4 Common 401(k) Pitfalls

 

If you are saving for retirement, like many Americans, your main vehicle to do so is probably some form of defined contribution plan such as a 401(k) or 403(b) plan. The problem is the average American is not saving enough and many are making common and basic mistakes with their employer sponsored retirement accounts.¹ Here are some tips that will help prevent you from derailing your retirement.

 

#1 PARTICIPATE AND CONTRIBUTE TO MATCH
The first and obvious pitfall to avoid is simply not participating in your company’s defined contribution plan. Four out of five American workers are employed by a company that offers a defined contribution retirement plan, but only 32% or workers are utilizing them.² Not only are they not taking advantage of the tax benefits, they are walking away from free money. Many employees offer an employee match (generally on average) of 50 cents on the dollar on up to 6% of contributions. To save an adequate amount for retirement, you should be contributing at least 15%. For those who cannot afford that much, make elective contribution deferrals to at least the employer match so you’re not missing out on the free retirement savings.

 

#2 LOANS VS. WITHDRAWALS
When faced with unexpected financial crisis, it’s tempting to tap into your 401(k), but doing so could put your retirement at risk by missing out on the compounded interest you would earn over years. Not to mention you would have to pay the IRS a 10% premature withdrawal penalty if you are under 59½ years old. The alternative, but not much better option, is taking a loan from your 401(k). Some plans offer a loan provision, which allows you to borrow from your fully vested funds. The loan is repaid to yourself/your 401(k) plan, with interest. Approximately one in five workers who participate in an employer-sponsored defined contribution plan has taken a loan from the plan’s balance. The pitfall participants can run into when taking a 401(k) loan, is leaving or getting fired before paying back the entire loan balance. If that happens, the full amount of the loan comes due and if not paid back, the remaining amount becomes a taxable distribution.

 

#3 VESTING (DON’T TURN YOUR BACK ON FREE!)
401(k)/403(b) vesting is when an employer makes a matching contribution on your behalf into a defined contribution plan, but does not give you complete ownership of those funds until you have met certain requirements. For example; the typical vesting schedule is 25% vested after one year, 50% vested after two years, and 100% vested after three years. Vesting schedules can vary based on the respective employer’s plan. Retirement savings plan vesting schedules are a common way for employers to provide a motivation for employees to stay with the company for at least a few years.

If you are thinking about leaving your job, first find out:

  • How much of your 401(k)/403(b) is vested?
  • How much time is left for it to be fully vested?

If you’re only a few months away from being vested, perhaps you should stick it out a bit longer until you are. You could be walking away from free money.

 

#4 TAX DIVERSIFICATION (ROTH 401K OPTION)
If you automatically get enrolled into your company’s 401(k), by default, you will most likely be enrolled in a traditional plan. One common mistake that 401(k) investors make is not learning if the plan has a Roth 401(k) option. A Roth 401(k) is exactly like a Roth IRA in the sense that you can take a portion of your taxed income and invest it so it grows tax free and can be withdrawn tax free, only with a much higher contribution limit. The IRS allows for up to $5500 a year contribution ($6500 if you are 50 years old or more) to Roth IRAs and up to $18,000 ($24,000 if you are 50 years old or more) for Roth 401(k)’s.

 

A better approach might be utilizing both the traditional 401(k) and Roth 401(k), so during retirement you have access to one bucket of savings that will be taxed when withdrawn and another bucket of savings that will not be taxed.

The only down side to the Roth 401(k) is that it does not reduce your taxable income like the traditional 401(k) does, so ask a financial advisor which situation might suit you the best.

 

 

Footnotes:
1. Steverman, Ben. “Two-Thirds of Americans Aren’t Putting Money in Their 401(k).” Bloomberg.com, Bloomberg, 21 Feb. 2017, www.bloomberg.com/news/articles/2017-02-21/two-thirds-of-americansaren-t-putting-money-in-their-401-k.
2. According to research conducted by AonHewitt in 2012. Powell, Robert. “7 Worst 401(k) Mistakes by Retirement Savers.” 8 Mar. 2014, www.marketwatch.com/story/7-worst-401k-mistakes-by-retirementsavers-2014-03-08.

