Michael Patryn, co-founder of the now-defunct Quadrigacx cryptocurrency exchange, has been compelled by Canadian officers to explain the origin of his wealth. Patryn must explain how he acquired a stash of 45 gold bars, more than $180,000 in cash, and a jewelry set with a diamond-studded Rolex watch. Quadrigacx Cofounder Must Explain 45 Gold Bar […]
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Savers who put money into traditional IRAs and 401(k)s get a nice tax break. Contributions up to an annual limit exempt some of your earnings from taxes, so if you fund one of these accounts, you get to not only set money aside for retirement, but pay the IRS a little less.
But because your contributions to a traditional IRA or 401(k) plan go in on a pre-tax basis, the IRS wants you to leave your money alone long enough for it to serve as income for retirement. As such, there’s a 10% early withdrawal penalty that generally applies to distributions from these accounts taken prior to age 59 1/2.
Now there are a few exceptions. IRAs, for example, allow you to withdraw up to $10,000 to purchase a first-time home. You can also tap an IRA early to pay for higher education.
Image source: Getty Images.
But even if you’re able to take an IRA or 401(k) withdrawal without incurring a penalty, doing so prior to actual retirement could hurt you in a very big way. Here’s why.
Clearly, a 10% early withdrawal penalty has the potential to cause you financial harm. But even if you’re able to avoid that penalty, raiding your IRA or 401(k) might harm you financially in another way.
The money in your IRA or 401(k) shouldn’t just sit in cash. Ideally, you’re investing that money so your balance grows nicely over time. As such, any dollar you remove from an IRA or 401(k) early is money you can’t keep investing. And the consequences there could be huge.
Let’s say you take a $10,000 withdrawal from your IRA at age 35 to purchase a home. But let’s also assume you then don’t retire until age 70. Furthermore, let’s assume that your IRA portfolio delivers an average annual return of 8%, which is a bit below the stock market’s average.
By missing out on the opportunity to earn 8% on your $10,000 withdrawal over 35 years, you’re losing out on almost $148,000 of retirement income. That could potentially constitute a few years’ worth of bills for your senior self, depending on what your costs turn out to be.
Once you turn 59 1/2, you can remove funds from your IRA or 401(k) without having to worry about a penalty. But even then, it’s important to be careful.
Let’s say you’re thinking of removing $20,000 from your 401(k) to renovate your home at age 60. That money is yours free and clear of penalties. But let’s also assume you’re not retiring until age 68, and that your portfolio delivers a yearly return of 6% in your 60s (since, by then, it’s good to shift to more conservative investments).
Losing out on a 6% return on $20,000 over eight years means missing out on about $32,000 in retirement income. That’s still a notable sum. It could, for example, end up being money you need to pay for healthcare down the line.
The fact that the IRS imposes early withdrawal penalties on IRAs and 401(k)s is actually sort of a good thing, since it may be the factor that helps you stay disciplined and avoid tapping your savings prematurely. But even if you’re able to avoid a penalty, it still pays to try not to take a withdrawal from your IRA or 401(k) until you’re actually retired and absolutely need that money.
Transitioning from the middle class to a wealthier status involves more than just an increase in income; it encompasses a broad range of financial behaviors, assets and mindsets. Key indicators of this transition include diversifying income streams beyond a primary job, such as through rental income; dividends from investments; or side business profits. This diversification strategy is crucial for building wealth and suggests a move toward financial independence.
Investing in assets like real estate or stocks that consistently contribute to your income signifies a departure from middle-class financial limitations. The reduction or absence of debt, coupled with the growth of assets that generate passive income, marks a significant step towards accumulating wealth. This transition is often evidenced by a substantial increase in net worth, sometimes reaching into the millions, as these assets grow over time.
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A net worth exceeding $2 million is frequently cited as a threshold for wealth, though this figure can vary based on individual circumstances and lifestyle choices. True wealth encompasses more than just a high income or substantial net worth; it includes financial freedom and the capacity to maintain a desired standard of living without compromising financial security.
Shifting towards passive income is a critical step for those moving from the middle class towards greater wealth. It involves creating income sources that do not require active daily effort, such as rental properties, dividends from investments or earnings from a business that does not demand constant hands-on management.
