UNITED STATES - MARCH 25: Senate Majority Leader Mitch McConnell, R-Ky., center, arrives to the ... [+] Capitol before speaking on the Senate floor about a coronavirus stimulus package on Wednesday, March 25, 2020. (Photo By Tom Williams/CQ-Roll Call, Inc via Getty Images)

The negotiating parties stayed up past their bedtime Tuesday night, announcing a deal. There were subsequent complaints about errors in the legislation. Finally, late Wednesday night, the Senate passed its economic stimulus and relief bill and sent it to the House.

Now the $2 trillion (yes, with a T) economic relief bills text has finally been released. For a run-down of the particulars of the bill as a whole, see the story here.

But Ive been keeping an eye on the retirement-related pieces.

For savers - section 2202

Individuals affected by the coronavirus will be permitted to take a withdrawal from their retirement accounts (IRAs, 401(k)s, etc.) of up to $100,000, without paying the usual early-withdrawal penalty. In addition, the sum withdrawn may be recontributed to a retirement account within three years, without being subject to the usual annual contribution caps. If its not repaid, the withdrawal will be taxed at ordinary income tax rates over a three-year period. Notably, the definition of eligibility for penalty free early withdrawals is rather expansive, encompassing anyone experiencing any economic effects due to the virus.

In addition, the limit on loans from retirement plans is increased from its existing $50,000 to $100,000 and the existing limitation that loans may not exceed half the vested account balance has been removed. Due dates for new loans or loans already outstanding are also to be extended by one year.

The legislation resembles prior iterations of disaster relief, most recently for individuals affected by the three 2017 hurricanes of Harvey, Irma, and Maria.

For retirees - section 2203

The legislation waives the required minimum distributions for IRAs and other individual retirement accounts for calendar year 2020.

For pension plans - sections 3607 and 3608

Readers will recall that earlier this week I featured the concerns of pension plan sponsors that, absent government action, they would face challenges with respect to quarterly pension plan contributions due as soon as April 15, at a time when they are facing challenges with cashflow and can ill-afford to direct money to pensions. This legislation relieves that worry by deferring those contributions to January 1, 2021, with interest. In addition, one component of existing funding rules is that plans with a funded status of less than 80% (based on the relevant government regulations) are unable to pay out lump sums to their participants. In order to prevent a low funded status calculation due to coronavirus economic impacts from triggering this restriction, plans would be able to use the last measurement prior to 2020 in place of their 2020 measurement. Finally, in the same manner as the Department of Labor previously had authority to postpone various sorts of deadlines for requirements in ERISA for cases of terrorism or war, the law grants them the same ability due to a public health emergency a change that doesnt have any immediate effect but enables the Department of Labor to invoke this ERISA clause to grant extensions, as they did, for example, in 2017 with the hurricanes and California wildfires.

Whats missing from the bill?

The House version of relief/stimulus was criticized for its grab-bag of provisions and inclusion of items on a wish list that were unrelated to the crisis at hand. Among these was the Butch Lewis Act that is, the Rehabilitation for Multiemployer Pensions, House-passed legislation that promised to solve the multiemployer crisis by means of 30 year loans in which only interest is paid for the first 29 years, and a final principal payment in year 30 is forgivable if the plan cant pay.

The House version also provided funding relief (or special treatment and exemptions from properly funding workers pensions, depending on your perspective) for community newspapers.

Im perfectly happy that these provisions were excluded.

But the House bill also included provisions for employer-sponsored pensions to help them in the medium-term: the ability to make up deficits caused by the market crash and the poor economy over fifteen rather than seven years, and boosts in the anticipated very-low discount rates companies would otherwise be obliged to use to calculate their liabilities (remember, the lower a discount rate is, the higher the liabilities, and those rates are at a historic low at the moment). To be sure, 95% of pension plans have a plan year that matches the calendar year, so that there is some time to be had for these plans, both in terms of future legislation and ability to see what the economy actually looks like some months from now, but others will need to measure their liabilities on dates as soon as April 1st.

What pension-related special treatment items remain?

One, that I can tell: a special benefit for the March of Dimes. This is Section 3609: Application of Cooperative and Small Employer Charity Pension Plan Rules to Certain Charitable Employers Whose Primary Exempt Purpose Is Providing Services With Respect to Mothers and Children.