 

 

Age Related Retirement Milestones That Could Even Have You Looking Forward to Your Next Birthday

 

For most of us, our attitude towards our next birthday can change dramatically as we go through life. Early on, we may greatly look forward to certain birthdays.

For example, many people look forward to their 18th birthday because in most states, that marks the “age of majority” when they are legally considered an adult and can take control of many aspects of their lives. And the 21st birthday may be the most highly anticipated of all, for reasons that we will leave up to the imagination. Unfortunately, birthdays after that tend to generate increasingly less enthusiasm. However, you may not be aware that in the realm of retirement planning, you may have some birthdays coming up that you should actually be looking forward to! That’s because as the years pass, certain age milestones give you more options when it comes to building wealth and saving for retirement. The following is a list of some of the more important age milestones with regard to retirement planning.

 

AGE 50
Once people reach their 50th birthday, they often realize that they’ve been too focused on things like getting that next job promotion, raising the kids and paying for the big new house. Unfortunately for many, they find themselves behind when it comes to building up their retirement nest egg. Luckily, the IRS allows for certain “catch-up” contributions to allow them to put their retirement savings on a fast track. One of the most important is that in the calendar year you turn 50 and thereafter, you can contribute an extra $6,000/yr. as a salary deferral into your company 401(k) plan, thus raising the maximum contribution limit from $18,000 to $24,000. In addition, you can add an extra $1,000/yr. into your Traditional or ROTH IRA, thus raising that maximum contribution limit from $5,500 to $6,500. Both of these amounts are as of the calendar year 2017, and are likely to go even higher in the future.

 

AGE 55
If you leave your job in any calendar year when you turn 55 or older, there is a little known loophole in the tax law that allows you to take distributions from your company 401(k) plan with no premature 10% penalty. The money will still be taxable, but relief from the penalty can yield a big savings. This rule can come in handy especially if, for example, you are unexpectedly laid off from your job and need to tap into some of that money to pay bills.

NOTE: This rule applies only to distributions from 401(k) plans and NOT from IRAs, so you want to be particularly careful not to hastily roll over the entire 401(k) into an IRA before analyzing whether you might need to take some of that money out, because once the money is rolled to an IRA, the opportunity to take advantage of this rule is lost.

 

AGE 59½
This is the age at which you can take distributions from any tax qualified retirement plan, such as your 401(k) and/or IRA, without paying the 10% premature distribution penalty. This rule can often come into play if you are retiring early, say in your early 60s, and need some of that money for living expenses.

NOTE: There is a strange quirk in this rule; the distribution actually has to take place at least six months to the day after your 59th birthday in order to avoid the penalty. So you have to carefully count out 183 days past your birthday and make sure not to take the money before that date.

 

AGE 62
This is the age at which you can elect to take early Social Security.

NOTE: The benefit will be reduced for every year you are younger than the “Normal Retirement Age” (NRA), which is generally age 66, so if you take your benefit at age 62, it will be reduced by about one third, and will stay that way for life. So, it is important to think carefully before deciding to go ahead with this. Still, statistics show that well over half of recipients start taking their benefit at some point before their NRA.

 

Age 66
For most people, this is the age at which they qualify for their full “Normal Retirement Benefit” from Social Security. One thing to keep in mind is that there is no requirement that you start taking your benefit at this time. In fact, if you decide to wait, your benefit will increase by about 8% per year all the way until age 70, at which point it will max out. So if you don’t need the money right away, you may want to wait and let the benefit keep growing. When you do start taking your benefit past age 66, the increased amount will continue for life.

