Dear Catey,

Were 69 and 68 respectively, and are presently retired in Las Vegas. Our net worth is about $5 million, so money is not an overriding issue.

We moved to Vegas to be near family, and for the vibrancy we didnt have in Cleveland. Seven years later, the family is gone and weve had some health issues. Las Vegas is fun and a great place to vacation, but as you get older, the availability and competence of a medical system means much more than shows and casinos.

My wife likes the weather, but that said, summers here are hellish. California is out for the political and its ridiculous tax situation. Phoenix seems to have the big city feel and the amenities that come with that, but not only do you get oppressive heat, you get sandstorms.

I know no place is perfect, but any suggestions you make would genuinely be appreciated.

Thanks for your consideration,

D.S.

Dear D.S.,

Good health care and weather and more reasonable taxes are three of the most common requests I get from readers of this column. Plus, it sounds like youd like a large-to-medium-sized city with lots to do and a more politically moderate spot than California to spend your golden years.

Its a challenging checklist but I think Ive got some options for you. (Admittedly, its hard to beat California weather, so you might have to endure some humidity, but I wont place you in a spot with cold winters.) Heres what Id suggest.

Honolulu

Great beaches, friendly locals, and plenty of museums (dont miss the Honolulu Museum of Art) and restaurants are just some of the perks of living in Honolulu. Another bonus: Though the city is cosmopolitan, it has a slower pace of life than many large cities in America.

The weather and the health care will likely be big pluses to you too. Honolulu boasts two five-star rated hospitals, and landed on The Streets list of best cities for health care in retirement. And the weather tends to stay between about 50 and 90 (though winters can be a bit rainy) and theres a low risk of hurricanes here.

While its certainly not cheap to live in Honolulu (median homes will set you back more than $650,000), with your nest egg, you can likely swing it. Added bonuses for you: Its a more tax-friendly spot for retirees than California, though its still not as great as a spot like Florida. One potential downside for you is that it might be a bit far from friends and family.

Sarasota, Fla.

OK, admittedly, summers are humid and brutal (with that $5 million nest egg, you can get out of town during August though) and there is a hurricane risk, but hear us out on Sarasota: It consistently lands on best places to retire lists for good reason. Its got tons of cultural offerings, including a ballet and opera, as well as art museums and plenty of performing arts options. It also has great beaches, and a plethora of restaurants.

And it checks a lot of boxes on your list too: Theres a five-star hospital in town, and The Street named it as one of the best places to retire for health care, writing five hospitals in Sarasota and another in Bradenton provides the kind of security that even competing Florida retirement communities are hard-pressed to match. Plus, the tax situation in Florida is pretty great, as the state does not have income tax.

While its not exactly cheap to live here, its more reasonable than Honolulu.

Dallas

The Big D, as Dallas is known, has good health care, with two five-star hospitals, the North Central Surgical Center and the Baylor Scott and White Heart and Vascular Hospital. And the weather checks a lot of boxes too, with mild temperatures for most of the year (though summers are hot and humid, but with your sizable nest egg, you can travel during the worst of it if you like).

U.S. News & World Report recently ranked Dallas-Fort Worth one of the 10 best places to retire, noting that it offers both big-city excitement and quiet, suburban living as well as an interesting mix of Texas pride and cosmopolitan offerings. Youll find thousands of restaurants (barbecue and Tex-Mex are particularly good), tons of shopping (its the birthplace of Neiman Marcus) and a bustling arts and culture scene, which includes the renowned Dallas Museum of Art and the Nasher Sculpture Center.

Though money isnt a huge hurdle for you, the cost of living in Dallas is only a bit above average, and the tax situation is much more reasonable than in California (one big perk of Texas is no state income tax).

Original post:
Im 69, worth $5 million and want great health care and a good climate but refuse to move to California. Where should I retire? - MarketWatch

You have a significant retirement portfolio. You're an experienced investor. You've done pretty well at picking stocks. You probably even own a few of Zacks Top Retirement stock picks like:

Independent Bank (IBCP), AT&T (T) and Grupo Aeroportuario del Sureste (ASR).

If that sounds like you, should you actively trade your own retirement assets?

Perhaps ...if you're the "one in a million" investor who can expertly manage risk and maintain unflinching emotional control in volatile markets. But for most, there may be better strategies to achieve long-term retirement investing goals.

Active stock trading requires a very different investing approach and risk - reward mindset than investing for retirement.

Managing Retirement Investments: Stock Picking vs. Diversification

While stock picking can potentially result in outsized returns, its outsized concentrated risk can pose significant hazards for retirement investors.

