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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.
Planning for Retirement Starts by Talking About These Key Questions
We all think about that day when we’ll finally retire, but some of us are more prepared than others. It’s true, you can overthink retirement – but for most of us, planning for retirement involves careful consideration of many factors.
Whether you began thinking of these questions years ago, or haven’t thought of them for years, each is vital in planning for retirement:
1. When Should I Take Distributions?
All qualified retirement plans have specific requirements regarding when you need to take your distributions. For example, some plans allow you to keep your benefits after you’ve retired or have been terminated from your job. If your plan expenses are low and you have other income options, allowing these funds to continue to grow could be a good idea.
2. How Are Distributions Taxed?
If you’re withdrawing early (before you turn 59.5 years old), there will be a 10% tax penalty assessed, in addition to any federal and state income tax that’s due. Some plans allow exceptions, so be sure to check with your plan administrator or advisor.
3. Can I Rollover My Distributions?
If you’re getting a large distribution via a pension or profit-sharing plan, federal law allows you to roll it to an individual retirement account (IRA). Instead of just putting this money in your bank account and getting taxed, you are “sheltered” from the tax while it’s in your IRA account. Then, when you begin taking distributions, that money is subject to income taxes.
4. What About Tax-Free Options?
While all money will be taxed, some prefer to be taxed up front, which is possible with a Roth IRA or Roth 401(k). When utilizing a Roth, you don’t get the tax break up front, but the Roth does allow for tax-deferred growth and tax-free withdrawals in retirement.
5. What About Investment Limitations?
Fortunately, when investing with an IRA, you have few limitations. You can invest in CDs, stocks, bonds, mutual funds or money market funds. However, talk to your investment advisor and make sure you have the options you need to best fit your strategy.
6. Do I Need an Advisor?
You’re not required to have an advisor assist you in planning for retirement or in managing your investments. However, paying modest fees can provide huge benefits on your investment in an advisor.
Perhaps just as valuable (if not more) is the peace of mind and confidence you can experience from not trying to D-I-Y important and life-changing investment decisions. Let’s put it this way … you wouldn’t try to fix a major plumbing problem yourself. You would hire an expert because you want the task at hand managed as effectively and efficiently as possible. And it will free up time for you to do things you enjoy. It’s similar when you hire a professional advisor (especially when you work with one who operates within a commission-free, client-focused setting).
To talk about these questions and others in a jargon-free environment, contact Family Investment Center today. Let’s sit down and determine what your kind of retirement freedom looks like and how you’ll get there.
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.
Dan Danford Shares How Financial Planning is Different for Each Employee
When the Harley Davidson plant in Kansas City closes its doors next year, approximately 800 workers will experience a life-changing event. Financial planning is important for everyone, but when losing a job, it becomes crucial.
As Dan Danford, CEO of Family Investment Center, said in an op-ed in the Kansas City Star, the next steps these employees take will be critical.
Different ages, different number of family members, different financial needs and other aspects make each situation unique. The approach an individual takes to this situation will not be a one-size-fits-all scenario. In fact, Danford notes that it’s a mistake to follow the lead of a colleague.
“Good choices depend on thoughtful analysis of some personal issues,” Danford said.
For example, current financial status must be taken into consideration: Is the person married or single? Do they have other family income, such as a spouse who works and can take care of health insurance? Is there an emergency reserve in the bank they can count on until another job is secured? If a job isn’t immediately available, how long can they go without a steady paycheck? These are all important financial planning questions.
“Younger workers may face a big mortgage and a houseful of children,” Danford said.
“Older workers may have health limitations or fewer job prospects. Some workers nearing retirement age anyway may choose not to seek another job.”
Taking Care of Health Insurance
COBRA benefits offer a short-term solution for health insurance, but it comes at a price and it’s not very flexible. Because Harley Davidson offered good insurance, former employees will probably face a situation where their premiums will be high in comparison, which will impact the budget.
Young workers will have access to individual policies that don’t have all the bells and whistles older folks require, so they can probably save some money there. However, anyone with a spouse and children will need something more extensive, and COBRA only covers them for around 18 months.
The Retirement Plan
While it’s tempting to dip into that 401(k) plan while unemployed, it’s not recommended because the costs are high in a number of ways. As you likely already know, you’ll have to pay taxes, state and federal, on funds you withdraw. Second, when you pull money out of your 401(k), you’re negatively impacting the ability of that vehicle to build up compound interest, which sets you back months, if not years. A better choice would be to borrow money elsewhere.
Adjusting the Budget
Danford notes that it’s always tough for workers to scale back a comfortable lifestyle. However, given the fact that these employees will have had many months to prepare for this situation, they can begin gathering information.
“How much adjustment is needed?” Danford said. “Where can you adjust without disrupting your lifestyle and needs? Are there things you can do to boost your emergency fund or savings? Can you sell unused items? Empty the garage or basement, perhaps?”
Finally, Danford offers that, “trauma is likely to be short-lived. Unemployment in the United States is low and good workers are in demand everywhere. It is likely employees will find new work faster than it seems.”
For more information about financial planning for you and your family, contact Family Investment Center 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.
Preparing for Retirement With 401(k) Investing
Once you hit the big 5-0, there are some financial advantages that can be beneficial for everyone who hits this milestone, including some tax breaks and perks where your retirement investments, like 401(k) investing, are concerned.
As of 2017, you can contribute $18,000 a year to your 401(k). However, once you hit the age of 50, you can put an extra $6,000 into your 401(k) each year. These are referred to as “catch-up” contributions, which can offer people with less time until retirement to contribute more to their plan.
If you’re turning 50 or have already hit that milestone, it can be beneficial for you to take advantage of that extra $6,000 investment. There are also advantages for business owners who have yet to establish their retirement investments. For example, say a couple in their mid-50s wants to finally get the ball rolling on their retirement accounts. They can open a self-employed 401(k), which is also referred to as an individual or solo 401(k), and sink the full regular contribution plus the “catch-up” $6,000 into this account.
For those who would rather go with an IRA investment, there are some options here as well. While traditional 401(k) contributions are tax-deductible, any withdrawals from the 401(k) are taxed as income. A traditional IRA works similarly, but the maximum annual contribution is $5,500, with an extra $1,000 “catch-up” contribution. With a Roth IRA, however, no deduction may be taken for contributions, but then withdrawals in retirement are not taxable. IRAs can be extremely advantageous for extra savings, especially when used in conjunction with employer-sponsored plans.
