild_000017586301.jpg" alt="Retiree couple learning how to manage unexpected expenses" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>So you've made the decision to retire. Congratulations! All that hard work and saving has paid off, and now you're ready to relax.</p> <p>If you've worked all your life and were diligent about saving, you may have most of your life expenses covered and funds saved for long-term care as you get older. And for the most part, retirees find that their overall expenses decline as they age. But there still could be unexpected costs that you haven't taken into account.</p> <p>Here are nine things that might hit your wallet harder now that you're retired:</p> <h2>1. Health Insurance</h2> <p>Yes, you may be getting Medicare, but that doesn't cover everything. Many retirees find that to get proper coverage, they will need to pay for a Medicare supplement. And even if you are covered under Medicare Part B, you may have to pay co-payments and deductibles. Older citizens should budget for additional <a href="http://www.wisebread.com/avoid-these-5-costly-health-insurance-mistakes">healthcare costs</a>, even if they believe they are fully covered.</p> <h2>2. Childcare</h2> <p>You thought you were done with childrearing? Think again. According to the Census bureau, about <a href="https://www.census.gov/prod/2013pubs/p70-135.pdf">23% of preschoolers</a> are cared for at least part time by a grandparent. Now that you're retired, you are more available to help with occasional babysitting or even full-time childcare for the grandkids. You're doing it out of love, but you may incur expenses ranging from extra food, kids' clothes, furniture, and kids' activities.</p> <p>If you're worried about the costs, be honest with the children's parents about how much you're spending and ask that they contribute. If the kids have certain favorite foods they like to eat at your house, buy those items in bulk. (My grandmother used to have a seemingly unlimited supply of chicken noodle soup for when I came over.) And don't be afraid to have the kids play with older and used toys, because there's a good chance they won't know the difference.</p> <h2>3. Utilities</h2> <p>When you went to work, there was no need to keep the AC or the furnace going during the day. But now that you're home, you may be adjusting that thermostat to make things more comfortable. (And this is exacerbated by the fact that older people are generally more sensitive to cold.) Plus, you may watch TV, use the computer, and run the appliances more often. All of this can add up to higher utility bills. Consider keeping the house at a slightly warmer temperature in the summer and slightly cooler in winter. You'll get used to it. Also, make the switch to LED light bulbs, and look into finding the most energy-efficient appliances you can buy.</p> <h2>4. Car Insurance</h2> <p>Auto insurance rates generally decline between the ages of 25 and 65, but they increase after that. That's because insurance companies view older drivers as a bigger risk, due to impaired vision, other physical problems, or decline in cognitive function. For older drivers, it pays to shop around for the best rates and even take a driving refresher course to prove you're still good behind the wheel.</p> <h2>5. Car Maintenance and Gas</h2> <p>When you were working, maybe you had a short commute or simply walked to the train station. Now, you're home all day and running to see friends, take care of grandkids, or volunteer. You would be surprised how much more you drive in retired life.</p> <p>To keep these costs in check, buy a small vehicle that suits your needs or even consider an electric or hybrid car. And when you do drive, plan your errands and trips strategically to cut down on excess mileage. Many retirees are also moving back into cities, where they can get around without a car at all. But be careful; moving to the city can be expensive. Speaking of...</p> <h2>6. Urban Living</h2> <p>The Washington Post reported that between 2000 and 2010, more than a million baby boomers moved to within five miles of a city center. Empty nesters no longer have to concern themselves with yard size, school districts, or other factors that keep them in the suburbs. But city living can be expensive. Housing costs more, and there's a temptation to spend money when you're surrounded by great restaurants, theatres, museums, and shopping. You might offset some of this expense with reduced transportation costs, but it you still may want to monitor your spending.</p> <h2>7. Charitable Giving</h2> <p>Older people tend to be very generous, and use some of their retirement savings to give back to causes that they've always wanted to support. According to Morningstar, charitable giving rates are relatively small and steady up until age 60. After that, giving comprises an increasing percentage of a person's annual expenses &mdash; up to 20% for America's oldest citizens. It's great to give, but be sure you can still cover your day-to-day costs and have enough saved for a long life. Consider donating shares of stock instead of cash, as you can avoid capital gains taxes and won't dip into your everyday savings.</p> <h2>8. Lawn Care and Landscaping</h2> <p>You always liked mowing your own lawn and doing your own yard work, but as you've gotten a little older, keeping up with the property isn't as easy as it once once. There's no shame in hiring someone to cut the grass or do some landscaping, but that work isn't free. Getting your lawn mowed might cost you $35&ndash;$40 each time, resulting in hundreds of dollars each month. To save money, do as much yard maintenance as you can on your own as long as you feel you are able. When you need help, seek out a neighbor or grandkid who might do it for free or cheap. (Heck, mowing my grandfather's lawn was the first paid gig I ever had.)</p> <h2>9. More Expensive Travel</h2> <p>You saved all your life to finally take a few big trips in retirement. And that's great, but be sure to take into account some extra expenses you might incur as an older citizen. For one thing, travel insurance is more expensive for older folks, because they are statistically more likely to cancel trips due to health-related problems. And even if you do go on a trip, you may find yourself paying extra for transportation or luggage handling when you may have previously taken care of things yourself. Be sure to factor in these extra costs when booking your next adventure.</p> <p><em>How is retirement costing you more than you expected?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/9-unexpected-expenses-for-retirees-and-how-to-manage-them">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-products-that-arent-worth-your-money">6 Retirement Products That Aren&#039;t Worth Your Money</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-know-what-annuities-are-you-might-be-missing-out">Don&#039;t Know What Annuities Are? You Might Be Missing Out</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-questions-to-ask-before-adding-to-your-family">5 Important Questions to Ask Before Adding to Your Family</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement child care elder care expenses insurance older americans seniors Mon, 30 Nov 2015 14:00:25 +0000 Tim Lemke 1616759 at http://www.wisebread.com Best Money Tips: Things You Can Save for Retirement Besides Money http://www.wisebread.com/best-money-tips-things-you-can-save-for-retirement-besides-money <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/best-money-tips-things-you-can-save-for-retirement-besides-money" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_paying_bills_000046468662.jpg" alt="Couple finding things to save for retirement besides money" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Welcome to Wise Bread's <a href="http://www.wisebread.com/topic/best-money-tips">Best Money Tips</a> Roundup! Today we found things you can save for retirement besides money, ways social media is making you poor, and changes to the homebuying process that you need to know about.