RETIREMENT INSIGHTS

News and information for current and future retirees.

TO RETIRE, OR NOT TO RETIRE?

For some of us, the coronavirus pandemic has complicated the question.

As Yahoo! Finance reports, a Harris Poll study conducted this past summer found that 25% of Gen Xers and 14% of baby boomers think they will retire later than they planned, because of the pandemic’s financial impact on their lives.   

Will this perception be fleeting? Forty-nine percent of respondents cited the current state of the economy as the biggest obstacle to realizing their retirement goals, but the economy frequently changes course. Long-term retirement strategies consider potential short-term economic ups and downs. 

If you are a retirement-minded baby boomer or Gen Xer, you might want to think about three factors. One, how did your investments perform in 2020. Two, the degree to which the pandemic is impacting your job security. If you feel you might be let go as a result of the pandemic’s economic stress on your employer, then it may be time to begin creating a retirement transition strategy. Three, the timing of retiring in 2021. If spending the first year of your retirement in a global pandemic has you down, consider waiting until 2022 or later to wrap up your career could be a better choice.*

*Yahoo Finance, December 4, 2020

FOR SOME, RETIREMENT MINUS KIDS IS A PLUS

According to the University of Michigan’s Health and Retirement Study, 18% of Americans aged 50-59 have never been parents.

A notable percentage of affluent baby boomers are retiring childless and happy, and sometimes in a better financial position than their peers with families.

Retiring affluent and childless has a potential upside. A solo retiree or two-career couple may have amassed significant retirement savings or net worth, having had to devote less annual income to the expenses of raising a family. The potential downside? No children to share your life with. Before retirement arrives, childless couples and singles should consider creating a will and putting a durable medical power of attorney in place, perhaps allowing friends, siblings, or nephews or nieces to become part of the network of people who might help take care of them or make medical decisions on their behalf should the need arise. As they enjoy their retirements, they should also give some thought to the eventual destiny of their invested assets, their creative or intellectual property, and their legacies. Working on a meaningful legacy may contribute to a satisfying and meaningful retirement.*

*Next Avenue, December 9, 2020

2020 IRA DEADLINES ARE APPROACHING

Here is what you need to know.

Financially, many of us associate April with taxes – but we should also associate April with important IRA deadlines.    

April 15, 2021 is the deadline to take your Required Minimum Distribution (RMD) from certain individual retirement accounts.

Keep in mind that withdrawals from traditional, SIMPLE, and SEP-IRAs are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.

To qualify for the tax-free and penalty-free withdrawal of earnings from a Roth IRA, your Roth IRA distributions must meet a five-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals.

April 15, 2021 is the deadline for making annual contributions to a traditional IRA, Roth IRA, and certain other retirement accounts.1   

Some people may not realize when they can make their IRA contribution. You can make a yearly IRA contribution between January 1 of the current year and April 15 of the next year. Accordingly, you can make your IRA contribution for 2020 any time from January 1, 2020 to April 15, 2021.2   

Thanks to the SECURE Act, both traditional and Roth IRA owners have the chance to contribute to their IRAs past age 72 as long as they have taxable compensation (and in the case of Roth IRAs, MAGI below a certain level; see below).2  

If you are making a 2020 IRA contribution in early 2021, you must tell the investment company hosting the IRA account for which year you are contributing. If you fail to indicate the tax year that the contribution applies to, the custodian firm may make a default assumption that the contribution is for the current year (and note exactly that to the I.R.S.).

So, write “2021 IRA contribution” or “2020 IRA contribution,” as applicable, in the memo area of your check, plainly and simply. Be sure to write your account number on the check. If you make your contribution electronically, double-check that these details are communicated.

1-irs.gov, November 23, 2020

2-irs.gov, November 10, 2020

On the Bright Side

Some large employers suspended matching contributions to retirement plans last year, but this was only temporary for many of them. Studying 260 such companies, consulting firm Towers Watson reports that 75% have already restored employer matches, with 74% matching at the same level they did before the arrival of the pandemic.*

Source: MarketWatch, December , 2020

Did you know?

Looking for the tallest mountain on earth? Try Hawaii.

Mt. Everest, at the border of Nepal and Tibet, is generally ranked as the world’s highest peak, towering more than 29,000′ above sea level. Hawaii’s Mauna Kea volcano, however, is in one sense even grander. While Mauna Kea rises 13,796′ from the shoreline, it actually measures 32,808′ from its base on the floor of the Pacific Ocean.*

Source: FarandWide.com, December 15, 2020

Investment Advisory Services offered through BCJ Capital Management LLC., a (SEC) Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. DISCLOSURES