retirement planning

How Much Social Security Will I Get?

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social security amount

How Much Will Your Social Security check be? Social Security is a program of the federal government that provides retirement income for Americans older than 62 years old. The program also offers benefits for those who are disabled. The amount of Social Security you get depends on several factors, but most importantly, your age when you choose to start taking Social Security, and your income while working. I want a better idea than that. I want to know how much Social Security will I get when I retire. Fortunately, there is an easy way to find out. Qualifying for Social Security As a government program, there are a million exceptions to every rule, but in general, in order to qualify for a Social Security benefit, you must have 40 work credits. You earn a credit for each quarter you have wages or self-employment income on which you pay Social Security taxes. So, if you have been working for a state government that opts out of Social Security like Colorado does with its PERA pension program, or California does with its CALPERS, then your income doesn’t earn you credits. You can earn up to four credits each year, and you need …

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Why Are Roth IRA Better for Young Adults

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why roth ira best for younger people

There are several different retirement account types, so why is Roth IRA better for young adults? What makes Roth IRA best for certain people? Can older people still benefit from Roth IRA? Why Are Roth IRA Good? A Roth IRA is one of several tax-advantaged retirement accounts. Like the traditional IRA, all money deposited in a Roth IRA grows tax-free. There are no capital gains taxes on a Roth IRA and no taxes on dividends or interest earned inside a Roth IRA. Why Is a Roth IRA Better Than a 401k for Younger People? What makes a Roth IRA so good is that unlike both traditional IRAs and employer sponsored retirement plans like 401(k)s is that withdrawals from Roth IRA are tax-free. With traditional IRAs or 401k plans, withdrawals are taxable even if you are over 59 1/2. However, you cannot deduct your contributions to a Roth IRA. Why Do a Roth IRA? So, what makes a Roth IRA better for younger people? As a younger person, the money you put into a Roth IRA will have much more time to grow. So, all things being equal, a younger person will end up with a higher amount of earnings in …

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Where Is My PERA 401k History?

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the history of pera 401k accounts is missing

Did you login to PERA 401k account and find all of your historical data missing? Do you wonder where your PERA 401k history is on the website? I had the same questions when I tried to log in and plan out buying some PERA retirement years with the 401k. Turns out, there is an easy answer to why all of your PERA 401k data is missing. PERA Changed Custodians If you have a balance in the PERA 401k, then you got the same mailers, emails, and notifications I did. You probably took a quick look at them and figured it wouldn’t matter and decided to ignore them, like I did. That is where the answer lies, however. The PERA Board of Trustees decided they could do better for PERA members. For an organization as large as PERA, doing better usually means lower expenses. 401k Blackout Period Once PERA figured out that they wanted to change 401k custodians, they needed to figure out how. For better or worse, the process of changing 401k administrators is highly regulated with a whole host of rules that must be followed. One of the rules that migrating 401k plans must follow is the imposition of …

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Colorado Secure Savings Program

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colorado secure savings program

Colorado is set to join a handful of other states in creating an automatic retirement savings program for Colorado workers. The idea is that while many Coloradoans have access to a retirement plan like a 401k or 457 plan through their employer, a lot of Coloradoans don’t. Unfortunately, those who do not have an employer sponsored retirement plan often do not start saving for retirement until much later than those who do. And, when it comes to retirement savings, time is lots of money. What Is the Colorado Secure Savings Program? The final Colorado Secure Savings Program won’t launch until at least 2023, but the rough idea is that each Coloradoan who works for an employer without a retirement plan will be automatically enrolled in the CSSP. The CSSP is actually nothing more than an IRA, or Roth IRA. What the program does differently is automatically create the retirement plan account and set the employee’s contribution to a specific minimum which will come from payroll deductions like a 401k plan. People who don’t want to participate can opt out. This plan could be a big retirement driver for Colorado workers over the long term. When I was a financial planner, …

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Retirement Tax Triangle for Better Retirement Planning

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tax triangle save money in retirement

Financial advisors make their bread and butter from retirement planning. Unless you’re wealthy (or young), chances are that most of your money is in your retirement savings and home equity. That makes your retirement accounts the main interest of most financial advisors, so it’s in their best interest to make it sound complicated. Unfortunately, they are right. There are a bunch of little tricks to good retirement planning. Fortunately, most of them are easy to straighten out, like the tax triangle. Retirement Taxes Welcome to Retirement. Oh, while you’re here, we need to tax those 401(k) withdrawals. All too many new retirees find themselves surprised that withdrawals from their 401k accounts are fully taxable. It’s an easy mistake to make. After all, when you contributed money to your 401k it was tax-free (technically, pre-tax, but same difference). And, while all of that money sat in your 401k earning interest and dividends, it was tax-free. So, why wouldn’t it keep being tax-free? Unfortunately, that’s the deal you make with the IRS. A 401k plan is actually a tax-deferred account. As the name implies, the IRS allows you to defer, or wait, to pay the taxes. It is a huge advantage and …

