Getting an Inheritance? Don’t Make These Mistakes

It turns out you’ve got a pretty good shot of landing an inheritance.

According to the Washington, D.C-based CFP Board, one-third of Americans can expect get a “significant” inheritance in their lives. If you fall into that fortunate category, congratulations. The Board says inheritance cash has multiple benefits, from providing the ability to pay off long-term debt to financing a family member’s college education.

But as hard as it might be to believe, there can be a downside or two with an inheritance, primarily because many recipients squander the inheritance and don’t want wind up using the money wisely.

Windfalls can turn into mixed blessings when people indulge themselves or rush into their decisions about what to do with their inheritances, states Jill Schlesinger, a financial planner and senior CFP Board ambassador.

Schlesinger lists the most common – and most financially painful – mistakes made by people who squander an inheritance. It all starts with bad decisions. Here’s a look:

Mindless spending: Some people begin mindless spending on “just a small indulgence,” Schlesinger notes. “A series of those kinds of purchases can morph into a spending splurge that might rob people of their ability to reach their overall goals for the inheritance.”

Forgoing professional financial advice: Even Americans who manage their 401(k)’s or their taxes well on their own can benefit from help, Schlesinger adds. “That’s because a windfall, whether it’s an inheritance or even lottery proceeds, is different,” she says. “Those who receive an inheritance should consider assembling a team, including an estate attorney, an accountant and a certified financial planner.”

Rushing big decisions: People receiving an inheritance should be careful not to make any big life decisions, like selling a house or quitting a job, too early in the process, Schlesinger explains. “An inheritance often coincides with loss, and many people aren’t thinking clearly when their emotions run high,” she says.

Doing nothing: Sometimes people who receive a lump sum become so worried about “investing at the top,” that they do nothing, she adds. “These individuals should consider dollar cost averaging, the investment strategy that divides available money into equal parts and then periodically puts the money to work in a diversified portfolio over time,” Schlesinger states.

Being too charitable: Schlesinger notes that people love their kids, friends and charitable organizations – so much so that they sometimes neglect to take care of themselves after a financial windfall. “Push the pause button,” she advises. “There is plenty of time to provide generous support after a plan is established.”

Overall, approximately 50% of inheritances are “squandered,” says Darren T. Case, a tax and estate planning attorney at Tiffany & Bosco, P.A. in Phoenix. “And they’re squandered almost immediately,” notes Case. “Often times this is due to the beneficiary simply being unprepared to receive the inherited windfall.”

Like Schlesinger, Case advises heirs who inherit a financial windfall to get good help right out of the gate, and bring in a professional, if necessary.

“From an estate planning standpoint, avoiding a blown inheritance often starts with family discussions about inherited wealth, which very much differs psychologically from earned wealth,” he says. “However, assuming that the family meeting never occurred prior to the beneficiary receiving the inheritance, one recommendation to beneficiaries is to come up with a plan of what to do with the inheritance with a reputable financial advisor, and also strongly consider waiting a significant amount of time prior to making any decision.”

Other financial professionals advise against heirs taking a lump sum payment in an inheritance.

“A large percentage of net worth for most people is tied up in retirement accounts,” offers Brent R. Sutherland, a financial planner with Ntellivest in Pittsburgh.

When the owner of a traditional retirement account (an IRA or work retirement plan) passes away, the beneficiary has three options in which to receive their inheritance, Sutherland says:

1) As a lump sum distribution.

2) As payments spread over five years

3) As payments spread over the course of their lifetime.

“A lot of people make the mistake of taking the lump sum distribution, not knowing that all those funds get treated as ordinary income, which often bumps them into the highest tax bracket,” he says. “In this situation, a significant portion of the inheritance is lost immediately via the Internal Revenue Service.” Sunderland says the beneficiary is usually always better off taking a smaller distribution over longer periods of time. “This way, the money can continue to grow tax-deferred while also helping keep the beneficiary in a lower tax bracket,” he adds.

In addition, the way inheritances are set up, there may be other tax considerations that most people just don’t know about, and can wind up costing them even more money.

“One of the biggest mistakes people make with inherited assets is spending them right away without considering the tax implications,” notes Anthony D. Criscuolo, a portfolio manager with Palisades Hudson Financial Group in Fort Lauderdale, Fla.

Criscuolo says that, depending on the type of assets one inherits, hasty action could mean handing over a substantial portion of your inheritance to the tax man. “For instance, if you inherit an IRA, distributions are subject to ordinary income tax,” he says. “Many people who inherit such accounts may regret acting hastily, without understanding the tax hit involved in an immediate withdrawal of funds.”

When you receive an inheritance, take the time to consider whether it changes your overall financial position, your future tax situation or your retirement plans, Criscuolo advises. “Depending on what you receive, you may be able to adjust your portfolio’s asset allocation, pay down high-interest debt or make new investments that were previously out of your reach,” he says. “It’s important to make a long-term plan and to avoid the temptation to make big purchases, such as a vehicle or a home, right away.”

