Don't Need Your IRA Cash Now?

Old savings habits die hard.

Well-to-do retirees who are drawing down income from their savings are spending less than they withdraw, according to recent data from Vanguard. 

That also applies to required minimum distributions, which generally must be taken from individual retirement accounts and 401(k) plans starting at age 70½. Most of that money went back into savings.

"It's the unknown that people are preparing for, and they want to be able to cover themselves," analyst Anna Madamba of the Vanguard Center for Retirement Research said in explaining the cash surplus. "When you plan for uncertainty, the force of that mindset is very strong."

The median withdrawal rate from tax-advantaged accounts was 4 percent, but curiously, the median spending rate was zero for withdrawals from retirement savings plans and 1 percent for distributions from IRAs, according to the Vanguard data.

"What it tells me is that maybe they have a nice pension and Social Security benefits, so they may never need to use this money," said Tim Steffen, director of financial planning at Robert W. Baird & Co.

"Required withdrawals get bigger as [time] goes on, so it's probably income that they are less likely to need," he said.

It's not typical for most retirees to have large required withdrawals.

For example, the average 401(k) plan at Vanguard held about $96,000 last year. But a fortunate few wind up with more cash than they need due to the forced distributions, which prompts the question: what to do with the extra cash? Here are a few suggestions that may strengthen your finances.

1. Consider taxable accounts

Stay in the market and have your extra cash routed to a taxable brokerage account.

Debbie Freeman, director of tax and financial planning at Peak Financial Advisors in Denver, said some of her clients are investing a portion of their distributions into dividend-paying stock and municipal bonds so that they can continue accumulating earnings over the long term. 

Among her clients who are already taking required withdrawals, a couple of them are putting away as much as 30 percent of their distributions in taxable brokerage accounts.

Reinvesting the distribution is also a great opportunity to rebalance your overall equity and fixed-income allocation, Freeman said.

2. Muni bonds

Think about your tax rate and your after-tax rate of return before you go whole hog into municipal bonds, Steffen said.

Investors who are in the 28 percent federal income tax bracket reap the biggest tax savings by investing in municipal bonds.

Those in lower tax brackets, however, may be sacrificing attractive yields available in other bonds for paltry tax savings by going into munis.

"If you invest in municipal bonds, you may get a lower rate of return than you would on corporates," Steffen said. "If you are in a low tax bracket, you may still have higher returns from corporates on an after-tax basis."

Bear in mind that neither corporate nor municipal bonds are risk free.

As with all debt obligations, consider the possibility that the issuer could default on the bond. Know the credit quality of the company or municipality that's offering the investment.

Also, all bonds face the risk of rising interest rates, which erode the market value of these securities.

3. Roth conversions?

A common error for retirees is to attempt a conversion of the required minimum distributions to a Roth IRA. It's a sensible mistake: You're required to withdraw the money and pay income taxes, so why not?

It's a simple answer, said Ed Slott, IRA expert and owner of Ed Slott & Co. in Rockville Centre, New York. You are not allowed to make that conversion.

However, you can use that money to pay taxes on other IRA dollars that you wish to convert.

Here's a better idea: Make a gift of the funds to your heirs.They can use this money to pay taxes on other IRA dollars they wish to convert to a Roth, said Slott. Roth IRAs are funded with post-tax dollars and any gains in the future, plus the original contributions, can be taken out tax-free.

You can make a gift up to $14,000 per recipient. An added bonus: These gifts reduce the size of your estate.

"The benefit of the Roth is longevity," Slott said. "The money grows fastest because it's never eroded by taxes. The longer the money is in the account, the more valuable it is."

If you want to save on taxes from very large withdrawals, consider a Roth conversion way ahead of time and in small chunks, Steffen explained.

"Start doing that early on in retirement in a year when income is low but before you trigger RMDs," he said.

Finally, talk to your advisor or accountant about having your bank or brokerage withhold income taxes from your required distribution. This way you save on penalties if you underpay for some reason.

"If it's the third quarter, and you've underpaid your taxes, you can have money withheld from the RMD so that you minimize your underestimated tax payments," Freeman said.

