Latest news with #401k
Yahoo
2 days ago
- Business
- Yahoo
With 11K Baby Boomers Retiring Daily And 401(k) Withdrawals Ramping Up, Are Millennials And Gen X About To Be The Ultimate Bag Holders?
Every day, about 11,000 baby boomers hit retirement age in the U.S., and the wave of 401(k) withdrawals is starting to gain momentum. That has many younger investors wondering: who's left holding the bag? Wealth Transfer Or Wealth Drain? On Reddit's r/stocks, one investor sparked a major debate with this post: 'With ~11k Boomers retiring daily, and the 401k spigot about to go on full blast, can't help but think how this transfer of wealth unfolds.' They raised a concern about whether there will be enough new investment inflows from younger generations to match the outflows from boomers selling off their assets. 'Ultimately, Millennials and Gen X ... could be the remaining bag holders,' the poster suggested. At least, as they say, 'those who were lucky enough to invest meaningfully in 401(k)s and taxable accounts.' Don't Miss: Be part of the breakthrough that could replace plastic as we know it— $100k+ in investable assets? – no cost, no obligation. But not everyone agrees with that framing. 'They've been retiring since 2011,' one person pointed out. 'The stock market has done just fine so far.' Another echoed that sentiment, saying, 'There will always be people retiring. The Baby Boomers started retiring 17 years ago... Why are you so convinced [the market crash] is going to happen now, when nearly all of the Boomers that were capable of retiring already did?' Wealth Inequality And Inheritance Several commenters emphasized that it's not boomers broadly driving the market, it's wealthy boomers. 'Most 401(k) holders ... are also the richest ones,' one person explained. 'The ones being forced to liquidate and sell don't have 401(k)s of a meaningful size. We're fine unless the rich people are screwed.' Trending: This AI-Powered Trading Platform Has 5,000+ Users, 27 Pending Patents, and a $43.97M Valuation — Then there's the question of where that money goes once boomers start drawing it down or pass it on. Some believe it simply recirculates. 'All money comes back to the market one way or another,' one commenter wrote. And inheritance is another piece of the puzzle. 'Who do you think is going to inherit all that wealth?' one investor asked. Others noted that wealthy boomers often advise their kids to stay invested: 'One even told his daughter, never sell this stock, just collect the dividends.' Healthcare, Housing, And The Real Risks But not all that wealth will be passed down. Nursing homes and healthcare costs are taking a bigger bite out of retirement savings than many expect. 'We spent $350K for my mom's nursing home in a 4.5-year period,' one person shared. Another added, 'Boomers are spending that money. You need to find out how to harness it.' The housing market is another looming issue. Some fear that when boomers pass away and their high-value homes hit the market, younger generations won't be able to afford them. 'Mark my words, one day there will be a massive crash in the housing market,' one investor many commenters argued that structural market shifts, not demographic trends, are the real drivers. 'Markets are not the same anymore,' one wrote, pointing to algorithmic trading, tech-driven investing, and persistent foreign inflows. Younger Generations Are Still Investing Despite these worries, younger Americans are investing more than ever. 'Millennials are saving for retirement earlier than any previous generation and Gen Z even earlier,' one person noted. For now, there's no clear consensus on whether millennials and Gen X will get stuck holding the bag. But one Redditor may have put it best: 'This has been a claim made every 10 years or so since 401(k)s have been a thing. I wouldn't worry about it.' Read Next: Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die."UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets. Get the latest stock analysis from Benzinga? APPLE (AAPL): Free Stock Analysis Report TESLA (TSLA): Free Stock Analysis Report This article With 11K Baby Boomers Retiring Daily And 401(k) Withdrawals Ramping Up, Are Millennials And Gen X About To Be The Ultimate Bag Holders? originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved.
