Why age 70 isn’t the new 65

Anyone contemplating retirement should seek the advice of an objective adviser. Your CPA, attorney, or fiduciary financial adviser will help you determine the optimum time to take social security and other vital decisions. If you can try to work as long as you can. It does not have to be full time, however this will allow your savings to last longer. Most importantly this should be a lesson to younger employees to begin saving for retirement as eraly as possible.

retirement (Photo credit: 401(K) 2013)

The analysis looked at both income and age. As you might expect, projections for the lowest pre-retirement income quartile are the most sobering. This group would need to defer retirement to age 84 before 90 percent of them would have even a 50 percent probability of achieving comparable pre-retirement living standards. The results improve with income levels, but even among those in the highest income quartile, 90 percent have only a 50 percent chance of having enough to retire by 70. When broken out by age, the news isn’t much better: For one-third of households in which the people were between ages 30 and 59 as of 2007, working until age 70 won’t provide adequate income in retirement. 

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All this aside, buried in the report is a glimmer of hope — working longer does help. While only about half of households age 50-59 in 2007 could retire at 65, the number increases to nearly two-thirds if retirement age is increased to 70. Those extra five years have a dual effect. Not only do workers save more, they also delay dipping into their retirement funds, allowing those funds to continue growing.

In the past, I have extolled some of the non-financial benefits of working longer, namely the continued social interaction and intellectual engagement. A previous EBRI report confirmed that 92 percent of those who worked beyond the traditional retirement age of 65 do so because they want “to stay active and involved,” and 86 percent say they “enjoyed working.” The problem is that there are some real risks associated with relying on the “work longer” retirement plan, the most significant being: What if you lose your job?

If you need more evidence that you need to start saving for retirement now I’m not sure what to say. You are accountable for your financial future.

Please comment or call to discuss.

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More Americans delaying retirement until age 80

Retirement (Photo credit: Wikipedia)

This is easier said than done. Many Americans will be unable to work into their 70’s because of the physical demands. Saving for retirement is not an option for many in order to avoid living in poverty.

“It is so tough for Americans to save for retirement that the answer seems to be to work longer,” said Joe Ready, director of Wells Fargo Institutional Retirement and Trust.Overall, 70% of respondents plan to work during retirement, many of whom plan to do so because they simply won’t be able to afford to retire full time.

But working well into your 70’s, 80’s or even 90’s, isn’t always realistic, said Ready. Nearly three-quarters of those who plan to work into their 80’s say their employer won’t want them working when they’re that old, for example. Other roadblocks, like health issues, could arise as well.

Those who are unable to work as long as they intend could therefore face a very grim reality. In fact, more than one-third of Americans could wind up living at or near poverty in retirement, the survey found.

Saving for retirement must not be an option. What will you do for work when you are 75?

Please comment or call to discuss your retirement savings strategy.

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Simple Strategies for Beefing up Your Savings

English: ceramic piggy bank
English: ceramic piggy bank (Photo credit: Wikipedia)

Without a disciplined savings strategy there is no need for a globally diversified portfolio and the discipline to stay on track. The easiest way to save for retirement is to start early and make it automatic. You should pay yourself first each month. Seek help if you cannot stay disciplined to your saving strategy.

Separate Your Savings Goals
Instead of socking away everything into one savings account, set up a separate account for each of your savings goals. You’ll want these funds to be FDIC-insured, so you may need to open a few extra savings accounts at your bank: one for your emergency fund, one for your new-car fund, one for your vacation fund, etc. Any money you intend to save toward retirement, however, should be invested in a different, tax-advantaged accounts, as the yields with traditional savings-only vehicles are too low for a retirement fund.Set Your Savings on Auto-Pilot
For an utterly hassle-free way to bolster your savings, arrange for your bank to automatically divert a predetermined dollar amount from each of your  paychecks into a savings account (or a few savings accounts). You’ll be surprised how quickly funds add up, and since it’s an automated process you needn’t lift a finger. For example, if you get paid twice a month and you have your bank automatically deposit $100 from each paycheck into your savings, in a year’s time you’ll have saved $2,400 — and that’s before accounting for any interest you may have accrued.

Give Yourself an Allowance
Instead of pulling out that well-worn debit card whenever you get the urge, withdraw a small amount of cash to pay for your weekly incidentals. These will vary from person to person and even from week to week, but might include things like a morning coffee, lunches or dinners out, treats and impulse buys. Stick to your guns — once your “allowance” is gone, it’s gone until next week. If you can see the financial impact of these purchases, you’re less likely to spend your hard-earned money.

Having a disciplined saving strategy is more important than any investment strategy.

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Young Investors Have the Power of Compounding

Most younger investors believe its the investments you choose is the reason for reaching a successful Financial goal. The real reason is having a disciplined savings strategy. Your investments should be globally diversified at your risk level and remain disciplined to that strategy.

