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We all know how important it is to save for retirement. That’s a given. But when it comes to how to save, you may have a lot of questions. How much should I save? What should I invest in? And most importantly, how can I be sure that I’ll meet my goals for a comfortable retirement?

A survey BlackRock recently completed confirms how many of us have these questions. Asking employees across the U.S. about their workplace savings plans, 50% said they didn’t know as much as they should about investing for their retirement, and 47% don’t know how much money they need to save to get the retirement they want. But the good news is that most employers have recognized these concerns and are taking the steps needed to help their employees become successful savers. Here are three important steps that should reduce confusion and ensure you’re on a good path to savings success.

1. Read the Instruction Manual

If you have access to a workplace savings plan, you might consider your plan to be ‘one stop shopping’ for a comprehensive retirement savings strategy. But as powerful as your plan can be, it’s important to note that to get the most out of it, you’ll need to devote some time to learn about the features of the plan. Over 40% of our survey respondents confess to not spending enough time trying to understand their plan. Considering how important it is to have your plan running at peak efficiency, this is an opportunity to learn more about the workings of your account. It’s a bit like getting a new gadget. Sure, it probably will work right out of the box, but to take full advantage of all it has to offer, you have to read the instruction manual and figure out which features will be the most helpful for your specific needs.

This is particularly true now that today’s plans have so many added features. Many plans allow a variety of ways to contribute, a spectrum of investment choices, and hopefully some tools to help you determine progress toward your retirement goal. Should you contribute pre-tax or after tax (using a Roth provision)? What about having the plan raise your contributions a small amount every year automatically (what is sometimes called an auto increase feature)? If you are 50 or older, you might explore making catch-up contributions. Many plans offer this feature which allows an additional contribution of up to $6,000 per year.

2. Get Help With the Investment Challenge

One of the most perplexing aspects of saving for retirement can be the task of choosing and maintaining a mix of investments. Although some employees may enjoy choosing funds, it takes a certain amount of familiarity and time to construct and monitor your own portfolio. We know from our survey that 50% of all respondents reported that they didn’t know as much as they should about investing. So what should you do if you fall within that camp? Fortunately most plans now provide an alternative to doing it all on your own. A target date fund provides a professionally diversified mix of investments all within one fund. The investment blend is based on a given time frame when investors might want to retire. As time passes, the investment mix becomes more conservative as investors in the fund get closer to retirement. This means the fund’s investors don’t have to mix and monitor their own mix of funds because that all happens within their target date fund.

Another alternative for savings plan investors involves receiving individualized advice from an investment professional that your plan sponsor makes available to employees. The advice provider can offer personalized advice that might take into account a wide range of considerations such as outside-of-plan investments and unique savings goals.

3. Be the Managing Partner

I like to think about savings strategies as partnerships. Many employers spend a lot of time and attention working to create a flexible, low cost savings plan to help employees save for retirement. But they can only go so far to make it easy for you. As the principal beneficiary, you should be the more engaged, Managing Partner!

Your part of the partnership should start with a commitment – a commitment to take it seriously and do what it take to meet your goals. If you’re young you may not need a thoroughly fleshed out retirement plan, but at least recognize the importance of socking away a lot of money starting at a young age. And by all means, the sooner you can start using retirement planning software, do it! Like putting your destination into your car’s navigation system, the earlier in your journey you start, the more certain you can be about reaching your destination on time. And with that knowledge comes confidence. In BlackRock’s survey, 34% of respondents cited the use of retirement planning tools and resources as the source of their retirement confidence. So by all means, make that commitment to yourself. You will someday look back and thank yourself!

Scott Dingwell is a Director in BlackRock’s Global Client Group where he serves on the U.S. and Canada Defined Contribution Team. He writes about retirement for The Blog.

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While saving for higher education is its own reward, saving on your taxes while saving for higher education is a bonus you don’t want to pass up.

Many investors save for college using a combination of investment accounts—including 529 college savings plans, bank savings accounts, CDs, and taxable mutual funds. In fact, industry research shows that half of the investors who have a 529 plan use it to hold only a relatively small portion (40% or less) of their total college savings.¹

To maximize the tax perks while saving for college, consider consolidating your college funds in a 529 plan.

“It’s important to think about how much you’re saving for higher education,” said Char Gross, who leads Vanguard Education Savings Group. “But it’s also important to think about where you’re investing your savings. If you’re going to set aside money for college, maximize the value of each dollar you contribute by taking advantage of the tax perks of a 529.”

Tax savings times three

You can’t measure the value of helping a loved one pursue academic dreams. But you can measure the value of the tax savings.

Investing in a 529 offers the following tax benefits:

Tax-free withdrawals. You can withdraw the money tax-free (both federal and state) when you use it for qualified higher-education expenses.
Tax deductions. You may deduct contributions on your state tax return, depending on your state’s rules.² Learn more about tax deductions.
Tax-deferred growth. Your earnings will be deferred from federal (and usually state) taxes.³

Additionally, you can contribute a single lump sum (up to $70,000 per beneficiary or $140,000 if married filing jointly) and count the contribution, for tax purposes, as if you made it over a five-year period.⁴

Pay less, save more

“Let’s say you invest $10,000 for your child’s education, and the account grows to $15,000 by the time you withdraw the money to pay for college,” said Ms. Gross. “If you had saved the money in taxable mutual funds, and your tax rate on investment earnings was 20%, you’d pay $1,000 in taxes. But if you saved that money in a 529 plan, you’d pay $0in taxes.”

