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Regs on retirement-payment withholding updated – Accounting Today

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The Internal Revenue Service has issued final regulations that update the federal income tax withholding rules for certain periodic retirement and annuity payments made after Dec. 31.

In July, the IRS released a draft of a redesigned 2021 Form W-4P and instructions intended to align with the redesigned W-4. The draft W-4P also proposed a new default rate of withholding on periodic payments that begin after Dec. 31, 2020. Based on comments received on the draft, the IRS will postpone issuance of the redesigned form. Instead, the 2021 Form W-4P will be similar to the 2020 Form W-4P.

The IRS also intends to provide in the instructions to the 2021 Form W-4P and related publications that the default rate of withholding on periodic payments will continue to be determined by treating the taxpayer as a married individual claiming three withholding allowances.

Tax reform provided that the rate of withholding on periodic payments when no withholding certificate is in effect (the default rate of withholding) would be determined under rules prescribed by the Secretary of the Treasury. Prior to the Tax Cuts and Jobs Act, if no withholding certificate was in effect for a taxpayers periodic payments, the withholding from the payments was determined by treating the taxpayer as a married individual claiming three exemptions.

The final regulation issued provides guidance for 2021 and future calendar years and specifies that the Treasury and the IRS will provide the rules and procedures for determining the default rate of withholding on periodic payments.

Regs on retirement-payment withholding updated - Accounting Today

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Empower to buy Fifth Third’s $6 billion retirement business – InvestmentNews

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Empower Retirement has inked a deal with Fifth Third to acquire its record-keeping business in a move to expand retirement plan services for the bank, the companies announced Tuesday.

Empower will acquire 476 retirement plans and will provide record-keeping and administrative services for the plans 100,000 participants, with $6.21 billion in assets, on Fifth Thirds platform, according to the announcement.

The terms of the agreement were not disclosed.

The transaction with Fifth Third is expected to close in the fourth quarter. When the deal closes, Fifth Third will continue to serve in a plan-level investment advisory capacity and manage $4.2 billion in plan assets.

The deal builds on a 16-year relationship between Empower and Fifth Third. Empower currently provides record-keeping services for Fifth Thirds retirement business through its private-label retirement plan unit, Empower Institutional. Because of this existing relationship, the Fifth Third plans will not require conversions.

Empower currently administers $667 billion in assets on behalf of 9.7 million American workers and retirees through approximately 41,000 workplace savings plans, according to the release.

This is an exciting evolution of the existing 16-year relationship between Empower and Fifth Third, Edmund F. Murphy III, president and CEO of Empower Retirement, said in the release. With the addition of these plans to Empowers platform, we will continue to expand our capabilities for these savers, enhance our financial wellness and advice offerings, and accelerate our value creation for all our stakeholders.

The news comes on the heels of Empower Retirements $1 billion purchase of digital advice firm Personal Capital. The deal, announced in August, will result in Empower bringing Personal Capital in-house, with the robo and human advice firm being rebranded as Personal Capital, an Empower Company.

In September, Empower announced the acquisition of MassMutuals retirement plan business, which is expected to close by the end of the year pending customary regulatory approvals.

[More: MassMutual 401(k) deal wins Empower valuable clients]

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Empower to buy Fifth Third's $6 billion retirement business - InvestmentNews

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Retirement Savers: 4 Easy Investing Strategies to Implement Now – SCNow

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3. Choose dividend payers for peace of mind

It's easy to plan on riding out market downturns, but it can be hard to stick to that plan. Once you see your portfolio balance take a big hit, you'll naturally want to do something, anything, to stop the losses.

Dividend-paying stocks and funds can help you stay the course in those tough times. Why? Because the good ones keep sending those quarterly payments no matter what's happening with share prices. You're not going to sell off those dividend payers in a panic if they're the only positions working for you. And hopefully, the income can pacify you enough so you don't panic-sell other positions either.