As it happens, in 2014, various small charities and other similar employers were given exemptions from current pension plan funding requirements, and permitted to fund their pensions in a less-stringent manner. The March of Dimes did not fit the criteria for a designation as a cooperative or small employer charity pension plan but, back in November, a group of legislators introduced a bill to include them with new narrowly defined criteria (provides services with respect to mothers and children and conducts medical research . . . through grant-making and has been in existence since at least 1938). Why March of Dimes? Reporting from a year ago describes fundraising shortfalls, proliferation of competitor fundraising walks, and efforts to rebrand and refocus.

(Note that this is different from the exemptions for church plans; plans sponsored by churches/religious groups have a longstanding exemption from federal funding requirements but are likewise not protected by the federal government through the PBGC. These small charity plans are protected by the PBGC but are nonetheless subjected to more lenient funding rules.)

Was this worthwhile legislation that just wasnt able to pass on its own? As an actuary, Im not happy with it, but in the grand scheme of things, its small potatoes.

What about the payroll tax credit?

Yes, every time there are proposals to give tax relief in the form of payroll tax credits/cuts, there are people who get upset that this will damage Social Security. The logic is this: if the Trust Fund is not made whole by means of transfers from general federal funds, then Social Securitys funding suffers. And if the funds are replenished, this weakens the degree to which Social Security funding is separate and set-apart from the rest of the government operations. Heres the advocacy group Social Security Works:

The Republican plan would replace Social Securitys dedicated revenue with deficit-funded general revenue, but this is a trap. Once the pandemic is done, Republicans will undoubtedly use the general revenueto demand cuts to Social Security in the name of reining in entitlements.

The reality is that delivering benefits via a mechanism of payroll tax credits is not a nefarious scheme to weaken Social Security, but simply something thats logistically/administratively easy to do, or, at any rate, comparatively easier than other mechanisms for accomplishing the same purpose.

What next?

Fundamentally, there are too many unknowns to speculate. Will the pandemic and its economic effects turn out to be the equivalent of a particularly nasty recession? Will the effects be so different from a normal recession as to cause economic textbook rewrites? And how will that affect the world of retirement?

As always, youre invited to comment at JaneTheActuary.com!

Go here to read the rest:
A Guide To The Retirement-Related Provisions In The Senate Coronavirus Stimulus/Relief Bill - Forbes

A woman wearing a protective mask walks past the New York Stock Exchange on March 12, 2020. in New York City.

Pablo Monsalve | VIEWpress | Corbis via Getty Images

The recent market volatility may have you wondering just what to do with your retirement account.

You may be thinking of heading for the exit or perhaps you want to buy some stocks on sale.

While stocks rallied the third straight day on Thursday, they have yet to make up the steep losses from the coronavirus sell-off. The Dow Jones Industrial Average, S&P 500 and Nasdaq all entered Thursday's session down at least 24.9% from their respective all-time highs set last month.

Financial advisor Mitch Goldberg, president of ClientFirst Strategy in Melville, New York, said the last few days of reprieve have given investors time to think.

"When you are bombarded by a ton of information, it's difficult to make a decision," he said.

"It's only after you have time to contemplate what you've learned and how it relates to your own situation that you can really make a smart decision."

However, remember that it is normal to feel anxiety amid the market volatility. The key is not to immediately act on those emotions.

Before you make a move, you should take several factors into consideration.

Your retirement date should determine how you are invested. Younger investors should be much more aggressive because they can withstand market swings. However, if you are less than five years away from retirement, you should be more conservative with your investments.

Make sure you check on your allocations, as your original target for example, 60% stocks and 40% bonds may have shifted. If you are young, you may consider adjusting future purchases toward a higher percentage of stocks to take advantage of the market drop.

If you are older, you may want to consider moving some stock funds that have overperformed and buying more fixed-income investments, which are considered safer.

If you want to up your contributions to your 401(k) to take advantage of low stock prices, only do so if you are financially sound. That means you are secure in your job and income, no credit card debt and a solid emergency fund.

If you have little or no cash cushion, consider reducing your contributions and directing that money into a high-yield savings account. However, you should continue to contribute enough money to your 401(k) to get your employer's matching contribution.

If you are strapped for cash, you can take a loan from your 401(k).

The stimulus bill passed by Congress Friday relaxes the rules around retirement-plan loans, allowing you to borrow up to $100,000 from your 401(k). That's double the amount you can normally take.

Experts tend to suggest this as a last resort, since any cash you take out will not be earning money for you as an investment.

However, it is an option to help pay bills and have money on hand in the event of an emergency.

