Retirement

5 Reasons You’re Not Ready To Retire (And What To Do About It)

Thinking about retirement? Not quite sure if you are ready? Here’s what you can do to get ready for a successful retirement:

REASON #1:

YOU DON’T HAVE A PLAN

Know Your Expenses And How You Will Pay For Them

This is a sure sign you are not ready. You need to know what your expenses are during retirement and how you are going to pay for them. Without a well thought out plan there is no way you are ready to retire. So, spend the time to build your plan or sit down with a CERTIFIED FINANCIAL PLANNER™ to help you.

REASON #2:

YOU HAVE TOO MUCH DEBT

Difficult to Pay Off When Living on a Fixed Income

Too much debt can really derail your retirement plan. Once you retire and are living on a fixed income it will become increasingly difficult to pay that debt off. In addition, too much debt can make dealing with financial emergencies nearly impossible.

REASON #3:

YOU HAVEN’T BUILT A RETIREMENT PORTFOLIO

You Need to Convert Your Savings Into Lifetime Income

During the accumulation phase of your retirement savings years, your goal is to save and grow your portfolio. As you enter retirement you need to refocus that goal and create a decumulation portfolio. Basically you need to convert your savings into lifetime income. In order to do this you’ll need to change your investment strategy. If you are still investing your portfolio with the sole purpose of growing it than you are probably not ready for retirement.

REASON #4:

YOU AND YOUR SPOUSE DON’T AGREE

The Change in Income Can Affect Your Lifestyle

So far I’ve just been talking about the financial aspects of retirement, but there is more to it than that. It’s important that you and your spouse are on the same page. Maybe you are ready but they are not. The change in income can affect your lifestyle so you want to make sure that you talk about this change and work through the issues this may cause before you decide to retire.

REASON #5:

YOU DON’T KNOW WHAT YOU’LL DO

This Can Lead to Overspending or Depression

Once you retire you will have a lot of time on your hands. Have you thought about what you will do with it? Not having a gameplan for your time can lead to overspending and even depression. Make sure you think through what you want to do, how you will pay for it and if it is really feasible. If you haven’t given this any thought, you are definitely not ready.


Sources:
1. This material was prepared, in part, by MarketingPro, Inc.

Should You Borrow From Your 401(k) if You Need Cash?

Thinking about borrowing money from your 401(k), 403(b), or 457 account? Think twice. Here are 6 reasons 401(k) loans are a bad idea.

REASON #1
Damages Retirement Prospects

A 401(k), 403(b), or 457 should never be viewed like a savings or checking account.

When you withdraw from a bank account, you pull out cash. When you take a loan from your workplace retirement plan, you sell shares of your investments to generate cash. You buy back investment shares as you repay the loan.

So in borrowing from a 401(k), 403(b), or 457, you siphon down your invested retirement assets, leaving a smaller account balance that experiences a smaller degree of compounding. In repaying the loan, you will likely repurchase investment shares at higher prices than in the past – in other words, you will be buying high. None of this makes financial sense.1

Most plans charge a $75 origination fee for a loan, and of course they charge interest – often around 5%. The interest paid will eventually return to your account, but that interest still represents money that could have remained in the account and remained invested.

REASON #2
Contributions Could Be Halted

May not be able to make additional contributions due to outstanding loans

Some workplace retirement plans suspend regular employee salary deferrals when a loan is taken. They can resume when you settle the loan.

REASON #3
Potential for Docked Pay

Your Take-Home Pay Could Be Docked

Most loans from 401(k), 403(b), and 457 plans are repaid incrementally – the plan subtracts X dollars from your paycheck, month after month, until the amount borrowed is fully restored.

REASON #4
A. May Have to Pay Back Immediately

30-60 Days: If You Quit, Get Laid Off Or Are Fired

This applies if you quit, get laid off or are fired. You will have 30-60 days (per the terms of the plan) to repay the loan in full, with interest.

If you are younger than age 59½ and fail to pay the full amount of the loan back, the IRS will characterize any amount not repaid as a premature distribution from a retirement plan – taxable income that is also subject to an early withdrawal penalty.1,2

Even if you have great job security, the loan will probably have to be repaid in full within five years. Most workplace retirement plans set such terms. If the terms are not met, then the unpaid balance becomes a taxable distribution with possible penalties (assuming you will not turn 59½ in the year in which repayment is due). If you default on the loan, the retirement plan may bar you from making future contributions.1

B. 5 Years To Repay

If Terms Are Not Met Unpaid Balance is Taxable

Even if you have great job security, the loan will probably have to be repaid in full within five years. Most workplace retirement plans set such terms. If the terms are not met, then the unpaid balance becomes a taxable distribution with possible penalties (assuming you will not turn 59½ in the year in which repayment is due). If you default on the loan, the retirement plan may bar you from making future contributions.1

REASON #5
You Get Taxed Twice!

