Tag: retirement fear

Happy Retirees? Maybe Not Why Life Satisfaction Isn’t Necessarily ‘U-Shaped’ After All

Happiness, experts say, is U-shaped: generally speaking, we are happy/full of life satisfaction as young adults but, as we reach middle age, we become less satisfied, with a trough in one’s early 50s; from this trough we rebound to ever-increasing satisfaction levels as we age. It’s remarkable, really, considering the physical infirmities we face, plus financial worries, loss of loved ones, and more. What explains this? We become wiser and we are able to see all of life’s ups and downs with a greater sense of perspective.

But what if that’s not true?

A new working paper by Peter Hudomiet, Michael D. Hurd and Susann Rohwedder, researchers at RAND Corporation, suggests an entirely different answer: older individuals have greater life satisfaction because the less-satisfied folk have been weeded-out. And by “weeded-out” I mean that they’re dead or otherwise unable to reply, because the likelihood of dying is greater for those who have less life satisfaction. When they apply calculations to try to strip out this impact, the effect is dramatic: rather than life satisfaction climbing steadily from the mid-50s to early 70s, then remaining steady, they see a steady drop from the early 70s as people age.

Here are the three key graphs (used with permission):

First, life satisfaction plotted by age without any special adjustments:

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Life satisfaction by age, unadjusted
Life satisfaction by age, unadjusted used with permission

Second, the difference in mortality between the satisfied and the unsatisfied:

Mortality by age and life satisfaction
Mortality by age and life satisfaction used with permission

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And, third, the same life satisfaction graph, adjusted to take into account the impact of the disproportionality of deaths:

Life satisfaction adjusted for death rates
Life satisfaction adjusted for death rates used with permission

In this graph, the blue line represents the unadjusted outputs from their calculations, the orange line is smoothed, and the grey line adds in demographic, labor market and health controls, to strip out the impact of, for example, people in poor health being less satisfied and try to isolate the impact solely of age.

Here are the details on this calculation.

The data they use for their analysis comes from the Health and Retirement Study (HRS), a long-running survey of individuals age 51 and older at the University of Michigan, sponsored by the National Institute on Aging. It is a longitudinal study; that is, it surveys the same group of people every two years in order to see how their responses change over time, adding in new “refresher cohorts” to keep the survey going. The survey asks about many topics, including income, health, housing, and the like, and in 2008, the survey also began to ask life satisfaction, on a scale of 1 to 5 (”not at all satisfied” to “completely satisfied”).

One simple way of analyzing the data is to look at how life satisfaction ratings vary based on survey participants’ characteristics. The average reported life satisfaction of those between ages 65 – 74 is 3.91, just slightly below “4 – very satisfied.” But those who rate their health as “poor” average out to 3.13, or not much more than “3 – somewhat satisfied,” and those who rate their health as “excellent” average to 4.34. Those who have 2 or more ADL (activities of daily living) limitations some out to an average of 3.32 vs. 3.97 for those with no such limits. Those who are in the poorest quarter of the survey group come out to 3.7 vs. 4.07 for the wealthiest quarter. (See the bottom of this article for the full table; this table and the following graphs are used with permission.)

But here’s the statistic that throws a monkey-wrench into the data:

“On average, the 2-year mortality rate [that is, from one survey round to the next] is 4.4% among those who are very or completely satisfied with their lives, while it is 7.3% (or 66% higher) among those who are not or somewhat satisfied with their lives.”

As a result, “those who are more satisfied with their lives live longer and make up a larger fraction of the sample at older ages.”

Now, this does not say that being pessimistic about one’s life causes one to be more likely to die. Nor does it say that this pessimism is justified by being in ill-health and at risk of dying. But this statistical connection, as well as further analysis of survey drop-outs for other reasons (such as dementia) is the basis for a regression analysis which results in the graph above.

