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We won’t settle for average. We continually seek top managers or securities and meld them into superior custom portfolios. Each palette of investments is carefully tailored to personal or family goals. We enlist excellent managers, research, resources, and effort for our clients. Don’t settle for average. You deserve excellence.
Please search our blog posts for answers to common investment questions, and we look forward to sharing our knowledge and experience with you first-hand.
A Brief Summary of the Changing Seasons of Planning for Retirement
Planning for retirement looks different for everyone, and those differences widen when you consider the various decades of life. Here is a look at how retirement planning changes during different seasons of your life:
The Roaring 20s
It’s important to get started with your investments early, and compound growth is something that should entice the interest of a 20-something. Compound growth is the gain on top of your previous gains. These snowball over the years and work to your advantage.
The 401(k) is the most common investment vehicle, but you can also consider IRAs. Talk to your investment advisor to put together a plan that is the right fit for you.
30-Somethings: Here’s to You
Many investment strategies focus on buckling down when you’re in your 30s, putting away as much as possible while you’re freeing yourself of debt you might have accrued from college or from “learning the ropes” about credit in your 20s.
Some 30-somethings are heavily invested in stocks. This gives them the chance to maximize their savings. Even if the market is volatile, stocks may be a viable option, because in the long run, the ebb and flow of the market can eventually pay off.
For the 40s …
Did your salary increase while you were in your 40s? There’s a good chance your spending followed suit. It’s vital that while in your 40s, you’re not building up bad debt, which means staying disciplined and on budget is a must.
It’s in the 40s that many will begin saving for their children, and/or setting aside money for renovations to a home and other projects. However, it’s important not to borrow against your retirement savings for any kind of project. In fact, it’s in your 40s that you may begin in earnest to make bigger contributions to your retirement funds.
Hitting 50. Now What?
If you’ve taken a closer look at what you’ve saved and begun to panic that you’ll never have enough to retire at age 65, you can increase your savings rates even higher now, as once you hit age 50, many retirement accounts allow a special “catch-up” contribution.
You may consider talking with your advisor more often as you approach retirement to ensure that your investments are properly aligned with your retirement needs and goals.
Arriving at Retirement … Or Not Yet.
Hitting 60 makes retirement feel like a reality, finally. Now is the time to make final adjustments with a more accurate look at your current finances and how what your lifestyle will resemble once you aren’t working.
However, many workers choose to continue working longer, realizing they may live several years longer than originally planned. Or they choose to semi-retire, leaving a full-time position for a flexible or part-time one.
This is an important time to talk in detail with your advisor about stocks (how many to keep, what the ratio might be, etc.). Also, talk to your investment advisor about how you’ll handle your Social Security filing, because there are ways to maximize that source of income. It’s not a “signand done” kind of benefit. In fact, you may be surprised to learn of different options and the outcomes for each of your decisions related to Social Security.
At Family Investment Center, we’ve assisted clients in every stage of life with planning for retirement and the life changes that happen along that journey. Contact us today and let’s talk about what matters most to you.
How About Starting With a Blueprint
Like a construction project, every good plan for a solid foundation involves a blueprint with overarching principles that must be followed. To develop your blueprint when you are planning for retirement, consider these three concepts:
1. Income vs. Expenses
The majority of retirees count their income as Social Security and the savings they’ve amassed. While the pension is quickly becoming a thing of the past, current retirees might be enjoying theirs right now. Regardless of whether you’re on a pension, 401(k) or IRA, the key to income success while in retirement is to coordinate your monthly expenses with monthly income.
Choosing a system of withdrawing your savings in a way that minimizes your tax load is important, and knowing from which accounts to withdraw first can be difficult to determine. If you’re unsure of the best strategy, be sure to ask an advisor for help.
Although profit sharing, 401(k) plans, deferred compensation, IRAs and tax-sheltered annuities are all more popular today than the pension plan, many still face the decision of what to do with a pension in retirement. There are usually two main options: annuitize the pension into monthly payments or take one lump-sum payment. For many, taking the lump-sum payment provides better long-term growth potential and flexibility, but getting a large amount of money at once can be challenging to budget for many retirees. Plus, any amount of that money that isn’t rolled into an IRA will face federal and state income taxes.
