Will You Really Be Able to Work Longer?

Blue Springs Financial Consultant

You may assume you will. That assumption could be a retirement planning risk.

Provided by Mike Mead EA, CTC

How long do you think you will work? Are you one of those baby boomers (or Gen Xers) who believes he or she can work past 65?

Some pre-retirees are basing their entire retirement transition on that belief, and that could be financially perilous.

  

In a new survey on retirement age, the gap between perception and reality stands out. The Employee Benefit Research Institute (EBRI) recently published its 2017 Retirement Confidence Survey, and the big takeaway from all the data is that most American workers (75%) believe they will be on the job at or after age 65. That belief conflicts with fact, for only 23% of retired workers EBRI polled this year said that they had stayed on the job until they were 65 or older.¹ 

  

So, what are today’s pre-retirees to believe? Will they upend all their assumptions about retiring? Will working until 70 become the new normal? Or will their retirement transitions happen as many do today, arriving earlier and more abruptly than anticipated?

Perhaps this generation can work longer. AARP, for one, predicts that nearly a quarter of Americans 70-74 years old will be working in 2022, including nearly 40% of women that age by 2024. That would still leave many Americans retiring in their sixties – and more to the point, working until 70 is not a retirement plan.²  

What if you retire at 63, two years before you can enroll in Medicare? EBRI’s statistics indicate that this predicament has been common. You can pay for up to 18 months of COBRA (which is not cheap), tap a Health Savings Account (if you have one), or take advantage of your spouse’s employer-sponsored health coverage (if your spouse still works and has some). Beyond those options, you could either pay (greatly) for private health insurance or go uninsured.³

      

What if you end up claiming Social Security earlier than planned? Given an average lifespan (i.e., you live into your eighties), that may not be so bad – you will get smaller monthly Social Security payments if you claim at 63 rather than at the Full Retirement Age (FRA) of 67, but the total amount of retirement benefits you receive over your lifetime should be about the same. Retiring and claiming Social Security well before Full Retirement Age (FRA), however, may mean a drastic revision of your retirement income strategy, if not your whole retirement plan.⁴ 

  

What will happen to your retirement assets if you leave work early? Will you still be able to contribute to your IRA(s) or pay the premiums on a cash value life insurance policy? Could you postpone withdrawals from your retirement accounts for months or years? How long can you count on this bull market?

   

If you are a baby boomer or Gen Xer, hopefully you have planned or built wealth to such a degree that the shock of an early retirement will not derail your retirement plan. It is realistic to recognize that it could.

If you want to work past 65, one key may be keeping your job skills current. The Transamerica Center for Retirement Studies reports that only about 40% of baby boomers are doing that.¹

Lastly, if you switch jobs, you may improve your odds to work longer. A new study from the Center for Retirement Research at Boston College notes that 55% of college-educated workers who voluntarily changed jobs in their fifties were still working at age 65, compared with only 45% of workers who stayed at the same employer.¹ 

Mike Mead EA, CTC your Blue Springs Financial Consultant may be reached at 816-220-2001 or mmead@afitonline.com     www.AFITonline.com

 

       

Citations.

1 - cnbc.com/2017/04/21/the-dangers-of-planning-on-working-longer.html [4/21/17]

2 - aarp.org/politics-society/history/info-2016/baby-boomers-turning-70.html [1/16]

3 - forbes.com/sites/financialfinesse/2017/02/09/how-to-cover-medical-expenses-if-you-retire-before-65/ [2/9/17]

4 - fool.com/retirement/2017/03/04/the-one-social-security-mistake-you-dont-want-to-m.aspx [3/4/17]

Blue Springs Tax & Financial Consultants

The majority of our clients have been with Alliance Financial and Income Tax for years, and we help multi-generational families in Missouri with their investment and tax preparation needs. These strong relationships are the result of the high-touch, personal care that we give each and every client.

