Thursday, January 31, 2013

$58 Billion Unclaimed: Is Some of It Yours?

by Melanie Hicken

Millions of Americans are missing out on billions in forgotten cash.

Currently, states, federal agencies and other organizations collectively hold more than $58 billion in unclaimed cash and benefits. That's roughly $186 for every U.S. resident. The unclaimed property comes from a variety of sources, including abandoned bank accounts and stock holdings, unclaimed life insurance payouts and forgotten pension benefits.

Some people are owed serious cash. Last year, a Connecticut resident claimed $32.8 million, proceeds from the sale of nearly 1.3 million shares of stock. The recipient of the funds requested to remain anonymous and no further details were provided.

More than $300 million in pension benefits is currently owed to some 38,000 people, according to the Pension Benefit Guaranty Corp. The unclaimed benefits currently range from 12 cents to a whopping $704,621, with an average benefit of $9,100. Benefits may go unclaimed because an employee is unaware they had accrued retirement benefits at a previous employer, the agency said.

However, the majority of the forgotten funds -- roughly $41.7 billion -- are held by the states, according to the National Association of Unclaimed Property Administrators.

Under varying state laws, financial institutions and other companies are required to turn over any funds considered "abandoned," including uncashed paychecks, forgotten bank account balances, unclaimed refunds, insurance payouts and contents of safe deposit boxes. They have found some pretty unusual items like diamonds, bottles of liquor and sardines. Property is usually considered abandoned after the holder of the account or property has had no activity or contact with the owner for several years.

The states then try to find the owner through websites, newspaper ads and booths at events like state fairs. But every year, the vast majority of unclaimed funds remain in state coffers, where the cash can be used to fund government operations. Although the states are careful to note that the owner's claim to the property will always remain valid.

"The money belongs to the owner in perpetuity. Even if the owner dies, then their heirs could come back and claim it," said Carolyn Atkinson, West Virginia's deputy treasurer for unclaimed property and a past president of National Association of Unclaimed Property Administrators.

Florida's chief financial officer announced this month that the state had received 61,271 new unclaimed property accounts worth more than $25 million as part of a settlement with insurance company AIG. The settlement is one of several reached last year with major insurers, including MetLife, Prudential and Nationwide after regulators in 20 states audited the methods they used to locate life insurance beneficiaries after a policyholder's death.

The state auditors found that many insurers would use the Social Security Administration's Death Master File to cancel annuity payments to clients who passed away, but not to start issuing payments to their beneficiaries. In some cases, companies would continue collecting premium payments from the policy's value for years after the insured's death, depleting the cash reserves down to zero.

Through the settlements, those balances are being reinstated and remitted to the states. But in many cases, beneficiaries remain unaware of their policy claim and many of their current addresses are unknown, making it hard for the funds to be connected with their rightful owner.

"Once it goes to the state, it's unlikely that the rightful owner will be found," said Mark Paolillo, a Massachusetts-based accountant and Ryan LLC's abandoned and unclaimed property practice leader.

Are you owed money? Here's where you can find out.

  • State-held unclaimed property: Visit NAUPA's unclaimed.org for a map with links to each state's program.
  • Life insurance: For benefits not held by the state, check the insurer's site directly. For example, MetLife has an online search.
  • Pensions: For Pension Benefit Guaranty Corp. benefits, visit the agency's online search directory.
  • U.S. savings bonds: More than 45 million matured savings bonds, worth nearly $16 billion, remain unredeemed, according to the U.S. Department of the Treasury. To search the database, visit treasuryhunt.gov.
  • Tax refunds: In 2011, the Internal Revenue Service said it had $153.3 million in tax refund checks that were undeliverable. To make sure you've received your checks, visit the IRS's Where's my refund? tool.
  • Overbid proceeds: If a foreclosed home or tax lien for delinquent taxes is sold at auction for a price above the money owed, the former property owner is owed the so-called "overbid proceeds," which are typically held at the county level. But, counties typically send notifications about the funds to the foreclosed address, so many people remain unaware of the extra cash, according to Mary Pitman, author of "The Little Book of Missing Money." These funds are different than other unclaimed funds in that the property owner's claim in some counties only last a few years. Contact the county clerk to find out which local agency holds the funds.