According to a recent Forbes article, 50 percent of investors age 50 to 69 took full advantage of catch-up contributions in 2015. For those putting their investments into a Roth IRA, 45 percent did the same.
The rules are different depending on the type of plan to which you’re contributing, so be sure to ask an advisor for the applicable rules. Aging into 50 and beyond can be an exciting and rewarding time. At Family Investment Center, we know a lot about the various ways that age has advantages when it comes to investing. Come in and talk to us today about your investment goals. If you’ve yet to establish a strategy, we’ll discuss the options available to you and get you started on the right path.
Taking a Fresh Mental Approach to Investing for Retirement
Mental buckets of money. It sounds like an odd idea at first, but when you consider all the investments contained in savings and retirement portfolios, thinking in terms of “buckets of money” can actually help deconstruct a complex situation into something more manageable when strategically investing for retirement.
During our working years, we look forward to that paycheck that comes every two weeks or once a month. We plan around that check; taking into account our rent or mortgage, food, clothes, entertainment and savings. Even if our investment accounts are plentiful, when it comes to retirement, we need to mentally adjust to the fact that the regular check is no longer coming in. Call it “mental accounting.”
Morningstar recently published an article on the subject of mental accounting, where Michael Kitces, director of wealth management for Pinnacle Advisory Group, touched on the fact that there are different ways to sort and separate the different “buckets” of money. It’s essentially the way people categorize their money and how they think about their assets and income sources. Some researchers have narrowed these categories down into three main buckets: current income (paychecks), current assets (money used for current needs), and the future bucket for everything else, including retirement accounts.
What’s interesting, as the article explains, is that as humans we have feelings that often don’t line up with logic, or what is actually happening. Take, for instance, the fact that British researchers found when they looked at people’s happiness, the happiest were the ones with a comfortable amount of money in the first bucket, regardless of what was in the third bucket.
The goal for those people is to have cash on hand rather than savings for the future. Investing for retirement requires a different mindset when it comes to that third bucket. Interestingly, people with plenty of money in their retirement accounts will often stress in retirement because they don’t have that regular paycheck coming in to fill the first bucket. This is why it’s important to do the mental accounting.
Financial advisors will often focus heavily on investing in the retirement bucket, taking much of the importance off the money their clients have in a checking account. However, to appease that need to have a constant influx of cash to the checking account, advisors might recommend an annuity. Interestingly, the source quoted in Morningstar said less than one percent of people actually follow through with this advice.
One of the reasons people don’t adopt the annuity method is because if they do, they don’t really have the opportunity to improve their lifestyle from where it is right now, as it removes a lot of the flexibility of other investment accounts.
At Family Investment Center, we’re experts at helping people understand what they need to reach their goals. Investing for retirement, in all its complexities, is an important topic that deserves the attention of people who make it their life’s work. Contact us today and let’s start some mental accounting that will make you comfortable with your position today and in the future.
Don't Fall Behind (as most Americans do) on Retirement Planning
As much as Americans focus on money, it’s disarming to know how few are focused on their financial future. The American College of Financial Services, in its survey of respondents who are in retirement or nearing it, found that close to 75 percent failed their quiz regarding retirement planning.
Americans are living longer, which means that if you stop working at age 65, you’re no longer planning for a ten-year period where you’re not earning an income – it’s likely much longer and you need to carefully plan for the decade-plus of no income other than what’s been put in retirement savings.
Only six in every 100 people were able to “ace” the quiz, implying that they are well-prepared for their retirement years. Almost 66 percent of the people quizzed reported that they had high levels of self-knowledge regarding retirement planning, which means that in actuality, they are unaware of their real financial situation as it relates to retiring comfortably.
As with any survey, differences in demographics were revealed in the retirement survey. For example, around 35 percent of males passed the quiz compared to 17 percent of females. This is particularly disturbing given the fact that women, on average, live longer than their male counterparts, which means their retirement planning acumen needs to be on point.
Another demographic difference showed that those with higher levels of education and wealth were more likely to be prepared for retirement. People with one million dollars or more in assets were 250 percent more likely to pass the test than those with less than one million. Furthermore, only nine percent of those without a college degree passed the quiz.
The caveat here is that people who can pass a financial literacy quiz are better planners and are better prepared to meet the challenges that can occur in retirement. And while it is evident that some demographics fair better than others, it doesn’t have to be a barrier to financial preparedness in retirement. All that is needed is a trusted advisor who can assist you in developing a sound retirement plan, and your ability to stick to that plan.
When you seek out an investment advisor, you should choose a trusted, experienced professional that can offer objective and non-conflicted advice. The best way to avoid conflict is to seek out a fiduciary, because a fiduciary must act in what they believe to be your best interests. Rather than work toward boosting their income by choosing products that give them a commission, many are fee-only advisors, which means they have no reason to offer something to you that doesn’t fit your goals.
At Family Investment Center, we have always operated as fiduciaries. Our goal is to get you to think about your goals for retirement and find ways to make sure you reach those goals. Contact us today and let’s start planning your own freedom tour.
Retiring Early Requires the Right Mix of Investing Strategies and Diversification
Do you dream of an early retirement? If you want to get out of the workforce before the traditionally targeted age of 65, your investing strategies may need to be adjusted. It may seem simple, but a quick reminder can be very beneficial. Here are some important steps to take:
Get Involved Early
It’s an overused saying but it is true: the best time to start saving is yesterday; the second-best time to start getting serious about investing for your future is today. If you want to retire early, you need to start planning as early as possible, which is why Millennials should consider strategies now that will put them in a position to make that early retirement decision in a couple of decades. The sooner you begin saving, the more compounding you’ll have working in your favor later.
If you’re making up for lost time, don’t worry – you’re not alone. Many investors pick up the intensity of their investments in mid-life. It’s important to start where you are and move forward consistently.
Establish Solid Goals
If you’re in your mid-to-late 20s, your vision of the future is likely going to alter by the time you’re in your late 30s. That’s fine, but establish your goals for retirement now so you have a plan to guide your investing strategies.
“Where should I put my money?” It’s an appropriate question, and most investment advisors will point to an IRA and an employer-matching 401(k) as excellent vehicles for early retirement. Talk to your investment advisor about diversifying your investments in a variety of types, as this will give you the best chance at growth, especially when the market is volatile.
Keep an Eye on Taxes
Being tax-efficient in your investing strategies is important for an early retirement. For instance, tax-deferred savings vehicles like 401(k)s and IRAs can help you boost your savings. If your employer offers a match on your 401(k) contributions, you're going to see your savings grow more quickly.
