White House Proposes Changes to Retirement Plans

Posted by on Jan 31, 2016 in 401k, 403b, Boomers. Millenials, family finances, Fixed Income Investing, insurance, Investing, IRA, Retirement, retirement planning, social security, taxes, TSA | 0 comments

  A look at some of the ideas contained in the 2017 federal budget.   Provided by Frederick Saide, Ph.D.   Will workplace retirement plans be altered in the near future? The White House will propose some changes to these plans in the 2017 federal budget, with the goal of making such programs more accessible. Here are some of the envisioned changes. Pooled employer-sponsored retirement programs. This concept could save small businesses money. Current laws permit multi-employer retirement plans, but the companies involved must be similar in nature. The White House wants to lift that restriction.1,2   In theory, allowing businesses across disparate industries to join pooled retirement plans could result in significant savings. Administrative expenses could be reduced, as well as the costs of compliance. Would governmental and non-profit workplaces also be allowed to pool their retirement plans under the proposal? There is no word about that at this point. This pooled retirement plan concept would offer employees new degrees of portability for their savings. A worker leaving a job at a participating firm in the pool would be able to retain his or her retirement account after taking a job with another of the participating firms. Along these lines, the White House will also propose new ways to make it easier for workers to monitor and reconcile multiple workplace retirement accounts.2,3   Scant details have emerged about how these pooled plans would be created or governed, or how much implementing them would cost taxpayers. Congress will be asked for $100 million in the new budget draft to test new and more portable forms of retirement savings accounts. Presumably, many more details will surface when the proposed federal budget becomes public in February.2,3   Automatic enrollment in IRAs. In the new federal budget draft, the Obama administration will require businesses with more than 10 employees and no retirement savings program to enroll their workers in IRAs. This idea has been included in past federal budget drafts, but it has yet to survive bipartisan negotiations – and it may not this time. Recently, the myRA retirement account was created through executive action to try and promote this objective.1,3 A lower bar to retirement plan participation for part-time employees. Another proposal within the new budget would allow anyone who has worked for an employer for more than 500 hours a year for the past three years to participate in an employer-sponsored retirement plan.2     A bigger tax break for businesses starting retirement plans. Eligible employers can receive a federal tax credit for inaugurating a retirement plan – a credit for 50% of what the IRS deems the employer’s “ordinary and necessary eligible startup costs,” up to a maximum of $500....

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The Lottery is No Retirement Plan

Posted by on Jan 15, 2016 in 401k, 403b, Boomers. Millenials, cars, credit card statements, family finances, Fixed Income Investing, insurance, Investing, IRA, Retirement, retirement planning, social security, TSA | 0 comments

  Pay yourself first instead, with your future in mind.     Provided by Frederick Saide, Ph.D.    Powerball fever swept across America last week, with a record jackpot of $1.5 billion eventually being split by three winners in the January 13 drawing. Millions lined up for lottery tickets, hoping to realize their dreams of being rich, independent, and carefree.1, 2 This infinitesimal chance at massive wealth was certainly alluring – to too many, more alluring than the practical steps that can be taken in pursuit of personal wealth and retirement security. The passion for Powerball defied logic. It may have been a commentary on our wishful thinking and on the lack of financial literacy in America as well. As Creighton University professor Brad Klontz remarked to CNBC, “A lot of individuals who are not saving for their retirement are standing in line to buy a Powerball ticket. It’s a lot more seductive than instituting a savings plan.”1 On January 13, a Powerball ticket buyer had a 1-in-292-million chance to win the big prize. In comparison, the odds of someone being killed by a falling vending machine within the next 365 days are 1 in 112 million, and the odds of a person being struck by both lightning and a meteorite during their lifetime are 1 in 210 million.2 When the Powerball jackpot reached $1.3 billion last week, a widely circulated Internet meme claimed that the jackpot could end poverty, stating that every American would get $4.3 million if were divided equally among the population. This was passed along as truth rather than colossally bad math – it would only apply if there were 300 Americans. Since there are roughly 300 million Americans, divvying up the $1.3 billion across the entire U.S. population would give each of us $4.33, give or take a few cents – enough to buy a flavored latte.3     What if we simply saved $4.33 per day, or more? Our financial lives might take a turn for the better.   Usually, wealth is not a matter of fate or luck. We can all take practical steps toward financial freedom, and even if we do not end up rich, those steps may improve our personal finances and retirement prospects. First, spend less than what you make. Two or three percent less, 5% less, 10% less – whatever the number, it must be calculated from a comparison of your monthly income versus your monthly budget. That comparison may take a half an hour, but it is time well spent. Size up the money coming into your household per month with the money going out of it per month, and set a percentage that you would like...

