A recent study by Merrill Lynch and Age Wave found that the cost of retirement exceeds $700,000 on average, easily surpassing the costs of buying a home or paying for college. While this number probably seems daunting, it may be a comfort to know that setting aside even small amounts of money for retirement can have a big impact on your future nest egg.
After having saved for retirement for so many years, some people don’t realize that eventually they will have to start taking distributions—or be hit with tax penalties. The rules surrounding these forced withdrawals—known as required minimum distribution, or RMDs more colloquially—are not new or complicated. But they are important to understand so you don’t end up paying more in taxes than you have to.
When the need for extra cash arises, retirement accounts can be easy targets to turn to in a pinch. Consider that almost one-third of participants say they have taken a loan against their plan savings, according to Natixis Global Asset Management’s 2016 survey of U.S. Defined Contribution Plan Participants. Another 28 percent reported having taken a withdrawal from their retirement plan—including 41 percent of Millennials.
Some of you may remember the Jetsons, the television animated sitcom about a futuristic family whose everyday life was made easier by flying cars, moving walkways, and electronic gadgets galore. Indeed, some of the tech-driven devices that seemed most fantastical in the 1960s when the show debuted are a reality today—namely flat-screen TVs, video chat, digital newspapers, smartwatches, and, of course, robots.
Roughly $4 trillion is set to be passed down to heirs over the next decade. Regrettably, the majority of Americans are unprepared for this massive wealth transfer. Consider a recent RBC Wealth Management report stating that only 30% of Americans have a full plan ready to transfer their wealth. By the same token, 30% have done nothing to prepare for wealth transfer, according to the report.