Archive for the ‘Retirement’ Category
Leonardo Mayer: Barbecues and fun time at home pushed me into retirement – Tennis World USA
Posted: October 10, 2021 at 1:54 am
Former world No. 21 Leonardo Mayer absolutely enjoyed his time at home and he felt it was the right to retire. Mayer last played at Wimbledon, where he lost in the qualifying first round. On Thursday, 34-year-old Mayer announced he was retiring.
"I had a kind of internal battle. Even when I came back from Wimbledon I told myself: Im going to stop playing for a while and see how I feel, said Mayer. So I gradually wound down from playing and, honestly, I felt fine.
With plenty of barbecues and things to do at home, I said: Thats it, everything Ive done has been perfect and Im not a tennis player anymore. Tennis brought me so much joy and its been part of my life since I was little.
But I feel that its time to end this wonderful period of being a player. Thank you to my wife Milagros, who was part of all my experiences and provided vital support. We have three beautiful children and they are the biggest trophies.
Mayer captured two ATP titles and achieved a career-high ranking of No. 21. "Yesterday, I went to the gym while my children were having a nap, but only for a while, so that my shoulder doesnt hurt, said Mayer.
Ive started living as a stay-at-home dad, taking care of the house, looking after the garden... I cook a lot of barbecues, eat whatever I want, take care of the kids; all the things I never used to do because I had to look after myself.
I can even play football matches now. Ive had a good career. Yes, there are a few specific matches I could have won or played better in, but thats just the way it is. Thats how you build a career and sometimes its not easy.
See the original post here:
Leonardo Mayer: Barbecues and fun time at home pushed me into retirement - Tennis World USA
Are You Missing Out on This Triple Tax-Advantaged Retirement Savings Account? – The Motley Fool
Posted: at 1:54 am
Key Points
You've probably heard that Social Security won't pay you a high enough monthly benefit to cover all of your living expenses in retirement, and that you'll need to save money independently to manage your various bills. Many people consistently put money in an IRA or 401(k) plan for this reason -- to ensure that they have savings to tap once their careers come to an end.
But there's another type of retirement savings plan you might be missing out on. And actually, it's an account that offers even more tax benefits than you'll get with an IRA or 401(k).
Image source: Getty Images.
Not everyone is eligible to contribute to a health savings account, or HSA. To qualify, you must be enrolled in a high-deductible health insurance plan, and the definition of that changes every year.
But if you are eligible for an HSA, it pays to contribute as much money as you're allowed to for one big reason -- or actually, three. HSAs offer a host of tax benefits -- more so than IRAs and 401(k)s.
With an HSA:
When we compare HSAs to IRAs and 401(k)s, it's easy to see why they make so much sense. Traditional IRAs and 401(k) also offer tax-free contributions, but investment gains are tax-deferred and withdrawals are taxed. Roth IRAs and 401(k)s offer tax-free gains and withdrawals, but no tax break on contributions.
Technically, you can use an HSA at any time to pay for qualified healthcare expenses. But if you manage your HSA wisely, it can serve as a retirement savings plan.
The funds you put into an HSA never expire, so you can carry that money all the way into retirement. Meanwhile, many seniors find that their largest monthly expense is healthcare. And so having a dedicated account to pay for those costs can come in very handy.
With an HSA, you can withdraw funds during retirement to cover your Medicare premiums and copays. You can also take withdrawals to cover services that Medicare won't pay for, like dental care and eye exams (though Medicare Advantage plans commonly cover these services, original Medicare does not).
Best of all, if you happen to enter retirement with so much money in an HSA that you don't need to spend it all on medical expenses, once you turn 65, there's no penalty for taking an HSA withdrawal for non-healthcare purposes. The worst that'll happen is that you'll be liable for taxes on your withdrawal. But in that case, all you're really doing is making your HSA comparable to a traditional IRA or 401(k).
Socking money away in an HSA could put you in a stronger position to tackle what could be your greatest retirement expense. If you're eligible for an HSA, it's a good idea to do two things:
Many seniors struggle financially specifically because their healthcare bills become unmanageable. An HSA could help you avoid that fate and set you up for a more comfortable, stress-free retirement.
Go here to read the rest:
Are You Missing Out on This Triple Tax-Advantaged Retirement Savings Account? - The Motley Fool
5 Big Retirement Risks and How to Tackle Them – Money Talks News
Posted: at 1:54 am
Make sure these financial landmines don't destroy your golden years.
