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Archive for the ‘Retirement’ Category

This study finds that those who retired early lost brain power – MarketWatch

Posted: September 23, 2020 at 7:57 am

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Senior Hispanic man checking his finances online at home using a laptop computer at night Getty Images/iStockphoto

People who retire early suffer from accelerated cognitive decline and may even encounter early onset of dementia, according to anew economic studyI conducted with my doctoral studentAlan Adelman.

To establish that finding, we examined the effects of a rural pension program China introduced in 2009 that provided people who participated with a stable income if they stopped working after the official retirement age of 60.

We found that people who participated in the program and retired within one or two years experienced a cognitive decline equivalent to a drop in general intelligence of 1.7% relative to the general population. This drop is equivalent to about three IQ points and could make it harder for someone toadhere to a medication scheduleorconduct financial planning.

The largest negative effect was in what is called delayed recall, which measures a persons ability to remember something mentioned several minutes ago. Neurological researchlinks problems in this area to an early onset of dementia.

Cognitive decline refers to when a person has trouble remembering, learning new things, concentrating or making decisions that affect their everyday life. Although some cognitive decline appears to be an inevitable byproduct of aging, faster decline can have profound adverse consequences on ones life.

Better understanding of the causes of this has powerful financial consequences. Cognitive skills the mental processes of gathering and processing information to solve problems, adapt to situations and learn from experiences are crucial for decision-making. They influence an individuals ability to process information andare connected to higher earningsand abetter quality of life.

Retiring early and working less or not at all can generate large benefits, such as reduced stress, better diets and more sleep. But as we found, it also has unintended adverse effects, like fewer social activities and less time spent challenging the mind, that far outweighed the positives.

While retirement schemes like the 401(k) and similar programs in other countriesare typically introduced to ensure the welfare of aging adults, our research suggests they need to be designed carefully to avoid unintended and significant adverse consequences. When people consider retirement, they should weigh the benefits with the significant downsides of a sudden lack of mental activity. A good way to ameliorate these effects is to stay engaged in social activities and continue to use your brains in the same way you did when you were working.

In short, we show that if you rest, you rust.

Because we are using data and a program in China, the mechanisms of how retirement induces cognitive decline could be context-specific and may not necessarily apply to people in other countries. For example, cultural differences or other policies that can provide support to individuals in old age can buffer some of the negative effects that we see in rural China due to the increase in social isolation and reduced mental activities.

Therefore, we can not definitively say that the findings will extrapolate to other countries. We are looking for data from other countries retirement programs, such as Indias, to see if the effects are similar or how they are different.

A big focus of theeconomics research labI run is tobetter understandthe causes and consequences of changes in what economists callhuman capital especially cognitive skills in the context of developing countries.

Our labs mission is to generate research to inform economic policies and empower individuals in low-income countries to rise out of poverty. One of the main ways we do this is through the use of randomized controlled trials to measure the impact of a particular intervention, such as retiring early or access to microcredit, on education outcomes, productivity and health decisions.

Plamen Nikolov is an assistant professor of rconomics at Binghamton University, State University of New York. This was first published by The Conversation Retiring early can be bad for thebrain.

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This study finds that those who retired early lost brain power - MarketWatch

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September 23rd, 2020 at 7:57 am

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With remote work flexibility, some people opt to relocate ahead of their retirement – CNBC

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If you are thinking of relocating when you retire, there are several things to consider before you make the move.

One of them may now be whether you should do it before you leave the workforce.

Thanks to the coronavirus pandemic, many Americans are working remotely and may be for some time to come. Several companies have added the option for employees to work from home for the rest of their career, including Twitter, which has said its employees can keep working from home "forever."

"The pandemic was unexpected, working from home was unexpected, but nonetheless many companies realized that workers can be just as productive working from home," said Lawrence Yun, chief economist for the National Association of Realtors.

"We may begin to see a boost in people buying retirement homes before their retirement."

Right now, the evidence is anecdotal, with demand rising in vacation resort areas, he said.

If you are going to relocate, you should be relocating for reasons that are going to make you happy.

Of those who have already entered retirement, 38% have moved to a new home, according to the 20th annual Transamerica retirement survey, released in September.

When choosing where to live, retirees' cited proximity to family and friends (61%), affordable cost of living (55%) and access to excellent health care and hospitals (46%), the survey found.

Whether you want to fully move ahead of your retirement, or buy a vacation home with the intent to use it full-time once you retire, you'll need to do some homework before you pack your bags.

In addition to family, cost and health care, retirees also look at the weather. Florida, which also doesn't have a state income tax, comes to mind for many, but it isn't the only warmer state retirees are flocking to.

There has been a general migration to Arizona, Nevada and Texas, as well, Yun said.

Miami Beach, Florida

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You can find a lot of information online about the area you may want to make your new home, but nothing beats giving it a trial run first. Consider extended visits if your work allows.

"You will get a pulse on the community," said Barbara O'Neill, an author, distinguished professor emerita at Rutgers University and CEO of Money Talk: Financial Planning Seminars.

"You want to find out about things like hospitals, social services, entertainment venues, [and] closest airports."

O'Neill did just that while she was working at Rutgers. She took a sabbatical and spent three months in Gainesville, Florida, in 2017 and 2018. In 2019, she did it again while working remotely. She's since left Rutgers and is living and working in Florida, about 30 minutes away from Gainesville.

Come up with a pro forma budget that has your best estimate of your income and spending after you leave your job, suggests O'Neill, whose latest book is titled, "Flipping a Switch: Your Guide to Happiness and Financial Security in Later Life."

Research the cost of living in the areas you are considering. Part of that is housing costs.

Housing affordability is a big reason people move when they retire, Yun said.

In particular, people from areas with expensive housing, like the Northeast and California, can find larger homes at much cheaper prices in other states. If they've paid off their homes, or close to it, they may be able to pocket a profit after buying their retirement home.

While prices are already rising, they may go higher the longer a person waits, he said.

"It seems like demand will remain solid for the upcoming years because the Fed has clearly made its intentions known that we will have a low-interest-rate environment," Yun said.

The mortgage rate for a 30-year fixed loan is 3.01%, as of Sept. 21, according to Bankrate.

However, just because demand may remain strong and prices may rise, you should be financially comfortable about making that retirement home decision, Yun advised.

"One wants to never overstretch their budget," he said.

