Pandemic Accelerated Senior’s Use Of Cell Phones And Other Technology

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The pandemic has caused many older Americans to become obsessive with cell phones and other technology which can connect them with friends and family.  A recent report from AARP found that Americans ages 65 and older are using smartphones and tablets more often for reading news and playing games as well as broadening their social-media use and doing more shopping online.  Another report from Nielsen found that Americans over the age of 50 are fueling growth in video-streaming services like Hulu, Netflix and YouTube.  The pandemic also forced many older Americans to learn how to make Facetime and Zoom calls to connect with friends and family, and to use streaming services to get entertainment online.

 

Monterey, CA What Are The Tax Issues When Giving Money To A Non-Profit From An IRA

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One way to do this is to donate out of an IRA or other retirement account.  However, Leonard Sloane of the Wall Street Journal cautions that you need to be careful when planning this.  “So many people make mistakes with the rules,” says Andy Ives, an IRA analyst at Ed Slott & Company, a tax consulting firm.  One mistake people make is making a gift to a donor-advised fund (such as the Community Foundation of the Monterey Peninsula), a private foundation or charitable-gift annuity.  To obtain the tax benefit, there must be a full release of the funds directly to a charity.  Another mistake is when the donor accepts something in return for the gift.  You can’t even accept a tote bag, coffee mug or T-shirt as a gift!  Make sure you talk to a tax advisor before implementing this strategy.

Widows And Widowers Beware Of Rolling Over Your Deceased Spouse’s 401K Into Your Own

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After losing your husband or wife, it’s tempting to simplify all of your financial assets and consolidate them.  However, it’s ill-advised to do this if you are younger than 59.5 years old.  IRS rules allow you to make withdrawals from your late husband’s retirement accounts with no penalty (although you will have to pay income taxes on the withdrawal).  You can also file your taxes as married filing jointly in the year that he or she died and get a better tax rate than filing as single.

IRS Taking Public Comments On Controversial Change In Rules For Inherited IRAs

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`The IRS will take public comments through May 25 on a controversial change to the Setting Every Community Up for Retirement Enhancement Act, which passed in 2019.  Known as the SECURE Act, it allowed anyone who inherited an IRA to withdraw the money any way that they wanted, including skipping annual distributions, provided the account was drawn down to zero by the end of year 10.  Now, the IRS is proposing that this option would only be available to non spouse beneficiaries who inherit an IRA if the original owner dies before having to take required minimum distributions.  If the original owner dies after April 1 following the year of the person’s 72nd birthday, the date when RMDs are first required, non spouse beneficiaries must take RMDs in the first nine years and then empty the account in year 10 (Kiplinger’s Retirement Report, May 2022 page 14).

Time To Ditch The 4% Rule In Retirement

Even the inventor of the 4% rule (Bill Bengen), which theorizes that withdrawing 4% in year one and then adjusting each year for inflation your retirement savings will last you a lifetime, is agreeing that we may need to take a more conservative approach given stock market volatility and soaring inflation.  “The problem is, there’s no precedent for today’s conditions,” Bengen told The Wall Street Journal.  Given the challenges of making forecasts right now, Bengen recommends cutting spending, if possible.

 

Inflation Driving Seniors Back Into The Workforce

A glass jar filled with dollars was placed on the table

Inflation in the U.S. hit a 40 year high of 7.9%, which is causing financial problems for many seniors.  Economists say that this is forcing many retirees back into the workforce.  Thankfully, this may ease staffing shortages which has hit a number of industries.  “We’re beginning to see the migration of the older cohort who expected to live on fixed income in a low interest-rate and low-inflation environment, Joseph Brusuelas, chief economist at RSM US LLP, told The Wall Street Journal.  “Really what you’re dealing with is an inflationary shock that has elicited a change in behavior,” he said.   The share of people over 55 either working or looking for a job rose to 38.9% in March from 38.4% in October.  That translates to more than 480K people in that age group entering the labor force during the last six months.

Monterey, CA Many Retirees Not Prepared For A Financial Shock

A glass jar filled with dollars was placed on the table

A new study which was published by the Society of Actuaries Research Institute’s Aging and Retirement Strategic Research Program found that many retirees and pre-retirees aren’t prepared for a financial shock, and the likelihood of that happening is increasing.  Many economists are saying that the odds are increasing that we will soon enter a recession, and Russia’s attack on Ukraine is likely to wreak havoc on the stock market.  According to the study, about half of pre-retirees report that they already experienced a financial shock, along with 4 in 10 retirees.  These shocks have reduced the assets of pre-retirees by 25% or more and their spending by 10% or more.  Experts urge retirees to build a reserve fund.  Half of pre-retirees could only afford to spend $10K or less on an emergency while retirees reported they could afford no more than $25K.  There are plenty of great financial advisors on the Monterey Peninsula and you should consult with one yearly.

https://www.usatoday.com/story/money/personalfinance/retirement/2022/03/25/retirement-prepare-sudden-financial-hardship/7157673001/

Age Discrimination Still Present Despite A Hot Job Market

The job market in the U.S. is on fire, but seniors looking for work continue to complain about age discrimination.  Workers over 50 haven’t joined the jobs recovery to the same degree as younger peers, not counting the millions who retired early during the past two years.  In January, nearly one-third of job seekers age 55 and older were part of the long-term unemployed, according to federal data which compared them to workers between the ages of 16 and 54.  In a recent AARP survey, 78% of workers between the ages of 40 and 65 said they had seen age discrimination.  One suggestion : Address the issue head on and don’t avoid it. Prove to a potential employer that you have what it takes to compete with a younger worker.

 

New Rules For IRA Required Minimum Distributions

With the exception of the COVID-19 blip over the last two years, people are living longer and the IRS has changed the rules on Required Minimum Distributions (RMDs) on IRA’s, 401(k)’s and 403(b)’s.  RMDs were suspended for 2020 because of COVID, but they are back.  You don’t have to take RMDs from Roth IRAs, but you do from non-Roth’s.  The 2019 Secure Act raised to 72 the age at which RMD’s kick in, up from 70.5 years, but not for people who were already taking RMDs in 2019.  Starting in 2022, many people will have RMD’s that are about 6-7% smaller than they would have been under the IRS’s old life expectancy tables.  Speak to your tax accountant because the rules have become very complex (See AARP Bulletin, December 2021, page 30).

AT&T Unexpectedly Cuts Retiree Benefits

A glass jar filled with dollars was placed on the table

AT&T has angered many former employees by reducing life insurance and death benefits as of January 1 for approximately 220K former workers.  One former employee, Dean Allison, told The Wall Street Journal that he accepted an early buyout offer to retire in 1998 and was promised a death benefit of $63K would go to his wife.  AT&T notified him that they will pay no more than $15K if he dies.  Managers who retired had their life insurance pegged at 1x their annual pay.  That number has been reduced to just $15K.  Putting more flames on the fire, the company has excluded executives from the death benefit reduction.  The heirs of Randall Stephenson, who left the company in 2020 after serving as its CEO, will receive a massive payout of $3.6 million under his current life insurance plan.  AT&T’s finance chief John Stephens has the most to gain from the benefits reduction.  The company offered to pay him an extra $500K if he meets any one of three financial targets, one of which is cutting $1 billion or more from AT&T’s obligation for retiree pension and benefits.

https://www.wsj.com/articles/at-t-slashed-promised-life-insurance-for-former-workersand-time-runs-out-at-year-end-11640544022