Beware of 2020's Stealth Social Security Cut - The Motley Fool

Many people spend years looking forward to turning 62. That's because 62 is the first age at which most workers can claim retirement benefits from Social Security, and a large fraction of older Americans choose to start getting monthly checks from Social Security as soon as possible.

If you're going to be eligible for Social Security for the first time in 2020, however, there's something you need to know. Under laws that took effect more than 35 years ago, the benefits that you'll receive will be less than what people in a similar position in 2019 received. That's because lawmakers back then dealt with potential financial difficulties for the program by instituting new rules that effectively reduced how much those hitting early retirement age will get from Social Security.

What lawmakers did to take away benefits now

Social Security has always been a dangerous issue to discuss in Washington, and lawmakers in the early 1980s knew that they were entering a potential minefield. Yet they also needed to ensure the long-term financial security of the program. As part of a compromise, Congress agreed to raise the full retirement age, which at the time was 65.

Image source: Getty Images.

However, the provisions didn't take effect immediately. The intent of waiting was to ensure that those who were close to retirement wouldn't get punished by the law changes at a time at which it was too late for them to do anything about it.

Instead, increases to the full retirement age got implemented on a delayed basis. It went rose from 65 in two-month increments for those born between 1938 and 1942, and stayed at 66 for those born between 1943 and 1954. More recently, another set of two-month incremental increases began a few years ago for those born in 1955. Those increases will continue until those born in 1960 and later have a full retirement age of 67.

What that means for those turning 62 in 2020 is that their full retirement age will be 66 and eight months. That's up two months from the full retirement age of 66 and six months for those who turned 62 in 2019.

Just how much money are new Social Security recipients losing?

The consequences of full retirement age rising by two months aren't immense, which is why it's fair to characterize the move as a stealth Social Security cut. Over time, though, the slight reductions will add up.

As an example, say that you're turning 62 in 2020 and were an above-average earner throughout your career, therefore qualifying for a full retirement monthly benefit of $1,800 from Social Security. Because your full retirement age is 66 and eight months, retiring at 62 means that you're getting your benefits 56 months early. That will result in your getting a Social Security check each month equal to 71 2/3% of your full retirement amount, or $1,290.

However, someone who turned 62 in 2019 and had the same earnings history and full retirement age benefit would receive slightly more. Because the full retirement age applying here was 66 and six months, claiming at 62 is just 54 months early. The 2019 retiree got 72 1/2% of their full retirement monthly benefit, or $1,305. That's $15 per month higher.

You can't just wait it out

If you think you can avoid the problem by holding off longer before claiming your Social Security benefits, think again. The change in full retirement age affects your benefits no matter when you claim.

For example, say you wait until age 70 to claim. You'll get 40 months' worth of delayed retirement credits, which will boost your check by 26 2/3%. The monthly check will be $2,280. However, for the person who turned 62 in 2019 instead of 2020, the increase would be slightly greater, with 42 months adding up to a 28% boost. That makes the corresponding monthly check $2,304 -- $24 higher every month.

Cuts will continue

Those turning 62 in 2021 and 2022 will also have to deal with this Social Security cut, until the full retirement age finally maxes out at 67. However, some policy makers believe that further increases to Social Security's retirement age could be forthcoming. Staying aware of them is critical to make sure that you don't get any nasty Social Security  surprises.

Let's block ads! (Why?)

https://news.google.com/__i/rss/rd/articles/CBMiW2h0dHBzOi8vd3d3LmZvb2wuY29tL3JldGlyZW1lbnQvMjAxOS8xMi8yOS9iZXdhcmUtb2YtMjAyMHMtc3RlYWx0aC1zb2NpYWwtc2VjdXJpdHktY3V0LmFzcHjSAV9odHRwczovL3d3dy5mb29sLmNvbS9hbXAvcmV0aXJlbWVudC8yMDE5LzEyLzI5L2Jld2FyZS1vZi0yMDIwcy1zdGVhbHRoLXNvY2lhbC1zZWN1cml0eS1jdXQuYXNweA?oc=5

2019-12-29 14:03:00Z
52780525607982

Can I Retire Securely by Saving Only in an IRA? - The Motley Fool

There's a reason 401(k) plans are regarded as a valuable retirement savings tool: Their generous annual contribution limits make it feasible for workers to retire with more than enough money to live on for decades.

