Retirement Tools
Buying Supplemental Health Insurance: Medigap
Description: Medicare won't cover all of your health-care costs during retirement, so you may want to buy a supplemental medical insurance policy known as Medigap. Offered by private insurance companies, Medigap policies are designed to cover costs not paid by Medicare, helping you fill the gaps in your Medicare coverage.
Medicare
Description: Medicare is a federal program that provides health insurance to retired individuals, regardless of their medical condition. Here are some basic facts about Medicare that you should know.
Should I use my 401(k) to fund my child's college education?
Description: You can, but it isn't your best option. Your 401(k) plan should be dedicated primarily to your retirement.
What does the term "qualified plan" mean?
Description: A qualified plan is an employer-sponsored retirement plan that qualifies for special tax treatment under Section 401(a) of the Internal Revenue Code.
How can I pay for nursing home care?
Description: In general, there are three ways to pay for nursing home care. You can pay for it from your own savings, buy long-term care insurance, or use government benefits.
What is Medigap?
Description: Medigap is health insurance that supplements the benefits covered under Medicare. It also fills in some of the gaps left by Medicare, such as your deductible and coinsurance contributions.
What are the rules for IRA contributions?
Description: It depends on what kind of IRA you're talking about. Traditional IRAs and Roth IRAs are each subject to different contribution rules.
Coordinating Long-Term Care Insurance with Government Benefits
Description: If you're a senior, the future may present more of a concern than it once did--you may wonder what you'll do if your health deteriorates. If you must enter a nursing home, for example, how will you pay for it? Fortunately, you may have several options. One such option is long-term care insurance (LTCI). Government-regulated programs can also help. These include Medicare, Medigap, and Medicaid.
Health Insurance in Retirement
Description: At any age, health care is a priority. When you retire, however, you will probably focus more on health care than ever before. Staying healthy is your goal, and this can mean more visits to the doctor for preventive tests and routine checkups. There's also a chance that your health will decline as you grow older, increasing your need for costly prescription drugs or medical treatments. That's why having health insurance is extremely important.
Should You Buy Long-Term Care Insurance?
Description: The longer you live, the greater the chances you'll need some form of long-term care. If you're concerned about protecting your assets and maintaining your financial independence in your later years, long-term care insurance (LTCI) may be for you.
Understanding Long-Term Care Insurance
Description: It's a fact: People today are living longer. Although that's good news, the odds of requiring some sort of long-term care increase as you get older. And as the costs of home care, nursing homes, and assisted living escalate, you probably wonder how you're ever going to be able to afford long-term care. One solution that is gaining in popularity is long-term care insurance (LTCI).
Housing Options for Older Individuals
Description: As you grow older, your housing needs may change. Maybe you'll get tired of doing yardwork. You might want to retire in sunny Florida or live close to your grandchildren in Illinois. Perhaps you'll need to live in a nursing home or an assisted-living facility. Or, after considering your options, you may even decide to stay where you are. When the time comes to evaluate your housing situation, you'll have numerous options available to you.
Your Home as a Source of Dollars in Retirement
Description: If you own a home, you may be wealthier than you think. The equity in your home could be one of your largest assets, especially if your mortgage has been paid down over the years or paid off. This home equity can be a valuable source of extra income during your retirement years.
Evaluating an Early Retirement Offer
Description: In today's corporate environment, cost cutting, restructuring, and downsizing are the norm, and many employers are offering their employees early retirement packages. But how do you know if the seemingly attractive offer you've received is a good one? By evaluating it carefully to make sure that the offer fits your needs.
Saving for Retirement and a Child's Education at the Same Time
Description: You want to retire comfortably when the time comes. You also want to help your child go to college. So how do you juggle the two? The truth is, saving for your retirement and your child's education at the same time can be a challenge. But take heart--you may be able to reach both goals if you make some smart choices now.
Taking Advantage of Employer-Sponsored Retirement Plans
Description: Employer-sponsored qualified retirement plans such as 401(k)s are some of the most powerful retirement savings tools available. If your employer offers such a plan and you're not participating in it, you should be. Once you're participating in a plan, try to take full advantage of it.
Understanding Defined Benefit Plans
Description: You may be counting on funds from a defined benefit plan to help you achieve a comfortable retirement. Often referred to as traditional pension plans, defined benefit plans promise to pay you a specified amount at retirement.