“Instead, take your time, and consider hiring a financial professional to help you make the most of your windfall,” he adds.

HSA accounts: The good news and bad news

Why HSA accounts can be a blessing and a curse

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High-deductible health plans spell trouble for many people’s financial and health outlook.

If you don’t know what a health savings account is, it’s time to find out.

These accounts, which are available only to people who have a high-deductible health plan, offer a trifecta of tax benefits for people who use them to save money for medical expenses: you put money in pre-tax, the money grows tax-free and is distributed tax-free as long as you use it on qualified medical expenses. But for many people, the disadvantages of such plans will outweigh the advantages.

A key tenet of President-elect Donald Trump’s stated health-care plan is to expand access to these savings accounts, but there’s already a growing trend among employers to move employees to high-deductible insurance plans. That means consumers need to understand both those insurance plans and the pros and cons of health savings accounts.

Here’s why: A trend toward high-deductible health plans spells trouble for many people’s financial and health outlook — unlike a traditional insurance plan, a high-deductible plan necessitates having money set aside for initial health costs — but it’s also true that some retirement savers are going to like what they see with health savings accounts.

That’s because they are probably the most tax-beneficial account on the planet and, for those who have good health, good luck and the financial wherewithal to pay their health costs out of pocket while they work, a health savings account or HSA could be a stellar way to save for that huge health-care bill we’re all going to face in retirement.

You’ve seen the numbers, right? One estimate is that a 65-year-old couple retiring in 2016 will need $260,000, or about $13,000 per year for 20 years, according to Fidelity Investment data.

With an HSA, you contribute pre-tax money, like a 401(k) or other defined-contribution account. You invest the money, and it grows tax-free. The icing on the cake is that if you use the money for qualified medical expenses, you don’t owe any tax on that money at all. Ever.

“One of the major benefits of the HSA is the tax-deferred growth and tax-free distributions if proceeds are used for qualified medical expenses,” said Brent Ulreich, senior financial planner at Hefren-Tillotson Inc. in Pittsburgh, Penn. “Even after you leave employment, funds left in your HSA can be used to pay for medical expenses throughout retirement.”

But there are drawbacks. One major hitch is that to open an HSA, your health insurance plan must have a high deductible. In 2017, only health plans with a deductible of at least $1,300, for single people, or at least $2,600 for family coverage, qualify.

Given that only 37% of folks said they can afford to pay for a $1,000 emergency from their savings account (that’s from a 2016 Bankrate survey) the question is how many people are financially prepared to pay for the health expenses they face under a high-deductible plan?

High-deductible plans generally have lower premiums than traditional plans, but people who use such plans need to consistently stash the difference into an HSA. These accounts only benefit people who are disciplined about saving, or have enough monthly cash flow to cover their health costs.

Meanwhile, the long-term tax benefits of HSAs — letting that tax-free money grow tax-free — will only accrue to you if you don’t need to withdraw the money. That is, these plans are a huge boon to those who can afford to pay for medical expenses with cash on hand, letting the money in these accounts grow.

A study in 2006 by the U.S. Government Accountability Office (GAO) found that about 55% of the people who reported HSA contributions in 2004 didn’t withdraw any funds from their account that year. The study also found that HSA users had higher-than-average incomes, with 51% earning adjusted gross income of $75,000 or more, versus 18% of all taxpayers under age 65. “Many focus group participants reported using their HSA as a tax-advantaged savings vehicle, accumulating HSA funds for future use,” the study said. One focus group participant said he paid for an expensive surgery out of pocket, so he could save his HSA money for the future. (Granted, HSAs didn’t become available until 2004, so this report is an early indicator of HSA use.) Read the report

Moving toward high deductibles

The move seems to be toward such plans. Certainly, Trump’s health plan includes expanding access to HSAs and making such accounts inheritable.

Read more: Health savings accounts are crown jewel of ‘Trump care’

HSAs have long been favored by Republicans, in part because such plans are said to encourage smarter consumer behavior. Rather than almost all costs being covered by your insurer, you have those upfront costs to pay before the deductible kicks in. The thinking, at least in part, is that will encourage consumers to shop around. (Some studies suggest it encourages people to refrain from seeking care at all.)

But it turns out one aspect of the Democratic push toward Obamacare might also be encouraging employers to move toward high-deductible plans: the so-called Cadillac tax, which, if it goes into effect, will tax the value, over a specified amount, of the most generous health plans. That tax is slated to go into effect in 2020, though with the new Republican administration there seems to be a good chance it will be repealed. Under the Obama administration, employers were eyeing ways to avoid that tax by reducing the value over their plans, in part by shifting to high-deductible plans, according to a study by Richard L. Kaplan, a law professor at the University of Illinois. The full study is here

Cadillac tax or not, companies in general want to lower their health costs. A growing number of U.S. workers are covered by a high-deductible health plan paired with an HSA: 19% of workers who have employer-sponsored health insurance have that type of coverage in 2016, up from 15% in 2015, according to the Kaiser Family Foundation. Read their report.

