Figuring Out How Muc h You Must Save for Retirement

 

Ohio-based registered financial consultant Jeffrey L. Wendel leads Wendel Retirement Planning as CEO. As the leader of the company, he helps businesses and individuals with their retirement needs. Beyond this, Jeffrey L. Wendel teaches educational classes at universities around Dayton, Ohio, and has written a book about retirement called “Grand Slam Retirement.”

When it comes to figuring out how much you need for retirement, there are plenty of guidelines that you can follow. For instance, some retirement experts advise that you plan on saving about 80 to 90 percent of your pre-retirement income. Since your annual expenses are expected to decrease in retirement, some believe this estimation will still give you plenty of money to work with. However, you must multiply that annual amount by the number of years your retirement will last. Other estimates advise that you save close to $1 million for retirement, or about 12 to 25-times your pre-retirement salary.

While these rules of thumb can be effective guidelines, particularly if you begin saving for retirement at a young age, they will not give you the specific amount that is best for your life. Depending on your situation, for instance, your post-retirement spending could increase. Or, you may live much longer than you predict. To account for these personal differences, it’s best to create a realistic picture of your ideal retirement, consider your estimated spending for this lifestyle, and plan on saving enough money to cover that until you reach 95 or 100 years old.

RMDs – What They Are and What Happens if They’re Skipped

The CEO of Ohio-based financial firm Wendel Retirement Planning, Jeffrey L. Wendel is responsible for helping clients in meeting their retirement goals. Outside of the office, Jeffrey L. Wendel teaches educational classes around Dayton, Ohio, that focus on such things as retirement taxation and required minimum distributions (RMDs).

Many retirement accounts, including individual retirement accounts IRAs and 401(k) plans, have an RMD that must be taken each year after the account holder turns 70½ years old. These distributions must be taken by December 31, in most situations. However, account holders can delay the required withdrawal date until April of the year after they turned 70½ in certain situations. For instance, a person who turns 70½ in November 2013 can wait until April 2014 to take their RMD for the 2013 year. But, they must make another withdrawal later that year to cover their 2014 RMD.

If an RMD is missed, account holders are subject to a tax penalty of up to 50 percent. This is applied to the amount of money that account holders had to withdraw. So, if they did not withdraw anything, the 50 percent penalty applies to the entire RMD amount. Meanwhile, if they withdrew some, but not the full RMD amount, then the penalty is applied to the difference between what they withdrew and what they should have withdrawn.

RMD rules also apply when the retirement account is inherited. In these situations, RMDs must be taken out every year starting the year after the account owner passed away. Hypothetically, if the account owner passed in 2013, then the person who inherited the account must make RMD withdrawal every year starting in 2014.

How Are Social Security Benefits Taxed?

 

Social Security Benefits
Image: investopedia.com

Accomplished financial professional and CEO of Wendel Retirement Planning Jeffrey L. Wendel helps clients achieve their financial goals by helping them make sound fiscal decisions based on his years of expertise. Not only does Jeffrey L. Wendel and his team assist with insurance, estate planning, and retirement planning, they also educate clients on Social Security and taxes so they can better protect their assets.

To determine whether your Social Security benefits are taxable or not, you must determine how much your combined income, or provisional income is. This is determined by adding together nontaxable interest, half of your Social Security benefits, and adjusted gross income from a job, pension, or other source of taxable income.

The IRS will only tax your Social Security benefits if your combined income is above a certain range. If you file as an individual, you are taxed when your combined income is above $25,000. When filing jointly as a married couple, this threshold increases to $32,000. Because of these limits, you may not be assessed any tax if Social Security is your only income.

Once you know whether you are taxed or not, you can determine how much you are taxed. Up to 50 percent of your Social Security benefits are taxed if your combined income is between $25,000 and $34,000 when filing as an individual. Combined income that is more than $34,000 results in 85 percent of Social Security benefits being taxed. As a married person filing jointly, the upper threshold is $44,000.

Keep in mind that having 50 percent or 85 percent of your Social Security benefits taxed does not mean you have to pay back 50 or 85 percent of the total benefits you get. Rather, only 50 percent or 85 percent of the total benefit is assessed taxes at your normal tax rate. For example, if you receive $2,000 in Social Security and are taxed on 50 percent of that, then only $1,000 of the total is assessed income tax.