Repay with after-tax dollars AND Taxed on withdrawals

When you borrow from an employee retirement plan, you invite that prospect. One, you will be repaying your loan with after-tax dollars. Two, those dollars will be taxed again when you withdraw them for retirement (unless your plan offers you a Roth option).

REASON #6
Why Go Into Debt to Pay Off Debt?

It’s Better to Go to a Reputable Lender for a Personal Loan

If you borrow from your retirement plan, you will be assuming one debt to pay off another. It is better to go to a reputable lender for a personal loan; borrowing cash has fewer potential drawbacks.

SMART TIP:

Your 401(k) Plan is NOT a Bank Account

Always remember, you should never confuse your retirement plan with a bank account.


Sources:

  1. cnbc.com/id/101848407 [9/14/14]
  2. mainstreet.com/article/why-you-cant-borrow-your-401k-and-only-way-you-should [7/24/14]
  3. This material was prepared in part by MarketingPro, Inc.

How Much Money Will You Need For Retirement?

What is enough?

If you’re considering retiring in the near future, you’ve probably heard or read that you need about 70% of your end salary to live comfortably in retirement. This estimate is frequently repeated … but that doesn’t mean it is true for everyone. It may not be true for you. Consider the following factors:

FACTOR #1

Your Health

Most of us will face a major health problem at some point in our lives. Think, for a moment, about the costs of prescription medicines, and recurring treatment for chronic ailments. These costs can really take a bite out of retirement income, even with a great health care plan.

FACTOR #2

Your Heredity

If you come from a family where people frequently live into their 80s and 90s, you may live as long or longer. Imagine retiring at 55 and living to 95 or 100. You would need 40-45 years of steady retirement income.

 

FACTOR #3

Your Portfolio

Many people retire with investment portfolios they haven’t reviewed in years, with asset allocations that may no longer be appropriate. New retirees sometimes carry too much risk in their portfolios, with the result being that the retirement income from their investments fluctuates wildly with the vagaries of the market. Other retirees are super-conservative investors: their portfolios are so risk-averse that they can’t earn enough to keep up with even moderate inflation, and over time, they find they have less and less purchasing power.

FACTOR #4

Your Spending Habits

Do you only spend 70% of your salary? Probably not. If you’re like many Americans, you probably spend 90% or 95% of it. Will your spending habits change drastically once you retire? Again, probably not.

Will You Have Enough?

When it comes to retirement income, a casual assumption may prove to be woefully inaccurate. However it doesn’t hurt to get a rough estimate. Using an online calculator link the one listed here can help you get started. You can use CNNMoney’s Will You Have Enough to Retire? calculator.

You won’t learn exactly how much retirement income you’ll need simply by watching this video and using the online calculator. But you will be on the right path. You may want to consider meeting with a fee-only, CERTIFIED FINANCIAL PLANNER™ who can help estimate your lifestyle needs and short-term and long-term expenses


Sources:

  1. This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.

6 Tips To Help You Begin (or Improve) Your Retirement Savings Plan

Feeling like you need to start saving and planning for retirement? Here are 6 smart tips to get you going:

TIP #1

Make Savings A Top Priority

Pay Yourself First

Resolve to pay yourself first. That is, direct money toward your retirement before you do anything else, like pay the bills or spend it on needs or wants. Always remember, your future should come first.

TIP #2

Invest Some or Most of What You Save

Potential to Grow and Outpace Inflation

Investing in equities is vital, because it gives you the potential to grow and compound your money to outpace inflation. With interest rates so low right now, ultra-conservative fixed-income investments are generating very low returns, and most savings accounts are offering minimal interest rates. Thirty or forty years from now, you will probably not be able to retire solely on your savings. If you invest your retirement money in equities, you have the opportunity to retire on the earnings and compound interest accumulated through both saving and investing.

TIP #3

The Effect of Compounding Can Be Profoud

The Earlier You Start The Better

The effect of compounding can be profound. Suppose you want to retire with $1 million in savings. Let’s project that your investments will yield 6.5% a year between now and the year you turn 65 and, for the sake of simplicity, we will put any potential capital gains taxes and investment fees aside. Given all that, how early would you have to begin saving and investing to reach that $1 million goal, and how much would you have to save per month to reach it?

How early would you have to begin saving and investing to reach that $1M goal?

