Archives for the ‘Wealth Management’ Category

18 Nov 2013
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3 Easy Steps to Understanding you IRA and 401K Limits for 2013

IRA and 401k Limits for 2013

Whether you have a personal IRA or a company sponsored 401K one crucial thing to know is how much you can add or contribute to that account each year before you get penalized, in other words your IRA and 401k limits for 2013. The IRS has strict rules regarding your maximum contribution and will impose hefty fines upon those individuals who contribute more than they are legally allowed. We have provided 3 easy to understand steps to help you understand how much you can contribute to either your IRA or 401K each year.

1st: You need to know which type of account you have.

The contribution limits differ depending on whether you have an IRA or a 401K. IRA literally stands for Individual Retirement Account. An IRA can be sought out privately and some employers provide IRA benefits. There are also different types of IRAs such as: traditional IRAs, Roth IRAs, and SEP IRAs. A 401K is typically part of an employee benefit program where an employer contributes a certain percentage of an employee’s income each year. You should be able to determine which type of account you have by looking at your monthly/quarterly statements. If you are still unsure then you should contact account servicer and ask for details.

2nd: You should know the difference between contribution limits for either an IRA or 401K.

IRA limits for 2013:

As of 2013, the new contribution limits for IRAs (both Roth and Traditional) is $5,500 per year collectively. You may have more than one IRA. If so then you can add money to either account but your total contributions cannot be more than $5,500 per year. If you are over the age of 50, then you can contribute and additional $1,000 per year, or $6,500 total (this is commonly referred to as a “Catch-Up Period.”) The same contribution limits will be true for 2014.

401k Limits for 2013

Since 401K plans operate differently than IRAs the contribution limits are different too. As of 2013, you can contribute up to $17,500 per year as an elective salary deferral to your account. In other words, the amount you choose to set aside each paycheck to go into your 401K cannot exceed $17,500 collectively during the year. This amount does not include employer contributions. The total of your elected savings into your 401K plus the amount your employer contributes cannot exceed $51,000 for 2013 and $52,000 for 2014. Finally, if you are over the age of 50, you are allowed an additional contribution of $5,500 each year.

3rd: Set goals for yourself and keep track of those goals.

It is important to have a firm understanding of where you are now and where you want to be in 5, 10, or even 20 years from now. Understanding your contribution limits is an excellent way to avoid unnecessary fees, but it is also a way to set goals for yourself. Think about the power of compounding interest and how much more effective that it would be if you were adding as much money as you could afford to the equation every year. USelfDirect.com is packed with tools and resources, like IRA calculators, to help you make the most out of your retirement account. Feel free to explore the site or give one of our representatives a call today.

 

 

 

 

 

 

Sources:

www.irs.gov

http://taxes.about.com/b/2012/10/23/ira-contribution-limits-for-2013.htm

http://taxes.about.com/od/retirementtaxes/qt/401k-contribution-limits.htm

www.uselfdirect.com

 

 

1 Jul 2013
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Social Security Income: The Longer you wait, the better.

Patience is a virtue… Especially when it comes to receiving social security income.

It isn’t a surprise that many people, Boomers and Millennials alike, are going to rely on Social Security to help fund their retirement. Actually according to an article published this morning on Mainstreet.com, 85% of Baby Boomers and 54% of Millennials expect SS to be a “top source” of income during retirement. It is debatable as to why there is a difference between generations and who plans on using SS, but one thing that is clear is that there will be a majority of the population using it for the next few decades. However, not all of the SS users will be receiving the same benefits.

According to the Social Security Administration website (ssa.gov) there are different benefits depending on when a person actually retires. Someone can actually receive less than 100% of their SS income if they retire early, but they could also receive more than 100% if they retired later than the age of 67. The SSA website is actually very helpful, but you have to understand that it was probably written by a government administrator and isn’t the easiest of reads. I have provided a summary of information that I found on the SSA website to spare you from reading through the long and complicated version.

Basically, the earliest you can “retire” and receive SS benefits is at the age of 62. At 62 you receive the LEAST amount of benefits at only 70.42% of your total allowable SS benefits. Normal retirement age, as defined by the SSA, is 67 years old. At 67, you would receive 100% of your allowable SS benefits. You can claim your benefits after the “normal retirement age” and actually receive a bonus for doing so. The latest you can wait, and receive any kind of added benefits, is the age of 70. At 70, you would receive 124% of your allowable SS benefits. Below is a chart that shows the different percentages of SS benefits depending on what age you decide to retire.

 

As you can see, it is MUCH more beneficial to elect to receive SS benefits until after the age of 67. The difference between retiring 3 years earlier (age 64) or 3 years later (age 70) is a 20% decrease or a 24% increase. You get more money for waiting.

Now, every person is different and everyone has a different scenario when it some to retirement-income needs. Not everyone can wait an extra 3 years to start receiving SS income, some can barely wait until age 62. I wrote this article to try and do 2 things. First, inform people about how the SS benefits work from a general perspective. Secondly, I aim to hopefully motivate people to plan ahead. If you plan on supplementing your retirement with IRAs, Real Estate Investments, Employee Retirement Plans, or another form of retirement investment then you can potentially wait longer to request SS benefits. In other words, you can AFFORD to have patience.

For more information on SS benefits, visit the SSA website.

Sources:
Mainstreet.com article: http://www.mainstreet.com/article/retirement/think-twice-about-social-security-early-retirement
SSA website: http://www.ssa.gov/oact/quickcalc/early_late.html