Plan deductibles vary widely, but the average for workers who have a high-deductible plan combined with an HSA is higher even than the regulations call for: $2,295 for single workers and $4,364 for family coverage, according to the Kaiser Family Foundation.

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Here’s what Trump means for health care

Not all bad

High-deductible plans combined with HSAs do offer some consumer protections and benefits. For example:

• People with high-deductible plans are legally protected in terms of their maximum out-of-pocket expense for deductibles and copays. In 2017, that maximum is $6,550 for individuals and $13,100 for family coverage in 2017.

• Thanks to the Affordable Care Act, some preventive care—including some cancer screenings—are covered before that high deductible kicks in.

• The money you save in your HSA can be accumulated over time, unlike a flexible savings account that requires you to spend the money down each year.

• Your employer might offer matching contributions, like a 401(k).

• If you manage to save the money for retirement (that is, you don’t need to use it for medical costs before you retire), HSA accounts don’t require distributions the way that traditional IRAs do at age 70-1/2. And Trump has suggested HSAs should be inheritable.

Not all good, either

There are also some serious drawbacks. Here’s one: If you use your HSA savings for non-qualified expenses before age 65, “you’ll owe an additional 20% penalty in addition to any taxes due,” Ulreich said.

Generally, qualified expenses for HSAs are the same as those for claiming the medical expense deduction. Some examples of nonqualified costs include “unnecessary” plastic surgery, swimming or dancing lessons even if recommended by a doctor, most insurance premiums, diaper service, hair transplants, and electrolysis. See IRS Publication 502 for the complete list and Publication 969 for general rules on HSAs.

A health savings account “should always be viewed first as a savings and accumulation vehicle for the inevitability of medical emergencies, but it does offer an opportunity for an additional retirement savings strategy,” he said.

Another drawback is that the investment options in your HSA may be limited and more expensive than your 401(k). “I would say the investment options in general are not as good as what you’re going to see in a 401(k),” said Rob Austin, director of retirement research at consulting firm Aon Hewitt. “HSAs are a relatively new concept and don’t have the same assets under management,” he said.

As for allocating your perhaps limited paycheck to an HSA instead of your 401(k), be wary. In addition to cheaper and more robust investment options, your 401(k) may come with a better employer match. “Most people should probably look at [an HSA] as a complement to their 401(k) strategy if they’re looking at this as a long-term investment vehicle, and not so much as a replacement for it,” Austin said.

If you can swing it, do both, said Marina Edwards, senior retirement consultant at consulting firm Willis Towers Watson. “It could be a good strategy to save enough into your 401(k) to get the matching contributions and then allocate your additional leftover savings dollars to your HSA.”

Manage your money

With a high-deductible health plan, don’t set it and forget it. While the low premiums might be appealing, be sure to pay the difference (between those premiums and a typical health plan) into an HSA.

“The mindset when you’re going through open enrollment is, ‘Oh, this is a great deal. I’m going to pay less per paycheck,’” said Eric Dowley, head of Fidelity Investments’ HSA business. “Then they forget about it and then it’s, ‘Oh my gosh. I have to pay this.’”

Look at the difference in premiums between an HMO or PPO and a high-deductible plan. If you’re willing to pay $400 a pay period for the HMO but you’re paying $200 a pay period for the high-deductible plan, set that $200 monthly savings into a health-savings account, Dowley suggested.

If you’re lucky in health, or wealthy enough to cover your health expenses out of pocket, you can let the money grow in your account tax-free—awaiting your retirement. “To the extent that you can devote some money and set it aside for medical expenses that are going to take place in your golden years,” said Aon Hewitt’s Austin, “by all means go ahead and do that.”

But don’t embrace one of these plans at the cost of your health.

How couples are sabotaging their retirement

It’s not just how much you save, but how you save that matters

Coupling up has a lot of perks, financial and otherwise. Married people have more wealth, a nightly couch companion and automatic rescue — via an agreed-upon I’m-just-scratching-my-eyebrow signal — from the token close-talker at a party.

Yet, many twosomes don’t take advantage of the benefits. Research on the number of couples who aren’t using a “save me” signal is thin, but Harris Poll recently surveyed more than 1,800 Americans in a relationship — defined as married or living with a partner — for NerdWallet, and a third of respondents said neither they nor their partner is saving for retirement.

In fact, Americans in a relationship may be making mistakes that could seriously undermine their financial advantage, according to the survey. Here are three of the most worrisome missteps:

1. When couples save, it’s often in the wrong accounts

Here’s the general order when it comes to where you should save for retirement: Contribute to your 401(k) or other employer-sponsored plan, at least to the point where you earn all possible matching contributions. Then turn to a traditional or Roth IRA. If you max that out, you can add more money to the 401(k).

Unfortunately, many Americans in a relationship who are saving for retirement have somehow worked into that hierarchy a savings account, which showed up in the NerdWallet survey as the second most common home for retirement savings.

