Category Archives: IRA
Annuities: What You Should Know
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.
Spotting the Bond Bubbles
HUNT VALLEY, Md. (TheStreet) — Two common beliefs for those approaching retirement are: the closer you get to retirement, the more bonds you should own; and that when you are retired, bonds should be a mainstay of your portfolio to generate income. These beliefs were created by the misperception of income and safety.
Income is typically defined as “interest and dividends,” but income can come in any form of distribution used to live on without affecting the original principal balance. With this interpretation we can include capital appreciation. In other words — total return. Some would say interest and dividends are safe income, but capital appreciation is not. In some regards this is true, but we must realize, especially now, that interest and dividends are not absolutely safe either. Dividends have been slashed in the past five years, especially in financial securities. Interest rates are so low that only the wealthiest could survive on the cash flow. Total return is now, and has always been, the only proper way to focus on income for a retirement portfolio.
U.S. Treasury Bonds are considered by some to be the biggest asset bubble since the subprime mortgage fallout of 2008.
Should Your Kids Get an IRA to Play With?
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).
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Obama Budget Triggers Retirement Changes
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.
Future of Retirement: Surprisingly Optimistic
BOSTON (TheStreet) — Americans’ perceptions and desires surrounding retirement planning are evolving rapidly.
In response to the recession, many Americans — in word, if not deed — have readjusted their expectations for where retirement income will come from. They are planning to live longer, work longer and have more modest expectations about their quality of life.
Living longer means new challenges and strategies for your retirement.
A 2010 Gallup survey of nonretired Americans showed more people expect to rely heavily on Social Security and fewer expect 401(k)s or IRAs, home equity and pension plans to be major funding sources. Overall, nonretirees still most commonly say IRAs and 401(k)s will be a major source of retirement income (45%), followed by Social Security (34%), work-sponsored pension plans (23%), saving accounts or CDs (22%), home equity (20%) and individual stock investments (20%).
Love Your Retirement Plan? Take the Quiz
The following commentary comes from an independent investor or market observer as part of TheStreet’s guest contributor program, which is separate from the company’s news coverage.
Richard Schmitt
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A Plea for Help From 401(k) Land
The following commentary comes from an independent investor or market observer as part of TheStreet’s guest contributor program, which is separate from the company’s news coverage.
By Richard Schmitt
NEW YORK (TheStreet) – Dear Uncle Sam,
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New Rules of Charity From Your IRA
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.
Investors Must Keep Time on Their Side
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.
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