Women, Longevity Risk & Retirement Saving. By John Jastremski

Statistics point out the need to save early, save consistently & stay invested. 

Will you live to be 100? If you’re a woman, your odds of becoming a centenarian are seemingly better than those of men. In the 2010 U.S. Census, over 80% of Americans aged 100 or older were women.1

Will you eventually live alone? According to the Administration on Aging (a division of the federal government’s Department of Health & Human Services), about 47% of women aged 75 or older lived alone in 2010. If that prospect seems troubling, there is another statistic that also may: while 6.7% of men age 65 and older lived in poverty in 2010, 10.7% of women in that age demographic did.2,3

Statistics like these carry a message: women need to pay themselves first. A phrase has emerged to describe all this: longevity risk. As so many women outlive their spouses by several years or more, a woman may need several years more worth of retirement income. So there is a need to consider income sources – and investment strategies – for the years after a spouse passes away.

What does this mean for the here and now? It means contributing as much as your budget allows to your retirement accounts. Procrastination is your enemy and compound interest is your friend. It means accepting some investment risk – growth investing for the long run is looking more and more like a necessity.

You will need steady income, and you will need to keep growing your savings. In 2012, Social Security income represented 50.4% of the average annual income for unmarried and widowed woman aged 65 and older. Having a monthly check is certainly comforting, but that check may not be as large as you would like. The average woman 65 or older received but $12,520 in Social Security benefits in 2012.4

You will likely need multiple streams of income in retirement, and fortunately forms of investment, housing decisions and inherited assets can potentially lead to additional income sources. A chat with a financial professional may help you determine which options are sensible to pursue.

Your income and your savings must also keep up with inflation. Even mild inflation can exact a toll on your purchasing power over time.

Risk-averse investing may come with a price. In 2013, the investment giant Allianz surveyed Americans with more than $200,000 in investable assets and unsurprisingly learned that their #1 priority was retirement savings protection. What did surprise some analysts was their penchant for conservative investing during a banner year for stocks.5

Memories of the 2008-09 bear market were apparently hard to dispel: 76% of those surveyed indicated that given the choice between an investment offering a 4% return with protection of principal and an investment offering an 8% return but lacked principal protection, they would take the one with the 4% return.5

A substandard return shouldn’t seem so attractive. If your portfolio yields 4% a year and inflation is running at 1% a year (as it is now), you can live with it. Your investments aren’t earning much, but the Consumer Price Index isn’t gaining on you. If consumer prices rise 3.3% annually (which was what yearly inflation averaged across 2004-07), you are barely making headway. You actually may be losing ground against certain consumer costs. If inflation tops 4% (and it might, if interest rates take off later in this decade), you have a real problem.6

Cumulative inflation can really eat into things, as a check of a simple inflation calculator reveals. An $18.99 steak dinner at a nice restaurant in 2000 would cost you $24.54 today given the ongoing tame-to-moderate inflation over the last 14 years. That’s 36.3% more.7

As much as we would like to park our retirement money and avoid risk, fixed-income investments don’t always offer much reward these days. Retirees can feel like they are being punished by low interest rates, as they can see prices rising faster around them at the grocery store and for assorted services and goods. Interest rates will rise, but equity investments have traditionally offered the potential for greater returns than fixed-income investments and in all likelihood will continue to do so.

Growth investing is a necessary response to longevity risk. After all, you can’t risk outliving your retirement savings. Keeping part of your portfolio in the stock market offers you the potential to keep growing your retirement money, thereby offering you the chance have a larger retirement fund from which to withdraw proportionate income.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – census.gov/newsroom/releases/archives/2010_census/cb12-239.html [12/10/12]

2 – aoa.gov/Aging_Statistics/Profile/2011/6.aspx [4/10/14]

3 – aoa.gov/Aging_Statistics/Profile/2011/10.aspx [4/10/14]

4 – ssa.gov/pressoffice/factsheets/women.htm [3/14]

5 – foxbusiness.com/personal-finance/2013/10/24/wall-streets-rallying-so-why-are-boomers-so-scared/ [10/24/13]

6 – usinflationcalculator.com/inflation/current-inflation-rates/ [4/10/14]

7 – usinflationcalculator.com/ [4/10/14]

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by ING Retirement, AT&T, fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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Couples Retiring on the Same Page by John Jastremski

Couples Retiring on the Same Page

Agreeing about what you want from retirement is crucial.

 

What does a good retirement look like to you? Does it resemble the retirement that your spouse or partner has in mind? It is at least roughly similar?

The Social Security Commission currently projects an average retirement of 19 years for a man and 21 years for a woman (assuming retirement at age 65). So sharing the same vision of retirement (or at least respecting the difference in each other’s visions) seems crucial to retirement happiness.1

What kind of retirement does your spouse or partner imagine? During years of working, parenting and making ends meet, many couples never really get around to talking about what retirement should look like. If spouses or partners have quite different attitudes about money or dreams that don’t align, that conversation may be deferred for years. Even if they are great communicators, assumptions about what the other wants for the future may prove inaccurate.

