But there’s another thing to look out for that can have the same disastrous effect on your retirement plans - Uncle Sam.

Most of us do our retirement investing with the goal of accumulating as much money in our retirement savings account as possible. When we think about taxes and our retirement investments, we generally are thinking only about whether or not we should invest with “pre-tax” dollars, use “tax-free” investments and so forth. We figure that later, when we start drawing on our retirement investments, we’ll worry about the taxes then and that, somehow, it won’t be a big deal because we supposedly won’t be in as high a tax bracket.

The truth, though, is that, without properly planning our retirement investing planning, Uncle Sam could take as much as 90% of your retirement funds!

As an example, once you reach 70 1/2, you have to begin withdrawing required minimum distributions from your retirement plan. If you don’t, you’ll have to pay a 50% penalty tax on any part of the required minimum distribution that you don’t withdraw.

If you’re still working, however, you can delay beginning your required minimum distributions until you do retire. (There are two exceptions, however. If you own at least 5% of the company or if your plan is an IRA, you have to begin taking your required minimum distribution even if you’re still working.)
Also, be aware that the payments you receive from ordinary retirement funds are taxed at regular income tax rates upon withdrawal. There’s no special ‘retirement rate’.

These payments are added to your total annual income and then taxed at the rate that applies to your income tax bracket. So, if you received a salary or earned significant income from sources other than your retirement plan, your retirement plan distributions may actually put you in a higher tax bracket than when you were simply working.

Then there is the so-called Death Tax. That is the taxes on your retirement investments that will apply should you die. They could eat up a huge portion of what you intended to leave to your heirs. One common solution nowadays is to buy a life insurance policy that will offset the estate taxes that will be charged on your Individual Retirement Account or IRA.

For many people, your tax situation in retirement could actually be more complicated than it was while you were working. And, if you’re like most people, you haven’t even thought about it. So start thinking. Consult with a professional. It’s money well spent, and if you plan to leave any serious amount of money to your heirs, they will appreciate your thoughtfulness and the fact that more money will pass to them and less will go to Uncle Sam.

investing for retirement

required minimum distributions

retirement investing

Retirement Living

retirement funds

retirement investments

retirement plans

retirement savings account

Tax Deferred Plans

tax free investments

And I will rebuke the devourer for your sakes, So that he will not destroy the fruit of your ground, nor shall the vine fail to bear fruit for you in the field, says the Lord of hosts.

I’ve had feedback from a couple of people on that post, so I thought this Sunday, I’d share another Bible principle. This one may seem a little more radical than the last one to many people. But since I believe the Bible is clear here, I feel like a preacher I heard one time who said “don’t blame me, I didn’t write the book.”

And like I said last week, for the benefit of any non-Christians or skeptics who are reading this post, it may not be for you. But for Christians this is the most practical kind of advise.

First let’s go back and look at a verse in the Book of John:

The thief does not come except to steal, and to kill, and to destroy. John 10:10

I wrote last week about praying for protection, according to the promise in Malachi 3:11, that the Devil would not devour your crops (our investments). That’s a promise for the future. But what about what’s already been stolen from you? This certainly covers at least any money we may have lost to swindlers, literal thieves and robbers – or even to white-collar thieves.

These kinds of conscious thievery are certainly covered by this principle. We’ll leave it to the theologians whether thievery here covers investments that went bad when the persons in charge of the investment originally only had the best intentions. Sometimes things just do not work out as planned. And the principle may well not cover a bad investment we made when we simply did not do our due diligence or got greedy and invested in something stupid that we should have known was too good to be true.

What we’re talking about here is the obvious kinds of theft. So what was the Bible penalty for theft? This can be found in Proverbs:

Yet when he is found, he must restore sevenfold; He may have to give up all the substance of his house. Prov. 6:31

So if the Devil or evildoers have stolen from us, what are we entitled to? According to Prov. 6:31, the Devil and the evildoers owe us a sevenfold restitution. OK, the principle is clear, so where do we serve the papers then? What’s the thief, the Devil’s, mailing address?