Tuesday, January 29, 2013

Twelve Sectors Where You Can Get Rich and Save the Earth

by Paul B Farrell

You tell us: where should investors put their money to "make a difference"? In "Conscious Capitalism: Liberating the Heroic Spirit of Business," the new book by John Mackey and Raj Sisodia, co-founders to Whole Foods Markets, the mission is clear.

“We believe,” they write, “that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence, and it is heroic because it lifts people out of poverty and creates prosperity. Free-enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived.”

“Conscious capitalist” companies include Southwest Airlines, Costco, Google, Patagonia, the Container Store, UPS and dozens of others. Their group has been together for years. Hopefully in the next generation, organizations like Cargill, Exxon Mobil, Massey Coal, Du Pont, J.P. Morgan and the U.S. Chamber of Commerce will join Mackey and Sisodia’s Conscious Capitalism after their consciences and bottom lines are shocked awake by public pressure following a huge catastrophe.

12 macroeconomic sectors: Make a difference, get rich, save planet


So how should you invest if you want to make a difference, make a decent return — and make sure Planet Earth is here in 2050 for your children? We want your input. Yes, you could just invest in Whole Foods and other “conscious capitalists.”

You can also take the long-term perspective, one we’ve been exploring since putting together an investment-research model based on the 12-part formula in anthropologist Jared Diamond’s book “Collapse: How Societies Choose to Fail or Succeed.” He analyzed 12 macroeconomic sectors that for centuries influenced whether and how nations and economies self-destruct or survive.

In recent years we’ve used this 12-part formula to analyze future macrotrends and individual investment opportunities that lead to survival and challenges for nations.

Diamond says that as global population increases, “more people require more food, space, water, energy, and other resources,” triggering wars, famine, pandemics and political miscalculations, threatening economic growth. So we’ll take a broader look at our future using the 12 macrotrends in our model, to see how “conscious” and conscientious these capitalists really are, with 18 examples of how they plan to protect the planet for 10 billion inhabitants in 2050.”

1. Food: Buy hot commodities, become a farmer


“If you want to become rich, become a farmer,” says Jim Rogers, co-founder with George Soros in the Quantum Fund, in “Hot Commodities: How Anyone Can Invest Profitably in the World’s Best Market.” The United Nations, IMF and World Bank estimate over a billion of the planet’s 7 billion people are poor, half are underfed, living on what amounts to $2 a day. Most are farmers, subsistence farmers.

Monsanto and other agricultural giants have a huge stake in the future of large and small farmers, in fertilizers, pesticides, irrigation systems, genetically engineered seeds. The challenge is daunting. U.S. money manager Jeremy Grantham says the planet can’t feed 3 billion more people. Others focus on commercial opportunities. So if you want to get rich in the near future, “become a farmer,” and invest in commodities.

2. Agriculture: land banking, land development


Billionaire investors and nations see value: Having farmlands in your portfolio is a solid bet on the future of both developed economies and emerging nations. Critics call it land grabbing, where rich nations buy the agricultural assets of poorer nations. But rich or poor, populations are exploding, demanding better lifestyles, and all need more food.

So today there’s a rally in productive agricultural properties, thanks to possible 25% returns. Check out the list of 416 land grabs from Grain.org with large-scale real-estate deals in 66 counties, more than 85 million acres, more coming.

3. Water: the new gold for 21st-century investors


Warren Buffett says buy what you know. Well, buy water. It’s everywhere, essential for drinking, industry, agriculture, transportation. A couple of years ago, Fortune said: “Water is the new gold in the 21st century.” Water generated over a half-trillion dollars in revenue worldwide in 2010.

As global population accelerates from 7 billion today to 10 billion by 2050, and more than a billion “lack access to clean drinking water,” it will soon “trade like oil futures. For many, water is more valuable than fuel. Consider bottled-water companies, soft drinks, purification, desalination. Buy water.

4. Forest lands: rapid conversion as world urbanizes


The demand for lumber and urban lands is exploding with population growth. China and India are planning 500 new cities. Half the world’s original rain forests and natural habitats have already been sacrificed to development, adding resource demands and pollution. A quarter more will be converted in the next 50 years. 
Soils are “being carried away by water and wind erosion at rates between 10 to 40 times the rates of soil formation,” much higher in forests where soil-erosion rate is “between 500 and 10,000 times” replacement rate, due to vastly increasing megafires.