In this time of crisis, you'll also be allowed to take a hardship distribution of up to $100,000 from your 401(k), 403(b) or individual retirement account at any age without a withdrawal penalty, according to the stimulus package. It passed both the Senate and the House is now headed to President Donald Trump's desk for signing.

Normally, if you take a withdrawal from your 401(k) or IRA before age 59 , you are subject to a 10% penalty.

You also have to pay income tax on the amount taken. However, the bill gives you the opportunity to pay the taxes over the course of three years. You also have the option of repaying the amount you pulled from your account over that time.

"The biggest consequence of withdrawing money from your retirement plan is that you are losing out on that money compounding for years and years and years and you are going to have to put away even more money in the future to make up for that loss," Goldberg said.

Be sure to check that your workplace's plan allows hardship distributions it isn't required to do so. Even if it does permit them, check in with your human resources department or plan administrator before you proceed.

Read the original post:
5 ways to ensure the coronavirus outbreak doesn't cripple your retirement savings - CNBC

In Summary California physicians and nurses groups say they will heed the call, but are eager for more specifics on how it will work. Almost 600 people with the coronavirus are in intensive care, three times more than a few days ago.

As the number of people hospitalized in California with the coronavirus doubled in just four days, Gov. Gavin Newsom on Monday sent out an urgent call seeking help from the states 37,000 retired and part-time health care professionals.

Newsom issued an executive order that will temporarily allow retired doctors and nurses to return to work, broaden the duties that some nurses may perform and bring medical school and nursing students who are close to graduating into the workforce almost immediately.

Statewide, 1,432 people have been hospitalized with the virus, up from 746 four days earlier, Newsom said. Of those, 42% or 597 were in intensive care, compared with about 200 four days earlier.

Newsom, making the announcement on National Doctors Day, said he hoped that his appeal for the new California Health Corps would generate thousands and thousands of additional medical workers to respond to the pandemic.

We are very, very hopeful with this effort that we will see a surge of individuals, he said, urging qualified people to sign up for the program at healthcorps.ca.gov.

Newsoms order allows the state to waive licensing and certification requirements for certain medical professionals through June 30th.

It gives the state the flexibility to allow doctors and nurses who have retired in the last five years, students who have nearly graduated from medical and nursing schools and others who are in the process of obtaining a license or getting relicensed to treat patients. The new workers would be paid and covered by malpractice insurance.

Health care advocates and experts say the governors order is vague so they are eager for details about what exactly will be allowed under the executive order. They said while it admirably aims to expand the workforce, it simply authorizes state agencies and licensing boards to make the final decision on what licensing and scope of practice regulations will be relaxed or waived for the time being.

Its opaque, said Joanne Spetz, associate director of research at the Healthforce Center at UCSF. Most of us who have been watching this expected there to be more clarity today about what is going to be allowed.

Until the agencies provide that specificity for the workforce its unclear what is going to be permitted, Spetz said. Workers are going to need that guidance from a practical standpoint.

The executive order leaves a lot of questions unanswered, said Scott Casanover, vice president of government affairs for West Coast University, a private nursing school with three campuses in Southern California.

Nursing students have to complete a certain number of hands-on clinical hours with patients to graduate. All of those hours were cut short in the last month as host organizations like hospitals began shutting down their programs or the schools pulled their students after the sheltering in place orders were issued.

Im glad that the governor turned his attention to the issue but he really didnt make any decision in todays order, Casanover said. He repeatedly says every second counts, every minute counts, but here we have the governor kicking the can down the road to the state agencies.

The California Medical Association, which represents more than 50,000 physicians, supports the move by the governor, said Anthony York, spokesman for the organization.

We understand that we all have to get out of our bunkers a little bit, York said.

Sandra Hernandez, president and CEO of the California Health Care Foundation, praised the order, calling it a thoughtful step that the governor and his team is putting in place.

The point here is to mobilize all available workforce in California, and I fully expect these agencies are ready to act and take the appropriate steps to deploy as many of our workforce as possible, Hernandez said. Ive got to believe that all agencies will be playing their part.

Hernandez said calling on the mature health care workforce will garner a large response, and including young near-graduates is equally important.

They are very freshly trained and this is a younger workforce. Their training has been the most immediate and I think it was wise to deploy that workforce quickly into their respective professions as possible, Hernandez said.

Newsom said the groups involved put aside their differences to agree to the program.

