Money Talks Retirement

Under United States federal income tax law, filing status determines which tax return form an individual will use and is an important factor in computing taxable income.[1] Filing status is based on marital status and family situation.[2]

There are five possible filing status categories: single individual, married person filing jointly or surviving spouse, married person filing separately, head of household and a qualifying widow(er) with dependent children.[1] A taxpayer who qualifies for more than one filing status may choose the most advantageous status

You divide your retirement money into three buckets: One is for cash that you'll need in the next year or two, including major expenses, such as a vacation, a car or a new roof. The next is for money you'll need in the next 10 years. The final bucket is for money you'll need in the more distant future, either for you or your heirs. The bucket system "gives you the confidence and peace of mind to stay the course

For the context of retirement planning, this is the target age goal to cease working for a salary and begin to implement the retirement strategy for replacing income. Retirement age is determined in various ways. Some people never want to retire so this is a moving target. In the financial world, the truer measure of retirement readiness or delay is that a person is working because the choose to work and not because the have to for the income to survive.

•Profit-sharing plans
•403(b) plans
•Money purchase plans
•Target benefit plans
•Employee stock ownership (ESOP) plans
•Keogh (HR-10)
•Simplified Employee Pension (SEP)
•Savings Incentive Match Plan for Employees (SIMPLE)

Qualified plans come in two main types: defined benefit and defined contribution, though there is also a hybrid of the two called a cash balance plan. Defined benefit plans give employees a guaranteed payout and place the risk on the employer to save and invest properly to meet plan liabilities. A traditional annuity-type pension is an example of a defined benefit plan. Under defined contribution plans, the amount employees receive in retirement depends on how well they save and invest on their own behalf during their working years.

is a retirement plan in which the employee and/or the employer contribute to the employee’s individual account under the plan. The amount in the account at distribution includes the contributions and investment gains or losses, minus any investment and administrative fees. Generally, the contributions and earnings are not taxed until distribution. The value of the account will change based on contributions and the value and performance of the investments. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans and profit-sharing plans.

A type of defined benefit plan that includes some elements that are similar to a defined contribution plan because the benefit amount is computed based on a formula using contribution and earning credits, and each participant has a hypothetical account. Cash balance plans are more likely than traditional defined benefit plans to make lump sum distributions.

A safe harbor 401(k) is similar to a traditional 401(k) plan, but the employer is required to make contributions for each employee. The safe harbor 401(k) eases administrative burdens on employers by eliminating some of the rules ordinarily applied to traditional 401(k) plans.

A plan in which an employer contributes on a tax-favored basis to IRAs owned by its employees. If the employer meets certain conditions, it isn't subject to the reporting and disclosure requirements of most retirement plans.

An individual account or annuity set up with a financial institution, such as a bank or a mutual fund company. Under federal law, individuals may set aside personal savings up to a certain amount, and the investments grow, tax deferred. In addition, participants can transfer money from an employer retirement plan to an IRA when leaving an employer. IRAs also can be part of an employer plan.

A 403(b) plan (tax-sheltered annuity plan or TSA) is a retirement plan offered by public schools and certain charities. It's similar to a 401(k) plan maintained by a for-profit entity. Just as with a 401(k) plan, a 403(b) plan lets employees defer some of their salary into individual accounts. The deferred salary is generally not subject to federal or state income tax until it's distributed. However, a 403(b) plan may also offer designated Roth accounts. Salary contributed to a Roth account is taxed currently, but is tax-free (including earnings) when distributed.

A Keogh plan is a tax-deferred pension plan available to self-employed individuals or unincorporated businesses for retirement purposes. A Keogh plan can be set up as either a defined-benefit or defined-contribution plan, although most plans are defined as contributions.

A substantially equal periodic payment plan allows individuals who have invested in an IRA or another qualified retirement plan to withdraw funds prior to the age of 59 1/2 and avoid income tax and early withdrawal penalties.

Trustee-to-Trustee Transfer
Direct Rollover

An annuity is a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future. You buy an annuity by making either a single payment or a series of payments. Similarly, your payout may come either as one lump-sum payment or as a series of payments over time.

The insurance company allows you to direct your annuity payments to different investment options, usually mutual funds. Your payout will vary depending on how much you put in, the rate of return on your investments, and expenses. The SEC regulates variable annuities

This charge is equal to a certain percentage of your account value, typically about 1.25% per year.

The 457 plan is a type of non-qualified, tax advantaged deferred-compensation retirement plan that is available for governmental and certain non-governmental employers in the United States. The employer provides the plan and the employee defers compensation into it on a pre-tax or after-tax (Roth) basis.

protects Americans’ retirement assets by implementing rules that qualified plans must follow to ensure that plan fiduciaries do not misuse plan assets.

U.S. tax law signed by President George W. Bush that made significant changes to retirement plan rules and overall tax rates

There are limits to how much employers and employees can contribute to a plan (or IRA) each year. The plan must specifically state that contributions or benefits cannot exceed certain limits. The limits differ depending on the type of plan.

a way for business owners or companies to provide additional supplemental benefits to key employees or executives of their choice

Earnings typically refer to after-tax net income, sometimes known as the bottom line, or a company's profits. Earnings are the main determinant of a company's share price, because earnings and the circumstances relating to them can indicate whether the business will be profitable and successful in the long run. Earnings are perhaps the single most important and most studied number in a company's financial statements, because they show profitability compared with analyst estimates and company guidance.