Are couples discussing retirement, or not? It depends on who you ask – or more precisely, what poll you reference.

A 2013 survey of 5,400 U.S. households by Hearts & Wallets (a research firm studying retirement money management trends) found that just 38% of couples plan for retirement together. The fourth Couples Retirement Study conducted by Fidelity Investments (released this February) offered similar results. In that study, 38% of the working couples polled cited some disagreement on what kind of lifestyle they would retire to, 32% disagreed on how much they would need to work in retirement, and 38% hadn’t planned to manage retirement health care costs.2,3

In contrast, Capital One ShareBuilder surveyed 1,008 employed adults this winter and found that on average, couples discuss retirement 14 times a year. (There was no word on the depth or length of those conversations, however.)4

Be sure to talk about what you want for the future. A few simple questions can get the conversation going, and you might even want to chat about it over a meal or coffee in a relaxing setting. Dreaming and planning together, even on the most basic level, gives you a chance to reacquaint yourselves with your financial needs, goals and personalities.

To start, ask each other what you see yourselves doing in retirement – individually as well as together. Is the way you are saving and investing conducive to those dreams?

Think about whether you are making the most of your retirement savings potential. Could you save more? Do you need to? Are you both contributing to tax-advantaged retirement accounts? Are you comfortable with the amount of risk you are assuming?

If your significant other is handling the household finances (and the meetings with financial professionals about a retirement strategy), are you prepared to take over in case of an emergency? When one half of a couple is the “hub” for money matters and investment decisions, the other spouse or partner needs to at least have an understanding of them. If the unexpected occurs, you will want that knowledge.

Speaking of knowledge, you should also both know who the beneficiaries are for your IRAs, workplace retirement accounts, investment accounts, and life insurance policies, and you both need to know where the relevant paperwork is located.

A shared vision of retirement is great, and respect for individual variations on it is just as vital. A conversation about how you see retirement today can give you that much more input to plan for tomorrow.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – forbes.com/sites/jamiehopkins/2014/02/03/planning-for-an-uncertain-life-expectancy-in-retirement/ [2/3/14]

2 – heartsandwallets.com/till-death-or-retirement-or-retirement-do-us-part/news/2013/02/ [2/13]

3 – shrm.org/hrdisciplines/benefits/articles/pages/retirement-couples-disagree.aspx [2/7/14]

4 – usatoday.com/story/money/personalfinance/2014/03/16/retirement-planning-couples-fight/6368967/ [3/16/14]

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.


The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, AT&T, Qwest, Chevron, Hughes, access.att.com, ING Retirement, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

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6 Steps to Get Out of Debt. By John Jastremski

6 Steps to Get Out of Debt

Why not plan to lighten your financial burden?

Positive moves to counteract negative cash flow. The financial analysis website nerdwallet.com keeps track of the various debts common to the U.S. household. As of April 2014, they’ve found an average mortgage debt of $154,365. They have also discovered an average household has $7,087 in debt from credit cards, but when the numbers are revised to only look at American households already in debt, the average more than doubles to $15,191. When you add this to the average student loan debt of $33,607, it paints a rather bleak picture.1

Every day, people draw on money they don’t actually have – via credit cards, various loans, home equity lines of credit, and even their 401(k)s. Many of them end up making minimum payments on these high-interest loans – a sure way to stay indebted forever.

If this is your situation, you may be wondering: how do I get out of debt? Here are some ideas.

*Make a budget. “Where does all the money go?” If you are asking that question, here is where you learn the answer. You might find that you’re spending $80 a month on gourmet coffee, or $100 a week on lousy movies. Cable, eating out, buying retail – costs like these can really eat at your finances. Set a budget, and you can stop frivolous expenses and redirect the money you save to pay down debt.

*Get another job. I know, this doesn’t sound like fun. But having more money will aid you to reduce debt more quickly. A family member who isn’t working can work to help reduce a shared family problem.

 

*Sell stuff. The Internet has proven that everything is worth something. Go to eBay, craigslist or some other online marketplace – you’ll be amazed at the market (and the asking prices) for this and that. What people collect, want and buy may surprise you. Don’t be surprised if you have a few hundred dollars – or more – sitting around your house or in your garage. You might be able to pay off a couple of credit cards – or even a loan – with what you sell.

*Ditch the big car payment and drive a cheaper car that gets good MPG. You’ve likely been thinking about saying goodbye to your current car if it gets terrible mileage. Get a car that makes sense instead of a statement. Your wallet will thank you.

 

*Pay off all debts smallest to largest. The benefits are psychological as well as financial. Knock off even a small debt, and you have an accomplishment to build on – encouragement to erase bigger debts. Also, every debt you have incurs its own interest charge. One less debt means one less interest charge you have to pay.

 

*Or, pay off your highest-interest debts first. Take a minute to figure out which of your debts hits you with the highest interest rate. Pay the minimum amounts toward each of your other debts, and apply all the extra money you can toward paying off the debt with the highest interest. This will have a cumulative effect. Your highest-interest debt will become smaller, meaning you will be saving some dollars on interest charges on the balance because the balance is lower. If the balance is lower, you should be able to pay off the debt faster. When you say goodbye to that debt, you can start paying down the debt with the next highest interest, and so on.