A study done by Hendrik Bessembinder of equity markets over nine decades found that just 4% of the best-performing U.S.stocks generated all the market's gains. The rest were flat - the gains of the next 38% were wiped out by the bottom 58%, which lost money.

For even the most expert stock pickers, the chances for long-term achievement are thin.

Is Successful Investing a Mind Game?

Investors feel they can make sensible choices, however research demonstrates that the opposite is what often happens. A DALBAR study analyzed investors from 1986 to 2015 and found that the average investor significantly underperformed compared to the S&P 500. Over 30 years, the S&P 500 produced a return of 10.35%, while the average investor return was only 3.66%.

It is worth noting that this period included the 1987 crash and enormous bear markets in 2000 and 2008, and the positively trending market of the 1990s as well.

This study indicates that one key explanation behind investor underperformance is attempting to time volatile markets - and that irrational emotional biases are likely to compound investor botches.

Interestingly, even savvy traders tend to underperform because they can't help but allow emotions to drive investment decisions. They may be overconfident and misjudge risk, latch onto a price target, or perceive a pattern that isn't there. This "behavior gap", over the long-term, can be catastrophic with potential underperformance of hundreds of thousands of dollars sabotaging your retirement.

The Bottom Line for Retirement Investors

When it comes to managing your assets for retirement, you must look at performance over the course of years and decades - not weeks or months. Because most traders generally tend to focus on the short term, they may not have the right mindset to achieve successful long-term outcomes.

Does that mean you should quit trading? Not really. One plan is to take 10% of your investable resources and trade to create alpha and look for outsized returns.

However, the major part of your wealth - those assets reserved for retirement - ought to be invested utilizing a more careful, conservative, risk management strategy to produce steady, compounded returns so you can securely achieve your retirement objectives.

Did you know that one in six people retire a multi-millionaire?

Read our just-released report: 7 Things You Can Do Now to Retire a Multi-Millionaire.

This report can help you maintain and increase assets heading into retirement while avoiding costly mistakes. Click here for a free report>>Independent Bank Corporation (IBCP) : Free Stock Analysis ReportGrupo Aeroportuario del Sureste, S.A. de C.V. (ASR) : Free Stock Analysis ReportAT&T Inc. (T) : Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment Research

Here is the original post:
Signs That Your Trading Will Ruin Your Retirement - October 21, 2019 - Yahoo Finance

Q. Im retired. I have a pension of just under $30,000 and additional retirement income from my 401(k) and gains on investment accounts. The total is less than $100,000. Can I claim the pension exclusion?

Happy senior

A. Weve got good news for you, but the exact amount of income you can exclude will depend on the total income and the year.

Pensions and retirement account distributions can be excluded from income in New Jersey.

Up to $60,000 could be excluded for 2018, $80,000 for 2019, and it rises to full $100,000 by 2020, said Martin Hauptman, an attorney with Mandelbaum Salsburg in Roseland.

He said many retirees will pay zero income tax under this new tax law.

Importantly, the exclusion is only available to those with New Jersey taxable income of $100,000 or less, Hauptman said,

If you go even $1 over the $100,000 income limitation, you will owe New Jersey income tax on all of your income - except Social Security- not just the income over $100,000, he said.

Hauptman notes that New Jersey taxable income does not include Social Security income, but it does include all other sources of income such as wages, pensions, retirement plans, interest, dividends and more.

Email your questions to Ask@NJMoneyHelp.com.

Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.coms weekly e-newsletter.

Follow this link:
Im retired. Do I have to pay tax on my retirement income? - NJ.com

Social Securitycurrently pays benefits to more than 60 million Americans, and the majority of them receive money from the old-age side of the program. The most common age for people to claim their retirement benefits is 62, and many of them still keep their jobs and decide to supplement their income by claiming their Social Security.

You don't have to stop working to receive your retirement benefits from Social Security. However, there are some provisions that will affect some workers who take early retirement benefits while still earning a paycheck. Specifically, if your earnings from work are above the limits that Social Security sets each year, then you might have to forfeit some of your benefits back to the Social Security Administration. Fortunately, those earnings limits typically go up every year, and workers in 2020 will be able to make a little bit more money before they'd have to give anything back.

There are a couple of aspects to the Social Security earnings test that recipients should understand -- ideally before they claim early retirement benefits. First, the provision only applies to those who are younger than full retirement age. If you've already reached that key age, then you can earn as much as you want and still get your full Social Security benefits.

Image source: Getty Images.