</p> <h2>Top 5 Articles</h2> <p><a href="https://aboutlife.com/blog/Retirement/Save-For-Retirement-Besides-Money">3 Things to Save For Retirement Besides Money</a> &mdash; If you plan to do some traveling after you retire, save up your airmiles, hotel rewards and points, and discounted gift cards to use in your golden years. [aboutLife]</p> <p><a href="http://creativemoney.biz/2015/11/10/is-social-media-making-you-poor/">Is Social Media Making You Poor?</a> &mdash; With social media, it's easy to compare the life you lead to the seemingly perfect lives of the friends you follow. But remember, not everything is as it seems; most photos are carefully framed and edited, and what you see might not be the reality. [Creative Money]</p> <p><a href="http://www.forbes.com/sites/learnvest/2015/11/12/house-hunting-again-3-need-to-know-ways-the-process-has-changed/">House Hunting Again? 3 Need-to-Know Ways The Process Has Changed</a> &mdash; There are new specialty mortgages that can help cover improvement costs if you buy a fixer-upper. [Forbes]</p> <p><a href="http://www.popsugar.com/smart-living/Cyber-Monday-2015-39047972">12 Things Major Retailers Have Released About Cyber Monday</a> &mdash; Expect deep discounts at eBay &mdash; up to 90%! [PopSugar Smart Living]</p> <p><a href="http://inexpensively.com/articles/budgeting-your-thanksgiving-dinner/">Budgeting Your Thanksgiving Dinner</a> &mdash; Once you have a menu, create a master ingredient list that includes everything you need for every recipe, with quantities. Then, check your pantry! [Inexpensively]</p> <p>Other Essential Reading</p> <p><a href="http://www.thefrugaltoad.com/frugal-living/downsizing-your-living-quarters-the-trend-towards-smaller-homes">Downsizing Your Living Quarters: The Trend Towards Smaller Homes</a> &mdash; Tiny homes are easier to maintain, leave a smaller environmental footprint, and tend to be more budget-friendly. [The Frugal Toad]</p> <p><a href="http://www.moneyunder30.com/keep-money-at-one-bank-or-not">Should You Keep All Of Your Money At One Bank? Probably Not</a> &mdash;Reaching your financial goals become much easier when you make it more difficult to borrow money from yourself for things you don't really need. [Money Under 30]</p> <p><a href="http://blog.allstate.com/5-ways-to-make-your-small-space-feel-bigger/">5 Ways to Make Your Small Space Feel Bigger</a> &mdash; Use a neutral palette for your walls with brighter focal points to make your home seem bigger. [The Allstate Blog]</p> <p><a href="http://www.sidehustlehq.com/how-to-avoid-side-hustle-burnout/">How to Avoid Side Hustle Burnout</a> &mdash; Don't let your side hustle take over your life. If you want to maintain a healthy work-life balance, be sure to set a time limit for work and separate your personal and professional spaces. [Side Hustle HQ]</p> <p><a href="http://parentingsquad.com/5-tips-to-help-parents-prep-for-the-holiday-season-rush">5 Tips to Help Parents Prep for the Holiday Season Rush</a> &mdash; Don't try to do everything by yourself. Ask your spouse and kids to pitch in! [Parenting Squad]</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amy-lu">Amy Lu</a> of <a href="http://www.wisebread.com/best-money-tips-things-you-can-save-for-retirement-besides-money">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-canada-s-tfsa-is-totally-awesome">Why Canada’s TFSA Is Totally Awesome</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/put-off-saving-for-retirement">Put Off Saving for Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/14-ways-to-retire-early">14 Ways to Retire Early</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-money-will-you-need-to-retire">How Much Money Will You Need to Retire?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/left-a-job-do-a-rollover">Left a job? Do a rollover.</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement best money tips retirement savings Fri, 13 Nov 2015 19:15:13 +0000 Amy Lu 1612001 at http://www.wisebread.com 7 Penalty-Free Ways to Withdraw Money From Your Retirement Account http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/ira_401k_000006195210.jpg" alt="Learning ways to withdraw from your 401k without penalty" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>While it's true that 401Ks have a higher contribution limit ($18,000 in 2015) than traditional IRAs and Roth IRAs ($5,500 for most people or $6,500 if you're age 50 or older in 2015), it would be a mistake to dismiss traditional IRAs and Roth IRAs as part of your retirement strategy.</p> <p>One of the major advantages of having an IRA is that it offers much more flexibility when it comes to taking distributions before age 59 1/2. Under most circumstances, early distributions from a 401K trigger a 10% penalty fee from the IRS on top of applicable income and capital gains taxes. But IRAs are subject to far fewer limitations in many cases &mdash; often, they're free from the 10% penalty for early withdrawals.</p> <p>Here are seven circumstances under which you can withdraw money before age 59 1/2 from an IRA without triggering an IRS penalty.</p> <h2>1. Health Insurance Premiums During Unemployment</h2> <p>If you're unemployed and can't jump on somebody's health plan for coverage, you're probably going to be stressed out about meeting your monthly premiums. Fortunately, once you've been unemployed for at least 12 continuous weeks, the IRS lets you take a penalty-free early distribution from your IRA to cover your health insurance monthly premiums. (To avoid any doubts about how you're using your IRA monies, consider opening a new bank account to handle deposits from your IRA and payments to your health provider.)</p> <p>Some additional points to remember are that the IRA distributions need to take place during either the year you received the unemployment compensation or the following, and that the IRA distributions need to take place no later than 60 days after you have been reemployed.</p> <h2>2. Large Medical Bills</h2> <p>Uncle Sam also gives you a break when you use an IRA withdrawal to pay for unreimbursed medical expenses greater than 10% (or 7.5% if you or your spouse was born before January 2, 1950) of your adjusted gross income for the year of the distribution.</p> <p>While the IRS doesn't require you to itemize your deductions to take advantage of this exception, you should keep a record of all of your medical, dental, and prescription expenses that weren't reimbursed or paid by others. Remember that you can't include the cost of non-prescription drugs (except insulin) or other purchases for general health, such as vitamins, diet foods, or health club dues. Costs of cosmetic procedures aren't eligible, either.</p> <p>However, you can include 23.5 cents per mile that you drove your car for medical reasons. Refer to the Schedule A of Form 1040 to find out the entire list of eligible expenses that you can use to calculate your total unreimbursed medical expenses.</p> <h2>3. First Home Purchases</h2> <p>If the dream property for which you've been waiting so long finally becomes available and you're up to $10,000 short on the down payment, you can tap into your IRA without a penalty.</p> <p>As long as your total IRA withdrawal for first-time home buying is not greater than $10,000, you can even split your withdrawals over more than one year. Not only can you use these monies to buy your own home, but also to pay qualified costs of buying, building, or rebuilding a property. Just make sure that those qualified costs are paid within 120 days after receiving your IRA distribution.