We know if we sue someone in a court of law, the judge and agents of the court can put a judgment against the guilty part. So where do we find a judge to settle our claim? The Bible talks about the ultimate Judge:

If one man sins against another, God will judge him. 1 Samuel 2:25 and

Let the heavens declare His righteousness, for God Himself is Judge. Ps. 50:6

The same principle and process applies here. God is our righteous Judge. But where do we find a lawyer to plead our case? In 1 John the Bible says”

My little children, these things I write to you, so that you may not sin. And if anyone sins, we have an Advocate with the Father, Jesus Christ the righteous. 1 John 2:1

This verse tells us who we can get that will represent us.

So we’ve established the legal principle of our right to restitution (Prov. 6:31). We have established that God is the ultimate Judge (1 Samuel 2:25) and that Jesus will act as our advocate (1 John 2:1). So how will we collect on what is owed us? Where will the money come from to pay restitution? Should we expect the Devil to write us a check? No, it doesn’t work that way. For the anser, let’s look at how God gets money to us in response to our obedience in tithes and offerings.

Give, and it shall be given unto you; good measure, pressed down, and shaken together, and running over, shall men give into your bosom. For with the same measure that ye mete withal it shall be measured to you again. Luke 6:38

God doesn’t literally drop the money down out of Heaven. God uses other men to get money to us. God can then be our process server to collect the judgment from the thief and can get the money to us through others, not even necessarily or even usually not the person who stole the money from us in the first place.

We can nearly all remember specific instances where money has been stolen from us, either by force or deception. Satan is the great thief, whoever did the actual stealing. Thievery is one of his specialties. God is the Supreme Judge, and Jesus is our advocate or attorney.

To put the principle to work, we need to remember specific instances of thievery, write them down, and present our case to God, our Judge, with Jesus as our advocate, through pray. We should ask for specific restitution, based on a specific incident, invoking a specific amount, and do this by basing our claim on Prov. 6:31.

If we believe God’s work is true, we can then wait for and expect restitution with the same certainly we would wait for a refund check from the government, if we are owed a tax refund. This does require great faith and a clear belief in God’s Word. This is a great test to find out who you trust more: the government or the Word of God?

If you have thought or comments, please respond. We welcome your comments, whether you agree or disagree.

bible

investing for retirement

retirement investing

retirement investing strategies

retirement investments

thoughts on the bible money and life

401(a) plans, also called Teacher Incentive and Teacher Matching plans, are designed specifically for school employees.

The rules covering 401(a) plans vary from state to state and can vary within a school district so that, say, teachers get one benefit while custodians or paraprofessionals can get quite a different one. Distributions can take several forms, including lump sum, rollover or an annuity type payment.

If you change jobs, you have the flexibility to consolidate your savings in another public sector employer’s 401(a) plan or 401(k) plan, a tax-sheltered 403(b) annuity plan, a 457 plan, or a traditional Individual Retirement Account or IRA.

Probably the 401(a) most people are familiar with is from TIAA-CREF. Fidelity is another major player.

403(b) plans are very similar to a 401(k) plan. The biggest difference is who is eligible to participate. While a 401(k) plan covers private-sector workers, only employees of public schools and 501(c)(3) tax-exempt organizations can participate in a 403(b) plan.

Also, unlike the 401(k), 403(b) plan members can’t invest in individual stocks. They have money taken out of their paychecks on a pretax basis, which is then handled by a financial institution chosen by their employer. Like in a 401(k) plan, the money grows tax-deferred until retirement and is then taxed as ordinary income when withdrawn.

Generally, the maximum contribution is $10,500 or 20% of salary, whichever is less, but they do allow for a catch-up in contributions. If you did not max out your contributions in previous years, you can contribute more than the maximum with certain annual and total restrictions.

You may have heard 403(b) plans referred to as Tax Deferred Annuities or Tax-Sheltered Annuities. Those names come from back when the only investment options offered were for annuities, but investment options have been expanded for decades to include mutual funds.

If you’re eligible, all these plans can make a worthwhile addition to your retirement investing options.

403 b plan

457 plan

501 c 3

individual retirement account

investing for retirement

IRA

retirement investing

retirement savings plan

retirement plans

Simple Investment Strategies

Tax Deferred Plans

tax deferred annuities

tax sheltered annuities

tiaa cref

One of the most important things we can do to stay healthy, as we get older, is to control our weight. Most of us know that, but most of us also fall victim to “middle-age creep”, as the pounds creep on a pound or two every year, after we reach middle age.

