Should We Reconsider What “Retirement” Means?

The notion that we separate from work in our sixties may have to go. An executive transitions into a consulting role at age 62 and stops working altogether at 65; then, he becomes a buyer for a church network at 69. A corporate IT professional decides to conclude her career at age 58; she serves as a city council member in her sixties, then opens an art studio at 70. Are these people retired? Not by the old definition of the word. Our definition of “retirement” is changing. Retirement is now a time of activity and opportunity.    Generations ago, … Read more

When Will the Business Cycle Peak?

As the recovery lengthens further, this is a natural question to ask. This decade has brought a long economic rebound to many parts of America. As 2017 ebbs into 2018, some of the statistics regarding this comeback are truly impressive: *Payrolls have grown, month after month, for more than seven years. *The jobless rate is lower than it has been for more than a decade. *Business activity in the service sector has not contracted since the summer of 2009. *The economy just grew 3% or more in back-to-back quarters, a feat unseen since 2014.1,2     In the big picture, the American … Read more

Crowdfunding & Taxes

Information for those giving, receiving, and organizing. Have you donated money to a crowdfunding campaign this year? You probably have. You may be wondering how the Internal Revenue Service treats these donations. Do the common tax rules apply?  The I.R.S. may or may not define such donations as charitable contributions. It depends not only on who the crowdfunding is for, but also who has organized the campaign. A donation to a qualified non-profit organization – a 501(c)(3) – is tax deductible if it is properly documented and itemized on Schedule A. Donations to crowdsourcing efforts administered by 501(c)(3)s are, likewise, … Read more

Can We Afford to Live to 100?

Our increased longevity poses a retirement planning challenge. Some of us may retire at 65 and live to 100 or 105. Advances in health care may make this a strong possibility. The corresponding question is: will we outlive our money?   More people are spending more of their lives in retirement. According to the actuaries at Social Security, today’s 65-year-olds have roughly a 25% chance of living into their nineties, and about one in ten will live to 100 or longer. Clearly, this puts a strain on Social Security. When it first sent out retirement benefits in 1940, the average life … Read more

End-of-the-Year Money Moves

Here are some things you might want to do before saying goodbye to 2017.  What has changed for you in 2017? Did you start a new job or leave a job behind? Did you retire? Did you start a family? If notable changes occurred in your personal or professional life, then you will want to review your finances before this year ends and 2018 begins.    Even if your 2017 has been relatively uneventful, the end of the year is still a good time to get cracking and see where you can plan to save some taxes and/or build a little … Read more

Refrain from Tapping Your Retirement Funds

Resist the temptation. Your future self will thank you. Retirement accounts are not bank accounts. Nor should they be treated as such. When retirement funds are drawn down, they impede the progress of retirement planning, even if the money is later restored. In a financial crush, a retirement account may seem like a great source of funds. It is often much larger than a savings account; it is technically not a liquid asset, but it can easily be mistaken for one. The central problem is this: when you take a loan or an early distribution from an IRA or a … Read more

The Republican Tax Reform Plan

What is in it? What could its changes mean for you, if they become law? Major changes may be ahead for federal tax law. At the start of November, House Republicans rolled out their plan for sweeping tax reforms. Negotiations may greatly alter the content of the bill, but here are the proposed adjustments, and who may and may not benefit from them if they become law. The corporate tax rate would fall from 35% to 20%. Wall Street would cheer this development, perhaps with a significant rally. Sole proprietorships, partnerships, and S corporations would also see their top tax … Read more

Are Too Many Baby Boomers Too Indebted?

Financial burdens could alter their retirement prospects. Imagine retiring with $50,000 of debt. Some new retirees owe more than that. Outstanding home loans, education debt, small business loans, and lingering credit card balances threaten to compromise their retirement plans. How serious is the problem? A study from the University of Michigan’s Retirement Research Center illustrates how bad it has become. Back in 1998, 37% of Americans aged 56-61 shouldered recurring debt; the average such household owed $3,634 each month (in 2012 dollars). Today, 42% of such households do – and the mean debt load is now $17,623.1 Are increased mortgage … Read more

3 Reasons You’re Not Getting The Most Out Of Your 403b Or 457 Plan

Make the most out of your 403b or 457 investment. The first thing you need to honestly need to do is ask yourself if you know what funds you are invested in your 403b or 457 plan.  If your answer is no, it’s ok, you aren’t the only one.  But you probably aren’t going getting as much out of your investment as you should be. Another thing is that you don’t open your 403b or 457 plan statements.  Fortunately not paying attention probably hasn’t hurt you over the last couple of years. Finally, you haven’t changed anything with investments in … Read more

Enjoy the Rally, But Prepare for the Retreat

Investors may be lulled into a false sense of security by this market. Will the current bull market run for another year? How about another two or three years? Some investors will confidently say “yes” to both questions. Optimism abounds on Wall Street: the major indices climb more than they retreat, and they have attained new peaks. On average, the S&P 500 has gained nearly 15% a year for the past eight years.1 Stocks will correct at some point. A bear market could even emerge. Is your investment portfolio ready for either kind of event? It may not be. Your … Read more

