retirement plans

New Retirement Plan Contribution Limits for 2019

By Robert J. Pyle, CFP®, CFA


Key Takeaways

  • Good news for workers: The 401(k) contribution ceiling has been raised $19,000 in 2019 ($25,000 if over age 50).

  • IRA and Roth holders can now contribute up to $6,000 per year ($7,000 if over age 50).

  • The contribution caps have been raised even higher for the self-employed.

  • See handy charts below for paycheck-by-paycheck breakdown.

 

While talk of Social Security’s demise may be exaggerated, there’s a very real possibility that many Americans won’t receive the full amount of benefits they’re expecting in retirement. Further, you don’t know how long you will live or what your true living costs will be in retirement—especially when unpredictable medical/eldercare costs are factored in.

Bottom line: It makes sense to save as much as you possibly can in tax-deferred retirement plans regardless of whether you are a salaried employee or a business owner. The rules are on your side.

Good news on the 401(k) front

The contribution limit for 401(k)s increases to $19,000 in 2019, up from $18,500 in 2018. Workers over age 50 in 2019 can make an additional $6,000 per year in catchup contributions, meaning you can now contribute up to $25,000 per year in tax-deferred retirement accounts. To put that sum into more realistic terms, many find it helpful to see what they can contribute on a paycheck by paycheck basis. Here’s a handy chart, based on monthly, semi-monthly or every- two-week paycheck cycles:

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If you are over age 50, here’s how the additional $6,000 catchup contribution looks broken down by paycheck frequency:

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IRA contribution ceiling also raised

There’s good news on the Individual Retirement Account (IRA) front as well. The IRA and Roth IRA limits have both increased by $500 in 2019. If you have an IRA, you can now contribute up to $6,000 per year, or $7,000 per year if you are over age 50. The same contribution limits of $6,000/$7,000 apply for a Roth IRA. Remember if you are over age 70-1/2, you can still contribute to a Roth IRA if you have generated earned income and if your adjusted gross income is below the eligibility threshold. You have until April 15th, 2019 to contribute for 2018 and until April 15th, 2020 to contribute for 2019. If you contribute early in the year, you will have your money working for you for a longer period of time.

Business owners can contribute more as well

If you are self-employed, the SEP IRA and solo 401(k) limits have been raised to $56,000 for 2019. In addition, if you are over 50 and have a solo 401(k), you can make an additional $6,000 in catch-up contributions for a total of $61,000. Just remember: if you want to set up an individual 401(k), you must do so by December 31st, 2018.

Conclusion

In today’s instant gratification world, it can be hard to set aside funds for the future. But, whether you are young or old, salaried employee or solopreneur, the tax advantages and compounding power of 401(k), IRAs and SEPs are just too attractive to ignore. You may not get same day shipping or bonus miles with tax-deferred retirement savings plans, but having peace of mind throughout your golden years is something you just can’t put a price tag on.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.


Diversified Asset Management, Inc. – 2018 2nd Quarter Newsletter

This quarter’s newsletter is filled with lots of great information. Here is a list of topics included in this newsletter.

 

Investing For The Long Run Amid Volatility

With stocks surging one moment and plunging the next, it’s good to remember that from 1926 through 2016, a portfolio diversified across stocks, bond and cash averaged a 9.6% annual return, with a better risk-reward ratio than any one of the four investments with large liquid markets.

The New Law Tax Gives Roth Converters A Little Less Wiggle Room

Retirements savers, give thanks! The recently passed tax plan doesn't harm you - much. Congress, for instance, did not lower maximum contributions for tax-deferred plans, like traditional 401(k)s and individual retirement accounts. Nor did Congress tinker with moving your money from a traditional plan into a Roth, where you pay the taxes up front and appreciation grows tax-free and your withdrawals won't ever be taxed.

Ways To Close The Retirement Gap

According to a recent article in The Washington Post, 71% of Americans aren't saving enough for retirement. If you're in this predicament, what can you do to close the gap? Here are six practical suggestions.

Six Tips To Avoid Phishing Scams

Fake news" has exacted a high cost to American culture and political discourse, but the internet fakery that costs you time and money is phishing, emails diabolically aimed to trick you into opening your personal data to crooks and miscreants.

You Don’t Need Perfect Knowledge To Invest Well

If you had the power to predict which one of 12 types of investments representing wide range of assets was going to be No. 1 every year for each of the 15 years from 2002 through 2016, you would have averaged a 29.9% annual return.

 

To read the newsletter click on the link below:

Diversified Asset Management, Inc. – 2018 2nd Quarter Newsletter

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Starting Out: Begin Funding for Your Financial Security

Congratulations! You’ve graduated from school and landed a job. Your salary, however, is limited, and you don't have much money (if any) left at the end of the month. So where can you find money to save? And, once you find it, where should this cash go?