 

Keep the real goal in mind. Building wealth, not reducing debt, should be your ultimate objective. Some debt reduction and debt consolidation planners obsess on getting you out of debt, but that is only half the story. Minimizing debt is great, but maximizing wealth is even better.

 

You can plan to build wealth and reduce debt at the same time. If you have a relationship with a financial advisor, you might be able to do it in the same unified process. Why just keep debt at bay when you can leave it behind? Do yourself a favor and talk with a good financial advisor who can show you ways toward financial freedom.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/ [5/8/14]`

 

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.


The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

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Getting It All Together for Retirement. By John Jastremski

Getting It All Together for Retirement

Where is everything? Time to organize and centralize your documents.

 

Before retirement begins, gather what you need. Put as much documentation as you can in one place, for you and those you love. It could be a password-protected online vault; it could be a file cabinet; it could be a file folder. Regardless of what it is, by centralizing the location of important papers you are saving yourself from disorganization and headaches in the future.

What should go in the vault, cabinet or folder(s)? Crucial financial information and more. You will want to include…

Those quarterly/annual statements. Recent performance paperwork for IRAs, 401(k)s, funds, brokerage accounts and so forth. Include the statements from the latest quarter and the statements from the end of the previous calendar year (that is, the last Q4 statement you received). You don’t get paper statements anymore? Print out the equivalent, or if you really want to minimize clutter, just print out the links to the online statements. (Someone is going to need your passwords, of course.) These documents can also become handy in figuring out a retirement income distribution strategy.

 

Healthcare benefit info. Are you enrolled in Medicare or a Medicare Advantage plan? Are you in a group health plan? Do you pay for your own health coverage? Own a long term care policy? Gather the policies together in your new retirement command center and include related literature so you can study their benefit summaries, coverage options, and rules and regulations. Contact info for insurers, HMOs, your doctor(s) and the insurance agent who sold you a particular policy should also go in here.

 

Life insurance info. Do you have a straight term insurance policy, no potential for cash value whatsoever? Keep a record of when the level premiums end. If you have a whole life policy, you want to keep paperwork communicating the death benefit, the present cash value in the policy and the required monthly premiums in your file.

Beneficiary designation forms. Few pre-retirees realize that beneficiary designations often take priority over requests made in a will when it comes to 401(k)s, 403(b)s and IRAs. Hopefully, you have retained copies of these forms. If not, you can request them from the account custodians and review the choices you have made. Are they choices you would still make today? By reviewing them in the company of a retirement planner or an attorney, you can gauge the tax efficiency of the eventual transfer of assets.1

Social Security basics. If you haven’t claimed benefits yet, put your Social Security card, last year’s W-2 form, certified copies of your birth certificate, marriage license or divorce papers in one place, and military discharge paperwork or and a copy of your W-2 form for last year (or Schedule SE and Schedule C plus 1040 form, if you work for yourself), and military discharge papers or proof of citizenship if applicable. Social Security no longer mails people paper statements tracking their accrued benefits, but e-statements are available via its website. Take a look at yours and print it out.2

 

Pension matters. Will you receive a bona fide pension in retirement? If so, you want to collect any special letters or bulletins from your employer. You want your Individual Benefit Statement telling you about the benefits you have earned and for which you may become eligible; you also want the Summary Plan Description and contact info for someone at the employee benefits department where you worked.

 

Real estate documents. Gather up your deed, mortgage docs, property tax statements and homeowner insurance policy. Also, make a list of the contents of your home and their estimated value – you may be away from your home more in retirement, so those items may be more vulnerable as a consequence.

Estate planning paperwork. Put copies of your estate plan and any trust paperwork within the collection, and of course a will. In case of a crisis of mind or body, your loved ones may need to find a durable power of attorney or health care directive, so include those documents if you have them and let them know where to find them.

 

Tax returns. Should you only keep last year’s 1040 and state return? How about those for the past 7 years? At the very least, you should have a copy of last year’s returns in this collection.

 

A list of your digital assets. We all have them now, and they are far from trivial – the contents of a cloud, a photo library, or a Facebook page may be vital to your image or your business. Passwords must be compiled too, of course.

     

This will take a little work, but you will be glad you did it someday. Consider this a Saturday morning or weekend project. It may lead to some discoveries and possibly prompt some alterations to your financial picture as you prepare for retirement.

   

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – fpanet.org/ToolsResources/ArticlesBooksChecklists/Articles/Retirement/10EssentialDocumentsforRetirement/ [9/12/11]

2 – cbsnews.com/8301-505146_162-57573910/planning-for-retirement-take-inventory/ [3/18/13]

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.


The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

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Wise Decisions with Retirement in Mind

Wise Decisions with Retirement in Mind

Certain financial & lifestyle choices may lead you toward a better future.

 

Some retirees succeed at realizing the life they want, others don’t. Fate aside, it isn’t merely a matter of stock market performance or investment selection that makes the difference. There are certain dos and don’ts – some less apparent than others – that tend to encourage retirement happiness and comfort.