START AT 45 = $2,039
START AT 35 = $904
START AT 25 = $438

If you start saving at 45, the answer is $2,039. If you start saving at 35, the monthly number drops to $904. How about if you start saving at 25? Only $438 a month would be needed. So, as you see the earlier you start saving and investing, the more compounding power you can harness.

TIP #4

Strive to Get The Match

Some Companies Contribute 50 cents for Every Dollar

Some companies reward employees with matching retirement plan contributions; they will contribute 50 cents for every dollar the worker does or, perhaps, even match the contribution dollar-for-dollar. An employer match is too good to pass up.

TIP #5

Invest in A Way You Are Comfortable With

Avoid Investments That are Convoluted or Mysterious

In the mid-2000s, some Wall Street money managers directed assets into investments they did not fully understand, a gamble that contributed to the last bear market. Take a lesson from that example and avoid investing in what seems utterly convoluted or mysterious.

TIP #6

Realize That Friends And Family May Not Know It All

Your Main Concern Should Be Staying Invested

The people closest to you may or may not be familiar with investing. If they are not, take what they tell you with a few grains of salt.

Getting a double-digit annual return is great, but the main concern is staying invested. The market goes up and down, sometimes violently, but there has never been a 20-year period in which the market has lost value. As you save for the long run, that is worth remembering.


Sources:

  1. This material was prepared, in part, by MarketingPro, Inc.

3 Steps To Get Your Financial Documents In Good Order for Your Loved Ones

Wondering what paperwork you need have at the ready for your spouse or children so that when you pass you don’t leave behind a collection of mysteries for them to solve? Here’s what you’ll need:

 STEP #1
Create a Financial File

Function is More Important Than Form

Many heirs spend days, weeks, or months searching for a decedent’s financial and legal documents. They may even discover a savings bond, a certificate of deposit, or a life insurance policy years after their loved one passes. So, your first step is to create a financial file. Maybe it is an actual accordion or manila folder; maybe it is a file on a computer desktop; or maybe it is secured within an online vault. Clients of Weiss Financial Group can use their Secure Client Portal. The form matters less than the function. The function this file will serve is to provide your heirs with the documentation and direction they need to help them settle your estate.

STEP #2
Put The Right Stuff in The File

Your Heirs Will Need to Supplement the File

Now that you’ve chosen your filing system, it’s time to start putting the right stuff in it. Here’s what should go it in it…

Your Financial File Contents:

  • Your Will
  • Durable Power of Attorney
  • Healthcare Proxy
  • Trust Instruments
  • Insurance Policies
  • List of Financial Accounts
  • Usernames & Passwords
  • Contact info for your financial professionals

Your heirs will want to supplement your “final file” with contributions of their own. Perhaps the most important supplement will be your death certificate. A funeral home may tell your heirs that they will need only a few copies. In reality, they may need several – or more – if your business or financial situation is particularly involved.

STEP #3
Tell Your Heirs About the File

It Will Do No Good if Nobody Knows About It!

Be sure to tell your heirs about your “final file.” They need to know that you have created it and they need to know where it is. It will do no good if you are the only one who knows those things when you die.


Sources:

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. marketwatch.com/story/13-steps-to-organizing-your-accounts-and-assets-2016-03-03 
  3. reuters.com/article/us-retirement-death-folder-idUSKBN0FK1RW20140715

How Much Can You Contribute to Your Retirement Plan in 2017?

A new year brings new opportunities to try and max out your retirement savings. Here’s a rundown of the 2017 contribution limits:

IRAs

For 2017 they remain the same as 2016: $5,500 for IRA owners who will be 49 and younger this year, $6,500 for IRA owners who will be 50 or older this year. These limits apply to both Roth and traditional IRAs. What if you own multiple IRAs? The total combined contributions cannot exceed the maximum allowed

401(k)s, 403(b)s, & 457s

Each of these workplace retirement plans have 2017 contribution limits of $18,000, $24,000 if you will be 50 or older this year. Now, If you are a participant in a 457 plan and within three years of what your employer deems “normal” retirement age, you can contribute up to $36,000 annually to your plan during the last three years preceding that “normal” retirement date.