Educating our clients is our first objective, and helping them save and grow their assets is our second. We understand that taxes can’t be avoided, and we work with clients to create tax-efficient strategies that will help them feel more confident in their financial future.

By offering tax, accounting, and financial services, Alliance Financial and Income Tax seeks to serve as a one-stop resource in Missouri for clients, whether they need assistance filing a tax return, building an investment portfolio, or simply have questions about how their taxes may affect their future retirement. We use our knowledge of the financial services industry and teaching skills to educate clients on investments and taxes.

Another reason our lifelong clients continue to turn to Alliance Financial and Income Tax is because we believe in the simple idea of paying off debt and not being a slave to the lender. We help our clients establish a plan to get on the right track when it comes to their debt and finances.

How We Help

At Alliance Financial and Income Tax in Missouri, our highly qualified team of professionals can help clients pursue their financial goals and rid themselves of any debt that they may have incurred without the guidance that they need. We operate under the philosophy that tax preparation and investment planning go hand-in-hand, meaning that you can’t have one without the other.

Our Blue Springs Enrolled Agents and investment professionals can provide a multitude of services, such as:

Investment Management

We offer access to professional money management and brokerage accounts, mutual funds, and annuities. 

Cash Flow and Debt Management

We assist clients with debt analysis, consolidation, reduction, and budgeting. We work with you to improve your cash flow through tax strategies and debt management tactics such as refinancing, consolidation or changes in tax withholding.

Retirement and Distribution Planning

We assist individuals, families, and small business owners with retirement plans, including but not limited to Roth, SIMPLE, and SEP IRAs, 401(k)s, 403(b)s, and annuities. Whether your idea of retirement means working part-time, full-time or no-time, we aim to find the appropriate retirement income vehicle to address your income needs, risk tolerance, and tax liabilities.

Estate/Legacy Planning

We can assist clients with charitable gifting during life, charitable inclination at death, titling of assets, executor/successor trustee issues and distribution of wealth to spouse/beneficiaries at death. We work with you to minimize your estate taxes with the goal of ensuring that the assets you pass on are maximized, and your survivors don’t have to guess what your wishes were in their time of bereavement.

Tax Planning

We assist businesses, families, and individuals with tax planning, IRS representation, and return preparation, including trust, gift, and estate tax filings. We stay abreast of constantly changing tax regulations so we can advise and represent you through the expansive maze of tax law compliance.

Our Investment Philosophy

At Alliance Financial and Income Tax in Missouri, we are committed to providing common sense education and empowerment, and we seek to instill hope in everyone, from the financially independent to the financially distressed. Proverbs tell us that “the borrower is a slave to the lender,” and we base what we do on this simple principle. We believe that our clients can’t live their fullest life when they are tied down with debt, which is why we help create a customized strategy to help our clients say goodbye to debt and hello to financial freedom.

Mike operates under the same principles that Dave Ramsey has laid out, including avoiding debt and operating with the heart of a teacher.

When clients turn to Alliance Financial and Income Tax, they expect a high level of service and ethically responsible investment techniques. We work to rid our clients of debt and educate them on how to pursue their personal and financial goals.

Our Mission

At Alliance Financial and Income Tax, our goal is simple: we want to educate our clients so they are more prepared for their financial future. Working throughout Missouri, we have helped clients gain better control of their finances and understand the importance of setting up a plan to pursue both short and long-term goals, including working on reducing debt. We work closely with our clients to develop investment and tax strategies that are aligned with their needs.

When clients work with Alliance Financial and Income Tax, they can expect an advisor that doesn’t confuse them with industry jargon, but instead sits down with them personally and educates them about where their money will go. We work in a low-pressure environment and as a fee-based firm in Missouri, we never pressure clients into purchasing particular services or products. Instead, we help guide them to an investment strategy that is right for them and their families.