For most of us, our attitude towards our next birthday can change dramatically as we go through life. Early on, we may greatly look forward to certain birthdays.

 

AGE 70½
Since distributions from your 401(k) and/or IRAs must be included as taxable income on your return, many people wait as long as possible before doing this and choose to live on other money instead. Well, the IRS won’t let you wait forever. Starting in the year you turn 70½, the IRS forces you to begin taking a certain amount out of your 401(k)s and IRAs. These mandatory withdrawals are called “Required Minimum Distributions” (RMDs). They are based on a calculation taking into account your life expectancy. You can always take out more than your RMD, but if you take less you will be subject to a stiff 50% penalty, so it’s critically important to do the proper planning in advance for this particular issue.

 

As you can see, there are numerous age related milestones on the road towards good retirement planning, and it’s critically important to be aware of them and take advantage of them in order to maximize your retirement income. And who knows, depending on your situation, some of these rules could help you actually look forward to one of your upcoming birthdays for a change—or at least take a little bit of the sting out of it!

Everyone’s situation is slightly different, so feel free to give us a call if you have any specific questions about your own circumstances.

 

 

Run the Numbers!

One of the most common questions I get from people is, “When can I retire?” My typical answer is “the day after you can afford to do so, and not a single day before or after that.”

By retiring too early, you run the risk of not having enough monthly income to maintain the lifestyle you were hoping for. Having to live Social Security check to Social Security check in retirement and having to worry how every dollar is spent is not most people’s vision of retirement. It would be frustrating watching your friends do things you can’t afford to do. On the flip side, many people work well beyond what they need to, not leaving themselves enough time to enjoy the fruits of their labor. We are all just one phone call away from having our worlds turned upside down. A major sickness or accident or death of a loved one can dramatically change our retirement goals.

The dilemma is deciding the optimal time to retire. You want to retire early enough to still be healthy enough to enjoy it, but not too early, so that you regret it. The logical solution is to run the numbers, and let the facts and circumstances make the decision for you. Deciding to retire should not be an emotional decision, but rather a well thought out process.

Some key decisions that have to be considered:

  • When to start your Social Security benefits
  • Taking your pension as a lump sum or as monthly income
  • Which accounts to draw supplemental income from
  • Most importantly, how much can you take from those accounts without putting yourself into potential jeopardy

This is why you need to keep re-running your numbers even after you retire, to make sure you are still on track for your comfortable retirement. Health insurance is another key variable that may impact your retirement date. If you plan on retiring before age 65, you will have to determine where you will get your health insurance prior to becoming eligible for Medicare, and budget for a higher payment accordingly.

In addition, you need to make sure that you are emotionally ready for retirement. Some people, especially men, delay their retirement simply because they can’t imagine what they will do once they quit working. The solution is to start working on your own retirement “bucket list” years before you actually decide to call it quits. This way instead of having to dread making the decision, you’ll have something to look forward to.

My last tip is to make sure you are on the same page as your spouse or partner. I have been in situations where one person starts talking about retiring, and it was the first time the other had heard about it. Let me tell you, it can make for a very uncomfortable meeting! The key is to make sure both of you are in agreement as to your retirement plans. This means having those conversations years before you actually retire. Make sure you both agree on the amount you will need in monthly income, and what date you are targeting. It’s a lot easier to reach your goals, if you are both pulling on the same side of the rope!

Your retirement should be a planned event and not left to happenstance. This means putting in the planning and work years or even decades in advance. Most people would not take a vacation by just walking up to the airline counter and just let them hand you a ticket, without first knowing the destination and planning the trip. Your 20 to 30 year retirement deserves more than just relying on your hunches. This means getting professional advice.

It’s never too early to start planning. We are here to help guide and coach you through those critical financial decisions that will help determine whether you ultimately get to enjoy your retirement leisure years.

