Retirement

What Women Need to Know Before Deciding to Retire: Challenges & Opportunities

thinking woman in white jacket and white scoop neck shirt blue denim jeans sitting on brown wooden bench beside green trees during daytime

Photo by Pixabay on Pexels.com

A practical financial checklist for the future.

When our parents retired, living to 75 amounted to a nice long life, and Social Security was often supplemented by a pension. The Social Security Administration estimates that today’s average 65-year-old female will live to age 86.6. Given these projections, it appears that a retirement of 20 years or longer might be in your future. (1,2)

Are you prepared for a 20-year retirement?

How about a 30- or 40-year retirement? Don’t laugh; it could happen. The SSA projects that about 25% of today’s 65-year-olds will live past 90, with approximately 10% living to be older than 95. (2)

How do you begin?

How do you draw retirement income off what you’ve saved – how might you create other income streams to complement Social Security? How do you try and protect your retirement savings and other financial assets?

Talking with a financial professional may give you some good ideas.

You want one who walks your walk, who understands the particular challenges that many women face in saving for retirement (time out of the workforce due to childcare or eldercare, maintaining financial equilibrium in the wake of divorce or death of a spouse).

As you have that conversation, you can focus on some of the must-haves.

Plan your investing.

If you are in your fifties, you have less time to make back any big investment losses than you once did. So, protecting what you have is a priority. At the same time, the possibility of a 15-, 20-, or even 30- or 40-year retirement will likely require a growing retirement fund.

Look at long-term care coverage.

While it is an extreme generalization to say that men die sudden deaths and women live longer; however, women do often have longer average life expectancies than men and can require weeks, months, or years of eldercare. Medicare is no substitute for LTC insurance; it only pays for 100 days of nursing home care and only if you get skilled care and enter a nursing home right after a hospital stay of 3 or more days. Long-term care coverage can provide a huge financial relief if and when the need for LTC arises. (1,3)

Claim Social Security benefits carefully.

If your career and health permit, delaying Social Security is a wise move for single women. If you wait until full retirement age to claim your benefits, you could receive 30-40% larger Social Security payments as a result. For every year you wait to claim Social Security, your monthly payments get about 8% larger. (4)

Above all, retire with a plan. Have a financial professional who sees retirement through your eyes help you define it on your terms, with a wealth management approach designed for the long term.

Sources

  1. cdc.gov/nchs/products/databriefs/db293.htm
  2. ssa.gov/planners/lifeexpectancy.htm
  3. medicare.gov/coverage/skilled-nursing-facility-care.html
  4. thestreet.com/retirement/how-to-avoid-going-broke-in-retirement-14551119

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

What a Target-Date Retirement Mutual Fund Is and How to Use It Properly

time-calendar-saturday-weekend-60032.jpeg

Photo by Pixabay on Pexels.com

Are these low-maintenance investments vital to retirement planning, or overrated?

Do target-date funds represent smart choices, or just convenient ones?

These funds have become ubiquitous in employer-sponsored retirement plans and their popularity has soared in the past decade. According to Morningstar, net inflows into target-date funds tripled during 2007-13. Asset management analysts Cerulli Associates project that 63% of all 401(k) contributions will be directed into TDFs by 2018. (1,2)

Fans of target-date funds praise how they have simplified investing for retirement. Still, they have a central problem: their leading attribute may also be their biggest drawback.

How do TDFs work?

The idea behind a target-date fund is to make investing and saving for retirement as low-maintenance as possible. TDFs feature gradual, automatic adjustment of asset allocations in light of an expected retirement date, along with diversification across a wide range of asset classes. An investor can simply “set it and forget it” and make ongoing contributions to the fund with the confidence that its balance of equity and fixed-income investments will become more risk-averse as retirement nears.

In a sense, a TDF starts out as one style of fund for an investor and mutates into another. When he or she is young, it is an aggressive growth fund, with as much as 90% of the inflows assigned to equities. By the time the envisioned retirement date rolls around, the allocation to equities and fixed-income investments may be split closer to 50/50. (2)

With such long time horizons, TDFs are truly buy-and-hold investments.

That has definite appeal for people who lack the time or inclination to take a hands-on approach to retirement planning. TDFs also usually have low turnover, with some distributions taxed as long-term capital gains. (1)

Are pre-retirees relying too heavily on TDFs?

Putting retirement investing on “autopilot” can have a downside – and that may be worth an alarm or two, given Vanguard’s forecast that 58% of its retirement plan participants (and 80% of its new plan participants) will have all of their retirement plan assets in TDFs by 2018. So in noting the merits of TDFs, we must also look at their demerits. (2)

The asset allocation of a target-date fund is not exactly dynamic.

As it is geared to a time horizon rather than current market conditions, TDF investors may wince when a severe bear market arrives – it could be a case of “set it & regret it.” They will need the patience to ride such downturns out. If they sell, they defeat the purpose of owning their TDF in the first place.

Additionally, some investors are conservative well before they reach retirement age.

