How to prepare for solo retirementBy Janet Bodnar
Kiplinger's Personal Finance | (Fotolia)Two sobering letters from readers address the challenges that single people face when they retire. "Publications and websites talk to their readers as if they are always married," writes Vic Linares. "Never do articles address retirees who are single and how they cope." And John Scholtz observes that "you may be taking away a huge part of your social life when you retire. Keeping in touch with former workmates will endure for only one coffee off-campus." In a study by Age Wave and Bank of America Merrill Lynch, preretirees said that what they expect to miss most when they leave work is a reliable income. But what many retirees actually miss most are their social connections. That's not surprising, says Ken Dychtwald, CEO of Age Wave. "You're at the peak of your career, answering phone calls and email, going to meetings," he says. "Suddenly, all that stimulation is gone." Without a spouse or other family members, it can be an even bigger shock. Being alone also raises financial and legal issues. "With single folks, the most important thing is to have appropriate powers of attorney in case you become incapacitated," says Ali Hutchinson, senior vice president of private wealth management at Brown Brothers Harriman. With no spouse or partner as backup, you're more likely to need long-term care from outside sources or to face estate-planning issues, says Hutchinson. Retiring alone has its pros as well as cons. "You get to do what you want without having to negotiate with anyone," says Dychtwald. "There's an aloneness but also freedom." Dychtwald predicts that more singles will form "families of friends." In the Age Wave study, single retirees said the leisure experiences they value most are with friends. "You're going to see women traveling together or men who play golf together," says Dychtwald. There's no one prescription for coping with being alone. For some people, the answer is to go back to work, at least part-time. The number of older Americans in the workforce has been rising, and respondents in the Age Wave study said social connections are a key reason for working in retirement. For others, the answer is to try something completely different. "I started taking classes in a new field purely for the pleasure of learning and ended up earning a master's degree in that field," writes reader Julia Brown. Others wrote to me about being proactive and looking for things to do. "What I realized is you have to make things happen," says Deb Russell. "They will not come knocking on your door." Janet Bodnar is editor at large at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com.
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IRS Releases Draft Form of New 1040 Tailored for SeniorsEasier-to-read form highlights retirement income streams and other tax benefits for citizens 65 and older.
Getty Images By Rachel L. Sheedy, Editor A new Form 1040 tailored to taxpayers 65 and older is making its debut today. In mid July, the IRS released a draft form of the inaugural version of the 1040-SR, “U.S. Tax Return for Seniors.” The new form was created by the 2018 Bipartisan Budget Act, which among its provisions called for the development of a tax return that would be easy for seniors to use and highlighted retirement income streams and other tax benefits for seniors. Those age 65 and older will be able to use this form to file their 2019 tax returns, and the IRS presented an overview of the new form at the IRS Nationwide Tax Forum in National Harbor, Md., earlier this week. Using the new form isn’t mandatory, but seniors can choose to use it if they want to. The form is based off the regular 1040, and the IRS says it uses all the same schedules, instructions and attachments. Older taxpayers who use tax software to file are unlikely to even notice. But for taxpayers who still file by paper, the new form will be modified for aging eyes. The font is bigger to make the text easier to read. The shading in boxes on the regular 1040 has been removed to improve the contrast and increase legibility. AdvertisementA highlighted feature of the new form is the addition of a standard deduction chart, said Darren Hamilton, an official in the agency’s forms and publications division who presented information about the new form. The form lists the standard deduction amounts, including the extra standard deduction amount that taxpayers age 65 and older qualify for “so seniors don’t have to hunt for it,” said Hamilton at the Maryland tax forum. The chart makes it simpler for seniors to take advantage of the full standard deduction for which they are eligible, particularly for those who may not even be aware of the extra amount for which they qualify. The form has lines for specific retirement income streams, such as Social Security benefits, IRA distributions, and pensions and annuities. “AARP supported the development of the simpler 1040 SR tax form since most seniors could not use the 1040 EZ due to their different sources of income,” says David Certner, AARP legislative counsel. But the IRS says you don’t have to be retired to use the form. The agency says the form is appropriate for older workers to use, too. SEE ALSO: State-by-State Guide to Taxes on RetireesYou can take a look at the draft form of the 1040-SR at IRS.gov/DraftForms. Of course, the draft form is subject to change before it is finalized later this year. Industry players, such as certified public accountants and enrolled tax agents, will get a chance to comment on it and suggest improvements. You can submit comments, too, no later than August 15 to WI.1040.Comments@IRS.gov. The Savings GameMultiemployer pension plans need savingMultiemployer pension plans need savingThe Savings Game August 21, 2019