</p> <p>Attention couples: If you keep separate IRA plans, each one of you can withdraw up to $10,000 without penalty to pool at total of $20,000 for a first home purchase.</p> <h2>4. Higher Education Expenses</h2> <p>Whether it is for your own education or that of your spouse, children, or grandchildren, you can take a penalty-free withdrawal from your IRA to cover qualified higher education expenses, including tuition, fees, books, supplies, and equipment required for the enrollment or attendance at an eligible educational institution.</p> <p>Other eligible education expenses include the cost of room and board for individuals that are at least half-time students and special needs services in connection with enrollment or attendance. While there is no limit to the amount of your withdrawal free from the 10% penalty tax, keep in mind that your monies may count as income for the student, and may thus impact their eligibility for financial aid.</p> <h2>5. Debts to the IRS</h2> <p>Uncle Sam wants so badly to collect on your unpaid taxes and arrears that he's willing to forego the 10% penalty tax on your IRA withdrawal. However, as in all other scenarios in this list, you do have to pay applicable income taxes, including capital gains.</p> <p>While using part of your IRA balance to pay all or part of your tax debts may not sound that great, it's better than trying to avoid a levy. Under the second scenario, you may have no bargaining power.</p> <h2>6. Rollovers From Traditional IRAs to Roth IRAs</h2> <p>Unlike traditional IRAs, Roth IRAs are funded with after-tax dollars. This means that you don't owe any taxes on withdrawals after age 59 1/2. Plus, once your Roth IRA has been open for at least five years, you can withdraw your contributions at any time without penalty (note that earnings on your contributions <em>are</em> subject to IRS penalties).</p> <p>If you were to transfer funds from your traditional IRA to a Roth IRA, you would pay applicable income taxes now, but no 10% penalty tax on contributions if you wait five years to withdraw those funds from your Roth IRA. Each transfer has its own five-year waiting period and you can only do one IRA rollover per year.</p> <h2>7. Periodic Income Distributions</h2> <p>Last but not least, you can take penalty-free distributions from your IRA by taking a series of substantially equal periodic payments (SEPP) over your life expectancy or the life expectancies of you and your designated beneficiary. The IRS website offers a useful list of frequently asked questions on <a href="http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments">setting up a SEPP plan</a>.</p> <p>If you're planning to set up a SEPP for early retirement, remember that there maybe some financial risks involved. So, before taking your first periodic income distribution, consult your accountant or financial advisor to check your calculations. (See also: <a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky?ref=seealso">4 Reasons Early Retirement Might Be Financially Risky</a>)</p> <h2>The Bottom Line</h2> <p>Taking an early distribution of your IRA may be a last resort to make your financial goals, such as a first home purchase, happen. As you can see from these seven examples, there are ways for you to take an early withdrawal from an IRA without the 10% tax penalty. While these strategies may not be for everybody, some of them can be true game changers. Consult IRS Publication 590-B for more details.</p> <p><em>Have you used your IRA to take early withdrawals without a penalty? Share with us how you did in the comments section.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-choose-a-roth-401k-or-a-regular-401k">Should You Choose a Roth 401k or a Regular 401k?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-tax-changes-for-2016">5 Important Tax Changes for 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA May be Better Than Your 401(k)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Taxes 401k borrowing health insurance home buying IRA medical bills penalties sepp Thu, 05 Nov 2015 13:15:18 +0000 Damian Davila 1605093 at http://www.wisebread.com How Much Can You Afford to Spend in Retirement? http://www.wisebread.com/how-much-can-you-afford-to-spend-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-much-can-you-afford-to-spend-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_fund_money_000049360888.jpg" alt="Figuring out how much you spend in retirement each year" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've finally reached retirement. Your days of fighting rush hour traffic to get to the office are over. But now you face a new challenge: How much of your retirement savings should you spend each year? It's a big question: Spend too much and you might find yourself out of money 10, 15, or 20 years into retirement.</p> <p>&quot;There are different ways to approach retirement spending,&quot; says Celandra Deane-Bess, chair of the national practice group on retirement for Philadelphia, Pennsylvania-based PNC Financial Services Group. &quot;As you get closer to retirement age, we recommend that you take a more detailed look at your income and your living situation. There are so many factors that can alter how much you can afford to spend each year in retirement.&quot;</p> <p>Planning your retirement spending isn't something you can do with a simple formula, though the following formulas can give you a starting point.</p> <h2>Inflation and the 60%&ndash;90% Rule</h2> <p>Deane-Bess says that many retirees plan for their annual cost of living, because of inflation, to rise 2% to 3% each year. That's a good starting point. But she also pointed to research showing that some costs of living are growing faster than the rate of inflation. This includes one of the major ones that impact retirees: health care costs.</p> <p>Retirees will need to adjust that annual cost-of-living increase upward to account for the rise in healthcare costs, including the rising costs of prescription medications.</p> <p>One rule of thumb that retirees have long followed is that they should spend from 60% to 90% of their after-tax annual income each year in retirement. So, if you were earning $50,000 each year before you retired and you had an effective tax rate of 15%, you were living on $42,500 after taxes each year.</p> <p>If you decide that you need to spend 85% of your most recent after-tax yearly income in retirement, you'd need to have $36,125 available to you each year after retirement. You can generate that yearly income from your savings, pensions, Social Security, and any other regular streams of income you might have.</p> <p>Again, though, this is only a general rule of thumb. You can change how much of your pre-retirement income you'll actually need during your retirement years, Deane-Bess said. If you move to a less expensive home or community, for example, you might need to spend 60% of your pre-retirement income each year. If you live in a higher-cost area, you might need to spend the full 90% each year.</p> <h2>The 4% Rule</h2> <p>Another rule of thumb? The 4% rule. This rule says that you should withdraw 4% of <a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">your retirement-savings</a> portfolio in the first year of retirement for your living expenses. You should then withdraw that same dollar amount, plus enough extra income to account for inflation, every other year of retirement.</p> <p>It's important to note, though, that this formula rests on the assumption that your retirement will last 30 years. If you're particularly healthy, and you might be retired for more than three decades, you might have to withdraw fewer dollars each year to make your money last.