The Allstate Blog » IRA http://blog.allstate.com Expert tips and fun facts on protecting your car, home, motorcycle or RV from Allstate Auto Insurance Thu, 23 May 2013 16:38:48 +0000 en-US hourly 1 http://wordpress.org/?v=3.5.1 5 Quick & Easy Strategies to Save More for Retirement http://blog.allstate.com/5-strategies-save-more-for-retirement/?utm_source=rss&utm_medium=rss&utm_campaign=5-strategies-save-more-for-retirement http://blog.allstate.com/5-strategies-save-more-for-retirement/#comments Wed, 13 Mar 2013 11:00:39 +0000 Admin http://blog.allstate.com/?p=4340 save for retirement

According to the Employee Benefit Research Institute, almost one-third of all Americans have less than $1,000 set aside for retirement and more than half have less than $10,000. This is surprising in light of the fact that many experts warn that your future Social Security income--a traditional form of retirement income--may not be enough. Saving for retirement, or saving more, is really not something to put off. Consider these five strategies to boost your retirement portfolio today: 1. Put Yourself on a Budget If you don't know where you are financially, you'll have a hard time getting to where you want to be. The solution is to budget, and it's easier than you might think. Use an online tool, such as Mint, or simply list all of your income and expenses in a spreadsheet or on paper. True, collecting your monthly statements, such as credit card and bank statements, and bills, may take a few minutes, but it's worth the effort. Then, review your expenses to see where you can cut back, and set monthly limits for each spending category. Deposit what you save into a Roth or traditional IRA, or increase your contribution to your 401(k) at work. 2. Clip Coupons to Save on Groceries According to the Department of Agriculture, the average American household spends as much as $1,200 per month on food. This means that if you reduce your food bill by 20 percent, you could save almost $3,000 per year. One good way to save is to clip coupons. Even if you don't take it to the extreme, regular couponing can translate into serious savings. Check the Sunday paper for coupons, sign up for your grocery store's loyalty program, and match coupons to in-store sales and incentives to get the biggest bang for your buck. 3. Generate Extra Income Consider reallocating the time you spend watching TV or posting on Facebook. You might consider selling unneeded items on the Internet, or even filling out paid surveys online. Or consider starting your own consulting business specializing in an area of your expertise. 4. Review Your Monthly Bills Review all of your monthly bills and look for ways to cut back, including negotiating extra fees and charges. Also, use the Internet to research less expensive options for your cable TV, cell phone and other monthly services. If you're not currently bundling, investigate this option, too. 5. Eliminate Credit Card Debt According to the Federal Reserve, the average American carries roughly $7,000 in credit card debt, which can result in significant interest payments. Consider your credit card's APR and the amount you end up paying every year in interest, and think how much you could save by paying off your credit card debt. Final Thoughts There are two chief components to saving more for retirement: One is to save more money, and the other is to actually deposit what you save into a designated retirement account. If you haven't already, open an IRA, a Roth IRA (if you qualify), or deposit more of your income into your 401(k) at work. A great way not to be tempted to spend what you save is to set up automatic deposits into your retirement account on a monthly basis. Remember, if you make early withdrawals (before you turn 59 1/2) from a 401(k) or traditional IRA you may be penalized. However, you can withdraw contributions made into a Roth IRA at any time without penalty. What other ways to save more for retirement can you share? David Bakke is a contributor for MoneyCrashers.com. He was once buried in more than $30,000 of credit card debt, and now shares his story and tips for smart money management. Recommended by the editors: ]]> save for retirement

According to the Employee Benefit Research Institute, almost one-third of all Americans have less than $1,000 set aside for retirement and more than half have less than $10,000. This is surprising in light of the fact that many experts warn that your future Social Security income--a traditional form of retirement income--may not be enough. Saving for retirement, or saving more, is really not something to put off. Consider these five strategies to boost your retirement portfolio today: 1. Put Yourself on a Budget If you don't know where you are financially, you'll have a hard time getting to where you want to be. The solution is to budget, and it's easier than you might think. Use an online tool, such as Mint, or simply list all of your income and expenses in a spreadsheet or on paper. True, collecting your monthly statements, such as credit card and bank statements, and bills, may take a few minutes, but it's worth the effort. Then, review your expenses to see where you can cut back, and set monthly limits for each spending category. Deposit what you save into a Roth or traditional IRA, or increase your contribution to your 401(k) at work. 2. Clip Coupons to Save on Groceries According to the Department of Agriculture, the average American household spends as much as $1,200 per month on food. This means that if you reduce your food bill by 20 percent, you could save almost $3,000 per year. One good way to save is to clip coupons. Even if you don't take it to the extreme, regular couponing can translate into serious savings. Check the Sunday paper for coupons, sign up for your grocery store's loyalty program, and match coupons to in-store sales and incentives to get the biggest bang for your buck. 3. Generate Extra Income Consider reallocating the time you spend watching TV or posting on Facebook. You might consider selling unneeded items on the Internet, or even filling out paid surveys online. Or consider starting your own consulting business specializing in an area of your expertise. 4. Review Your Monthly Bills Review all of your monthly bills and look for ways to cut back, including negotiating extra fees and charges. Also, use the Internet to research less expensive options for your cable TV, cell phone and other monthly services. If you're not currently bundling, investigate this option, too. 5. Eliminate Credit Card Debt According to the Federal Reserve, the average American carries roughly $7,000 in credit card debt, which can result in significant interest payments. Consider your credit card's APR and the amount you end up paying every year in interest, and think how much you could save by paying off your credit card debt. Final Thoughts There are two chief components to saving more for retirement: One is to save more money, and the other is to actually deposit what you save into a designated retirement account. If you haven't already, open an IRA, a Roth IRA (if you qualify), or deposit more of your income into your 401(k) at work. A great way not to be tempted to spend what you save is to set up automatic deposits into your retirement account on a monthly basis. Remember, if you make early withdrawals (before you turn 59 1/2) from a 401(k) or traditional IRA you may be penalized. However, you can withdraw contributions made into a Roth IRA at any time without penalty. What other ways to save more for retirement can you share? David Bakke is a contributor for MoneyCrashers.com. He was once buried in more than $30,000 of credit card debt, and now shares his story and tips for smart money management. Recommended by the editors: ]]> http://blog.allstate.com/5-strategies-save-more-for-retirement/feed/ 0 Don’t Let Your Emotions Get the Best of Your Finances http://blog.allstate.com/dont-let-your-emotions-get-the-best-of-your-finances/?utm_source=rss&utm_medium=rss&utm_campaign=dont-let-your-emotions-get-the-best-of-your-finances http://blog.allstate.com/dont-let-your-emotions-get-the-best-of-your-finances/#comments Thu, 12 Apr 2012 13:09:44 +0000 Pauline Hammerbeck http://community.allstate.com/community/allstate_blog/blog/2012/04/12/money-expert-your-emotions-might-be-getting-the-best-of-your-finances Calculator

