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The 6 Craziest Ways Millennials Can Save Money To Retire Early

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Financial independence, retire early.

It sounds like the dream. But it takes a lot of work to be part of the elite group of Americans in the so-called FIRE movement. While their counterparts were splurging at bars, they committed to save money from their corporate jobs…or even take on side hustles to build their income.

Inspired in part by the personal finance tome, “Your Money or Your Life” by Vicki Robin and Joe Dominguez, these millennials are pinching pennies in order to build up big nest eggs. The goal is to then live off their investments.

And while the end sounds nice – who doesn’t want a break from the office – the road there can be tough, with millennials in the FIRE movement saving anywhere from 60% – 90% of their paychecks.

From keeping a car from 2006 to saying no to out-of-state weddings, here are six resolutions for 2020 for some of the leaders in the financial independent, retire early movement. While some ideas might be a bit zany for you – like sharing your personal finance history with a friend – it’s helpful to see what the experts recommend.

Even if your goal isn’t to retire by 40, there’s something to be said about being frugal going into this new decade. Here’s some of the craziest ways FIRE leaders jumpstarted their savings.

Kiersten and Julien Saunders are co-creators of the award-winning blog, rich & REGULAR. On their platform, they document their journey through parenting, work life, entrepreneurship, real estate investing and their pursuit of financial independence. They can also be seen in the 2019 documentary, “Playing With Fire.”

Give yourself an allowance.

We stopped thinking of savings as leftovers. It’s a bit of a brain hack, but the idea is that most people do their budget and then use the leftovers as their baseline savings rate. This approach assumes that everything is savings until you spend it.

This is saving, but in the affirmative. So you’re starting with a 100% savings rate and any time you spend money you subtract a %. It helps you easily identify the areas of life you need to change to meet your goal. If your goal is a 50% savings rate but the moment you pay your car note, your 100% starting point drops to 60%, then you know the car is an impediment to the goal.

Julie Berninger is a 30-year-old new mom, blogger, and Etsy-seller living in Seattle, WA. Julie and her husband paid off over $100,000 of debt and are now saving towards financial independence. She blogs at Millennial Boss, interviews early retirees on her podcast, Fire Drill, and teaches others how to blog and sell printables for profit at Gold City Ventures.

Say no to out-of-state weddings.

I stopped saying ‘yes’ to out-of-state weddings and expensive events associated with weddings such as destination bachelorette parties. We sent a nice note and a gift instead. We prioritized the events where we were closer with the couples but avoided spending hundreds of dollars on weekend trips. We’ve not attended at least three out of state weddings since making this decision and I did not attend a destination bachelorette. I estimate that saved us a few thousand dollars total.

Tanja Hester, author of WORK OPTIONAL: Retire Early the Non-Penny-Pinching Way, is a former political communications consultant. Since retiring early from formal employment at the age of 38 along with her husband Mark Bunge, she devotes all her time to fun and purpose: writing her award-winning financial independence blog Our Next Life, podcasting on The Fairer Cents, gathering women together to talk about financial independence at Cents Positive retreats, volunteering in her community, traveling the world, and skiing, hiking, biking, paddling, and climbing around her home in North Lake Tahoe, California. Basically: living the dream.

Set up your paycheck to auto deposit into savings. 

Back when I was in debt and struggled to save any money at all, I decided to do new payroll paperwork at work so that part of my paycheck went straight to savings instead of checking, so I’d never feel like I had that money to spend. I started with $50 a paycheck, but you can do any amount. Especially if you get a raise at the start of the year, challenge yourself to live on what you earned last year and save as much of your new money as possible.

Sam started Financial Samurai in 2009 to help people achieve financial freedom sooner, rather than later. In 2012, after spending 13 years in investment banking, Sam decided to retire at the age of 34. He spends his free time writing, playing tennis, and taking care of his two young children. 

Talk about your financial habits. 

One of the best ways to learn is to teach. Therefore, of the best ways to elucidate your financial weak spots is explain your financial habits to someone close to you. Not only will you better understand your spending and savings habits, the person listening may also offer some constructive criticism. Get rid of complacency. Seek criticism to improve your financial health!

Mabel A. Nunez is the founder and Chief Investment Officer of Girl$ on The Money – a stock market investing education company targeted to women, minorities, and individuals that are underrepresented in the world of investing. Through courses and resources, she empowers women to take action towards wealth creation and to take control of their lives. 

Live frugally and keep your old car. 

In 2006, as I got started in my career after undergrad, I paid full price (less than $5,000) and bought myself a high quality used car to take me to work and back. My commute totaled more than 1.5 hours both ways, Monday through Friday. I am not ashamed to share that I drive the same car to this day. I am confident that this key decision allowed me to save and invest thousands of dollars over the years.

Kristy is a world-traveling, early retiree. She and her husband Bryce used to live in one of the most expensive cities in Canada, but instead of drowning in debt, they rejected home ownership. What resulted was a 7-figure portfolio, which has allowed them to retire in their 30s and travel the world. They now spend time helping people with their finances and realizing their travel dreams on their blog millennial revolution. Their also wrote a bestselling book “Quit Like a Millionaire.”

Embrace minimalism.

I grew up poor so hoarding was a big problem of mine. I wouldn’t even throw out empty CD cases (remember CDs?) just in case I might need them again. Luckily, before our one bedroom apartment turned into an episode of “Hoarders”, I realized how much money we’d be wasting by moving to a bigger apartment (our rent would have increased by 50%), so I started donating and de-cluttering our belongings, while making a pledge not to buy anything that wasn’t an absolute necessity.