There are also many things to consider with alternatives to an IRA rollover. Be sure to find out about investment restrictions, surrender charges (in some but not all cases), and the tax consequences of all of your options. If you’re in an employer plan that allows you to stay on after termination or retirement, your plan fees might be low, and you could have a number of investment options, which is a good thing in planning for retirement. Ask lots of questions about all the options. If you’re unsure, talk to an advisor.
3. Know Your Risks
Not everyone is going to have the same opinion where risk is concerned. People are living well into their 80s today, which means they need to consider more carefully how they approach investment risks as they age. What might be considered “risky” for a 60-year-old in investment planning could be “safe” for a person who has decades to go before they retire.
However, risk must also be taken into account in regard to how long you plan to be in retirement. People retiring today could have a 30-year retirement horizon, and inflation can make a huge impact on a retirement portfolio.
Dan Danford, CEO of Family Investment Center, says, “If you’ve ever built a house, you know it's easy to get caught up in the details: lights, appliances, floor coverings and finishes. Deciding on all these things can be exhausting. Planning for retirement can feel a bit like that. But just like building a house, in retirement, the right foundation creates lasting value.” Find out more about how Family Investment Center can help you build a solid foundation by contacting us today.
Planning for Retirement Later in Life
It’s no secret – many Americans aren’t financially ready for life after a career. If you are 40 or older and unprepared for retirement, what steps can you take to start planning for retirement now?
Take Advantage of “Catch Up” Opportunities
If you are 50 or older, you are allowed to make “catch up” contributions to your retirement accounts. For example, if you have a 401(k), you can contribute an extra $6,000 per year to it. Younger investors are held to the $18,000 annual contribution limit.
If you have an IRA, you’re held to $5,500 annual contribution limit, then when you’re 50 or older, you can put in an extra $1,000 per year. That might not seem like a lot of extra money, but if you make those extra contributions over the 15-year period before you retire (assuming you retire at 65), you will be able to increase your retirement nest egg substantially.
Make Approximations for the Future
Good retirement strategies are based on goals. In order to establish goals, you’ll need to crunch some numbers, which means you have to approximate how much money you’ll need in retirement to cover all your expenses. Keep in mind many people will live ten to 15 years longer than they anticipate.
Once you know how much you will need to live comfortably, you can start adjusting your investment strategy accordingly. This might require some adjustments to the way you are currently living, i.e. making cuts in expenditures so you’ll have more money to put toward investments.
Put the Hammer Down
To use an automotive term for rapidly accelerating, this is exactly what you need to do with your investment accounts if you are 40-plus and haven’t started saving for retirement. You need to do everything you can to max-out your retirement accounts, such as your employer-sponsored plan and IRA.
You may have a lot of ground to cover in a short amount of time. Make cuts where necessary, such as vacations or new cars or buying a new house, and save vigorously.
Adjust Plans as Needed
If planning for retirement has been put on the back burner for you, for whatever reason, it doesn’t mean all is lost. If your original idea of retirement was one of fun and relaxation, you might have to consider working part-time in “retirement.” This income will help cover the shortfalls that your investments won’t cover while still allowing you to live a lifestyle that fits your comfort level.
Also, if your idea of retirement was to begin at age 65, you might consider keeping that full-time job for a few more years. This extends the life of your investments, meaning you won’t dip into them as soon as you had planned, giving you more assurances for covering costs when you do finally hang up your career for good.
At Family Investment Center, we can help you navigate these complex waters. Don’t be intimidated by the process of planning for retirement. Let us help you make crucial decisions now that will help you later.
Here’s a little more food for thought: November 2017 is Millionaire’s Month at Family Investment Center. Why are millionaires wealthy? How do they think? What do they do (or not do) that you can apply to your own life? Is there a secret? Read more on our website or listen to Money is Freedom on SoundCloud or iTunes for a special four-part series.
