Tag Archives: retirement reality

Wise Decisions with Retirement in Mind

30 Nov
Photo by cottonbro on Pexels.com

Some retirees succeed at realizing the life they want; others don’t. Fate aside, it isn’t merely a matter of investment decisions that makes the difference. There are certain dos and don’ts – some less apparent than others – that tend to encourage retirement happiness and comfort. 

Retire financially literate. Some retirees don’t know how much they don’t know. They end their careers with inadequate financial knowledge, and yet, feel they can prepare for retirement on their own. They mistake creating a retirement income strategy with the whole of preparing for retirement, and gloss over longevity risk, risks to their estate, and potential health care expenses. The more you know, the more your retirement readiness improves. 

A goal to retire debt free – or close to debt free?  Even if your retirement savings are substantial, you may want to consider reviewing your overall debt situation.1 

Retire with purpose. There’s a difference between retiring and quitting. Some people can’t wait to quit their job at 62 or 65.  If only they could escape and just relax and do nothing for a few years – wouldn’t that be a nice reward? Relaxation can lead to inertia, however – and inertia can lead to restlessness, even depression. You want to retire to a dream, not away from a problem. 

The bottom line? Retirees who know what they want to do – and go out and do it – are positively contributing to their mental health and possibly their physical health as well. If they do something that is not only vital to them, but important to others, their community can benefit as well. 

Retire healthy. Smoking, drinking, overeating, a dearth of physical activity – all these can take a toll on your capacity to live life fully and enjoy retirement. It is never too late to change habits that may lead to poor health.

Retire where you feel at home. It could be where you live now; it could be a nearby place where the scenery and people are uplifting. If you find yourself lonely in retirement, then look for ways to connect with people who share your experiences, interests, and passions; those who encourage you and welcome you. This social interaction is one of the great, intangible retirement benefits.

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

Sources:

  1. CNBC.com, December 2, 2020

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

The Pros and Cons of Early Retirement Plan Rollovers

30 Aug

Did you know you may be able to take your 401(k), 403(b), or 457 plan and roll it into another type of retirement account while you are still working? Let’s look at how these rollovers can happen and the pros and cons of making them. 

To start, some basics. Distributions from 401(k) plans and most other employer-sponsored retirement plans are taxed as ordinary income, and if you take one before age 59½, a 10% federal income tax penalty commonly applies. In addition, 20% of the withdrawn amount is withheld for tax purposes. Generally, once you reach age 72, you must begin taking required minimum distributions.1

Now, the fine print. You may be able to take a distribution from your qualified, employer-sponsored retirement plan while still working, via an in-service non-hardship withdrawal. This is done by arranging a direct rollover of these assets to an Individual Retirement Account (IRA) in order to potentially avoid both the 10% penalty and the 20% tax withholding in the process. It’s important to note that this option is only available if allowed by your employer.2

It may be smart to speak to your financial professional before making any changes.

Generally, distributions from traditional IRAs must begin once you reach age 72. The money distributed to you is taxed as ordinary income. When such distributions are taken before age 59½, they may be subject to a 10% federal income tax penalty.

The criteria for making in-service non-hardship withdrawals can vary. Some workplace retirement plans simply prohibit them. Others permit them when you have been on the job for at least five years or when assets in your plan have accumulated for at least two years or you are 100% vested in your account.2

Weigh the pros and cons. Who knows if your reinvested assets will perform better in an IRA than they did in your company’s retirement plan? Only time will tell. Right now, you can put up to $7,000 into an IRA, annually, if you are 50 or older. The limit on annual additions, however, is much more impressive at $58,000 for 2021. Lastly, if your employer matches your retirement plan contributions, getting out of the plan may mean losing future matches.3

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

Sources:

1. IRS.gov, March 3, 2021

2. IRS.gov, March 3, 2021

3. IRS.gov, March 3, 2021

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

2021 Retirement Confidence Survey

25 Jun

Will your retirement dreams match your reality?

That’s perhaps the most critical question to ask people who are currently retired. Was your retirement what you expected, or was it something else?

For more than 30 years, the Employee Benefit Research Institute (EBRI) has conducted the Retirement Confidence Survey, which gauges the views and attitudes of working-age and retired Americans regarding retirement and their preparations for retirement.1

Part of the survey takes a deep dive into workers’ expectations for sources of income in retirement versus retirees’ actual income sources.