   

Retire financially literate. Some retirees don’t know how much they don’t know. They end their careers with inadequate financial knowledge, and yet feel that they can plan retirement on their own. They mistake retirement income planning for the whole of retirement planning, and gloss over longevity risk, risks to their estate, and potential health care expenses. The more you know, the more your retirement readiness improves.

   

Retire knowing that you’ll have to assume some risk. Growth investing is increasingly seen as a necessity for retirees who want to keep ahead of inflation.

 

According to data and research compiled by the Social Security Administration, the average 65-year-old man will live to be 84 and the average 65-year-old woman will live to be 86. So that’s a 20-year retirement. The SSA also notes that roughly a quarter of today’s 65-year-olds will live past 90, and about 10% of them will live beyond age 95.1

   

If these seniors rely on fixed-income investments for the balance of their lives, they may end up with reduced retirement income potential, and in turn a reduced standard of living. Look at the Rule of 72: if an investment is yielding 2%, it will take about 36 years to double your money. Yes, interest rates are rising – but inflation should rise with them.2

 

A generation ago, mature Americans were urged to gradually shift their portfolio assets out of stocks and into fixed-income investments. One old rule of thumb was to subtract your age from 100, with the resulting number being the percentage of your portfolio you should assign to equities.3

 

Today, retirees and retirement planners are reconsidering this thinking. As the Wall Street Journal reported recently, one study of retirement money and longevity risk concluded that retirement funds may last longer if a retiree gradually increases the stock allocation within a portfolio about 1% per year from an initial range of between 20-50% to between 40-80%. The concept here is that a retiree’s stock allocation should be lowest when their retirement nest egg is largest.3

 

Retire debt-free, or close to debt-free.  Who wants to retire with 10 years of mortgage payments ahead or a couple of car loans to pay off? Even if your retirement savings are substantial, what will big debts do to your retirement morale and the possibilities on your retirement horizon? On that note, refrain from loaning money to family members and friends who seem quite capable of standing on their own two feet.

 

If the thought of using some of your retirement money to pay outstanding debts hits you, set that thought aside. You have dedicated that money to your future, not to bill paying. On second or third thought, other sources for the cash may be apparent.  

 

Retire with purpose. There’s a difference between retiring and quitting. Some people can’t wait to quit their job at 62 or 65 – their work is “killing” them, or boring them senseless.  If only they could escape and just relax and do nothing for a few years – wouldn’t that be a nice reward? Relaxation can lead to inertia, however – and inertia can lead to restlessness, even depression. You want to retire to a dream, not away from a problem.

 

A retirement dream can become even more captivating when it is shared. Spouses who retire with a shared dream or with utmost respect for each other’s dreams are in a good place.

 

The bottom line? Retirees who know what they want to do – and go out and do it – are contributing to their mental health and possibly their physical health. If they do something that is not only vital to them but important to others, their community can benefit as well.

      

Retire healthy. Smoking, drinking, overeating, a dearth of physical activity – all these can take a toll on your capacity to live fully and enjoy retirement. It is never “too late” to quit smoking, quit drinking or slim down.

 

Retire in a community where you feel at home. It could be where you live now; it could be a place hundreds or thousands of miles away where the scenery and people are uplifting. It could be the place where your children live. If you find yourself lonely in retirement, then “find your tribe” – look for ways to connect with people who share your experiences, interests and passions, and who encourage you and welcome you. This social interaction is one of the great intangible retirement benefits. 

    

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 – ssa.gov/planners/lifeexpectancy.htm [2/6/14]

2 – investopedia.com/terms/r/ruleof72.asp [2/6/14]

3 – tinyurl.com/m8akefj [2/3/14]

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.


The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and maybe reached at www.theretirementgroup.com.

 

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Why You Should Keep Contributing to Your 401K

Save for retirement consistently, regardless of how the market behaves.

There is seldom a dull moment on Wall Street. Stocks may rise or fall dramatically over the course of a year or a decade. Sometimes, breaking news may tempt you to pull money out of your 401(k) or greatly reduce your contributions. If you’re considering such a move, think twice.

Don’t stop saving for retirement. Even if you think you’re wealthy enough to forego putting money in your 401(k) for a while, you could end up seriously shortchanging your retirement savings potential by reducing your retirement plan balance or elective salary deferrals.

A 401(k) plan is a terrific retirement savings vehicle – but many Americans have not saved enough for their retirement years. On top of that, if you withdraw money from a 401(k) plan before age 59½, you’ll face a 10% tax penalty (with few exceptions) and you may end up spending money today that could have enjoyed tax-deferred compounding in the future.1

Don’t lose out on the power of tax deferral & compounding. Together, these factors have the potential to exponentially grow your retirement savings. As an example, let’s say you enroll in a 401(k) plan at age 25 and contribute $2,000 a year for 40 years with an annual return of 10%. At age 65, your $80,000 of contributions will be worth $973,684 thanks to compounding and a consistent inflow of new money.2

Contributions to a traditional 401(k) also reduce the amount of taxable income listed on your W-2 form. They may lower your initial tax hit on your state return as well; most states exempt traditional 401(k) contributions from tax. Self-employed individuals can actually deduct 401(k) plan contributions.2,3

The 2013 401(k) contribution limit is $17,500, with $5,500 in additional “catch-up” contributions permitted for workers 50 and older. These limits may rise slightly in 2014.4

Don’t lose out on a match. Will your employer match your contributions – say, a dollar-for-dollar match on the first 3% of salary? If you make $60,000 per year, 3% is $1,800. Would you throw away $1,800 worth of free money each year? You shouldn’t, especially given that this money will grow tax-deferred.