¹ Source: Strategic Insight 529 Industry Analysis 2015.

² The availability of tax or other benefits may be contingent on meeting other requirements.

³ Earnings on nonqualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as state and local income taxes.

⁴ Any additional gifts made to the beneficiary during that five-year period will incur a gift tax. In the event the donor doesn’t survive the five-year period, a prorated amount will revert back to the donor’s taxable estate.

Note:

Investment returns are not guaranteed, and you could lose money by investing in a 529 plan.

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We all know that the market changes all the time. So do life goals. That’s why Heather Pelant stresses checking-in with your investments from time to time to make sure you’re on the right track.

A colleague of mine used to say that reviewing her investments was like getting her teeth cleaned. She dreaded it ahead of time, but loved the feeling when it was done. It provided a sense of taking care of something important, both for today and in the future.

Like your teeth, your investment portfolio needs regular maintenance. For example, remember when you got that first “real” job—you know, the one you studied for in college and that paid benefits? You felt pretty good when you signed up for the company 401(k) and started investing for the future, and you’ve been contributing the max to take full advantage of the company match. Both were important steps to set you up for success.

But what’s happened in your life since then? Have you gotten married, bought a house, had a baby (or two or three)? Maybe those babies are closer to attending college or walking down the aisle. Perhaps going back to school to further, or change, your own career is in your plans. Has your investment plan kept pace?

Our 2015 Global Investor Pulse Survey found that ”winning” investors—those who have both savings and investments, a formal retirement plan, and less than 25% in cash holdings—didn’t just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets and changing lives.

Don’t Set It and Forget It

Consider these healthy habits that the highly effective investors in our research had in common:

Regularly review finances. Examine all of your investment statements together at least once a year. Are you getting the return you hoped for? How much are fees and taxes cutting into that return? How much money do you have in low-interest cash accounts? Are you properly diversified across asset classes, markets and industries? Think about whether you need to invest more money or make changes to your holdings to meet your goals.
Spend time to get informed. BlackRock Chief Executive Larry Fink encourages all of us to be “students of the market.” That means keeping up with financial news and finding independent information about what is happening in the U.S. and global economies. Our blog is just one place where you can find easy-to-understand insight about what’s happening in the markets today and how it may affect you.
Seek financial advice. Successful investors seek a trusted source for good advice. In fact, our Global Investor Pulse Survey found 81% of winning investors value professional advice, and 72% are most likely to consult a financial advisor. If you feel you don’t have enough money for a personal advisor right now, consider some of the digital advice tools or online resources, which are designed to help you decide where to invest your savings based upon your personal lifestyle and goals.

In short, as your life changes, so should your investment plan. By reviewing, reconsidering and rebalancing your portfolio regularly, you will position yourself for success. Moreover, that sense of being prepared and sure-footed about your financial future will make your smile that much brighter.

Heather Pelant is Personal Investor Strategist for BlackRock. She is a regular contributor to The Blog.

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5 Ways to Ease the Pain of Health Care Costs in Retirement

The best medicine is to plan ahead for this significant line item in your retirement budget.

From Kiplinger’s Retirement Report, February 2016

This number should hurt a lot: The average 65-year-old couple will pay $240,000 in out-of-pocket costs for health care during retirement, according to Fidelity Investments. And that does not include potential long-term-care costs.

Critical, yes. Incurable, no. The worst thing you can do is take to your bed and expect the pain will go away with an aspirin or two. The best medicine is to make sure your retirement plan takes into account this large line item — and to find ways to cut future costs or develop income streams to pay expenses.

It’s easy to see how the costs can add up. Just Medicare premiums alone for 25 years — for standard Part B (which pays for outpatient care), a Part D prescription-drug policy and a Medigap supplemental insurance policy — will set a couple back close to $200,000. And that does not include dental and vision care, hearing aids, and out-of-pocket drug costs. A Medicare Advantage plan could cost somewhat less. Thank goodness Part A, which pays for hospital care, is free.

Set up a special fund. You can create a retirement health care kitty with a health savings account. Your contributions are tax-deductible (or pre-tax if through an employer), the money grows tax-deferred, and you can withdraw the money tax-free for medical expenses in any year.

To make HSA contributions in 2016, you must be covered by an HSA-compatible policy with a deductible of at least $1,300 for single coverage or $2,600 for family coverage. You can contribute up to $3,350 for single coverage or $6,750 for family coverage, plus a $1,000 catch-up contribution if you’re 55 or older.

You can no longer contribute once you’re on Medicare, but you can use the money to pay for medical expenses at any age. Those costs include deductibles, co-payments, dental expenses and Medicare premiums (but not premiums for Medigap plans).

Make the most of the tax benefits by paying for current medical expenses with cash and letting the money grow in the HSA. If you keep the receipts, you can reimburse yourself from the account for any eligible expenses since you opened the HSA — even years later. “For folks who are nearing retirement, that’s a way to accumulate some real money,” says Eric Dowley, senior vice-president of health savings accounts for Fidelity.