Look to invest in a dividend-paying index fund rather than individual companies. A fund is already diversified and easier to manage over time than a bunch of individual company stocks. One to look at is the Vanguard High Dividend Yield Index Fund (NASDAQMUTFUND: VHDYX) which tracks the FTSE High Dividend Yield Index.

The equities in your S&P 500 index fund or a dividend fund are great for growth and income, but they can be volatile. If you're in the early years of retirement saving, you may not mind a little volatility. But as you get older, it's important to moderate that volatility with assets that are more stable in value, like bonds or bond funds.

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Retirement Savers: 4 Easy Investing Strategies to Implement Now - SCNow

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Need another income stream? Here are 5 reasons to invest in dividend-paying stocks for retirement. – USA TODAY

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Selena Maranjian, The Motley Fool Published 7:00 a.m. ET Sept. 29, 2020

It's a terrible mistake to ignore dividends when you're investing, as they can be powerful aids in growing your portfolio while you're still working, and they can serve you particularly well in retirement, too. But don't think of dividend-paying stocks as only appropriate for older investors.

Here's a look at five key reasons you should consider adding some (or many) dividend-paying stocks to your portfolio.

The first reason is perhaps the most obvious one: Dividend-paying stocks generate income. As an example, if you have a portfolio worth $400,000 with an average dividend yield of 3%, you're positioned to receive $12,000 each year, just from dividends. That money can be reinvested in additional shares of stock, to plump up your portfolio further, or it can be used for living expenses.

Forget cheap, high-risk stocks: Here are 3 better ways to invest

Want to invest in an IPO?: Heres what you need to know to profit on initial public offerings

Dividends aren't typically static, either: When they're being paid out by healthy and growing companies, they tend to be increased over time often annually. This can help your income streams keep up with inflation, which has averaged about 3% annually over long periods.

Check out a few examples below.


Recent Dividend Yield

5-Year Avg. Annual Dividend Growth Rate
















Data source: Author calculations, Yahoo! Finance.

When you search for dividend-paying stocks for your portfolio, look not only for a meaningful yield, but also a payout that's growing well over time.

Another upside of dividend-paying stocks is that they're often relatively stable, compared to stocks of other companies. This is not always true, of course, but in general, for a company to commit to paying its shareholders a certain sum on a regular basis, its managers will be fairly confident of reliable revenue and earnings. That's why you'll find that a large proportion of blue-chip stocks are steady dividend payers. (On the other hand, many relatively young and fast-growing companies do not pay dividends at all, because they're plowing every available dollar into furthering their growth.)

(Photo: Getty Images)

Remember, too, that dividend-paying stocks don't merely offer dividends. The shares are still tied to companies that are working hard to grow and become more valuable over time. Thus, if you invest in healthy and growing dividend payers, you'll likely enjoy not just dividend income that increases over time, but also a stock price that increases over time and not necessarily at a paltry rate.

Indeed, when academics Eugene Fama and Kenneth French studied stock market data from 1927 to 2014, they found dividendpayers outperformed non-payers, averaging 10.4% annual growth vs. 8.5%. Here are some more examples of dividend payers:


Recent Dividend Yield

10-year Avg. Annual Stock Growth Rate
















Discover Financial Services









Verizon Communications



Data sources: Yahoo! Financial and

Finally, if you're relying on income from dividend-paying stocks in retirement and you end up not needing to sell off those shares over time for additional cash, you'll be able to leave them to your loved ones. This is a meaningful advantage over some other income-producing options, such as annuities. Fixed annuities have the advantage of providing even more reliable income, and they are worth considering in your retirement planning. Indeed, you may end up wanting to set up income streams in retirement from both annuities and dividends.