Do keep contributing steadily. It’s a good idea to keep up the dollar cost averaging and continue to make steady month-to-month or paycheck-to-paycheck salary deferrals. In all probability, this is central to your financial plan – and how will you amass the retirement savings you need if you stop contributing? Sure, there are other ways to build retirement savings, but dollar-cost-averaged contributions to a 401(k) represent a consistent, recurring way to get that job done.

If you contribute to your 401(k) plan through a dollar cost averaging approach, your investment dollar buys shares at a lower price in a bear market – and it also buys more shares for your money. So when a bull market cycle resumes, you may end up in a really good position.

It’s a good idea to keep contributing even if you are falling behind financially. Should you pay down debts with your 401(k) assets? Only as a last resort. In fact, if you are looking at a bankruptcy you should know that 401(k) assets are protected in Chapter 7 bankruptcies under federal law.5

Do review your goals with your financial advisor. Look at your time horizon. Look at your overall financial plan. Whether you are nearing retirement or far away from it, you will see that your 401(k) is a vital tool for pursuing your financial objectives. Whatever this or that website may proclaim, don’t be discouraged by short-term headlines; abide by the long-term plan created personally for you.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – irs.gov/taxtopics/tc424.html [4/1/13]

2 – womensfinance.com/wf/401k/taxes.asp [12/12]

3 – finance.zacks.com/tax-deductions-contributions-401k-plans-1852.html [10/15/13]

4 – irs.gov/uac/2013-Pension-Plan-Limitations [9/27/13]

5 – boston.com/business/personalfinance/managingyourmoney/archives/2010/05/bankruptcy_prot.html [5/17/10]

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views  of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, Pfizer, Verizon, Bank of America, AT&T, Merck, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

 

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Getting It All Together for Retirement By John Jastremski

Getting It All Together for Retirement

Where is everything? Time to organize and centralize your documents.

 

Before retirement begins, gather what you need. Put as much documentation as you can in one place, for you and those you love. It could be a password-protected online vault; it could be a file cabinet; it could be a file folder. Regardless of what it is, by centralizing the location of important papers you are saving yourself from disorganization and headaches in the future.

What should go in the vault, cabinet or folder(s)? Crucial financial information and more. You will want to include…

Those quarterly/annual statements. Recent performance paperwork for IRAs, 401(k)s, funds, brokerage accounts and so forth. Include the statements from the latest quarter and the statements from the end of the previous calendar year (that is, the last Q4 statement you received). You don’t get paper statements anymore? Print out the equivalent, or if you really want to minimize clutter, just print out the links to the online statements. (Someone is going to need your passwords, of course.) These documents can also become handy in figuring out a retirement income distribution strategy.

 

Healthcare benefit info. Are you enrolled in Medicare or a Medicare Advantage plan? Are you in a group health plan? Do you pay for your own health coverage? Own a long term care policy? Gather the policies together in your new retirement command center and include related literature so you can study their benefit summaries, coverage options, and rules and regulations. Contact info for insurers, HMOs, your doctor(s) and the insurance agent who sold you a particular policy should also go in here.

 

Life insurance info. Do you have a straight term insurance policy, no potential for cash value whatsoever? Keep a record of when the level premiums end. If you have a whole life policy, you want to keep paperwork communicating the death benefit, the present cash value in the policy and the required monthly premiums in your file.

Beneficiary designation forms. Few pre-retirees realize that beneficiary designations often take priority over requests made in a will when it comes to 401(k)s, 403(b)s and IRAs. Hopefully, you have retained copies of these forms. If not, you can request them from the account custodians and review the choices you have made. Are they choices you would still make today? By reviewing them in the company of a retirement planner or an attorney, you can gauge the tax efficiency of the eventual transfer of assets.1

Social Security basics. If you haven’t claimed benefits yet, put your Social Security card, last year’s W-2 form, certified copies of your birth certificate, marriage license or divorce papers in one place, and military discharge paperwork or and a copy of your W-2 form for last year (or Schedule SE and Schedule C plus 1040 form, if you work for yourself), and military discharge papers or proof of citizenship if applicable. Social Security no longer mails people paper statements tracking their accrued benefits, but e-statements are available via its website. Take a look at yours and print it out.2

 

Pension matters. Will you receive a bona fide pension in retirement? If so, you want to collect any special letters or bulletins from your employer. You want your Individual Benefit Statement telling you about the benefits you have earned and for which you may become eligible; you also want the Summary Plan Description and contact info for someone at the employee benefits department where you worked.