2017.Contribution.Limits

High Earners

High earners may find their ability to make a full Roth IRA contribution restricted. This applies to a single filer or head of household whose modified adjusted gross income (MAGI) falls within the $118,000-133,000 range, and to married couples with a MAGI of $186,000-196,000. If your MAGI exceeds the high ends of those phase-out ranges, you may not make a 2017 Roth IRA contribution. (For tax year 2016, the respective phase-out ranges are $117,000-132,000 for single and $184,000-194,000 for married)

SIMPLE IRAs & SEP-IRAs

In 2017, the contribution limit for a SIMPLE IRA is $12,500; those who will be 50 or older this year may contribute up to $15,500. Federal law requires business owners to match these annual contributions to at least some degree; self-employed individuals can make both employee and employer contributions to a SIMPLE IRA. Both Business owners and the self-employed can contribute to SEP-IRAs. The annual contribution limit on a SEP-IRA is very high – in 2017, it is either $54,000 or 25% of your income, whichever is lower.


Sources

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. fool.com/retirement/2017/01/17/roth-vs-traditional-ira-which-is-better.aspx
  3. money.usnews.com/money/retirement/iras/articles/2016-12-19/how-saving-in-an-ira-can-reduce-your-2016-tax-bill
  4. forbes.com/sites/ashleaebeling/2016/10/27/irs-announces-2017-retirement-plans-contributions-limits-for-401ks-and-more/ 
  5. fool.com/retirement/2016/12/19/457-plan-contribution-limits-in-2017.aspx 
  6. money.cnn.com/2017/01/13/retirement/ira-myths/

7 Important Ages To Be Ready For In Retirement

Getting ready to retire or have you just started your retirement? Here are 7 important ages you should to be ready for:

 

AGE  55

Can Make Withdrawals Without 10% Penalty if Retired

At age 55 you can withdraw from your 401(k) or 403(b) plan without the 10% penalty if you retire or get fired. Also, if your employer offers a pension you may be eligible for full retirement benefits, if you meet the plan requirements.

AGE  59 1/2

Can Make Withdrawals Without 10% Penalty

This is an important age to remember. Once you turn 59 ½ you can withdraw money from IRA’s and deferred annuities without paying the 10% penalty for early withdrawal.

AGE 62

Can Start Reduced Social Security Benefits

This is another big year. At age 62 you can start receiving Social Security benefits. However, keep in mind your benefits will be reduced since you will not have reached full retirement age. The other thing is that at age 62 you may be eligible for full pension benefits if applicable to your situation.

AGE 65

Qualify for Medicare Benefits

This is when you qualify for medicare benefits. Also, with most pension plans you become eligible for your full benefits.

AGES 66 & 67

Eligible for Full Social Security Benefits

Ok, I have two ages here. But, they are pretty much for the same thing so I lumped them together. At age 66 you become eligible for full social security benefits, if you were born between 1943-1954. Everyone born after 1954 follows this table:

screen-shot-2016-11-13-at-6-16-49-pm

AGE 70

Your Social Security Benefits Max Out

Once you hit 70 you should start collecting your social security benefits if you haven’t already done so because your benefits will be maxed out. Waiting to collect benefits until age 70 can actually be a great strategy if you are trying to max out social security benefits or are concerned about longevity.

AGE 70 1/2

Must Start Your Required Minimum Distributions (RMD’s)

Finally, age 70 ½ . When you turn 70 ½ you will be required to start withdrawing specified amounts from your 401(k)’s and IRAs. This is called your Required Minimum Distribution or RMD for short. You must begin these withdrawals once your turn 70 ½ but you actually have until April 1st of the year following the year you actually turn age 70 1/2 . I know, confusing right? Let me give you an example. Let’s say you turn 70 ½ in January 2016, you will need to take your RMD by April 1st, of 2017. Now, you can take it in 2016 but you don’t have to. Going forward, every year after your first RMD you will be required to take the distribution buy December 31st.


Source:

  1. Planning Retirement Income

 

 

What We Learned at Schwab IMPACT 2016 That Impacts YOUR Financial Life

Every year we trek to the Schwab IMPACT conference to learn the latest developments in financial planning and investment management so we can better serve you.

Day 1&2: The Election PLUS Tips For Your Kids 18+

screen-shot-2016-10-29-at-3-22-07-pm

The Market & The 2016 Presidential Election

Greg Valliere, Schwab’s Chief Political Strategist had this to say:

  • If Trump wins the markets may not respond favorably
  • On the flipside, if Hillary wins there may not be much in the way of volatility
  • Valliere anticipates Hillary winning by a 5-7 point lead spread
  • However, if Hillary wins by a wider margin we could see strong volatility along with potential changes to the house (not good historically for the markets)

Tips for Your Kids Heading To College

  • Consider having them sign Power of Attorney form (POA) before going off to school since you may not have access to their accounts.
  • Fill out the HIPAA release form at the college your child is attending. If something were to happen to your child the college could then release the information to you.