Here are some ways to help free up the money you need for current expenses, financial protection, and future investments -- all without pushing the panic button.

Get Out From Under

For most young adults, paying down debt is the first step toward freeing up cash for the financial protection they need. If you’re spending more than you make, think about areas where you can cut back. Don't rule out getting a less expensive apartment, roommates, or trading in a more expensive car for a secondhand model. Other expenses that could be trimmed include dining out, entertainment, and vacations.

If you owe balances on high-rate credit cards, look into obtaini ng a low-interest credit card or bank loan and transferring your existing balances. Then plan to pay as much as you can each month to reduce the total balance, and try to avoid adding new charges.

If you have student loans, there's also help to make paying them back easier. You may be eligible to reduce these payments if you qualify for the Federal Direct Consolidation Loan program. Though the program would lengthen the payment time somewhat, it could also free up extra cash each month to apply to your higher-interest consumer debt. The program can be reached at 800-557-7392.

What You Really Should Buy

How would you pay the bills if your paychecks suddenly stopped? That's when you turn to insurance and personal savings -- two items you should “buy” before considering future big-ticket purchases.

Health insurance is your first priority. Health care insurance is now also mandatory under the Affordable Care Act. If you're not covered under an employer plan, look into the new state or national health insurance exchanges, which offer a variety of coverage options and providers to choose from. You may also qualify for a subsidy if your taxable income is under 400% of the federal poverty level.

Life insurance is the next logical step, but may only be a concern if you have dependents.

Disability insurance should be another consideration. In fact, government statistics estimate that just over 25% of today's 20-year-olds will become disabled before they retire. 1  Disability insurance will replace a portion of your income if you can't work for an extended period due to illness or injury. If you can't get this through your employer, call individual insurance companies to compare rates.

Build a Cash Reserve

If you should ever become disabled or lose your job, you'll also need savings to fall back on until p aychecks start up again. Try to save at least three months' worth of living expenses in an easy-to- access "liquid" account, which includes a checking or savings account. Saving up emergency cash is easier if your financial institution has an automatic payroll savings plan. These plans automatically transfer a designated amount of your salary each pay period -- before you see your paycheck -- directly into your account.

To get the best rate on your liquid savings, look into putting part of this nest egg into money market funds. Money market funds invest in Treasury bills, short-term corporate loans, and other low-risk instruments that typically pay higher returns than savings accounts. These funds strive to maintain a stable $1 per share value, but unlike FDIC-insured bank accounts, can't guarantee they won't lose money. 2

Some money market funds may require a minimum initial investment of $1,000 or more. If so, you'll need to build some savings first. Once you do, you can get an idea of what the top-earning money market funds are paying by referring to iMoneyNet, which publishes current yields. Many newspapers also publish yields on a regular basis.

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Build Your Financial Future

Some long-term financial opportunities are too good to put off, even if you are still building a cache for current living expenses.

One of the best deals is an employer-sponsored retirement plan such as a 401(k) plan, if available. These tax-advantaged plans allow you to make pretax contributions, and taxes aren't owed on any earnings until they're withdrawn. What's more, new Roth-style plans allow for a fter-tax contributions and tax-free withdrawals in retirement, provided certain eligibility requirements are met. Another big plus is direct contributions from each paycheck so you won't miss the money as well as possible employer matches on a portion of your contributions.

Don't underestimate the potential power of tax savings. If you invested $100 per month into one of these accounts and it earned an 8% return compounded annually, you would have $146,815 in 30 years -- nearly $50,000 more than if the money were taxed annually at 25%. 3 Bear in mind, however, that you will have to pay taxes on the retirement plan savings when you take withdrawals. If you took a lump-sum withdrawal and paid a 25% tax rate, you'd have $110,111, which is still more than the balance you'd have in a taxable account.

If you're already participating, think about either increasing contributions now or with each raise and promotion.

If a 401(k) isn't available to you, shop aroun d for individual retirement accounts (IRAs), both traditional and Roth, at banks or mutual fund firms. In 2016, you can contribute up to $5,500 to traditional IRAs or Roth IRAs. Generally, contributions to and income earned on traditional IRAs are tax deferred until retirement; Roth IRA contributions are made after taxes, but earnings thereon can be withdrawn tax free upon retirement. Note that certain eligibility requirements apply and nonqualified taxable withdrawals made before age 59½ are subject to a 10% additional federal tax.

Stop Waiting for the Next Paycheck

Beginning your working life with good financial decisions doesn't call for complex moves. It does require discipline and a long-term outlook. This commitment can help get you out of debt and keep you from a paycheck-to- paycheck lifestyle.

Source(s):

1.  Social Security Administration, Fact Sheet, March 2014.

2.  An investment i n a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

3.  This hypothetical example is for illustrative purposes only. It does not represent the performance of any actual investment.

