Data and Research May 17, 2016

Americans Regret Not Saving Early Enough for Retirement

Seventy-five percent of Americans say they have regrets about financial decisions, a survey finds.
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A majority of Americans (75%) wish they could change their financial decisions, with 18% saying that not saving for retirement early enough is their top money regret, according to Bankrate.com’s Financial Security Index survey. Not saving enough for emergencies came in second, with 13% citing it as their biggest money blunder.

Not surprisingly, those ages 65 and older feel the most remorseful about not saving early enough for retirement. More than a quarter (27%) of respondents in this age bracket say it’s their biggest regret, compared with 4% of respondents ages 18 to 29 and 17% ages 30 to 49. Conversely, younger Americans are more likely to say they wish they had saved more for emergencies. Twenty-one percent of respondents ages 18 to 29 and 10% of respondents ages 30 to 49 consider this their biggest financial regret, compared with only 7% of Americans ages 65 and older. But Millennials are taking action: Bankrate found that Millennials have put a focus on emergency savings, as they are the only age group to say they are more comfortable with their savings now than they were a year ago.

“Inadequate savings looms large among Americans’ financial distress,” says Greg McBride, chief financial analyst for Bankrate.com. “Whether it’s saving for emergencies or retirement, Americans’ biggest financial regret is not saving enough.”

Other areas that cause financial remorse include taking on credit card debt (9%), not saving enough for children’s education (8%) and excessive student loan debt (9%). Twenty-four percent of respondents ages 18 to 29 cited student loans as their top source of financial remorse, compared with 11% ages 30 to 49, 2% of Americans ages 50 to 64 and 0% of those ages 65 and older.

Despite these financial regrets, Bankrate.com found that its Financial Security Index jumped to its highest reading since February 2015 and second-highest reading ever at 104.7. Those saying their overall financial situation is better than one year ago outnumber those saying it is worse by nearly two to one. In addition, 31% of Americans report higher net worth than one year ago, compared with just 13% that say their net worth is lower now. Both men and women noted improved financial security compared with one year ago, with each posting the best readings in over a year. Comfort level with savings was the only area that decreased in the past year.

More information about the survey is available here.

Ask the Experts May 17, 2016

(b)lines Ask the Experts – Can Church Plan Employees Contribute More?

“Are there still rules that allow church employees to contribute more than they might normally be able to do under the existing contribution limits?”
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Michael A. Webb, vice president, Cammack Retirement Group, answers: 

Yes, though these rules don’t receive a lot of attention, they do exist. Such rules apply to all church plans, including plans of churches and qualified church-controlled organizations (QCCOs) under 3121(w) as well as non-QCCO religious organizations, such as church hospitals. These unique church plan rules are, as follows:

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1)         There is an election, subject to a $40,000 lifetime maximum, under which church employees can exceed their 415 percentage limit (generally, 100% of compensation), up to an annual maximum of $10,000. This election can be useful, if, for example, individuals who have taken a vow of poverty (which is not unusual for clergy in some denominations) and thus receive little or no compensation from the church. Even if such an individual receives zero compensation, $10,000 may be contributed to a 403(b) on that individual’s behalf for a period of four years ($10,000 x 4 = $40,000 lifetime limit). Of course, the lifetime maximum must be tracked over time, which is a bit of an administrative burden, but not nearly as much work as calculating the 15-year catch-up election, for example.

2)         There is an election under which foreign missionaries may contribute the greater of $3,000 or their includible compensation under Section 403(b)(3). This election is somewhat complicated, but is summarized nicely by David Powell with Groom Law Group in a prior Ask the Experts column. 

It should also be noted that, besides these two special church plan elections, there is a special way that service is counted for church employees for purposes of the 15-year catch-up election. All years of church service, regardless of whether such service was performed for the current church plan sponsor, are aggregated for purposes of determining whether an individual has completed the years of service necessary to qualify for the 15-year catch-up.

Finally, keep in mind that certain ministers who are self-employed or chaplains can make elective contributions of their own funds to a church 403(b)(9) plan up to the usual elective contribution limits, and deduct them from their individual income taxes as an above-the-line deduction. That is found in the deduction rules of Code section 404(a)(10). Of course, the plan must permit such contributions.

Church employees used to have additional special contribution limit elections, but those were repealed when the maximum exclusion allowance (remember that?) was eliminated in 2002.

Thank you for your question!

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.  

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to rmoore@assetinternational.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

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