Archive for the ‘Retirement’ Category
How to (Legally) Dodge the Tax Man in Retirement
Posted: March 9, 2012 at 9:42 pm
Saving for retirement isn't just a smart move for the long run. It can also cut your taxes right now.
But just because you can reduce your current tax bill doesn't mean it's always the right move. For many workers a smarter option -- and one made possible by more and more employers -- is a retirement plan that completely eliminates your tax bill down the road.
Make Way for the Roth 401(k)
401(k) plans have been staple benefits from employers for decades. Your retirement plan at work lets you have money taken straight out of your paycheck, and in some cases, your employer matches those funds with extra money of its own.
In a regular 401(k), the money you set aside reduces your taxable income for the year, potentially saving you hundreds or even thousands of dollars in current-year taxes. But a relatively new type of retirement plan -- called the Roth 401(k) -- can be an even better idea for some workers.
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Based on the Roth IRA, these retirement plans don't give you the same up-front tax break. But unlike regular retirement plans, you don't have to pay a cent in tax when you pull money out of a Roth 401(k) to spend after you retire.
Is the Tax Trade-Off Worth It to You?
Currently only a very small number of workers who have access to Roth 401(k)s at work have taken advantage of them. In part, that's because you lose your current-year tax savings when you contribute to a Roth 401(k). (Apparently, the idea of paying taxes today on money that will be locked up for decades in a retirement account doesn't sit well with many workers.)
But that only tells half the story. For many workers -- especially those who are early in their careers -- you can expect your income to go up over time, as well as your corresponding tax rates. Giving up on a deduction now essentially lets you preserve it until a time when it might be worth a whole lot more.
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How to (Legally) Dodge the Tax Man in Retirement
Decision Points: Should I Postpone My Retirement?
Posted: at 9:42 pm
For most of us, retirement is the ultimate reward after a long life of hard work. Yet some of our retirement futures may not be as secure as we would like. If the market is dipping as you approach retirement age, you may be considering postponing your golden years a little longer in order to reap richer rewards. To help make your decision a little easier, here are some of the major advantages and disadvantages associated with postponing retirement.
Retirement Pros
Some of the benefits to retirement are quite obvious. Youll begin a well-earned break from the trials and stresses of working life as you prepare to enter your golden years. If youre well prepared financially or flexible about your quality of life, then deciding to forgo the extra cash in exchange for the freedom to start a new chapter of your life should be a no-brainer. Of course, if you choose to retire as planned, youll need to assess your finances thoroughly to ensure that you will remain well-supported throughout the rest of your life.
Certified Public Accountant and member of the AICPAs National CPA Literacy Commission, Ted Sarenski, warns that with poor financial planning, you risk having insufficient funds supplementing your Social Security to live your desired lifestyle after retirement.
For a quick calculation of what I need to have saved when I retire; take the desired budget, subtract what you would receive from Social Security, multiply the result by 25. If your savings fall short of this amount, youll most likely need to postpone your retirement, he says.
Retirement Cons
According to the AARP, the single most important question you need to consider when deciding whether or not to delay retirement is if you will have, at a minimum, enough lifetime income to cover your basic living expenses. If you decide that your retirement fund is insufficient to support you and your dependents throughout the rest of your life, youll almost certainly need to postpone your retirement. Even if you do decide that youve saved enough to get by, you may still experience a significant dip in your quality of life. Remember, if you retire in your fifties or sixties, you may still live for another 30 or 40 years, so you need to be sure that your finances are well prepared.
Postponement Pros
While spending a few more years in the workforce may not sound like an appealing prospect, for some it can greatly enhance their quality of life throughout the years that follow. Of course, postponement will allow your investments further time to grow, and decrease the amount of time spent drawing down your investments, but there are even further benefits to be gained.
According to Social Security Online, each additional year of full-time work adds another year of earnings to your Social Security record, which can result in higher benefits when you retire. In addition, individuals will receive delayed retirement credits, which increase each extra year you work after retirement age.
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Decision Points: Should I Postpone My Retirement?
