Economic fallout from the COVID-19 crisis may cause some cash-strapped individuals to default on loans they’ve taken out from company qualified retirement plans, including 401(k) and profit-sharing plans. Defaulting on a plan loan will cause adverse tax and retirement-saving consequences. Here are the details.Read more
Roughly one in five Americans in the workforce believe that “working for pay” will be a major source of their retirement income. This is according to the “2018 Retirement Confidence Survey“ produced by the Employee Benefit Research Institute (EBRI). Nearly half of respondents believe paid work will be a minor source of retirement income for them. Read more
Setting up and maintaining a simplified employee pension (SEP) is probably easier than you think. The sooner you get started saving, the more secure your retirement will be, plus your business can gain tax advantages right away. Read more
Just as having an outside expert prepare your company’s tax return doesn’t get you off the hook if you have problems with your financial systems, using professional retirement plan administrators and investment advisors doesn’t absolve you of responsibility for complying with IRS regulations.
Where problems typically crop up, according to Monika Templeman, IRS Director of Employee Plan Examinations, is when “there’s a communication gap between you and the plan administrator about what the plan document provides and what documentation is needed to ensure compliance.” The following are the most common communications breakdown-related mistakes her department uncovers in audits, as described on an IRS webpage on the importance of internal control systems: Read more
Want to borrow money from your retirement plan? Not so fast. Retirement plan loans can be a viable way to get money in a crunch, but you need to follow the rules about repaying them. If you don’t, it could lead to unfavorable tax consequences, as two taxpayers recently learned the hard way in U.S. Tax Court. Read more
Reverse mortgages have been around for years. But they’re getting a new spin: Some senior homeowners are tapping into their home equity to “bridge the gap” until the time they’re ready to apply for Social Security benefits.
However, an independent consumer agency — the Consumer Financial Protection Bureau (CFPB) — is cautioning retirees against using this strategy. A recent CFPB report claims that the costs and risks associated with a reverse mortgage often exceed the cumulative increase in Social Security benefits you would receive by delaying benefits. Read more
Created just a few years ago in 2014, the My Retirement Account (myRA) program will end, according to the U.S. Department of the Treasury. As part of the Trump Administration’s effort to slim down wasteful spending where possible, the Treasury has decided this short-lived Roth IRA backed by the government isn’t cost effective.
First Some Background on Roth IRAs
A Roth IRA is an individual retirement account that’s treated as a traditional IRA except where special rules apply. For 2017, individuals can make annual, nondeductible Roth IRA contributions up to $5,500, or $6,500 for those age 50 and older (or 100% of compensation if less). The total contributions for the tax year must be reduced by amounts that are put into all other IRAs. Read more
For years, people have questioned the viability of the Social Security system going forward. In July, the Social Security Board of Trustees released its annual report on the long-term financial status of the Social Security Trust Funds.
The report projects that the combined asset reserves of the Old-Age, Survivors and Disability Insurance (OASDI) Trust Funds will become depleted in 2034, unless Congress takes action to reverse the situation.
In general, people approaching retirement age often have other questions about benefits they may be eligible to receive from the Social Security Administration (SSA). Here are common concerns regarding the Social Security system.