Wealth Strategies Blog

Category Listing


Sort By: Title   |   Blog Date


Tuesday, October 4, 2016

Should You Plan to Retire on 80% of Your Income?

A classic retirement planning rule states that you should retire on 80% of the income you earned in your last year of work. Is this old axiom still true, or does it need reconsidering? Some new research suggests that retirees may not need that much annual income to keep up their standard of living.

The 80% rule is really just a guideline. It refers to 80% of a retiree’s final yearly gross income, rather than his or her net pay. The difference between gross income and wages after withholdings and taxes is significant to say the least.  The major financial challenge for the new retiree is how to replace his or her paycheck, not his or her gross income.   

Retirees need to determine the expenses that will diminish in retirement. That determination, rather than a simple rule of thumb, will help them realize the level of income they need. New retirees may not necessarily find themselves living on less. The retirement experience differs for everyone, and so does retiree personal spending.  A 2013 study from investment research firm Morningstar noted that a retiree household’s inflation-adjusted spending usually dips at the start of retirement, bottoms out in the middle of the retirement experience, and then increases toward the very end.1

A retirement budget is a very good idea. There will be some out-of-budget costs, of course, ranging from the pleasant to the unpleasant. Those financial exceptions aside, abiding by a monthly budget (with or without the use of free online tools) may help you to rein in any questionable spending.

Any retirement income strategy should be personalized. Your own strategy should be based on an accurate, detailed assessment of your income needs and your available income resources. That information will help you discern just how much income you will need when retired.

 

Citation

1 - money.cnn.com/2015/12/02/retirement/retirement-income/ [12/2/15]

 


Posted by: Patrick Carroll at 10:16 AM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.






Tuesday, October 4, 2016

How Much Retirement Income Should You Withdraw?

In the first few years of retirement, some couples “live it up” and seek to do all the things they have been dreaming to do, once they retire.  Many new retirees are told that a 4-5% annual withdrawal rate makes sense.  If you withdraw 4-5% from your retirement nest egg annually and your investments steadily earn about 5-6% each year, it is possible that your invested assets can last for many years. However, that’s the scenario when the economy is stable – what happens if your portfolio only returns 1-2%? 

Ultimately, the answer is highly personal.  There is no “standard” retirement income withdrawal rate.  Your withdrawal rate should be determined in consultation with your financial professional, who can help you evaluate some very important matters:  your risk tolerance, your age and health and your lifestyle needs.  With ongoing improvements in healthcare, today’s retirees stand a good chance of living into their eighties and nineties and longer.  This is a good reason to exercise a little moderation when scheduling retirement income.  Ideally you have a retirement income plan in place along with the help of a financial professional who can review your investments and income needs and adjust your withdrawal rate over the course of your retirement.


Posted by: Patrick Carroll at 10:13 AM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.






Tuesday, October 4, 2016

Planning for Retirement When You Are Single

How does retirement planning differ for single people? At a glance, there would seem to be no difference in the retirement saving effort of an individual versus the retirement saving effort of a couple: start early, save consistently, and use vehicles that allow tax-advantaged growth and compounding of invested assets.  On closer inspection, differences do appear – factors that single adults should pay attention to while planning for the future.

Retirement savings must be built off one income. Unmarried adults should save for retirement early and avidly. Most couples have the luxury of creating retirement nest eggs from either or both of two incomes. They can plan to build wealth with a degree of flexibility and synchronization that is unavailable to a single saver. So when it comes to building retirement assets, a single adult has to start early, save big and never let up, as there is no spouse around to help in the effort and only one income from which savings can emerge.

The Social Security claiming decision takes on more importance. An unmarried person’s Social Security benefits are calculated off his or her lifetime earnings record. Simple, cut and dried.  A couple can potentially rely on two Social Security incomes before both spouses reach what the program deems full retirement age. An unmarried person cannot exploit that opportunity, so the decision to claim Social Security early at reduced monthly benefits or postpone claiming to receive greater benefits becomes critical.

 An unmarried person may someday have a huge need for long term care insurance. If there are no adult children or spouse around to serve as caretakers in the event of a debilitating mental or physical breakdown, an unmarried individual may eventually become destitute from costs linked to that sad consequence. LTC coverage is growing more expensive and fewer carriers are offering it these days, so many married baby boomers are wondering if it is really worth the expense; in the case of a single, unmarried baby boomer retiring solo, it may be.

