Halloween may be an appropriate time for a good scare, we should limit unwanted surprises in retirement!  Generalizations may not necessarily reflect your individual circumstance although there are fact-based reasons why the average woman faces greater hurdles than the average man does in securing her retirement. However, an awareness of the negatives and a proactive plan to take full advantage of some positives should demonstrate that retirement should not scare women.

More years of retirement and with fewer assets

The deck is stacked against some women before they even think about enjoying their first day of retirement. Some of the factors include:

• Longer life expectancy
• Greater likelihood of being the surviving spouse
• Wage gap as compared to male counterparts
• Less working years due to child rearing and caring for aging parents

One factor that may be interpreted as either a positive or negative is risk tolerance. Women tend to invest more conservatively than men, which can lead to lower potential returns. Conversely, conservative investors tend to move money around less often and continuity can lead to more consistent growth in the long term.

Take control

Where one starts is seldom as important as where one ends up. Consider these strategic goals to level the retirement playing field:

• Save – Start early, continue to save and save as much as possible. 20 percent of income is a nice goal but maximizing what is practical is the ultimate goal.

• Know what is needed – In our sunset years, we tend to fear dying less than outliving our retirement money. One way to prevent that is to begin with knowledge of what it costs to live. Be realistic about expenses that are fixed and what will no longer be needed once work is no longer in the picture. Ideally, the fixed expenses of one year of retirement living is generated annually by retirement income.

• Invest the savings – This comes with one caveat – invest savings once an emergency fund for unexpected expenses is established. Most experts recommend six months of living expenses in cash assets as a minimum. Once that is accomplished, an asset allocation plan should be devised based primarily on age and ultimate financial goals.

• Keep working – Other than the satisfaction work can provide as wells as a longer timeline to save, extending work past age 65 pays dividends in social security benefits. Although many women are concerned social security may one day fail, experts predict its pending demise is over exaggerated. One thing that is certain is that the longer a worker waits before taking benefits, the better. Consider that at age 62 a worker receives 70 percent her full retirement benefits, but that number rises to 132 percent at age 70.

Include an estate plan

Careful planning includes what-if scenarios. Take the time to set up a will and more preferably a trust, as well as a financial power of attorney and durable power of attorney for healthcare.

There’s no reason any woman should fear retirement. A realistic analysis, a well-crafted plan and disciplined execution will go a long way towards a secure and serene future.  We are here to help, give us a call, today.

You have worked hard for your money, because you have a bigger goal than just paying the monthly expenses. You have a long term goal that is important to you. For some, that goal is to be able to retire comfortably, while others have other dreams that they are putting away money to be able to achieve. Whatever your goal, your savings are being set aside for a reason.

Savings Are Not Enough

However, if you are just putting your money into savings, you are really not getting the biggest bang for your buck, so to speak. Although rising, interest rates are at very low rates; therefore, having your money in a savings account is really not going to accomplish anything other than having a place to hold your money. Wouldn’t you rather that money WORK for you to reach your goals faster or reach higher goals?

Failing to Plan is Planning to Fail

The market can be a highly effective place for income growth, but it can also be a very scary place for your money. While we all like a good scare in October, your money should not be where you get scared. Unfortunately, that is often the reality.

If you just throw your money into investments without a strategy for that money, it could be hit and miss and full of risk. At the vest best, you could simply be missing the best opportunities out there for you.

As of a Gallup goal in 2015, the reality that they discovered was that a mere 38% of investors like you had a financial plan, while only 18% said they didn’t find financial plans useful. The rest wanted to but didn’t create one. Of those that created a plan, 74% said they created the plan with the help of an experienced investment professional.

Getting Qualified Help

This is where it is important to take time to create an investment plan that will guide your investment growth to reach your goals, but how do you know where those best opportunities lie for you. You spent a lot of time learning your craft and becoming experienced at what you do, and others trust you to do your job. The same peace of trusting a qualified individual can be found in an experienced Financial Advisor that knows the best investments and the risks that can hinder your growth.

National Financial Planning Month

This month is National Financial Planning Month, and it is a good time to meet with a skilled Advisor to communicate your short term and long term goals that you desire to reach. After hearing your dreams and your timeline, they will be able to translate those into options for you to consider.

