Retirement http://www.wisebread.com/taxonomy/term/417/all en-US How Are People Retiring in Their 30s?! http://www.wisebread.com/how-are-people-retiring-in-their-30s <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-are-people-retiring-in-their-30s" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-508191870.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you think about retirement, it's generally a time later in life after you've put many working years into a career. But today, some people are retiring in their 40s, 30s, and even in their 20s! What is the secret to retiring so early?</p> <p>I reached out to several bloggers who either retired or reached financial independence by the time they reached their 30s to learn just how they did it.</p> <p>Even if you are not aiming to retire at a very young age, these strategies can still help you accelerate your retirement.</p> <h2>Secret 1: Pay down debt ASAP</h2> <p>The first step toward early retirement is to get rid of debt as soon as possible. Making payments on debt limits your ability to build your investments and grow enough assets to retire. This is how Michelle Schroeder-Gardner of Making Sense of Cents got started on the path to financial independence in her early 20s. &quot;In the beginning,&quot; she said, &quot;I worked many, many hours a week so that I could pay off my debt in seven months, but it was well worth it.&quot;</p> <p>See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso2" target="_blank">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a></p> <h2>Secret 2: Take advantage of compound interest</h2> <p>The key to reaching early retirement is to save a large portion of your income &mdash; for example, 50 percent or more &mdash; and let that money compound over time. How can you put away that much on a modest income? You need to live very frugally so you can apply a large percentage of your income toward investments.</p> <p>Jeremy Jacobson, who runs Go Curry Cracker with his wife Winnie, reached financial independence in his 30s. He explained, &quot;We just used our income to buy our freedom rather than things and experiences that we would have quickly forgotten. Ironically, thanks to compound interest we can now have things, experiences, and freedom.&quot;</p> <h2>Secret 3: Multiple sources of income</h2> <p>Many of these bloggers who retired early had a traditional career for a time, and gradually built up &quot;side hustles&quot; to generate multiple streams of income. The extra cash helps get debt paid off faster and starts building your investment accounts sooner. Writing, owning income properties, selling items on eBay or Amazon, and consulting are some ideas to bring in &quot;extra&quot; money.</p> <p>One of these side projects that you enjoy could grow into enough income to one day replace your primary job. (See also: <a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job?ref=seealso" target="_blank">15 Ways to Make Money Outside Your Day Job</a>)</p> <h2>Secret 4: Commit to living differently</h2> <p>One thing I noticed is that these people are quite different from their peers. They are not concerned about fitting in and even celebrate living much differently than others their age.</p> <p>Travis Hornsby, blogger at Millennial Moola, was able to retire in his mid 20s. How did he manage it? &quot;I lived in a semifinished basement for several months because it included utilities and allowed me to supercharge my savings rate,&quot; he explained.</p> <p>Justin McCurry at Root of Good retired in 2013 at age 33 by redefining what qualified as a sacrifice. &quot;Unlike our peers, we never upgraded our starter home to a McMansion, nor did we trade in our Honda sedans for luxury cars,&quot; he said. &quot;Is that a sacrifice?&quot;</p> <p>Kristy Shen, one half of Millennial Revolution and retiree by age 31, resisted the pressure to buy a large home and settle into a traditional lifestyle. &quot;We stuck to our guns because we knew the math didn't make sense,&quot; she said.</p> <h2>Secret 5: Know when to stop</h2> <p>Many of those who retire at an early age plan to maintain a low spending rate after they retire, allowing them to leave the workforce early. But how much is enough? There are many opinions about this, but many subscribe to the 4 percent safe withdrawal rate as a rule of thumb. Simulations have shown that under a range of economic scenarios, you can withdraw up to 4 percent per year from your investment portfolio with a very low probability of running out of money during retirement.</p> <p>If your desire is to retire as soon as possible, it is important to have a specific goal for how much you need to accumulate so you don't end up spending extra years in the cubicle. For example, if you can live on withdrawing $40,000 per year from your account, then $1 million is the minimum amount you would need to fully retire under the 4 percent safe withdrawal rate. If you will have income after you retire, then you will need to withdraw less, so the balance you need to accumulate is less &mdash; and you can retire earlier.</p> <h2>Secret 6: Income after &quot;retirement&quot;</h2> <p>Many of these people who &quot;retire&quot; very early are actually still working at least part-time. Financial independence may be a better description than retirement for this lifestyle. Financial independence means that although you are still working, you don't need to do it purely for the money anymore.</p> <p>Michelle of Making Sense of Cents started her blog in graduate school a few years ago to help pay off student loans faster. As a dramatic example of income after reaching financial independence, she now makes nearly $1 million per year from her blog!</p> <h2>Secret 7: Invest for growth</h2> <p>Saving the money is the first step, but you have to invest it so it will grow. Parking your savings in a bank account at less than 1 percent interest is not going to get you to retirement very fast.</p> <p>Kristy of Millennial Revolution regrets her initial hesitation to dive into investments. &quot;I think we spent a lot more time waffling on whether we should do the investing-route or the housing-route than we should have, and that caused some missed opportunities along the way,&quot; she said. &quot;As a result, we stayed out of the market when the S&amp;P 500 bounced off the floor in early 2009 because we were still deciding whether to buy a house. As a result, we missed a 40 percent rally from 2009&ndash;2010 just sitting in cash! Fortunately by the time we decided in early 2012, there turned out to be plenty more gains to go in this bull market.&quot;</p> <h2>Secret 8: Don't sink money into a house</h2> <p>This one comes as a bit of a surprise to me since I have gone the route of investing in a home. But several folks who have reached early retirement recommend avoiding homeownership in order to reach financial independence sooner.</p> <p>Kristy and her husband Bryce felt scrutiny at their decision to forgo homeownership and continue to rent. &quot;Going against the grain is tough, but it's even tougher to do for such a long period of time while everyone around you is pointing and saying 'What an idiot. They're renting and throwing money away.'&quot; she explained.</p> <p>The advice not to buy a house makes sense if your goal really is to minimize costs. Owning a home not only commits you to a mortgage payment, but also to additional expenses such as insurance, taxes, repairs, and maintenance. Plus, if you own a home, you are more likely to spend money on furniture, landscaping, and home improvement projects. In some cases, you may be better off minimizing your expenses by renting instead of buying a place to live during your run up to early retirement. (See also: <a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide?ref=seealso" target="_blank">Rent Your Home or Buy? How to Decide</a>)</p> <h2>Secret 9: Enjoy now</h2> <p>In my experience, most people in their 20s are not focused much on retirement at all. But if you want to retire in your 30s, you will need to start working toward that goal very early in life. The earlier you want to retire, the more aggressively you will need to save money. But it is possible to focus too much on making and saving money. As you look forward to some great experiences after retirement, you don't want to miss out on unique opportunities to enjoy life along the way.</p> <p>Joe Udo of Retire by 40 emphasizes this point: &quot;If you're working toward early retirement,&quot; he said, &quot;don't forget about the present. Being miserable every day will screw up your mental health.&quot;</p> <h2>How early should you retire?</h2> <p>Very early retirement is not for everyone. Retiring early clearly requires some significant sacrifices and lifestyle adjustments. You'll have to decide if this cost is worth the reward of reaching financial freedom years (or possibly even decades) earlier.</p> <p>If you'd like to learn more and read about the journey of the bloggers mentioned in this article, check the table below.</p> <table> <tbody> <tr> <td> <p>Blogger</p> </td> <td> <p>Blog</p> <p>(link to their best early retirement advice post)</p> </td> <td> <p>Age at Retirement / Financial Independence</p> </td> </tr> <tr> <td> <p>Justin</p> </td> <td> <p><a href="http://rootofgood.com/zero-to-millionaire-ten-years/" target="_blank">Root of Good</a></p> </td> <td> <p>33</p> </td> </tr> <tr> <td> <p>Joe</p> </td> <td> <p><a href="http://retireby40.org/3-easy-steps-retire-40/" target="_blank">Retire by 40</a></p> </td> <td> <p>38</p> </td> </tr> <tr> <td> <p>Jeremy &amp; Winnie</p> </td> <td> <p><a href="http://www.gocurrycracker.com/how-we-saved-multi-millions/" target="_blank">Go Curry Cracker </a></p> </td> <td> <p>38, 33</p> </td> </tr> <tr> <td> <p>Michelle</p> </td> <td> <p><a href="http://www.makingsenseofcents.com/2016/01/early-retirement-myths-busted.html" target="_blank">Making Sense of Cents</a></p> </td> <td> <p>20s</p> </td> </tr> <tr> <td> <p>Kristy &amp; Bryce</p> </td> <td> <p><a href="http://www.millennial-revolution.com/freedom/how-i-built-a-seven-figure-portfolio-and-retired-at-31/" target="_blank">Millennial Revolution</a></p> </td> <td> <p>31, 33</p> </td> </tr> <tr> <td> <p>Travis</p> </td> <td> <p><a href="https://millennialmoola.com/2015/06/22/how-to-retire-in-your-20s/" target="_blank">Millennial Moola</a></p> </td> <td> <p>25</p> </td> </tr> </tbody> </table> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dr-penny-pincher">Dr Penny Pincher</a> of <a href="http://www.wisebread.com/how-are-people-retiring-in-their-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-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/one-smart-thing-you-can-do-for-your-retirement-today">One Smart Thing You Can Do for Your Retirement Today</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-you-wasting-300000-on-lunch">Are You Wasting $300,000 on Lunch?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-couples-must-ask-before-retirement">5 Questions Couples Must Ask Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-thing-will-get-you-to-1-million-tax-free">This One Thing Will Get You to $1 Million (Tax-Free!)</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/youre-wasting-up-to-42532-by-not-investing-your-gasoline-savings">You&#039;re Wasting Up to $42,532 by Not Investing Your Gasoline Savings</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement 20s 30s compound interest debt early retirement expenses income streams lifestyle retiring young saving money Mon, 27 Mar 2017 09:00:11 +0000 Dr Penny Pincher 1913293 at http://www.wisebread.com 7 Traps to Avoid With Your 401(k) http://www.wisebread.com/7-traps-to-avoid-with-your-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-traps-to-avoid-with-your-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-163904271.jpg" alt="Finding traps to avoid with your 401(k)" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>More and more Americans are choosing an employer-sponsored 401(k) as their preferred way to build up their nest eggs. As of 2014, an estimated 52 million Americans were participating in a 401(k)-type plan.</p> <p>When used properly, a 401(k) can be a powerful tool to save for your retirement years, but there are a couple of crucial pitfalls that you have to watch out for. From high fees to limited investing choices, here is a list of potential downsides to 401(k) plans &mdash; and how to work around them.</p> <h2>1. Waiting to set up your 401(k)</h2> <p>Depending on the applicable rules from your employer-sponsored 401(k), you may be eligible to enroll in the plan within one to 12 months from your start date. If your eligibility kicks in around December, you may think that it's fine to wait until the next year to set up your retirement account.</p> <p>This is a big mistake for two main reasons.</p> <p>First, contributing to your 401(k) with pretax dollars allows you to effectively reduce your taxable income for the current year. In 2017, you can contribute up to $18,000 ($24,000 if age 50 or over) to your 401(k), so you can considerably reduce your tax liability. For example, if you were to contribute $3,000 between your last two paychecks in December, you would reduce your taxable income by $3,000. Waiting until next year to start your 401(k) contribution would mean missing out on a lower taxable income!</p> <p>Second, your employer can still contribute to your 401(k) next year and make that contribution count for the current year, as long as your plan was set up by December 31 of the current year. Your employer contributions have to be in before Tax Day or the date that you file your federal taxes, whichever is earlier.</p> <h3>How to work around it</h3> <p>If you meet the requirements to participate in your employer-sponsored 401(k) toward the end of the year, make sure to set up your account by December 31st. That way, you'll be ready to reduce your taxable income for the current year through your own contributions and those from your employer before their applicable deadline (December 31 and Tax Day or date of tax filing (whichever is earlier), respectively).</p> <h2>2. Forgetting to update contributions</h2> <p>When you set up your 401(k), you have to choose a percentage that will be deducted from every paycheck and put into your plan. It's not uncommon that plan holders set that contribution percentage and forget it. As your life situation changes, such as when you get a major salary boost, marry, or have your first child, you'll find that your contributions may be too big or too small. (See also: <a href="http://www.wisebread.com/5-times-its-okay-to-delay-retirement-savings?ref=seealso" target="_blank">5 Times It's Okay to Delay Retirement Savings</a>)</p> <h3>How to work around it</h3> <p>To keep a contribution level that is appropriate to your unique financial situation, revisit your percentage contribution every year and whenever you have a major life change. Don't forget to also check whether or not you elected an annual increase option &mdash; a percentage by which your contribution is increased automatically each year &mdash; and adjust it as necessary.