Thanks to low interest rates, growing your money in a savings account is nearly impossible. Money for retirement should be invested in a mix of low-cost stock and bond funds via a tax-advantaged retirement account. You can do that even without earned income: If you file taxes jointly, you can open a spousal IRA based on the income of the working spouse.

2. Couples are letting one partner shoulder the responsibility

It’s not unusual to have an income gap in a relationship; the pay gap actually widens with marriage and expands more when children come into play.

According to salary comparison site Payscale, married women without children make 21% less than married men without children. That gap widens to 31% when you compare married women with children to their male counterparts.

So it’s not surprising that in the NerdWallet survey, only 24% of Americans in a relationship said both they and their partner are saving for retirement, or that men in a relationship were more likely to report saving for retirement than women in a relationship (65% versus 46%).

Saving for retirement is a solo game until you’re married. After that, it should be a shared effort. That’s not because the nonsaver could be left with nothing in a divorce — how retirement assets are split depends on your state, but they do get split — but because that person could be giving up tax advantages and employer-matching dollars.

Even if one spouse earns less, the couple should be planning retirement account choices together. If only one of you has access to an employer match, use your shared retirement savings to contribute enough to catch that match, which is free money and a guaranteed return on your investment. If you both have an employer match, you should each contribute enough to take advantage of it.

 
3. Couples aren’t putting a dollar sign on their dreams

It isn’t hard to talk about the fun parts of retirement, like how and where you’re going to spend it. I’m not saying these chats aren’t important — my husband should know that I’m out if he ever buys an RV — but how you’re going to pay for those dreams should also be part of the conversation.

The trouble is that, according to the NerdWallet report, almost a third of Americans in a relationship who are saving for retirement haven’t discussed how much they need to save. This isn’t a fun part, but it also isn’t hard: An effective retirement calculator can shoulder some of the work.

How much you save makes all the difference in retirement. It means you can live in a beach house instead of a sand castle. It’s what gives you a choice about how you’ll spend retirement. Without savings, you could spend it working, and that’s if you’re lucky. Nearly half of retirees left work earlier than planned, most commonly due to health issues, according to a recent survey by the Employee Benefit Research Institute.

When you plan for your future, you can hope for the best while being prepared for the worst.

401(k) Intro: Is Your Retirement Plan Foolish?

How to get the most from your employer’s retirement plan.

It’s no secret that when it comes to retirement, you’re on your own, Fool. Traditional pensions — where employers send retired employees a check every month for the rest of their lives — are increasingly rare. As for Social Security, the average annual benefit is around $16,000, and we’ll see what happens to that when the future funding problems become present funding problems.

No, Fool, if you want to retire, you’re going to have to do all the saving and investing yourself. For many Americans, the best place to start is with the defined-contribution plan at work, whether it’s called a 401(k), 403(b), 457, SEP, or SIMPLE IRA. Taking advantage of such accounts is a great way to sock away thousands of dollars, with all kinds of tax benefits to boot.

But just because your employer offers a retirement plan, that doesn’t mean somebody in your office will tell you what to do with it.

Enter the Fools. We’re happy to share our knowledge about employer-sponsored, self-directed retirement plans, and in this tidy little collection we very much believe you’ll find out everything you need to know about yours. In fact, for the truly lazy, we’ve packed all the real information into the first 100 words of the first step. How’s that for brevity?

But, hey, we realize that there may be some individual questions that aren’t covered in this concise little package. So if you’ve read our whole collection here and still wonder, “Hey, what’s up with my plan?” — then give our Rule Your Retirement service a try free for 30 days. You’ll get access to special retirement discussion boards, plenty of good advice about how to invest your money, and some cool, whizbang financial-planning tools.

In the spirit of the aforementioned brevity, we will henceforth use the term “401(k)” when discussing employer plans. However, we recognize that you may have a different type of plan. The vast majority of our advice will still apply to you, but check in with the HR guru in your office to find out the particulars (especially contribution limits and employer matching arrangements) of your plan.

And now it’s time to learn how to use these accounts to improve your retirement prospects. Also, consider the opportunity to rule your 401(k): Check out The Motley Fool’s new guide to getting the most out of your workplace retirement account!

7 Facts About Your Roth IRA You Didn’t Know

You may be saving for retirement via a Roth IRA without fully understanding how it works and what it can do — or you may not be using one because you don’t appreciate just how powerful it can be. Indeed, making the most of your Roth IRA might even help you retire early.

Whichever camp you’re in, you’ll likely benefit from a brief review of the Roth IRA. Here are seven facts about it that are worth knowing.

Young boy in glasses at laptop looking astonished, mouth open

IMAGE SOURCE: GETTY IMAGES.