 

Real estate documents. Gather up your deed, mortgage docs, property tax statements and homeowner insurance policy. Also, make a list of the contents of your home and their estimated value – you may be away from your home more in retirement, so those items may be more vulnerable as a consequence.

Estate planning paperwork. Put copies of your estate plan and any trust paperwork within the collection, and of course a will. In case of a crisis of mind or body, your loved ones may need to find a durable power of attorney or health care directive, so include those documents if you have them and let them know where to find them.

 

Tax returns. Should you only keep last year’s 1040 and state return? How about those for the past 7 years? At the very least, you should have a copy of last year’s returns in this collection.

 

A list of your digital assets. We all have them now, and they are far from trivial – the contents of a cloud, a photo library, or a Facebook page may be vital to your image or your business. Passwords must be compiled too, of course.

     

This will take a little work, but you will be glad you did it someday. Consider this a Saturday morning or weekend project. It may lead to some discoveries and possibly prompt some alterations to your financial picture as you prepare for retirement.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – fpanet.org/ToolsResources/ArticlesBooksChecklists/Articles/Retirement/10EssentialDocumentsforRetirement/ [9/12/11]

2 – cbsnews.com/8301-505146_162-57573910/planning-for-retirement-take-inventory/ [3/18/13]

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.


The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may
be reached at www.theretirementgroup.com.

Posted in 401(k), 72T, Exxonmobil, Option 1 Withdrawal, Retirement Planning | Tagged , , , , , , , , | Comments Off

Why You Should Keep Contributing To Your 401(a) And/Or Your 457 Plan. By John Jastremski

Why You Should Keep Contributing To Your 401(a) And/Or Your 457 Plan

Save for retirement consistently, regardless of how the market behaves.

There is seldom a dull moment on Wall Street. Stocks may rise or fall dramatically over the course of a year or a decade. Sometimes, breaking news may tempt you to pull money out of a 401(a) plan or 457 plan, or greatly reduce your contributions to either. If you’re considering such moves, think twice.

 

Don’t stop saving for retirement. Even if you think you’re wealthy enough to forego contributing to a money purchase plan or deferred compensation plan for a while, you could end up seriously shortchanging your retirement savings potential by reducing your balance or elective salary deferrals.

 

These plans are terrific retirement savings vehicles – and the fact is that most Americans have not saved enough for their retirement years. Additionally, if you withdraw money from a 401(a) plan before age 59½, you’ll face a 10% tax penalty (with few exceptions) and you may end up spending money today that could have enjoyed tax-deferred compounding in the future. (Thankfully, your 457 plan contributions aren’t subject to early withdrawal penalties; only retirement savings funds that you roll over into a 457 get hit with the usual 10% penalty if withdrawn too soon.)1,2

 

Don’t lose out on the power of tax deferral & compounding. Together, these factors have the potential to dramatically grow your retirement savings. As a hypothetical example, let’s say you have $30,000 in your 457 deferred comp plan at age 40, and you just contribute $50 a month to it for the next 20 years while your account yields 8% a year. Twenty years later, that $30,000 will grow into $177,255. In fact, it would grow to $147,804 in 20 years under those circumstances even if you never contributed a penny to it after age 40, all thanks to compounding and tax deferral.3

 

You make pre-tax contributions to a 457 plan, and contributions to 401(a) plans may be made with pre-tax dollars as well. These pre-tax contributions reduce the amount of taxable income listed on your W-2 form.1

 

Contribution limits on 457 plans are unchanged for 2014. You can put up to $17,500 in a 457 next year if you are younger than 50, and $23,000 if you are 50 or older (thanks to the catch-up contribution allowance for most 457 plans).4

 

Next year, the total contribution limit for the combined employee and employer contributions to a 401(a) money purchase plan increases to $52,000.5

Don’t lose out on a match. Does the employer sponsoring the 401(a) plan match your contributions – say, something like a dollar-for-dollar match on the first 3% of salary? If you make $60,000 per year, 3% is $1,800. Would you throw away $1,800 worth of free money each year? You shouldn’t, especially given that this money will grow tax-deferred.

 

Do keep contributing steadily. It’s a good idea to keep up the dollar cost averaging and continue to make steady month-to-month or paycheck-to-paycheck salary deferrals. In all probability, this is central to your financial plan – and how will you amass the retirement savings you need if you stop contributing? Sure, there are other ways to build retirement savings, but dollar-cost-averaged contributions to a 457 plan or money purchase plan represent a consistent, recurring way to get that job done.

 

If contributions are made via a dollar cost averaging approach, the investment dollar buys shares at a lower price in a bear market – and it also buys more shares for the money. So when a bull market cycle resumes, you may end up in a really good position.