</p> <h2>3. Missing out on maximum employer match</h2> <p>Talking about contributions, don't forget that your employer may contribute to your plan as well. In a survey of 360 employers, <a href="https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/bigger-401k-matches.aspx" target="_blank">42 percent of respondents</a> matched employee contributions dollar-for-dollar, and 56 percent of them only required employees to contribute at least 6 percent from paychecks to receive a maximum employer match.</p> <h3>How to work around it</h3> <p>Employers require you to work a minimum period of time before starting to match your contribution. Once you're eligible, meet the necessary contribution to maximize your employer match. One estimate puts the average missed employer contribution at $1,336 per year. This is free money that you can use to make up for lower contribution levels from previous months or years.</p> <h2>4. Sticking only with actively managed funds</h2> <p>When choosing from available funds in their 401(k) plan, account holders tend to focus on returns. There was a time in which actively managed funds were able to deliver on their promise of beating the market and delivering higher-than-average returns. That's why 401(k) savers often choose them.</p> <p>However, passively managed index funds &mdash; funds tracing an investment index, such as the S&amp;P 500 or the Russell 2000 &mdash; have consistently proven that they can beat actively managed funds. Over the five past years, only 39 percent of active fund managers were able to beat their benchmarks, which is often an index. That's why over the same period, investors have taken $5.6 billion out of active funds and dumped $1.7 trillion into passive funds.</p> <h3>How to work around it</h3> <p>Find out whether or not your 401(k) offers you access to index funds. Over a long investment period, empirical evidence has shown that index funds outperform actively managed funds. Review available index funds and choose the ones that meet your retirement strategy. (See also: <a href="http://www.wisebread.com/3-steps-to-getting-started-in-the-stock-market-with-index-funds?ref=seealso" target="_blank">3 Steps to Getting Started in the Stock Market With Index Funds</a>)</p> <h2>5. Chasing high returns instead of lower costs</h2> <p>When reading the prospectus of any fund, you'll always find a disclaimer warning you that past returns aren't a guarantee of future returns. So, why are you holding onto those numbers so dearly? As early as 2010, investment think tank Morningstar concluded that a fund's annual expense ratio is the only reliable indicator of future investment performance, even better than the research firm's well-known star rating.</p> <p>And guess what kind of funds have the lowest annual expense ratios? Index funds! For example, the Vanguard 500 Index Investor Shares fund [Nasdaq: <a href="https://finance.yahoo.com/quote/VFINX?p=VFINX" target="_blank">VFINX</a>] has an annual expense ratio of 0.16 percent, <a href="https://personal.vanguard.com/us/funds/snapshot?FundId=0040&amp;FundIntExt=INT" target="_blank">which is 84 percent lower</a> than the average expense ratio of funds with similar holdings. If your 401(k) gives you access to lowest cost <a href="https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&amp;FundId=0540" target="_blank">Vanguard Admiral shares</a>, you would shed down that annual expense ratio even further to 0.05 percent.</p> <h3>How to work around It</h3> <p>When evaluating a fund in your 401(k), look for comparable alternatives, including index funds. To maximize the growth of your nest egg, chase funds with lower annual expense ratios and investment fees. Regardless of their performance (which tends to be better anyway!), you'll minimize your investment cost. (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso" target="_blank">Watch Out for These 5 Sneaky 401(k) Fees</a>)</p> <h2>6. Not periodically rebalancing your portfolio</h2> <p>Even when choosing index funds, you still need to periodically adjust your portfolio. Let's assume that you follow this investment recommendation from Warren Buffett for your 401(k): <a href="http://www.berkshirehathaway.com/letters/2013ltr.pdf" target="_blank">90 percent in a low-cost index fund</a>, and 10 percent in government bonds. (See also: <a href="http://www.wisebread.com/the-5-best-pieces-of-financial-wisdom-from-warren-buffett?ref=seealso" target="_blank">The 5 Best Pieces of Financial Wisdom From Warren Buffett</a>)</p> <p>Depending on the market, your portfolio allocation may be way off as early as one quarter. If the S&amp;P 500 were to have a huge rally, you may now be holding 95 percent of your 401(k) in the index fund. That would be much more risk that you may be comfortable with, so you would need to take that 5 percent and put it back into government bonds. On the other hand, holding 85 percent in government bonds would make you miss your target return for that year. Forgetting to <a href="http://www.wisebread.com/the-most-important-thing-youre-probably-not-doing-with-your-portfolio?ref=internal" target="_blank">rebalance your portfolio</a> once a year when necessary is one easy way to derail your saving strategy.</p> <h3>How to work around it</h3> <p>Many 401(k) plans offer an automatic annual rebalancing feature. Review the fine print of this feature with your plan and decide whether or not it's suitable for you. If your plan doesn't offer an automatic rebalancing feature, choose a date that makes the most sense to you and set it as your day to rebalance your portfolio every year.</p> <h2>7. Taking out 401(k) loans</h2> <p>Treating your 401(k) as a credit card is a bad idea for several reasons. Doing this:</p> <ul> <li>Creates additional costs, such as origination and maintenance fees;<br /> &nbsp;</li> <li>Becomes due in full within 60 days of separating from your employer;<br /> &nbsp;</li> <li>Turns into taxable income when not paid back, triggering potential penalties from the IRS and state and local governments; and<br /> &nbsp;</li> <li>May quickly turn into a bad habit: <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html" target="_blank">25 percent of 401(k) borrowers</a> go back for a third or fourth loan, and 20 percent of them take out at least five loans.</li> </ul> <h3>How to work around it</h3> <p>Treat your 401(k) as a last-resort source of financing. There are very few instances when you should <a href="http://www.wisebread.com/this-is-when-you-should-borrow-from-your-retirement-account?ref=internal" target="_blank">borrow from your retirement account</a>. Make sure that you go through all of your credit options and include the opportunity cost of foregoing retirement savings, including potential taxes and penalties, when comparing a 401(k) loan against another type of loan.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/7-traps-to-avoid-with-your-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <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> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-retirement-terms-every-new-investor-needs-to-know">15 Retirement Terms Every New Investor Needs to Know</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-your-retirement-is-on-track">8 Signs Your Retirement Is on Track</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-dumb-ira-mistakes-even-smart-people-make">5 Dumb IRA Mistakes Even Smart People Make</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) actively managed funds contributions employer match employment fees index funds loans rebalancing Thu, 23 Mar 2017 09:00:15 +0000 Damian Davila 1909973 at http://www.wisebread.com 6 Millennial Money Habits Every Retiree Should Learn http://www.wisebread.com/6-millennial-money-habits-every-retiree-should-learn <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-millennial-money-habits-every-retiree-should-learn" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-589447046.jpg" alt="Learning millennial money habits retirees should strive for" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>When it comes to money matters, Millennials don't always get a good rap. These young adults are likely to view themselves in good financial health so long as they make the bills at the end of the month, let alone stow a little extra away for retirement. But don't mistake them as financial illiterates. In fact, there are some common ways Millennials handle their money that could benefit the older generations. (See also: <a href="http://www.wisebread.com/6-ways-millennials-have-changed-money-so-far?ref=seealso" target="_blank">6 Ways Millennials Have Changed Money So Far</a>)</p> <h2>1. Get Creative</h2> <p>As retirees age, their expenditures fall &mdash; but their <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2498185" target="_blank">income drops even faster</a>. Perhaps retirees, who are unlikely to jump back into the traditional workforce due to a suddenly trickling cash flow, can benefit from some Millennial-style money tactics. Indeed, Millennials know how to get creative when it comes to their earnings. The old rules simply didn't apply to this generation of '80s and '90s babies that entered adulthood during the uncertainty of the financial recession. So, they made their own rules. They found their own innovative ways to survive. And now, as they continue to develop a distinctly entrepreneurial spirit, many Millennials are beginning to thrive.</p> <p>More than any other generation, Millennials have embraced the <a href="http://www.wisebread.com/5-fun-ways-the-sharing-economy-helps-you-save-on-vacation?ref=internal" target="_blank">sharing economy</a>, in which a lawn mower, <a href="http://www.wisebread.com/how-to-make-more-money-as-an-uber-driver?ref=internal" target="_blank">their car</a>, or a <a href="http://www.wisebread.com/the-11-best-websites-for-renting-your-extra-space?ref=internal" target="_blank">spare bedroom</a> can become a valuable source of revenue. The average Airbnb host earns more than $20,000 a year renting out a full, two-bedroom apartment or house in a major city, and this is exactly the kind of peripheral revenue stream that Millennials have become accustomed to seeking out for themselves.</p> <p>When it comes to ride-sharing, 21% of Millennials have used user-powered programs like Lyft and Uber to save money while on vacation. Among other age groups, those numbers are much lower &mdash; 7% for Gen-Xers and 4% for Baby Boomers. For older retirees, the percentage is presumably even lower. Yet <a href="https://www.bls.gov/opub/btn/volume-5/spending-patterns-of-older-americans.htm" target="_blank">transportation is a significant expense</a> for most retirees, and it's one that could potentially be lowered through the use of ride-sharing &mdash; not only during a vacation, but on a daily basis. Older households spend about $8,000 a year on transportation, ranging from a high of $9,321 for the 55 to 64 age group, to a low of $5,091 for the 75-and-older group, according to federal data.</p> <h2>2. Don't Buy Stuff, Spend on Experiences Instead</h2> <p>Millennials highly value experiences &mdash; concerts, yoga festivals, French lessons, surf lessons, palm readings, trips to Italy &mdash; and they are increasingly willing to fork over more and more money to get them. All told, 78% of Millennials would choose to spend money on a <a href="http://www.wisebread.com/4-reasons-you-should-splurge-on-experiences-not-things?ref=internal" target="_blank">desirable experience</a> or event over buying something desirable, and 55% of Millennials say they're spending more on events and live experiences than ever before, according to a 2015 study by Eventbrite. What's more, nearly eight in 10 Millennials say some of their best memories are from an event or live experience they attended or participated in, while 69% say attending live events and experiences make them more connected to other people, the community, and the world.</p> <p>As it turns out, there's scientific evidence to support the idea that people of all ages who spend money on experiences rather than things have a greater shot at attaining happiness. More than stuff, experiential pursuits promote greater happiness, psychologists have found. Perhaps painting lessons, bowling clubs, and a little international travel might also hold the key to a happy retirement.</p> <h2>3. Save Like You Mean It</h2> <p>A recent survey by T. Rowe Price found that 67% of Millennials will save by any means necessary. One reason might be this: It's reassuring to have a stash of cash available for emergencies, and this fact very well may be a major motivator for young adults who came of age during the recession, when jobs were scarce and layoffs were commonplace.</p> <p>Older generations could benefit from that same mentality. Saving by any means necessary, as if the financial future was completely uncertain, will help build up a money cushion should the worst actually happen.</p> <h2>4. Embrace Technology</h2> <p>Millennials are famously tech-savvy, and they're using their familiarity with mobile apps to track their investments, as well as their spending and saving habits, in real time. Tools like <a href="https://www.mint.com/" target="_blank">Mint</a> and <a href="https://digit.co/" target="_blank">Digit</a> make financial planning quick and easy, while <a href="https://www.acorns.com/">Acorns</a> helps Millennials automatically invest their spare change into a diversified and customizable portfolio. There are money-saving apps specific for grocery shopping, <a href="http://www.wisebread.com/the-10-best-couponing-apps?ref=internal" target="_blank">couponing</a>, freelancing, and so much more. (See also: <a href="http://www.wisebread.com/7-apps-that-make-budgeting-fun-no-really?ref=seealso" target="_blank">7 Apps That Make Budgeting Fun &mdash; No Really!</a>)</p> <p>While retirees generally lag in technological proficiency, there's been great improvement in recent years. All told, <a href="http://www.pewinternet.org/2015/06/26/americans-internet-access-2000-2015/" target="_blank">58% of people 65 and older</a> go online, according to the Pew Research Center, which marks an impressive increase from 14% in 2000. The app and website <a href="https://lifereimagined.aarp.org/" target="_blank">Life Reimagined</a> by AARP is one example of a highly-rated financial and social planning tool for retirees of all ages.