This saved us a lot of rent – probably about $550 a month or around $6,600 by not upgrading to a two bedroom.

Follow me on Twitter. Check out my website.

Based in Lebanon, I cover travel and personal finance topics for millennials. I’m committed to a life of adventure and have lived in four countries before turning 30. My work appears regularly in Playboy Magazine, Outside Magazine and AFAR Magazine, among others. Before becoming a full-time writer, I was the founding Editor-in-Chief of StepFeed in the Middle East.

Source: The 6 Craziest Ways Millennials Can Save Money To Retire Early

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How To Find A Full-Time Job When You’re Over 50

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With unemployment at all-time lows, now might be the best time for you to be looking for a full-time job. The challenges, however, are greater if you’re over 50 years old.

According to data compiled by the U.S. Department of Labor, Bureau of Labor Statistics, on average it takes those 55 to 64 two weeks longer to find a job compared to those 20 years and older. (The news is worse if you’re 65 and older, where this average duration of unemployment is 10 weeks longer.)

It seems the idea of early retirement hasn’t caught on with those in their 50s (and even beyond).

“Our research shows that experienced workers are staying on the job longer or looking for a job for two reasons,” says Susan K. Weinstock, Vice President, Financial Resilience Programming at AARP. “Financially, they need the money, and, secondly, they like their job and find it fulfilling and want to keep working.”

Bankrate regularly surveys workers regarding their financial circumstances. Its data confirms what AARP found for those working well past age 50.

“When Bankrate asked Americans who were neither retired nor permanently disabled about their retirement savings, more than half said they were behind where they should have been,” says Mark Hamrick, Senior Economic Analyst at Bankrate.com. “For members of Generation X (age 39-54), the percentage was 63% and Boomers (age 55-73), 54% said they were behind on their retirement savings. No doubt many people who would otherwise be candidates to retire seek to remain in the workforce because they feel they need income, or to further boost their savings. Others may choose to work as a means of remaining engaged and active.”

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If you’re like many older workers, you may prefer to retain your current position. But what if your present employer can’t accommodate you? It may have been decades since you last tried to look for a new job. What has changed since then? What do you have to do different today to land full-time employment?

Bryan Zawikowski has been a recruiter for 25 years and is the vice president and general manager of the military transition division for Lucas Group. Forbes ranked Lucas Group as one of the top 10 executive search firms in the nation in 2019. Zawikowski’s team works with many people who find themselves either changing careers or looking for new jobs later in life. He shares the following advice:

“What are best practices?”

·        To thine own self be true: “Don’t try to hide your age. It doesn’t work, and you end up looking either vain or foolish—maybe both.”

·        Polish up your online presence: “Your LinkedIn profile should be very professional, including the photograph.”

·        Emphasize your real-world experience: “No ‘functional’ resumes. They end up in the trash.”

·        Brevity is the soul of wit: “Maximum 2-page resume. The further back in your work history you go, the less detail there should be.”

“What are the easiest ways to make it happen?”

·        Recalculate: “Be financially prepared to take a step back in compensation (either scale back your lifestyle or be prepared to dip into savings if need be).”

·        Re-calibrate: “Be emotionally and mentally prepared to work for someone younger and perhaps more talented than you.”

·        Circulate: “Network with former classmates, former work colleagues, friends and acquaintances that know something about your desired career path.”

·        Captivate: “Have a GREAT story about why you are interested in this new career field and why you’d be good at it.”

“What are the do’s and don’ts?”

·        DO something you enjoy: “Pick a career that you are really into, something that energizes you and somewhere you look forward to going to work most days.”

·        DO maintain your health: “Stay physically active. You don’t have to be a marathon runner, but do something to keep your energy level up.”

·        DO continue to learn: “Read as much as you can about your new career field.”

·        DON’T lie: You can’t “pretend to be an expert at something just because you were good at something else.”

·        DON’T assume the status quo: You’ll be disappointed if you “think you will be able to make a lateral move from where you are in your current career field.”

·        DON’T be unrealistic: You’ll only hurt yourself more if you “sacrifice more than you can afford to in terms of compensation. Retirement isn’t too far away and you don’t want to jeopardize that.”

You are the master of your own destiny. If you want to find a job, you can. No matter what your age.

Follow me on Twitter or LinkedIn. Check out my website.

I am a nationally recognized award-winning writer, researcher and speaker. Among the seven books I’ve written include From Cradle to Retire: The Child IRA, Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort, and A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, I appear regularly in the national media. A “parallel” entrepreneur, I’m actively running a handful of small family-owned businesses, so I have hands-on experience on the things I write about. A trained astrophysicist, I hold an MBA and have been designated a Certified Trust and Financial Advisor. I invite you to share your thoughts and story ideas with me through my web-site, email, or any of the usual social media platforms whose links appear below.

Source: How To Find A Full-Time Job When You’re Over 50

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7 Rules For A Wealthy Retirement

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s you enter the home stretch of your career, you may be paying professionals large sums for retirement guidance. Maybe you don’t have to do that. This 7-part series on wealth will give you the tools to make a lot more financial decisions on your own.