Retirees tend to flock to lower-tax states, especially those with no state income tax, like Florida, Tennessee and Texas, Yun said.

Yet it may not be that simple, especially if you are still working.

You can only have one official domicile, and it is where you spend most of the year. It's where you register your car and vote.

More from Invest in You: How to take the mystery out of picking the best retirement savings plan for you Dreaming of retiring abroad? Here's what you need to know How to jump-start your retirement savings when you are in your 30s

Those who have bought a house in a low-tax state but still spend much of their time at their first residence can expect to be audited if they claim the low-tax state as their primary residence, warned Ed Slott, CPA and founder of Ed Slott & Co. in Rockville Centre, New York.

He had one case where the IRS did a three-year residency audit, which included a request for records of where the subjects spent each day, each year.

If you move out of state but are still working, you'll still be paying income tax in your employer's state. For example, if you are living in Florida, but your company is based in New York, you'll have to file taxes as a nonresident to New York.

If you relocate to a state that has income tax, there's a chance you can get caught up in being double-taxed, Slott said.

Some states have agreements that the resident state will give credit for the income tax paid to the state where the job is based, as New Jersey does for those commuting into New York. However, now that the pandemic has opened up remote work, people are moving farther away and they could wind up in a state that doesn't have such an agreement, Slott said.

Also, if you wind up working side jobs, you'll have to pay taxes to your new state of residence.

When checking out your specific tax situation, be sure to include your current state of residence. Many even high-tax states, offer huge tax benefits for seniors, Slott said.

"You might be surprised at how low state taxes are when most of your income is from Social Security and retirement accounts," he said.

After doing your research, make up columns or a matrix listing the pros and cons of staying and the pros and cons of moving, O'Neill said.

In addition to financial reasons, remember emotional ones, as well. In the era of Covid-19, a move to Texas may be too far from family members who don't want to travel by plane.

On the other hand, living in year-round warm weather allows for safer outdoor activities.

"If you are going to relocate, you should be relocating for reasons that are going to make you happy," O'Neill said.

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With remote work flexibility, some people opt to relocate ahead of their retirement - CNBC

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September 23rd, 2020 at 7:57 am

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My grandma’s secret to a comfortable retirement for the past 22 years – Business Insider

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Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.

Born in 1988, I came of age during the Great Recession. I watched as the systems my parents and grandparents relied on like job security and pension plans morphed into mythology. I've always understood Social Security and Medicare as forms of political currency, not long-term solutions I can count on in old age. I'm a card-carrying member of the gig economy, more comfortable working for now, not for later. The very idea of "retirement" terrifies me.

But like all millennials, I'm aging. My back twinges after an afternoon spent working in the yard, fine lines are forming around my eyes, and the inevitable truth is upon me: Working until I die is not a viable option.

Like many people, one of the reasons retirement has felt so impossible for me is my lack of a road map. My grandparents had pensions, which is something I won't have. But as I look at their financially secure and abundant retirement years, I realize pensions can't possibly tell the whole story.

My grandpa was a warehouse worker and my grandma was a nurse. They must have done something to prepare for retirement to wind up as comfortable as they did, and maybe it's something I can emulate.

My grandpa passed away in 2006 and my grandma Ellen Young is now 84. I recently sat down with her to ask, "How in the world have you managed to live off your retirement savings for over 22 years?"

Her answer was both scarier and more accessible than a simple pension plan. According to my grandma, the key is to factor your retirement into every single financial decision you make. This is daunting, but she assured me, "It all adds up."

For her and my grandpa, this kind of thinking began in 1960, their first year of marriage. As my grandma remembers it, my then 30-year-old grandpa "would have retired right then if he could have."

My grandma married my grandpa at the age of 24; she had already been working as a registered nurse for three years. She didn't choose nursing for the retirement benefits, but my grandpa certainly chose his job as a factory worker based on the promise of being able to retire early.

This is an example of how important it is to factor your retirement into all your decisions. While few companies offer pensions these days, most salaried positions offer retirement packages. A far-off future may not seem nearly as significant as immediate job satisfaction, but while your career is a large portion of your life, if you're lucky, your retirement years will be as well.

Selecting a job with a clear-cut retirement plan isn't the only choice my grandparents made with retirement in mind, however. They factored their golden years into every choice they made, big or small. "I've always been frugal, only shopping sale items and saving every spare cent," my grandma said. For her, the single most effective savings come from avoiding interest-bearing loans all together.

My grandparents bought their first home in 1962. And while they purchased an older home sitting on 40 acres for the jaw-droppingly low price of $5,500, it cost them every penny they had. Always thrifty, my grandma refused to pay a penny more to drill a well or build her dream house until they had saved enough to qualify for a small mortgage with a low interest rate. It took three years, and even when they were ready to build a brand new house on their property, my grandma, with her eye always on retirement, kept her vision modest.

Understanding that this was the most important purchase she would ever make, my grandma's financial strategizing didn't end there. Over the years, she made as many extra payments on the mortgage as she could to pay down the principal. There were two layers to this retirement strategy: First, by paying down the principal as quickly as possible, she saved thousands of dollars on interest. And second, by eliminating debt, she alleviated her future retired self from making sizeable monthly payments.

Saving for retirement, as my grandma pointed out, doesn't mean just putting money in the bank, it also means keeping it there by minimizing your financial obligations.

It also means making that money self-propagate. When my grandpa's company offered him stock purchases, they began investing $5 at a time, increasing the amount as they could afford to. When their investments paid off, they took the money out and brought it to an investment broker who lived locally. In my grandma's view, trusting your broker is the single most important aspect of investing in stock, and for her, this meant working with someone who she could meet face-to-face.

Over the years, she stuck with relatively safe investments of her choosing, but she credits her broker with this crisis-averting advice she was eager to pass on: Diversify your portfolio.

"I was always careful with my money. I did my research and made sure I only invested in financially sound companies," she told me. But living in a motor town like St. Louis, and with a son-in-law who worked for Ford, she was comfortable putting all of her money in Ford stock.

"But when I tried to put all my money in Ford, my broker said he couldn't let me do that," she said. "Years later, after I retired, all those motor companies crashed, and I couldn't believe how much I would have lost if I hadn't followed his advice."

Individual retirement accounts played an important role in my grandparents' retirement plans as well. Taking any money out of your paycheck for a later date may seem impossible, but "later," my grandma told me, "you'll be glad you did."

