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Do Women Face Greater Retirement Challenges than Men?
Do Women Face Greater Retirement Challenges Than Men?
If so, how can they plan to meet those challenges?
Provided by Joe Occhipinti
A new study has raised eyebrows about the retirement prospects of women. It comes from the National Institute on Retirement Security, a non-profit, non-partisan research organization based in Washington, D.C. Studying 2012 U.S. Census data, NRIS found that women aged 65 and older had 26% less income than their male peers. Looking at Vanguard’s 2014 fact set on its retirement plans, NRIS learned that the median retirement account balance for women was 34% less than that of men.¹
Alarming numbers? Certainly. Two other statistics in the NRIS report are even more troubling. One, a woman 65 or older is 80% more likely to be impoverished than a man of that age. Two, the incidence of poverty is three times as great for a woman as it is for a man by age 75.¹²
Why are women so challenged to retire comfortably? You can cite a number of factors that can potentially impact a woman’s retirement prospects and retirement experience. A woman may spend less time in the workforce during her life than a man due to childrearing and caregiving needs, with a corresponding interruption in both wages and workplace retirement plan participation. A divorce can hugely alter a woman’s finances and financial outlook. As women live longer on average than men, they face slightly greater longevity risk – the risk of eventually outliving retirement savings.
There is also the gender wage gap, narrowing, but still evident. As American Association of University Women research notes, the average female worker earned 79 cents for every dollar a male worker did in 2014 (in 1974, the ratio was 59 cents to every dollar).
What can women do to respond to these financial challenges? Several steps are worth taking.
Invest early & consistently. Women should realize that, on average, they may need more years of retirement income than men. Social Security will not provide all the money they need, and, in the future, it may not even pay out as much as it does today. Accumulated retirement savings will need to be tapped as an income stream. So saving and investing regularly through IRAs and workplace retirement accounts is vital, the earlier the better. So is getting the employer match, if one is offered. Catch-up contributions after 50 should also be a goal.
Consider Roth IRAs & HSAs. Imagine having a source of tax-free retirement income. Imagine having a healthcare fund that allows tax-free withdrawals. A Roth IRA can potentially provide the former; a Health Savings Account, the latter. An HSA is even funded with pre-tax dollars, as opposed to a Roth IRA, which is funded with after-tax dollars – so an HSA owner can potentially get tax-deductible contributions as well as tax-free growth and tax-free withdrawals.4
IRS rules must be followed to get these tax perks, but they are not hard to abide by. A Roth IRA need be owned for only five tax years before tax-free withdrawals may be taken (the owner does need to be older than age 59½ at that time). Those who make too much money to contribute to a Roth IRA can still convert a traditional IRA to a Roth. HSAs have to be used in conjunction with high-deductible health plans, and HSA savings must be withdrawn to pay for qualified health expenses in order to be tax-exempt. One intriguing HSA detail worth remembering: after attaining age 65 or Medicare eligibility, an HSA owner can withdraw HSA funds for non-medical expenses (these types of withdrawals are characterized as taxable income). That fact has prompted some journalists to label HSAs “backdoor IRAs.”4,5
Work longer in pursuit of greater monthly Social Security benefits. Staying in the workforce even one or two years longer means one or two years less of retirement to fund, and for each year a woman refrains from filing for Social Security after age 62, her monthly Social Security benefit rises by about 8%.6
Social Security also pays the same monthly benefit to men and women at the same age – unlike the typical privately funded income contract, which may pay a woman of a certain age less than her male counterpart as the payments are calculated using gender-based actuarial tables.7
Find a method to fund eldercare. Many women are going to outlive their spouses, perhaps by a decade or longer. Their deaths (and the deaths of their spouses) may not be sudden. While many women may not eventually need months of rehabilitation, in-home care, or hospice care, many other women will.
Today, financially aware women are planning to meet retirement challenges. They are conferring with financial advisors in recognition of those tests – and they are strategizing to take greater control over their financial futures.
