Retirement Planning

Can You Make Charitable Donations from Retirement Accounts Without Triggering Taxes?

Published on: November 16, 2017 | By McCulloch & Miller, PLLC

If you roll the money over to an IRA first, you can donate funds from your 401(k) Required Minimum Distribution tax free. Be very careful to follow the rules, so that you don’t create a tax or penalty problem.

First, let’s define the RMD (Required Minimum Distributions). This is the least amount of money that someone who owns a retirement plan is required to withdraw every year, starting the year that the individual turns 70½, or, if they retire later, the year when they retire.

However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs have to start once the account holder is age 70 ½—even if she’s not retired. The rules of what can and cannot be done with retirement plans are very strict, so you may need help from a professional.

Data on Retirement and Health for Americans Presents a Challenge

Published on: November 13, 2017 | By McCulloch & Miller, PLLC

Americans in their fifties and sixties may want to think twice about putting off their “bucket list” trips and accomplishments. Recent statistics indicate you may be better off enjoying life now.

As the government shifts retirement ages higher and employees are working later in life, the health of Americans is changing, and not for the better. According to a recent article in Think Advisor, “Americans Are Retiring Later, Dying Sooner and Sicker in Between,” millions of Americans will likely have shorter and far less active retirements than their parent’s generation.

The U.S. age-adjusted mortality rate, which is a measure of the number of deaths annually, increased 1.2% from 2014 to 2015, according to the Society of Actuaries. It’s the first year-over-year increase since 2005, and only the second rise greater than 1% since 1980.

How are 401(k)s and IRAs Different?

Published on: August 4, 2017 | By McCulloch & Miller, PLLC

New regulations from the Department of Labor may come into play for Americans deciding which type of account is best for their retirement savings.

There are significant differences between 401(k)s and IRAs, and as reported in a recent post on wjbf.com, “Advantages and disadvantages to a 401k and an IRA,” a number of new regulations from the Department of Labor makes this a good time to review the pros and cons of these popular retirement savings plans.

401(k): A 401(k) can potentially be less expensive than other investment vehicles, due to the number of participants. Many also have a loan provision for access to your principal, if you need it in an emergency. If you retire early, qualified plans may have an age 55 withdrawal privilege that gets you around the 10% withdrawal excise tax provision. However, if you’re still working, you may be able to push back your required minimum distribution (RMD), if you’re over age 70 and still participating in the plan. You’ll also have creditor protection in the typical qualified plans. Those are some of the general positives.

Avoid Penalties by Signing Up for Medicare Part B at the Right Time

Published on: July 21, 2017 | By McCulloch & Miller, PLLC

You must sign up for Medicare Part B no later than eight months after retirement, or the penalties could be serious.

These are the details that really matter when it comes to retirement and Medicare. If you signed up for Medicare Part A on your 65^th birthday but were still working, you probably didn’t enroll in Part B. Now you’ve just turned 68 and plan on retiring this year. When do you need to enroll in Medicare Part B, and what do you need to know to ensure that you’re covered?

Kiplinger’s recent article, “What to Know About Enrolling in Medicare Part B,” says that many people who are still working do this. They sign up for Medicare Part A at 65 (because it’s free) and wait to sign up for Part B, while they’re covered by their employer’s insurance. However, you are required to sign up for Medicare Part B no later than eight months after you leave your employment and lose that coverage. Failure to do so, can result in a lifetime penalty and a gap in coverage.

The Most Important Decision about Social Security: When?

Published on: July 17, 2017 | By McCulloch & Miller, PLLC

Deciding when to start taking Social Security payments has to be considered in the total picture of retirement planning.

The challenge of retirement planning is that once a big decision is made, you don’t have three or four decades to fix any mistakes. The same holds true for deciding when to take your Social Security payments. Taking it out too early, can have a long term negative impact.