Confusion, fear and an inability to stay grounded often drive people to do dumb things with their money, says Carl Richards, author of the New York Times Bucks Blog and the newly released book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Your Money. This chat with Richards is part two in our money-happiness series (part one, Sometimes Money Can Buy Happiness). The key to avoiding disastrous financial decisions? According to Richards, it’s understanding that money management isn’t about getting rich, but getting what you want.
Allstate Blog: What’s an example of that? Richards: The classic one is that we buy high and sell low. In 2006, did you become a real estate investor, like so many of us did? In ’08 did you swear off equities forever? And, now, are you feeling, like ‘Hey maybe I should be buying back in the stock market?’ We sell when everyone else is scared and buy when everyone feels great. And we just keep doing that. AB: What’s a good way to resolve that? R: We have to realize money is emotional. Let’s stop expecting it to be like a math problem, like it should be 2 + 2 = 4. It’s not. [Money] represents our biggest goals and dreams. We also don’t talk about money enough. How many late-night arguments have you gotten in over the credit card statement? Instead of [arguing about the money spent], let’s talk about why you spent this money. AB: So, where should a money talk begin? R: Start with your current [financial] reality. Get really clear about [it]. I used to think that was easy, but the more I talk to people the more I realize people don’t know where they stand. So, build a personal balance sheet. And if you don’t know what that is, do not be embarrassed—nobody else does either. Use Google. AB: What next? R: Start to put a framework around where you want to go. But don’t get too tied up in that. People get so nervous, like, ‘Where am I going to be 30 years from now? I have no idea!’ That’s fine. Where do you think you “might” want to be? The process of getting clear about where you are today, and having those discussions of where you want to go, will lead you. AB: One of the really interesting things you talk about in your book is the idea of personal responsibility. You’re a rare voice in that. R: We all make [financial] mistakes, but we have a choice. We can sit around and blame Wall Street, the big bad banks, credit card companies, a family member, business partner, spouse … but as long as we stay in that game—of just finding someone else to blame—nothing will change. AB: Why do you think people respond that way? R: We’re making very important decisions under an extreme degree of uncertainty, and it leads to a feeling of lack of control. I don’t know if there’s anything scarier to humans than lack of control. Instead, it really helps to focus only on the things you can control. AB: Like what? R: Like, how the amount of money you save will have a far more dramatic impact on your financial future than the rate of return you earn. We spend so much time searching for the best investment, or trying to get the highest return, instead of figuring out how to save a little bit more (or maybe how to make a little more; there are two sides to that). So, focus on what you can control—how much to save, what your expenses are, what the tax consequences of your decisions are, etc. AB: And then? R: And then realize that, when it comes to investing, this really is a long-term game. Everyone says ‘invest in a diversified index fund, it’s a long-term investment,’ but the average hold time is less than two years. You would never plant an oak tree and dig it up every week to check its roots. Long term means long term.
]]> Calculator

Confusion, fear and an inability to stay grounded often drive people to do dumb things with their money, says Carl Richards, author of the New York Times Bucks Blog and the newly released book, The Behavior Gap: Simple Ways to Stop Doing Dumb Things With Your Money. This chat with Richards is part two in our money-happiness series (part one, Sometimes Money Can Buy Happiness). The key to avoiding disastrous financial decisions? According to Richards, it’s understanding that money management isn’t about getting rich, but getting what you want.
Allstate Blog: What’s an example of that? Richards: The classic one is that we buy high and sell low. In 2006, did you become a real estate investor, like so many of us did? In ’08 did you swear off equities forever? And, now, are you feeling, like ‘Hey maybe I should be buying back in the stock market?’ We sell when everyone else is scared and buy when everyone feels great. And we just keep doing that. AB: What’s a good way to resolve that? R: We have to realize money is emotional. Let’s stop expecting it to be like a math problem, like it should be 2 + 2 = 4. It’s not. [Money] represents our biggest goals and dreams. We also don’t talk about money enough. How many late-night arguments have you gotten in over the credit card statement? Instead of [arguing about the money spent], let’s talk about why you spent this money. AB: So, where should a money talk begin? R: Start with your current [financial] reality. Get really clear about [it]. I used to think that was easy, but the more I talk to people the more I realize people don’t know where they stand. So, build a personal balance sheet. And if you don’t know what that is, do not be embarrassed—nobody else does either. Use Google. AB: What next? R: Start to put a framework around where you want to go. But don’t get too tied up in that. People get so nervous, like, ‘Where am I going to be 30 years from now? I have no idea!’ That’s fine. Where do you think you “might” want to be? The process of getting clear about where you are today, and having those discussions of where you want to go, will lead you. AB: One of the really interesting things you talk about in your book is the idea of personal responsibility. You’re a rare voice in that. R: We all make [financial] mistakes, but we have a choice. We can sit around and blame Wall Street, the big bad banks, credit card companies, a family member, business partner, spouse … but as long as we stay in that game—of just finding someone else to blame—nothing will change. AB: Why do you think people respond that way? R: We’re making very important decisions under an extreme degree of uncertainty, and it leads to a feeling of lack of control. I don’t know if there’s anything scarier to humans than lack of control. Instead, it really helps to focus only on the things you can control. AB: Like what? R: Like, how the amount of money you save will have a far more dramatic impact on your financial future than the rate of return you earn. We spend so much time searching for the best investment, or trying to get the highest return, instead of figuring out how to save a little bit more (or maybe how to make a little more; there are two sides to that). So, focus on what you can control—how much to save, what your expenses are, what the tax consequences of your decisions are, etc. AB: And then? R: And then realize that, when it comes to investing, this really is a long-term game. Everyone says ‘invest in a diversified index fund, it’s a long-term investment,’ but the average hold time is less than two years. You would never plant an oak tree and dig it up every week to check its roots. Long term means long term.
]]> http://blog.allstate.com/dont-let-your-emotions-get-the-best-of-your-finances/feed/ 0 Sometimes, Money CAN Buy Happiness (for a little while) http://blog.allstate.com/sometimes-money-can-buy-happiness-for-a-little-while/?utm_source=rss&utm_medium=rss&utm_campaign=sometimes-money-can-buy-happiness-for-a-little-while http://blog.allstate.com/sometimes-money-can-buy-happiness-for-a-little-while/#comments Thu, 01 Mar 2012 17:42:02 +0000 Pauline Hammerbeck http://community.allstate.com/community/allstate_blog/blog/2012/03/01/sometimes-money-can-buy-happiness iStock-Money

Laura Vanderkam offers a total rethink about financial planning in her new book, All the Money in the World: What the Happiest People Know about Getting and Spending. Every dollar is a choice, she says. So when you think more broadly about how you spend it, you’ll find that money can buy happiness. The Allstate Blog caught up with Vanderkam to talk about money and happiness (part one in a series; part two, Don't Let Your Emotions Get the Best of Your Finances), why extreme couponing might be a waste of time, and why you should keep on enjoying those morning lattes.

Laura Vanderkam-3.JPGALLSTATE BLOG: Many personal finance books focus on the tiny expenditures that take a cut out of budgets. But you tell people to keep those small indulgences and, instead, scale back the big-ticket items. 

VANDERKAM: Small indulgences have an outsized effect on happiness. Buying a house and buying a latte will both make you happy when they come into your possession, but you only buy a house once every few years (or decades). You can buy a latte three times a week, and you’ll enjoy it every time. When it comes to happiness, the general thrust of the research is that frequency trumps intensity.

AB: So, lattes trump McMansions?

V: A house, a fancy car, or expensive furniture certainly make you happy when you buy these objects. But then you adapt to them. Happiness research is finding that variability forestalls adaptation. That’s one reason that travel, and getting together with friends, tends to make people happier than their furniture. Furniture is always the same. Every trip is a new adventure.