Also, there are two sets of earnings test numbers that apply to people of different ages. If you'll remain younger than your full retirement age throughout 2020, then you'll be able to earn up to $18,240 over the course of the year without having to give up any of your benefits. That figure is up $600 from 2019's numbers. Above the $18,240 mark, you'll have to give up $1 in annual benefits for every $2 you earn over the threshold. So if your earnings come to $20,000 for the year, then that's $1,760 over the limit, so you'd have to forfeit half that, or $880.

Those who will reach full retirement age at some point during 2020 face a different set of numbers. You can earn up to $48,600 in 2020 without triggering forfeiture provisions, and the reduction is $1 in benefits for every $3 above the threshold. The $48,600 figure is $1,680 higher than the corresponding number for 2019. One other thing to keep in mind is that only the portion of earnings you have before reaching full retirement age counts toward the limit. So if you hit full retirement age in June 2020, then you can earn as much as you want during the second half of the year without any adverse effects on your benefits.

Giving back money to the federal government always sounds like a bad move. However, with the earnings test, there is a silver lining if your benefits get taken away.

Here's how it works: For every month's worth of benefits you have to pay back to the Social Security Administration, you'll be treated as if you had claimed your retirement benefits a month later than you actually did. When you reach full retirement age, your benefit amount will get adjusted upward to account for the extra time the SSA credits you with after forfeiting benefits. Over time, those higher payments can eventually catch up with the amount of money you lost.

The best strategy to follow with Social Security when you're still working depends on how much money you make. If your earnings are squarely below the limits, then you can make an informed decision based on your financial needs and other factors. However, if you make more than the limit, you might want to think twice about taking early benefits at all. The more of your Social Security you end up having to give back, the less it makes sense to make your Social Security claim early in the first place.

Read the original here:
Earn More in 2020 and Keep Your Social Security Benefits - The Motley Fool

After 39 years of anchoring KPRC (Channel 2)s evening news, Bill Balleza is ready to do absolutely nothing when he retires in January.

No deadlines. No suits. Nothing.

He might sport a beard and let his hair grow, but aside from that, he has no plans.

Im going to spend the next part of my life not having to report to work, said the 72-year-old San Antonio native, who announced his retirement Wednesday.

I dont have any more chapters. Ive worked in this business the better part of 50 years, my whole lifes work. Ive loved it. I dont plan to do anything else, Balleza said as he settled in at the news desk in the KPRC studio.

Balleza is one of Houstons longest-running and most respected TV anchors. Hes covered nearly every major news event, including the death of Pope John Paul II from the Vatican in 2005 and the Conclave to elect Pope Francis in 2013. He also covered the Murrah Federal Building explosion in Oklahoma City and the crash of American Airlines Flight 587 in New York one month after the 9/11 attacks. He earned an Emmy Award for his reporting on the deadly explosion of a fertilizer company in West in 2013.

Theres such an endorphin rush when you are on assignments like that, he said. You get these great people stories on deadline. There is nothing like that feeling in the world. Thats the biggest high. Thats what its all about for me. Im going to miss that.

Home: Southwest Houston

Style: Classic

In your closet: I own 10 suits, 20 shirts, 30 ties, and I buy Allen Edmonds shoes. Thats it.

Best book: Anything by Elmore Leonard. Ive never been much of an academic reader, but I love those kinds of funny crime stories.

Favorite movie: I love the Rambo war, high-action, high-adventure, extremely violent movies. Thats the kind of thing that drew me to the Marine Corps.

Must-have food: Mexican or Cajun

Favorite local restaurant: Pappas Bros. Steakhouse

Favorite travel destination: Europe. I love Italy, France, Switzerland, Germany

What brings you joy? Family. My kids, my grandkids, my wife. Yeah. Thats everything to me.

With his clean-cut, classic style, you would never know Balleza was a bad boy destined for a troubled life before he stepped in front of a TV camera.

The oldest of six children, Balleza got expelled from the ninth grade twice for fighting and being involved in gangs. He was kicked out of high school a final time in the spring of his senior year after he got into a brawl with the football coach. At that time, Ballezas father banished him from the familys house, so he was forced to live at the downtown YMCA in San Antonio.

My dad wasnt expecting great things from me. In fact, I wasnt expecting great things from myself either, Balleza said.

With no other options, Balleza enlisted in the U.S. Marines, where boot camp changed his life.

It was overnight. In fact, I really owe my life to the Marine Corps because I was heading in the wrong direction, he said. You think youre such a tough guy, then they show you just how tough you thought you were. They straightened me out.

Balleza thrived in the military and was such a good marksman he was sent to sniper school in Virginia. He went on to serve in the Vietnam War.