</p> <h2>Expect Some Expenses to Rise</h2> <p>&quot;People often forget that there are actually a few expenses in retirement that go up,&quot; Deane-Bess says. &quot;Everyone assumes that their expenses will go down in retirement. But not all of them do.&quot;</p> <p>For instance, if you are going to be home more often after retirement, your utility bills will typically rise. That's because your heat will be on all day and you'll be using more electricity because you'll be home more often.</p> <p>Some retirees also spend more on leisure, entertainment, or travel during their after-work years. Instead of taking one big trip a year, they might plan on taking two or three. They might take more frequent smaller trips to see their grandchildren.</p> <p>The takeaway? You need to look at your own retirement plans &mdash; where you'll be living, what you'll be doing &mdash; when deciding how much money you can afford to spend each year. Start with the rules of thumb, but tweak them to meet your needs.</p> <p>For instance, Deane-Bess said that retirees who want to travel frequently or live in a higher-cost community might need to withdraw just 2.5% to 3% of their savings portfolio every year.</p> <p>&quot;We are starting to see a pullback from some of the rules of thumb,&quot; Deane-Bess says. &quot;I have been in the industry for 18 years. When I started, there were lots of rules of thumb. But things are changing. Today, it's about taking a more detailed look at your individual retirement plans.&quot;</p> <p><em>How much do you plan to spend in retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-much-can-you-afford-to-spend-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-things-your-boomer-parents-could-afford-that-you-cant">8 Things Your Boomer Parents Could Afford That You Can&#039;t</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough">How to Enjoy Retirement If You Haven&#039;t Saved Enough</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement cost of living expenses inflation social security spending Thu, 05 Nov 2015 11:15:12 +0000 Dan Rafter 1605094 at http://www.wisebread.com 8 Steps to Starting a Retirement Plan in Your 30s http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-steps-to-starting-a-retirement-plan-in-your-30s" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_retirement_fund_000048250694.jpg" alt="Woman saving for money for retirement " title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It's simple: The sooner you start a retirement plan, the more you'll have during your golden years. What's not so simple is figuring out what you need to get started once you're ready. Fortunately, we have some simple tips to help you start a retirement plan in your 30s.</p> <h2>1. Get Real About Your Expectations</h2> <p>According to the United States Department of Labor, the average American spends 20 years in retirement, so you need to make saving for retirement a priority. However, if you haven't started saving yet, it's never too late to start planning for your golden years. In fact, Forbes found that 60% of millennials in their 20s haven't even thought about retirement at all, so you aren't alone.</p> <p>Before you can start thinking about what you will contribute to your retirement plan, you need to figure out what your retirement goals are. Then, you can better determine the right upfront investment, how much you should save every year, and what the correct asset allocation is for your risk tolerance and expectations.</p> <h2>2. How Much Will You Need in Retirement?</h2> <p>Most experts estimate that a person needs 70%&ndash;90% of their pre-retirement income after retirement. Take advantage of a <a href="http://www.bloomberg.com/personal-finance/calculators/retirement/">simple retirement calculator</a> to find out how much you can save by retirement or a <a href="http://www.schwab.com/public/schwab/investing/retirement_and_planning/saving_for_retirement/retirement_calculator">more detailed calculator</a> that will help you determine the right retirement plan and asset allocation.</p> <h2>3. Take Advantage of Compounding Interest</h2> <p>With compounding interest, you can benefit from earning interest on your interest. The longer you are invested in a retirement plan, the more money you will make because the interest will just keep growing exponentially. Compound interest can significantly boost your contributions over the long-run because it will make your account grow at a faster rate than it could with simple interest alone.</p> <p>For example, if you start saving at age 25 (with an annual return of 7% after fees), you only have to save about $4,830 annually to reach $1 million by age 65. If you wait until age 40, you'll need to save $15,240 per year, which is more than triple the amount, all thanks to compounding interest.</p> <h2>4. Find Out About Employer Contributions</h2> <p>The first thing you need to do is enroll in your workplace retirement plan, such as a 401K, 403(b), 457, or pension. If you aren't already enrolled, you may be missing out on free money.</p> <p>Often, a company will match your contribution, up to a certain amount. For instance, they may offer to match up to 20% of what you contribute. This is like free money and should be considered an additional source of income that will pay off after retirement.</p> <p>Once you are participating in the retirement plan, you should try to contribute the max amount, or at least as much as you can afford. For 2015, you can contribute up to $18,000 per year to your 401K (and $6,000 more at age 50 and older), so try reaching the max limit, if you can.</p> <p>Make sure you learn what your plan includes, such as how much you need to contribute and how long you need to stay in the plan to receive your employer's contribution. You may also be able to receive some benefits from your spouse's employee retirement plan.</p> <h2>5. Set Up Automatic Contributions</h2> <p>You can even sign up for automatic contributions to make things easier. The more you contribute, the lower your taxes will be at the end of the year, so there will be a slight payoff now, and a big payoff later. Look for low-fee mutual or index funds so that you are spending less on fees and enjoying more in your account.</p> <h2>6. Open an IRA</h2> <p>You can contribute up to $5,500 per year (or more if you are age 50 or over) to a traditional Individual Retirement Account (IRA) or a Roth IRA. You may need to speak to a financial planner about which type of retirement account is right for you. Keep in mind that a Roth IRA is more flexible and you can even use up to $10,000 from your Roth IRA to purchase your first home. IRAs also have tax advantages and automatic contribution options.</p> <h2>7. Save More</h2> <p>Wells Fargo recommends saving at least 10% of your income at this stage of your life. Contributing at least 10% of your income into a retirement plan will add up quickly every year. If you can't commit to this amount, then save as much as you can and gradually increase your contribution as soon as you are able. More recent estimates agree that as you age, you may want to save more &mdash; closer to 15%&ndash;20% of your income.</p> <p>Find additional sources of income that you can save, such as tax refunds and year-end bonuses. If you are expecting a raise, increase your savings by the same percentage as your raise amount. Try <a href="http://www.wisebread.com/7-habits-of-the-financially-successful">minimizing your spending and debt</a> so that you have more available for your savings and retirement accounts.