Now a recent study from the University of Pittsburgh says that walking can go a long way in helping to control that extra weight. Researchers studied 3 groups of people. The first group was given general guidelines for exercise, which included moderate daily activity for 30 minutes a day. The second group was told to be active for about 30 minutes a day, plus they were given weekly classes on the importance of exercising. The third group was told to exercise 45 to 60 minutes a day, and they were given behavior modifications classes.

All of the study participants were told to eat a healthy diet but not to restrict the number of calories they ate. About 75% of all the participants chose to use walking for their exercise.

The results after 18 months? Averaged over the 3 groups, 40% of the folks in the study gained weight, about 7 pounds on average. These were primarily those people who did not exercise regularly. 60% lost weight, once again about 7 pounds. These were exclusively those who engaged in physical activity for about 40 minutes 5 to 7 days a week. That’s a 14 pound difference between the two groups, almost all attributable to exercise, primarily walking.

In another study, researchers at the University of North Carolina analyzed data on about 5,000 young adults over 15 years. They found that those who walked at least 2 hours each week gained about 9 pounds less than those who did not.

The results of these two studies are very clear. Time spent walking, or any other aerobic physical activity, is a very good retirement investment. It’s also a good investment of our time before we retirement so that we can stay healthy going into the retirement years.

exercise

healthy diet

importance of exercising

investing for retirement

investing money

investment plan

physical activity

retirement investing

retirement investment plan

Retirement Living

retirement investment

walking

The biggest downside to savings bonds has been that the interest rate has always been very low.  Often it’s not even kept us with inflation.  That’s why the Government introduced the Series I (for inflation) savings bond.

The interest on a Series I bond is divided into 2 parts.  There is a fixed rate that remains the same for the life of the bond.  In addition, there is an inflation-adjusted adder rate that changes every 6 months, based on the Consumer Price Index.

The US Treasury changes the fixed rate periodically, but once you’ve bought your Series I bond, it’s locked in.  Over the last 5 years, the fixed rate component has ranged from a high of 3.6% in 2000 to a low of 1% in 2004.

Series I bonds are worth taking a look at as part of your overall retirement savings plan, but you should also consider other alternatives.  The average rate for an insured 6-month CD is 4.69% when this is written.  You can check the current rate at Bankrate.com.  Since this is the average, some banks are obviously offering more and some less.  Our local bank is currently paying 4.4%.  Online, E-Loan’s bank is currently offering 5.5%. You can check out what they are currently offering here.  E-Loan

Series I bonds have some advantages.  They are exempt from state and local taxes, and you don’t have to pay federal taxes on the earnings until you cash in the bond.  On the other hand, unlike a 6-month CD, you must keep a Series I bond at least a year before you can cash it in.  Also if you cash in a Series I bond before you’ve had it at least 5 years, you won’t get the last 3 months interest.

You may be able to do better on interest at your local bank or online, but those rates aren’t guaranteed to adjust with inflation.  Check it out and compare.  In addition to federal tax deferred interest, there may be other things to consider.  Where you live and whether you must pay state and local income taxes can make a big difference.  So check with you tax advisor to see if adding Series I bonds to your retirement investments makes sense for you.

federal taxes

financial planning for retirement

inflation

investing for retirement

retirement investing

retirement savings plan

savings bond

series i bonds

Simple Investment Strategies

Tax Deferred Plans

us savings bonds

Regardless of where you are investing and what type of retirement savings plan you have, you need to take steps to protect those investments.  This is especially important as we get older.  We could always write off a bad investment and start over when we were young.  It wasn’t a lot of fun to see an investment we had high hopes for go down the drain, but sometimes it happens.  When we’re older though, we know we have to be very careful where our money is invested, to try to minimize risk.

Christians have an advantage, however, when it comes to investments or at least to peace of mind.  The Bible says:

The thief does not come except to steal, and to kill, and to destroy. John 10:10

This post is too short to get into involved in a debate on whether God really wants His children to prosper financially as well as spiritually. I think he does.  Maybe we’ll look at that another time.   For now, most Christians accept that the Devil does not want Christians to prosper.  We can then can look at what the Bible says about protecting ourselves from the thief and how to stop him from stealing from us.

