Do you own an IRA? If so, you have company. According to a 2013 study, Americans hold nearly $2.5 trillion worth of assets inside IRA accounts.1 Much of those assets are held in traditional IRAs.
Traditional IRAs, 401(k) plans and similar qualified accounts are popular savings tools because of their tax-favored treatment. You can fund these accounts with pretax dollars. Also, your growth is tax-deferred as long as the funds stay in the account. You can’t avoid taxes on these dollars forever, though.
You can defer distributions from your IRA or 401(k) up to age 70½. At that age, however, you must begin taking required minimum distributions, also known as RMDs. The amount of your RMD is based on several factors, primarily your age and your end-of-year account balance. Generally, your withdrawal will increase relative to your balance as you get older.
A budget can be one of your most valuable financial tools as you plan your retirement. Your budget can help you plan your required income and make smart buying decisions. Unfortunately, most Americans don’t use a budget. According to a study from U.S. Bank, only 41 percent of American households rely on a budget to guide their spending.1
Even if you don’t use one today, there’s nothing saying you can’t change that habit in retirement. However, you may find it difficult to project your future expenses. After all, you can’t predict the future. You can, though, use your current expenses and your plans for retirement to develop an accurate estimate of your anticipated spending.
Since its inception nearly 40 years ago, the 401(k) has become one of the most commonly used retirement savings vehicles. It’s popular with employers because it relieves them of the burden of funding a pension. The 401(k) plan is popular with employees because it usually offers a broad range of investment options, tax-deferred growth and employer matching contributions.
While a 401(k) can be a powerful retirement accumulation tool, it can also be complex to manage, especially after you’ve left your employer. Many workers leave their 401(k) balances in their former employer’s plan after they leave. They may feel that’s their best option, or they may forget about the balance altogether.
However, many employers have decided they aren’t going to keep former employee balances in the plan forever. Many companies have adopted a policy known as “forced rollover.” Under a forced rollover, your balance is automatically rolled out of the plan and into an IRA. Most plans only enforce this type of rollover for balances under a certain threshold.
The new year is upon us. For many people, that signals an opportunity to implement new strategies and pursue important resolutions. One of your major goals may be to catch up on your retirement savings. If so, you’re not alone. According to a Gallup study, more than half of Americans are worried about their ability to afford retirement.1
The good news is it’s never too late to take action and stabilize your financial future. Perhaps you started saving for retirement late in your career. Or maybe you suffered some setbacks along the way that limited your ability to save. You can make 2018 the year that you get back on track and take control of your retirement plans.
For many, New Year’s is a time to look to the future and start fresh. It’s a time to set goals and chart a new course. You may be looking at your family’s finances as one area where you can implement new habits and strategies. Perhaps you’ve fallen behind on your savings or feel that you may be too exposed to risk. The new year might be the right time to analyze your current situation and make changes.
The good news is there are many steps you can take to strengthen your family’s financial picture that are relatively simple. Below are five such steps. Use the new year as a time to reflect on your current financial picture and take action to make improvements. If you haven’t undertaken the following steps, now may be the time to do so.
Retirement is a major financial challenge for many workers. In fact, according to a study from Gallup, it’s the top financial worry for 54 percent of Americans.1 They’re concerned that they won’t be able to save enough money to fund their desired lifestyle in retirement.
Retirement planning isn’t just about saving, though. While it’s important to accumulate assets during your working years, you also need a plan to make those assets last throughout retirement. It’s possible your retirement could last decades, so you’ll need a strategy to make sure you don’t outlive your money.
Do you plan on leaving an inheritance to your children, grandchildren and other loved ones? If you’re like many retirees, you’ve worked hard to build a career, accumulate assets and raise a family. While it may not be enjoyable to think about your death, an estate can help you pass your legacy on to your family members after you die.
Of course, there’s nothing saying you have to wait until your death to distribute your legacy. It may be just as effective for you to give assets away to your family members while you’re still alive. That way, you can see your loved ones put your legacy to use.
Many retirees, however, find that these assumptions are not accurate. In fact, it’s possible that your spending will actually increase after you retire. Fortunately, you can keep your spending under control by understanding some of the unique factors faced by retirees.
It’s a common assumption among many workers, retirees and even financial professionals that spending goes down after you retire. In fact, many retirement plans are built on the assumption that retirement spending will be a fraction of your preretirement income needs.
According to a recent study by Gallup, 64 percent of Americans say they are worried about having enough money for retirement. That makes retirement the country’s number one concern for the 16th consecutive year. In fact, retirement has been the top financial concern for Americans every year since Gallup started conducting the study.1
There’s good reason for Americans to be concerned. With the disappearance of company pensions and the uncertain future of Social Security, it’s clear that the next generation of retirees will carry more of the retirement funding burden than any previous generation. It’s primarily your responsibility to save money for retirement, as you may not be able to count on a pension or a full Social Security benefit as a safety net.
As important as it is to save for retirement, however, there may be times when it may not be wise to make retirement your top financial priority. Many people assume that retirement should always top the list of savings goals. Depending on your circumstances, though, that assumption could be incorrect.
Do you have a health savings account, also known as an HSA? You’re not alone. According to a study from America’s Health Insurance Plans (AHIP), nearly 20 million Americans are enrolled in an HSA.1
An HSA can be a valuable tool to help you pay for deductibles, copays and other out-of-pocket health care costs. They can be especially helpful for those emergency costs that you don’t factor into your regular budget.
If you’re like many Americans, you probably use your HSA to pay for short-term, unexpected costs. Your child suffers a sports injury, so you take money out of the HSA to cover the copay. Or you need to buy medicine for an illness, so you use HSA funds to pay for the prescription. There’s nothing wrong with using an HSA as a short-term reserve account for health care costs. In many ways, that’s why HSAs exist.