5. Energy: Oil, coal, natural gas, fossil fuels at the peak


OK, so you’re not a cash-rich nation or super-rich billionaire. Check out mutual funds like Vanguard and Pimco — they manage hundreds of billions in oil and natural-gas equities, bonds and commodity funds. Pimco’s Bill Gross predicts a “significant break” in the world’s “growth pattern” and is betting we’re past the “peak oil” tipping point.

His New Normal strategy accounts for a decline in consumer shopping as economies grow slower and “corporate profits will be static.” But with population exploding, every investor’s portfolio needs energy stocks and funds.

6. Alternative energies: biofuels, wind, nuclear at 20%


In “The Quest,” Daniel Yergin, one of the world’s most respected energy experts, says alternative energies will remain a niche market for decades, while fossil fuels will be 80% of the total in 2050. And the journal Foreign Policy confirms Yergin’s forecast in “The 7 Myths About Alternative Energy.”

Biofuels, solar, wind and nuclear many not be the “major ticket.” But with the global economies in excess of $80 trillion annually and with America spending over a trillion dollars annually on total energy usage, 20% on alternatives may grow even faster as fossil-fuel production costs increase.

7. Solar Power: space rockets and robots mining asteroids


We know sunlight is not unlimited, that we could reach max use by mid-century. But enlightened minds are already investing heavily in innovative alternatives, such as fuel cells and batteries.

And when the Mars Rover project shut down, Silicon Valley investors essentially privatized the Mars engineering team tasked to build new rockets and robots to explore and mine 10,000 asteroids for energy resources potentially worth trillions.

8. Ozone-layer protection: geoengineering climate change


Yes, human activities, autos and manufacturing plants produce carbon dioxide and other gases that escape into the atmosphere and destroy the protective ozone or absorb and reduce solar energy. Innovative geoengineering plans are under development to explore the use of space rockets to block harmful rays, reduce global warming and climate change.

9. Chemicals, minerals, mining: economic growth and public health


Diamond says human solutions have unintended consequences. For example, mining generates economic growth and also dumps toxins into the air, soil, rivers, lakes and oceans that break down too slowly or not at all — from insecticides, pesticides, herbicides, detergents, plastics. Balance is essential between economic growth and public health, with solutions more in the realm of politics, lobbying, government regulations at odds with business plans.

10. Species diversity: Variety isn’t always the ‘spice of life’


Diamond explores the consequences of transferring native species to new lands, causing the unpredictable “preying on, parasitizing, infecting or outcompeting” of native animals and plants that lack evolutionary resistance, and infect native species with new diseases.

“A significant fraction of wild species, populations and genetic diversity has been lost, and at present rates a large percent of the rest will disappear in half a century.” The solution requires innovations and trade restrictions unavailable to most investors.

11. Population: a world out of-control, 10 billion by 2050


A special issue of Scientific American calls population “the most overlooked and essential strategy for achieving long-term balance with the environment.” By 2050 world population will grow from 7 billion to 10 billion, with 1.4 billion each in China and India.

Yes, experts challenge the projections, but even Bill Gates’s 8.3 billion projection may be too much to handle. Earth Institute director Jeffrey Sachs says even 5 billion is unsustainable. Meanwhile, Gates is working on population-control initiatives in vaccines, family planning.

12. Population lifestyles: American Dream goes global, demanding more


Worldwide, most people now have their own version of the American Dream. In fact, we are all capitalists: the rich, middle class and even the poor. Witness microloans in India and luxury-car sales in China.
The problem, says Diamond, is that if all nations consumed resources at the same rate as America — 32 times more resources — and dump 32 times more waste, we’d need six Earths to survive, which will eventually force even hard-right capitalists like the Koch brothers to embrace environmentalism.

Saving the planet takes political will, leaders and long-term thinking


Bottom line: The world needs new leaders fast, says Diamond. Leaders with “the courage to practice long-term thinking, and to make bold, courageous, anticipatory decisions at a time when problems have become perceptible but before they reach crisis proportions.”

Unfortunately, history tells us that leaders all too often tend to respond to short-term crises, focus on economic growth and fail to plan ahead for predictable disasters, droughts, pandemics, famines, global warming. And so they act too little, too late. Eventually caught off-guard, they collapse fast.

Comments: What would you do? Where to invest? Focusing on what sectors? Specific assets and investments? What kind of long-range policies are essential to be a conscious capitalist and conscientious citizen committed to protecting the planet for generations into the 22nd century.

