Get Out of (401k) Jail Free

 

Listen up jailbirds, it's time to face the cold hard facts. Many of your cherished defined contribution retirement plans (e.g. 401(k), 403(b), 457) are little more than gilded holding cells leaving you and your retirement nest egg exposed to some unpleasant truths: the investment choices are constricted and the fees (assuming you can ever figure them out) unconscionably high.

Despite the obvious handicaps that all-too-often accompanies closed architecture plan design, most participants over the age of 59 1/2 are completely unaware of special in-service distribution rules that allow tax-free rollovers to an IRA...even while you remain on the job and continue to make tax-deferred contributions. It's like the IRS baked a carbon-tipped hacksaw blade in the cake, walked it past the guards in plain sight, and then neglected to inform you the keys to freedom and choice were within your grasp. Though not widely advertised by 401(k) plan providers (who are keenly motivated to retain as many dollars in the plan for as long as possible), it's estimated more than 70% of 401(k) plans now allow in-service distributions. More importantly, that number seems to be growing.

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8 Great Ways to Expand Saving Beyond Your 401k

 

If you are currently contributing the maximum annual amount to your 401k (or other employer provided retirement account), congratulations, you’re a step ahead of most Americans. In fact, according to the U.S. Government Accountability Office, you’re doing more in one year than close to half of all individuals age 55 and older have done in a lifetime - not saving anything in a 401k style account or IRA at all.

We’ve all seen attention grabbing statistics like this pointing to a looming “retirement apocalypse.” As a result, there’s plenty of experts offering advice revolving around how we can fix the issue (hint: save more, spend less).

But for individuals that are already making the effort to save and are looking to do more, it can be a bit overwhelming when looking for the best ways to save beyond your 401k. There are plenty of options, and like with most things when it comes to financial planning, there isn’t a clear-cut best choice that fits everyone in all situations. That said, below are 8 ways you can tuck extra cash away that will all put you in a stronger financial position no matter where you are at in your career.

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Blindsided by Early Retirement

The age when you leave the workforce is one of the most vital factors that determine how much money you will have available in retirement. Working longer can be a good way to improve retirement security. After all, working longer not only provides more years to earn and save, it results in fewer years to rely on retirement savings. Many Americans seem to have gotten that message. According to the Center for Retirement Research, the share of workers reporting that they expect to work past age 65 rose from 16 percent in 1991 to 48 percent in 2018. However, their research also indicates that over a third of workers involuntarily retired earlier than anticipated.

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Financing The Boomerang Tax

In 2018, Zillow released a report estimating that nearly one third of college graduates will move back home with their parents. For some parents, that outcome is a dream come true. For others, it’s a nightmare. Regardless of how you feel emotionally, it’s important to understand the financial impact of indefinitely supporting children after graduation day.

How can this increase in aid towards children be explained? The sudden expansion in support for adult children is usually linked to rising education expenses, increasing housing costs, stagnant wage growth and numerous additional factors.

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The Conundrum of Naming a Trust as a Retirement Account Beneficiary

 

Naming beneficiaries to retirement accounts is a seemingly simple task, yet it’s quite often misunderstood, especially when it includes a trust. For many individuals, retirement accounts represent the majority of their assets. Therefore, getting this piece of estate planning right is crucial and should not be overlooked.

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Women and Retirement: 4 Financial Challenges

We all have women in our lives we care deeply about: mothers, daughters, sisters, cousins, work colleagues, and friends. Educating yourself on ways to challenge the economic biases that systematically disadvantage women is a crucial first step towards effecting positive change and creating a more equitable society. When that happens, we all win.

Since we’re all supposed to save a percentage of what we earn for our retirement, what happens if half of the population isn’t earning enough? The National Institute on Retirement Security (NIRS) ran a study where it concluded that women are far more likely than men to face financial hardship in retirement. Even in 2019? Yes, even in the age of raging feminism, grl pwr tattoos, the #MeToo movement, and Ruth Bader Ginsburg memes, we see time and time again how women are disadvantaged in long-term savings opportunities. Now the real question is, what can we do about it?

Women face unique financial challenges. Some of these challenges fall under large economic issues like disproportional earnings and investment potential, penalties for time out of the labor force, and longevity risk. Let's break it down.

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Social Security and Divorce: 5 “Non-Negotiables” You Need to Know

She stood in the storm, and when the wind did not blow her away, she adjusted her sails.

-- Elizabeth Edwards

Even in the most thoughtfully run and financially independent of lives, there will be heart-wrenching twists and turns. Some of these life transitions are expected and planned accordingly, while others are abrupt and uncertain. It’s no secret that a significant number of marriages end in divorce, raising many emotional and financial uncertainties.  However, understanding the benefits entitled to you will help build a secure framework for the next chapter of your life.

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What's Your Retirement Withdrawal Strategy?

 

In retirement the loss of a regular paycheck means you may need to turn to your investments for income. As a diligent saver, you likely have accumulated assets in various types of accounts like a 401(k), Roth IRA, Rollover IRA, taxable brokerage, bank savings, HSA and an annuity, just to name a few. At retirement, you may face what can seem like an overwhelming task – determining how to withdraw tax-efficiently from your different accounts to extend the portfolio’s longevity. The impact of taxes is just as important to consider now as it was when you were saving for retirement. Unfortunately, conventional wisdom regarding which order to draw down your accounts in retirement is fundamentally flawed. When followed blindly, it could potentially deduct years from the life of your portfolio.

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The IRS Just Offered You a Raise

It doesn’t happen often, but every now and then the IRS has some good news to share. For the first time in 6 years, retirement savers have just been given a “raise” for the 2019 calendar year. Thanks to persistently low levels of inflation, maximum contribution limits for various retirement accounts haven’t budged since 2013.

That’s finally changing, providing some relief for anyone looking to sock away as much savings as they can leading up to retirement. While the increases may appear relatively small at first glance, every little bit helps as the vast majority of Americans find themselves behind when it comes to saving for retirement.

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Social Security: Now or Later?

The Social Security Administration (SSA) released on October 11, 2018 its planned changes for calendar year 2019.  Not surprisingly, to both current beneficiaries and those weighing the pros and cons of starting to collect, the item of greatest interest is the cost-of-living adjustment (COLA) planned for the year ahead. More than 67 million Americans will be affected.

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