The expansion of the role of nurses has been particularly controversial in California in recent years. Nurse practitioners have been fighting to persuade the California Legislature to permit them full scope authority, which would allow them to evaluate and treat patients independently without direct physician oversight.

Under current law a doctor can oversee four nurse practitioners. York said the Dept. of Consumer Affairs, which licenses professions, said on a conference call Monday that it will allow for a higher number per doctor as needed by hospitals and clinics, which will have to apply for the waiver.

However, the medical association, he said, is still opposed to legislation intended to give nurse practitioners the ability to practice independently.

Californias attention had been on stockpiling protective gear such as masks, gloves and ventilators, and greatly expanding the number of hospital beds for patients with the virus as well as other health problems.

The Naval hospital ship Mercy, moored at the Port of Los Angeles, has begun to care for patients who are not infected with the coronavirus, and numerous field hospitals are being erected in parking lots and sports arenas.

But now staffing the burgeoning medical facilities has taken primacy as the number of people hospitalized, particularly in intensive care units, has surged.

Newsom said the state would need to quickly increase its hospital capacity by two-thirds to handle the anticipated rush of cases.

While the rate of infections is rising, officials are more concerned at the much faster pace of patients requiring hospitalization.

Mark Ghaly, secretary of the state Health and Human Services Agency, said current models project the need for an additional 50,000 hospital beds by the middle of May. Thats in addition to Californias current inventory of 75,000 licensed beds.

Who better than those folks who are really close to being done to bring into the workforce now to essentially continue their clinical training with the help of experienced nurses or other health professionals, Ghaly said.

Building the workforce is critical, but so is their protection. As more workers are brought to the front line, the state has to ensure that they are provided adequate personal protective gear, which has been a struggle, said Stephanie Roberson, government relations director at California Nurses Association.

We cant talk about workforce and how we prepare for a surge if our nurses and other health care workers are not protected at the bedside, said Roberson.

Calling for almost-ready student nurses can ease the burden at hospitals, Roberson said, as long as they work under the direct supervision of experienced registered nurses.

We absolutely can use our student nurses judiciously in this situation, she said. And at the same time they can still gain the clinical experience they need for graduation, that can happen right now.

Nurses have regularly protested outside hospitals demanding more N95 respirators and other gear. An increase of medical staff will require that much more supplies, which the state is still sourcing.

Newsom said the state had distributed 32.6 million N95 masks, part of an estimated 100 million gloves, gowns, and other pieces of protective equipment officials are trying to procure, including as many as 10,000 ventilators.

He said the statewide social distancing edict has been successful, but when asked if the mandate that Caliornians stay at home was working to flatten the curve epidemiologists holy grail of decreasing the rate of infections he demurred.

The policy alone may not end the epidemic, Newsom said, But we know what does work, and thats physical distancing.

Newsom would not specify the cost of the program, but said some if it would be borne by the federal government.

Some other states have already allowed for retirees and students to begin treating patients and allowed some nurses to perform tasks usually reserved for physicians.

At least 33 states have amended licensing requirements for health care workers, according to the National Council of State Legislatures.

For instance, Washington has allowed volunteer doctors and practitioners from other states to practice as long as they are in good standing in their home state. Florida is allowing licensed health care workers from elsewhere to temporarily provide care without a state license. Iowa is allowing doctors, nurses and physician assistants with inactive or lapsed licenses to practice.

Originally posted here:
California starts recruiting retired and student doctors, nurses to handle surge in severely sick people - CALmatters

Connie Ottmann, a high school English teacher from Maine, had always wanted to live in New York City. And last summer, when she was 66, seemed the right time to do it.

Retired for several years, she had been rereading the works of the mythologist Joseph Campbell, who really affirmed living life as an adventure.

Once she made the decision, things fell into place. A friend who is a real estate agent offered to help rent her house in Hallowell, near Augusta, then quickly found a couple who signed a yearlong lease. Her sister in Irvington, N.Y., was going through some life changes and was happy to have her as a houseguest for several months, so Ms. Ottmann was able to conduct her apartment hunt from a place near the city.

It seems invisible hands carried me here, Ms. Ottmann said. I couldnt afford to rent an apartment alone so I thought, Ill rent a room.

She was confident that finding an apartment share would also go smoothly. Many friends and family members were not equally confident. People werent too optimistic, she said.

Her brother, who owns a house in Bedford-Stuyvesant, Brooklyn, didnt think she would be able to find a place. A college friend who lived in the city was equally discouraging about securing a room share: She said, Eh, thats mostly young people.