Here’s a couple of highlights of the 2021 survey.

Only 33% of workers expect Social Security to be a significant source of retirement income. In reality, 62% of retirees say it’s a major source.

Further, more than 50% of workers believe that workplace retirement savings plans will be a significant source of retirement income. But the 2021 survey found that workplace plans are a major source for only 20% of retirees.

Surprised? We’re not. These numbers are consistent year after year. Here’s another nugget to consider: 26% of workers plan to work for pay in retirement. In reality, only 7% of retirees do.

For most, retirement is the “next chapter” in life. It’s critical that your finances support your retirement vision, so there are no surprises when it’s your turn.

Let us know if there’s a change in your retirement dream. We’d welcome the chance to hear what prompted the difference, and we’ll be sure to make any needed adjustments in your financial strategy.

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Sources:

1. Employee Benefit Research Institute, 2021 Retirement Confidence Survey

Why Medicare Should be Part of Your Retirement Planning

22 Jun

Medicare takes a little time to understand. Certain features of Medicare can affect health care costs and coverage. Some retirees may do okay with original Medicare (Parts A and B), others might find it lacking and decide to supplement original Medicare with Part C, Part D, or Medigap coverage. In some cases, that may mean paying more for senior health care per month than you initially figured. As you approach age 65, familiarize yourself with its coverage options and their costs and limitations. We’ve aggregated some helpful information to get you started.

How much do Medicare Part A and Part B cost, and what do they cover? Part A is usually free; Part B is not. Part A is hospital insurance and covers up to 100 days of hospital care, home health care, nursing home care, and hospice care. Part B covers doctor visits, outpatient procedures, and lab work. You pay for Part B with monthly premiums, and your Part B premium is based on your income. In 2018, the basic monthly Part B premium is $134; higher-earning Medicare recipients pay more per month. You also typically shoulder 20% of Part B costs after paying the yearly deductible, which is $183 in 2018.1

The copays and deductibles linked to original Medicare can take a bite out of retirement income. In addition, original Medicare does not cover dental, vision, or hearing care, or prescription medicines, or health care services outside the U.S. It pays for no more than 100 consecutive days of skilled nursing home care. These out-of-pocket costs may lead you to look for supplemental Medicare coverage and to plan other ways of paying for long-term care.1,2

Medigap policies help Medicare recipients with some of these copays and deductibles. Sold by private companies, these health care policies will pay a share of certain out-of-pocket medical costs (i.e., costs greater than what original Medicare covers for you). You must have original Medicare coverage in place to purchase one. The Medigap policies being sold today do not offer prescription drug coverage. A monthly premium on a Medigap policy for a 65-year-old man may run from $150-250, so keep that cost range in mind if you are considering Medigap coverage.2,3

In 2020, the two most popular kinds of Medigap plans – Medigap C and Medigap F – will vanish. These plans pay the Medicare Part B deductible, and Medigap policies of that type are being phased out due to the Medicare Access and CHIP Reauthorization Act. Come 2019, you will no longer be able to enroll in them.4

Part D plans cover some (certainly not all) prescription drug expenses. Monthly premiums are averaging $33.50 this year for these standalone plans, which are offered by private insurers. Part D plans currently have yearly deductibles of less than $500.2,5

Some people choose a Part C (Medicare Advantage) plan over original Medicare. These plans, offered by private insurers and approved by Medicare, combine Part A, Part B, and usually Part D coverage and often some vision, dental, and hearing benefits. You pay an additional, minor monthly premium besides your standard Medicare premium for Part C coverage. Some Medicare Advantage plans are health maintenance organizations (HMOs); others, preferred provider organizations (PPOs).6

If you want a Part C plan, should you select an HMO or PPO? About two-thirds of Part C plan enrollees choose HMOs. There is a cost difference. In 2017, the average HMO monthly premium was $29. The average regional PPO monthly premium was $35, while the mean premium for a local PPO was $62.6

HMO plans usually restrict you to doctors within the plan network. If you are a snowbird who travels frequently, you may be out of the Part C plan’s network area for weeks or months and risk paying out-of-network medical expenses from your savings. With PPO plans, you can see out-of-network providers and see specialists without referrals from primary care physicians.6

Now, what if you retire before age 65? COBRA aside, you are looking at either arranging private health insurance coverage or going uninsured until you become eligible for Medicare. You must also factor this possible cost into your retirement planning. The earliest possible date you can arrange Medicare coverage is the first day of the month in which your birthday occurs.5

Medicare planning is integral to your retirement planning. Should you try original Medicare for a while? Should you enroll in a Part C HMO with the goal of keeping your overall out-of-pocket health care expenses lower? There is also the matter of eldercare and the potential need for interim coverage (which will not be cheap) if you retire prior to 65. Discuss these matters with the financial professional you know and trust in your next conversation.