Currently, the annual contribution limits for 401(k)s are $19,000 for workers under 50, and $25,000 for those 50 and older. In 2020, these limits are increasing to $19,500 and $26,000, respectively. Plus, employers that sponsor 401(k)s often match worker contributions to varying degrees, which means those who save in a 401(k) can often sock away more than what the annual limits allow for, since employer contributions don't count toward them.

There's just one problem with 401(k)s, though: Not everyone has access to one. In fact, an estimated 49% of private sector workers did not have the option to save in a 401(k) in 2014, as reported in 2018 by the National Institute on Retirement Security.

IMAGE SOURCE: GETTY IMAGES.

If you don't have the option to save for retirement in a 401(k), you may be wondering if an IRA will suffice. The annual contribution limits for IRAs are much lower than those of 401(k)s: just $6,000 for workers under 50, and $7,000 for those 50 and over. And, those limits are holding steady going into 2020, so workers won't get an added opportunity to save in the coming year. The good news, however, is that if you manage your IRA wisely, you could potentially retire quite comfortably with that money alone.

Maximizing your IRA

If you're limited to saving for retirement in an IRA, financial security could very well be yours if you do three key things:

1. Start saving at a young age.
2. Max out every year.
3. Invest your savings wisely.

Many people delay their retirement savings for years after entering the workforce, largely because they graduate college with debt, but also because they figure they have plenty of time to save for their golden years. But if you start funding your IRA at age 22, and you retire around age 67, you'll have a solid 45 years to invest your savings for added growth. And if you're willing to live frugally so you can max out year after year, you'll wind up socking away quite a bundle.

Now, let's talk investments. Loading up on stocks in your IRA is generally the way to go, because that's where you'll usually be looking at the most aggressive growth. With an IRA, you can choose to invest in individual stocks, or in mutual funds that are stock-based. A mix of both could serve you well, but if you're not well-versed in vetting individual companies, mutual funds may be the way to go. That said, opting for index funds over actively managed mutual funds is a great way to keep your investment fees to a minimum, thereby getting to retain more of your returns.

Assuming you stick to this plan, there's a good chance your IRA will manage to generate an average annual 7% return over a 45-year period, since that's a bit below the stock market's average. Now, let's assume that you max out your account for 45 years at the current annual contribution limits between the ages of 22 and 67. When we apply that 7% return, you're left with -- wait for it -- $1.75 million. That's certainly enough for a decent retirement, because if you withdraw from that amount of savings at an annual rate of 4%, which many financial experts recommend, you'll be looking at $70,000, and that doesn't include the money you get from Social Security or other sources.

So there you have it: An IRA is enough to buy you financial security during your golden years. You just need to make sure you fund it for as many years as possible, contribute as much as you can, and invest it wisely.

Let's block ads! (Why?)

https://news.google.com/__i/rss/rd/articles/CBMiXmh0dHBzOi8vd3d3LmZvb2wuY29tL3JldGlyZW1lbnQvMjAxOS8xMi8yOS9jYW4taS1yZXRpcmUtc2VjdXJlbHktYnktc2F2aW5nLW9ubHktaW4tYW4taXJhLmFzcHjSAWJodHRwczovL3d3dy5mb29sLmNvbS9hbXAvcmV0aXJlbWVudC8yMDE5LzEyLzI5L2Nhbi1pLXJldGlyZS1zZWN1cmVseS1ieS1zYXZpbmctb25seS1pbi1hbi1pcmEuYXNweA?oc=5

2019-12-29 11:36:00Z
CAIiEFeeYmsl5ZF8Q4wfMSGz65gqFQgEKgwIACoFCAowgHkwoBEw2vCeBg

Elon Musk says Las Vegas tunnel will hopefully be operational by 2020 - CNN

His idea to bore tunnels underground to alleviate traffic in highly congested cities like Los Angeles and Las Vegas initially began as a joke in 2016 but has now become a full-fledged business aptly named the Boring Company with several nascent projects in major cities, including Chicago and Baltimore.

He tweeted Friday night that the Boring Company is completing its first commercial tunnel in Vegas from the Las Vegas Convention Center to the Strip, before it works on other projects.

Musk and the Boring Company have been working to revolutionize the way people travel with high-speed Loop and Hyperloop transportation systems. Underground tunnels will transport people in cars or passenger "pods," allowing commuters to bypass traffic and get around cities faster.