Roth IRA fact No. 1: The Roth IRA is relatively new

Your grandparents probably couldn’t have saved for retirement with a Roth IRA — though it’s much more likely that they had or have pension income than it is that you will have it. Roth IRAs were introduced as part of the Taxpayer Relief Act of 1997, with their most prominent feature being tax-free withdrawals in retirement. This is a good reminder that tax laws and possible investment strategies can change over time, sometimes getting better and sometimes worse.

highway sign that says "tax free"

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Roth IRA fact No. 2: The Roth IRA isn’t the only IRA with tax benefits

There are two main kinds of IRAs — the traditional IRA and the Roth IRA — and both offer tax-advantaged ways to build your future financial security. With a traditional IRA, you contribute pre-tax money, reducing your taxable income for the year, and thereby reducing your taxes, too. (Taxable income of $70,000 and a $5,000 contribution? You’ll only report $65,000 in taxable income for the year.) The money grows in your account and is taxed at your ordinary income tax rate when you withdraw it in retirement.

With a Roth IRA, you contribute post-tax money that doesn’t reduce your taxable income at all in the contribution year. (Taxable income of $70,000 and a $5,000 contribution? Your taxable income remains $70,000 for the year.) Here’s why the Roth IRA is a big deal, though: Your money grows in the account until you withdraw it in retirement — tax free.

So while one kind of IRA offers an upfront tax break, the other offers a back-end one. In many cases the Roth IRA will provide the greatest savings, but sometimes a traditional IRA is the better choice.

Roth IRA fact No. 3: Roth IRA contributions must be made with earned money

If you’re a teenager who wants to sock away $500 you got for your birthday in a Roth IRA, you’re out of luck. Roth IRA contributions must be made with earned money. There’s no minimum age for opening a Roth, but anyone funding their Roth IRA, whether child or adult, must do so with earned income. For kids, allowance or birthday money doesn’t qualify, but cash earned through babysitting or odd jobs can. For adults, qualified earnings include wages, commissions, and even alimony payments, but not inheritances, Social Security benefits, or pension or disability income.

Close up of stack of money

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Roth IRA fact No. 4: You can sock away up to $5,500 or $6,500 in an IRA

The contribution limit for all IRAs in 2017 is $5,500, plus an additional $1,000 for those 50 or older. That’s a combined maximum contribution, so if you have three IRA accounts, you might contribute $1,000 to one, $2,000 to another, and $3,500 to a third — if you’re 50 or older.

The limits increase over time, so expect higher ones in the future. In 2000, you could contribute only $2,000 to an IRA, while in 2002 you could sock away $3,000 — plus an additional $500 if you were 50 or older. The current limit has been in place since 2013.

Roth IRA fact No. 5: You can amass a surprising sum in a Roth IRA

Contributing $5,500 annually to a retirement account doesn’t seem like a recipe for riches, but you can build a surprisingly hefty war chest that way. The more you park in your Roth IRA each year, the more dollars you’ll have that can grow for you. Remember, too, that your earliest invested dollars can do the most for you, as they’ll have the most time in which to grow. Check out the following table, showing how much you might amass investing $4,500 versus $5,500 each year:

Growing at 8% For: $4,500 Invested Annually $5,500 Invested Annually
10 years $70,405 $86,050
15 years $131,959 $161,284
20 years $222,403 $271,826
25 years $355,295 $434,249
30 years $550,556 $672,902

CALCULATIONS BY AUTHOR.

You can see how powerful time is by looking at how much more rapidly the sums grow in later years. Note, too, how much of a difference it can make to invest an additional $1,000 each year — in this example, $5,500 instead of $4,500. If you’re old enough to contribute the $6,500 allowed for those 50 and older, aim to do so.

Fingers turning a dial labeled "profit" to "high"

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Roth IRA fact No. 6: How you invest in your Roth IRA matters

While 401(k)s often limit your investment choices to a modest suite of mutual funds, you can invest in all kinds of securities through your Roth IRA. Some make more sense than others, though. For example, there’s little point to investing in municipal bonds in a Roth, since they’re typically already tax-exempt. Low-interest rate CDs and slow-growing stocks are also not ideal.

It can be effective to park Roth IRA money (at least some of it) in stocks you expect to be your fastest growers — especially if you’re a long way to retirement. If a stock averages 15% growth per year for 25 years, a single $5,000 initial investment can turn into about $165,000. Better still, fully $160,000 of it will be a capital gain — on which you pay no taxes, if you withdraw following the rules.

Real estate investment trusts are also good for Roth IRAs. They tend to generate a lot of dividend income, but much or all of that is often not eligible for the low long-term capital gains tax rate and is instead taxed at your ordinary income tax rate. In a Roth, there can be no tax at all. You can also do quite well just investing in a broad-market index fund or two, or a target-date fund, in your Roth IRA. Such a simple approach can be very effective.

The following table highlights the importance of your growth rate over time. It shows how much you might amass with $5,500 annual investments:

$5,500 Invested Annually For: Growing at 6% Growing at 8% Growing at 10%
15 years $135,699 $161,284 $199,224
20 years $214460 $271,826 $346,514
25 years $319,860 $434,249 $595,000
30 years $460,909 $672,902 $995,189

CALCULATIONS BY AUTHOR.