As we spoke of retirement, we did the math. My grandma began her nursing career in 1957 and retired in 1998. Her life as a "working girl," as she calls it, lasted 41 years. She has been retired for 22 years, over half the amount of time she worked. She thinks of her retirement so far as the kind of golden years we all hope to enjoy: trips to Egypt and Germany, holding court with members of her Rose Society, scrapbooking with friends, and cooking large family dinners.

When I asked her what she would tell someone hoping to retire as securely as she has, she responded simply, "You can't work forever. You have to retire, so you need to plan for it."

Our conversation was made up almost entirely of wild numbers like $5,500 for a hilltop property with a house and $5 as a semidecent retirement contribution, but I realized the advice she gave me still works.

Even if $5 in 2020 will barely cover a medium latte, even if my used car is three times the cost of 40 acres in 1962, even if I don't have a pension, I can pay down the principal on my home loan, I can put a little more toward my IRA each month, and I can delay major purchases until I can pay for them in cash.

Things change, prices go up, social safety nets come and go, but some truths are immovable. I can't work forever, so I better start planning.

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My grandma's secret to a comfortable retirement for the past 22 years - Business Insider

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September 23rd, 2020 at 7:57 am

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Most Americans are behind on their retirement savingshere are some tips to catch up – CNBC

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According to retirement-plan providerFidelity Investments, you should have saved the equivalent of 10 times your income by age 67 to have a comfortable retirement. This works out to about $544,440 in savings based on the U.S. Bureau of Labor Statistics'median American earnings data, and many experts will say you need $1 million or more.

It's a little daunting to imagine saving half a million dollars or more, so experts at Fidelity suggest you should aim to hit smaller savings benchmarks throughout your life. Fidelity's rule of thumb says you should have the equivalent of one year's salary in the bank by age 30, which would be about $40,508 according tomedian U.S. earnings.

But many of us fall short of that goal, a2020 TD Ameritrade report finds. The survey, which polled 2,000 U.S. adults ages 40 to 79 with at least $25,000 in investable assets, reveals that only 14% of 60-somethings have more than $500,000 saved.

Meanwhile, one in five people(20%) in their 70s have less than $50,000 in the bank, and two-thirds (66%) of 40-somethings have less than $100,000 saved for retirement.

"Having one year's income of accumulated savings by 30 is a very achievable goal, but I don't think most hit it," saysBrandon Renfro, a Texas-based certified financial planner. "A major reason is simply a delayed start."

If you're feeling behind on your savings goals, Renfro has tips to help you catch up.

First focus on your savings rate to help make up the difference says Renfro. Fidelity projects that saving 15% of your salary starting at age 25 is more than enough to put you on track for retirement. Using a percentage, rather than a dollar amount, means that as your salary goes up, in theory your savings will, too.

For instance, saving 15% of a $40,000 salary works out to $6,000 per year, or $30,000 over five years. And if you invested the money in a retirement account, like a 401(k) or IRA, it's growing year-over-year. Ideally, the money in your retirement investment account is earning anywhere between 5 and 8% in annual returns of course that can go up and down depending on the market, but that's why investing for retirement is a long-term plan.

But if you're just starting to save at 30, you've missed out on five years of saving, plus all the interest you could have earned. To catch up, you'll need to think about saving more than 15% in order to make up for it. Start now, contribute what you can presently afford and stay consistent.

"Don't try to do it all at once," says Renfro. "So if you just turned 30, maybe plan to get back on track by 35." Look at your budgetand see what savings rate you can afford. If it's realistic, put aside 5%, 10% or even 15% like experts suggest. Then, try and increase this percentage using a few of the suggestions below.

If you've only started saving in your 30s, there's still plenty of time to catch up. This is the decade to kick your career into high gear and seek out opportunities and promotions that can propel you from making entry-level wages to comfortable earnings. As you advance in your career and earn more money, you can increase the amount you save, especially if you avoid lifestyle creep.

If you get a big raise, celebrate by bumping up your savings rate before buying a new car or booking a big vacation. One way to enjoy your success is by making sure your future self is well taken care of. Even if you just get a cost-of-living increase of 3%, consider putting 2% toward your retirement and pocket the 1%.

Look for other ways you can divert spending toward retirement savings."For example, you can pay off a car and redirect your car payment into an IRA or increase your employer plan savings," says Renfro. This approach works well because if you're already used to making a car payment, then putting it toward your savings won't feel like you're cutting into your spending money.

If you don't have an employer-sponsored account, set up an automatic transfer from your checking account into a savings account so you don't even think twice and try to spend it.

While it might seem daunting to think about working up to a 20% savings goal, an easy place to start is with your employer's matching contributions, says Renfro.

"Make sure you contribute enough to get every matching dollar available,"Renfro tells CNBC Select. A 5% employer match could get you from a 10% savings rate to 15%, at no cost to you whatsoever.

And if your current employer doesn't offer matching contributions, consider this perk when you think about your next career move.

"For someone nearing 30, a retirement plan with even a slightly higher match will make a huge difference in savings over the course of a career," says Renfro. You still have a few decades to earn on that money, so a 1% to 2% increase in matching will add up over time.

Aside from employer contributions, consider investing any potential cash windfalls into your retirement account. A common example is your tax return. But you might also receive a year-end bonus, family money, wedding gifts or cash from selling an asset, such as a car.

With retirement accounts, such as 401(k)s and IRAs, there are contribution limits to consider. So while you might want to rapidly increase your savings to make up for lost time, there's only so much you can put into these accounts. In 2020, people under age 50 can contribute up to $19,500 to your 401(k) account, and up to $6,000 to your IRA account.

There is also steep penalty to withdraw money from a traditional, or pre-tax, 401(k) and/or IRA account before the age of 59 and a half. You can withdraw the after-tax money you've contributed to Roth 401(k) and Roth IRA before retirement penalty-free, but you must wait until age 59 and a half to dip into the earnings. With some IRA accounts, there is a fee for using the money before you've had the account open for five years.

With that in mind, you should do your best to avoid withdrawing from these accounts. While you might be eager to build up your retirement savings, it's important to remember that retirement doesn't have to be your only financial goal. It's also important to have a healthy emergency fund and a clear plan to pay off your debt. All of these are important when thinking about having a healthy financial future.