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Big Social Security Raise Coming

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social security card cola increase

I did not see that coming. Well, I knew that there was enough inflation washing around in the US economy that retirees would see an increase in there Social Security payments for 2022. I did not know it would be this big. Social Security COLA Increase Is a Big One If you’re new to collecting Social Security, or if you are just new to following along, Social Security offers a fixed monthly payment to US retirees based upon a combination of how many years they worked, what their salary was while working, and at what age they started taking Social Security benefits. Once this number is set, it is never recalculated. However, each year, all Social Security recipients get a Cost of Living Adjustment or COLA that ensures the benefit’s value stays steady with inflation, a mistake made with the minimum wage that they did not want to repeat. Check out my SoFi review The COLA is calculated by the Social Security Administration based upon inflation statistics for the prior year. In the last few years, the COLA increases have been moderate, less than 2% in most cases. This year, the calculation occurs as higher food and energy prices have …

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Financial Independence Made Simple

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financial independence freedom

Financial independence is both easier and harder to achieve than most people think. Financial independence is simple if you follow the standard, time-tested formula of long-term saving and investing. But no one wants to do that. They want financial independence faster and easier, and that is much harder to achieve than most people think. What Is Financial Independence? The definition of financial independence is when work becomes optional, and you do not depend on anyone else for any income or help with expenses. In other words, when your finances are completely under your control. If you want to keep working, go ahead. If you want to earn money on the side, do you. When you are financially independent you make the choices without regard to your finances. Sound impossible? It is actually quite simple. Easy Financial Independence Achieving financial independence is easy and simple… in exactly the same way as losing weight is easy and simple. Just eat less calories than you burn over a long enough period of time. Financial independence is no different. Just spend less money than you earn over a long enough period of time. You have heard this song a thousand times, and it is …

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What Are Pre-Tax Dollars?

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pretax dollars

Financial advisors and other financial professionals throw around certain terms like, pre-tax dollars, like everyone already knows what they mean. In some cases, they are right, and in other cases, most people only have a partial grasp on what exactly certain financial terms mean. In many cases, knowing the complete definition of a word or phrase makes all the difference. What Does Pre-Tax Mean? Pre-tax dollars is a phrase that is often used in conjunction with retirement planning and 401k contributions. In fact, one of the benefits of a 401k plan is that contributions are made with pre-tax dollars. But, what is the definition of pre-tax dollars, anyway? When an employee gets paid, there are numerous deductions that get taken out of their paycheck. These payroll deductions range from income tax withholding to FICA taxes to voluntary contributions for things like health insurance or cafeteria plans (Section 125 plans). Some of the deductions from your paycheck, like federal tax withholding, are computed based on how much you are paid. Pre-tax means that the deduction occurs before that withholding is calculated. This is why many financial writers and other financial experts point out that contributing to your 401k plan doesn’t actually …

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Social Security If Still Working

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Social Security is a supplemental retirement income program run by the federal government. The idea is simple. While you are working, you pay money into the Social Security system in the form of FICA tax. When you retire, you get a monthly income check from the Social Security system. Social Security is full of political controversy, and we aren’t interested in that here. This is about personal finance and your actual retirement plan, not about what should or should not be according to someone. Social Security While Working Once upon a time, 65 years old was the mandatory retirement age in many fields. In addition, most people didn’t live much past 65. These days, plenty of people live long past 65 years old, and plenty of people also work long past the age of 65. This introduces some new wrinkles to the Social Security program. First, with people living longer, Social Security was paying out more benefits than it used to. So, Congress passed a law that changes the retirement age for Social Security. If you were born between 1943 and 1954, your full retirement age is 66 years old, not 65. You can start collecting Social Security retirement benefits …

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Stock Market Records Is It Time to Buy

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Nothing gets the financial press in tizzy quite like a run of “up days” for the stock market. And, nothing gets the mainstream media interested in the financial media’s excitement like a new RECORD! Dow Jones Record High The Dow Jones Industrial Average has notched some record high closes lately. The S&P 500 Index isn’t far behind, within striking distance of its record high as well. So, what do these new stock market records mean for smart investors? First, the recent stock market records are a lesson to be learned for long-term investors such as retirement investors. When the market looked terrifying in  2008 many people sold off stocks in their 401k plans and other retirement savings, often after much of the damage had already been done. That was a foolish strategy then, but now, five years later, those investors are officially the fools. You were better off to have just stayed put. Harsh? Maybe, but if you are investing for retirement or other long-term horizons, this is a critical lesson to learn. In a recent discussion someone said to me that he was sure he did better by getting out when things were bad and getting back in now …

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