AB: You also say that, rather than spending loads of time scrimping (extreme couponers come to mind), people should invest time in earning more. So … more work makes us happier? V: Work can make you happy if you choose the right kind of work. These days, many people moonlight by doing something creative—the thousands of merchants on Etsy and Zazzle come to mind. But even if you like nothing more than sitting on the sofa watching TV, people change jobs pretty frequently these days. Positioning yourself to get a higher salary at your next job means you can spend less time hunting around for discarded coupon circulars and more time watching your shows. AB: And then there’s your take on retirement … the idea that the allure isn’t about “not working” but a result of people’s dissatisfaction with their current work. V: If you’ve been stuck in the grind for years in a job you don’t like, the lure of retirement is freedom. But a better question than the exact day you want to retire is what kind of work you’d enjoy so much that you’d never want to retire from it. What if your gig was something part-time and flexible? What if it tapped your hobbies? And then, here’s the real question: how can you get into some kind of job that looks a lot like that now? You don’t have to wait until age 65 to live your dreams. AB: Love that. You also suggest couples look at expenditures as a series of choices (like a spendy diamond engagement ring vs. 100 date nights after you’re married). V: When you’re in the middle of planning your nuptials, it seems very important that you get the details right. It’s hard to picture yourself, 10 years hence, exhausted from work and caring for three children under the age of six. So the fact that the amount of money you’re about to blow on a wedding reception could pay for a cleaning service for years never enters your mind. One way to try to think long-term is to talk to couples who’ve been together for 10 to 20 years about what ways they think money could have made their lives easier during that time. Then, go ahead and plan a great wedding. But start saving some money, too, for those life enhancers older couples tell you about. All The MoneyCOVER.jpgAB: What advice do you have for people who are finding it a rough go in this economy? V: A key skill people need to learn in this economy is how to be entrepreneurial. We can no longer count on somebody giving us jobs. Often, we have to make our own. This involves asking several questions: what skills do I have, or could I learn? Which of these will people pay me for? How do I find those people?

AB: So, what’s in your joy budget?

V: These days, I buy more lattes. I buy more flowers. I try to get together with friends and “make a fuss” for social occasions. But we spend less than we could in other areas that don’t make us as happy, like clothes. While I was writing All the Money in the World, we actually moved from New York to Pennsylvania, in part for the lower cost of living. Splurging on what makes you happy, and scrimping everywhere else sounds pretty smart to me.

AB: To us too. Thanks for chatting.

Photo: Michael Falco

]]> iStock-Money

Laura Vanderkam offers a total rethink about financial planning in her new book, All the Money in the World: What the Happiest People Know about Getting and Spending. Every dollar is a choice, she says. So when you think more broadly about how you spend it, you’ll find that money can buy happiness. The Allstate Blog caught up with Vanderkam to talk about money and happiness (part one in a series; part two, Don't Let Your Emotions Get the Best of Your Finances), why extreme couponing might be a waste of time, and why you should keep on enjoying those morning lattes.

Laura Vanderkam-3.JPGALLSTATE BLOG: Many personal finance books focus on the tiny expenditures that take a cut out of budgets. But you tell people to keep those small indulgences and, instead, scale back the big-ticket items. 

VANDERKAM: Small indulgences have an outsized effect on happiness. Buying a house and buying a latte will both make you happy when they come into your possession, but you only buy a house once every few years (or decades). You can buy a latte three times a week, and you’ll enjoy it every time. When it comes to happiness, the general thrust of the research is that frequency trumps intensity.

AB: So, lattes trump McMansions?

V: A house, a fancy car, or expensive furniture certainly make you happy when you buy these objects. But then you adapt to them. Happiness research is finding that variability forestalls adaptation. That’s one reason that travel, and getting together with friends, tends to make people happier than their furniture. Furniture is always the same. Every trip is a new adventure.

AB: You also say that, rather than spending loads of time scrimping (extreme couponers come to mind), people should invest time in earning more. So … more work makes us happier? V: Work can make you happy if you choose the right kind of work. These days, many people moonlight by doing something creative—the thousands of merchants on Etsy and Zazzle come to mind. But even if you like nothing more than sitting on the sofa watching TV, people change jobs pretty frequently these days. Positioning yourself to get a higher salary at your next job means you can spend less time hunting around for discarded coupon circulars and more time watching your shows. AB: And then there’s your take on retirement … the idea that the allure isn’t about “not working” but a result of people’s dissatisfaction with their current work. V: If you’ve been stuck in the grind for years in a job you don’t like, the lure of retirement is freedom. But a better question than the exact day you want to retire is what kind of work you’d enjoy so much that you’d never want to retire from it. What if your gig was something part-time and flexible? What if it tapped your hobbies? And then, here’s the real question: how can you get into some kind of job that looks a lot like that now? You don’t have to wait until age 65 to live your dreams. AB: Love that. You also suggest couples look at expenditures as a series of choices (like a spendy diamond engagement ring vs. 100 date nights after you’re married). V: When you’re in the middle of planning your nuptials, it seems very important that you get the details right. It’s hard to picture yourself, 10 years hence, exhausted from work and caring for three children under the age of six. So the fact that the amount of money you’re about to blow on a wedding reception could pay for a cleaning service for years never enters your mind. One way to try to think long-term is to talk to couples who’ve been together for 10 to 20 years about what ways they think money could have made their lives easier during that time. Then, go ahead and plan a great wedding. But start saving some money, too, for those life enhancers older couples tell you about. All The MoneyCOVER.jpgAB: What advice do you have for people who are finding it a rough go in this economy? V: A key skill people need to learn in this economy is how to be entrepreneurial. We can no longer count on somebody giving us jobs. Often, we have to make our own. This involves asking several questions: what skills do I have, or could I learn? Which of these will people pay me for? How do I find those people?

AB: So, what’s in your joy budget?

V: These days, I buy more lattes. I buy more flowers. I try to get together with friends and “make a fuss” for social occasions. But we spend less than we could in other areas that don’t make us as happy, like clothes. While I was writing All the Money in the World, we actually moved from New York to Pennsylvania, in part for the lower cost of living. Splurging on what makes you happy, and scrimping everywhere else sounds pretty smart to me.

AB: To us too. Thanks for chatting.

Photo: Michael Falco

]]> http://blog.allstate.com/sometimes-money-can-buy-happiness-for-a-little-while/feed/ 0 Take the Right Steps on the Path to Retirement http://blog.allstate.com/take-the-right-steps-on-the-path-to-retirement/?utm_source=rss&utm_medium=rss&utm_campaign=take-the-right-steps-on-the-path-to-retirement http://blog.allstate.com/take-the-right-steps-on-the-path-to-retirement/#comments Wed, 18 Jan 2012 20:38:31 +0000 Marilyn Katz http://community.allstate.com/community/allstate_blog/blog/2012/01/18/take-the-right-steps-on-the-path-to-retirement IRA Roth 401(K)

Can you believe another year has come and gone? By now, you’ve certainly already made (and even broken) your annual New Year’s resolutions. But here’s one resolution everyone should keep each year: Set goals for retirement and make plans for achieving them.
The earlier you start saving for retirement, the better off you will be when you reach your golden years. Even if that’s decades from now, it’s never too soon to begin building your nest egg. And if your retirement is just around the corner, now is a great time to reassess your situation and put your plans in order.

A Sure-Fire Strategy: More is Better

Whatever predictions you hear from so-called experts on TV (or in your living room), the only thing you can say with certainty about the future is that it will be filled with surprises. So if you think you’ll need “x” dollars to retire, you will be better off saving “x+y”! The more “y” money you can stash away, the less you’ll have to worry about the future value of the dollar, inflation rates or market returns. Since experts can’t reliably predict these things a month in advance, how can anyone know what their value—or the shape of the economy—will be in 10, 20 or 30 years?