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

 Sources:

1 – medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html [5/21/18]

2 – cnbc.com/2018/05/03/medicare-doesnt-cover-everything-heres-how-to-avoid-surprises.html [5/3/18]

3 – medicare.gov/supplement-other-insurance/medigap/whats-medigap.html [5/21/18]

4 – fool.com/retirement/2018/02/05/heads-up-the-most-popular-medigap-plans-are-disapp.aspx [2/5/18]

5 – money.usnews.com/money/retirement/medicare/articles/your-guide-to-medicare-coverage [5/2/18]

6 – cnbc.com/2017/10/18/heres-how-to-snag-the-best-medicare-advantage-plan.html [10/18/17]

Checklist for Managing Money Well as a Couple

24 May

When you marry or simply share a household with someone, your financial life changes – and your approach to managing your money may change as well. To succeed as a couple, you may also have to succeed financially. With a little communication, this is a very doable goal.

To start off, you will have to ask yourselves some money questions – questions that pertain not only to your shared finances, but also to your individual finances. Waiting too long to ask (or answer) those questions might carry an emotional price. In the 2017 TD Bank Love & Money survey consumers who said they were in relationships, 68% of couples who described themselves as “unhappy” indicated that they did not have a monthly conversation about money.1 So, grab your spouse (and maybe a glass of wine) and go through the questions below!

1. Talk about how you will make your money grow

Simply saving money will help you build an emergency fund, but unless you save an extraordinary amount of cash, your uninvested savings will not fund your retirement. Should you hold any joint investment accounts or some jointly titled assets? One of you may like to assume more risk than the other; spouses often have different individual investment preferences.

How you invest, together or separately, is less important than your commitment to investing. Some couples focus only on avoiding financial risk – to them, maintaining the status quo and not losing any money equals financial success. They could be setting themselves up for financial failure decades from now by rejecting investing and retirement planning.

An ongoing relationship with a financial professional may enhance your knowledge of the ways in which you could build your wealth and arrange to retire confidently.

2. Agree on how much will you spend & save

Budgeting can help you arrive at your answer. A simple budget, an elaborate budget, or any attempt at a budget can prove more informative than none at all. A thorough, line-item budget may seem a little over the top, but what you learn from it may be truly eye opening.

3. Decide how often you will check up on your financial progress

When finances affect two people rather than one, credit card statements and bank balances become more important, so do IRA balances, insurance premiums, and investment account yields. Looking in on these details once a month (or at least once a quarter) can keep you both informed, so that neither one of you have misconceptions about household finances or assets. Arguments can start when money misunderstandings are upended by reality.

4. Discuss the degree of financial independence you want to maintain

Do you want to have separate bank accounts? Separate “fun money” accounts? To what extent do you want to comingle your money? Some spouses need individual financial “space” of their own. There is nothing wrong with this, unless a spouse uses such “space” to hide secrets that will eventually shock the other.

Can you be businesslike about your finances? Spouses who are inattentive or nonchalant about financial matters may encounter more financial trouble than they anticipate. So, watch where your money goes, and think about ways to repeatedly pay yourselves first rather than your creditors. Set shared short-term, medium-term, and long-term objectives, and strive to attain them.

Communication is key to all this. In the TD Bank survey, 78% of the respondents indicated they were comfortable talking about money with their partner, and 90% of couples describing themselves as “happy” claimed that a money talk happened once a month. Planning your progress together may well have benefits beyond the financial, so a regular conversation should be a goal.1

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

Sources:

1 – newscenter.td.com/us/en/campaigns/love-and-money [1/2/18]

7 Reasons to Get Your Retirement Plan in Writing

30 Apr

Many people save and invest vaguely for the future. They know they need to accumulate money for retirement, but when it comes to how much they will need or how they will do it, they are not quite sure. They will “wing it,” hope for the best, and see how it goes. How do they know they are really contributing enough to their retirement accounts? Would they feel less anxious about the future if they had a written plan?