Planning For Retirement Requires Focus on Diversification
Are you a small business owner who has avoided planning for retirement? If so, you’re one of a third of respondents to a survey from Manta that said they do not have a plan in place for their retirement. Among those, 37 percent said they don’t have enough money to save for retirement. But, what’s really happening?
A number of small business owners say they’re not planning for retirement because they simply don’t make enough to open a retirement account. However, there really isn’t such a thing as “too little” to begin saving. The truth is, many small business owners are actually reinvesting in their own company instead of focusing on a retirement account. While this seems at first glance as a responsible action, it really puts the owner at risk.
Almost 20 percent of those surveyed by Manta said they’ve taken what retirement accounts they had and sunk them into their business. Doing this means the business owner is losing money due to taxes, penalties, and tax-deferred potential growth. It’s a risk that shows the owner has really invested in the growth of the business, but it comes at a high cost.
Of the survey’s respondents, 20 percent also said they don’t have retirement accounts because they plan to sell their business before retiring. However, what if the timing isn’t right? What about those business owners who had a long-term plan to retire in 2009? They are likely still working today, trying to recoup what they lost. The fact is, nobody really knows what the market will bring, so your best-laid plans can fall victim to unforeseen circumstances.
As a small business owner, here are a few important steps for you to take toward a solid retirement strategy:
· Invest in a self-employed retirement plan, such as an individual 401(k), a SEP-IRA, or a SIMPLE IRA.
· Create a plan for leaving the company. A succession plan can keep your business afloat in your absence, offering you a stable income.
· Planning for retirement should include setting a tentative retirement date. Evaluate your lifestyle and talk to your investment advisor about how you can make a smooth exit that allows you to live comfortably in retirement.
Planning for retirement isn’t easy, especially when you’re passionate about your business and you want to see it succeed after you leave, or if you want to get what you feel it is worth when it’s time to sell. At Family Investment Center, we can help you navigate all the various decisions that have to be made. Contact us today and let’s begin planning for your retirement.
Steps You Can Take Now to Get Started With Your Retirement Planning
Many people who are still years away from retirement look forward to that day when they leave the workforce to enjoy the golden years. However, when the retirement date comes close, those thoughts of rest and relaxation are often replaced with trepidation. Why? Because retirement planning has been put on the back burner. What can you do to improve your outlook and develop a plan now?
What will weekly and monthly expenses look like in retirement? This is something you must consider as you begin your retirement planning. Perhaps you have debts today that you know you don’t want to carry forward into retirement. Your plan may include managing a way to enter retirement with reduced debt so you’re not tied down.
There are various calculators, such as DebtBlaster, that allow you to come up with a more solid strategy for retirement expenses. You also need to consider how inflation and the cost of living will differ in terms of where you choose to live in retirement and for healthcare costs.
2. From Where is the Income Derived?
You should develop a complete list of pension, 401(k), IRA, Social Security and other income resources. This will help you gain a better picture of how much you can spend at any given moment. Also, be sure to write out all the contact information, passwords, account numbers, etc., so should you become disabled or pass away, there will be no confusion regarding these accounts.
3. Retirement Goals
Part of planning for retirement is looking at things aside from money. Will you follow a passion or pursue a hobby? Will you be focused on recreation, or will you take this time to continue your education? Obviously, if travel is on the itinerary, you’ll need to budget for that, as frequent travel can get pricey. However, it’s important that your retirement goals will work with the plans of your spouse, family and friends.
4. Finding an Advisor
Planning for retirement can be a process full of complexities. When you partner with an investment advisor, your eyes will be opened to a number of issues that you likely would never have known existed. Look for an advisor with transparent fees and for one that will act as a fiduciary. When you have a fiduciary working for you, they are acting in your best interest – not their own. Unfortunately, there are many investment professionals out there who are driven by the commissions they earn, which means their investment advice isn’t always in clients’ best interest.
At Family Investment Center, we’ve always acted as a fiduciary, which means you can trust that when it comes to your retirement planning, we’ve got your best interests as our primary focus.