Healthcare Can Get Expensive
This is an area of retirement planning that you may not have thought about – your health. Maybe you haven’t been to a doctor in 15 years and any sickness you’ve had has been managed from home. Unfortunately, you’re likely going to be visiting your family practitioner more often when you hit your golden years, which will increase your cost for healthcare.
Even though you may not have medical problems now, you need to budget for costs related to healthcare because your medical issues can wipe out your savings if you’re not prepared.
At Family Investment Center, we’ve established many investing strategies for our clients who want to retire early. Every situation is different and requires a customized approach, which is why you should come in and talk to us about your retirement goals. We’ll help put you on a path where an early and comfortable retirement may actually be attainable.
How Establishing Goals Can Improve Your Retirement Planning Strategies
Retirement planning should really be about planning with a purpose in mind. Many people avoid this crucial planning stage because the numbers confuse them and the whole process may seem daunting. However, money is more than a number; when you attach a goal to it, the planning process become less confusing.
Rather than thinking about dollars, try thinking about what you want your wealth to do for you in retirement. And remember – your goals will probably change, even in your golden years, which means you have to be flexible in your planning.
In fact, a recent Kiplinger article titled “To Make a Financial Plan, You Need a Financial Purpose” reminds readers of key questions to ask now, and to revisit often. As you embark on retirement planning goals, keep the following questions in mind:
· Which relationships are important enough that you will be willing to provide (financially) for them?
· Do you have health concerns?
· What lifestyle do you envision in retirement?
· What is your idea of a happy and healthy retirement?
· What hobbies would you like to pursue in retirement?
Answering these questions will help you round out more concrete ideas of what your future will look like and also give you an idea of how much money you will need in retirement. Here are some other questions to explore:
What will you do in retirement? Everyone has different ideas about that, which is why every plan has to be just as unique. For instance, do you plan to continue working part time into your 70s? If the answer is yes, your planning will differ from the person who plans to never work again after the day they retire. Do you want to travel extensively or just stay local and enjoy your family and friends? Again, the traveler will have to make extra room in their budget for the expense of traveling.
When will you quit your career? Do you have a set date that you’ve been looking forward to for years, or are you going to step down when you have saved enough money to retire and have enough for the goals you’ve set for yourself during those years?
Where you plan to retire will also have an impact in how you plan your investments. Are you planning to downsize your current living situation or upgrade to something less modest? Maybe you want to move to a different city in a different state or live with nearby family. The way you answer the question of “where” will also change how you approach your investments.
Getting an objective viewpoint from a qualified professional can go a long way in making the decisions that will put you on the road to reaching your goals. An investment advisor has the expertise to help you invest money in a way that is as unique as your goals. However, be sure to seek out the assistance of a fiduciary. When your investment advisor operates as a fiduciary, they will work for your best interests, not theirs. Instead of pushing products that pay them a commission, a fiduciary will only make recommendations that match your goals.
At Family Investment Center, we’ve looked out for our clients’ best interests since day one. We’ll listen to your plans for retirement and help you choose investments that provide you with confidence toward your future.
Avoid Retirement Planning Missteps and Plan Your Exclusive Freedom Tour
If you’re intimidated by retirement planning, you share a similarity with a great many Americans. However, this intimidation leads to the first big mistake – not planning at all.
“I’ll get to my planning for retirement later,” many people say to themselves. You may think you’ve got decades ahead of you before you have to start worrying about it. Don’t fall victim to this thinking.
Another mistake many people make in retirement planning is that they have a faulty vision of what they’ll be able to spend in retirement. A survey conducted by Fidelity Investments reveals that more than 10 percent of Baby Boomers think they can withdraw 10 to 12 percent of their income on an annual basis. Following that line of thinking can drain a retirement account within a decade.
Everyone’s vision of retirement is unique, as are the strategies one must use to plan for their retirement. A common denominator in all scenarios is that an accurate forecast for retirement relies on how old you are today, how much money you’re saving and how you’re investing it.
This means that if two people have the same vision of living on a golf course in Arizona during retirement, they could have vastly different prospects for reaching that goal. If one of them has a few thousand dollars in the bank while the other has hundreds of thousands, the retirement planning is going to be just as disparate.
To get into the right mindset for reasonable retirement expectations, you have to stop thinking about retirement as a single event; it’s actually a long, extensive event. There are 70,000 people in America right now who have reached the age of 100. Not many of them will tell you they thought they’d reach that milestone.
Think of your retirement as a freedom tour, a series of events that you are free to choose to do during your years of retirement. Here are a few tips for a successful retirement freedom tour:
· Think about your retirement in terms of a theme or idea
· It takes expertise to plan this theme, which some might consider a “tour”
· Planning for the tour begins months before the excursion takes off
· All stops along the way are planned
· There will be emergency stops, so have money set aside for them (think medical emergencies)
· Working together with family and investment advisors provides for a smoother tour
The snapshot of your tour is going to differ from others’ snapshots, which means you can’t rely on someone else’s investment strategy to make yours become a reality. Work with an investment advisor to make sure you’re not making mistakes that could keep you from enjoying retirement.
At Family Investment Center, we love assisting our clients in retirement planning. In fact, we form relationships that have followed through to the next generation of our clients’ families. Let us help you plan your tour.
Survey Says Few Small Business Owners are Planning Adequately
Small business owners are seemingly tireless entrepreneurs when it comes to building and maintaining a business, but they often forget to plan for their exit strategy. A survey by BMO Wealth Management confirms that startlingly few small business owners are planning for retirement adequately.
The survey by BMO found that 75 percent of the owners between ages 18 and 64 had not saved more than $100,000 for retirement. The good news is that nearly 40 percent of business owners age 45 to 64 had at least started an IRA and nearly 30 percent had established a 401(k). For many entrepreneurs and small business owners, their way of planning for retirement is to invest in their business and sell it when the time is right. Essentially, the business becomes their retirement plan.
In some cases, the business owner will wish to keep the business alive. Therefore, they transfer ownership to a family member and get a share of the future wealth in return, which helps to support their retirement. Unfortunately, this doesn’t always work out as planned. Different management methods, a jarring transition between owners, and/or the unpredictability of the market can wreak havoc on a business, potentially leaving the retiree with little or nothing for their retirement.
A number of business owners will say that if their planning for retirement hits any snags, they’ll simply delay retirement. While this seems like a fair way to approach retirement, plans made while relatively young and healthy can turn quite suddenly as we age and our health begins to fail. For example, a survey by the Employee Benefit Research Institute reveals that nearly 55 percent of people surveyed said they retired earlier than expected due to health issues.