So, this month is a great time to face the scary market by creating an investment plan with an investor’s steady hand and vision to be able to reach the dreams that have inspired your work for so long. Then, you can rest in knowing you have given your dream the best potential to be what you will need when needed.   We are here to start that conversation with you or take a second look at your current plan.

Retirement should be a time of rest, relaxation, and play. It should be about focusing on those pursuits that you wanted to do when you were younger, but you have yet to cross them off of your bucket list. 

Failing to plan for a comfortable retirement, however, can be a major stressor in the life of someone facing their golden years. Recreational hopes and dreams can quickly be squashed in the wake of news that you haven’t set up things to be nearly as prosperous as you’d hoped. Learning what to do, and what NOT to do, as you plan for this time in your life will be key to being able to enjoy these years. Here are some things to avoid as you plan for this exciting time in your life: 

Don’t Rely Solely On Social Security 

You may have been somewhat misled with regard to social security—it was never meant to replace your original paycheck. Social security will cover approximately 40 percent of your pre-retirement income, and unless you are intending to pare down your expenses in retirement, its best to put other things in place to make sure you can live comfortably. 

Social security funds are also subject to availability, so if market fluctuations affect the overall health of this national account pool, you could also be affected. 

Don’t Assume Cost Of Living Will Be Cheaper

If you think of your day to day living expenses like food, clothing, and utilities, it is likely that these expenses will not go away in retirement. You might even find that certain expenses, like health care and leisure entertainment, actually go up during this time. To plan for a comfortable retirement, you’ll need to take into account all of these potential expenses when you budget what your cost of living will be. 

Don’t Neglect Catch-Up Contributions 

Many people simply don’t prioritize adding to their retirement savings in their early years of contribution to the workforce–most of their income is spent on student loan payments, housing, and supporting their families. 

After 50, people can take advantage of a catch-up contribution option, where you are able to put additional money into an IRA or another retirement account. While a startlingly low percentage of people over 50 do take advantage of the catch-up option, it is strongly recommended that you look into this as an efficient way to expand and grow your retirement portfolio. 

Don’t Forget Those Taxes 

It may seem at first with social security and other avenues of income streaming in that you have a pretty healthy influx of cash at your disposal. Stop and consider whether you have paid Uncle Sam his dues. Most retirement income is still taxable by law; up to 85 percent of social security income is still taxable! Interest and investment income are not immune to tax regulations either, even in retirement. Staying informed and making wise decisions with the counsel of trusted financial advisors will be key to maximizing your profit while minimizing your tax liability. 

An Ounce Of Prevention 

You’ve heard the phrase, “an ounce of prevention is worth a pound of cure”. It is especially true when planning for retirement. Making smart decisions now and preparing for this time will ensure that your golden years are just that.  We are here to help you create a plan that will help you achieve a successful retirement.

When planning one’s last will and testament, one always hopes that the people they will be passing on their hard-earned wealth to will be responsible enough to handle it well and if possible, carry on their legacy. This is a hope which can be difficult to keep alive, especially in cases where the heirs have issues such as bad spending habits, drug addiction, gambling problems, and other weaknesses which compromise their judgment. When passing your estate to an imperfect heir, you need to make sure that you have put in place measures to control the manner in which they will use the money to prevent wastage. Here are some of the most common approaches.

Creating a trust

A trust is one of the ways in which you can pass on wealth to an heir while at the same time controlling the manner in which they use the money.  You can open a trust fund and appoint someone to play the role of trustee. The trustee is usually an independent and non-partisan party to the agreement. They should also be responsible, trustworthy, firm and principled. There are people who opt to appoint family members as trustees although there are times that these arrangements do not work out because of the possibility that they will cave when pressured by a family member who needs the money.  The ideal features of a trust is that they can specify the circumstances under which the money can be withdrawn. There are also trusts which state that it is only the trustee who will have discretion on when the funds can be disbursed.

Structured ideas

There are other approaches proven to have some success;

· You could decide to only have a lump sum payment made to them after they graduate from college

· You could decide to have chunks of the money offered to them after a specified period of time of sobriety. For instance, you could have money released to them after five years of being sober.

· You could create a will which says that payments are made directly to their utility providers such as their landlords and other utility companies.