What’s more, the original “inventor” of the concept of the life satisfaction curve, David Blanchflower, published a follow-up study just after this one. One of their key concepts is the notion of using “controls” to try to identify changes in life satisfaction solely due to age rather than changes in income over one’s lifetime, for example, or other factors, and there has been extensive debate about whether or to what degree this is appropriate, given that the reality of any individual’s life experience is that one does experience changes in marital and family status, employment status, and the like.

Having received pushback for this concept, they defend it but also insist that the U-shape holds regardless of whether “controls” are used or not. At the same time, Blanchflower is quite insistent that the “U” is universal across cultures, though (see my prior article on the topic) it really seems to require quite some effort to make this U appear outside the Anglosphere, which is all the more interesting in light of the John Henrich “WEIRDest people” contention (see my October article) that various traits that had been viewed by psychologists as universally-generalizable are really quite distinctive to Western cultures and, more distinctively, the United States.

But here’s the fundamental question: why does it matter?

On an individual level, to believe that there is a trough and a rebound offers hope for those stuck in a midlife rut. It’s a form of self-help, the adult version of the “it gets better” campaign for teenagers.

On a societal level, the recognition of a drop in life satisfaction for the middle-aged might be explained, by someone with the perspective of the upper-middle class, as the result of dissatisfaction with a stagnating career, failure to achieve the corner office, the challenge of shepherding kids into college, and the like. In fact, when I wrote about the topic two years ago, that’s how the material I read generally presented the issue.

But Blanchflower’s new paper recognizes greater stakes: “These dips in well-being are associated with higher levels of depression, including chronic depression, difficulty sleeping, and even suicide. In the U.S., deaths of despair are most likely to occur in the middle-aged years, and the patterns are robustly associated with unhappiness and stress. Across countries chronic depression and suicide rates peak in midlife.” (In the United States, among men, this is not true; men over 75 have the highest suicide rate.)

And what of the decline in life satisfaction among the elderly?

The premise that the elderly become increasingly satisfied with their lives as they age is a very appealing one, not just because it provides hope for us individually as we age. It serves as confirmation of a more fundamental belief, that the elderly are a source of wisdom and perspective on life. Although it is Asian cultures which are particularly known for veneration of the elderly, the importance of caring for those in need is just as much a moral imperative in Western societies, even if without the same sense of “veneration” or of valuing them to a greater degree than others in need.

Consider, after all, that the evening news likes to feature stories of oldsters running marathons or competing in triathlons or even just having a sunny outlook on life; no one likes to think of the grumpy grandmother or grandmother from one’s childhood as representative of “old age.” In this respect, “old folks are more satisfied with life” provided an easy to make the elderly more “venerable.” Hudomiet’s research might force us to think a bit harder.

As always, you’re invited to comment at JaneTheActuary.com!

Full table of impact of demographic characteristics on life satisfaction:

Impact of demographic characteristics on life satisfaction
Impact of demographic characteristics on life satisfaction used with permission

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Elizabeth Bauer

Elizabeth Bauer

Yes, I’m a nerd, and an actuary to boot. Armed with an M.A. in medieval history and the F.S.A. actuarial credential, with 20 years of experience at a major benefits consulting firm, and having blogged as “Jane the Actuary” since 2013, I enjoy reading and writing about retirement issues, including retirement income adequacy, reform proposals and international comparisons.

