Charles Schwab & Co. financial consultant Kimberly Segal says she recommends her clients save enough to meet 80 percent of their current expenditures when planning for retirement. But a recent survey by her firm finds that Bostonians with means aren’t necessarily hearing the message. Most are expecting to only need about half the income they earn now when they retire, even amidst concerns about healthcare and other rising costs.
It’s not as if Segal’s clientele can’t afford to save. The demographic polled by Charles Schwab are technically well off, with at least $250,000 in “investable assets and retirement funds.” On average they earn $113,000 a year, yet in retirement they expect to only need $63,000.
The disconnect is particularly striking given that the majority of survey respondents plan to continue living in the Boston area in their golden years. Only one in four said they will move to a new area, seeking a better quality of life and lower living costs when they stop working.
“We’re urging people at a younger age to look at retirement planning, prioritize current and future expenses, and take action on the plan to make them financially secure for retirement,” Segal said. “Doing it early on can alleviate concerns, especially unforeseen expenses in medical and healthcare costs.”
Last year, my New Year’s Resolution was to go paperless. I succeeded, but not in the way that I expected.
I began the year trying several new online applications that aimed to help me organize tasks ranging from setting up a snapshot of all my bills and reminders to pay them, to creating a family system that would allow my kids to track their allowances and chores.
As I often discover (and re-discover) when I embark on an effort to create new habits, starting simple is best. As such, I found that a lot of these applications fell by the wayside, probably because I tried to integrate too many of them into my busy routine at once. Collectively they were too new, and therefore too difficult to master, in an efficient amount of time.
I ended up laying the foundation for my paperless life – and eliminating literally bags upon bags of clutter - with three simple steps:
1. Assign one email address as my contact for reminders from banks and bill companies, and then sign up for paperless statements.
2. Create a filing system on my computer to organize all documents, back it up twice with an external hard drive and a cloud-based storage system, and set quarterly reminders on my calendar to download statements.
3. Buy a desktop scanner that’s also portable for when I travel. As silly as this may sound, having the big all-in-one printer/scanner/fax machine that sits at the opposite end of the room was simply too much effort when I could more easily throw a piece of paper into the scanner to file online while talking on the phone or finishing an email.
Time to read your 401(k) statements: New regulations aim to make it easier for participants to understand the fees
If you participate in your employer’s 401(k) plan, you may have already noticed a change in the format of the statements that are provided to you, detailing your investments. If you haven’t, keep an eye out – by Aug. 30th, the information provided on there will be changing.
The U.S. Department of Labor is requiring that plan sponsors (your employer) provide more detailed information on fees and expenses related to 401(k) plans. It’s important to note that the fees listed are not new. They’ve always been there. It’s just that now the DOL is trying to make it easier for participants to see the administrative expenses charged for running a program, as well as the individual expenses – or those fees that may have been deducted from a participant’s account based on actions they may have taken, such as redemption or loan fees.
Plan sponsors must also notify participants about the existence of any revenue-sharing arrangements. This is a practice that involves using a portion of the investment-related fees paid by participants to help cover a plan’s administrative costs. It is this type of so-called “soft dollar” arrangement that has been the subject of some debate, and helped prompt the new fee disclosures. (To get a sense of the historical context around the fee debate, read this 2006 column by Bloomberg columnist John F. Wasik, “401(k) Fees Are Still Exorbitant, Buried Secrets.”)
Previously there was concern about administrators passing along fees to participants in the form of individual fund expense ratios, which is an annual percentage deducted from plan assets. The lack of transparent disclosure raised criticism that some plans may have been paying excessive administrative fees, and investors were buying into them without considering other, lower-cost options such as index funds. Other concerns included the potential for conflicts of interest: Plan sponsors and administrators may have an incentive to pick funds that pay more in revenue sharing, instead of evaluating funds for being the best investment. (SmartMoney highlighted this ongoing concern in a May 2012 article, “Will 401(k)s Abandon Revenue Sharing?”)
Have you procrastinated on your taxes? Then it’s time to make a resolution for next year because it’s probably costing you twice as much to meet that IRS deadline.
Those taxpayers who file in April, or file an extension, pay an average of $163 compared with $87 for those who file in January or February, according to a Tax Prep survey by TechBargains.com, a website that aggregates information on deals available online.
Waiting to the last minute could also impact how you feel about your tax preparation method, the survey of more than 1,100 respondents found. About 89 percent of early filers felt positive about their tax prep method whereas just 62 percent of procrastinators felt good about it. In general, most people file their taxes in March, TechBargains said.
Fidelity Investments today announced a new iPad App that allows investors to make a mobile deposit directly into their Fidelity IRA accounts. Investors can take a picture of a check with their iPad camera and immediately send it to Fidelity for deposit into a traditional or Roth IRA.FULL ENTRY
Are you up to date in your understanding of mortgage interest deductions for your taxes? Here are some new tips for your tax checklist.
Grant Thornton, an international tax advisory and consulting firm, offered some tips and reminders for this year’s tax season – and, looking forward, some advice on things to think about as you plan for next year. I found the information on the mortgage interest deduction helpful. There’s also a few items for small business owners included. Take a look:
For your personal finances:
What’s new for 2011?
- You can deduct interest on a mortgage of up to $1.1 million – For many years, courts and the IRS interpreted the tax code to limit your deduction to the interest on up to $1 million in debt used to buy, build or improve your home, while allowing you to deduct interest on an additional $100,000 in home equity debt only if it was not used to acquire the home. So you could deduct interest on up to $1.1 million in mortgage debt only if $100,000 was not used to purchase or build the home. The IRS recently changed its position and has now ruled that debt used to buy, construct or improve a home can be treated as both acquisition and equity indebtedness. This means you can now deduct $1.1 million in mortgage interest even if all of it was used to purchase or build the home.
- Payroll tax deduction – The employee portion of the Social Security tax was reduced in 2011 from 6.2 percent to 4.2 percent. This lower rate applied all the way up to the Social Security wage limit of $106,800, and employers reduced withholding accordingly. If you’re self-employed, your self-employment taxes were also lowered from 15.3 percent to 13.3 percent on income subject to Social Security. But this reduction does not affect the deduction for self-employment taxes on your 2011 tax return.