Everything You Need to Know About 401(k) Contribution Limits for 2020

When it comes to preparing for retirement, it’s very important to stay right up to speed with all the rules, regulations, and changes made by the IRS from year to year. With the next year looming just two months away, the IRS has made some 401(k) contribution limit changes for 2020 but still has left both Roth and traditional IRA contribution limits for 2020 flat.

The IRS has changed 401(k) contribution limits for 2020 and here's what you need to know about them to maximize your retirement savings.

The IRA limits are again unchanged from 2019’s $6,000, or $7,000 combined if you’re age 50 or older. This is the second straight year at those caps. The caps are the maximum amounts you can kick into those retirement accounts, whether you use just one type or in any combination. Before 2019, the IRA contribution limits stayed the same for six years in a row. So just in case you needed a refresher, today I thought I’d go over some of the things that you really need to know when you are saving in these accounts for your retirement!

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Will Your Retirement Be Scarier Than Halloween?

It seems that before we start working for a living, all we can think about is getting a good job and earning lots of money. I am pretty sure that the vast majority of us think exactly like that when we get to a certain age and that’s probably by the time we near the end of high school or college. After all, we know we are going to be out on our own soon and we need a job. But then a funny thing happens.

If you don't pay attention to retirement planning basics, your retirement may be scarier than Halloween! Here are six strategies to help you plan.

Almost as soon as we start that “first great job”, some papers are shoved in front of our faces and one of them is all about benefits and retirement plans. Retirement planning? I mean, holy crap, I just started working and now I have to think and decide about retirement planning?

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2020 Social Security COLA May Not Be Good News

Update: The SSA has announced that the Social Security Cost-of-Living Adjustment (COLA) for 2020 will be 1.6% as predicted.

Every year around this time, anyone who gets a regular check from Social Security gets curious and also a bit nervous. That’s because they and I know that in just a few weeks, mid-October, the annual Social Security Cost-of-Living Adjustment (COLA) for 2020 will be announced. This comes as our lawmakers are looking for ways to expand and preserve Social Security, a task they have been avoiding now for decades. So perhaps for them, this news that Americans might be in for a smaller cost-of-living adjustment next year is good news. But not for anyone who depends on it.

For those relying on government benefits, the Social Security COLA 2020 may be a disappointment. While an increase is expected, it isn't very much.

According to a new estimate released by The Senior Citizens League on Thursday, the 2020 COLA is forecast to be a 1.6% increase which would come out to about $23.40 per month for the average beneficiary (the average beneficiary received $1,475 a month this year). That compares to the $40.90 beneficiaries received in 2019 which was a 2.8% COLA.

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Are Annuities Good or Bad for Your Retirement?

A lot of financial experts and bloggers don’t recommend annuities or even like to talk about them very much. They are more likely to recommend and want to talk to you about investments in stocks, bonds, and mutual funds for growing your wealth and prepping for retirement. That may leave you to wonder what annuities really are and whether you should you invest in them for your retirement years.

Annuities...good or bad? They have a poor reputation, but there can be good reasons to include the right one in your retirement plans.

I chose to purchase an annuity about 20 years ago (when I was 50) with qualified money I used from a 401(k). Then, about 5 years ago, I took that money and used it to purchase a 5-year deferred annuity that will start paying me beginning in January of 2020. Those payments are guaranteed to me or a beneficiary (my wife who is 20 years my junior) for 20 years, or for my entire life as long as I live (even if I live to be 100 or more). This made good sense for my situation. But, before you decide that an annuity is either a good or bad choice, ask yourself this: Have you taken a really good look at annuities and do they make any sense for you?

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What About Your Retirement Debt?

So much is written about eliminating your debt, paying off your debt, and being totally debt free at any and every age in life that you may believe that it’s always the only goal you should have. Financial independence (FIRE) depends to a huge degree on not owing money to anyone or anything.

Many recommend that you reduce or eliminate your debts, especially if you're about to retire. But are there times it makes sense to keep retirement debt?

Truthfully, it’s a wonderful goal and for some people it actually can be achieved. It’s not common, but it does happen. When you owe debt, more than you can ever repay, it can ruin your life. But today’s post isn’t about that subject. There are many posts about it, so I want to look at debt from a different angle. What about debts you hold after you retire….your retirement debt?

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The Big “H” to Worry About in Retirement

Most people who talk about retirement planning are usually concerned about the “financials”. They talk about saving for it, investing for it, earning more for it, and guarding against the erosion of it so it will last on and on into the sunset of those golden years. And they are 100% right to do that, for sure. Without a strong financial base, retirement will be a struggle at best or a disaster at worst. Believe me when I say that the proper planning doesn’t just appear magically when you are actually retiring and needs to starts much earlier. So much earlier, in fact, that it should start when you begin your very first job because it’s that important. I say that to anyone who will listen, but very often if falls on deaf ears.

Healthcare in retirement is the Big "H" to worry about. Many retirees don't plan adequately for healthcare costs and don't realize how significant they are.

But, the fact that financials are so important doesn’t mean that there isn’t “something else” to be concerned about. I like to call it the Big “H” that you need to give plenty of thought to when it comes to your retirement years. What is it you ask? The twist is it’s about your healthcare, the Big H of your retirement years!

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When Financial Knowledge is Wasted on the Retired

I am really amazed about how things work out in life. For one, we spend so much of our lives mulling over money that when you think about it, it is kind of scary. I’m not claiming here that I don’t, hell I always have and now even in my retirement I spend hours every day writing and thinking about it. But the time I devote to the subject these days is much more balanced than it was all the years that came before. Know why? It’s because as I have aged, I have learned and re-learned the ups and downs, the trial and tribulations, and the financial knowledge that makes money make much more sense to me! I’m not claiming I have all the answers but I can say at least this: I know most of the questions. And that’s something.

Financial knowledge is critical for success, but it's often wasted on the retired. Here are some considerations for those pondering early retirement.

One of the good things in life is that I have lived long enough (69.833 years) to have learned stuff and yet one of the great mysteries is why all of that financial knowledge is wasted on the retired?

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How to Better Your Financial Decision Making

Life isn’t easy. We all make little and big decisions every day and sometimes it feels like there isn’t a minute that goes by that we can just veg and not have to do any decision making at all. Oh, and by the way, if you actually try to do just that, someone will probably call you out and tell you that you’re shirking your responsibilities or not facing up to reality or must be plain lazy or stupid. Is that why you never avoid making a decision or you agonize over one and never ever take a few minutes to take a deep breath before you do?

Financial decision making can be difficult and overwhelming, but here are some ways to make it easier and more successful.

When it comes to your money decision making, the pressure is even more ridiculous. Why? Because not only are those decisions important to you, but they show up and stand out. I mean they are pretty visible to the naked eye and often are the main ways that others can see how you function and judge how good your decision making actually is. Even though it sometimes doesn’t show up immediately to the naked eye, your money decisions will eventually be very visible and will affect you, your family, friendships, and even your job. Perhaps you can hide a few bad decisions, at least for a while. But when that day of reckoning arrives, everyone will know what really happened. When that happens, it’s not just bad for you, but for everyone around you and that just sucks!

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