Roth IRA fact No. 7: You can convert a traditional IRA into a Roth IRA

Finally, know that if you have money in a traditional IRA, you can probably convert that IRA into a Roth IRA — a tactic that makes particularly good sense for some people, such as those with relatively small accounts and many years until retirement.

Converting a traditional IRA into a Roth means you’ll face a tax hit, as the money you’re converting has avoided taxes so far but will be going into an account funded with post-tax money. If you’re converting $150,000, you’ll be recognizing that as taxable income in the year of conversion, and it can result in a big tax hit. You’ll have to decide whether the tax hit is likely to be worth it. Conversions can be especially effective after a market crash or correction, as the sum you’re converting will be smaller.

You can roll over 401(k) funds into an IRA, too, when you change a job.

Don’t overlook the power of a Roth IRA, as it can give you more financial security in retirement — and possibly hundreds of thousands of dollars in tax-free withdrawals!

5 Ways You’re Making Your Boss Angry

5 Ways You’re Making Your Boss Angry

Angry boss making fist

Angry boss | iStock.com

Having a good, or at least civil, relationship with your boss, is often critical to job success. If you have a horrible boss, there are ways you can make the situation better. On the other hand, you may think that you have a good relationship with your boss, and you also may like your boss as a person. However, you also might be doing things that are regularly making your boss angry.

Sometimes we know that we are not performing our best, and other times we don’t realize we are letting anyone down. There might be things that are regularly part of your routine that you don’t even consider as an issue; these infractions might not seem so small to your boss. It’s important to understand what your boss wants from you, and how you may be letting him or her down. Here are five ways you may be making your boss angry.

 

1. Socializing too much

It’s great if you get along with your boss or your co-workers (preferably both), but don’t mistake a good rapport with your superior as an excuse to spend too much time socializing. While some bosses might enjoy being asked about their hobbies, talking about the weather, or engaging in general chatting, many won’t, or they’ll will prefer the exchange stays brief. Also, there’s a good chance your boss will get angry if you spend too much time socializing with your co-workers. Office gossiping, or even simple conversations about things outside of work-related projects, can waste valuable time and also make some people uncomfortable.

2. Incorrectly using technology

A participant sits with a laptop computer at a hacker conference - Sean Gallup/Getty Images

A man using a computer | Sean Gallup/Getty Images

Work email shouldn’t be used for sending private emails; there are too many opportunities for the wrong person to see them. Also, your boss won’t appreciate if you are using work time to send private emails. You also risk a very angry boss if you accidentally send something inappropriate to the wrong person, or if you badmouth your boss; you may even get fired.

Many company networks have firewalls and some sites might be blocked, but don’t assume that you can use social media even if the sites still work. At best, you risk annoying your boss and co-workers, but at worst you may really piss off your boss by wasting company time or saying  or otherwise off something inappropriate (think: sexist, racist,ensive).

3. Showing up late

man sleeping next to a ticking alarm clock

Employee running late | iStock.com

Regularly showing up late to work is disrespectful and wastes company time. Many companies have relaxed schedules, but be sure to check with your boss before assuming that you can come in when you want to. Even if you are only showing up five or ten minutes late, and your boss hasn’t said anything, there’s a good chance he’s noticed. If you repeatedly show up late, you risk making your boss really angry, or worse.

The same is true about meetings: when you’re regularly late for meetings, other people are negatively affected. Your co-workers may feel that you are entitled; they also might start to copy your behavior or lose respect for your boss or manager. These feelings can all affect employee morale and customer service, and if these things are affected, your boss will definitely get angry.

4. Slacking on assignments

man sleeping on office desk

Slacking employee | iStock.com

Wasting time or showing up late are bad enough, but if you are failing to do your best work when you actually are working, then your boss is sure to get mad. Perhaps you are handing in projects late because you are not prioritizing correctly, you’re turning in subpar work, or you’re relying on your co-workers to pick up your slack. If practiced often enough, these habits will certainly be detrimental to your relationship with your boss, and potentially, your ability to keep your job or move into a new one. Your boss will expect you to complete your own job duties, and do your best work every time.

5. Being disrespectful

The Office, Dwight

You shouldn’t make fun of your boss too much | NBC

You don’t have to use social media to be disrespectful at work. While posting something on Facebook about how much you hate your boss is guaranteed to make her mad, and showing up late will also piss her off, you can show disrespect in many other ways as well. Regularly questioning your boss in front of your co-workers, ignoring his requests, or making fun of him are all offensive ways to behave at work.

Bullying co-workers is also a disrespectful choice, and so is physically trashing your workspace or your office. There are so many ways to be disrespectful at work. You want to avoid all of them. If you are truly unaware how your behavior comes across, you can always ask, and then take a step forward toward better behavior.

How to Look for a New Job While You Still Have Your Old One

How to Look for a New Job While You Still Have Your Old One

Dwight Schrute working at Staples

Dwight Schrute working at Staples instead of Dunder Mifflin on The Office | NBC

A promotion and raise are years away in your current job, and you’ve decided to speed up that process by looking for a role in a new company. Or perhaps you can’t take any more of your toxic co-worker or unpredictable boss, and you’re finally heading for the door. If you’re like most people, you’re continuing to work while you start your job search, since a few months without a steady income is a no-go.

