Retirement Archives - Page 6 of 10 - NorthStar Capital Advisors

Average U.S. Retirement Age Rises to 62

The average age at which U.S. retirees report retiring is 62, the highest Gallup has found since first asking Americans this question in 1991. Current expectations for retirement have increased to age 66, up from 63 in 2002.

Why is retirement age on the rise?

Living longer – lifespans in the U.S. have increased
Better health – Americans are in better health in their senior years than ever before and better able to work later in life
More service and office jobs – less manual labor allows folks to stay working longer
Financial needs – not having enough cash to retire is another reason people retire later

Social Security Myth #1 — Age Doesn’t Matter

Myth:
You’ll receive the same monthly Social Security benefit no matter how old you are when you start collecting.

Answer:
False. You can start your earned benefits as early as age 62 or as late as age 70. For every year you wait, your payments increase by 6-8%.

3 1/2 Weeks Until an Important Deadline

Here’s an important reminder if you have an individual retirement account (IRA) or are considering opening an IRA. 2013 contributions to IRAs can still be made up through April 15, 2014.

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 2013 tax year and an additional one for 2014, 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.

2013/2014 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: $12,000 ($14,500 if you are 50 years old or older)
SEP IRA: $51,000 (2013), $52,000 (2014)

*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.

22: Your Magic Retirement Number

Most Americans need to save more to assure a financially secure retirement.

But many people struggle with key retirement questions like “how much do I need to save?”

You should save 22 times the annual income you want to have in retirement.

For example, if you want $100,000 in annual income (not including Social Security), then you need to have $2.2 million in total retirement savings.
(22 x $100,000 = $2.2 million)

See this recent article in the Wall Street Journal on how researchers arrived at this magic number of 22.

Code Red! 8 Ways to Permanently Wipe Out Your Retirement Savings

Dana Anspach at MarketWatch recently wrote about 8 financially devastating mistakes (aka “Code Reds”) that must be avoided:

1. Believe in a stock
The company you work for is doing well. You understand the potential of the business. You should own a lot of company stock. After all, it shows your level of commitment, right?
WRONG! CODE RED!
You can lock in lifestyle by taking risk off the table. If trusted advisers are telling you to reduce risk, listen. You can’t take your “belief” in your company stock to the bank. Owning a lot of company stock doesn’t demonstrate a commitment to your company; it demonstrates a lack of commitment to your own personal financial planning.

2. Get reeled into real estate
Rental real estate is a good way to build wealth with someone else’s money, isn’t it? I mean, that’s what the infomercials say.
WRONG! CODE RED!
Investing in real estate is a profession in and of itself. With real estate prices on the rise again, don’t get reeled in with the lure of easy passive income. It isn’t as easy as it looks.

3. Follow a Tip
An opportunity to double your money is an investment opportunity worth pursuing. It could change your life, right?
WRONG! CODE RED!
Tips are great for your waiter or waitress. But where you family’s future is concerned, avoid the tips, and stick with a disciplined and diversified approach.

4. Change lanes — every year
Smart investors watch the market and frequently move money into the latest high performing investment, right?
WRONG! CODE RED!
You’ve probably noticed if you constantly changes lanes on a backed up highway, always trying to inch ahead, you usually end up farther behind. Driving this way isn’t effective; investing this way isn’t effective either. Pick a disciplined strategy and stick to it. Jumping from investment to investment is only going to slow you down.

5. Play the currency cards
Experts can deliver higher returns, right? Find someone who knows how to trade, and you’ll be set.
WRONG! CODE RED!
If experts could generate such high returns, why would they need your business? Don’t play the currency cards, the expert cards, or fall for any kind of outlandish promises. I’ve yet to see one of these programs work the way it was marketed.

6. Follow your ego
Better investments are available to those with more money, right? If you get the opportunity to participate in something exclusive, it is likely to deliver better returns.
WRONG! CODE RED!
If someone appeals to your ego, walk away. When it comes to investing, the only thing I’ve seen egos do is help someone lose money.

7. Follow their ego
You can trust prestigious people in your community. That’s why you should do business with them, right?
WRONG! CODE RED!
Checks and balances are good in government and in investing. One way to make sure checks and balances are in place is to work with an investment adviser that uses a third party custodian. The third party custodian sends account statements directly to you. The investment adviser can make changes in your account, but the transactions are reported to you directly by the custodian, who isn’t and should not be affiliated with the investment adviser.