Reaction to Dravid's retirement
Posted: at 9:42 pm
March 9 (Reuters) - Reaction to the retirement of India batting stalwart and former skipper Rahul Dravid on Friday:
India batsman and team mate Sachin Tendulkar:
There was and is only one Rahul Dravid. There can be no other. I will miss Rahul in the dressing-room and out in the middle.
Former India opener Sunil Gavaskar on BBC Radio 5 live:
He was totally a class act, on and off the field. A terrific role model for youngsters with his work ethic, with the way he carried himself, with the way he applied himself.
Its going to be a bit of a void in Indian cricket now. I think you really wont find anybody playing with the same tactical virtuosity that you saw with Rahul Dravid.
Former India captain Anil Kumble:
Ive enjoyed every moment that Ive played with you. Its been a great honour. Rare are those individuals that hold the unique combination of exceptional talent and commitment.
His ability to concentrate for long hours remains unmatched. He is someone who is constantly in search of perfection.
You are a perfect ambassador for cricket and an ideal team man.
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Reaction to Dravid's retirement
Senate-Passed Measure Approves Retirement Work for Federal Employees
Posted: at 9:42 pm
The Senate passed an amendment on Thursday that allows retirement-eligible federal employees to work part time -- a move designed to offset costs of economic-development aid in rural counties nationwide.
The measure, proposed by Sen. Max Baucus, D-Mont., passed the Senate by an 82-16 vote. It was put forward just hours before the vote as an amendment to the Surface Transportation Bill.
The American Federation of Government Employees, the largest federal-employee union, feared the amendment would result in additional, unneeded sacrifices by government workers in a congressional session that already has hit federal pay and benefits -- for instance with a pension-contribution hike for newly hired federal employees passed in February as part of an extension of the payroll-tax break.
While the change to federal retirement -- a phased, part-time retirement-employment concept -- may be acceptable to the federal-postal community after proper analysis and study, it is completely outrageous for federal and postal employees to be required, again, to serve as the automated teller machine for programs having nothing to do with deficit reduction, Beth Moten, AFGEs legislative and political director, said in a letter to senatorson Thursday. She also complained that lawmakers had not made the text of the legislation available.
AFGE spokesman Tim Kauffman further explained that the union was not necessarily opposed to phased retirement, but took issue with the process of the legislation.
What we really have a problem is using the savings that would come from that proposal to fund yet another program thats unrelated to federal employees, Kauffman said.
Our opposition to the Baucus amendment is in how this assistance for rural schools is being paid for, Moten said. Federal employees have paid -- again and again and again.
National Treasury Employees Union President Colleen Kelley echoed those sentiments. NTEU supports a phased retirement program for federal employees on its merits, Kelley said in a statement on Thursday. However, we do have serious objections to the use of the projected $450 million in savings from such a program for any use unrelated to federal employees. This includes the rural-schools funding initiative.
The Office of Personnel Management included a similar proposal in its fiscal 2013 budget request. Easing older employees into retirement by offering a part-time work program would save the Obama administration $720 million during the next 10 years, the White House estimates.
Many federal employees are nearing retirement, so part-time work could pad federal agencies coffers if they did not have to replace these employees entirely. Under the proposal, part-time employees would receive partial annuities and could earn additional retirement benefits proportional to the amount of time they work. Older employees also would be required to mentor younger new hires and help preserve agency knowledge.
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Senate-Passed Measure Approves Retirement Work for Federal Employees
fnatic’s cArn about his retirement and IEM’s World Championship – Video
Posted: March 8, 2012 at 10:40 pm
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fnatic's cArn about his retirement and IEM's World Championship - Video
Dravid likely to announce his retirement tomorrow-NewsX – Video
Posted: at 10:40 pm
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Dravid likely to announce his retirement tomorrow-NewsX - Video
Prudential Retirement Calls for Establishment of Multiple Small Employer Plans
Posted: at 10:40 pm
NEWARK, N.J.--(BUSINESS WIRE)--
Prudential Retirements Jamie Kalamarides, senior vice president of Institutional Investment Products, testified today during a U.S. Senate Special Committee on Aging hearing on the shortage of retirement savings plans among small businesses.