</p> <h2>5. Volunteer in Exchange for Free Tickets</h2> <p>Americans 55 and older spend <a href="https://www.bls.gov/opub/btn/volume-5/spending-patterns-of-older-americans.htm" target="_blank">5.3% of their budget</a> on entertainment, which is slightly more than the entertainment spending of all Americans, according to U.S. Bureau of Labor Statistics. Perhaps older Americans could benefit from this tip straight out of the Millennial playbook: A little volunteer work can go a long way to get you access to concerts, festivals, and sporting events. Many theaters, stadiums, and festival grounds offer volunteers free tickets to events in exchange for some time spent charitably directing parking or ushering the aisles.</p> <h2>6. Talk It Out</h2> <p>Millennials are markedly open when it comes to discussing their financial woes, worries, and successes. Not only are they quick to seek expert advice, but they are also undeterred from engaging in frank financial talks with friends, spouses, parents, co-workers, and others. Retirees who come from a generation that largely believed that it's rude to talk about money in public could learn from the younger generation's fiscal transparency. Experts say that open conversations about finances can help save relationships, <a href="http://www.wisebread.com/5-money-conversations-every-couple-should-have?ref=internal" target="_blank">especially intimate ones</a>. They can also lead to people to better address their financial concerns, which can help prevent financial crises from building up later on down the road.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/brittany-lyte">Brittany Lyte</a> of <a href="http://www.wisebread.com/6-millennial-money-habits-every-retiree-should-learn">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/tiny-nestegg-retire-abroad">Tiny Nestegg? Retire abroad!</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-millennials-can-learn-about-saving-money-from-gen-x">5 Things Millennials Can Learn About Saving Money From Gen-X</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-millennials-have-changed-money-so-far">6 Ways Millennials Have Changed Money (So Far)</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/its-the-21st-century-why-is-your-money-stuck-in-the-20th">It&#039;s the 21st Century — Why Is Your Money Stuck in the 20th?</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-manage-your-money-no-budgeting-required">How to Manage Your Money — No Budgeting Required</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Retirement apps baby boomers gen x generations millennials money habits retirees saving money sharing economy volunteering Tue, 14 Mar 2017 11:00:11 +0000 Brittany Lyte 1906388 at http://www.wisebread.com Here's How Your Taxes Will Change When You Retire http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-your-taxes-will-change-when-you-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-508211721.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>When most people dream about their retirement, they focus on the places they'd like to travel, the hobbies they'd like to spend time on, and the people they will see more of. Pondering how to deal with taxes in retirement generally does not enter into these sorts of reveries.</p> <p>While everyone should plan for the good stuff in retirement, it's also important to recognize the less fun aspects of retiring &mdash; like taxes. If you are prepared for the financial side of retirement, then you'll be better able to enjoy your time.</p> <p>Here's what you need to know about how your taxes will be different post-retirement.</p> <h2>Understanding Your Tax Bracket</h2> <p>Before discussing how your taxes change in retirement, it's a good idea to understand both what your tax bracket is and what that means for the amount of money you owe. As of 2017, these are the federal tax brackets for ordinary income:</p> <p><strong>Tax Rate &nbsp; &nbsp; Married Filing Jointly &nbsp; &nbsp; &nbsp; &nbsp;Most Single Filers</strong><br /> 10% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $0&ndash;$18,650 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$0&ndash;$9,325<br /> 15% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $18,651&ndash;$75,900 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$9,326&ndash;$37,950<br /> 25% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $75,901&ndash;$153,100 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$37,951&ndash;$91,900<br /> 28% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $153,101&ndash;$233,350 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$91,901&ndash;$191,650<br /> 33% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $233,351&ndash;$416,700 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$191,651&ndash;$416,700<br /> 35% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $416,701&ndash;$470,700 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$416,701&ndash;$418,400<br /> 39.6% &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;$470,701+ &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; $418,401+</p> <p>What these tax brackets describe is your marginal tax rate, which is the rate you pay on the highest portion of your income. For instance, if you are single and fall in the 25% tax bracket, you are not taxed 25% on all of your income. You are taxed 25% on any income above $37,950, you are taxed 15% on any income between $9,326 and $37,950, and you are taxed 10% on any income below $9,325.</p> <h2>The Tax You Will No Longer Pay in Retirement</h2> <p>Let's start with the good news. There is one type of federal tax that retirement income and Social Security income are both exempt from. That's the Federal Insurance Contributions Act (FICA) tax, which funds Social Security and Medicare.</p> <p>Employed individuals see 6.2% of their gross earnings taxed for Social Security through FICA (and their employers also kick in 6.2%, making the total tax contribution 12.4% of each earner's gross income). In addition to Social Security, FICA also collects 1.45% of your gross income for Medicare Part A.</p> <p>Once you retire and you are no longer earning income from employment, then all of your income will be exempt from FICA &mdash; even any income you take from tax deferred accounts, such as 401K accounts or traditional IRA accounts. That's because your contributions to these accounts were already subject to FICA taxes, even if you funded the account with pre-tax dollars.</p> <h2>The Taxes You Will Owe on Tax-Deferred Accounts</h2> <p>Tax-deferred accounts, like 401Ks and traditional IRAs, allow workers to set money aside before Uncle Sam takes any income tax (although FICA taxes are deducted before the money is placed in such accounts). That money grows tax-free, and once the account holder reaches age 59&frac12;, they can take distributions from it without any penalty.</p> <p>However, the money will then be considered ordinary income and taxed accordingly. So that means a single retiree's $30,000 distribution from their IRA will place them in the 15% tax bracket, and they will owe $4,033.75:</p> <p>10% of $9,325 = $932.50</p> <p>15% of $20,675 = $3,101.25 ($30,000 - $9,325 = $20,675)</p> <p>$932.50 + $3,101.25 = 4,033.75</p> <p>The other important thing to remember about tax-deferred accounts is that you will have to take required minimum distributions (RMDs) once you reach age 70&frac12;. That's because the IRS does not want you to hold onto the money, tax-free, forever. Once you reach 70&frac12;, you must take the RMD amount every year, or owe the IRS 50% of the amount you should have withdrawn. The RMD is calculated based on your date of birth, the balance of each tax-deferred account as of December 31 of the previous year, and one of three <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets" target="_blank">IRS distribution tables</a>, and it is taxed as ordinary income.</p> <h2>No Taxes on Roth IRA and Roth 401K Distributions</h2> <p>The Roth versions of IRAs and 401Ks are also tax-advantaged, but the tax burden is front-loaded. That means you invest after-tax dollars into your Roth account, the money grows tax-free, and any distributions taken after you have reached age 59&frac12; and have held the account for at least five years are completely tax-free.</p> <p>This is one of the reasons why many retirement experts recommend investing in both traditional and Roth tax-advantaged accounts, because it offers you tax-savings both during your career and once you reach retirement.</p> <h2>Capital Gains Taxes</h2> <p>Any investments you have made outside of tax-advantaged accounts &mdash; such as stocks, bonds, mutual funds, and real estate &mdash; are taxed as capital gains, which is great news for many investors.</p> <p>That's because long-term capital gains tax rates, which apply to assets you have held for a year or longer, are quite low. For any investor in the 10% or 15% tax bracket, long-term capital gains taxes are a very favorable 0%. Investors in the 25% through 35% tax bracket will only owe 15% on long-term capital gains, while those in the 39.6% tax bracket owe 20% on long-term capital gains.</p> <p>Short-term capital gains, on the other hand, are taxed at your ordinary income tax rate, as is the interest on your savings account and CDs, as well as dividends paid by your money market mutual funds.</p> <h2>Taxes on Your Social Security Benefits</h2> <p>Up to 85% of your Social Security benefits may be subject to income tax in retirement. The higher your non-Social Security income in retirement, the more likely it is that you'll owe taxes on your Social Security benefit.</p> <p>The way the IRS determines whether your benefits are taxable is by calculating something known as provisional income. The formula for determining the provisional income is: one-half of your Social Security benefits, plus all your other income, including tax-exempt interest. (While tax-exempt interest is included in this calculation, tax-free distributions from a Roth IRA are not.)</p> <p>This means that the more money you take from your retirement accounts, the more of your Social Security benefits are considered taxable.</p> <h2>Taxes on Pensions and Annuities</h2> <p>Pensions from both private companies and the government tend to be taxed as ordinary income, unless you also contributed after-tax dollars to your pension.</p> <p>As for annuities, the tax on your annuity will depend partly on how you purchased it. For instance, if you used pre-tax dollars (like from an IRA) to purchase your annuity, then your annuity payments will be taxed as ordinary income. However, if you purchased the annuity with after-tax dollars, then you will only be taxed on interest earned. With each annuity check you receive, a portion will be considered non-taxable principal, and a portion will be interest that is taxed at your ordinary income tax rate.</p> <h2>Diversifying Your Taxes</h2> <p>Most people recognize that diversifying investments is a sound strategy for growing wealth. However, it's also a good idea to diversify your taxes &mdash; that is, make sure you will not be paying all of your taxes at the same time.</p> <p>Many workers only contribute to tax-deferred retirement accounts, which means they will be facing large tax bills in retirement. It makes more sense to understand when and how you will owe taxes on your various sources of retirement income, and try to diversify the tax burden.</p> <p>Taking a small tax hit now, by investing a Roth account or making other investments with post-tax dollars, will help make sure you are not overwhelmed by your tax burden once you retire.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-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/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/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-3 views-row-odd"> <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-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/13-crucial-social-security-terms-everyone-needs-to-know">13 Crucial Social Security Terms Everyone Needs to Know</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Taxes 401k benefits capital gains distributions FICA IRA medicare social security tax brackets tax changes tax-deferred accounts Thu, 09 Mar 2017 10:30:37 +0000 Emily Guy Birken 1902767 at http://www.wisebread.com 3 Ways More Money in Retirement Might Cost You http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-ways-more-money-in-retirement-might-cost-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-622064048.jpg" alt="Learning how more money in retirement might cost you" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>You might think that there is no such thing as too much money in retirement. After all, without a steady income from working, you need your retirement nest egg to last you throughout your golden years. So more money must be better, right?</p> <p>Well, as The Notorious B.I.G. once said, the more money we come across, the more problems we see &mdash; even in retirement. While I would never discourage anyone from saving as much as they can for retirement, it is a good idea to recognize what kinds of additional problems a large retirement portfolio could cause you.</p> <p>Here's what you need to know about the potential pitfalls of having more money in retirement:</p> <h2>1. You Will Owe Taxes on Tax-Deferred Retirement Accounts</h2> <p>According to the Bureau of Labor Statistics, as of December 2016, <a href="https://www.bls.gov/opub/btn/volume-5/pdf/defined-contribution-retirement-plans-who-has-them-and-what-do-they-cost.pdf" target="_blank">44% of all workers</a> were participating in a tax-deferred defined contribution plan, such as a 401K or an IRA. These types of retirement accounts allow workers to put pretax dollars aside for their retirement, where the money grows tax-free. Once you reach age 59&frac12;, you may withdraw money from such tax-deferred accounts without penalty.</p> <p>The potential trouble comes from the fact that any distribution you take from your tax-deferred account is taxable as ordinary income. This means that you will be taxed on that income in the same way you would be taxed on the same amount of income from a job. Because of the taxes you will owe on your distributions, the money in your tax-deferred retirement account is worth less than the dollar amount.</p> <p>Since many workers anticipate having a lower tax bracket in retirement than they do during their career &mdash; that is, they expect to have a much lower retirement income than career income &mdash; it makes sense to put off the taxes they will pay on the money in their 401K or IRA until after retirement. However, for anyone who manages to create a large retirement portfolio from a modest salary during their career, the tax burden in retirement will be much larger.