Pat yourself on the back. You saved up, did the 401(k) thing, built up a nice portfolio. Maybe youve got a million, maybe more. Now its time to chill out, travel, play with the grandchildren, whatever. The point is, youre done working.
And that could be the scary part!
Without that regular paycheck, youve got to make sure your savings last the rest of your life. But that could be two decades, perhaps more. You dont want to deplete your nest egg, and you certainly dont want to spend sleepless nights worrying about it.
But youve got this, and weve got your back. You have plenty of weapons in your retirement arsenal, its just a matter of learning about them and deploying them.
Here are some big retirement risks and how to address them.
What it is: Longevity risk is the risk that youll outlive your savings.
Americans are living longer lives than ever before. In fact, the life expectancy in the United States is about 77 years, and folks on average are retiring before age 65. Thats a lot of nonworking years to make sure your savings last and if you stay healthy, it could be a lot longer.
Severe fluctuations in the stock market could put a dent in your portfolio, and there are unplanned expenses: illness, housing repairs, a sick pet, you name it. And dont forget inflation, keeping the price of everything on the rise.
What you can do: To create additional monthly income, consider annuities or a reverse mortgage. To conquer inflation, devote a portion of your savings to stocks and other investments likely to rise in value.
How an adviser can help: If youre unsure of how much money youll need in retirement, talk to a financial adviser. A good adviser will help you define your post-retirement income, spending and plans for the future. Then, theyll develop a clear plan.
The value of working with a financial adviser varies by person, but according to an independent study, people who work with a financial adviser feel more at ease about their finances and could end up with about 15% more money to spend in retirement.
Use this free matching service to connect with three qualified financial advisers in your area in five minutes. The first appointment is typically free.
What it is: Market risk, also called systematic risk, is the risk the entire stock market declines, taking your savings with it.
Thats why investing in stocks, although theyre an important part of your overall savings, can be intimidating. While stocks have historically gone up over time, sudden declines of 10% or more arent uncommon. At the wrong time, that could be devastating.
What you can do: Dont put all your eggs in the stock basket. Diversify. Ideally, your portfolio should be a mix of stocks, bonds and cash equivalents. Your ideal personal mix depends on your age, risk tolerance and other factors.
How an adviser can help: As you plan and invest for retirement, make sure youre developing the right mix of investments. Talk to an investment professional. Even if youre sure youve got it down pat, a review by an outside expert never hurts.
What it is: The risk that health care expenses devour more of your savings than you planned.
Today youre healthy, but unfortunately, sooner or later, especially as you age, the odds increase that youll need expensive medical treatment. Medicare will help, but it wont pay for everything. For example, Medicare doesnt pay for long-term nursing home stays, which cost an average of more than $7,000 a month.
According to a study by Fidelity Investments, todays average 65-year-old couple will incur about $300,000 in medical expenses during their retirement years.
What you can do: The best defense to offset medical expenses is to be proactive by eating well, exercising and getting regular checkups. You could also consider long-term care insurance, which pays all or part of long-term nursing care. But it doesnt come cheap and gets prohibitively expensive as you pass retirement age.
Another way to save for health expenses is with a health savings account (HSA). If you have high-deductible health insurance and are otherwise eligible, youre not taxed on HSA contributions, your account grows tax-free and withdrawals for qualified medical expenses are also untaxed.
You can also explore Medigap and Medicare advantage plans. Both can lower your post-retirement health care costs.
How an adviser can help: Meeting potential health care challenges is critical and planning for them is complicated. Connect with an expert adviser for help.
What it is: Inflation is when the cost of goods and services rises over time. It affects everyone, but its particularly dangerous for retirees, who lose the ability to earn more even as the cost of living goes up.
Consider this: In 1980, the average annual wage was $12,513. The average amount retirees need to fund their retirement was $125,134.
The difference between then and now? Thats inflation.
What you can do: Buy stocks, which carry some risk but which have historically greatly outpaced inflation. Real estate is also an inflation hedge, as are investments like TIPS (Treasury Inflation-Protected Securities), which adjust to keep pace with inflation.
How an adviser can help: New ideas and techniques to defeat inflation are being developed all the time, so make sure your bases are covered by talking to an expert, especially when you can get matched with an adviser in five minutes for free.
What it is: The risk from changing tax rules and policies.
Whether youre still working or youve already retired, its important to do everything possible to keep income tax and other taxes from eroding your savings.
The federal government is continuously changing tax rules. For instance, the SECURE Act, passed in 2017, ushered in several changes affecting retirees. And more changes could be in store during the Biden administration.
