Is Working in Retirement Right for You?
When you picture your retirement, working at a part-time job might be the last thing on your mind. But that's exactly what many retirees have chosen to do, for a variety of reasons. In fact, statistics from the American Association of Retired Persons (AARP) demonstrate that 20 percent of Americans over age 65 are still employed to some degree.
In a few cases, these working seniors represent those who just haven't retired yet. But many people initially retire, only to re-enter the workforce at a later time. If you're wondering why, the AARP gives five main reasons that working in retirement is a common choice among senior citizens.
They're bored. Most of us believe that we can't wait to stop working and enjoy our retirement years. But many seniors actually discover that they're bored after their careers have ended! By returning to work, at least part time, seniors stay active and feel engaged in their communities.
They've been pursued. It feels good to be wanted, and many employers are actively seeking older workers! The experience level, maturity, and high degree of skill displayed by retirees are highly valued attributes in the working world. It can be hard to say no when employers pursue you!
They just don't feel “done”. Many of us pursue careers that pay well, but that we find emotionally unfulfilling. It's understandable to make this choice when we have bills to pay and a retirement plan to fund. But later in life, we may decide that we're ready to take on a second career that we truly enjoy, or that makes a difference in the world.
They can afford to do it now. Sometimes the more fulfilling jobs are the lower-paying ones. But now that your primary career has funded a comfortable retirement, and you've claimed your Social Security benefits, you may find it possible to take on a rewarding position doing something you truly love.
They need the income. Sometimes working in retirement isn't all about personal fulfillment or staying active. Some seniors retire to find that their retirement income doesn't quite provide for the lifestyle they truly want. In that case, a part time job can help pay the bills or fund an annual vacation.
If working in retirement sounds like fun, then go for it! But if you don't want to be forced back to work out of necessity, then you need to make sure your retirement plans are in order. Schedule regular meetings with your retirement planning professional to make sure that your financial plans align with your ultimate retirement goals.
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If you're like many people, you may tend to lose track of your financial priorities. One day you realize that you aren't quite sure of how much you've saved for retirement, or how your financial outlook is holding up these days. It's a good idea to review this information periodically, to make sure you're on the right track toward a comfortable future. Not to mention, you'll sleep better at night once you get your financial affairs in order!
Review your retirement plan contributions. Are you currently contributing the maximum to your retirement plan? If so, you can skip this step. But if you aren't taking advantage of your maximum tax-advantaged contribution, call your human resources department at work. Increase your contributions by an amount that is comfortable for you, even if you don't reach the maximum. Any increase is better than continuing to save at a rate that is too low.
Review your fund allocations. When you originally chose your retirement fund allocations, you probably based those decisions around your retirement goals and your risk tolerance. Over time, goals and risk tolerance usually change. Therefore, your investment choices need to change as well. Schedule a meeting with your financial advisor, review your goals, and talk about making necessary changes to your retirement fund allocations.
Review your retirement plan. While you're meeting with your financial advisor, talk about your overall retirement plan. You may have experienced changes to your income or lifestyle since your last meeting, or you may be thinking about a new goal for retirement. Ask your advisor to run a projection to see how your current funds will sustain you in retirement. Rather than waiting until retirement time to discover that your plan isn't solvent, make changes now to help ensure that you can support your lifestyle when you stop working.
You may have other financial goals in mind, such as getting out of debt. Discuss these with your financial advisor at your meeting. But keep in mind that if you accomplish the steps outlined here, you will be well on your way to a solid financial future.
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The Smart Way to Pay Down Debt
When debt starts to accumulate, it can be tempting to start writing checks to lenders any time there's a little extra money in the budget. But as with anything else in life, it is best to analyze the situation and craft a smart, logical plan before you leap into action. Some types of debt are more damaging than others, so follow this guide to paying off your debts the smart way.
Which debts should be your top priority? Those with high interest rates should be addressed first. For most people, this means credit cards, since rates can average between 13 and 15.7 percent. First call all of your credit card companies, and find out what rates you're paying on each card. If you can, transfer high-interest balances to a card with lower interest. Otherwise, pay as much as you can on the card with the highest interest rate until it is paid off, then work on the card with the next-highest interest rate, and so on. If you hold several credit cards with high interest rates, you might consider a consolidation loan.
If you bought your car on a zero-interest special, your car loan shouldn't be a high priority to pay off early. For most people, though, car loans are a medium priority debt. Generally the interest rates are higher than a mortgage but lower than credit cards. It's a good idea to pay off your car loan early, if you can. You might save hundreds of dollars on interest.
Car insurance is also a debt. Did you know that most auto insurance companies charge you more for making monthly installments, rather than purchasing 6 or 12 months of insurance at one time? If you can, avoid making monthly payments and you can save some money.
You might dream of paying off your mortgage early, but it's a low-priority debt in the grand scheme of things. If you're one of the few people still carrying a higher interest rate on your mortgage, look into refinancing the loan.
The main idea is to worry about high-interest debts first, and then work your way down to debts that carry a lower interest rate. But don't forget to save for retirement, and set aside some money in an emergency savings account. In fact, having emergency funds on hand can prevent debt in the future!
14326 – 2015/4/6
How to Avoid an IRS Audit
If you're like many Americans, filing your taxes is no easy feat. Once you're finished, you'd love to put the whole matter behind you – but you may still worry about being audited. You're well aware that an audit can cost you time, energy, and hundreds or even thousands of dollars. Wouldn't it be nice to file your taxes with peace of mind?
Unfortunately, there is never any guarantee against an audit. But understanding how the IRS chooses returns to audit can help you avoid this scenario. Since 1.6 million people cheat on their taxes every year, and many more make accidental errors, the IRS conducts random audits to discourage cheating or sloppy returns.
So which returns does the IRS typical target for an audit? Keep in mind people earning between $25,000 and $200,000 annually provoke the least amount of suspicion. Only about one percent of these returns are ever audited. Almost all audits are targeted at people who earn more than $200,000 per year. Some people who claim no adjusted gross income but qualify for certain tax benefits are also audited.
Other than income level, filing a paper return is the biggest factor that triggers mistakes. Paper returns actually carry an error rate of 21 percent! Tax software is programmed to double check for errors, whereas paper returns are subject to human errors in calculation or even handwriting. Sometimes IRS agents even make mistakes transferring your paper return into their system. The IRS knows this, so they tend to target paper returns for audits much more often than they target electronic returns.
Millions of Americans still file paper returns, but going electronic is getting easier and easier every year. You might be surprised by how simple it is to use tax software, but if you aren't computer-inclined, you can have a tax professional do it for you. It's faster to file your tax return electronically, and it's the number one way to discourage an audit.
This material is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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