</p> <h2>2. Required Minimum Distributions May Force You to Withdraw Money You Don't Want</h2> <p>If you put money aside into a tax-deferred account, the IRS will want to see its cut of the money eventually. For that reason, the IRS requires each account holder to begin withdrawing money during the year that he or she reaches age 70&frac12;. There is a minimum amount you must withdraw, and the IRS levies a stiff penalty for failing to do so &mdash; you will owe 50% of the amount that should have been withdrawn.</p> <p>In addition, the required minimum distribution is calculated based on your date of birth, the balance of each tax-deferred account as of December 31 of the previous year, and one of three <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/required-minimum-distribution-worksheets" target="_blank">IRS distribution tables</a>. That means your required minimum distribution must be recalculated each year using your new end-of-year balance from the previous year and your new distribution period according to the IRS distribution table. Getting the amount wrong can be potentially costly, and if you have a great deal of money in your tax-deferred accounts, you will be required to take more money than you necessarily want to access in one year.</p> <p>Don't forget, this required minimum distribution is also taxed as regular income (as we discussed above), so in addition to potentially withdrawing money you don't want, you will also owe taxes on the amount that you are required to withdraw.</p> <h2>3. You Will Be Taxed on Your Social Security Benefits</h2> <p>Many people are unaware of the fact that up to 85% of their Social Security benefits may be subject to income tax in retirement. The higher a retiree's non-Social Security income, the more likely it is that they will owe taxes on their Social Security check.</p> <p>The way the IRS determines whether your benefits are taxable is by calculating something known as provisional income. The formula for determining the provisional income is: One-half of your Social Security benefits, plus all your other income, including tax-exempt interest. (While tax-exempt interest is included in this calculation, tax-free distributions from a Roth IRA are not.)</p> <p>Your provisional income is compared to an upper and lower base amount to determine how much of your Social Security benefits are taxed, if any. If you file as single, then your lower base amount is $25,000. If your provisional income is above that amount, then you owe taxes on 50% of your Social Security benefits. The upper base amount for single filers is $34,000. If your provisional income is above that amount, then you owe taxes on 85% of your Social Security benefits.</p> <p>What this means is that the more money you take from your retirement accounts, the more of your Social Security benefits are considered taxable.</p> <p>For instance, if you are single and you take $38,000 from your IRA in retirement each year, then you are in the <a href="https://taxfoundation.org/2017-tax-brackets" target="_blank">25% tax bracket</a> and you owe taxes on 85% of your Social Security benefits since your income is above the upper base limit. If you decide to withdraw an additional $1,000 from your IRA one year, your additional $1,000 in income will cause $850 more of your Social Security income to be considered provisional income, making it subject to taxation at your marginal tax rate of 25%. You'll owe $462.50 on your $1,000 withdrawal ($1,850 x 25% = $462.50) between your IRA taxes and your Social Security benefit taxes.</p> <h2>More Money in Retirement Is a Good Problem to Have</h2> <p>Though having a large nest egg may cause some headaches after your retirement, it's important to remember that this is a better problem to have than facing retirement <a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement" target="_blank">without enough savings</a>. Just recognize that large amounts of money need to be properly managed and you need to stay on top of your financial life post-career. You can handle each of the financial problems that you may see with a larger retirement portfolio, as long as you are aware of them and prepared for them.</p> <p> &nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-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/heres-how-your-taxes-will-change-when-you-retire">Here&#039;s How Your Taxes Will Change When You Retire</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">3 Reasons to Claim Social Security Before Your Retirement Age</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/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-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 Taxes 401k benefits contributions income IRA social security tax brackets tax-deferred Wed, 08 Mar 2017 10:00:10 +0000 Emily Guy Birken 1901333 at http://www.wisebread.com Ask the Readers: What Is Your Target Retirement Age? http://www.wisebread.com/ask-the-readers-what-is-your-target-retirement-age <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/ask-the-readers-what-is-your-target-retirement-age" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_couple_beach_539257477.jpg" alt="Couple choosing their target retirement age" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p><em>Editor's Note: Congratulations to Christie, Jenny, and C for winning this week's contest!</em></p> <p>Most people aim to retire as soon as they can receive full Social Security benefits, but there are those who dream of retiring much earlier so they can enjoy more days without working, or much later because they want to stay busy and continue working.</p> <p><strong>What is your target retirement age?</strong> Are your finances on track for the kind of retirement that you want? What do you plan to do during your golden years?</p> <p>Tell us what your target retirement age is and we'll enter you in a drawing to win a $20 Amazon Gift Card!</p> <h2>Win 1 of 3 $20 Amazon Gift Cards</h2> <p>We're doing three giveaways &mdash; here's how you can win:</p> <ul> <li>Tweet about our giveaway for an entry.</li> <li>Visit our Facebook page for an entry.</li> </ul> <p>Use our Rafflecopter widget for your chance to win one of three Amazon Gift Cards:</p> <p><a class="rcptr" href="http://www.rafflecopter.com/rafl/display/79857dfa288/" rel="nofollow" data-raflid="79857dfa288" data-theme="classic" data-template="" id="rcwidget_ghxwzilh">a Rafflecopter giveaway</a> </p> <script src="https://widget-prime.rafflecopter.com/launch.js"></script></p> <p>If you're inspired to write a whole blog post OR you have a photo on Flickr to share, please link to it in the comments or tweet it.</p> <h4>Giveaway Rules:</h4> <ul> <li>Contest ends Monday, March 13th at 11:59 p.m. Pacific. Winners will be announced after March 13th on the original post. Winners will also be contacted via email.<br /> &nbsp;</li> <li>This promotion is in no way sponsored, endorsed or administered, or associated with Facebook or Twitter.<br /> &nbsp;</li> <li>You must be 18 and U.S. resident to enter. Void where prohibited.</li> </ul> <p><strong>Good Luck!</strong></p> <div class="field field-type-text field-field-blog-teaser"> <div class="field-items"> <div class="field-item odd"> Tell us what your target retirement age is and we&#039;ll enter you in a drawing to win a $20 Amazon Gift Card! </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-jacobs">Ashley Jacobs</a> of <a href="http://www.wisebread.com/ask-the-readers-what-is-your-target-retirement-age">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-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/ask-the-readers-do-you-do-black-friday">Ask the Readers: Do You Do Black Friday?</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/ask-the-readers-i-used-to-but-now-i">Ask the Readers: I used to __, but now I __ to save money.</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/ask-the-readers-what-winter-savings-tip-do-you-swear-by">Ask the Readers: What Winter Savings Tip Do You Swear By?</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/ask-the-readers-how-did-you-spend-your-first-paycheck">Ask the Readers: How Did You Spend Your First Paycheck?</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/ask-the-readers-what-is-your-new-years-resolution">Ask the Readers: What Is Your New Year&#039;s Resolution?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Giveaways Retirement Ask the Readers retirement age Tue, 07 Mar 2017 10:31:35 +0000 Ashley Jacobs 1901983 at http://www.wisebread.com 3 Reasons to Claim Social Security Before Your Retirement Age http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-reasons-to-claim-social-security-before-your-retirement-age" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-538053186.jpg" alt="Man claiming social security before retirement age" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>When it comes to Social Security, the usual advice is to hold off on taking benefits as long as possible. While most people could claim benefits as early as age 62, your monthly benefit amount will grow each year that you wait up to age 70. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <p>However, there are some situations where taking benefits as soon as possible may be the better way to go. Here are three such scenarios.</p> <h2>1. You Need the Money</h2> <p>If you can't find a job, or simply don't have enough savings to live on, claiming Social Security benefits at age 62 may be your only option.</p> <p>Just keep in mind that if you do find a job, there are <a href="https://www.ssa.gov/planners/retire/whileworking.html" target="_blank">limits to how much you can earn</a> without impacting your Social Security benefits. In years when you are younger than your &quot;full retirement age&quot; (65&ndash;67, depending on when you were born), for every $2 you earn above $16,920, your Social Security benefits will be reduced by $1.</p> <h2>2. Longevity Doesn't Run in Your Family</h2> <p>One way to evaluate the impact of claiming Social Security benefits at various ages is to run what's known as a break-even analysis.</p> <p>When you claim as early as possible, your monthly benefit amount will be smaller than it would have been if you claimed later. However, the head start that early claiming provides means that if you claim benefits at a later age, even though the monthly amount is higher, it'll take a number of years before you've broken even with the total amount you would have received by claiming earlier.</p> <p>For example, here's a look at a friend's estimated monthly Social Security benefits and how they vary depending on when he claims benefits:</p> <ul> <li>$1,529 if claimed at age 62</li> <li>$2,273 if claimed at his full retirement age of 67</li> <li>$2,873 if claimed at age 70</li> </ul> <p>If he claims benefits beginning at age 62, by the end of the year that he turns 67, he will have received a total of over $100,000. If he waits until age 67 to begin taking benefits, it will take him until approximately age 78 before his accumulated benefits would overtake the total he would have received if he had started taking benefits at age 62.</p> <p>If he didn't expect to live to age 78, it would make sense to claim benefits earlier. Of course, that's a tough call. Even in families when one or both parents die early, some of their kids live far longer.</p> <p>To find out your own estimated Social Security benefits, create an account on the Social Security Administration's website.</p> <h3>Run Your Own Break-Even Analysis</h3> <p>Unfortunately, there isn't an easy way to run your own break-even analysis. The Social Security Administration used to have a calculator on its site designed for this purpose, but took it down because they felt it was encouraging too many people to claim early.</p> <p>One workaround is to run various scenarios with <a href="https://www.calcxml.com/do/ins07" target="_blank">this calculator</a>. As a starting point, enter your &quot;current age&quot; as 62, enter your estimated age of death in the &quot;retirement age&quot; field, enter the annual age-62 benefit amount in the &quot;your current annual income&quot; field (the SSA website lists benefits in monthly amounts, so be sure to multiply by 12), and then use the &quot;annual salary increase&quot; field to enter an estimated inflation rate (Social Security benefits are adjusted for inflation each year; use a relatively low amount &mdash; somewhere between 1% and 2%).</p> <p>Then run the same analysis, but change your &quot;current age&quot; to your full retirement age and change &quot;your current annual income&quot; to the annual amount of your full retirement age benefit.</p> <h2>3. You Have Plenty of Money Already Saved for Retirement</h2> <p>If you have enough money to live on regardless of your Social Security benefits, that may be another reason to take Social Security benefits as early as possible. You could use the money to invest, buy a <a href="http://www.wisebread.com/is-long-term-care-insurance-worth-it?ref=internal" target="_blank">long-term care insurance policy</a>, or buy a <a href="http://www.wisebread.com/term-vs-whole-life-insurance-heres-how-to-choose?ref=internal" target="_blank">life insurance policy</a>.</p> <p>It's true that you should think very carefully before claiming Social Security benefits at age 62. There's a hefty increase in the monthly benefit amount for each year that you wait. And if you're married, keep this in mind: When you die, your spouse will be able to choose to take the higher of their benefit or your benefit. If you had been the higher earner, by waiting as long as possible before claiming your benefit, that will be very helpful to your spouse once you're gone.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/13-crucial-social-security-terms-everyone-needs-to-know">13 Crucial Social Security Terms Everyone Needs to Know</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/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> Retirement benefits full retirement age income longevity savings social security Wed, 01 Mar 2017 10:30:37 +0000 Matt Bell 1898659 at http://www.wisebread.com If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do http://www.wisebread.com/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-519505869.jpg" alt="Man receiving pension and doing these things" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Pensions are becoming a thing of the past &mdash; so if you're still entitled to one, consider yourself lucky. Once you have a pension, however, what will you do with it? How will you manage it? Here are a few suggestions on how to handle your well-earned windfall.