READ MORE

Sunday, January 27, 2013

January To Do List for Taxes

by Eva Rosenberg

We start the year off with tax legislation that finally makes it possible to do some definitive tax planning.  Some of the measures affect your 2012 taxes; the rest cover 2013-17, with permanent changes.

The single most helpful tool for keeping your tax resolutions is a checklist.  Every successful self-improvement course, study program - and even job - benefits from one.  Have you ever noticed how many checklists you use on a daily basis?

Consider consolidating them, so you can see your daily, weekly and monthly responsibilities at a glance. Let’s build your tax checklist for January 2013:

- Set up your 2013 tax file.  Pull out your labelmaker and put new labels on file folders, expanding files, or drawers, so you have a place to drop your 2013 records and receipts.  Now you can consistently file all relevant documents for the year in one place.  Instead of a set of file folders, consider using an expandable file.  While you’re at it, do the same for last year - and get a head start on locating and organizing your 2012 papers.

- Set up your 2013 tax calendar.  Individuals can use IRS Publication 509 to locate deadlines for the year.  Small businesses can use the IRS’s colorful “Important Tax Dates for Small Business” calendar to set reminders for 2013 due dates.  Not only is it available online, but there’s also a desktop version and a tool to integrate it with a variety of personal electronic calendars.  The Spanish print version is sold out and won’t be reprinted again this year due to budget limitations.  But the calendar is still available in English.

- Update your address.  If you moved in 2012, be sure to update your address with everyone who is expected to send you tax-related documents: Former employers (W-2s), banks (1099-Int), lenders (1098), brokerages (1099-DIV, 1099-B), the IRS, your state tax agency, clients (1099-MISC), investments (K-1s) and trusts (K-1s).

- Update your name.  New brides generally remember to change their names on driver’s licenses and paychecks, but often forget to notify the Social Security Administration.  You won’t be able to e-file your tax return with your new name if it doesn't match the Social Security Record.

- Get a special IRS PIN.  Were you the victim of identity theft last year?  Make sure to contact the IRS and have them issue you a special Identity Protection Personal ID Number.  Notifying the IRS about the identity theft will flag your account.  By getting the IP PIN issued to you, no one will be able to file a tax return under your Social Security Number without it.  Your refund will be safe.

- File a new W-4 with your employer now - and again in March.  The legislature did not extend the 2% reduction of Social Security payments from paychecks.  Your paycheck will be a little lower this year.  Consider increasing your withholding if you have refinanced your mortgage and your mortgage interest has been reduced, or if your child or children are no longer dependents.  You can reduce your withholding if you are making a payment for private mortgage insurance (PMI).  The deduction has been restored, retroactive to Jan. 1, 2012.  Also, reduce your deductions if you have bought a home, gotten married, have a new child or expect large, deductible losses in 2013.  Use the IRS withholding calculator to help.

- Send out W-2s this month.  Have you been paying household employees?  Although the IRS has sort of a short-cut - Schedule H - for reporting and paying taxes for those workers, you’re still responsible for sending them a W-2 in January.  Your state will require full, year-end payroll tax returns.

- Send out 1098s this month.  Folks collecting payments on private mortgages or loans must send out Form 1098 showing the amount of interest paid by their borrowers.  Even if you don’t send out the form, be aware that your borrower will be reporting the interest on their Schedule A.  There’s an area on Schedule A to list your name, address and taxpayer ID number.  So remember to report the private mortgage interest income you receive.

- Send out a 1099-MISC this month.  Although owners of rental properties don’t need to send 1099s to folks who worked for them, all other business owners must still comply.  Send Form 1099-MISC to anyone who was paid $600 or more during the year for services.  There’s no need to send it to vendors who supplied merchandise or supplies - just service providers.  There’s no need to send 1099s to corporations, except attorneys and medical care providers.  When a company operates as an LLC, you don’t know whether or not they are filing as a corporation.  So get a Form W-9 from each vendor and have them tell you.  In fact, it’s a good idea to send a new Form W-9 to each vendor in January, so you can have the most up-to-date information before paying them.

- Use up your medical Flexible Spending Account (FSA).  If you haven’t spent enough money on medical care to get all your FSA deductions back, you might still have some time.  Turn in your receipts from your doctors, dentists, clinics, therapists and pharmacies immediately.  If you don’t have enough receipts to get all your money back, contact your FSA administrator or payroll department to find out if your plan gives you extra time.  Some plans are set up to give you until March 31 to get the medical care and the related receipts.  Naturally, if you get reimbursed by your FSA plan for these costs, you may not list them as itemized deductions.