Im one of those guys who came back from Vietnam with no PTSD, nothing to get over or reconcile. Its so weird to say, but I enjoyed it. I enjoyed being in the Marines and being in Vietnam. I would do it all over again, he said.

He thought hed make a career out of the military, but his first wife, Irene, had other plans and secretively submitted a letter on his behalf to San Antonio College. He was admitted under the G.I. Bill on the condition he take the GED and the ACT tests after his military tour.

Though he had been an academic disaster his entire life, Balleza made the deans list every semester in college and eventually earned an associates degree in broadcasting because it required as little math as possible, he said. A school counselor told him hed never find work in TV because no people of color were hired in the media at the time, but he got a job as a TV cameraman at a San Antonio station while in college.

I fell in love with broadcasting. It was just something about it that really caught my interest and captivated me, he said.

Community activists nationwide began challenging the TV industrys lack of representation of Mexican Americans, and soon Balleza had offers to join newsrooms across the country. Although he had a scholarship to attend Trinity University in San Antonio for a bachelors degree, he took a job as a TV reporter in San Francisco. After two years, Balleza returned to Texas as a reporter and anchor at KHOU (Channel 11).

Not having a bachelors degree was unsettling, so he tried taking classes at the University of Houston while working at KHOU. A professor discouraged him, saying that having a professional anchor in the classroom was a disruption for the students. Besides, he told Balleza, getting a degree at that point would be useless.

I spent a lot of my initial years here in Houston talking to junior high and high school students about doing well and staying in school. I told them I dont have the degree, and by a miracle, it worked out for me. But it doesnt for most people. Its like the NBA. Its a miracle.

In 1980, Balleza joined KPRC as an anchor, replacing the retiring Ron Stone. Hes been co-anchoring the evening news with Dominique Sachse for nearly 20 years.

Im trying not to think about Bill leaving because I dont want to cry, Sachse said at the station. Its the end of an era. We count our blessings that we got in this business when we did. It was this beautiful, glorious, exciting and prosperous environment. I know Bill feels the same way. Our timing was perfect.

Balleza wanted to leave on his own terms and before he was told he was too old, he said, though his body has been sending him signals for a while.

After almost 30 years of doing the 10 oclock news and walking down that sidewalk toward the building, my knees hurt. My back hurts. I just had my third back surgery in August. I didnt want to get really old on air, he said.

But hes candid about how he cheated a bit with a face-lift six years ago.

I was upfront about it on social media. I had a jowly face, a double chin, and I wanted it corrected. I was scared to death the day of the surgery, but I was in the sink washing my face, and I looked up in the mirror to remind myself why I was having this done. I had these jowls hanging down under my neck and on my cheeks. Then in one day that all went away.

Since announcing his retirement, Balleza has heard from many viewers and followers on social media, telling him how much theyve trusted his work over the years.

That means everything, he said.

Retirement also means hell have more time for his passion making wooden boxes.

I like cigar boxes, jewelry boxes, keepsake boxes because they are small and I can give them away right away. So Ill be making a lot more boxes when I retire.

His grandfather was a home builder who taught Balleza a love for woodworking. Over the years, hes made cabinets, entertainment centers, desks and more for family and friends and even for the Habitat for Humanity houses that his station supports. Balleza mills his own lumber and works with a variety of woods, including walnut, cherry, maple and mesquite.

He wants to have his own woodworking studio one day. Now that he and wife, Missy, are empty-nesters with three adult children and two granddaughters, theres time.

As he prepares to sign off of TV news, Balleza hopes hes remembered for his work.

I want people to know I loved this city, cared about this city, cared about the people in it. And that I cared enough to try to make things better. Nothing more.

joy.sewing@chron.com

Read more:
Retiring KPRC 2 anchor Bill Balleza looks back on his nearly 50-year career - Houston Chronicle

Four years ago Stella Abrera danced the lead in Giselle for the first time at American Ballet Theater. For her farewell performance with the company, on June 13, she will take on the role again at the Metropolitan Opera House. Her retirement, after 24 years with the company, was announced on Monday.

It feels like a good time, like the right thing, Ms. Abrera said in an interview about her decision to retire.

Giselle is particularly meaningful to her. When she danced the lead in 2015, she was stepping in for an injured Polina Semionova. It happened to be the companys alumni night. About 200 ex-A.B.T. dancers were in the audience, so they all very much knew what was up, she said. I had to put all the fears aside and get on that stage and do what I had been dreaming of doing my whole life.

