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It's not uncommon for retired homeowners to want to relocate or downsize.

Yet if the move involves buying a house and financing that purchase, they may discover that qualifying for a mortgage is a bit different from the last time they bought a home. Not only have lenders tightened their credit during the pandemic, retirees generally have left a steady paycheck behind.

"It can get tricky for retirees," said Al Bingham, a mortgage loan officer with Momentum Loans in Sandy, Utah. "You can have a lot of money but show very little income and have difficulty qualifying for a mortgage.

"It frustrates a lot of them," Bingham said.

More from Personal Finance: Emergency savings are tumbling during pandemic Avoid making these investment mistakes, pros warn 'Super savers' makesacrifices to help reach goals

The average interest rate on a 30-year mortgage is just above 3%, while for a 15-year fixed-rate mortgage, it's about 2.7%, according to NerdWallet. With rates low and inventory in many markets tight, it may be necessary for retired homebuyers to do some strategizing and planning ahead.

Of course, the typical aspects of qualifying for a mortgage such as having a good credit score, monthly debt that isn't too high and the required down payment would apply, as well.

The specifics will depend on the lender and the type of mortgage you're seeking. Loans that are backed by Fannie Mae and Freddie Mac come with requirements that lenders must adhere to, while private mortgage lenders could have their own set of standards.

The most common way for retirees to get a mortgage is by qualifying based on income, said certified financial planner Daniel Graff, a principal and client advisor at Sullivan, Bruyette, Speros & Blayney in McLean, Virginia.

Lenders generally will look at your last two years' worth of tax returns to see what that amount is. It may include, for instance, Social Security, pension income, dividends and interest.

However, your taxable income may not be enough to qualify for the loan on its own. That's where a retirement account like a 401(k) plan or individual retirement account can come into play.

"You basically create more cash flow to satisfy the lender," said CFP David Demming, president of Demming Financial Services in Aurora, Ohio.

The idea is that you take distributions to help you qualify for the mortgage, even if you don't really need the money. As long as you're at least age 59, you can tap your IRA or 401(k) plan without paying a 10% early-withdrawal penalty.

And, under rollover rules applying to retirement accounts, you can put the cash back within 60 days without the distributions being taxable. Beyond that time frame, however, the withdrawals would be locked in and you'd owe income taxes on the money.

Meanwhile, the lender would see the income on your bank statements, where the money came from and when it hit your account.

Graff said he has helped with two mortgages for clients this year that involved taking distributions from an IRA for two months so they could qualify and then returning it under the 60-day rollover rule.

However, he said, "My mortgage lenders are telling me that they are getting a bit more strict on the historical verification, which may restrict this opportunity in the future."

In addition to seeing verification of the required income, lenders will want to verify that the distributions can continue for at least three more years, Graff said.

Alternatively, you could potentially qualify for a mortgage based on your assets in a brokerage account or IRA. Essentially, the lender applies a formula to the money in your account using 70% of the value of the account to determine whether it could stretch long enough to cover mortgage payments for the life of the loan.

"In this scenario, the underwriter is not looking directly for a taxable transfer from an IRA to a bank, but a statement of assets that allows [the lender] to be comfortable that a certain amount could be withdrawn each month," Graff said.

One alternative to a mortgage is to "pledge assets" that is, you essentially take a loan against your brokerage account up to a limit and purchase the home that way.

"You'd be considered a cash buyer for purposes of the contract with the home seller," Graff said. "There isn't a mortgage happening at that point because in actuality you'd be taking the loan against your brokerage account."

For instance, at Schwab, you may be able to borrow up to 70% of the value of eligible assets pledged as collateral. However, the longest term for such a loan is five years.

"You could almost use that loan as bridge financing and plan more carefully how to prove income to the bank," Graff said.

In other words, it might be a way to get a home more quickly because you wouldn't have to go through the underwriting process and associated costs involved in mortgages. And then you could figure out your traditional mortgage options.

If you refinance within six months of the purchase, you could put a mortgage in place to pay off the loan and it would not be considered a cash-out refinance, which is harder to get, Graff said.

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Here's how to qualify for a mortgage in retirement - CNBC

In todays world, a one-size-fits-all idea of retirement doesnt fit everyone. Rather than defining retirement as the total conclusion of a 40-year working career, individuals are increasingly retiring early, taking multiple smaller retirements, or working longer and only partially retiring.

Thankfully, theres a savings vehicle that offers specific benefits for each of these retirement concepts. Health savings accounts, or HSAs, provide powerful features to help account holders easily reach their successful version of retirement, whatever that looks like.

This is what most people think of when they think of retirement: working until age 65, then not working for the rest of your life. By putting away funds for retirement during your working career, you earn time later in life to relax, spend time with family, and pursue hobbies.

For these individuals, HSA tax savings can have a significant benefit. Not only are HSA contributions tax-free or tax-deductible, HSA funds grow tax-free and can be withdrawn tax-free to pay for qualified medical expenses. By taking advantage of HSA tax breaks, individuals can save money on their medical costs and free up other funds to put away for retirement. And if they choose, they can even use HSA funds to cover health care expenses in the future.

