Quick Check: Are Your Retirement Savings On Track?

The two greatest impacts on your retirement savings over time are starting early and saving consistently. Beyond that, how do you know if you’re on track to have enough set aside to retire comfortably? Fidelity Investments recently published convenient “rule of thumb” that provides convenient, age-based targets to help you gauge your progress.

What’s the end game look like?
If you’ve saved eight times your annual salary by your last year of work before retiring, you should have enough money to replace 85% of your annual income for a 25-year period, including social security.

Age-based targets for retirement savings. For example, at age 35 you should have saved one times your annual salary. By age 55 you should have 5 times your salary. Ultimately retire at age 67 with eight times your annual salary set aside in retirement savings.

Here are the key milestones for getting to 8x and beyond:

  • age 25: start saving for retirement beginning at 6% of annual salary and increasing this by 1% per year until it reaches 12%; employer provides a 3% matching contribution
  • ages 31-67: setting aside 12% of annual income for retirement savings with an additional 3% matching contribution from the employer
  • age 35: you should have saved one times your annual salary
  • age 45: you should have saved three times your annual salary
  • age 55: you should have saved five times your annual salary
  • age 67: retire with eight times your annual salary in retirement saves
  • age 67-92: live off your retirement savings

Recognize that this is a broad guide and each person’s requirements will vary by the specifics of their situation. Nonetheless, this provides a quick and easy reality check.

What if you check your actual retirement savings and you’re coming up short against these targets? Try to increase your retirement contributions to close the gap. Sit down with an investment advisor to review your investment portfolios and make sure they are optimized for success.

Age-based retirement savings targets for an individual making $100,000 per year.

Source:
Fidelity Outlines Age-Based Savings Guidelines to Help Workers Stay on Track for Retirement

Auto and Homeowners Insurance? Shop Regularly

home_auto_insurance

It’s important to shop most of your insurance policies on a regular basis. We recommend yearly for auto and every two years for homeowners.

Insurance rates vary by hundreds of dollars or even thousands per a year among insurers for the same levels of coverage. Get quotes from several companies on a regular basis to make sure you’re getting the best deal.

There are two ways to get competitive quotes: one-by-one via telephone or multiple quotes at a single go online. The latter is faster but don’t go there if you’re not comfortable getting spam in your inbox. If you’re a telephone kind of person, call three of the big providers like Allstate, Progressive, USAA, GEICO, and State Farm. If you prefer online, try insurancequotes.com or carinsurancequotes.com.

When you do your comparison shopping be sure its on an apple-to-apple basis — same level of coverage and save deductible. Also avoid asking for a new quote within 6 months of your last attempt. Insurers usually quote lower rates to “new” customers (i.e., those who haven’t asked for a quote in the last 6 months).

So, if you’ve never shopped your auto and homeowner’s insurance, or it’s been a while, don’t put it off any longer because you’re probably leaving money on the table.

4 Weeks Until an Important Deadline

april18

Here’s an important reminder if you have an individual retirement account (IRA) or are considering opening an IRA. 2016 contributions to IRAs can still be made up through April 18, 2017.

[Tax day falls on April 18, 2017. Usually, April 15 is the day taxes and IRA contributions are due. But in 2017, that falls on a Saturday. On Monday, the District of Columbia celebrates Emancipation Day. That affects taxes the same way federal holidays do. Emancipation Day is normally April 16, but that’s a Sunday. Therefore, the tax deadline is pushed out to the following Tuesday, April 18.]

Make it a double? If you really want to make the most of the growth potential that retirement accounts offer, you should consider making a double contribution this year: a last-minute one for the 2016 tax year and an additional one for 2017, which you’ll claim on the tax return you file next year. That strategy can add much more to your retirement nest egg than you’d think.

2016/2017 Annual IRA Contribution Limits*

  • Traditional/IRA Rollover: $5,500 ($6,500 if you are 50 years old or older)
  • Roth IRA: $5,500 ($6,500 if you are 50 years old or older)
  • SIMPLE IRA: $12,500 ($15,500 if you are 50 years old or older)
  • SEP IRA: $53,000 (2016); $54,000 (2017)

*Note: The maximum contribution limit is affected by your taxable compensation for the year. Refer to IRS Publication 590 for full details.

The savings, tax deferral, and earnings opportunities of an IRA make good financial sense. The sooner you make your contributions, the more your money can grow.

If you have any questions or would like to make an IRA contribution give us a call at (704) 350-5028 or email info@nstarcaptical.com.

How Does the Stock Market Work?

Real Life Adventures by Gary Wise and Lance Aldrich

This cartoon highlights how your behavior as an investor strongly influences your success. Investor behaviors that likely contribute to reducing your returns include:

  • The tendency for investors to sell underperforming investments and then replace them with others that performed well; a pattern of “buying high,” and “selling low.”
  • Emotionally driven decisions that may cause trading at inopportune times.
  • Investment activity motivated by media hype, financial news networks, or televised “experts.”
  • Poor market timing decisions resulting in missed opportunities.

Avoid being the subject of this cartoon! Great investors throughout history have understood that building long-term wealth requires the ability to control one’s emotions and avoid self-destructive investor behavior.

Picking a Financial Advisor? Ask Them “How Are You Compensated?”

Asking the right questions is critical to finding a high-quality financial advisor that you can trust. One of the most important questions that you can ask is:

  • How are you compensated?

Note that the exact wording is crucial. We did not ask, “How do I pay you?” or “What am I charged as a client?”. Use these limited questions and you might not get the complete picture or identify potential conflicts of interest.

For example, many financial advisors’ compensation include:

  • bonuses for meeting sales goals
  • spots on “educational” trips
  • direct compensation for selling you certain products

Here are some great follow-up questions:

  • Do you get paid or win anything based on the products you recommend to me?
  • Do you receive compensation for our relationship from anybody other than me?

An independent advisor’s fee usually differs from the fees assessed by the brokers that work for the banks/brokerage houses. Broker’s fees are typically based on commissions for the trades and products (mutual funds and insurance products) “sold” to their clients. This conflict of interest between the broker’s objectives and those of the client results in non-transparent and substantially higher client fees.

ABOUT US

We are a fee-only, independent fiduciary advisor. Our allegiance rests solely with our clients and their best interests. We are headquartered in Charlotte, North Carolina and serve client families across the nation.



CLIENT TOOLS
CONTACT
  • (704) 350-5028
  • info@nstarcapital.com
  • 521 East Blvd, Charlotte, NC 28203
    (by appointment only)
  • fax: (704) 626-3462
FROM OUR BLOG
Nothing on this website constitutes either the provision of investment advice or solicitation to provide investment advice. Investment advice can only be provided through a formal investment advisory relationship. Copyright © 2023 NorthStar Capital Advisors - Charlotte, NC. All Rights Reserved.