It’s Critical to Understand RMDs

 
 


 
 
What exactly is an RMD? Why is it “critical” to understand RMDs? What details should everyone know about RMDs? How much does the RMD have to be? How do RMDs affect a married couple? Are there any planning considerations when dealing with RMDs? Watch Szarka Financial’s Senior Financial Advisor Alex Menassa, MT, CPA, JD discuss these issues with Fox 8 News Anchors Matt Wright and Autumn Ziemba.
 

Important Age Milestones in Retirement Planning

 


 
 
Does your age have any impact on what you can do with regard to retirement planning? What’s the next significant age milestone? What other important age milestones? Any other important birthdays to remember after that? Watch Szarka Financial’s Senior Financial Advisor Alex Menassa, MT, CPA, JD discuss these issues with Fox 8 News Anchor Gabe Spiegel.
 
 

What is the Trend with Financial Advice and Robo Advising?

 


 
 
What is the industry trend that you are seeing with financial advice? What is robo advising? Why are we seeing more of the larger firms offering the robo advising? How will this affect how you do business? Watch Szarka Financial’s CEO Les Szarka, CFP®, ChFC®, discuss these issues with Fox 8 News Anchors Stefani Schaefer and Gabe Spiegel.
 
 

What to Discuss When you Meet with an Advisor

 
 
It’s been just over a month since I joined the group at Szarka Financial. And, I am glad that I made the move. One of the things that attracted me to the firm was their emphasis on education. Having come from a healthcare background in medical device sales, prior to being an advisor, I know the importance of educating my clients so that we can partner together on reaching their goals. Meeting with a financial advisor can be a key factor in aiding the overall management of your finances and investments. What is expected in that first meeting? What are some of the key topics that will be discussed?
 
Not unlike when you visit a doctor’s office and they ask you about every disease possible, in order to rule out any issues before making a diagnosis or prescribing medications, the more you can tell your advisor regarding your overall financial “health”, the better they will be able to help you.
 
 
Here are some of the topics and associated questions that you will encounter during that first meeting. Gaining a better understanding of a person’s situation provides a solid foundation upon which a comprehensive financial plan can be built:
 
 
Spending
The first step is no fun, but necessary. You need to know what you spend each month. Don’t estimate it, figure it out. This will determine many things in your financial plan. How can someone know they are saving enough, ready to retire, or building wealth if they don’t know what they spend? No matter how much money you make or have, spending will determine if it’s enough.
 
What’s Left Over (Also Known as Discretionary Income)
Look at your monthly pay stub and see what you receive after taxes, and other deductions. For salespeople, it’s best to figure out the average since it fluctuates. Now, subtract what you spend in a month and see what is left over. This is your discretionary income and where your investment dollars would come from in the future.
 
Risk Profile
Do you panic easily when the markets start to get more volatile or do you stay cool as a cucumber, knowing you are in for the long haul? Do you like to be more conservative or more aggressive? Everyone has a different level of comfort when it comes to investing. It’s important to understand what your tolerance for risk really is.
 
Life, Disability, & Long Term Care Insurance Policies
Do you have any? Is it enough? If you have a family now, you can’t take this for granted.
 
Pay Stub
It will show you what deductions are coming out and how much is coming in.
 
Designation of Beneficiaries, Trust and/or Will Documents
Do you have them? Nothing good happens if you pass away without a Will or without keeping your beneficiary designation forms up-to-date.
 
Emergency Fund
Do you have enough cash available in case of an emergency? What if you lost your job for six months? What if you were disabled and could not work? Would you be able to cover your fixed expenses?
 
401(k) Plan
Do you receive a match on your 401(k) and how does it work? Most people think this is the only, and best place, to invest for savings. It can be, but only if it is done right, which is not always obvious or easy to determine.
 
Mortgage and/or Loans
What do you owe on your house? What is the interest rate you are paying? Do you have any other debt? There are a lot of questions and things to think about here. Remember, that working on creating financial goals supported by a strong plan is a process. To be successful, it will take an understanding of where you are today, where you want to be financially (your plan) and how to get there, and most importantly, the discipline to execute.
 