Day 3: Malcolm Gladwell PLUS Balancing Retirement & College Saving

screen-shot-2016-10-29-at-3-23-41-pm

Insights from Malcolm Gladwell

This year was packed with thought provoking commentaries from the likes of Malcolm Gladwell and political insight from Greg Valliere, Ian Bremmer, Alan Simpson and Robert Reich, plus MUCH more.
For those of you that don’t know, Malcolm Gladwell is the author of the Tipping Point, Blink, and Outliers.
He coined the phrase “Tipping Point” which is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire.

The Internet of Things

In his session he predicted that the internet of things is going to be as big as the industrial revolution. That’s a bold statement, but one to take notice of. We are beginning to see products like Amazon Dash, which is a Wi-Fi connected device that reorders your favorite product with the press of a button.The growth of internet connected “things” is expect to accelerated.

Playing Basketball vs. Playing Soccer

Gladwell also discussed how our country and economy has traditionally focused on making the best people even better. He illustrated that we operate like a basketball team. For a basketball team to be great, you really only need a few amazing players. It doesn’t matter how weak the rest of the team is so long as you have a few great players. And, if you work on making your best players even better, the team as a whole usually improves.
Soccer on the other hand requires that ALL players work together. Studies have shown that soccer scores can increase dramatically when time and energy is invested in coaching the weakest players on the team not the strongest players like in basketball.

Malcolm’s Advice: Improve The Weak Links

In the new world order, Gladwell suggests we invest in what he calls the weak links. He went on to explain that the best way to improve our economy is to invest in the weakest links.

College Planning vs. Retirement Planning

The balance between saving for college AND saving for retirement is difficult for most families. A study by JP Morgan reveals some useful guidance:

  • Only 0.3% of college student receive enough grants and scholarships to cover ALL costs
  • You need to to start saving now and seriously consider a 529 savings plan
  • The most important thing is to be saving for retirement
  • Saving for retirement should come BEFORE saving for college
  • The JP Morgan study says that saving 15% of what you make is the optimal number

Saving 15% is a great rule of thumb, however your situation could be different. What you need will depend on things like how much you have already saved, if are you planning on moving during retirement, if you will you work, or if you will receive an inheritance. So, there are lots of factors to consider which is where we can assist. At Weiss Financial Group we help figure out how much you NEED to save, how much you CAN save, and WHERE to invest the money.

For the Latest LIVE Videos Don’t Forget to Like Our Facebook Page 

I am live Wednesdays at noon answering your questions and providing smart tips.

Check it out here: http://bit.ly/WFGFacebook

3 Important Personal Finance Tasks for September [VIDEO]

Here are three things you should be doing this month to keep your financial life on track:

#1 Review Your Credit Report

For the second time this year, download a copy of your credit report from http://www.Annualcreditreport.com. Just remember that each of the bureaus will only give you one free copy a year, so if you received a copy from Equifax in May, pull your report from either TransUnion or Experian now.

#2 Gauge Your Tolerance For Risk

Once a year you want to check your tolerance for risk. “Risk Tolerance is an important component in investing. An individual should have a realistic understanding of his or her ability and willingness to stomach large swings in the value of his or her investments. Investors who take on too much risk may panic and sell at the wrong time” – Investopedia. Market conditions, your age or life events could affect your risk tolerance this this so it’s good to gauge where you are at to determine if changes to your portfolio are necessary. Use my free tool to gauge your current comfort for risk: http://bit.ly/YourRiskNumber

#3 Review Your Asset Allocation

You should have set up the assets allocation in your portfolio at the beginning of the year. Now, you want to check in to see if any of the allocations have drifted and if you need to make any adjustments. If you’re not comfortable doing this yourself I advise you to talk to your CERTIFIED FINANCIAL PLANNER™ and he or she will be able to help you making smart decisions.

Sources:
1.http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
2.http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
3.http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

3 Smart Financial Moves For August [VIDEO]

#1 Check Your Credit Score

It’s that time again: Review your credit score at http://www.CreditKarma.com, paying special attention to any fraudulent charges, so you can report it to your credit card company.

#2 Review Your Insurance

Review your auto and homeowners insurance coverage and to shop around. Make an appointment with your agent, or go online and see what other insurers charge for similar coverage.

#3 Review Your Benefits

Review your current benefits situation. Each fall, employees have a brief window of time when they can make changes to their insurance policies or set up and adjust contributions to health savings accounts (HSAs) and flexible spending accounts (FSAs). Check out any new options that are available and decide whether you should make any switches

Sources:
1. http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
2. http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
3. http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4