As of sept 28th 2012
Powerball. $216 mil
Classic Lotto. $30.4 mil
Lotto. $23 mil
Lotto Max. $20 mil
Euro Millions. $18 mil
1. Don’t forget about taxes when you look at the size of that retirement nest egg.“We look at our assets on a gross basis, which creates a wealth illusion,” says Robert Fishbein, vice president and corporate counsel at Prudential Financial. “Wealth illusion is simply a term used to describe thinking an asset provides more value for retirement than it does.”
In other words, look at our 401(k), pension or IRA balance with the view that we still have to pay taxes when we start withdrawing.
Fishbein’s example: Your retirement nest egg is $100,000. You plan to withdraw 3% a year for living expenses, or $3,000. “But if the individual is subject to combined federal and state tax rate of 30%, that $3,000 of income provides $2,100 of after-tax income.”
“The after-tax amount is what is there for paying for your housing costs, your food, your utilities,” he says. “We live on after-tax dollars so we need to see though our retirement assets so that we see their true value.”
2. Diversify your retirement assets by adding a Roth IRA, even if you are close to retirement.
Diversity does three things, says Fishbein. It creates tax-planning options, gives you the ability to manage your tax liability, and sets up a hedge against future tax increases. With a Roth, contributions are not tax-deductible, but withdrawals are tax-free. Thus, in retirement, the Roth will let you withdraw tax-free money along with your taxable income.
“It is hard for people to take the action to convert (a traditional IRA) to a Roth and pay a tax to the government before they have to,” he says. “But for some of one’s retirement nest egg, it makes sense to convert some of the funds.”
3. Remember, you must pay estimated taxes in retirement. If you’ve been working all your life, you’ve probably had taxes taken out of your paycheck automatically. But when you retire, that’s not necessarily the case. If you’re getting pension payments and taking IRA withdrawals, you’re going to have to get used to writing a check to the government every quarter.
“They [new retirees] are used to getting withholding,” says Paul Gevertzman, tax partner at Anchin, Block & Anchin in New York. “Now they have to make estimated tax payments. They can end up with a big tax bill in April that they never thought about.” There may also be a penalty for underpayment of tax.
Some financial institutions will let you withhold taxes from retirement plan withdrawals, but you have to set those up. You can also set up withholding from Social Security checks.
4. Even if you wait until 66, it may not pay to take Social Security the first year of eligibility. If you worked for part of the year, those earnings may push you over the limits and result in taxes on your Social Security, says Ted Sarenski, CEO of Blue Ocean Strategic Capital in Syracuse, N.Y.
MONEY WATCH: Maximizing your Social Security benefits
“My birthday is Sept. 5,” he says. “In the year I turn 66, I already have nine months of income. If I have earned $50,000, I am $10,000 over $40,000 limit. I have to give back $1 for every $3 over that. It may not pay for me to take Social Security (in the first year).”
5. Don’t put retirement planning on autopilot. Be aware of changes to the tax laws and how they may affect you. It would be a mistake to not revisit your tax and financial-planning assumptions to make sure they are still accurate, planners say.
For example, the old rules of thumb on how much you should withdraw from your retirement savings each year may no longer apply, says Thomas Langdon, professor at Roger Williams University in Bristol, R.I. The old thinking was 4% a year, but after the financial crisis, he says, new research predicts that is too much and you may run out of money. Three percent may be a better goal.
You have just arrived at the most interesting blog, most exciting platform to meet the most creative people on earth. Welcome! Here you will see all sorts of talents and every kind of creativity. Just Flush In and enjoy the show. An initiative to bring together Talent & Creativity from every nook and corner of earth. For any queries, email us at firstname.lastname@example.org
Gossip for the Hardcore | Black Celebrity & Entertainment News
Snap pictures, tell stories
Power tips for Success, Inspiration, Love, Motivation & Personal Development. Everyday!
Being Less Fortunate Doesn't Have to Make You Any Less Fabulous
design and clothes by nütie
Web Design/Logo Design/Soundclick Design
FORKSTER'S Top 15 UNSIGNED "Bands of the week": Written reviews and listings show!
Notes from an incredibly shrinking Earth.