New York Times
3 days ago
- Business
- New York Times
5 Money Mistakes That Can Make the Road to Retirement Even Longer
For many Americans, their 401(k) balance is a sobering reminder that good intentions don't always lead to good outcomes. Perhaps you planned to increase your retirement savings each year, but instead succumbed to immediate gratification and upgraded to a nicer car each time you were promoted. Or you charged family vacations to your credit card but never fully paid them off. Maybe you diligently funded your retirement account, only to borrow from it to pay for costly home repairs because you didn't have an emergency fund to cover the expenses. The result: Instead of accumulating the recommended six times your annual salary in your retirement fund by age 50, you have less than $100,000 saved and fewer than 20 years to finance what could be a decades-long retirement. If this sounds familiar, you're not alone. Nearly 60 percent of those who are saving worry that they aren't putting aside enough money for retirement, according to a 2024 Bankrate study. And in a 2024 AARP study, about one-quarter of U.S. adults over the age of 50 who are not yet retired said they would never be able to. Despite 73 percent of private sector, state and local government employees having access to an employer-sponsored retirement plan, just 56 percent participate, according to the U.S. Bureau of Labor Statistics. And many people who do sometimes cut back or stop their contributions to offset inflation and unexpected expenses — or when there is uncertainty in the market. According to a 2025 Morgan Stanley at Work report, nearly four in 10 employees surveyed earlier this year said they reduced their 401(k) contributions in reaction to current economic worries, which isn't always advisable. Financial experts have identified five common habits that sabotage retirement savings, all stemming from our tendency to choose immediate gratification over future financial security. Here's a closer look at these money missteps that can undermine long-term financial health — and practical strategies to overcome them. Want all of The Times? Subscribe.
Yahoo
3 days ago
- Business
- Yahoo
Don't Need Your Required Minimum Distribution (RMD) Right Now? What Can You Do With the Cash Influx?
Key Points The IRS eventually comes looking for the tax revenue it didn't get to collect earlier on the money invested within IRAs and other tax-deferred accounts. Just because you withdraw money from a tax-sheltered retirement account doesn't mean it can't continue providing value, or continue growing. There's a financial maneuver that can help negate your need to make future RMDs. The $23,760 Social Security bonus most retirees completely overlook › Are you going to be 73 years old (or older) at any point in 2025? If so, whether or not you need it -- or even want it -- you will be legally required to start taking money out of most types of tax-deferred retirement accounts you may own. These withdrawals are called required minimum distributions, in fact, or RMDs -- and failing to make those taxable withdrawals each year before the annual deadline can result in decent-sized penalties. Don't stress out if you just don't need this cash at this time, though. While you can't refuse to withdraw it, you can still do constructive things with it outside of your IRA. Here's a review of your four best options. But first things first. What's an RMD? If you've already been through your first required minimum distribution, then 2025's RMD isn't your first rodeo. If you're unfamiliar with them, though, here's the deal. All the money that's been growing tax-free inside your (non-Roth) IRA, 401(k), or similar account? The IRS eventually wants its cut. The federal government's revenue-collection arm figures that 73 years of age is about as late in life as it wants to let you keep this money completely untaxed. And once you start, you'll take these required minimum distributions every year for the rest of your life. But what's the minimum? It varies with your age. When you're 73, you'll only need to withdraw about 3.77% of your retirement account's value as of the end of the prior year. The proportion gets progressively larger as you age, though, reaching 50% of the prior year's closing value at the rarely seen age of 120. Your brokerage firm or your account's custodian will supply you with the information needed to determine your RMD, and in many cases can figure it out for you. Otherwise, refer to the IRS for instructions. If you own more than one retirement account, that's OK. You can mix and match your withdrawals from the same kinds of retirement accounts to come up with a sum-total RMD figure, and then make the withdrawal from just one of these accounts, or portions from each. The IRS only cares about the total amount it's owed -- not where the money comes from. However, you can't mix and match among different kinds of retirement accounts, like a 403(b) and a traditional IRA. Both of them do have RMDs, but you'll have to handle each category separately. You can only combine like-categorized retirement accounts for RMD calculation and withdrawal purposes. There's one exception to this: 401(k) accounts. If you happen to have more than one 401(k), you need to take your calculated RMD for each one from that one. As for timing, your very first required minimum distribution doesn't need to be completed until April 1 of the year after you turn 73. Past that point, these withdrawals are supposed to be completed by the end of the calendar tax year. That means if you wait to make your first one, you may end up taking two years' worth of RMDs in the year you turn 74. Options Suppose you don't actually need all of that money in that year, though. No problem. While you'll still need to make these withdrawals, there are several options for what you may want to do with the cash influx, some of them specific to IRAs. 1. Give it away (tax efficiently) You can always give money to charitable causes. And, while there are limits, donations to legitimate charities are at least somewhat tax-deductible. If you're over 70 and a half and are willing to transfer cash or assets directly from your IRA to a charity, though, tax-deductibility limits are much higher. Specifically, by categorizing your RMD as a qualified charitable distribution (or QCD), you can take as much as $108,000 worth of an IRA distribution that would have been considered your taxable income (or up to $216,00 for a married couple) and directly transfer it to a charitable cause -- and that maneuver will still satisfy your minimum distribution requirement. You can't do this with 401(k)s or similar accounts. Contact the charity in question for instructions on how they can receive this gift, and then confirm it for your record-keeping and documentation purposes. 