Tag Archives: Retirement Planning

Is 401k Nationalization a Possibility?

Runaway debt and an unfunded pension system make 401K nationalization not only a possibility but a very real likelihood

According to USDebtClock.org the U.S. federal government is more than $19 trillion in the red. That’s more than $59,143 of debt for every man, woman and child.

Within the runaway government spending that got us to where we are today, Social Security is the second largest cost at $894 billion only less than the annual cost of Medicare/Medicaid at $1.0 trillion. Both of these programs are seriously underfunded and will cost the government trillions of dollars.

Once thought an impossibility, 401K nationalization is looking more likely as a tool for both the Federal government and corporations to cover wasteful spending and rampant corruption.

Is 401K nationalization coming and what can you do to protect your retirement investments?

The Government Moves Closer to 401K Nationalization

To cover the insurmountable debt, the government has passed a 22% increase in premiums to be paid by employers to the Pension Benefit Guaranty Corporation (PBGC) through 2019. The PBGC was designed to take over bankrupt pension plans and make payments, though payments are normally renegotiated well below what was originally promised by the employer. The new hike costs businesses an extra $14 per employee beyond the 236% increase in per employee costs added by the PBGC since 2005.

Even on the increased premiums to the PBGC, the fund admitted that it was 90% likely to run out of money by 2025.

401k nationalization pensions

The combination of building national debt and underfunded needs at both the federal and corporate level means lawmakers and corporate management are going to be scrambling to find money to fill the coming gap.

And that is when 401K nationalization will become a reality.

There are currently about $3.7 trillion saved in 401k plans and other employer-sponsored retirement accounts. Yes, the government knows that we are saving that money to use during retirement, but that didn’t stop them from raiding the Social Security coffers. How long will it be before the government mandates that a certain portion of 401k accounts be invested in government-backed investments like Treasury bonds? After all, just last year the government announced the creation of MyRA plans that are nothing more than bond-based IRAs.

In fact, the Pension Protection Act of 2006 might actually make it easier for 401K nationalizations to become a reality. The law was the beginning of a long list of investor protections that were wiped from the rules, allowing employers to automatically enroll employees and protecting 401K plan sponsors from liability in the event of loss.

What Can Investors do to Protect Themselves from 401K Nationalization?

Protecting your investments from a 401K nationalization or from corporate malfeasance raiding the funds means taking control of your own assets. An investor’s best course is to take control of their retirement investments through the 401K rollover process. A 401K rollover is a relatively easy process where you transfer the assets within your corporate 401K into an Individual Retirement Account (IRA). The IRA benefits from all the same deferred-tax advantages of a 401K and you can make tax deductible contributions every year.

It’s your name on the IRA account and neither the government or an employer has access to it. Learn the differences between 401K vs IRA and critical questions you need to ask. 401K rollover specialists can answer your questions and can help you understand the rollover process to protect your money.

Like and Share this post if you want the government to let you decide how to manage your retirement account funds.

you have not saved enough for retirement

What to Do When You Haven’t Saved Enough for Retirement

Americans haven’t saved enough for retirement and the bill is about to come due. Follow these steps to make retirement work.

Nearly seven years from the bottom of the financial crisis and the S&P 500 has surged 210% over the period. Net private savings reached almost $700 billion in 2015, so why are you so worried about your retirement?

If you haven’t saved enough for retirement and are feeling a little uneasy heading into what should be some well-deserved R&R, you’re not alone. More than 38 million households have no money saved away for retirement and the median savings for Americans with 10 years from retirement is just $12,000 in assets.

Most Americans are woefully unprepared for retirement. Even including the average social security benefit of just over $1,100 you would still need a portfolio of about $570,000 to provide a $36,000 annual income at a 4% withdrawal rate.

If you’re hoping that the stock market will continue to rocket higher, providing just enough return to cover your living expenses, you might end up worse than you are now. I’m not going to try predicting the next market crash but one legendary investor sees returns of just 4.5% annually over the next decade on a portfolio of stocks and bonds.

So what do you do when you haven’t saved enough for retirement and you’re running out of options? If you’re approaching your 60s, you might not have the luxury of just saving more. You’ll need to be proactive to make sure you’re not living on the dollar menu at the Golden Arches for the rest of your golden years.

Four Steps for When You Haven’t Saved Enough for Retirement

you have not saved enough for retirement The absolute first thing you should do when you realize you don’t have enough saved for retirement is to change the way you invest. Your retirement investments may not provide for much but imagine getting caught in a market crash and losing what little you’ve saved.