</p> <h2>8. Start With an Emergency Fund</h2> <p>Before you begin saving for retirement, make sure you are set up for the here and now. Most financial experts recommend keeping at least three to six months' worth of expenses in an accessible savings account, in case you ever need emergency funding. The last thing you want to do is pull money from your retirement account before retirement, so make sure your savings account is set up before you start worrying about retirement.</p> <p>If you still aren't sure if you're saving enough money, or don't know where to get started, you may want to speak with a certified financial planner. They can help you organize your personal finances and create the right plan for your retirement goals.</p> <p><em>Do you have a retirement plan in place? What are your tips for getting started? Please share your thoughts in the comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/andrea-cannon">Andrea Cannon</a> of <a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-can-you-afford-to-risk-in-a-play-money-account">How Much Can You Afford to Risk In a Play Money Account?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-sep-ira-is-how-the-self-employed-do-retirement-like-a-boss">The SEP-IRA Is How the Self-Employed Do Retirement Like a BOSS</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 30s 401k compound interest emergency funds IRAs millennials savings Thu, 29 Oct 2015 13:16:02 +0000 Andrea Cannon 1599238 at http://www.wisebread.com 6 Ways to Guarantee Income in Retirement http://www.wisebread.com/6-ways-to-guarantee-income-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-ways-to-guarantee-income-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/roth_ira_401k_000008885505.jpg" alt="Learning how to guarantee income in retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There's nothing like having the peace of mind and security that comes from knowing you'll have steady income throughout retirement. Unless you're expecting a guaranteed pension, or know that your social security insurance (SSI) payments will be sufficient, there's little way of knowing you won't outlive your savings. Whether you're retirement age and have <a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough">not saved enough</a> or simply exploring your options, here are six ways that you can guarantee income in retirement.</p> <h2>1. Pensions</h2> <p>If you or someone you know works for the federal government, you're probably familiar with pension plans. Pensions are similar to <a href="http://www.wisebread.com/4-ways-to-boost-your-401k-returns">401K plans</a> in that employers match up to 25% of your contributions in some cases, but pensions also offer <em>guaranteed</em> income after retirement. The two most common types of plans are defined benefit (DB) and defined contribution (DC) plans. DB plans pay out a fixed benefit while payouts from DC plans are determined based on the investment's performance. Both plans will require that your tenure is extended in the period before retiring.</p> <h2>2. Social Security Insurance</h2> <p>As long as you've worked for at least 10 years and earn 40 credits, you'll qualify for SSI benefits once you reach retirement age (age 66 for most). In 2015, the IRS says that for every $1,250 you earn, you <a href="http://www.ssa.gov/pubs/EN-05-10072.pdf">accumulate one credit</a> and can earn a maximum of four a year. Credits never disappear even if you take an extended leave of absence and return to work or change jobs. Per credit earnings will rise with wage increases. Estimated by today's calculations, you would need to have earned at least $5,000 per year for 10 years, or $50,000 in wages to qualify for SSI.</p> <h2>3. Retirement and Investment Accounts</h2> <p>Even if the assets within your retirement portfolio (stocks, bonds, CDs, ETFs, etc.) have accumulated enough wealth that your annual withdrawals will meet your income needs, you should still make certain that your yearly returns can outpace inflation (averaging 3% annually). If not, you could suddenly find yourself having to live drastically below your means. For example, if at age 65 you have a nest egg of $1,000,000 and start taking annual withdrawals of 5% (or $50,000), you'd need an annual return of over 8% in order to replenish your coffers.</p> <h2>4. Annuity</h2> <p>If you need the type of guaranteed income assurance that retirement accounts and investment portfolios cannot provide, then you need an annuity. Annuities guarantee a monthly or annual payout for as long as you're alive. There are two types of annuities: fixed income and variable income. With fixed annuities, the money you invest today is guaranteed a predefined payout. Variable annuity payouts are based on the performance of your investment (if gains are realized, payouts will be higher). Payouts can begin at whatever age you choose, and continue for the rest of your life, or for a predetermined term.</p> <h2>5. Reverse Mortgage</h2> <p>A reverse mortgage is a type of home equity loan which pays out an annuity-like cash stream based on your home's accumulated equity. Typically, reverse mortgages are reserved for borrowers age 62 or older. The money borrowed can be paid out as one lump sum payment, or issued in installments for the life of the loan. But reverse mortgages are known for their high fees and aren't always a good deal, especially if you wish to retain or pass-on ownership of your home.</p> <h2>6. Longevity Insurance</h2> <p>Longevity insurance is an insurance contract that guarantees the money invested today will generate payments in retirement. As with other forms of guaranteed income, the longer you wait to start taking payments, the higher annual payouts will be. These products allow investors to make a lump sum initial investment (or smaller amounts over time) in order to receive guaranteed payments later. For example, if a woman aged 45 invested $50,000 today, she could start taking payments at 65 and receive roughly $7,650 in annual income for the rest of her life.</p> <p>Of course, the best approach to retirement income is generally asset diversification. The more income streams you can draw on, the less likely you'll be to ever run out.</p> <p><em>What steps are you taking to guarantee retirement income?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/6-ways-to-guarantee-income-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-do-i-need-to-retire-how-much-can-i-spend">How much do I need to retire? How much can I spend?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k annuties longevity insurance pensions reverse mortgage social security Tue, 27 Oct 2015 13:16:59 +0000 Qiana Chavaia 1599240 at http://www.wisebread.com How to Plan for Retirement When You’re Ready to Retire http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-plan-for-retirement-when-you-re-ready-to-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/piggy_bank_wearing_glasses_000066017397.jpg" alt="Learning how to plan for retirement at the age of retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Americans nearing retirement age are faced with challenges that can make saving for retirement doubly difficult. Though you ideally should've already accumulated most of your retirement assets by now, the majority of the middle-aged population have a significant retirement savings shortfall. In a survey conducted by the Board of Governors of the Federal Reserve System, 19% of respondents aged 54 to 64 reported <a href="https://www.americanprogress.org/issues/economy/report/2015/01/26/105394/the-reality-of-the-retirement-crisis/">not having any retirement savings</a> at all.