Many of my clients start serious retirement planning around the age of 57, with plans to work about 10 years beyond that age. But will you control the choice? Will you be forced to retire earlier than you have planned? Did either you or your partner fall ill and have to leave the work force? These are topics we worry about, maybe even talk about, but generally do not plan for. Beefing up your skills at your job and maybe even your muscles can help in these two examples, but you have to take a good hard look at your income and expenses to be able to overcome the choice of when to quit work being made for you.

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That is the average number of years we are living as retirees. As many as 43% of current retirees think they can pull 10% a year from their retirement accounts annually. That is a great plan only if you know you will live less than 10 years into retirement. If your family history dictates a longer life than that, you might want to check out your son’s guest room if this is your withdrawal plan. You need to look at a lower withdrawal annually so you do not outlive your retirement nest egg.
Another notion that has not proven to be correct is that you will spend less in retirement. When I am running a retirement plan for my clients, I look at their current living expenses and add 3% annually for inflation. I do not cut their expenses back. After 32 yrs. in business, I have learned that retirees generally do not spend less than in their working years.

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I have the worst handwriting ever. One main reason my office got software to fill in applications is due to my poor printing. I have resorted to typing as much as possible when I have to correspond, especially with the US Treasury Department. I no longer do my taxes by hand – neither should you.
By typing my return, my name is easy to read and clearly matches my social security number.
Like my name, my address is now easy to read. Both of these challenges cause tax returns to be booted back to the taxpayer.
If you are typing in the information on your tax return, the opportunity for math errors decreases. One tends to double check numbers and punch the keys slower when typing vs. doing long math by hand.

I do sign actually sign my tax return but this is the only place I do not type. Tax returns can be scary things to complete – common errors from bad writing should not add to the drama.

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All of your working life you have been told to save for your retirement. You have taken advantage of your corporate plan, and IRA, a Roth IRA, and any other retirement savings plan that has come your way. You have also done all of this under the appropriate tax laws now and in the past. Well, Uncle Sam thinks you have now done too much. Here are some proposals directed towards retirement savings:
Cap retirement account savings. Granted, the cap is large, it can always be lowered once you open that door. The proposal is to cap accounts at $3.4 million through either contributions or growth of the accounts.
Eliminate the ability to do a Roth rollover. Currently, if your AGI is too high, you cannot contribute to a Roth IRA. You can rollover a Traditional IRA to a Roth, manage when you pay the tax through the rollover, and then allow the funds to grow with Tax-free withdrawals. This would be eliminated under the current proposal.

Eliminate the Stretch provision for IRA accounts. Currently, when one inherits an IRA from someone other than their spouse, you can choose to cash the account out at once or tax payments over your lifetime. Stretching out the payments also stretches out the tax you owe, not good in the eyes of the government.

Pay attention to these proposals. They can have a great impact on your retirement planning.

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Money management between loved ones does not always go smoothly. Here are a couple of money myths that often cause problems between loved ones that, hopefully, you can avoid.

He who makes more – knows more.
Earnings are not a measure of financial smarts. Taking time to learn about investing plus some plain old common sense often makes for the better investor. Often, the partner with better intuitive skills, not the higher wage earner, has a better BS detector when making investment decisions.
You have to always agree.
Sometimes, a different point of view is better. Disagreement leads to discussions- not just arguments. That can help flesh out an investment decision and may lead to a totally different, yet more successful, investment path in the end.

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Many of us have parents or grandparents that bought their homes decades ago for a very low price. The idea of passing on the family home as a large asset without much negative tax consequence may be gone forever.
One of the President’s proposals for his new budget is to take basis back to the original purchase price. Here is an example:
We bought out house for $144k, it recently appraised for $390k. If I assume an annual appreciation rate of 3% that value in 30 years would be $922,000. Upon our death our daughter could sell the house only be taxed on anything she might get over the $922,000 under current law.

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If you are not saving enough for your retirement, the government wants to help you. The myRa retirement savings plan is now open. Here is how it works:
You can contribute a maximum of $5500/year; you cannot exceed a max balance of more than $15,000. Once you exceed $15,000 you must roll your account over to a private sector Roth IRA.
The deposits must go into US Treasury securities. These securities average a 3% interest rate.
Household incomes cannot exceed $191,000 for married couples, $129,000 for an individual.

So if you want to supplement your current retirement savings plan – talk to Uncle Sam – he wants to help you.

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Congratulations! You have retired. For the first time in a long time you will no longer have to pay Social Security or Medicare tax. Now, once you are eligible, you can start receiving those benefits.
On the other hand… you are no longer able to contribute pre-tax to your retirement plan. Not only that, at age 70.5, you will have to start withdrawing from your retirement accounts. Additionally, as much as 85% of your Social Security benefit could be subject to federal income tax depending on your filing status and income.
Confused? Since you no longer have a paycheck with withholding for income tax, you now may have to start paying withholding tax yourself. If you go to www.irs.gov, you can figure out your estimated tax. Do not pay this late as there will be additional penalties.

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Wishing you peace, love, and laughter this Holiday Season and throughout the coming year.