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Your Age-by-Age Checklist to Prepare for Retirement Conversations June 24, 2020

Posted by bradstreetblogger in : General, Retirement, Tax Tip, Taxes , add a comment

June 24, 2020

The question isn’t at what age I want to retire, it’s at what income.                      -George Foreman

Never have times been so interesting. Never has change occurred so fast.  We all know that time moves faster as we grow older.  However, it may not make sense to bend over backwards in an effort to fund your retirement at a young age.  But neither may it be ignored completely either.  
                           -Mark Bradstreet

What should you and your loved ones be doing to prepare for a retirement when and how you want? While the answer partially depends on whether your own personal finish line is just around the corner or decades away, there’s one thing that everyone should be doing, no matter your age: talking.

It’s important to have conversations about retirement planning early and often, but not everyone knows what to talk about or how to get started. These age-based guidelines can serve as discussion points with your loved ones to make sure you’re on track for the retirement you want.

Preparing for retirement in your 30’s

• Don’t let student loans prevent you from saving for retirement. It’s usually a mistake to think that student loan debt should be fully paid off before putting aside money for retirement. Your retirement savings need time to grow so you can achieve your goals, and investing early will pay off in the long run — even if you can’t save as much as you’d like.  The right balance will likely include payments toward both goals, with the exact amounts depending on factors like interest rates and expected returns. 

• Make sure you’re maxing out your company’s 401(k) matching contributions. Employers often match up to a certain amount of your contributions; it’s essentially free money that you could be taking advantage of! 

• Don’t leave your job without taking vesting into consideration. Many companies tie their retirement contributions to a requirement that you stay with the company for a minimum amount of time, known as the vesting period. If you leave before the allotted period of time, be aware of the financial repercussions. 

• Revisit your 401(k) contributions each time you get a raise or promotion. If you’ve set up automatic contributions, it’s important that you don’t fall into the trap of sticking to those levels indefinitely.

• Understand the power of compounding returns. The earlier you begin investing, the more time your money will have to grow. Don’t delay. 

Preparing for your retirement in your 40’s

• Prioritize paying down your high-interest debt. Whether you have credit card debt, a car loan or a home mortgage, paying interest can eat away at your ability to save money for retirement. Prioritize your highest interest debt first and work your way down until you’re debt free. 

• Don’t fall behind. Your 40’s can be a stressful time financially. Many people in today’s “sandwich generation” are squeezed by the needs of children getting ready for college and elderly parents with dwindling reserves. Try to at least keep pace with your previous level of retirement savings. 

• Start running the numbers. Making some quick calculations can help show you where different savings scenarios are likely to lead you. If you’re not sure where to start, try Lincoln Financial’s retirement calculators.

• Talk to a financial advisor to make sure you’re on the right track. “Meeting with a financial advisor can help alleviate some of the stress surrounding retirement by helping savers create a plan,” said Jamie Ohl, Executive Vice President, President, Retirement Plan Services, Lincoln Financial Group. “People who have a plan are more confident and better prepared for retirement.”

Preparing for retirement in your 50’s

• Don’t let your spending get out of control. People often find that their disposable income increases in their 50’s as they become empty nesters and their salaries peak. Instead of letting your spending increase in tandem, increase the amount of money you put into your retirement accounts and practice frugality — getting accustomed to a more luxurious lifestyle can make it more difficult to retire.

• Ask your employer about catch-up contributions. Most companies allow workers who are age 50 and above to contribute an extra $6,000 annually to their 401(k) on top of the regular contribution limits. 

• Don’t count on an “average” lifespan. “People are living longer than ever before, and they may not factor that into their retirement planning,” said Will Fuller, Executive Vice President, President, Annuities, Lincoln Financial Distributors and Lincoln Financial Network. “That makes outliving your savings a real concern for the millions of households in America that do not have any kind of income protection in place.”

• Consider purchasing an annuity to protect against uncertainty. Annuities provide you with a guaranteed income for life, safeguarding you against longevity risk and stock market risk. 

• Get your financial advisor to align with your expected retirement age. You may have an ideal retirement age in mind, but your financial advisor is best situated to help you determine whether it’s realistic and what you need to do to get there. 

Tips like these will make sure that you’re heading in the right direction, but there’s no substitute for talking through your own personal circumstances with a financial advisor every step of the way. You’re never too young or too old to get help from a professional — and if you’ve already followed the steps above, it will be easy for them to take you across the finish line.

Today’s author – Mark Bradstreet

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

– until next week.

IRS Faces Next Challenge: Reopening June 17, 2020

Posted by bradstreetblogger in : General, Taxes , add a comment

June 17, 2020

    WASHINGTON — The Internal Revenue Service cranked out $267 billion in stimulus payments in about two months, faster than many analysts expected. But challenging work lies ahead, such as opening 10 million pieces of piled-up mail and resuming a semblance of normal taxpayer service.                