Advantages of Working With Us

Throughout your lifetime, you’ll be faced with situations that may require helpful advice from an experienced professional. We seek to serve as your one-stop tax and investment resource, guiding you through the various financial milestones in life.

The following are occasions when you may need tax or financial advice:

• Starting, buying, selling, or closing a small business
• Changing or leaving a job
• A raise or promotion
• Before receiving a distribution from a 401K or pension plan
• Buying or selling a house or rental property
• Refinancing your current home
• Receiving an inheritance
• Making a charitable contribution
• Giving or receiving a gift over $13,000
• Anytime your investment time horizon changes
• Retiring or starting to receive Social Security
• Having a child
• Questions about financing your own, your children’s, or your grandchildren’s education
• Any situation where you would just want to talk or get a second opinion

We help simplify the often complex world of tax planning and investment management. No matter where you are in your financial life, we will work with you to reduce debt and help you feel comfortable with your financial future.

9 Facts About Retirement

Tip: Nearly 80% of workers expect to work for pay in retirement, but only 29% of retirees actually have done so.
Source: 2017 Retirement Confidence Survey, EBRI

Retirement can have many meanings. For some, it will be a time to travel and spend time with family members. For others, it will be a time to start a new business or begin a charitable endeavor. Regardless of what approach you intend to take, here are nine things about retirement that might surprise you.

1. Many consider the standard retirement age to be 65. One of the key influencers in arriving at that age was Germany, which initially set its retirement age at 70 then lowered it to age 65.¹
2. Every day between now and the end of the next decade, another 10,000 baby boomers will turn 65. That’s roughly one person every 8 seconds.²
3. In 2016, people aged 65 and older accounted for 15% of the population in the U.S. By 2060, they are expected to make up more than 24% of the population.³
4. Ernest Ackerman was the first person to receive a Social Security benefit. In March 1937, the Cleveland streetcar motorman received a one-time, lump-sum payment of 17¢. Ackerman worked one day under Social Security. He earned $5 for the day and paid a nickel in payroll taxes. His lump-sum payout was equal to 3.5% of his wages.⁴
5. Seventy-nine percent of retirees say they are confident about having enough money to live comfortably throughout their retirement years.⁵
6. Nine of ten adults aged 65 years and older say they have taken at least one prescription drug in the last 30 days.⁶
7. In 2016, nearly two-thirds (61%) of retirees depended on Social Security as a major source of their income. The average monthly Social Security benefit at the beginning of 2016 was $1,341.⁷
8. Centenarians — in 1980 there were 15,000 of them. Today there are more than 72,000. And 80% of them are women.⁸
9. Seniors age 75 and over spend a lot of time watching TV, on average 4.5 hours a day.⁹

Conclusion

These stats and trends point to one conclusion: The 65-and-older age group is expected to become larger and have more influence in the future. Have you made arrangements for health care? Are you comfortable with your investment decisions? If you are unsure about your decisions, maybe it’s time to develop a solid strategy for the future.

Postponing Retirement?

26% of workers now intend to keep working until age 70 and beyond. And 10% don’t intend to retire at all.

Chart Source: Employee Benefit Research Institute, 2016.

If you have questions regarding your retirement planning contact our Blue Springs financial consultant office today.

Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012
AFITOnline.com

Who is Alliance Financial & Income Tax

1,4. Social Security Administration, 2017
2. The Motley Fool, May 15, 2016
3. Population Reference Bureau, January 2016
5. Employee Benefit Research Institute, 2017 Retirement Confidence Survey
6. Centers for Disease Control and Prevention, 2016
7. Employee Benefit Research Institute, 2017 Retirement Confidence Survey; Social Security Administration, 2016
8. The New York Times, January 21, 2016
9. Bureau of Labor Statistics, June 24, 2016

Getting Married?

Saving $1 Million for Retirement

How can you plan to do it? What kind of financial commitment will it take?

