Latest news with #BrettDaniel
Yahoo
06-07-2025
- Business
- Yahoo
4 Reasons People Are Using 401(k)s for Emergencies, According to Vanguard
Vanguard recently released its 2025 report on how America saves. It revealed that a record 4.8% of 401(k) holders took a hardship withdrawal in 2024, up from 1.7% in 2020. Be Aware: Check Out: So why are more Americans raiding their retirement accounts? The report listed the following reasons for hardship withdrawals. Over a third (35%) of account holders who took a hardship withdrawal listed avoiding foreclosure or eviction as their motivation. 'Traditionally, homeowners in financial distress might refinance or tap home equity to stay afloat,' said Josh Richner of FaithWorks Financial. 'But with mortgage rates hovering near 7%, refinance volume has dropped to its lowest level since the mid-1990s. That leaves many turning to the only sizable resource they can access: their retirement savings.' Read Next: At 30%, medical expenses made up the second most common driver of hardship withdrawals last year. It doesn't help that many Americans have little to no emergency savings. A study by GOBankingRates found that half of Americans have $500 or less in savings. Vanguard reported that 16% of hardship withdrawals went to cover a home repair or purchase. Brett Daniel, founder of Daniel Safe Money Retirement Solutions, cautioned homebuyers against raiding their retirement savings. 'While purchasing a home can make a great financial investment, using retirement savings for the down payment or home repairs is risky due to the fees involved on the amount withdrawn from your 401(k).' It also leaves you with less money in financial investments to compound throughout your career and pay for your retirement. Another 14% of hardship withdrawals went to covering tuition costs, and 5% were uncategorized. While some of those withdrawals helped the account holders themselves get degrees and improve their future earnings, some likely went to account holders' children. But most financial experts agree that's a dangerous path, as children have many options to fund their college degree, but retirees have just one: their savings. 'Parents looking to help with tuition should look at 529 college savings plans or Coverdell Education Savings Accounts, rather than draining their own retirement accounts,' Daniel said. Vanguard noted that it is now easier to request a hardship withdrawal, due to a 2019 budget act, which could account for some of the increase. Additionally, another recent law could also help explain the bump in hardship withdrawals from 401(k)s. The Secure 2.0 Act of 2022 required employers to automatically enroll new workers in 401(k) accounts, if available. That led to many lower-income workers having retirement accounts, and for some, it represents their only source of savings. Overall, Vanguard doesn't see much cause for alarm with the heightened hardship withdrawals. The report pointed to these legal changes as significant drivers, taking a sanguine stance on the 4.8% hardship withdrawal rate. More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 10 Used Cars That Will Last Longer Than an Average New Vehicle 5 Cities You Need To Consider If You're Retiring in 2025 This article originally appeared on 4 Reasons People Are Using 401(k)s for Emergencies, According to Vanguard
Yahoo
08-06-2025
- Business
- Yahoo
11 Ways Being Single in Retirement Can Save You Money
Retiring as part of a couple or a family is often treated as a certainty, but plenty of people retire solo, without a romantic partner. Find Out: Read Next: While media likes to make this sound sad, and expensive, there are ways that being single in retirement can actually save you money. Retirement experts offered a positive reframe if you find yourself enjoying your own company in your golden years. Being single in retirement means you're the CEO of your own plan, according to Gregg Cummings, a financial planner and retirement plan consultant and founder and CEO at Gregg Cummings Financial. 'Fewer decision-makers. More agility. The key is building a strategy around your lifestyle and values, not someone else's. It's cost effective and empowering,' he said. Learn More: Most people would say one of their biggest expenses right now is groceries, and quite simply, if you're single, you're spending less on groceries than if you were buying for two, according to Brett Daniel, founder at Daniel Safe Money Retirement Solutions. Single retirees are probably also saving on energy bills by using less electricity and saving on the water bill as well, Cummings pointed out. Single retirees might also be saving on car costs. 'If you have a vehicle, you are more than likely only traveling for one, which means less money is going out for gas, less on vehicle maintenance and insurance than if you were paying these bills for two people.' In general, being single tends to mean not only a lower spend on almost all basic essentials but 'leaner living,' according to Cummings. 'You are not planning around someone else's schedule, preferences or spending habits. That freedom lets you live smaller, travel lighter and spend more intentionally.' Without a partner to have to negotiate living arrangements with, you're free to find roommates or co-housing communities that can dramatically reduce housing costs, Cummings said. 'You could cut housing expenses by as much as half just by sharing space in a retirement-friendly town with walkability.' Budgeting can also be simpler if you're single, with only one set of expenses and one income to plan around. 'That clarity can make it easier to track spending, avoid lifestyle creep and make adjustments on the fly,' Cummings said. Daniel added, 'There is no need to compromise on spending priorities and setting plans to travel as desired destinations can be possible without trying to meet the needs of two people.' Though there are certain tax benefits that favor married people, single retirees over 65 get a higher standard deduction than younger single people, Daniel said. 'Singles may fall into lower tax brackets post-retirement making it advantageous to convert traditional IRA to a Roth IRA at reduced tax rates,' he said. Best yet, older single adults may be able to avoid 'the marriage penalty' depending on tax brackets. Singles may pay less tax than married couples who file jointly (and thus are taxed on joint income). Don't forget the saver's credit for singles, Cummings pointed out. Not to mention, 'filing as single [person] gives you a more predictable tax structure year over year,' he said. When it comes to healthcare as a single person, the healthcare premiums for anyone ages 65 and older, Medicare, is determined by your income, according to Richard E. Craft, a financial advisor and CEO of Wealth Advisory Group. 'Remember, the full retirement age for Social Security is age 67, not 65 like for Medicare,' Craft said. A single person only needs to elect Medicare Part A for hospitalization, Part B for doctors and therapy services, and a Part D for prescription drugs. 'The cost for one is half of the cost for two so this saves money. You also have only one person to incur expenses so this should save over the long run.' 'Without a partner's income boosting your MAGI (Medicare Adjusted Gross Income) you could fall into a lower bracket,' Cummings said. That can reduce what you pay for Parts B and D. 'You also won't have a spouse's long-term care risks, which simplifies planning,' he said. If you want to keep working for the social and financial benefits, Craft pointed out that a single retiree could take a part-time job and continue to contribute to a tax-deductible IRA. 'Even better, work for an employer who offers an attractive match for the 401(k) and contribute up to $31,000 and get the match on top of that. Remember, you don't have to work full time to be eligible for a 401(k).' In a nutshell, the freedom to plan for one's own lifestyle needs is much simpler than when balancing the wants for two people, Craft said. '[A single person] might be more flexible, can live on a smaller budget, can pick a low-cost area to live and cut expenses easier than two people … You can do with less if you want to.' More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 10 Cars That Outlast the Average Vehicle The 10 Most Reliable SUVs of 2025 This article originally appeared on 11 Ways Being Single in Retirement Can Save You Money