What steps can you take in planning for retirement that can help protect your investments?
· Diversify: Putting a set amount of money per month in a variety of investments is a smart move because you’re spreading out your wealth in several directions. As the market ebbs and flows, you’ll see the advantages of a diversified portfolio. Talk to your investment advisor about popular options, like an IRA or 401(k).
· Specialize: Ask your investment advisor about retirement plans that are specifically for small businesses. For instance, a SEP-IRA, solo 401(k), or SIMPLE IRA.
· Know What You Need: How many of your current expenses are lumped into your business dealings? You’re won’t have that luxury when you retire, so crunch the numbers to get an accurate estimate of what you’ll need on a monthly basis when you retire.
If you’re like most small business owners, you have few hours in the day to research retirement vehicles on your own. Talk to a fee-only professional advisor like our team at Family Investment Center. Since our founding, we’ve maintained a client-first, client-focused philosophy. Today, we welcome you at our table to learn more about what makes us truly unique among investment advisor teams.
Probably Not…Keep Planning and Know Your Options for Social Security Maximization
For nearly the past 40 years, Social Security has offered Americans a small “gift” in the form of a cost of living adjustment (except for two years). You may have heard some discussion that this coming year could mark a third year of the absence of this adjustment. Although this is unknown, we should prepare for stagnant benefits and look at how that affects your social security maximization.
Why does this happen? Ironically, because of the inflation rate being declared “low.” The cost of living adjustment is largely connected to the nation’s rate of inflation, and experts also explore the cost of living increase based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. However, what the adjustment amounts to for some households is a little over $20 more per month, according to last year’s numbers. Not highly significant, yet still pointing to a message that is significant: counting on Social Security benefits as a retirement source of income may not be a successful strategy.
Instead, investors are encouraged to consider Social Security as a federal savings account and to consider delaying tapping into that account, past the typical age. If you start drawing benefits at age 62, you will receive a significantly reduced portion of what you could be receiving each month you wait until you’re 70.
To get a better idea of how much more you could get if you do so, let’s look at an example. If a person waits to claim their benefits until age 66 would get $1,000 a month if they waited, what happens if they start receiving benefits earlier? If they decided to start taking that money at age 62, they’d get 75 percent, or $750. The amount will grow based on a formula for each year you postpone from age 62.
At age 63, that person would pull down 80 percent, or $800 a month. At age 64, the amount goes up to 87 percent, or $870. At 65 you’re at 93 percent, or $930. For every year you wait past full retirement age, the amount per month increases by around eight percent every year. If our fictional person who gets $1,000 per month at full retirement age waits until age 70 to pull benefits from Social Security, the monthly benefit goes up to $1,320 per month. (Now that’s more significant than the absence of a cost of living adjustment.)
Couples Need to Plan Wisely
You might be eyeing the higher-earning spouse’s Social Security benefits early because it appears that you’ll get more money per month by drawing those benefits, but don’t make this mistake. The surviving spouse will get less in this scenario when one spouse passes away. Waiting until the higher earning spouse is at least 66 before drawing Social Security benefits can be a smarter option.
Singles Need to Plan Wisely Also
If working into your mid to late 60s sounds appealing to you, it will also benefit you in retirement. Working later and delaying benefits until later will also give you a higher monthly benefit. This is a strategy that can work especially well for women, as they tend to live longer.
Seek Investment Advice
Everyone’s situation is different, which is why your retirement plans deserve a look from a professional investment advisor. Our commission-free team at Family Investment Center has assisted people in every stage of life, including using tools to look at Social Security maximization scenarios. Contact us today and let’s begin planning your future.
Interesting Tips for Social Security Maximization for Your Retirement
President Franklin Roosevelt signed Social Security into law 80 years ago in an effort to help Americans whose savings were depleted during the Great Depression. The program exists today embraced by some controversy or confusion, but it does continue to benefit retirees. Social Security maximization should be on the minds of every individual planning for retirement – and especially when it comes to understanding the facts and the options available.
Living longer and retiring earlier can have a double-impact on your Social Security earnings. The average American lives longer now than they did 80 years ago, but they are also choosing to retire earlier, which means receiving approximately 12 more years of Social Security benefits than decades ago. In fact, the average retirement age is 64 years of age; in 1950, it was 68 years. For some, delaying receiving benefits even just a few years can mean thousands of dollars more in potential Social Security earnings over the course of your lifetime.
Social Security has expanded. The first year benefits were paid was in 1940, and only 220,000 Americans had signed up for Social Security. At that time, spouses, widows and widowers were not eligible for these benefits. Today, there are 60 million retirees, spouses, widows and widowers receiving monthly payments through the program. Work with a professional advisor so that you’ll know all the options and the facts regarding spousal withdrawal, because it’s not as simple as it may seem.
Social Security is not dying. You may hear reference to the idea that the program will be insolvent in “X” number of years, but the truth is that even without reform from Congress, full Social Security benefits are estimated to be available through 2034, and then three-quarters of the benefits should be available through 2089.
People still depend on Social Security. While the common thinking might be that Social Security benefits are an insignificant portion of a retiree’s finances, roughly 90 percent of retirees say they depend on them to help pay their expenses. The average monthly check from Social Security is $1,221.
Taking benefits early will reduce your payment amounts. You can actually start reaping the benefits of Social Security at age 62, but you can delay taking benefits until age 70 and see your monthly benefit continues increasing until then. The benefit will not increase any further after 70. There are dozens of ways to file, and many special ins and outs, so consider asking for help from an advisor.
Working later and taking payments at 70 can increase your benefits. If you love your career and don’t want to leave it behind, working later in life has financial benefits. If you wait to take Social Security Benefits until you’re 70, you’ll see your benefit continue to climb until then. (There is no additional benefit for waiting to take your payments after age 70).
Connect with an investment advisor. Are you unsure how you should proceed with Social Security? It can be confusing, which is why more and more Americans are consulting with a professional investment advisor. At Family Investment Center, we have experience across all life stages, and we know about Social Security maximization because we offer an in-depth calculation tool. Contact us today, and we’ll discuss the surprising options that are available to you and what they mean for your family.
In Planning for Retirement Mid-Career, Now is the Time for Action (Not Intimidation)
There’s no doubt recent market swings can be a little stressful, regardless of which stage you’re in on your own journey. Talk about the individual generations and their retirement, such as Baby Boomers and the Millennials, continues to swirl across multiple media sources. When the subject of retirement comes up, experts usually focus on how Millennials should plan for it and what Baby Boomers can do to catch up.