Don't dismiss dividends as only suitable for older investors and retirees. They have a lot to offer investors at every stage of life.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Selena Maranjian owns shares of Amgen, Costco Wholesale, Microsoft, Starbucks, and Verizon Communications. The Motley Fool owns shares of and recommends Microsoft, Nike, and Starbucks. The Motley Fool recommends Amgen, Costco Wholesale, Lowe's, Sherwin-Williams, and Verizon Communications and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and short November 2020 $85 calls on Starbucks. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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Need another income stream? Here are 5 reasons to invest in dividend-paying stocks for retirement. - USA TODAY

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8 Ways to Save for Retirement as a Freelancer – Entrepreneur

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September 28, 2020 6 min read

Opinions expressed by Entrepreneur contributors are their own.

Freelance life unquestionably brings freedom and flexibility. You can work full-time or part-time for who you want, when you want. Depending on your work choices, this type of career can be lucrative and satisfying.

For freelancers, both payment and tax withholding processes are different from a traditional job. These small business owners tend to get their income in a non-taxed way. That means that what they bill a client is what they get paid.

Because no state or federal income tax gets taken out from your payment, you might take a financial hit when it comes time to do your taxes. However, there are some ways to save for retirement and invest in ways that reduce your tax burden on a quarterly and annual basis.

Related: 5 Top Financial Tips for Entrepreneurs

The SEP (Simplified Employee Pension) Individual Retirement Account (IRA) is surpassing other retirement accounts in popularity. Part of the reason for that growth has to do with increased flexibility for your retirement plan. You can deposit more into a SEP-IRA than you could with a Roth IRA, which has a stricter contribution limit.

Another advantage of opening a SEP-IRA is the amount you can contribute. You can contribute up to 25 percent of business profits after you subtract business deductions and half of your total self-employment taxes. Most brokerages offer a calculator to help you determine this figure when you sign up for the account.

If you incorporated your freelance business as an S-Corp and pay yourself a salary, then the calculations are different.

Another option is to open a solo 401(k), which often allows for a larger contribution than even the SEP-IRA. Youll also have opportunities to make post-tax Roth contributions that arent available with a SEP-IRA.

Although that wont benefit your tax obligation today, it will help your long-term savings plan. Someday you'll want to retire and start tapping into that money. The only downsides are that the paperwork is more complex and there may be more fees involved.

Related: New Stimulus Bill Unlocks IRA and 401(k) Dollars for Financially Affected

You might be able to maximize the benefits of various account types by opening a few and adding to each over the course of your freelance career. How you decide which ones to open should be based in part on your tax bracket and marital status.

Check with your tax professional on whether to add a Roth IRA or traditional IRA to your retirement account portfolio.

Although this tax tip mightnot apply to everyone, it does help those freelancers who are 50 and older. Freelancers in this demographic can make whats known as a catch-up contribution to their 401(k) plans.

The extra contributions can help to reduce taxable income and generate considerable tax savings. Becausethe amount continues to change each year and is also tied to your tax bracket, the best approach is to read the IRS guidelines.

Related: 13 Reasons Why Your 401(k) Is Your Riskiest Investment

Relying on family assistance can yield more benefits than ready access to trusted help. By paying family members to work for your business, you can also help reduce your tax burden. While there are some varied rules in place for doing so, self-employed people can gain the most benefit. If you have a corporation, this option has different requirements.

The IRS provides specific guidance on this approach. Payments made to children are not subject to social security and Medicare taxes if your business is a sole proprietorship.

However, while payments to a child under the age of 21 are not subject to Federal Unemployment Tax Act (FUTA) tax, they are subject to income tax withholding, regardless of age. If you employ your spouse or parents, those payments are subject to income tax withholding as well as social security and Medicare taxes.

While freelancing, its important that you create a process for regular rate increases so your clients get accustomed to it. In addition to factoring in your increased value to your clients as you gain experience, it will help fund your retirement and cover the cost of your taxes.

Calculate your estimated tax payments using different income rates while also determining how much you can put into retirement accounts to offset taxes and help build that nest egg. Divide the number you need by your number of clients. This way, you can spread the cost across your client base rather than hitting one or two clients up for the full amount.

