Lynn Gaumer and Nathan Stelter of the Stelter Co., which serves nonprofit organizations nationwide.
How the CARES Act Affects Your Retirement Savings
BY STEVE DINNEN
Important changes have come to your retirement savings accounts and income tax calculations by way of the financial stimulus package enacted in the wake of the COVID-19 pandemic.
The CARES Act that was passed last month drew a lot of attention because of the federal jobless benefits it extended to the new legions of unemployed people. Almost lost inside the 800 pages of the financial stimulus bill were provisos that could have an impact on your taxes and charitable giving. With help from Nathan Stelter, president of the Stelter Co., and Lynn Gaumer, senior gift planning consultant at that Urbandale-based firm that supports nonprofit organizations, we looked at three items from the CARES Act that are most likely to affect you:
Required minimum distributions from IRAs are suspended for 2020. Once you reach age 72, you are required to annually withdraw a percentage of funds accumulated in your retirement account, such as an IRA, Simple IRA or SEP IRA. That money is taxed as ordinary income. But for 2020 only, there is no RMD mandate.
The savings can be considerable. If you are a 76-year-old man with $2 million tucked into an IRA, normal IRS rules would mandate that you withdraw at least $90,909 this year, and owe taxes on that.
You still can withdraw money from the account. And if you took a withdrawal prior to passage of the law, that will count as a distribution.
What Is the Government Doing to Your Retirement Funds? BY STEVE DINNEN
Retirement savings plans have sailed into some new waters lately, undergoing two major overhauls in nearly as many months. With the government poised to consider still more ways to stimulate this pandemic-rattled economy, who knows whether further changes are afoot. First came the SECURE Act, signed into law last December. Its big changes included incentives for employers to allow part-time workers to participate in them. It allowed annuities to be offered as investment options (cheer up, all you Des Moines annuities companies), and lifted the age cap on contributing to a 401(k). And it pushed to 72 the age at which you have to start taking mandatory distributions from your IRA. In short order the CARES Act popped up. It put a halt to required minimum distributions (RMDs) for this year. RMD amounts are calculated based upon the value of your assets as of Dec. 31 of the prior year, and at that time the market benchmark Dow Jones industrial average was 16% higher than today. Your assets inside that IRA have likely declined. With the RMD hiatus, you have a chance to recover some of those assets. And the tax man won’t be breathing down your neck to take the money out – or pay an ugly penalty. At least this year.
How to Pin Down Your Coronavirus Finances BY JILL CORNFIELD FOR CNBC
In an uncertain period, money may be the first thing to wobble.
Over the last few weeks, 16 million filed for unemployment. Many more are frightened about job security. It’s an excellent time to strive for some peace of mind by smoothing out unpredictability during the quarantine.
To make matters worse, unexpected expenses can still pop up, and fewer than half of all Americans can put their hands on $1,000 for an emergency.
A few strategies are essential, says Sa El, a licensed independent insurance agent and co-founder of Simply Insurance in Atlanta. Not only does El, 35, run his own company, he also works in an industry that can have built-in unpredictability in pay.
El never knows what his income actually is until six months after a sale. "It might look like you’re getting $3,000, but in fact you only get $1,500," he said.
Here’s how to smooth out the jagged edges of an up-and-down income.>> READ MORE
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How Elections Affect the Market 2020 will be remembered as a historically significant year. The upcoming Presidential election will reflect who the electorate sees as most ready to manage public health and economic/market turmoil. This look at how elections have or have not affected US investors may surprise you. ... Read more »
The Easiest Way for Millennials To Become Millionaires BY DAN KADLEC for MONEY MAGAZINE
Millions of millennials have heard the message: Saving early and often is the key to long-term financial security. Nearly 1 in 5 saves 15% or more of every paycheck in a 401(k) plan, new research shows, which puts them on track to building $1 million retirement portfolios.
This finding should not take anyone by surprise. Millennials may be quirky, uninterested in a traditional career or formal marriage, and even annoyingly self-entitled. But they were at an impressionable age during the financial crisis and many took its lessons to heart. For a large segment, saving is part of their psyche — similar to their grandparents who came of age during the Great Depression.
Among older generations, a greater percentage save 15% or more, according to Fidelity Investments. Some 29% of Gen X-ers, for example, are socking away 15% or more. (This data comes from Fidelity’s analysis of savings habits the 13 million 401(k) investors in the plans it administers.) But older Americans have higher incomes and less time to save. The urgency is particularly acute among boomers, who have beefed up savings late in the game.>> READ MORE