Required Attribution

Because of the possibility of human or mechanical error by DST Systems, Inc. or its sources, neither DST Systems, Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall DST Systems, Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.

© 2017 DST Systems, Inc. Reproduction in w hole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

 

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

 

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Defined Benefit Plans

The defined benefit plan is a powerful tax strategy for high income individuals with self-employment income. It's great for small business owners who want to catch-up on their retirement saving and save a tremendous amount on taxes. 

Click here to view our latest webinar on Defined Benefit Plans.

Click here to read a case study.
 
Why is a defined benefit plan a powerful tax strategy for high income individuals with self-employment income and small business owners?

The small business defined benefit (DB) plan is an IRS-approved qualified retirement plan that allows independent professionals and consultants, individuals with self-employment income and small business owners to make large contributions and accumulate as much as $1-2 Million in just 5-10 years. The contributions are deductible and can potentially reduce income tax liability by $40,000 or more annually. To read more about examples where a defined benefit plan would be beneficial click here The Defined Benefit Plan.pdf
 
New Flexibility in Defined Benefit Plans
 
Independent professionals and consultants, small business owners, and individuals with self-employment income often are so busy with their day-to-day responsibilities that they don't take the time to think about preparing for the day they finally retire. Since they aren't thinking about the future - at least not one that includes life beyond their daily work - they may not accumulate retirement savings sufficient to maintain their pre-retirement lifestyle. Business owners are also more likely to put the needs of their business ahead of their well-being... to read more click here New Flexibility in Defined Benefit Plans.pdf


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.



The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Own a Retirement Account? Keep Your Beneficiary Designations Up to Date

Many investors have taken advantage of pretax contributions to their company's employer-sponsored retirement plan and/or make annual contributions to an IRA. If you participate in a qualified plan program you may be overlooking an important housekeeping issue: beneficiary designations.

An improper designation could make life difficult for your family in the event of your untimely death by putting assets out of reach of those you had hoped to provide for and possibly increasing their tax burdens. Further, if you have switched jobs, become a new parent, been divorced, or survived a spouse or even a child, your current beneficiary designations may need to be updated.

Consider the "What Ifs"

In the heat of divorce proceedings, for example, the task of revising one's beneficiary designations has been known to fall through the cracks. While (depending on the state of residence and other factors) a court decree that ends a marriage may potentially terminate the provisions of a will that would otherwise leave estate proceeds to a now-former spouse, it may not automatically revise that former spouse's beneficiary status on separate documents such as employer-sponsored retirement accounts and IRAs.

Many qualified retirement plan owners may not be aware that after their death, the primary beneficiary -- usually the surviving spouse -- may have the right to transfer part or all of the account assets into another tax-deferred account. Take the case of the retirement plan owner who has children from a previous marriage. If, after the owner's death, the surviving spouse moved those assets into his or her own IRA and named his or her biological children as beneficiaries, the original IRA owner's children could legally be shut out of any benefits.

Also keep in mind that the law requires that a spouse be the primary beneficiary of a 401(k) or a profit-sharing account unless he/she waives that right in writing. A waiver may make sense in a second marriage -- if a new spouse is already financially set or if children from a first marriage are more likely to need the money. Single people can name whomever they choose. And nonspouse beneficiaries are now eligible for a tax-free transfer to an IRA.

The IRS has also issued regulations that dramatically simplify the way certain distributions affect IRA owners and their beneficiaries. Consult your tax advisor on how these rule changes may affect your situation.

To Simplify, Consolidate

Elsewhere, in today's workplace, it is not uncommon to switch employers every few years. If you have changed jobs and left your assets in your former employers' plans, you may want to consider moving these assets into a rollover IRA or your current employer's plan, if allowed. Consolidating multiple retirement plans into a single tax-advantaged account can make it easier to track your investment performance and streamline your records, including beneficiary designations.

Review Your Current Situation

If you are currently contributing to an employer-sponsored retirement plan and/or an IRA contact your benefits administrator -- or, in the case of the IRA, the financial institution -- and request to review your current beneficiary designations. You may want to do this with the help of your tax advisor or estate planning professional to ensure that these documents are in synch with other aspects of your estate plan. Ask your estate planner/attorney about the proper use of such terms as "per stirpes" and "per capita" as well as about the proper use of trusts to achieve certain estate planning goals. Your planning professional can help you focus on many important issues, including percentage breakdowns, especially when minor children and those with special needs are involved.

Finally, be sure to keep copies of all your designation forms in a safe place and let family members know where they can be found.

This communication is not intended to be tax or legal advice and should not be treated as such. Each individual's situation is different. You should contact your tax or legal professional to discuss your personal situation.


Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.



The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Consider the "Autopilot" Option for Your Plan

These days, it is vitally important for individuals to set money aside for retirement during their working years. Unfortunately, not every employee thinks so. Which explains why some employer-sponsored retirement plans have low participation rates. If your company's retirement plan participation rate disappoints you, there may be an easy fix. Why not put your plan on autopilot?