The Bible compares investing to planting a seed.  For example:

As long as the earth endures, seedtime and harvest, cold and heat, summer and winter, day and night will never cease.”  Gen. 8:22

When a farmer plants a crop, he does not just go away and leave the crop unprotected until it is time for harvest.  He watches his crop to make sure it gets adequate nutrients and enough water.  If insects attack the crop, he fights back before they can devourer the crop.  For Christians, the Bible says:

And I will rebuke the devourer for your sakes, So that he will not destroy the fruit of your ground, nor shall the vine fail to bear fruit for you in the field, says the Lord of hosts.  Malachi 3:11

The same principle applies here to protecting our financial crops.  Of course, God is our ultimate source – not a special set of financial investments we have made.  If all our investments were wiped out, God could find another way to supply our needs.

Bet let’s start with what we know best – the investments we have been involved in.  If you’re a Christian, you can accept and appropriate God’s protection on your crop (based on the promise in Malachi) and pray that the devourer (Satan) stays away from your crop (your investments).

I know this may be a little radical for some of you Christians out there.  But we are also told:
Bless the LORD, O my soul, and forget not all His benefits.  Ps. 103:2

The promise in Malachi 3:11 is a tremendous benefit, if we have the faith to receive it.  Let’s be bold enough to acknowledge that we have been given this promise and to accept it.

For you non-Christians and skeptics out there who are reading this, you probably won’t think today’s post fits in the usual practical advice on retirement investing and retirement savings accounts you see on this blog.  Feel free to post a comment or to just ignore today’s post.  It’s not really for you.  But for the Christians out there, this is one of most practical pieces of advice you’re likely to read on retirement investing.

Let us remember to “forget not His benefits”.

bible

investing for retirement

retirement investing

retirement investing strategies

retirement investing

retirement investments

saving for retirement

thoughts on the bible money and life

While choosing a retirement investment plan might be fairly easy if you have a sole proprietorship that brings in a limited amount of income, the more successful your small business is, the more choices become available and the more variables you must consider which will affect your decision.

For example, you may have incorporated your business, you could have employees, or you could be making an awful lot of money (don’t we wish!). You could also have a job, in addition to your business, or be over 50. All these variables, plus more, can significantly affect what self-employed retirement investing plan is best for you.

For the self-employed, Keogh plans are the equivalent of big time corporate retirement plans, like the pension plans our parents counted on. Keogh’s can be set up either as profit-sharing plans or defined benefit pension plans

Annual contributions to a Keogh profit-sharing plan are based on a percentage of your self-employment income (or the salary you make as an employee of your own corporation) with a $44,000 cap on contributions.

On the other hand, if you choose a defined benefit pension plan, your contributions are based on your targeted retirement benefit. For example, if your goal is to get a $50,000 a year pension, your contributions will be based on what it will take to achieve that goal, including your income, your age, and the assumed return on your investments. (You can have a Keogh set up to give you as much as $175,000 a year.)

However, because you have a targeted goal, you have to contribute whatever it will take to achieve that goal. If you have a bad year, your contribution won’t decrease, no matter the effect on your income. The upside is that, if you haven’t done much retirement financial planning, are getting closer to retirement age, and are making really good money, the Keogh can be a way to catch up fast because it allows you to contribute so very much more to your retirement than any other retirement program.

Do keep in mind, though, that should you choose a Keogh and have employees, you will have to make contributions for them as well, which may affect the amount you’ll be able to set aside for yourself. So make sure you get professional advice before making your retirement investment planning choice.

benefit pension plans

defined benefit pension

defined benefit pension plans

investing for retirement

keogh plans

profit sharing plans

retirement investing

retirement investment

self employed

self employment income

Simple Investment Strategies

Tax Deferred Plans

People with small or significantly variable self-employment earnings may be better off looking at retirement investment plans that also allow them the flexibility of whether or not to make a contribution at any given time.

For self-employed people in that situation, the best choices include SEPs and self-employed 401(k) plans.

A SEP (Simplified Employee Pension) lets you contribute up to 20% of your self-employment income (and that percentage increases to 25% of your salary if you’re an employee of your own corporation), up to a current maximum of $44,000 a year.

