Posts Tagged ‘401(k)’

Save More For Retirement in 2015

Tuesday, December 2nd, 2014

As you work to secure your retirement, you may be pleased to find out about changes to several retirement-related items that may allow you to put a little more cash away in 2015. In October, the IRS announced several adjustments to the limitations previously set on retirement planning tools as a result of an increased cost-of-living. So what does that mean to you and your retirement plan(s) of choice? Take a look:

  • If you contribute to a 401(k), 403(b), 457 plan or a Thrift Savings Plan, the following changes could impact how you contribute:

-        You can now invest up to $18,000 annually – this is an increase up from $17,500.

-        If you’re 50 years old or older and are trying to catch-up on your retirement savings, you may now invest $6,000 annually. The previous catch-up contribution limit was $5,500.

  • If you contribute to an individual retirement account (IRA), you will see the following changes in 2015:

-        The annual limit and additional catch-up contribution limit for an IRA for individuals 50 years old and older will not change in 2015. The annual contribution is $5,500 and the catch-up contribution is $1,000.

-        Single filers and heads of household who are covered by a workplace retirement plan and have adjusted gross incomes (AGI) between $61,000 and $71,000 will no longer be eligible to receive a deduction for contributing to their traditional IRA. This has increased from $60,000 and $70,000 in 2014.

-        Married couples who file jointly, where one spouse makes an IRA contribution that is covered by a workplace retirement plan, will see an increased income phase-out range for taking the deduction as well. The new range is $98,000-$118,000 – up from $96,000-$116,000.

-        If you’re an IRA contributor, not covered by a workplace retirement plan, but are married to someone who is covered, the deduction is phased out if you and your spouse’s income falls between $183,000 and $193,000 – up from $181,000 and $191,000.

-        The phase-out range for a married taxpayer who files a separate return and who is covered by a workplace retirement plan will not change in 2015. The range remains $0 to $10,000.

  • If you make contributions to a Roth IRA, you will see the following changes:

-        The phase-out range for married couples filing jointly is $183,000 to $193,000 – an increase from $181,000 to $191,000.

-        The phase-out range for single filers and heads of household is $116,000 to $131,000 – an increase from $114,000 to $129,000.

-        The phase-out range for a married individual who files a separate return is unchanged.

As we approach the end of the year, there’s not a better time to evaluate your current retirement plan situation and determine if you need to make any changes for 2015. To learn more about how these retirement plan changes could impact your financial situation, email Rea & Associates.

By Paul McEwan, CPA, MT, AIFA (New Philadelphia office)

 

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What You Should Know Before Dipping Into Your 401(k)

Friday, May 16th, 2014

Got a 401(k) plan? Have you ever withdrawn money from your 401(k) account? If so, you’re part of the growing number of Americans using their 401(k) accounts to fund other areas of their lives. A recent Bloomberg article explains that more and more Americans are turning to their 401(k) accounts rather than to other means, such as a loan, to help cover any unexpected financial needs that come up.

Historically, Americans have used their homes as a source of additional money. According to the article, when home values rose, homeowners refinanced or took out second mortgages. But due to the housing collapse back in 2008, many homeowners don’t have these options anymore – so they turned to their 401(k) accounts. What many people don’t realize is that depending on their 401(k) plan, they could be penalized for either taking an early withdrawal and/or not putting that money back into their account in the appropriate amount of time.

Shocking 401(k) Withdrawal Statistics

The Bloomberg article cites an IRS report that states the agency collected $5.7 billion in withdrawal penalties in 2011. In other words, Americans withdrew nearly $57 billion from their retirement accounts. That’s $5.7 billion that the IRS would otherwise not have banked on receiving. And what’s the federal government doing with this “extra” income? Funding federal agencies and projects.

Think Before You Dip

Before you turn to your retirement plan for help, you should be aware of some things. It may seem like an easy option, but the IRS actually has some rules that you have to meet before taking money from your 401(k). One of the following conditions must occur before you can take money out without being penalized:

  • You lose your job
  • You claim disability
  • You or your spouse dies
  • You turn 59 ½ years old

401(k) Withdrawal Based on Financial Hardship

If you don’t meet the criteria listed above, but are facing a financial hardship, you may also be able to take an early withdrawal from your retirement account. The IRS’ hardship rules require you have one of the following needs to qualify for a hardship withdrawal:

  • Medical expenses for you or your immediate family
  • Financial assistance in the purchase of your primary residence (this excludes mortgage payments)
  • Tuition or other educational fees (maximum of 12 months) for you or your immediate family
  • Prevent the eviction of you from your primary place of residence
  • Burial or funeral expenses for deceased parent, spouse or other immediate family member
  • Expenses for the repair of damage to your principal residence

The amount of money you take can’t be more than the amount you actually need to cover your hardship. It’s important to note that your early withdrawal due to a financial hardship is subject to state and federal taxes, and is also subject to a 10 percent early withdrawal penalty if you are under age 59 ½. So keep all of these considerations in mind when deciding whether to dip into your retirement account.

401(k) Withdrawal Help

If you’re not sure if a retirement withdrawal is the best route to go, contact Rea & Associates. Our team of Ohio retirement plan services professionals can help you determine if you’re eligible and what you need to do to minimize your tax liability from a withdrawal.