When completed, the Las Vegas project will consist of two tunnels, each about a mile long. Passengers will be transported via autonomous vehicles at up to 155 miles per hour, the company says.

As hawk-eyed Twitter users have pointed out, Musk, who also founded electric-car maker Tesla (TSLA)and rocket company SpaceX, had originally tweeted in March that the Vegas tunnel could be operational by the end of 2019. He then tweeted in May that the company would begin digging in two months — but the company did not actually start until November.

The Boring Company did not respond to a request for comment on Saturday.

A spokesperson for the Las Vegas Convention and Visitors Authority told CNN Business that Musk's 2020 fully operational deadline was in line with what was previously announced in November and that the tunnel would be complete in time for the 2021 Consumer Electronics Show.

"Nothing has changed on the anticipated timeline for development," she said. "We just broke ground mid-November and have its anticipated completion for the CES 2021 show."

In December 2018, Boring completed a test tunnel in Hawthorne, California that's used for developing Loop and Hyperloop. While Musk demonstrated a Tesla Model X that descended into the tunnel and drove a mellow 35 miles per hour during opening night, he envisions Hyperloop transport that will eventually reach 600 miles per hour. If that happens, US transportation could see a serious upgrade, but a lot of shifting deadlines stand in Musk's way for now.

Let's block ads! (Why?)

https://news.google.com/__i/rss/rd/articles/CBMiSWh0dHBzOi8vd3d3LmNubi5jb20vMjAxOS8xMi8yOC90ZWNoL2Vsb24tbXVzay1sYXMtdmVnYXMtdHVubmVsL2luZGV4Lmh0bWzSAQA?oc=5

2019-12-28 18:36:00Z
52780525428054

McDonald's employees help woman who mouthed "help me" at drive-thru - CBS News

When a woman walked up to a McDonald's counter in Lodi, California, this week, she didn't order a Big Mac. Instead, she indicated she needed help.

According to the San Joaquin County Sheriff's Office, the woman told an employee at the counter to call 911, providing the license plate of the vehicle she had arrived in. She also asked them to hide her. 

Police said the distressed woman used the bathroom and attempted to place an order at the counter, but the nearby suspect, Eduardo Valenzuela, demanded she order using the drive-thru instead. While driving through, she mouthed, "Help me," to an employee. 

McDonald's employees in Lodi, California immediately called police after a woman came up to the counter begging for help.   San Joaquin County Sheriff's Office

Deputies arrived just after her request for help, and the McDonald's employees immediately directed them to the drive-thru. They ordered the woman to pull over. Valenzuela was sitting in the passenger seat. 

Trending News

A police investigation revealed that Valenzuela had a history of being violent with the woman. On that particular day, he threatened her with a firearm and told her to take him to visit his family, according to the San Joaquin County Sheriff's Office, 

Police found a stolen firearm from another state in the trunk of the vehicle. Valenzuela was booked in the San Joaquin County Jail for criminal threats, stolen property, and felon in possession of a firearm.

Eduardo Valenzuela was booked in the San Joaquin County Jail for criminal threats, stolen property, and felon in possession of a firearm. San Joaquin County Sheriff's Office

Police thanked the employees for providing a "safe place" for abuse and human trafficking victims. The McDonald's location is owned by the Golden State Restaurant Group, which certifies each of its establishments as a "safe place." 

"Safe Place is a national youth outreach and prevention program for young people in need of immediate help and safety," the restaurant group said on its website. More than 20,000 community and business locations across the U.S. participate in the program. 

"We are proud of our team for doing their part in being A SAFE PLACE!" Golden State McDonald's wrote on Facebook. "We are proud to be in support with both A Safe Place and all of our law enforcement!" 

Let's block ads! (Why?)

https://news.google.com/__i/rss/rd/articles/CBMiXmh0dHBzOi8vd3d3LmNic25ld3MuY29tL25ld3MvbWNkb25hbGRzLWVtcGxveWVlcy1oZWxwLXdvbWFuLXdoby1tb3V0aGVkLWhlbHAtbWUtYXQtZHJpdmUtdGhydS_SAWJodHRwczovL3d3dy5jYnNuZXdzLmNvbS9hbXAvbmV3cy9tY2RvbmFsZHMtZW1wbG95ZWVzLWhlbHAtd29tYW4td2hvLW1vdXRoZWQtaGVscC1tZS1hdC1kcml2ZS10aHJ1Lw?oc=5

2019-12-28 17:05:00Z
52780522667500

The Secure Act changes the way people will inherit money — are you affected by the new rules? - MarketWatch

The Secure Act, which was signed earlier this month, changes the way beneficiaries will receive money from inherited retirement accounts, but not everyone is in danger of a big tax hit.

