Many Americans who graduated from college this spring are now starting jobs that pay them enough to begin putting something away for retirement.
Mike Sorrentino, chief strategist at Global Financial Private Capital, has several tips to offer these millennials
to ensure adequate savings for their golden years.
- "Invest in equities," he writes on MarketWatch. Recent college graduates should place all of their savings in stocks, Sorrentino advises. And why? "Equities have delivered an average annual return of 10 percent, which is the largest of any major asset class."
- "Buy index funds." You're probably aware that investment legends Jack Bogle, founder of The Vanguard Group, and Warren Buffett, CEO of Berkshire Hathaway, agree. "Active management of a stock portfolio requires skill, education, and experience," Sorrentino notes. "Younger investors have none of these, and those who try will be doing nothing more than speculating."
- "Never buy the company stock." Doing so makes you overly dependent on your company for your financial well-being.
Elsewhere on the retirement front, many Americans over 70 aren't taking required distributions from their IRAs, and the IRS may soon go after them.
A report from the Treasury Inspector General for Tax Administration urges the IRS to “proactively” contact taxpayers about this, writes Forbes editor Ashlea Ebeling
“People are making mistakes, but they aren’t getting caught,” Barry Picker, an accountant in New York City told her. “The IRS wants people to comply, but they don’t want to penalize them.”
You have to start taking money out of your IRA in the year following the year you turn 70 ½, and that income is taxable unless it's a Roth IRA. The amount you must withdraw depends on the prior year-end balance in your IRA and IRS-provided life expectancy charts.
If it’s an honest mistake, you can make one withdrawal to cover all the misses and fill out IRS Form 5329 for a standard waiver of the 50 percent penalty on missed distributions, Ebeling explains.
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