A fortysomething risk-averse investor might not like having a clear majority of his or her TDF assets held in equities.

An investor will not be able to perform any tax loss harvesting with assets invested in a TDF (that is, selling “losers” in a portfolio to offset gains made by “winners”) and if all of his or her retirement savings happen to be in the TDF, you have to pull money out of the TDF to put it in other types of investments that might generate tax savings. (1)

Fees can be high

Because most TDFs are funds of funds – that is, multiple mutual funds brought together into one giant one – it may mean two layers of fees. (2)

The glide path is very important.

All TDFs have a glide path, the glide path being the rate or pace at which the asset allocation changes from aggressive toward conservative. With some TDFs, the glide path ends at retirement and the asset allocation approaches 100% cash. With others, the fund keeps gliding past a retirement date with the result that the retiree maintains a foot in the equities market – potentially very useful in the face of longevity risk, or as it is popularly known, the risk of outliving your money. The glide path of the TDF should be agreeable to the investor. The problem is that an investor may agree with it more at age 40 than at age 60. (1)

Here is a sample equity glide path for Vanguard’s target date funds:

Screen Shot 2018-06-05 at 8.59.23 PM

One feature can make TDFs even more appealing.

In 2014, the IRS and the Treasury Department permitted TDFs held in 401(k) plans to add a lifetime income option. That let a TDF investor receive a pension-like income beginning at the fund’s target date. Companies sponsoring 401(k)s can even elect to make such TDFs the default plan investment; that is, employees who wanted to direct their money into other investment vehicles would have to inform their employers that they were opting out.

Younger retirement savers should take a look at TDFs.

If you are not enrolled in one already, you may want to weigh their pros and cons. While not exactly “the cure” for America’s retirement savings problem, they are deservedly popular.

Source

  1. money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2015/04/07/3-questions-to-ask-before-choosing-target-date-funds
  2. time.com/money/3616433/retirement-income-401k-new-solution/
  3. nextavenue.org/article/2015-02/target-date-funds-pros-and-cons
  4. https://www.vanguard.com/pdf/s167.pdf

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Planning Income For Life: Using The Bucket Strategy in Retirement

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Constructing a portfolio this way may help you ride through a bear market in retirement.

The bucket approach may help you through different market cycles in retirement.

This investing strategy, credited to a Florida financial planner named Harold Evensky, has simple and complex variations. It assigns fixed-income and equity investments to different “buckets” with the goal of providing sufficient cash flow to retirees during different stages of their “second acts.” (1,2)

The simplest version involves just two buckets.

One holds the equivalent of 1-5 years of cash reserves (in deposit accounts and/or fixed-income investments), and the other holds everything else in the investment portfolio. When you need to fund your expenses, you turn to the cash and the fixed-income vehicles and leave equities untouched. Rebalancing your portfolio (that is, selling investments in an overweighted asset class) lets you increase the size of your cash bucket. (1,2)

Other versions of the bucket approach have longer time horizons.

In one variation designed to be used for at least 25 years, a cash reserve bucket is created to fund the first two years of retirement, its size approximating 10% of the portfolio; the cash comes from FDIC-insured sources or Treasuries. A second bucket, intended to generate somewhat greater income, is planned for the rest of the first decade of retirement; this bucket is filled with longer-duration, fixed-income investments and comprises about 35% of the portfolio. The third bucket (the other 55%) is designed for the years afterward and contains a sizable equities position; the goal here is to realize some growth and compounding for a decade, then tap into that bucket for income. (1,2)

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In glimpsing the details of the bucket approach, you can also see the big picture.

Suppose a bear market occurs just as you retire. Since your retirement income strategy pulls cash from deposit accounts and fixed-income investments first, your equity positions have time to rebound. You have a chance to avoid selling low (and selling off part of your retirement fund).

Is the bucket approach foolproof?

No, but no investing strategy is. In the worst-case scenario, you drain 100% of the cash bucket(s) and end up with an all-equities portfolio. That is hardly what you want in retirement. Bucket allocations must be carefully calculated, and periodic bucket rebalancing is also needed.

The bucket approach may have both financial and psychological merits.

Most retirees use the 4% rule (or something close) when withdrawing income: they take distributions from various accounts and asset classes, perhaps with little regard for tax efficiency. If Wall Street stumbles and their portfolios shrink, they may panic and make moves they will later regret – such as selling low, abandoning stocks, or even running toward alternative investments in desperation.

When you use a bucket approach, you first turn to cash and/or liquid securities for retirement income rather than equities. Psychologically, you know that if a bear market arrives early in your retirement, your equity holdings will have some time to recover. This knowledge is reassuring, and it may dissuade you from impulsive financial decisions.

