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Articles: Retirement

It's never too early to start planning for retirement, and our guide to retirement is a good way to get started. We'll talk about the importance of individual retirement accounts, such as the traditional and Roth IRA, and we'll explain all of the eligibility and contribution rules too. This information will allow you to better understand the best choice for your individual situation.

Investing in Retirement Plans

The sheer number of offerings can be intimidating to anyone thinking about investing in a retirement plan for the first time. It's easy to get confused, especially when it comes to tax-advantaged plans versus employer plans.

Determining Retirement Withdrawal Rates

When it comes to withdrawal rates from a retirement account, the rule of thumb is 4% of the starting balance without fear of depleting the account. This rule of thumb has been around for quite some time, and many individuals might be wondering if these old rules still apply today. Using the correct rate is important, because the retiree needs to balance the risk of running out of money with living too frugally in retirement.

Retiring Early

Anyone working for more than ten years has probably daydreamed about retiring early. But everything is relative, and 35-year-olds are going to have a different definition than a 45-year-old. And what exactly is retirement anyway? Does that mean switching jobs, or completely checking out of the working world?

Retirement Planning in Your 20s

To the young, it might seem crazy to create an article that talks about retirement planning in your 20s. Admittedly, to most 20-somethings, retirement is so far away that it occupies very little of their thoughts. But the reality is a time will come when these "youngsters" will retire too.

Retirement Planning in Your 30s

If we had to summarize what retirement planning in your 30s is all about, it would probably go something like this: When you're in your 30s, you are in a unique position from a retirement planning standpoint. For most of us, these are the "make or break" years. Here's why.

Retirement Planning in Your 40s

Anyone that started their retirement planning early in their career should be in very good shape by the time they reach their 40s. Individuals planning for the first time may be faced with serious catching-up to do. That being said, starting a plan in your 40s is perhaps the single most important step someone can take to prepare themselves for the future.

Retirement Planning in Your 50s

If there is ever a critical time for retirement planning, it's when you hit your 50s. You still have ten to fifteen years left in the workplace, and you're entering your peak earning years.

Retirement Planning in Your 60s

If you agree with the mindset "it's never too late," then you'll appreciate what retirement planning in your 60s is all about. When it comes to something as important as retirement planning, don't ever give up and concede it's too late.

Selling Pension Benefits

A poorly performing economy often forces people to look for short term sources of much needed cash. That's one of the reasons selling pension benefits is growing in popularity. But before entering into any agreement to sell a pension, it's important to understand the real cost of these loans.

Cashing Out a 401(k)

When leaving a job, it's tempting to pull money out of a 401(k) account. In fact, studies conducted by some of the leading benefits administrators indicate that nearly 50% of employees take the money out of their retirement account when they leave their jobs. That statistic is unnerving, because cashing out a 401(k) plan can be expensive in the long run.

401(k) Plans in 2020 and 2021

It's well known in the financial community that 401(k) plans are one of the premier benefits an employer can offer their workers. They provide employees a perfect tax shelter, and most plans even include an instant return on the employee's contributions. In fact, for many investors 401(k) plans should be their first stop for any money earmarked for retirement.

401(k) Rules in 2020 and 2021

For anyone that's thinking about contributing to their employer's 401(k) plan, but in need of more information, we have most of the 401(k) rules covered in this article. We use the word "most" because employers have some flexibility in how they can administer their 401(k) plans.

Understanding 401(k) Retirement Plans

Anyone planning to retire one day needs to consider enrolling in their employer's 401(k) plan. These plans are one of the premier ways to save money, thereby supplying individuals with a reliable source of retirement income.

401(k) Rollover

The term rollover refers to the option of taking money from one retirement account and transferring it into another qualified plan. The most common rollover scenario occurs when an individual accepts a new job, and wishes to move a 401(k) plan to a new company, or another financial institution.

401(k) Loans

For many individuals, their 401(k) plans are the first and only place reserved for consistent and "real" savings. This is money put away, and never touched until retirement. But what happens if someone is faced with an unexpected expense? Is getting a 401(k) loan possible?

Recovering 401(k) Losses

On February 20, 2008, the U.S. Supreme Court ruled that individuals have a right to recover 401(k) losses based on what were considered fiduciary breaches. This landmark decision means the 50 million Americans participating in a 401(k) plan now have a right to recover their loss if plan administrators don't fulfill what's considered their obligation to participants to manage their plans wisely.

401(k) Withdrawals

In this article, we're going to be discussing 401(k) withdrawals. This includes early withdrawals, and allowed distributions under current rules. We're also going to discuss potential tax penalties that may apply to early withdrawals.