 
Sounds like a job, right? It is a job.
 
 
Think about it, you are basically running your own corporation whether you like it or not. You have income, expenses, cash flow, assets, and liabilities, just like any corporation. And once you retire, it will be even more important how you manage your corporation, because for most of us our income will be fixed. As financial advisors we take our role very seriously in assisting you set up and supervise your corporation. We look forward to the opportunity to helping you run it!

Don’t Be a Victim of the Looming 401(k) Crisis

There is a slow moving time bomb coming in the world of retirement planning, and it’s important for everyone to understand what’s happening so that they can avoid becoming a victim. The time bomb is that the traditional “3-legged stool” of retirement planning is quickly crumbling away, and it doesn’t currently appear as if anything is coming to replace it.
 
 
The 3-legged stool consists of:
(1) Social Security
(2) Defined Benefit Pensions
(3) Personal Savings.

 
 
The first leg (Social Security) is still there. Unfortunately, a sort of grand experiment has been going on for the past couple of decades for the second leg of the stool (Defined Benefit pension plans), which have been quickly disappearing to the point where they are pretty much obsolete other than for government workers. The thinking was that they could be replaced by a beefed up third leg of the stool (Personal Savings) in the form of 401(k) plans, but this “401(k) experiment” appears to be failing.
 
It was never supposed to be this way. The 401(k) was a little known provision added to the Internal Revenue Code around 1980, originally designed to allow executives to defer tax on some of their bonuses until they retired. But once it became clear that this provision could be used as a tax deferral vehicle for the regular wages of any employee, the modern 401(k) as we know it was born.
 
There was massive growth in the use of 401(k)’s over the ensuing decades, at the same time that employers were turning away from Defined Benefit Plans in record numbers. Fast forward to the situation today, where most workers in the U.S. have no Defined Benefit Pension whatsoever, and will have to rely solely on Social Security for their retirement income… along with whatever they have in their 401(k) or other personal savings.
 
This has created a tremendous change whereby responsibility for retirement planning has now shifted directly onto the shoulders of workers themselves… and the results don’t look good. Studies show that the average balance in a 401(k) is less than $100,000. But the true situation is actually far worse than that, because the averages are greatly skewed upward by the relatively few workers at the top who have very large balances.
 
The median balance, (half higher, half lower) even for workers in their late 50s, is less than $20,000.
Even more shocking, fully half of working families have no 401(k) savings at all.
 
There are many reasons for this. More people are working as independent contractors rather than employees. People are changing jobs more often, and/or feel like they can’t afford to save anything in their 401(k). People put it off, thinking that they’ll just get around to it at some better time in the future. And some employees don’t even have access to a 401(k) at all. For a variety of reasons, there is a massive shift going on where a relatively small number of workers at the top (the “Top 10”) have large balances, while the vast majority of people have far too little in their 401(k)’s.
 
The result of all this is that if people don’t pay attention to their 401(k) plans, they could be left with little more in retirement than their Social Security Benefit…which on average is about $1,400/month. Does that sound like a great retirement? For a shocking number of people, this is going to be reality for them. Even if they have a 401(k) with a balance of, say, $150,000, that should only be expected to provide an additional $6,000-8,000/yr. of retirement income, if they want it to last their entire lives and keep up with inflation. Especially if they retire with any debt, that is likely to just not be enough. This is the looming 401(k) retirement crisis that the country is facing. How can you avoid becoming a victim?
 
 
Here are the steps you should follow:
 
1. Enroll in your 401(k) ASAP. Ask your employer as soon as you take
a new job, and make sure you start on the very first day of eligibility.
 
2. If you are self-employed, look at some of the other options that are available to do on your own, such as a SEP-IRA (simplified employee pension) or an Individual 401(k).
 