Building up their HSA has been a key strategy for Bob and Debbie West of Ellicott City, Md., both 65. For many years, they have worked with spreadsheets estimating retirement expenses, and they predict they will need more than $250,000 for health care. They’ve been maxing out their HSAs since Bob retired four years ago and bought a high-deductible plan. “The HSA was an additional benefit,” he says. “Not only has that been a great deduction at tax time, I now have a nest egg to use for my out-of-pocket medical and dental expenses in retirement.” Now enrolled in Medicare, the couple can no longer make HSA contributions.

The savings are eye-catching. Say you contribute the 2016 maximum $7,750 a year from ages 55 to 65, and the money earns 3% a year. At 65, you go on Medicare and don’t touch the account for 10 years. At 75, you’ll have more than $120,000 tax-free to pay for medical expenses.

Avoid the surcharge. Most Medicare beneficiaries will pay a total of $1,258 for Part B premiums in 2016. But the premium tab will be considerably higher if your adjusted gross income (plus tax-exempt interest) exceeds $85,000 if single or $170,000 if filing jointly. In that case, your premium will range from $2,046 to $4,677 for 2016 per person, depending on the size of your AGI. You’ll also pay a surcharge for a Part D drug plan.

Large premiums can throw your retirement financial plan off track. “Most people are unaware of the surcharge,” says Ron Mastrogiovanni, chief executive officer of HealthView Services, which helps financial advisers estimate retirement health care costs. “Or they think they won’t have to worry about it because they won’t be earning that much in retirement.” But it’s easy to reach the surcharge threshold if you have a taxable pension and are withdrawing money from tax-deferred 401(k)s and IRAs.

Retirees and current beneficiaries can take a number of steps to keep their income under the threshold — or at least at one of the lower of four premium rungs. One strategy is to build up a tax-free stash of money for retirement. Withdrawals from a Roth IRA, Roth 401(k) or health savings account are not included in your AGI. So it could make sense to contribute to a Roth or an HSA before you enroll in Medicare — and tap those accounts in years when your AGI threatens to exceed the threshold. You also could gradually convert money from a traditional IRA to a Roth through the years.

Another way to keep your AGI on the lower side is to donate your IRA required minimum distribution to charity. People age 70 1/2 and older can now transfer up to $100,000 from their IRAs to charity each year. The donation isn’t included in your AGI.

If you are hit with the surcharge after you retire, consider asking the government to reduce it. The Social Security Administration uses your most recent tax return on file to determine whether you’re subject to the surcharge (generally the 2014 return for the 2016 premium). But you may be able to contest the surcharge if your income has dropped since 2014 as a result of a “life-changing event” — such as a marriage, divorce or retirement. You can ask Social Security to use your more recent income instead. Submit your tax return for the year, or estimate the income if you haven’t filed yet.

Save on drugs. It’s likely that your drug costs are rising, whether you’re covered by Medicare, an employer plan or an individual policy. When choosing a plan, be sure you understand how much you may pay out of pocket. A $20 “co-payment” for a $200 drug will be far less than 20% “co-insurance” for the same drug.

Ask your doctor about generics. Generic drugs can cost 85% less than brand-name versions and usually have a much smaller co-pay — generally $10 or less for a 30-day supply.

If you shop for your generic drugs at Walmart, Costco or Target, it may cost you less if you pay directly than if you use insurance. A Walgreens prescription savings club also may offer good deals. GoodRx.com provides coupons and helps you search for the pharmacy with the best deal for your medications.

Most insurers, including Part D plans, have preferred pharmacies, which have lower co-pays than other in-network pharmacies. For instance, you may pay a $1 co-pay for a preferred generic at a preferred pharmacy and pay a $10 co-pay for the same preferred generic at an in-network pharmacy. A mail-order pharmacy may cost even less — but not always.

If there’s no generic for your medication, “ask your doctor if there are other medications that are equally effective but may be on a different pricing tier,” says Christopher Abbott, chief executive officer of United Healthcare Medicare and Retirement.[huge_it_gallery id=”2″]

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10 Best States for Retirement

The very best place to retire for you might be on a beach…or in the mountains…or near family…or in the same house you’ve lived in for years. It’s a personal decision that no one else can make for you. However, if you haven’t already settled on a retirement destination, an objective analysis of your options can help narrow your search.

We rated all 50 states and the District of Columbia based on quantifiable factors that are important to many retirees. Our rankings favored states that are affordable and economically healthy, as well as those with low crime rates. We also rewarded states with large but relatively prosperous populations of residents age 65 and up (though if you prefer a younger crowd, consider a college town for retirement). Finally, we weighed the tax situation for retirees in each state.

The following 10 states topped our rankings of retirement destinations. No state is perfect, but within each we identified a city or two that should hold particular appeal to retirees. Take a look. Our picks span the country from east to (far) west and offer a wide diversity of climates and lifestyles. There’s a place for just about everyone.

Populations, household incomes, home values and poverty rates are from the U.S. Census Bureau. Rates for both violent crime and property crime are from the Federal Bureau of Investigation. The cost-of-living data is provided by the Council for Community and Economic Research. Tax rankings, based on Kiplinger’s Retiree Tax Map, divide states into five categories: Most Friendly, Friendly, Mixed, Not Friendly and Least Friendly.