However, one segment that may be overlooked is those aged 35 to 49 known as Generation X (Gen Xers). They’re often mid-career and climbing toward top career income years. When planning for retirement, there are important considerations for Gen Xers.
Northwestern Mutual recently completed a study about Generation X and found that they are further behind in their retirement goals (for those who have them) than the other three broadly defined generations. They may also be more rattled by recent market fluctuations, as they haven’t had enough time in the workplace to really build up their retirement fund.
Around 66 percent of Xers are planning to work past the traditional retirement age, not because they love their work, but because they feel they won’t have enough savings to retire. Around one-third of those who responded in the study said they don’t even know how much they’ll need to have saved for their retirement, and half of them haven’t discussed planning for retirement with anyone.
If the study defines where you are in planning for retirement, consider these four tips:
· Calculate your retirement budget. To get a better idea about how much you’ll need, picture your lifestyle in retirement and compare that to how you’re living today. Will your house be paid off by retirement and will you still be making car payments? Perhaps there will be areas where you’ll downsize, but maybe you’ll want to increase your travel budget.
· From where will you draw your income in retirement? Most people will point to Social Security benefits as one source, but others will primarily count on employer-sponsored plans and/or IRAs. If you’re not taking part in your employer-sponsored plan, now is the time to get involved. If you’re 50 or older, Congress allows you to catch-up contributions.
· Reminder: The dollar you earn today won’t be worth as much when you retire. Inflation means you have to account for the fact that the money you require to live on over the course of the next year will not be sufficient 20 years from now when you retire. Inflation has a significant impact, so be ready to account for that in your planning for retirement strategy.
· As you age, you’ll incur more healthcare costs than you do today. You might be healthy right now, but health issues will generally increase as you age. Unexpected medical expenses can make a difference in your retirement plan, so be prepared by making sure your planning includes healthcare strategies.
· Rather than feeling intimidated, start today. Take action by contacting an investment advisor today. They can help you to form a plan so that you carry less worry and more confidence, no matter your career stage. It’s never too late to take a new look at your current situation and make adjustments.
Don’t let yourself become overwhelmed when planning for retirement. Family Investment Center offers a team of professionals who can help guide every generation through the process of planning for retirement. Contact us today and let’s start a conversation about your future.
Some Mistakes When Planning for Retirement Happen All Too Often
Did you know people are living longer today than ever in history? This means when planning for retirement, careful steps must be taken to ensure the money is there many years after you stop earning a regular paycheck. Planning for retirement today means the average 65-year-old should plan for another 20 years of life (and expenditures).
There are many details to consider when planning for retirement. We’ve compiled a short list of common mistakes to avoid:
1. Got a plan? Have a plan and follow it. One of the biggest mistakes people make when it comes to being prepared financially for retirement is failing to create a strategy. A good plan begins with considering cash flow needs now and in the future. A small percentage of prospective retirees actually configure their cash flow needs accurately.
2. Don’t mistake your retirement account for a checking account. Dipping into your 401(k) or IRA early when other resources are available is something you want to avoid. Any money you take out will impact your money’s potential to earn growth, not to mention paying income tax plus a 10 percent tax penalty when under the age of 59 ½.
3. Don’t let your aversion to risk get in the way of smart investing. The market ebbs and flows regularly. Today’s losses in diverse investments will typically bounce back. For instance, if you didn’t make any sudden moves in your 401(k) or other investment accounts during the recession, you’ve most likely seen your accounts bounce back, over and beyond where they were. Avoid over-reacting to media hype about the markets and work with a trusted advisor; they’re accustomed to market fluctuations and can help you stay on track and move forward with confidence.
4. Reminder: Inflation will impact you in retirement. The dollar you make today won’t be worth the same amount in 20 or 30 years. Are your investments keeping up with the rate of inflation? Your purchasing power may be limited if you’re not considering the inflation factor while planning for retirement. Professional investment advisors can help you estimate inflation – and thus spending – increases using both industry tools and experience, so enlist their help.
5. Emotions and investments don’t mix. People who play the market like a game often find themselves the victim of their own emotions. If you get too emotional about the stock market, you may make mistakes -- like pulling out of stocks when they are low or buying when they are high. Instead, stay focused on consistency and on your goals.
6. Are you taking advantage of your employer’s 401(k)? Take part in your company’s 401(k) plan and contribute at least up to the maximum that your company will match, if you can. Investment experts have estimated that Americans are missing out on approximately $24 billion each year collectively by not taking advantage of their company’s 401(k) plan.
7. You might be healthy now, but things can change when you age. Don’t forget about your health and how much you’ll spend on healthcare needs in your senior years. It’s a mistake that many prospective retirees make, but you don’t have to.
These are just a few tips you should know as you plan for your retirement. Find out more by contacting Family Investment Center today. We have investment advisors on our team who devote their hours to helping you succeed, so that you can enjoy freedom and simplicity. We can help you avoid common retirement planning mistakes, and more importantly, help you carve out the picture of what the “good life” means to you and your family and the steps it takes to get there.
6 Tips to Follow When Planning for Retirement
Here’s a startling statistic: According to the Employee Benefit Research Institute, one-third of Americans between the ages of 35 and 44 have less than $1,000 saved for their retirement. If you feel challenged or overwhelmed with planning for retirement, it’s time to implement a few steps in the plans for your future.
1. Save for You First
Before you can help your family, you must first help yourself. Many investment professionals suggest that you think about your retirement in more detail than planning for your children’s college education. Why? In simple terms, the costs for your children to care for you in retirement and your post retirement years can far outweigh the costs they’ll see for their college education.
2. Increase Your Savings Toward Retirement. (Sounds simple, but many fail
Many investment advisors will recommend socking away 15 percent of your income every year to a retirement account. However, for individuals who have waited until later in life to begin planning for retirement that number may be much higher. Consider incrementally increasing the amount until you reach 20 percent.
3. Max Out the Contributions to Your 401(k) and IRAs.
This year, if you are 50 or older, you can contribute $6,500 to your IRA. If you’re younger than 50, the maximum amount is $5,500. The amount is subject to change every year, so keep an eye on it. Furthermore, if you receive bonuses, raises, gifts, etc., it is good to put these toward your investments.