This strategy is not merely about augmenting your income; it’s a fundamental change in how you generate wealth, indicating a move towards financial independence. Passive income allows for the accumulation of wealth over time, offering a buffer that can lead to a more secure financial future and is indicative of a strategic approach to achieving long-term financial goals.
Creating a successful business or venture that consistently generates income is a clear indication of moving towards greater wealth. This success is usually supported by consistent growth in savings and investments, underscoring the importance of a solid financial foundation and the strategic accumulation of wealth.
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Trending: Can you guess how many Americans successfully retire with $1,000,000 saved? The percentage may shock you.
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Having a team of financial advisers, accountants and legal advisors is crucial for those transitioning from the middle class to richer statuses. These professionals provide strategies to optimize investments and minimize tax liabilities, facilitating greater wealth accumulation and offering guidance on navigating the complexities of financial growth.
A significant change in lifestyle and mindset towards prioritizing financial success, viewing money and time from a different perspective and the ability to enjoy leisure without financial concern are hallmarks of this transition. Such shifts reflect a deeper, strategic approach to wealth management, focusing on long-term security over immediate gains.
Understanding and employing tax-efficient strategies, along with investments in additional real estate beyond a primary residence, showcase financial sophistication. Entrepreneurial initiatives and the creation of multiple income streams further signal a proactive approach to wealth building, demonstrating a comprehensive shift in managing and sustaining wealth.
The journey from middle class to a wealth is marked by a series of strategic decisions and changes in financial behavior, asset management and mindset. This transition reflects not just an improvement in financial standing but a fundamental shift in the approach to accumulating and managing wealth, emphasizing the importance of diversification, investment and strategic planning in achieving financial independence and security.
Even if you’re not yet rich by societal standards, consulting with a financial adviser can be an important step in reaching your own personal financial goals. A financial adviser can provide tailored advice that aligns with your unique circumstances, aspirations and risk tolerance. Whether it’s building an emergency fund, planning for retirement, investing in the stock market or saving for a home, a financial adviser can help you navigate the complexities of financial planning, ensuring you’re on the right path to achieving your personal version of financial success.
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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.
Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty or undertaking, stated or implied, as to the accuracy or completeness of the information.
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I’m in my early 30s and I have $30,000 in a 403(b). Saving for retirement has always been a priority, but paying for the day-to-day expenses has kept me from putting more money away for the future.
I’m looking to go back to school, but the total cost would be $20,000 ($5,000 required every six months). I’m not sure if I should take a graduate loan, which would most likely be unsubsidized, or if I should take a hardship distribution or loan.
I don’t have any student debt, and I’m worried about the interest rate if I were to take out a graduate loan. I’ll still be working throughout this extra education, and school will begin in April.
What should I do?
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com.
Going back to school can be a really rewarding endeavor, but saving for retirement while keeping up with everyday expenses isn’t easy, even for the most seasoned budgeter, and there are times in life when it feels difficult to do both. That said, it is possible to accomplish your goals.
Raiding your retirement account for a non-emergency — even for something as important as education — is typically frowned upon, especially if it’s a distribution and not a loan. Withdrawing such a large chunk from your 403(b) robs you of the potential investment returns you’d otherwise get if you left the money alone. You also have to pay taxes and penalties for an early distribution, which would eat into your retirement savings even more.
Let’s start with the student-loan option. An unsubsidized loan is obviously not ideal, since interest begins when you’re in school, but you do have options.
Federal loans are available to graduates or professional students, up to $20,500 per year. These loans have a fixed rate, but flexible repayment plans, which is better than the other way around. The current fixed interest rate is 7.05% for direct unsubsidized loans, according to Federal Student Aid.
To get a federal student loan, submit a FAFSA form (short for Free Application for Federal Student Aid).
You don’t need to go the federal-loan route, but if you decide you’d rather take out a private loan, proceed with caution and shop around. They tend to be more expensive than federal loans, and they’re not quite as flexible, warns the Consumer Finance Protection Bureau.
“Your private loan interest rate and monthly payment could change with little warning, and you will have fewer options for when and how much you repay,” the agency says. Also, try to conduct all of your credit inquiries within a two-week window, since multiple inquiries over a longer period of time can affect your credit score.
