Should the Self-Employed Plan to Work Past 65?

Some solopreneurs think they will “work forever,” but that perception may be flawed. About 20% of Americans aged 65-74 are still working. A 2016 Pew Research Center study put the precise figure at 18.8%, and Pew estimates that it will reach 31.9% in 2022. That estimate seems reasonable: people are living longer, and the labor force participation rate for Americans aged 65-74 has been rising since the early 1990s.1,2 It may be unreasonable, though, for a pre-retiree to blindly assume he or she will be working at that age. Census Bureau data indicates that the average retirement age in this country is 63.3 When do the self-employed anticipate retiring? A 2017 Transamerica Center for Retirement Studies survey finds that 56% of U.S. solopreneurs think they will retire after 65 or not at all.4 Are financial uncertainties promoting this view? Not necessarily. Yes, the survey respondents had definite money concerns – 28% felt Social Security benefits might be reduced in the future; 22% were unsure that their retirement income and accumulated savings would prove sufficient; and 26% suspected they were not saving enough for their tomorrows. On the other hand, 54% of these self-employed people said that they wanted to work...
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In-Service Withdrawals from Employee Retirement Plans

You might be able to take money out of your 401(k), 403(b), or 457 plan while still working. If you withdraw money out of a workplace retirement plan in your fifties, will you be penalized for it? In most cases, the answer is yes. Distributions taken from a qualified retirement plan before age 59½ usually trigger a 10% IRS early withdrawal penalty. The key word here is “usually,” for there are ways to make these withdrawals with no IRS penalty, even while you are still working for your employer.1 You may have a strong reason to make such a withdrawal. Maybe you want the money now. Maybe you are tired of your plan’s limited choices and high fees and want to invest those assets in a different way. In fact, some of these withdrawals are made just so the assets can be transferred to an IRA. An IRA allows you many, many more investment options than the typical employer-sponsored retirement plan.1,2 You can avoid the 10% penalty through an in-service, non-hardship withdrawal. Some 401(k), 403(b), and 457 plans permit such distributions for plan participants who are still working. You may be able to arrange one, but you must pay attention...
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Is There Still Value in Value?

Despite a strong 2016, there may still be some value in value. While value has lagged growth so far in 2017, based on the Russell style indices [Figure 1], we see several reasons to like value stocks, including accelerating economic and profit growth, and an improving outlook for the financial sector. But the growth side has enough going for it that we recommend investors maintain balance across the styles. Here we discuss our latest style views. SLOW GROWTH NO MORE? Economic and profit growth are both poised to improve in the coming months in our view, creating a more favorable backdrop for value stocks that have historically outperformed when growth is accelerating. Economic growth has been subpar during the entire economic expansion (approximately 2% growth on average in gross domestic product [GDP]), which is one of the reasons why growth stocks have outperformed value during the current economic expansion. The logic here is that when economic and profit growth is scarce, you want to own stocks that can generate their own growth without the need for a macro tailwind. Value stocks tend to need help from the economy to grow. When all companies get a macro lift, and growth is...
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