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7 Ways to Beat the Retirement Draw-Down Blues

Tue, 28 Feb 2012 08:00:00 EST

BOSTON (MainStreet) -- Even as baby boomers march into the ranks of the retired, many are behind the ball in preparing for that inevitability. Complicating matters has been a recession, market volatility and staggeringly low interest rates.

More than 76 million baby boomers -- nearly 25% of all Americans -- are approaching retirement age in the next 20 years, making the transition from retirement saving to retirement spending. That shift from accumulation mode to a deccumulation phase is proving difficult for many. So much so that a recent survey by Schwab found that one-third of those who say they are just five years away from retirement have not even calculated how much income they will need in retirement. Carrie Schwab Pomerantz, Schwab's senior vice president, has a focus on financial literacy issues that has given her insight on, and concern about, street-level investing behaviors.

"Flummoxed" is how those same researchers described nearly half of these soon-to-be retirees when it comes to how to invest money for maximized retirement income. ...

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Obama Budget Triggers Retirement Changes

Tue, 14 Feb 2012 13:27:40 EST

BOSTON (TheStreet) -- Within the pages of President Barack Obama's fiscal 2013 budget proposal are several initiatives that could have a direct impact on your retirement strategy, including deduction limits for high-income 401(k) investors and a mandate for employer-offered IRA plans.

Brian Graff, executive director and CEO of the American Society of Pension Professionals & Actuaries, lambasted the president's proposals to limit the tax benefit for retirement savings for families earning over $250,000 as a "double tax on contributions" and "bad policy based on bad math." Initiatives in President Barack Obama's fiscal 2013 budget proposal could have a direct impact on retirement strategies.

The budget seeks to reduce the value of itemized deductions and other tax preferences. It would limit the tax rate at which high-income taxpayers can reduce their tax liability to a maximum of 28%, affecting only married taxpayers filing a joint return with income over $250,000 and single taxpayers with income over $200,000. This limit would apply to all itemized deductions; foreign excluded income; tax-exempt interest; employer-sponsored health insurance; and retirement contributions. ...

Should Your Kids Get an IRA to Play With?

Tue, 14 Feb 2012 07:25:00 EST

BOSTON (MainStreet) -- The birth of a baby can lead parents to think about many things. That bundle of joy's old age is probably not among them.

Given the powerful nature of compounding interest -- which ideally can double retirement savings every seven years -- should parents be taking a greater role in securing their children's financial future, not just by building a college savings fund, but by funding an IRA that can multiply assets for a lifetime to come?

With people living longer and longer, the uncertainty of Social Security decades from now and the likely extinction of traditional pensions, future generations will need all the help they can get. A retirement plan that grows steadily as they age into adulthood could be exactly what they need to be secure and happy. Just $50 a month tucked aside in an IRA when a baby is born could grow to as much as $180,000 by the time they are 65 (assuming a 4% average rate of return). ...

Annuities: What You Should Know

Tue, 14 Feb 2012 07:15:00 EST

By Eric Henderson COLUMBUS, Ohio (MainStreet) -- The risk of outliving one's retirement savings is growing. Increased life expectancies coupled with declines in the financial markets and home equity over the past few years have made it much more challenging for Americans to create adequate, lifelong income. In fact, the Employee Benefit Research Institute has found that nearly half (47%) of workers near retirement are predicted to run out of money and won't be able to cover their basic expenses and uninsured health care costs.

To overcome these challenges, many are turning to annuities. In June, the Government Accountability Office issued a report advocating the use of immediate annuities to protect one's retirement portfolio against underperforming investments, inflation and longevity risk. But how many Americans really understand annuities? What does one need to know? Fear of outliving retirement savings has many turning to annuities, but these tools have pluses and minuses.

Annuities offer unique benefits and can be an important component of a sustainable income-producing, diversified retirement portfolio. And, according to Insured Retirement Institute research, 92% of investors who own annuities have a higher confidence in the financial stability of their retirement compared with those who do not. ...