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Wes Moss Money Matters

So, are you setting yourself up for true happiness as a retiree? Sure, you’re planning the money piece, and that’s important. But, there’s also the personal piece of the retirement equation that’s just as important as the money part. Read more: https://www.wesmoss.com/news/7-skills… The 4% Rule: https://www.wesmoss.com/news/the-new-… Retirement Calculator: https://www.yourwealth.com/retirement… Send me your questions directly at https://bit.ly/3dPKcvd (contact box in top right corner) You Can Retire Sooner Than You Think https://bit.ly/3kiRhXJ Money Matters with Wes Moss podcast https://spoti.fi/3jk9wL8 or on Apple Podcasts https://apple.co/3kwKvhj Twitter: https://bit.ly/2HqnWfe Facebook: https://bit.ly/3kvrHi4 Check out my website for more financial tools and articles: https://bit.ly/3dPKcvd Please note, this information is provided to you as a resource for informational purposes only and should not be viewed as investment advice or recommendations. Investing involves risk, including the possible loss of principal. There is no guarantee offered that investment return, yield, or performance will be achieved. There will be periods of performance fluctuations, including periods of negative returns. Past performance is not indicative of future results when considering any investment vehicle. This information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. This information is not intended to, and should not, form a primary basis for any investment decision that you may make. Always consult your own legal, tax, or investment advisor before making any investment/tax/estate/financial planning considerations or decisions.

8 Ways Coronavirus Will Drastically Alter Boomer Retirements

Eventually, the economy and the stock market will recover and COVID-19, the disease caused by the novel coronavirus, will be contained. Yet the current pandemic and its economic consequences could devastate the retirement prospects of some Baby Boomers, while permanently changing the attitudes of many more.

 “This is going to leave a real imprint on the minds of people who are near or in retirement,’’ says Joseph Coughlin, director of the Massachusetts Institute of Technology AgeLab. “It’s a personal health 9/11 for much of the country.”

Consider this:  After years of hearing how 60 is the new 40, boomers are now being told that those as “young” as 60 have weaker immune systems and face greater risk from the novel coronavirus, particular if they have certain other health problems that increase with age. In China, those 80 and older with COVID-19 suffered a 14.8% death rate, while those 70 to 79 had an 8% death rate, compared to a 2.3% mortality rate for all age groups.

Of course the Baby Boomers—the 72 million still living Americans born between 1946 and 1964—are a diverse group. The majority are still working and plan to stay in the labor force longer, assuming the tanking economy permits it. About a fifth of boomers provide eldercare, either in person or remotely, to a parent or other family member. That means that even if they themselves are relatively healthy, they’re on the front lines worrying about the high vulnerability of the very old and frail. Some have no choice but to worry helplessly from afar. With the largest cluster of COVID-19 deaths in the U.S. so far occurring at a nursing home in Kirkland, Washington, the Trump Administration has directed nursing homes to keep all non-medical visitors out, except in “end of life” situations, and even in those cases clergy and relatives (after passing a respiratory infection screening) must wear face masks.  Some assisted living facilities are barring visitors too. (Read more on how coronavirus is changing care for the frail elderly here.)

Much will depend, of course, on how severe and prolonged the pandemic is; how long the bear market that began March 11th lasts; and how deep a recession is caused by the shutdowns and social isolation steps needed to slow the virus’ spread. Here are eight likely longer term effects on Boomers’ retirements. (For current survival advice, read Rational Panic: Coronavirus Plan For Retirees.)

1. Younger Boomers Will Fall Farther Behind

A new study from the Center for Retirement Research (CRR) at Boston College shows that as of 2016, even after seven years of a bull market, late boomers (those born in 1960 or later) had accumulated a lot less in 401(k) and IRA wealth than older boomers had at the same age. That’s despite the fact that fewer late boomers are covered by traditional defined benefit pensions, meaning they need to accumulate more, not less, to achieve the same level of retirement security. Late Boomers were on track to save more, the study found, but got slammed by the Great Recession and layoffs in their 40s. Some dropped out of the labor force. Others settled for lower paying jobs without 401(k)s. Alarmingly, for late Boomers in the middle wealth quartile, 401(k) participation was actually lower in 2016 than before the Great Recession.

The CRR researchers noted they were waiting for results from the Federal Reserve’s 2019 Survey of Consumer Finances to see how lasting the damage to late Boomers, and members of Gen X behind them, had been. Now, even if the news from that triennial survey is good, it might be just a bittersweet historical footnote—-particularly for any late Boomers who lose their jobs in a coronavirus recession.