2. Tuck it away for a rainy day Just because you don't need this money right now doesn't necessarily mean you want to get rid of it altogether, of course. The day may well come when you do need it. If that's the case, leaving a sizable wad of cash in a checking or savings account is an option, but arguably not your best one. These accounts pay little to no interest. If you're willing to make a minimal amount of effort to shop around, you can find a high-yield money market fund you like instead. Such accounts are currently paying in the ballpark of 4%, and almost all brokerage firms and most online banks offer them. Now, moving money into and out of such funds involves buying and selling just like an ordinary mutual fund. So, to convert that money back to something liquid and cash-like will take one full business day. It's certainly worth the trouble, though, for a good interest rate on the kind of money you're likely to be reallocating with an RMD. 3. Invest it -- or reinvest it -- with its new taxable status in mind Most people slated to collect a required minimum distribution who don't actually need the money at that time are likely just going to reinvest it. However, if you're only going to repurchase the same investments you sold to facilitate the RMD, you need not bother. You can simply request a transfer of assets from an IRA and into an ordinary brokerage account. Just instruct your broker/custodian to do what's called an in-kind transfer. It may take an extra day or two to complete, but you'll still get a precise distribution value figure for the day the transfer was officially done. That being said, while you're moving things around anyway, you might want to use the opportunity to make some smart changes to your portfolio. Just consider the new taxable status for any freed-up money or assets. Nothing that ever happened within your IRA was a taxable event. Now, everything this money could become presents a potential tax liability. If you want to keep your tax bill to a minimum, you probably won't want to invest your entire RMD in dividend stocks. While they're riskier, buy-and-hold growth stocks are also rather tax-efficient. 4. Start saving for a Roth conversion Finally, if you know taking taxable withdrawals out of your retirement account every year is going to be more of a drag than you care to deal with, you've always got the option of converting an ordinary IRA into a Roth IRA -- Roths aren't subject to RMDs. The downside to this move is that when you convert money from an ordinary IRA into a Roth, all the taxes on this withdrawal come due at once. This can get expensive, especially if doing so bumps you into a higher tax bracket for the year. That's why many people who opt for Roth conversions perform them over the course of multiple years, completing the conversion in tranches, each of which is a relatively small income-taxable event. Assuming you'd rather not leave any money out of the newly converted (but still tax-deferring) Roth when you don't have to, you can cover this tax bill with other funds ... including your RMD money. Just bear in mind that a Roth conversion doesn't satisfy your RMD for that year. And, paying taxes on one doesn't negate the tax bill for the other. Every year's required minimum distribution is already determined at the end of the prior year, and is owed whether you do a conversion that year or not. If you like this idea, you'll simply want to convert as much money as possible as quickly as possible to keep your RMDs -- and the number of years you must take them -- to their lowest-possible minimum. The $23,760 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. Don't Need Your Required Minimum Distribution (RMD) Right Now? What Can You Do With the Cash Influx? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 days ago
- Business
- Yahoo
Retirement savers are getting a boost from low mutual fund fees
Let's hear it for a bit of good news for retirement savers. The average mutual fund expense ratios in 401(k) plans are at historic lows, according to a new research report from the Investment Company Institute (ICI). Average equity mutual fund expense ratios paid by 401(k) plan savers have dropped from 0.76% in 2000 to 0.26% in 2024, according to the report. Think that half a percentage point doesn't matter? Here's what it looks like in dollars. Consider this: You're 35 years away from retirement and have a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7% and fees and expenses reduce your average returns by 0.26%, your account balance will grow to $245,127.52 at retirement, even if there are no further contributions to your account. Read more: Your guide to how a 401(k) works If fees and expenses are .76%, however, your account balance will grow to just $207,980.31. The addition of a mere .5% annually over a 35-year span can cut your retirement account by $37,147.21. 