There are many other specifications which you can make, but the most important part of to ensure that you are dealing with a professional who understands the rules and regulations of the process.

Dealing with the problem at the present

Another approach that many people never think about, and one that can be more helpful than trying to make safety nets, is dealing with the problem in the present. For instance, if you have a child that has an addiction issue, you can work to correct the issue now. Speak to them in the present and tell them that they need to get help. Create incentives that work in the present and work towards making sure that by the time you are approaching your sunset, the child has tried their best to reform.

Disinheritance

This may sound harsh, but in some circumstances, when you have tried all other approaches and when you are sure that leaving the property to the problematic heir will just be the same as throwing it away, you can choose to disinherit them. However, this is a last resort and usually applied if everything else that you can think about has completely stopped working.

These are just a few of the ways in which you can resolve the inheritance issue when their heirs are less than perfect. Ensure that you start looking for a solution long beforehand so that you can protect the child and/or family member from further destruction.

Life insurance is one of those things that many people prefer to avoid thinking about because it often conjures up dark images.  Many people are jarred into realizing the importance of buying life insurance after a close friend or family member has passed away or even after hearing a news story about a tragic death that hit close to home. The reality is that it is better to be prepared and know that our loved ones will not be left to fend for themselves. Consider these important questions to determine your need for life insurance.

How Will Your Loved Ones Live Without Your Income?

Some households are run on a paycheck to paycheck basis. Some people may have a modest amount of savings, but it may take two incomes to pay the monthly bills. Your spouse and children may quickly run out of money without your income to support them. Life insurance benefits are most commonly used to supplement lost wages and to eliminate debts after an income-producing adult passes away. By eliminating debts with insurance proceeds, your loved ones will need less money to live off of each month. Some people will purchase enough insurance to pay off all outstanding debts including the home mortgage. The surviving spouse may even be able to support the family through his or her income alone after the debts have been eliminated. Others will purchase enough coverage so that the proceeds can be invested to generate supplemental income.

How Will Your Spouse Be Able to Retire?

While some life insurance is needed to help your loved ones to survive on a monthly basis, you also need to think about the future. Your income may currently be instrumental in your spouse’s ability to fund a retirement account. Without your income, your spouse may be forced to work for many years past the traditional retirement age, this can create an unnecessary hardship on him or her. It can be wise to purchase extra coverage to fund a retirement account.

Do Your Kids Need Financial Assistance Getting Their Adult Lives Started?

If you have kids, you may be well aware of their financial dependence on you, and this will often not simply evaporate when they turn 18. Many children need financial assistance buying their first car, paying for their wedding, paying for college and more. Some parents will purchase additional death benefits so that their kids’ lives are not financially impacted by a death.

How Much Coverage Do You Need?

This is a complicated question that often requires you to create a solid financial plan for the future. Funds can be used strategically in different ways, such as to purchase income-producing assets, to pay off debts and more. Your current lifestyle, debts and assets all must be taken into account. It is wise to work with an experienced life insurance expert to review your financial needs.

Remember, life insurance has evolved over the years and there are many benefit programs that can come to your families rescue even if you don’t pass away but are too sick to work.  Now can be a great time to review what coverage you currently have and what coverage is available to you. Some people will live well into their 90s or beyond, but others have a life that is cut short far too soon. 

It may seem as if the end of the year is very far away and that there is no need to start making end of the year financial plans as of yet. However, the reality is that the end of the year, and the activities which surround it are busy.  At times, with all the festivities going on, it becomes close to impossible to do anything sensible where financial planning is concerned. You should consider starting your end of year plans now because early plan may spare you the heavy fines. Here are a few things that you should consider doing right now.

If It’s Time, Get Your RMD

You probably know that you are supposed to start making withdrawals from your IRA or other retirement plans when you reach the age of 70 and a half. If you don’t take your RMD on time, you may be forced to pay a 50 percent excise tax on the amount which you will have failed to distribute. This is another reason why working with a Financial Advisor can help you avoid penalty’s and anxiety.

Making A Charitable Contribution

Did you know that if you make a charitable contribution using a Qualified Charitable Distribution, you will get a tax exemption of the amount and the amount donated could also qualify as RMD?   If you have not made any donation this year, perhaps now is the right time to make a meaningful contribution from your IRA.  Again, seek professional guidance on this strategy.