Additionally, one HSA can be used to pay for medical expenses incurred by anyone in your family. As an HSA account holder, you can cover your spouse and tax dependents health care costs tax-free with your HSA, even if they are on a different health plan. You can also change your contribution level midyear, unlike an FSA, where you have to set a defined contribution amount for the entire year. This flexibility allows HSAs to easily fit individuals changing spending and saving needs throughout their journey toward retirement.

Read: 6 ways to keep health care costs from eating up your retirement savings

This version of retirement has gained popularity in part from the FIRE (Financial Independence, Retire Early) movement. By advocating a frugal lifestyle and saving a large portion of your paycheck, this movement allows individuals to potentially stop working much earlier than 65.

Read: Early retirement could be bad for your brain

For individuals pursuing early retirement, it is vital to get money invested quickly and take advantage of compound interest over time. HSAs are appealing here because they have no use-it-or-lose-it limits and can be invested just like a 401(k) or IRA. This maximizes individuals ability to grow funds and reach financial independence as soon as possible. For these individuals, choosing an HSA provider that offers funds with low expense ratios is also a key, since those often-overlooked fees can take a big bite out of their savings.

Individuals pursuing early retirement are eagle-eyed about getting all the tax savings they can, and HSA contributions offer more tax savings than 401(k) or IRA contributions. HSA account holders who make pretax HSA contributions via their employers Section 125 plans unlock FICA tax savings on those contributions; thats an extra 7.65% back in your paycheck. This additional money-saving opportunity makes HSAs a popular choice with individuals looking to retire early.

This view of retirement entails taking temporary breaks in working to travel or pursue hobbies, then going back to work afterward. Rather than having one large retirement after 40 to 45 years of working, this concept breaks retirement up into smaller pieces throughout your life.

Because of their periods of not working, advocates of mini-retirement may end up changing jobs many times during their lives. HSAs shine here because they are individually owned, which makes them portable. Unlike FSAs, which stay with your employer, your HSA comes with you from job to job, making it easy to keep saving.

Because of their mini-retirements and subsequent new jobs, these individuals also might find themselves switching health insurance plans often or potentially not having health insurance. While the ability to contribute additional HSA funds is dependent on having an HSA-qualified health plan, account holders never lose the ability to spend the current funds in their account. That means as long as account holders have funds in their HSAs, they will be able to pay for their medical expenses tax-free, even if their insurance situations change.

Read: Health care will cost this much in retirement and probably more

This version of retirement is for people who dont see themselves completely stopping working. Their financial situation may require a longer career, or they may love what they do and keep working by choice. Either way, these people dont experience the complete ending of work that is typical of traditional retirees.

Because HSAs dont have required minimum distributions, theyre ideal for people in this stage. They never have to withdraw funds from their HSAs before they need to, like they will with a traditional 401(k) or IRA. Their HSA funds can keep growing until they choose to withdraw them.

In addition, after HSA account holders turn 65, they can withdraw HSA funds for nonmedical expenses and only pay regular income taxes. For individuals who are working longer, this offers additional flexibility on how their HSA funds can be used. They never need to worry about having more HSA funds than health care costs, because they can easily use their HSA dollars on nonmedical expenses.

These days, retirement might look like 20 years of frugal living so you can stop working at 45, taking breaks from work every five years, or continuing to pursue the work you love into your later years. However, no matter what retirement means to you, the robust feature set and unparalleled tax savings offered by your HSA will help you get there.

James Denision is marketing director at HealthSavings Administrators, an HSA provider.

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Whatever retirement looks like for you, health savings accounts can help you get there - MarketWatch

It might be a good time for a general conversation about your shared savings and retirement goals, the advice columnist writes.

Dear Penny,

My husband became obsessed with the stock market during quarantine. His company stopped its 401(k) match in March, so he stopped contributing. He also stopped making his Roth IRA contribution, which he used to max out.

Instead, hes putting all that money into his Robinhood account and hes always trading on the app.

I left my job in the medical field earlier this year because of worries about COVID-19 and because our kids school had closed. Weve decided not to send the kids back to school at least through the end of 2020, so Im at home getting our three kids through virtual school. Since Im not working, I cant contribute to a retirement account of my own.

I dont know much about the stock market and I have zero interest. My husband has a finance degree, though thats not his profession, so I lack his expertise in this respect. Some of his friends are equally obsessed with Robinhood. Im alarmed because Ive heard them joke about the risky bets theyve made.

He hasnt taken money out of retirement accounts or our savings. He says I shouldnt worry because hes made way more than he would have with his 401(k) and also because were still current on all our bills even without my income.

Is it OK that hes stopped contributing to his 401(k) so he can trade stocks? How do I ask him what hes actually investing in? Im worried that hes gambling money that we need for our retirement.

-K.

Dear K.,

Maybe your husband does know more about the stock market than you do. But it sounds like youre the smarter investor.

If your husband is using the fact that hes gotten superior returns since March compared to what hes averaged in his 401(k) over the years, hes giving himself WAY too much credit. Please dont buy in.

As of Sept. 1, the S&P 500 was up 57 percent since its historic crash in March. Those returns simply arent sustainable. Historically, stocks deliver average annual returns of about 10 percent before you account for inflation. Investments in 401(k) plans skew conservative, so youd expect slightly lower returns.

You dont build wealth through huge short-term stock market fluctuations. You build it by consistently investing and staying put over the long haul. Your concern implies that, unlike your husband, you grasp that.