2. Working Longer Will Get Harder

You’ve probably heard this factoid: an average of 10,000 boomers turn 65—the traditional retirement age—each day. But the Pew Research Center calculated last July that the Baby Boomer labor force has been shrinking by an average of only 5,900 per day since 2010. That’s because while some chose to retire early or were forced out of the labor force early, on average, the Boomers are working longer than the previous two generations did. In 2018, 29% of folks aged 65 to 72 (that is, the oldest Boomers) were working or looking for work. When the Silent Generation and the Greatest Generation were that age, Pew figures, only 21% and 19%, respectively, were in the labor force.

Even more dramatic has been the growth in older workers who say they expect to work past 65—even though they don’t all end up doing so. In a 2016 Employee Benefit Research Institute survey, 54% of workers aged 55 and older said they expected to retire at 66 or older or never. Twenty years earlier, only 19% of older workers answered that way.

Yet while lots of Boomers want (or need) to keep working, this harsh fact hasn’t changed in recent decades: when those 50 and older do lose their jobs (say, in the Great Recession or the coronavirus recession), it takes them longer to find new jobs than it does younger workers. Moreover, just one in 10 match their old pay. Some give up and retire earlier than they planned. Those who claim Social Security early to make ends meet end up with lower monthly benefits and less overall from Social Security than those who claim later.

3. Panic Will Doom Some Boomers’ Wealth

The current market dive is scary, for sure. The stomach churning volatility that’s typical of a bear market has been so severe this time that the drops have triggered multiple automatic trading halts. Eventually, the bear market will end, but not all Boomers will be there to ride the recovery. During the 2008 market crash, about 5% of those 55 or older dumped all the stock in their 401(k)s and then missed the 2009 rebound, a 2011 study of 425,000 workers’ 401(ks) showed.

The problem with “going to cash” in a crash is that you lock in your losses. Maybe your plan is to jump right back in after the market bottoms? Good luck with that. When markets do turn back up, they do so quickly.  As financial planner Kristin McKenna explains here, six of the 10 best daily gains in the S&P 500 between January 2000 and December 2019 occurred within two weeks of the worst 10 days. Had you missed all of those 10 best days, your average annualized total return on the S&P 500 for those two decades would have been 2.44% compared to 6.06% had you stayed fully invested and ridden the roller coaster down and back up.

4. The Cash Bucket Strategy Will Gain New Fans

The current bear market should give a permanent boost to a strategy that was already gaining favor—one designed to allow retirees to live well while the market tanks and to conquer the “sequence of return” risk in retirement. The problem is this: even if the stock market averages a healthy return over the 30 or so years you spend in retirement, you’re more likely to run out of money if it has its bad years early in your retirement. (That’s assuming you’re planning to draw 4% out of your portfolio each year, a common rule of thumb.)

There are multiple ways to deal with sequence of return risk, but arguably the simplest way is with a cash bucket. For example, someone nearing or in retirement could keep three to five years’ worth of money for necessary expenses (over and above what Social Security and any pensions provide) in cash or cash equivalents—say, laddered CDs, or Treasury Bonds. The idea is to have enough cash that you won’t panic and can wait for the market to recover before you sell stocks to refill you cash bucket.

5. Cruises Will Fall Off Boomers’ Bucket Lists

In January, AARP released a survey of Boomers’ 2020 travel plans showing they expected to spend an average of $7,800 on four to five trips this year, with 51% planning at least one international adventure, and 23% calling their planned foreign travel a “bucket list” trip. Moreover, a full third of Boomers’ planned international trips involved staying on a cruise ship; 61% of those who chose a cruise said they did so because it was “hassle-free”.