It’s a good idea to keep contributing even if you are falling behind financially. Should you pay down debts with your 457 plan assets? Only as a last resort. In fact, if you are looking at a bankruptcy you should know that assets in 457 plans and profit sharing plans commonly qualify for state and/or federal exemptions in personal bankruptcies.6

 

If you haven’t maxed out 457 plan contributions in prior years, you may be able to make “double limit” catch-up contributions to a 457 in the three years prior to your normal retirement age. The limit in each of these three years is the lesser of a) twice the normal annual contribution limit, or b) the annual contribution limit plus the difference between the annual limit and what was under-contributed in previous plan years.2

Do review your goals with your financial advisor. Look at your time horizon. Look at your overall financial plan. Whether you are nearing retirement or far away from it, you will see that 401(a) plans and 457 plans are vital tools for pursuing your financial objectives – whether you contribute to one type of account, or both. Whatever this or that website may proclaim, don’t be discouraged by short-term headlines; abide by the long-term plan created personally for you.

 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – finance.zacks.com/401a-retirement-plan-4786.html [11/8/13]

2 – ing.us/individuals/retirement/products/types-accounts/employer-plans/457-plans [11/8/13]

3 – mwdplans.gwrs.com/link.do?contentUrl=education.Maximize&txnCode=WQKTIP [11/8/13]

4 – irs.gov/uac/IRS-Announces-2014-Pension-Plan-Limitations;-Taxpayers-May-Contribute-up-to-$17,500-to-their-401%28k%29-plans-in-2014 [11/4/13]

5 – icmarc.org/for-plan-sponsors/plan-rules/contribution-limits.html [11/8/13]

6 – nolo.com/legal-encyclopedia/pension-bankruptcy.html [11/8/13]

 

 

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.


The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Merck, Pfizer, Verizon, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Posted in 401(k), 401K.com, 72T, Access.ATT, ATT | Tagged , , , , , , , , | Comments Off

Debunking a Few Popular Retirement Myths. By John Jastremski

Certain misconceptions ignore the realities of retirement.

Generalizations about money & retirement linger. Some have been around for decades, and some new clichés have recently joined their ranks. Let’s examine a few.

“When I’m retired, I won’t really have to invest anymore.” Many people see retirement as an end instead of a beginning – a finish line for a career. In reality, retirement can be the start of a new and promising phase of life that could last a few decades. If you stop investing entirely, you can risk losing purchasing power; even moderate inflation can devalue the dollars you’ve saved.1

    

“My taxes will be lower when I retire.” You may earn less, and that could put you in a lower tax bracket. On the other hand, you may end up waving goodbye to some of the deductions and exemptions you enjoyed while working, and state and local taxes will almost certainly rise with time. So while your earned income may decrease, you may end up losing a comparatively larger percentage of it to taxes after you retire.1

“I started saving too late, I have no hope of retiring – I’ll have to work until I’m 85.” If your nest egg is less than six figures, working longer may be the best thing you can do. You will have X fewer years of retirement to plan for, so you can keep earning a salary, and your savings can compound longer. Don’t lose hope: remember that you can make larger, catch-up contributions to IRAs after 50. If you are 50 or older this year, you can put as much as $23,000 into a 401(k) plan. Some participants in 403(b) or 457(b) plans are also allowed that privilege. You can downsize and reduce debts and expenses to effectively give you more retirement money. You can also stay invested (see above).1,2

“I should help my kids with college costs before I retire.” That’s a nice thought, but you don’t have to follow through on it. Remember, there is no retiree “financial aid.” Your student can work, save or borrow to pay for the cost of college, with decades ahead to pay back any loans. You can’t go to the bank and get a “retirement loan.” Moreover, if you outlive your money your kids may end up taking you in and you will be a financial burden to them. So putting your financial needs above theirs is fair and smart as you approach retirement.

“I’ll live on less when I’m retired.” We all have the cliché in our minds of a retired couple in their seventies or eighties living modestly, hardly eating out and asking about senior discounts. In the later phase of retirement, couples often choose to live on less, sometimes out of necessity. The initial phase of retirement may be a different story. For many, the first few years of retirement mean traveling, new adventures, and “living it up” a little – all of which may mean new retirees may actually “live on more” out of the retirement gate.

“No one really retires anymore.” Well, it is true than many baby boomers will probably keep working to some degree. Some people love to work and want to work as long as they can. What if you can’t, though? What if your employer shocks you and suddenly lets you go? What if your health won’t let you work 40 hours or even 10 hours a week? You could retire more abruptly than you believe you will. This is why even workaholics need a solid retirement plan.

There is no “generic” retirement experience, and therefore, there is no one-size-fits-all retirement plan. Each individual, couple or family needs a strategy tailored to their particular money situation and life and financial objectives.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – tiaa-cref.org/public/advice-guidance/education/financial-ed/empowering_women/retirement-myths [8/29/14]

2 – 401k.fidelity.com/public/content/401k/Home/HowmuchcanIcontrib [8/29/14]

This material was prepared by Peter Montoya Inc, and does not necessarily represent the views of John Jastremski, and The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

The Retirement Group is not affiliated with nor endorsed by fidelity.com, netbenefits.fidelity.com, hewitt.com, resources.hewitt.com, access.att.com, ING Retirement, AT&T, Qwest, Chevron, Merck, Pfizer, Verizon, Hughes, Northrop Grumman, Raytheon, ExxonMobil, Glaxosmithkline, Bank of America, Alcatel-Lucent or by your employer. We are an independent financial advisory group that specializes in transition planning and lump sum distribution. Please call our office at 800-900-5867 if you have additional questions or need help in the retirement planning process.