But her son and his girlfriend, who rent an apartment in her brothers house, were encouraging. So, undeterred, Ms. Ottmann started looking for Brooklyn room shares on Listings Project, a weekly email with real estate listings, and Roomi, an app.

She did experience a twinge of concern after noticing that most Listings Project users seemed to be between 28 and 40; Roomi also skewed younger.

Several responses she wrote to ads went unanswered, including one she sent to a pair of comedians. Id thought it might provide them with new material for their acts, she said.

I got a little discouraged at first, but then I started hearing back from people, Ms. Ottmann said.

A nice young man who got in touch had just rented an unfurnished apartment and was looking for someone to split the brokers fee, which wasnt ideal for Ms. Ottmann, who was planning to stay for only a year.

She met a pleasant couple looking to rent the second bedroom in their apartment, but the place was small and she thought living with a couple might not be the best option. A third apartment was run-down and smelled like cat urine.

And then she found a seemingly perfect situation: two rooms a bedroom plus a separate room for a studio in a Bedford-Stuyvesant three-bedroom shared with one roommate. It was a furnished sublet of at least six months and the rent, including utilities, was $1,200 a month.

Ms. Ottmann, who paints and writes a blog, had hoped for a space to work in other than her bedroom, but had dismissed the idea as unrealistic. And yet, here it was.

$2,400 | Bedford-Stuyvesant, Brooklyn

Occupation: Ms. Ottmann is a retired high school English teacher; Ms. Calvo is an archivist at the Gilder Lehrman Institute of American History. Dividing a three-bedroom: Ms. Ottmann gets two bedrooms, but Ms. Calvos room is about the size of the other two rooms combined, so they pay the same amount of rent. Dealing with the coronavirus: I knew there would be risks, uncertainties and trials along the way, Ms. Ottmann said, but this was not one she planned for.

When she saw it in person, Ms. Ottmann immediately liked the space. I found the apartment quite spacious, and I liked how they set it up, she said. The departing tenant, a woman in her 30s, interviewed her and offered Ms. Ottmann the two rooms before she met the roommate, Christine Calvo, 32.

Ms. Calvo, an archivist at the Gilder Lehrman Institute of American History, grew up in a household of four women in Los Angeles, so she wasnt concerned about getting along with Ms. Ottmann. After living in New York for 12 years, Ive had so many different types of roommates, she said. Ive lived with friends and friends of friends. Sometimes it worked out, sometimes it didnt. You never know what its going to be like. She fit all the criteria.

I would have wanted to meet me! said Ms. Ottmann, who moved in this December.

Connie is definitely one of the more laid-back roommates Ive had and respectful, Ms. Calvo said. Ive had some wild ones: I lived in one apartment without a door; one roommate started a fire, another misplaced the rent. Its been easy with Connie.

Were both introverts, Ms. Ottmann said of their rapport.

As for New York, I like it, she said. I mean, I love it.

Until recently, when she, like most New Yorkers, started spending all of her time at home, Ms. Ottmann could be found traveling on the subway, going to museums and lectures. She saw the Agnes Denes show at the Shed and David Byrnes American Utopia musical.

I want to meet people and take advantage of being here as much as I can, she said. And I want to know my way around really well. Maine is a beautiful place, but winters are hard and spring is even worse. And you have to drive everywhere. Theres a theater I love, but its a half-hour away.

She has also been able to spend more time with her son and his girlfriend, as well as her brother, whose wife died several years ago, and his 15-year-old twins. She was lucky, she reflected, that moving to New York has been an adventure and a chance to spend quality time like this with two of my siblings in our later years.

A few things have surprised her: how open-minded potential roommates were about her age, how helpful and nice New Yorkers are in general and how quiet the apartment is.

On one of her first nights alone there, she noticed a neighbor making some noise. She couldnt have been more delighted.

It was an opera singer practicing her scales, Ms. Ottmann said. I was, like, Oh my gosh Im in New York. I heard it and I thought, This is lovely.

More here:
Retiring to New York City and Getting a Roommate - The New York Times

WINCHESTER Legislation introduced by Rep. Jennifer Wexton, D-10th, to safeguard Americans retirement savings in the midst of the financial crisis brought on by the coronavirus was incorporated into the Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed by President Trump on Friday.

