Retirement Tool

If you are caring for an elderly or disabled relative who needs help managing their monthly Social Security or SSI benefits, you can apply to be representative payee. Social Security will conduct a careful investigation to determine if you meet the requirements.

You can use the person’s benefits on his or her behalf. Therefore, you must know what your relative’s needs are so you can decide how benefits can best be used for his or her personal care and well-being. First, you must make sure that food and shelter are provided. Then, you can use the money to pay medical and dental bills not covered by health insurance and for personal needs and recreation.

Source: SSA Publication No. 05-10127

Every women should always have an IRA or Roth IRA, even if they are a stay-at-home mom. If a divorce was to happen to a women, her separate retirement fund would still be intact and will come in handy when she reaches the age of 65.

She should invest in mostly stocks when she is younger and slowly put it in more conservative things as she grows older such as bonds. If a women has children she should put more money in a retirement fund such as an IRA than a college savings account until the IRA is fully funded. College can be funded with things like scholarships and student loans, but retirement must come from a woman’s own pocket.

If the workplace has a retirement fund that can be matched, this is not to be passed up. The match is essentially free money that the company is giving her. Fund the retirement fund up until the match, then place the rest of money that is going towards retirement into an after-tax fund.

by: Michelle L. Marrs

A frustrating situation that bankruptcy attorneys are often faced with is meeting clients who have drained their retirements in an effort to avoid bankruptcy, only to end up filing anyway. In a bankruptcy situation, funds in a qualified retirement account are exempt to over $1 million dollars – a limit not generally approached by most debtors.

People sometimes use loans and disbursements as a band-aid for their financial troubles. If this approach is not going to “cure” the problem, then you should avoid these false “solutions”. The best decision you could make in considering resolution of your financial difficulties is to seek the advice of an experienced bankruptcy attorney.

There is extensive planning that can be done to seek to maximize the amount of assets you keep while minimizing the repayment to creditors. Your number one goal should be to seek a fresh start with as many assets as possible.

Speaking to a bankruptcy attorney doesn’t mean that you will need to or should file a bankruptcy. A good bankruptcy attorney is experienced in many different areas of financial distress and can offer a comprehensive and creative approach to solving the problem. They deal with these issues on a daily basis and will have a broader range of experience and insight than the average person.

There may also be additional relief available to you in stripping mortgages, adjusting interest rates, IRS issues and so on that can be explained by a bankruptcy attorney. People often are misled by false information on the Internet or from well intentioned friends with only partially true information.

In short, meet with someone experienced in financial issues before raiding your retirement, you may be surprised at the options available to you.

About The Author

Ms. Marrs is a 1992 graduate of the University of Wisconsin-Stevens Point with a degree in Business Administration and a minor in Economics. She received her law degree from Thomas M Cooley in 1998. Ms. Marrs practices in the areas of bankruptcy including adversary proceedings. http://www.marrsterry.net

A Profit Sharing Plan or Stock Bonus Plan is a defined contribution plan under which the plan may provide, or the employer may determine, annually, how much will be contributed to the plan (out of profits or otherwise). The plan contains a formula for allocating to each participant a portion of each annual contribution. A profit sharing plan or stock bonus plan include a 401(k) plan.

Source: U.S. Department of Labor

A defined contribution plan does not promise a specific amount of benefits at retirement. In these plans, the employee or the employer (or both) contribute to the employee’s individual account under the plan, sometimes at a set rate, such as 5 percent of earnings annually. These contributions generally are invested on the employee’s behalf. The employee will ultimately receive the balance in their account, which is based on contributions plus or minus investment gains or losses. The value of the account will fluctuate due to the changes in the value of the investments. Examples of defined contribution plans include 401(k) plans, 403(b) plans, employee stock ownership plans, and profit-sharing plans.

Source: U.S. Department of Labor

Cash balance plans are defined benefit plans. In contrast, 401(k) plans are a type of defined contribution plan.

More about Defined Benefit Plans and Defined Contribution Plans.

There are four major differences between typical cash balance plans and 401(k) plans.