In his review for The Times, Alastair Macaulay commended Ms. Abreras performance. Some of her dancing was luminous, and all of it was stylish and heartfelt, he wrote. Her work in Act II received special praise: She made it clear that dance was a spiritual act.

Ms. Abrera, 41, joined Ballet Theater in 1996. Five years later she was promoted from the corps de ballet to the rank of soloist. A serious injury in 2008 made further advancement difficult, but she fought her way back to health and was made a principal dancer in 2015. Ms. Abrera, who was promoted on the same day as Misty Copeland, became the companys first Filipino-American principal.

In recent years, Ms. Abrera has had lead roles in Kenneth MacMillans Romeo and Juliet, Frederick Ashtons Monotones I and Twyla Tharps Bach Partita, among other productions.

Ms. Abrera said that after retirement what she would miss most is the connection with her fellow dancers. Theres nothing like creating a bond with people who you work with in live performance, she said. Its a sense of community unlike any other.

Ms. Abrera said she would remain involved with dance: I plan on continuing to contribute to the dance world from a different angle than with point shoes. She added that shes also excited to explore other dance projects as a performer.

She is to perform once more during American Ballet Theaters fall season. Shell appear on Tuesday as The Spirit of the Corn in Alexei Ratmanskys The Seasons.

Original post:
Stella Abrera of American Ballet Theater to Retire in Spring - The New York Times

No matter how much you try to avoid it, Uncle Sam will always take a chunk out of your paychecks.

The same is true in retirement, although taxes in retirement can potentially have greater consequences than when you're working -- because you'll likely be living on a fixed income in retirement, spending more than you anticipated can throw off your entire plan. And if you're not prepared for them, taxes can take a serious bite out of your retirement budget.

To ensure your retirement savings go as far as possible in your golden years, there are a few tax mistakes you should do your best to avoid.

Image source: Getty Images.

It's easy to forget about taxes when you're saving for retirement. When you get caught up in determining how much you expect to spend in retirement and how much you should be saving, taxes may not figure into that equation.

However, the only way to completely avoid paying taxes on your retirement account withdrawals is to store all of your savings in a Roth IRA, where your contributions are taxed upfront but you can withdraw your money tax-free. If you have money in a different type of retirement account -- such as a 401(k), 403(b), or traditional IRA -- you can expect to pay income taxes on the money you withdraw from your retirement fund.

There are a few ways to trim your tax bill in retirement so you're not caught totally off-guard. One option is to invest primarily in a Roth IRA. You'll still pay taxes when you make the initial contributions, but it may be easier to plan for retirement when you know that the money in your account is that amount you'll be able to spend.

Another way to prepare for retirement taxes is to start thinking of your savings goals in terms of pre-tax dollars. For example, say you estimate you'll need $50,000 each year to pay all your bills in retirement, and you base your retirement plan around that number. Even if you save according to your plan and you can afford to withdraw $50,000 per year, you'll actually end up with less than that once taxes are taken out. Instead, you might want to increase your annual spending estimate to, say, $65,000, so that you'll have roughly $50,000 each year to spend after taxes. Of course, the actual numbers will vary based on your tax bracket and your state's tax rate, but figuring taxes into your retirement plan can help avoid any surprises.

Yes, you'll likely still owe taxes on your benefits even when you've been paying Social Security taxes throughout your entire career. There are different thresholds for how much you'll pay in taxes, and it depends on your income. If your benefits are your only source of income in retirement, you may get away with not paying any taxes. However, the majority of people will have to pay taxes on at least a portion of their benefits.

The first step to determining how much you'll owe in Social Security taxes is to estimate your combined income, which is half of your annual Social Security benefit amount plus all your other annual retirement income (money from a pension, savings from your retirement fund, etc.). So if you're receiving $25,000 per year in benefits and are earning $40,000 per year in other retirement income, your combined income is $12,500 + $40,000, or $52,500.

Here's how much of your benefits may be subject to taxes depending on your combined income:

Source: Social Security Administration.

Keep in mind that these tax rates are only for federal taxes, and some states will make you pay state taxes on your benefits as well (although 37 states don't tax Social Security benefits at all). By being aware of what you may pay in taxes on your benefits before you retire, it can help ensure your retirement plan is as accurate as possible.

Assuming you'll need to pay taxes on your retirement account withdrawals, the exact amount you'll owe depends on your tax bracket.

Income taxes are the same in retirement as they are when you're working, but the difference is that in retirement, you get to choose how much income you're earning. You can withdraw however much you want from your retirement fund each year, and that amount determines what tax bracket you fall under. If you're spending roughly the same amount in retirement as you were when you were working, you likely won't notice much of a difference in your tax bill. But if you decide to splurge during your first few years of retirement and withdraw a lot of cash, you may push yourself into a higher tax bracket.

