Category: Baby Boomers

The One Dangerous Assumption Made By 70% of Baby Boomers

Don’t put your retirement at risk with this assumption.

It’s an unfortunate fact that many older Americans who are still in the workforce are in danger of not having enough money to last them in retirement. In fact, just over half of all Baby Boomers actually have money put away for retirement, which is a pretty low number! The assumption made by many in this generation is that Social Security benefits will see them through their golden years. This, unfortunately, is not the case.

Social Security was never designed to be a program that would sustain retirees on its own, without any other income. If you’re of the mindset that you’ll be able to make it work without money coming in from any other source, you may be putting your retirement at risk

By Maurie Backman

You can’t live on Social Security alone.

Countless seniors enter retirement with inadequate savings and wind up living in poverty. The reason: They expect their Social Security benefits to pick up the slack, which they’re just not equipped to do. Those payments, in a best-case scenario, will replace about 40% of the typical worker’s pre-retirement income. Most folks, however, need twice that amount to live comfortably, and that doesn’t mean trekking the globe during retirement, but rather, enjoying a modest existence.

Why the disconnect? It really boils down to a glaring lack of knowledge, but the sooner more workers acknowledge that, the more motivated they’ll be to take action.

If you’re still not convinced, here’s some data: Almost one-third of baby boomers expect to need an annual income of $45,000 to $75,000 during retirement, according to the IRI. But the average Social Security recipient today collects just over $1,400 a month in benefits, which translates into just under $17,000 per year. And that’s way off the low end of the aforementioned range.

Even if both you and your spouse worked, and are therefore entitled to two sets of benefits, you’re still only talking about $34,000 a year, on average. And given that could cost the typical 65-year-old couple today $20,000 a year over a 20-year retirement, that’s not a lot of income to work with.

If you’re an older worker who’s lacking savings, let this be your wake up call: Social Security won’t cover your basic bills once your retirement savings run out, so if you’re behind on building a nest egg, now’s the time to act.

Salvaging your retirement

If you’re reading this and know you have only a handful of working years left with limited savings, you may be starting to panic. Don’t. You have several options to boost your nest egg, even if you’re already counting down the months until retirement.

For one thing, take advantage of catch-up contributions. Whether you’re saving in an IRA or 401(k), both plans offer this option. In the case of the former, you get a $1,000 catch-up if you’re over 50, bringing your total annual contribution limit to $6,500. If you have access to an employer-sponsored 401(k), you have an even greater opportunity to make up for lost time, as those 50 and over get a $6,000 catch-up that brings their annual contribution limit up to $24,500. This means that if you’re able to cut enough expenses to max out a 401(k) for five years, you’ll have an additional $122,500 to work with in retirement, and that’s not even taking investment growth into account.

Another option: Work a bit longer. Doing so will help you in a number of ways. First, it’ll give you a greater opportunity to save, but just as important, it’ll prevent you from tapping your nest egg earlier, thus stretching the money you’ve already socked away.

Working longer can help raise your Social Security benefits, too. For each year you delay your benefits past full retirement age, you’ll boost them by 8% up until you turn 70. This means that if you’re entitled to $1,400 a month at a full retirement age of 67 but hold off until age 70 to collect, you’ll receive $1,736 a month instead for life. Of course, that still won’t put you in a position to live solely off Social Security—but it’ll help.

Finally, be prepared to work in some capacity during retirement, whether it’s starting a new business or consulting in your former field. Putting in just a few hours each week could help you avoid financial struggles.

No matter what steps you take to prepare for the costs of retirement that lie ahead, don’t make the mistake of thinking you’ll get by on Social Security alone. Those benefits, though helpful, won’t come close to paying the bills, and accepting that reality will put you in a much better position to salvage your retirement now.

So how do you feel about the fact that you shouldn’t rely on Social Security alone in retirement? Let us know in the comments!

Read the full article here.

When to Expect Your Tax Refund in 2019

This year’s burning tax questions, answered.

It’s almost that time of year again—time to file your taxes! Whether you put it off as long as possible or jump on it as soon as tax season starts, you know it has to get done. The article below details all the due dates and deadlines you need to know for your 2019 tax refund, along with answers to some important questions. Find out when you’ll get your refund, now!

By Thomas Minter

WHEN ARE TAXES DUE FOR THE 2018 TAX YEAR?

If you’re an early tax filer, we’ll get to you in a second. But if you plan on submitting your taxes in the spring sometime before the due date, you should expect to do so by Monday, April 15, 2019.

The IRS hasn’t stated when they will start accepting returns in 2019 yet but based on previous years, you can anticipate tax return season to officially begin on January 29, 2019. That means you can file taxes beginning on that date.