    The agency, already struggling with budget cuts and reduced staff before the coronavirus pandemic hit in March, was given the monumental task of sending stimulus payments worth $1,200 for most adults and $500 per child to help Americans ride out the economic slump. Despite some hitches—like payments to dead people and debit-card envelopes that looked to some like junk mail—those payments are largely complete, the government said this week. “The IRS has taken on nearly impossible challenges and performed many of them very well,” said Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee.

    Now the agency is trying to slowly reopen dozens of offices around the country and recall thousands of workers as the July 15 tax filing deadline approaches.“It gets tougher from here,” said Mark Everson, a former IRS commissioner.

    Some major operations centers remain closed, and open ones aren’t running at full strength. Refunds are being processed more slowly than usual, agency data indicate. Some telephone assistance is available, but IRS officials say phone lines remain unusually busy and they are directing people to the agency’s website whenever possible. Catching up will take time.

    “If you mailed us something, especially in February, it’s gonna be a while,” said Chad Hooper, an IRS worker in Philadelphia and president of the Professional Managers Association, which represents the agency’s supervisors.

    Meanwhile, the regular tax filing season continues, postponed from the usual April 15 deadline to July 15 as part of the coronavirus relief effort. As of May 29, the IRS had received 6.5% fewer returns than it did last year and processed 13% percent fewer. That suggests many people are waiting longer than usual for refunds. Sometimes the agency’s automated filters block refunds for suspected fraud, requiring a person to check before payments are made, even on electronically filed returns that normally yield fast refunds.

    Michael Whiteley, an unemployed chef in Rochester, N.H., said he filed his tax return in March, expecting a refund of more than $4,000. Instead, he got a notice from the IRS requesting documentation to prove that his son with a different last name was his own. Mr. Whiteley, who had already spent about $500 at H&R Block for tax preparation, said he spent $40 on expedited mail delivery to send follow-up documentation to the IRS in Fresno, Calif.—an office that isn’t set to reopen until the end of June. “I’m still sitting here to this day, waiting,” he said.

    Getting back to normal will be tricky. More than half of agency employees have been working remotely, according to the House Ways and Means Committee. But about 30% have been on paid leave because of the pandemic, and those who staff phone lines generally can’t work from home. The IRS had been trying to make more employees eligible for remote work but didn’t finish doing so before the pandemic started, Mr. Hooper said.

    “Having more modern systems would have been a great thing to have prepared for prior to a thing like this,” said Andrew Moylan, executive vice president of the National Taxpayers Union Foundation, a nonprofit research group affiliated with a conservative organization. “Expect less timeliness, less ability to contact people, less ability to get your questions answered, more problems that people have to sort out.”

    Reopening will be uneven for an agency with offices scattered across the country. Major offices in Utah, Texas and Kentucky reopened this week for employees who can’t work from home. Next come eight states and Puerto Rico, including campuses in Atlanta and Fresno, and that phase could bring back as many as 12,500 workers who aren’t eligible to work remotely. Offices in places with tighter restrictions—including Pennsylvania, Washington, D.C., New York and Maryland—aren’t yet scheduled to reopen.

    Different campuses do different types of work. Many employees have very specialized skills handling certain types of tax returns, creating a complicated management challenge to restore full service. “This is not a McDonald’s where you can move a person from the register to the to-go window,” said Mr. Everson, now vice chairman of Alliantgroup LP.

  The IRS hasn’t restarted services that require face-to-face meetings with the public, such as taxpayer assistance centers and some audit and collections operations. That is a safety concern for taxpayers and the government. Years of hiring freezes and the security of public-sector jobs mean the IRS has an aging workforce that is more susceptible to Covid-19. Employees remain anxious about the risks posed by taking public transportation, being in enclosed facilities with hundreds of co-workers and whether their work stations will be consistently and properly cleaned and disinfected,” said Tony Reardon, president of the National Treasury Employees Union, which represents front-line IRS workers.

    IRS Commissioner Charles Rettig, in a memo to employees, said their health and safety was the agency’s priority. In a statement to The Wall Street Journal, Mr. Rettig said employees worked around the clock in challenging circumstances to provide more than 159 million payments. “As we continue a phased-in reopening, we will do everything possible to accelerate our operations and enhance taxpayer services and processing of refunds,” he said.

    There are other challenges. In March, the IRS announced its “People First Initiative,” suspending some enforcement and collection through July 15 to help taxpayers struggling with unemployment and disruption. At some point, the agency will shift back toward enforcement.

    When will that happen? “It’s going to be a judgment call,” said Diana Erbsen, a lawyer at DLA Piper in New York who is chairwoman of the agency’s advisory council. “It’s not going to be an on-off switch.”

This week’s Author – Mark Bradstreet

Thank you for all of your questions, comments and suggestions for future topics. As always, they are much appreciated. We also welcome and appreciate anyone who wishes to write a Tax Tip of the Week for our consideration. We may be reached in our Dayton office at 937-436-3133 or in our Xenia office at 937-372-3504. Or, visit our website.  

– until next week