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Senate Passes Bill to Alter Retirement Account Rules
Tweet Share on Facebook December 12, 2008 Comment (2)A bill that would allow seniors to avoid drawing down their savings from depleted retirement accounts sailed through the Senate yesterday. The legislation temporarily removes the penalty for people age 70 1/2 and older who fail to withdraw a required minimum amount from their retirement plan or IRA in 2009. Companies will also get a break on pension funding requirements. The bill was passed by the House on Wednesday.
Here’s a look at how the legislation would affect retirees and companies.
Next up: The bill goes to President Bush. He is expected to sign.
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House Passes Bill to Change 401(k) Requirements for Retirees
Tweet Share on Facebook December 11, 2008 Comment (7)The U.S. House of Representatives approved legislation last night that would provide some relief to older Americans suffering from significant losses in their retirement accounts. The bill would temporarily suspend an excise tax levied on seniors who fail to take a required minimum distribution (RMD) from their retirement accounts. The penalty would be waived for 2009, thereby allowing seniors not to withdraw money from IRAs, 401(k)s, and 403(b)s while investments are low.
Under current law, savers who have reached age 70½ must take an annual required minimum amount from their retirement plan or IRA. The specific distribution amount is calculated by dividing the prior December 31st balance of the retirement account by your life expectancy as determined by the Internal Revenue Service. Failure to withdraw this amount and report it as taxable income subjects the account holder to an excise tax penalty of 50 percent of the amount that should have been withdrawn in addition to regular income tax.
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More Seniors Consider Reverse Mortgages to Finance Retirement
Tweet Share on Facebook December 11, 2008 Comment (12)Most seniors don’t use their home equity to finance retirement. But it is a back up plan if catastrophic expenses strike. And for some seniors that time is now.
Seniors took out 112,100 Home Equity Conversion Mortgages, a government-backed reverse mortgage, in fiscal year 2008, which ended September 30, up from 107,558 in 2007, according to the Department of Housing and Urban Development.
Even more seniors struggling to pay their bills may consider reverse mortgages next year. A survey of 800 age 65 and older homeowners released this week found that one quarter are either borrowing against their home or trying to sell it in order to generate income to survive the economic crisis, Crestwood Associates and Golden Gateway Financial found. The Oakland, Calif.-based Golden Gateway Financial also reports a 200 percent increase in calls to its reverse mortgage help center involving senior citizens facing foreclosure in the past three months.
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Kodak Suspends Its 401(k) Match for Employees
Tweet Share on Facebook December 10, 2008 Comment (1)Eastman Kodak Company today joined General Motors Corp., Ford Motor Co., real estate firm Cushman & Wakefield, and Frontier Airlines in suspending its 401(k) match for employees. The employer matching contribution will be temporarily axed for 2009. The camera company also announced that executives will not receive a salary increase next year.
“There is an unprecedented amount of uncertainty surrounding the economic environment and most signs indicate that we may be facing a prolonged global recession,” said Antonio Perez, Kodak chairman and CEO, in a statement. The slowdown in consumer spending and tight credit markets that are making it difficult for Kodak's business customers to finance new equipment played a role in the decision, the company said.
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How Old Do You Feel?
Tweet Share on Facebook December 10, 2008 Comment (4)We are almost never satisfied with our current chronological age. Children desperately want to be seen as older than they are. And older people go to great lengths and expense to appear younger. Throughout our lives we refuse to be defined by our actual age because we feel like a different number should apply. A new study quantifies that feeling.
The typical 70-year-old feels like they are age 57, an aging study from the University of Michigan and the Max Planck Institute for Human Development in Berlin found. Older people tend to feel about 13 years younger than their chronological age, according to an analysis of the responses of 516 people age 70 and older over a 6 year period.
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Retirement Savers are in a Holding Pattern
Tweet Share on Facebook December 9, 2008 Comment (3)Despite recent market turmoil, about 68 percent of Americans have not changed the way they save, invest, or manage their retirement assets in the last three months, according to a recent Bank of America survey of 1000 adults. At first, this appears to be good news. Many retirement savers are finally getting the message that you need to develop a savings plan and stick with it. Then I asked Craig Averill, a personal retirement solutions executive for Bank of America, to clarify the findings. His response:
“Some people may understand the basic axiom of remaining invested in the market for the long term and they may understand the value of dollar cost averaging. But there are a significant portion of people who are being bombarded with a large amount of mixed messaging, which in combination with today’s market is leading to anxiety and indecision. They may feel that any decision that they make today will be wrong. They are kind of in a holding pattern.”
Additionally, 18 percent of the general public has prematurely withdrawn from their retirement accounts due to recent economic conditions. The top reasons were to pay off credit card debt (26 percent), pay down a mortgage (22 percent), and job loss (22 percent).
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7 Ways You Can Still Retire During a Recession - Stick to the Plan
Tweet Share on Facebook December 9, 2008 Comment (1)Stick to the plan. Once you've set up an asset allocation with a level of risk you can tolerate, you need to put your retirement savings and withdrawal strategy on autopilot. Some 68 percent of Americans have not changed the way they save, invest, or manage their retirement assets in the past three months, Bank of America found. "Watchful waiting, no matter how deeply your portfolio dips, is still the best option," says Michael Kresh, a certified financial planner and the author of You Can Afford to Retire, with one caveat:. "After 70, you should always have three to five years of living money in highly liquid and stable short-term accounts." This plan will protect retirees from any additional stock market shocks in the future.
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7 Ways You Can Still Retire During a Recession - Get Advice
Tweet Share on Facebook December 9, 2008 Comment (2)Get advice. It's painful to watch retirement account balances dwindle every month. Many workers approaching retirement age are looking for reassurance about their investment strategy. One-on-one advice consultations via phone jumped by 40 percent from September to October at Charles Schwab, a company with 1.3 million corporate retirement plan participants. A financial planner who is not trying to sell you something can help put market gyrations into perspective and keep your retirement plans on track. "Have regular meetings with your adviser, maybe every 30 or 60 or 90 days," advises Craig Averill, a personal retirement solutions executive for Bank of America. "There's a lot of anxiety and uncertainty to reassess."
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7 Ways You Can Still Retire During a Recession - Downsize
Tweet Share on Facebook December 9, 2008 CommentDownsize. Moving into a smaller house or cutting back from two cars to one is a great way to significantly slash expenses in retirement. Some retirees take it even further and move to an area of the country where theire retirement dollars will stretch more. Approximately 27 percent of Americans are considering relocating to an area with a lower cost of living as a result of the current economic climate, according to a Bank of America survey. U.S. News has a search tool that allows you to create a personalized list of great places to retire, including criteria like the cost of housing and proximity to healthcare. You can also check out these affordable and low-tax places to retire.
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7 Ways You Can Still Retire During a Recession - Don't Raid Retirement Accounts
Tweet Share on Facebook December 9, 2008 CommentDon't raid retirement accounts early. An emergency fund with enough cash to cover at least six months' worth of living expenses is a necessity for retirement savers who want to see their nest egg grow and recover from market losses untouched until retirement. Fifty-six percent of workers and 69 percent of retirees currently have an emergency fund they can tap if they lose their job or incur an unanticipated medical expense, Principal found. "The 401(k) should be the last area that is accessed for cash-flow needs," says Craig Averill, a personal retirement solutions executive for Bank of America.