The new rules say beneficiaries of qualified retirement accounts, such as individual retirement accounts and 401(k) plans, need to withdraw all of the money out of those accounts within 10 years, instead of over their life expectancy as was previously allowed. There are no required minimum distributions within that time frame, but the account balance must be zero after the 10th year.

Stretching the withdrawals over the beneficiary’s life expectancy — the so-called stretch IRA provision — meant paying less in taxes, whereas the new rule threatens to result in higher tax bills, especially if the inheritor is in her peak earning years. Required minimum distribution calculations are based on numerous factors, including beneficiary’s age, life expectancy and the account balance.

See: The Secure Act is changing retirement — here are the most important things to know

Still, original account holders and their beneficiaries may want to discuss their current inheritance and withdrawal plans with financial professionals, such as an adviser, the institution housing the assets or a firm handling a trust. Failure to act on these changes, if necessary, could leave some beneficiaries paying substantially more in taxes — or getting locked out of their inheritance for a decade.

Here are a few questions readers had about the new rule:

I have been taking RMDs out of an inherited IRA for a few years now. Will I be subjected to the 10-year rule?

No. The new 10-year rule only applies to accounts of benefactors who die in 2020 and beyond. Current beneficiaries of inherited IRAs and 401(k) plans will still be allowed to withdraw the required minimum distributions over their life expectancy, said Michael Kitces, a partner and the director of wealth management for Pinnacle Advisory Group in Columbia, Md. The 10-year rule will take effect on Jan. 1, 2020, which means anyone who died by Dec. 31, 2019 will not be affected.

Are there exceptions to the rule?

The rule does not apply to spousal beneficiaries, as well as disabled beneficiaries and those who are not more than 10 years younger than the account holder (such as a slightly younger sibling, for example). Minor children are also exempt, but only until they reach majority age. After that, they will have 10 years to withdraw the assets in an inherited account.

Spouses, disabled beneficiaries and others under the exception will still be allowed to take distributions over their life expectancies.

Don’t miss: Want to pass money on to your children? Avoid the ‘Rich Kids of Instagram’

How should I withdraw the money from this account under the new 10-year rule?

This depends entirely on the individual’s situation, but there are some factors to take into consideration. The withdrawals will be taxed at the beneficiary’s ordinary income-tax rate, which means someone in their peak earning years will be more heavily taxed than someone with lower income. Beneficiaries nearing their own retirement (in less than 10 years) may want to delay taking any withdrawals from these inherited accounts under the 10-year rule until after they’ve retired, so that the withdrawal is not taken on top of their earned income, Kitces said.

Also see: Numbers that older workers and retirees need to know in 2020

Can I roll over the inherited assets into another traditional IRA? Do I have alternatives to keeping the money in this inherited IRA?

Nonspouses cannot roll over an inherited IRA from one account to another — they can only take distributions from them, according to the Internal Revenue Service. (They may look into a trustee-to-trustee transfer if the account receiving the roll over is set up in the name of the deceased IRA owner, however). Beneficiaries of 401(k) plans can roll the money over into an “inherited IRA.”

For many, the new 10-year rule drastically diminishes the chances of withdrawing assets in a tax-friendly manner (this provision alone is expected to generate about $15.7 billion in tax revenue over the next decade). But there are alternatives, said Steve Parrish, co-director of the Retirement Income Center at the American College of Financial Services in King of Prussia, Penn. One option is a benefactor buying life insurance.

Take for example a grandmother wanting to leave her adult grandson an IRA with a $100,000 balance. Prior to the enactment of the Secure Act, she may have wanted to leave it to him in its current state so he could withdraw the assets over his life expectancy. But now that the law has changed, she could pay premiums on a life insurance policy and name her grandson as the beneficiary, Parrish said. She’ll be paying taxes on the premium, not the life insurance death benefit, and her grandson will receive the benefit tax-free. “A huge motivation to stretching out the payment of an IRA after death was the ability to lower taxes,” Parrish said. “Now this motivation has been substantially curtailed.”