</p> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/Screen%20Shot%202015-10-12%20at%203.18.12%20PM.png" width="605" height="288" alt="" /></p> <p>Many people in this age bracket find themselves in this position due to providing support for others. This is the stage in life where it's common to have kids in college or aging parents that you have to care for &mdash; typical setbacks for this chapter of life. But your retirement fund doesn't have to suffer. Here's how to beef it up in time for retirement.</p> <h2>1. Simplify and Live Like a Retiree</h2> <p>Retirees often have simpler lifestyles &mdash; they drive older cars, shop less often, and typically don't pay rent because their homes are paid off. And if you're approaching retirement, you should think of adopting this simpler lifestyle, too. If you don't already own your home or vehicle outright, then it's time to seriously cut discretionary expenditures and focus on paying off your core assets. Your home is perhaps your most valuable asset and biggest expense, so pay it off as soon as possible. Then, pay-off large ticket items you will need in retirement, like automobiles. The money you save after these are fully paid should be put into retirement accounts.</p> <p>Fortunately, simplifying gets easier as we age. Many of us naturally opt for a simpler lifestyle, anyhow. Some easy areas where you might simplify expenses in order to boost retirement savings include:</p> <ul> <li>Limiting expensive vacations or frequent eating out.<br /> &nbsp;</li> <li>Cutting gym memberships and cable or magazine subscriptions.<br /> &nbsp;</li> <li>Driving less often and eliminating unneeded car insurance.<br /> &nbsp;</li> <li>Avoiding the purchase of unnecessary electronics or other big-ticket items.<br /> &nbsp;</li> <li>Cutting back on costly hobbies.</li> </ul> <p>Remember, even a savings of $100&ndash;$200/month can make a significant impact on your retirement bottom line, so get frugal today in order to relax more comfortably into retirement.</p> <h2>2. Delay Retirement</h2> <p>Don't quit your day job, and wait an extra three to seven years before retiring. If you've already retired, consider going back to work and delaying Social Security benefits. The difference between retiring at age 65 instead of 70 can be hundreds of dollars per month in SSI savings and many thousands more in your retirement accounts. In fact, your yearly SSI benefits increase 8% for every year you delay retirement. Calculate the difference for yourself using the government's <a href="http://www.ssa.gov/oact/anypia/anypia.html">SSI benefits calculator</a>.</p> <p>Another way to boost retirement savings: Work while receiving partial SSI benefits (more on this below), allowing you to stash more cash away. In 2015, those 66 and over can earn up to $41, 880 per year without impacting SSI payments. Those under age 66 can earn a maximum of $15,720 while receiving SSI checks.</p> <h2>3. Make Catch-Up Contributions</h2> <p>Worried about a paltry retirement savings account? Individuals age 50 and over are entitled to make heartier <a href="http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Catch-Up-Contributions">catch-up contributions</a> to their retirement accounts in order to more quickly bolster their savings. For IRAs, the 2015 catch-up limit is an additional $1,000 (for an annual total of $6,500), while 401K plan contributions are an additional $6,000 (total of $24,000). And don't forget to use bonuses, tax-returns, gifts, earned, and extra income to fund your accounts.</p> <h2>4. Purchase Income-Producing Assets</h2> <p>Common income-producing assets include stocks, bonds, CDs, and deferred annuities &mdash; but also side businesses or real estate. These investments can guarantee passive income in retirement, so setting these up now can help boost your cash flow during your golden years. (See also: <a href="http://www.wisebread.com/why-retirees-are-using-annuities-instead-of-early-social-security?ref=seealso">Why Retirees Are Using Annuities Instead of Early Social Security</a>)</p> <p>Consider whether divesting some non income-producing assets in favor of income-producing ones is feasible in your situation. For example, could selling your extra vehicle enable you to put a down payment on a rental property? Or, do you own gold that could be put into income-producing stocks or bonds, instead? Finally, are there any side businesses which you can comfortably invest in for passive income?</p> <p>Preparing for retirement as you're approaching retirement age (or already there) can seem a daunting task, but a little ingenuity and frugality goes a long way.</p> <p><strong>Note: </strong>The Social Security Administration recommends that if you are going to delay retirement benefits you should <a href="http://www.ssa.gov/planners/retire/justmedicare.html">sign up for Medicare</a> at age 65.</p> <p><em>How robust is your retirement savings?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-guarantee-income-in-retirement">6 Ways to Guarantee Income in Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-sep-ira-is-how-the-self-employed-do-retirement-like-a-boss">The SEP-IRA Is How the Self-Employed Do Retirement Like a BOSS</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k benefits catch-up contributions savings social security ssi Fri, 16 Oct 2015 13:00:48 +0000 Qiana Chavaia 1589897 at http://www.wisebread.com The SEP-IRA Is How the Self-Employed Do Retirement Like a BOSS http://www.wisebread.com/the-sep-ira-is-how-the-self-employed-do-retirement-like-a-boss <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-sep-ira-is-how-the-self-employed-do-retirement-like-a-boss" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/man_holding_nest_egg_000020513200.jpg" alt="Learning how self-employed do retirement with SEP-IRA" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Self-employed? The odds are high that you aren't saving enough for your retirement years. A 2013 survey by TD Ameritrade found that nearly 70% of self-employed individuals weren't saving regularly for retirement &mdash; and 28% weren't saving anything at all. Those are alarming numbers. But they don't surprise ReKeithen Miller, certified financial planner with Palisades Hudson Financial Group in Atlanta.</p> <p>&quot;You hear stories about employees with traditional full-time jobs struggling to save enough for retirement. And they have 401K plans already established for them. They just have to sign up,&quot; Miller says. &quot;Just imagine how difficult it can be for self-employed people to save enough.&quot;</p> <p>That's where a Simplified Employee Pension &mdash; better known as a SEP-IRA &mdash; can help. It's an excellent <a href="http://www.wisebread.com/how-to-save-for-retirement-without-a-401k">retirement savings option</a>&nbsp;for the self-employed.</p> <h2>The Basics of a SEP-IRA</h2> <p>A SEP-IRA works much like a traditional IRA. Self-employed individuals can deposit their savings into an account and then watch their earnings grow on a tax-deferred basis until withdrawal. This means that you if you deposit $10,000 of the money you earn as self-employed worker into your SEP-IRA, you won't have to pay taxes on this income until you withdraw it.</p> <p>Like a traditional IRA, you won't face any penalties for withdrawing money once you hit age 59&frac12;. If you withdraw sooner, though, not only will you have to pay taxes on your distribution, you will also have to pay an additional penalty tax of 10% on the money you withdraw.</p> <p>One important change from a traditional IRA, though, is the amount of money you can contribute. You can deposit 20% of your net business income for the year or a total amount of $53,000 &mdash; whichever is less &mdash; into a SEP-IRA for 2015. By contrast, you're only allowed to contribute a maximum of $5,500 &mdash; $6,500 if you are 50 or older &mdash; into a traditional IRA each year.