Make no mistake, a written retirement plan sharpens your focus. It can refine dreams into goals and express a strategy to pursue them. According to a Charles Schwab study, just 24% of Americans plan their financial futures according to a written strategy. Here is why you should join their ranks, if you are not yet among them.1,2

  1. You can figure out the “when” of retirement planning. When do you think you will retire and start drawing income from your taxable and tax-advantaged accounts? At what age do you anticipate you will start to collect Social Security? How long do you think you will live? No, you cannot precisely know the answers to these questions at this point – but you can make reasonable assumptions. Your assumptions may be altered, it is true – but a good retirement plan is an evolving document, one that can be revised with changing times.
  2. You can set a target monthly or annual savings rate. Once you have considered some of the “whens,” you can move on to “how.” Assuming a conservative rate of return on your invested assets, you can specify how much to defer into retirement accounts.
  3. You can decide on a risk tolerance and an investment mix that agrees with it. Ultimately, you will invest in a way that a) makes sense for your objectives and b) makes you comfortable. The investment mix that you decide on today may not be the one you will favor ten years from now or even three years from now. Regular portfolio reviews should complement the stated investment approach.
  4. You can think about ways to get more retirement income instead of less. Tax reduction should be part of your retirement strategy. Think about the possibility of part of your Social Security income being taxed. Think about tax on your Required Minimum Distributions (RMDs) from your IRAs and employee retirement plan. What could you do to manage, or even minimize, the income and capital gains taxes ahead of you?
  5. You can tackle the medical expense question. That is, how will you fund the medical care that you will inevitably need to greater or lesser degree someday? Should you assign part of your savings to a special account or form of insurance for that purpose? Retiring before 65 may mean paying for some private health insurance in the years before Medicare eligibility.
  6. You can think about your legacy. While a retirement plan should not be equated with an estate plan, the very fact of planning for your later years does make you think about some things: where you want your money to go when you are gone; your endgame for your company or professional practice; whether part of your accumulated wealth should go to causes or charities.
  7. A written plan promotes confidence and a degree of control. A 2017 Wells Fargo/Gallup survey determined that those with written retirement plans were nearly twice as confident of having sufficient retirement income in the future, compared to those with no written plan.3

If you lack a written retirement plan, talk to the financial professional you know and trust about one. Writing it all down may make a difference in planning for your second act.

 

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

 

 

Sources:

1 – kiplinger.com/article/retirement/T023-C032-S014-do-you-have-a-written-financial-plan.html [10/25/17]

2 – aboutschwab.com/images/uploads/inline/Charles_Schwab-Modern_Wealth_Index-findings_deck.pdf [6/17]

3 – time.com/money/4860595/how-to-retire-wealthy/ [7/18/17]

Do You Let These Emotions Affect Your Financial Decisions?

30 May

Have you ever made a financial decision that you later regretted? Think back. Chances are, you can pinpoint the emotion that led you to make the decision. Emotions are powerful influencers that can cause us to overreact – or not act at all when we should. Consider these common emotional mishaps to avoid.

Sudden reactions to Wall Street volatility. In a typical market year, Wall Street can see big waves of volatility. This year, it has been easy to forget that truth. During the first third of 2017, the S&P 500 saw only 3 trading days with a 1% or greater swing – or to put it another way, 1% swings occurred just 3.5% of the time. Compare that to 2015, when the S&P moved 1% or more in 29% of its trading sessions.1

The 1.80% May 17 drop of the S&P this year stirred up fear in some investors. The plunge felt earthshaking to some, given the placid climate on the Street this year. Daily retreats of this magnitude have been seen before, will be seen again, and should be taken in stride.2

Fear and anxiety that also cause stubbornness. Some people have looked at money one way all their lives. Others have always seen investing from one perspective. Then, something happens that does not mesh with their outlook or perspective. In the face of such an event, they refuse to change or admit that their opinion may be wrong. To lose faith in their entrenched point of view would make them feel uneasy or lost. So, they doggedly cling to that point of view and do things the same way as they always have, even though it no longer makes any sense for their financial present or future. In this case, emotion is simply overriding logic.