</p> <h2>1. Request an Updated Pension Statement Annually</h2> <p>Call me crazy, but I check my bank account every morning when I wake up. It's all still there each day, but I don't like to take any chances. You need to keep an eye on your pension, too. Granted, you don't need to check in every day, but you should request an update once a year.</p> <p>&quot;Like your Social Security benefits, your pension benefit amounts can change,&quot; explains Brannon T. Lambert, owner of the investment firm Canvasback Wealth Management. &quot;Not only that, but pensions can have several options for payouts, survivor benefits, or cash out options. You want to know every option available to you especially if you are married or have dependents.&quot;</p> <h2>2. Weigh Your Payout Options Carefully<strong> </strong></h2> <p>Before the IRS passed a law in 1978 to make self-funded 401Ks possible, many companies provided employees pensions &mdash; a fund that accrued in value over time to ensure that their employees were at least modestly supported through their retirement. That's all but reversed nowadays. In 1979, 28% of all workers were <a href="https://www.ebri.org/publications/benfaq/index.cfm?fa=retfaq14" target="_blank">enrolled with pension plans</a>, whereas only 2% of today's workforce is enrolled. Conversely, between 95% and 98% of employers <a href="http://www.cheatsheet.com/personal-finance/5-best-ways-for-companies-to-improve-401k-plans.html/?a=viewall" target="_blank">offer 401K plans</a>. Go figure.</p> <p>When it's time to receive your pension, the first decision you'll need to make is how you want to receive the money&mdash; which, in turn, raises many important questions. Morgan Christen, CFA at Spinnaker Investment Group in Southern California, explains your options.</p> <p>&quot;Pension planning involves many decisions that are irrevocable; anyone that will receive a pension should learn about all of the payout options,&quot; he says. &quot;Do you want to receive income for your life? Do you want to make sure a spouse is covered should you pass away? If you want to cover a spouse, how much of your benefit do you want that person to receive &mdash; 100%, 75%, or 50%?&quot;</p> <p>These are all things to think about when it comes time to take your pension. Keep in mind that if you want to cover a spouse, you will be taking a reduced amount on a monthly basis &mdash; and if your spouse predeceases you, you may not be able to change course.</p> <h2>3. Investigate the Social Security Offset Provisions<strong> </strong></h2> <p>You may expect a certain dispersed dollar amount each month when your pension begins, but you could be caught off guard if it changes down the road. Your Social Security payments may be the culprit.</p> <p>&quot;Some pensions come with Social Security offset provisions,&quot; Lambert explains. &quot;This means that your pension benefit amount could be one dollar figure initially, but once Social Security benefits begin, your pension will be reduced somewhat depending how much they offset. It could possibly be dollar-for-dollar up to a preset limit. This can come as a big surprise if you are not aware of it.&quot;</p> <h2>4. Research Your Investment Opportunities<strong> </strong></h2> <p>If you want to roll the dice with your pension, that's your prerogative &mdash; but you need to go into any investment situation well-informed of what you're getting into. This is money that needs to last the rest of your life, and you don't want to squander it because of poor decision-making. Do you research and get level with expectations so you're not blindsided by bad news.</p> <p>&quot;When it comes to pensions, many people assume that the managers of the funds will do the investment on behalf of the participants, which is rarely true,&quot; says Justin Kumar, senior portfolio manager at investment firm Arlington Capital Management in Arlington Heights, Ill. &quot;Participants must elect their investment options from the lineup of available funds, but if they do not, they will often be invested in the default option. The problem is that the default is usually some type of cash or money market equivalent funds. Although these funds may be a safer option, they will not participate in market uptrends, leaving participants confused at the end about why they may not have more money.&quot;</p> <p>Furthermore, for those participants with limited investment options, there may be language in the pension plan documents that specifies an age &mdash; such as 55 or 59 1/2 years old &mdash; in which pension funds can be rolled over by a participant into an IRA, thus allowing access to a greater universe of investment possibilities. Participants should consult with their pension consultants and perhaps with an outside adviser to determine the best course of action when making these investment decisions.</p> <h2>5. Avoid Greedy Financial Advisers<strong> </strong></h2> <p>How do you know if a financial adviser has your best interest at heart? Mark Zoril, founder of the retirement-planning firm PlanVision, reveals how to spot the con artist.</p> <p>&quot;As someone evaluates and reviews their options, it is important to understand the pros and cons of taking the pension or transferring it to an IRA,&quot; he says. &quot;Unfortunately, far too many advisers' compensation is directly impacted by what someone does with their pension. Therefore, they are strongly incentivized to convince people of the benefits of cashing out their pension. In fact, a transfer from a pension can be a very strong payday for an adviser.&quot;</p> <p>This applies to so-called &quot;fiduciary&quot; advisers as well.</p> <p>&quot;Many of these advisers promote how they are 'fee only' and offer objective guidance,&quot; Zoril adds. &quot;However, if they charge their clients based upon assets under management &mdash; the most common model of advisers &mdash; they have a huge conflict of interest in providing guidance on this particular topic.&quot;</p> <p>It's important that you seek the guidance of a professional &mdash; perhaps someone you know well in that field, and not someone who's blinded by your potential investment &mdash; regarding your pension plan to fully understand whether or not the advice you're seeking will be influenced by their adviser's compensation. This presents a real risk to your evaluation process.</p> <h2>6. Plan for the Taxes You're Required to Pay<strong> </strong></h2> <p>Your pension is not tax-free. It will be taxed as regular income. You need to plan and save for that bill so you stay in good standing with the IRS. You don't want to spend your golden years in the slammer, do ya?</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <p>&nbsp;</p> <p style="text-align: center;"><a href="//www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fif-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIf%20Youre%20Lucky%20Enough%20to%20Receive%20a%20Pension%2C%20Here%20Are%206%20Things%20You%20Need%20to%20Do.jpg&amp;description=If%20Youre%20Lucky%20Enough%20to%20Receive%20a%20Pension%2C%20Here%20Are%206%20Things%20You%20Need%20to%20Do" data-pin-do="buttonPin" data-pin-config="above" data-pin-color="red" data-pin-height="28"><img src="//assets.pinterest.com/images/pidgets/pinit_fg_en_rect_red_28.png" alt="" /></a> </p> <!-- Please call pinit.js only once per page --><!-- Please call pinit.js only once per page --><script type="text/javascript" async defer src="//assets.pinterest.com/js/pinit.js"></script></p> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/If%20Youre%20Lucky%20Enough%20to%20Receive%20a%20Pension%2C%20Here%20Are%206%20Things%20You%20Need%20to%20Do.jpg" alt="If You're Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-your-financial-planner-isnt-telling-you-about-retirement">5 Things Your Financial Planner Isn&#039;t Telling You About Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/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-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</a></span> </div> </li> <li class="views-row views-row-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/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement fiduciary financial advisers investment opportunities payout pensions social security taxes Tue, 21 Feb 2017 11:00:11 +0000 Mikey Rox 1894200 at http://www.wisebread.com Your 401K in 2017: Here's What's New for You http://www.wisebread.com/your-401k-in-2017-heres-whats-new-for-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/your-401k-in-2017-heres-whats-new-for-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-502449548.jpg" alt="Learning what&#039;s new for your 401K in 2017" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>There aren't many 401K rule changes to keep up with this year, but that doesn't mean you can't bring about some of your own positive changes to your retirement savings. Let's take a look at what you need to know to make the most of your 401K in 2017.</p> <h2>No Changes in the Contribution Limits</h2> <p>The amount the IRS allows you to contribute to a 401K plan this year remains as it was last year &mdash; $18,000 if you're younger than 50, or $24,000 if you're older. However, the Feds did make two changes to the retirement savings landscape, which pertain to people on either end of the income spectrum.</p> <h3>1. More May Qualify for the Saver's Credit<strong> </strong></h3> <p>Low and middle-income earners should be aware of the <a href="https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit" target="_blank">Saver's Credit</a>, a tax benefit that rewards those who save for their later years through a 401K or IRA. Depending on your income and filing status, the credit is worth 10%, 20%, or 50% of up to $2,000 of contributions per person (for married couples, that means up to $4,000 of contributions).</p> <p>Married couples filing joint returns can claim at least a 10% credit as long as their adjusted gross income (AGI) is no more than $62,000. That maximum income amount is $500 more than in 2016, so more households should qualify. However, the most generous 50% credit is allowed only for those couples making no more than $37,000 &mdash; the same threshold as in 2016.</p> <p>The credit/income limits for married couples filing jointly are:</p> <ul> <li>50% if AGI is $37,000 or less</li> <li>20% if AGI is $37,001&ndash;$40,000</li> <li>10% if AGI is $40,001&ndash;$62,000</li> </ul> <p>For singles, or married couples filing separate returns, the maximum amount you can earn and still qualify for a credit is $31,000, which is $250 higher than in 2016. In order to qualify for the maximum 50% credit, your income has to be no higher than $18,500.</p> <p>Here are the details:</p> <ul> <li>50% if AGI is $18,500 or less</li> <li>20% if AGI is $18,501&ndash;$20,000</li> <li>10% if AGI is $20,001&ndash;$31,000</li> </ul> <p>Keep in mind, a tax credit is much more valuable than a tax deduction because it is a dollar for dollar reduction of taxes.</p> <h2>2. Higher-Income Earners May Get More</h2> <p>On the other end of the income spectrum, the IRS expanded the contribution parameters pertaining to the retirement plans of well-paid workers. For example, contributions &mdash; by the employee and/or his or her employer &mdash; are limited by how much an employee is paid in total. In 2017, the amount of compensation on which contribution amounts can be based was increased by $5,000 to $270,000, and the maximum total contribution amount was bumped up by $1,000 to $54,000.</p> <h2>What Changes Will You Make?</h2> <p>Even if the two changes noted above don't pertain to you, that doesn't mean you need to &mdash; or should &mdash; stay the course with your retirement savings. The start of a new year is a good time to re-evaluate your goals and see if you're on track.</p> <p>Here are two areas to review.</p> <h3>1. How Much You Need<strong> </strong></h3> <p>Do you know how much you should have saved by the time you retire? Do you know how much that means you should be saving each month right now? If not, take a few minutes to run some numbers. If you're not saving enough, consider increasing your contributions.</p> <h3>2. How You Should Allocate</h3> <p>Do you know your optimal asset allocation? That pertains to how much of your investment portfolio should be in stocks, and how much in bonds (or stock and bond mutual funds). Vanguard offers a well-designed, free <a href="https://personal.vanguard.com/us/FundsInvQuestionnaire" target="_blank">asset allocation questionnaire</a>, so give it a try. Then try to bring your portfolio more in line with your optimal asset allocation.</p> <p>While tax credits and employer contributions are significant benefits, the most important factors that determine your investing success are the amount of money you save each month, and whether your asset allocation is appropriate for someone of your age and risk tolerance. Take the time to evaluate your individual retirement savings scenario, and see how you can make it even better for 2017.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/your-401k-in-2017-heres-whats-new-for-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-crucial-things-you-should-know-about-bonds">5 Crucial Things You Should Know About Bonds</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/your-401-k-is-not-an-investment">Your 401(k) is not an investment</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-tell-if-your-401k-is-a-good-or-a-bad-one">How to Tell if Your 401K Is a Good or a Bad One</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-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-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-threats-to-a-secure-retirement">9 Threats to a Secure Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k Adjusted Gross Income asset allocation bonds changes contribution limits employers investing saver's credit stocks Mon, 20 Feb 2017 10:00:11 +0000 Matt Bell 1892607 at http://www.wisebread.com The Inventor of the 401K Has Second Thoughts About Your Retirement Plan — Now What? http://www.wisebread.com/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-171328267.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>In the early 1980s, the 401K plan was introduced as a potential supplement to the pension plans offered by employers. Now, they are a staple of retirement planning, while pensions are available to fewer workers than ever before.