10 Best States for Retirement

10. Wyoming

Total population: 570,134

Share of population 65+: 12.7% (U.S.: 13.4%)

Cost of living: 6.4% above the U.S. average

Average income for 65+ households: $40,197 (U.S.: $48,665)

Retiree tax picture: Most Friendly

The Cowboy State is a particularly good destination for retirees looking to connect with nature. Wyoming’s unique landscape includes Yellowstone National Park, the Grand Teton mountain range and Snake River. Plus, you can keep a nice slice of earth all to yourself: Wyoming has the smallest population of any state in the country, with just six residents per square mile.

If you’d prefer some company, Cheyenne is Wyoming’s most populous city and home to the state’s largest hospital. It ranks ninth for successful aging among 252 small metro areas, according to the Milken Institute, an economic think tank that credits the capital city’s high ranking to its economic strength. In fact, the entire state has the third-lowest poverty rate in the U.S. among people age 65 and older (behind Alaska and New Hampshire). Wyoming is also one of Kiplinger’s 10 Most Tax-Friendly States for Retirees.

10. Wyoming

9. Kansas

Total population: 2.9 million

Share of population 65+: 13.5%

Cost of living: 1.8% above the U.S. average

Average income for 65+ households: $44,165

Retiree tax picture: Friendly

For some retirees, there’s no place like Kansas. The Sunflower State offers affordable housing and health care for the 65-and-older population. The median home value for this age group is $110,900 in Kansas, compared with the U.S. median of $164,400. And lifetime health care costs for a healthy 65-year-old couple retiring this year (and covered by Medicare parts B and D and a supplemental insurance policy) are expected to run about 5% less in Kansas than the U.S. average, according to research firm HealthView Services.

Topeka is particularly affordable, with overall costs for retirees coming in 6.4% below the national average. No wonder the capital city is popular with people age 65 and older, who account for 14.8% of its population. Plus, Lawrence, home to the University of Kansas’s main campus, is less than 30 miles away, close enough to take advantage of the amenities of college life. The university’s Osher Lifelong Learning Institute offers low-cost classes and special events designed for students age 50 and older. Also, KU’s Landon Center on Aging houses clinical and research facilities focused on the treatment of older adults.

9. Kansas

8. Iowa

Total population: 3.1 million

Share of population 65+: 15.1%

Cost of living: 0.2% above the U.S. average

Average income for 65+ households: $37,468

Retiree tax picture: Not Friendly

There are retirement destinations of all sizes to choose from in Iowa. For those looking to live in a big city on a small budget, Des Moines is a good choice thanks to living costs for retirees that fall 9.6% below average. Affordability is just one reason the Milken Institute ranked the state capital seventh out of 100 large U.S. metro areas for successful aging. Des Moines also boasts a strong economy, numerous museums and arts venues, and plenty of health care facilities specializing in aging-related services. For similar reasons, the Milken Institute ranks Iowa City first among small metro areas for successful aging. In addition, AARP named Cedar Rapids one of the 10 most livable midsize cities in the U.S. for people age 50+; nearby Marion made AARP’s top 10 for livability among small cities.

As such, it should come as no surprise that older residents account for an above-average portion of Iowa’s population, and an overwhelming majority of them are economically secure. The state’s poverty rate for people 65 and older is 7.4%, compared with 9.4% for the U.S. Iowa’s affordability surely helps. The state’s overall cost of living is on par with the nation’s, and housing and health care costs are well below average. Although the state is the least tax-friendly toward retirees among our top 10, Iowa did recently phase out state income tax on Social Security benefits.

8. Iowa

7. Hawaii

Total population: 1.4 million

Share of population 65+: 14.8%

Cost of living: 33.4% above the U.S. average

Average income for 65+ households: $66,288

Retiree tax picture: Mixed

Let’s get this out of the way: Hawaii is expensive. But for retirees who can afford it, it’s a paradise that can be worth every penny—and it’s not necessarily out of reach. As a whole, retirement-age residents of the Aloha State aren’t financially strapped. The average household income for Hawaii’s 65+ population is the highest of any of the 50 states. And the poverty rate for the same age group is 7.4%, well below the national 9.4% rate.

Housing can eat up a big chunk of a nest egg. Hawaii’s median home price for residents 65 and up is the highest in the country at $541,600, more than three times the national median. And state capital and tourist hub Honolulu, on the island of Oahu, is one of the most expensive U.S. cities to live in. Retirees will get more bang for the buck on the island of Hawaii, also known as the Big Island, where the median home value for 65+ residents is a more reasonable $304,500 and rental costs are about on par with the rest of the nation. Areas to consider on the Big Island include Kona, Waimea and Hilo. And no matter where they live in Hawaii, retirees can at least save on some taxes: Social Security benefits and most other pension payouts are exempt from state income taxes.

7. Hawaii

6. Arizona

Total population: 6.5 million

Share of population 65+: 14.4%

Cost of living: 6.2% above the U.S. average

Average income for 65+ households: $43,628

Retiree tax picture: Most Friendly

The Grand Canyon State, with its ample sunshine and beautiful desert landscape, is a popular retirement destination. Prescott, located 100 miles north of Phoenix, has a particularly abundant population of 65-and-older residents, who make up a whopping 24.3% of the metro area’s total. And while the state has slightly above-average living costs, Prescott is one of our Cheapest Places Where You’ll Want to Retire. Its retirees tend to spend 2.1% less than average on living expenses. Younger retirees might consider Peoria, a suburb of Phoenix that rates as one of our Best Cities for Early Retirement.

