2019 IRA Deadlines are Approaching

Posted by on Dec 22, 2019 in 401k, 403b, Boomers. Millenials, Budgeting, Consumer Tools, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, Saving Money, tax returns, taxes, TSA | 0 comments

Here is what you need to know. Provided by Frederick Saide, Ph.D.   Financially, many of us associate April with taxes – but we should also associate April with important IRA deadlines. April 1, 2020 is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts. April 15, 2020 is the deadline for making annual contributions to a traditional IRA, Roth IRA, and certain other retirement accounts.1 Keep in mind that withdrawals from traditional, SIMPLE, and SEP-IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. Generally, once you reach age 70½, you must begin taking required minimum distributions. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as a result of the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals. The earlier you make your annual IRA contribution, the better. You can make a yearly IRA contribution any time between January 1 of the current year and April 15 of the next year. So, the contribution window for 2019 started on January 1, 2019 and ends on April 15, 2020. Accordingly, you can make your IRA contribution for 2020 any time from January 1, 2020 to April 15, 2021.2 You may help manage your income tax bill if you are eligible to contribute to a traditional IRA. To get the full tax deduction for your 2019 traditional IRA contribution, you have to meet one or more of these financial conditions: *You aren’t eligible to participate in a workplace retirement plan. *You are eligible to participate in a workplace retirement plan, but you are a single filer or head of household with Modified Adjusted Gross Income (MAGI) of $64,000 or less. (Or if you file jointly with your spouse, your combined MAGI is $103,000 or less.)3 *You aren’t eligible to participate in a workplace retirement plan, but your spouse is eligible and your combined 2019 gross income is $193,000 or less.4 If you are the original owner of a traditional IRA, you are no longer able to contribute to it starting in the year you turn 70½. If you are the original owner of a Roth IRA, you can contribute to it as long as you live, provided you have taxable compensation and MAGI below a certain level (see below).1,3 If you are making a 2019 IRA contribution in early 2020, be aware of this fact. You must tell the investment company hosting the IRA account which year...

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Creating a Retirement Strategy

Posted by on Dec 11, 2019 in 401k, 403b, Boomers. Millenials, Consumer Tools, Credit & Debt, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Life Stages, Medicaid Planning, Medicaid Recovery, Medicare Planning, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, Saving Money, social security, tax returns, taxes, TSA | 0 comments

Most people just invest for the future. You have a chance to do more.   Provided by Frederick Saide, Ph.D.   Across the country, people are saving for that “someday” called retirement. Someday, their careers will end. Someday, they may live off their savings or investments, plus Social Security.  They know this, but many of them do not know when, or how, it will happen. What is missing is a strategy – and a good strategy might make a great difference. A retirement strategy directly addresses the “when, why, and how” of retiring. It can even address the “where.” It breaks the whole process of getting ready for retirement into actionable steps. This is so important. Too many people retire with doubts, unsure if they have enough retirement money and uncertain of what their tomorrows will look like. Year after year, many workers also retire earlier than they had planned, and according to a 2019 study by the Employee Benefit Research Institute, about 43% do. In contrast, you can save, invest, and act on your vision of retirement now to chart a path toward your goals and the future you want to create for yourself.1 Some people dismiss having a long-range retirement strategy, since no one can predict the future. Indeed, there are things about the future you cannot control: how the stock market will perform, how the economy might do. That said, you have partial or full control over other things: the way you save and invest, your spending and your borrowing, the length and arc of your career, and your health. You also have the chance to be proactive and to prepare for the future. A good retirement strategy has many elements. It sets financial objectives. It addresses your retirement income: how much you may need, the sequence of account withdrawals, and the age at which you claim Social Security. It establishes (or refines) an investment approach. It examines tax implications and potential tax advantages. It takes possible health care costs into consideration and even the transfer of assets to heirs. A prudent retirement strategy also entertains different consequences. Financial advisors often use multiple-probability simulations to try and assess the degree of financial risk to a retirement strategy, in case of an unexpected outcome. These simulations can help to inform the advisor and the retiree or pre-retiree about the “what ifs” that may affect a strategy. They also consider sequence of returns risk, which refers to the uncertainty of the order of returns an investor may receive over an extended period of time.2 Let a retirement strategy guide you. Ask a financial professional to collaborate with you to create one, personalized for your goals and dreams. When...