The Non-Deductible IRA Trap -- and the Fix

Tue, 31 Jan 2012 07:20:00 EST

HUNT VALLEY, Md. (TheStreet) -- If you don't have any nondeductible IRA assets, this article will not be of interest to you. If you have ever made nondeductible IRA contributions, get ready to be shocked!

Nondeductible IRA assets happen when you are ineligible for an IRA deduction but make an IRA deposit. There is no limitation to make a deductible IRA deposit if you and your spouse (if applicable) don't have a pension plan at work. If you or your spouse has a pension, there are income limitations to deducting IRA deposits. In addition, every year after you make a nondeductible IRA contribution you must file a form 8606 to disclose your basis in an IRA. Here's an example: If you have ever made nondeductible IRA contributions, you should start thinking about the lowest-taxed way to get your money out. ...

Investors Must Keep Time on Their Side

Tue, 31 Jan 2012 07:10:00 EST

MIAMI (TheStreet) -- Time is such a valuable commodity that it's a shame when investors squander it. Yet many investors do, wasting a resource that can't ever be recovered.

Time is an investor's most valuable ally because returns increase exponentially over time -- as close to magic as most of us will ever see. Investment returns increase exponentially over time, which is as close to magic as most of us will ever see. ...

Banks Grab at Bigger Retirement Share

Tue, 24 Jan 2012 07:25:00 EST

BOSTON (TheStreet) -- Despite widespread complaints -- and considerable outrage -- directed at the nation's "big banks," Americans increasingly turn to them for investment advice.

Research by Hearts & Wallets, a firm that analyzes retirement market trends for the financial services industry, shows that banks now serve as the primary source of retirement advice for 43% of Americans, an increase of two percentage points from a year ago, with gains across all investment product categories. Despite anger at "big banks," more pre-retirees are turning to them for their nest egg needs.

The findings come from a survey of more than 4,500 households nationally and statistics based on 9,000 responses on specific financial firms. ...

New Rules of Charity From Your IRA

Tue, 24 Jan 2012 07:20:00 EST

NEW BERLIN, Ill. (MainStreet) -- At the end of December, the provision for Qualified Charitable Distributions expired. That provision allowed taxpayers 70.5 or older to make direct distributions from an IRA account to a qualified charity, bypassing recognition of the distribution as income.

With the expiration of this provision, you can still make charitable contributions of money from your IRA. The difference is that these contributions are no different from a contribution you've made from your savings account or regular income. To achieve a tax advantage from the contribution, you will itemize the charitable contribution on your tax return. (Of course, if the money is from your IRA you'll also have to recognize the distribution as income.) You can still make charitable contributions of money from your IRA, but the new year brought new rules.

Let's look at both ways to understand what's different. ...

The New Retirement Rulebook

Tue, 17 Jan 2012 08:00:00 EST

BOSTON (MainStreet) -- The rules of retirement are in need of a rewrite.

The loss of company pensions, longer lifespans, concerns over Social Security and a volatile investing world are among the forces that have made planning for a financially secure retirement more challenging than ever. Longevity and market volatility mean that retirement goals and how to reach them have changed.

Retirement strategy has long been almost entirely focused on the accumulation of assets, but study after study has continually moved the goal post for what is needed in savings -- $500,000, $1 million, $3 million. ...

How to Ensure Your Inheritance at Tax Time

Mon, 09 Jan 2012 08:00:00 EST

NEW YORK (MainStreet) -- Losing a person in your life is difficult enough without having to figure out how to hold on to what they left you.

The approaching tax season only brings more worries for those who've lost a friend or loved one and received an inheritance for their trouble. That last gift from mom, dad, the grandparents or anyone else in your circle can seem like a touching gift at first, but can also incur serious penalties for heirs unsure how to handle it. Estate tax and inheritance tax laws written in Washington and state capitals can take a bite of what's left behind, but they don't have to.

"Don't feel like you need to be in a rush to make an investment decision after a person passes away," says Chris Hobart, CEO and founder of Hobart Financial Group in North Carolina. "You're in a rush and don't know all the rules, then all of a sudden you realize you owe taxes on all this money after you've bought a car or bought a pool." ...