#1: Put It All In One Fund

This cheap index fund is an excellent one-step, five-minute answer to your portfolio needs. Read more →


#2: Create Your Own Yield

You don’t have to buy those complicated, fee-saturated Wall Street products that promise big payouts. Instead, create your own payout. Read more →


#3: Don’t Buy A Long-Term Care Policy

We have two better ways to fund nursing care. Read more →


#4: Cut Your Portfolio Management Costs

Are you paying 1% or 2% to have your money invested? Why? Read more →


#5: Pay Off Your Mortgage Rapidly

The Trump tax cut means that debt is for losers. Get rid of your mortgage. Read more →


#6: Moonlight

Take up a second career and take advantage of these tax breaks for the self-employed. Read more →


#7: Count Your Blessings

What makes a retirement happy? We veer off the money track. Read more →


I aim to help you save on taxes and money management costs. I graduated from Harvard in 1973, have been a journalist for 45 years, and was editor of Forbes magazine from 1999 to 2010. Tax law is a frequent subject in my articles. I have been an Enrolled Agent since 1979. Email me at williambaldwinfinance — at — gmail — dot — com.

Source: 7 Rules For A Wealthy Retirement

Do Retirees Hate Annuities & Insurance Companies?

Investors have been buying fixed annuities for a long time now for the added security they can offer. The current best interest rate on a five-year fixed annuity is 3.9% compared to the current 2% rate of a bank CD.

Fixed index annuities are paying income streams with a guaranteed rate as high as 6% over much longer time periods. These annuities earn their interest from participation with stock or bond market indexes. When the market is up, you earn a percentage of the gain in what is known as a participation rate strategy.

An example might be if the chosen index were up 10% for the year and your contract paid 70% participation, you would earn 7%. If the index selected should go down 10% for the year, you are guaranteed not to have any market losses ever. There are additional strategies for index annuities to pay interest, and each strategy has its limitations compared to the actual index earnings. As always, make sure you read the fine print.

In addition to guarantees and income provided by these products, there are additional tax strategies used to increase your net return. It’s one thing to earn interest, but it’s another to keep it.

The tax system is a huge factor in retirement planning. For example, if your account is an IRA and you elect to have a guaranteed income rider on the index annuity contract, you and your spouse will have income guaranteed as long as either is alive. At the time both of you have passed, the company would pay any remaining balance to your beneficiaries.

But what if you live a long time taking a guaranteed increased income but the stock market indexes do not go up during that period? The insurance company still has to pay you your increased income even if your account runs out of money. In this example, the year your account runs out of money, you convert the remaining small amount to a Roth IRA. All future income would be considered Roth IRA income with a “zero-tax liability.” You do need to make sure you have a Roth IRA currently in order to do this strategy.

One of the least-known tax strategies is to take regular non-qualified money and purchase a fixed index annuity where the income paid out each month is, depending on your age, approximately 70% tax-free. There is a limit on how much you can put into a Roth IRA to obtain tax-free income, but this strategy has no limit. An example might be that you deposit $1 million into this type of account.

Immediately, if you were drawing $100,000 income each year under this strategy, you would only have to pay taxes on about $30,000 with the remaining $70,000 being tax-free. Who doesn’t like the sound of that?

The final piece of the puzzle is longevity planning. What if you outlive your savings? There is a form of life insurance that will advance the death benefit to pay for home health care, nursing home care, and even offer advanced lump sums of money if you are diagnosed with a critical condition. Also, under current law, the advance is all tax-free.

What about the pensions that go away when the breadwinner dies? What about the potential of decreased Social Security income? The life insurance mentioned above can also provide enough money to replace the lost pension and Social Security dollars providing for your soulmate’s standard of living in the manner in which you want them to have. Your final love letter, so to speak.

People are living longer, which has driven down the cost of this type of insurance, making it possible to provide for you and your spouse. Critical care, chronic care, and loss of your income can all be addressed with one properly structured insurance contract.

Insurance company products can offer stability that most retirees want and need. With proper planning, you can reduce or even eliminate taxes and have retirement income you can enjoy for the rest of your life. You won’t have to worry about running out of income or keeping up with inflation.

So back to the beginning question – do retirees hate annuities and insurance companies? I believe it is safe to say at the rate these products are being purchased by retirees, they actually love insurance companies. How things have changed from the past generations.

This content was brought to you by Impact PartnersVoice. Insurance and annuities offered through Donald W. Owens, OH Insurance License #16525. DT# 1023595-1220.

Since 1980, Don Owens has strived to offer the highest standard of integrity assisting clients in retirement growth and income strategies. His mission is to offer straightforward advice to his clients in and transitioning into retirement to build a financial plan that emphasizes safety and security in the most tax-efficient manner. Don has developed his business by nurturing and maintaining close relationships with each of his clients. He understands how important it is for you to be able to trust your financial professional and is guided by his clients’ objectives and future needs. Don has earned the designations of ChFC, CLU, LUTCF, and FSCP. He is also proud to have received an A rating from the Better Business Bureau. Don and his wife, Kim, have three children, four grandchildren, and two dogs. Family is important in the Owens household, and they enjoy spending time with their large extended family, swimming, barbecuing, and creating memories and a lot of meals together

Source: Do Retirees Hate Annuities & Insurance Companies?

Affording Health Insurance Before Medicare

Retirement: Don’t Make These 3 Big Savings Mistakes

If you don’t use your employer’s 401(k), you’re committing one of the worst retirement mistakes possible, according to Cameron McCarty, president of Vivid Tax Advisory Services.

“What I want viewers and our clients to do is to contribute as much as they can,” McCarty told Yahoo Finance recently.

The days of pension plans are fizzling out. Instead, workers are offered 401(k)s — employer-sponsored retirement plans that allow employees to contribute a portion of their paycheck before taxes to retirement savings. These contributions are invested and, over time, grow into a nest egg you can tap when you retire.