401(k) Hardship Withdrawal

Individuals faithfully building their 401(k) plans at work can suddenly find themselves facing a financial hardship. This leaves them wondering: Is it possible to make a 401(k) withdrawal without incurring a penalty? Unfortunately, the answer to this question is not that simple.

401(k) Contribution and Catch-up Limits in 2020 and 2021

Perhaps the single most important retirement account available to employees today is their 401(k) plan. In this article, we're going to discuss the current (2020 and 2021) 401(k) contribution limits, including catch-up limits, pre-tax and total contribution limits, as well as those that apply to highly-compensated employees.

Comparing 401(k) Contributions in 2020 and 2021

In this article, we're going to discuss the three options many employees have with respect to their 401(k) contributions: before-tax, after-tax, and now the Roth 401(k). Back in 2006, many plan administrators took advantage of the new Roth 401(k), and started offering this choice to their company's participants. Let's take a closer look at the difference this new option can make to everyone's retirement funding plans.

401(k) Debit Card

Borrowing money from a 401(k) plan just got easier; the only thing needed is a 401(k) debit card. When a financial hardship occurs, it's a relief to know one can borrow from their account. But retirement savings are just that: money set aside that's intended to provide income once retired. These two points of view are at the heart of this debit card controversy.

Remedying 401(k) Problems

Undoubtedly, the market slide that began in December 2007 unveiled some series flaws in the way America saves for retirement. Millions of Americans watched their precious 401(k) retirement savings vanish, as did their hope for an early retirement.

The Roth IRA in 2020 and 2021

The Roth IRA is perhaps the premier individual retirement planning tool and savings account offered today. In this article, we're going to discuss the full range of Roth IRA benefits, the basics of withdrawals, transfers, and contributions. Then we'll finish up with some comparisons between the Roth IRA, and employer sponsored plans such as the 401(k) and 403(b).

Roth IRA Rules in 2020 and 2021

Roth IRA rules are fairly straightforward, and they align with many of the retirement planning scenarios that an investor might encounter over time: eligibility, contributions, transfers, and withdrawals. Fortunately, this relatively short list covers most of the Roth IRA information individuals would ever need to understand.

Roth IRA Contribution Limits in 2020 and 2021

In this article, we're going to discuss Roth IRA Contribution Limits. That discussion will address recent changes that affect Roth IRA accounts in 2020 and 2021, including income restrictions, as well as the limits on contributions.

Roth IRA Conversions

In this article, we're going to talk about Roth IRA conversions. That discussion will include Roth IRA contribution rules, transfers, income limits for conversions, and their affect on income taxes owed. We'll also discuss when, and under what conditions, it might be a good idea to make a conversion.

Roth IRA 5-Year Rule

There are two related, but slightly different, 5-year rules that apply to Roth IRA withdrawals. The first has to do with earnings on contributions made to an account, while the second has to do with Roth IRA conversions.

2010 Roth IRA Conversions

Back in May of 2006, there was a significant change to the tax laws involving IRAs. Starting in the year 2010, all taxpayers can convert their Traditional IRAs to a Roth IRA. That's an opportunity that not everyone had in the past.

The Disadvantages of Roth Conversions

Back in 2006, then President Bush signed a $70 billion tax cut provision that changed the eligibility rules for Roth IRA conversions. Starting in 2010, taxpayers with a modified adjusted gross income in excess of $100,000 can now convert a Traditional IRA into a Roth IRA. The easing of the income limit provided individuals planning for retirement with more freedom. But as we'll soon demonstrate, there are some significant disadvantages of Roth conversions too.

Roth 401(k) Plans in in 2020 and 2021

The Roth 401(k) was first made available to retirement planners back in 2006. Since that time, many employees have found themselves faced with the question: Should I start contributing to a Roth 401(k)? We're going to help answer that question by discussing its rules, contribution limits, withdrawals, distributions, as well as rollovers.

The Self-Directed Roth IRA in 2020 and 2021

A self-directed Roth IRA is defined as one where the accountholder determines where the money is invested. That's a fairly common arrangement when it comes to Roth IRAs.

The Traditional IRA in 2020 and 2021

A Traditional IRA is a savings plan that allows individuals to set aside money for retirement. In the case of a Traditional IRA, accountholders may also be offered an immediate tax shelter for the contributions made to their account.

The SIMPLE IRA in 2020 and 2021

A SIMPLE IRA is a plan that gives smaller employers an easy way to contribute towards an employee's retirement account. The SIMPLE IRA allows the employee to make salary-reduction contributions, and employers can make matching contributions.

Self-Directed IRAs

Investors that prefer to maintain control over their money have some good news in the form of a self-directed IRA. This is an individual retirement account established with a stockbroker rather than a bank or an investment house.