But this question is about so much more than money.

Youre not earning a paycheck right now, but youre very much working. Youve put your career on pause and taken on the difficult work of getting your family through the pandemic.

But has your husband sacrificed? It doesnt sound like it. Instead, hes turning your couch into a casino.

Heres whats even more worrisome, though: Hes unilaterally making decisions that affect your entire family without your consent, despite knowing youre worried. This is not a partnership.

You obviously know that its time for a long-overdue talk with your husband about his decisions. And while Im being hard on him, Id suggest taking a different approach.

Dont lead with Im worried that youre gambling away our future. Its a 100 percent legitimate concern. I just dont think it will start a productive dialogue.

Tell him instead that you want to set aside a couple hours to go over all of your investment and savings accounts. Its harder for him to get defensive if youre simply seeking to understand where your family finances stand. If he resists having an open conversation, consider it a huge red flag.

Focus the discussion on your broader goals, like when you want to retire or whether you want to pay for your kids college. Dont let yourself get sucked into an argument about the returns hes gotten. Those returns are unattainable in the long run. Aim to figure out what you should contribute for retirement based on the modest 6 percent to 7 percent returns financial planners estimate youll average.

One thing Id insist on here is that he prioritize your retirement as well. Youre right that you cant contribute to a retirement account without earned income, but earning spouses can fund an IRA for a non-earning spouse. The regular IRA contribution limits of $6,000 if youre under 50 or $7,000 if youre 50 or older apply.

Once youve resumed funding your retirement accounts sufficiently and youre saving for any other goals, you can split any extra money between the two of you for your individual wants. If he chooses to trade stocks on Robinhood, he can bet to his hearts content.

Dont let him sway you with his stock market expertise. Your future is at stake. Personally, Id trust you to manage my money over your husband any day.

Robin Hartill is a certified financial planner and a senior editor at the Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.

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Dear Penny: I think my husband is gambling away our future on Robinhood - Tampa Bay Times

Maybe you're a seasoned investor and have a good track record with stock-picking. And you may have a robust retirement portfolio - perhaps including some Zacks Top Retirement stock selections such as:

Virtu Financial (VIRT), Simmons First National (SFNC) and Farmers National Banc (FMNB).

If you did something similar, would it be advisable for you to trade your own retirement nest egg?

It could be a good idea - that is, if you are one of the very few investors who understands your own risk tolerance and can keep your emotions in check during chaotic market swings. However, if you're like the rest of us, there are likely more prudent ways to reach your retirement investing goals.

That's because the risk - reward scenario and investing approach is completely different for long-term wealth building and active stock trading.

Diversification vs. Stock Picking

Picking individual stocks has the potential for huge returns - but also carries a lot of risk, which is particularly hazardous when investing for retirement.

In fact, a study done by Hendrik Bessembinder revealed that only 4% of equities produced all of the stock market's gains over the last 90 years. All other stocks "broke even" with the increases of 38% canceled out by the losses of the bottom 58%.

For even the most talented stock pickers, the odds for long-term success are slim.

Is Investing Success All In Your Mind?

Most people think they can make rational investment decisions, but research indicates the opposite is often true. Investors followed in a DALBAR study performed significantly worse than the S&P 500: For the 30 years between 1986 to 2015, the average investor earned just 3.66%, whereas the S&P 500 produced a 10.35% return.

It is interesting to note that the period covered by this study includes the 1987 crash, the 2000 bear market, and the Great Recession of 2008, as well as the bull market of the 1990s.

This study suggests that one key reason for investor underperformance is trying to time volatile markets - and that irrational behavior biases tend to compound investor mistakes.

Story continues

Curiously, even experienced traders tend to underperform since they can't resist the emotional urge to make impulsive investment choices. They might be overly self-assured and miscalculate risk, get attached to a price target, or perceive a pattern that does not exist. This behavioral fallacy, over the long-term, can be disastrous with potential underperformance of a huge number of dollars disrupting your retirement.

The Key Takeaway for Retirement Investors

Your retirement portfolio should be managed with a strategy of performance over decades - not days, weeks or quarters. Most self-directed investors tend to fall short when it comes to long-term results.

Does that mean you should quit trading? Not really. One plan is to take 10% of your investable resources and trade to create alpha and look for outsized returns.

However, the major part of your wealth - those assets reserved for retirement - ought to be invested utilizing a more careful, conservative, risk management strategy to produce steady, compounded returns so you can securely achieve your retirement objectives.

Do You Know the Top 9 Retirement Investing Mistakes?

Whether you're planning to retire early or not, don't let investing mistakes derail your plans.

If you have $500,000 or more to invest and want to learn more, click the link to download our free report, 9 Retirement Mistakes that will Ruin Your Retirement.

This report will help you steer clear of the most common mistakes, like trying to time the market, lack of diversification in your portfolio, and many more. Get Your FREE Guide Now Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report Simmons First National Corporation (SFNC) : Free Stock Analysis Report Farmers National Banc Corp. (FMNB) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research

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Signs That Your Trading Will Ruin Your Retirement - September 07, 2020 - Yahoo! Voices

Automatically saving a percentage of your salary can be one of the easiest ways to fund your retirement.

