Help Your Children Get a Let Up in Retirement

Retirement can be a long way off for teenagers, but given how much retirement can cost–and the costs will probably continue to rise throughout future generations–there’s no such thing as getting too early of a head start. No, you teenager might not fully appreciate how much such steps may help in the future, but that shouldn’t be a good enough reason not to at least talk to your teenager about starting to save for retirement as soon as they are able. Of course, you can start off through conversation. However, if you really want to make an impression, you may want to consider setting up a Roth IRA for your teenager once they have a job and earn income. You can teach them the importance of saving for the future by having them make contributions from their income. Now, obviously, it might be hard to get a teenager to part with their money, but you may be able incentivize them by offering something like a matching contribution or a reward for contributions they make. There is a number of things they can do with that money once it’s in a Roth IRA, particularly relating to education expenses or buying a first home. Before you jump right into opening a Roth IRA for your children, you will probably want to speak with a certified financial analyst or wealth manager and possibly even bring your teenager along so that you can hash out a plan for contributions and what the money will be used for. A retirement professional may also be able to better explain what the purpose of a Roth IRA is and be better informed when it comes to helping with such an account–that is if you choose to have a professional oversee it.

Staying Focused on Retirement During Trying Times

I’ve focused a lot on Coronavirus and how it has or may affect retirement plans for many. I see no reason to change that theme now. While parts of the country are starting to re-open, many areas are still largely shut down. There is also a lot of uncertainty surrounding opening up parts of the country. What happens in infections spike in areas that are reopening and they have to shut down again? Many predict, such a situation is a real possibility for places opening without a proper plan. It can be easy to become cautious regarding saving for retirement during such situations. You may cut back on your retirement account contributions so you can save up to build up an emergency fund. Or maybe your worried about not having a job that will make it through, so you focus on paying down some of the debts you have at the moment so that you won’t have to worry about them later. Or maybe you had your hours cut back, so you adjusted your nest egg contributions to make it through these times. There are a lot of reasons why you may have cut back or stopped making retirement account contributions. However, if your going through difficult times work and income-wise, that doesn’t mean you can’t continue to stay focused on retirement. You can work on your budgeting skills and areas you may feel weak in. You can also lower your contribution rates to free up money for the here and now. Once we get through this difficult time, you can then up the contributions when you have the resources to do so. The key is to stay focused on retirement and make the moves that will allow you to get there. If that means surviving through now to get to retirement later, then do so!

Money In, Money Out: The SECURE Act and Age Restriction Changes

If you’ve been reading up on the SECURE Act, then you are probably well aware of the fact that it eliminated the age restriction on contributions to traditional IRAs. This is a big deal for those Americans planning to work into their 70s by allowing them to put money into their traditional IRAs while they continue working. It should be noted, though, that removal of the age restriction does not remove required minimum distribution (RMD) age requirements. That means that people will still need to begin taking RMDs from a traditional IRA at 72, even as they are still making contributions. The ability to continue making contributions can blunt the blow of having to take RMDs out of your nest egg before you really want to. It may feel a bit weird having money coming in and out at the same time when it comes to your retirement accounts, but it can also be a good feeling. It can be nice knowing that you can continue to work and still build up your nest egg. Furthermore, future generations may continue to push these age restrictions, especially as medicine and planning allow people to live longer and thus work longer (it’s debatable whether that’s for good or bad reasons). If you plan to work well into your 70s and take advantage of the ability to continue contributing to a traditional IRA, you should speak with a certified financial planner or wealth manager to make sure it’s the right decision for you.

The SECURE Act Passed. What Does That Mean?

I’ve written about the SECURE (Setting Every Community Up for Retirement Enhancement) Act a number of times over the past year or so. I’m writing now following it’s passing Congress last week as part of the year-end spending bill. Now that President Trump has signed it into law, it goes into effect on January 1, 2020. The legislation is a relatively large overhaul to retirement savings accounts. The two biggest changes are to contributions and required minimum distributions (RMDs). First off, the new law eliminates the age limit for traditional IRA contributions. This means that if you are still working, you can continue to contribute to a traditional IRA no matter how old you are. This can be really helpful for people who plan on working well past 70. As for RMDs, the legislation raises the age for beginning RMDs from 70 1/2 to 72. Again, this is beneficial for people who plan to work past 70 as it prevents them from having to tap into retirement accounts too early. Another big change is the ending of the Stretch IRA, which will be replaced with a ten year rule. The rule will be in place for most beneficiaries and requires accounts to be emptied by the end of the tenth year after the year of death. The change only goes into effect for deaths that occur on or after January 1, 2020. As with any legislation, the SECURE Act includes more than just the above mentioned and I suggest you read up on what the legislation offers and how it could impact your retirement plans and accounts.

Finance Themed Gifts or the Holidays

We’re a little less than 10 days away from Christmas, so chances are, you’ve probably done all your holiday shopping at this point. However, if you’re looking for a few more gift ideas for your children or grandchildren, then maybe you might want to consider something with a focus on finances and money. For example, a book on personal finance can be a great gift that can help people more than they may even realize. There are many such books out there covering various aspects of personal finance, so you may want to stick with bestsellers on this. A personal finance book can make a great stocking stuffer too. If you know the person you’re buying for probably won’t read a book, then maybe consider a financial contribution to a 529 plan. While this may not bring immediate joy to a child’s face on Christmas Day, it may really help them in the future. The cost of a secondary education these days is immense and only looks to get more expensive as time goes on. Helping to get a 529 plan started for a young child or grandchild could go a long way once they graduate college and start out in the real world. It may not cover all the education expenses, but even just having a few thousand dollars less of debt can be a huge boost to a young adult. If you are retired, you can also consider making a qualified charitable distribution (QCD) to a charity in honor of a friend or family member. Not only will such a donation have a positive tax consequence, but it can also be a touching gift, especially if that person being honored has worked closely with that charity or it is a cause that they truly care about. If you have questions about 529 plan contributions or making a QCD, you should speak with a certified financial planner or wealth manager.

Getting Involved With the Match Game

No, this is not a blog post about dating games, but it is about matches–employer contribution matching, that is. In case you are unfamiliar, employer contribution matching is a retirement benefit in which a company will match contributions you make to your employer-sponsored retirement account (usually a 401(k)). Such benefits usually have certain limitations or rules for eligibility. For example, you may have to work at the company for a certain length of time before being eligible or you have to contribute a certain amount of your annual income to take advantage of it. While matching contributions are offered by many large companies, it is not as widespread as other retirement benefits–such as employer-sponsored retirement plans–and it also tends to be among the first benefits cut or rolled back when companies hit hard financial times. However, if you find yourself with such an opportunity, you should take advantage of it as it can be an efficient and easy way to build up your nest egg.¬†After all, who wouldn’t want free money added to their retirement savings? Before diving in, take some time to read up on such retirement benefits to ensure that you are taking full advantage of it if you do decide to pursue it. Keep in mind that many of these benefits require that you contribute a certain amount to your retirement plan to be eligible for the match. Also, be sure to remind your children or grandchildren of such benefits when they go out into the working world and encourage them to contribute enough to their employer-sponsored plans to effectively use it.¬† If you want to learn more about whether your employer offers retirement contribution matching, you should speak with the benefits manager or director at your employer.