4. Consider Delaying Social Security Benefits.
Maybe you’ve got your mind set on retiring at 65, but you could consider putting in a couple more years at work to assist your planning for retirement goals. Another thing to consider is to delay drawing your Social Security. If you can wait until you’re 70 to begin drawing down your benefits, you may receive monthly payments that are up to 75 percent higher than if you start taking them at age 62.
5. Don’t be Afraid to Plan for Your Future at Any Age.
It can be intimidating to turn 40 or 50 and take the plunge into planning for retirement. However, considering you still have a couple of decades to build a portfolio, sit down with an investment advisor and get some advice about how to allocate your investments.
6. Work With a Fee-Only Advisor.
A fee-only advisor is one that will not take commissions on products; instead, their ultimate objective is to help you meet your goals and acting in your best interest. (A more client-first philosophy).
Family Investment Center is a team of fee-only investment advisors who assist individuals and families as they plan for retirement or when other life situations arise. We keep our clients’ interests at the center of our focus, and we never take a commission. We will walk you through the complex investment processes. Come in and talk to us today.
A recent report from the White House outlines some pervasive issues in investment management, and it has many Americans talking. The report addresses how investors should be wary of hidden fees and conflicts of interests when they work with professional advisors, and in fact, some findings have caused the White House to consider some of these practices “a threat” to Americans planning for retirement.
The President’s Council of Economic Advisors released a report on February 23, 2015, called “The Effects of Conflicted Advice on Retirement Savings,” that outlines the issues and how they are hurting the middle class. The report finds that “conflicted advice leads to lower investment returns.” For example, investments people make with advisors that work on commission average roughly one percent point lower each year compared to investors working with fee-only advisors. What else does the report say?
Conflict costs you money. Shockingly, retirees who get advice from an advisor with a conflict of interest about rolling over a 401(k) balance to an IRA lose around 12 percent of the value of that balance over 30 years. With the average IRA rollover being $100,000 or more, that 12 percent loss is equivalent to $12,000.
According to a summary of the report: “…conflicted advice leads to large and economically meaningful costs for Americans’ retirement savings. Even a far more conservative estimate of the investment losses due to conflicted advice, such as half of a percentage point, would indicate annual losses of more than $8 billion.”
Know the difference between fee-only and commission-based advisors. Advisors that work on commission confuse clients with a “fee-based” advisors title. The difference is that a fee-only advisor charges you one flat fee, usually based on the overall assets of your portfolio. They aren’t motivated by commission-based sales, allowing for a more unbiased environment. In contrast, a fee-based advisor can offer you investment products for which they will make a profit. They not only charge you a fee for their services, but they can also collect a commission.
Look for advisors who act in the best interests of the client. Commission-based may direct their recommendations toward products for which they can also benefit, rather than those that are solely in the best interests of the client. This is why the report from the Council on Economic Advisors highlighted how returns on investments made with these types of advisors may fall below what can be gained when working with an advisor who acts in their clients’ best interest (this is called a “fiduciary” standard).
Consider looking for a NAPFA advisor. The National Association of Personal Financial Advisors (NAPFA) is an association to which many professional fee-only advisors belong. If you’re shopping for an investment advisor when planning for retirement, this resource can be a solid place to start.
The team at Family Investment Center decided from our beginnings that working in our clients’ best interest meant never taking commission or putting any hidden fees into our business strategy. As members of NAPFA, we’re committed to bringing value to you in a straightforward way, and we’ll never take a commission for any product. We wholeheartedly believe that conflicts of interest should not exist in an industry that handles the life savings and future goals of individuals and families, and it shows in our relationships with our investors. Contact us today to find out more about what makes us unique.
Pension plans are largely a thing of the past, which means many workers who want a chance at a good retirement are putting money away in 401(k) accounts. Surprisingly, only 53 percent of Americans in the civilian workforce are actually doing that, according to the U.S. Bureau of Labor Statistics.
The statistics for private industry workers are worse – 48 percent are contributing regularly to a 401(k). On the upside, around 81 percent of state and local government workers are participating. The subset that suffers the most when it comes to participating in a tax-deferred account is the part-time worker and the low-income worker who don’t have an employer offering a 401(k). Financial planning for these individuals is often especially lacking.
As more Americans leave the corporate world where employer contributions in 401(k) plans are common, workers are juggling multiple jobs and not setting any money aside for retirement. By choosing an entrepreneurial path, these individuals are finding more satisfaction in their careers, but at the expense of a smart financial planning strategy.
For people engaged in financial planning for retirement, most are clued in to what they should be spending on non-essentials and what they need to be investing each paycheck. Unfortunately, the people who need to save the most could be making the biggest blunders: one statistic from the Institute for American Values says that people earning less than $13,000 a year spend about three percent of their income on lottery tickets. If that money was put toward investments, it could add up to $87,000 over 40 years if it earned 7.2 percent per year in an investment fund.
The problem may be rooted in the classic difficulty that many Americans have toward foregoing some expenditures now, getting the big things right, and thinking now toward the golden years of retirement. Even people who are already investing in their future are often baffled to learn they could be doing much more, and the actual number of investment options out there – pointing again to the need for professional investment management.
Investment advisors have the knowledge and experience that can help your money work for itself and take the stress of these decisions off your mind. The closer you get to retirement, the more impactful your decisions will be. Bringing in a professional to guide you along can make the path toward the retirement lifestyle you want that much clearer.
Retirement planning isn’t easy to do on your own, which is why the professionals at Family Investment Center continue to maintain high credentials and industry knowledge. Our team can sit down with you to talk about all the scenarios that could be in your future, in language that makes sense. We’re also commission-free, which means you get an objective opinion about where you should consider putting your money. Come see why we’ve earned the trust of so many families as they plan for retirement.
You’ve come to the conclusion that retirement is indeed a reality. As a youth, you always thought of retirement as a distant event that was too far removed to take seriously. You’re probably starting to ask more questions about how to plan for retirement, so here are some tips to take into account.
1. How Much are Your Socking Away?
Most investors could put more into their retirement accounts but don’t. You’re missing out on free money if you aren’t contributing the maximum amount that your employer is willing to match. Don’t get too crafty, either; if you think you’re smart by frontloading your contributions at the beginning of the year, think again, because you're missing out on the employer match. Don’t get caught up in the formulas and all the talk; concentrate on what your employer contributes and how so that you can maximize this benefit.