What you can do: However and whenever the IRS rewrites the rule book, there are investment options and strategies to help cope with the tax burden, such as:
How an adviser can help: While its illegal to evade taxes, its smart to legally minimize your obligations by understanding the rules. Enlist the help of a professional to make sure youre not paying a penny more than you should and to plan how best to access your retirement accounts in the future.
More than 1 million Americans have reported saving an average of $991.20 each simply by reading the totally free Money Talks Newsletter.
Our newsletter gives you a daily dose of specific advice to help you make more, spend less and invest like a pro.
It takes less than five seconds to subscribe and, if you dont like it, less than five seconds to unsubscribe. Sign up for our free newsletter right now and see what youve been missing.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.
Like Article
Go here to read the rest:
5 Big Retirement Risks and How to Tackle Them - Money Talks News
Ask Larry: Will Changes In The Full Retirement Age Reduce My Social Security Benefit At 70? – Forbes
Posted: December 22, 2020 at 7:01 pm
Economic Security Planning, Inc.
Today's column addresses questions about spousal benefits before delayed retirement credits at 70, potential effects on Social Security benefits of the WEP and the GPO due to receiving a public pension and what happens to other benefits drawn on a person's record when child benefits end. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc, which markets Maximize My Social Security and MaxiFi Planner.
See more Ask Larry answers here.
Have Social Security questions of your own youd like answered? Ask Larry about Social Security here.
Will Changes In The Full Retirement Age Reduce My Social Security Benefit At 70?
Hi Larry I turn 68 January 2021 and I was planning on waiting until 70 to start drawing my Social Security retirement benefits. I currently receive my spousal benefit, which is relatively small. My wife retired at 62. Will my age 70 Social Security benefit be reduced due to all these changes of full retirement age I've heard about? Thanks, Jonathan
Hi Jonathan, Your own Social Security retirement benefit amount won't be reduced as a result of the fact that you've been drawing spousal benefits. Nothing has changed with regard to Social Security regulations that would affect your ability to wait and claim your full rate at 70 when you reach that age. Your full retirement age (FRA) is 66, so if you wait until the month you turn 70 to start drawing your retirement benefits, you'll receive four full years of delayed retirement credits (DRCs). That will make your benefit rate 32% higher than if you'd started drawing your retirement benefits at FRA. Best, Larry
Is It True That My Social Security Amount Will Be Reduced If I Receive PERS Retirement?
Hi Larry, I am a retired NV teacher in the marvelous PERS retirement system. I worked enough summer jobs and NV National Guard to qualify for about $900 when I turn 66 years and two months old. The rumor mill out here claims that Ill only get about $300 monthly from Social Security because Im receiving PERS money. Please, tell me the rumor mill is wrong. Thanks, Chuck
Hi Chuck, Your monthly Social Security retirement benefit rate won't be reduced by as much as $600 because of your PERS pension, but it sounds like it will almost certainly be reduced significantly due to the Windfall Elimination Provision (WEP). The WEP can cause a person's Social Security retirement benefit rate to be calculated using a less generous calculation formula if they receive a pension based on their work and earnings that were exempt from Social Security taxes.
I don't have enough information to be able to give you an idea of how much your Social Security rate may be reduced, but you may want to consider using my company's software Maximize My Social Security or MaxiFi Planner to analyze your options so that you can determine the best strategy for maximizing your benefits. Our software is fully capable of handling WEP computations as well as the Government Pension Offset (GPO) that could also come into play if you receive auxiliary or survivor benefits based on another person's Social Security record. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
What Happens When My Son's Benefits End?
Hi Larry, My last son is turning 18 in January and his Social Security benefits will end. What happens to the money and does it come back to me or does it just end? Thanks, Rita
Hi Rita, Your son's benefits will simply stop being paid when he's no longer eligible. Child benefits paid from the record of a living parent are auxiliary benefits. In other words, they are an extra benefit paid in addition to the parent's own retirement benefit rate. Auxiliary benefits are only paid if an eligible family member qualifies for such benefits.
The payment of auxiliary benefits does not reduce the benefit amount payable to the worker whose record the benefits are paid from. Therefore, since your son's benefits had no effect on your benefit rate in the first place, your benefit rate won't change as a result of your son's payments stopping. Best, Larry
Read more here:
Ask Larry: Will Changes In The Full Retirement Age Reduce My Social Security Benefit At 70? - Forbes
5 Unexpected Sources of Retirement Income — All Related to Your Home – Motley Fool
Posted: at 7:01 pm
Most Americans approaching retirement have not saved nearly enough. More than a third of those 55 and older have socked away less than $100,000, and about 60% have saved less than $250,000 (perthe 2019 Retirement Confidence Survey). Clearly, even factoring in Social Security income, most people will need additional sources of retirement income.