Kiplinger notes, in its June article, “What to Consider Before Filing for Social Security Early,” that some Americans are beginning see the financial benefits of waiting for their full retirement age (between 66 and 67 based on your birth year). But others don’t wait because you can take them as early as 62 with reduced benefits.

Must-Do Retirement Planning Principles

Published on: June 19, 2017 | By McCulloch & Miller, PLLC

In the best of all possible worlds, your retirement finances include a nest egg that generates a steady flow of income while your principal assets continue to grow.

There are six key investment points that, if you can meet them, will make retirement finances work in your favor, according to Stock Investor’s recent article, “6 Retirement Estate Planning Criteria You Must Address.”

Minimum required yield. This is the first factor when looking for reliable long term income. It’s calculated based on household income requirements and investable assets—typically IRAs, taxable brokerage accounts and other savings that are planned for retirement income. When the required percent of investment (portfolio yield) increases, so does the income risk. When the yield is too high to be practical, traditional thought is to liquidate some of your principal by gradually drawing down your investment portfolio over the retirement years or by using an insurance product, such as a single premium immediate annuity.

Retiring in 2017? Take These Steps Before You Make It Official

Published on: May 22, 2017 | By McCulloch & Miller, PLLC

Before you tell HR what your final day of work will be, there are more than a few details that you need to cover to prepare for taxes, make the most of any potential benefits and start retirement on the right foot.

If there’s a retirement season, it’s spring or early summer, when it feels like it did when the school year ended! But before you start planning your retirement party, Kiplinger advises you to take these steps first, as explained in article, “4 Actions to Take If You’re Retiring in 2017.”

Make sure to get the match. Your employer may “match” and/or offer “profit-sharing” contributions to your 401(k) or other retirement plan. You typically must be actively employed on the date of payment in order to receive these funds, so be sure that you understand the terms before setting your final work date.

The Biggest Purchase is Not Your House

Published on: March 17, 2017 | By McCulloch & Miller, PLLC

If you think of retirement as a one-time purchase, it is the biggest thing you’ll ever buy. Trying to pay for retirement without the funding, is asking for the impossible.

Compared to buying a new car or a house, paying for retirement is the biggest purchase of a lifetime, according to a study from Merrill Lynch and Age Wave reported in Credit Union Times, “Retirement Is ‘Life’s Most Expensive Purchase.” Conversations over the course of four years with 50,000 people about their plans for retirement revealed some very problematic trends.

The average cost of retirement is over $700,000. That’s about 2.5 times that of the average home. The average cost of a home is $278,300.

Four Decisions at the Heart of Retirement Planning

Published on: March 15, 2017 | By McCulloch & Miller, PLLC

Are you surprised that such a complex topic can be divided into just four sections? Once these difficult tasks are accomplished, you’ll have some much needed perspective that will help the rest of the process along.

According to a recent article in Forbes, “How Much Do You Need To Retire: 4 Things For Your Checklist,” these four decisions will help you clarify many questions about retirement and help more your planning forward:

Decide on your retirement age. This is easiest for many people, but the age you choose should align with your retirement savings and Social Security benefits. At a minimum, use Social Security payments as a baseline for your retirement income.

Gender Gap isn’t Limited to Income Levels

Published on: November 9, 2016 | By McCulloch & Miller, PLLC

A recent international study reported that it will take 170 years before women around the globe reach pay equality with men. This study determined exactly how much income is lost when women step out of the workforce.

If knowledge is power, then the hope is that Business Wire’s article, “Millennial Women Face Significant Gender Gap in Financial Wellness,” will help women gain a better understanding of the cost of taking time out of their careers. The 2016 Gender Gap in Financial Wellness Study was done to clarify the financial impact of leaving the workforce on women’s ability to save for retirement.

There’s already a significant retirement gap between millennial men and women. Although pay parity for the typical 25-year-old may be assumed, there’s still a 28% gap in the additional retirement savings required to cover estimated retirement expenses due in large part to women’s longer life expectancy.