Retirement

Adam Shell reported for USA Today:

Add Gen Xers to the long list of Americans who fear they won’t have a sizable enough nest egg to retire.

Nearly four out of 10 (37%) of Generation X — those born between 1965 and the late 1970s — say they would like to stop working for good and “fully retire” someday, “but will not be able to afford to,” a new survey from TD Ameritrade, an online broker based in Omaha, found.

Other gloomy Gen X retirement findings:

• 43% say “they are behind” in their savings.
• Half (49%) are “worried about running out of money” once they leave the workforce.
• Nearly two out of 10 (17%) say they “aren’t saving or investing for anything.”
• Only a third expect to be “very secure” in retirement — vs. nearly half of Baby Boomers.

As your working days begin to wind down, you may be feeling a mix of emotions about retirement. Along with the excitement you are experiencing, you are probably somewhat nervous about planning the day-to-day financial details of this new chapter in your life. It was recently reported that a proper income for retirement is approximately 70% of what you were earning in your working life. If you’re unsure of where you stand in relation to this figure, you may be left with questions. Have you properly prepared for being out of work? Will you face any unexpected expense? Will you need to take on a part-time job at some point? These are the kinds of questions that, if they are currently unanswered, can keep you awake at night pondering the answers.

Thankfully, you have the ability to quickly uncover the answer to questions like the ones above. If you are just starting to plan out your budget for retirement, learn more about the three things you need to consider as you establish your plans. [Read more…]

More and more Americans are spending their golden years on the job. Almost 19 percent of people 65 or older were working at least part-time in the second quarter of 2017, according to a recent U.S. jobs report. Bloomberg reported:

Certainly baby boomers are increasingly ignoring the traditional retirement age of 65. Last quarter, 32 percent of Americans 65 to 69 were employed. Even past age 70, a growing number of seniors are declining to, or unable to, retire. Last quarter, 19 percent of 70- to 74-year-olds were working, up from 11 percent in 1994.

Older Americans are working more even as those under 65 are working less, a trend that the Bureau of Labor Statistics expects to continue. By 2024, 36 percent of 65- to 69-year-olds will be active participants in the labor market, the BLS says. That’s up from just 22 percent in 1994.

A number of factors are keeping older Americans in the workforce. Many are healthier and living longer than previous generations. Some decide not to fully retire because they enjoy their jobs or just want to stay active and alert.

Others need the money. The longer you work, the easier it is to afford a comfortable retirement.

Do Americans have a saving problem for retirement? Many Americans do not have enough savings ever to be able to retire comfortably. The median family of retirement age has $12,000 in savings. Using the 4% safe withdrawal rate, that’s only $40 per month in retirement income. That is a terrifying figure to remind younger people to save for retirement.

About 70 percent of Americans have access to to retirement accounts through their employers, but just over 50% take advantage of the retirement saving plan. To this segment of population that has access to retirement accounts,  the average American household has just about $100,000 in 401(k)’s and IRA’s.

The U.S. Census Bureau reported in September 2016 that real median annual household income was $55,775 in 2015. To be financially secure in retirement, retirees would need about six to eleven times annual earnings. Given that retirement saving is nothing other than giving up money during one’s working years to be able to spend more in retirement. So how will Americans with low savings survive in retirement?

The savings-poor households can still thrive in retirement. Many of them depends on Social Security and state pension for monthly incomes. Older retirees could also rely on other family members to avoid the retirement crisis.

 

The Pension Plan is a tax qualified retirement plan designed to provide you with additional income when you retire. Most of the time you don’t need to make any contributions and the money is funded solely by your employer. This cash-balance pension is kept in a safe interest bearing accounts. The interest credits on your pension balance might be based on the annual interest rate on 30-year U.S. Treasury bonds. Any distribution of benefit you receive from the Pension Plan is considered taxable income.

So can you cash out a pension early? Yes you can. The best way to avoid any penalty when you cash out your pension early is to roll your money into an IRA when you leave the company. But first, let’s talk about the penalty when you cash out your pension early.

Penalty for Cash Out Pension Plan Early

If you receive a lump sum distribution prior to reaching age 55, you may be required to pay an additional 10% Federal income tax. You can avoid paying the additional tax on a lump sum distribution by rolling over this distribution into an IRA, Roth IRA, or another eligible retirement plan, which is usually sponsored by another employer. [Read more…]

The amount of your Social Security retirement benefit is based on your year of birth, your age when your benefits begin, and the earnings on which you paid Social Security payroll taxes—not on the amount of taxes you paid. I will claim my social security benefit at 70 years old while my wife, Mrs. PFN, will claim at 68 years old. Here is how I deride our plan to claim social security benefits.

Background of Social Security Benefits

Retirement income from Social Security has the extra benefit of an automatic cost-of-living adjustment (COLA) that increases your payments annually to keep pace with inflation. You should apply for benefits about three months before you want them to begin. You may apply for your benefits to begin between the ages of 62 and 70 if you have at least 10 years of coverage. Benefits are permanently reduced if they begin before full retirement age. A retired worker’s spouse can apply for benefits at age 62 or later.

A surviving spouse of a worker or retired worker can apply at age 60 or later. Since both Mrs. PFN and I were born after 1960, our full retirement age is 67. At first we plan to use the file-and-suspend strategy to maximize our benefits: I will file and suspend my benefit at the age of 67 while my wife claim the spousal benefits. However, Congress passed the new law that close the file-and-suspend strategy. May 1, 2016 is when the laws grace period ends, eliminating people’s ability to file-and-suspend in order to trigger benefits for a spouse. So we have to come up with a new plan. [Read more…]