The good news is that there are a lot of ways to generate retirement income, such as working for a few more years and tapping life insurance policies. Here are five sources of retirement income, all of which relate to your home.
Image source: Getty Images.
One way to generate income from your home is to occasionally (or frequently) rent out parts of it -- or all of it -- via a service such as Airbnb or VRBO.com. This is a particularly powerful strategy if you live in an area where many business or vacation travelers might like to stay, such as in a big city or by a beach. As an example, last year (pre-pandemic), the average daily Airbnb rate in Steamboat Springs, Colorado -- a skiing hotspot -- was around $450, while in Boston, it was $266.
You might be able to take this strategy further, if you want, by taking in a boarder. If someone rents a room in your home and pays you, say, $500 per month, you're looking at $6,000 in extra income. Plus, when you're retired, a trusted housemate can be helpful and reassuring to have around.
Another way to wring dollars out of your home in retirement is via a reverse mortgage. That's where you borrow against the equity of your home, receiving either a lump sum or specified regular payments. You're allowed to remain in your home, but when you leave -- perhaps due to moving to a long-term care facility or when you die -- the loan will need to be repaid. That typically is handled by selling the home.
A downside is that your heirs generally won't get your home. Read up on this strategy and learn a lot more about its pros and cons before getting a reverse mortgage.
You might also get more money for retirement by downsizing into a smaller home. Doing so will generally give you smaller mortgage or rent payments and should cost you less in property taxes, insurance, maintenance, repairs, and utilities. It might not cramp your style too much, either, if your kids have grown and moved out, leaving you with more space than you need during retirement.
You might also generate more retirement income by moving to a less costly town or part of the country. This could include moving to a smaller home, but it might not. Check out the median home value in some representative cities, along with a recent cost-of-living score there (with a score of 100 representing the national average):
City
Median Home Price
Cost of Living
Portland, Oregon
$419,600
130.8
Longmont, Colorado
$398,000
122.0
Salt Lake City, Utah
$392,000
118.9
Charleston, South Carolina
$316,500
111.5
Nashua, New Hampshire
$289,700
111.1
Atlanta, Georgia
$259,000
107.5
Chicago, Illinois
$229,100
106.9
Tampa, Florida
$219,400
100.1
Richmond, Virginia
$214,400
95.10
Yuma, Arizona
$156,300
88.2
Oklahoma City, Oklahoma
$130,000
85.4
Ocala, Florida
$148,200
83.8
Tulsa, Oklahoma
$118,700
83.2
Hobbs, New Mexico
$140,600
78.5
Source: BestPlaces.net.
There are, of course, lots of other possible locations that can be great places to retire.
Finally, another way to generate more retirement income from your home is to work there doing a side gig. That might be tutoring kids online in a subject you're good at, such as math or French, or running an online store where you sell sweaters you've knitted or wooden jigsaw puzzles you've cut or soaps you've made. There are many other side gigs to consider that can bring in needed income. If you can generate just $200 extra per week, you're looking at more than $10,000 in additional annual income.
Take some time to figure out how much income you'll really need in retirement, and see whether any of the above strategies can help you. Be sure not to ignore healthcare costs, and factor Social Security income into your overall plan, too.
See the original post:
5 Unexpected Sources of Retirement Income -- All Related to Your Home - Motley Fool
Considering retirement? Here’s why you need to talk about it. A lot. – Minneapolis Star Tribune
Posted: at 7:01 pm
The pandemic has accelerated a major social and economic shift that has been unfolding over the past three decades: Retirement is less a binary choice you are either working or retired and more another transition into a mix of activities, some paid and others unpaid. The so-called retirement years (better yet, unretirement years) often include activities that may include a mix of volunteering, grandparenting, leisure, flexible work, part-time jobs, gig tasks, self-employment and encore careers.
Behind the shift in expectations is the fact that Americans are living longer and healthier lives (on average) since retirement-as-leisure became commonplace in the 1950s and 1960s. The typical person now reaching age 65 will spend about 22 years in the traditional retirement years, according to the MIT AgeLab. Not many people can save enough to maintain their standard of living for that length of retirement. The pandemic recession has been hard on so many older workers that the need to earn an income longer for financial security is greater than before. At the same time, working a meaningful job offers purpose, a reason to get out of bed in the morning exerts a powerful pull.