English: Retirement savings for various period...
English: Retirement savings for various periods with squirrel and nut analogy (Photo credit: Wikipedia)

Bruno conceded that young people face many competing savings goals such as buying a house, paying for a wedding or their children’s college education, but said retirement saving should still be factored into a financial plan.

Many things can be paid with loans, but retirement cannot, which is why retirement saving must be a priority. A post-graduate with student loans should still contribute to a retirement plan, she stated. This is not to say student loan debt should be neglected, but a plan should be in place to pay off debt while simultaneously saving for retirement. “You don’t want to necessarily shift away from retirement just to pay off student loans,” Bruno said.

Young investors might be hesitant to invest because of market performance in recent years. “Their short investment horizon has been marked by some volatility,” she noted, but emphasized that this is typical throughout history.

Young investors should not focus on market volatility because they are being exposed to it early and can still bounce back. Worrying too much about volatility can cause young investors to avoid market risk and expose themselves to inflation, she cautioned.

Bruno added that young investors should not try to time the market and chase performance.  Studies show that investors who attempt this have lower performance than those who pick an asset allocation and stick with it. Portfolios should be broadly diversified with both U.S. and non-U.S. stocks, she suggested.

The sooner you start saving for retirement the easier it will be to reach your goals. History shows that the market volatility we have been experiencing is not unusual. To succeed you will need a prudent strategy and discipline to stay the course.

Please comment or call to discuss.

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Solutions to Your Biggest Money Problems

No two individuals have the same financial woes.  Not only do financial situations vary in income, debt, spending and saving habits, but they also vary in the perspectives of those individuals and how they rank their specific money problems.  After researching a few polls on the most popular money problems, we’ve created a list of what financial issues most individuals worry about the most and what you can do about it.

I spend too much.  Without a doubt, the most worrisome financial problem people dwell over is the act of spending too much money, but why?  While credit cards play a big factor in their ease and accessibility of use, scientists have actually proven that spending money makes us happy.  Surprise?  Probably not.  Much like chocolate cake or kissing a loved one, the idea of spending money can release a feel-good chemical in our brains called dopamine.  Overspending can also stem from poor planning or lack of time.  So, how do you stop spending?  It’s not easy but doing things like changing your daily habits, only having one credit card and using more cash, unsubscribing from catalogs and finding other inexpensive ways to be happy will help you curb your spending problems.

I save too little.  You’re not alone!  According to the U.S. Department of Commerce, the average American household saves 0.4 percent of its disposable income, down from 2.4 percent in 1999. Some blame low interest rates; if you’re making very little in your savings account you have less incentive save.  Others blame spending too much.  It’s obvious – when you spend too much you can’t save what you should.  One nice way to make yourself save is to detail out a clear goal.  Additionally, you can set up automatic deductions from your paycheck, open a 401(k), and start an immediate savings account.

Gas prices are absurd.  Energy prices, in general, are on the rise, but gas prices specifically are up one-third in the past year.  And with our economy depending heavily on other world markets, it is clear that gas prices are not going to drop any time soon.  There are several alternatives to driving, like taking metro transit, walking, biking and carpooling.  But if you must drive, check out the cheapest gas prices online, remove heavy junk from your car, and be sure to check the oil, air filter and tire pressure on a regular basis.  If you can, investing in energy efficient will save you money in the long run.

I’m not sure how much to save for retirement.  The standard number for your retirement planning is 15% of your income each year.  However, each person’s financial picture is different, and there are many variables that need to be factored in.  You can either contact a retirement specialist, or check out the countless online calculators that will do the math for you.  Some tips for retirement planning include 401(k)’s, IRA’s, pension plans, investments and annuities.

I need a budget.  Are you constantly finding yourself out of cash?  Is your monthly cash cycle consistently inconsistent?  A budget is simply a plan on how to appropriately spend your money.  In order for it to work, though, you must realistic and stick to your plan.  Budgets are relatively easy to calculate.  Simply sit down and create a map of your monthly spending and saving habits.  Follow it accordingly and revisit it at the end of the month to determine what’s worked and what hasn’t.  Another tip is to sign up for an online money-tracking program.  You can even link your bank accounts and bills for deductions itemizations.

I need a financial plan.  Wait, didn’t we just talk about budgets?  A financial plan is much broader than a budget.  It’s a track to help you achieve those big things in life, like a house, vacation home or your child’s education.  It encompasses your savings, investments and even your insurance.  Creating a financial plan is much more complex than creating a budget.  Do some research and hire a financial planner.  The peace of mind in knowing your financial future is secure and protected is worth the time and effort in hiring and educator to coach you through your big life decisions.


