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August 2018 Archives

It's Not Always True That You Must Start Taking Pension Distributions By April 1 of the Year Following the Year You Turn Age 70½

Under the Internal Revenue Code (IRC), participants in tax-qualified pension plans [most pension plans ARE tax qualified] MUST start taking "required minimum distributions" (RMDs) of their pension by April 1 of the year following the year they turn age 70½. This is referred to as the "required beginning date" (RBD), and it is very important because the penalty for failing to take an RMD by the deadline is an onerous 50% tax penalty. Ditto if you fail to take your RMD in future years. Thus, if you were supposed to take an RMD of $5,000, but failed to do so, you will have the privilege of writing the IRS a check for $2,500!

What Is the Better Strategy For Achieving Retirement Security? Working Longer? Or Saving More?

The National Bureau of Economic Research recently published a working paper that purports to answer this question. [See "The Power of Working Longer," by Gila Bronshtein, Jason Scott, John B. Shoven, and Sita N. Slavov]. With exhausting technical analysis, the authors demonstrate that working longer is a much more powerful strategy for achieving retirement security than saving more.

Latest Social Security Trust Fund Report Is Not Good News for Retirees

Each year, Social Security's trustees report on the current and projected financial status of the Social Security trust fund. Their 2018 annual report is worrisome. In a nutshell, the trustees conclude that the Social Security trust fund faces insolvency and resultant benefit cuts by 2034 if changes are not soon made to the program.