Even if you don't have a lot of extra cash after paying your bills, anything you save now will grown thanks to the power of compound interest. When you're not ready to invest yet, ahigh-yield savings accountis a good place to stash your money. You can earn a higher average interest rate (APY) than traditional accounts, which are currently around 0.05%

You don't need to start with a lot. Setting up a weekly $20 direct deposit from your checking accountinto a high-yield savings with an APY of about 1% would help you save $1,000 in about a year. Doubling it to $40 per week would save you $2,000 per year. Yes, that's not $40,000, but it's a start. And over time, you can increase the amount you save with extra cash you get through tax returns or year-end bonuses or by bumping up your monthly contribution by 1 percentage point or $5 per month or whatever you think you can afford.

To get started, look for a high-yield savings account that has zero monthly fees and no minimum deposits or balance requirements.

CNBC Select's top pick isMarcus by Goldman Sachs High Yield Online Savings, with no fees whatsoever and easy mobile access. It is an easy-to-use, straightforward savings account for when you're just getting started.

Information about the Marcus by Goldman Sachs High Yield Online Savings has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication. Goldman Sachs Bank USA is a Member FDIC.

None to open; $1 to earn interest

Up to 6 free withdrawals or transfers per statement cycle

TheAlly Online Savings Account, which currently offers a higher APY and also comes with no fees, is another popular choice. Account holders can put their money into different "buckets" within the same savings account, so it's very easy to plan ahead for multiple goals. For example, you can create a designated fund for a down payment and another for emergency savings.If you're looking for a way to stay motivated and remind yourself of the good things to come, this feature might help you stay on track.

On Ally Bank's secure site

Up to 6 free withdrawals or transfers per statement cycle

Yes, if have an Ally checking account

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staffs alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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Most Americans are behind on their retirement savingshere are some tips to catch up - CNBC

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September 23rd, 2020 at 7:57 am

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Retirement is coming, but it won’t be smooth sailing – WATN – Local 24

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Director Mike Rallings has made it clear he will continue working until next April, but with everything changing, it won't be easy.

MEMPHIS, Tenn Memphis Police Director Mike Rallings, is scheduled to retire next April.

I am going to work up to my last day, he says.

But hes in for a rough time.

The murder of George Floyd, the shootings of others by police officers has changed everything. Then, toss in a pandemic, and youve got big problems.

The gangs, the guns, the drugs, the domestic violence, the Director says, has really plagued our community. And unfortunately, our community has spoke out about a lot of things, but there hasnt been a lot of talk about violence. And to me, Rallings says, that is what plagues Memphis.

There has been talk of defunding police. It does not mean shutting down departments. It means shifting money from police to other agencies.

Director Rallings says I dont think many people who make these plans, know what defunding police means.

He wants to hire at least five hundred more officers.

We are grossly understaffed, he says. If you go to Chick-Fil-A, he says, ...there are more individuals working in Chick-Fil-A then we have on average on any given shift, and we have four shifts at our precincts.

Clearly frustrated, Director Rallings says If you want more people in the community serving chicken versus keeping you safe. Thats a terrible choice to make.

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Retirement is coming, but it won't be smooth sailing - WATN - Local 24

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September 23rd, 2020 at 7:57 am

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If youre home-rich but cash-poor, heres what to know about reverse mortgages – CNBC

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If you're thinking about a reverse mortgage, be prepared to learn a lot about a complicated financial commitment.

With a reverse mortgage, you can convert part of the equity in your home into cash instead of selling, provided you're at least 62 years old.As long as you continue paying taxes and maintaining the home, you cannot be evicted.

It may sound like the answer to your retirement cash prayers, but complexity and costs are among the factors to consider.

Here's how it works. Instead of a debt that gets lower as you make payments to the bank for a regular mortgage, a reverse mortgage is the exact opposite.

You draw out funds and interest builds up, while the balance grows larger and you hold less equity in your home.

Keep in mind,you must use the funds to first pay off any existing mortgage on your home.

For loans insured by the federal government,the amount you can borrow depends on the age of the youngest borrower, current interest rates and either your home's appraised value or the $765,600 maximum set by the Federal Housing Administration whichever is smaller.

You don't repay the lender until you permanently move out or die.

More from Invest in You: How to get more years for your retirement buck Gen Z needs to know some hard facts about saving for retirement Here's how to keep the well from running dry in retirement

Paymentstoyou vary widelywith different types of reverse mortgages. Possibilities include a one-time payment, monthly payments, or leaving the funds in a line-of-credit that can grow over time if unused or some combination of options.

Most popular is the variable-rate home equity conversion mortgage, according to Wade Pfau, professor of retirement income at the American College, in Bryn Mawr, Pennsylvania. This type of mortgage, aka an HECM, is insured by the Federal Housing Administration and offers several payment options.

Other arrangements are the proprietary reverse mortgage, a private loan backed by a company, and the single-purpose reverse mortgage offered by some state or local government agencies.

Maica | E+ | Getty Images

When you're considering a reverse mortgage, ask yourself if the house will work for you the rest of your life, says Carolyn McClanahan, a physician and certified financial planner who is founder and director of financial planning at Life Planning Partners in Jacksonville, Florida. Scout other possibilities, she advises, such as selling the house so you can use the money for a less-expensive property or to rent.

With a reverse mortgage, you have to be sure you can afford your home forever,McClanahan says.

On the plus side of a reverse mortgage, there are two pros:

On the minus side? Here are the cons:

Applications for reverse mortgages rose 15%in March from the previous month as people turned to the loans to avoid tapping retirement investments in a down market.

And there's another potential reason we'll see more interest in reverse mortgages. Although retirement communities and assisted living facilities have become more common in recent decades, the current Covid-19 pandemic may make large groups of older people living together in one place look like not such a good idea after all, McClanahan says.

This new dynamic could mean that more people will try to age in place instead of selling and moving.

Having more equity built up in the home than in savings is a common reason for turning to a reverse mortgage.

In other words, some people are "home-rich and cash-poor," Pfau said. "They might not have a lot of savings."

Several factors should be in place for a reverse mortgage to work.

[For] an older person who has a home that is aging-friendly in a community that's also aging-friendly, it's probably an OK idea," McClanahan said.

A good strategy could be taking some of the initial money and putting it into modifications to make the home adaptable for someone as they age.