10 Resolutions For the Retirement Industry

Tue, 03 Jan 2012 08:30:00 EST

BOSTON (MainStreet) -- Heading into 2012, one can only hope that the economy improves and retirement plans continue to recover.

But whatever good news, bad news and curveballs the next 12 months bring, we offer the following 10 resolutions we hope folks who earn their living providing retirement services will consider making: If 2008 didn't make it clear, the party's over. And that means it's time for the retirement industry to make some profession-healthy resolutions for the new year.

1. We'll say enough already with the golf courses and beaches. For 2012, we urge a resolution that retirement marketing focus more on the reasonable dreams of real people, not the flights of fancy wealthier clients may harbor. ...

How to Use Retirement Funds to Start a Business

Wed, 28 Dec 2011 07:45:00 EST

NEW YORK (MainStreet) -- With access to credit still tough, small-business owners sometimes need alternative sources to fund a business.

Rolling over a qualified retirement plan is a good way to inject equity into your business without penalty, says Steve Stovall, vice president of business development at Benetrends, which helps entrepreneurs and small-business owners create funding strategies for their businesses. With access to credit still tough, rolling over a qualified retirement plan is a good way to inject equity into your business without penalty.

"While the Small Business Administration says there are all types of loans available, to actually find a bank that will fund a lot of business opportunities is very different, and those actual lenders can be very few and far between. So if somebody is up against a time constraint or if someone doesn't a have a job, without creating debt or without pledging collateral activity, using the 401(k) rollover is a great way to go," Stovall says. ...

The Tax Answer to Short-Term Capital Gains

Tue, 27 Dec 2011 07:00:00 EST

BERKELEY HEIGHTS, N.J. (TheStreet) -- If you want to be proactive about managing your 2011 tax liability, now is the time.

One of the items under every taxpayer's control is managing their realized capital gains and losses. The first thing to determine is what, if any, capital gains you have realized in your taxable accounts for 2011 -- either short term or long term, depending how long you have held the investment. (Investments that have a holding period of one year or less are considered short term.) Why should anyone care? Because short-term capital gains are taxed at ordinary income tax rates, meaning for a high-tax-bracket person that might mean paying taxes at a 35% federal marginal tax rate plus their marginal state income tax rate. If you've got short-term capital gains, consider tax loss harvesting.

Long-term capital gains tend to be of less concern, since the highest rate regardless of tax bracket is typically 15% with some taxpayers qualifying to pay even less. Certain long-term capital gains do have a higher rate -- collectibles at 28%, for instance, and certain commodity investments. ...

You're Ignoring Taxes and Retiring With Less

Fri, 25 Nov 2011 07:15:00 EST

ATLANTA (TheStreet) -- An overlooked, often misunderstood impact on retirement savings can be summed up in one frightful word: taxes.

For years, the focus for retirement plans has been placed squarely on the "accumulation" phase and maximizing investment returns. The onslaught of 80 million retiring baby boomers has made the drawdown of those savings a more mainstream concern. Selling retirement assets without a tax strategy could be eroding 20% of retiree savings.

Big questions abound for retirees and near-retirees regarding their savings. Will they last? How much can retirees take, when and how? What's the best way to turn assets into income? ...

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E*Trade Cancels Its Own 'Sell Order'

Thu, 10 Nov 2011 17:42:44 EST

NEW YORK (TheStreet) -- E*Trade Financial late Thursday put an end to speculation that its strategic review would yield a company sale.

Rejecting pressure from its largest shareholder Citadel to sell itself to an online broker competitor such as TD Ameritrade or Charles Schwab, E*Trade chief executive and interim chairman Steven Freiberg said, "Following this review by our Board, the management team will continue to execute on our strategy designed to create value for both our stockholders and our customers."

E*Trade shares fell more than 5% in after-hours trading to $8.96. The pioneer in online retail investing of stocks and bonds, with $182 billion in customer assets worldwide, has seen its stock fall more than 40% year to date. ...

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