Deciding on the right mix of paid and unpaid activities for you is a difficult task to figure out on your own. Tapping into professional expertise, say, financial planners, career coaches and lifestyle tutors can help, of course. What if you don't command the kind of resources it takes to hire well-schooled professionals? Where can you turn for guidance?
That's the question moderator Rich Eisenberg, managing editor of PBS' Next Avenue, asked a group of experts during a panel discussion on "Unretiring: The New Rules of the Second Half of Life." Panelist Andrew Scott, professor of economics at the London Business School, hit the mark when he urged people nearing the transition to unretirement to hold many discussions in their household. Your household, your family and extended family are an incredibly valuable resource. Don't try navigating this major transition (or any big transition for that matter) on your own.
Engage in conversation with your broad network for ideas, suggestions, and insight. Run the numbers to see how your income and savings match up with your portfolio of desired paid and unpaid activities. Budget and learn new skills as needed. Personal finance is nothing more than making realistic calculations to support your goals, your dreams and your values.
Chris Farrell is senior economics contributor, "Marketplace," and Minnesota Public Radio.
Read more here:
Considering retirement? Here's why you need to talk about it. A lot. - Minneapolis Star Tribune
3 Moves to Make Right Now if You Want to Retire Early – The Motley Fool
Posted: at 7:01 pm
Approximately 52% of workers say they plan to continue working past age 65, or never retire at all, according to a survey from the Transamerica Center for Retirement Studies.
If the idea of working well into your senior years sounds dreadful to you, retiring as early as possible may be a better option. While retiring early isn't easy, there are a few steps you can take to make sure you're on the right path.
Image source: Getty Images.
No matter what age you choose to retire, you'll need to set a savings goal. But it's especially important if you're retiring early, because you'll have to save more money in a shorter amount of time.
Use a retirement calculator to estimate how much you'll need to save. Remember, too, that depending on how early you plan to retire, you may not be able to depend on Social Security benefits. You're not eligible to begin claiming benefits until age 62, so if you intend to retire before that age, you may need to survive on your savings alone until you can start collecting benefits.
The average 65-year-old couple can expect to spend close to $300,000 on out-of-pocket healthcare costs during retirement, according to research from Fidelity Investments. In addition, you won't become eligible for Medicare until age 65. So if you retire before then, healthcare costs could take a substantial bite out of your budget.
You have a few options when it comes to covering healthcare costs in retirement if you're not eligible for Medicare yet. You can enroll in COBRA insurance after you leave your job, for instance, but the caveat is that you can only keep COBRA coverage for up to 18 months. So if you retire before age 63 1/2, you'll need to find another type of health insurance before you can enroll in Medicare.
Another option is to buy health insurance through the Affordable Care Act marketplace. You may face higher premiums or deductibles than when you were still employed, but if you develop health problems, having expensive insurance is better than no insurance at all. Just be sure to account for these costs as you're budgeting for retirement.
It's hard enough to save when you're planning on retiring at the traditional retirement age, but it's even more challenging if your goal is to retire early. You'll need a hefty nest egg to enjoy retirement comfortably, and unless you have loads of spare cash lying around to invest, you may need to make some budget cuts.
Depending on how much you need to save for retirement and how many years you have left to prepare, you might need to make significant financial cutbacks. But the sooner you start saving, the fewer sacrifices you'll need to make.
If you're unable to save as much as you need, you may consider reducing your retirement expenses instead. You may choose to downsize to a smaller home once you retire, for example, or consider relocating to a more affordable city. The more you can reduce your expenses, the easier it will be to retire early.
Early retirement is more achievable than you may think, but you'll need to have a strategy in place. By making these money moves right now, you'll be on your way to retiring as early as possible.
Follow this link:
3 Moves to Make Right Now if You Want to Retire Early - The Motley Fool
Dont Miss These CARES Act Retirement Benefits – Forbes
Posted: at 7:01 pm
Signed into law on March 27, 2020, Congress created the Coronavirus Aid, Relief and Economic Security (CARES) Act to provide financial relief to Americans suffering from the economic fallout of Covid-19.
Several of the more high-profile retirement provisions of the CARES Act have expiredincluding stimulus checks, supplemental weekly unemployment benefits and the suspension of federal student loan payments. But there are still a few important CARES Act benefits that you can take advantage of before the end of 2020.
