There are a lot of factors to consider when choosing a place to retire.
It is not enough that you choose a place where you can stretch your
retirement income. Based on information released by Bankrate.com, we came up with a list of the best and worst retirement locations.
A single idea – one that has enjoyed strong support from both political parties in this country – has the potential to help solve the retirement savings crisis, to narrow the income-and-wealth gap, and to lift the growth rate of productivity and the overall U.S. economy. The idea, known as employee ownership, is already in practice at thousands of companies large and small, where tools ranging from stock options and stock grants to more formalized vehicles like Employee Stock Ownership Plans, or ESOPs, are turning workers into owners.
In workplaces where employees are significant owners, the general result has been improved corporate performance and job growth, and a workforce that retires with far larger nest eggs than at other companies. Put simply, ESOPs turn capitalism into a team sport. I’ve spent more than 25 years helping companies to structure and finance ESOPs, and then have watched as the incentive of ownership leads employees to reduce waste, to self-police slacking co-workers and to offer up useful ideas for improving operations.
There’s just one problem: ESOPs cover maybe 11 million U.S. workers. Other forms of significant employee ownership are also small when compared to companies with publicly traded stock, those owned by private equity funds and those still owned by families and founding entrepreneurs. Thus, we’ve only begun to enjoy the broader economic benefits of employee ownership. Given the potential, shouldn’t the U.S. try to expand employee ownership? I spent some time this week with Joseph R. Blasi, a Rutgers University professor, and author of The Citizen’s Share: Reducing Inequality in the Twenty First Century (Yale University Press) with Richard Freeman and Douglas Kruse, trying to find out how we could accelerate the growth of the concept. The conversation – excerpts printed below – turned out to be just the jolt of optimism and patriotism I needed heading into July 4th.
Mary Josephs: Your book traces the notion of employee ownership back to the Founders of the American Revolution. How did that surface?
Joseph Blasi: Seven years ago, on vacation with my family in Maine, I picked up a book on maritime history. It talked about President George Washington working with the cod fishing industry to bring it back. Washington signed a law that gave tax cuts to the cod fishery on the condition that the shippers and captains continued broad-based profit sharing with workers on the entire catch of fish. The Founders favored broad-based property ownership. Washington, Jefferson and Madison all wrote of its benefits.
Josephs: You were a staffer in the House of Representatives during the 1970s when the original ESOP laws were enacted, but they haven’t turned out to be enough. Your book advocates a broader set of tax incentives. Why?
Blasi: The existing set of laws cannot take us far enough. They only provide incentives for closely held companies to consider ESOPs. There are no incentives for publicly traded companies, and none for high-tech growth companies. Our proposals would provide tax incentives for corporations to offer broad-based ownership plans to all workers. And they would also make the availability of other tax incentives – accelerated depreciation, deductibility of executive compensation, R&D tax credits – dependent on a company offering a broad-based employee ownership plan.
Chances are, save for retirement has a near-permanent spot on your to-do list. You know saving for retirement makes sense, but deep down, your retirement plan is to live off (or sell) the business you are busy building today. As a serial entrepreneur, I get it. Saving for retirement is more of an insurance plan than a core strategy.
If that sounds like you, then the Roth 401(k) is ideal. It differs from a traditional 401(k) in that you do not get a tax deduction on contributions. But it also differs from a traditional plan in that you do not pay tax on your investment returns. And it gets better, especially for entrepreneurs: With one easy maneuver, you can eliminate the obligation to ever take distributions from it.
The retirement-account giant Vanguard says that nearly half of the 401(k) plans it handles offer a Roth option, but fewer than 10 percent of folks have signed up. My educated guess is that the pickup is equally slow among entrepreneurs. I think that's a big missed opportunity.
Roth Rules of the Road
Though there are income limits on who can make direct contributions to a Roth IRA, there is no such hurdle with the Roth 401(k). That provides a front-door opportunity for high-income entrepreneurs to create a tax-free income flow in retirement.
Besides, even if you are eligible to contribute directly to a Roth IRA (which means a modified adjusted gross income below $112,000 for individuals and $178,000 for married couples filing a joint tax return), the maximum you can set aside this year is just $5,500 if you are younger than 50, and $6,500 if you are older.
You can invest much more in 401(k)s. The base contribution limit to a 401(k) is $17,500 this year; anyone at least 50 years old can tuck away $23,000. Those are the same limits as with a traditional 401(k). Entrepreneurs under age 50 without employees (other than a spouse) can contribute as much as $51,000 this year in a special breed of these retirement plans called a Solo 401(k) or Individual 401(k). That's a whole lot more security building than $5,500.
The Later-Year Payoff
Come age 70 and a half, you must make annual required minimum distributions, or RMDs, from traditional retirement accounts, and those distributions are treated as ordinary income. That's going to boost your adjusted gross income, which could push your marginal tax rate higher. This year, as I probably don't have to tell you, the top marginal tax rate bumped up to 39.6 percent.
If you have seen any celebrity news stories lately, chances are you’ve heard about the 50 Cent bankruptcy story. The famed rapper and music mogul shocked fans around the globe when he announced he would be filing for bankruptcy.
In the overlapping worlds of business and politics are a substantial group of billionaire capitalists who have used their government connections to grow richer still, according to a new study from researchers at Columbia and Villanova universities.