Understanding IRAs
Description: An individual retirement arrangement (IRA) is a personal savings plan that offers specific tax benefits. IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA.
What to Do after You've Been Automatically Enrolled in Your Company's Retirement Plan
Description: At one time, the only way you could join your company's 401(k) plan, 403(b) plan, or 457(b) plan was to put pen to paper and sign yourself up by filling out the appropriate forms. Now, though, in an effort to help participants increase their retirement savings, some employers have begun enrolling their employees automatically. With automatic enrollment, you don't fill out a form to opt into your company's retirement plan; you only fill out a form to opt out of it.
Can I roll a retirement plan distribution into an IRA?
Description: If you're asking this question, you probably have a 401(k) or other retirement plan through a former employer. The short answer is yes--most retirement plans allow you to roll your plan funds over into an IRA after you've left your employer's service. However, there is more than one way to do a rollover, and how you do it can be critical.
Can I still have a traditional IRA if I contribute to my 401(k) plan at work?
Description: Yes. Anyone with earned income who is under age 70½ can open and contribute to a traditional IRA. The contribution limit is $5,000 for 2010 and 2011, plus an additional "catch-up" contribution of $1,000 in 2010 and 2011 if you're 50 or older. However, you may not be able to deduct your IRA contributions if you're covered by a 401(k) plan at work. Whether or not you can deduct your IRA contributions depends on your filing status and annual income (adjusted gross income, or AGI).
Does the federal government insure pension benefits?
Description: The federal government insures certain pension benefits. Specifically, it insures defined benefit plans (but not other types of retirement plans) through the Pension Benefit Guaranty Corporation (PBGC), a federal agency created by ERISA.
Should I contribute to my 401(k) plan at work?
Description: Yes. Unless you absolutely cannot afford to set aside any dollars whatsoever, you should contribute to your employer's 401(k) plan. A 401(k) plan is one of the most powerful tools you can use to save for your retirement.
What is vesting?
Description: Vesting occurs when you acquire ownership. Does your employer offer a retirement savings plan such as a 401(k), traditional pension, or profit-sharing plan? Did you receive a stock option grant as a year-end bonus? These employee benefits and others like them are often tied to a timeline known as a vesting schedule. The vesting schedule determines when you acquire full ownership of the benefit.
Should I accept my employer's early retirement offer?
Description: The right answer for you will depend on your situation. First of all, don't underestimate the psychological impact of early retirement. The adjustment from full-time work to a more leisurely pace may be difficult for you. So ask yourself if you're ready to retire yet. Next, look at what you're being offered. Most early retirement offers share certain basic features that need to be evaluated. To decide if your employer's offer is worth taking, you'll want to break it down.
Can I deduct premiums paid for long-term care insurance (LTCI)?
Description: It depends on several factors. Your LTCI contract must be a qualified one, and the total of your medical expenses (including your LTCI deduction) must exceed 7.5 percent of your adjusted gross income (AGI). Qualified LTCI premiums are deductible as medical expenses (subject to the 7.5 percent of AGI floor) within certain limits, based on your age.
How do I enroll in Medicare?
Description: You'll be automatically enrolled in Medicare when you turn 65 if you're already receiving Social Security benefits, or when you apply for Social Security benefits at age 65. In either case, the Social Security Administration will notify you that you're being enrolled.
How does Medicare Advantage work?
Description: Medicare Advantage permits Medicare beneficiaries to receive health care through managed care plans (e.g., HMOs) and private fee-for-service plans. When you join a Medicare Advantage plan (also known as Medicare Part C), you may be able to save money on your health-care costs, and you may get additional benefits not found in original Medicare. To enroll in Medicare Advantage, you must be covered under both Medicare Part A and Medicare Part B.
What is long-term care insurance?
Description: Long-term care insurance is designed to pay for the cost of your care in a variety of settings, including a nursing home if you can no longer care for yourself independently. Long-term care policies vary widely in their coverages, limitations, and exclusions.
I'm having a hard time selling my home. Should I take out a reverse mortgage?
