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5 Big Retirement Mistakes

  • February 17, 2019/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement

#1 Not paying for financial guidance
People who have no problem paying for the services of an accountant or lawyer often balk at the prospect of cutting a check to pay for investment advice. Instead, they rely on “free” help from retirement advisers they meet at banks, brokerage firms and retirement seminars.

#2 Investing in something you don’t understand
If your financial adviser recommends an investment you can’t explain to someone else, just say no. It will likely carry steep fees (to pay steep commissions) and be less wonderful than it is touted to be.

#3 Supporting your adult children
You might be tempted to help them with a down payment or living expenses, but unless you are certain that you have enough to ensure your own survival, don’t do it.

#4 Low-balling elder-care costs
When planning for retirement, few people think about how much they might end up spending to support elderly parents. Inflation and longevity could erase the purchasing power of the children’s pension and savings, leaving them with too little to live on, let alone cover medical expenses.

#5 Underestimating how much you will need
It is easy to underestimate the impact of inflation and longevity, or the cost of health care, supporting family members or caring for a spouse with Alzheimer’s disease or cancer.

Source: Wall Street Journal


Guessing at Retirement?

  • February 1, 2019/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement

Here are some startling facts when it comes to retirement planning:

  • 75% of middle-class Americans say their estimates of their retirement needs are based on “some sort of guess”.
  • Middle-class American believe the median cost of their out-of-pocket health care in retirement will be $47,000 when the actual number according to the Center for Retirement Research is $260,000.
  • On average, middle-class American expect to withdraw 10% of their nest egg annually in retirement.  Most experts recommend annual withdrawal rates of only 3% to 4%.
  • 34% of middle-class Americans expect to live off of 50% or less of their pre-retirement income.  Since the median household income is ~$50,000, these folks are planning on living off of less than $25,000 per year.

Are you playing the guessing game or have you done detailed calculations of your retirement needs?

Source: New York Times


Quick Check: Are Your Retirement Savings On Track?

  • January 18, 2019/
  • Posted By : admin/
  • 0 comments /
  • Under : 401(k), Retirement, Seeking Prudent Advice

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 a financial planner to review your plans and your portfolios to 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


HSA = Tax Triple Play!

  • November 9, 2018/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement, Saving Money

health-savings-accountTis the season to select your health insurance plan either through your employer’s offering or the private insurance market. If you’re considering a high-deductible health plan (HDHP), keep in mind that many (but not all!) come with the fantastic opportunity called a Health Savings Account (HSA).

We love HSAs because they do two things:

  1. They help you pay for your medical costs either today or in the future
  2. They are triple tax advantaged

The government makes these accounts triple tax-advantaged because they want to incentivize you to save for your future medical costs. We know as the nation greys and gets older, we need to have a pot of money set aside to cover our potential out-of-pocket costs.

Here’s the triple tax saving advantage:

  1. When you have an HSA account attached to a high-deductible plan, you get to take a tax deduction on your current your contribution.  For families, it’s $6,900 in 2018 ($7,000 in 2019). This means you get to lower your adjusted gross income by $6,900, a tax savings of potentially around $2,000 if you take into account state and federal income taxes. That’s $170 of savings each month if you do a little rounding. That’s pretty incredible.  That’s step 1 – you get a tax deduction in current year.  If you’re age 55 or older, you eligible for a $1,000 “catch-up contribution” so your can lower your AGI by $7,900 (thus lowering your tax bill by ~$2,300 or $190 a month).
  2. Layer two of the triple tax advantage is it grows completely tax deferred meaning it is growing without taxation on any appreciation, any dividends, or any income that’s going on a long as that money is sitting in the HSA account.
  3. Here’s the third layer and really the knockout that makes it an awesome savings tool for the future.  If you use the money in the future for medical expenses, your HSA distributions are completely tax free.
    (Here’s another cool thing.  Once you reach retirement, you don’t have to use your HSA for medical expenses, but if you want them to be tax free, it needs to be medical expenses.)

Be careful when you select a high-deductible health plan (HDHP) to make sure it qualifies for HSA eligibility:

  1. HDHP minimum deductibles: self-only $1,350; family: $2,700
  2. HDHP maximum out-of-pocket amounts: self only $6,650; family $13,300

HSAs can be one of your best friends for the future.

hsa


Got retirement plans? Your spouse may disagree

  • October 19, 2018/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement

couple

A recent survey by Fidelity shows that wives and husbands don’t share retirement-planning duties nor agree on the plan:

  • Only 41% of couples surveyed handle retirement investment decisions together.
  • Only 17% of couples say either spouse is prepared to assume sole responsibility of their retirement finances.
  • Although women are more likely to outlive their husbands, only 35% of wives say they are completely confident in their ability to take over the finances. 72% of husbands feel they can.
  • 33% of couples say they don’t agree or don’t know where they plan to retire.
  • 62% of couples nearing retirement don’t agree on the age at which to stop working
  • 47% of couples nearing retirement don’t agree on whether they will continue to work in retirement.