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Insurance Needs for Empty Nesters and Retirees

Posted by on Nov 3, 2019 in 401k, 403b, Boomers. Millenials, Budgeting, Consumer Tools, Credit & Debt, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, taxes, TSA | 0 comments

Thinking about coverage as you enter a new phase.   Provided by Frederick Saide, Ph.D.   With the children now out of the house, financial priorities become more focused on preparing for retirement. At this stage, you may very likely be at the height of your earning power and fast approaching peak savings as you lay the groundwork for retirement. During this final leg to retirement – and throughout your retirement period – wealth protection is critical. The preservation of your assets will not be solely a function of your investment strategy but will include a comprehensive insurance approach to protect you against an array of financial risks, most especially health care. In addition to wealth protection, you may also now be seriously contemplating a few important estate and legacy objectives. Home. Even though your mortgage may be paid off – thus, releasing you from the lender’s requirement to have homeowner’s insurance – it remains important to consider coverage against property loss and exposure to personal liability. Now is an ideal time to review your policy as the cost of replacing your home and belongings contained therein may have grown over the years. Also, consider an umbrella policy, which is designed to help protect against the financial risk of personal liability. Health. There are several key health insurance issues facing empty nesters and retirees. If you retire prior to age 65 when Medicare coverage is set to begin, you will need coverage to bridge the gap between when you retire and when you turn 65. If your spouse continues to work, you may want to consider getting yourself added to their plan; though, you may need to wait until the employer’s annual enrollment period. Alternatively, you may also purchase coverage through a private insurer or HealthCare.gov (or your state’s program). Once you enroll in Medicare, you should consider purchasing Part D of Medicare, the Medicare Prescription Drug Plan, which can help you save money on prescriptions. Additionally, you may want to consider other Medigap insurance, which is designed to pay for medical care not covered by Medicare. Medigap plans are bought through private insurance companies and best purchased within the first six months of turning age 65 since no health exam is required during this period. Disability. This coverage may continue until you retire. When you stop working, you should consider canceling your disability insurance as the need for it has expired.1 Life. The financial obligations that drove your life insurance needs while you were raising a family may have evaporated. However, you may find new needs arising from estate issues, such as liquidity, creating a legacy, etc. Several factors will affect the cost and availability of life insurance,...

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Cybersecurity

Posted by on Oct 27, 2019 in 401k, 403b, atuos, bank statements, Boomers. Millenials, Budgeting, cars, Consumer Tools, Credit & Debt, credit card statements, family finances, financial advice, financial planning, Investing, IRA, IRS, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, Saving Money, social security, tax returns, taxes | 0 comments

Protecting yourself from potential calamity.   Provided by Frederick Saide, Ph.D.   Cybercrime affects both large corporations and private individuals. You’ve likely read about the large data breaches in the business world. These crimes are both expensive and on the rise. The U.S. Identity Theft Resource Center says that these corporate data breaches reached a peak of 1,632 in 2017. The response to the growing need for data protection has been swift and powerful; venture capitalists have invested $5.3 billion into cybersecurity firms.1 That’s good news for the big companies, but what about for the individual at home? What can you do to protect data breaches to your personal accounts? For most private individuals, the key idea is to both: * Know what to do if you’ve had a data breach. * Know what you can do that might help prevent a data breach. Total cybersecurity for your financial matters isn’t something that can be strategized in a single short article like this one, but I would like to offer you two suggestions that can help you get started. Both can be done from home and represent reactive and preventative measures. Credit Freeze. By reactive, I mean that a step that you can take after the fact. In many cases, a credit freeze might be a reaction to identity theft or a data breach. What it specifically does is restrict access to your credit report, which has information that could be used to open new lines of credit in your name. The freeze prevents this, but it will not prevent a criminal from, for instance, using an active credit card number, if they’ve discovered it. For that reason, you still must monitor for unauthorized transactions during the freeze.2 While the freeze is in place, you can still get your free annual credit report. You also won’t have issues with credit background searches for job or renter’s applications or when you buy insurance – the freeze doesn’t affect those areas of your credit history. You can even apply for a new line of credit during a credit freeze, though that requires a temporary or permanent elimination of the freeze during the process. This can be done through either a call to the big three credit reporting agencies (Equifax, Experian, and Transunion) or a visit to their respective websites.2 Password Manager. This is a preventative measure. Yes, we all know the poor soul who uses “Password” as their password. While you are probably not that far gone, the truth is that there are many tricks that cybercrooks use to learn or intuit our passwords. In fact, 20% of Internet consumers have experienced some sort of account compromise. That comes at a time...