Treating revolving debt nonchalantly. Some people treat a credit card purchase like a cash purchase – or worse yet, they adopt a psychology in which buying something with a credit card feels like they are “getting it for free.” A kind of euphoria can set in: they have that dining room set or that ATV in their possession now; they can deal with paying it off tomorrow. This blissful ignorance (or dismissal) of the real cost of borrowing can dig a household deeper and deeper into debt, to the point where drawing down savings may be the only way to wipe it out.

Putting off important financial decisions. Postponing a retirement or estate planning decision does not always reflect caution or contemplation. Sometimes, it reflects a lack of knowledge or confidence. Worry and fear are the emotions clouding the picture. What clears things up? What makes these decisions easier? Communication with professionals. When the investor or saver recognizes a lack of understanding, shares his or her need to know with a financial professional, and asks for assistance, certainty can replace ambiguity.

Emotions can keep people from doing the right things with their money – or lead them to keep doing the wrong things. As you save, invest, and plan for your future, try to let logic rule. Years from now, you may be thankful you did.

Julie Newcomb, a Certified Financial Planner™ in Orange County, CA, specializes in financial planning for women.  As a wife, mom and business owner, Julie understands the pressures and challenges most women feel on a daily basis as they juggle many important priorities. Julie’s favorite thing about her job is the ability to give women peace of mind when they entrust her with their finances. To learn more about Julie Newcomb Financial, go to julienewcomb.com.    

Sources:

1 – nytimes.com/2017/05/09/upshot/the-stock-market-is-weirdly-calm-heres-a-theory-of-why.html [5/9/17]

2 – google.com/finance?q=INDEXSP:.INX&ei=6RMeWfG_JMO7euKQkagG [5/18/17]

5 Questions Couples Need to Answer to Achieve Financial Success

24 Feb

shutterstock_193636496When you marry or simply share a household with someone, your financial life changes – and your approach to managing your money may change as well. To succeed as a couple, you may also have to succeed financially. The good news is that is usually not so difficult.

At some point, you will have to ask yourselves some money questions – questions that pertain not only to your shared finances, but also to your individual finances. Waiting too long to ask (or answer) those questions might carry an emotional price. In the 2016 TD Bank Love & Money survey of 1,902 consumers who said they were in relationships, 42% of the respondents who described themselves as “unhappy” cited their number one financial error as “waiting too long” to discuss money matters with their significant other.1

#1: How will you make your money grow?

Investing is essential. Simply saving money will help you build an emergency fund, but unless you save an extraordinary amount of cash, your uninvested savings will not fund your retirement.

So, what should you invest in? Should you hold any joint investment accounts or some jointly titled assets? One of you may like to assume more risk than the other; spouses often have different individual investment preferences.

How you invest, together or separately, is less important than your commitment to investing. Some couples focus only on avoiding financial risk – to them, maintaining the status quo and not losing any money equals financial success. They could be setting themselves up for financial failure decades from now by rejecting investing and retirement planning.

An ongoing relationship with a financial professional may enhance your knowledge of the ways in which you could build your wealth and arrange to retire confidently.

#2: How much will you spend & save?

Budgeting can help you arrive at your answer. A simple budget, an elaborate budget, any attempt at a budget can prove more informative than none at all. A thorough, line-item budget may seem a little over the top, but what you learn from it may be truly eye-opening.

#3: How often will you check up on your financial progress?

When finances affect two people rather than one, credit card statements and bank balances become more important. So do IRA balances, insurance premiums, and investment account yields. Looking in on these details once a month (or at least once a quarter) can keep you both informed, so that neither one of you have misconceptions about household finances or assets. Arguments can start when money misconceptions are upended by reality.

#4: What degree of independence do you want to maintain?

Do you want to have separate bank accounts? Separate “fun money” accounts? To what extent do you want to comingle your money? Some spouses need individual financial “space” of their own. There is nothing wrong with this, unless a spouse uses such “space” to hide secrets that will eventually shock the other.

#5: Can you be businesslike about your finances?

Spouses who are inattentive or nonchalant about financial matters may encounter more financial trouble than they anticipate. So, watch where your money goes, and think about ways to repeatedly pay yourselves first, rather than your creditors. Set shared short-term, medium-term, and long-term objectives, and strive to attain them.

