Last Week’s Question of the Week: A Power of Attorney for Property conveys your medical wishes and decisions. True or False?
HOST: What suggestions do you offer to our listeners for understanding our retirement plans at work and how should we be working to maximize them?
KLAAS FINANCIAL: This is a big area that we work through with clients who are serious about their retirement planning. What is important to realize is that we are halfway through 2020, believe or not! So, this is an excellent time to assess those retirement funding goals and see how you are tracking. First, we look at what plans they have available to them:
- Do they have a 401k, a 403b or 457 plan? If not, do they have an IRA they can contribute to? What we are trying to find are ways that we can put away the most amount of money into retirement accounts, either pre-tax or post tax. Maximize contributions when possible!
- Is there a match to your contributions? Perhaps your employer offers a match up to 3%…which means that you need to save at least 3% to receive the free money! Don’t miss out on free money!
- So, what are the limits of how much you can put away each year? This is a really good question as everyone should be working towards maximizing contributions as close to the limits as possible. If you are under 50 years old and saving into a 401k or 403b, in 2020, you can contribute up to $19,500, plus an extra $6500 for those who are over 50, for a total of $26k that you can put away this year. Remember that when you add money to your employer’s retirement plan that you can generally only do this through payroll deductions which needs to be done by December 31st every year, unlike an IRA where you have until April 15th every year to make the contribution for the prior tax year. Note: This year everyone has until July 15th to make an IRA contribution as a result of the CARES ACT.
- It is a fact that many people start saving for retirement later than they would like. So, the catch-up provisions that I just mentioned are critical. If you don’t have an employer retirement plan, you could be saving into an IRA, and if you are over 50 you can put away $7000 in 2020, which is $6000 per year with a catch-up of an extra $1000.
- If you don’t have any retirement accounts open, perhaps you have an after-tax investment account in which you can put away dollars for part of your retirement account vs. spending them.
- Finally, since we are halfway through the year, please look at how much you have put away so far, look at the number of pay periods left and then adjust the contribution so you can possibly put away as close to the max as you can.
HOST: So, midway through the year, what else should we be assessing and addressing?
KLAAS FINANCIAL: We would suggest that you look at your level of debt and your budget, as it is a good time to possibly re-adjust things. Starting with the basics:
HOST: So, if I receive an inheritance this year, what do I need to know? How do I handle this?
KLAAS FINANCIAL: It depends on your own situation. You should probably first sit down with a financial planner who can look at how this can help you with your future retirement planning. Things to know:
HOST: Sam from our Money in Motion Listener Corner asks: “How can I estimate how much social security benefit I will receive when I turn 62?”
KLAAS FINANCIAL: Social Security has a great website: www.ssa.gov. Go to that website and set up an account. They have a retirement benefits planner that will allow you to estimate your benefits at each age from 62 (the earliest you can receive them); to age 70 (when you receive the highest amount) and will also provide figures on earning limits if you plan to work while receiving Social Security benefits. You can also apply for retirement benefits on this same website.
This Week’s Question of the Week: In 2020, if you have earned income of $50,000 and you are 49 years old, how much can you put into your 401k plan at work?
Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.