Joe Occhipinti may be reached at 714.823.3328 or Joe@warrenstreetwealth.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – bankrate.com/financing/retirement/retirement-women-should-worry/ [3/1/16]
2 – blackenterprise.com/small-business/women-age-65-are-becoming-poorest-americans/ [3/18/16]
3 – tinyurl.com/jq5mqhg [6/8/16]
4 – bankrate.com/finance/insurance/health-savings-account-rules-and-regulations.aspx [1/1/16]
5 – nerdwallet.com/blog/investing/know-rules-before-you-dip-into-roth-ira/ [1/29/16]
6 – fool.com/retirement/general/2016/05/29/when-do-most-americans-claim-social-security.aspx [5/29/16]
7 – investopedia.com/articles/retirement/05/071105.asp [6/16/16]
The A, B, C, & D of Medicare
The A, B, C, & D of Medicare
Breaking down the basics & what each part covers.
Provided by Joe Occhipinti
Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover, and where they come from.
Parts A & B: Original Medicare. America created a national health insurance program for seniors in 1965 with two components. Part A is hospital insurance. It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care, and nursing home care – but not for long, and only under certain parameters.¹
Seniors are frequently warned that Medicare will only pay for a maximum of 100 days of nursing home care (provided certain conditions are met). Part A is the part that does so. Under current rules, you pay $0 for days 1-20 of skilled nursing facility (SNF) care under Part A. During days 21-100, a $161 daily coinsurance payment may be required of you.²
If you stop receiving SNF care for 30 days, you need a new 3-day hospital stay to qualify for further nursing home care under Part A. If you can go 60 days in a row without SNF care, the clock resets: you are once again eligible for up to 100 days of SNF benefits via Part A.²
Part B is medical insurance and can help pick up some of the tab for physical therapy, physician services, expenses for durable medical equipment (scooters, wheelchairs), and other medical services such as lab tests and varieties of health screenings.¹
Part B isn’t free. You pay monthly premiums to get it and a yearly deductible (plus 20% of costs). The premiums vary according to the Medicare recipient’s income level; in 2016, most Medicare recipients are paying $121.80 a month for their Part B coverage. The current yearly deductible is $166. Some people automatically get Part B, but others have to sign up for it.³
Part C: Medicare Advantage plans. Insurance companies offer these Medicare-approved plans. Part C plans offer seniors all the benefits of Part A and Part B and more: many feature prescription drug coverage and vision and dental benefits. To enroll in a Part C plan, you need have Part A and Part B coverage in place. To keep up your Part C coverage, you must keep up your payment of Part B premiums as well as your Part C premiums.4
To say not all Part C plans are alike is an understatement. Provider networks, premiums, copays, coinsurance, and out-of-pocket spending limits can all vary widely, so shopping around is wise. During Medicare’s annual Open Enrollment Period (Oct. 15 – Dec. 7), seniors can choose to switch out of Original Medicare to a Part C plan or vice versa; although any such move is much wiser with a Medigap policy already in place.5
How does a Medigap plan differ from a Part C plan? Medigap plans (also called Medicare Supplement plans) emerged to address the gaps in Part A and Part B coverage. If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance, and deductibles for you. Some Medigap policies can even help you pay for medical care outside the United States. You have to pay Part B premiums in addition to Medigap plan premiums to keep a Medigap policy in effect. These plans no longer offer prescription drug coverage; in fact, they have been sold without drug coverage since 2006.6
Part D: prescription drug plans. While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare. As per Medigap and Part C coverage, you need to keep paying Part B premiums in addition to premiums for the drug plan to keep Part D coverage going.7
Every Part D plan has a formulary, a list of medications covered under the plan. Most Part D plans rank approved drugs into tiers by cost. The good news is that Medicare’s website will determine the best Part D plan for you. Go to medicare.gov/find-a-plan to start your search; enter your medications and the website will do the legwork for you.8
Part C & Part D plans are assigned ratings. Medicare annually rates these plans (one star being worst; five stars being best) according to member satisfaction, provider network(s), and quality of coverage. As you search for a plan at medicare.gov, you also have a chance to check out the rankings.9
Joe Occhipinti may be reached at 714.823.3328 or Joe@Warrenstreetwealth.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – mymedicarematters.org/coverage/parts-a-b/whats-covered/ [6/13/16]
2 – medicare.gov/coverage/skilled-nursing-facility-care.html [6/13/16]
3 – medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html [6/13/16]
4 – tinyurl.com/hbll34m [6/13/16]
5 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/when-can-i-join-a-health-or-drug-plan.html#collapse-3192 [6/13/16]
6 – medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [6/13/16]
7 – ehealthinsurance.com/medicare/part-d-cost [6/13/16]
8 – medicare.gov/part-d/coverage/part-d-coverage.html [6/13/16]
9 – medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/five-star-enrollment/5-star-enrollment-period.html [6/13/16]
What Are Catch-Up Contributions Really Worth?