Retired residents throughout the state can also save on taxes. Arizona is one of Kiplinger’s 10 Most Tax-Friendly States for Retirees. The state exempts Social Security benefits from taxes, as well as a portion of some other types of retirement income. Plus, you won’t face an inheritance or estate tax.

6. Arizona

5. South Dakota

Total population: 825,198

Share of population 65+: 14.5%

Cost of living: 0.1% above the U.S. average

Average income for 65+ households: $37,102

Retiree tax picture: Most Friendly

Safety and affordability are two good reasons to retire to South Dakota. Crimes occur at much lower rates in the state than they do across the country. The median home value for residents age 65 and older is just $111,300, about one-third less than the U.S. median. And lifetime health care costs for an average, healthy 65-year-old couple in South Dakota are expected to total nearly $25,000 less than the national average. A favorable tax environment with no state income tax adds to the attractiveness.

Both Sioux Falls and Rapid City rank among the five best small metro areas for successful aging, according to the Milken Institute, coming in second and fifth, respectively. The cost of living for retired people in the former is a bit better, at 1.9% below average, while it’s just below average in the latter. Young retirees may be particularly happy in Sioux Falls with its large population of 45- to 64-year-olds. AARP named Sioux Falls one of the 10 most livable midsize cities in the U.S. for people age 50+, citing the 25-mile walking and biking trail that loops the city. And you’ll be sure to lure the grandkids for a visit with the promise of a day trip to the Mount Rushmore State’s famous memorial.

5. South Dakota

4. Pennsylvania

Total population: 12.7 million

Share of population 65+: 15.8%

Cost of living: 14.8% above the U.S. average

Average income for 65+ households: $43,356

Retiree tax picture: Friendly

Economic stability holds the poverty rate of older residents of the Keystone State down to 8.3%, compared with 9.4% for the U.S. And crime rates are safely below average. Though the overall cost of living is above average, housing for people 65+ is reasonably priced. The median home value is $149,300 for this age group, or $15,100 below average. Plus, Pennsylvania’s tax laws help offset some costs for retirees: Social Security benefits and payouts from 401(k)s, IRAs, deferred-compensation plans and other retirement accounts are all tax-exempt.

Retirees on a budget will like Pittsburgh. Rated as one of our Cheapest Places Where You’ll Want to Retire, the metro area’s cost of living for retired people falls 3.7% below the U.S. average. And don’t let the city’s Rust Belt reputation fool you. Enjoy cultural attractions such as the Andy Warhol Museum and the Pittsburgh Ballet Theatre, a vibrant jazz scene, as well as all the offerings of local universities including Duquesne, Carnegie Mellon and Pitt. State College, home to Penn State, is another great university town in Pennsylvania to consider for retirement. But if your heart is set on a major East Coast city, opt for Philadelphia. AARP named it one of the 10 most livable big cities in the U.S. for people age 50+, highlighting the free (or reduced) transit fares for residents 65 and over.

4. Pennsylvania

3. West Virginia

Total population: 1.9 million

Share of population 65+: 16.5%

Cost of living: 2.0% below the U.S. average

Average income for 65+ households: $37,788

Retiree tax picture: Friendly

Why retire to the Mountain State? John Denver said it best. For retirees hoping to explore the outdoors, West Virginia is almost heaven with its Blue Ridge Mountains and Shenandoah River. If that’s not enough to get you singing “take me home,” perhaps the low cost of living can entice you. For homeowners age 65 and older, the median home value is just $91,400, tied with Mississippi for the lowest in the nation. Rental costs are also rock-bottom for retirees.

Morgantown offers a downtown Main Street to take you off the country roads and give you a small taste of city living. You can enjoy an array of restaurants and pubs, art galleries, and boutique shops. Home to West Virginia University, Morgantown offers residents the opportunity to take in all the concerts, theater performances and sporting events hosted by the school. Plus, the college town provides an excellent health care system and low hospital costs, according to the Milken Institute.

3. West Virginia

2. Florida

CharlotteHarborTravel.com

Total population: 19.1 million

Share of population 65+: 17.8%

Cost of living: 4.6% above the U.S. average

Average income for 65+ households: $45,144

Retiree tax picture: Most Friendly

Nearly 3.4 million older residents can’t be wrong. Florida is famous for its retiree-haven status and boasts a population with the greatest abundance of people age 65 and up in the country. The warm weather and beautiful beaches may not hurt the state’s appeal to people of a certain age, but the tax picture is surely the main attraction. Florida has no state income tax, estate tax or inheritance tax, and it doesn’t tax Social Security or other retirement income.

The Sunshine State may be an obvious retirement destination, but picking where to retire within Florida will prove more difficult. The state is packed with good, affordable options, including Fort Myers, Sarasota and Tampa along the Gulf and Vero Beach on the Atlantic side. And Gainesville is a great college town for retirement. But Punta Gorda tops our rankings for Cheapest Places Where You’ll Want to Retire. The share of Punta Gorda’s population age 65+ is a robust 34.5%, and the cost of living is 3.8% below average for retired people.