4. Give it to charity

Don't forget the qualified charitable distribution, which allows you to donate all or part of your withdrawal without adding to your income.

In order to make this valid, the trustee of your IRA must directly transfer the money to a charity. You can give up to $100,000 per taxpayer per year.

"You don't have to donate the whole RMD, but the direct transfer will be excluded from income in your tax return," said Slott. "That keeps your income lower."

The UMC Development Center can assist you in gifting to many ministries of The United Methodist Church.  send us an email to info@umcdevelopmentcenter.org or call us at 615.369.2382

Source: http://www.cnbc.com/2016/08/01/if-you-do-not-need-your-ira-cash-now-do-this-instead.html?__source=xfinity|hero&par=xfinity

Getting Ready To Do Your Will?

See our estate planning website, www.umcdclegacy.org, for any and all of your questions regarding your planned giving needs.

Sign up to get one of our free estate planning guides, Your Legacy, click here.

Please feel free to contact our Chief Development Officer, Rhodes Logan with any questions you can't find answers to on our page, rlogan@umcdevelopmentcenter.org or at 615-369-2382.

Prayer that Powers Summer Stewardship by Moses Kumar

Church giving tends to be lower than normal during the summer. Fewer members are in the pews, and church financial donations may also drop during the summer months for several other reasons.

With school out, some families have more expenses, like increased daycare costs, babysitters and camp fees. Moms and dads might work fewer hours if they have caregiving responsibilities for children who are at home. All of this contributes to less money being available to households.

Vacation expenses eat away at a budget, too. So, some church members may prefer to give in-kind donations to the church. They may volunteer their time at Vacation Bible School or donate food to the summer lunch program as a way to give to the church.

How can we address this decline in needed income to support church ministries? There are different methods to increase giving – like the use of social media, appeal letters and online giving.  Using a mobile giving app allows people to still give even though they are not in the church sanctuary and can be a great way for church members to contribute throughout the summer.

But what I would like to tackle in today’s post is not the “how,” but the “why.”

Why will a person on vacation take the time to use a mobile giving app to make certain they don’t miss contributing their tithes and offerings for that week or month? Why will someone stop to read your post or tweet among the myriad items that come up on their feeds? Why would a member read the appeal letter the church sent via snail mail or email?

Passion for God’s Work

When people ask me whether, in my capacity as Treasurer for The United Methodist Church, I worry about the future finances of the Church, I say, “No.”

My colleague on this blog, Jeff Pelletier of Milestone Church, writes eloquently on Matthew 6:21, “Where your treasure is, there your heart will be also.” (CEB)

Another way to read this verse might be to say, “Where your heart is, your treasure will follow.”

People will continue to give to what they feel passionate about – where their heart is. As long as the church remains relevant to the passions of the people, it will be supported by its members.

The question then becomes how do we accomplish this? My answer is always “through prayer.”

Not a prayer in the sense that we ask for God’s blessing on where we see a need and would like to do something. But, rather, a prayer where we attend to God’s message, so we understand God’s desire for the world.

“For I know the plans I have for you,” declares the Lord, “plans to prosper you and not to harm you, plans to give you hope and a future. Jeremiah.” 29:11 (NIV)

This is a prayer that requires patience and listening, that allows us to see and feel the world through God’s eyes and heart, and experience the hope and future as God has planned it. Our finances, our presence and our perfection rest not on our needs and abilities but on the desires and power of God.

What we have is not ours. It is God’s. And when we listen for God’s plans for us, our lives and our ministries benefit greatly.

About the Author / Moses Kumar

With more than 35 years of business experience and a lifelong faith, Moses was elected General Secretary of the General Council on Finance and Administration (GCFA) of The United Methodist Church in August 2008. In this role, he serves as the chief financial officer for the 13 million-member denomination. He is responsible for oversight and administration of United Methodist global financial resources, statistical data collection, insurance products and legal interests of the church, among other areas of administrative ministry. Moses has established and implemented an innovative vision for the services provided by GCFA to increase its servant ministry and responsibilities to the people of The United Methodist Church. He plans to share not only financial insights for growing stewardship, but also experiences and inspirations from the churches he serves.

