SilverBlog

Wisdom from our industry experts and our SilverLink magazine.

 
 

Blog Tag: retirement

More than 10,000 Baby Boomers turn 65 each day. This means a new person is eligible for Medicare benefits every eight seconds. But many who reach this milestone need help determining their best Medicare options. Further complicating the matter is that many people continue to work past the age of 65. Understanding Medicare can help employees make the right decision based on their particular needs. Let’s start by covering some of the basics.

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There has been a lot written about when to collect Social Security benefits. Despite this, most retirees remain confused – and rightly so! This area of financial planning is very complicated with general rules and a host of exceptions to those rules. Moreover, searching for advice at your local Social Security office may result in conflicting recommendations on the best strategy.

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Job hopping is on the rise. In fact, a new survey revealed that 64% of professionals feel that changing employment every few years is an effective way to get a higher salary.¹ This trend has led to more and more workers failing to update their contact information with previous employers, which is troublesome for pension plans because these individuals often become “missing participants.”

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For years the retirement plan industry has focused on protecting plan administrators through outside fiduciary support. Discussions have often centered on investment assistance through a 3(21) or 3(38) fiduciary, but it’s also important to consider administrative assistance through a 3(16) fiduciary. Too much emphasis has been placed on investment returns and fees when the vast majority of errors occur in the day-to-day management of the plan. These errors can involve loans, tracking eligibility, processing distributions and approving hardships.

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Companies often use a group annuity to move the benefit payment responsibility out of their pension plan. Known as a “pension buyout,” this transaction keeps the size of the pension plan manageable, minimizing volatility in the balance sheet. Group annuities are also necessary to continue the promised retirement benefits when a pension plan terminates.

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Are you considering surrendering an annuity contract or purchasing a new one? Annuities have been the brunt of considerable criticism lately and consumers are getting mixed signals. There are TV commercials that joke that death is a better option than purchasing an annuity, but the fact is over $200 billion was deposited into annuity contracts in 2017. So who’s right? Is there a middle ground where sometimes annuities make sense while other times they don’t?

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Consider a worker who is 55 and making $50,000 per year. He plans to retire at age 67, at which time Social Security could make up 43% of his retirement income. Assuming he can live on 75% of his pre-retirement income, he would need to make up an additional 32% in retirement savings.

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The Internal Revenue Service (IRS) recently prescribed new mortality tables for purposes of calculating minimum required contributions according to Internal Revenue Code (IRC) Section 430 and minimum lump-sum amounts under IRC Section 417(e)(3) for qualified single employer pension plans. These regulations are applicable for plan years beginning in 2018. The prescribed tables include an update of the base mortality table to the RP-2014 tables, as well as an update of the improvement scale to the MP-2016 scale.

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Chief financial officers and other company leaders have a heavy burden when it comes to managing an organization’s financial risk. From strategic initiatives to outside investments, it can be a full-time job keeping it all in check.

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Attention Plan Sponsors
The United States Department of Labor (DOL) is taking action to better protect investment plan participants from advice that could be motivated by undisclosed conflicts of interest. On June 9, 2017, the DOL enacted new fiduciary regulations that address a wide range of investment recommendations. While aimed at financial professionals (such as advisors and recordkeepers), the new rules will also affect plan sponsors, and those working with advisors and vendors who are not acting as fiduciaries will be the first to feel the impact.

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