</p> <p>A 401K allows workers to set aside a certain amount of their salary and invest into a variety of mutual funds. Often, companies will match contributions up to a certain amount. These plans can be powerful vehicles for amassing great wealth in retirement, but the founders of these plans recently voiced concerns that the plans are inadequate for many people, and that they were never meant to <em>replace </em>pensions altogether.</p> <p>For sure, 401K plans place more of the savings burden and risk onto the individual than pensions do. And many plans are lousy, with high fees and poor investment choices. So, what to do? Here's how to build that big retirement fund even when you're at the mercy of the 401K.</p> <h2>1. Save Up to the Match, Regardless</h2> <p>You may be annoyed that a 401K is all your employer has to offer, but if the company is offering to match contributions, you'd be a fool not to participate. Even if the plan has lousy mutual funds with high fees, free money is still free money. Most good companies offer at least 50 cents for every dollar you contribute up to a certain amount, and that can add up to a lot of dough over time.</p> <h2>2. Get an IRA</h2> <p>A 401K is not the only vehicle for saving for retirement. Individual retirement accounts, or IRAs, offer some good tax advantages and better flexibility than a 401K. There's no company match for an IRA, but you have the ability to invest in just about anything. That's why many investors will put money in a 401K up to the company match, then put any additional savings in IRAs. Most people can contribute $5,500 annually into an IRA. With a traditional IRA, any money you contribute is deducted from your taxable income. With a Roth IRA, your money is taxed right away but you don't have to pay tax on any gains when you withdraw the money at retirement.</p> <h2>3. Start Early and Have a Long Time Horizon</h2> <p>Despite the flaws of a 401K, it's still very possible to amass a large sum for retirement if you begin investing when you are young and keep it up for a long time. If you enter the workforce when you're 18 and keep saving and investing until retirement age, that means you'll have 45 years to allow your nest egg to grow. In fact, under this scenario, it's possible to retire a millionaire by putting aside less than a few hundred dollars per month.</p> <h2>4. Find the Low-Cost Funds</h2> <p>Even if your 401K plan isn't perfect, you owe it to yourself not to make matters worse by investing in bad funds. Many 401K plans offer mutual funds with high management fees and other expenses, but most also offer low-cost options, including basic S&amp;P 500 Index funds. Find those funds with the lowest fees, so you get to keep more of your money. Look for funds with expense ratios below 0.5%, if possible.</p> <h2>5. Embrace the Power</h2> <p>When an employer offers a pension, it almost always contributes to a pension fund and then hopes that investment returns are enough to meet the obligations they have to employees. So in reality, the only significant difference between a pension and a 401K plan is who is in control. With a 401K plan, you have more control over how you invest. For some people, this is scary. But for others, it's just as scary to leave their financial future in the hands of others.</p> <h2>6. Make a Good 401K Part of Your Job Search</h2> <p>Think about the last time you searched for a job. When you applied and interviewed for positions, did you take the quality of the company's 401K plan into account? Chances are, this was far down the list of concerns, below salary, health benefits, and even vacation time. But imagine if more people turned down job offers because of a lousy 401K plan or a low company match. If more prospective employees voiced concerns about the quality of retirement plans during the hiring process, companies might be more likely to improve their plans.</p> <h2>7. Talk to Your Lawmakers</h2> <p>It's unlikely that the President or Congress can force companies to bring back pensions, but they are the ones who could change 401K plans to make them more attractive. Lawmakers could pass legislation that improves the tax benefits of plans or increases the amount investors are allowed to contribute. They could pressure companies to boost their matching contributions, and require more companies to offer plans to more employees. Lawmakers could also propose new kinds of savings plans managed by the government. At the very least, voicing your concerns about the quality of the 401K as a retirement option could start a conversation on Capitol Hill.</p> <h2>8. Join a Union, If You Can</h2> <p>Much of the erosion of defined benefit plans has coincided with the drop in influence of labor unions in America. According to the AFL-CIO, about 75% of union workers participate in defined benefit plans, compared to about 20% for nonunion workers. But far fewer people are part of unions these days.</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/the-inventor-of-the-401k-has-second-thoughts-about-your-retirement-plan-now-what">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/15-retirement-terms-every-new-investor-needs-to-know">15 Retirement Terms Every New Investor Needs to Know</a></span> </div> </li> <li class="views-row views-row-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/stop-making-these-10-bogus-retirement-savings-excuses">Stop Making These 10 Bogus Retirement Savings Excuses</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement">10 Signs You Aren&#039;t Saving Enough for Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k contributions employer match IRA nest egg pensions Roth savings Mon, 13 Feb 2017 10:30:33 +0000 Tim Lemke 1889313 at http://www.wisebread.com How Almost Anyone Can Afford to Retire in Mexico http://www.wisebread.com/how-almost-anyone-can-afford-to-retire-in-mexico <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-almost-anyone-can-afford-to-retire-in-mexico" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_chairs_beach_154894068.jpg" alt="Couple learning how to retire in Mexico for less" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>If you're thinking about retirement, you're not alone. However, out of 100 Americans who start working at age 25, only 4% are <a href="http://www.statisticbrain.com/retirement-statistics/" target="_blank">expected to have saved enough</a> for retirement at age 65.</p> <p>While this number may seem surprisingly low, retiring doesn't have to be as expensive as you may think. If you can lower your monthly income requirement, you can also greatly reduce the total capital that you need to save to retire.</p> <p>One easy way to do this: retire abroad. For many Americans, Mexico is a top choice. It's not only geographically close, it's also very affordable. Adventure seekers love its bustling cities full of colonial architecture and rich culture, as well as the natural beauty found along its coastlines and highlands. (See also: <a href="http://www.wisebread.com/retire-for-half-the-cost-in-these-5-countries?ref=seealso" target="_blank">Retire for Half the Cost in These 5 Countries</a>)</p> <p>If you're worried you might be among the 96% of people who haven't saved enough for retirement, moving to Mexico may be an effective way to make your nest egg go further.</p> <h2>Cost of Living in Mexico</h2> <p>The cost of living is drastically lower than in the U.S. or in Canada. According to Numbeo, the cost of living in Mexico is <a href="https://www.numbeo.com/cost-of-living/country_result.jsp?country=Mexico" target="_blank">nearly 60% lower</a> than the United States, with rent costing 79% less.</p> <p>However, keep in mind that those are costs averaged over the entire country. Expenses are higher in bigger cities such as the capital, and in places that attract a lot of foreigners, such as Playa del Carmen.</p> <h2>Rental Costs</h2> <p>Based on my experience living in Mexico City and traveling extensively through the country during 2015 and 2016, I have found rents to be far lower than the U.S. You can find a place for as low as $100 a month in off-the-beaten-track destinations, such as the small beach town of Mazunte. However, a great deal like this often means sacrificing on some of the comforts of home such as air conditioning and hot water.</p> <p>On the upper end of the budget, if you're willing to spend $600&ndash;$1,000, you can rent a luxury apartment, even in the more expensive and cosmopolitan destinations.</p> <h2>Health Insurance Costs</h2> <p>Private health insurance is significantly cheaper in Mexico than in the states. It can cost you <a href="http://rollybrook.com/health.htm" target="_blank">as little as 20%</a> of what it would cost in the U.S.</p> <p>Because the cost of routine visits and minor incidents is so small, you may also choose to self-insure, which means simply paying for these costs out-of-pocket as opposed to purchasing an insurance plan.</p> <h2>Doctor Costs</h2> <p>As with rental prices, the cost of going to the doctor also varies to some extent, so these numbers should only serve as a rough guideline.</p> <p>From my experience, a routine teeth cleaning from a dentist costs $15&ndash;$20. A regular doctor's visit costs as little as $25 to $50, while a specialist normally costs $35&ndash;$50 and up per visit.</p> <h2>Food Costs: Restaurants and Grocery Shopping</h2> <p>Groceries in Mexico are about a third of the price of food in the U.S., depending on the season and availability. You can even sometimes find American chains like Wal-Mart, where you can buy cheap groceries.</p> <p>Restaurant prices vary, too, based on type. On the lower end, you can visit food stands to get snacks, which Mexicans call antojitos for as little as 50 cents to a dollar. These include tacos, quesadillas, and burritos. Freshly pressed juice and prepared fruit is also in this price range.</p> <p>One step up from the food stands are restaurants called fondas. These are small, family-owned establishments that serve two- or three-course meals, including soup or salad, a full entree, and a drink. Sometimes they also come with dessert. Expect to pay $3&ndash;$10 dollars.</p> <p>A truly gourmet, upscale dining experience should set you back $10&ndash;$30.</p> <h3>Alcohol Costs</h3> <p>Alcohol in Mexico is widely available, and enjoying tequila or mezcal is a common cultural practice. There are no taboos on drinking, and alcohol is accessible at the local corner store for very affordable prices.</p> <p>For a bottle of tequila or mezcal you can expect to pay $10 for a low-quality bottle and up to $40 for an artisanally produced bottle of very good quality alcohol.</p> <p>A six-pack of beer starts at $4&ndash;$6. There are not as many microbrew options available as in the U.S., but some bars do offer local, small-batch beer, usually priced around $4 a bottle.</p> <p>Mexico is an attractive place to retire, not only because it is an affordable option, but because of all that it has to offer, from interesting cultural experiences to the hospitable locals who often go out of their way to make you feel at home.</p> <h2>Transport Costs</h2> <p>If you're traveling by plane, prices start around $250 for round-trip tickets to or from the U.S., and $40&ndash;$100 for trips within country. Long-distance coaches are an even cheaper alternative to internal flights. An eight-hour basic bus trip costs about $25, varying a bit depending on your destination. You also have the option of paying more for a first-class bus that includes drinks, snacks, entertainment (TV and music), and seats that are designed to be comfortable to sleep in.</p> <p>Local transportation options include the bus (on average 50 cents) and, in Mexico City, the Metro (25 cents).</p> <h2 style="text-align: center;">Like this post? Pin it!</h2> <p>&nbsp;</p> <p style="text-align: center;"><a href="//www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fhow-almost-anyone-can-afford-to-retire-in-mexico&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FHow%20Almost%20Anyone%20Can%20Afford%20to%20Retire%20in%20Mexico.jpg&amp;description=How%20Almost%20Anyone%20Can%20Afford%20to%20Retire%20in%20Mexico" data-pin-do="buttonPin" data-pin-config="above" data-pin-color="red" data-pin-height="28"><img src="//assets.pinterest.com/images/pidgets/pinit_fg_en_rect_red_28.png" alt="" /></a> </p> <!-- Please call pinit.js only once per page --><!-- Please call pinit.js only once per page --><script type="text/javascript" async defer src="//assets.pinterest.com/js/pinit.js"></script></p> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/How%20Almost%20Anyone%20Can%20Afford%20to%20Retire%20in%20Mexico.jpg" alt="How Almost Anyone Can Afford to Retire in Mexico" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amanda-gokee">Amanda Gokee</a> of <a href="http://www.wisebread.com/how-almost-anyone-can-afford-to-retire-in-mexico">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/retire-for-half-the-cost-in-these-5-countries">Retire for Half the Cost in These 5 Countries</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-let-these-expenses-spoil-your-retirement-abroad">Don&#039;t Let These Expenses Spoil Your Retirement Abroad</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-lessons-i-learned-about-money-after-living-in-mexico">7 Lessons I Learned About Money After Living in Mexico</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-couples-are-shortchanging-their-retirement-savings">4 Ways Couples Are Shortchanging Their Retirement Savings</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-your-financial-planner-isnt-telling-you-about-retirement">5 Things Your Financial Planner Isn&#039;t Telling You About Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Travel cost of living expats expenses food costs foreign countries health care mexico Fri, 10 Feb 2017 10:30:38 +0000 Amanda Gokee 1871128 at http://www.wisebread.com 4 Reasons People Don't Retire Early — and How You Can http://www.wisebread.com/4-reasons-people-dont-retire-early-and-how-you-can <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-reasons-people-dont-retire-early-and-how-you-can" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-503452702.jpg" alt="Woman learning reasons people don&#039;t retire early" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Retirement is undeniably a time of drastic change in most people's lives. Typically, people have spent at least four decades in the workplace by the time they accept their gold watch. The average retirement age is 62 to 65, depending on where you live, according to a survey by SmartAsset.