Other Tax Mitigating Strategies

This is the perfect time to look into all your accounts and see whether there are tax gains which you can still capitalize on this year. If you do not understand how having investments such as mutual funds could affect your taxes and distribution, talk to a financial expert and have everything straightened out before the year ends and you are left with massive losses in your hands.

Avoid Tax Deferral

Don’t Delay!   When the year is coming to an end, some postpone all their tax related items until a later date. Tax deferral may seem like a quick fix to grow your money, but it is important to note that it puts off your taxes as opposed to getting a permanent resolution to the problem. If you are employed, it may be wise to fund your employer sponsored plan as much as possible to get the full match of the company.  After all, free money is indeed the best kind that there is, right?

Yes, all of this takes knowledge and effort but can pay off with the proper plan.  We are here to help you plan for everything that comes with a successful retirement.  Start early, plan ahead and you will have the best shot at a confident retirement.

President Donald Trump signed an executive order Friday, August 31, that proposes asking for reviews on changing certain rules for tax-deferred retirement savings such as 401(k)s and individual retirement accounts, or IRAs. Trump signed the order during a scheduled visit to Charlotte, N.C., and asked the Treasury Department to push forward several bipartisan changes to how retirement plans operate.

Here are the big initiatives:

• Review Required Minimum Distribution (RMD) rules with an eyes towards starting them later than age 70 ½ and/or reducing them once they start;
• Consider the creation of pooled Multiple Employer Plans, which would allow companies to offer financial institutions’ 401(k) plans with participants pooled from multiple unaffiliated employers, rather than asking employers to create their own independent 401(k) plan from scratch; and
• Review paperwork and administrative requirements for employers’ workplace retirement plans with the intent of lowering costs and spurring retirement plan adoption among small and medium businesses.

No changes are certain, and the changes if enacted would likely take months or years to go into effect. And it’s also unclear what impact (if any) the executive order will have on pending bipartisan retirement legislation in Congress.

Currently, holders of tax-deferred retirement accounts are required to begin minimum withdrawals from the accounts beginning the year following age 70 1/2. These RMDs are predetermined amounts in a table set by the IRS according to age and must be taken on an annual basis. The purpose of the withdrawals is for the government to start collecting the taxes owed on these accounts, which have enjoyed tax-free status until then.

According to CNBC, the reviews would be of the life expectancy tables from the IRS for the purpose of updating the tables, which may allow retirees to withdraw lower RMDs from their tax-deferred retirement accounts. These tables were last updated in 2002, and the average life expectancy has risen since then from under 77 to 78 1/2, as derived from data compiled from the Federal Reserve Bank of St. Louis.

This could be helpful to retirees because the tax hit of these withdrawals can be spread out more over a longer period of time. Taking large withdrawals can significantly increase income levels, which translates to a higher tax bracket for many. These smaller distributions can also help those who have inherited tax-deferred accounts and are taking distributions.

If the rules for open multiple employer plans are relaxed, small business owners could join with other, dissimilar small business and implement savings plans for their employees. That could help these business owners attract more skilled employees because of the retirement savings plans added to their employee benefit packages.

The average individual can spend less during their retirement due to a budget. One exception can be giving to charitable causes. A study by the WPI or the Women’s Philanthropy Institute looked at the way households in America spent money as they retired. The study revealed both single women and married couples maintained the same level of giving to charities both prior to and after they retired. The charitable giving of single men decreased once they retired.

The report from the WPI also showed both married and single women have less confidence regarding their financial health upon retirement than men. Their focus is not on outliving their savings. Considering women generally live longer than men, this fear is justified. There are numerous ways for both women and men, married and single, to donate to charitable causes without being concerned about running out of money. Using savings meant for retirement to make donations is most likely to cause the individual to outlive their savings unless they use proper care.

A way to donate to causes in retirement is to plan for them just as you did your retirement savings portfolio.  A portfolio likely plans for retirement income to last the life of the individual. One of the most important aspects of the retirement portfolio are the monthly retirement paychecks. These are guaranteed and will last for a lifetime. If the stock market crashes, this income will not decrease. These paychecks can then be supplemented with either yearly or monthly retirement bonuses. These may have fluctuations depending on the investment performance, but they can last for life.