2. Florida

1. Delaware

VisitDelaware.com

Total population: 908,446

Share of population 65+: 14.9%

Cost of living: 6.4% above the U.S. average

Average income for 65+ households: $47,860

Retiree tax picture: Most Friendly

The First State is tops for retirees. Delaware’s population includes a great number of residents who are 65+, and the retired set can enjoy a life unburdened by heavy taxes. One of Kiplinger’s 10 Most Tax-Friendly States for Retirees, Delaware levies no sales tax and modest income taxes, from which Social Security benefits are exempt. Plus, it’s relatively affordable compared with nearby New Jersey (with living costs 21.4% above the national average), Connecticut (33.4% above average) and New York (52.7% above average), one of our worst states for retirement.

Oceanside cities such as Bethany, Dewey and Rehoboth may be attractive, but they come with living costs between 49.4% and 81.9% above the national average. A more affordable choice: Milford. The small inland city is less than an hour north of the popular beach towns and has living costs just 5.2% above average, according to Sperling’s Best Places. With a population of about 10,000 people, Milford straddles the Mispillion River. Along with the river walk and park, you can find numerous restaurants, boutiques and festivals in the downtown area. It’s also just about an hour south of Wilmington, the state’s largest city, and all its amenities, ranging from museums and galleries to gambling and wineries. Regular Amtrak service via Wilmington can get you to New York or Washington in less than two hours and to Philadelphia in less than half an hour.

But you can stay in town for quality health care. Bayhealth Milford Memorial offers an array of inpatient and outpatient services, ranging from a cancer center to a joint-replacement facility.

Larry Light – Contributor

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People change jobs. But what should they do with the retirement account from the previous employer? Barry Glassman, CFP, the founder and president of Glassman Wealth Services in Reston, Va., has some solid advice on this important subject:

It’s a question my clients ask me all the time: “What should I do with my old 401(k)?” When you change jobs, you can keep your 401(k) where it is, or roll it to other accounts.

Let’s examine your choices:

Roll your 401(k) to an individual retirement account is usually the default option I recommend to clients. Flexibility is the primary reason.

Many 401(k) plans have limited mutual fund options, and those funds, often times, have higher management fees than IRAs. You can open an IRA at many custodians such as Charles Schwab, Fidelity and Vanguard, and have virtually unlimited investment options.

You can simplify with low-cost index funds, invest in active mutual funds or exchange-traded funds, or even pick individual stocks for your portfolio.

Roll your old 401(k) to the new 401(k) if you’re happy with your new employer’s plan and options. Consult with your new human resource department to confirm that rollovers are permissible. Keeping all your retirement assets in one account makes it easier to manage.

Keep your 401(k) with your former employer if it is a terrific plan with lots of investment options. But some previous employers may charge you extra administrative fees, which can eat into your overall return.

Now you know your options. But before making your rollover decision, take these factors into account to avoid mistakes that could result in higher taxes, penalties and fees.

1. Your age. Once you turn 70½, you must begin withdrawals from a traditional IRA, even if you don’t retire. Your 401(k) is not subject to this rule as long as you continue to work. So if you’re over 70½ and still working, a 401(k) is advantageous in reducing your taxable income.

2. Company stock. If you roll company from a 401(k) stock to an IRA, the entire gain is taxed at your ordinary income tax rate when you withdraw it.

However, if you have a triggering event, like turning 59½ or losing your job, you can move the company stock to a taxable account, and roll the rest of the account into an IRA. You must pay ordinary income tax on the basis of the stock upon transfer, but the growth over the basis (the net unrealized appreciation) is taxed at the more favorable capital gains rate only when you sell the stock.

3. Roth option. If you have a pre-tax 401(k) and a Roth 401(k), it’s important to keep those dollars segregated when rolling over to IRAs. Make sure you establish two accounts: a traditional IRA for the tax-deferred 401(k) dollars and a Roth IRA account for the Roth 401(k).

4. Creditor protection. In some states, 401k plans offer better creditor protection than IRAs. So if debt is a concern, you may want to keep the funds where they are.

5. Don’t take the easy way out. Probably the biggest mistake you can make when leaving a job is cashing out your old 401(k). Often times, people, especially younger employees, see their retirement dollars as a windfall to spend. They leave a company and cash out whatever dollars they saved in their retirement accounts. Not only does this create taxable income and a 10% penalty, but puts them behind in their retirement savings. It’s difficult to make up that savings deficit as people get older.

Leaving a job, whether retiring or just moving to the next opportunity, can be a hectic and scary time. Relax, keep things simple and work with your financial advisor to decide what makes the most sense for you and your retirement.

Declining at a clip of nearly 1¢ per day.

Brad Tuttle @bradrtuttle Jan. 14, 2016

To view original article click here.

The national average for a gallon of regular gasoline dipped to $1.937 on Thursday, according toAAA. Average prices are down 6¢ over the past seven days, as drivers in every state in the country have benefited from increasingly cheaper prices.