Related: 8 Lame Ways to Fritter Away Your First Million Dollars

If you don't have many clients, then pursue a strategic marketing plan to generate more income. While you mightspend some money now, you can write off those marketing expenses in many cases as part of your deductions.

That doesnt mean you should spend without thought. Its important to set a financially prudent marketing budget. A tax deduction is only a small percentage of your total marketing spend, so focus on maintaining cash flow while attracting new clients.

Incorporating can be such a complex process that freelancers often opt for the straightforward sole proprietorship structure instead. However, despite its complexity, incorporation can yield significant benefits and perks like liability protection, tax breaksand health insurance discounts that you cant achieve as a sole proprietorship.

Because every business is different, its important to do your research first and consult with a tax professional and a financial advisor. This will pay dividends not only for your ongoing freelance income, but also any attempt you make at home ownership, or for your retirement savings as well.

Related: New Study: Health Care Is Freelancers' Biggest Concern


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If you’re saving for retirement and are in your 50s, it may be time to reassess your plan – CNBC

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Oliver Rossi | Stone | Getty Images

Once you hit your 50s, retirement is no longer something happening far off in the future.

Whether you have been a super-saver your entire career or are just starting to think about retirement, it's time to take a serious look at what you expect your golden years to look like.

For those in their 50s, "it is the most important time to really figure out where they are, reassess their goals long term and really focus on planning," said certified financial planner Diahann Lassus, co-founder, president and chief investment officer of wealth-management firm Lassus Wherley, a subsidiary of Peapack-Gladstone Bank.

That means crunching the numbers and really thinking about when you want to retire and how you are going to get there.

While it may be easy to get distracted by other financial obligations, like helping your kids pay for college or a young adult child moving back home due to the coronavirus pandemic, remember to "put your mask on first," said Lassus, a member of the CNBC Financial Advisor Council.

"You have to take care of yourself because no matter how brilliant your children are, they really aren't going to want to support you later in life," she said.

Greg Dailey and his wife, Cheryl

Source: Greg Dailey

For small-business owner Greg Dailey, retirement is something he never gave much thought to. Instead, the 51-year-old has been focused on growing his framing business, located in Chatham, New Jersey, picking up extra cash from his side hustle delivering newspapers and raising his three children with his wife, Cheryl.

"I don't really have a real plan," said Dailey, who grew up poor and without any financial literacy instilled in him as a child.

"Am I going to have enough money to ever 'retire'?" he said. "I don't know.

"I don't think so."

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He puts much of his focus on his kids. His oldest, 24-year-old Erin, was the first in his family to go to college. His 22-year old son, Sean, is currently a senior in college and 17-year old Brian is a high school senior. While his kids all have, or will have, student loan debt, Dailey is doing what he can to help out financially.

He has been able to put aside about $13,000 in an emergency fund, but he has no retirement savings and two mortgages on his house in East Windsor, New Jersey which add up to more than what he paid for it more than 20 years ago.

"I've always been in survival mode," he said.

Fortunately, his business didn't suffer too much during the coronavirus restrictions and is growing. His wife has a 401(k) and he plans on working hard for the next 10 years and putting money aside.

"I'm going to have to start investing," he said. "Hopefully in the next 10 years I'll be able to pay off my house."

If you haven't started saving yet, the first thing to do is to examine your expenses and where you can cut so you can begin putting money aside.

Also, look at your overall expenses what you spend money on today that you won't have to in 10 years to 15 years, like college tuition, mortgage or car payment, said Brian Walsh, senior advisor at Walsh & Nicholson Financial Group, based in Wayne, Pennsylvania.

"Retirement is expense-driven, not necessarily assets-driven," he said.

From there, determine what you'll need to live on in retirement and see how much you'll need to save in addition to any Social Security you may collect, he said.

Put as much as you can into your 401(k), if you have one, advises Lassus.