Keep Your Money Working

One of the keys to retiring comfortably is keeping your money productive! You may need to explore several good retirement vehicles to come up with the best plan for your individual situation. For example, you may want to compare Roth IRA vs. traditional IRA plans. Although both have tax advantages, they are different in regards to rules, eligibility, withdrawal penalties and when you receive your deductions, so you will need to evaluate which will be right for you. Fixed annuities also are popular retirement vehicles. They are generally regarded as safe investments, but may have better returns than some other types of safe financial products. Consider some of the advantages of annuities, which are also available from insurance companies. Other insurance products can benefit you and your family before and after your retirement. Life insurance protects your family, while health insurance can supplement your Medicare. You may also want to consider the pros and cons of long-term care insurance.

Get Retirement Planning Help!

Retirement planning can get complicated, and financial or insurance professionals can help you make good decisions. An experienced professional should listen to your concerns, evaluate your unique situation and present you with alternatives. Good luck sticking to this and all your other 2012 resolutions!
Guest blogger Marilyn Katz is the founder of www.over50web.net, an online community for boomers.
]]> IRA Roth 401(K)

Can you believe another year has come and gone? By now, you’ve certainly already made (and even broken) your annual New Year’s resolutions. But here’s one resolution everyone should keep each year: Set goals for retirement and make plans for achieving them.
The earlier you start saving for retirement, the better off you will be when you reach your golden years. Even if that’s decades from now, it’s never too soon to begin building your nest egg. And if your retirement is just around the corner, now is a great time to reassess your situation and put your plans in order.

A Sure-Fire Strategy: More is Better

Whatever predictions you hear from so-called experts on TV (or in your living room), the only thing you can say with certainty about the future is that it will be filled with surprises. So if you think you’ll need “x” dollars to retire, you will be better off saving “x+y”! The more “y” money you can stash away, the less you’ll have to worry about the future value of the dollar, inflation rates or market returns. Since experts can’t reliably predict these things a month in advance, how can anyone know what their value—or the shape of the economy—will be in 10, 20 or 30 years?

Keep Your Money Working

One of the keys to retiring comfortably is keeping your money productive! You may need to explore several good retirement vehicles to come up with the best plan for your individual situation. For example, you may want to compare Roth IRA vs. traditional IRA plans. Although both have tax advantages, they are different in regards to rules, eligibility, withdrawal penalties and when you receive your deductions, so you will need to evaluate which will be right for you. Fixed annuities also are popular retirement vehicles. They are generally regarded as safe investments, but may have better returns than some other types of safe financial products. Consider some of the advantages of annuities, which are also available from insurance companies. Other insurance products can benefit you and your family before and after your retirement. Life insurance protects your family, while health insurance can supplement your Medicare. You may also want to consider the pros and cons of long-term care insurance.

Get Retirement Planning Help!

Retirement planning can get complicated, and financial or insurance professionals can help you make good decisions. An experienced professional should listen to your concerns, evaluate your unique situation and present you with alternatives. Good luck sticking to this and all your other 2012 resolutions!
Guest blogger Marilyn Katz is the founder of www.over50web.net, an online community for boomers.
]]> http://blog.allstate.com/take-the-right-steps-on-the-path-to-retirement/feed/ 1 How Newlyweds Can Better Manage Their Money http://blog.allstate.com/how-newlyweds-can-better-manage-their-money/?utm_source=rss&utm_medium=rss&utm_campaign=how-newlyweds-can-better-manage-their-money http://blog.allstate.com/how-newlyweds-can-better-manage-their-money/#comments Thu, 27 Oct 2011 17:32:20 +0000 Admin http://community.allstate.com/community/allstate_blog/blog/2011/10/27/how-newlyweds-can-better-manage-their-money Money

In the weeks before my wedding, it seemed like I had hundreds of choices left to make—from which flowers I’d carry down the aisle to where everyone would sit at the reception. I was looking forward to it all being finished so my new husband and I could enjoy our wedded bliss. But it turns out there were a ton more decisions waiting for me on the other side of “I do.”
As newlyweds, my husband and I realized that we needed to start planning for our next big adventures, like buying a home, starting a family and enjoying our dream retirement. Laying a foundation for these goals felt overwhelming at first, so we broke them down into individual milestones. Here are some of the lessons we learned along our way:

Get out of the red

Before my husband and I could focus on saving for the things we wanted, we knew we’d have to tackle my least favorite four-letter word: debt. I made it a point to be honest about my financial history before we got married, but we revisited this sticky subject soon after taking our vows. We set aside a weekend to discuss our finances and drafted a spreadsheet that detailed our respective student loans, credit card debt and bank account balances. This helped us prioritize which debts we wanted to pay off first, while continuing to meet the minimum payments for our other debts. In addition, we created a monthly budget for ourselves with the help of Mint.com—and vowed to stick to it. Since 36 percent of young couples argue monthly about money, we work hard to communicate about our spending and stay within the limits we set for ourselves. So far, it’s been going pretty well. When I get tempted to add yet another pair of jeans to my collection, I remember the advice my mom gave me the day I got my first job: “You can’t always control how much income you have coming in, but you can control how much is going out.”

Save up for your own space

For a while, the little townhouse we rented right after we got married worked out great, but eventually, we wanted a bigger space for our future family. Once we decided to make the leap to homeownership, we opened a joint savings account dedicated to our down payment and put a portion of our paychecks into that account each month. During months with three pay periods, we directed the “extra” paychecks into this account, along with our tax refunds at the end of the year. And instead giving us birthday or holiday gifts, we asked our families to make small donations toward our goal. In the end, this strategy worked perfectly for us. After about two years, we had enough for a down payment and used the time we spent saving to figure out exactly what we wanted in a home. Since we’d like to start a family in the next few years, we didn’t try to buy a house at the top of our current price range. Instead, we took into account what type of mortgage we could afford after paying for things like childcare, larger health and life insurance policies, and school fees. After all, the USDA’s Cost of Raising A Child calculator estimates that having just one kid could cost us between $14,000 and $17,000 per year from birth to age 17—college tuition not included. Which is why, no matter how far off a baby is in your future, it’s not a bad idea to plan for the bundle of expenses that come with your bundle of joy.

Rest assured with a retirement plan

I’ve always dreamed of retiring early and spending our empty-nester years making memories with our grandchildren and traveling the world. But I know that unless we start setting money aside now, this blissful future could remain a pipe dream. That’s why my husband and I are diligent about contributing to our employer-sponsored retirement plans. If you’re like us, you may want to consult a financial advisor to determine whether a traditional IRA, Roth IRA or 401(k) is best for you. If your company offers a retirement plan, try to contribute enough to qualify for your employer’s match, otherwise you’ll be walking away from free money. And for additional financial security as you age, it might be worth talking through retirement plans that include disability and long-term care insurance. Money is never easy to discuss, even with your significant other. But to set yourselves up for success, it’s important to plan for the future as soon as possible. Most fairy tales leave this part out, but I’ve found that once you get smart about savings, you can find yourself one step closer to living happily ever after.
]]> Money