To nudge workers, a third of employers auto-enroll their employees into a 401(k) plan, a two-fold increase from a decade ago, according to a recent analysis from Fidelity Investments.

But simply signing up doesn’t merit a pat on the back, McCarty said. Younger workers should max out their annual contributions, if possible, and not doing so is the second mistake McCarty sees.

For 2019, that means you should contribute as close to the $19,000 annual limit as you can. The limits, determined by the Internal Revenue Service, typically change every year, and are usually announced in November for the upcoming tax year.

The third mistake to avoid, according to McCarty: Not taking the money your employer will contribute to your retirement.

Some companies will match your annual 401(k) contributions up to a certain amount. The average employer match is 4.7%, according to Fidelity.

“I don’t want my clients or your viewers to be the 20% of Americans that make this big mistake,” said McCarthy in a conversation with Yahoo Finance. “And that’s taking advantage of the free money your employer is giving you.”

By: Dhara Singh

Source: Retirement: Don’t make these 3 big savings mistakes

282K subscribers
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3 Awful Reasons to Take Social Security Benefits at 65

The age you land on for claiming Social Security could affect the monthly benefits you receive for life. Those benefits themselves are calculated by taking your average monthly earnings during your 35 highest-paid years in the workforce, adjusting them for inflation, and applying a special formula to that number. You’re then entitled to collect your monthly benefit in full once you reach full retirement age.

But you actually get an eight-year window to sign up for benefits that starts at age 62 and ends at age 70. In fact, you technically don’t have to sign up at 70, but delaying past that point won’t put more money in your pocket, so there’s no sense in waiting longer.

Currently, 62 is the most popular age for seniors to start collecting benefits. But if you’re contemplating that decision, you may be inclined to go with age 65. And while that could be a wise choice in some cases, here are three terrible reasons to land on 65 as your filing age.

1. You don’t know your full retirement age

You might assume that 65 is your full retirement age for Social Security purposes because that’s when you’re first eligible for healthcare coverage under Medicare. But for people born between 1943 and 1954, full retirement age is 66. For those born between 1955 and 1959, it’s 66 and a certain number of months. And for those born in 1960 or later, it’s 67.

If you sign up for Social Security at 65, you’ll automatically slash your monthly benefits between 6.67% and 13.34%, depending on your full retirement age, so rather than grapple with a lifelong reduction in Social Security income, commit your full retirement age to memory. Incidentally, in a recent Nationwide survey, only 24% of older adults knew what their full retirement age was, so if you’re nearing retirement, be sure to get that number straight.

2. You’re worried you won’t get Medicare coverage

It could be the case that you want to start getting Medicare benefits at 65 and aren’t ready for Social Security — but you sign up for Social Security at that age anyway because you’re convinced your Medicare coverage hinges on it. In reality, though, you can be on Medicare for years before claiming Social Security, and it won’t impact the level of care you receive.

The only drawback to signing up for Medicare before Social Security is that you won’t have the option to pay your Part B premiums directly from your Social Security benefits. Not only does that mean you’ll need to take that step yourself, but it also means you don’t get protection under Medicare’s hold harmless provision. This provision effectively caps the extent to which your Medicare premiums can rise from year to year when you’re on Social Security, because an increase in Part B can’t cause your monthly benefit to go down.

In other words, if your annual cost-of-living adjustment raises your monthly Social Security benefit by $12, but Medicare premium costs rise by $13, you’re only liable for the extra $12. Still, the reduction in benefits you’ll face by claiming Social Security early will generally well outpace any increase Part B throws at enrollees, so if you’re ready to sign up for Medicare at 65 but don’t need your Social Security benefits just yet, don’t feel compelled to claim them.

3. You’re scared Social Security is running out of money

There are rumors abounding that Social Security is on the verge of bankruptcy, but actually, that’s far from true. Social Security gets its funding from payroll taxes, so despite the program’s financial woes, it’s not in danger of going away. Right now, the worst-case scenario is a potential cut in benefits in 2035 to the tune of 20%, but that assumes lawmakers won’t step in and prevent that from happening, which many are invested in doing.

Therefore, don’t file for Social Security at 65 because you’re worried that by waiting, you’ll risk not getting paid any benefits at all. That scenario just isn’t on the table, and if you file at 65 rather than wait until full retirement age or later, you’ll risk losing out on a substantial amount of monthly income for life.

Claiming Social Security at 65 isn’t always a bad idea, and with regard to reducing benefits, it doesn’t cause nearly the same extreme hit as filing at 62. But if you’re going to sign up for Social Security at 65, make sure you’re doing so for the right reasons, and not because you’re ill-informed or are buying into myths.

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Maurie Backman

Maurie Backman

(TMFBookNerd)

Source: 3 Awful Reasons to Take Social Security Benefits at 65

94.3K subscribers
https://socialsecurityintelligence.com | Not everyone needs to delay filing for SS. There are some cases where filing at the earliest eligible age makes the most sense. A lot of the content that you find online will make the case that filing early for social security benefits is always a bad idea. They’ll say things like, “you should always wait until you’re full retirement age for file for maximum amount of benefits,” and while it’s true you can make a good case for filing later for social security benefits, for maximization of income in most cases, that doesn’t apply to every situation. In fact, there are five specific circumstances where I think filing early makes the most sense.

Six Things to Do When Your Aging Parents Have No Retirement Savings

It sounds like the makings of a sitcom, but your parents may end up rooming with you if they haven’t started saving for retirement.An analysis for the Harvard Health Letter using U.S. Census Bureau data concluded that some 3.4 million people aged 65 or older were living in a grown child’s home in 2016.