A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non publicly tradable securities, like real estate, art, and private investments. Portfolios are held directly by investors and/or managed by financial professionals and money managers. Investors should construct an investment portfolio in accordance with their risk tolerance and their investing objectives. Investors can also have multiple portfolios for various purposes. It all depends on one's objectives as an investor.

a person who collects the benefits of an annuity or pension, or named in a specialized life insurance contract. The annuitant is the beneficiary of an annuity or pension. An annuitant can be the contract holder or another person.

The joint-life payout option allows the retiree to receive benefits during the remainder of his/her life and guarantees income for another person after he/she has died

Tax-deferred growth is investment growth that's not subject to taxes immediately, but is instead taxed down the line. Perhaps the most common example of tax-deferred growth is that which you'll get in a retirement plan like a traditional IRA or 401(k). Annuities also offer tax-deferred growth, making them a viable though perhaps less popular option for generating retirement income.

There are two kinds of taxable income: Earned income (salary, wages, tips, bonuses, commissions, etc.) and unearned income (dividends, interest, rents, alimony, winnings, royalties, etc.).

A gain is an increase in the value of an asset or property. A gain arises if the selling price of the asset is higher than the original purchase price. A gain can occur anytime in the life of an asset.

Portability is an employee's ability or right to retain certain benefits when switching employers. Benefits such as certain pension plans and health insurance have portability. Most 401(k) plans have portability of benefits as well as health savings accounts (HSAs).

can be combined with a health savings account (HSA), allowing you to pay for certain medical expenses with money free from federal taxes. The IRS defines a high deductible health plan as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family.

A 401(k) plan sponsor is the plan fiduciary, legally responsible for selecting the plan’s investment options and monitoring their suitability. Generally, your employer is your 401(k) plan sponsor.

a tax-advantaged savings plan designed to encourage saving for future education costs.

represent a claim on profits (dividends) and confer voting rights. Common stockholders are last in line for the company's assets

A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.

a commission or sales charge applied at the time of the initial purchase of an investment. ... The front-end load is deducted from the initial deposit, or purchase funds and, as a result, lowers the amount of money actually going into the investment product.

A lump-sum payment is an often large sum that is paid in one single payment instead of broken up into installments. They are sometimes associated with pension plans and other retirement vehicles, such as 401k accounts, where retirees accept a smaller upfront lump-sum payment rather than a larger sum paid out over time.

stockbrokers that charge reduced commissions on transactions, a self-service model

security is a bond or other type of debt obligation that is issued by a government with a promise of repayment upon the security's maturity date

a fancy name for an investment partnership. It's the marriage of a professional fund manager, who can often be known as the general partner, and the investors, sometimes known as the limited partners, who pool their money together into the fund.

investment strategies that allow you to pool your money together with other investors to purchase a collection of stocks, bonds, or other securities that might be difficult to recreate on your own.the decisions to buy and sell securities are made by one or more portfolio managers, supported by teams of researchers

Municipal bonds (or “munis” for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems. Generally, the interest on municipal bonds is exempt from federal income tax. The interest may also be exempt from state and local taxes if you reside in the state where the bond is issued.

are not backed by government’s taxing power but by revenues from a specific project or source, such as highway tolls or lease fees. Some revenue bonds are “non-recourse”, meaning that if the revenue stream dries up, the bondholders do not have a claim on the underlying revenue source.

the art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk against performance.

Part A covers inpatient hospital stays, care in a skilled nursing facility, hospice care, and some home health care.

Part D covers prescription drug coverage

income taxes can be your single largest expense in retirement. You can't avoid income taxes during retirement. But once you stop working, you stop paying taxes for Social Security and Medicare, which can add several thousand dollars to your bottom line.

Check the base income amounts in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Generally, the higher that total income amount, the greater the taxable part of your benefits. This can range from 50 to 85 percent depending on your income. There is no tax break at all if you're married and file separate returns.

You can find instructions for calculating what you owe in IRS Publication 590, Individual Retirement Arrangements.

Interest paid on investments in taxable accounts is taxed at your regular rate

asset held for one year or less is a short-term gain or loss

prior to your death, you can make gifts to whomever you wish. The ceiling changes from time to time. In 2018, you can make a gift of up to $15,000 per year, or $30,000 per year if you're married, to as many individuals as you like without ever owing federal gift taxes on the amount.

The primary beneficiary (or beneficiaries) inherit first. If they are dead or if they die with you, your assets would instead go to any secondary beneficiaries you have designated. These secondary beneficiaries are often referred to as contingent beneficiaries on account forms.

IRA basis is the funds in an IRA that already have been taxed, either as nondeductible IRA contributions or after-tax funds rolled over from plans. ... If basis is not taken into account, tax-free withdrawals can become taxable, meaning the funds will be taxed twice

A recharacterization allows you to treat a regular contribution made to a Roth IRA or to a traditional IRA as having been made to the other type of IRA

Inflation is the increase in the prices of goods and services over time. It's an economics term that means you have to spend more to fill your gas tank, buy a gallon of milk, or get a haircut. Inflation increases your cost of living. Inflation reduces the purchasing power