But figuring out how much your contributions will equal in the future can be confusing. If your plan is to get to $1 million, starting younger will go a long way toward keeping the process manageable.

As a rule of thumb, most financial advisors suggest you save 10% to 15% of your annual salary. Saving less is likely to leave you with regrets, while going too much higher than that can put a strain on your budget.

Personal finance website NerdWallet crunched the numbers, and we can tell you exactly how much of your $50,000 you'll need to tuck away to get there.

Just a few things to remember: These numbers assume you have no money in your retirement plan, that you will get a 6% return on your investments and that you will retire at age 65.

The math also does not account for potential pay increases, employer matches, inflation or any curveballs life may throw at you. So plan accordingly.

Now let's dive into the figures. Watch this video to find out how to make it happen.

More from Invest in You: How Walmart and other big companies are trying to recruit more teenage employees Americans are more in debt than ever and experts say 'money disorders' may be to blame How much money do you need to retire? Start with $1.7 million

Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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How much you'll need to save per month to retire with $1 million on a $50,000 salary, broken down by age - CNBC

Less than two weeks into the 2019 NFL season, Steelers quarterback Ben Roethlisberger suffered the most devastating injury of his career. Just before halftime of a game against the Seahawks, Big Ben tore three tendons "off the bone" while trying to throw a pass.

Not only did the injury end Roethlisberger's season, but there was also some speculation that it might end his career. The idea that Big Ben's career might be over after 16 seasons basically boiled down to two things: First, he suffered a devastating injury that no quarterback has ever had to recover from, and two, the Steelers quarterback is 38 years old, which is an age when nearly every NFL player not named Tom Brady sees their productivity come to a screeching halt.

Roethlisberger's wife, Ashley, knew it is was going to be tough for her husband to return to football, so one of the first things she did after the injury was to let him know that it was OK if he wanted to retire.

"I told him that I was only going to say this one time," Ashley said, via ESPN.com. "I wanted him to hear me and mark my words, not going to bring it up again, but if he felt content where he was with the career that he's had and it's on his heart to just be done, I would support him 100% in that. He doesn't have to worry about my feelings in all that. I want what he wants. I was basically just handing him permission to retire if that's where his heart was and I was going to support him in that."

Ashley revealed the details of the conversation during episode oneof a YouTube docu-series the Roethlisbergers are doing together.

After hearing what his wife had to say, Big Ben made it clear that he had no plans to retire, despite the fact that he didn't yet know how difficult it was going to be to recover from the injury.

"He listened, and you could tell he really took it to heart and thought," Ashley said. "And he said, 'Thank you, but I don't feel done. I'm not done.'"

The reason Big Ben came back is that he wants to win a few more Super Bowls, which is something he explained in early August.

"I think any athlete, any competitor, will tell you they want to go out on their own terms," Roethlisberger said. "And it doesn't happen all the time. We don't always get that lucky I think if I had felt that I was closer to the end, it might have been a decision for me to think longer about coming back or not. But I didn't feel that I was close to that. I'm not saying that I have 10 years left in me, but I definitely feel that I have some really good years left in me. That was definitely a motivating factor; coming back and showing that I still have it in the tank. I still have a lot to give this team. I still have a lot to give the fans. And I still want to win Lombardis, and I say that with a plural on the end."

Roethlisberger has continuously said during training camp that he feels really good, but the fact of the matter is that he still hasn't taken any hits. Since there were no preseason games this year, that means Big Ben won't take his first hit until he gets on the field in Week 1 against the Giants. The Steelers opener is being played on Monday night, which means there will be a lot of curious eyes watching when Roethlisberger suits up to play his first game in nearly a year.

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Ben Roethlisberger's wife reveals details of retirement talk she had with Steelers QB after his ugly injury - CBS Sports

In its 2019 Stress in America survey, the American Psychological Association reported that 60% of American adults identified money as a significant source of stress in their lives. Aside from simply trying to make ends meet, saving money for retirement is often reported as folks primary money concern. In fact, only 45% of people feel confident that theyll be able to pay for their retirement dreams.

While financial experts stress starting to save for retirement early, and common wisdom dictates that individuals should be setting aside 10% to 15% of their yearly incomes as early as in their 20s, that doesnt always happen. A variety of factors like the recession, downturns in the stock market, and supporting adult children or elderly parents make it impossible for many to put money aside even though they know they should. As a result, the size of the average nest egg in 2019 was down 7.5% to 8% from 2018s average.

Retirees in the United States would need more than $1 million to retire at age 65. That amount of wealth is unattainable for many, and as a result, those reaching retirement age have started looking for other options. One such option? Retiring overseas. In 2019, it was reported that more than 500,000 people were receiving their retirement benefits overseas, an increase from the 400,000 receiving their benefits overseas in 2000.

In this article, Stacker looks at what it would be like to retire in 50 places around the world. Using independent sources, weve checked key components like the cost of living, safety, health care, ease of obtaining a visa, popular activities, and cultural similarities to give you an idea of what it would be like to start your third act somewhere new.

From sunny Costa Rica to glacial Iceland, read on to get a basic idea of what your golden years would look like spent outside the United States.

You may also like: Best boarding schools in America

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What retirement is like in 50 places around the world Stacker Money - MSN Money

Paying to much in taxes in retirement is for the dogs.