Description: A reverse mortgage is a loan secured by the equity in your home. With a reverse mortgage, you borrow against the equity you have built up in your home using a mortgage loan. In return, the mortgage lender either gives you a lump sum of cash or pays you a predetermined monthly amount for a fixed number of years or until the house is sold.
I'm retired now and own my home outright, but I need money to live on. How can I use my home to raise some money without selling it?
Description: You may want to consider a reverse annuity mortgage, more commonly known as a reverse mortgage. Developed to help the elderly find an additional source of income while remaining in their homes, reverse mortgages are steadily proliferating and in many instances are federally insured.
My husband just died. Should I accept my daughter's offer to move in with her?
Description: Maybe. The death of a spouse is a traumatic life event. Perhaps you've never lived alone before and the idea frightens you. Or maybe your husband's salary paid the mortgage and you're concerned about your financial outlook. Moving in with your daughter may seem like the perfect solution right now, but you want to be sure you'll feel that way a year from now. Keep in mind that this may be a temporary situation while you adjust to your new circumstances. Consider the possibilities.
Can I contribute to a Roth IRA?
Description: Maybe. It depends on your particular circumstances. You must have earned income during the year (typically, wages or self-employment income). Beyond that, your eligibility for a Roth IRA will hinge on two primary considerations: your adjusted gross income for the year and your income tax filing status.
Can I roll a retirement plan distribution into an IRA?
Description: If you're asking this question, you probably have a 401(k) or other retirement plan through a former employer. The short answer is yes--most retirement plans allow you to roll your plan funds over into an IRA after you've left your employer's service. However, there is more than one way to do a rollover, and how you do it can be critical.
Can I set up a traditional IRA?
Description: Almost anyone can set up a traditional IRA. The only requirements are that you generally must have taxable compensation (typically, salary or wages from your job) and be under age 70½ in order to put money into an IRA. Beyond that, the basic mechanics of setting up an IRA are pretty straightforward.
Can I convert my traditional IRA funds into a Roth IRA?
Description: Yes. Any funds you convert during the tax year, other than amounts that represent nondeductible (after-tax) contributions to your traditional IRA, are treated as taxable income for that year.
Can I take money from my IRA without any penalty?
Description: It depends. If you are 59½ or older, you can take money from your IRA without penalty. In contrast, if you withdraw from your IRA before age 59½, you may be hit with the 10 percent penalty on top of whatever income taxes you owe on the distribution. This penalty, known as the premature distribution tax, is intended to discourage people from exhausting their IRA funds before they retire.
I need money--can I take funds from my IRA?
Description: Yes, but you may be subject to a 10 percent penalty for early withdrawal if you're not yet age 59½. If you are 59½ or older and take money from your IRA, you will not be assessed a penalty, though you may still have to pay income tax on all or part of the distribution. The purpose of this premature distribution tax is to discourage you from exhausting your IRA savings too soon. However, the penalty can be a significant drawback if you need money to meet unexpected expenses.
It's January, and I forgot to contribute to my IRA. Is it too late?
Description: No. Generally speaking, the IRS allows you to make your IRA contribution for a particular tax year up until April 15 of the following year. This rule applies to both traditional IRAs and Roth IRAs, giving you some flexibility in terms of the timing of your annual IRA contribution. In 2010 and 2011, you can contribute a total of $5,000 a year to all the IRAs you own. In addition, if you're age 50 or older, you can make an extra "catch-up" contribution of $1,000 a year in 2010 and 2011.
Should I withdraw money from my IRA to pay for my child's college tuition?
Description: Assuming that you have a traditional IRA or Roth IRA, you'll want to consider the financial consequences before making a decision. You'll want to evaluate any fund withdrawals based on several factors: How far away from retirement you are The size of your retirement fund The amount of money you intend to withdraw Whether or not you have other sources of cash available The tax consequences of a withdrawal
What's a premature IRA distribution, and what happens if I make one?
Description: A premature IRA distribution occurs when you take money from your IRA before reaching age 59½. If you are under 59½ and withdraw funds from your IRA, you'll probably have to pay a 10 percent penalty tax on top of whatever income taxes you owe on the distribution. This can be a major drawback for IRA owners who need money and have few other assets to draw on. There are a number of exceptions to this rule, however. You may qualify under one of these exceptions to make penalty-free IRA withdrawa


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