(reblog from Voices of Stewardship Blog) http://www.voicesonstewardship.com/

When does it pay to take social security early?

I will turn 62 in a few months and am trying to decide when to start taking my Social Security retirement benefits. Almost everything I read on this topic tells me it's better to wait until my full retirement age or beyond. Is there ever a good reason to start early?

You're right! Most financial planners agree that waiting to take your Social Security retirement benefits is a smart financial move. Why? Because each month you defer, from your 62nd birthday to your 70th, your monthly benefits grow. That adds up to around 6% to 8% higher payments for every year you delay.

Despite the financial incentive to wait, most people (58% of men and 64% of women) claim their benefits before full retirement age, which is currently 66 for those born between 1943 and 1954.

Speeding up the clock isn't always a bad idea. Here are some scenarios where it may make sense for you to collect early.

You need the money: If you're retired and don't have enough savings or a pension to cover your living expenses, you'll probably have to start early. But, if you decide to work, be aware of the earnings test.

If you claim Social Security benefits before full retirement age (and you don't reach 66 this year), you'll forfeit $1 for every $2 you earn over the earnings limit of $15,720 in 2016. It usually doesn't make sense to take benefits early if you're working, unless your income is below the earnings limit.

You have poor health: Having a serious medical problem that is likely to shorten your life is another reason to start your benefits sooner rather than later.

You should consider that the "breakeven point" - the age you need to reach to come out ahead by waiting to claim Social Security - is 78 for someone who claims at 62 versus waiting to 66. If you don't anticipate making it to 78, go ahead and claim early.

However, if you are married or have other dependents at home who depend on your benefit, you may want to hold off because starting early will reduce their survivor's benefits.

You're a lower-earning spouse: If you're married and your lifetime earnings are much lower than your spouse's, you could take your benefit early but your higher-earning spouse should delay. This lets you increase your household income now, while the higher-earning spouse's benefit grows, therefore increasing the survivor benefit.

Skeptical of Social Security: Many people take their retirement benefits early because they fear Social Security will go bankrupt, but this not a good reason to start collecting early.

While it is true that the Social Security trust fund will become insolvent around 2033 - 17 years from now - if no changes are made, that doesn't mean there will be no more money for benefits. It means that the fund is no longer taking in enough money to cover all promised benefits. Thus payment checks are likely to end up shrinking by about 25%.

But, if the thought of losing out on your benefits keeps you up at night, then it may be better to start claiming early instead of holding off for more later.

To see how much your benefits will be affected by your claiming age, use the Consumer Financial Protection Bureau's new Planning for Retirement tool at consumerfinance.gov/retirement/before-you-claim.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living” book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization’s official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.

How To Replace Vital Documents That Are Lost or Stolen

Can you tell me how to go about replacing important lost documents? My wife and I recently downsized to a retirement community, and somewhere in the move we lost our Social Security and Medicare cards, birth certificates, marriage license and passports.

Replacing important documents that are lost, stolen or damaged is pretty easy if you know where to turn. Here are the replacement resources for each document you mentioned, along with some tips to protect you from identity theft, which can happen if your documents end up in the wrong hands.

Birth certificate: If you were born in the United States, contact the vital records office in the state where you were born (seecdc.gov/nchs/w2w.htm for contact information). This office will give you specific instructions that will explain how to order a certified copy and what it will cost you. Birth certificate fees range between $9 and $30.

Social Security card: You can replace a lost or stolen Social Security card for free. If you live in the District of Columbia, Michigan, Nebraska, Washington or Wisconsin, you can do it online at ssa.gov/ssnumber. If you live outside these areas, you'll need to fill out Form SS-5 (seessa.gov/forms/ss-5.pdf to print a copy) and take it in or mail it to your nearby Social Security office, along with either your U.S. driver's license, a state-issued non-driver ID card or a U.S. passport (photocopies are not accepted). Any documents you mail will be returned to you. To find the Social Security office that serves your area, call 800-772-1213 or see ssa.gov/locator.

