Tag Archive | "401(k) plans"

Your 2013 Retirement Gift From The IRS

Don’t get too excited, it’s actually a very small gift — and it won’t put your retirement savings ahead of the game in any way. But it is better than nothing — I suppose — so here’s your 2013 retirement gift from the IRS.

Your 2013 retirement gift from the IRS. It won’t make your retirement much better.

Your 2013 retirement gift from the IRS

On Oct. 18, the IRS announced that the contribution limits for the most commonly used retirement accounts — IRAs and 401(k) plans — would be going up. For 2012, you can put as much as $5,000 into an IRA and up to $17,000 in a 401(k) account. In 2013 those amounts increase $500 for both types of accounts. The additional amounts that those age 50 or older are allowed to put in will remain the same – an extra $1,000 for IRAs and $5,500 for 401(k)s.

It baffles me that you can still contribute more to a 401(k) — with all their problems — than you can to an IRA which gives you much more flexibility in planning and saving for your retirement. But that’s the government for you….

The reason for the changes? Inflation. Inflation adjustments are designed to let your retirement savings keep pace with rising costs of living.

You’re being thrown a bone so that at least — hopefully — your retirement savings can keep up with inflation; assuming you can afford to plunk down all that cash and still make ends meet.

The real problem is that so many Americans have been beaten down by the poor judgment and misguided policies of big business and the government, that we can barely save anything at all. So, happy new year and here’s your 2013 retirement “gift” from the IRS.

Click here to read more about your 2013 retirement gift from the IRS.

Posted in Creating a Personalized Retirement Plan, Planning for Your Retirement, The EconomyComments (0)

2013 Retirement Resolution: Understand 401(k) Fees

401(k) plans are notorious for charging outrageous fees to manage your account and it’s amazing how much those fees can drain your retirement fund. So, make this 2013 retirement resolution: understand 401(k) fees.

Your 401(k) could be bleeding money. Make this 2013 retirement resolution: understand 401(k) fees.

2013 retirement resolution: understand 401(k) fees

The fees your retirement fund management team charges you to take care of your money range from fractions of a percent to several percent, depending on the company and the funds where you have your money. While it may not sound like much, over the years it can add up to tens of thousands — or even hundreds of thousands — of dollars.

That money should be yours, and what you’re spending it on isn’t a bargain, considering the quality of the investment advice most of us get.

Finally, you have a way to see what you’re being charged, and although it will still take some work to figure it all out, it’s well worth it.

Make use of new 401(k) fee information.

Retirement savers will get new information about the fees and other charges being deducted from their 401(k) this year in the form of quarterly and annual statements. Take a look at the costs of your investment options and how your returns compare to the benchmark. If your funds aren’t delivering enough value to be worth the cost, consider switching to investments with lower fees. “Ideally you should be paying no more than half a percent on investments in your 401(k),” says Mark Jarvis. “You need to make sure that all fees on investments, whether in a 401(k) or IRA or other account, are as low as possible.”

Chances are, your 401(k) account is being over-charged and there are more economical options in your plan. If you must put money into a 401(k) plan, make this 2013 retirement resolution: understand 401(k) fees.

 Click here to learn more about 401(k) fees and other 2013 retirement resolutions.

Posted in Medicare, Planning for Your Retirement, Retirement Investment Options, Retirement Plan Challenges, Saving for RetirementComments (0)

Japan Provides Valuable Insights on Retirement

It’s easy to become focused on our own situation — for example the retirement problems facing us here in the US — and miss what’s happening in the rest of the world. Those “external” events can — and do — affect us and can also provide us with important insights to our own problems. In this regard, Japan provides valuable insights on retirement.

Japan provides valuable insights on retirement

As different as our two countries are in many ways, Japan and the US have many similarities, especially when it comes to the economy and entitlement programs.

  • While poverty among the elderly is no worse than it is in the United States, recent surveys show hardly any Japanese know how much money they will have to live on in retirement. Fewer than one in five has a plan on how to spend it.
  • The average Japanese person is 44.8 years old, the oldest average for any nation in the world, according to the CIA World Factbook’s 2011 estimate. (The average American is 36.9.)
  • Retired Japanese outnumber the nation’s children. The Japanese government has had to borrow heavily to keep up with social security spending. Government debt now exceeds $12.1 trillion, or more than twice the economy’s annual output.
  • The current maximum government pension (equivalent to Social Security) for a Japanese worker who retires after 40 years in the system is a little less than $10,000 a year.
  • The retirement age in Japan has risen from 60 to 65. Since 2004, benefits are indexed according to demographics – the fewer workers there are to support a growing number of retirees, the lower the benefits.
  • As in the U.S. Social Security system, current workers are taxed to pay for those already retired – a method known as pay-as-you-go.