2. Calculate How Much You’ll Need in Retirement
This is where many investors falter because they don’t think they can accurately determine what they’ll need 20 years or less from now and how Social Security will play into that. Take advantage of some retirement income tools, such as retirement calculators, that help you get a handle on exactly how much you’ll need when you decide to start pulling down your Social Security benefits. Keep in mind that the average life expectancy is longer than it once was, and women typically live longer than men, which is another aspect of retirement planning that people often forget. Many professional advisors offer a Social Security maximization service, so ask for it when you make an appointment.
3. Should You Get Taxed Now or Later?
This is a question that can go either way depending on your tax situation. For people who think their tax rate will be lower in retirement than it is now, the choice may be the traditional route of taking taxes out during retirement. For people who think their tax rate will be lower now than in retirement, they generally go with a tool like the Roth IRA.
4. Do You Need to Play Catch-Up?
You can put a maximum of $17,500 in your 401(k) per year as of 2014. Many Americans are finding themselves in the position where they didn’t put anything close to that in their account every year, and now that they are 50 or older, they fear they’ll never be able to retire. Fortunately, those 50 or older are allowed to bulk up their 401(k) by adding an additional $5,500 a year and another $1,000 in their IRA this year. In 2015, the maximum contribution to a 401(k) is $18,000 with a catch-up contribution of $6,000. Do some budgeting and start putting more in those accounts now so you can have a comfortable retirement.
5. See an Investment Advisor
Knowing how to plan for retirement is something few novices can do on their own effectively. Your best bet is to invest in professional advice with an advisor who knows how you can put your money to work for you. You can’t be expected to know about all the tax laws, contribution limits, and the minutiae that make a difference. At Family Investment Center, we’ll walk you through the process so that you can enjoy a little of the freedom that comes with working with a professional advisor.
Education isn’t cheap, and for doctors, more education is required than in just about every other profession. The result is an average student loan debt of $170,000.
Not only are you coming out of school with more debt than your undergraduate counterparts (averaging $25,000), you could be working through a late start on your earning potential. Most doctors don’t start earning their full-scale paycheck until ten years later than those with whom they completed their undergraduate classes.
Furthermore, as a doctor, you’re at more risk for liability issues, which makes your investment plans all the more complex. Financial planning for physicians is much different than the average investor.
If you’re in the same situation as many other physicians, it’s possible that you didn’t get out of your residency and into a well-paying position until you hit the age of 30. It’s possible that your medical school total bill could reach $150,000. Even if you’re in a practice that is considered low risk, there is a 75 percent chance you could experience a malpractice suit by the time you’re 65. Another thing you probably have in common with a majority of doctors is the high cost of your own insurance, and needing to lessen the risk for your family if you were to become disabled.
In your profession, you’re constantly facing new regulatory burdens and liability issues. Trying to keep track of the tax code for physicians is one of the main reasons physicians seek assistance from third parties. With all of these aspects in front of you, it’s easy to see why investment planning for physicians is a burdensome task and why looking to a professional investment advisor is a smart choice.
Don’t make the mistake of ignoring the risks and liability issues related to asset protection. Have you looked into umbrella insurance policies that expand your liability coverage? This is something that can protect you should you get involved in a lengthy legal battle. Asset protection is another area that deserves some research; you need to be able to protect your assets from malpractice claims, litigators, and creditors.
Another common mistake physicians make is failing to put a comprehensive plan together that involves controlled spending and investing. You’ve dedicated so much of yourself into becoming a doctor and it would be easy to give in to quick-decision purchases, but don’t be tempted to forego your financial planning.
Financial planning for physicians takes the keen eye and expertise of a professional investment advisor, such as those at Family Investment Center. In fact, Dan Danford, our founder/CEO, is listed among the 150 Top Financial Advisors for physicians, according to Medical Economics magazine. Our team has multiple levels of education and experience toward investment management and retirement planning for physicians. Contact us today and let us help guide you – we might be just what the doctor ordered!
How much thought have you put into your retirement accounts? Do you know how much you’ll need to have saved to live comfortably after you retire from work? As a part of Gen X you were brought up believing Social Security couldn’t be counted on, which means you’ve probably got an eye on big retirement savings if you want to live comfortably in retirement. Unfortunately, that doesn’t mean you are necessarily saving aggressively enough.
According to a study by the Transamerica Center for Retirement Studies, more than 80 percent of the generation of people born between 1965 and 1978 don’t think they’ll be as well off as their parents were/are in retirement. In fact, less than 15 percent say they believe they will retire comfortably one day.
While many Gen Xers say they will need to amass $1 million for their retirement, most of them aren’t saving or investing aggressively enough to reach that goal. Investment advisors say that regardless of how long you’ve waited to get your retirement plan up and running, it’s never too late to make investments that will benefit you later in life. However, the earlier in life you begin planning for retirement, the closer you’ll get to your goals. When you consider that the first Gen Xers will turn 50 next year, you can see how important it is for you to stop waiting and start investing wisely.
Transamerica’s report shows that nearly 40 percent of Gen Xers are not even thinking about their retirement investments and are waiting until closer to retirement to make decisions. Planning for retirement requires a close look at finances at all stages of life. If you pay close attention to your budgeting now, you could be in a much safer position as you reach retirement age.
One way to get yourself in a better position is to put away as much as you are allowed in your employer-sponsored retirement program. If you’ve already hit 50 and are behind on your investments, take advantage of the “catch-up” contributions you should be able to make.
Planning for retirement requires that you stay on top of your investments, which means it is good to look for assistance from a professional investment advisor. Your advisor will walk you through your options and help you get caught up on everything you need to know, which allows you to make decisions based on facts (not hunches about what the market will do next).
Unfortunately, the eventual depletion of the Social Security Trust Fund is a definite possibility. Nobody ever claimed to be living a life of luxury on Social Security alone, but without that option, you’re going to have to make up the difference through more aggressive saving and investing.
Family Investment Center is a great option for you if you’re looking for professional guidance. Planning for retirement isn’t an easy task, but with professionals like us on your side, you can look forward to your future more confidently.
Tips for Planning Your Retirement With a Tropical Beach in Mind
Planning your retirement, ideally, is a life-long process that starts when you are stepping into a new career. That’s the best-case scenario. In reality, many people put it off and struggle to formulate a workable plan later in life. However, if you’re working with an investment advisor, there is a good chance the money you’ve worked hard to save will put you in a better position to have the retirement you’ve been dreaming of.