In the weeks before my wedding, it seemed like I had hundreds of choices left to make—from which flowers I’d carry down the aisle to where everyone would sit at the reception. I was looking forward to it all being finished so my new husband and I could enjoy our wedded bliss. But it turns out there were a ton more decisions waiting for me on the other side of “I do.”
As newlyweds, my husband and I realized that we needed to start planning for our next big adventures, like buying a home, starting a family and enjoying our dream retirement. Laying a foundation for these goals felt overwhelming at first, so we broke them down into individual milestones. Here are some of the lessons we learned along our way:

Get out of the red

Before my husband and I could focus on saving for the things we wanted, we knew we’d have to tackle my least favorite four-letter word: debt. I made it a point to be honest about my financial history before we got married, but we revisited this sticky subject soon after taking our vows. We set aside a weekend to discuss our finances and drafted a spreadsheet that detailed our respective student loans, credit card debt and bank account balances. This helped us prioritize which debts we wanted to pay off first, while continuing to meet the minimum payments for our other debts. In addition, we created a monthly budget for ourselves with the help of Mint.com—and vowed to stick to it. Since 36 percent of young couples argue monthly about money, we work hard to communicate about our spending and stay within the limits we set for ourselves. So far, it’s been going pretty well. When I get tempted to add yet another pair of jeans to my collection, I remember the advice my mom gave me the day I got my first job: “You can’t always control how much income you have coming in, but you can control how much is going out.”

Save up for your own space

For a while, the little townhouse we rented right after we got married worked out great, but eventually, we wanted a bigger space for our future family. Once we decided to make the leap to homeownership, we opened a joint savings account dedicated to our down payment and put a portion of our paychecks into that account each month. During months with three pay periods, we directed the “extra” paychecks into this account, along with our tax refunds at the end of the year. And instead giving us birthday or holiday gifts, we asked our families to make small donations toward our goal. In the end, this strategy worked perfectly for us. After about two years, we had enough for a down payment and used the time we spent saving to figure out exactly what we wanted in a home. Since we’d like to start a family in the next few years, we didn’t try to buy a house at the top of our current price range. Instead, we took into account what type of mortgage we could afford after paying for things like childcare, larger health and life insurance policies, and school fees. After all, the USDA’s Cost of Raising A Child calculator estimates that having just one kid could cost us between $14,000 and $17,000 per year from birth to age 17—college tuition not included. Which is why, no matter how far off a baby is in your future, it’s not a bad idea to plan for the bundle of expenses that come with your bundle of joy.

Rest assured with a retirement plan

I’ve always dreamed of retiring early and spending our empty-nester years making memories with our grandchildren and traveling the world. But I know that unless we start setting money aside now, this blissful future could remain a pipe dream. That’s why my husband and I are diligent about contributing to our employer-sponsored retirement plans. If you’re like us, you may want to consult a financial advisor to determine whether a traditional IRA, Roth IRA or 401(k) is best for you. If your company offers a retirement plan, try to contribute enough to qualify for your employer’s match, otherwise you’ll be walking away from free money. And for additional financial security as you age, it might be worth talking through retirement plans that include disability and long-term care insurance. Money is never easy to discuss, even with your significant other. But to set yourselves up for success, it’s important to plan for the future as soon as possible. Most fairy tales leave this part out, but I’ve found that once you get smart about savings, you can find yourself one step closer to living happily ever after.
]]> http://blog.allstate.com/how-newlyweds-can-better-manage-their-money/feed/ 0 Four Ways To Help Make Saving For Retirement Easier http://blog.allstate.com/four-ways-to-help-make-saving-for-retirement-easier/?utm_source=rss&utm_medium=rss&utm_campaign=four-ways-to-help-make-saving-for-retirement-easier http://blog.allstate.com/four-ways-to-help-make-saving-for-retirement-easier/#comments Tue, 05 Jul 2011 18:31:53 +0000 Brendan http://community.allstate.com/community/allstate_blog/blog/2011/07/05/four-ways-to-help-make-saving-for-retirement-easier afb0ce1214c6c4f780d8f52f9daab2cb

Saving for retirement is one of the most important financial decisions that you can ever make. Unfortunately, many people take this lightly and fail to have enough money to last them throughout their entire retirement. One of the ways that you can avoid falling into this predicament is to start saving for retirement now. Saving for retirement is a whole lot easier if you have a strategy. Use these tips to make planning for retirement a whole lot easier.

Automate your savings

With all of the responsibilities and distractions of daily life, it can be difficult to remember to add money to your retirement plan or savings account on a regular basis. That is why it makes sense to automate your retirement savings. You can schedule all of your retirement transactions so that they are automatically deducted from your paycheck or bank account. This way you no longer have to worry about making the payments yourself. After a few months, you will get used to the money being deducted from your account and will treat your retirement savings deposits just like another bill.

Bank your pay increases

One of the biggest mistakes that people make when they receive a salary increase is creating a new bill to spend it on. Spending your raise on another expense has the same effect on your retirement savings as not receiving your raise. You should treat your raise as if you have never received it. Take the additional income that you are earning and send it directly into your 401(k) or IRA. This way you can save money for retirement without even affecting your standard of living.

Invest small amounts of money

It does not always take large lump sums to make your retirement account grow. You would be surprised to learn about the impact that small amounts of money can have on your retirement plan. Just by saving small amounts of money like $50 a week, you can add an extra $2,600 a year to your current retirement plan. Over a 25 year time period, this would add up to an additional $65,000 in retirement plan contributions. Even small extra contributions like this can help you grow your retirement savings.

Take advantage of the company match

If you are fortunate enough to have your company offer a 401(k) matching plan, you should take advantage of it. Matching plans are like getting free cash from your employer. Contribute enough to take advantage of the full matching percentage and you will reduce the total dollar amount of contributions that you will need to make yourself. Applying these tips to your daily life can help you get into the regular routine of saving for your retirement.  
Mark Riddix is a guest blogger from Buy Like  Buffett. In exchange for sharing this content, the Allstate Community has compensated him via cash payment.
]]> afb0ce1214c6c4f780d8f52f9daab2cb

Saving for retirement is one of the most important financial decisions that you can ever make. Unfortunately, many people take this lightly and fail to have enough money to last them throughout their entire retirement. One of the ways that you can avoid falling into this predicament is to start saving for retirement now. Saving for retirement is a whole lot easier if you have a strategy. Use these tips to make planning for retirement a whole lot easier.

Automate your savings

With all of the responsibilities and distractions of daily life, it can be difficult to remember to add money to your retirement plan or savings account on a regular basis. That is why it makes sense to automate your retirement savings. You can schedule all of your retirement transactions so that they are automatically deducted from your paycheck or bank account. This way you no longer have to worry about making the payments yourself. After a few months, you will get used to the money being deducted from your account and will treat your retirement savings deposits just like another bill.

Bank your pay increases

One of the biggest mistakes that people make when they receive a salary increase is creating a new bill to spend it on. Spending your raise on another expense has the same effect on your retirement savings as not receiving your raise. You should treat your raise as if you have never received it. Take the additional income that you are earning and send it directly into your 401(k) or IRA. This way you can save money for retirement without even affecting your standard of living.

Invest small amounts of money

It does not always take large lump sums to make your retirement account grow. You would be surprised to learn about the impact that small amounts of money can have on your retirement plan. Just by saving small amounts of money like $50 a week, you can add an extra $2,600 a year to your current retirement plan. Over a 25 year time period, this would add up to an additional $65,000 in retirement plan contributions. Even small extra contributions like this can help you grow your retirement savings.