Retirees: Make contributions from your IRA in January.  Congress has restored the special provision for those age 70.5 or over to transfer up to $100,000 from their IRA to a charity for 2012.  You have until Jan. 31, 2013, to make this donation.  You will not get a deduction for the charitable contribution.  But you will avoid all taxes on this withdrawal.  It will count as your required minimum distribution.

Make your fourth estimated tax payment.  Jan. 15 is the due date for the fourth quarter estimated tax payment for 2012.  This is important for folks who have investment income, unemployment income or any freelance income.  If your business profits were over $400, you will owe self-employment taxes, even if you don’t owe income taxes.

Make 5 tax resolutions for 2013.
  1. Resolve to pay no more than your share of taxes.
  2. Resolve to pay no penalties and interest this year.
  3. Resolve to take advantage of every tax credit and deduction legally available to you.
  4. Resolve to make your tax return audit-proof.
  5. Resolve to read MarketWatch’s tax columns year-round.
READ MORE

Wednesday, January 23, 2013

Tuesday, January 8, 2013

Ten Numbers That Can Change Your Life

by Paul Merriman

At some point, every investor who is planning to retire must confront his or her financial future. For most people, basic retirement planning can be distilled into 10 numbers.

As I worked with thousands of people over the years, and I saw over and over that when these numbers come into focus, the future starts looking clearer and less mysterious.

As you work to nail down these numbers, I suggest you regard the process as an exercise in discovery. Some items are easy to determine, while others may require some digging and careful thought. I think you will do a much better job if you use a competent financial adviser to help you get the right numbers and see what they mean for you.

One: Your current cost of living. This is the foundation of everything that follows. You could go into great detail on this, but a quick-and-dirty approach may be enough to get the process started: Identify your current gross income and subtract whatever you are saving for the future, including contributions to any IRA and employee retirement accounts. That's your cost of living, including taxes.

Two: The rate of future inflation. You will have to estimate this, of course. We all know that $100 isn't what it used to be, and inflation isn't likely to go away. Since 1926, inflation has been 3%. Over the years, that can do much more damage to your finances than you might think.

Three: The number of years before you will retire. This isn't as simple as it seems. We can't always control when we stop working. And baby boomers increasingly retire in stages. But getting a useful financial snapshot requires a number here. So for this exercise, choose a future date when you want to be financially ready to leave the workforce "cold turkey."

Four: Your inflation-adjusted cost of living in your first year of retirement. While you can crunch the number yourself with a financial calculator, this item can have lots of moving parts.

How will your taxes change? Will you spend more money on travel and hobbies? Less on commuting and clothes but more on health care? Will you move in search of lower housing costs, a better climate or to be closer to your kids? I suggest you use an adviser to help make sure you have not overlooked something important.

Five:
 The noninvestment retirement income you can count on. Probably this will include Social Security. It might also include a pension or rental income. Don't include interest, dividends and capital gains; they come into play next.

Six: The retirement income you will need from your portfolio. If you have the first five answers, this one requires only simple math. You know how much you'll need in that first year of retirement, and you know how much you can count on. The difference must come from somewhere else, most likely your portfolio.

Seven: The size of the portfolio you'll need when you retire. If your investments are properly balanced between well-diversified stock funds and low-cost bond funds, you should be able to withdraw 4% of your portfolio annually without much risk of running out of money.

Multiply the result you obtained in the previous step by 25. That's how big your portfolio should be on Day 1 of retirement. If this number seems impossibly large, don't panic. There are lots of things you can do about it.

Eight: The current size of your portfolio, excluding real estate and other nonliquid assets. For most pre-retirees, this number will be less than what you will need when you retire. The next items will help you build it up.

Nine: The amount you're saving for retirement every year. You should already know this from the very first calculation. If your annual savings plus your present portfolio will equal the result from Item seven, then you're in fine shape. More likely, these savings alone won't be enough. That's why you need some growth in your portfolio.

Ten: The annual return you need from now until you retire. While you can make this computation with a financial calculator, I suggest you discuss this point with an adviser to make sure you have reached a reasonable result.

The point of this exercise is to get a snapshot of your retirement readiness. I found an online calculator that, while it doesn't cover all the information I have described, will give you a quick idea of whether or not you are on the right track.