If you’re taking an unsubsidized loan, aim to begin debt repayments right away to avoid interest accruing while you’re learning. Look at your budget, and if you don’t have one, analyze your current cash flow instead. This doesn’t have to be an arduous process — simply look at all of the money you have coming in and going out every month for, say, the last two months or so, and see if you have extra money every month to put toward a student loan. If not, can you make any adjustments to the way you spend? The worst-case scenario would be that you put no money toward the loan until you graduate, in which case you’ll have a larger balance to pay off.
Now on to your retirement-plan options. A retirement-plan loan would probably be the first preference, even over a student loan, said Daniel Galli, a certified financial planner and principal of Daniel J. Galli & Associates, but there are caveats. First, this is assuming you can make the payments within five years, so that you avoid any taxes or penalties. Also — and this is a big one — you may be required to pay the loan back in full if you were to leave your place of employment, so check with your human-resources department to see what the rules are for your particular plan. Sometimes you can only pay back a retirement-plan loan in full or via the monthly payment (meaning you can’t put extra money like a tax refund towards the loan to lower the balance). Again, make sure you know what the terms are.
The loan would also be limited to half of your vested funds (or $50,000, whichever is less), so in your case you could take out a $15,000 loan and have a $5,000 shortfall to make up for, said Carol Fabbri, a certified financial planner and executive director of the Fair Advisors Institute, a financial-literacy organization. You do pay interest on retirement-plan loans, but it goes back into your own account. If you were to go this route, you could then take a student loan for the remaining $5,000, Fabbri said.
“She will still have money in her 403(b), so she won’t be starting from nothing when she begins saving for retirement again,” Fabbri said. “The downside is that she will have to pay the loan back in five years, including the time she is in school. This could put a lot of pressure on her.”
The hardship distribution is a last resort, Galli said. “If she has no or low income, this may be an option but otherwise, I’d avoid it,” he said.
It might help you to do a cost analysis of the straight distribution. For example, figure out what the interest rate would be on your student loan, and calculate what you’d ultimately pay in interest if you were to follow a specific repayment schedule. Then look at your retirement account — if you use a relatively conservative 5% rate of return over the same period, what could you potentially get if you kept the money where it is?
Let’s take this example. If you have $30,000 in your 403(b) with a 5% rate of return and no additional contributions over the next five years, you’re looking at about an $8,000 return at the end of that time period (in other words, $8,000 potentially lost, not including what you paid in taxes and penalties). Comparatively, if you take a $20,000 student loan for a five-year term with an interest rate of 7.05%, and assuming payments begin immediately, the total amount of interest is a little less than $4,000. Those figures can change, based on market volatility, the interest rate and terms of your loan and the amount you pay every month toward your loan, among other variable factors.
“The argument often made is that the return you are earning within the account needs to be more than the student-loan payment to make financial sense to take a loan,” said Crystal McKeon, a certified financial planner and chief compliance officer at TSA Wealth Management. “However, I think the right attitude to take is any money in a retirement account is reserved for retirement unless you have some drastic situation.”
In short, the decision is of course entirely yours as to how you pay for your education, but try to think of the long-term impact of your decision. The good news: Going back to school is a great way to improve yourself, and it could help you make more money and pay yourself and your future.
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Payable on death (POD) and transfer on death (TOD) accounts both offer a unique mechanism for streamlining the transfer of assets when an account holder dies. Assets held in POD and TOD accounts swiftly pass to the named beneficiary, bypassing the often time-consuming and costly probate process. Despite their similar names and purposes, the POD designation only applies to bank accounts, certificates of deposit and savings bonds, while the TOD designation applies to investment accounts and other assets.
A financial advisor with estate planning expertise can be a valuable resource as you plan for the day when you’re no longer around.
A payable on death (POD) account is a type of bank account that eases the process of estate planning. In essence, a POD account allows the account holder to designate a beneficiary who will inherit the funds in the account upon the account holder’s death.
Also known as Totten trusts, POD accounts avoid probate, the legal process for validating a person’s will and distributing their assets under court supervision.
As an example, if a mother opens a POD account and names her son as the beneficiary, the son would automatically inherit the balance of the account upon her death without probate.
One of the key characteristics of a POD account is its adaptability. A wide range of account types and holdings can be designated as POD accounts, including:
Transfer on death (TOD) accounts can easily be confused with POD accounts, as both facilitate the transfer of assets upon the account holder’s death. However, they hold distinct types of assets. While POD accounts typically hold bank account funds, TOD accounts primarily contain securities and investment accounts.
