Retirement

Retirement Sneaks Up On You

February 13, 2018 By Twila VanLeer

When you are young and just starting down the employment path, it’s easy to ignore the fact that you’ll face retirement some day. But some day is not as far away as you think. If it arrives and you haven’t prepared, you may face some tight living in your “golden” years.

How much you need to save to be prepared is a personal question. How well do you want to live in retirement and how much do you earn? A rule of thumb is to estimate what you will be earning the year you retire. Subtract your retirement income, such as Social Security, pension, trust accounts, etc.) and then multiply it by the number of years you expect to live after retirement. Not exact, but at least a figure to shoot for.

The answer to how much you should be saving, simply put, is “as much as you can, but not more.” The earning years should not be miserable in order to finance the retirement years. But retirement savings must be high up on your priority list.

You can’t get a loan to finance your retirement. To make the figures more real, make a pie chart with five “slices.” Label them “bills,” “debt,” “spending,” “short-term savings” and “long-term savings.” If the long-term savings (i.e., retirement) is too small, look at the other categories and see where it is possible to make a shift. Possibly you need to trim short-term savings a bit in favor of long-term. Be wise, don’t decimate your emergency funds to make the difference. Be willing to sacrifice a few things, like lunching out, being too free with entertainment expenses, making unnecessary clothing purchases. Focus first on the necessities.

What kind of retirement account should you consider? How long do you have before retirement and how much do you make? Taxes should be a large part of your consideration. Some programs, such as an employee-sponsored 401(k), allows you to defer payment. Optimize your contribution to a company plan, especially if your employer offers a match.

Speak with a professional if you need help understanding your options, how to invest to maximize your returns. He or she can guide you through the maze of possibilities and help you adopt the best plan for your circumstances.

Yes, there are many questions. But the one that can be easily answered is: When do I start? The answer: Now.

Choose A Financial Advisor

February 3, 2018 By Twila VanLeer

Saving for retirement just makes good sense, but when retirement is still a long way in the future and you are intent on living now, the task can seem daunting.

Too often, people look at retirement preparation as a last-minute sprint instead of a long-term marathon. The process should begin early in one’s career and you don’t need a degree to figure it out. The process can be eased by involving a qualified financial adviser.

A qualified financial adviser can provide advice and guidance and provide services that might include investment management, income tax preparation and estate planning.

Building a sufficient retirement savings may require putting a rein on spending during the earning years. Your financial adviser can tell you how much you need to save and then guide you through what can be a confusing investment strategy so that the money you invest will give a good return.

Your local banking institution may offer free or low-cost adviser services, along with printed or online information that would be helpful, such as retirement calculators, trust and estate services, insurance options and others.

The AARP offers these guidelines to finding a competent financial adviser:

• Verify the individual’s credentials and get client reference.
• Study your options and don’t hire an adviser until you are certain he or she offers what you want for your particular circumstances.
• Be clear up front about the adviser’s fees. There are various ways an adviser can be compensated.

Saving for retirement need not be overwhelming. Take advantage of information provided by your employer and your financial institutions. Spend your money before retirement with an understanding of how that will affect the future and team up with someone knowledgeable about retirement finances. And then – happy retirement.

Will They Be Ready For Retirement?

January 7, 2018 By Twila VanLeer

Even though it appears that young workers today can look forward to less benefits from government programs and pensions when they retire, they don’t seem to be bothered enough to start saving.

Forty-eight percent of those aged 18 to 30 have zilch in their savings accounts, according to a GenForward poll conducted by the Black Youth Project at the University of Chicago. Associated Press-NORC Center for Public Affairs Research collaborated.

While some of those in the research sample would still be in school, those at the other end of the spectrum are doing no better. In the age group 25 to 30, the great majority had nothing set aside for retirement. All this is occurring at the same time that traditional pensions offered by employers are disappearing, leaving future retirees dependent on their own resources.

Contributing to the problem are new Social Security rules that keep increasing the age limits for participants. It used to be possible to apply for full SS benefits at age 66. Now it is 67. The rising generations have less faith in the federal retirement program than did their parents. Only 5 percent say they have confidence in the program and 28 percent are “somewhat confident.” That leaves well more than half who are not counting on Uncle Sam to underwrite their retirement.

Still, the young people look at the situation through rose-colored glasses, expressing confidence that they will be able to maneuver through retirement okay.

Many are relying on company-sponsored savings plans such as 401(k)s to see them through. One young man who took a finance course in college, was alerted to begin saving at age 20 to secure his retirement. He didn’t begin until several years later, but at least has the concept in mind. He and his wife both have 401(k)s. Some of the younger set reported taking second jobs to give them a savings boost.

There is no simple formula for deciding how much you need to squirrel away for retirement. Depends on when, where and the lifestyle you anticipate. Fidelity suggests as a rule of thumb that you dedicate 15 percent of your current income to that future need. Some young workers have looked at their personal situations and expect to be working beyond usual retirement age — until they are 70 or more.

Some of the confidence these younger generations exhibit is founded in the knowledge that they are just getting started in their careers. They expect to increase their earnings as time passes and to have more leeway for saving. But based on well-founded common wisdom, about half of them are already behind the curve and they may wake up to find themselves retired — and broke.

Get A Handle On Retirement

December 20, 2017 By Twila VanLeer

The future is a murky place. No crystal ball has yet been invented that will tell you exactly what financial realities you will face in retirement. Today’s Millennials, GenX-ers and Baby Boomers are all approaching the zero hour with lots of questions. So many variables! Marriage, babies, divorce, bills, bonuses, job changes and the country’s shifting economy all play into the equation.

Without offering a rigid, one-size-fits-all solution, here are some ideas that you might consider as you contemplate the end of your working years:

Those in their 20s and 30s are at the entry end of careers, often straddled with student debt, credit card debt and high living expenses. Nevertheless, now is the time to start thinking about retirement savings. It comes faster than you’d suppose.