When the portfolio is properly in place, charitable giving can be funded with these bonuses and paychecks. It is important to allow for charitable giving as part of the budget in addition to the other living expenses. This will enable the individual to give to charities while ensuring the person will not outlive their savings. There is another excellent method for planning to increase effectiveness for charitable giving. Many individuals have concerns the recent changes made to the tax laws may decrease their income and impact their charitable giving.

The concern is there will be a significant decrease in the taxpayers itemizing their deductions. This makes it harder to use taxable income to make donations. Any individual age 70 and 1/2 or above has another option. A traditional IRA can be used for a qualified charitable distribution. This distribution will not be included in the taxable income. The distribution will also apply towards the minimum required distribution.

There is an annual limit of $100,000 for qualified charitable distributions. This cannot be funded from both 410 (k) plans and IRA’s. If the 401 (k) plan contains a substantial savings, these funds can be used for charitable giving by rolling over the savings into an IRA. The IRA platform must enable the individual to be able to write checks.

The report from the WPI also revealed married couples and single women have a higher likelihood of volunteering once they retire than single men. There is a lot of research showing volunteers enjoy financial security and health benefits while providing their communities with substantial contributions. The documentation for this research is located in the Hidden in Plain Sight report prepared by the Center on Longevity located at Stanford. Anyone not currently volunteering may want to give some thought to pursing this activity once they have retired.

Planning for both volunteering and charitable giving may be important when determining retirement planning. This will not only enable the individual to give something back to their community, it often increases the enjoyment of life.  Let’s review your plan today, contact us to set up a time to talk.

The way we work and save for retirement has changed and the old rules no longer apply to every individual’s situation. There are many professionals with the resources to retire early, but continue working until retirement age just to avoid paying penalties to the IRS. However, there are ways to retire early that you might want to consider.

You Can Pay the Penalty

The most obvious solution is to bite the bullet and pay the 10% penalty for early withdrawal. Most people are motivated to avoid paying the early withdrawal penalty and will wait until the legal retirement age of 59 ½, before accessing funds in their retirement accounts. This can be an attractive option, simply because the tax-deferred investments in your 401k may have outperformed other taxable investments. If this is the case, your tax benefits may actually pay for the penalty by the time you’re ready to retire. Of course, this all depends on how well your tax-deferred investments have performed.
The Substantially Equal Periodic Payments Option
The IRS allows early retirees to access their retirement funds without paying the penalty through their Substantially Equal Periodic Payments (SEPP) program. An early retiree will have to consent to making substantial annual withdrawals each year until they reach traditional retirement age, as outlined by a calculation chart published by the IRS. However, failing to withdraw the correct amount each year can cause the IRS to charge you with the 10% penalty for each withdrawal you have already made. For this reason, it’s best to work with a tax professional to ensure you meet all of the requirements set out through the SEPP program.

Additionally, the program requires that you fulfill a minimum of five withdrawals, before your obligation is complete. If you retire at 40, you must adhere to the withdrawal requirements until you turn 59 ½ years old. However, if you retire at 57, you must continue the SEPP withdrawals until you reach 62 years of age. As long as you can adhere to the timetable, this may be a good option for accessing your retirement funds early and without paying the penalty.

Convert to a Roth IRA

Another option that will help you avoid the 10% penalty is to convert your 401k to a Roth IRA. Once you open the account, you will have to wait five years, before you can begin withdrawing your contributions. For that reason, it will be important to anticipate your early retirement and plan ahead. However, once you have met that requirement, you can begin withdrawing without facing a penalty.

An additional restriction is that the IRS requires that withdrawals be made in a particular order. You must withdraw direct contributions first, before withdrawing funds that were converted into the account. Lastly, you can withdraw earnings on those contributions. Depending on your situation, this may be a worthwhile alternative.

While these options do exist, waiting for retirement age may still be worthwhile. Where a 401k account is concerned, remaining on the job will keep those employer contributions coming. That “free money” will pad your retirement account, while your savings continue to earn on investments. Additionally, you’ll continue to benefit from tax breaks for a few more years. Ultimately, it will be your decision, which you can only base on your specific circumstances. If you do choose to retire early, you should consult a Financial Advisor and/or tax professional, before you act.