You also need to be aware that losing your Social Security card puts you at risk for identity theft. If you find that someone uses your Social Security number to obtain credit, loans, telephone accounts, or other goods and services, report it immediately to the Federal Trade Commission at IdentityTheft.gov (or 877-438-4338). This website also provides specific steps that you'll need to take in order to handle this problem.

Medicare card: To replace your Medicare card for free, just call the Social Security Administration at 800-772-1213 or contact your local Social Security office. You can also request one online at ssa.gov/myaccount. Your card will arrive in the mail in about 30 days.

Since you lost your Medicare card, you also need to watch out for Medicare fraud. Check your Medicare Summary Notice for services you did not receive and, if you spot any, call the Inspector General's fraud hotline at 800-447-8477 to report them.

Marriage certificate: Contact your state's vital records office to order a copy (see cdc.gov/nchs/w2w.htm). You'll need to provide your full names for you and your spouse, the date of your wedding, and the city or town where the wedding was performed. Fees range from $10 to $30.

Note: Divorce certificates can also be ordered from your state's vital records office (fees range from $5 to $30), and divorce decree documents can be obtained from the county clerk's office in the city or county where the divorce was granted.

Passport: A lost passport also puts you at risk for identity theft, so you need to report this as soon as possible to the U.S. State Department. Go to travel.state.gov/content/passports/en/passports/lost-stolen.html and fill out Form DS-64. You'll receive an e-mail acknowledging that your report was received. Within a couple of days, you'll receive another e-mail (or letter, if you request that option) confirming that your passport has been entered into the Consular Lost or Stolen Database.

You can apply for a replacement passport at a Passport Application Acceptance Facility. Many post offices, public libraries and local government offices serve as such facilities. You can search for the nearest authorized facility at iafdb.travel.state.gov. The fee for a replacement passport is $135.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living” book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization’s official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.

An Exciting Tax Option for the UMC

turbotax.intuit.com/affiliate/gcfa

A Global Impact For Generations, Moses Kumar, Guest Blogger

We want you to know, brothers and sisters, about the grace of God that has been granted to the churches of Macedonia; for during a severe ordeal of affliction, their abundant joy and their extreme poverty have overflowed in a wealth of generosity on their part.  For, as I can testify, they voluntarily gave according to their means, and even beyond their means, begging us earnestly for the privilege of sharing in this ministry to the saints— and this, not merely as we expected; they gave themselves first to the Lord and, by the will of God, to us … 2 Corinthians 8:1-5 NRSV

Just as the Apostle Paul’s special collection provided needed money for the church in Jerusalem, The United Methodist Church offers believers a specific vehicle through which donations can benefit people in need around the world.

While he was not born into The United Methodist Church, over the decades Mr. Willis Gardner served our denomination in various ways.  When he was in his 30's and early 40's he was a Sunday school teacher.  Later, he served on stewardship committees and committees devoted to church finances and infrastructure/capital campaigns.  He often served as an usher on Sunday as well.

The Christian faith was very central to his life. He took it very seriously and saw his local church as a positive force in the life of his family and the community. But he also believed in the Methodist church's global ministries and gave generously to those causes over the years. He was a frugal person but gave abundantly to the Church when he was alive, believing that every member should give as much as they could afford to help support their local community and the world. Mr. Gardner understood that the United Methodist Church would live well beyond his lifetime, and his estate gift would have a global impact on the lives of millions around the world for years to come through The Permanent Fund.

A gift to The Permanent Fund of The United Methodist Church is a gift to the entire Church and provides an opportunity for us to minister in many different ways including:

·      Support for local church ministries to adults and children and those with special needs

·      Church growth programs and the birth of new congregations

·      College and theological education for those who may not otherwise have the opportunity

·      Improving healthcare in remote regions

·      Encouraging a more ethical, just, and humane world

Truly, one person can make a global impact for generations to come. As you consider planning for the future of your local congregation, we hope you will also consider adding The Permanent Fund as the best method to make a lasting impact throughout the Church.

http://umcdevelopmentcenter.org/ministry-opportunities/the-permanent-fund-of-the-united-methodist-church

MosesKumar.com