For instance, assets like stocks, mutual funds and exchange-traded funds (ETFs) might reside in a TOD account, while POD accounts primarily hold savings or checking account funds. Beyond this distinction, TOD and POD accounts are quite similar.
Moving beyond the standard TOD accounts for securities and investment accounts, other types of assets can also carry TOD designations. These encompass real estate and vehicles, known as transfer on death deeds and transfer on death titles for vehicles, respectively. Like TOD accounts, these designations aim to facilitate a direct transfer of these assets to designated beneficiaries upon the owner’s death, bypassing probate.
However, a crucial point to remember is that the acceptance and regulations concerning TOD accounts and designations can differ across states. This variation underlines the importance of seeking legal advice or conducting comprehensive state-specific research before establishing a TOD account or designation. Understanding the specific regulations in your state can help avert potential legal complications and facilitate a smoother transfer of assets.
Understanding how to add these POD and TOD designations to your accounts is vital when striving for a more efficient distribution of your assets following death. The first step in this process involves reaching out to your bank or brokerage firm to inquire about adding POD or TOD designations. These financial institutions usually provide specific forms for this purpose, typically titled “POD designation form” or “TOD designation form.” Filling out these forms usually entails providing the full legal name, address and Social Security number or tax ID number of the beneficiary.
Once these forms are completed, they should be returned to the bank or brokerage firm. In turn, the institution will update your account information with the new POD or TOD designations, thus legally binding the asset transfer upon your death.
The process of designating POD or TOD is not without legal considerations and regulations. Generally, anyone can be named as a beneficiary for a POD or TOD account, including minors, non-U.S. citizens and organizations.
However, the beneficiaries have certain responsibilities, such as providing a certified copy of the deceased’s death certificate to the bank or brokerage firm to facilitate the transfer of assets.
Designating beneficiaries of POD and TOD accounts is a simple and effective estate planning strategy that can make things a little easier for your heirs when you pass away. However, there are some drawbacks and shortfalls of these accounts. Here’s a look at the pros and cons of POD and TOD accounts.
Probate avoidance: By sidestepping probate, POD and TOD accounts streamline the distribution of assets post-death, allowing beneficiaries to gain access to these funds with greater speed.
Simplicity: Setting up these accounts is generally straightforward, often requiring just the completion of a form at the bank or brokerage firm.
No additional cost: There’s usually no cost to establish these accounts, aligning with the needs of individuals seeking a cost-effective method of transferring assets.
Joint ownership complexity. When an account is jointly owned, the beneficiary of the account won’t receive the assets until the surviving owner(s) die. The same applies to accounts owned in states with tenancy by the entirety for married couples.
Naming alternative beneficiaries: These accounts do not allow for the nomination of alternative beneficiaries if the primary beneficiary or beneficiaries predecease the account owner. This could lead to the assets being subjected to probate if the primary beneficiary is no longer alive at the time of the account holder’s death.
Transfers only happen after death: These accounts stipulate that the person must pass away before the beneficiary can access the funds – a restriction that could prove troublesome if the beneficiary requires access to these assets during the account holder’s life or if the account owner becomes incapacitated during their lifetime.
Payable on death (POD) and transfer on death (TOD) accounts are effective estate planning tools designed to simplify the transfer of assets upon the account holder’s death by bypassing the probate process. POD and TOD provide flexibility and control, allowing for savings and investment accounts to be transferred seamlessly to a named beneficiary, respectively.
If you’re focused on avoiding probate, there are several estate planning strategies that you can employ to keep your assets out of this court-supervised process. Transferring assets to a living trust while you’re alive is one way to bypass probate, but it’s not the only approach that may work for you.
It’s important to enlist the help of professionals when you need it. A financial advisor with estate planning expertise may be able to guide you through this process. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Photo credit: ©iStock.com/shapecharge, ©iStock.com/kate_sept2004, ©iStock.com/stocknshares
The post Payable on Death Account vs. Transfer on Death Account appeared first on SmartReads by SmartAsset.
On Thursday night, Algorand CEO Staci Warden’s X Account (formerly known as Twitter) was compromised. Since then, the crypto community and the hacker have been having a back-and-forth conversation.
Algorand Foundation’s X account was the first to inform about the hack and advised users to be careful when interacting with the compromised account or any link promoted by it. The hacker then took Staci Warden’s compromised account to start a series of controversial posts and replies.