For the sake of comparison, average per-gallon prices were 16¢ higher a year ago at this time—when we were all gobsmacked athow cheap gas prices were. Here’s another way to put this into perspective: Remarkably, the price of a gallon of regular averaged $3.60 for all of 2012, or $1.64 more than it is right now. For 2016 as a whole, experts like GasBuddy are forecasting an average of a mere $2.28 per gallon, down from $2.40 in 2015.

Cheap prices at the pump are obviously great for American drivers, who saved $550 on average last year, and who will spend even less on gas in 2016.

What could be wrong with this? Well, some have pointed out that the money Americans save on gasoline is being spent rather than saved or used to pay down debt. And it’s being spent in ways that aren’t exactly good for us. Namely, we’re spending a disproportionate amount of the gas savings on things like fast food, tobacco, alcohol, and (in some cases)gambling.

Gas prices have also had significant effects on automakers. On the one hand, cheap gas is great for automakers, who have credited prices at the pump as part of the reason that there were record-high sales in 2015, including particularly strong sales for pricey (and fuel-inefficient) SUVs and trucks.

On the other hand, however, things have become extremely complicated for automakers because cheap gas is at odds with long-established goals of increasing fuel economy and shifting to electric and other alternative-fuel power.

When gas is only $1.50 or $2 a gallon, drivers have little financial incentive to seek out vehicles that run on little or no fuel—not if it means other sacrifices, like less space and power, limited driving range, and higher initial prices. Hence, the rise of SUV sales and a corresponding fall-off in sales of electric cars and fuel-efficient hybrids like the Toyota Prius.

In 2012 (when gas prices averaged $3.60 remember), U.S. regulators established the goal of nearly doubling fuel-efficiency of new vehicles, with automaker fleets expected to average 54.5 mpg by 2025. For a while, average fuel economy crept upwards. But then, as gas prices tanked in 2015 and mileage became less of a priority for car buyers, average mpg for new cars plateaued and even declined a little.

The trends put automakers in an awkward spot, facing the contradictory pressures of churning out popular SUVs to meet the demands of today’s drivers while simultaneously planning for a rapidly approaching future expected to be dominated by electric cars and car sharing.

“Over the weekend I saw the lowest gas prices I’ve seen in a long time, at $1.68 — that’s a world of hurt for selling electric and selling efficiency,” Mark Wakefield, of AlixPartners, explained this week to Bloomberg News. “Now you have consumers at odds with regulators, and, stuck in the middle, is the auto industry.”

For the time being, it looks like automakers have little choice but to keep playing both sides of the equation. They’ll keep pumping up SUVs and trucks to maintain strong sales in the era of cheap gas and a preference for larger, higher vehicles. Yet they’ll also keep pursuing futuristic models likeVW’s electric micro-bus BUDD-e and Chrysler’s electric minivan because, well, this is where the market’s heading in the future.

That future, in which self-driving cars and more car sharing are expected to be realities, “will clearly favor EVs,” IHS Automotive analyst Egil Juliussen told Automotive News. “That’s a big reason why you’re seeing so much activity in the EV space even though the market so far has been a bit of a disappointment.”

Advisors need to understand they can’t go it alone.

I recently had an eye-opening exchange with a fellow advisor at an industry conference. On the surface, he was like so many others in this space, having started a prosperous solo practice and possessing an insatiable drive to serve clients and build his business. Professionally, everything seemed in place for him and he looked to have a bright future.

But as he told me a few years back, his prospects didn’t always look so great after he was diagnosed with cancer – which, as you might imagine, temporarily turned his life upside down. Upon hearing the news, naturally his concern immediately turned to his family: What would they do without him? Thankfully, years earlier he had taken out an insurance policy and already had an estate plan in place. That put his mind at ease a bit.

Then, he thought about what would happen to his business, and in what turned out to be a strange twist, a good diagnosis from his doctors almost became a major hiccup for his practice. Because the cancer was detected early, it was eminently treatable and a full recovery was expected. That was the good news.

The bad news, however, was that he did not have a contingency plan that would cover him in the event of a temporary disability caused by sickness or a major accident. Luckily for him, he bounced back much quicker than his doctors initially thought, allowing him to save nearly all of his client relationships. Had he been sidelined much longer, though, he could have lost his clients, his business and, ultimately, his livelihood.

According to a recent fact sheet compiled by the Social Security Administration, most Americans believe there is only a miniscule chance that a disability will prevent them from working for three months or more at some point during their career. But the actual odds are close to 25 percent. That’s too great a risk to take for any advisor, especially if you have a small or solo practice. Here are some top things to look for in a contingency plan partner, someone who can help keep your business afloat and take care of your clients in the event you become disabled on a temporary basis:

Make sure they are within the same broker-dealer and custodial network.This will make the transition as seamless as possible for your clients, who will have access to the same set of services, investment solutions and products via your contingency plan partner. Among other things, it also means clients won’t be burdened with troublesome logistical items such as repapering, only to have to go through the process again once you are fully recovered – which would be an enormous waste of time for all parties.

Team with a large group. Typically, it’s not a good idea to have a contingency plan partner that is also a solo practitioner or part of a small team, since they are unlikely to have the excess bandwidth necessary to absorb an entirely new roster of clients, even if it is just for a short time. As such professionals can attest, the day-to-day grind of running a small business can be difficult, and with only so many hours in the day and limited administrative support it makes an already delicate task almost impossible. The best contingency plan partners, therefore, have a large team of advisors and extra administrative resources to handle the swell of temporary work when you are away.