Once you hit 50, you are allowed to make up to an additional "catch-up" contribution each year. For 2020, the catch-up limit is $6,500, which can make a huge difference down the road, she said.

If you don't have an employer-sponsored plan, then contribute as much as you can to a Roth individual retirement account, if you qualify, or a traditional IRA. Your annual contribution for 2020 is capped at $7,000 if you are age 50 or older.

While Roth IRAs are widely beloved by financial professionals, since contributions are made after tax and distributions aren't taxed, there are income limits. You can contribute the full amount if you make less than $196,000, if you are married and filing jointly, or less than $124,000 if you are single. However, you can still contribute a reduced amount if you make less than $206,000 as a married person or under $139,000 if you are single.

Then, there are Roth 401(k) plans. Contributions are made after tax and there are no income limits. The maximum contribution is the same as the traditional 401(k). Walsh is a fan of the plans and said he believes it is a good way to take advantage of low taxes today.

"With the swelling debt taken on by the U.S. government, taxes are going to have to go up," he said.

In other words, pay now at a lower rate than later at a potentially higher one.

You'll want to make sure your retirement portfolio keeps pace with inflation. These days that means staying middle-of-the-road in a moderate-risk portfolio, Lassus said.

"I wouldn't start getting more conservative," she said. "The old 60-40 still works."

The standard 60-40 portfolio means 60% is invested in equities and 40% in fixed income.

Make sure you really understand where you are relative to where you want to be when you get ready to retire.

Diahann Lassus

certified financial planner

Walsh agrees that at this point, 10 years to 15 years from retirement, you want a majority of your assets in equities and, even five years to seven years away, he would keep 60% to 70% in stocks, since there is a lot of risk in the bond market these days.

If you have a 401(k), he suggests sticking with a target date fund, which automatically rebalance as you get closer to retirement.

What you have in your 401(k) or IRA likely won't be enough to retire on, even if you are maxing out your contributions, Lassus said.

"The 401(k) doesn't provide the kind of dollars that a person is used to," she said.

Therefore, having money outside of your retirement accounts is important, as well.

"Otherwise, what happens is, when people retire, they have to be very creative at reducing expenses," she said.

First, have an emergency fund. Typically, that is three months to six months of expenses that is easily accessible.

After that, start making monthly investments in a brokerage account using primarily a mutual fund or exchange-traded fund, advised Lassus.

Debt is a big issue for many in their 50s, Lassus said. If you have credit card debt, try to get it under control.

Also, take a look at any car debt you have, like a lease, which is an ongoing cost, she said.

While many aim to pay off their house by retirement, she wouldn't focus as much on paying off your mortgage.

In the end, making sure you are ready for retirement means continually updating your plan.

"Make sure you really understand where you are relative to where you want to be when you get ready to retire," she said.

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This lesser-known retirement savings tool is loaded with tax benefits – Fox Business

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No matter your age or income level, your goal should be to pay the IRS as little tax as possible. And the choices you make with regard to retirement savings could have a huge impact in that regard. In fact, many workers overlook one important long-term savings tool that's actually loaded with tax benefits. And if you're forgetting it, too, you're doing yourself a major disservice.


Not everyone is eligible to contribute to ahealth savings account, or HSA. To qualify, you must be enrolled in a high-deductible health insurance plan, the definition of which changes from year to year. For 2020, you'll need an individual deductible of $1,400, or a family level deductible of $2,800.

But assuming youdoqualify, HSAs are unique in that unlike other retirement savings plans, they offer three distinct tax benefits:

By contrast,IRAs and 401(k)s, which are commonly used to save for retirement, don't offer the same number of tax benefits. With a traditional IRA or 401(k), your contributions go in pre-tax, and investment growth is tax-deferred, but withdrawals are subject to taxes. With a Roth IRA or 401(k), contributions are made with after-tax dollars, while investment gains and withdrawals are tax-free. These accounts are certainly worth funding, but it's also worth incorporating an HSA into your retirement savings strategy. Though you can use an HSA outside of retirement, these accounts are best maximized when you contribute more than what you need in the near term, invest your money for added growth, and then carry those funds all the way into your senior years, when you're likely to need that money the most.