Someone who's financially responsible could benefit. "Don't use [a reverse mortgage] because you want a bunch of money to buy a boat," Pfau said. "If someone can't deal with having the cash, they might be better having their home equity tied up and not available."

A reverse mortgage needs to be a family discussion. "Make sure the children understand," McClanahan said. "We have a huge problem, in that people don't talk over their finances with their children until they are in trouble."

Some families might be able to avoid actually using a reverse mortgage. A client of McClanahan's created his own version, in which he paid his father to help with his living expenses. The son inherited the house when the father died.

Since 2015, people who want a reverse mortgage must undergo a financial assessment to demonstrate they can maintain the home and keep up with property taxes and other costs associated with ownership.

You generally have up to a year after moving out to either sell or come up with the repayment, Pfau says. The category of non-borrowing spouse, created in 2015, means the remaining spouse can remain in the house.

The home must be your primary residence, and you can't be delinquent on any federal debt.

You have to participate incounselingwith a HUD-approved counselor who specializes in home equity conversion mortgages.Counseling is a good idea, McClanahansays. "When people are doing these reverse mortgages, they need the money so much they discount the bad things that could happen," she said.

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If youre home-rich but cash-poor, heres what to know about reverse mortgages - CNBC

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September 23rd, 2020 at 7:57 am

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Here’s how to take the mystery out of picking the best retirement savings plan for you – CNBC

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Saving for retirement is crucial. Yet trying to figure out the best retirement plan may leave many people confused.

You may have the option to contribute to an employer-sponsored plan, like a 401(k) plan. There are also individual retirement accounts: the traditional, into which contributions are made pre-tax, and Roth IRAs, in which you contribute money after tax.

There are a number of factors to consider in making your decision, depending on your age, employment and income.

You may have the ability to contribute to a retirement plan sponsored by your employer, typically a 401(k). Contributions are automatically deducted through your paycheck pre-tax, which lowers your table income. Once you withdraw the money in retirement, it will be taxed as income. The rate will therefore depend on your tax bracket at the time.

The big advantage of the 401(k) is that you can save up to $19,500 for 2020, regardless of income, said personal finance expert Chris Hogan, author of "Retire Inspired" and "Everyday Millionaires." He is also part of the Ramsey Solutions group and hosts an online show, "The Chris Hogan Show.

With IRAs, you can only contribute $6,000 this year. If you are age 50 or over, you can save an additional $6,500 in your 401(k) this year or an additional $1,000 in your IRA.

With a 401(k), your employer may also match up to a certain percent of your contributions. More than three-quarters, 76%, received an employer contribution in the second quarter of 2020, according to Fidelity. The average employer contribution was $1,080.

If you have an employer match, you should at least put enough into the 401(k) to take full advantage of the match, Hogan said.

"It's free money," he said.

When you hit 72, you'll be required to take a required minimum distribution, or RMD, from your 401(k) whether you want to or not. Those facing an RMD in 2020 are allowed to skip those withdrawals thanks to the CARES Act.

Contributions to Roth IRAs are made after tax, so you don't have to pay taxes when you take money out in retirement.

However, there are income limits. You can contribute the maximum of $6,000 (or $7,000 if you are 50 and over) if you make less than $196,000, if you are married and filing jointly, or less than $124,000 if you are single. You can contribute a reduced amount if you make between $196,000 and $206,000 and are married or between $124,000 and $139,000 if you are single.

If you are younger, a Roth may be the way to go, said David Clausen, a Los Angeles-based certified financial planner and wealth management advisor for Northwestern Mutual.

"It is great to build up those Roth funds when you are younger because you may not qualify when you are older," he said.

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Pete Hunt, a CFP and director of client services at Exencial Wealth Advisors, is a huge fan of Roths because he thinks tax rates will only go higher in the future. Therefore, it's better to pay taxes now at the lower rate, he said.

"I recommend it to all my clients, unless they are in a situation where they think they will make significantly less income in the future," said Hunt, who is based on Charlotte, North Carolina.

There are also no required minimum distribution with Roths and you can withdraw your contributions at any time, tax- and penalty-free. You generally can't tap into any earnings until you reach 59. You also typically have more investment options than you do in a 401(k).

It also doesn't have to be an either-or situation. If you have a 401(k) but also qualify for a Roth IRA, do both, Hunt said.

First, contribute up to the employer's match for the 401(k). He then recommends putting money in a health savings account, if you have a high-deductible health-care plan. After that, put money into a Roth, he said.

"I like having a Roth IRA, if they are eligible for it, just because it gives a lot of flexibility that if they need that money, they can pull the contributions at any time for any reason," Hunt said.

For those who don't qualify for a Roth IRA, contribute as much as you can to your 401(k) or traditional IRA.

A Roth 401(k) combines what is best about a 401(k) and a Roth IRA.

Contributions are made after tax, so you won't pay taxes when you take the money out in retirement, like the Roth IRA. However, like the traditional 401(k), there are no income limits and you can contribute up to $19,500 this year, plus the additional $6,500 for those 50 and over.

When it comes to choosing between a Roth 401(k) and a traditional 401(k), Hogan said it's a Roth 401(k) all day long.

"That's putting almost $20,000 away tax-free each year," Hogan said.

Hunt also generally recommends the Roth 401(k).

"A Roth 401(k) essentially allows you to put more money away than a traditional 401(k), even though the amounts are technically the same," he said.

"$19,500 (or $25,000 if over age 50) of after-tax money is far more valuable than the same dollar amount in pre-tax money, especially over many years."

There is just one caveat, Hogan pointed out. If your employer is offering a match, it is treated like the pre-tax 401(k), which you will pay taxes on when you take it out during retirement, he said.

Roth 401(k)s are also subject to RMD rules, which means you'll have to start taking money out by age 72.

A traditional IRA is good for those who don't qualify for a Roth IRA or don't have a 401(k). An IRA can also be used to roll over any 401(k)s from previous employers.

Generally, you should never leave your 401(k) from a previous job with that employer, Hunt said.

If you are happy with the investment options in the plan, then you can roll it into your new 401(k) to keep things simple, he said. However, if you had a plan with high expense ratios, then roll it into an IRA.

With IRAs, you have a $6,000 contribution limit for 2020, or $7,000 if you are age 50 and older.

A Roth 401(k) essentially allows you to put more money away than a traditional 401(k), even though the amounts are technically the same.