Kalamarides discussed Prudential Retirements support for expanding retirement coverage through multiple small employer plans, which would allow groups of employers to pool resources under a single defined contribution plan, resulting in lower costs and simplified administrative requirements. Kalamarides testified that the establishment of multiple small employer plans may help close the retirement income gap for the more than 78 million employees who do not have a retirement plan, and help improve overall retirement security.*
During his testimony, Kalamarides explained that compliance with ERISAs reporting, disclosure and fiduciary requirements may be a concern for many small employers and, the ability to reallocate these responsibilities to professionals through a multiple employer plan would remove a major impediment to small employers extending retirement savings opportunities to their employees. Kalamarides further explained that, if multiple employer plans are to play a meaningful role in closing the retirement coverage gap clarifications and changes in the law are necessary, including expanding multiple employer plan sponsorship, reallocating fiduciary and plan administration responsibilities and eliminating nondiscrimination testing. For full version of testimony (link to testimony) and white paper, (link to whitepaper).
Prudential Retirement delivers retirement plan solutions for public, private, and non-profit organizations. Services include state-of-the-art record keeping, administrative services, investment management, comprehensive employee investment education and communications, and trustee services. With over 85 years of retirement experience, Prudential Retirement helps meet the needs of over 3.6 million participants and annuitants. Prudential Retirement has $229.5 billion in retirement account values as of December 31, 2011. Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, CT, or its affiliates.
Prudential Financial, Inc. (NYSE: PRU - News), a financial services leader with approximately $901 billion of assets under management as of December 31, 2011, has operations in the United States, Asia, Europe, and Latin America. Prudentials diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. In the U.S., Prudentials iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit http://www.news.prudential.com/.
* Employee Benefit Research Institute, Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 010, Issue Brief No. 363, October 2011
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Prudential Retirement Calls for Establishment of Multiple Small Employer Plans
WWE 12 – Brock Lesnar’s UFC Retirement
Posted: March 7, 2012 at 5:52 pm
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WWE 12 - Brock Lesnar's UFC Retirement
How low must retirement withdrawals go?
Posted: at 5:52 pm
By Linda Stern
WASHINGTON (Reuters) - After a lifetime of diligently saving, retirees are faced with a new question: How much can they take out during retirement?
Retirement -- or the "withdrawal phase of life" as actuaries and other numbers wonks refer to it -- can present a psychological challenge. It's often hard to spend money that took decades to save.
But it's also a mathematical challenge. Spend too much, and you can find yourself running out around the time you hit 75 or 80. Spend too little and you can live a retirement life of ascetic self-denial, only to enrich your kids when you die.
For many years, retirement experts have been telling retirees that 4 percent is a safe withdrawal rate. The theory, supported with lots of backtesting, holds that if you keep your portfolio diversified and start your retirement with a 4 percent withdrawal, you can increase your withdrawal by the inflation rate every year and be almost certain your money will last for 30 years. T. Rowe Price, for example, has suggested retirees can increase their withdrawals by 3 percent every year to cover inflation.
But events and developments of the last few years have cast some doubt on a 4 percent solution. In the first place, many people are retiring at 62 or under, and living into their 90s, so 30 years isn't always enough. Even more significantly, the market meltdown of 2008-2009 drove home the weakness of the 4 percent rule. When stocks and bonds deliver poor returns, even 4 percent isn't safe enough.
In fact, someone calculating their safe withdrawal rate in 2008 might only be able to take 1.5 percent of their money out, according to a paper from retirement expert Wade Pfau published in the Journal of Financial Planning. Pfau, an associate professor at the National Graduate Institute for Policy Studies in Tokyo, doesn't actually suggest that retirees restrict themselves to that degree. Rather he suggests that retirees amend their withdrawals by considering how their investments are doing and staying flexible.
"It would be a great pity if recent retirees scaled down their retirement expenditures and loved a more frugal lifestyle only to find at the end that a higher withdrawal rate could have been sustainable," he wrote.
Some financial firms have considered lowering their recommended withdrawal rate to 3 percent but have found it hard to gain traction. That's a safer rate, concedes T. Rowe Price spokeswoman Heather McDonold, but it may be "difficult and unrealistic for some folks."