The best way to protect your retirement investments is to follow the Bucket Approach to Retirement Planning, outlined in a previous article. This involves separating your retirement investments into three distinct categories, each providing different levels of cash and return. The safest bucket will help you meet any near-term expenses without having to withdraw too much from your account. The second bucket generates reliable cash to refill the first bucket and the final bucket gives you the max return possible with what you’ve been able to save.

You’ll also want to do a 401k rollover for all your old employer retirement plans. The 401k rollover process is simple and will help you better see all your retirement assets in one place. Rolling those orphaned 401k plans into an individual retirement account (IRA) puts you in control of the money and reduces the risk that a bankrupt former employer will put your retirement dreams in jeopardy.

While many people say they will continue to work later in life, 45% of men and 51% of women retire as soon as their allowed to start collecting social security benefits. It’s a mistake that costs people thousands a year. Retiring at 62 will cost you big time with a $1,000 benefit payment reduced to just $750 per month. You’ll get the full amount at age 66 and will collect $1,160 a month if you can hold out to age 68 to retire.

Unfortunately, age discrimination in the workplace may keep you from working as long as you need to delay social security. Covering the income gap may mean starting a second career as a work from home freelancer or contract worker. If it’s not enough to cover all your expenses, you might consider digging into your savings just a little to delay social security a few more years.

Finally, challenge yourself and your perception of what retirement looks like. This starts with how much you’re spending now and how much you plan on spending in retirement. It may seem impossible to cut further into your budget but put yourself on a no-spending challenge for a month and you’ll be surprised how easily you can live on less. You might also consider retiring somewhere with a lower cost of living and an easier tax burden. We highlighted the top five retirement destinations on any budget recently but lower cost options exist right here in the Red, White and Blue as well.

There’s really no quick fixes if you’re within a few years of retirement and haven’t started saving. It mostly comes down to saving a little more, spending less and earning as much as you can for as long as you can. Besides adopting the bucket approach, holding the right mix of assets like stocks, bonds, real estate and precious metals can help lower your risk and provide a little higher return compared to a simple stock-bond portfolio.

401k retirement accounts rollover

Why is Everyone Rolling Over Their Employer-Sponsored Retirement Plans

Learn how investors are rolling over their retirement accounts for safety and stability against financial disaster

The 2008 financial crisis affected the lives of people all over the World. Long-standing investments were shattered, jobs were lost, and the systemic collapse of financial markets resulted in immense hardship.

Subsequently, retirement accounts took a major hit. Retirement investors had little to no control over the outcome as Wall Street bankers went gambling with complicated derivatives and other financial alchemy.

But there is a bright side.

People learned from the event. They found ways to take better care of their savings, to protect their retirement accounts from volatility and mismanagement, and decided to take the future of their finances into their own hands.

What did many retirees and future retirees do to protect their nest egg? They rolled over their employer-sponsored retirement plans to individual retirement accounts, and the statistics prove it.

The Great Retirement Account Rollover

401k retirement accounts rollover According to the 2014 Investment Company Institute (ICI) Fact Book, 49% of traditional IRA-owning households have made rollovers at some point in time. Nearly half of traditional retirement account owners have decided to rollover their funds from employer-sponsored accounts such as 401K and 403B plans.

More telling is the dates behind the retirement account rollover trend.

Between 1990 and 1994, 5% of IRA owners had made a rollover. Between 1995 and 1999, 10% had made a rollover. The number jumps to 29% between 2005 and 2009 and to 34% by the time 2010 rolls around.

Employer-sponsored retirement account rollovers increased 29% (from 5% to 34%) between the early 1990s and the years following the 2008 financial crisis. Why would this happen?

What we find is that individuals viewed that a portion of their losses resulted from the vulnerability and lack of control their funds experienced being under 401K plans, 403B plans, and other types of employer-sponsored retirement accounts.

According to The New York Times, 401K plans and individual retirement accounts lost $2.8 trillion in value in 2008. On average, U.S. workers lost almost a quarter (24.3%) of their 401K accounts. These are retirement accounts that people have been slowly building for years and years, and in one instant, their value plummeted. Part of the reason is due to employer control in the investment of these accounts.

Also in 2008, 72% of workers held 20% or less of their account balances in company stock. However, nearly 7% of 401K investors had more than 80% of their account balance invested in company stock. This exemplifies a mismanagement of those funds, which contributed to glaring losses. Having too much of your retirement account invested in company stock leaves you vulnerable to the company going out of business, getting bought out, or filing for bankruptcy, as what occurred in numerous companies after the financial crisis.