The CARES Act eliminates the 10% withdrawal penalty for qualified retirement account holders who have a valid Covid-19-related financial hardship. It allows them to withdraw up to $100,000 from their tax-deferred retirement accounts, or taxable earnings in a Roth account, in 2020.
Under normal circumstances, withdrawing funds from most tax-deferred retirement accountslike a 401(k) or a traditional IRAbefore age 59 triggers a 10% penalty from the IRS in addition to the income tax youd normally owe on the withdrawal. Earnings, but not contributions, withdrawn from a Roth account are hit with the penalty as well.
Valid Covid-19-related hardships include a positive coronavirus diagnosis for the account owner, their spouse or a dependent; a lay-off, furlough, reduction in hours, inability to work or lack of childcare because of Covid-19; a delayed or rescinded job offer because of Covid-19; or Covid-related closing or reduced hours for a business owned by the account holder or their spouse.
The CARES Act has also waived the 20% mandatory tax withholding requirement for early withdrawals from workplace tax-advantaged retirement accounts. This withholding is how the IRS normally ensures that plan participants pay the necessary taxes on their early withdrawals.
But just because you can avoid both the early-withdrawal penalty and the mandatory withholding does not make your early distribution free of taxes, however. Michele Cagan, a certified public accountant (CPA) based in Baltimore, warns plan participants to remember the tax bite. The lowest tax bracket under current tax law is 10%, so you need to prepare to pay at least 10% of what you take out. So if you need to take a $50,000 withdrawal, expect to owe at least $5,000 in taxes.
The CARES Act allows for some flexibility in paying those taxes. Cagan notes that you have the option of paying your taxes in three even installments for the 2020, 2021, and 2022 tax years.
Heres how that might look. According to Vanguard, the median coronavirus-related withdrawal was $12,000. A hypothetical participant could either choose to add the entire $12,000 withdrawal to their 2020 income to pay taxes all at once, or increase their 2020, 2021 and 2022 income by $4,000 each year, spreading the tax burden over three years.
That said, if your income was significantly diminished in 2020 and you can afford to pay any applicable taxes this year, you might save money compared to future years.
The CARES Act also allows participants to redeposit the money within three years of the distribution, which is much longer than the usual 60 day allowance for redepositing early withdrawals. If you do choose to return the money, you will owe no taxes, although you may have to file an amended tax return to get back any taxes you paid on the early distribution prior to redepositing it.
While expanded access to retirement funds may provide an important financial lifeline, Cagan suggests participants try to exhaust other options first. Even with all of these CARES Act breaks, taking early withdrawals could end up costing you thousands of dollars and putting you in an even worse financial position than youre already in, she says.
Thats because money taken out of your retirement investments cant grow. You lose the momentum of your investment which makes it harder for your account to recover, Cagan says. And though you may need money now, youre taking it from your 75 or 80-year old self, and it will be that much harder to get needed money once you reach that age.
These pitfalls may explain why only 4.5% of Vanguard plan participants decided to take a coronavirus-related distribution as of Oct. 30, 2020.
In addition to penalty-free early withdrawals, the CARES Act also expanded hardship loans from employer-sponsored retirement accountssuch as 401(k), 403(B), and 457suntil Sept. 22, 2020.
Under the CARES Act, plan participants were allowed to borrow up to 100% of the vested balance or $100,000, whichever was less. This was double normal hardship loan limits50% of the vested balance or $50,000, whichever is less.
The window for borrowing the expanded amount from a workplace retirement account has already closed, so anyone considering a hardship loan now will be limited to the 50% or $50,000 maximumor a coronavirus hardship withdrawal of up to $100,000.
One hardship loan provision does remain in effect until December 31, 2020: If you took a hardship loan prior to the Covid-19 pandemic and have a repayment due between March 27 and Dec. 31, 2020, your repayment can be delayed for up to one year. Thats because the CARES Act allows retirement account borrowers (including new borrowers) to forgo repayment in 2020. Under normal circumstances, you must pay back your loan within five years and you are required to begin paying it back immediately.
According to Vanguard, only 1.0% of plan participants took advantage of the Coronavirus Hardship Retirement Account Loan options. This may be in part because participation in the loan program was optional, so not all workplaces allowed for participants to take loans. But the downsides of 401(k) loans may also have discouraged people.
According to Kevin Matthews II, creator of Building Bread, a financial education company, People think a 401(k) loan has no drawbacks since you repay it. But taking money out of the market means you lose the compounding factor, and you wont see the true opportunity cost until years later.
