Russ Wiles Arizona Republic Published 1:00 p.m. UTC Aug 12, 2018 Individual retirement accounts have been attracting record amounts of assets, even though relatively few people actually contribute money to them. An oxymoron? Not really. The growth of IRAs results from their widespread use as tax-sheltered repositories for money that has been building up in 401(k)-style plans. When leaving a job, workers and retirees must decide what to do with their 401(k) assets. Moving them to an IRA often is the best choice. "Making these types of decisions sometimes comes at an unexpected time due to a layoff, career change, personal emergency or an unexpected retirement," said Alan Norris, a certified financial plawithnner at Norris Wealth Management in Phoenix. The decision is complicated by differing investment options, variances in expenses, tax traps and more. "Knowing your options ahead of time can save you … [Read more...] about Don’t know what to do with your 401(k) plan? Consider moving it to an IRA
Employer sponsored retirement plan types
By Dayana Yochim/NerdWallet The average household led by a retiree makes $48,000 annually before taxes and spends roughly $46,000 a year. That's according to the Bureau of Labor Statistics' (BLS) measure of the income and outflow of "older households," meaning ones headed by someone 65 or older. Meanwhile, the annual average pretax income for all U.S. households is about $74,000 and expenditures are $57,000. While the main source of money for those still toiling in the 9-to-5 world is, of course, wages from work, who signs the average retiree's $4,000-a-month paychecks? Here's the answer to the $48,000 question. Retirees' trillion-dollar allowance By far the biggest source of income for retired Americans is Social Security, which in 2018 will pay out about $1 trillion in benefits, according to data from the Social Security Administration. As of May, the average monthly Social Security benefit for retired workers was $1,412, or just shy of $17,000 a year. (Remember, this is per … [Read more...] about Could you get by on the average American’s retirement income?
If asset growth rates were a race, individual retirement accounts could soon be lapping 401(k) accounts. Assets added to IRAs are set to grow to nearly twice the amount of assets in 401(k) retirement plans over the next four years, according to a report released by Cerulli Associates, a retirement industry consulting and research firm. What's behind the faster growth of IRA assets? Rollovers from 401(k) plans. Workers and retirees are opting to transfer their assets out of a 401(k) or other employer-sponsored retirement plan and into an IRA because the former lack flexible withdrawal options such as ad-hoc withdrawals. Individuals request to take distributions from retirement accounts for variety of reasons. And those reaching 70 1/2 are required to take minimum distributions beginning at that age and annually thereafter. So, when separated or retired plan participants need to withdraw from a 401(k) plan that doesn't offer flexible options, they'll typically transfer their plan … [Read more...] about When an IRA beats a 401(k) for your retirement savings
The American ideal of a happy, secure retirement is under threat as the economy changes and the financial foundations that supported previous generations erode. The decline of traditional pensions has increasingly shifted the retirement burden to personal savings, but stagnant wages and rising health care costs mean that it’s harder for Americans to build up a nest egg that can cover their costs through a longer lifespan. Social Security is on track to become insolvent in another decade or so, raising the possibility that even the marquee national safety-net program will have to reduce benefits to millions. As a result, older workers are postponing retirement, and businesses are feeling the effects in the form of reduced productivity. Washington created the incentives that have shaped retirement for nearly a century. Now, who is responsible for safeguarding the financial well-being of older Americans? What should be done, and what’s even possible politically? The answer is … [Read more...] about How to solve the retirement crisis
iStock Overview Because most households have relatively fixed and expected expenses each month, a single financial shock— such as a major car repair or a sudden loss of income—can make meeting those obligations more difficult. When Americans experience these unexpected expenses, most look to multiple sources of money. Household savings are designed for such emergencies but are often insufficient to completely cushion an income loss or the cost of unexpected repairs on a home or vehicle. A 2015 report by The Pew Charitable Trusts gives a sense of how Americans say they would respond to a hypothetical scenario involving a financial emergency: Some 78 percent said they would use their savings and checking accounts, and 49 percent would turn to credit cards. About a quarter, though, would look to defined contribution retirement accounts, such as a 401(k), a 403(b), or an individual retirement account (IRA). The availability of early withdrawals from certain retirement … [Read more...] about Financial Shocks Put Retirement Security at Risk