Your Social Security Benefits & Your Provisional Income

Earning too much may cause portions of your retirement benefits to be taxed. You may be shocked to learn that part of your Social Security income could be taxed. If your provisional income exceeds a certain level, that will happen. Just what is “provisional income”? The Social Security Administration defines it with a formula. Provisional income = your modified adjusted gross income + 50% of your total annual Social Security benefits + 100% of tax-exempt interest that your investments generate.1 Income from working, pension income, withdrawals of money from IRAs and other types of retirement plans, and interest earned by … Read more

Understanding Inherited IRAs

What beneficiaries need to know and consider. At first glance, the rules surrounding inherited IRAs are complex. Here are some questions (and potential answers) to consider if you have inherited one or may in the future. Who was the original IRA owner? If the original owner was your spouse, you have a fundamental choice to make. You can roll over your late spouse’s IRA into an IRA you own, or you can treat it as an inherited IRA. If the original owner was not your spouse, you must treat the IRA for which you are named beneficiary as an inherited … Read more

Retirement Plan Trusts

These tools can shield inherited IRA assets from lawyers and creditors. Inherited IRA assets are vulnerable in bankruptcy proceedings. Many older IRA owners and their beneficiaries do not realize this, but it is true. In Clark, et ux v. Rameker (2014), the Supreme Court ruled 9-0 that inherited IRAs cannot be defined as “retirement funds” under federal bankruptcy law. They now lack the protection that retirement savings accounts commonly get in bankruptcy courts.1 So today, a longstanding estate planning dictum is being reevaluated. If you have non-spousal heirs who seem at risk for bankruptcy, you might want to leave your … Read more

Actively Managed 401(k)s

An option that may help your retirement efforts. How should your 401(k) be invested? While some investors manage their 401(k)s themselves, others may seek a different kind of “hands-on” approach: having their retirement plan assets actively and professionally managed. Why should a 401(k) be actively managed? In a volatile stock market climate, there are potential drawbacks to leaving a 401(k) alone. If 401(k) participants don’t adjust asset allocations in response to market conditions or don’t adjust their investment mix for years, they can potentially lose on their investment. While “buy and hold” can be a successful investment strategy at times, … Read more

Questions After the Equifax Data Breach

Consumers may be at risk for many years. How long should you worry about identity theft in the wake of the Equifax hack? The correct answer might turn out to be “as long as you live.” If your personal data was copied in this cybercrime, you should at least scrutinize your credit, bank, and investment account statements in the near term. You may have to keep up that vigilance for years to come. Cybercrooks are sophisticated in their assessment of consumer habits and consumer memories. They know that eventually, many Americans will forget about the severity and depth of this … Read more

How Much Should You Save By Age 30, 40, 50, or 60?

What number should you strive to reach? It is agreed that the earlier you start saving for retirement, the better. The big question on the minds of many savers, however, is: “How am I doing?” This article will show you some rough milestones to try and reach. (Keep in mind that you may need to save more or less than these amounts based on your objectives and lifestyle and income needs.)   At age 30, can you have the equivalent of a year’s salary saved? Some 30-year-olds have the equivalent of a year’s salary in debt, it is true; the … Read more

Retiring Before 60

If that is your dream, explore whether these steps could be useful to take. How could you retire in your fifties by choice? You will need abundant retirement savings and ways to access your retirement assets that lessen or avoid early withdrawal penalties. You may also need to have other, sometimes overlooked, components of retirement planning in place.    There are ways to tap retirement savings accounts before 60. True, the I.R.S. discourages this with 10% penalties on traditional IRA withdrawals prior to age 59½ and withdrawals from many employee retirement plans before age 55½ – but those penalties may … Read more

Is a Home an Investment?

From one perspective, the answer is yes; from another, no. When you buy a home, are you investing? If you buy it to flip it or buy it as a rental property, the answer is yes. If you buy a home simply to live in it, the answer may be no. Your home is an expression of your lifestyle, a wonderful setting for your life, and a place you can enjoy in privacy and comfort. As an investment, though, it is essentially illiquid, and its rate of return is no sure thing.     Home values do not automatically increase with time. … Read more

Avoiding the Cybercrooks

How can you protect yourself against ransomware, phishing, and other tactics? Imagine finding out that your computer has been hacked. The hackers leave you a message: if you want your data back, you must pay them $300 in bitcoin. This was what happened to hundreds of thousands of PC users in May 2017 when they were attacked by the WannaCry malware, which exploited security flaws in Windows.    How can you plan to avoid cyberattacks and other attempts to take your money over the Internet? Be wary, and if attacked, respond quickly.  Phishing. This is when a cybercriminal throws you … Read more