IRA Rules in 2020 and 2021

We've covered the specific rules for each type of IRA elsewhere on this website, but we've never put all of them together in one place. In this article, we are going to provide a summary of these general IRA rules; this information will apply to eligibility, contributions, as well as withdrawals.

IRA Rollovers

In this article, we're going to discuss IRA rollovers. We'll start off by briefly explaining why an IRA rollover might be necessary, as well as providing a definition of the term. We're then going to talk about the difference between a rollover and a transfer, and finish up with some of the rules that can help individuals avoid income tax penalties.

IRA Rollovers: One-Per-Year Limit

In January 2014, the U.S. Tax Court rendered their interpretation of the one-per-year IRA rollover tax code provision. To allow taxpayers time to transition to this new interpretation, the Internal Revenue Service will apply this decision to rollovers taken after January 1, 2015.

IRA Withdrawals

This article is going to cover the topic of IRA withdrawals. Here we're going to summarize the withdrawal or distribution rules that apply to a Traditional, Roth, and SIMPLE IRAs. We're going to talk about qualifying and minimum required distributions, exceptions to these rules, and possible income tax penalties.

IRA Contribution Limits in 2020 and 2021

In this article, we're going to discuss IRA contribution limits, which will include the recent changes for 2020 and 2021. We will also address two important IRA limits: one relating to household income, and a second dealing with the dollar value of the contributions themselves.

IRA Recharacterization

For a variety of reasons, it's sometimes necessary to recharacterize an IRA. One of the more common scenarios occurs when an individual is no longer eligible to make a tax deductible contribution to a Traditional IRA. Under these circumstances, the taxpayer may decide to recharacterize their Traditional IRA contribution as a Roth contribution.

The 403(b) in 2020 and 2021

A 403(b) account is a retirement savings plan, or tax shelter, for employees of tax exempt organizations. This includes public school systems, non-profit organizations, and employees of cooperative hospital services. Generally, the 403(b) can be considered the nonprofit organization's equivalent of the 401(k).

403(b) Contribution Rules in 2020 and 2021

In this article, we're going to be reviewing the 403(b) contribution rules that have the greatest impact on a plan's participants. That discussion is going to include elective deferrals, after-tax contributions, maximum allowable contributions, as well as the 15-Year Rule.

403(b) Distributions and Transfers

With such an uncertain future for Social Security, individuals look to the safety of retirement savings plans such as the 403(b). But there comes a time when an individual may need to take a distribution, or make a transfer, from their 403(b) account, and the rules they need to follow can be quite complex.

403(b) Rollover

Generally, it's possible to roll-over all or any part of a distribution from a 403(b) plan to a Traditional IRA or an eligible retirement plan without paying any taxes. This includes Roth IRAs, a 457 plan, and even another 403(b) account.

403(b) Loans

Under certain conditions, it's possible to obtain a loan from a 403(b) plan. But it's important to work closely with the plan administrator to make sure the loan isn't viewed as an early distribution. If that occurs, the distribution will be reported as income, and if the accountholder is under age 59 1/2, then a 10% tax penalty may apply.

Final 403(b) Regulations

On July 26, 2007, the Treasury Department, in conjunction with the IRS, released a finalized set of 403(b) regulations. With a history dating back to the 1950's, this rulemaking effort was nearly 50 years in the making, and provides 403(b) participants with some long-awaited guidance.

Roth 403(b) Plans in 2020 and 2021

Back in 2006, the Bush Administration created a new way to fund a 403(b) plan: the Roth 403(b). In this article, we're going to discuss the benefits of a Roth 403(b), along with the rules of these plans including withdrawals, distributions, contributions, and income taxes.

Roth IRAs versus 403(b) Plans

For anyone that's been wondering whether or not to fund a Roth IRA or a 403(b) plan, we're going to lay out some of the factors to consider before making that decision. They are both great retirement planning options, but there may be reasons for choosing to fund one type of plan versus the other.

Delaying Social Security

Before collecting Social Security, it's important to understand the long-term advantages offered by delaying receiving benefits. That's because the longer collecting benefits is delayed, the larger the monthly check received.

Coverdell Education Savings Accounts in 2020 and 2021

Formerly known as Education IRAs, the Coverdell Education Savings Account can be an excellent way to save for college. While they cannot rival 529 plans in terms of contributions, under certain conditions they can offer more flexibility.

Keogh Retirement Plans in 2020 and 2021

Keogh plans allow self-employed individuals, or small businesses, the opportunity to provide employees with retirement savings benefits. Keogh plans are sometimes referred to as qualified plans, or HR10 plans, and their rules are quite different from those that apply to Individual Retirement Accounts (IRA).

