Retirement

Let Go of Frugality: How Baby Boomers Can Responsibly Invest in Enjoyment

boomers

Guest Article by Jim McKinley of moneywithjim.org.

Baby Boomers were raised by parents of the Great Depression, so frugality is in our nature. It’s one thing to be responsible, and it’s another entirely to live as if we are fighting poverty daily. For many of us, we can afford to indulge ourselves and truly make our lives enjoyable.

Help for Fixed Budgets

When we live on fixed budgets, following our dreams can be difficult. To free up cash, consider switching from traditional life insurance to a final expense life insurance policy. This is a more affordable option that will still protect your family in the future. These policies are easier to qualify for, yet give us the comfort of knowing our families will not go into debt over a funeral. Although this isn’t always the easiest step to take, knowing that everything is taken care of will take that weight off your shoulders and allow you to have a little fun.

Make a Plan for Your Health

Perhaps one of your most pressing concerns in your golden years will be staying on top of your health, so in order to grab life by the horns and enjoy this era of your life, take care early on to make sure your health needs will be covered now and in the future. Medicare is a boon for most seniors, so find a plan that meets your needs and budget if you haven’t already. Using a step-by-step online guide will help you make sense of the many different Medicare plans available to you, and show you exactly how to sign up for your perfect plan on Medicare.gov.

Travel Smart

One thing many of us aspire to do is travel. Unfortunately, costs can skyrocket, especially if we don’t take time to plan. Hotels are often unaffordable, but their rates drop when you visit during theoff-season. In fact, you don’t have to stay at a hotel; instead, why not immerse yourself in local culture by using non-traditional accommodation? This could mean using camper vans, Airbnb apartments, or even house sitting. Should you go abroad, book plane tickets in advance, and aim for a Tuesday travel date. Wherever you go, plan out what you want to do before you arrive. That way, you can find free or inexpensive attractions while exploring something new and exciting.

Go Secondhand

Have you always wanted to ski, but balk at the cost of all the equipment? Stop by your local thrift store and see what sporting goods they have. You may have longed for nice jewelry or a designer coat, but you don’t have to spend big on these pricey items. Instead, buy them secondhand. They’re often in pristine condition or need just a bit of cleaning. The best part is that no one will know you didn’t pay top dollar for them. Buying secondhand allows you to experience new things and remain fiscally responsible.

Adopt, Don’t Shop

Now that we’re of the age to retire, many of us have more free time than we’re used to. One excellent way to use that time is to adopt a pet. Pets of all varieties are beneficial to us. They keep us happy, energized, and active. In fact, being around pets relieves stress and can even decrease our risk of heart disease. However, don’t go out and buy an expensive puppy. Even if you want a particular breed, you can adopt a rescue for a fraction of the price. What’s more, rescue pets are often already housebroken, which saves you the effort of potty training. Best of all, you’re saving an animal from being put down, because shelters are perpetually overcrowded.

Transform Your Home

Are there projects you have always wanted to do, but could never justify? Now is the time. It doesn’t take a lot of money, and many jobs can be doneyourself. For example, you can transform the feel of each room by adding crown molding, or put in plantation shutters for a touch of class and to make cleaning easier. Look outside the home, too. You may want to transform a grass lawn into a lushgarden. This has added benefits, as gardening is a fun and healthy way to stay active.

While it’s smart to be sensible, we don’t need to deny ourselves fun. There are clever ways we can save money and have a great time, too. Plan accordingly, and soon, you’ll be living the life you have always dreamed of.

Image courtesy of Pixabay

Americans For Tax Reform Backs Simple Tax Form For Seniors

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Tax-News

Tax Reform

Americans for Tax Reform (ATR) has urged all members of Congress to support a bill aimed at simplifying tax filing for American seniors.

The president of the taxpayer advocacy group, Grover Norquist, wrote to Congressman Bill Posey (R – FL), who is introducing the Seniors’ Tax Simplification Act. The bill would create a new tax form, 1040SR, aimed at senior citizens with relatively simple tax affairs. It would include the most common types of income reported by seniors on it, such as interest, dividends, capital gains, Social Security benefits, and pension payments.