Provided by your Blue Springs Financial Professional Mike Mead, EA, CTC

How many of us will retire with $1 million or more in savings? More of us ought to – in fact, more of us may need to, given inflation and the rising cost of health care.

Sadly, few pre-retirees have accumulated that much. A 2015 Government Accountability Office analysis found that the average American aged 55-64 had just $104,000 in retirement money. A 2016 GoBankingRates survey determined that only 13% of Americans had retirement savings of $300,000 or more.^1,2

 

A $100,000 or $300,000 retirement fund might be acceptable if our retirements lasted less than a decade, as was the case for some of our parents. As many of us may live into our eighties and nineties, we may need $1 million or more in savings to avoid financial despair in our old age. 

The earlier you begin saving, the more you can take advantage of compound interest. A 25-year-old who directs $405 a month into a tax-advantaged retirement account yielding an average of 7% annually will wind up with $1 million at age 65. Perhaps $405 a month sounds like a lot to devote to this objective, but it only gets harder if you wait. At the same rate of return, a 30-year-old would need to contribute $585 per month to the same retirement account to generate $1 million by age 65.³    

The Census Bureau says that the median household income in this country is $53,657. A 45-year-old couple earning that much annually would need to hoard every cent they made for 19 years (and pay no income tax) to end up with $1 million at age 64, absent of investments. So, investing may come to be an important part of your retirement plan.⁴

 

What if you are over 40, what then? You still have a chance to retire with $1 million or more, but you must make a bigger present-day financial commitment to that goal than someone younger.

 

At age 45, you will need to save around $1,317 per month in a tax-advantaged retirement account yielding 10% annually to have $1 million in 20 years. If the account returns just 6% annually, then you would need to direct approximately $2,164 a month into it.⁴

    

What if you start trying to build that $1 million retirement fund at age 50? If your retirement account earns a solid 10% per year, you would still need to put around $2,413 a month into it; at a 6% yearly return, the target contribution becomes about $3,439 a month.⁴

  

This math may be startling, but it is also hard to argue with. If you are between age 55-65 and have about $100,000 in retirement savings, you may be hard-pressed to adequately finance your future. There are three basic ways to respond to this dilemma. You can choose to live on Social Security, plus the principal and yield from your retirement fund, and risk running out of money within several years (or sooner). Alternately, you can cut your expenses way down – share housing, share or forgo a car, etc., which could preserve more of your money. Or, you could try to work longer, giving your invested retirement savings a chance for additional growth, and explore ways to create new income streams. 

 

How long will a million-dollar retirement fund last? If it is completely uninvested, you could draw down about $35,000 a year from it for 28 years. The upside here is that your invested retirement assets could grow and compound notably during your “second act” to help offset the ongoing withdrawals. The downside is that you will have to contend with inflation and, potentially, major healthcare expenses, which could reduce your savings faster than you anticipate.

So, while $1 million may sound like a huge amount of money to amass for retirement, it really is not – certainly not for a retirement beginning twenty or thirty years from now. Having $2 million or $3 million on hand would be preferable.

Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012
AFITOnline.com

Who is Alliance Financial & Income Tax

EXPENSES FROM LOOKING FOR WORK MAY BE TAX-DEDUCTIBLE

If you are looking for work, some of the expenses you incur may be tax-deductible, provided that you are looking for work within the same field. Unfortunately, expenses incurred when searching for a job in a new field or a first job are not tax-deductible. 

If you are an employee, job-search expenses are deducted as miscellaneous itemized deductions on Schedule A. Thus, you have to itemize your deductions to gain any benefit. On top of this, miscellaneous itemized deductions are only deductible to the extent that they exceed 2% of your adjusted gross income. Self-employed individuals can deduct expenses related to acquiring new business on Schedule C. 

Travel Expenses – One of biggest expenses related to searching for a job is travel, which may be local or away from home. Deductions for travel expenses when driving locally for job interviews are generally limited to the cost of parking and tolls, plus mileage, which is deducted at the current mileage rate (53.5 cents per mile in 2017) for trips to and from potential job locations and job-placement services. 