The $2 trillion CARES Act, approved by the Senate on Wednesday and the House on Friday, includes a provision to suspend for the current year the required minimum distribution (RMD) for defined contribution retirement plans, including 401(k)s, thrift savings plans (TSPs), and Individual Retirement Accounts (IRAs). Before the CARES Act was passed, individuals with these plans were required to begin withdrawing a percentage of their tax-deferred retirement plan when they turn 72 or face a penalty of 50% of the amount that should have been distributed.

The economic fallout of this pandemic has taken a devastating toll on the retirement savings of millions across America, said Wexton in a news release. The provisions that I fought for will suspend the required minimum distribution, allowing retirees to leave their money in tax-deferred accounts without facing a penalty and give time for the markets to recover. This will help protect the financial security of every American household that has planned their future around hard-earned retirement savings.

Wexton notes in the release that as the financial markets face a historic downturn due to COVID-19, tax-deferred retirement plans have faced a significant drop in value, meaning that individuals who are made to withdraw funds at this time will take serious losses on their investment.

No one whose retirement savings has lost value due to the pandemic should be forced to withdraw funds and take losses on their investments while the market is down, Wexton said in a statement to The Star. This is just a small piece of our overall relief program, but its a common-sense, bipartisan step my colleagues can take to protect the retirement savings of all Americans. Im working hard to get help to my constituents as fast as possible and in every way possible.

Wextons retirement legislation will become effective immediately and remain in effect until the end of 2020.

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Wexton bill to protect retirement savings included in coronavirus stimulus package - The Winchester Star

Just over half of all Americans owned stocks in 2019, according to a Gallup poll. Unfortunately, 35% of Americans don't have any equities and thus have no exposure to the market.

With the stock market experiencing major ups and downs in recent weeks due to the COVID-19 pandemic, it may seem odd to read an article that laments the fact more Americans aren't invested. But even in times of economic uncertainty, and even when the market falls, investing in stocks is still your best bet if you want to build wealth.

In fact, it is very difficult (and perhaps impossible) for the average person to build a big enough nest egg without putting a substantial amount of money into the stock market.

Image source: Getty Images.

While there are times when the market goes down, including in recent weeks, historically it has performed better than most other types of investments.

In fact, in a stock-heavy investment portfolio, you can reliably expect around a 7% annual return over timeafter accounting for inflation.This doesn't necessarily mean you'll make 7% in a particular year. Some years you may lose money, and in others you'll make more. But over the long term, expecting a 7% average annual return is reasonable given past market performance.

If you opt out of investing in stocks, though, or you invest only a small percentage of your portfolio in them, your projected returns are likely to be much lower. That means you have to save a whole lot more.

In fact, the table below shows how much more you'd have to invest per year to save $1 million by age 65, assuming you started at age 30.

Annual Return

Amount You Need to Save Annually

2%

$20,050

3%

$16,575

4%

$13,600

5%

$11,075

6%

$8,975

7%

$7,250

Table calculations: Author.

For most people, even saving $7,250 a year is a challenge, and putting aside more than $20,000 is downright impossible. To ensure you can build the necessary nest egg while saving an affordable sum, you simply have to put your money to work for you. That means investing in the market and earning a reasonable rate of return.

While you need money invested, you don't want too much -- you must balance risk with reward. A diversified portfolio that includes stocks and other investments is the best way to ensure you'll have enough in your later years.

The level of risk you should be exposed to varies depending on how soon you need the money. If you're retiring soon, you don't have time to wait out market downturns, so you'll want less money in stocks. If you're retiring decades from now, you'll want to invest more money in the market since you have a longer timeline for your investments to grow.

One good technique for deciding what percentage to put into the market is to subtract your age from 110. If you're 20, you should have 90% of your portfolio in the market; if you're 80, you should have just 30% in stocks.

Maintain this asset allocation even during volatile times and keep investing (and holding solid investments) even during market downturns. By buying and holding over the long term, you maximize your chances of earning or exceeding a 7% average annual return.

If you're among the minority of Americans with no money in the stock market, you should change that. And if you have some funds invested, but not enough, you may also want to consider re-allocating your assets. You don't need to wait until the market stabilizes or hits bottom, since there's no reliable way of timing it.

While it can be scary, and there is a risk associated with investing, there's also a downside to keeping your money out of the market. It may be safe, but it's unlikely to grow enough to give you the nest egg you need.

Don't pass up the chance for a secure future as a senior because of your fear of investing, even during these scary times.