The hacker called Algorand’s community “poor” in the initial post, later suggesting it would be better for the community if they “sold ALGO and instead bought Ether.” Both posts have amassed a combined total of 150,000 views and, as it’s worth noting, contain racial slurs.
Additionally, the hacker offered a fake airdrop giveaway, claiming they would send “1 $ETH for every % $ALGO drops this week.” While following some users’ petitions, the hacker shared music and changed the account’s bio, claiming that Warden had exited Algorand Foundation and had become a “semi-professional pole dancer.”
Staci Warden's X Account biography was changed by the hacker. Source: X
Most notably, a fake story was shared in the account narrating a call with Tron founder Justin Sun, referred to as “his excellency” by the hacker. In the fake story, Sun promised to take Algorand to “new heights” under the condition that Algorand’s CEO gave total control over the network and allowed Sun to mint any token to back TRUE USD (TUSD).
A sarcastic comment insinuating that Sun’s projects will be the reason behind “the next major financial collapse in crypto” closed the story.
Just when I thought it was all over for Algorand — my phone rang — it was his excellency. Justin told me that he would boost Algorand to new heights by launching TUSD (TRUE USD) and VRUSD (VERY REAL USD) on Algorand, and all I had to do was agree to give him total control over… pic.twitter.com/Rr9K28uGwh
— staci.algo (@StaciW_DC) January 26, 2024
The original announcement about the hack and the different posts shared on the compromised account ignited comments from the crypto community. Most users took the incident with humor, while others have taken the opportunity to express their discontent with the CEO.
One user claimed that Algorand CEO “qualifies to be an intern” at the Securities and Exchange Commission (SEC), clearly referencing the recent hack to the SEC’s X account suffered and resulted in a false report about the approval of spot Bitcoin ETFs.
Similarly, known crypto sleuth ZachXBT shared his thoughts about the hack, “Unpopular opinion: Staci hacker would make a better CEO for Algorand Foundation.” To which the hacker jokingly replied, “Hey bro, I just send you $10,000. Keep up the good work for this industry, buy your mom some flowers, and take your father out for a nice dinner,” referencing a previous X post informing the crypto detective of a donation made about a week ago.
No further posts have been shared in the last hours, but the account appears to still be under the hacker’s control, as none of the posts have been taken down, and there’s no official statement about the account’s recovery.
As reported by NewsBTC, ALGO outperformed the general crypto market growth in Q4 2023, experiencing an increase in market capitalization, transaction volume, revenue, and user adoption. ALGO’s prince trades at $0.1652, a 3.18% surge in the last 24 hours.
ALGO is trading at $0.1652 in the hourly chart. Source: ALGOUSDT on TradingView.com
Featured image from Unsplash.com. Chart from TradingView.com
Disclaimer: The article is provided for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.
The Federal Bureau of Investigation (FBI) has joined an investigation into a security breach involving the SEC’s X account, Reuters said on Jan. 10.
An SEC spokesperson told Reuters:
“The [U.S. Security and Exchange Commission] continues to investigate the matter and is coordinating with appropriate law enforcement entities, including the SEC’s Office of the Inspector General and the FBI.”
Critically, that statement does not indicate the FBI is investigating the SEC — only that the FBI is working with the SEC on the investigation.
On Jan. 9, an unknown party accessed the SEC’s X profile and posted a false announcement in which the securities agency appeared to announce the approval of multiple spot Bitcoin exchange-traded funds (ETFs). SEC chair Gary Gensler and, later, the SEC itself denied the announcement. The SEC removed the false post from its X profile soon after those corrections were posted.
Later, X commented on the breach and said that an unknown individual accessed the SEC’s account by obtaining control of a linked phone number. Other sources have described the breach method as a SIM swap in line with X’s description.
An SEC spokesperson additionally told Reuters on Wednesday that the false announcement was neither “drafted or created” by the agency. That comment disproves speculation that the agency legitimately created the message in advance of anticipated ETF approvals and and simply published the announcement early.
Despite the breach and redaction, the SEC ultimately approved various spot Bitcoin ETFs in a public statement on Jan. 10.
A separate SEC filing additionally indicates that spot Bitcoin ETFs from eleven applicants have received approval. The agency was specifically required to decide on Ark Invest’s application today, Jan. 10, but simultaneously approved similar proposals.