Photo courtesy of http://mondaymorningclacker.com

3 Simple Steps to Create a Seriously Savvy Budget

No, budgets are not attractive, fun or exciting in any way shape or form.  They are, however, the necessary evil that can assist in getting you and your family’s spending and saving habits back on track.  It’s difficult to understand why more individuals don’t already adhere to a budget, what with the economic crisis and unemployment still looming above us.  It would seem that the majority of individuals without a budget either don’t think they need one, are unaware of its benefits, or simply don’t like discussing or even thinking about their financial situation.  The unfortunate part about that last point is the fact that implementing a personal or family budget can help dig those individuals out of the financial holes they’ve already put themselves in.  And the best part?  It’s ridiculously easy to do.  From writing everything down on your own to downloading or purchasing budget software, technology has made it extremely simple to execute.

The first step in creating a budget (and all these tips go for individuals to families alike) is gathering every financial statement you can find.  Examples include bank statements, credit card statements, investment accounts, utility bills, and income information.  The idea is to gather any piece of information regarding an expense or income for you or your family in order to process the information into a monthly average.  Record all your sources of income – any type of cash flow that’s coming to you needs to be recorded.  Next, create a list of monthly expenses.  Examples include the mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings – essentially everything you spend money on (even that daily latte from Starbucks!).

After you’ve created your list of expenses, you’ll want to break it up into two different categories – fixed and variable.  Fixed expenses are those that stay relatively the same each month and are essential parts of your way of living.  Examples of fixed expenses include your mortgage or rent, car payments, cable and/or internet service, trash pickup, credit card payments and so on.  For the most part, these expenses are essential yet not likely to change in the budget.  Variable expenses are those that will change from month to month and include items such as groceries, gasoline, entertainment, eating out and gifts, for example.  This category will be important when making adjustments.

The last steps include totaling both lists of expenses and income.  This is where you’ll need to make adjustments and determine what types of changes you’ll want to make to your spending and saving.  If your end result shows that your income outweighs your expenses, you can start prioritizing the excess to areas of your budget such as retirement savings or paying more on credit cards to eliminate that debt faster.  If you are in a situation where expenses are higher than income you should look at your variable expenses to find areas to cut.  Since these expenses are typically adjustable, it should be easy to shave a few dollars in a few areas to bring you closer to your income.  Once you’ve made your adjustments and have a reasonable budget to stick to, make sure you review it regularly to determine whether you are staying on track and all your numbers are up-to-date.

In addition to the steps I’ve mapped out, I’ve also put together a list of snapshot tips to help you in your budget creation and execution:

  • Be honest!
  • Track your spending to make sure it stays within your guidelines.
  • Use software to save grief – personal finance programs have built-in budget-making tools that can create your budget for you.
  • Don’t drive yourself crazy, or stop buying groceries!  Monitoring your spending can sometimes lead to overly-attentive detail – don’t go overboard.
  • Monitor your cash flow – it’s much more difficult to track where your cash is going, so keep those ATM receipts and watch your cash flow with more scrutiny.
  • Beware of expenses that may seem fixed – do you really need that $50 bottle of wine?
  • Aim to save at least 10% of your income for your future, such as investments and retirement planning.

Budgets aren’t easy to create, let alone stick to, but they are essential in getting a grip on your financial situation.  Looking over this list of tips, I’m sure you’re thinking, “okay, easy enough.”  But it’s not.  It takes time, effort and active dedication to continually be aware of your saving and spending habits.  The best part?  You won’t regret it; it is guaranteed to pay off in the end. Think of your personal budget like your map and journey to financial peace of mind.

Photo courtesy of http://americancity.org
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What’s your retirement number?

The secret to proper retirement planning is to start as early as possible. Just like you mortgage the longer the time to save the less per month you have to save. You are the one who must decide how you want to live after you are no longer able to work.

Save Money
Save Money (Photo credit: 401K)

— Inflation assumption: 4.5 percent (higher than where we are today, but most economists believe that inflation is headed up in the coming years).– Rate of investment return both before and after retirement: Consider your risk tolerance and err on the side of being conservative. If you’re stuck, use 4-5 percent. Obviously, if you use a higher rate of return, the calculator will ultimately determine that you have to save a smaller amount. After our Great Recessionand financial crash, I probably don’t have to tell you that higher return assumptions may not always work out as planned.– Life Expectancy — if you are younger than 50, use 95; if you’re older than 50, use 90. If you want a closer estimate, go to www.livingto100.com and use their Life Expectancy Calculator.

Saving for retirement is just the opposite of paying your mortgage, The longer the mortgage the lower the payment, obvious right? When saving for retirement the longer the savings time the lower the required savings rate. Many saving for retirement delay the start of their savings plan and then try to make up for it by taking additional risk. It might work but it’s doubtful.

Please comment or call to discuss how this affects you and your employees.

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