Communication is key to all this. In the TD Bank survey, nearly 80% of the respondents who indicated they talked about money once per week said that they were happy with their relationship. Follow their lead and plan for your progress together.1

Julie Newcomb, a Certified Financial Planner™ in Orange County, CA, specializes in financial planning for women.  As a wife, mom and business owner, Julie understands the pressures and challenges most women feel on a daily basis as they juggle many important priorities. Julie’s favorite thing about her job is the ability to give women peace of mind when they entrust her with their finances. To learn more about Julie Newcomb Financial, go to julienewcomb.com.    

Sources:

1 – gobankingrates.com/personal-finance/surprising-ways-money-affects-love-life/ [9/26/16]

 

Retirement Planning for Single Parents

23 Jan

shutterstock_160939274How should a single parent plan for retirement? Diligently. Regularly. Rigorously. The good news is that you have the autonomy to decide how you want to approach saving for retirement and how aggressive you want to be. Here are some steps that may help, whether you are just beginning to do this or well on your way.

Setting a household budget is an important first step. Most households live without budgets – and because of that financial inattention, some of the money they could save and invest routinely disappears. When you set and live by a budget, you discipline yourself to spend only so much and save (or invest) some of the rest. You need not track every single expense, but try and track your expenses by category. You may find money to save as a result.

Save first, invest next. If you are starting from scratch, creating an emergency fund should be the first priority. It should grow large enough to meet 6-9 months of living expenses. If no financial emergency transpires, then you will end up with a cash reserve for retirement as well as investments.

You may want to invest less aggressively than you once did. Young, married couples can take on a lot of risk as they invest. Divorcees or widowers may not want to – there can be too much on the line, and too little time left to try and recoup portfolio losses. To understand the level of risk that may be appropriate for you at this point in life, chat with a financial professional.

There is great wisdom in “setting it and forgetting it.” Life will hand you all manner of distractions, including financial pressures to distract you from the necessity of retirement saving. You cannot be distracted away from this. So, to ward off such a hazard, use retirement savings vehicles that let you make automatic, regular contributions. Your workplace retirement plan, for example, or other investment accounts that allow them. This way, you don’t have to think about whether or not to make retirement account contributions; you just do.

Do you have life insurance, or an estate plan? Both of these become hugely important when you are a single parent. Any kind of life insurance is better than none. If you have minor children, you have the option of creating a trust and naming the trust as the beneficiary of whatever policy you choose. Disability insurance is also a good idea if you work in a physically taxing career. Name a guardian for your children in case the worst happens.1

Have you reviewed the beneficiary names on your accounts & policies? If you are divorced or widowed, your former spouse may still be the primary beneficiary of your IRA, your life insurance policy, or your investment account. If beneficiary forms are not updated, problems may result.

College planning should take a backseat to retirement planning. Your child(ren) will need to recognize that when it comes to higher education, they will likely be on their own. When they are 18 or 20, you may be 50 or 55 – and the average retirement age in this country is currently 63. Drawing down your retirement accounts in your fifties is a serious mistake, and you should not entertain that idea. Any attempt to build a college fund should be secondary to building and growing your retirement fund.2

Realize that your cash flow situation might change as retirement nears. Your household may be receiving child support, alimony, insurance payments, and, perhaps, even Social Security income. In time, some of these income streams may dry up. Can you replace them with new ones? Are you prepared to ask for a raise or look for a higher-paying job if they dry up in the years preceding your retirement? Are you willing to work part-time in retirement to offset that lost income?

Consult a financial professional who has worked with single parents. Ask another single parent whom he or she turns to for such consulting, or seek out someone who has written about the topic. You want to plan your future with someone who has some familiarity with the experience, either personally or through helping others in your shoes.

Julie Newcomb, a Certified Financial Planner™ in Orange County, CA, specializes in financial planning for women.  As a wife, mom and business owner, Julie understands the pressures and challenges most women feel on a daily basis as they juggle many important priorities. Julie’s favorite thing about her job is the ability to give women peace of mind when they entrust her with their finances. To learn more about Julie Newcomb Financial, go to julienewcomb.com.    