For example, at the end of 2010, the average 401(k) balance held by a worker in his or her 60s, who had been on the job for between 20 and 30 years, was $159,654, according to the Employee Benefit Research Institute. Note that figure is probably high, because it only focuses on people with a long history on the job. A retiree who started pulling 3 percent a year out of that would be able to withdraw only $400 a month, enough for groceries perhaps but not much else.
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How low must retirement withdrawals go?
Retirement savings to spending: How to handle the transition
Posted: at 5:52 pm
Saving for retirement is a long journey with a destination that, at many times, feels far off. But once that last day of employment rears its mixed-emotions head, fantasies about pursuing sports, hobbies and travel are often displaced by anxiety about what lies ahead. How will you spend your time? Where will you live? And, perhaps most importantly, how will you pay for it all?
After so many years of marching to the beat of the save-for-retirement drum, it can be hard to imagine spending that money when the time comes. Indeed, drawing down your retirement savings is not a simple affair; taking too little can leave you with few options with respect to how to spend your senior years, while taking too much could leave you with years to live - and nothing to live on. Before you sit down with an advisor to discuss your options, here are some factors to consider. [More: Find out why you should contribute to your RRSP this year]
Start early Nearly every piece of retirement advice revolves around a simple edict you probably learned when you were young: always be prepared. The final stage of your working years is no different. According to personal finance expert and author, Gordon Pape, those who are approaching retirement need to start preparing their portfolios at least five years in advance. This involves winding down higher-risk investments in favour of low-risk dividend stocks, bonds and anything with a regular cash flow. Why? Because you don't want to be forced to switch your portfolio in a hurry - especially if market conditions are not in your favour.
"As you approach retirement, your focus shifts from growth to safety and income," Pape advises. "Make the transition gradually so that when the time comes to stop work, your portfolio is set up." [More: Retirement 101: Your guide to saving and planning for your retirement]
Demolish debt Nearly half of Canadians (47 percent) are concerned about the debt they'll be carrying into retirement, according to a poll released by Sun Life Financial in February. According to Pape, that's a huge mistake.
Think debt's no big deal? Not so fast. Current interest rates are at a historic low, which means that big, old debt is likely to cost you a whole lot more in the future up to 50 percent more, according to Pape's estimate. In other words, that mortgage or line of credit could be a financial disaster just waiting to happen, especially for someone on a fixed income.
The solution? Make sure your debt retires before you do, Pape says, even if it means keeping that 9-to-5 for a few more years than you'd planned. [More: Does it make sense to borrow for your RRSP? Here's what you need to consider...]
Slow and steady Many retirees have big plans for their post-work years. Unfortunately, the increasing health and longevity that many people now enjoy put them in a tough position. It's only natural to want to kick your retirement off by getting out and enjoying your free time. But if you take that round-the-world cruise early on, you might be left with very little to keep you afloat in your final years, pun intended. This doesn't mean you have to abandon all your grand plans; just be sure to consider the long-term picture before throwing down a lump sum for a luxury.
When to withdraw You can begin collecting Canada Pension at age 60 and you can convert your RRSP to a RRIF and begin receiving regular payments whenever you choose. Indeed, after all your hard work, you probably can't wait to get your hands on this money. Unfortunately, there's a cruel trick to spending retirement income the longer you put it off, the more you'll have to spend.
Sticking it out to age 70 before collecting CPP can mean a payment that's a full 42 percent higher than it would be if you started collecting your payments at age 60. As for your RRSPs, Pape recommends that you avoid converting them to RRIFs until absolutely necessary to avoid minimum withdrawal requirements until they become mandatory at age 71. Receiving a payout from an RRIF means pulling your nest egg out of its cozy tax-sheltered refuge, thus subjecting yourself to more tax and lower investment returns. Pape says it may be worth converting a small RRIF earlier to receive $2,000 per year and capitalize on the Pension Income Tax Credit. Overall though, it's best to tuck those RRSPs in for a few extra years. You'll thank yourself later. [More: Cracking the golden nest egg of retirement: Can you retire and still have debt?]
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Retirement savings to spending: How to handle the transition