Pete Hunt

certified financial planner

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Here's how to take the mystery out of picking the best retirement savings plan for you - CNBC

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September 23rd, 2020 at 7:57 am

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CalSavers will help people save for retirement. What to know – Los Angeles Times

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Good morning. Im Rachel Schnalzer, the L.A. Times Business sections audience engagement editor, back with our weekly newsletter. Its a vast understatement to say that Californians have been feeling the financial pinch of the coronavirus crisis. But even before the pandemic began, many across the state were living in dire economic straits a reality that a new state retirement program, launched in July 2019, aims to address.


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Nearly half of working Californians are on a trajectory to retire in economic hardship, says Katie Selenski, executive director of CalSavers, which will offer potentially millions workers an automatic way to save for retirement.

CalSavers targets workers in the private sector who dont have access to a retirement plan at work, Selenski says. As Margot Roosevelt reported last year, employers with five or more workers will eventually be required to sign onto CalSavers and facilitate putting a cut of workers paychecks into Roth IRAs if they dont already offer their employees a way to save and invest for retirement.

Were approaching an important deadline for employers that dont sponsor a retirement plan: Those with more than 100 employees must register with CalSavers by Sept. 30.

Heres what employers and workers should know about the program.

What does the CalSavers program offer to workers and employers?

First and foremost, CalSavers offers workers including part-time and short-term employees an easy way to save for their retirement. When people have access to an automatic enrollment in a workplace retirement plan, theyre 15 times more likely to save, Selenski says. One of the big drivers of our retirement and security problems in the state is that so many millions of Californians dont have access to an easy workplace plan where they can just set it and forget it.

CalSavers has benefits for employers too. There are three main reasons employers havent been offering retirement plans, Selenksi says: cost, administrative burden and the fiduciary liability that comes along with sponsoring a plan. CalSavers is designed to address these concerns. In addition to being free for employers, We have made it as easy as possible for them to facilitate their employees payroll deductions, Selenski says. Plus, the employers are not the plan sponsor, so they dont have the fiduciary liability.

What are the deadlines for businesses, and how do they sign up?

Businesses with more than 100 employees must register with CalSavers by Sept. 30. Those with 51 to 100 employees have until June 30, 2021, to register, and those with five to 50 employees have until June 30, 2022.

Companies that already sponsor a retirement plan or that have fewer than five employees dont have to sign up.

Businesses that fail to register will get a notice from the state. If they dont have what the state considers a good reason and if they still havent signed up within 90 days of receiving the notice, financial penalties start kicking in, according to the CalSavers website.

To get started, employers should visit the CalSavers website to register and confirm their information. It takes about two minutes, Selenski says. After registering, employers upload their roster of employees, and the state contacts those workers, who have 30 days to opt out of the program. CalSavers will tell each company which of its staffers havent opted out, and from there, employers will need to facilitate the deductions each payroll cycle.

If employers have questions, CalSavers is willing to help, Selenski says. We have a dedicated onboarding team to work with employers or their payroll representatives to get through that first payroll cycle.

What should employees of businesses getting involved in CalSavers know?

For workers, participation in CalSavers is completely voluntary. But they do need to opt out if they dont want to participate, Selenski says.

CalSavers says it will reach out to workers by either mail or email, using addresses provided by the employer, so workers may want to make sure their company has up-to-date contact information and check those mailboxes regularly.

Those who dont opt out of the program will be enrolled at a default setting of 5% of gross pay. That money is taxed, taken out of the workers paycheck and deposited in the retirement savings account. The worker can adjust the rate at any point to as little as 1% or as much as they want. The program also has an automatic increase feature that notches up the savings rate 1% annually until it reaches 8%, unless the worker decides otherwise.

CalSavers provides a number of investment options with varying degrees of risk. If workers do not select a specific investment option, their first $1,000 in contributions gets invested in the CalSavers Money Market Fund and subsequent contributions are invested in a target retirement date fund based on their age, according to the CalSavers website. Workers can change their investment options at any point.

A person with more than one job could be enrolled in CalSavers through each employer, and could choose to contribute through all, any or none of those jobs, Selenski says. If the person doesnt want to participate at all, they would have to opt out multiple times: once per participating employer.

Its important to note that the retirement account is a Roth IRA, and that the Internal Revenue Service has rules restricting the amount of money that each person is allowed to contribute to such accounts each year. High earners and the spouses of high earners are at risk of exceeding that maximum if they enroll in CalSavers and its their responsibility to keep their savings rate low or opt out of the program so as to stay within the limits.

What about Californians who dont have access to any retirement plan through work?

CalSavers lets people enroll by themselves under those circumstances. You must have earned income, be at least age 18, have a bank account from which you will make contributions, and provide some personal information, the program says on its website.

What are the limitations of CalSavers?

Some investment experts and human resource professionals caution employers about enrolling with the CalSavers program without first exploring alternatives. Now is a good time to consider your options when selecting retirement plans, says Linda Duffy, founder and president of human resources consulting firm Ethos Human Capital Solutions.

Although participating in CalSavers is free, businesses are going to be forced to take the time to allocate resources to register for the CalSavers program and deposit contributions every pay period, says Danielle Sesock, senior vice president of sales at Ryding Co., which works with business owners to pick retirement plans. They have to set aside the time to administer the program, but they have no oversight of the program. Because offering retirement plans can be a way to attract and keep talent, many employers want more control, Sesock says.

In addition, there are tax benefits for employers that offer retirement plans and match a portion of their employees contributions, which they cant do with CalSavers, says Phuong Jennings, a regional vice president at consulting firm Economic Group Pension Services. Plus, Jennings says, the flexibility of private plans might serve workers better as well.

CalSavers purpose is to give more workers in California access to a retirement savings plan, but its not necessarily the best option: Selenski acknowledges businesses may want to offer private plans instead. 401(k)s have some substantial advantages over an IRA for workers who can afford the higher contributions and for employers who can afford to manage and sponsor a plan, she said via email. Were here for folks who cant.

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Banks say cardholders can get help during the pandemic. But it may not be easy, columnist David Lazarus writes. He suggests that those struggling with credit card debt reach out to their bank to learn what options are available.

What will offices look like in the post-COVID future? Carolina A. Miranda profiles a Hollywood co-working space that has managed to survive throughout the pandemic.

Millions of California workers at smaller businesses now have job protections that will allow them to take time off to bond with a new baby or care for sick family members. Melody Gutierrez breaks down the new legislation.