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Why You Need to Invest to Save Enough for a Secure Retirement - The Motley Fool

Q. I have annuities in my retirement accounts. I hope to use the interest earned as spending money when I retire, which will be after I reach the age of 59 1/2. Will the interest be taxable in the state of New Jersey?

Counting it down

A. As with many tax issues, It depends.

Were going to assume that when you say annuities in retirement accounts, you mean youre holding an annuity purchased inside your IRA. This is called a qualified annuity.

The key is the source of the funds in the IRA annuity, said Howard Hook, a certified financial planner and certified public accountant with EKS Associates in Princeton.

He said if the funds in the IRA came from a rollover from a 401(k) plan, then the interest would be taxable for both federal and New Jersey purposes, Hook said.

That is because the contributions originally made into the 401(k) plan were tax deductible for both federal and New Jersey purposes so all the distributions are taxable, Hook said.

Interestingly enough, certain contributions to retirement plans are not tax deductible for New Jersey purposes, he said.

For example, if the funds were a rollover from a 403(b) plan, then a portion of the distribution would not be taxable because New Jersey does not allow a tax deduction for contributions into a 403(b).

Same goes if the original contributions were IRA contributions. New Jersey does not allow a tax deduction for those either, Hook said.

If the annuities are not IRA, the answer is different. These would be called non-qualified annuities.

If you indeed withdraw just the interest from the annuity, then you would only pay tax on the interest, Hook said. The interest would be subject to both federal and New Jersey income tax.

Email your questions to Ask@NJMoneyHelp.com.

Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.coms weekly e-newsletter.

View original post here:
How will my annuities be taxed by N.J. after I retire? - lehighvalleylive.com

A 401(k) is one of the best ways to save for retirement, but there's more than one type of employer-sponsored retirement account and knowing the differences can give you more options in the long run.

One of the biggest perks of contributing to a traditional 401(k) is that doing so can save you money on taxes. Any money you put in a traditional 401(k) goes straight from your paycheck before taxes are applied, so it reduces your taxable income.

But financial expert Suze Orman says there's a better way to invest for your retirement. Instead of investing in a traditional 401(k), Orman recommends investing in a Roth 401(k). Now you've probably heard of the individual retirement account option, the Roth IRA, but there's now a 401(k) version as well that functions in roughly the same way.

With a traditional 401(k), you don't pay taxes on the income you're funneling into your investments. But when you retire, you pay taxes when you withdraw money from that account.

With a Roth IRA, you contribute the money after-taxes, so while you don't get the immediate tax break, you don't have to pay any taxes when you retire. About 70% of employers offer Roth 401(k)s, according to Plan Sponsor Council of America's 2019 annual survey of employers.

"In my opinion, you should absolutely be putting every single cent into the Roth version of your retirement account," says Orman who recently released her new book,"The Ultimate Retirement Guide for 50+."

Why does Orman like Roth retirement accounts so much more? Because they offer more flexibility than a traditional 401(k). With a Roth 401(k), you don't ever have to take the required minimum distributions. Meanwhile, a traditional retirement account requires you to start taking money out at age 72. If you miss this deadline, or don't take enough money out, the penalty can be severe: The amount not withdrawn is taxed at 50% rate.

Meanwhile, if you're planning to leave retirement savings as an inheritance, Orman says a Roth 401(k) is better here, too. What if your kids are in a higher tax bracket than you ever were in, and you leave them money in a traditional 401(k)?

They're going to lose a lot of that money, Orman says. But with a Roth, they get it without income taxes, she says.

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If you don't have the option to invest in a Roth 401(k) at work, you can always invest in a Roth IRA if you earn under the income limit, Orman says. In 2020, you can put away $6,000 in a Roth IRA if you're under age 50 (a bit more if you're older), but you can only make full contributions to these accounts if your individual modified adjusted gross income is less than $124,000 this year ($193,000 for those who are married and filing jointly).

Orman's advice: If you have a retirement account at work that matches your contribution, invest up to the point of the match. After that, fully fund your Roth IRA.

Plus, with a Roth IRA, you can take out your contributions at any time without penalty, regardless of your age or how long the money has been there. "There are so many advantages for you to do a Roth versus a traditional," Orman says.

"So please don't go for the tax write off today so that later on in life you have to pay taxes on a traditional retirement account. Go for a Roth," Orman says.

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Here's why Suze Orman says it's better to invest your retirement savings in a Roth 401K if you can - CNBC

Congress may permit retirees to skip required minimum distributions from their retirement savings.