457 Plans in 2020 and 2021

A 457 plan is a retirement or pension plan that provides benefits to government employees as well as employees of tax-exempt organizations. Employees participating in 457 plans are allowed to defer their compensation on a before-tax basis through regular payroll deductions. Money placed in these accounts grows on a federally tax-free basis until withdrawn.

457(f) Plans

The 457(f) is a deferred compensation plan that allows eligible employers to contribute money on a pre-tax basis into investments that provide key executives with a retirement benefit. By doing so, these companies can help their executives defer payment of federal and state income tax on the money contributed into their accounts.

Defined Benefit versus Contribution Plans

Over the last several decades, there has been a rapid increase in the number of participants in what are known as defined contribution programs. At the same time, we're seeing a slow decline in the number of participants in traditional pension plans, also known as defined benefit programs. As individuals plan for retirement, it's important to understand the difference between these two benefits programs.

Fixed Annuities

A fixed annuity is an insurance contract in which the issuing company promises to make fixed dollar payments to the contract holder, the annuitant, for a pre-determined length of time. In return for payment of the contract premium, the issuing company also guarantees both the earnings on the account and the principal balance.

Variable Annuities

A variable annuity is a written agreement with an insurance company in which the insurer promises to make a series of payments to the contract holder. Unlike a fixed annuity that guarantees a series of fixed dollar payments, the value of a variable annuity will depend on the performance of the investments chosen.

Equity-Indexed Annuity (EIA)

Equity-indexed annuities, or EIA, are a unique type of annuity. It's one that's based on a stock market index, such as the S&P 500, Dow Jones Industrial Average, or the Russell 1000. As a reminder, an annuity is defined as a contract with an insurance company in which the annuitant, or contract holder, agrees to make a payment or series of payments. In exchange, the insurance company agrees to supply the contract holder with a future source of income.

Inflation-Protected Annuities (IPA)

It's somewhat ironic that retirees often worry about longevity. They want to live a long and rewarding life, but if that comes to fruition, then they need to worry about outliving their assets. That's the primary reason many retirees invest in annuities. Unfortunately, those same annuities didn't protect against inflation, until recently.

Stable Value Funds

Individuals looking to preserve capital, and earn a competitive rate of return on their investment, should consider investing in stable value funds. In fact, the combination of low risk and attractive returns makes investing in these funds one of the ideal ways to defend against a stock market downturn during an economic slump or credit crisis.

Roth versus a Traditional IRA

Funding a retirement account is an important part of the financial planning process. When it comes to choosing between a Roth and a Traditional IRA, it's important to make an informed decision, since it's vital to get the optimal future income benefit from the money placed into either of these plans.

Minimum Required Distributions (MRD)

In this article, we're going to discuss minimum required distributions, or MRDs. For certain retirement accounts, including the 401(k), 403(b), and the Traditional IRA, minimum distributions are required. Here we'll discuss the calculation of this distribution, and the exact MRD rules to follow.

2009 Minimum Required Distributions

When President Bush signed the Worker, Retiree, and Employer Recovery Act of 2008 on December 23rd, he suspended the requirement to take minimum required distributions in 2009. That's good news for retirees that didn't have the financial need to take a full distribution.

Balancing Your Retirement Account

Investing in a retirement account isn't a onetime decision. It's more like a process. At a single point in time, a decision is made to invest money in a certain way, but as time moves forward, balancing that retirement account becomes important too.

Calculating Retirement Income Needs

A comprehensive retirement plan will have a mix of employer benefits, government plans, and retirement savings accounts. There are also many "rules of thumb" that prescribe how much income is needed once retired. From a practical standpoint, retirement income needs to last a lifetime, which might be longer than most people think.

Retiring a Millionaire

To many of us, the ultimate measure of a successful career was to retire a millionaire. But it takes more than just dreaming, and a big salary, to retire with that much money. It takes discipline and time.

The Best Time to Retire

As workers approach their peak earning years, many begin to think about questions like "When is the best time to retire?" We hear stories all the time about people living longer, which is good news. Individuals still thinking about retiring at age 62, need to figure out if their retirement plans are taking this new information into account.

Retiring With a Mortgage

There was a time when retiring with a mortgage was unthinkable. Making that last payment was something to celebrate, and that achievement was shared with family and friends. There was even a name for those celebrations; they were called mortgage-burning parties.

Reverse Mortgages

Retirees that want to enjoy a richer lifestyle should give serious thought to tapping into their home's equity using a reverse mortgage. For many Americans, the single most valuable asset they own is their home, and reverse mortgages allow seniors to generate a steady stream of income.

Keith Hodges

Keith Hodges