Considering the major market rebound since May of this year, Matthews worries that participants who took 401(k) loans in the spring, when the market tanked, may have hurt their future account growth. Borrowers wont see the same bounce as those who remained invested, Matthews says. The S&P 500, for example, has grown 64% from its March low as of mid December 2020.
Additionally, job stability is a concern for 401(k) loans. Though participants are no longer beholden to the old rule requiring repayment of such a loan within 60 days of terminating employment, you will still have to repay it when your federal tax return is due for that year, with extensions, or else you will have to treat the loan as a distribution and owe taxes on it.
For 2020, that means if you take a loan this year and lose your job, you will have to repay the loan in full by Oct. 15, 2021. For that reason, if your job is not secure, a 401(k) loan could be a risky proposition and wind up a large financial burden.
While financial experts implore struggling Americans to find other places to look for extra money, like 0% APR credit cards or low-interest personal loans, Cagan concedes that if you need to take it because there are no other choices, then take it.
But dont take the maximum simply because you can. Cagan recommends you take only what you need and not more. But consider including the amount you will need to pay taxes so youre not left scrambling come tax time. For instance, if you need $30,000, plan on withdrawing $34,000 and paying your tax bill with the excess.
And to prevent such a dilemma in the future, Matthews offers some advice: Everyone should have three different tax buckets for investing: a tax-deferred retirement account, a Roth retirement account and taxable investments. Then, if youre strapped for cash, you can take money from the taxable investments without worrying about the implications on your tax-deferred retirement accounts, he says. A Roth, with its penalty-free and already-taxed contributions, might then be your next line of defense.
Another important provision of the CARES Act was the suspension for 2020 of required minimum distributions (RMDs), or mandatory minimum withdrawals the IRS mandates for most retirement accounts. This was done to give retirement accounts a chance to bounce back from the market downturn in the first half of 2020.
Until Aug. 31, 2020, anyone who had already taken an RMD for 2020 and wished to return it could do so with no penalty. If you have not yet returned your RMD for 2020, though, the window has closed.
The IRS normally requires RMD withdrawals from retirement accounts belonging to individuals over age 70 (for those born before July 1, 1949) or age 72 (for those born after July 1, 1949) as well as non-spousal heirs who inherited tax-deferred accounts. RMDs are calculated each year based upon the balance of the account on December 31 of the previous year.
In addition to decreasing your taxable income by avoiding RMDs this year, you may also be able to decrease income through charitable donations in 2020.
The CARES Act allows taxpayers who dont itemize their deductions to take up to a $300 deduction for a cash contribution made to qualifying organizations in 2020. Under normal rules, you cannot deduct charitable giving unless you itemize your deductions. Further, if you do itemize your deductions, the CARES has temporarily suspended limits on charitable contributions for tax year 2020. Normally, you are limited to deductions of up to 60% of your income. This year, you can deduct 100% of your adjusted gross income.
For the first time ever, you can make your tax liability zero. Give 100% of your AGI to charity, owe zero taxes, says Cagan.
With 2020 rapidly drawing to a close, there are only a few weeks left for CARES Act provisions that can help you access needed funds or reduce your tax burden. However, though there is only a little time left, make sure you consider your financial options carefully before deciding to take advantage of any of these temporary rules.
Consider speaking to a financial advisor or tax professional for help with this decision. You dont want to start 2021 with regrets because you made a hasty decision to beat the deadline.
The rest is here:
Dont Miss These CARES Act Retirement Benefits - Forbes
Supreme Court Justice Stephen Breyer, 82, says he will retire ‘eventually’: ‘Hard to know exactly when’ – Fox News
Posted: at 7:01 pm
Supreme Court Justice Stephen Breyer indicated that he does not plan on remaining on the bench for the rest of his lifeand will retire at some point.
Justices enjoy lifetime appointments, and while some like Justices Antonin Scalia and Ruth Bader Ginsburg have remained on the court until their passing, others like Justice Anthony Kennedy have called it quits early. In an interview with Slate, Breyer said he looks to be among the latter.
SUPREME COURT DISMISSES CASE ON EXCLUDING ILLEGAL IMMIGRANTS FROM CENSUS COUNT AS 'RIDDLED' WITH SPECULATION
"I mean, eventually Ill retire, sure I will," Breyer said while noting that "its hard to know exactly when."
