What set the financial world ablaze this week? Our weekly round-up of financial news highlights… perfect for those watercooler moments. This week retirement has been the zeitgeist for all ages, with shifts happening for those beginning their contributions and those already drawing their retirement funds alike.
Planning for retirement isn’t what is used to be, and no demographic is more starkly aware of this fact than Millenials. Retiring is no longer a god given right, that we can all expect once we reach a certain age - the goal posts are moving and our mindsets must follow.
Millennials have already adapted to this change with surprising vigour, they're a financially savvy bunch who look after every penny and will sacrifice some independence in order to save.
What was once known as ‘failure to launch’, is now seen as a smart way to save money by cohabiting with your family. A way to keep a close and unfractured bond with your family? Perhaps not. A fast track to property ownership and future stability? Absolutely. Millennials are reshaping the conversation around retirement, and for the better.
In contrast to the previous news piece, baby boomers don’t have it all handed to on a plate either. It’s predicted that in 2020 Baby Boomers will be the fastest growing segment of the workforce, according to a Glassdoor report. Data collected from the Department of Labor showed a 20% rise of older workers last year compared to 12% 20 years prior.
This means people are choosing not to retire until later on in life, perhaps because they are not yet financially prepared to stop earning. This data also reflects those retirees returning to the workforce to meet growing living costs that their pension no longer covers according to the study.
Once you reach 70½ you’re required to withdraw a required minimum distribution (RMD), in other words, you can’t just sit on your retirement fund even if you don’t need the extra income. You must withdraw a sum, however, there are ways of lessening the tax implications on your hard earned cash kept in individual retirement accounts or 401(K)s. An expert from Forbes shares his advice on how to minimise this tax bite.
For example, those over the age of 70½ who are still working may be able to push back taking RMD from their 401(k) if they meet the specific circumstances. Although, they will then be obliged to take the RMD when they do retire.
There are other tax loopholes to explore, especially for those who donate to charity or church regularly - those payments will count towards your RMD but won’t be added to your income. Sounds like a good reason to be more charitable.