Sources:

1 – cnbc.com/2016/07/20/5-winning-money-strategies-for-single-parents.html [7/20/16]

2 – aol.com/article/2016/05/03/the-average-retirement-age-in-all-50-states/21369583/ [5/3/16]

 

 

How to “Rehearse Retirement” Before You Take the Plunge

30 Dec

shutterstock_439838155For most people, retirement is a huge shift in life as they know it. However, beyond planning the dollars and cents, few people take the extra step to “rehearse” what retirement might feel like. Your current job situation and flexibility will determine how far you can take this trial run, but here are a few steps to try before you actually retire.

Draw up a retirement budget & live on it for one, two, or three months. Make a list of essential expenses (groceries, gas, utilities, mortgage, medicines), and then a list of discretionary expenses (such as movie tickets, dinners out, spa treatments). This may reveal that you can live handily on less than what you currently spend each month.

Next, list your income sources for retirement. They might include Social Security benefits (depending on when you want to claim them), IRA Required Minimum Distributions, pension checks, dividends, freelance or consulting payments, or other revenue streams. Investment income is also in the mix here, so check with a financial professional to determine a withdrawal rate off of those accounts that you can safely maintain through your retirement. (It might differ slightly from the long-recommended 4%.) When you have your list, stack the projected total income up against your essential expenses and see how much you have left over.

Try living off of that level of monthly income for a month or more while you are still working. If it covers your necessary monthly expenses and not much else, then some adjustments in your retirement strategy might be needed – a housing change, a change in your retirement date.

 See how it feels to retire. Before you conclude your career, try to arrange some “previews” of your retirement lifestyle. If you want to serve your community, volunteer avidly for a month or two to get a taste of what daily volunteer work is like. If you see yourself traveling enthusiastically at the start of retirement, take a dream vacation or even a couple of consecutive trips (if your schedule allows) to see how they truly fit into your financial picture.

Your “rehearsal” need not be last-minute. If you think you will retire at 65, you could try doing this at 63, 60, or even before then. The earlier your attempt, the more time you have to alter your retirement plan if needed.

What else should you consider as you rehearse? Besides income, expenses, and the day-to-day retirement experience, there are a few other factors to gauge.

How much cash do you have on hand? Starting retirement with a strong cash position provides you with some insulation if you happen to retire during a market downturn. The possibility of a bear market coinciding with your entry into retirement may make you want to revisit your portfolio allocations as well.

Take a second look at your projected monthly income. Will it be consistent? If it will vary, you will want to address that. If you are in line for a pension, you will face a major, likely irrevocable, financial decision: should it be single life, or joint-and-survivor? The latter option would reduce your pension income in retirement, but give your spouse 50% or more of your pension payments after you die. Your employer might also offer you a lump-sum pension buyout; if that turns out to be the case, you will have to decide if the lump sum constitutes the better deal versus a lifelong income stream.1

How about your entry into Medicare? You may enroll in it at medicare.gov within a 6-month window of your 65th birthday (that is, beginning three months prior to your birthday month and ending three months after it). If you sign up before your birthday, you will be covered beginning on the first day of your birthday month. Sign up following your 65th birthday, and you may have to wait a few months for coverage to begin.2

If you plan to stay on the job after 65, sign up for Medicare Part A anyway (the part that pays for hospital care) within the usual 6-month window. It will not cost you anything to do so, and sometimes Part A makes up for shortcomings in employer-sponsored health plans. You can enroll in Part B and other Medicare component parts later – within eight months of your retirement, to be precise. You will want to pay attention to that 8-month deadline, as your premiums will jump 10% for every 12-month period afterward that you refrain from enrolling. If you pay for your own insurance, you will still need to enroll in Medicare when you are eligible (Medicare will make that coverage superfluous, so you can anticipate dropping it).3

Rehearsing for retirement can be very insightful. Some new retirees leave work abruptly only to have their financial and lifestyle assumptions jarred. As you want to make a smooth retirement transition to a future that corresponds to your expectations, test-driving your retirement before it begins is only wise.

Sources:

1 – kiplinger.com/article/retirement/T047-C000-S002-put-your-pension-to-work.html [1/16]

2 – medicare.gov/sign-up-change-plans/get-parts-a-and-b/when-coverage-starts/when-coverage-starts.html [10/20/16]

3 – fool.com/investing/2016/09/18/5-tips-to-avoiding-common-medicare-missteps.aspx [9/18/16]