Another thing you should know about HSAs is that normally, you'll be penalized for removing funds from your account for non-medical purposes, the same way you'll face penalties if you withdraw from an IRA or 401(k) prior to age 59 1/2. However, once you turn 65, you're actually allowed to remove money from an HSA for any reason. If you don't spend that money on medical expenses, you'll be taxed on your withdrawal -- but you'll still get the flexibility to take money out as a senior and use it as you wish.

The contribution limits for an HSA change from year to year, and currently, you can put in up to $3,550 if you're contributing as an individual, or up to $7,100 if you're putting money in at the family level. However, like IRAs and 401(k)s, HSA offer a catch-up contribution to older workers, albeit at a slightly later age. Once you turn 55, you can put an extra $1,000 a year into your HSA, bringing your total for 2020 up to either $4,550 or $8,100.

Best of all, unlike flexible spending accounts, you're not required to commit to an annual contribution in advance. Rather, you can adjust your contributions at any time. This means that if you've only allocated $1,000 to your HSA this year when you're actually entitled to contribute $3,550, you can still go ahead and put in that remaining $2,550.


It's easy to disregard HSAs as a retirement savings tool since, as the name implies, they're an account intended to cover the cost of near- and long-term medical expenses. But the flexible nature of HSAs makes them perfect for your later years, and given that the typical 65-year-old couple today is expected to spend$295,000on medical care throughout retirement, having a dedicated source of healthcare income is hardly a bad thing. Just as importantly, it never hurts to lower your tax burden as a working adult and as a retired one. Be smart with your HSA, and you'll enjoy less taxes up front, and a tax-free source of income when you're older.


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This lesser-known retirement savings tool is loaded with tax benefits - Fox Business

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Op-ed: The pandemic has forced firms to offer early retirement plans. Heres what to consider before you decide to pack it in – CNBC

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With so many companies seeking to cut costs to survive the Covid-19-induced economic downturn, many corporate executives are now weighing the answer to a simple question: "Does it make sense to take an early retirement?"

I work closely with corporate executives from a wide range of Fortune 500 companies. These firms have seen their revenues decline in recent months and many are now changing their business model to reposition themselves. One immediate way to improve their bottom line and navigate today's volatile economic climate is to reduce the compensation and benefits paid out to top-tier executives and managers.

Fortunately, many of these companies are providing voluntary exit programs rather than surprising employees with an unexpected large layoff. These early retirement packages can give people more control over the timing of their departure and time to consider whether to participate in the program. If enough people accept the voluntary package, jobs may be spared for those who want or need to keep working.

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Over the past few weeks, I have had some conversations with several of my impacted clients and the overall feeling was that, while these executives weren't planning on leaving just yet, they didn't think they would ever see offers this good come along again.

To that point, nearly all of my executive clients at the Coca-Cola Co. applied for its "voluntary separation program," which includes some major incentives, including at least a year's pay plus a 20% bump. (The Coca-Cola Co. offered this package to about 4,000 employees working for corporate or Coca-Cola North America in the U.S., Canada and Puerto Rico.)

For corporate executives staring at a possible early and unexpected retirement, here are some recommendations to determine if the package you've been offered is the right one for you:

Assess the emotional impact of leaving your long-time employer. While the decision to take an early retirement package is primarily a financial decision, there's more to it. When an executive begins diving into what leaving their job means for their family now and into the future, I usually see a raw, emotional response about the loss of a job especially if a person has grown up with their company and given 20 years or more of service.