3. Make sure you put enough away.For most people that means about 10-15% of their salary, at least. Don’t short change yourself by putting only enough in to get the employer match…you’re only hurting yourself with that strategy.
 
4. Look at the investment options carefully, and consider choosing some that offer the potential for future growth. Don’t put all your eggs in one basket with company stock or unbalanced fund choices.
 
5. When you change jobs, don’t ever spend the money you’ve accumulated in your former employer’s 401(k)…consider rolling everything to an IRA so it can keep growing vs. rolling it into your new employer’s 401(k). Follow that procedure with every job you ever take to help you build a nest egg.
 
6. Review your 401(k) on a regular basis to make sure it’s still doing what it’s supposed to do and balanced appropriately, based on your age and risk tolerance.
 
7. If you are 5 to 10 years out from retirement, and have not already met with an advisor to review your 401(k) allocations and financial goals, now is the time to do so to help ensure you are on the right track.
 
 
It doesn’t look like there’s any going back to the world of Defined Benefit Plans. Like it or not, it’s now your own responsibility to be aware of the changing landscape and that means paying attention to your 401(k). Although your company may provide the 401(k) to you as an employee, ultimately you are responsible, not your employer, to ensure you are saving enough in your plan for retirement. Working with an advisor can help ensure you have set and followed realistic goals. Your retirement lifestyle will probably depend on it!

5 Crucial IRA Tax Planning Strategies

 
 
Someone once said “It takes a great deal of boldness and a great deal of caution to make a great fortune and when you have got it, it requires ten times as much wit to keep it.” Although exactly who said it is unclear, the message is definitely clear. Many of you have been building your retirement savings for years, even decades. No matter how much you have saved, you definitely don’t want to lose some of it by making an avoidable mistake.
 
While the market volatility can be a major threat to some retirement plans, Uncle Sam is an unavoidable reality for most of us. And unless you have a Roth IRA, if you take a withdrawal from a Traditional IRA, or comparable tax-deferred account, you are inevitably going to pay taxes. No way to avoid it, but you may be able to minimize the amount of taxes and/or penalties by paying attention to some key areas.
 
 
Here are five pointers that may help you avoid penalties and/or reduce your tax liability.
 
 
IRA and Roth IRA Income Limitations
If you make improper contributions to your IRA or Roth IRA, penalties can apply. There are no income limits to contribute to a conventional/traditional IRA, but some of the contributions you make to your IRA, thinking they will reduce your taxable liability, might not be allowed and could be disqualified in the future. Taxes and penalties may be assessed in arrears. Specifically, if you are active in a company-sponsored retirement plan, income limits apply to how much of your contribution will be tax-deductible. The deduction starts to phase out if your Modified Adjusted Gross Income (MAGI) is $98,000 for married/joint filing ($61,000 for single) and is entirely phased out if your MAGI is greater than $118,000 for married/joint ($71,000 for single).
 
If you are married and are not active in a company-sponsored retirement plan, but your spouse is, then the deduction phases out from $184,000 to $194,000 MAGI for your contribution. The rules above apply separately to your spouse’s potential contribution.
 
 
RMD Aggregation
If you don’t take the Required Minimum Distribution (RMD) from your tax-deferred plan(s), such as IRA, 401(k), 403(b), etc., which are required in the year in which you turn age 70 ½, you may have to pay a major penalty. You can defer the first year’s distribution to the second year, but then you have to take two RMDs in the second year. Except for the first year, you have to follow the rules every year to avoid the penalty. And the penalty is a stiff one! It’s 50% of the RMD – and you still have to pay the income tax as well. For example, if the RMD is $2,500 and you are in the 25% marginal federal income tax bracket, the penalty would be $1,250 (paid to the IRS), along with the $625 income tax on the full $2,500, leaving you with $625! You definitely want to avoid this penalty.
 