Norquist noted that a similar form already exists: form 1040EZ. However, this covers some forms of income not relevant for those who have retired.

He suggested that introducing form 1040SR could benefit some 23 million taxpayers.

Norquist said “All members of Congress should have no hesitation supporting and co-sponsoring this helpful legislation.”

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Retirement investing through the decades

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

By Bankrate

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Investing to grow your retirement savings is a long-term project. The earlier you begin, the better, thanks to compounding interest.

You don’t have to worry about saving a lot at first. It’s all about forming a plan you can stick to.

Here are suggestions for retirement planning through the decades.

Your 20s: Open a 401(k) and IRA

You will likely land your first job in your 20s and can begin saving money for retirement. But before doing so, make sure you have enough cash to pay for three to six months’ worth of living expenses, in case an emergency arises. If you set up a retirement account and then withdraw from it to pay for emergency expenses, you may be subject to taxes and a penalty payment.

Once you have emergency savings, start funding a 401(k) if your employer offers one, especially if the company matches some of your contributions. If you turn down the option to contribute to a 401(k) plan that matches, you’re essentially giving away free money. In 2017, you can contribute up to $18,000 in a 401(k).

You also can open an individual retirement account, or IRA. In 2017, you can contribute up to $5,500.

If you can’t save enough to maintain both a 401(k) and an IRA, go for the 401(k) because contributions are automatic, pretax and subject to matching.

Your 30s: Consider a Roth, adjust asset mix

If you open an IRA in your 20s or 30s, you’ll want to consider a Roth IRA. Unlike a regular IRA, you don’t receive a tax deduction for contributions to a Roth. But when you withdraw money from a Roth IRA during retirement, it’s all tax-free. The money you withdraw from a regular IRA is taxed as regular income.

So if your tax rate is likely to be higher when you withdraw money from your IRA than it is now, you’re better off with a Roth IRA.

When it comes to allocating your retirement investments, try to put at least 60 percent in stocks during your 20s and 30s. But it all boils down to your risk tolerance. If you are unwilling to stomach losses, don’t put everything in stocks. The worst thing you can do is buy stocks and then sell them for a big loss.

Your 40s: Stay focused on the long run

Many people purchase homes in their 30s and 40s. It’s important to remember that your house is not part of your retirement plan, says Mick Heyman, an independent financial adviser in San Diego.

“I haven’t seen too many times that somebody buys a great home, sells it at 60 and then lives off the profits,” he says. So don’t spend so much money on a home that you can’t afford to save for your retirement as well.

You also must be realistic in providing for your children. Don’t spend so excessively on your kids that you neglect your retirement savings goals. That may even mean putting retirement plans ahead of your children’s college. Tuition payments can come from many sources, but retirement funds will have to come largely from the parents.

Your 50s: Capitalize on catch-ups

The 50s are the peak earning years for most people, so it’s even more critical to save. The government gives you some assistance, allowing increased contributions to IRAs and 401(k)s through “catch-up provisions.”

For IRAs, people 50 and older can contribute an extra $1,000 this year — $6,500 in total.

For 401(k) plans, participants 50 and older can put in an extra $6,000 — $24,000 in total.

If you have children who are now out of the house, you might have enough money to finance those catch-up payments.

Your 50s are a good time to opt for more safety in your asset allocation, experts say.

“Somewhere in your 40s and 50s, you want to transfer to more conservative stocks, and make sure you aren’t all in stocks,” Heyman says. “Start having 20 to 30 percent in bonds.” He also recommends orienting your stock holdings toward dividend-paying blue chips. They offer safety and income payments that you’ll appreciate during retirement.

Your 60s: Plan an income strategy

This is the decade in which you may well retire, which means you’ll begin withdrawing from your retirement funds.

The traditional rule of thumb is that you can cash out about 4 percent of your portfolio in each year of retirement. But with low interest rates limiting the amount of income your portfolio will generate, 3 percent may be more appropriate now.

Ideally, you should have two years’ worth of living expenses in cash to avoid having to dump your investments when markets are weak.

Adjust your asset allocation so that bonds account for a larger part of your portfolio, given your need for safety and income.

Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York.  He provides guidance and strategies to improve clients’ financial well-being.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.