Assuming their portfolios recover while they’re still in the travelling mood (travel declines past 75 or 80) it’s hard to believe that retirees will permanently forsake bucket list trips. But it’s easy to imagine that the image of passengers trapped on a ship for weeks as the coronavirus spreads among them, might permanently reduce the number planning to hit the high seas. Yes, the cruise industry, which has suspended operation from U.S. ports until at least mid-April— has recovered from previous health scares. (The World Health Organization notes there have been more than 100 reported disease outbreaks on cruises over the past 30 years, including recent norovirus and influenza outbreaks.) This time could be different.

6. Time With Family Will Be Even More Important

One item that pops up at the top of many retirement wish lists is spending more time with family and friends; it’s the leading reason people say they were “pulled” into retirement rather than being pushed there by ill health, layoffs or age discrimination. In the AARP travel survey, multi-generational family trips and family reunions, combined, were the top reason Boomers were planning either domestic or international travel.

Being closer to family also turns up in surveys as the leading reason people move in retirement. It’s not hard to imagine the pandemic and related air travel fears will motivate even more Boomers to move nearer to adult children.

7. Aging At Home Will Be Even More Compelling

Even more than cruise ship horrors, the spread of coronavirus through that Washington nursing home and the nursing home visitor ban is likely to be imprinted on Boomers’ minds—and the minds’ of their own now adult children. The vast majority of Boomers already say they want to age in place “where their marriage and mortgage and memories are,’’ notes the AgeLab’s Coughlin. But, he observes, that determination hasn’t been tested yet, since the oldest of them turn 74 this year, while the average age for entering assisted living facilities is 83 or 84.

The desire to age in place—and the reality that not everyone can—predates the Boomers.  A new CRR study, using data from the University of Michigan Health & Retirement Study which has tracked about 20,000 Americans 50 and older since 1992, finds 53% of homeowners stay in the house they owned at 50 for the rest of their lives. Another 17% move once, around the time of their retirement, and then stay put. The other 30%? According to the CCR analysis, 14% move frequently after 50 because of job problems and 16% move in their 80s when health problems force them into a rental, assisted living or a nursing home.

A new generation of connected health technology could help even more people stay in their own homes—or at least delay the age at which they move, Coughlin figures. He sees everything from internet-linked pill reminder systems that dispense medication to sensors that allow remote caregivers to check whether an elder is up and moving about. As Coughlin, a Forbes contributor, writes, the internet-of-things will be not only around us, but in us, as Mom has a smart glucose sensor under her skin transmitting and adjusting her insulin levels.

8. Care Facilities And Senior Housing Will Change

Over the past four years more than 550 nursing homes have closed, bowing to rising costs, reimbursement pressures—and crucially, shrinking demand from older folks, who as noted above, want to age at home. Nursing homes aren’t likely to disappear as a last resort. But they will need to change, Coughlin predicts—for example, employing contagious disease experts and using antimicrobial surfaces.

Meanwhile, senior housing and assisted living developments, now designed to encourage congregation and socialization, might be built in the future with more spread out units and an eye towards limiting contagions.

“Until two weeks ago, every article was about the perils of social isolation (for the elderly). Now we’re changing it to (promoting) self-isolation,’’ Coughlin observes. “This is an inflection point in our medical model of how to age well.”

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Janet Novack

Janet Novack

I’m the Washington D.C. bureau chief for Forbes and have worked in the bureau for more than two decades. I’ve spent much of that time reporting about taxes — tax policy, tax planning, tax shelters and tax evasion. These days, I also edit the personal finance coverage in Forbes magazine and coordinate outside tax, retirement and personal finance contributors to Forbes.com. You can email me at jnovack@forbes.com and follow me on Twitter @janetnovack

Source: 8 Ways Coronavirus Will Drastically Alter Boomer Retirements

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Barron’s Wealth and Asset Management Associate Publisher Jack Otter on a new study that more than 50% of workers over age 60 are postponing retirement.

7 Rules For A Wealthy Retirement

wealth-hero

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 →

William Baldwin

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

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

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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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Ashlea Ebeling

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.

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