It is clear that investors wanted more control and transparency in terms of their retirement funds. But why choose self-directed IRAs over other investment options?

The Advantages of Rolling Over Retirement Accounts to a Self-Directed IRA

Self-directed IRAs act independently of the ups and downs of one’s employer. Funds in these accounts will not be affected if your company goes out of business, if it gets bought out, or if it files for bankruptcy. Many 401K plans were absorbed or liquidated during the financial crisis. Investors want to protect themselves from the same outcome repeating itself.

The freedom and flexibility of IRA investment options also makes rolling over to a self-directed IRA an attractive option. You have the freedom to invest in real estate, private businesses, and precious metals (a relatively stable investment) which employer-sponsored plans may not support. You also have the option of doing your own research and diversifying your funds to take on the risk only you are willing to.

401k asset investments You are typically free to invest in any or all of the following:

  • Certificate of Deposits (CD’s)
  • Bonds
  • Mutual Funds
  • Exchange-Traded Funds (ETF)
  • Stocks
  • Annuities
  • Real Estate
  • Precious Metals

With a 401K, the plan is usually set up by your employer with a large financial institution, limiting your investment options to what the institution offers.

In addition, fees for IRAs are typically lower than that of 401K plans, and your individual retirement account will retain all of the accompanying tax benefits. Stability, lower cost and control are just a few of the advantages in an IRA vs 401k account.

How to Rollover your Retirement Accounts

We advise consulting a tax advisor if you feel that rolling over to a self-directed IRA is right for you. There are many companies that understand the process, know the market, and will be very willing to guide you through the process. With a competent professional, it should not take more than two to three weeks to have your funds fully rolled over into your hands and invested to your liking.

401kRollover.com is dedicated to providing accurate, up-to-date information about 401K rollovers and custodian-to-custodian transfers, so rest assured that we are here to help and guide you to a healthy and vibrant financial future.


orphan 401k self directed ira

Best alternatives for an orphan 401k plan

Take advantage of a self-directed IRA for more investment options with your orphaned 401k

Job security isn’t what it used to be and few workers stay with one employer for their entire careers. When you leave your employer, what should you do with your orphaned 401k plan (or 403b plan if the employer is a non-profit or governmental entity)? You basically have four options:

  • Transfer the account into a managed IRA (Individual Retirement Account)
  • Transfer the account into a self-directed IRA
  • Roll the account into another employer-sponsored 401k, if one is available
  • Cash out the account

Cashing out your orphaned 401k accounts is not an option, even if you’d like to use the money. Cashing out a 401k will mean a 10% withdrawal penalty plus paying income taxes on the full amount. Setting the precedent that it’s acceptable to withdraw money from your retirement accounts is going to leave you penniless in retirement.

Rollover orphan 401k Accounts

Rolling your orphaned 401k accounts into those run by a current employer may not be the best decision either. Most employer-sponsored 401k plans offer extremely limited investment options in funds where the manager happens to be offering the biggest fee kickback to the plan administrator. It’s still a good idea to get the full company match on contributions but putting more money to overpriced funds with high commissions won’t help you reach your financial goals.

For most people, rolling their 401k plan into a self-directed IRA is the best alternative. According to Cerulli Associates, a Boston-based research firm, around three million American workers rolled approximately $289 billion from employer plans in 2012. The bulk of this money, or almost $204 billion, was rolled into IRA accounts controlled by financial advisors. Another $85 billion was rolled into self-directed IRA accounts. The company also estimates that by 2017, Americans will roll $451 billion into self-directed IRAs, making this an $8 trillion market place.

Advantages of an IRA vs orphan 401k plans

orphan 401k self directed ira There are quite a few benefits to an IRA. If you have several orphaned 401k accounts, you can consolidate all of them into one account for ease of management and tracking. Most 401k plans have limited investment options and can charge high management fees to its participants. By rolling orphaned 401k accounts into a self-directed IRA, you gain better control of your retirement investments and the associated expenses. It may also be wise to sever ties with former employers depending upon how you left your job and the financial stability of their retirement plan. With the pension system crumbling, corporate sponsored 401k plans may be an easy target for corporate malfeasance.

There are specific rules governing a 401k rollover which must be followed to avoid withdrawal penalties and taxes. The funds will go into either a Traditional IRA or a Roth IRA depending on when you want to incur the inevitable tax impact. Managed or self-directed IRA accounts also offer different benefits depending on your needs and financial goals.

A managed IRA can offer many more retirement investment options than an orphaned 401k. Alternatives may include stocks, bonds, ETFs, CDs and mutual funds, but this type of account will also be controlled by a financial advisor. This advisor will charge fees and/or commissions for his services.