The House coronavirus relief bill, which was released yesterday, contains a provision that waives for 2020 the required minimum distributions from individual retirement accounts and workplace retirement plans.

A similar provision is in the latest version of the Senate bill.

"For people with a retirement account and who don't need the money right now, it's helpful," said Garrett Watson, senior policy analyst at the Tax Foundation. "It's interesting that this showed up in both versions; it shows some consensus."

The House's proposed legislation contains a range of additional relief measures, including permitting coronavirus-related withdrawals from retirement accounts and enhancing the earned income tax credit.

Historically, savers who are aged 70 have had to take mandatory withdrawals from their retirement accounts every year. The distributions are required from each 401(k) account you hold, as well as any traditional IRAs you have.

Roth IRAs are exempt from RMDs, but Roth 401(k) investors must take the mandated withdrawals.

Starting in 2020, the Secure Act boosted the RMD age to 72 and over.

If it's your first time taking this distribution, you generally have until April 1 of the following year to do so. But all subsequent RMDs must be taken by year-end.

If there was ever a good time to waive mandatory distributions, now would be it. Mandatory distributions are looking especially painful as major market indexes have been battered by volatility.

While this measure and others would allow savers to hold onto more of their savings, waiving the RMD for 2020 would work in favor of those who don't need to live off of their IRA or 401(k) in retirement.

"The idea of pushing back the RMD is useful, but it would mostly benefit those who are still working or who are higher income," said Jamie Hopkins, director of retirement research at Carson Group.

Indeed, individuals who are still working and saving in a workplace retirement plan are able to put off their RMD from the plan until they retire provided they don't own more than 5% of the company.

They still need to take RMDs from their IRAs.

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Congress may let you skip this mandatory withdrawal from retirement accounts - CNBC

When you start planning for retirement, the hope is that you will set aside money and it will grow until you leave the working world to spend your time on things other than working at a job.

However, life happens. There are going to be times when you will need money to pay for things that pop up. It is at times as if these that you will want to pull money out of your IRA.

However, you do need to be careful. If you pull money out before you reach age 59-and-a-half, you will face a 10% penalty for early withdraw. This would apply if you were pulling money out of either a Roth or Traditional IRAs.

However, it only applies to the amount of the distribution that is included in gross income. Therefore, it does not apply to the part of your distribution that is a return of your contributions.

However, this is not a hard and fast rule. There are certain instances where you will not be subject to the 59 and-a-half rule. When you receive your 1099-R that shows the amount you received, Box 7 will have a code in it that will signify what type of distribution it is.

Lets take a look at these codes and what they mean.

If you see Code 1 in box seven, you have had a separation of service.

Code 2 in box seven means that you have received a distribution that is part of a series of substantially equal periodic payments.

If you have a total and permanent disability, you should see a three in box seven, indicating that the payments you receive are due to a disability.

Code 4 in box seven means that you are receiving the payment as a beneficiary of the participant in the plan, who has died.

If you have received a distribution from the retirement plan to pay for unreimbursed medical costs, box seven will have a five in it.

If you underwent a divorce, and as part of qualified domestic relations order fund were distributed from a retirement plan (other than an IRA), box seven with having a six written in it.

If you have left a job and have been receiving unemployment compensation for 12 consecutive weeks, you can receive money from a retirement plan to pay for unemployment health insurance.

You can make withdraws from an IRA to pay for education costs, including tuition, supplies, books, and room and board for someone who is a half-time student.

First-time homebuyers are allowed to withdraw up to $10,000 from an IRA to purchase a home.

Code 10 in Box 7 indicates that a distribution was made from a retirement plan to pay an IRS levy.

If you are a reservist called to active duty for a period of 180 days or more, or for an indefinite period, if number 11 appears in in Box 7 indicates that you have received a qualified reservist deferral.

Need some help with understanding your options when it comes to early retirement distributions?

Drop me a line at chris@pedenaccountingservices.com and we can discuss your situation and how best to take advantage of the deductions and credits available to you.

In accordance with Circular 230 Treasury Department Regulations, we are required to advise you that any tax advice contained in this article may not be relied upon to avoid penalties under the Internal Revenue Code.

If you are interested in a written opinion that can be relied upon to prevent the imposition of tax-related penalties, please contact the author.

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1099-R explained: What you should know if you're pulling cash from a retirement fund to pay for unexpected expenses - PotomacLocal.com