</p> <h2>Creating the Retirement Savings Habit</h2> <p>So why do so few self-employed individuals save regularly for retirement? Miller says that self-employed workers are often under stress, worrying about irregular income streams and scraping together enough for estimated income-tax payments.</p> <p>This means that saving for retirement too often becomes less of a priority.</p> <p>&quot;When you are self-employed, you have a lot to think about,&quot; Miller says. &quot;You have to get your own health insurance. You have to set a marketing budget for your business. You might have to deal with employees. Saving for retirement is not one of the top things on the list, even though it should be.&quot;</p> <p>Others might worry that they don't have enough extra income to make a dent in their retirement-savings shortfall. But Miller says that this thinking is misguided.</p> <p>&quot;Something is better than nothing,&quot; Miller says. &quot;It's better to save what you can than to not save anything at all.&quot;</p> <p>Other self-employed individuals worry that starting a SEP-IRA will take time that they need to instead devote to running and growing their businesses. Again, though, this thinking is incorrect, Miller explained. &quot;Setting up a SEP-IRA is easy,&quot; he said. Individuals can quickly set up a SEP-IRA in minutes by calling their local bank or a national financial services company.</p> <p>And once individuals have a SEP-IRA up and running, they aren't required to make any specific amount of contributions each year. You can contribute $25,000 one year, no dollars the next, and $9,000 a third year. There is no required minimum contribution to a SEP-IRA.</p> <h2>Where to Sign Up</h2> <p>Now that you're interested in retirement investing via a SEP-IRA, you should know that there are several online services you can use to open an account. Many of these allow you to sign-up and make contributions online or by phone, simplifying the process. These services range from traditional brokers to <a href="http://www.wisebread.com/should-you-trust-your-money-with-these-4-popular-financial-robo-advisers">robo-advisers</a>, each with varying perks and fees, so pay attention to the details. Some sample services include:</p> <ul> <li>Automated investment service, <a target="_blank" href="http://track.flexlinks.com/a.ashx?foid=1029882.1559546&amp;fot=9999&amp;foc=1" rel="nofollow">Betterment offers a SEP-IRA</a> with no transaction or trade fees. They also offer 4 months to 1 year free, depending on your deposit.<br /> &nbsp;</li> <li><a href="https://www.merrilledge.com/small-business/sep-ira">MerrillEdge </a>offers a SEP-IRA with no program or administrative fees. Trades may cost $6.95 per transaction, however.<br /> &nbsp;</li> <li>Online broker giants <a href="https://www.fidelity.com/retirement-ira/small-business/sep-ira">Fidelity</a> and <a href="https://investor.vanguard.com/what-we-offer/small-business/sep?WT.srch=1">Vanguard</a> also offer SEP-IRAs with no set-up fees. These services do charge for trades, however.<br /> &nbsp;</li> <li>A number of credit unions and banks also offer SEP-IRAs; check with your local provider for details and online account availability.</li> </ul> <p>The lesson here? It's time to start saving in a SEP-IRA today.</p> <p><em>Are you making contributions to a SEP-IRA?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/the-sep-ira-is-how-the-self-employed-do-retirement-like-a-boss">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Retirement 401k freelancers full-time jobs pension savings self-employment SEP-IRA Fri, 09 Oct 2015 11:00:47 +0000 Dan Rafter 1580103 at http://www.wisebread.com How to Save for Retirement Without a 401K http://www.wisebread.com/how-to-save-for-retirement-without-a-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-save-for-retirement-without-a-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/401k_plan_000007571872.jpg" alt="Learning how to save for retirement without a 401k" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Employer-sponsored retirement plans are not mandated. They're an added benefit to being on the job. As a result, there are instances where an employer may not offer one. And even those who <em>do</em> may have strict participation rules that create gaps in your savings plan or disqualify you altogether.</p> <p>According to the Board of Governors of the Federal Reserve System, of full-time private sector workers, 25% were denied access to employer-sponsored retirement plans. In fact, studies indicate that access to workplace retirement plans is lower today than it was in the late 1980s.</p> <p>Often we get so tied up with our careers that we forget that the reason we're working in the first place is to support ourselves &mdash; now and into retirement. But don't let your career focus derail your retirement. Here is what you can do if your employer doesn't offer a retirement plan.</p> <h2>1. Seek an Employer Who Does</h2> <p>If you're putting your retirement first, it is not unreasonable to think about taking your skillset elsewhere, especially if the new employer matches 401K contributions. Even the standard 3% employer match, on say $60,000, would yield an extra $1,800 in free money per year. On the other hand, let's assume that you receive a generous year-end bonus, but no retirement offering. In this scenario you might be better off staying at your current job and following my next piece of advice &mdash; unless of course, you can find a position that offers you both, which many do.</p> <p>There are many variables to consider when deciding whether to leave or stay with an employer. Be willing to design your own retirement plan and don't be afraid to see what's out there. Fear and/or complacency will only hold you back.</p> <h2>2. Start an Individual Retirement Account, or IRA</h2> <p>The best alternative to employer-sponsored retirement accounts are IRAs. In fact, these are nice to have <em>in addition</em> to employer plans, and are in some ways more advantageous than 401K accounts because they offer greater investment flexibility. There are two types of IRAs: Traditional and Roth, though they each have distinctive differences that need to be taken into consideration.</p> <h3>Traditional IRAs</h3> <p>Traditional IRAs are funded with pre-tax income. Additionally, Traditional IRA contributions are tax deductible (depending on your adjusted gross income), however, distributions are taxed at withdrawal and cannot be taken before age 59 1/2 without incurring income tax and a 10% early-distribution penalty. All contributions must cease at age 70 1/2 and mandatory withdrawals have to made by April 1st of that year.</p> <h3>Roth IRAs</h3> <p>The Roth IRA is a less complicated option because it is funded using after-tax dollars, which allows your earnings to grow tax-free. Distributions from your contributed funds can be taken at anytime without penalty, assuming the account has been open at least five years. And unlike the Traditional IRA, there are no mandatory distribution rules, so you can make contributions for the rest of your life, if you'd like.</p> <p>Individuals can maintain one or both types of accounts. The current annual contribution limit for all IRA accounts combined is $5,500 ($6,500 for ages 50+). Learn more about the benefits of IRA accounts from <a href="http://www.wisebread.com/how-to-set-up-an-ira-to-build-wealth?ref=seealso">How to Set Up an IRA to Build Wealth</a> and <a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k?ref=seealso">4 Reasons Why a Roth IRA May Be Better Than Your 401(k)</a> are two great articles that explain the benefits of IRA accounts.</p> <p>Your choice of employer doesn't have to stymie your retirement plans. Consider all the alternatives available to ensure a safe and comfortable financial future for your family.