Assuming you still have some form of income, tax planning does not end once you retire. The Internal Revenue Service (IRS) will always expect you to pay taxes on your retirement income. For those who are well prepared to maintain their standard of living in retirement, many find their tax bills are similar to when they were working full time. Some of you may even find you are paying more in taxes; this is common for retiring business owners.

As the saying goes, nothing is certain except death and taxes. How can you make the most of your retirement investments and keep more of your hard-earned retirement income from getting sucked up by taxes? First, take the time to do the necessary tax planning to avoid the following retirement income tax mistakes that can drastically reduce your financial security as you age.Making tax-smart moves can help you get the absolute maximum enjoyment from your retirement income. Ignoring these retirement tax mistakes could lead to both paying more in taxes and running out of money earlier than necessary.

The Six Retirement Tax Planning Mistakes That Could Kill Financial Security

Tax Planning can help your have a happier retirement.

Retirement Tax Mistake #1:Assuming Your Taxes Will Be Lower in Retirement

Even if they were able to live tax-free, most Americans are not prepared financially to maintain their standard of living in retirement. Still, many assume their taxes will be lower once they leave the workforce. Those who do end up paying fewer taxes in retirement often do so by simply having a smaller retirement income, which is not likely the dream retirement.

After suffering through nearly four years of the Trump Presidency, we are in the midst of a global pandemic, and the national debt has skyrocketed. Tens of millions of Americans are out of work. Thousands of baby-boomers are reaching retirement age, leaving the workforce, and moving onto rolls of government programs like Social Security and Medicare. We have known for decades that changes will need to be made to keep these expensive government programs solvent. It is hard to see how that will happen without taxes being raised at some point in the future. As a financial planner, I know that cutting benefits would be untenable, politically, and devastating for the millions of retirees who rely on Social Security to meet their basic needs.

On a brighter note,Americans have saved trillions of dollars into tax-deferred retirement accounts like a 401(k) or IRA.Keep in mind that taxes will be due once funds are withdrawn from those accounts. If tax rates increase, you may have similar, or even higher, tax bills in retirement.

Have you ever heard of provisional income? Im guessing most of you said, No. Provisional income is what the IRS uses to determine whether or not yourSocial Security benefitswill be taxed. Yes, Social Security income can be subject to taxation from the IRS.

For those with distributions from retirement accounts like an IRA or 401(k), they count as part of your provisional income. These distributions are added to any 1099 forms you receive from your taxable investments and to one-half of your Social Security benefits for the year. If that income totals more than $34,000 for singles or $44,000 for a married couple, filing jointly, a whopping 85% of your Social Security benefits will become taxable at your highest marginal tax bracket.

Talk to your financial planner to determine whether you will be above those relatively small retirement-income numbers in retirement. There are a variety of ways to strategically minimize the taxes on your Social Security benefits. Lumping IRA withdrawals into one year and diversifying your retirement savings into taxable and non-taxable accounts are a couple of ways. Higher earners (above $200,000 per year) may want to check out theRich Person Roth IRA for even more tax-free income in retirement.

The contribution limit for a Roth IRA is just $6,000, per year, in 2020. For the average American, only saving that amount each year, and only having one type of retirement account, will most likely not be enough savings for retirement. Yes, you read that right. Solely contributing the maximum amount of $6,000 each year into a Roth IRA will not likely grow enough to help you achieve financial independence. Luckily, there is now a Roth 401(k) option with an annual $19,500 contribution limit.However, your employer has to offer this option as part of the employee benefits package.

Many of you reading this will likely make too much money to contribute to a Roth IRA. Married couples making more than $203,000, per year, in 2020 are not eligible to contribute to a Roth IRA at all.

Some of you might be asking, Why is ignoring a Roth IRA a problem? The reason is that having both a Roth IRA account and traditional IRA or 401(k) allows you to diversify some of your tax-rate risk in retirement. If you have a big-income year, or taxes are higher in one year, you can pull more money from the Roth (tax-free withdrawals) and less from the 401(k) (taxable withdrawal).

Retirement Tax Mistake #4:Ignoring Taxes All Together

Have you ever looked at a retirement calculator, or projection, and said, I could live off that amount of retirement income.? Perhaps you did not realize that the retirement income estimate was before taxes? This problem is easy to fix when you are years away from retirement. When you have already left the workforce, it will be much harder to make up the difference. It is essential to point out that for those with large retirement nest eggs, federal taxes can be as high as 37% (current tax rates for 2020).

Additionally, state taxes can also be high. Californias tax rate is 13.3%. States with lofty tax rates often cause people to ask themselves,Should I move from my high-tax state after I retire?

Retirement Tax Mistake #5:No Strategy to Minimize Taxes

For retirees relying solely on Social Security, there is not much tax planning needed. For everyone else with higher retirement incomes, a penny saved is a penny earned, as the saying goes. Be proactive with tax planning. That will help you keep more of your hard-earned money out of Uncle Sams hands. If you need a little push, contact aCertified Financial Plannerwho can help you develop a strategy to minimize taxes.