If you have employees, you can still have a SEP, and you can set up a SEP any time up to the time you file your taxes. In addition, you can vary the amount of contribution as needed since you are not locked into a specific contribution amount or percentage. This obviously can be a big plus if your income fluctuates

However, if you make a contribution for yourself, you have to make it for all your employees. Also, be aware that you can’t take out loans against your SEP.

On the other hand, a self-employed 401(k) plan - also called a solo and individual 401(k) - does allow loans to be taken out against it. Indeed, you can transfer your IRAs, regular 401(k), or any other pretax-retirement funds, whatever the amount, to your self-employed 401(k) account and then borrow from it.

However, self-employed 401(k) plans are only available if you have no employees, although they can be used for multiple owners, as well as for spouses who are employees.

Like the SEP, a self-employed 401(k) plan also allows annual contributions of up to $44,000. (By the way, maximum contributions for both SEP’s and self-employed 401(k)s can be affected by whether or not you participate in any other retirement plan. Check with your retirement investment planner or tax advisor before making your decision.)

401(k) plan

individual retirement account

investing for retirement

investment plans

IRA

retirement investing

retirement investing

retirement plan

self employed

self employment income

SEP

Simple Investment Strategies

simplified employee pension

Tax Deferred Plans

However, there are many tax-free self-employed retirement plan options available nowadays. For example:

Simplified employee pensions (SEP) let you contribute…and deduct…up to 20% of your self-employment earnings (25% if you’re an employee of your own corporation), up to $44,000 a year.

Keogh plans are a lot more elaborate, and can be either profit sharing or defined benefit pension plans. Keogh’s also allow tax-free contributions up to $44,000 a year for the profit-sharing option. Defined pension plan contributions have to be determined by an actuary and depend on your income, your target benefit (which can be up to $175,000 a year!), the number of years until your retirement and the anticipated investment returns. Obviously Keogh’s are more expensive to administer than other options.

An individual 401(k) plan lets you contribute up to 100% of the first $15,000 of your annual self-employment earnings/income (up $20,000 if you’ll be 50+ by the end of the year). In addition, you can also contribute and deduct another 25% of your salary (if you’re an employee of your own corporation) or 20% of your self-employment income.

And…if you want to put aside a little bit more and are willing to pay taxes now, rather than later, there’s always the Roth IRA in addition to whatever tax-free or tax deferred plan you’ve decided on. You’ll have to pay taxes on your Roth contributions, but your earnings will be tax-free! And, yes, you’ll only be able to contribute up to $4,000 a year ($8,000 if you’re married or $5,000/$9,000 if you’re 50+), but a Roth allows you to add to your retirement investing, and you’ll be able to withdraw all that Roth money when you retire and won’t have to pay a cent in taxes.

Not preparing for retirement when you’re self-employed is like not planning to pay the bills for your business. Sure, you can do it. But why? Think of all the trouble you’ll make for yourself. And just like all the other things you know you need to do for your business, the key is to get started as soon as possible.

401 k

defined benefit pension

defined benefit pension plans

employee pensions

investing for retirement

keogh plans

retirement investing

Retirement Living

retirement investing

roth ira

self employed

self employment income

SEP

Simple Investment Strategies

simplified employee pension

Tax Deferred Plans

7. A home equity loan may be a better solution from your particular situation. Most states, with the notable exception of Texas, where I live, have made setting up a home equity line of credit simple. If you have enough equity in your house, and you have a good credit rating, you should consider a home equity loan. Unlike a loan from your retirement account, the interest you pay on a home equity loan is usually tax deductible.

8. There may also be special deals available that are better than a loan from your 401k account or a home equity loan. For example, at the time this is being written, several car companies are offering 0% financing for up to 60 months. If you qualify, this is a much better way to finance a new car that borrowing from your 401k account or using a home equity line of credit to buy a new car.

In conclusion, everyone’s situation is a little different. When you’re talking about $1,000’s of dollars and the impact of tax laws, it’s always best to get professional advice from an accountant or tax attorney. It may cost you $100 to $200 for a simple consultation, but it will be money well spent to find out what’s right for you and your situation.

0% financing

401(k) plan

401k

advice for retirement investing

credit rating

home equity line of credit

home equity loan

investing for retirement

retirement investing

retirement investments

Retirement Living

retirement savings plan

tax deductible

Tax Deferred Plans