The Pregnant Workers Fairness Act, which would provide workplace protections for women, has passed the House. HuffPosts Emily Peck outlines the accommodations the act would require if it becomes federal law

A sports apparel store operator in Torrance has filed a lawsuit against L.A. County in an effort to push the country to ease virus restrictions. Roger Vincent reports on the perspective of businesses operating in indoor malls during the pandemic.

The Government Accountability Office has found the selling of junk health plans favored by Trump is rife with deception, columnist Michael Hiltzik writes. He explains how the GAOs undercover staff were repeatedly misled by health plan sales representatives.

A reader asked us: If my co-worker has COVID-19, does our employer need to tell me?

Yes, according to the Los Angeles County Department of Public Health. If an employer learns about a case of the coronavirus in the workplace, they must notify all workers who were potentially exposed to the infected individual. However, the employer must also maintain the confidentiality of the employee with COVID-19. It is a violation of a patients rights to reveal private medical information, a spokesperson for the department explained via email.

In addition to informing potentially exposed employees, employers should communicate with their local health department, as well as the local health department of any COVID-19-positive employee, to receive further guidance, per the California Department of Public Health.

If youre an employer and curious about best practices and county guidance, its worth checking out this FAQ sheet created for managers. And if youre an employee concerned that your employer is violating public health protocols, you can call the L.A. County Department of Public Health at (888) 700-9995 or submit a complaint online.

Its worth noting that rules regarding communication about potential virus cases in the workplace vary by location. If you work outside L.A. County, you should reach out to your local health department for more information.

Have you had trouble buying a home desk for your child? As many students continue distance learning, its been hard to find desks in stock at many online retailers. Times contributor Bonnie McCarthy offers some tips on how to track down a desk for the remote learners in your home.

Have a question about work, business or finances during the COVID-19 pandemic, or tips for coping that youd like to share? Send us an email at, and we may include it in a future newsletter.

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CalSavers will help people save for retirement. What to know - Los Angeles Times

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September 23rd, 2020 at 7:57 am

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College-Based Retirement Communities Have Been Upended by Covid. Are They Still Worth It? – Barron’s

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When Gordon Evans hopped on his bicycle and left his Ohio retirement community this past spring after two months of sheltering in place amid the pandemic, he found that all of the seniors were gone. The juniors, sophomores, and freshmen, too.

The 88-year-old Evans is a resident of Kendal at Oberlin College, one of a growing number of seniors opting to live in university-based retirement communities that offer a host of residential optionsfrom independent living to assisted living to skilled nursingto allow one to age in place along with the cultural offerings and vibrancy of a college campus.

They are attractive because of what I call the trifecta of what retirees today want: They want active, they want intellectually stimulating, and they want an intergenerational retirement environment, says Andrew Carle, an adjunct professor at Georgetown Universitys Master of Science in Aging & Health Program. They dont want to retire to what I call an elderly island.

Yet that is what the coronavirus has basically turned the residences into. Not only had his facility closed its doors to visitors, but as Evans pedaled across the Oberlin campus, every corner was quiet, the students dispersed as they had been since March when the school moved to virtual learning to combat the spread of the coronavirus.

It looks like that film that came out shortly after World War II about what life would be like after the nuclear bomb dropped, Evans says. Its just vacant.

For those living at some of the several dozen university-based retirement communities across the country, the tenor of life changed the day campuses shut down. In New York, the intergenerational choir of Ithaca College students and seniors at nearby Longview stopped singing. And in Virginia, the drumbeats sounding morning formation at Virginia Military Institute could no longer be heard at nearby Kendal at Lexington.

The universities are very generous in opening up programs, arts, music, lectures, says Bruce Summers, 74, a retired Federal Reserve official who had just moved into his new home, at the Kendal at Lexington, with his wife in February. All of that was taken away from us.

Now, as the fall semester continues with restrictions on the auditing of classesand with some campuses still empty of students and many canceling sportsresidents of these communities are finding themselves isolated in a way they didnt necessarily anticipate.

Whats more, in the age of Covid, do seniors want to live in a 20-story building, even if it does have chandeliers in the lobby, sushi for dinner, and an aquatic club, like the soon-to-open Mirabella at Arizona State University?

Barrons brings retirement planning and advice to you in a weekly wrap-up of our articles about preparing for life after work.

Congregate-care living in general is risky, with nursing homes some of the hardest-hit communities by the pandemic. Many seniors recognize they are at a higher risk and dont want to expose themselves to the virus by attending in-person classes or mingling with students.

Indeed, the virus has accelerated the shift toward technology in these communities, with iPads and social-media programs used to promote connection. Many seniors have recently transitioned to remote classes through the Osher Lifelong Learning Institutes program for the over-50 crowd with 124 sites set not only on college grounds, but also on satellite campuses inside the senior facilities or elsewhere in towns around the country.

Enrollment in live and recorded classes has declined in some programsincluding at the University of California, Irvine, for example, where membership dropped to 400 from 763 before the pandemic. Although many programs have lost some enrollment, Steve Thaxton, the executive director of National Resource Center for Osher Lifelong Learning Institutes, says there has been a silver lining to the digital transition: access for the seniors who dont drive or have physical limitations.

Still, for the seniors who banked on a rich cultural experience, the pandemic might lead some to rethink the costs and benefits. Living in these places can be pricey: The average cost of a unit in a continuing care retirement community is $3,665 a month, according to the National Investment Center for Seniors Housing & Care, or NIC. Many have an initial entrance fee, which may be returned after death, averaging $384,000. It can be much higher, though. At the Mirabella at ASU, which is set to open in January, the initial fee ranges from $250,000 to $1 million, and $4,195 to $6,321 monthly.

The senior communities relationship to their neighboring universities varies as much as their floor plans. Just a few are physically on campus, such as Lasell Village at Lasell University in Newton, Mass., or the $167 million ASU residence. Some places may be populated with alumni and retired faculty who are actively studying alongside the traditional students. But most are adjacent or within 2 miles, and the collegiate relationships arent formalized in terms of governance or oversight, according to Zeigler, an investment bank that tracks trends in senior living and care.

The universities are very generous in opening up programs, arts, music, lectures. All of that was taken away from us.