The post FBI joins investigation into SEC X account compromise appeared first on CryptoSlate.
Bitcoin may now be used to determine the market value of goods and services in the region.
Bitcoin (BTC) has scored yet another big win in a special economic zone in Roatan, Honduras. Barely two years after adopting the cryptocurrency as legal tender, it has now also officially recognized it as a unit of account. That is, Bitcoin may now be used to determine the market value of goods and services.
According to the acting manager of Próspera’s ZEDE (Zone for Employment and Economic Development), Jorge Colindres, the move is an attempt to bring more financial freedom to residents of the region. Colindres, who is also a tax commissioner, shared this in a recent X post. He also mentioned that businesses within the Próspera zone stand to benefit from the development as well. The post reads:
“At @ProsperaZEDE we believe in the right to financial freedom and monetary freedom. People should be free to carry out transactions, do their accounting and report taxes in the currency of their free choice.”
Colindres also addressed the issue of tax liabilities of entities that choose Bitcoin as their unit of account. According to the commissioner, a “Final BTC Tax Payment Procedure” is not yet available. He noted that there are technicalities with its eGovernance system, at the time, that need taking care of. That is not to mention other issues bordering on external regulations.
However, pending the time those issues will be resolved, Colindres says that such entities that have made BTC their preference will see their tax liabilities determined using BTC. He added that this will be for internal accounting purposes only, but will be escalated to Próspera ZEDE in United States dollars or the Honduras lempira. Once resolved, entities may then report tax liabilities and even pay the corresponding tax dues to Próspera ZEDE in BTC.
Furthermore, Colindres has advised those interested in making BTC their unit of account to file a notice with the commission. They must do so within 30 days of the relevant tax period. The notice must also include a reference to any approved cryptocurrency exchange, such as Coinbase or Kraken.
It might be worth noting that the Central Bank of Honduras denied reports of Bitcoin being approved as legal tender.
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I have a pension worth $1.5 to $2 million depending on my and my wife’s longevity. It passes to her when I die, and she is six years younger. I am still working part time, and earn about $75,000 a year. I plan on retiring in 1.5 years when I reach my Full Retirement Age. We have zero debt and newer vehicles so I don’t anticipate any major expenses in the next few years.
Our investment portfolio, which I manage, is worth about $975,000 with some moderate and higher-risk investments with an asset allocation of 90% stocks and 10% bonds. I’m debating on drawing Social Security at my FRA and investing some of that rather than waiting until I am 70 to draw. I can also start drawing from some of our investments rather than Social Security to increase that benefit amount.
We do not live an extravagant lifestyle, but we enjoy traveling domestically and overseas once a year. When I retire, if I draw Social Security and take 3% annually from our investment income, I anticipate my annual income to be $100,000; my wife will retire in three years and possibly draw her Social Security at that time.
What are your thoughts as far as a retirement strategy?
See: I’m 56 and have $3.4 million in assets. I’m semi-retired, but my spouse, 64, has no savings. How do we move forward?
Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
You’re in a great position for retirement, so kudos to you.
It’s great that you’re getting so granular with your retirement planning. Not everyone considers the balancing act it takes between Social Security and retirement-plan distributions, but that may be because many people simply must claim Social Security earlier than their Full Retirement Age, or FRA, to afford their cost of living. That being said, a lot of it will come down to running numerous projections.
There’s no crystal ball, unfortunately, but you can still make some well-informed calculations. Let’s start with your Social Security benefits.
You probably already know this, but you can get a decent estimate from the Social Security Administration itself as to what your benefits will be at FRA versus age 70. There will also be cost-of-living adjustments in the years to come. If you know what the base figures are, however, you can use that for benchmarks when comparing what you’d need from your investments.
Now let’s do a quick break-even analysis. In this example, if you started at 67, you’d be $64,800 ahead from if you started at 70 (the monthly benefit for three years). If you divide that figure by the excess monthly benefit for delaying ($432 per month), you would find it would take you 12.5 years to break even. The break-even analysis doesn’t consider COLAs or other factors, of course, but it does give you an idea of when your delayed benefits would surpass the benefits you would receive if you decided to take them at an earlier age. You can use it to compare to your expected life expectancy, which is another determining factor when choosing the time to claim Social Security benefits.