Retirement Tax Mistake #6: Taking Withdrawals from your retirement accounts in the Wrong Order

Throughout this article, we have been talking about putting off taxes as long as possible and how to minimize taxes in retirement. This often leads people to spend down their post-tax investment accounts first, in retirement. This can lead many to feel like they have more money than they do. Without taxes being due on withdrawals, you will take home more money from a post-tax investment account compared to IRA or 401(k) accounts.

You may see your net worth continues to grow even after withdrawals. That has been especially true over the last few years of the bull market. If that has been the case, you could be sitting on a tax time bomb. Once the post-tax money is gone, all your retirement income will be taxable (assuming funds are held in IRA or 401(k) accounts). You will have little to no options to minimize taxes once that happens.

While it is a bit more complicated, most people will benefit from taking some money from accounts like a 401(k) now. Yes, you would pay taxes when you withdraw the money, but the goal would be to minimize taxes over your entire retirement while paying as little as possible on each withdrawal.

Bottom line - Do not forget about taxes when planning for retirement. A little proactive tax planning will help you earn income in your golden years as efficiently as possible. Also, you want to pay the least amount of taxes as possible so you can keep as much of your hard-earned money as you can.

See the article here:
Tax Mistakes In 2020 That Could Ruin Your Retirement - Forbes

3. You've researched your healthcare costs

Healthcare is the one expense that tends to catch seniors off-guard. Though it's impossible to predict exactly what healthcare will amount to for you, Fidelity estimates that the average 65-year-old woman retiring today can expect to spend $155,000 on it throughout retirement, while the average 65-year-old male can expect to spend $140,000. If your health is terrific, you may find that healthcare costs you a bit less. If your health is poor, you might spend more. But either way, it pays to do your research so you understand how much money to allocate to taking care of your health.

It used to be the case that setting aside 10% of your income in an IRA or 401(k) would be enough to buy you a secure retirement. Not anyone. These days, you're better off socking away 15% to 20% of your earnings (or more) to help ensure that you're able to keep up with inflation and cover all of your eventual needs. If you're currently saving a smaller amount, percentage wise, then it may be time to look at your expenses and find ways to free up more cash for your nest egg.

The knowledge that you're on track for retirement could buy you the peace of mind so many older workers crave. If you don't think you're on track for retirement, take steps to change that so you don't want up disappointed once your time in the workforce eventually comes to a close.

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Are You on Track for Retirement? Here's How to Know - Statesville Record & Landmark

The Trump administration is pushing dramatic changes to the American retirement system that will benefit Wall Street but push average citizens into plans that are riskier, less profitable, and loaded with high and hidden fees.

In the past two months, the Trumps Labor Department has introduced two pending changes to deregulate vulturous private equity firms and multi-trillion dollar retirement managers like Vanguard, Fidelity, and BlackRock. A third proposed change would restrict retirement investments with an underlying environmental, social, or governance mission mainly to boost the struggling fossil-fuel industry.

If finalized, the result will be death by a thousand cuts to Americans diminished retirement nest egg, amounting to an all-out Wall Street looting of American retirement.

Pushing this through is Secretary of Labor Eugene Scalia son of the late Supreme Court Justice Antonin Scalia who for many years was one of Wall Streets most prominent litigators, representing corporations like Chevron, Walmart, and Facebook, as well as over a dozen banks and financial firms during his tenure at Gibson, Dunn & Crutcher, a law firm with a robust corporate lobbying wing.

Secretary Scalia is still working for his former clients, said Barbara Roper, director of Investor Protection at the Consumer Federation of America. This is a multipronged attack on Americans retirement security.

How Wall Street Works Over Workers

For the millennials and zoomers in the crowd, perhaps a quick review of the basics of retirement is helpful. Retirement refers to a period toward the end of a human life during which ordinary people could use money theyd saved and invested combined with Social Security payments to stop working but still live comfortably.

This used to be considered a core part of the American dream. But for reasons having very much to do with the growth of the financial sector, austerity budgets eroding the welfare state, and the decline of union membership (and having absolutely nothing to do with avocado toast), retirement as a concept has become more of a goal than a guarantee.

There are a few things still working in our favor, however, including federal rules aimed at making sure we get the most out of the money we save for retirement. The 1974 Employee Retirement Income Security Act (ERISA) gives the Labor Department control over all areas of retirement investing including defined contribution plans like 401(k)s and defined benefit plans like union pensions.

Pensions are a retirement fund where employers guarantee a certain level of payout (a defined benefit) and agree to be on the hook for covering that payout, even if the pension funds investment returns cant cover it. Also, financial professionals manage pensions, thus reducing the likelihood of retirees being confused or swindled by complex financial arrangements. This even allows pensions to take on higher-risk products like private equity funds. But today, only 27.3 percentof retirees, shrinking with nationwide unionization rates, have a pension.

For everyone else, there is a 401(k), where workers and retirees pay in their defined contribution and then get payouts from it based on how well the investments perform. An employers human resources department usually provides the retiree with a menu of 401(k) investment options, but few HR managers are financial professionals so their menu is rarely curated to the workers wants or needs. Originally, 401(k)s were meant to supplement pensions, but today, only 6.8 percent of retirees have both types of plans, and Social Security, as intended.

The federal government, and the Labor Department in particular, have a big role making sure these plans work the way theyre intended, and in (at least in theory) preventing people from getting swindled by investment managers. One of the main guardrails aspiring retirees have is whats known as fiduciary duty, a rule that requires managers of both pensions and 401(k)s to provide the best possible service here, meaning the best quality investments for the lowest possible cost or face liability.