</p> <p>While work can provide routine and stability, as the years go by it can also grow to feel burdensome and stale. When to retire is a very personal question, linked to lifestyle and finances. Here are a few of the common reasons people feel they're not ready for retirement. (See also: <a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky?ref=seealso" target="_blank">4 Reasons Early Retirement Might be Financially Risky</a>)</p> <h2>Worried About Having Enough Money</h2> <p>It's probably not a surprise that monetary reasons are number one on this list. Having a regular paycheck affords a lot of comfort that can be hard to walk away from.</p> <p>One of the most common reasons most individuals won't consider an early retirement is fear that their savings will be insufficient to provide the lifestyle they've been used to in their working years.</p> <p>However, if you're serious about wanting to retire now, there are ways you can make your savings go further, such as <a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security?ref=internal" target="_blank">retiring in a cheaper state</a>, or even a foreign country where the cost of living is lower. Also, using the <a href="http://www.wisebread.com/how-to-save-an-extra-109486-a-year?ref=internal" target="_blank">right credit card can save you thousands</a> of dollars a year.</p> <p>Alternatively, the <a href="http://www.wisebread.com/can-you-really-make-a-living-in-the-gig-economy?ref=internal" target="_blank">gig economy</a> affords a lot of ways for people who are officially retired to earn disposable income. For instance, you could <a href="http://www.wisebread.com/this-is-how-you-rent-your-place-on-airbnb-and-succeed?ref=internal" target="_blank">rent out a room on a site like Airbnb</a> to help pad your savings. Just make sure you check out local laws in your area for any restrictions on short-term rentals.</p> <h2>Hesitant to Lose Identity Tied to Work</h2> <p>In the Western world, one of the first questions we ask when meeting someone new is, &quot;What do you do?&quot; The meaning, of course, is what do you do for work. This question is a way of situating someone socioeconomically, understanding their background and education, and gaining a window into their lives.</p> <p>Of course, identity goes beyond what you do for work, and this is an important shift to be conscious of when considering retirement. Many individuals may feel that they are giving up a part of themselves when they decide to stop working.</p> <p>However, there are many other meaningful activities outside of work that have an equally important bearing on identity. These may include hobbies such as artwork, exercise, reading, writing, or travel.</p> <p>While a loss of identity is a common fear for people facing retirement, in reality, retirement can give you the time to explore other creative outlets that you wouldn't have been able to partake in with a busy work schedule.</p> <p>Instead of viewing the end of work as losing part of your identity, try to shift to viewing this as a time to explore different components of who you are. This will make early retirement meaningful, not boring.</p> <h2>Anxious Due to No Concrete Retirement Plan</h2> <p>According to a 2015 survey by the Deloitte Center for Financial Services, only 49% of consumers have a formal retirement plan. The problem of not having a plan for retirement is that it leaves fears and emotions to govern your decisions, as opposed to concrete numbers. Plus, by putting a plan in place, you can see very clearly what steps you need to follow to reach a certain goal, like retiring in five years, for example. (See also: <a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make?ref=seealso" target="_blank">7 Retirement Planning Steps for Late Starters</a>)</p> <h2>Afraid of Being Bored and Restless</h2> <p>Some people simply put off retirement because they are worried about being bored with all the extra time on their hands once they're not going to the office every day.</p> <p>However, retirement doesn't mean that you have to stop working entirely. Some individuals use this time to move from a decades-long career they've grown tired of to more fulfilling employment, or even their own business.</p> <p>If your new pursuit is something that gives you the chance to vary your work schedule, that can be very stimulating, too. Additionally, some universities offer free classes to those over 65 years of age.</p> <p>You can also take up countless hobbies like yoga, dance, snorkeling, scuba diving, golfing, hiking, or biking. To stimulate the mind, you can throw yourself into an artistic endeavor or learn a new language, the ideal activity for those who choose to retire overseas.</p> <p>Retirement is not just the end of one chapter, but also the beginning of a new one. Often, the biggest roadblocks to retiring are fear-based. It can help to re-evaluate the situation by looking at the facts, instead of just relying on emotions.</p> <p>Of course, the decision to retire is a personal one, and the right age to retire is different for everyone.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/amanda-gokee">Amanda Gokee</a> of <a href="http://www.wisebread.com/4-reasons-people-dont-retire-early-and-how-you-can">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-retirement-planning-steps-late-starters-must-make">7 Retirement Planning Steps Late Starters Must Make</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-keys-to-an-early-retirement">4 Keys to an Early Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-end-of-the-4-rule">The End of the 4% Rule?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-signs-you-arent-saving-enough-for-retirement">10 Signs You Aren&#039;t Saving Enough for Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Here&#039;s How Your Taxes Will Change When You Retire</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k early retirement IRA retirement planning saving Tue, 07 Feb 2017 10:30:37 +0000 Amanda Gokee 1885695 at http://www.wisebread.com 4 Keys to an Early Retirement http://www.wisebread.com/4-keys-to-an-early-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-keys-to-an-early-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-623601680.jpg" alt="here&#039;s how to retire sooner" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Does it seem like retirement can't come soon enough? Are you tired of feeling like you're wasting time at a job you no longer enjoy, daydreaming about the day you won't have to come in anymore?</p> <p>The good news is there are several steps that you can take if retiring early is your goal. Retiring early will mean setting clear priorities and goals that you can meet, but it doesn't have to be out of reach. Consider these four tips to get there faster. (See also: <a href="http://www.wisebread.com/14-ways-to-retire-early?ref=seealso" target="_blank">9 Things People Who Retire Early Do</a>)</p> <h2>1. Slash Costs Now</h2> <p>It's easy to go on autopilot with monthly costs, but they can add up fast, especially if you're spending more than you should. By switching providers for home or car insurance, Internet, phone, and cable TV, you could save thousands a year. In fact, do you even need cable TV? What about that gym membership &mdash; are you using it enough to justify the cost?</p> <p>Could you trim expenses even further by downsizing your home or getting by with one car? Leave no monthly cost unexamined.</p> <p>While you're at it, look at the fees you're paying on your investments. Because of compounding, <a href="http://www.wisebread.com/4-sneaky-investment-fees-to-watch-for?ref=internal" target="_blank">investment fees</a> that seem small can eat a big chunk out of your retirement savings over time.</p> <p>All of these cost savings won't be enough on their own to ensure your early retirement, but over the course of a few years they can add up and enable you to retire comfortably earlier than you may have thought. (See also: <a href="http://www.wisebread.com/14-ways-to-retire-early?ref=seealso" target="_blank">14 Things to Do to Retire Early</a>)</p> <h2>2. Look for Tax Advantages</h2> <p>When planning for retirement, it's important to consider the taxes you will have to pay once you stop working. While you can contribute now to 401K or regular IRA accounts using pretax income, you'll have to pay taxes on the distributions once you start to draw down the accounts.</p> <p>On the other hand, you contribute to a <a href="http://www.wisebread.com/7-surprising-facts-about-roth-iras" target="_blank">Roth IRA</a> with money that's already been taxed, but then it grows tax-free and you'll pay no taxes when you withdraw the money. Often it's good to have a combination of both types of retirement accounts. A financial adviser can help you decide. But keep in mind that withdrawing from either of these accounts before you hit age 59-1/2 usually incurs a tax penalty.</p> <p>Taxes on Social Security are another expense to keep in mind for when you hit official retirement age. Social Security benefits may be taxed at the federal level, depending on what your total income is. But the IRS won't tax more than 85% of your benefits. Thirteen states tax Social Security benefits, while other states have <a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees?ref=seealso" target="_blank">low or no taxes for retirees</a>.</p> <h2>3. Retire Abroad Full Time</h2> <p>Retiring early means figuring out a way to live on what you save during a shortened working career. You can lower your needs drastically by changing your country code.</p> <p>If you've been working and saving in U.S. dollars, you can make that money go much further in a <a href="http://www.wisebread.com/x-exciting-world-cities-you-can-afford-to-retire-in" target="_blank">country where the cost of living is lower</a> than in the United States. Many destinations in Central and South America, as well as many parts of Asia and even Europe, are much less expensive for Americans to retire to &mdash; and if you're looking for a warmer climate, you can find that too.</p> <p>Of course, there are some logistics that you should take into consideration when retiring abroad.</p> <h3>Taxes</h3> <p>The U.S. taxes citizens or resident aliens living abroad on worldwide income, including Social Security, other retirement income and any earnings you may get from working in your new country. However, you may be eligible for the <a href="https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion" target="_blank">Foreign Earned Income Exclusion</a>, which allows you to exclude foreign earnings &mdash; up to a certain amount &mdash; from your taxable income. The exclusion is adjusted annually for inflation. For 2017 it is $102,100.</p> <p>You may also be subject to income taxes in the country where you retire, though many countries have treaties with the U.S. that make sure you are not double taxed. You'll need to research local tax laws to make sure you're in compliance.</p> <h3>Logistics</h3> <p>There are a lot of logistics involved in moving to a foreign country. You'll need to research the appropriate visa for the country you'll be living in. Many desirable locations for Americans have special visas for retirees. Generally, you'll need to show you have a certain amount of retirement income and you will not be allowed to work for a local employer on these visas.</p> <p>Think too about whether you want to sell your home in the U.S. You may want to get rid of furniture and other belongings as well, though retirement havens such as Panama and Nicaragua allow you to import a certain amount of household goods duty-free.</p> <p>Banking is another consideration. Many expats continue to hold a U.S. bank account and to transfer money between it and an account in the country where they live. If you've got a U.S. account it's also a good idea to have a U.S. travel credit card that charges <a href="http://www.wisebread.com/smarter-security-and-no-foreign-transaction-fees-the-best-credit-cards-to-use-while-on-vacation?ref=internal" target="_blank">no foreign transaction fees</a>. A U.S. card can help you purchase from U.S. websites more easily and comes in handy during trips back home.</p> <h3>Health</h3> <p>In some countries, quality health care is so cheap that expats choose to pay out of pocket for treatment and medications. In other cases, you will need to research local health insurance options or make sure your U.S. insurance covers care abroad. Medicare is not available for health care outside of the U.S.</p> <p>Other expats can be a great resource as you try to find doctors that speak English and have a good reputation.</p> <p>The U.S. State Department has more <a href="https://travel.state.gov/content/passports/en/abroad/events-and-records/retirement-abroad.html" target="_blank">resources for planning to retire abroad</a>.</p> <h2>4. Move Abroad Part Time</h2> <p>You can also considerably lower your retirement expenses just by spending a portion of the year abroad, without the commitment of leaving the U.S. entirely.</p> <p>Different people choose to set up this arrangement differently. Some will return to the same place every year, while others may prefer to try out somewhere new.</p> <h3>Taxes</h3> <p>As with moving abroad full time, you will still be responsible for paying U.S. income taxes on worldwide income, and you may be subject to local taxes as well. Many tax breaks in the U.S. and abroad are dependent on how many days per year you spend in the foreign country, so you'll need to research those requirements.</p> <h3>Logistics</h3> <p>The most important consideration when you'll be spending your time in multiple locations is your accommodations. Will you rent your home while you're away? Will you hire a property manager to make sure that everything is running smoothly in your absence?</p> <p>Consider home or apartment exchanges if you are going to be overseas for a shorter period of time.</p> <h3>Health</h3> <p>For health insurance, you may want to consider purchasing travel insurance for the part of the year that you'll be out of the country to supplement your plan back home.</p> <p>Early retirement doesn't have to be an unattainable goal. Focus on setting your priorities and using creative thinking to be able to retire when you want.</p> <p>See also: <a href="http://www.wisebread.com/12-money-moves-to-make-the-moment-you-decide-to-retire?ref=seealso" target="_blank">12 Money Moves to Make the Moment You Decide to Retire</a></p> <h2 style="text-align: center;">Like this article? Pin it!&nbsp;</h2> <p>&nbsp;</p> <p style="text-align: center;"><a href="//www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F4-keys-to-an-early-retirement&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F4%20Keys%20to%20an%20Early%20Retirement.jpg&amp;description=4%20Keys%20to%20an%20Early%20Retirement" data-pin-do="buttonPin" data-pin-config="above" data-pin-color="red" data-pin-height="28"><img src="//assets.pinterest.com/images/pidgets/pinit_fg_en_rect_red_28.png" alt="" /></a> </p> <!