Here’s what you should do and know:

  • Both husbands and wives should know where critical documents are kept
  • Both need to know what to do if their spouse is no longer able to assist with financial decision-making
  • Both should have an understanding of the family’s finances, savings, and investment goals.
  • Both should become active in financial planning and meeting with the family’s financial planner and investment manager.
  • Both husbands and wives should talk about retirement and finances more often together for better agreement and mutual understanding.

Advice for New (and soon-to-be) Retirees

  • July 27, 2018/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement

A few years ago the consulting firm PricewaterhouseCoopers conducted a survey to reveal what new retirees need to understand to make their retirement more meaningful and to ease this major life transition.  The following are powerful insights for those moving toward retirement from those just ahead of you.

Initial Thoughts
Most of the new retirees strongly recommended keeping active, whether in volunteer work, hobbies, travel, reading, or new business ventures.  Words of wisdom included:

  • Use your talents and realize this is a “new beginning” and not an end.
  • Set goals two to three years in advance. Good planning is helpful … focus on financial and emotional issues.
  • You should develop a routine (daily) and not just allow things to happen or not happen—you really are on your own—work, family, etc.
  • Learn to relax without feeling guilty about it! Stay busy, mentally and physically. Remember, it’s never too late to learn new things and improve old things.
  • Make a priority list of the things you’ve always wanted to do but didn’t have the time to do. Start doing the highest-priority items immediately.
  • Consider retirement a process rather than an event.
  • Don’t worry about how you will fill your day. If you are reasonably active physically, have outside interests and are willing to be involved in your community affairs … you will wonder where the time flies. But nail down the finances.

Your Significant Other
A frequently overlooked but important aspect of retirement is the new or different relationship with one’s spouse.  A new retiree may need to be careful not to intrude or tread on a spouse’s independent lifestyle.  Spouses offered the following comments:

  • Retirement is great but not for lunch.
  • Remember we have lives that are already full, and don’t expect to be waited on all the time.
  • Spouses have their own life in community activities. Make sure you don’t make them feel guilty when they continue their own lives.
  • Be prepared for a lot of togetherness. [One wife described it as half the money, twice the husband.]
  • Continue to pursue and respect other interests; take care of your health.
  • Sit down and review life’s priorities. Develop a jointly agreed-upon plan, together with benchmarks concerning the high-priority items. Allow plenty of time to relax together.

Expectations
Most retirees were surprised at how easy it was to fall into a new routine.  Common sentiments included:

  • Instead of being bored and frustrated I found a new sense of freedom. For the first time in years I was my own boss and totally accountable for my state of mind.
  • The first six months [were] lonely and depressing that your successors never ask for your advice … followed by bliss!
  • How hard I thought it would be and how easy it really is.
  • [I was surprised that] my handicap did not drop by 10 strokes.
  • [You will be surprised by] how much you will miss the relationships and connections that you leave behind at work.

What They Would Do Differently
Lastly, new retirees were asked what they would have done differently before retiring.  Most respondents said they would begin retirement planning, including financial and tax planning, at an earlier stage.  Here are some insightful comments on this topic:

  • Put as much of the financial/administrative side of life on automatic pilot as soon as possible. Simplify and try to get out of the middle of all the minutiae.
  • We traveled extensively the first year. I would spread it out, but highly recommend travel.
  • Develop a greater understanding of the income tax considerations in the year of retirement.
  • I would have said appropriate farewells (good-byes) to all colleagues.
  • Would have done advance planning (for post-retirement activities) one to two years before actually retiring.

Source: PwC


Planting a Tree

  • March 16, 2018/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Retirement

Warren Buffett once said, “Someone’s sitting in the shade today because someone planted a tree a long time ago.” It’s planting season and your deadline to act is coming up very soon!

If you have an individual retirement account (IRA) or are considering opening an IRA, 2017 contributions to IRAs can still be made up through April 17, 2018.

[Tax day falls on April 17, 2018. Usually, April 15 is the day taxes and IRA contributions are due. But in 2018, that falls on a Sunday. On Monday, the District of Columbia celebrates Emancipation Day. That affects taxes the same way federal holidays do. Therefore, the tax deadline is pushed out to the following Tuesday, April 17.]

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 2017 tax year and an additional one for 2018, 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.

2017/2018 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: $54,000 (2017); $55,000 (2018)

*Note: The maximum contribution limit is affected by your taxable compensation for the year.

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, and the more “shade” you’ll have to enjoy in the future.

If you have any questions about how to make the most of your IRA savings opportunity, please give us a call at 704-350-5028.