What Are Catch-Up Contributions Really Worth?
What degree of difference could they make for you in retirement?
Provided by Joe Occhipinti
At a certain age, you are allowed to boost your yearly retirement account contributions. For example, you can direct an extra $1,000 per year into a Roth or traditional IRA starting in the year you turn 50.¹
Your initial reaction to that may be: “So what? What will an extra $1,000 a year in retirement savings really do for me?”
That reaction is understandable, but consider also that you can contribute an extra $6,000 a year to many workplace retirement plans starting at age 50. As you likely have both types of accounts, the opportunity to save and invest up to $7,000 a year more toward your retirement savings effort may elicit more enthusiasm.¹ ²
What could regular catch-up contributions from age 50-65 potentially do for you? They could result in an extra $1,000 a month in retirement income, according to the calculations of retirement plan giant Fidelity. To be specific, Fidelity says that an employee who contributes $24,000 instead of $18,000 annually to the typical employer-sponsored plan could see that kind of positive impact. ²
To put it another way, how would you like an extra $50,000 or $100,000 in retirement savings? Making regular catch-up contributions might help you bolster your retirement funds by that much – or more. Plugging in some numbers provides a nice (albeit hypothetical) illustration.³
Even if you simply make $1,000 additional yearly contributions to a Roth or traditional IRA starting in the year you turn 50, those accumulated catch-ups will grow and compound to about $22,000 when you are 65 if the IRA yields just 4% annually. At an 8% annual return, you will be looking at about $30,000 extra for retirement. (Besides all this, a $1,000 catch-up contribution to a traditional IRA can also reduce your income tax bill by $1,000 for that year.)³
If you direct $24,000 a year rather than $18,000 a year into one of the common workplace retirement plans starting at age 50, the math works out like this: you end up with about $131,000 in 15 years at a 4% annual return, and $182,000 by age 65 at an 8% annual return.³
If your financial situation allows you to max out catch-up contributions for both types of accounts, the effect may be profound indeed. Fifteen years of regular, maximum catch-up contributions to both an IRA and a workplace retirement plan would generate $153,000 by age 65 at a 4% annual yield, and $212,000 at an 8% annual yield.³
The more you earn, the greater your capacity to “catch up.” This may not be fair, but it is true.
Fidelity says its overall catch-up contribution participation rate is just 8%. The average account balance of employees 50 and older making catch-ups was $417,000, compared to $157,000 for employees who refrained. Vanguard, another major provider of employer-sponsored retirement plans, finds that 42% of workers aged 50 and older who earn more than $100,000 per year make catch-up contributions to its plans, compared with 16% of workers on the whole within that demographic.²
Even if you are hard-pressed to make or max out the catch-up each year, you may have a spouse who is able to make catch-ups. Perhaps one of you can make a full catch-up contribution when the other cannot, or perhaps you can make partial catch-ups together. In either case, you are still taking advantage of the catch-up rules.
Catch-up contributions should not be dismissed. They can be crucial if you are just starting to save for retirement in middle age or need to rebuild retirement savings at mid-life. Consider making them; they may make a significant difference for your savings effort.
Joe Occhipinti may be reached at 714.823.3328 or Joe@warrenstreetwealth.com
www.warrenstreetwealth.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 – nasdaq.com/article/retirement-savings-basics-sign-up-for-ira-roth-or-401k-cm627195 [11/30/15]
2 – time.com/money/4175048/401k-catch-up-contributions/ [1/11/16]
3 – marketwatch.com/story/you-can-make-a-lot-of-money-with-retirement-account-catch-up-contributions-2016-03-21 [3/21/16]
Black April: The Twitch Partner Reckoning
April 2016 may have seemed like just another month on Twitch.tv, but the volume of Twitch partners struggling with the complexity of taxes on social media was louder than ever.