* Participation. Participation in typical cash balance plans generally does not depend on the workers contributing part of their compensation to the plan; however, participation in a 401(k) plan does depend, in whole or in part, on an employee choosing to make a contribution to the plan.
* Investment Risks. The investments of cash balance plans are managed by the employer or an investment manager appointed by the employer. The employer bears the risks and rewards of the investments. Increases and decreases in the value of the plan’s investments do not directly affect the benefit amounts promised to participants. By contrast, 401(k) plans often permit participants to direct their own investments within certain categories. Under 401(k) plans, participants bear the risks and rewards of investment choices.
* Life Annuities. Unlike many 401(k) plans, cash balance plans are required to offer employees the ability to receive their benefits in the form of lifetime annuities.
* Federal Guarantee. Since they are defined benefit plans, the benefits promised by cash balance plans are usually insured by a federal agency, the Pension Benefit Guaranty Corporation (PBGC). If a defined benefit plan is terminated with insufficient funds to pay all promised benefits, the PBGC has authority to assume trusteeship of the plan and to begin to pay pension benefits up to the limits set by law. Defined contribution plans, including 401(k) plans, are not insured by the PBGC.

Source: U.S. Department of Labor

While both traditional defined benefit plans and cash balance plans are required to offer payment of an employee’s benefit in the form of a series of payments for life, traditional defined benefit plans define an employee’s benefit as a series of monthly payments for life to begin at retirement, but cash balance plans define the benefit in terms of a stated account balance. These accounts are often referred to as hypothetical accounts because they do not reflect actual contributions to an account or actual gains and losses allocable to the account.

Source: U.S. Department of Labor

There are two general types of pension plans-Defined Benefit Plans and Defined Contribution Plans. In general, defined benefit plans provide a specific benefit at retirement for each eligible employee, while defined contribution plans specify the amount of contributions to be made by the employer toward an employee’s retirement account. In a defined contribution plan, the actual amount of retirement benefits provided to an employee depends on the amount of the contributions as well as the gains or losses of the account.

A cash balance plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance.

Source: U.S. Department of Labor

The three major elements of your retirement portfolio are benefits from pensions, savings and investments, and Social Security benefits.

Each year the Social Security Administration sends you your personal Social Security Statement, which gives you an estimate of the monthly benefit amounts you and your family may qualify for now and in the future.

Once you’ve reviewed your Statement, you may want to explore a variety of retirement scenarios using a range of assumptions about your future earnings or when you stop working.

Source: the Social Security Administration

Social Security plays an important role in providing economic security for women. Nearly 60 percent of the people receiving Social Security benefits are women. In the 21st century, more women work, pay Social Security taxes and earn credit toward monthly retirement income than at any other time in our nation’s history.

Today, women have challenging choices to make. Some may spend their entire adulthood in a career or job outside the home. Some may work for a few years, leave the labor force to raise children and eventually return to work. And some may choose not to work outside of the home. Whether they work, have worked or have never worked, it is essential that women understand how Social Security can help them and their families.

Women tend to care for many people—spouses, children and parents. And although they have made significant strides, women are more likely to earn less over their lifetimes than men. They are less often covered by private retirement plans and more dependent on Social Security—and for a longer period of time since, on average, women live about five years longer than men.

Social Security offers a basic level of protection to all women covered by this program. When women work, they pay taxes into the Social Security system, providing for their own benefits. In addition, their husbands’ earnings can give them Social Security ­coverage as well. Women who do not work are often covered through their husbands’ work and can receive benefits when they retire, become disabled or die.
Over the years, the level of Social Security protection for women has been strengthened. For example, the amount of benefits for a surviving spouse was raised and benefits for disabled spouses also increased. Economic protection for divorced women improved with the removal of the requirement that the divorced wife must be dependent on her husband. Also, the number of years the couple must be married in order for the divorced spouse to qualify for benefits decreased.

Besides understanding the benefits to which they may be entitled, women also need to be aware of other aspects of the Social Security program. They need to know about providing Social Security coverage for anyone they may hire as a household worker or childcare provider. And they need to know some basics like what to do if they change their names.

While Social Security is a vital program, especially for women, it was never intended to cover all of their financial needs. To live comfortably, everyone needs to plan accordingly. Living within one’s means and saving for the future are big parts of that plan.

Source: Social Security Administration