Before you start counting the ways your life will change once your parents move in, prepare to do some information gathering. Your parents may not have much in savings, but the faster you can get their finances in order, the better off you’ll all be.

1. Get your siblings on board 

Start by having an informal chat with your siblings to share perspectives. Has anyone already had this conversation with mom and dad? If so, how’d it go? Also find out who’s willing to join forces with you to ensure your folks have a good plan for the future.

2. Invite your folks to an open conversation about finances 

Your parents may be defensive about their financial situation, so it’s important to set the tone carefully. Do your best to treat this as a shared circumstance. You’re not fixing or blaming. You’re simply looking out for them by planning for their future.

By starting the conversation with an offer to help, you can keep from playing the blame game. You might say, “Mom and Dad, I’d like to help you guys plan for your later years. Can we set aside some time to talk about financial stuff?”

3. Ask for the numbers 

It may feel better to talk about finances in generalities, but to be successful, you need to resist that urge. You can be most helpful when you know how much your parents spend, their income, what they own, and what they owe. It’s also useful to chat openly about how stable they think their income is. For instance, Mom may plan on working another 20 years, but things are more complicated if she’s worried about getting pushed out next year.

When you understand their income outlook, you can broach the topic of Social Security benefits, and help them strategize on when to take those benefits. If they aren’t sure where they stand with Social Security, help them set up an online account withmy Social Security. And while you’re at it, see if they’ll share passwords to their other financial accounts in case you need to check in on those.

If your folks have a ton of debt or are borrowing to cover their expenses, help them find ways to spend less. Review their credit card statements and checking accounts for subscription services they don’t use, encourage them to shop around for cheaper rates on home or auto insurance, and introduce them to streaming TV so they can cancel cable.

A consistently high grocery bill is a harder challenge to tackle. You might introduce them to a grocery delivery service to minimize impulse purchases. A produce delivery service can also eke out some savings, as these focus on less expensive, seasonal produce that’s locally sourced.

Once your parents’ spending is in line with their income, every bit of savings should go towards paying down the debt.

5. Consider downsizing on homes and cars 

If your parents are open to it, downsizing now may result in more freedom later. Selling an extra car raises some quick cash to pay down debt, and also reduces insurance and maintenance expenses. Downsizing the home may be a tougher conversation to have, but it’s worth exploration. A smaller place that’s fully paid off provides a lot more security for your parents than a bigger place with a mortgage. Ongoing maintenance and expenses will be less, too.

6. Brainstorm new streams of income 

Even after you help your parents streamline their debt and expenses, they probably won’t have access to the traditional, work-free retirement lifestyle if they haven’t been saving diligently for years. That’s not to say they’ll be fully dependent on Social Security either. They could start up aside hustle to generate income and protect their lifestyle.

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The joint effort pays off 

A little teamwork between you and your folks could have them on sustainable financial ground in just a few years. In other words, the best way to head off the parent-roommate situation is to start those tough conversations now.

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Source: Six things to do when your aging parents have no retirement savings

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More Canadians are living well into their eighties. Chances are that many of us will be involved in caring for at least one aging parent and will be concerned if their retirement savings will be enough. Planning ahead will help ensure your parents’ financial independence and for you – piece of mind. BlueShore Financial advisor David Lee explains the nuances of financial planning for aging parents, including RRSPs, Canada Pension Plan, Old Age Security, Long Term Care Insurance and more. Learn more about helping your parents with their financial plan: https://www.blueshorefinancial.com/We…

IRS Announces Higher 2020 Retirement Plan Contribution Limits For 401(k)s And More

How much can you save for retirement in 2020? The Treasury Department has announced inflation-adjusted figures for retirement account savings for 2020: 401(k) contribution limits are up; traditional IRA contribution limits stay the same; almost all the other numbers are up.

The amount you can contribute to your 401(k) or similar workplace retirement plan goes up from $19,000 in 2019 to $19,500 in 2020. The 401(k) catch-up contribution limit—if you’re 50 or older in 2020—will be $6,500 for workplace plans, up from $6,000. But the amount you can contribute to an Individual Retirement Account stays the same for 2020: $6,000, with a $1,000 catch-up limit if you’re 50 or older.

So super-savers age 50-plus can sock away $33,000 in these tax-advantaged accounts for 2020. If your employer allows aftertax contributions or you’re self-employed, you can save even more. The overall defined contribution plan limit moves up to $57,000, from $56,000.

Today In: Money

Sounds unreachable? During 2018, 13% of employees with retirement plans at work saved the then maximum of $18,500/$24,500, according to Vanguard’s How America Saves. In plans offering catch-up contributions, 15% of those age 50 or older took advantage of the extra savings opportunity. High earners are really saving: 6 out of 10 folks earning $150,000+ contributed the maximum allowed, including catch-ups.

Want to join in? We outline the numbers below; see IRS Notice 2019-59 for technical guidance. For more on 2020 tax numbers: Forbes contributor Kelly Phillips Erb has all the details on 2020 tax brackets, standard deduction amounts and more. We have all the details on the new higher 2020 retirement account limits too.

401(k)s. The annual contribution limit for employees who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan is $19,500 for 2020—a $500 boost over 2019. Note, you can make changes to your 401(k) election at any time during the year, not just during open enrollment season when most employers send you a reminder to update your elections for the next plan year.