Take time to understand who you will be leaving many of the colleagues and friends you've known most of your career. As you consider leaving, make a list of people you want to stay connected with for personal and professional reasons once you've moved on. This will somewhat help ease the emotional blow and help build your business network for any future ventures.

Make certain the company provides key incentives. Some companies are tossing in extra incentives as part of a severance package to help make an executive's decision easier.

These incentives include allowing them to continue to participate in the company's health insurance plan, providing extra time to sell company stock grants and a premium on their lump-sum severance payment. You may also want to explore other possible benefits, such as qualifying for a partial year bonus especially if your separation is near the end of the year.

Run those numbers. Once the severance package is offered, understand its impact on your financial future. If you plan to keep working, will the severance package allow you to fast-forward plans to meet long-term financial goals, such as paying off your mortgage, funding your children's college savings accounts or building a financial reserve to buy that beach house a few years early?Or even better, is this package just the extra bump you needed to hit your retirement number?

For those who need or want to keep working, it is critical not to spend or invest the severance package "windfall" until they secure their next job. The severance payment can help tide them over and allow them to keep paying bills if they don't already have enough cash reserves in the bank.

Make certain your retirement package meets your needs. The severance package should offer enough cash to cover several months or more of your current paycheck. For example, if you would have earned $200,000 annually in pay, a package should ideally offer up at least six months of pay $100,000 to make it worth your while and minimize financial hardship.

Ideally, there are provisions to allow an executive to keep most of their stock options and restricted stock grants while forfeiting a minimal amount of the retirement benefits they've accumulated over many years. The longer you've worked there, the more retirement benefits you want to keep as part of your early retirement package.

boonchai wedmakawand | Moment | Getty Images

When it's all said and done, the most important question to answer is this: "Is this a good deal for me?"

To answer that question, make certain that you will be better off financially if you accept the package and that it keeps your financial plan on track.

Your decision to take a severance package will have a major impact on your financial future, as well as your career. By carefully analyzing it while weighing how to advance your career, you may be able to take a major step in hitting your financial goals.

By Lisa Brown, Chief Strategy Officer for corporate professionals and executives at Brightworth

Op-ed: The pandemic has forced firms to offer early retirement plans. Heres what to consider before you decide to pack it in - CNBC

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Even Seniors Who Are Good Savers Stand to Fall Short in Retirement, Report Concludes – Barron’s

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Researchers long have been sounding the alarm that Americans arent saving enough for retirement. Now, it seems, rising costs mean that even the most diligent of savers are at risk of not having enough.

A new report from the National Institute on Retirement Security, a nonprofit research institute, finds that increasing costs for housing, health care, and long-term care are major burdens for seniors across the wealth spectrum. Heres a rundown of the reports findings on those three major expenses, along with some policy recommendations from NIRS.

Housing: Older Americans are the group most likely to own a home, but 46% are carrying mortgage debt into retirement, up from 24% three decades ago, according to the NIRS report, which cites research from the Harvard Joint Center for Housing Studies.

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

Tyler Bond, research manager for NIRS, said many seniors likely are still paying off their mortgages because they took advantage of historically low interest rates to refinance their homes. Still, he said, its concerning that nearly twice as many seniors are carrying mortgage debt into retirement as they did 30 years ago, suggesting that money is tighter for todays seniors.

Another concern is that fewer seniors own a home today than a decade ago, and that downward trend is likely to continue because Americans who are nearing retirement are less likely to own a home than current retirees, the report says. The percentage of seniors who own a home peaked at 81% in 2012 but has dropped to about 78.5% today, according to the report.

In addition, the number of seniors considered cost-burdened by housing, meaning more than 30% of their income goes toward housing, reached 10 million in 2017, an increase of 200,000 from the prior year, the report says. Of that group, almost 5 million were severely burdened, spending more than half their income on housing.

The lack of affordable housing is a major concern nationwide, the report says, but high rents are particularly burdensome for seniors living on fixed incomes. Women tend to live longer than men, and older adults are more likely to live alone, so senior women often bear housing costs entirely on their own, frequently with a reduced income due to the death of a spouse, the report says.