Breyer described how this year has posed challenges for him as a result of the coronavirus pandemic. The Supreme Court continued to hear and decide cases, but conducted oral arguments via conference call as the justices remained at home.
JUSTICE GORSUCH SAYS KENTUCKY GOVERNOR SHOULD FACE JUDICIAL REVIEW ON RELIGIOUS SCHOOLS CASE
"The thing that makes that difficult is were doing our normal court work," Breyer said about his time at home. "In fact, COVID cases come along, and there are a few more of them that we have to decide quickly. We have a telephone that is secure. And we do our oral arguments. People have to listen harder and be more direct in their questioningthats all good. But all of that takes time, and we have to write opinions."
U.S. Supreme Court Associate Justice Stephen Breyer is seen during a group portrait session for the new full court at the Supreme Court in Washington, Nov. 30, 2018. REUTERS/Jim Young
A retirement in the near future would allow President-elect Joe Biden the nominate Breyer's replacement, ensuring the ability to replace the liberal jurist with a like-minded successor.
CLICK HERE TO GET THE FOX NEWS APP
Earlier this year, rumors abounded that conservative Justices Clarence Thomas and Samuel Alito were considering retirement. The departure of one or both of them from the Supreme Court during Biden's administration would allow Democrats to chip away or overtake the high court's current conservative majority.
See original here:
Supreme Court Justice Stephen Breyer, 82, says he will retire 'eventually': 'Hard to know exactly when' - Fox News
Don’t forget to check your retirement plan. Here are moves to make before the year is out – CNBC
Posted: at 7:01 pm
wera Rodsawang | Moment | Getty Images
As you check off your to-do list for the end of the year, don't forget to look at your retirement savings.
Whether it is an individual retirement account, an employer-sponsored plan like a 401(k) or a brokerage account, assessing your portfolio is crucial.
That means checking to see where you are at with your savings, comparing it to your long-term financial planning goals and making a plan to bridge the gap, if necessary, said certified financial planner David Totah, senior wealth advisor at Frisco, Texas-based Exencial Wealth Advisors.
There's no better time to do it than the end of the year.
"We are wrapping up the year and beginning a new year and you have the entire year for these changes to impact your position, your plan," he said.
While the stock market has been volatile, it is up which means your portfolio could be out of balance. Instead of a 60% stocks/40% bonds split, you could be more heavily weighted in equities than you want.
"If there is a big downturn, you will expose yourself to a bigger loss," said CFP Jude Boudreaux, senior financial planner with The Planning Center in New Orleans.
More from Invest in You: Year-end tax moves aren't just for the rich. How to lower your bill Mellody Hobson, new Starbucks' board chair, champions financial literacy 7 money moves to make now to start the new year strong
Sell some stock to get yourself back to your original asset allocation.
"Buy low, sell high," he said. "Stay disciplined to a strategy."
If you have a target-date fund in your 401(k), which is geared towards your anticipated retirement date, it will automatically adjust the allocations based on your age.
designer491 | iStock | Getty Images
Try to contribute enough to your 401(k) to at least get your employer's matching contribution, if there is one.
"Pay yourself first," Totah said. "Save the money first, and then spend what is left over."
It may also be a good time to see if you can bump up the amount of your contribution for next year.
"Don't let the perfect 'I can't get to the max so I won't make any changes' get in the way of doing 1%," said Boudreaux, a member of the CNBC Financial Advisor Council.
"Try 1% and see how it goes," he added. "Taking a step forward and doing a little more can be a big plus."
You may also be in line for an annual raise. For instance, if it is 3%, aim to bump up your contribution by 2%, if you can.
Also, if you are age 50 or older, consider trying to add in the catch-up contribution.
The contribution limit for 2021 is $19,500, but people age 50 and up are allowed an extra $6,500.
"Catch-up contributions are so critical," Totah noted. "You are in the last quarter of the game.
"You have to start socking it away if you are short of your goals."
You may find that you have a lot of stocks in a certain sector, especially if there were a lot of gains during 2020. You may consider reducing some of that exposure, Totah said.
You may then increase your exposure in another area.
"Make sure that the positions that you own currently are the positions you want to own next year in possibly a new type of economic situation," he said.
If you made money on the sale of some investments this year, you can offset those gains with selling other assets at a loss during the same year.
This is called tax-loss harvesting, and it should reduce the amount of capital gains taxes you'll have to pay.
Constantine Johnny | Moment | Getty Images
Read the original here:
Don't forget to check your retirement plan. Here are moves to make before the year is out - CNBC