In this space, I have frequently written of the potential difficulties facing those preparing for retirement who do not have the advantage of a defined-benefit pension. Today I’d like to address a different crisis: the potential insolvency of pension funds that cover millions of people who have lived, worked and planned their retirement on the assumption that their pension would be there. At particular risk are multiemployer pension plans. These cover pools of union workers working typically in the same union but for different companies. Currently, there are approximately 1,400 plans funded jointly by employers and unions. About 10 million participants are covered. Unfortunately, about 130 of these plans are in trouble, covering more than a million employees. These plans cover truck drivers, iron workers, warehouse workers and others. These plans are failing at a high prate, and employees covered by these plans do not have very much protection. According to Karen Friedman, executive vice president of the Pension Rights Center, 12% of these plans ae expected to run out of assets within 20 years. These plans are backstopped by the Pension Benefit Guarantee Corporation (PBGC), a government-sponsored enterprise that guarantees private defined-benefit pension plans. However, multiemployer plans do not have the same protection with as pension plans covered by one employer. For example, PBGC pays no more than $12,870 a year to an employee with 30 years of service if his plan fails. PBGC itself is also in danger of running out of funds. In December 2014, Congress passed the Multiemployer Pension Reform Act (MPRA), as part of an omnibus spending bill. The law reflects suggestions made by the National Coordinating Committee on Multiemployer Plans, a coalition of employers, unions and plan trustees. A key part of the Act, which was opposed by AARP, gives trustees of certain plans that are projected to run out of money within 15 to 20 years the authority to immediately cut retirees’ pensions to 110% of the amounts guaranteed by the PBGC. There are several reasons why so many plans are running into financial problems. Many employers have gone out of business or faced bankruptcy. The reduction of union jobs has meant that there are often way more retirees than current workers paying into the funds. Lower interest rates for many years have reduced the returns of many plans. In addition, stock market volatility has created investment losses. Because of these factors, there is an immediate need for legislation that will provide more funds to the PBGC to assist multiemployer plans that are now running out of assets, or that expect to in the foreseeable future. A bill, the Rehabilitation for Multiemployer Pension Act (aka the Butch Lewis Act) has passed the House of Representatives in a bipartisan vote. However, the Senate has not reviewed the legislation yet, and there may be some opposition there because of the proposed cost, which is estimated at $64 billion from 2020 to 2029. The purpose of the Act is to allow failing pension plans to borrow from the PBGC in order to ensure that they meet their commitments to retirees and workers. This legislation is important not only to the fate of multiemployer plans but also to the other pensions guaranteed by the PBGC, namely single-employer plans. Interest rates are likely to remain low, and stock market returns are likely to remain volatile. For these reasons, many pension plans will face underfunding in the future, and that will cause more plans to depend on PBGC guarantee. I urge you to contact to your congressional representatives and point out the need to pass legislation that will stabilize the PBGC, so that a painful crisis can be averted. (Elliot Raphaelson welcomes your questions and comments at raphelliot@gmail.com.) |
AuthorJeff Sodoma, MPA, Esq. is a lawyer based in Virginia Beach, Virginia Blog!Hello, there! Welcome to my blog. I will use this blog as a platform for my writing. I will write about topics in the legal world, certainly, as well as everything else under the sun, because I have many interests (and viewpoints). All views expressed in this blog, unless otherwise noted, are mine alone. One of my interests is music--my wife believes that I should go on "Beat Shazam" because I know so many songs--and I will be, from time to time, analyzing song lyrics and how they relate to the legal world.
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