Take advantage of the company match

If you are fortunate enough to have your company offer a 401(k) matching plan, you should take advantage of it. Matching plans are like getting free cash from your employer. Contribute enough to take advantage of the full matching percentage and you will reduce the total dollar amount of contributions that you will need to make yourself. Applying these tips to your daily life can help you get into the regular routine of saving for your retirement.  
Mark Riddix is a guest blogger from Buy Like  Buffett. In exchange for sharing this content, the Allstate Community has compensated him via cash payment.
]]> http://blog.allstate.com/four-ways-to-help-make-saving-for-retirement-easier/feed/ 0 Budgeting 101 http://blog.allstate.com/budgeting-101/?utm_source=rss&utm_medium=rss&utm_campaign=budgeting-101 http://blog.allstate.com/budgeting-101/#comments Thu, 02 Sep 2010 16:29:41 +0000 Brendan http://community.allstate.com/community/allstate_blog/blog/2010/09/02/budgeting-101 Happy mature Couple in Meeting With Advisor at home

As a recent college graduate, getting your first real pay check can be exciting and budgeting your money may be the last thing you want to think about. But from paying off those college loans to paying rent and the bills, living on a budget may not be fun. However, it is one of the best decisions you can make for yourself. Unlike those college days, budgeting in the real world can be much more complex because you also have to think about things like saving up for grad school and/or retirement, paying for insurance and knowing that your parents will probably be less willing to bail you out if you overspend. Fortunately, like most good habits, it's actually not difficult to stay on a budget once you get started. The key is having the will power to skip that daily latte and power through those first couple of weeks. Here are a few tips to help you create your first budget and make the right financial decisions to keep you on track.

1.  Review your current spending

Before you start yourself on a budget, you should review your recent bank and credit card statements to evaluate your monthly expenses and income. It might be a good idea to keep a log of everything you are spending money on each day so you can figure out the things you can easily cut out of your budget. You may not think that $3 latte costs a lot, but $3 a day for 365 days adds up to more than $1,000 a year.

2.  Use the 60 percent solution

When creating a budget, a good rule to follow is the 60 percent rule--limit 60 percent of your income to essential spending like rent, utilities and bills and dedicate 10 percent of your income to going out with your friends, shopping, and other non-essential expenses. The remaining 30 percent of your income should be put into savings.

3.  Save, save, save

Saving money for a rainy day and for the long-term is the most important step in growing up. And even though retirement is still decades away, you should begin putting money into a 401(k) account and saving up for a rainy day in an interest-yielding savings account. Consider opening up a dedicated savings account and automatically having 30 percent of your paycheck deposited into that account. This way, you won't even notice that the money is gone so you'll be less tempted to spend it. Generally, employers will match your 401k contribution, so its a great way to get a head start without having to drastically change your lifestyle.

4.  Pay off your debt

Whether its credit card debt or college loans, interest on the money you owe can accumulate quickly and put you in even more debt than you started off with. Paying off your debt should be one of your first priorities especially because high levels of debt can affect your credit score.

5.  Use online tools

Luckily, we live in the 21st century and excel sheet budgets are no longer the only tool to keep track of our spending. With free online programs like Yodlee and Mint, you can create a budget for all types of spending from bills, shopping, restaurants, gas and even entertainment and track your daily spending activities. These programs can also link to multiple bank accounts and credit cards and can send you alerts when you have spent past your allocated budget.
]]> Happy mature Couple in Meeting With Advisor at home

As a recent college graduate, getting your first real pay check can be exciting and budgeting your money may be the last thing you want to think about. But from paying off those college loans to paying rent and the bills, living on a budget may not be fun. However, it is one of the best decisions you can make for yourself. Unlike those college days, budgeting in the real world can be much more complex because you also have to think about things like saving up for grad school and/or retirement, paying for insurance and knowing that your parents will probably be less willing to bail you out if you overspend. Fortunately, like most good habits, it's actually not difficult to stay on a budget once you get started. The key is having the will power to skip that daily latte and power through those first couple of weeks. Here are a few tips to help you create your first budget and make the right financial decisions to keep you on track.

1.  Review your current spending

Before you start yourself on a budget, you should review your recent bank and credit card statements to evaluate your monthly expenses and income. It might be a good idea to keep a log of everything you are spending money on each day so you can figure out the things you can easily cut out of your budget. You may not think that $3 latte costs a lot, but $3 a day for 365 days adds up to more than $1,000 a year.

2.  Use the 60 percent solution

When creating a budget, a good rule to follow is the 60 percent rule--limit 60 percent of your income to essential spending like rent, utilities and bills and dedicate 10 percent of your income to going out with your friends, shopping, and other non-essential expenses. The remaining 30 percent of your income should be put into savings.

3.  Save, save, save

Saving money for a rainy day and for the long-term is the most important step in growing up. And even though retirement is still decades away, you should begin putting money into a 401(k) account and saving up for a rainy day in an interest-yielding savings account. Consider opening up a dedicated savings account and automatically having 30 percent of your paycheck deposited into that account. This way, you won't even notice that the money is gone so you'll be less tempted to spend it. Generally, employers will match your 401k contribution, so its a great way to get a head start without having to drastically change your lifestyle.

4.  Pay off your debt

Whether its credit card debt or college loans, interest on the money you owe can accumulate quickly and put you in even more debt than you started off with. Paying off your debt should be one of your first priorities especially because high levels of debt can affect your credit score.

5.  Use online tools

Luckily, we live in the 21st century and excel sheet budgets are no longer the only tool to keep track of our spending. With free online programs like Yodlee and Mint, you can create a budget for all types of spending from bills, shopping, restaurants, gas and even entertainment and track your daily spending activities. These programs can also link to multiple bank accounts and credit cards and can send you alerts when you have spent past your allocated budget.
]]> http://blog.allstate.com/budgeting-101/feed/ 1 401(k) Plan Loans Think Twice http://blog.allstate.com/401k-plan-loans-think-twice/?utm_source=rss&utm_medium=rss&utm_campaign=401k-plan-loans-think-twice http://blog.allstate.com/401k-plan-loans-think-twice/#comments Mon, 19 Oct 2009 19:35:27 +0000 Brendan http://community.allstate.com/community/allstate_blog/blog/2009/10/19/401k-plan-loans-think-twice iStock_000012561606Large

When you need to borrow money to pay a big expense, taking a loan from your 401(k) plan may seem like a good idea. With a 401(k) loan, you are essentially borrowing from your own account rather than from a bank or other lender. Although the loan may be relatively easy to obtain, youll want to take a closer look before you decide to go ahead with it.

Benefits of a 401(k) Loan

On the plus side, a 401(k) loan can be cost effective. Instead of paying the high interest rates that credit cards typically charge, frequently you can get a much lower rate from your 401(k) plan. In addition, all interest goes directly to your account. While loan payments to the plan must be made with after-tax money (unlike plan contributions), this is no different from most other loan options. (Mortgages are an exception, since interest is generally tax deductible.)