There are a couple of things you can do before you retire to ensure your taxes don't get out of control. First, make sure you understand what tax bracket you'll be in when you retire. That will impact how much you pay in income taxes each year, which then affects how much you actually have to spend.

Second, adjust your withdrawal strategy so you stay within your desired tax bracket. It's smart to have a withdrawal strategy when you retire so you don't blow through your savings too quickly, but it can also help limit what you pay in taxes. Spending even a few thousand dollars over your bracket will result in a heftier tax bill, which can potentially throw off the rest of your retirement plan.

Taxes aren't the most exciting part of planning for retirement, but they are a vital aspect of your retirement plan. And the more accurately you account for them, the more financially secure you'll be in your golden years.

See the original post:
3 Tax Mistakes That Could Ruin Your Retirement - The Motley Fool

A man fishes in a lake.

Twenty20

With some experts warning that $1 million in retirement savings might not even do the trick these days, it's understandable if you're kept up at night wondering: Will I have enough?

Here's another question worth asking: How should I spend what I have?

A good answer to the latter can help you with the former.

Whether your nest egg is $1 million, $250,000, more or less, you'll need to devise a smart strategy of how to spend your money so that you don't outlive your savings. "Withdrawing too much money early in your retirement can have a devastating effect on your standard of living," said Arielle O'Shea, a retirement and investing expert at personal finance website Nerdwallet.

On the other hand, O'Shea said, you don't want to be led by fear. "Being too conservative could mean you don't enjoy these years you've worked so hard for," she said.

Below are some time-tested ways to spend your retirement savings.

Davids' Adventures Photos | Moment | Getty Images

Now retired financial advisor William Bengen came up with the so-called 4% rule almost two decades ago. It's still in circulation.

It's simple: You draw 4% from your savings in your first year of retirement, and then adjust that amount for inflation every year thereafter.

For example, imagine you have $800,000 in savings. In your first year of retirement, you'd withdraw $32,000. If inflation was 3% for the year, the following year you'd take out $32,960. (In other words: 4% of $800,000, which is $32,000, plus 3% of that $32,000, which is $960, for a total of $32,960.)

"It's a good starting point, especially for someone doing their own planning," said certified financial planner Brad Bobb, owner of Bobb Financial in Springfield, Illinois.

Of late, however, some experts say retirees might not be able to depend on the strategy. "The 4% rule hasn't really been tested against such low interest rates," said Wade Pfau, professor of retirement income at the American College for Financial Services.

Most experts agree that retirees will need a portion of their savings still invested in the stock market, where returns are typically higher in the long run than those produced by bonds or certificates of deposit. Even so, not all nest eggs will be able to endure a 4% annual drain.

And for those with really large savings, the 4% rule could leave you living more frugally than you need to. "The goal is not to die the richest person in the graveyard," said Allan Roth, CFP and founder of financial advisory firm Wealth Logic in Colorado Springs, Colorado.

Another issue with this tool? It's awfully rigid, said Colleen Jaconetti, senior investment analyst at Vanguard. There are a number of factors that can make your budget vary from one year to the next, including health care and travel expenses and when you claim Social Security.

"Every individual's needs are different and it's likely that their annual spending will fluctuate throughout retirement," Jaconetti said.

John Foxx | Stockbyte | Getty Images

Some retirees prefer a dynamic spending strategy, which "provides retirees with the flexibility to account for unexpected expenses or rocky market conditions," Jaconetti said.

With this technique, you might still begin your retirement at a 4% withdrawal, but you can also establish a withdrawal "ceiling" and "floor" rate the most and least you'll take out in a given year.

For example, say you have a $1 million nest egg. Your maximum annual withdrawal might be 5%, and your minimum could be 2.5%.

"One of the drawbacks of the 4% rule is that annual withdrawals from the portfolio are indifferent to the returns of the capital markets," Jaconetti said. The dynamic spending strategy, she said, offers an antidote.

For example, if the market dropped 20% in a year, a retiree might slash spending by a fifth for a few years. Or he or she could permanently cut spending by a smaller percentage, say 3%.

"In short, this rule helps retirees maintain income for basic expenses while allowing for more discretionary income if market returns are favorable," Jaconetti said.

The strategy might be unnecessary for retirees who really do anticipate a consistent overhead.

PM Images | Stone | Getty Images

A third spending tool is the bucket strategy, which divides your retirement savings into segments, said Jon Beyrer, CFP and director of wealth management at Blankinship & Foster in Solana Beach, California.