Did you know that a staggering number of Americans move to new towns for their retirement every year? According to Where to Retire Magazine, about half of the states in the nation are actively vying to become home to around 700,000 retirees who are stepping away from where they lived most of their lives. Why do towns and cities try so hard to pull them in? Because of the revenue they bring with them. For retirees, it’s easier than ever to choose from a top list of locations with select and distinct amenities they’re looking for – plus social media and tools like Skype mean they can actually relocate and still keep in touch with loved ones.
With around 10,000 people turning 65 everyday, there is no shortage of Baby Boomers needing advice on planning for retirement. If you live in a cold climate, you’re probably one of those hundreds of thousands of prospective retirees with an eye on a warmer climate. However, planning your retirement around such a move could be quite costly. You want to live in a place that has great climate, excellent healthcare facilities nearby, low crime rate, taxes that won’t drain your accounts dry and a place with plenty of events to keep you entertained in your golden years. These places don’t come cheap.
If you’ve weighed your options and figured out that the advantages of moving to a more expensive location is worth more than staying where you are currently, it might be time to start looking at your investments and making them work a little harder for you so that you can attain your retirement goals. Don’t make this move alone – choose a professional who does this for a living.
Planning for retirement, even in the late stages of your career, can take a positive change in direction quite quickly when you’re working with the right investment advisor. The process of choosing a team that caters to your needs should begin with looking for a fee-only advisor who doesn’t work on commission. You want an objective professional on your side, not someone who needs the commission or is hyper-focused on it. A fee-only advisor will offer you products that work for you, not for their wallet.
Another point to consider: the decisions you make now about your Social Security benefits could cost you tens of thousands of dollars later in potential earned income. An investment advisor will help in planning your retirement and can inform you of information toward investing that most people probably don’t know about. Come to Family Investment Center and find out how our experienced, credentialed professionals can assist you in mapping the steps to get you to your dream location.
“Family Feud is an American game show in which two families compete against each other in a contest to name the most popular responses to a survey question posed to 100 people,” according to Wikipedia.org. Using a similar premise, we have created a game called “Financial Feud”. This version can be a single-player or multiple-player game.
In our version of Financial Feud, you will be asked a financial question and provided several options for the answer. From these options, you will choose what you think the top response was from a survey of more than 2,000 U.S. adults. Again, you will guess the response that the majority of the public answered, not necessarily the most correct response. After all the questions have been asked, we will provide you with the correct responses. You can also answer the survey questions yourself to see where you rate with the survey participants.
Now that we have explained the game, it’s time to play Financial Feud! Start by having a pen and paper ready, and make two columns: One for your guesses on the Financial Feud survey responses, and one for your own answers to the survey questions.
Question 1: A survey of over 2,000 U.S. adults asked, “How would you grade your personal finance knowledge?” What letter grade did most people choose?
- A or B (above average)
- C (average)
- D or F (below average)
Question 2: A survey of over 2,000 U.S. adults asked, “Do you use a budget?” Which percentage of people answered “YES”?
Question 3: A survey of over 2,000 U.S. adults asked, “Do you carry credit card debt from month to month?” Which percentage of people answered “YES”?
Question 4: A survey of over 2,000 U.S. adults asked, “Do you carry $2,500 or more in credit card debt from month to month?” Which percentage of people answered “YES”?
Question 5: A survey of over 2,000 U.S. adults asked, “Do you believe you have a sufficient amount in your emergency fund?” Which percentage of people answered “YES”?
Question 6: A survey of over 2,000 U.S. adults asked, “Do you believe you will have enough money during retirement?” Which percentage of people answered “YES”?
Question 7: A survey of over 2,000 U.S. adults asked, “Do you plan to spend less than you did last year?” Which percentage of people answered “YES”?
Question 8: A survey of over 2,000 U.S. adults asked, “Do you plan to save/invest the same amount this year as last year?” Which percentage of people answered “YES”?
Question 9: A survey of over 2,000 U.S. adults asked, “If you are having financial problems related to debt, where do you turn first?” Who/what did most people choose?
- The Internet
- Friends and Family
- Professional Services
Question 10: A survey of over 2,000 U.S. adults asked, “Do you believe you could benefit from advice and answers to everyday financial questions from a professional?” Which percentage of people answered “YES”?
Answers: 1) A or B 2) 40% 3) 35% 4) 15% 5) 85% 6) 85% 7) 30% 8) 50% 9) Friends and Family 10) 75%
Ahh…vacation. There’s nothing like saving up and preparing for a week or two away, and then when the time comes, relaxing while letting the time pass. But interestingly enough, U.S. research shows that more people are planning for vacations throughout the year than they are planning for their own retirement.
An Edward Jones study, which surveyed more than 1,000 adults, asked what they spend more time planning for: vacation, college or retirement. Nearly 30 percent said they focused more on vacation planning and even less said they spend time planning their retirement. This is an indicator that nearly one-third of Americans are likely to live their golden years short of the dream of idyllic vacations and property rentals.
Many people who don’t plan ahead for retirement may believe common myths including not having enough to invest or not needing to be concerned with it so early in their lives. In fact, less than 10 percent of people ages 18-34 put any emphasis on retirement planning. But what if they knew that with a steady rate of return, saving $250 a month starting at age 25 could turn into a million dollars in retirement? Waiting until you’re 50 to start saving for retirement means you’ll have to dole out more than $3,000 a month to hit the same goal.
Many young people are experiencing crushing student loan debt, credit card debt, and leading lavish lifestyles, all of which leaves little room for investing. However, any financial advisor will tell you that no matter how little you put away for retirement, anything is better than nothing. The closer you become to retirement, the more anxious you may get about your lacking retirement account. Starting investing early will put you in a better financial position later. Seriously, if you think putting away $400 a month is difficult now, how do you think you can save $3,000 or more at age 50; alongside loans, debts, and other payments?
By no means does this mean you have to stop enjoying life or stop taking your annual earned vacation. It simply means that by prioritizing the way you think about your finances now, and trying to put a little more emphasis on goals for the future, you can experience even more golden sunsets at your favorite vacation destinations once your golden years arrive.
We know it takes knowledge and experience to make wise investment decisions, which is why we want you to choose a financial advisor to provide that guidance. Working with a professional investment manager can give you more peace of mind to focus on what you want or need to focus on. Consider seeking out fee-only advisors who don’t work on commissions, so that your investments receive the ongoing and long-term attention they need in your retirement planning.
If you want unbiased advice from professionals who spend many hours each week studying investment strategies for each of their clients and accounts, visit us at Family Investment Center. Retirement planning is one of our true areas of expertise, and we’ll always put your needs above all else so that you can hopefully enjoy vacations now and also in your retirement future.