Consider saving 15 percent of your pre-tax income. Sounds like a lot. But that is the figure experts in the field say is necessary to have a health retirement.
Take advantage of ”free money” such as employer-sponsored 401k programs, which often offer a matching contribution to expand the benefit. If that seems too high a goal now, put whatever you can into a work-sponsored savings option or into personal savings. Look into profit sharing options if your employer takes this approach to helping employees to a healthy retirement. If you have to start small, plan to add a percentage to your savings each year until you reach the 15 percent goal.

Plan and budget conscientiously, not haphazardly. Keep your must-have expenses at a level not more than 50 percent of your take-home pay. Some items, such as housing, food, health care, transportation, child care and debt, can’t be avoided, but they may be flexible. Study your own circumstances and determine if there are places to cut, even if it means a little temporary sacrifice to make it work. Turn down the thermostat in winter, up in the summer, to save on heating and cooling. Buy groceries and clothing when they are on sale and brown -bag it to work. Minimize eating out.

Try to have three to six months of essential expenses in a savings account in case of an extended emergency. Think of a contribution to this fund as a monthly expense, not separate from other “musts.” After you have this three-to-six-month cushion, save for short-term expenses that pop up unexpectedly. Consider having these savings taken from your paycheck and deposited in separate accounts automatically.

Especially if retirement is some decades in the future, it gives you time to ride out the inevitable rises and falls in the stock market. Stocks have traditionally produced higher long-term returns than bonds and cash, despite the volatility.

Keeping a balance between accounts where retirement withdrawals are taxable and those where withdrawals in retirement are taxable and those where withdrawals are tax free can help manages taxes when you are living on that retirement income.

An annuity is one way to create a simple and dependable income stream that is guaranteed for as long as you or your spouse lives.

Since Social Security may be a significant factor in your retirement, make the most of the government’s program. The longer you wait to take out Social Security, the higher your monthly benefit will be. For instance, in a very simple example, a person retiring at 62 may receive $1,200 per month, while one who waits until age 66 to retire will receive $1,600. If you wait until age 70 in this scenario, the monthly benefit will be $2,112 per month. The average life expectancy for a woman now is 89 years.

Married couples should look at a number of options that would maximize their retirement income through Social Security. Divorced persons also may be able to claim a former partner’s benefit, if it is larger than their own.

Although there are many variables in trying to determine how much you need to have to live on after retirement, there is a general sense that between 55 percent and 80 percent of the amount that you earned is necessary. While some expenses you have routinely paid while working, such as savings, taxes and insurance, you may find that out-balanced by new expenses such as health care, travel and new insurances.

If you are coming close to retirement, make a detailed budget to see how your money will need to be re-directed. Check your expected expenses against all potential sources of income. Personal finance experts advise that you plan to withdraw not more than 4 percent to 5 percent of your retirement assets per year, adjusted for inflation.

It is essential to have an estate plan with clear directions about who is to inherit your estate when you die. Planning goes beyond a will. You may need expert advice to help you plan distribution in a way that will help your heirs to pay less in taxes, fees and potential legal expenses.

When retirement is a considerable way down the road, it is easy to minimize the importance of budgeting and saving and chafing to have to part with money you could spend making life better in the here and now. But thousands of elderly Americans who are now scratching their way through retirement will tell you that it is worth it.

Three Ways To Stop Worrying About Money

December 10, 2017 By Twila VanLeer

Things look pretty rosy on the American economic front, with slow but steady improvement in the measures experts use to gauge such things and a stock market that is definitely on the upswing. So how come about half of Americans, even those with six-digit incomes, still say they worry about their personal financial security? Money is, in fact, the number one source of arguments between partners.

What’s in the wallet is not the only measure of monetary comfort. And in today’s world, despite the positive signs, real incomes are not rising much, college costs are off the charts and retirement lasts longer on average. Those are all areas for concern, Marguerita Cheng, a financial planner in Rockville, Md., offers these three ways to keep money concerns reasonable:

Pay less attention to the markets. Worry about the markets seems to be a common stressor, regardless of the amount of the individual’s assets. If you believe more wealth would free you from that concern, forget it. A survey among people with $5 million to $25 million in assets showed they worried too. Psychologists call this “loss aversion.” People tend to fret more over a dip in the portfolio than they celebrate an uptick. A diversified strategy can help you to avoid these lopsided perceptions. Don’t dwell on the market. Do check your portfolio once a quarter. You can be assured that your asset/allocation balance is okay and hopefully fend off obsession with unimportant ups and downs.

Tell someone “Thank you.” People who develop an “attitude of gratitude” for the things they have report themselves to be happier. Try writing a note of appreciation to someone who has given your life a lift at some point. Make it beyond a simple “thank you” card. Be specific about the “gift” you received. People who study such matters report that those who take the time for such niceties are happier. Putting gratitude into writing makes it more real, they say, and takes the writer’s mind off what they do not have in favor of what they do have.

Spend socially. Psychologists report that few people ever arrive at a point that they have enough. And accumulating more and more doesn’t lead to happiness. Strong relationships are more important, whether it is with a spouse, family members, friends or a religious group. Direct some of your spending to others. Plan a family vacation, donate to a charity or simply buy a gift for a friend. In one study, participants were given a $10 Starbucks gift card with instructions to use it, give it to a friend to use or to take the friend to Starbucks and share the gift card. The final choice produced more happiness, the survey said. Giving is a way to boost a sense of well-being.

(These suggestions are adapted from “Never Worry About Money Again,” by Carla Fried, Ian Salisbury and Taylor Tepper. Their article appeared in the July 2015 issue of MONEY Magazine.)