A self-directed IRA allows for a greater variety of investments such as physical gold, real estate, foreign businesses, horse farms, etc. The options are limited only by the investor’s imagination, risk tolerance and IRS rules and tax laws. This form of IRA truly gives the investor freedom to use his money how he sees fit to best serve his needs. A self-directed IRA also allows for greater financial diversification – for example in physical metals like gold and silver which is very appealing to many US investors today.

Before deciding if a self-directed IRA is best for you, consider how you want your hard-earned money to work for you, the benefits and restrictions of each type of account, and of course the tax implications you may face. Of course you can always contact the orphaned 401k experts at 401krollover.com. Our experts can help you select the best IRA options for your unique needs.

avoid worst retirement mistakes

How to Avoid 5 Worst Retirement Mistakes Everyone Makes

Learn the worst retirement mistakes that cost people money and keep your retirement planning on track

As retirement approaches, we all look for simple ways to plan and save. Many people are confused or even misled by some common misconceptions which could lead them astray. A few simple rules of thumb can help avoid the worst retirement mistakes and provide for security.

For example, the 4% retirement spending rule suggests that you can safely spend four percent of your stocks and bonds each year in retirement, with adjustments for inflation. The “100 minus your age” rule addresses the percentage of savings recommended for stock investments. These over-generalizations and myths can lead to huge retirement mistakes.

Many planners unknowingly rely on retirement myths which could result in future financial woes. Here are five of the worst retirement mistakes:

Social Security will provide enough to cover your expenses.
Current inflation is low, so there is no need to worry about it.
You may receive an inheritance to supplement your retirement.
The Stock Market will provide additional income down the road.
You can always return to work if you need to.

Let’s look at each of these retirement mistakes in some detail.

Retirement Mistake #1: Social Security will Provide Enough

The average Social Security benefit is $1,328 per month. That’s only $15,936 per year, which is barely above the poverty line for a couple. Full retirement age is now 66 and the maximum possible benefit is $2,663 per month. If you wait until age 70 to retire, the maximum would be $3,501, or $42,000 per year.

The maximum benefits only apply to those workers who were earning more than $100,000 per year for most of their careers. Keep in mind, these are today’s figures. Social Security continues to push the full retirement age back and there is no guarantee that today’s benefits will be available when you reach the required age. In fact, as of March 19, 2015, the Social Security liability is $13,784,756,000,000 and rising rapidly.

Retirement Mistake #2: Inflation won’t be a Problem

Some advisors think inflation is dead and deflation is headed our way. Despite massive stimulus programs by the Federal Reserve, inflation has slowed to about 1.7% annually. We also have had years in the past, specifically 1980, where it went up more than 13 percent so super-low inflation over the last few years may be the exception rather than the rule.

Since 2000, inflation has been averaging 3% so the $100 you earned in 2000 is only worth about $72 today. In fact, it takes just 22 years to halve the value of a dollar on 3% inflation.

worst retirement mistakes inflation


Retirement Mistake #3: Depending on Relatives for Retirement

Even if you come from a wealthy family, beware. Some of the most affluent people are enjoying longer, better lives and actually outliving their assets. This is especially true if they don’t have long-term care insurance and wind up in nursing homes which can cost thousands of dollars per month. Depending on relatives may be a retirement mistake because everyone may be in the same boat at the same time, trying to pay for higher retirement costs and coming up short.

Retirement Mistake #4: The Stock Market will Provide all I Need

The market has been doing well since 2009 and has provided a good return for those wisely invested in the stock market and mutual funds. However, we can’t forget 2008 when U.S. workers lost an average 24.3% in their 401k accounts, according to a study from the Employee Benefits Research Institute and the Investment Company Institute. After retirement, use the stock market for solid, long-term investments, but don’t use stocks for any money you might need in the next five years.

In fact, legendary investor Jack Bogle recently forecast returns of just 6% on stocks and under 3% for bonds over the next decade. This is before inflation so real returns on your money will be much lower and may not cover expenses in retirement if your relying on just stocks and bonds.

Retirement Mistake #5: I’ll just find another job

avoid worst retirement mistakes If you have worked hard and planned wisely for retirement, why would you want to return to the workforce? Many baby boomers claim they would be willing to work after retirement age or try work from home options, probably because most believe they won’t be able to afford their monthly obligations with investments alone. Also, even though many retirees may want to continue working in retirement, the number of people actually returning to work is significantly smaller. According to the Bureau of Labor Statistics, in 2014 only 19% of the over-65 population was considered part of the labor force, and only 17.7% of those workers were employed.