The 401(k) Catch-Up. The catch-up contribution limit for employees age 50 or older in these plans is $6,500 for 2020. That’s the first increase since 2015 when the limit rose to $6,000. Even if you don’t turn 50 until December 31, 2020, you can make the additional $6,500 catch-up contribution for the year.

SEP IRAs and Solo 401(k)s. For the self-employed and small business owners, the amount they can save in a SEP IRA or a solo 401(k) goes up from $56,000 in 2019 to $57,000 in 2020. That’s based on the amount they can contribute as an employer, as a percentage of their salary; the compensation limit used in the savings calculation also goes up from $280,000 in 2019 to $285,000 in 2020.

Aftertax 401(k) contributions. If your employer allows aftertax contributions to your 401(k), you also get the advantage of the $57,000 limit for 2020. It’s an overall cap, including your $19,500 (pretax or Roth in any combination) salary deferrals plus any employer contributions (but not catch-up contributions).

The SIMPLE. The limit on SIMPLE retirement accounts goes up from $13,000 in 2019 to $13,500 in 2020. The SIMPLE catch-up limit is still $3,000.

Defined Benefit Plans. The limitation on the annual benefit of a defined benefit plan goes up from $225,000 in 2019 to $230,000 in 2020. These are powerful pension plans (an individual version of the kind that used to be more common in the corporate world before 401(k)s took over) for high-earning self-employed folks.

Individual Retirement Accounts. The limit on annual contributions to an Individual Retirement Account (pretax or Roth or a combination) remains at $6,000 for 2020, the same as in 2019. The catch-up contribution limit, which is not subject to inflation adjustments, remains at $1,000. (Remember that 2020 IRA contributions can be made until April 15, 2021.)

Deductible IRA Phase-Outs. You can earn a little more in 2020 and get to deduct your contributions to a traditional pretax IRA. Note: Even if you earn too much to get a deduction for contributing to an IRA, you can still contribute—it’s just nondeductible.

In 2020, the deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $65,000 and $75,000, up from $64,000 and $74,000 in 2019. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $104,000 to $124,000 for 2020, up from $103,000 to $123,000.

For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $196,000 and $206,000 in 2020, up from $193,000 and $203,000 in 2019.

Roth IRA Phase-Outs. The inflation adjustment helps Roth IRA savers too. In 2020, the AGI phase-out range for taxpayers making contributions to a Roth IRA is $196,000 to $206,000 for married couples filing jointly, up from $193,000 to $203,000 in 2019. For singles and heads of household, the income phase-out range is $124,000 to $139,000, up from $122,000 to $137,000 in 2019.

If you earn too much to open a Roth IRA, you can open a nondeductible IRA and convert it to a Roth IRA as Congress lifted any income restrictions for Roth IRA conversions. To learn more about the backdoor Roth, see Congress Blesses Roth IRAs For Everyone, Even The Well-Paid.

Saver’s Credit. The income limit for the saver’s credit for low- and moderate-income workers is $65,000 for married couples filing jointly for 2020, up from $64,000; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married filing separately, up from $32,000. See Grab The Saver’s Credit for details on how it can pay off.

QLACs. The dollar limit on the amount of your IRA or 401(k) you can invest in a qualified longevity annuity contract is increased to $135,000 from $130,000. See Make Your Retirement Money Last For Life for how QLACs work.

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I’m an associate editor on the Money team at Forbes based in Fairfield County, Connecticut, leading Forbes’ retirement coverage. I manage contributors who cover retirement and wealth management. Since I joined Forbes in 1997, my favorite stories have been on how people fuel their passions (historic preservation, open space, art, for example) by exploiting the tax code. I also get into the nitty-gritty of retirement account rules, estate planning and strategic charitable giving. My favorite Forbes business trip: to Plano, Ill. to report on the restoration of Ludwig Mies van der Rohe’s Farnsworth House, then owned by a British baron. Live well. Follow me on Twitter: http://www.twitter.com/ashleaebeling Send me an email: aebeling@forbes.com

Source: IRS Announces Higher 2020 Retirement Plan Contribution Limits For 401(k)s And More

The IRS announced changes to contribution and benefit limits for 2019. CSIG’s Alison Bettonville, CFA highlights the limit changes that affect various qualified retirement plans. Highlights include: -402(g) limit increased to $19,000 -415 or the Total Annual Additions limit increased to $56,000 -Catch up contributions limit remained at $6,000 -Compensation limit increased $280,000 -Highly Compensated Employee definition increased to $125,000 To the extent that any portion of the information submitted by CSIG contains material that is copyrighted, the recipient shall observe the protection of such material as provided under applicable copyright laws. Past performance does not guarantee future results. Diversification does not guarantee investment returns and does not eliminate risk of loss. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal, or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation. The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. International investing involves a greater degree of risk and increased volatility. There is no guarantee that companies that can issue dividends will declare, continue to pay, or increase dividends.

These Are Retirement Numbers All Couples Should Plan On, But Don’t

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Shortly after wrapping up my lecture on the future of retirement, a petite older woman approached me. Confidently, she quickly positioned herself between me and other attendees that had follow-up questions. She came close and began speaking to me at a volume that may have been more appropriate several feet away, saying: “I don’t know who he is! He is always there—every day!”

Before I could ask her whom she was describing, I noticed an older man standing slightly to the side, but a little behind her. She continued, picking up her pace, and volume.

“He just doesn’t understand. I have a daily routine!”

The man now seemed to be stepping back — almost shrinking away. She turned to him and rhetorically asked: “Isn’t that true?!”