WHEN TO EXPECT A TAX REFUND IN 2019?

The big question on our minds is, “When will I get my money?”.

The fastest way to get your tax refund is to have it electronically deposited into your financial account. This is a free service.

Well, most taxpayers get their tax refunds in less than 21 days from the date the IRS received and approved their tax filing. The IRS actually doesn’t put out a calendar but rather states most people should be getting their refund within that 21 days. They also say that even if people use tax-filing software programs before tax season, filers shouldn’t eFile until the IRS has opened the tax system.

So the bottom line is that is will take about three weeks from the time your taxes have been filed. However, there are some exceptions.

WILL 2018 TAX REFUNDS MAY BE DELAYED IN 2019?
Congress passed a new law that requires the IRS to hold onto tax refunds including the Additional Child Tax Credit (ACTC) and the Earned Income Tax Credit (EITC). The IRS will hold these tax returns until February 15, 2019.

And it doesn’t matter how early you filed your return, if this is your situation, the IRS cannot release your refund until at least February 15. Last tax season, the IRS said they would start issuing these refunds on February 27, so it’s probably safe to assume those refunds will be slightly delayed again.

Why this weird law? What’s the point?

The goal of this is to lessen the prevalence of fraud. The extended hold gives the IRS time to carefully review each of these returns.

2017 and 2018 experienced many credit attacks on large institutions. We found the best way to ensure that your credit is safe, is to monitor it early and often. You can check your credit for free, and as often as you want without penalty using Credit Sesame.

WHERE’S MY REFUND?

After you file taxes, you can track your refund by using the IRS’s Where’s My Refund? tool. This tells you what stage your refund is on and when you can expect to receive it. This way, you won’t have to be in the dark about when you’re money will arrive.

Again, the fasted way to get your tax refund if to file electronically (IRS eFile) and have the funds deposited directly into your bank account. This IRS program is called direct deposit. Interestingly, You can use it to deposit your refund up to three different accounts.

Direct deposit returns are common. About eight out of ten taxpayers get their refunds through direct deposit. It is fast and safe. Then direct deposit and e-Filing is combined, the IRS issues more than nine out of ten refunds in less than 21 days.

Does This Apply To State Tax Refund?

All of this stuff about timeframes and new law – it doesn’t apply to your state tax refund. So far, we’ve only talked about federal tax refunds.

Typically, your state tax refund can take up to 30 days to get back to you if you file electronically. But if you file a paper tax return, it can take up to 12 weeks (three months!) for your refund to arrive – that’s not surprising knowing how snail mail works.

If you’re wondering where your state tax refund is, you can either contact your state tax agency or check the Department of Revenue’s website for your state.

HOW WILL THE TAX REFORM BILL AFFECT YOUR TAX REFUND IN 2019?

Back in December 2017, the government signed in new legislation that may affect the taxes you file in 2019 (2018 tax year). This new legislation could lower taxes for small business and individuals.

Here’s a quick highlight on what this tax reform will do for taxpayers:

– Lower tax rates for individuals

– Higher standard deduction

– Higher child tax credit

– No more dependent and personal exemptions allowed

– Some itemized deductions

– $10,000 limit on deductions for state income, sales, local, and property taxes combined

And there are more. But let’s take a look at the common situations that will be affected. This isn’t an exhaustive or comprehensive list of changes, just the highlights – things that may affect you.

FAMILY WITH CHILDREN

A family with kids may see bigger refunds in 2019 – the child tax credit was doubled from previous years from $1,000 to $2,000. There’s also a non-refundable credit of $500 for each dependant that is not your child.

And these benefits have in the past phases out for families with an annual income of $110,000 or more. Now, that threshold is $400,000.

STANDARD DEDUCTION INCREASE

Individual taxpayers will get a larger standard deduction in 2019 – it’s going from $6,350 to $12,000. The standard deduction for married couples who file jointly will go from $12,700 to $24,000.

ITEMIZED DEDUCTIONS AND LOWER TAX LIABILITY

If you have itemized deductions on your return, you’ll probably see fewer deductions, which in turn lower your tax liability (tax debt owed by an individual). This is especially true if you live in a state with high property taxes.

INVESTMENT EXPENSES

If you have investment accounts, you will no longer be able to deduct the fees associated with those accounts.

Before this new tax reform, you were allowed to deduct fees from custodial or investment accounts (trust admin fees, investment management fees, etc.) if they exceeded two percent of your Adjusted Gross Income. Now, those can no longer be listed as deductions.

So if your IRA is quickly growing and you want to have it for the long-run, you may want to think about paying the fees out-of-pocket. Doing this means the money in your IRA will keep growing and still be tax-deferred.