People are continuing to take their hobby of streaming video games and turning it into careers, many with great success. These successful careers are creating lives for many people that they haven’t experienced before, getting paid to do what they love. With this new found success and income came an increase in payments to the outstretched hand of the tax man, Uncle Sam. While for a majority of the people who have experienced this before, their thought may be: “Seems standard.” In this case, many who were impacted the most were not prepared for the impending tax bill and did not know what steps to take to soften the blow. Successful streamers in the past got away with standard tax preparations in their first year of business, but they did not anticipate the increase in the complexity of their taxes with the increase in their annual pay. This has always been a problem for those making a significant amount of money, a relatively new situation in the Twitch world.
Obviously, some may allude to the fact that tax preparation should be common knowledge. It’s hard to disagree with that statement, but many of these young entrepreneurs look at themselves as employees taking home a paycheck instead of as small business owners looking to manage their tax burden. Streamers who grew their respective gaming communities were thrust into a new position that some were not prepared for from a financial standpoint.
What is the glaring issue here? The main issue was the lack of knowledge on the streamer front as to how to handle taxes proactively. This was a first time experience for many, and for someone working under the 1099 independent contractor banner, it can be easily forgotten that taxes are a looming liability. The even more forgotten concern is the full 15.3% payroll tax that becomes the liability of the streamer versus only paying half as a W2 employee. If taxes are not adequately addressed in the current tax year, it can create years of future problems, additional payments, and more time spent dealing with the IRS.
The silver lining to this story is the viability of the interactive media market as a career for professional players, streamers, or content creators. This growing market is a breeding ground for sponsors to find new users of their products and create lifetime customers. Each micro-community on Twitch represents a unique opportunity for streamers to leverage their audience.
With taxes continuing to be an annual problem for streamers, there are solutions. Individual firms, consultants, and even pro-bono counseling groups are being formed for the sole purpose to better educate, prepare, and potentially offer professional services to those in need. One example is the Player Resource Center being developed by esports lawyer Bryce Blum and former professional gamer Stephen “Snoopeh” Ellis to fill this exact void. The growing interactive media environment needs professional infrastructure to help it continue to thrive into the future.
Outside of being able to generate a living via streaming, the biggest financial problem that streamers face is proper consideration towards taxes at the end of the year. With many firms looking to help and resources becoming available to those in need, there is hope that these entrepreneurs will continue to increase their efficiency and make the most of their success for years to come.
Joe Occhipinti
Joe@warrenstreetwealth.com
714.823.3328
Retirement Planning Isn’t Just For “Retirees”
Retirement Planning Isn’t Just for “Retirees”
By: Joe Occhipinti
When people discuss the topic of saving or planning for retirement, the picture that often comes to mind is that of an employee that has been working for the same company for 20+ years and is on the verge of retirement.
When I hear about planning and saving for retirement, I find myself thinking about those who are 20+ years away and need to make the most of one variable that cannot be replaced – time.
Time is precious, and when it comes to preparing for retirement making up for lost time is one of the most difficult things to do. One of the most basic ways we see this is employees missing out on years of 401(k) matching contributions from their employer. A match can be a 100% return on your investment, assuming you are fully vested. That’s a tough return to beat in any financial market.
Too often financial planning and saving for retirement gets thrown to the wayside as something that can be put off for another year. For some, that could be an additional 6% of their salary they are choosing to forgo in their 401(k). If you got an additional 6% of your salary per year added to your retirement account, then how much sooner do you think you’ll be able to retire? How much stronger would your retirement look?
The other key piece of a strong retirement is a financial plan. A sound financial plan should you help surface all facets of your financial picture and ultimately how each piece helps or hinders you from achieving your long term goals. This includes budgeting, savings, investing, and managing risk.
Debt is probably the most often overlooked and underestimated piece of planning. Holding on to excessive debt during your working years can really put a damper on your ability to retire, especially if you have a large amount prior to retirement. Don’t let lack of planning be the sole reason for you to not get the retirement you’ve been dreaming of.
The final thoughts I will leave you with are: 1) Do I want to retire? 2) If I begin contributing to my 401k today, then how much do my chances of a successful retirement increase? 3) Am I managing debt appropriately? 4) Have I put enough time into financial planning to build a strong retirement?
Take the necessary steps to put you on track for retirement, whether that’s 2 or 20 years away.
Joe Occhipinti
Wealth Advisor
Joe@Warrenstreetwealth.com
714.823.3328
Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor.
The information posted here represents opinions and is not means as personal or actionable advice to any individual, corporation, or other entity, Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this presentation is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the presentation and due to the static nature of content, those securities help may change over time and trade may be contrary to outdated posts.