Sources

  1. seattletimes.com/business/about-to-retire-heres-how-to-cope-with-stock-market-shocks/
  2. news.morningstar.com/articlenet/article.aspx?id=839521
  3. https://am.jpmorgan.com/us/en/asset-management/gim/adv/insights/guide-to-retirement

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

7 Ways to Replace Your Income In Retirement

Thinking about retirement? Wondering where your income will be coming from. Here are the top 7 sources of income for your retirement:

 

INCOME SOURCE #1

SOCIAL SECURITY

Provides Foundation for Average Person’s Retirement

Social Security provides the foundation for the average person’s retirement income. So long as you’ve paid into the system, you will receive it. It’s a good starting point, but unfortunately it usually isn’t enough to help you maintain the lifestyle you may be accustomed to.

INCOME SOURCE #2

DEFINED BENEFIT PENSIONS

Employer Funds This Plan and Provides Lifetime Income

If you have a pension, congrats. Unfortunately pensions are becoming a thing of the past as the burden of retirement funding is falling on the employee. In a pension, the employer funds the plan and agrees to provide you a specified amount of lifetime income. This is a direct contrast to #3 the defined contribution plan

INCOME SOURCE #3

DEFINED CONTRIBUTION PLANS

These Are Your 401(k)’s and 403(b)’s

These are designed to help you , the employee, save for your retirement. They can be funded by both you and your employer but it is your responsibility to contribute and choose the investments. During retirement it is up to you to figure out how to convert these funds into retirement income

INCOME SOURCE #4

IRAs

Funded With Money You Contribute or Rollover

IRAs are individual retirement accounts funded with money you contribute or with money you have rolled over from an old employer’s retirement plan. You can begin withdrawing money from the account for retirement without penalty after you turn 59 1/2

INCOME SOURCE #5

ANNUITIES

Can Provide a Fixed or Variable Amount of Money

Annuities are insurance products that can provide a fixed or variable amount of money during retirement. You do give up some control over your money, however they can help you create guaranteed income for life.

INCOME SOURCE #6

TAXABLE INVESTMENTS

Often Held in Savings or Brokerage Accounts

These are any investments you hold outside your retirement plans. These assets could be held in savings accounts or brokerages accounts. Depending on how have this money invested you can use the dividends, interest and capital gains on these investments to help create retirement income.

INCOME SOURCE #7

JOBS

You May Still Need or Want to Work in Retirement

Even though you are retired you may still want or need to work. If you are healthy and able to still work, a job can help with your retirement income strategy.

 

What Is Covered Under Each Part of Medicare

Whether your 65th birthday is on the horizon or decades away, you should understand the parts of Medicare – what they cover, and where they come from.

Medicare was created in 1965 as a national health insurance program for seniors. It was made up of two original components, Part A and Part B.

Part A = Hospital Insurance

National Health Insurance Program for Seniors

It provides coverage for inpatient stays at medical facilities. It can also help cover the costs of hospice care, home health care, and nursing home care – but not for long, and only under certain parameters.

Part B = Medical Insurance

Part B Covers:

  • Physical Therapy
  • Physician Services
  • Medical Equipment
  • Medical Services

Part B is medical insurance and can help pick up some of the tab for physical therapy, physician services, expenses for durable medical equipment (scooters, wheelchairs), and other medical services such as lab tests and varieties of health screenings.

Keep in mind, Part B isn’t free. You pay monthly premiums to get it along with a yearly deductible. The premiums vary according to the Medicare recipient’s income level.

Part C = Medicare Advantage

Part C Covers:

  • Prescription Drug Coverage
  • Vision
  • Dental

Part C are medicare advantage plans. Insurance companies offer these Medicare-approved plans. Part C plans offer seniors all the benefits of Part A and Part B and more: many feature prescription drug coverage, vision and dental benefits. To enroll in a Part C plan, you need have Part A and Part B coverage in place.

Medigap

Addresses Gaps in Part A & B Coverage

Medigap Covers:

  • Copayments
  • Coinsurance
  • Deductibles

Medigap plans address the gaps in Part A and Part B coverage. If you have Part A and Part B already in place, a Medigap policy can pick up some copayments, coinsurance, and deductibles for you.

Part D = Prescription Drug Plans

While Part C plans commonly offer prescription drug coverage, insurers also sell Part D plans as a standalone product to those with Original Medicare.

Visit Medicare.Gov for More Info

I hope this helps to demystify medicare a bit. There is a lot more to know about these plans but this should be enough to get you started in the right direction. If you need more information be sure to visit Medicare.Gov.


Sources:

  1. This material was prepared, in part, by MarketingPro, Inc.
  2. mymedicarematters.org/coverage/parts-a-b/whats-covered/
  3. medicare.gov/coverage/skilled-nursing-facility-care.html
  4. medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html
  5. tinyurl.com/hbll34m
  6. medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/when-can-i-join-a-health-or-drug-plan.html
  7. medicare.gov/supplement-other-insurance/medigap/whats-medigap.html
  8. ehealthinsurance.com/medicare/part-d-cost
  9. medicare.gov/part-d/coverage/part-d-coverage.html
  10. medicare.gov/sign-up-change-plans/when-can-i-join-a-health-or-drug-plan/five-star-enrollment/5-star-enrollment-period.html

 

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