He says there are typically two buckets: one for withdrawal, one for growth. "These could also be called a short-term bucket and a long-term bucket," Beyrer said.

The withdrawal bucket should have enough to cover your annual expenses for a set period of time. For example, if a retiree needs to take out $50,000 a year, and they want the money to cover five years, the bucket should have at least $250,000. "The withdrawal bucket will typically be invested in low-risk, highly liquid investments such as high-grade bonds and money market funds," Beyrer said.

The timeline with this strategy is less overwhelming than with the 4% rule, Beyrer said. "By having rules about how many years worth of spending should be in the withdrawal bucket, the retiree is more tuned into what their withdrawals need to be," he said.

The other bucket will be for long-term growth. "The investments in this bucket can include higher-risk, more volatile investments such as stocks," he said.

It'll be important for retirees to strike a balance between the two buckets, to make sure they're not being too conservative or too risky. The strategy can also get complicated fast.

You might have more than two buckets: one for emergency savings, or one for children and grandchildren. "Lifestyle buckets like travel or philanthropy force some discipline on how much to spend on those items," Beyrer said.

A big advantage of the strategy, he said, is that it reduces people's risk of making regrettable moves with their savings.

"When a retiree knows their withdrawal bucket is secure, it's easier not to panic in the face of bad stock market news," Beyrer said. "It gives retirees peace of mind."

Some retirees might want to use the IRS's required minimum distributions tables for individual retirement accounts and 401(k) plans as guidance on how to spend down all of their savings, including any brokerage accounts or certificates of deposit.

An RMD is the amount you're required by the government to withdraw each year from your IRA (but not Roth IRAs, which have no required withdrawal). The mandates kick in the year you turn 70. (The number is calculated by dividing your account balance as of Dec. 31 of the prior year by the IRS life expectancy tables.)

So let's say you have $1,000,000 saved. If you don't have a spouse, and were born in December of 1953, your first RMD would be roughly $50,500, according to calculations on the Charles Schwab website. Assuming an annual return of 6%, your nest egg shouldn't dry out until after your 115th birthday.

Check out this handy calculator to figure out your math.

More from Personal Finance:Earning income after 65? Make it work for youHow to start an emergency fundWhat we might learn from Trump's tax returns

The rest is here:
Four ways to not outlive your retirement savings - CNBC

Retirement planning can be difficult. Retirement planning and securing a future for a child with special needs can be doubly so.

The good news is there are a number of government programs that can help parents provide for special-needs children, depending on the level of disability, such as ABLE accounts, Medicare or Medicaid, nutritional assistance and Social Security programs.

The bad news, says James Fox, a certified financial planner and a chartered special needs consultant at AXA Advisors, is that missteps can cause children to lose benefits and lead to significantly higher taxes in estate planning. The twin goals need to be done concurrently and with care, he says.

Here, experts who specialize in this often-complex area share tips.

Similar to 529 college-savings plans, ABLE accounts are tax-advantaged savings accounts for people with disabilities and their families. To be eligible for the account, the onset of a significant disability must occur before age 26. People who receive Supplemental Security Income or Social Security Disability Insurance automatically qualify. Others may qualify if they meet Social Securitys definition of disability and have a physicians disability certification.

The beneficiary, family, or friends may contribute up to $15,000 a year in total to the account.

As with a 529 plan, the money can be invested and grows tax-deferred. Contributions to the account arent tax-deductible. As long as the money is used for a qualifying expense, it comes out tax-free and wont be counted as a resource against any needs-based government programs, Fox says. To qualify for SSI and Medicaid, a person must have no more than $2,000 in assets, excluding a few items like housing.

Qualified expenses need to be related to the disability and can include costs for education, transportation, and other expenses that help to improve quality of life, says Nancy Spain, attorney at Spain, Spain & Varnet PC, whose practice specializes special-needs trusts.

Some families say that they will work forever. You may not be able to work forever.

There are some limits to ABLE accounts, Fox says. The number to watch is $100,000. If the balance rises above that level, the beneficiarys SSI payments will be suspended until the balance drops below that figure. It doesnt affect the beneficiarys Medicaid eligibility. Although it doesnt happen often, he recommends families watch if the balance starts to creep to $90,000.

Any time a benefit gets shut off, its a mountain to climb for families to go through the red tape to get that put back on, he says.

He says ABLE accounts are owned by the beneficiary, even if there is a guardianship established with control. That direct ownership is key as ABLE accounts may be subject to a Medicaid payback provision once the individual dies, where the state may try to recoup some of its Medicaid costs.