The fiduciary duty combined with workers being on the hook make the 401(k) sector a fertile breeding ground for high-stakes, multiparty lawsuits, where employers fight off accusations by workers and retirees of selecting low-performing and/or high-fee funds for their 401(k)s. An employer may negligently choose a retirement investment manager because they were the most readily available, or they didnt have the resources to find an optimal plan, or they were mistaken of a funds potential. Other times as was alleged against the Massachusetts Institute of Technologys retirement plan last year when the school received a $5 million donation from Fidelity Investments the employer might have an incentive for choosing a certain fund.

For many years, one of the most prominent employer-side litigators was Eugene Scalia himself. None of the prior secretaries of labor, either Democratic or Republican, have been people who have been on the firing line against workers and retirees, said plaintiffs attorney Jerome Schlichter, whose law firm pioneered retirement excessive-fee litigation. Schlichter directly butted heads with Scalia in an ongoing retirement fund suit right up until his secretarial appointment.

Andy Behar, CEO of As You Sow, a nonprofit that rates the financial sector for its ethical standards, said that Scalias three most recent DOL rulemakings suggest a personal vendetta. Hes couldnt win as an attorney, so hes changing the rules, Behar said.

The Private-Equity Exposure

One of the Trump administrations planned changes to retirement rules will open up 401(k) investments to high-risk, high-fee private equity funds. Its a major break with past practices, but it wasnt done through a formal rule process that would allow for scrutiny and public input.

Instead, in early June, the DOL sent a high-profile information letter to Pantheon Ventures, a private equity firm, codifying conditions, such as a 15 percent cap, for a 401(k) to invest in private equity. The letter formalized private equitys entry into the 401(k) marketplace, creating a blueprint for copycats and sending shockwaves throughout both sectors.

Private equity is a type of hedge fund comprising private investors who buy privately held, struggling companies in order to rehabilitate or liquidate them, collecting extremely high fees and enriching shareholders either way. Direct investments in private equity and other types of hedge funds are typically restricted to high-net-worth individuals or institutions. This is because high-net-worth individuals and large institutional investors have extra, discretionary money to handle private equitys huge risks, long-term illiquidity, astronomical fees, and capital calls, investor fundraisers demanded at the drop of a hat. In other words, high-net-worth individuals and huge institutional investors can afford to burn that money if the investment goes south.

The average retirement investor, however, has always been considered uniquely reliant on their savings, which is why ERISAs fiduciary duty requires a very conservative investment strategy. Considering private equitys many risks and costs, the government, until now, and 401(k) plaintiffs attorneys have largely opposed it in retirement plans.

According to Wally Okby, a senior analyst at Aite Group, the pool of available capital from high-net-worth investors for private equity has recently dried up. And considering the shrinking state of pensions, private equity is chomping at the bit to enter the $8.9 trillion 401(k) marketplace. Theyre looking for cash anywhere they can get it, Okby said. Therefore, they go to 401(k)s, where investors typically dont understand what theyre investing into.

In an ensuing press release, Secretary Scalia said the Pantheon letter helps level the playing field for ordinary investors. Securities and Exchange Commission Chairman Jay Clayton also praised the letter as improving investor choice.

Investor advocates disagreed. The use of private equity in retirement plans is fraught with peril. It was a vehicle that was created for wealthy, sophisticated investors, not for average people, Schlichter said.

The letter is part of a broader private-equity lobbying, pressure campaign, and creation of complicated fund structures designed to prey on more of Americans hard-earned savings. Clayton and other lawmakers have made several moves to lower barriers for private fund access to Main Street investors. On July 28th, one senior SEC director at a conference openly solicited the financial-industry attendants on what SEC rules should be changed to open up working peoples money to hedge funds and private equity.

The letter also comes in light of a recent SEC warning that some retail fund managers have been receiving undisclosed kickbacks from private-equity investments.

The industry has supported the letter on the disputed belief that private-equity investments outperform the stock market at large. George Gerstein, an attorney for the financial industry and co-chief of fiduciary governance at Stradley Ronon, believes that increased private-equity exposure will increase performance of retirement plans, especially as a counterweight to other economic headwinds. But a recent study at Oxford University found that, after fees, top private-equity funds have performed no better for pension funds over 15 years than if the money were passively indexed to the stock market.

Further, private-equity disclosures lack any standard date or metrics, so its disclosed performance data is inherently misleading, Roper argued.

A 401(k) was designed to allow a worker to select different investments in the employer-provided menu to suite their wants and needs: shorter-term or longer-term growth funds, high or lower risk, smaller- or larger-sized company exposure. But in reality, workers overwhelmingly do not make any changes to their 401(k) investment lineup, Roper said. That means that even if private equity did disclose its risks, most people probably wouldnt change anything. Plus, any disclosure could be found on the 40th page of dense legalese. Maybe because the typical worker isnt a financial analyst, Roper understated.

Undoing the Fiduciary Duty

On June 29th, 2020, the Department of Labor unveiled its second major shift, a proposed update to the breadth and depth of the retirement professionals fiduciary duty money managers requirement to provide the best possible service or face liability.