Here is one of the more common ways to make a mistake in this area. You remember to take the RMD from your primary IRA, but you forget that you have other IRA accounts. In order to fully satisfy the IRS, you have to withdraw the RMD based on ALL of your tax-deferred accounts, including any annuities that you may own in an IRA. Your total RMD for any given tax year is calculated by taking the current value of all of your tax-deferred accounts as of December 31st of the prior year, and dividing it by the government’s uniform life expectancy table, giving you the minimum amount that must be distributed from your tax-deferred accounts. The penalty applies to the amount that you are short. It’s also important to know that you don’t have to take withdrawals from each separate account. Strategically, it might make sense for you to take the entire RMD from one account, or two accounts; it’s up to you. The IRS doesn’t care where it comes from they just require you to take the total RMD each year. Make sure you follow this requirement and avoid the costly penalty!
 
 
Inherited IRAs – Spousal Beneficiary
It is common for a spousal beneficiary to roll an inherited IRA into their existing IRA. That’s okay if the surviving spouse is over 59 ½. However, if the spouse is under 59 ½, it is important for that spouse to keep it separate as an inherited IRA in order to preserve the right to withdraw funds without the 10% early withdrawal penalty, which is waived for this type of account. On the other hand, if the spouse beneficiary is over 59 ½, an inherited IRA can be combined with another IRA.
 
Another key difference for a spousal beneficiary is that they do not have to immediately begin taking an RMD unless the original owner had reached 70 ½ and had started taking the RMD. If the original owner had started taking an RMD, then the spouse has to continue to take the RMD based on the spouse’s life expectancy after the year in which the original owner died.
 
 
Inherited IRAs (and Roth IRAs) – Non-Spousal Beneficiary
Non-spousal beneficiaries of any age who want to “stretch” the IRA withdrawals over their life expectancy must start the RMD in the year following the death of the original owner, regardless of whether that owner had reached age 70 ½ or not. They also want to keep an inherited IRA separate in order to preserve the ability to withdraw funds without the 10% early withdrawal penalty. Once they reach age 59 ½, they can combine it with another IRA, though they may want to keep it separate if they are utilizing the “stretch” option.
 
Note that Roth IRA owners are not required to take an RMD, but non-spouse beneficiaries are required to take an RMD from an inherited Roth IRA (spouses are exempt from this requirement). If they do not, the 50% penalty will apply, even though withdrawals from any Roth IRA are tax-free.
 
 
Inherited IRAs – Wrong Beneficiary
This pointer won’t produce any tax savings, but it may keep a tragedy from occurring. Unfortunately, people don’t always pay enough attention to who they have named as beneficiaries. There are many stories following a divorce, death or remarriage where owners forget to update their beneficiaries.
 
Beneficiaries should be reviewed after every major life event to ensure that the information is properly updated on the account. A basic will does not apply to any tax-deferred account, unless the individual’s estate is the named beneficiary. And this is typically not a recommended strategy as it robs the potential beneficiaries of the opportunity to “stretch” IRA withdrawals over their lifetime.
 
 
As you can see, IRAs can have quite an effect upon an individual’s tax situation. IRA accounts continue to grow in popularity, as more and more businesses move away from providing traditional defined pension plans and workers are expected to take on a more significant role in funding their own retirement. Not surprisingly, the rules and regulations surrounding IRAs are very complex and often confusing. The same can also be said to our Tax Code. Thus, if you are seeking some assistance with gaining more clarity about IRAs and the role they can play within your own retirement planning, give me a call and we can talk about doing so.

Avoid Commonly Made Blunders with your 401k

As we wrap up tax season, what is the most common tax saving tool people can use? What are the most common mistakes people make with their 401k? What are other typical mistakes? What else can 401ks be used for? Watch Szarka Financial’s Senior Financial Planner Alex Menassa, CFP®, ChFC®, discuss these issues with Fox 8 News Anchors Stefani Schaefer and Gabe Spiegel.