The Government Accountability Office reported that Americans over the age of 55 are the least likely to find another job and the most likely to take a significant pay cut for the next position. Even when older people find new work, the new wage is typically only 85 percent of the old salary.

Experts told the GAO that employers are reluctant to hire older workers because they “expect providing health benefits to older workers would be costly.” Others said computer skills often hold back the elderly, especially when the job application is all online. More than 1 million older Americans have been looking for work unsuccessfully for more than six months, while hundreds of thousands of other older workers have stopped searching.

Steps to Avoid the Worst Retirement Mistakes

Rather than depending on outside forces to provide a comfortable retirement, you can take control of your retirement and carefully plan for your own future. Diversification is key. Consider not only stocks and mutual funds, but also tangible assets such as gold and silver or real estate which may be beyond the reach of the government and not tied to stock and bond market volatility.

Start now by reviewing your retirement accounts and understanding your IRA investment options. . If you have more than one account, it is probably best to consolidate numerous plans into a comprehensive IRA. Consider investing in assets such as precious metals, like gold and silver, real estate, foreign currencies or even businesses. Go to www.401krollover.com for more information. Our experts can help you select the best options for your unique retirement needs and avoid the worst retirement mistakes that cost people money and their financial security.

myth 4% rules of retirement spending

Debunking the Rules of Retirement Spending: How the 4% Retirement Spending Rule Could Leave You Broke

After years of hard work, saving and planning, you have finally reached retirement. Now the most important question on your mind is, “Will my money last for the rest of my life?” In 1994, a financial planner named William Bengen developed one of the most popular rules of retirement spending. The 4% rule of retirement spending caught on quickly and has been quoted by nearly every advisor. The rule has become a safety net for many advisors and their clients and is based upon the following parameters:

  • Your retirement portfolio is comprised of one-half stocks and one-half bonds.
  • In the first year of retirement, you calculate 4% of the total account balance. This is the amount of money you can spend within that first year. For example an account balance of $1 million would allow for $40,000 based on the rules of retirement spending.
  • Every year thereafter, you adjust for inflation and add that adjustment to the original 4% amount. For example a 3% inflation rate would allow for an additional $1,200 of spending in the second year, or a total spend of $41,200.
  • If you do not spend more than 4%, adjusted for inflation each year, your account will provide a steady stream of funds while also keeping a balance well past your 125th birthday.

A Little History about the Rules of Retirement Spending

How did Bengen settle on 4% rule of retirement spending as the appropriate annual withdrawal amount? It starts with the unrealistic assumption that stocks and bonds can produce an annualized rate of return of 7%. This figure was based upon information gathered twenty years ago. Since Warren Buffet had predicted that the US stock market will experience a 7% long-term annualized return for the next few decades, we’ll play along, for now.

Next, the rule assumes that inflation will erode the dollar value at the rate of 3% per year. Reducing the 7% annualized rate of return by the 3% rate of inflation leads to an annualized real return of 4%. Bengen then reviewed studies of stock and bond returns dating back to 1926. At that time his retirement spending rule worked in every historical 30-year period, as well as in most computer simulations based on the historical rate of return.

At first, the rule on retirement spending gave many retirees a sense of comfort and security. They just needed to set up a retirement account, save as much money as possible and then set up the 4% rule and forget about it. However, based upon the changing nature of our economy over the past 20 years, the 4% retirement spending rule just doesn’t fit as well anymore and it can’t provide the return most investors crave in today’s economic environment.

What has Changed Since the Rules of Retirement Spending were Suggested

Financial advisors are concerned about multiple factors which have changed in the 20 years since Bengen’s rules of retirement spending were proposed.

  • Interest rates are so low now, they will almost certainly increase, which will negatively affect stocks and bonds
  • In 2014 the true rate of inflation, per ShadowStats.org, was 9.4%
  • The stock market has crashed and rebounded several times making one average forecast inappropriate
  • Global central banks’ money printing programs could have serious consequences on the rate of inflation going forward
  • Age-related healthcare costs are skyrocketing according to the U.S. Department of Health & Human Services.
  • People are living longer on average

The fact is that the stock market has missed Bengen’s estimated return by a long-shot and multiple market crashes make even the long-term return unlikely. The future return on stocks and bonds is likely to fall well short of expectations, turning the rules of retirement spending upside-down.

4% rules of retirement spending stock returns

So Does the Retirement Spending rule Still Fit Today?