Other things to consider with delaying your Social Security benefits: I hate to use the word “guaranteed” for anything in retirement planning, but with Social Security, you can count on it being inflation-protected. Whether it’s a big annual increase every year is of course variable, since some recent years we’ve seen practically no COLA and others we’ve had a larger jump, but it’s more certain than investment returns, which rely on a market that can be volatile year to year.
The delay would also benefit your wife, who could see a larger survivor benefit because of the delayed retirement credits, should you predecease her.
However, if you were to claim Social Security at your FRA and not delay, you’d allow your retirement account to grow over time untouched.
I suggest going back to the basics and looking at what you actually need in retirement income, then providing yourself with numerous scenarios, ones in which you mix various claiming ages for Social Security with distributions from your pension and investments. Keep in mind the implication of taxes, investment returns, inflation rates (for your benefits as well as expenses). A qualified financial planner can help you with this if you want to get specific with the numbers.
As you enter retirement, you might want to reconsider your asset allocation so that it isn’t completely at the hands of market volatility — retirees need to strike a balance with conservative and aggressive assets so their investments continue to grow but they aren’t at risk of losing a huge chunk of it in a downturn — in which case a qualified financial planner could also assist.
Overall, you have something not many others have when entering retirement — a pension — and that provides you with an incredible amount of flexibility when adding in Social Security and an additional investment account. It’s great that you’re taking the distribution and claiming strategy so seriously. Now it’s just a matter of the specifics.
Also see: I’m 76 with $73,000 in an investment account that has not increased in 2 years. Should I abandon the 50/50 strategy?
Readers: Do you have suggestions for this reader? Add them in the comments below.
Cryptocurrency infrastructure firm Fireblocks has identified and assisted in tackling what it describes as the first account abstraction vulnerability within the Ethereum ecosystem.
An announcement on Oct. 26 unpacked the discovery of an ERC-4337 account abstraction vulnerability in the smart contract wallet UniPass. The two firms worked together to address the vulnerability, which was reportedly found in hundreds of mainnet wallets during a white hat hacking operation.
According to Fireblocks, the vulnerability would allow a potential attacker to carry out a full account takeover of the UniPass Wallet by manipulating Ethereum’s account abstraction process.
As per Ethereum’s developer documentation on ERC-4337, account abstraction allows for a shift in the way transactions and smart contracts are processed by the blockchain to provide flexibility and efficiency.
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Conventional Ethereum transactions involve two types of accounts: externally owned accounts (EOAs) and contract accounts. EOAs are controlled by private keys and can initiate transactions, while contract accounts are controlled by the code of a smart contract. When an EOA sends a transaction to a contract account, it triggers the execution of the contract’s code.
Account abstraction introduces the idea of a meta-transaction or more generalized abstracted accounts. Abstracted accounts are not tied to a specific private key and are able to initiate transactions and interact with smart contracts, just like an EOA.
As Fireblocks explains, when an ERC-4337-compliant account executes an action, it relies on the Entrypoint contract to ensure that only signed transactions get executed. These accounts typically trust an audited single EntryPoint contract to ensure that it receives permission from the account before executing a command:
“It’s important to note that a malicious or buggy entrypoint could, in theory, skip the call to “validateUserOp” and just call the execution function directly, as the only restriction it has is that it’s called from the trusted EntryPoint.”
According to Fireblocks, the vulnerability allowed an attacker to gain control of UniPass wallets by replacing the trusted EntryPoint of the wallet. Once the account takeover was complete, an attacker would be able to access the wallet and drain its funds.
Several hundred users who had the ERC-4337 module activated in their wallets were vulnerable to the attack, which could be performed by any actor on the blockchain. The wallets in question only held small amounts of funds, and the issue has been mitigated at an early stage.
Having ascertained that the vulnerability could be exploited, Fireblocks’ research team managed to carry out a white hat operation to patch the existing vulnerabilities. This involved actually exploiting the vulnerability:
“We shared this idea with the UniPass team, who took it upon themselves to implement and run the whitehat operation.”
Ethereum co-founder Vitalik Buterin previously outlined challenges in expediting the proliferation of account abstraction functionality, which includes the need for an Ethereum Improvement Proposal (EIP) to upgrade EOAs into smart contracts and ensure the protocol works on layer-2 solutions.
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