This should all sound very familiar to anyone thinking about retirement. And there’s more:

  • HSBC has polled adults in 15 nations for the last five years about retirement. The survey of 1,000 Japanese in May 2009 found that 97 percent did not know how much retirement income they would have. (The same survey done in the United States found 86 percent did not know what their retirement income would look like.)
  • A Nomura poll in July of 1,000 Japanese born between 1947 and 1949 found only 20 percent had put together a retirement plan. Two-thirds didn’t know how much they’d have to live on in retirement until, at best, a few months before they quit working.

Around the world, those approaching retirement have suffered from disastrous economic recession, lack of planning and unrealistic expectations that government, company pensions and other income sources will be sufficient to carry them through their “golden years.”

Now those unrealistic expectations are meeting hard economic realities. We can’t truly rely on anyone other than ourselves to provide for us. Social Security is teetering on the brink, although removing the income cap on paying into the system would substantially relieve that problem. Corporate pensions are a thing of the past and 401(k)s and other retirement plans were never meant to carry the whole financial load, even for those who are fully contributing.

The coming economic disaster facing Americans, as more and more of us retire, does not face Americans alone. It is a worldwide problem and as such the size and scope of the crash — when and if it comes — will be much greater than most of us expect. Japan provides valuable lessons on retirement that can benefit all of us.

Click here to read more about Japan’s aging population and the valuable lessons on retirement we can learn from them.

Posted in Planning for Your Retirement, Retirement Plan Challenges, Social Security, The EconomyComments (0)

Learn About Retirement Planning from Pro Athletes

We all do it: Watch pro sports and wonder what it would be like to make that kind of money, do something you love, and then retire with a cushy lifestyle.

Turns out, retiring from a career as a professional athlete may not be as wonderful as we think it is. There are many pitfalls and there’s lots we can learn about retirement planning from pro athletes.

Retirement Plans for Pro Athletes and What You Can Learn From Them

First Steps

According to Andre Mirkine, president of the Sports Financial Advisors Association, “They’re (the athletes) not going to be able to put away in qualified retirement plans enough money to live on.”

Sound familiar? You’re not alone. Many – perhaps most – of us are in a similar position. We just don’t have adequate funds or time to fully fund our retirement. By the way, “qualified plans” refers to retirement options with tax advantages.

Step one. Figure out where to put the money you are able to save so it will do you the most good. There are lots of options which we’ll discuss in more detail in future posts.

Step two. Remember: if it sounds too good to be true, it probably is.

“Sometimes, former athletes run out of retirement savings chasing after wild investment deals,” says Pete D’Arruda, a financial planner who frequently advises athletes.  Enough said?

Step three. What do professional athletes’ options include that you should look for as you plan for your retirement?

  • Pension Plans. If you can find a company that still offers pension plans, you’re lucky. Incredibly lucky. Most have switched over to 401(k) plans, which benefit the company, but can really stick it to the employees. Major League Baseball pensions “are reputed to be among the most generous in sports.” Players receive full pension benefits after 10 years of service time and can be eligible for $200,000 a year for life at age 62. If you’re young enough and you have the skills, the MLB is the way to go.
  • Health Care Coverage. It’s tough to find health care coverage that carries over into retirement, but this can be a huge financial benefit as you age. For example, MLB members with at least four years of service can continue their health care coverage and pay only 60% of the cost of their chosen plan.
  • 401(k) Plans. This is the most common retirement plan currently being offered. The NFL offers players a 401(k)-type plan called the NFL Player Second Career Savings Plan. It provides an employer match of up to $2 for every $1 contributed by the player. Employer matches are the “goose that lays the golden egg” of 401(k) plans, both your contribution and your employer’s – and the profits from the investments – are tax deferred, the more your employer contributes the better off you are. But it’s not all roses, click here to learn how you may be getting burned by your company and the government.
  • Union Leverage. Players’ strikes. Management lockouts. As a fan, unions can be a pain in the neck. As an employee, however, many of the benefits we enjoy today are the result of union bargaining. In 1885, a group of nine players formed the Brotherhood of Professional Base Ball Players – and you know what they can do today, if they choose to. So, if there’s a union where you work, joining could be a good idea.

There are no shortcuts to retirement security, not even for professional athletes. But there are options that can ensure you get on – and stay on – the right path for a secure retirement and much we can learn about retirement planning from pro athletes.

Click here to read the article Go long: Retirement plans for pro athletes by Sonya Stinson | Bankrate.com


Posted in Planning for Your RetirementComments (0)

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