The key to the 4% retirement spending rule is the expected rate of return on stocks and bonds which is required to replace the amount being spent each year. Wade Pfau, professor of retirement income at the American College for Financial Services, argues that asset prices have less room to rise in the future and the long-run outlook calls for lower returns ahead. For example, the 10 year Treasury bond is currently yielding 2.1% as opposed to its historic average yield of 3.5%. Today’s 10-year yield will generally predict the total return expected for the next decade.

Pfau also raises concerns about stock values. According to Robert Shiller, a noted Yale economist, the large companies which are included in the S&P 500 index are currently priced at 25 times their averaged earnings over the past decade. These prices are significantly above the overall historic average of 16 times earnings. When the price to earnings ratio is high, you can expect lower returns over the next 10 years.

As a result, Pfau is predicting that a portfolio consisting of half stocks and half bonds will realize a annual return, after inflation, of only 2.2% over at least the next decade. If Pfau is correct, a retiree following the 4% rules of retirement spending, with an adjustment for inflation, will run out of money 57% of the time.

So what does this mean for the average retiree? It really depends upon your investment and spending strategies. There’s really two options for investors and new rules of retirement spending. You can decrease your spending rate to 3% which will spread your retirement funds out. For a lot of retirees, this isn’t really an option because of low retirement savings. You can also look for higher returns in alternative assets like precious metals. While gold and silver prices have languished for several years, key factors are coming together that may increase demand just as supply is shrinking. Investing just 20% of your retirement accounts in precious metals could increase your long-term return by several percentage points.

Because of the changes we have seen in the past 20 years, most advisors agree that the 4% retirement spending rule should be nothing more than a starting point for discussions about spending after retirement, and preservation of assets during retirement, to ensure continued financial freedom.

Steps to Take Beyond the Simple 4% Rule of Retirement Spending

Here are some better retirement suggestions to follow:

myth 4% rules of retirement spending Save more money before retirement. This sounds obvious, but for many reasons, it is not always possible. With high unemployment rates, increasing medical expenses, and increased costs of living, today’s U.S. citizens are just not able to set aside as much as they want for retirement. More Americans are expecting to work longer than their parents did before they will be able to retire. Save more money by saving on taxes, taking advantage of deductions for retirement accounts and 401k tax breaks.

Be flexible during retirement – both in investing and spending. Reevaluate your financial situation frequently throughout your retirement years. Adjust spending annually, if necessary. Pay attention to the markets when deciding if you can afford that new car this year, or if you would be better served to wait a while. Match your spending and life experiences with your investment performance.

Diversify. Do not just invest in large-cap stocks and bonds. If you invest in assets other than stocks and bonds, you can realize a greater spending potential since your withdrawals are not solely dependent upon market fluctuations and inflation or interest rates. Understand your IRA investment options and the flexibility you have for investing with an IRA transfer from old 401k accounts.

According to John Halloran of Certified Gold Exchange, “Even though interest rates are almost zero today, they are poised to rise for the next 20 years. With government liabilities increasing, you can bet Uncle Sam will try to spend its way out of debt. This uncontrolled spending will really affect the purchase power of many hard-working Americans. Investing in safe havens like gold and silver really debunk the 50% stock 50% bond recommendation which is the basis of the outdated 4% retirement spending rule.”

The best rule today may be to not follow rules of retirement spending at all. Retirees need to be active participants in the management of their retirement savings and adjust spending where needed. Consider a 4% spending cap, but remain open to modification and diversification in order to ensure the comfortable retirement you have worked so hard to enjoy. Let our experts at 401krollover.com help you make the best decisions for your particular needs. Contact us through our website at www.401krollover.com for your own personalized plan.

stories that changed the world 2015

5 Stories that Changed your World in 2015

It’s time to look back on the most important stories of the year, the ones that changed your world and will change your finances in the years to come

This is my favorite time of year. Besides family dinners and holiday worship, it’s a time to look back on 401kRollover and the stories that shaped our lives in 2015. Looking at the most popular stories helps to put together a picture of where things are heading and a roadmap of how to meet our financial goals.

Unfortunately, the picture we found looking back at the five most read stories was not a pleasant one.

stories that changed the world 2015 2015: A Worrying Turn of Events

While the economy has not roared ahead since the financial meltdown, there have been signs of improvement since 2008. The Federal Reserve was ending its historic period of monetary manipulation and unemployment had come down to more normal levels. This year brought several events that seem to cue a new crisis on the horizon, one where massive government spending and debt comes to the forefront.