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Sequence of Return Risk – Does it Matter?

Posted by on Oct 13, 2019 in 401k, 403b, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement planning, Saving Money | 0 comments

A look at how variable rates of return do (and do not) impact investors over time.   Provided by Frederick Saide, Ph.D.   What exactly is the “sequence of returns”? The phrase describes the yearly variation in an investment portfolio’s rate of return. Across 20 or 30 years of saving and investing for the future, what kind of impact do these deviations from the average return have on a portfolio’s final value? The answer: no impact at all. Once an investor retires, however, these ups and downs can influence portfolio value – and retirement income. During the accumulation phase, the sequence of returns is ultimately inconsequential. Yearly returns may vary greatly or minimally; in the end, the variance from the mean hardly matters. (Think of “the end” as the moment the investor retires: the time when the emphasis on accumulating assets gives way to the need to withdraw assets.) An analysis from BlackRock bears this out. The asset manager compares three model investing scenarios: three investors start portfolios with lump sums of $1 million, and each of the three portfolios averages a 7% annual return across 25 years. In two of these scenarios, annual returns vary from -7% to +22%. In the third scenario, the return is simply 7% every year. In all three situations, each investor accumulates $5,434,372 after 25 years – because the average annual return is 7% in each case.1 Here is another way to look at it. The average annual return of your portfolio is dynamic; it changes, year-to-year. You have no idea what the average annual return of your portfolio will be when “it is all said and done,” just like a baseball player has no idea what his lifetime batting average will be four seasons into a 13-year playing career. As you save and invest, the sequence of annual portfolio returns influences your average yearly return, but the deviations from the mean will not impact the portfolio’s final value. It will be what it will be.1  When you shift from asset accumulation to asset distribution, the story changes. You must try to protect your invested assets against sequence of returns risk.  This is the risk of your retirement coinciding with a bear market (or something close). Even if your portfolio performs well across the duration of your retirement, a bad year or two at the beginning could heighten concerns about outliving your money. For a classic illustration of the damage done by sequence of returns risk, consider the awful 2007-2009 bear market. Picture a couple at the start of 2008 with a $1 million portfolio, held 60% in equities and 40% in fixed-income investments. They arrange to retire at the end of the...

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Annual Financial to-Do List

Posted by on Sep 29, 2019 in 401k, 403b, bank statements, Boomers. Millenials, Budgeting, college planning, Consumer Tools, Credit & Debt, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement planning, Saving Money, social security, tax returns, taxes, TSA | 0 comments

Things you can do for your future as the year unfolds.   Provided by Frederick Saide, Ph.D.                         What financial, business, or life priorities do you need to address for the coming year? Now is a good time to think about the investing, saving, or budgeting methods you could employ toward specific objectives, from building your retirement fund to managing your taxes. You have plenty of choices. Here are a few ideas to consider:  Can you contribute more to your retirement plans this year? In 2020, the contribution limit for a Roth or traditional individual retirement account (IRA) remains at $6,000 ($7,000 for those making “catch-up” contributions). Your modified adjusted gross income (MAGI) may affect how much you can put into a Roth IRA: singles and heads of household with MAGI above $139,000 and joint filers with MAGI above $206,000 cannot make 2020 Roth contributions.1  Before making any changes, remember that withdrawals from traditional IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty. To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Make a charitable gift. You can claim the deduction on your tax return, provided you itemize your deductions with Schedule A. The paper trail is important here. If you give cash, you need to document it. Even small contributions need to be demonstrated by a bank record, payroll deduction record, credit card statement, or written communication from the charity with the date and amount. Incidentally, the Internal Revenue Service (I.R.S.) does not equate a pledge with a donation. If you pledge $2,000 to a charity this year, but only end up gifting $500, you can only deduct $500.1 These are hypothetical examples and are not a replacement for real-life advice. Make certain to consult your tax, legal, or accounting professional before modifying your strategy. See if you can take a home office deduction for your small business. If you are a small-business owner, you may want to investigate this. You may be able to legitimately write off expenses linked to the portion of your home used to exclusively conduct your business. Using your home office as a business expense involves a complex set of tax rules and regulations. Before moving forward, consider working with a professional who is familiar with homebased businesses.3  Open an HSA. A Health Savings Account (HSA) works a bit like your workplace retirement account. There are also some HSA rules and limitations to consider. You are limited to a $3,550 contribution for 2020, if you are single; $7,100, if you have a spouse or...

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