DONATIONS AND CHARITY

If you are a generous person and list your donations to charity on your tax return, listen up. If your giving is less than the standard deduction, you could think about making 50-100% more donations in 2018 to surpass the deduction threshold. Then you can itemize those donations and increase your refund amount.

Obviously, not everyone can afford this. But if you can, it may be a smart move.

LOWER TAX LIABILITY FOR THE SELF-EMPLOYED, S CORPS, AND PARTNERSHIPS

If you’re self-employed or have a partnership or S-Corp, you may have a lower tax liability this tax season. This could lead to a bigger refund for you because the tax reform allows for a 20% business income deduction for those who qualify. It also nearly doubles the amount that a small business can list as an expense for business equipment.

FORM W-4

Because of the tax reform legislation, you’ll need to file a new Form W-4 with your employer if your life situation changes or if you get a new job. Your employer will most likely be aware of these changes too and should be alerting you of any necessary steps on your part. Also, you should definitely check with your tax advisor, or the IRS website, if you still have questions.

IRS REFUND SCHEDULE IN 2019 (TAX YEAR, 2018)

Here are the 2019 IRS refund schedule estimates (2018 Tax Year) by the date your return was accepted and refund method. Estimated dates based on previous tax refund schedules released by the IRS. Typically, e-filers, combined with direct deposit, get their refund the fastest.

Note: Estimated dates based on previous tax refund schedules released by the IRS. Due to auditing processes, the IRS no longer publishes tax refund schedule charts. Refunds may be delayed this year.

After you file taxes, you can track your refund by using the IRS’s Where’s My Refund? tool. This tells you what stage your refund is on and when you can expect to receive it. This way, you won’t have to be in the dark about when you’re money will arrive.

Again, the fasted way to get your tax refund if to file electronically (IRS eFile) and have the funds deposited directly into your bank account. This IRS program is called direct deposit. Interestingly, You can use it to deposit your refund up to three different accounts.

Direct deposit returns are common. About eight out of ten taxpayers get their refunds through direct deposit. It is fast and safe. Then direct deposit and e-Filing is combined, the IRS issues more than nine out of ten refunds in less than 21 days.

Read the full article here.

5 Surprising Rules for Preserving Your Wealth

Make sure you’re maximizing your efforts so you can make the most of your retirement.

Baby boomers are beginning to retire, and so now it is time for them to start changing the way they look at investing. Investing plays a key role in the preservation of wealth. The right investment strategies can set you up for a worry-free retirement, while the wrong ones could have you scrambling when you’d much rather be relaxing.

A recent survey identified five essential rules for baby boomer investors.

By Elena Holodny

1. Stay invested for the long term.
The vast majority of retired baby boomers surveyed — 92% — think Americans need to save more for retirement by getting and staying invested in the market. Four out of five believe Americans should go for a consistent investment strategy with long-term objectives, and only 32% said they would change their strategies based on the fluctuating markets.

On a related note, billionaire investor Warren Buffett also champions the stay-in-it-for-the-long-term strategy. At the height of the financial crisis, in October 2008, he wrote in a New York Times op-ed article:

“Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”

2. Keep an eye on fees.
94% of retired boomers said they want to be able to “easily” understand what fees they’re paying. And 78% said low-cost, simple investments are better for the long-term.

3. Diversify your portfolio.
85% of those surveyed said that a diversified portfolio is one of the most important things for “a safe path to a better retirement.”

In other words, regular Americans just trying to save up for retirement probably shouldn’t risk putting all of their money in things like bitcoin.

4. Protect yourself against market downturns.
80% said it’s important to protect “your nest egg” and lower your risk of losses when markets swing downwards. And 30% said they wished they knew earlier about what to do when markets start getting shaky.

5. Start saving early and often.
79% said they think putting a portion of one’s monthly income toward retirement is one of the best things you can do. Moreover, 60% of respondents said they wished they had started investing as young as possible.

Although some younger investors might think diving into investing right away is intimidating or boring, those who start investing earlier could end up with significantly greater returns.

As Business Insider’s Andy Kiersz reported last year, the team at J.P. Morgan Asset Management showed a powerful illustration showing outcomes for hypothetical investors who invested $10,000 a year at a 6.5% annual rate of return over different periods of their lives.

The differences are remarkable: Chloe, who invested over her entire career from age 25 to 65, ends up retiring with nearly $1.9 million. Lyla, who started just 10 years later, has only about half of that, at $919,892.

And, somewhat astonishingly, Quincy, who invested only from ages 25 to 35, ends up with $950,588, slightly more money than Lyla, who invested for 30 years. That shows how important early compounding is to investing.

Read the full article here.