Bank Bail-ins, The $297 Trillion Monster Hiding in Your Closet

It’s been nearly eight years since the financial crisis and $29 trillion in bank bail-outs funded by tax payers. A new crisis is brewing and it could be ten times worse, bringing the dollar to its knees and changing the way we think about banking.

I’ve worked in finance and can tell you that nothing has changed since the financial crisis. Complicated derivative investments are still used to leverage up a bank’s capital and the next recession will catch the industry off-guard, yet again. The difference is that new regulations have given bankers the authority to cover their losses by raiding deposits. It’s called a bank bail-in and if you’ve got money in a savings account, you need to read this article.

Houston’s High Pension Costs Cause Other Budget Cuts

After Detroit became the largest municipal bankruptcy in U.S. history, filing to wipe out its $20 billion in commitments, I have been watching the municipal market really closely. Puerto Rico is on the verge of bankruptcy and Houston’s pension fund is underfunded by more than $5.3 billion.

The story is the same across America and it is going to affect you in ways you may not yet know.

  • State and local governments will first try to increase your taxes to cover underfunded pensions and other pork spending. Houston has doubled property tax rates over the last 15 years and still hasn’t been able to plug its budget gap.
  • Budgets for public services will be cut even as taxes increase. Spending on roads and utilities will shrink to nothing and quality of life could suffer.
  • Finally, local governments will just walk away from their debt and other commitments in nationwide bankruptcies. Banks, insurance companies and most pension funds invest their money in seemingly-safe municipal debt so the bankruptcies will resonate through the rest of the economy and could wipe out trillions in investments.

Anthem-Cigna Merger Reduces US Healthcare Options

Just as the government is forcing people to sign up for mandatory health insurance, companies are merging and reducing options available. Shareholders of Anthem and Cigna recently approved the formation of the nation’s largest health insurance company and regulators look to approve the deal within months.

The merger will cut costs for the two companies but will also decrease competition in the health insurance industry. Less competition means companies can more easily increase prices and people will be forced to pay because of mandatory coverage.

Veteran Affairs to Close Hospitals Due to Funding Gap

Budget gaps aren’t only hitting local communities but the Department of Veteran’s Affairs is also scrambling to cut benefits to the men and women that have fought for our freedoms. Chronic mismanagement led to a $2.5 billion shortfall in the 2015 budget and it’s beginning to look like the situation won’t improve in 2016.

In fact, the Obama administration is looking to make things worse for veterans and their families. The administration has proposed cutting veteran pensions by 20%, forcing military families out of Tricare Health insurance and into private plans and a wide range of other cuts to benefits and pay.

Opposed by the U.S., AIIB Holds Signing Ceremony

Among all this financial trouble at home, China is making its move to undermine the U.S. dollar as the world’s reserve currency. The world’s second-largest economy has pushed through the creation of its own “World Bank” that will give it overwhelming authority on the world’s financial stage.

The problem with this is that once the Chinese Yuan replaces the greenback as the major holding currency for central banks, a 30-year time bomb will explode. Our national debt is now the same size as the economy and there is nothing that can stop the coming fiscal meltdown. When the dollar is no longer supported by central bank reserve holdings, the value of the greenback will crash and inflation will surge.

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The country is in bad financial shape as we enter a new year and there may be nothing that can stop or even postpone the next collapse. Personal protection through self-directed retirement accounts and investments in safe-haven assets like gold may be the only way to ensure your own financial security.

Drop your Pension Plan Before it Drops YOU

Drop your Pension Plan Before it Drops YOU

Pension plans are about to get too expensive for Corporate America. What comes next will shock you.

Corporate pension plans have been slowly bleeding out for 30 years but the new federal budget has just fired the final shot that will kill the system. New premiums make the costs of offering pension benefits to employees unmanageable and the fallout could start as early as next year.

The problem is that it’s all going to happen just as the government’s own guarantor of pension benefits approaches insolvency. Anyone with retirement assets left in the system could suffer massive losses in promised benefits.

Pension Premiums Skyrocket 310% and Become Unmanageable

The government’s newly passed budget calls for a 22% hike in employer premiums paid to the Pension Benefit Guaranty Corporation (PBGC) through 2019. That adds another $14 in cost for every employee on top of the 236% increase in per employee costs added since 2005. Put it all together and pension costs will have risen 310% over just 14 years.

Alan Glickstein, senior retirement consultant at Towers Watson, calls it ironic that the increase meant to shore up the PBGC could end up weakening it through companies cutting head count in pension plans.

Ironic? I call it catastrophic.