</p> <p><em>Does your employer offer a retirement plan? If not, how are you planning for your future?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/how-to-save-for-retirement-without-a-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-steps-to-starting-a-retirement-plan-in-your-30s">8 Steps to Starting a Retirement Plan in Your 30s</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-important-things-to-know-about-your-401k-and-ira-in-2016">5 Important Things to Know About Your 401K and IRA in 2016</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/choosing-a-retirement-account-whats-available-and-what-s-best-for-you">Choosing a Retirement Account: What&#039;s Available, and What’s Best for You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-penalty-free-ways-to-withdraw-money-from-your-retirement-account">7 Penalty-Free Ways to Withdraw Money From Your Retirement Account</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-accounts-and-money-to-spend">Retirement accounts and money to spend</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k employers no retirement plan Roth IRAs self employment traditional iras Tue, 06 Oct 2015 13:00:49 +0000 Qiana Chavaia 1577211 at http://www.wisebread.com Watch Out for These 5 Sneaky 401K Fees http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/watch-out-for-these-5-sneaky-401k-fees" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_nest_egg_000006292825.jpg" alt="Learning which 401K fees to look out for" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>No matter how diligent you are at socking away money into your 401K, you could still be contributing less than you think, thanks to hidden fees and plan costs. According to a study from AARP, about three in five Americans are unaware of how much they're paying in <a href="http://assets.aarp.org/rgcenter/econ/401k-fees-awareness-11.pdf">401K plan fees</a>.</p> <p>Excessive 401K fees can eat away your returns. Let's assume that a worker invests $5,000 every year over a 35-year period in a 401K plan with an annual return of 4.9%. She would end up with $423,000 at the end of period assuming an annual fee of 0.5% of the total balance, and with $345,000 at the end of the period assuming an annual fee of 1.5% of the total balance.</p> <p>To claim back control of your retirement account, here are five 401K&nbsp;fees to look out for.</p> <h2>1. 12b-1 Fee</h2> <p>Owing its name to the Securities and Exchange Commission (SEC) Rule 12b-1, a 12b-1 fee is a charge from a mutual fund to cover marketing, distribution, and administration expenses.</p> <p>The original intent with this rule was to encourage mutual funds to invest in marketing so that more people would buy into the mutual fund. In theory, the more assets that a mutual fund can buy, the better the economies of scale. Unfortunately, the empirical evidence from the SEC shows that mutual funds with 12b-1 fees have higher expense ratios than those without those fees, and that the services rendered to earn the fees don't enhance the fund's performance.</p> <p>By law, 12b-1 fees can range between 0.25% and 1% of a fund's net assets. Given that these fees have shown no benefit to investors, you should try to choose funds that don't charge 12b-1 fees at all. If all your available investment options charge such a fee, go with the one that charges closest to the minimum 0.25%.</p> <h2>2. Redemption Fee</h2> <p>A front-end load is one of many sneaky <a href="http://www.wisebread.com/4-sneaky-investment-fees-to-watch-for">investment fees to watch out for</a>. Front-end load funds have such a bad rap that many investment firms have started advertising no-load fund options.</p> <p>However, there can be a catch. While no-load funds won't charge you for loading shares, those funds can charge you a fee for unloading your shares too soon. Known also as an exit fee, back-end load, or contingent deferred sales charge, a redemption fee is applied to an investor that exits a fund too soon. How soon is too soon? The minimum holding period ranges from 30 days to one year, so make sure to check your fund's prospectus.</p> <p>Here are two useful rules of thumb when evaluating redemption fees:</p> <ul> <li>The average minimum holding period to avoid a redemption fee is 65 days, so avoid funds that require you to hold onto your fund much longer than that. While your nest egg should be a last resort fund, you shouldn't be penalized for accessing your money when in need.<br /> &nbsp;</li> <li>The SEC limits redemption fees to 2%. However, some funds may charge as low as 0.01%. The lower the redemption fee, the better.</li> </ul> <h2>3. Exchange Fee</h2> <p>Diversification is a useful investment strategy to lower your market risk. For example, it's generally better to split your investment into three significantly different assets than to &quot;put all your eggs in one basket.&quot; If one of your investments tanks, you still have two to fall back on.</p> <p>Before you fire up the online dashboard of your 401K and transfer money from one fund to another, check for applicable exchange fees within your retirement plan. Even worse, some 401K plans may tack on additional load and redemption fees when you exchange between funds.</p> <h2>4. Individual Service Fee</h2> <p>On top of your plan's administrative fee, your 401K may incur individual service fees related to features that you opted into. You may incur individual service fees when:</p> <ul> <li>Taking a loan from your 401K account;<br /> &nbsp;</li> <li>Executing participant investment directions;<br /> &nbsp;</li> <li>Opting for a clause to terminate a contract with your employer before the contract's expiration date; or<br /> &nbsp;</li> <li>Choosing an investment option that includes an insurance component (e.g. annuity).</li> </ul> <p>There are many other types of individual service fees. Keep in mind that some individual service fees that are paid indirectly from the investment options you have chosen may not be listed in your quarterly 401K statement.</p> <h2>5. &quot;Other&quot; Fee</h2> <p>Along with those other fees, 401K plans can have a miscellaneous fee category for listing anything that is neither a sales charge nor an account maintenance charge.</p> <p>Some examples of other fees are:</p> <ul> <li>Custodial expenses;</li> <li>Legal expenses;</li> <li>Recordkeeping expenses;</li> <li>Furnishing statement expenses;</li> <li>Toll-free telephone service fees;</li> <li>Transfer agent expenses; and</li> <li>Other administrative fees.</li> </ul> <p>Depending on the terms of your plan, another fee may be a percentage of your assets invested in the fund or a flat fee.</p> <h2>The Bottom Line</h2> <p>Do your due diligence before choosing funds within <a href="http://www.wisebread.com/7-signs-your-401k-is-underperforming">your 401K plan</a>. To get a full picture of your investment options, you need to go beyond their average returns. The two key documents that you need in order to find out more about applicable fees are the Summary Plan Description and the Annual Report.</p> <h3>Summary Plan Description (SPD)</h3> <p>Upon joining the 401K plan, you receive a copy of your SPD. You will receive an updated copy every five years if there are significant changes or every 10 years if there are no changes.</p> <h3>Annual Report (Form 5500 Series)</h3> <p>Every year you should receive a copy. If not, you can examine a free copy from the <a href="http://www.efast.dol.gov">Department of Labor</a>.</p> <p><em>Do you know what fees your 401K is charging you? Are they fair?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. 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