The Nuts and Bolts

Putting a retirement plan on autopilot simply means introducing an automatic enrollment feature. In other words, employees are automatically enrolled in the retirement plan unless they elect otherwise. A specific percentage of the employee's wages will be automatically deducted from each paycheck for contribution to the plan unless the employee opts out.

Once enrolled in the plan, employees can change their contribution rate and choose how to invest their contributions from the plan's investment menu. If they don't make their own investment selections, their contributions are automatically directed to a qualified default investment alternative (QDIA), which is typically a target date fund, a balanced fund, or an account managed by an ERISA-qualified investment manager. Employees whose contributions are invested in the default option can later switch into another plan investment, if desired.

Does It Work?

According to recent research, approximately 75% of employees participate in their employer's retirement plan.1 The same study found that 62% of plan sponsors offer an auto-enrollment feature, 97% of those offering auto enrollment are satisfied with their program, and that 88% of sponsors believe auto enrollment has had a positive impact on their plan participation rates.2

A Win-Win

Many employees are confused about retirement planning. Many want guidance. Automatic enrollment makes the tough decisions for them and starts them on the path to a more secure financial future. Having a robust retirement plan usually helps businesses attract and keep talented employees. Automatic enrollment may be just the enhancement you need to get more employees to participate in -- and appreciate -- the benefits of working for you.
 

Source:

1. & 2.  Deloitte Consulting, LLP, the International Foundation of Employee Benefit Plans, the International Society of Certified Employee Benefit Specialists, "Annual Defined Contribution Benchmarking Survey, 2015 Edition."


Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.



The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Can Volatility Predict Returns?

Here is a nice article provided by Dimensional Fund Advisors: 

Do recent market volatility levels have statistically reliable information about future stock returns? We examine historical data to see if there have been differences in average returns between more volatile and less volatile markets, if a strategy that attempts to avoid equities in times of high volatility adds value, and if there is any relation between current volatility and subsequent returns.  CLICK HERE TO READ MORE:
 
Can Volatility Predict Returns.pdf



Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.



The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.

Retirement Confidence Leveled Off in 2016

Americans' confidence in their ability to retire in financial comfort has rebounded considerably since the Great Recession, but worker optimism leveled off in 2016. According to the 26th annual Retirement Confidence Survey -- the longest-running study of its kind conducted by Employee Benefit Research Institute in cooperation with Greenwald & Associates -- worker confidence stagnated in the past year due largely to subpar market performance.

The percentage of workers who reported being "very confident" about their retirement prospects hit a low of 13% between 2009 and 2013, recovered to 22% in 2015, and stabilized at 21% in 2016. However, significant improvement was reported among workers who said they were "not at all" confident about retirement, as their numbers shrank from 24% in 2015 to 19% this year. Curiously, the attitude shift away from being not at all confident came from those respondents who reported no access to a retirement plan.

It's All in the Plan

The data clearly shows a strong relationship between the level of retirement confidence among workers and retirees and participation in a retirement plan -- be it a defined contribution (DC) plan, a defined benefit (DB) pension plan, or an IRA. Workers reporting they and or their spouse have money in some type of retirement plan -- from either a current or former employer -- are more than twice as likely as those with no plan access to be very confident about retirement.

Still Not Preparing

Underlying the generally positive trend in the 2016 survey was the persistent fact that most Americans are woefully unprepared for retirement, having little or no money earmarked for retirement. For instance, among today's workers, 54% said that the total value of their savings and investments (excluding the value of their home and any defined benefit plan assets) is less than $25,000. This includes 26% who have less than $1,000 in savings.

Retirement Plan Dynamics

Not only do workers and retirees that own retirement accounts have substantially more in savings and investments than those without such accounts, on a household level, these individuals tend to have assets stored in multiple savings vehicles. For instance, according to the 2016 RCS, about two-thirds of those with money in an employer-sponsored plan also report that they or a spouse have an IRA. Further, 90% of survey respondents with access to a defined benefit pension plan either through their current or former employer also have money in a defined contribution plan.

Retirement Age

Perhaps as an antidote to their lack of savings, some workers are adjusting their expectations about when they will retire. In 2016, 17% of workers said the age at which they expect to retire has changed -- of those, more than three out of four said their expected retirement age has increased. Longer-term trends show that the percentage of workers who expect to retire past the age of 65 has consistently crept higher -- from 11% in 1991 to 37% in 2016.

For more retirement trends among workers and retirees or to review the 2016 Retirement Confidence Survey in its entirety, visit EBRI's website.


Source:

Employee Benefit Research Institute and Greenwald & Associates, 2016 Retirement Confidence Survey, March 2016.


Required Attribution


Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

© 2016 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.


Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.
 


The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.