Drawbacks of 401(k) Loans

Your loan could become a cash problem if you change jobs. Usually, you have only two options when you leave your employer: Repay the entire balance or let the outstanding amount be classified as a taxable distribution.  The second alternative would mean youd have to pay income taxes on the unpaid balance of your loan and a 10% early withdrawal penalty (some exceptions apply). So, for example, if you had a $6,000 balance outstanding on the loan, you would have to pay $2,100 (tax and penalty) if you were in a 25% tax bracket. Short Repayment Period Another possible complication of taking a plan loan may be the length and form of the repayment schedule. By law, the term of a 401(k) loan is limited to five years unless you use the money to fund the purchase of your principal residence. That rule could cause timing problems if you intend to use your loan to pay for college expenses. If you take out a loan for freshman year expenses, youd have to finish repaying it just a year after graduation. Repayment must be in a substantially level amortization over the term of the loan with payments made not less frequently than quarterly. Hardship Withdrawals What about simply withdrawing the money you need? In certain situations,  you may be eligible for a “hardship” withdrawal from your plan. Plans  generally can allow hardship withdrawals for the following:
  • Medical expenses
  • To buy a principal residence
  • College expenses for the person, his or her spouse, children,  or other dependents
  • To prevent eviction from or foreclosure on a principal  residence
  • Funeral expenses of a spouse, parents, children, or other  dependents
  • To repair damage to the person’s principal residence that would  qualify for the income-tax casualty loss deduction
You would have to have an immediate and heavy financial need for the withdrawal and show that you cannot attain the funds from other sources. Unfortunately, there would be tax consequences. Regular taxes and a possible 10% early withdrawal penalty would apply to the amount you withdraw.

Alternatives to a 401(k) Plan Loan

Before you take a retirement plan loan, you may want to look at other options. A loan that offers a longer term, such as a home equity loan, could be a more comfortable and less costly way to cover college costs or finance a major expense. On the tax advice and tax planning website of Peter B. Diaz, CPA & Associates, Diaz says, "I encourage clients to take full advantage of their 401(k) plans and IRAs to reduce their taxable income. At a minimum, it's silly not to at least put enough in your 401(k) to get the full employer match."   Recommended by the editors: IRA Withdrawals Without Penalty The Basics of Rollover IRAs
]]> iStock_000012561606Large

When you need to borrow money to pay a big expense, taking a loan from your 401(k) plan may seem like a good idea. With a 401(k) loan, you are essentially borrowing from your own account rather than from a bank or other lender. Although the loan may be relatively easy to obtain, youll want to take a closer look before you decide to go ahead with it.

Benefits of a 401(k) Loan

On the plus side, a 401(k) loan can be cost effective. Instead of paying the high interest rates that credit cards typically charge, frequently you can get a much lower rate from your 401(k) plan. In addition, all interest goes directly to your account. While loan payments to the plan must be made with after-tax money (unlike plan contributions), this is no different from most other loan options. (Mortgages are an exception, since interest is generally tax deductible.)

Drawbacks of 401(k) Loans

Your loan could become a cash problem if you change jobs. Usually, you have only two options when you leave your employer: Repay the entire balance or let the outstanding amount be classified as a taxable distribution.  The second alternative would mean youd have to pay income taxes on the unpaid balance of your loan and a 10% early withdrawal penalty (some exceptions apply). So, for example, if you had a $6,000 balance outstanding on the loan, you would have to pay $2,100 (tax and penalty) if you were in a 25% tax bracket. Short Repayment Period Another possible complication of taking a plan loan may be the length and form of the repayment schedule. By law, the term of a 401(k) loan is limited to five years unless you use the money to fund the purchase of your principal residence. That rule could cause timing problems if you intend to use your loan to pay for college expenses. If you take out a loan for freshman year expenses, youd have to finish repaying it just a year after graduation. Repayment must be in a substantially level amortization over the term of the loan with payments made not less frequently than quarterly. Hardship Withdrawals What about simply withdrawing the money you need? In certain situations,  you may be eligible for a “hardship” withdrawal from your plan. Plans  generally can allow hardship withdrawals for the following:
  • Medical expenses
  • To buy a principal residence
  • College expenses for the person, his or her spouse, children,  or other dependents
  • To prevent eviction from or foreclosure on a principal  residence
  • Funeral expenses of a spouse, parents, children, or other  dependents
  • To repair damage to the person’s principal residence that would  qualify for the income-tax casualty loss deduction
You would have to have an immediate and heavy financial need for the withdrawal and show that you cannot attain the funds from other sources. Unfortunately, there would be tax consequences. Regular taxes and a possible 10% early withdrawal penalty would apply to the amount you withdraw.

Alternatives to a 401(k) Plan Loan

Before you take a retirement plan loan, you may want to look at other options. A loan that offers a longer term, such as a home equity loan, could be a more comfortable and less costly way to cover college costs or finance a major expense. On the tax advice and tax planning website of Peter B. Diaz, CPA & Associates, Diaz says, "I encourage clients to take full advantage of their 401(k) plans and IRAs to reduce their taxable income. At a minimum, it's silly not to at least put enough in your 401(k) to get the full employer match."   Recommended by the editors: IRA Withdrawals Without Penalty The Basics of Rollover IRAs
]]> http://blog.allstate.com/401k-plan-loans-think-twice/feed/ 0 The Basics of Rollover IRAs http://blog.allstate.com/the-basics-of-rollover-iras/?utm_source=rss&utm_medium=rss&utm_campaign=the-basics-of-rollover-iras http://blog.allstate.com/the-basics-of-rollover-iras/#comments Thu, 03 Sep 2009 05:51:49 +0000 Brendan http://community.allstate.com/community/allstate_blog/blog/2009/09/02/the-basics-of-rollover-iras IRA Roth 401(K)

When you retire, youll be eligible to receive the money youve accumulated in your employer-provided retirement plan. The money might be paid to you in a single lump sum or other eligible rollover distribution that can be rolled over into an individual retirement account (IRA).

What is a Rollover IRA?

A rollover IRA is a traditional IRA that accepts rollovers from another IRA or employer qualified plan. There is no limit on the amount you are allowed to rollover to the traditional IRA. For 2009, the maximum regular contribution that can be made to a traditional IRA is $5,000, plus an additional catch-up contribution of $1,000 if you are at least age 50.

Taxes and Rollover IRAs

Tax-deferral is probably the biggest advantage of a rollover IRA. When you receive an eligible rollover distribution from your employers retirement plan, you have a choice. You can either pay tax immediately on the distribution or you can defer paying tax by directly rolling the distribution over into an IRA (or another eligible plan). If you choose the IRA rollover, you can postpone paying tax until distributions begin. And you dont have to start receiving payments from your IRA until April 1 of the year after you reach age 701/2*. Just remember, once you begin taking withdrawals from your IRA, tax will eventually be due.

Time Limits

The IRS requires you to complete your rollover within 60 days after receiving the distribution. Generally, however, its more advantageous to have the money transferred directly from your former employers plan to an IRA. Heres why. There is a 20% withholding requirement on all eligible rollover distributions from qualified retirement plans that are not directly transferred to IRAs or other eligible retirement plans. So, if you actually take possession of the distribution, you will see 20% of it withheld for federal tax purposes. If you then decide within 60 days of receiving your distribution that you want to roll over the full amount, you must supply the withheld 20% from other sources to put in your rollover IRA. When you file your tax return, you may receive a refund of the withheld tax. If you dont make up the difference and simply roll over the 80% you have in hand, the withheld 20% will then be considered a taxable distribution. That means youll have to pay taxes on the 20%. By having the distribution transferred directly to your IRA, you can avoid this 20% withholding altogether. And 100% of the distribution will continue to grow on a tax-deferred basis. * TheWorker, Retiree and Employer Recovery Act waives the minimum distribution requirement for calendar year 2009 only. As a result, no required minimum distributions need to be taken for 2009. Additionally, if you turn 701/2 in 2009, you will not have to take your first distribution by April 1, 2010. The deadline for your first required minimum distribution (for 2010) will be December 31, 2010. Related Articles and Discussions 5 Things to Know About Retirement The Number - Is there a "Magic Number" for Retirement? 5 Things to Know About Social Security
]]> IRA Roth 401(K)

When you retire, youll be eligible to receive the money youve accumulated in your employer-provided retirement plan. The money might be paid to you in a single lump sum or other eligible rollover distribution that can be rolled over into an individual retirement account (IRA).