Several times I have recommended using a financial adviser to help you through these calculations, and you can do that without establishing a long-term relationship. You can hire one by the hour to check your work and make sure you have an action plan to get you where you want to go.

If you do that, these 10 numbers can change your life.

READ MORE

Friday, January 4, 2013

Four Retirement Planning Steps for Gen X, Yers

by Steve Vernon

If you're like many people in their 20's and 30's, you've put off thinking about retirement because it seems so far away. And while some Gen X and Gen Yers have started worrying about being prepared for retirement, they aren't yet following through on solutions.

Maybe it's time to get serious.

When I give retirement planning workshops to baby boomers, audience members often express one of these two thoughts:
  • I wish I'd heard you 20 years ago
  • My kids need to hear your message

If you're a member of Gen X or Gen Y, why not get 2013 started on the right track by taking steps to improve the odds that you'll be able to enjoy your retirement years without the stress of worrying about your finances? It's never too early to start planning for a long and prosperous life. But don't try to do everything at once -- you're more likely to succeed by taking just one step at a time. So act on one of these ideas each month, and before half the year has passed you'll be well on your way to financial freedom in your later years.

Step 1: Find ways to spend less money. 
The No. 1 reason most people give to explain why they can't save any money is that they spend their whole paycheck -- and then some -- in order to afford all the things they need or want now. Instead of that line of thinking, why not think of it this way: You can buy yourself freedom from work in your later years if you're careful about how you spend your money today. Because if you spend all your wages now, you'll become a slave to work for the rest of your life.

Over the years, I've found many ways to save significant sums of money, including driving my cars into the ground instead of buying a new one before the old one's dead; not buying the latest electronic gizmo and making do with older versions that work perfectly well; and not taking expensive vacations. And in spite of cutting back, I've had a great life!

You can also be careful about how much money you set aside for your children's college education. Will it really ruin their lives if they go to a good public school instead of an expensive private one? Keep in mind that if you sacrifice your retirement savings to pay for your kids' college tuition, the "gift" you might end up giving them is the need to move in with them in your later years.

Step 2: Make changes to improve your health. 
There are simple things you can do now to significantly reduce the odds of developing expensive and debilitating illnesses at any age. And the sooner you get started, the better. Many readers may have innovative wellness programs at work that make it easy and rewarding to make progress. Improving your health doesn't need to cost anything -- all it takes is determination. And another great benefit is that you'll look and feel better right now and won't need to wait for your retirement years for the payoff.

One simple step to take is to reduce the amount of fatty foods you eat and to increase the amount of fruits, vegetables and grains you consume. The bonus? Cutting out meat and consuming more fresh fruits, vegetables and grains should save you money at the grocery store, since these foods usually cost less than meat. This will allow you to save more for retirement, so you'll be achieving two goals for the price of one.

Most people would also benefit by increasing the amount of exercise they get every day. If you're a couch potato but want to be more active, try starting with a brisk, 30- to 45-minute walk around your neighborhood, either first thing in the morning or right after dinner. Take your spouse or partner, too, if you have one, or call up a friend who's interested in exercising. And if you're already exercising, good for you! But I bet you can find ways to improve your workouts by making sure you get all the kinds of exercises (stretching, cardio, strength training and balance) that are necessary to keep you fit in your later years.

Step 3: Invest in your career. 
You won't be able to invest much for retirement if you don't have a job that pays well. If you're in a dead-end job, maybe it's time to investigate what type of training or education you need to start a career with more of a future. Or if you're in a good career already, think about the steps you can take that will make you more valuable, and thus more likely to be earn raises and promotions. It might not even cost you anything; maybe it just involves signing up for more training offered by your employer or taking on new responsibilities.

Think you've been doing well at work but haven't received a raise lately? Consider asking for one, but do your homework first. If you're successful and convince your boss you deserve a raise, invest the amount of your raise in your 401(k).

Step 4: Increase your retirement savings. 
Yeah, yeah, I know you've heard over and over that you should start saving for retirement when you're young. Well, you're going to hear it again!

If you participate in a 401(k) at work, bump up your savings by just 1 or 2 percent of your pay. Or if your plan has an "auto-escalation" feature that periodically increases your contribution, sign up for it. Saving a little more now won't ruin your life -- you likely won't even miss the money -- and you'll learn how to get by while spending less (see Step 1 above). Better yet, make sure you're saving enough money. (The posts below offer some guidelines for determining how much money to set aside for retirement and for motivating yourself to meet your savings goals.)