More from MarketWatch

Let's block ads! (Why?)

https://news.google.com/__i/rss/rd/articles/CBMihwFodHRwczovL3d3dy5tYXJrZXR3YXRjaC5jb20vc3RvcnkvdGhlLXNlY3VyZS1hY3QtY2hhbmdlcy10aGUtd2F5LXBlb3BsZS13aWxsLWluaGVyaXQtbW9uZXktYXJlLXlvdS1hZmZlY3RlZC1ieS10aGUtbmV3LXJ1bGVzLTIwMTktMTItMjfSAQA?oc=5

2019-12-28 13:42:00Z
52780518904052

That Recession Everyone Was Scared of Just Got Priced Out By a Record Stock Rally - Bloomberg

[unable to retrieve full-text content]

That Recession Everyone Was Scared of Just Got Priced Out By a Record Stock Rally  Bloomberg
https://news.google.com/__i/rss/rd/articles/CBMicmh0dHBzOi8vd3d3LmJsb29tYmVyZy5jb20vbmV3cy9hcnRpY2xlcy8yMDE5LTEyLTI4L3JlY2Vzc2lvbi1nZXRzLXByaWNlZC1vdXQtaW4tYS1zdG9jay1yYWxseS1mb3ItdGhlLXJlY29yZC1ib29rc9IBdmh0dHBzOi8vd3d3LmJsb29tYmVyZy5jb20vYW1wL25ld3MvYXJ0aWNsZXMvMjAxOS0xMi0yOC9yZWNlc3Npb24tZ2V0cy1wcmljZWQtb3V0LWluLWEtc3RvY2stcmFsbHktZm9yLXRoZS1yZWNvcmQtYm9va3M?oc=5

2019-12-28 12:00:00Z
CAIiEB25IK-FaOwxNSMOM_psCYEqGQgEKhAIACoHCAow4uzwCjCF3bsCMIrOrwM

McDonald’s employees aid drive-thru customer who mouths ‘Help me’: report - Fox News

Some McDonald’s employees in Northern California are being credited with taking fast action on Christmas Eve on behalf of a customer who appeared to be in distress.

The woman entering a restaurant in Lodi asked an employee to call 911 and gave a license plate number for the vehicle she was riding in, according to the San Joaquin County Sheriff's Office.

DRUNK BURGER KING ROBBER STEALS $300 IN CASH, DROPS $80 WHILE FLEEING, ENDS UP DRINKING AT HOOTERS

After she returned from a quick trip to the restroom, a man with whom she was apparently traveling demanded that they use the drive-thru window rather than wait in line inside the restaurant.

While in the drive-thru, a woman mouthed to an employee, "HELP ME." Just then, deputies arrived and spoke with employees inside the restaurant, they rushed them out the door telling them that the woman needing help was in the drive-thru line. (San Joaquin County Sheriff's Office)

When their car got to the drive-thru window, the woman – who was driving -- reportedly mouthed the words, “Help me” to the McDonald’s drive-thru cashier. By then, San Joaquin County sheriff's deputies had already arrived from the 911 call and were able to arrest the man.

Authorities say Eduardo Valenzuela was charged with making threats, possessing stolen property and felon in possession of a firearm.

Eduardo Valenzuela was booked in the San Joaquin County Jail for criminal threats, stolen property, and felon(prohibited person) in possession of a firearm. (San Joaquin County Sheriff's Office)

They say Valenzuela had a firearm in the trunk of the vehicle, which had been reported stolen in another state.

CLICK HERE TO GET THE FOX NEWS APP

They added that Valenzuela had allegedly been violent with the woman in the past.

Let's block ads! (Why?)

https://news.google.com/__i/rss/rd/articles/CBMiYWh0dHBzOi8vd3d3LmZveG5ld3MuY29tL3VzL21jZG9uYWxkcy1lbXBsb3llZXMtYWlkLWRyaXZlLXRocnUtY3VzdG9tZXItd2hvLW1vdXRocy1oZWxwLW1lLXJlcG9ydHPSAWVodHRwczovL3d3dy5mb3huZXdzLmNvbS91cy9tY2RvbmFsZHMtZW1wbG95ZWVzLWFpZC1kcml2ZS10aHJ1LWN1c3RvbWVyLXdoby1tb3V0aHMtaGVscC1tZS1yZXBvcnRzLmFtcA?oc=5

2019-12-28 11:28:32Z
52780522667500