-- Please call pinit.js only once per page --><!-- Please call pinit.js only once per page --><script type="text/javascript" async defer src="//assets.pinterest.com/js/pinit.js"></script></p> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/4%20Keys%20to%20an%20Early%20Retirement.jpg" alt="4 Keys to an Early Retirement" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nick-wharton">Nick Wharton</a> of <a href="http://www.wisebread.com/4-keys-to-an-early-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-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/4-reasons-people-dont-retire-early-and-how-you-can">4 Reasons People Don&#039;t Retire Early — and How You Can</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-end-of-the-4-rule">The End of the 4% Rule?</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/x-exciting-world-cities-you-can-afford-to-retire-in">4 Exciting World Cities You Can Afford to Retire In</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-retirement-planning-steps-late-starters-must-make">7 Retirement Planning Steps Late Starters Must Make</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-handle-a-forced-early-retirement">5 Ways to Handle a Forced Early Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Career and Income Retirement 401k early retirement expat living abroad retirement planning travel Fri, 03 Feb 2017 10:00:09 +0000 Nick Wharton 1884232 at http://www.wisebread.com Why Your Credit Score Matters in Retirement http://www.wisebread.com/why-your-credit-score-matters-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-your-credit-score-matters-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/retired_couple_car_108348263.jpg" alt="Couple learning why credit score matters in retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've left the working world and are ready to enjoy your retirement years. So, you might be forgiven for thinking that your days of fretting over your FICO credit score are over.</p> <p>Guess what? They're not. Your three-digit credit score matters even in your retirement.</p> <p>Lenders of all kinds, not to mention credit card providers, rely on your FICO credit score to determine how well you've managed your credit in the past. Having a low score can hurt you financially, even after you've left the days of commuting to work behind you.</p> <h2>Why Scores Matter</h2> <p>Your FICO credit score &mdash; you have three, one each maintained by the credit bureaus of Experian, Equifax, and TransUnion &mdash; is a key number throughout your adult life. Lenders rely on these scores to determine if you can qualify for loans. And if your score is low, even if you do qualify, you'll pay higher interest rates.</p> <p>Generally, lenders consider a FICO credit score of 740 or higher to be an excellent one. Scores under 640 are generally considered weak by lenders, and will leave you with higher interest rates on the money you borrow.</p> <p>As you make your way through adulthood, lenders will check your scores as you apply for auto loans, mortgages, or credit cards.</p> <p>When you retire, the odds are high that you will no longer be applying for mortgage loans. However, this doesn't mean that credit scores will no longer play a key role in your financial life.</p> <h2>The Best Credit Cards</h2> <p>If you want to <a href="http://www.wisebread.com/5-best-credit-cards-for-people-with-excellent-credit?ref=internal" target="_blank">qualify for the best credit cards</a>, including ones with the <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">most generous rewards programs</a>, you'll need a high FICO score. Financial institutions only pass out their best credit cards to those customers who've proven that they have a history of paying their bills on time.</p> <p>Having a high credit score is how you'll prove to banks that you are financially responsible. And if you want to qualify for the best credit scores during your retirement, you'll take steps to make sure that your credit score is strong in your 60s, 70s, 80s, and beyond.</p> <h2>A New Car</h2> <p>Maybe you plan to buy that dream car after retirement. If you can't pay for it in cash, you'll need an auto loan. And if you want to qualify for an auto loan with the lowest possible interest rate, you'll need a strong FICO credit score.</p> <p>Auto lenders will check your credit score when you apply for financing. So make sure that your score doesn't take a dip after retirement.</p> <h2>Auto Insurance Rates</h2> <p>If you buy a new car, you'll need auto insurance, too. Guess what? Auto insurers rely on a variation of your credit score to help set their rates. Again, you'll want the highest possible credit score if you expect to qualify for the most affordable auto insurance.</p> <p>Auto insurers use something called a credit-based insurance score to set rates. If this score is strong &mdash; and your driving history is good &mdash; you'll usually qualify for lower insurance rates. Your credit-based insurance score doesn't factor in your job or income. But it will rise if you pay bills such as your credit card payments and mortgage on time every month. It will fall if you miss payments, make payments 30 days or more late, have too much debt, or have accounts that have been sent to collections.</p> <h2>Refinancing to a Lower Monthly Payment</h2> <p>The goal is to enter retirement without having a monthly mortgage payment. That doesn't always happen, though. And if you are still paying off a mortgage loan when you enter your after-work years, you might want to someday refinance that home loan to one with a lower interest rate. Lowering your rate will give you a lower monthly payment. That extra cash each month could be important once you're living on a fixed income.</p> <p>To qualify for a refinance, and for the lowest possible interest rate to make such a move financially worthwhile, you'll again need a high credit score. If your FICO credit score is 740 or higher, the odds are good that you'll qualify for an interest rate low enough to make refinancing a smart financial decision.</p> <p>The lesson here is obvious: You can't put worrying about credit scores behind you just because you've entered retirement. The best move is to continue taking the steps that help guarantee a strong credit score &mdash; paying your bills on time and keeping your credit card debt low &mdash; even after you've left the working world.</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/why-your-credit-score-matters-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</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-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</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/building-a-credit-history">Building a Credit History</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/what-the-new-credit-card-formula-means-for-your-wallet">What the New Credit Card Formula Means for Your Wallet</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-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement car insurance credit history credit score fico insurance rates mortgages new car refinancing Mon, 30 Jan 2017 10:00:08 +0000 Dan Rafter 1870059 at http://www.wisebread.com 5 Things Your Financial Planner Isn't Telling You About Retirement http://www.wisebread.com/5-things-your-financial-planner-isnt-telling-you-about-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-things-your-financial-planner-isnt-telling-you-about-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/couple_financial_planner_485026010.jpg" alt="Couple learning what their financial planner isn&#039;t telling them about retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Personal finances can get complicated fast, which is why many people seek the assistance of a financial adviser. Especially when considering your retirement, it can give you extra confidence to know that a professional is helping ensure you make the best decisions for your future.</p> <p>It may therefore come as a surprise to know that historically, financial advisers haven't been required to put your best interests first. But in April 2016, the Labor Department finalized a new rule that requires financial advisers who deal with retirement accounts to respect what's known as the fiduciary standard, meaning they <em>have</em> to put the client's interests first.</p> <p>Before, financial advisers just had to follow the suitability standard, which meant they were only required by law to provide clients a &quot;suitable&quot; plan, which might satisfy your basic requirements but isn't necessarily the best plan for you.</p> <p>When they're doing their job well, a financial adviser can help you invest your money wisely and plan for retirement. But it's always important to do your own research and stay informed. When it comes to retirement, here are some things your financial planner may not have brought to the table.</p> <h2>1. Fees May Grow With Your Assets</h2> <p>Financial advisers often charge based on a percentage of the assets they are managing for you. Unfortunately, the fees compound over time, just as your returns do. By the time you're ready to retire, that could mean you're paying thousands of dollars a year in fees.</p> <p>As your nest egg grows, keep an eye on your fees and renegotiate your rates, so you don't end up paying too much for their services.</p> <h2>2. Retiring Abroad Can Halve Living Costs</h2> <p>If you're feeling tight on funds for retirement and you're not sure how to make your money go further, there's an important alternative that you should be considering. Retiring abroad can <a href="http://www.wisebread.com/retire-for-half-the-cost-in-these-5-countries?ref=internal">cut your retirement costs in half</a>. (See also: <a href="http://www.wisebread.com/x-exciting-world-cities-you-can-afford-to-retire-in?ref=seealso" target="_blank">4 Exciting World Cities You Can Afford to Retire In</a>)</p> <p>However, many U.S.-based financial advisers are entirely focused on domestic retirement and that's what they'll help you plan for. Plus, it may be in their interest to keep you close so you don't decide to move your funds elsewhere.</p> <p>If retiring abroad is something you want to truly consider, seek an expert who brings that specialty expertise to the table. You should also do your own research, including finding online forums for expatriates to answer your questions about retiring abroad. (See also: <a href="http://www.wisebread.com/5-incredible-places-to-retire-abroad-that-anyone-can-afford?ref=seealso" target="_blank">5 Incredible Places to Retire</a>)</p> <h2>3. Travel and Retirement Go Hand in Hand</h2> <p>If you've written off the idea of traveling as being too expensive, and these views are being reaffirmed by a conservative financial planner, it's time to re-evaluate. Retirement affords you great flexibility and the price of travel may be within closer reach than you realize.</p> <p>See also: <a href="http://www.wisebread.com/how-one-woman-retired-at-60-and-traveled-the-world?ref=seealso2" target="_blank">How One Woman Retired at 60 and Traveled the World</a></p> <p>Costs in many countries are often much lower than at home, and if you plan carefully &mdash; especially if you're able to start socking away money early in your career &mdash; your monthly budget may be able to absorb the extra expense of plane tickets, accommodations abroad, food, and entertainment. <a href="http://www.wisebread.com/top-5-travel-reward-credit-cards?ref=internal" target="_blank">Rewards credit cards</a> can help you <a href="http://www.wisebread.com/9-ways-to-use-travel-rewards-cards-to-get-free-trips" target="_blank">earn free travel</a>, too.</p> <p>See also: <a href="http://www.wisebread.com/how-to-travel-full-time-for-17000-a-year-or-less?ref=seealso2" target="_blank">How to Travel Full-Time for $17,000 a Year (or Less!)</a></p> <h2>4. An HSA Could Lower Your Health Care Costs</h2> <p>If you have a high-deductible health insurance plan, you may be eligible for a Health Savings Account. As with an IRA, HSA contributions are tax-free and they grow tax-free. You can leave money in the account for years and if you withdraw the funds to pay for qualified health care costs, you will still not pay taxes on the money. If you have a balance at age 65 and want to use it for nonmedical expenses, you can, but the withdrawals will be taxable. (See also: <a href="http://www.wisebread.com/how-an-hsa-saves-you-money?ref=seealso" target="_blank">How an HSA Saves You Money</a>.)</p> <p>Keep in mind that only people enrolled in qualifying high-deductible health care plans are eligible. But if you're one of them, an HSA could be an important part in reducing your health expenses during retirement.</p> <h2>5. You May Be Able to Ditch Your Life Insurance</h2> <p>Having a life insurance policy is useful if someone else will be financially hurt when you die. However, depending on your particular situation, you may no longer have dependents after you retire. Or you may have investments and pensions that pay 100% to the surviving spouse. In that case, your spouse won't suffer financially from your death and you probably don't need life insurance.</p> <p>There are a lot of variables to consider when planning for retirement, and a financial planner can clarify your options. But while a financial planner can be a helpful resource, they aren't the ultimate authority on what's best for you. Stay informed and choose what's best for you and your family.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nick-wharton">Nick Wharton</a> of <a href="http://www.wisebread.com/5-things-your-financial-planner-isnt-telling-you-about-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retire-for-half-the-cost-in-these-5-countries">Retire for Half the Cost in These 5 Countries</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/if-youre-lucky-enough-to-receive-a-pension-here-are-6-things-you-need-to-do">If You&#039;re Lucky Enough to Receive a Pension, Here Are 6 Things You Need to Do</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-keys-to-an-early-retirement">4 Keys to an Early Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-almost-anyone-can-afford-to-retire-in-mexico">How Almost Anyone Can Afford to Retire in Mexico</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-let-these-expenses-spoil-your-retirement-abroad">Don&#039;t Let These Expenses Spoil Your Retirement Abroad</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement expats fees fiduciary financial advisers financial planners health care life insurance living abroad retiring overseas travel Tue, 10 Jan 2017 11:00:09 +0000 Nick Wharton 1870053 at http://www.wisebread.com