In fact, starting a job search while you still have your current gig is a smart choice, if you go about it the right way. “Companies want to hire the best of the best and [those people] are usually employed,” Sara Menke, the founder and chief executive of Premier, a boutique staffing firm in San Francisco, told Forbes. What’s more, continuing in your current job gives you more bargaining power. You won’t give off an air of desperation, and you’ll be able to use your existing role to your advantage. On the flip side, quitting before you have another job lined up can be a red flag to potential employers.

“If you don’t currently have a job, it raises a lot of questions and puts you in a defensive position, and you won’t be coming at them from a position of strength,” Andy Teach, a corporate veteran and author of From Graduation to Corporation: The Practical Guide to Climbing the Corporate Ladder One Rung at a Time, told Forbes.

Job hopping is now an acceptable way to climb the career ladder, and plenty of people are on the job search while they’re still reporting for their original 9-to-5. The only trick is make sure you’re doing so while remaining professional and not giving yourself away before you planned to. Here are the rules for job searching on the job.

Reality Check: What Does Retirement Mean to You?

Reality Check: What Does Retirement Mean to You?

Source: iStock

Source: iStock

The cliche retirement picture paints a graying couple sitting on a beach somewhere without a care in the world. In the reclined position, she’s pondering what novel to read next, while he’s deciding whether to look at his new gold watch again. The drinks are always cold and there isn’t a boss in sight. The only problem: this retirement is located in fantasy land.

A retirement without some kind of employment is becoming a thing of the past. According to a new report from Transamerica Center for Retirement Studies (TCRS), 20% of all workers expect to continue working as long as possible in their current or similar position until they can’t work any longer, and 41% envision transitioning into retirement by reducing their hours or by working in a different capacity that is less demanding. Only one in five workers plan to immediately stop working and fully retire when they reach a certain age or savings goal.

“Today’s workers recognize they need to save and self-fund a greater portion of their retirement income. In response, they are transforming the United States retirement system from a three-legged stool into a table by creating a fourth leg: working,” said Catherine Collinson, president of TCRS, in a press statement. “The long-held view that retirement is a moment in time when people reach a certain age, immediately stop working, fully retire, and begin pursuing their dreams is more myth than reality. Retirement has become a transition that may be phased over time or happen abruptly due to intervening circumstances.”

Reality Check: What Does Retirement Mean to You?

Expectations differ across age ranges, but the majority of workers are placing paradise on hold indefinitely. The report finds that 61% of workers in their 40s plan to work past age 65, with 59% of workers in their 50s saying the same. However, even these numbers appear to be optimistic as 82% of workers already in their 60s plan to work past age 65 or do not plan to retire. In contrast, half of workers in their 20s and 30s expect to retire at age 65 or sooner.Despite the bleak outlook, retirement dreams are alive and well. American workers of all ages most frequently cite travel as their greatest retirement dream (42%), followed by spending more time with loved ones (21%) and pursing hobbies (15%). Continuing work in a current field (5%) and doing volunteer work (4%) are a distant fourth and fifth, respectively.

Your own retirement dream is ultimately your responsibility. “It is never too soon or too late to save, invest and plan for retirement. By taking proactive steps today, workers of all ages can improve their retirement outlook,” said Collinson. “By extending our working lives and fully retiring at an older age, we can earn income, bridge savings shortfalls and stay active and involved. It’s also important to remember that life’s unforeseen circumstances, such as health issues or job loss, can derail the best laid plans. Everyone needs a Plan B for the unexpected.”

How Not to Spend Your Retirement Money Like a NFL Player

Tom Szczerbowski/Getty Images

Tom Szczerbowski/Getty Images

Nobody spends their paycheck quite like a professional athlete. Blessed with talent, opportunity, and multi-million-dollar contracts, pros can live the good life at an extraordinary young age. Spectators may feel envy, but important money lessons can be learned from these pros, especially when it comes to spending habits and retirement planning.

Four researchers recently conducted a study to test one of the central predictions of the life cycle hypothesis that individuals smooth consumption over their economic life cycle, meaning people save when income is high to compensate for when income is likely to be low, such as in retirement. In order to focus on an extreme example, the researchers decided to study players in the National Football League (NFL) — whose income typically spikes for only a few years. Data was collected on all players drafted by NFL teams from 1996 to 2003. The results are sobering.

Mansions, luxury cars, and a posse big enough to fill a stretch Hummer with its own wet bar all come at a cost. Despite a median level of earnings totaling about $3.2 million, one in six players (15.7%) had filed for bankruptcy by the 12th year of retirement. Some bankruptcies even occurred by the second year of retirement. Adding insult to injury, a longer playing career or higher career earnings did little to lower the bankruptcy rate.