Not waiting for his response she turned to me, seemingly looking to me to agree, or referee, saying, “My husband! Now that he is retired, he is always looking to me to feed him, entertain him, and keep him busy!”

Today In: Money

Not waiting for my reply, she took the old man by the arm and walked toward the exit.

This was not the first time I heard from an older woman, a now common refrain, voiced by many women with retired partners—“I married him for life, but not for lunch.”

People 50 years old and older have the highest divorce rate of all age groups. In fact, according to Pew Research, the Baby Boomer divorce rate, the so-called gray divorce, has doubled since the 1990s.

Social observers have offered many reasons—among them, most often voiced by women, is: “He bores me.” That reason may not be altogether incorrect, just a little incomplete.

What if the cause of many divorces is poor planning? Not retirement planning in the financial sense, but longevity planning. The failure to plan how, as a couple, they will spend nearly a full third of their adult lives together. A far more concentrated time together than all the previous decades they shared.

There is a new retirement math that has nothing to do with money, and everything to do with living well—together. This new math includes numbers you and your partner didn’t imagine, let alone plan on.

Relationships are typically measured in years. We even assign symbolic gifts to achieving years of togetherness: 25 years is a silver anniversary, 50 years is golden, etc. But, in all those early decades—how much time do you really spend together? Between raising children, careers and countless other activities and responsibilities that only grow in number, and intensity, from young adulthood through midlife, a couple may find they spend years living together, but very few hours actually being together.

The New Math Of Retirement Togetherness

How much time do we actually spend with our partners?

There are 168 hours in a week. Assume that about 8 hours each day are spent sleeping, totaling 56 hours a week, leaving 112 waking hours.

The Bureau of Labor Statistics reports that the average work day is about nine hours, five days a week. For most, that means 45 hours of work away from their partner, leaving 67 hours.

Just getting to work and going home takes time, too. The nation’s average commute time is nearly 30 minutes one way to work, unless you share Boston’s commute with me, then you are sitting nearly idle for an average 49 minutes. Assuming at least an hour per day to travel to and from work, that is an additional five hours from home, leaving 62 waking hours together—assuming that Saturdays and Sundays are days off.

On any given Monday through Friday, however, a couple may spend only a mere six hours truly together. And that is six hours of togetherness counting showers, bio-breaks, meals, children and all the other big and little tasks that make up a day.

Now, let’s consider retirement. A clean break from the workplace. A dividend of 45 waking hours per week are given to you—with interest. Because the end of the daily grind, also ends the daily work commute, another five-plus hours of freedom is gained to spend with your mate.

Suddenly instead of being limited to a just six waking hours per day with your partner, you have scored an additional ten waking hours at home!

Overnight, you went from 6 to 16 hours together! Every day!

Cause for celebration? Perhaps. For many, it is a surprise. Instead of a time to be celebrated, if not fully planned for, it may be a time that brings unanticipated complexity and even conflict between partners.

Many couples cash in their retirement dividend of more time together by making trips dreamed of decades before. Others plan on spending time with friends, family and, grandchildren. However, leisure travel for most is only a week or two a year. Family visits are typically over holidays and long weekends. In sharp contrast, life after full-time work is a daily event that continues for decades.

Retirement planning today focuses primarily on financial security. It is now necessary to develop a longevity plan, that includes money, but also a comprehensive and collaborative discussion that couples must have about what they will do, and how they plan to live together in the many years that is likely to be a full one third of their adult lives.

For now, many may not have a plan, but they are muddling through. Women appear to be taking action to ensure that their later years are filled with activity and income— not just activity planning for their retired mate. The Boston College Center for Retirement Research reports a sharp rise in the average retirement age of women.

Some men are taking a defensive approach. Pete, my Uber driver, keeps busy by staying on the road four to five days a week. With a full head of white hair, dressed in khakis, polo shirt, and sweater, Pete looks more like someone on his way to a member meeting of a high-end golf club, than someone who has found navigating traffic for seven to eight hours a day a side hobby.

I ask him why does he work so many days in retirement? As he puts it, “Retirement has been a great change after years at a desk. I am outside, and I get to meet and talk with interesting people.”

Looking at me in the rearview mirror, he adds, with a big smile: “There’s another reason too. Driving gets me out of the house before the wife kills me.”

More reading: Why 8,000 Is The Most Important Number For Your Retirement Plan

Great Places To Follow Your Passions In Retirement

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I lead the Massachusetts Institute of Technology AgeLab (agelab.mit.edu). Researcher, teacher, speaker and advisor – my work explores how global demographics, technology and changing generational attitudes are transforming business and society. I teach in MIT’s Department of Urban Studies & Planning and the Sloan School’s Advanced Management Program. My new book is The Longevity Economy: Unlocking the World’s Fastest Growing, Most Misunderstood Market (Public Affairs, 2017) . Follow me on Twitter @josephcoughlin.

Source: These Are Retirement Numbers All Couples Should Plan On, But Don’t

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Saving for retirement means navigating a potential minefield of high fees and bad advice. Billy Eichner and Kristin Chenoweth share some tips. Connect with Last Week Tonight online… Subscribe to the Last Week Tonight YouTube channel for more almost news as it almost happens: http://www.youtube.com/user/LastWeekTonight Find Last Week Tonight on Facebook like your mom would: http://Facebook.com/LastWeekTonight Follow us on Twitter for news about jokes and jokes about news: http://Twitter.com/LastWeekTonight Visit our official site for all that other stuff at once: http://www.hbo.com/lastweektonight

Here’s Why This 44-Year-Old’s Happiness Grew After She Abandoned Early Retirement

When Lisa first learned about the financial independence, retire early (FIRE) movement she was stunned that so many people, often younger than her, could possibly save enough to retire. Reading the blogs and first-person stories invigorated her. She wanted to follow suit. It changed the way she and her husband spent money. They cut out restaurants, wore old clothes and avoided coffee shops, funneling all the extra cash into paying down debt and building retirement funds.