Despite safety measures, the virus continues to spread. Though there arent any Covid cases at Kendal at Oberlin now, two staff members at tested positive for the virus in July. At Lasell Village, five died in April in the unit serving residents with cognitive and physical impairments, as well as one in the independent living unit who was on hospice. At present, there are no known cases at Lasell Village, and the five-year wait list for apartments remains unchanged.

Its not just being away from the students thats been hard for residents, but family and friends are restricted from visiting because of pandemic safety protocols. To combat loneliness, Lasell Village instituted a buddy system, pairing up single residents, and it has since expanded it to any four households.

Still, despite such efforts, some retirees have delayed their decision to relocate, and elsewhere have changed their mind. In some cases, people arent moving in just because of paralysis associated with Covid; not literally paralysis, but fear, said Beth Mace, NICs chief economist, of the trend across the board in senior living. That could be fear from adult children who often influence their parents on where they are going to live. It could be fear in general about Covid and where am I going to be safer? It could be operators have chosen to limit move-ins.

Some seniors, meanwhile, are bummed out but bent on making the best of a bad situation. Gordon Evans and his wife, Barbara, long to join their Oberlin classmates who have resumed in-person instruction. They miss studying in the library alongside them, or eating beside them in the dining halls.

Though the virtual classroom is not the same, Gordon Evans says his professors lectures about the transformation of Eastern Europe had helped him and Barbara reconnect to Oberlin and the world that they had traveled around four times while in the foreign service until Gordon retired in 1982.

But since sitting beside the students isnt possible now, the couple have cracked open their books and are dutifully studying from home. At the top of their curriculum now? A Zoom class on China.

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College-Based Retirement Communities Have Been Upended by Covid. Are They Still Worth It? - Barron's

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September 23rd, 2020 at 7:57 am

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3 things to do immediately if you have no retirement savings – Fox Business

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Barron's senior writer Reshma Kapadia and Barron's Roundtable discuss how coronavirus upended some people's retirement plans and what can be done to make up for that lost capital.

If you have even $1 saved for retirement, it might surprise you to know that you're doing better than a lot of other Americans. A recent Federal Reserve report found that nearly a quarter of working Americans don't haveanyretirement savings at all. This problem was worst among adults 18 to 29, with 42% saying they hadn't started saving, but perhaps more concerning is the 13% of Americans 60 and older who said they had no money to fall back on in retirement.


If you're one of those Americans who has not begun saving yet, it's time to change that. It probably won't be easy, especially for those who have been hit hard by the coronavirus pandemic and recession, but there are still a few steps you can take now to set yourself up for retirement. Do these three things first.

The first thing you must do is set your target retirement age and dollar amount so that you know how much you must save per month to reach your goal. You can choose any age that you'd like to retire at, but understand that you may have to revise your target if you find out your initial goal is not feasible. Subtract your chosen retirement age from your estimated life expectancy to get the approximate length of your retirement. Plan to live to at least 90 if you're reasonably healthy. It's always better to overestimate than underestimate when it comes to retirement savings.

Next, add up yourestimated annual retirement costsand multiply them by the number of years of your retirement, adding 3% annually for inflation. Use aretirement calculatorif you don't want to do this math yourself. When it asks about investment rate of return, enter 5% or 6%. Your money may grow more quickly than this, but you want to be conservative in case it doesn't. Once you've entered all this information, your calculator should tell you how much you need to save per month and overall to reach your goal.

Subtract from these totals any money you expect fromSocial Security benefits, a 401(k) match, or a pension. Your employer can provide details about any pensions and 401(k) matches you're eligible for, and you can estimate your Social Security benefit by creating amy Social Security account. Then, you should be able to figure out how much you must save on your own. For example, if you believe you'll need $2 million for retirement and that Social Security and your 401(k) match will cover $500,000, then you know you need to save $1.5 million on your own.


Make adjustments from here until you find a plan that works for you.Delaying retirementis one option. This will give you more time to save while also decreasing the length, and therefore the cost, of your retirement. Seeking out ways to boost your income today is also a smart move because it can give you more money to put toward retirement. Asking for a raise might be out of the question in the current climate, but you could always start a side gig for some extra cash.

If you realize retirement probably isn't going to be an option for you because you got a late start on saving, consider working part time in retirement. You can find a job that better aligns with your interests and use this to supplement your personal savings.

Once you have a plan, you need aplace to put your money. If your company offers a 401(k), this is a good place to start, especially if your employer matches some of your contributions. You can also open anIRAif your company doesn't offer a retirement plan or if you'd like to put away more money than your 401(k) plan allows for the year. You may contribute up to $19,500 to a 401(k) in 2020 or $26,000 if you're 50 or older, and you can contribute up to $6,000 to an IRA or $7,000 if you're 50 or older.

You might also have to choose between a tax-deferred and Roth retirement account. Contributions to tax-deferred retirement accounts reduce your taxable income this year, but then you owe taxes on your distributions in retirement. These accounts make the most sense for people who believe they're in a higher tax bracket today than they will be in once they retire. Roth retirement account contributions don't reduce your taxable income this year, but then they grow tax-free afterward. These accounts are a better choice if you think you're in the same or a lower tax bracket than you'll be in once you retire.

You can also choose to have some tax-deferred and some Roth retirement savings, but note that the contribution limits above are for all of your retirement savings, not for each type. So you can't contribute $6,000 to a traditional IRA and $6,000 to a Roth IRA this year.


Start setting aside money for your retirement as soon as possible. You may have to wait a little while if you don't have a steady income at the moment, but you shouldn't put it off any longer than you have to.

Your earlier contributions are more important than your later ones because they have more time to grow. Even if you can only spare $100 today, that $100 could grow into over $761 after 30 years with a 7% annual rate of return.


Your401(k) planshould enable you to automatically withhold money from each paycheck, and some IRAs may also enable you to set up automatic transfers so you don't have to remember to set aside money every month.

You might need to make some adjustments to your budget to free up the cash you need. Look for areas where you can cut back spending, like limiting how often you drive to reduce your gasoline bill or canceling subscriptions you aren't using. You can also try bringing in more cash by working overtime, if that's an option, or doing side jobs.

These steps are just the beginning. You must periodically check in to make sure that you're on track and make changes to your retirement plan as needed. Your financial situation will change with time, and so might your plans for your future and the rules surrounding your retirement accounts. Staying in touch with these changes is essential for keeping yourself on track.


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3 things to do immediately if you have no retirement savings - Fox Business

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