If you take charge now, you'll feel much better about your future! And there's no better way to get started than by taking these steps during the first half of 2013.

READ MORE

Tuesday, January 1, 2013

Seven Tips for People Who Will Retire in 2013

by Emily Brandon

The oldest baby boomers will turn 67 in 2013. Many of these boomers have already retired, while others may be contemplating taking the plunge next year. Here are some tips for those planning to retire in 2013:

Make sure you are vested in your retirement benefits. While you always get to keep the money you contribute to your workplace retirement account, you don't necessarily get to keep your employer's contributions until you are vested in the retirement plan. Some retirement accounts don't allow you to keep any employer contributions until you have been with the company for a specific number of years, while others allow you to keep a proportion of your benefit based on your years of service. Find out the date upon which you can keep all of your benefits, especially if you have only been with your current employer for a few years. In some cases, it can be worth it to stick around for a few extra weeks or months to get a bigger retirement payout.

Decide when to claim Social Security. Social Security statements became available online for the first time in 2012, and more than 1 million people have already downloaded them. Check your statement to make sure your earnings were accurately posted to your Social Security record, and make note of how much you will receive from Social Security at various dates. Most baby boomers can claim the full amount of Social Security they have earned beginning at age 66. Boomers who sign up before age 66 will get a reduced payout. Retirees can further boost their monthly payments by delaying claiming up until age 70. You don't have to sign up for Social Security in the year you officially retire. "You have some folks who, by default because they are going to retire, decide to take Social Security, and that's not always the smartest decision," says Robert Oliver, a certified financial planner for Oliver Financial Planning in Ann Arbor, Mich. "You get delayed retirement credits the longer you wait between ages 62 and 70. For most people, it makes sense to wait."

Sign up for Medicare on time. You can first sign up for Medicare beginning three months before the month you turn 65. This initial enrollment period lasts until three months after age 65. If you don't sign up during this seven-month window around your 65th birthday, your monthly premiums will increase by 10 percent for each 12-month period you were eligible for, but did not enroll in, Medicare Part B. If you are covered by a group health plan based on your or your spouse's current employment after age 65, you need to sign up within eight months of leaving the job or health plan to avoid the penalty. For people who retire before age 65, you need a plan to maintain health coverage until you become eligible for Medicare, such as through COBRA continuation coverage or a spouse's health plan. "People really need to think about the cost of health insurance, especially if they are retiring from a company that has paid all their premiums," says Connie Brezik, a certified financial planner for Asset Strategies, Inc., in Casper, Wyo., and Scottsdale, Ariz. "They might not realize how big a part of their budget that is going to be."

Protect your savings. If you haven't done so already, you need to shift your primary investment strategy from growing your wealth to protecting what you have. "As you get closer to retirement, you normally are not willing to take on as much risk because you can't stomach another downturn like we did during the great recession," says Oliver. "For most people, as they get closer to retirement, they can stand less risk so they get more conservative. They are going to start living off their portfolio so they can't afford to lose value in their portfolio because they need the income from it."

Develop a plan to spend down your assets. Retirees need a plan for how they will convert their retirement savings into a stream of income that will pay their monthly bills. "You want to be careful not to take too much from your savings too early in retirement," says Joan Gagnon, a certified financial planner for Gagnon Wealth Management in Mansfield, Mass. "You want to have a plan about where to take your assets from and try to stay within the plan." Remember to factor in the income tax that will be due on traditional 401(k) and IRA withdrawals. "If all your money is in a 401(k) or IRA, if you want to spend $100, $30 of that may go to Uncle Sam first, and you only have $70 to spend," cautions Brezik. "You should have funds saved and accumulated outside of those types of accounts to avoid spending a lot of money on taxes."

Don't forget to take required minimum distributions. After you turn age 70½, you will be required to take annual withdrawals from your traditional 401(k) and IRA accounts. The penalty for failing to take these distributions is a stiff 50 percent penalty on the amount that should have been withdrawn.

Consider maintaining your connection to the workforce. Some retirees find they miss many of the friends and daily challenges they encountered in the workplace. If you continue to enjoy some aspects of your job, consider shifting to part-time or consulting work instead of pursuing a full-time life of leisure. "Keep an open mind and don't burn any bridges," says Oliver. "Plenty of people think they are ready for retirement, and retire and find that they really enjoy working and at least want to keep working on a part-time basis."

READ MORE