“It really did motivate us,” Lisa said.

But as someone who has worked in the pharmaceutical industry for a number of years, she never had a huge problem with her job. The more Lisa saved, though, the more she felt annoyed at going to work. The more she saved, the more she wanted to watch HGTV before bed. The more she saved, the more she couldn’t understand why she should walk around in a coat with holes in it simply to prove that she was good with money.

The whole effort “made me unhappy,” said Lisa, who asked to only use her first name since she’s still working full-time. That’s why, four years after starting her FIRE goal of retiring young, Lisa and her husband decided to abandon the ‘retire early’ portion of their savings plan. Instead, she’s decided to focus on financial independence, but also not worry if they want to eat out on a Friday night.

Today In: Money

There’s a fine line between frugality and feeling guilty over every dime that you spend in order to save a little bit more. Those that enter FIRE often ignore that line during the accumulation phase, saving as much as possible without regard to how it makes them feel today while sometimes sacrificing their health or well being. But it’s not a feat for everyone. For Lisa, this excessive frugality only became a hindrance to life.

It doesn’t mean she’s giving up saving. Or now, suddenly, going to rack up credit card debt. Instead, Lisa, who blogs about her experience at Mad Money Monster, is reevaluating her life again, figuring out what to keep and what to ignore when it comes to her financial independence (FI) strategy.

Abandoning Her Great Health Care Wasn’t An Option

As they saved, one factor that grew increasingly concerning was the health and welfare of her mom. “My mother depends on us for help for basic living expenses,” Lisa said. She expects to care for her mother as she grows older. While Lisa was making strides paying back debt under the FIRE plan, she had to spend $2,000 on her mother’s dental expenses.

Usually that cost comes out of pocket, and they expect to have to do the same with vision care and some other wellness needs.

This unknown complicated their financial picture. But also Lisa sees her mom’s situation, and then recognizes her luck with her current health care plan, which she describes as “really good.” The idea that she would walk away from that plan, simply so she could retire early – she’s about 60% of the way to her original FIRE mark – she now views as “selfish.” And she’s not comfortable with some of the other options out there for health care coverage, including the public markets or health shares.

“For me to walk away from that [healthcare] would be kind of dumb,” Lisa added.

Keeping A High Savings Rate

Despite rejecting the idea of early retirement at this point in her mid-40s, she’s made great strides in reshaping her financial situation.

When she learned about FIRE, her and her husband had just walked away from buying a large, expensive home that would have put them in a tricky financial predicament. They thought they needed the big house because that’s what people did after getting married. Instead of getting the house, she’s paid off her student loans, two cars and some credit card debt. The family has also invested in two single-family hoes, which they rent out, covering the mortgages.

At the peak of their saving they stashed away about 70% of their income. Now it’s closer to 50%. Still a strong level, but not with early retirement as the goal.

Lisa’s realization that there’s little desire to retire before traditional age has given her the freedom to build wealth for other purposes. She has the financial knowledge now and she’s using it to provide a large inheritance for her daughter one day.

“I want to build legacy wealth for my family,” she said. She has no problem staying at her job to grow that wealth.

But she’s also in a much more secure position, whenever her job does go away.

She’s Not Deprived Of Time

Often when people say they want to retire in their 30s or 40s they have dreams of traveling across the world, seeing new sights and meeting new people. That’s not the case for Lisa. “I’m so content with and entrenched in the adult family life,” she said.

She doesn’t demand much more travel than the summer vacation her family already goes on. Meanwhile, her husband, who works in the film industry, never wants to retire because he’s already found a job he would do even if he didn’t have to work.

“I feel like [we’re] not being deprived of time,” said Lisa.

And now that she has clarified her goals, it makes going into work much easier.

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I’ve written about personal finance for Fortune, MONEY, CNBC and many others. I also authored The Everything Guide to Investing in Cryptocurrencies.

Source: Here’s Why This 44-Year-Old’s Happiness Grew After She Abandoned Early Retirement

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‘Time poor’ is the catch-cry of our era, and yet end-of-life retirement means we have an average of two decades of feeling time rich to look forward to… when we’re old. In this talk, Lacey shares how combining financial independence and mini-retirements is one way to bring that time rich feeling into our youth.  Lacey Filipich started her entrepreneurial journey with a hair wrap stall at 10 years old. Today, she is the co-founder and director of two successful businesses; Money School and Maker Kids Club. Between hair wraps and start-ups, Lacey graduated as valedictorian from the The University of Queensland with an Honours degree in Chemical Engineering. She moved to Australia’s ‘wild west’ to begin her career in mining, rising quickly through the ranks. A health scare and her sister’s suicide opened Lacey’s eyes to the world beyond work, leading her to redesign her life and take five mini-retirements in the next five years. This was achievable because of Lacey’s financial position: she started investing at 19 and now earns a passive income. Lacey considers herself time rich: able to choose if, when, where, how, on what and with whom she works. Her story is one of many in the Financially Independent Retiring Early (FIRE) movement supporting the idea that end-of-life retirement is optional. This talk was given at a TEDx event using the TED conference format but independently organized by a local community. Learn more at https://www.ted.com/tedx

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