This means there is a serious need for affordable housing for the oldest Americans, who are disproportionately women, and this need will grow in the coming decades as the number of much older Americans increases, the report says.

Health care: The report, citing research from Fidelity Investments, notes that a 65-year-old couple retiring in 2019 can expect to spend about $285,000 on health care in retirement. That figure includes Medicare premiums, co-pays, and prescription drugs, but doesnt include dental, vision, or long-term care.

About half of all Medicare beneficiaries spend at least 12% of their income on health care, according to the report, which cites research from the Kaiser Family Foundation, and health-care costs continue to rise.

Long-term care: With seniors living longer and baby boomers retiring, NIRS said it expects more Americans to need long-term care such as a home health aide or a nursing home, and those costs likely will continue to rise. Senior citizens today have an almost 70% chance of needing long-term care at some point, the report says, citing data from the U.S. Department of Health and Human Services.

About 10% of retirees will spend three years or more in a nursing home, with total costs typically exceeding $300,000 over that time, according to the report, which cites research from the Genworth Cost of Care Survey. That figure dwarfs the median retirement savings of workers ages 55 to 64, which is about $88,000, the report says.

To address the gap, NIRS outlines a number of possible remedies, including expanding Social Security benefits and allowing retirees to purchase annuities through the Social Security Administration.

The report also highlights the Long-Term Care Trust Act in Washington state, the first state-operated long-term-care insurance program. The 2019 law establishes a payroll tax on employees of 0.58% to provide long-term-care benefits of up to $36,500 per senior.

The state is scheduled to begin collecting the tax in 2022 and to start paying benefits in 2025. Since Medicaid is the largest payer of long-term-care costs in the nation, Washington state expects to see its Medicaid costs reduced due to this law, Bond says.

That lifetime cap of $36,500 may seem like a small amount of money, especially with some people facing these astronomical amounts for long-term care, he says. But I think its important to keep in mind that a lot of seniors wont need the most expensive forms of long-term care, and so that amount from the Washington trust fund can go a long way for those seniors who have more manageable long-term care needs.

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Even Seniors Who Are Good Savers Stand to Fall Short in Retirement, Report Concludes - Barron's

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September 30th, 2020 at 1:51 am

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Women’s Health Care Costs in Retirement Projected to be $200000 More than Men’s – Business Wire

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DANVERS, Mass.--(BUSINESS WIRE)--Health care costs are a major expense during the Womens Longevity Gap, the period in which a woman will need to cover expenses single-handedly after the death of a male spouse or partner, according to recent data from HealthView Services, the nations leading provider of health care cost projection software. The company estimates that in retirement an average, healthy 43-year-old woman will face nearly $200,000 more in health insurance premiums than her husband.

The company, which provides software for personalized health care cost projections to financial professionals, urges women and couples to start planning early to address the longevity gap.

HealthView Services encourages thoughtful, personalized planning for the disparities of age, income, and life expectancy that commonly exist among male/female couples. Recommendations include:

Following these steps, women and their financial advisors can mitigate and potentially even eliminate the longevity gap and the other challenges that are common among female retirees, said Ron Mastrogiovanni, CEO of HealthView Services. Financial advisors with the right tools and data at their fingertips have the power to help their female clients close that longevity gap.

About HealthView Services Founded in 2008, HealthView Services is the nations leading provider of healthcare cost projection software, built on a dataset of 530 million health care claims. Its portfolio of retirement healthcare planning applications centered on personalized longevity estimates and individual health care cost projections is used by advisors, financial institutions, employers and consumers to create comprehensive, reliable health cost projections for 33 million users annually. Visit us to know more:

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Women's Health Care Costs in Retirement Projected to be $200000 More than Men's - Business Wire

Written by admin

September 30th, 2020 at 1:51 am

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