GF¢ 025: Top 6 Mistakes That Will Screw Up Your Retirement


No one likes to get screwed.

It’s not a fun feeling and personally it irritates the crap out of me.

But what happens when you screw yourself? That’s definitely not cool!

I’ve been a financial advisor for over 12 years now and I’ve seen plenty of people screw themselves out of a successful retirement.

screw up retirement

The most frustrating aspect on my end is that many of it could have been avoided if the person took a little bit of time to review their situation.

Fact: More people spend time planning their family vacation than they do preparing for retirement.

Don’t be one of these people.

Here are the top 6 mistakes that I’ve seen people do to screw up their retirement.

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401k Contribution Limits for 2014

2013 401k Contribution LimitsThere are reasons for relief in some quarters since the IRS release its official 2012 regulations for 401k, 403b, and other retirement plan contribution limits.

This information is renewed annually based the 2012 cost of living adjustment figures.

The good news is that the cost of living adjustment (COLA) numbers have increased a bit.

This makes an increase after a three year period of relative stability in contribution limits. Back in 2011 there were some fears circulating that the limits were supposed to be lowered.

Those fears never came into fruition as 401k limits remained flat.

Each October the limits are re-calculated using a formula that is based on the inflation rate (which is connected to the COLA figures) in the third quarter versus the previous year’s quarter performance.
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How Much Social Security Will I Get? Is Social Security a Broken Promise?

People in their 50s who are still working can start to see an eventual end to daily work down the road. In another 15 years or so, these 50-plus workers will look forward to exploring retirement and enjoying the benefits of more leisure time. Having spent a life dedicated to employment and contributing to society, now comes the time when promises of an easier life are fulfilled and realized.

At least, that’s been the idyllic dream for 70 odd years, since the start of social security.

Today, the financial crisis is hitting social security, and it’s not pretty for many Americans. In June, Americans got to see the annual report from The Social Security Board of Trustees. The big news? Well, the board restated last year’s projection that the Social Security fund would be dry by 2033 – that’s 20 years from now, just about the time when 50-somethings today may be relying on Social Security as their sole income.

is social security a broken promise

Social security money comes from a variety of trust funds, several of which are expected to deplete their financial resources before 2033. Some of these trust funds will run out of money long before 2033. CNN Money reports that the federal Disability Insurance Fund is expected to run out of money soon, possibly as early as 2016. Another fund, the Old-Age and Survivors Insurance fund is expected to last longer.

Why is Social Security depleting so fast and how should you change your retirement financial plan because of it?  [Read more...]

Are Roth IRA Contributions Tax Deductible?

Are Roth IRA contributions tax deductible?

The simple answer is no. But a more nuanced answer will note that although Roth IRA contributions themselves are not tax deductible, you can claim a Roth IRA tax credit or a claim a loss on a Roth IRA if eligible.

So let’s take a look at the various options at your disposal.

Non-Deductible Roth IRA Contributions

Unlike 401k or Traditional IRA contributions, Roth IRA contributions are not tax deductible. According to the Roth IRA funding rules established by the IRS, all your contributions must be made with after-tax dollars.

For example, let’s say you earn $40,000, and you’re in the 25% tax bracket. If you want to make a $5,500 tax deductible 401k contribution, you’ll put $5,500 in your 401k first and then you pay your taxes, which leaves you with $25,875 (75% of $34,500).

However, if you make a $5,500 non-deductible Roth IRA contribution, you’ll pay your taxes first, which leaves you with $30,000 (75% of $40,000). Then you’ll make your $5,500 Roth IRA contribution, leaving you with $24,500 in disposable income.
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What Should You I Do With My Pension?

When I say the word “Pension” to a 20 some year-old, most of them think I speaking some mythical language.

What the heck is a pension?

While most younger people are familiar with them, there are still some workers that still have them. The keyword is “some” though as pensions are becoming more and more rare being replaced by the 401k.

Recently, I had 2 different readers that both had pensions and had to make an important decision on what to do with them. In one case, her company was taking away her pension and, in the other; they were retiring and were exploring their retirement pension rollover options.

Should You Rollover Your Pension?

I’ve had many baby boomer clients that are faced with this tough decision.  Does it make sense to take the lifetime annuity payout, or roll your pension into an IRA?
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Boomers Beware: The Insecurity of Social Security

Social SecurityBaby boomers who think they can rely on Social Security to support them during retirement might want to make other plans.

According to the Social Security Administration, trust funds that supply the program with money will deplete their reserves by 2033.

That’s three years earlier than previous projections.

This situation brings a lot of uncertainty to current and future retirees who have not made independent financial plans outside of Social Security payments.
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10 Essential Factors of a Retirement Planning Checklist

retirement planning checklistIf you are approaching retirement do you know if you are ready?

Do you have the funds saved that you will need?

Do you have all the other details in place and ready to go?

While retirement is an exciting time, it is also a time of big changes in your life.

Not only will you not be going to work every day but you will also have adjustments in your personal life and your finances will also be changing.

To make sure you are prepared for all the changes creating a retirement planning checklist is recommended.
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Rules and Limits to Open a SEP IRA for 2014

Open a SEP IRA: Contribution Limits and Rules

Time to SEP it up!

Are you a self-employed business owner that is looking for a cost effective to lower your taxes and help you save for retirement?

If that fits your profile then opening a SEP (Simplified Employee Pension) IRA might be a good retirement account to start for your business.

When I was researching what would be the best retirement plan to set up for myself when I first became self-employed, I narrowed it down between the SEP IRA and the Solo 401k.

Both allowed very favorable contribution limits, but the administrative costs and ease of setting up made the SEP IRA the easy answer.

If you are considering opening a SEP IRA for your business, here’s what you need to know about the SEP IRA rules and contribution limits and how easy it is to open one.

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7 Things You MUST Know About the Roth IRA for 2014

Does your Roth IRA measure up?

When you’re at the point in your life where you are adding to your Roth IRA in order to help plan for a stable and enjoyable retirement, it makes sense to have all of the current information regarding the current IRS regulations concerning the Roth.

Plus, you want to have a grasp of the current IRA rules for a given year. At this point, people are looking forward to 2014.

In some cases, you might have taken the maximum contribution amount into your Roth for 2013 and you’re thinking about saving for next year’s contribution.

Perhaps, you’ve got your eye on the tax season. No matter what, you want to know enough before you start making decisions about your IRA. Here’s a look at the Roth IRA rules for 2014.
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Is an Annuity The Worst Investment a Young Person Can Make?

should you buy an annuityOne of the best things that my mom ever did for me as a young adult was start an investment strategy for me.

She wanted to get me started with investing so she setup some investment account with her financial advisor for my benefit.

At the time, I was young, clueless and completely indifferent.

“No problem, mom. Appreciate it!”

When I began my career as I financial advisor I finally became very interested in what investments I had so I did some inquiring.

Turns out my mom’s financial advisor was purely an insurance agent and the “investment” I had was a fixed annuity paying 4.5%.

I remember thinking to myself,

“Why does a 24 year-old need a fixed annuity?”

Turns out it was a very legitimate question.
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The Saver’s Credit Explained

retirement contribution savings creditThere are several things when added together make them that much better.

One personal favorite is peanut butter and jelly. Mmmmm…..

My kids would vote for Tom and Jerry.

In the investing world, there’s nothing better than saving for yourself and getting a tax credit on top of it.

The retirement savings contribution credit often referred to as “The Saver’s Credit” can be a great way for middle and low income people to save a lot of money on their taxes.

It is important to note, however, that there are several different rules that have to be followed in order to take the credit on a federal income tax filing. [Read more...]