Freeman's Blog


October 27, 2015
October 27th, 2015 by

Spousal IRA
An IRA study found that women lag behind men when it comes to accumulating money for retirement (see chart). Though there may be multiple reasons for this disparity, the most fundamental is the continuing wage gap between men and women.1 This gap tends to widen around the age when many women have children, which suggests that time away from the workforce may have a negative impact on a woman’s career.2 It also stands to reason that if a mother — or stay-at-home dad — is taking care of the children rather than working, she or he may not be contributing to a retirement account. The same situation could arise later in life if one spouse works while the other takes time off.

Additional Saving Opportunity

A spousal IRA — funded for a spouse who earns little or no income — offers an opportunity to help keep the retirement savings of both spouses on track. It also offers a larger potential tax deduction than a single IRA.

For the 2014 and 2015 tax years, an individual with earned income (from wages or self-employment) can contribute up to $5,500 to his or her own IRA and up to $5,500 more to a spouse’s IRA — regardless of whether the spouse works or not — as long as the couple’s combined earned income exceeds both contributions and they file a joint tax return. An additional $1,000 catch-up contribution can be made for each spouse who is age 50 or older. Contributions for 2014 can be made up to the April 15, 2015, tax filing deadline.

All other IRA eligibility rules must be met. So if a spousal contribution to a traditional IRA is made for a nonworking spouse, she or he must be under age 70½ in the year for which the contribution is made. The age of the working spouse does not matter for purposes of the spousal IRA.

Traditional IRA Deductibility

If neither spouse actively participates in an employer-sponsored retirement plan such as a 401(k), contributions to a traditional IRA are fully tax deductible. However, if one or both are active participants, federal income limits may affect the deductibility of contributions.

In 2015, contributions to the IRA of an active participant will phase out with a modified adjusted gross income (AGI) between $98,000 and $118,000, but contributions to the IRA of a nonparticipating spouse will phase out with an AGI between $183,000 and $193,000. (The income ranges were slightly lower in 2014.) Thus, some participants in workplace plans who earn too much to deduct an IRA contribution for themselves may be able to deduct an IRA contribution for a nonparticipating spouse.

Annual required minimum distributions (RMDs) from traditional IRAs and most employer-sponsored retirement plans must begin for the year in which the account owner reaches age 70½. Withdrawals taken prior to age 59½ may be subject to a 10% federal income tax penalty, with certain exceptions as outlined by the IRS.

1) The Washington Post, May 21, 2014
2) Pew Research Center, 2013

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM Plan for your retirement early so you can reach the goals you want.
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October 21st, 2015 by

Retirement Earnings Test

More than 2.7 million jobs were created in 2014, providing new opportunities for people of all ages.1 This is good news, but what happens if you find a good job after you’ve already filed for Social Security?

You may have heard that the retirement earnings test (RET) could reduce your benefits. This shouldn’t stop you from taking the right job, but it’s important to understand this provision before you receive your first paycheck. Here are the basics:

  • The RET applies only if you are working and receiving Social Security benefits before reaching full retirement age (66 to 67, depending on birth year).
  • If you are under full retirement age for the entire year in which you work, $1 in benefits will be deducted for every $2 in gross wages or net self-employment income earned above the annual limit ($15,720 in 2015). Special rules, using a monthly limit, apply during the year you file for benefits.
  • In the year you reach full retirement age, the reduction in benefits is $1 for every $3 earned above a higher annual limit ($41,880 in 2015). Starting in the month you reach full retirement age, there is no limit on earnings or reduction in benefits.
  • The Social Security Administration (SSA) may begin to withhold benefits as soon as it determines that your earnings are on track to surpass the annual limit.

Even though the RET may seem like a stiff penalty, the deducted benefits are not really lost. Your Social Security benefit amount is recalculated after you reach full retirement age. For example, if you claimed benefits at age 62 and forfeited the equivalent of 12 months’ worth of benefits by the time you reached your full retirement age (66), your benefit would be recalculated as if you had retired at 63 instead of 62. In this case, the benefit reduction would be 20% instead of 25%, and you would receive this higher benefit for the rest of your life.

The RET applies only to wages and self-employment income, not to income from investments, pensions, or withdrawals from retirement accounts. Regardless of your age, keep in mind that you must pay Social Security and Medicare payroll taxes on your earnings.

1) U.S. Bureau of Labor Statistics, 2014

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM Plan for your retirement early so you can reach the goals you want.
Let me help you there!
Meet me for a FREE retirement strategy consultation
at my office at 1-833-313-7233 | MD, VA & DC. 


October 13, 2015
October 13th, 2015 by

Gen X turns 50
The oldest members of Generation X are turning 50 in 2015, and a recent study suggests that this generation is well behind in saving for retirement. Although Gen Xers expect to need at least $1 million for a comfortable retirement — and many think they’ll need even more — the median savings in their retirement accounts is just $70,000.1

An additional challenge is that Gen Xers will start reaching their full Social Security retirement age of 67 in 2032, just a year before the Social Security trust fund is expected to run out. At that time, it’s projected that the program may be able to pay just 77% of scheduled benefits, unless Congress finds a solution in the meantime.2

Still Time To Get On Track

This may sound bleak, but there’s still time to get back on track. Here are some ideas to consider, not only for Gen Xers but for anyone concerned about falling short of retirement savings goals.

Calculate retirement needs. Only 12% of Gen X workers have used a calculator or worksheet to estimate the savings they will need for a comfortable retirement.3 Regardless of age, workers who try to calculate their retirement needs tend to have higher savings goals and are more confident about reaching those goals.4

Make saving a priority. Gen Xers have many competing financial priorities — mortgages, auto loans, college for their children, and sometimes their own student loans. If that sounds familiar, you might have to reduce expenditures in order to allocate more to savings. When your children are out of school or your auto loan is paid off, you can dedicate additional resources to saving for retirement.

