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Retirement In Motion

by Kevin Murphy, United Investment Services, LPL Financial Advisor

 

Boomers on the Brink

Keeping your eyes on the prize. How do you envision retirement? Will you stop working altogether or keep active doing something you love? According to a 2012 report on the Transamerica Retirement Survey, "The majority of workers in their 50s and 60s plan to work after they retire, with 52% reporting that they plan to work part-time and about 9% reporting that they plan to work full-time. Fewer than one in five workers (19%) do not plan to work after they retire."2

 

Basic Financial Terms to Know

Distribution yield vs. SEC yield

Bond mutual funds calculate their distribution yield by taking their current monthly income per share, subtracting operating expenses and annualizing the result. The distribution yield is backward-looking, and not necessarily representative of the yield the investor will get going forward. The SEC yield reflects the bond fund's yield-to-maturity, which is the best yield to use when comparing funds because it captures the effective rate of interest an investor can receive in the future.

 

Q & A

How will the new federal tax law affect me this year?

All workers have already seen a small cut in their paychecks as a result of the tax package passed in Congress on January 1-about $822 a year for taxpayers earning between $50,000 and $75,000 a year. This followed the expiration of a temporary 2% reduction in the Social Security payroll tax, which is now restored to 6.6% of your annual income. However, unless your adjusted gross income exceeds $400,000 ($450,000 for married filing jointly), you likely will see little effect from the new tax rates on your personal income and investments. Rates on capital gains and dividends remain at 15% for taxpayers below these higher-income thresholds. If you make over $200,000 single/$250,000 married, a new tax of 3.8% will be levied on any investment income generated in taxable accounts. This tax is to help offset the cost of the Affordable Care Act signed into law in 2012.

 

Tools & Techniques

Retirement vs. saving for college

Many financial advisors agree that you should take full advantage of retirement accounts such as 401(k), IRA and 403(b) tax-sheltered annuities before funding college savings accounts for your kids or grandkids. Unlike students who can cobble together many sources of college funds, no one will offer you grants, scholarships or federally guaranteed loans to support you when you retire. Using retirement funds to pay for education costs means they won't be there to meet your own retirement expenses. Read more at savingforcollege.com.

 

Quarterly Reminder

Free tax help

If your adjusted gross income for 2012 is less than $57,000, you can get free help completing and filing your federal tax return. With IRS Free File, you select free online software from a tax preparation company. The software walks you though your return and makes all the necessary calculations. You simply fill in your information, review it for accuracy and then transmit your return electronically by using secure IRS e-file. It will even allow you to track your refund or make a secure online payment. To learn more, look for the Free File link at www.irs.gov.



2Collinson, C. (2012). Redefining retirement: The new 'retirement readiness'. The 13th annual Transamerica Retirement Survey. San Francisco, CA: Transamerica Center for Retirement Studies. Retrieved from https://www.ta-retirement.com/resources/TCRS%2013th%20Annual%20Thematic%20Report%20Final%205-14-12.pdf

 

Kmotion, Inc., P.O. Box 1456, Tualatin, OR 97062; www.kmotion.com

© 2013 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.

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This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. LPL Financial and its advisors are providing educational services only and are not able to provide participants with investment advice specific to their particular needs. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own, separate from this educational material