What is a Rollover IRA?

A rollover IRA is a traditional IRA that accepts rollovers from another IRA or employer qualified plan. There is no limit on the amount you are allowed to rollover to the traditional IRA. For 2009, the maximum regular contribution that can be made to a traditional IRA is $5,000, plus an additional catch-up contribution of $1,000 if you are at least age 50.

Taxes and Rollover IRAs

Tax-deferral is probably the biggest advantage of a rollover IRA. When you receive an eligible rollover distribution from your employers retirement plan, you have a choice. You can either pay tax immediately on the distribution or you can defer paying tax by directly rolling the distribution over into an IRA (or another eligible plan). If you choose the IRA rollover, you can postpone paying tax until distributions begin. And you dont have to start receiving payments from your IRA until April 1 of the year after you reach age 701/2*. Just remember, once you begin taking withdrawals from your IRA, tax will eventually be due.

Time Limits

The IRS requires you to complete your rollover within 60 days after receiving the distribution. Generally, however, its more advantageous to have the money transferred directly from your former employers plan to an IRA. Heres why. There is a 20% withholding requirement on all eligible rollover distributions from qualified retirement plans that are not directly transferred to IRAs or other eligible retirement plans. So, if you actually take possession of the distribution, you will see 20% of it withheld for federal tax purposes. If you then decide within 60 days of receiving your distribution that you want to roll over the full amount, you must supply the withheld 20% from other sources to put in your rollover IRA. When you file your tax return, you may receive a refund of the withheld tax. If you dont make up the difference and simply roll over the 80% you have in hand, the withheld 20% will then be considered a taxable distribution. That means youll have to pay taxes on the 20%. By having the distribution transferred directly to your IRA, you can avoid this 20% withholding altogether. And 100% of the distribution will continue to grow on a tax-deferred basis. * TheWorker, Retiree and Employer Recovery Act waives the minimum distribution requirement for calendar year 2009 only. As a result, no required minimum distributions need to be taken for 2009. Additionally, if you turn 701/2 in 2009, you will not have to take your first distribution by April 1, 2010. The deadline for your first required minimum distribution (for 2010) will be December 31, 2010. Related Articles and Discussions 5 Things to Know About Retirement The Number - Is there a "Magic Number" for Retirement? 5 Things to Know About Social Security
]]> http://blog.allstate.com/the-basics-of-rollover-iras/feed/ 0 5 Things to Know About Retirement http://blog.allstate.com/5-things-to-know-about-retirement/?utm_source=rss&utm_medium=rss&utm_campaign=5-things-to-know-about-retirement http://blog.allstate.com/5-things-to-know-about-retirement/#comments Thu, 23 Jul 2009 00:34:39 +0000 Brendan http://community.allstate.com/community/allstate_blog/blog/2009/07/22/5-things-to-know-about-retirement Happy Retirement

When you think about your retirement, what comes to mind? Here are five things to think about as you plan for your retirement:

It’s a great time for a fresh start.

Think 65 is too old to start a new career, take up new hobbies, or go back to school? Think again.  After all, retirement these days may be 20 years or more. And that’s too long to spend in a rocking chair. Instead, plan to spend your time doing the things you’ve always wanted to, but never had time for.

Your Employer’s 401(k) Plan Alone Might Not be Enough.

Don’t confuse your 401(k) with a pension. Your 401(k) does a lot of good by automating your savings, deferring your taxes until retirement (when you could be in a lower tax bracket), and giving your employers the chance to match some of your contributions if they choose to. But you can only benefit from it if it’s well-funded. Take the time to see how much income you’re on track to have during retirement, and whether you’re currently contributing enough to your 401(k). It’s never too late to bump up the amount you put in! And because that money gets taken out of your paycheck before taxes are deducted, contributing extra won’t lower your take-home pay as much as you might think.

Social Security Won’t Take Care of You

Chances are good that your Social Security benefits won’t be enough to cover your living expenses. To get an idea of how much your monthly benefit might be, take a look at your Personal Earnings & Benefits Estimate Statement, which the Social Security Administration mails out each year and plug those number into our social security benefits calculator. (Your monthly benefit will change over time, so check your statement each year.)

There’s More Than One Way to Go About It

When it comes to funding your retirement, it pays to be creative. Chances are, your income will come from several sources, like savings and Social Security. You’ll also have lots of opportunities to stretch that income. For example, if you’re willing to relocate to a city with a lower cost of living, your expenses could go down by 20% or more. Downsizing to a smaller home can add thousands to your potential income. Many retirees take on part-time jobs they love. Or how about putting your skills to use by tutoring or offering services to your community? Or, find a volunteer opportunity in your area and take part in a national campaign to serve your community.  The choices for earning extra income or lowering your expenses are endless.

It’s Still Within Your Reach

No matter where your finances are at, you can always improve your retirement options.
  • ...in 1 hour or less
    • Adjust your road to retirement so you can hit your "Magic Number"
    • The specified space was not found. are creating plans for retirement that work for them
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When you think about your retirement, what comes to mind? Here are five things to think about as you plan for your retirement:

It’s a great time for a fresh start.

Think 65 is too old to start a new career, take up new hobbies, or go back to school? Think again.  After all, retirement these days may be 20 years or more. And that’s too long to spend in a rocking chair. Instead, plan to spend your time doing the things you’ve always wanted to, but never had time for.

Your Employer’s 401(k) Plan Alone Might Not be Enough.

Don’t confuse your 401(k) with a pension. Your 401(k) does a lot of good by automating your savings, deferring your taxes until retirement (when you could be in a lower tax bracket), and giving your employers the chance to match some of your contributions if they choose to. But you can only benefit from it if it’s well-funded. Take the time to see how much income you’re on track to have during retirement, and whether you’re currently contributing enough to your 401(k). It’s never too late to bump up the amount you put in! And because that money gets taken out of your paycheck before taxes are deducted, contributing extra won’t lower your take-home pay as much as you might think.

Social Security Won’t Take Care of You

Chances are good that your Social Security benefits won’t be enough to cover your living expenses. To get an idea of how much your monthly benefit might be, take a look at your Personal Earnings & Benefits Estimate Statement, which the Social Security Administration mails out each year and plug those number into our social security benefits calculator. (Your monthly benefit will change over time, so check your statement each year.)

There’s More Than One Way to Go About It

When it comes to funding your retirement, it pays to be creative. Chances are, your income will come from several sources, like savings and Social Security. You’ll also have lots of opportunities to stretch that income. For example, if you’re willing to relocate to a city with a lower cost of living, your expenses could go down by 20% or more. Downsizing to a smaller home can add thousands to your potential income. Many retirees take on part-time jobs they love. Or how about putting your skills to use by tutoring or offering services to your community? Or, find a volunteer opportunity in your area and take part in a national campaign to serve your community.  The choices for earning extra income or lowering your expenses are endless.

It’s Still Within Your Reach

No matter where your finances are at, you can always improve your retirement options.
  • ...in 1 hour or less
    • Adjust your road to retirement so you can hit your "Magic Number"
    • The specified space was not found. are creating plans for retirement that work for them
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