Special-needs trusts are another way parents can give financial resources to adult children while protecting access to needs-based programs like SSI and Medicaid, Spain says. These trusts can be created to care for the child who isnt able to work as an adult while the parents are alive or after the parents death.

There are two basic types of trusts, third-party and first-party trusts, and Spain recommends when possible parents set up a third-party trust for the child. Third-party trusts protect the funds from the Medicaid payback provision because the money is not left directly to the child. Additionally, because the trust is not in the childs name, if the child dies while money remains in the trust, parents or the trustee can give that money to someone else.

Costs to set up a special-needs trust vary, Spain and Fox say, and can range from $3,000 to $10,000. There also are annual costs, including having an accountant file taxes for the trust and having a trustee administer the trust.

Parents of children with special needs often defer saving for retirement because their resources are limited. Often one parent may stay out of the workforce to care for the child, which also limits their ability to save for retirement.

But parents shouldnt forgo retirement savings, says Kristian Finfrock, founder and CEO of Retirement Income Strategies. Some families say that they will work forever. You may not be able to work forever, he says.

When it comes to retirement-savings choices, Finfrock recommends parents at least save enough to get the employer match on 401(k)s and then, if possible, Roth IRAs because of their withdrawals are tax-free, before returning to max out a 401(k).

If parents realize their retirement assets wont be enough to care for their child after the parents death, Finfrock recommends buying life insurance to have the death benefit fund a special-needs trust.

Fox says using life insurance and Roth IRAs to fund a special-needs trust is a smart tax decision, too. He recommends using a special-needs attorney to create one.

To do so, the trust needs to be listed as the beneficiary of the Roth IRA or life-insurance policy. The life-insurance policies can be new or active, he says. If the policy is already active, the owner can change the beneficiary to the trust.

The trust must file annual taxes, and trusts tax rates are at the highest tax bracket, close to 40%. Since Roth IRAs and life-insurance money is tax-free, the beneficiary receives more money. Life insurance for the special-needs trust can also help for parents worried about inheritance equity with other children. These parents can leave funds in their tax-sheltered accounts, such as traditional IRAs, to their other children to reduce the tax hit.

Obviously it depends on each family situation. But looking for tax-free dollars to actually fund the special-needs trust makes the most sense, he says.

Questions? Comments? Write to us at retirement@barrons.com

Here is the original post:
How to Plan for Retirement and Special-Needs Care - Barron's

In fiscal 2018, the number of federal employees who filed for retirement jumped a dramatic 24%, from about 85,000 to 105,000. The sudden increase set off alarm bells that the long-awaited retirement wave was hitting with full force.

Then, last week, the Office of Personnel Management reported the fiscal 2019 retirement numbers. A little less than 104,000 feds filed their retirement papersa decrease of 1.4%.

So whats up? Is the retirement wave a myth? Not exactly. Its just that its not a tsunami, crashing ashore and destroying everything in its path, but more of a tidal phenomenon, with ebbs and flows over time, and substantial variations from agency to agency.

A couple of things to remember: First, the number of employees who file retirement applications has in fact been steadily increasing over time, and is higher now than in the recent past. From fiscal 2008 to fiscal 2017 the number of retirements averaged a little over 61,000 per year, substantially less than todays rate.

Second, the increase in the percentage of federal employees who are eligible to retire continues to go up. As of June 2018, 14% of the workforce was retirement-eligible, and OPM projects that figure to increase to 30% in just a few years.

Retirement eligibility rates vary widely from agency to agency. At the Housing and Urban Development Department, more than 23% of employees were eligible to retire in 2018, a figure that will rise to almost 45% in four years. At the Homeland Security Department, by contrast, only about 10% of employees were eligible to retire last year. That percentage will go up up to 25% in the near future.

The good news is that federal agencies have had plenty of time to prepare for the slow, inexorable demographic change in their workforces. Sotheoreticallythey should have effective plans in place for for recruiting the next generation of workers and retaining the institutional memory of those who are departing.

It's good that we haven't seen a full-scale wave, because OPM is still struggling with a substantial backlog of retirement applications awaiting processing. The backlog fell from 17,576 applications in August 2019 to 17,376 last month, but thats still a mountain of paperwork to move through the system.

And it literally is paperwork, with hard-copy federal employee records stored deep beneath the earth at a secure location in Pennsylvania. Tammy Flanagan, your regular retirement planning columnist, will describe the processing systemand ongoing efforts to finally modernize itin more detail in a future column.

See original here:
Where's the Retirement Wave? - GovExec.com