The same culture, same investment approach. Just as clients need to be comfortable with you, you need to be comfortable with whomever you entrust to take over your business, both from a service and investment approach standpoint. Essentially, the only question you need to ask is this: Would you do business with this advisor if you were the client? If the answer is no, continue your search. It could require some vetting and a lengthy get-to-know-you process to find the right fit. But if your partner is not an effective steward of your business, you will lose clients.

Someone younger but qualified. As a practical matter, your contingency plan partner should probably be younger than you – or at the very least someone that is not planning to retire in the near future – and in good health. This is just being smart and playing the percentages. (After all, this is your backup plan, and you want to make sure they aren’t going anywhere). And in keeping with the above, they need to be professional, knowledgeable and capable of delivering world-class service and advice. Finding someone who meets all these criteria can be a delicate balance. But if you find the right fit, as an added plus there’s no reason this relationship cannot form the basis of a succession plan when it comes time to retire and sell your firm.

Advisors need to understand they can’t go it alone. Indeed, much like you should never have to go through a personal trauma alone, professional headaches should not be something you have to confront by yourself either. If you do not have a contingency plan, take the steps to get one today, because if you wait till it’s absolutely necessary, that’s when it is too late.

Steven Dudash is President of IHT Wealth Management (www.ihtwealthmanagement.com), a Chicago-based firm.

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To view original article from First Trust Economics Blog click here.

The stock market is not the economy, and the economy is not the stock market. Nonetheless, many are convinced that the market correction of the past few weeks is a certain sign of impending recession. Never mind that China just reported 6.9% real GDP growth. Never mind that a barrel of oil costs less than $30, which means consumers are saving hundreds of billions of dollars per year on top of what the drop in natural gas prices has saved them.

And in just 10 days, the US will report another quarter of Plow Horse economic growth. Right now we estimate real GDP grew about 1% at an annual rate in Q4. It’s below trend, but that’s nothing new. Since mid-2009, real GDP has had six other quarters with less than 1% growth. The US economy grew only 0.9% for a full year from mid-2012 to mid-2013.

Inventories were the real challenge for GDP in Q4. Working off those inventories slowed manufacturing, rail traffic and transportation. But “right-sizing” inventories is not likely to be a persistent problem. Excluding inventories, trade, and government – none of which can be counted on for long-term growth – the economy probably grew close to a more respectable 2% rate.

Real (“inflation-adjusted”) consumer spending grew at a 1.5 – 2.0% rate in Q4, while home building likely grew at a solid 9% rate. Consumers’ financial obligations, the share of their after-tax incomes they need to make recurring payments (mortgages, rents, car payments, student loans…etc.) is hovering at its lowest levels since the early 1980s. Meanwhile, more jobs, mildly accelerating wages, and lower fuel prices mean consumers are in pretty darn good shape.

And as much as home building has recovered, there’s still much further to go. Back in 2009-11, housing starts were running at an average annualized pace of about 600,000. Last year, builders started about 1.1 million homes. But fundamentals, like population growth and “scrappage” (voluntary knock-downs, fires, floods, hurricanes, tornadoes, earthquakes…etc.) suggest a “norm” of about 1.5 million.

In other words, Consumer spending and homebuilding look poised for solid growth in 2016.

But, hey, this ain’t a perfect world. Over the past several years, some of the world’s production facilities focused too much on generating raw materials for China and finding new oil. Now, they face creative destruction. Much of the pain these producers will face is hitting right now.

But stop and think about the rest of the world that now gets to enjoy lower oil prices. Just two years ago, the leading experts were forecasting around $100 oil as far as the eye can see. Non-energy producers are benefiting hugely from cheap oil, and are generating new goods and services that cost less as a result. So, it’s not all bad news on the drilling and mining front.

Still, Donald Trump’s populism is stirring up support for slapping huge tariffs (maybe 45%) on China. This is a tax that will ultimately be paid by the populace. So much for populism! But, Congress would most likely prevent such an unwise tax.

And don’t forget growing geopolitical turmoil. The Spratly Island dispute with China may be a harbinger of ill winds if the US continues to step down from its ability and willingness to project military power. And Russia’s economy stinks, so “wagging the dog” and flexing muscles in the Baltics like it did in the Ukraine can’t be ruled out. Will the US balk at its NATO obligations if this happens?

Worst of all is the Middle East. There’s a whiff of World War I in the air with regional powers picking sides. Who knows what would happen if some young Kurd is able to assassinate the leader of Turkey.

But, chances are that all these scare stories will just be added to the long list of other stories the markets have confronted the past several years. Remember the impending implosion of commercial real estate or the European financial system? Remember Greece leaving the Euro? Remember, the “hidden inventory” of unsold homes about to hit the US market?

US equities were relatively cheap before 2015 started and even cheaper today. We recommend keeping a stiff upper lip, and waiting for pessimistic investors to realize their mistake. Even with more rate hikes coming, the US stock market is still significantly undervalued.

Brian S. Wesbury – Chief Economist
Robert Stein, CFA – Deputy Chief Economist

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