Increase contributions. Even though 84% of Gen Xers who are offered a savings plan through work participate in their plans, their average contribution percentage — 7% of salary — may not be enough to achieve their retirement goals. Experts generally recommend saving at least 10% to 15% of salary throughout a working career, and even higher percentages may be required for those who start saving later.5 When you turn 50, take advantage of annual “catch-up” contributions that allow you to save an additional $1,000 in an IRA and an additional $6,000 in most employer-sponsored plans.

Keep your savings working. More than one out of four Gen Xers have used their 401(k) accounts for purposes other than retirement — cashing out when changing jobs, taking early withdrawals (which may include penalties), or borrowing against their account balances.6 Instead of tapping retirement funds, it’s wiser to keep a separate emergency fund and to save for special purchases outside of a retirement account.

Educate yourself and consider professional guidance. Sixty-five percent of Gen X workers say they do not know as much as they should about retirement saving and investing, and 58% would like outside advice. Yet only 35% work with a financial professional.7 There is no assurance that working with a financial professional will improve investment results. But by focusing on your overall objectives, a financial professional can provide education, identify strategies, and help you consider options that could have a substantial effect on your long-term financial situation.

Every generation faces retirement challenges. The good news for Generation X is that there is time to turn those challenges into opportunities to prepare for a comfortable retirement.

1, 6), August 28, 2014
2) Social Security Administration, 2014
3, 5, 7), August 28, 2014
4) Employee Benefit Research Institute, 2014

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM Plan for the retirement you’ve always dreamed about. Let me help you get to those goals!
Meet me for a FREE retirement strategy consultation
at my office at 1-833-313-7233 | MD, VA & DC. 


October 5, 2015
October 5th, 2015 by




Although IRAs are primarily intended to help fund retirement, some people don’t withdraw all IRA monies during their lifetimes. Any remaining money goes to the account owner’s designated beneficiaries and could provide a generous legacy.

If you’ve inherited an IRA or might inherit one in the future, it’s important to understand your options.

IRS rules and regulations for inheriting an IRA can be complicated, and an uninformed decision could result in unexpected taxes and penalties.

To Stretch or Not to Stretch?

An individual who inherits an IRA can take all or part of the funds as a lump-sum distribution or stretch withdrawals over his or her life expectancy (under current law) by taking required minimum distributions (RMDs). If the original account owner was under 70½ at the time of death, the beneficiary could delay distributions until December 31 of the fifth year after the original owner’s death, but all the monies must be distributed by that time.

The lump-sum approach may be appropriate for small accounts, but you should think twice before liquidating a large account. Distributions from a traditional IRA are subject to ordinary income tax, so taking a large distribution could push you into a higher tax bracket and reduce the potential value of the inheritance. Roth IRA distributions might not be taxable (as long as the original owner met the Roth five-year holding requirement), but liquidating the account would lose the benefit of potential tax-free growth.Inheriting An IRA

Taking RMDs (Required Minimum Distribution)

The rules on RMDs depend on the beneficiary’s relationship to the original owner. RMDs are generally based on the life expectancy of the beneficiary.

A non-spouse beneficiary who doesn’t cash out should properly re-title the account as an inherited IRA — such as “Joe Smith (deceased) for the benefit of Mary Smith (beneficiary).” Inherited IRAs are not subject to early-withdrawal penalties, but they are subject to annual RMDs, which must begin no later than December 31 of the year after the original owner’s death (regardless of the beneficiary’s age). However, if the original owner died after age 70½ and failed to take an RMD in the year of death, the beneficiary must take at least the amount of the RMD by December 31 of that year.

A surviving spouse who is the sole beneficiary has more options. The survivor can treat the money as his or her own by rolling them over to an existing or a new IRA. RMDs would not have to start until age 70½ (distributions before age 59½ may be subject to a 10% early-withdrawal penalty). If the account remains an inherited IRA with the surviving spouse as sole beneficiary, minimum distributions are based on the beneficiary’s or the late spouse’s life expectancy (whichever is longer). If the late spouse died before reaching age 70½, distributions can be delayed until the year he or she would have turned 70½, but RMDs would be based on the surviving spouse’s life expectancy.

Another option that may be available to both spousal and non-spouse beneficiaries is to disclaim the IRA and allow it to pass directly to the account’s contingent beneficiaries. RMDs typically would be lower if based on the life expectancy of a younger beneficiary, which may result in a more significant opportunity for the financial instrument to pursue growth.

RMD rules become more complex when multiple beneficiaries are designated or when the IRA is left to the estate or trust. Be sure to consult with a tax or estate professional before taking any specific action.

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM Plan for your retirement and the legacy you will leave behind. Early preparation can get you to your goals!
Meet me for a FREE retirement strategy consultation
at my office at 1-833-313-7233 | MD, VA & DC. 


October 2nd, 2015 by

Avoid Retirement Regrets
According to a recent survey, nearly half of retirees between the ages of 62 and 70 wish they had retired sooner. On average, they would have preferred to retire four or five years earlier, when they were more likely to be healthy and had more opportunities to enjoy an active lifestyle.

Some people who are approaching retirement age may be reluctant to stop working because they are worried that their nest egg dollars will not last throughout their lifetimes. Younger workers, however, still have time on their side.

It’s possible they could set themselves up to retire sooner by starting to save earlier in their careers and by saving more of their incomes.

Source: InvestmentNews, April 15, 2015

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM Getting ahead is only successful when you plan for it.  Let me help you establish SAFE ways to ensure you reach your retirement goals.
Meet me for a FREE retirement strategy consultation
at my office at 1-833-313-7233 | MD, VA & DC.