Medicare 101: “The What’s”

  • February 1, 2018/
  • Posted By : admin/
  • 0 comments /
  • Under : Retirement, Saving Money

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities and medical conditions.  The different parts of Medicare help cover specific services:

  • Medicare Part A (Hospital Insurance)
    • Inpatient care in hospitals
    • Skilled nursing facility care
    • Hospice care
    • Home healthcare
  • Medicare Part B (Medical Insurance)
    • Services from doctors and other health care providers
    • Outpatient care
    • Home health care
    • Durable medical equipment
    • Many preventative services
  • Medicare Part C (Medicare Advantage)
    • Includes all benefits and services covered under Part A and Part B
    • Usually includes Medicare prescription drug coverage (Part D) as part
      of the plan
    • Run by Medicare-approved private insurance companies that follow
      rules set by Medicare
    • Plans have a yearly limit on your out-of-pocket costs for medical
      services
    • May include extra benefits and services that aren’t covered by Original
      Medicare, sometimes for an extra cost
  • Medicare Part D (Prescription Drug Coverage)
    • Helps cover the cost of prescription drugs
    • Run by Medicare-approved drug plans that follow rules set by Medicare
    • May help lower your prescription drug costs and help protect against
      higher costs in the future

We’ll cover the when’s and how’s of enrolling in forthcoming articles.

Source: medicare.gov


Top 10 Mistakes Made with Beneficiary Designations

  • October 26, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : Behavior, Best Practices, Retirement

beneficiary form#1 — Not Naming a Beneficiary
By not naming a beneficiary you have most likely guaranteed that the asset will go through probate upon your death.

#2 — Not Designating Contingent Beneficiaries
If your primary beneficiary predeceases or dies at the same time as you, you’re subject to the same consequences as #1

#3 — Failing to Keep Beneficiary Designations Up-to-Date
If you get divorced, it’s essential you immediately review and update all beneficiary designations.

#4 — Naming Minors as Direct Beneficiaries
Trusts are often established to delay the time a survivor receives an asset until they are old enough to make good money decisions.  However, if you designate a minor child as an account’s beneficiary and there’s also a testamentary trust, the designation trumps the trust and the child will receive the assets immediately.

#5 — Naming Special Needs Individuals as Direct Beneficiaries
Naming a “special needs” individual as the direct beneficiary could unintentionally disqualify that individual from receiving his or her valuable governmental benefits.

#6 — Naming Financially Irresponsible Beneficiaries
Often it’s better to create a lifetime “spendthrift trust” to hold the inheritance for the benefit of the individual for his or her lifetime while protecting the assets from creditors.

#7 — Naming Direct Beneficiaries on All Assets Other than Real Estate
Very often real estate will need to go through probate even if there’s a will in place.  This process can take a year or longer during which the estate is responsible for paying for maintenance, taxes, etc.  It’s generally advisable to allow your cash accounts and/or life insurance proceeds to go through probate so the estate will have sufficient funds to support the real estate during probate.

#8 — Naming Multiple Beneficiaries on a Transfer on Death Deed
Avoid doing because all beneficiaries must agree on the realtor, sale price, and maintenance costs until the property is sold.  Getting that type of agreement is very difficult.

#9 — Naming a Child as Co-Owner of a Deposit or Investment Account
Aging parents will sometimes add a trusted adult child as the co-owner of his or her bank account.  Avoid this because it can create complicated issues around gifting, creditor issues,  and final expenses.

#10 — Naming One Child as the Sole Beneficiary of a Life Insurance Policy or Deposit Account
A parent with multiple adult children should avoid doing this because it can create a situation very similar to #9.

Source: AAII


7 Fatal Flaws in 401(k) Plans

  • October 12, 2017/
  • Posted By : admin/
  • 0 comments /
  • Under : 401(k), Retirement

USmapPaul Merriman writes about seven fatal flaws in America’s 401(k) plans:

#1 Restricted Access
The first and biggest flaw in 401(k) plans is restricted access to the best investment choices

#2 Participation not required
I believe that many American households, with nothing saved for retirement, are headed by employed breadwinners who could participate in a 401(k) retirement plan

#3 Insufficient employer match
I also think employers should be required to match at least a quarter of what each employee contributes — after the waiting period, of course.

#4 Employees bear the costs
Many employers make their workers pay the costs of administering a 401(k) plan, which should be treated as an employee benefit that’s paid for by the company. In far too many cases, the costs paid by employees are hidden in the form of higher fees for investment funds.

#5 No Rollover IRA option
Federal law allows — but doesn’t require — employers to let employees move part or all of their 401(k) balances into a Rollover IRA while continuing to contribute to the company plan. All workers should have this option, which gives them access to virtually unlimited investment choices.

#6 Too much company stock

Corporate 401(K) plans often encourage participants to load up on company stock. There’s probably no way to stop this short of a federal law, because employers with publicly-traded stock love the steady market that’s created for their shares every payday.

#7 Default options are too safe
Too many plans steer contributions to low-performance investments. It’s bad enough that the employee’s default option in many plans is simply not to participate. But for those who do sign up, it’s equally wrong to have a default option of a stable value fund that virtually guarantees the employee will gradually lose some of the purchasing power of their savings.


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