John Jastremski is a Representative with FSC Securities and may be reached at www.theretirementgroup.com.

Posted in 401(k), 401K.com, 72T, Access.ATT, ATT | Tagged , , , , , , , , | Comments Off

Money & Taxes After Marriage by John Jastremski

Money & Taxes After Marriage

Some not-so-small matters to think about.

 

When you tie the knot, your financial lives will change. Marriage is one of those life events that can really affect your money and tax situation. If you are about to wed, here are a couple of things you’ll want to consider when it comes to taxes and household cash flow.

 

You can now elect to file jointly. Marriage allows you to file your income taxes together, and that can really benefit your financial picture. Joint filers may deduct two exemption amounts from their income, which amounts to one of the biggest standard deductions in the federal tax code. For 2014, a single filer can take a standard deduction of $6,200 but a married couple filing jointly can take one of $12,400.1

 

In addition, joint filers are eligible for key tax breaks at comparatively higher income thresholds than single filers, and filing jointly opens the door to eligibility for the American Opportunity and Lifetime Learning Credits, the Child and Dependent Care Credit, the adoption credit and the Earned Income Tax Credit.2

  

So why would any married couple file separately? Good question. In most cases, filing separately invites higher taxes for a married couple, and when marrieds forego joint filing, they become ineligible for the tuition and fees deduction, the student loan deduction and most of the deductions mentioned in the preceding paragraph.2

 

The deduction for traditional IRA contributions really shrinks if you reject joint filing status. Want an example? Look at the difference if you contribute to a traditional IRA in 2014 while covered by a retirement plan at work. Marrieds who file jointly may take a full deduction up to the amount of their contribution limit if their 2014 modified AGI is $96,000 or less. Marrieds who file separately can’t take any deduction for traditional IRA contributions once their 2014 income hits $10,000. (Only a partial deduction is available underneath that threshold.)2,3

 

In rare circumstances, filing separately may offer particular tax advantages. Take the case of a couple with a high adjusted gross income and major out-of-pocket medical expenses. Under the federal tax code, you can only deduct the amount of those costs that exceeds 10% of AGI. If the hypothetical couple has an AGI of $220,000 when filing jointly, 10% of that is $22,000. If they file separately, the 10% threshold can apply to only one of the couple’s incomes. If the afflicted person has an AGI of $40,000, the 10% threshold becomes $4,000. (One note here: until December 31, 2016, taxpayers who are age 65 and older and their spouses may deduct out-of-pocket medical care expenses that exceed 7.5% of AGI. That also applies for individuals who turn 65 during the tax year.)2

Run the numbers to see which filing status gives you the lowest taxes. That may sound arduous, but software and/or a professional tax preparer will make it less so for you. You will probably elect to file jointly, but compare the projections to inform your decision.

Your household budget will likely need adjusting. Maybe you were only budgeting for one before this; now you need to budget for two, or maybe two plus kids. If you are newlyweds without kids, you still need to watch income, debts and assets. Find a screen or a piece of paper and list your combined monthly income sources and your essential and discretionary expenses each month. Aim to save some money per month for your emergency fund, even just a little.

A conversation about how you each see money will be informative. How much should you spend each month? How should you attack debts? What accounts should you consolidate, and what legal and financial paperwork do you need to update? Will you own certain assets jointly, or individually? Beyond the budget, pursuing long-term money goals with a shared investment outlook is important. Life insurance and a will also go on your to-do list.

  

All this is relevant for blended families too, of course, and they have other concerns as well. Existing trusts and beneficiary designations may need to be modified with the marriage. College aid may be harder to come by: if a “custodial” parent goes from single to married, the stepdad or stepmom’s income goes into the FAFSA calculation. Child support from past spouses may be inadequate or absent. In late 2013, a Census Bureau report looking at the years 1994-2012 found that in cases where the child had no contact with the other parent, child support was paid less than 31% of the time. In 2011, less than 50% of eligible parents actually got 100% of the child support payments awarded to them. About a quarter of eligible parents received nothing. Blended families need to be vigilant about these possible predicaments.4,5

Set aside some time for a conversation. Turn to a financial professional for input, if you wish. When you address these issues proactively, you do yourselves a financial favor. Discussing these kinds of matters and planning for them as a couple can help “marry” your financial lives and put them on the same page.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

Citations.

1 – taxfoundation.org/article/2014-tax-brackets [11/27/13]

2 – turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Should-You-and-Your-Spouse-File-Taxes-Jointly-or-Separately-/INF20137.html [8/21/14]

3 – tinyurl.com/k3omgyk [2/19/14]

4 – money.msn.com/family-money/4-money-traps-of-blended-families [2/15/13]

5 – articles.latimes.com/2013/nov/20/nation/la-na-1121-child-support-20131121 [11/20/13]

 

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