The PBGC admitted last year in a report that it was “more likely than not” to run out of funds by 2022 and was 90% likely to run out by 2025. The government entity provides insurance guarantees to more than 44 million people in private defined-benefit pension plans.


PBGC Revenue and Spending

Companies are already looking for ways to cut employees from their pensions including lump sum payouts that could lead to a huge tax bill and a 10% penalty if the funds are not rolled over quickly. New premium increases could lead to more companies simply terminating their plans with the burden falling on the PBGC. Employers do not even need to file for bankruptcy protection to pass pension responsibilities off to the PBGC under a distressed termination.

When that happens, the amount of benefits employees receive from the PBGC varies but no worker will receive more than 82% of their promised benefit and most receive much less. PBGC benefits for multi-employer plans are capped at $12,870 per year for new retirees with 30 years of service and will almost surely be reduced if the government fund gets into trouble.

Take Control of Your Money and Protect Your Assets

The 2006 Pension Protection Act (PPA) rolled back a lot of investor protection in employer 401k programs. The PPA repealed the ban on affiliated advisor fees as well as a giving employers the right to automatically enroll employees and protection against any liability of losses.

While the new premium increases put defined-benefit plans in serious jeopardy of failure, the PPA gives employers an incentive to manipulate defined-contribution plans for their own gain.

The only solution is to take control of your own money. Retirement assets held in a former employer’s plan must be rolled over into an individual retirement account to avoid the potential collapse in pension benefits. Putting assets into an account you control is the only way to be certain those assets will be there when you retire.

Rolling over your 401k plan to an individual account not only gives you control of your assets but you get greater freedom through more investment choices like real estate and precious metals besides traditional stocks, bonds and CDs.

It just got cheaper to retire...somewhere else.

It Just Got Cheaper To Retire… Somewhere Else

The value of the dollar has surged against other currencies, making your retirement portfolio go further on those sandy beaches.

While economists and politicians argue over debt ceilings, real people are worrying about real problems like how can anyone retire on an underfunded social security system and rising healthcare costs.

The good news is that it might have just gotten a little cheaper to retire…just not here in the United States. The value of the dollar has been surging since July of last year, up more than 20% against a group of ten major currencies. For retirees, or anyone visiting another country, that means your greenbacks buy much more when converted into the weaker local money.

There are several reasons for the dollar’s surge, some possibly passing while others that could help keep the dollar strong for some time. Economic growth has rebounded since the financial crisis, especially against other developed economies. Interest rates are higher and the central bank is much closer to raising rates than monetary authorities in Japan or Europe.

This has all made the U.S. dollar very attractive to foreign investors and the rush of money from overseas has made its value more precious.

Spending Less to Get More in Retirement

Unfortunately, several of the top retirement destinations use the dollar or peg their currency’s value to the dollar through manipulation of money flows. You won’t get much benefit from dollar strength in places like Ecuador, Panama, Belize, Uruguay, Bermuda, Bahamas, Costa Rica, El Salvador, British Virgin Islands or the Turks and Caicos Islands.

The European Union has yet to really rebound from the financial crisis of 2008 and unemployment is still into the double-digits in most countries. The European Central Bank (ECB) just recently joined the monetary printing party started in the United States and Japan several years ago. This has driven the value of the euro down to nearly even with the dollar. Your retirement savings may go 24% further in popular E.U. retirement countries like Spain and Italy but prices are still expensive compared to other hotspots.

I could talk for hours about how much further the dollar goes in Colombia because I live there myself. Besides the stronger dollar, the country’s two major exports of oil and coal are both facing drastically lower prices. Neither of the two fossil fuels is likely to rebound quickly which should mean that the peso stays weak against the greenback even if other currencies strengthen.

Mexico and Malaysia, the third and fourth on International Living’s 2015 List of Retirement Destinations, have also seen their currencies depreciation against the dollar but to a smaller extent.

Check out the table below to see how much further your dollar goes in popular retirement destinations.

It Just Got Cheaper To Retire..Somewhere Else

Not quite ready to retire yet but want to take advantage of dollar strength? Those dollars will buy more investments denominated in foreign currencies as well. Buying investments overseas is a good way to diversify your investments and your dollar-denominated return will get a boost if the dollar reverses its course to continue the decades-long path of weakening.

New Retirement Account Option for 2015

New Retirement Account Option for 2015

Retirement savers have a new retirement account option in 2015. The Treasury will offer a new type of retirement account, the myRA, which is not tied to your job and is portable if you change jobs. Savers with an annual income of less than $129,000 for individuals and $191,000 for couples will be eligible to participate.

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