8. Leverage up
Borrowing at low interest rates and investing in high growth assets is an excellent way to accumulate wealth, isn’t it?
WRONG! CODE RED!
Think twice before borrowing to invest. It causes ruin more often than it causes riches.

Visit MarketWatch to read Anspach’s full article.

401(k) Balances Hits Record High

Multiple years of strong stock market performance coupled with disciplined savings has propelled 401(k) accounts to a record high.

According to Fidelity Investments, the nation’s largest 401(k) provider, the average 401(k) balance reached $84,000 during the third quarter of 2013, up 11% from $75,900 the previous year. This is overall average is based on 12.6 million accounts.

401(k) savers that have been actively contributing to their accounts over the past 10 years saw their average balance grow $223,100, up 19.6% during the 12 months that ended in June.

Fidelity also reported that fewer 401(k) participants are relying on “do-it-yourself” investing and instead are moving toward managed accounts and target-date funds. Managed accounts provide individualized investment advice.

Social Security Benefits To Increase 1.5% in 2014

The federal government announced Wednesday that the social security benefits for almost 63 million retirees and disabled people will increase by 1.5% next year.

This will be one of the smallest annual increases since automatic cost-of-living adjustments (COLA) began in 1975. The sluggish U.S economic recovery has kept inflation in check and limited businesses’ ability to raise prices of goods and services.

The COLA is calculated by comparing consumer prices in July, August and September each year to prices in the same three months from the previous year. If prices go up over the course of the year, benefits go up, starting with payments delivered in January.

The benefit increase for 2014 comes after a 1.7% gain for 2013. Besides 2010 and 2011, when there were no increases, next year’s rise will be the smallest since 2003, when benefits went up by 1.4%.

Social Security pays retired workers an average of $1,272 a month. A 1.5% raise comes to about $19.

Your Projected Medical Costs in Retirement Will Surprise You!

It’s important to be aware of what healthcare costs will look like in your future retirement budget.

The following statistics effectively guarantee the need to emphasize portfolio growth as opposed to income for many investors:

According to an AARP study released early this year, titled “What are the Retirement Prospects of Middle-Class Americans,” rising out-of-pocket medical costs are the prime factor threatening retirement security.

The report notes that median out-of-pocket medical expenses for 70-year-olds currently come to $2,800, or 8.2% of annual income.

For middle-income workers aged 45 to 54 in 2012, that figure should rise to $5,600, or 15.3% of income, when they reach 70,

while for those between ages 25 and 34, those expenses are likely to rise to $11,000, or 20% of income.

With those rising medical outlays, the AARP study concluded “future retirees are less likely than current retirees to maintain their standard of living during retirement.”

The takeaway for this is that the real risk for many future retirees will not be volatility – it will be the real threat of running out of money before running out of life. To combat this, it’s prudent to build up your pre-retirement savings and assure you have sufficient stock holdings even during retirement.

Source:
Not Your Father’s Retirement

Health-care Inflation at Slowest Pace in 50 Years

The prices paid for medical care in July rose just 1% from a year earlier, the slowest annual rate of growth since the early 1960s, according to Commerce Department data. Health-care increases now trail overall inflation, which itself has been historically slow in recent years. The recent slowdown in medical inflation is partly the result of less-generous health plans forcing patients to pay more attention to prices, doctors say.

Is Your Financial Advisor Close to Retiring?

Financial advisors as a group are growing old in a line of work with a very slow replacement rate. According to Accenture, the average age of a financial advisor in the U.S. is 50 and advisors above the age of 60 control $2.3 trillion of client assets.

Actions to take if you have an older advisor

Understand the coming transition. Ask your advisor about her or his retirement date and how your account will be handled. Do you want to stay with the firm or try some place new?
Look for an upgrade. You may like your current advisor but there’s always room for improvement. If you stay put, this is an opportunity for you to reset expectations and articulate your changing needs.
Ask questions. If you get notified about a transition in your retiring advisor’s office, you want to know all your options. The office staff will likely be very busy managing the various processes and may not give you the attention your deserve.

For the record, the advisors at NorthStar Capital Advisors are in their low 40s. In other words, we’re not retiring any time soon!

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