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Will You Avoid These Estate Planning Mistakes?

Posted by on Jan 10, 2016 in Uncategorized | 0 comments

  Too many wealthy households commit these common blunders.   Provided by Frederick Saide, Ph.D.    Many people plan their estates diligently, with input from legal, tax, and financial professionals. Others plan earnestly, but make mistakes that can potentially affect both the transfer and destiny of family wealth. Here are some common and not-so-common errors to avoid.   Doing it all yourself. While you could write your own will or create a will or trust from a template, it can be risky to do so. Sometimes simplicity has a price. Look at the example of Warren Burger. The former Chief Justice of the United States wrote his own will, and it was just 176 words long. It proved flawed – after he died in 1995, his heirs wound up paying over $450,000 in estate taxes and other fees, costs that likely could have been avoided with a lengthier and less informal will containing appropriate language.1   Failing to update your will or trust after a life event. Relatively few estate plans are reviewed over time. Any life event should prompt you to review your will, trust, or other estate planning documents. So should a life event affecting one of your beneficiaries. Appointing a co-trustee. Trust administration is not for everyone. Some people lack the interest, the time, or the understanding it requires, and others balk at the responsibility and potential liability involved. A co-trustee also introduces the potential for conflict.   Being too vague with your heirs about your estate plan. While you may not want to explicitly reveal who will get what prior to your passing, your heirs should have an understanding of the purpose and intentions at the heart of your estate planning. If you want to distribute more of your wealth to one child than another, write a letter to be presented after your death that explains your reasoning. Make a list of which heirs will receive particular collectibles or heirlooms. If your family has some issues, this may go a long way toward reducing squabbles and the possibility of legal costs eating up some of this or that heir’s inheritance.   Failing to consider what will happen if you & your partner are unmarried. The “marriage penalty” affecting joint filers aside, married couples receive distinct federal tax breaks in this country – estate tax breaks among them. This year, the lifetime gift and estate tax exclusion amount is $5.45 million for an individual, but $10.9 million for a married couple.1,2   If you live together and you are not married, it is worth considering how your unmarried status might affect your estate planning with regard to federal and state taxes. As Forbes mentioned last year,...

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Making & Keeping New Year’s Resolutions

Posted by on Jan 3, 2016 in 401k, 403b, Boomers. Millenials, family finances, Fixed Income Investing, retirement planning, social security | 0 comments

What you might do (or do differently) in the months ahead?   Provided by Frederick Saide, Ph.D.    How will your money habits change in 2016? What decisions or behaviors might help your personal finances, your retirement prospects, or your net worth? Each year presents a “clean slate,” so as one year ebbs into another, it is natural to think about what you might do (or do differently) in the 12 months ahead. Financially speaking, what New Year’s resolutions might you want to make for 2016 – and what can you do to stick by such resolutions as 2016 unfolds? If you have merely been saving for retirement, save with an end in mind. Accumulating assets for retirement is great; doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year, which will make the “how” clearer as well.   Strive to maximize your 2016 retirement plan contributions. The 2016 limit on IRA contributions is $5,500, $6,500 if you will be 50 or older at some point in the year. Contribution limits are set at $18,000 for 401(k)s, 403(b)s, and most 457 plans; if you will be 50 or older in 2016, you can make an additional catch-up contribution of up to $6,000 to those accounts.1   If you want to retire in 2016, be mindful of the end of “file & suspend.” Social Security is closing the door on the file-and-suspend claiming strategy that married couples have used to try and optimize their Social Security benefits. If you are married and you will you be at least 66 years old by April 30, 2016, you and your spouse still have a chance to use the strategy. Starting May 1, that chance disappears forever for all married couples. (It will still be permitted on an individual basis.)2,3   Similarly, the opportunity to file a restricted application for spousal benefits has also gone away. This was another tactic retirees employed in pursuit of greater lifetime Social Security income.2   Can you review & reduce your debt? Look at your debts, one by one. You may be able to renegotiate the terms of loans and interest rates with lenders and credit card firms. See if you can cut down the number of debts you have – either attack the one with the highest interest rate first or the smallest balance first, then repeat with the remaining debts.   Rebalance your portfolio. If you have rebalanced recently–great. Many investors go years without rebalancing, which can be problematic if you own too much in a declining...

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