“Our findings are different from what the life-cycle model predicts,” said Kyle Carlson, Joshua Kim, Annamaria Lusardi, and Colin F. Camerer, in a working paper published by the National Bureau of Economics. “First, players declare bankruptcy relatively soon after retirement. After only two years post-retirement many players have gone into bankruptcy. Second, annual bankruptcy (‘hazard’) rates are not affected by a player’s total earnings or career length. Having played for a long time and having been a successful and well-paid player does not provide much protection against the risk of going bankrupt.”

The researchers believe NFL players may not save enough during their primetime years because of optimism about career length, poor financial decisions, or social pressures to spend. This makes sense considering that higher earnings fail to significantly lower bankruptcy risk, and that the median length of a player’s NFL career was only six years in the study. It’s also a valuable lesson on how much money you actually keep is more important than how much you make.

Entering retirement with a low net worth is like celebrating before reaching the end zone — you’re asking for trouble. You can avoid spending your money like a pro athlete by recognizing the difference between wants and needs well before retirement age. You may want a shiny new car, which now costs an average of $33,560, but you only truly need reliable transportation. You may want a McMansion that’s suitable for a magazine cover, but you only truly need shelter in a safe location.

To take that philosophy one step further, calculate how much your so-called want will cost you in labor hours and see if you still want it. For example, a worker making $25 per hour would need to work about 1,342 hours to afford that shiny new car, not including other expenses like payroll taxes, sales taxes, and property taxes. In comparison, a reliable used car costing $10,000 would only cost 400 hours in the same scenario. This is just one example, but it can be applied to anything you buy. More importantly, it forces you to reconsider your purchases and may even help you avoid spending money on things you can’t truly afford.

The Retirement Crisis: Statistics Everyone Should See

Source: TCRS

Source: TCRS

The retirement crisis in America does not discriminate against consumers based on age; it’s an equal opportunity punisher seeking out anyone not properly handling their personal finances. We may hear one generation is more doomed than the other to spend their so-called golden years in a perpetual state of poverty, but truth be told, every age group in America has its fair share of retirement problems.

Who wants to be a millionaire? A new report from Transamerica Center for Retirement Studies (TCRS) finds that workers of all ages think they will need to accumulate a median of $1 million to live comfortably in retirement, presenting a wall of worry to savers. While this figure is merely guesswork by many of the respondents, there is a legitimate foundation of concern when taking a closer inspection at how workers are building their nest eggs. Let’s take a look at how five age brackets are handling retirement planning these days.

Twenty-somethings:

Young workers may not be as helpless as previously thought. Impressively, 67% of twenty-somethings are already saving for retirement through an employer-sponsored retirement plan or outside of work, and they started saving at a median age of only 22. In fact, 68% expect these accounts to serve as their primary source of income.

However, this demographic faces financial challenges not commonly seen in other age groups. Four out of five of twenty-somethings are concerned Social Security will not be available by the time they retire. Furthermore, 34% say paying off student loans or credit cards is their greatest financial priority right now. Making matters worse, the aftermath of the Great Recession still haunts retirement portfolios. Nearly a quarter of twenty-somethings who are saving for retirement are invested mostly in bonds, money market funds, cash, and other risk adverse investments. Due to inflation, being too conservative with money is a real threat to retirement aspirations.

Savings, piggy bank

Source: iStock

Thirty-somethings:

With the Great Recession in the rear-view mirror, 43% of thirty-somethings say they have either fully recovered or were not impacted by the worst financial downturn since the Great Depression. Nearly eight out of 10 are saving for retirement, and started placing money aside for their future self at a median age of 25. Three out of 10 who participate in a retirement plan are saving at least 10% of their annual pay.

This group may be feeling too confident, though. The report finds that 52% of thirty-somethings believe they are building a large enough retirement nest egg, but 57% have only “guessed” how much they will truly need in retirement, and 68% agree they don’t know as much as they should about retirement investing.

“Thirty-something workers are now well into their careers, albeit with the major disruption of the Great Recession. The good news is many are saving for retirement,” said Catherine Collinson, president of TCRS, in a press statement. “For those who are not yet saving, now is the time for them to get started. For those who are saving, now is the time to save even more and expand their efforts to include building knowledge and planning.”

Source: Thinkstock

Source: Thinkstock

Sixty-somethings:

Retirement outcomes are now a reality. More than half of respondents still plan to continue working after they retire, mostly to collect income and health benefits. Four in 10 sixty-somethings are envisioning a phased transition into retirement that involves shifting from full-time to part-time or working in a different capacity. “Workers in their sixties and older have cast aside long-held societal notions about fully retiring at age 65. They are literally transforming retirement as they retire,” said Collinson.

Even at this stage, only 15% of respondents have a written retirement strategy. This may be caused by the large role Social Security plays. Almost half of sixty-somethings expect Social Security to be their primary source of income when they retire. However, a lack of financial knowledge and planning may still hinder the retirement experience. Just 29% of respondents claim to know a “great deal” about Social Security retirement benefits. Overall, the median amount saved in all household retirement accounts by sixty-somethings is $172,000.