'The long-term downward trend in mutual fund fees for more than two decades is great news for investors looking to secure their financial future,' Sarah Holden, ICI's senior director of retirement and investor research, told Yahoo Finance. Millions of 401(k) participants invest in equity mutual funds, including both active and index equity mutual funds, according to the report. As for target-date funds, the retirement savings vehicle Americans can't get enough of, their average expense ratio has also dropped dramatically over the decades, from 0.67% in 2008 to 0.29% now. Reduced fees — even by slivers of a point — are consequential. Sign up for the Mind Your Money weekly newsletter By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy The expense ratio fee is subtracted from your investment returns. They include what a mutual fund or ETF pays for management advisory fees as well as the cost of marketing and selling the fund and other shareholder services, transfer-agent costs, and legal and accounting expenses. A 401(k) plan may deduct fees — both administrative and investment — from your account either as a direct charge or indirectly as a reduction of the account's investment returns. It all adds up to real money you'd much rather have to live on in retirement than pay out in phantom fees to a bank or brokerage. Learn more: How to start investing in 6 steps Finding the real cost It's not all that easy to suss out what you're paying in fees in your 401(k) account. But it is possible with a little legwork. Employers are required to provide both an initial and an annual fee disclosure notice to plan participants. It outlines the fees associated with your 401(k), including the expense ratios for each fund available within your mutual fund or ETF has a prospectus that details its expense ratio, typically in a section called 'Annual Fund Operating Expenses.' These documents can be found on your 401(k) provider's website. If you can't find the information, contact your 401(k) plan administrator, who can provide the fee details or guide you to them. One additional resource: The Financial Industry Regulatory Authority (FINRA) provides a fund analyzer on its site to help. My two cents: Keep the low expense trend going by choosing index funds or other low-expense options with expense ratios below 0.5%. Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work," and "Never Too Old to Get Rich." Follow her on Bluesky. Sign up for the Mind Your Money newsletter
Yahoo
3 days ago
- Business
- Yahoo
Retirement savers are getting a boost from low mutual fund fees
Let's hear it for a bit of good news for retirement savers. The average mutual fund expense ratios in 401(k) plans are at historic lows, according to a new research report from the Investment Company Institute (ICI). Average equity mutual fund expense ratios paid by 401(k) plan savers have dropped from 0.76% in 2000 to 0.26% in 2024, according to the report. Think that half a percentage point doesn't matter? Here's what it looks like in dollars. Consider this: You're 35 years away from retirement and have a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7% and fees and expenses reduce your average returns by 0.26%, your account balance will grow to $245,127.52 at retirement, even if there are no further contributions to your account. Read more: Your guide to how a 401(k) works If fees and expenses are .76%, however, your account balance will grow to just $207,980.31. The addition of a mere .5% annually over a 35-year span can cut your retirement account by $37,147.21. 'The long-term downward trend in mutual fund fees for more than two decades is great news for investors looking to secure their financial future,' Sarah Holden, ICI's senior director of retirement and investor research, told Yahoo Finance. Millions of 401(k) participants invest in equity mutual funds, including both active and index equity mutual funds, according to the report. As for target-date funds, the retirement savings vehicle Americans can't get enough of, their average expense ratio has also dropped dramatically over the decades, from 0.67% in 2008 to 0.29% now. Reduced fees — even by slivers of a point — are consequential. Sign up for the Mind Your Money weekly newsletter By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy The expense ratio fee is subtracted from your investment returns. They include what a mutual fund or ETF pays for management advisory fees as well as the cost of marketing and selling the fund and other shareholder services, transfer-agent costs, and legal and accounting expenses. A 401(k) plan may deduct fees — both administrative and investment — from your account either as a direct charge or indirectly as a reduction of the account's investment returns. It all adds up to real money you'd much rather have to live on in retirement than pay out in phantom fees to a bank or brokerage. Learn more: How to start investing in 6 steps Finding the real cost It's not all that easy to suss out what you're paying in fees in your 401(k) account. But it is possible with a little legwork. Employers are required to provide both an initial and an annual fee disclosure notice to plan participants. It outlines the fees associated with your 401(k), including the expense ratios for each fund available within your mutual fund or ETF has a prospectus that details its expense ratio, typically in a section called 'Annual Fund Operating Expenses.' These documents can be found on your 401(k) provider's website. If you can't find the information, contact your 401(k) plan administrator, who can provide the fee details or guide you to them. One additional resource: The Financial Industry Regulatory Authority (FINRA) provides a fund analyzer on its site to help. My two cents: Keep the low expense trend going by choosing index funds or other low-expense options with expense ratios below 0.5%. Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including the forthcoming "Retirement Bites: A Gen X Guide to Securing Your Financial Future," "In Control at 50+: How to Succeed in the New World of Work," and "Never Too Old to Get Rich." Follow her on Bluesky. Sign up for the Mind Your Money newsletter Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