The proposed rule would reduce the fiduciary duty to cover fewer transactions and parties, opening up enormous loopholes wherein a retirement professional has to uphold their fiduciary duty.

Shockingly, it would also allow any retirement professional to receive third-party payments for their recommendations, so long as they adhered to an undefined best interest standard and didnt materially mislead investors. This part of the rule is perhaps akin to a doctor being allowed to take kickbacks in exchange for prescribing certain pharmaceuticals. Scalia said his rule expanded investor choice.

Once again, investor advocates disagreed. [T]he proposal is designed to preserve financial firms ability to place their own interests ahead of their customers interests and profit unfairly at their expense, argued a public letter co-signed by several investor advocate groups.

That Scalia is the one proposing the rule is, to many, an inverted justice. When Scalia was a Wall Street attorney, in one of his most notorious cases, he led litigation for Wall Street groups in successfully overturning an Obama DOL rule that enhanced the scope of a financial professionals fiduciary duty to retirees.

Given Scalias role in the prior rulemaking, both Schlichter and Roper believe Scalias role in its replacement was conflicted, and that many believe he should have recused himself from fiduciary rulemaking. Gerstein disagreed with both assertions.

A spokesperson for the Department of Labor noted that Scalia sought advice from the DOLs career ethics attorneys, who also consulted the U.S. Office of Government Ethics, and they determined that neither relevant ethics rules nor the Trump administrations Ethics Pledge required his recusal from the rulemaking.

A Fossil-Fueled 401(k)

The investment world has recently been choosing to invest heavily in renewable energy, diverse workplaces, and companies with fair-labor practices. So-called environmental social governance (ESG) investing has become incredibly popular, with US SIF estimating that today one-quarter of all U.S. dollars invested have some form of an ESG mandate, an 18-fold increase between 1995 and 2018. Financial firms have been working doggedly to create new funds and products that meet customers growing demand.

And its popular not just because of some charitable spirit. Performance data shows that not only does ESG investing outperform traditional investments in a good economy, but it also loses less in a downturn, though there is some disagreement. Most ESG-sector growth has remained outside of retirement due to retirements need for perceived low-risk investments, but given ESGs growth, it was inevitable that it would eventually enter retirement investing.

Or at least, it was inevitable, until mid-June, when the DOL unveiled its third monumental retirement rule proposal, this time from authority from a Trump executive order promoting fossil fuels. The Labor Departments slash-and-burn rule will subject all ESG in retirement plans to the stigma of heightened scrutiny. While on its face, the rule clarifies what is already the law that retirement investments must meet fiduciary-level scrutiny it also forbids retirement plans from having investments that promote some non-pecuniary purpose, such as not destroying the planet, no matter retirees wishes.

Private employer-sponsored retirement plans are not vehicles for furthering social goals or policy objectives that are not in the financial interest of the plan, Scalia said in a press release.

The consensus in the financial sector is that this rule will have a chilling effect on ESG and benefit the Trump-allied fossil-fuel sector.

Basically the rule that they proposed is deeply internally conflicted. On the one hand, you have to make decisions on financial returns, and yet if you did that, youd have to exclude fossil fuels, Behar from As You Sow said. Why is the DOL saying that fiduciaries should steer clear of less risk, steer clear of outperformance?

Like the other regulatory shifts, the DOL is not acting alone. The SEC has scrutinized and criticized ESG, alongside the New York branch of the DOL and the White House itself. Despite this antagonism to ESG, European regulators, Democratic lawmakers, investor advocates, and even the investment industry itself support expanding and standardizing the ESG sector.

The ESG rule is just straight political, Roper said.

Foxes Guarding the Retirement Coop

Together, the Trump administrations plans contribute to a remaking of a retirement system that gives financial firms new opportunities to cash in at the expense of greater risk to workers, while making it harder for us to use our money to build the kind of world wed like to retire into.

The most perplexing aspect of these rules is their open contradictions. The Labor Departments justifications for the private equity letter and the standard of conduct rule were to expand investor choice. While the rule on environmentally and socially conscious investing effectively shuts out investor choice. The rules allow a retiree to choose a high-risk, high-fee investment, or to choose a retirement adviser who gets a kickback for their imprudent recommendations. But retirees may not choose an investment that promotes the idea that cutting carbon emissions or increasing diversity are in and of themselves good investments.

You could understand if they took alaissez faire approach to both. or if they took a restrictive approach to both, Roper said. This is about picking winners and losers. And the losers are going to be retirement savers.

They just dont like transparency; they want to put us in the most risky, nontransparent vehicles they can find, Behar said. I guess that kind of squares with this administration.

Discouragingly, the rules seem likely to go forward. The private-equity letter effectively lets the horse out of the barn. And while the two formal rules havent been finalized, theres little to stand in their way, as legal challenges seem unlikely after a related SEC decision was upheld in June.

In theory, individuals could sue their retirement-investment managers on a case-by-case basis if they felt the money was being mismanaged, but thats no substitute for a system that works to protect them in the first place something Scalia seems hell-bent on trying to dismantle.

Then again, Scalias only calling the shots so long as Trump is in the White House.

Read more:
Wall Street Is Looting the American Retirement System. The Trump Administration Is Helping - Rolling Stone