If you travel outside your tax home (where you normally live and work) overnight, you may be qualified to deduct, in addition to the auto travel expenses described above, the full cost of overnight lodging and of various forms of transportation (air, bus, train and more), as well as half the cost of meals. 

Résumé Preparation – The costs of having a professional service prepare your résumé are deductible. In addition, you can deduct the costs of résumé reproduction, postageand envelopes for mailing. 

Job-Placement Services – You can generally deduct the fees paid to job-placement agencies when looking for a job.

A few additional tax issues might apply to your situation: 

Unemployment Income – Although some states don’t tax unemployment compensation, that income is taxable income for federal purposes. Generally, no income tax is withheld on unemployment benefits, which may lead to an unpleasant surprise at tax time. 

Health Insurance – If you acquired your insurance through a marketplace, and if your premiums are subsidized with the advance premium tax credit, it is important that you report any changes in circumstances to the marketplace; this includes increases or decreases in income, changes in eligibility for other coverage and changes of address. Advance payments are paid directly to your insurance company to lower the out-of-pocket cost for your health insurance premiums. Reporting changes will help you get the proper type and amount of financial assistance so that you can avoid getting too much or too little in advance.

If you have questions about job-search expenses or other issues related to changing employment, such as pension-plan rollovers and moving-expense deductions, please give our Blue Springs income tax preparation office a call.

Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012
AFITOnline.com

Who is Alliance Financial & Income Tax

Dave Ramsey Endorsed Local Provider in Missouri

Mike Mead, EA, CTC, is the Endorsed Local Provider for Missouri income taxes services for the Dave Ramsey Show.

As Dave's Endorsed Local Provider, my team and I are committed, just as Dave is, to providing Biblically based, common sense education and empowerment, seeking to give HOPE to everyone from the financially independent to the financially distressed.

Alliance Financial & Income Tax  provides a faith driven and ethical approach for solving the tax, financial, and accounting challenges of today's marketplace. We strive to learn and understand individual and business financial information, build and maintain long lasting relationships, and provide the highest quality information, service, and products to help bring financial peace.

Dave Ramsey knows first-hand what financial independence means in his own life - living a true rags to riches to rags to riches story. By age 26 he had established a $4 million real estate portfolio (using mostly debt), only to lose it by age 30. He has since rebuilt his financial life and now devotes himself full-time to helping ordinary people understand the forces behind their financial distress and how to set things right - financially, emotionally and spiritually.

Dave rebuilt his financial life and is the host of the nationally syndicated radio program "The Dave Ramsey Show". His radio program is syndicated to more than 400 radio stations nationwide with more than 4 million daily listeners. He has also authored the New York Times best sellers The Total Money Makeover, Financial Peace, More than Enough, and most recently EntreLeadership.

Dave started his company to provide wealth management counseling to the public. The new Financial Peace University (FPU) is a 9-week program that helps people dump their debt, get control of their money, and learn new behaviors around money that are founded on commitment and accountability.  Financial Peace University is also available as a group curriculum to churches and organizations for on-site classes.

What is an ELP?

An Endorsed Local Provider is a tax professional in your area that has been personally chosen by Dave's team based on his or her integrity, professionalism, and experience. ELPs understand and believe in the financial principles that Dave teaches on The Dave Ramsey Show each day.

Why use Dave's ELP?

ELPs are contractually obligated to share the same financial philosophies with you that Dave teaches on the air everyday. Dave's team works with the ELPs everyday to make sure they serve his listeners with high standards of customer service and with the heart of a teacher.

 

Mike Mead, EA, CTC
Alliance Financial & Income Tax
807 NW Vesper Street
Blue Springs, MO. 64015
P - 816-220-2001 x201
F - 816-220-2012
AFITOnline.com

Who is Alliance Financial & Income Tax