Author: Steve Renner, QKA (New Philadelphia office)

 

Looking for more information related to 401(k) or retirement plan withdrawals? Check out these blog posts:

Will I Be Penalized for a Hardship 401(k) Withdrawal?

Raiding Your 401(k)? It’ll Cost You

What Are The Rules For Taking A Distribution from My 401(k) Plan?

 

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Retirement Is Knocking … Are You Ready To Answer The Door?

Wednesday, April 2nd, 2014

Traveling to exotic places. Spending hours on the links. Enjoying time with the grandkids. Supporting philanthropic efforts. While these all might be things you hope to do during retirement, do you have any idea the likelihood that you’ll actually get to do them? Sadly, more and more individuals are finding that they’re not adequately prepared for retirement. According to the Employee Benefit Research Institute’s (EBRI’s) March 2013 Retirement Confidence Survey, 49 percent of individuals surveyed are “not very confident” or “not at all confident” that they’ll have enough income when they hit retirement. That’s an astounding, yet insightful number. How would you answer the question, “How confident are you that you’re prepared for retirement?” If you find yourself in either of the categories mentioned above, all hope is not lost.

For many of you, retirement probably seems light years away. But there may be some of you who are fast approaching retirement age. Wherever you’re at on the retirement spectrum there are practices you can put in place now to move you toward your retirement goals.

Five Practical Tips for Retirement Readiness       

  1. Look at your ability to save and cut corners where you can to save money. Even if your savings goal seems beyond reach or too distant in the future to be of concern now, re-evaluate where you can save and strive for it. Some individuals won’t begin to save if they see the goal as unattainable and set themselves up for failure before they even begin. Just as a tiny grain of sand can form into a pearl within an oyster over time, small steps in saving for retirement can lead you to your goals. Take responsibility to make it happen, and get financial advice if you need some help.
  2. Determine what you expect your retirement lifestyle to look like. If you dream or envision traveling to those exotic places I mentioned earlier, or perhaps you want to buy a motor home and travel the United States, it’s critical that you have the funds to do it. In theory it sounds like a great idea, but what many people realize upon retirement is that they don’t have enough funds to support these kinds of adventurous or carefree lifestyles. The EBRI survey cited above also showed that seven out of 10 individuals haven’t talked with a financial advisor about their financial situation nor have they put together a plan for retirement. If you want to have a retirement that’s close to what you dream of, put a realistic plan together for what you expect retirement to look like and go after it to make it happen.
  3. Evaluate your debt. Have you purchased a new car? Is your mortgage paid off? Are you (or are you planning on) paying for your kids’ college education? As you prepare for retirement, it’s important you evaluate your debt situation. Ideally, you don’t want to go into retirement with any debt. Work hard now to pay off debt you may have. It’ll pay off (literally and figuratively) later on down the road!
  4. Consider what monetary resources you have to pull from. There’s a whole slew of ways you can fund your retirement. Make certain you are taking advantage of any retirement plan your employer offers. Not only does this give you the ability to save for retirement, but many employers will also contribute money for you – do your best to take full advantage of the contribution your employer will make for you. Personal savings and other avenues, such as an Individual Retirement Account (IRA) or investment in property, could be considered. Social security benefits can also be factored in as part of your retirement benefits, but should not be viewed as the only or primary source of retirement income.
  5. Anticipate medical costs and needs. You may feel fit as a fiddle. But unfortunately for many of us, that feeling won’t last our entire lives. As we get older, our bodies age, and it’s important for us to prepare financially for any potential medical costs or needs we could encounter. Medical costs are one of the more commonly overlooked items when planning for retirement. Knowing your family’s medical history could be helpful when anticipating your future medical costs. 

Retirement Planning Help

While these five tips won’t completely solve all of your retirement woes, they’ll help you get in better shape for retirement. Don’t wait until it’s too late. To celebrate National Employee Benefits Day, which is today, start preparing for the retirement of your dreams today. If you need guidance or additional insight on how to best plan for your retirement, contact Rea & Associates. Our team of Ohio tax professionals can help you put together a plan to ensure you’re on a good path to retirement.

Author: Darlene Finzer, CPA, QKA, CSA (New Philadelphia office) 

 

Looking for more advice on retirement planning? Check out these posts:

What Are Ways You Can Ensure You’re Ready for Retirement?

Will You Be Ready for Retirement?

What Are The Rules For Taking A Distribution from My 401(k) Plan?

 

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Why Should You Review Your Retirement Plan Documents Now?

Tuesday, March 4th, 2014

“If it’s not broken, don’t fix it.” A lot of people adhere to this philosophy, but in some cases, a review of how something works is not only helpful, it is required. If a business’s retirement plan seems to be working fine, and there doesn’t appear to be anything out of place, many employers believe there is no reason to review the provisions of the plan. This may be the case for a plan that was recently established, but it is always a good idea to review provisions every few years to ensure the plan is still meeting the goals of both the employer and its’ employees.  (more…)

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What Should Plan Sponsors Ask Their Investment Advisors?

Wednesday, February 12th, 2014

Like many business owners, running your business every day is a top priority for you. But as a sponsor of a 401(k) plan, you have an obligation to your employees to make your plan a priority as well. The truth is, most business owners are not 401(k) experts. Therefore, working with a quality 401(k) investment advisor should also be a priority. As a plan sponsor, there are questions you should be asking your advisor to ensure they are helping your meet your fiduciary obligations as the plan sponsor.  (more…)

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