 Housing is often the largest expense for the unmarried. In an ideal world, a single adult could pay half of the monthly housing expense of a married couple. That seldom happens. Relatively speaking, housing costs usually consume much more of a sole individual’s income than the income of a couple. This is true even early in life: according to Bureau of Labor Statistics data, married folks in their late twenties spend $7,200 per person less on housing expenses annually. So a single person would do well to find ways to cut down housing expenses, as this frees up more money that can be potentially assigned to retirement saving.1

 Saving when single presents distinct challenges. In fact, saving for retirement (or any other financial goal) as a single, unmarried person is often more challenging than it is for a married couple – especially in light of the fact that spouses are given some distinct federal tax advantages. Still, the effort must be made. Start as early as you can, and save consistently.


Posted by: Patrick Carroll at 10:12 AM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.






Friday, May 6, 2016

Learning to Save for the Future

Don’t underestimate the importance of liquidity.  Throughout your investment journey there will be situations that arise requiring immediate access to your assets.  Personal emergencies and early retirement are both very real examples that may require you to liquidate certain assets to cover expenses.  If you do not have enough liquid assets, you may have to dip into illiquid investments which may mean paying stiff penalties.  Not understanding the importance of liquid assets can cause loss of positive investments and a gain in stress and frustration.    

As your age goes up your risk should go down.  There is no sense in aiming for one last homerun when there is less time to reap the benefits of a win and less time to make up for a loss.  Rebalancing your portfolio can help in reestablishing the original level of risk by resetting all asset allocation.  Although this may get rid of any possible big gains it will, more importantly, get rid of any possible big losses.

Be aware of biases.  Liking a company does not mean you should invest in that sector and neither does working in one.  Getting attached to specific investments will make you highly vulnerable to fluctuations within the economy and can decrease the value of your portfolio by extreme measures.  Diversification of investments is key when looking to reduce risk and achieve steady gains.  

Markets will always rise and fall so it is important not to panic.  You should always strive to keep your financial goals within reach even when going through shocks within the market.  This entails staying invested and staying positive. 


Posted by: Patrick Carroll at 4:27 PM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.






Friday, July 24, 2015

Enough to Retire?

Millions of Americans have not saved enough money for retirement because retirement is not on their radar, it may seem like a distant and far away phase of life. People have busy lives and many expenses, saving money for retirement is on the back burner. This is a huge mistake because the longer retirement is ignored the worse the financial situation may be when that time comes. Individuals need to face the facts and start making steps toward saving and preparing for their future life.

Families or couples may need to consider their home expense, moving to a cheaper neighborhood may become necessary.  Also, spend less, as unappealing as that sounds, cutting out unnecessary expenses will help save more money; cutting out cable TV, or anything deemed unnecessary. Also, maximize your 401(k), and take full advantage of it, sometimes this means taking your social security later. 


Posted by: Patrick Carroll at 9:55 AM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.






Friday, July 24, 2015

Questioning Retirement Assumptions

Questioning Retirement Assumptions

 

Many baby boomers expect a typical, planned out and smooth retirement

This is possible for many of them, but for others, the road will be different. There is not a generic road to take when it comes to an individual’s personalized retirement plan. Financials, life expectancy, and health lead individuals to create their own retirement path and plan. 

 

Here are some assumptions that many people have on retirement.

 

#1 Take social security as late as possible because you will most likely live 15-20 years after you retire

v  People born in the years 1943-1954 will have a 25% smaller monthly benefit if they claim their Social Security at 62 instead of the “full” retirement age at 66. So the question is why would anyone take their social security so early in their 60’s?

v  The answer is that people may really need that income for medical bills, and other essentials. Some individuals don’t expect to live 15-20 years after retirement due to hereditary diseases. Evaluate your own life and future and then make that decision.

 

#2 You shouldn’t invest as you get older, and the payout of a lump sum is the best option.

v  As investors grow older they want to take less risk in their investment portfolios. This doesn’t have to be the case for everyone, there are many retirees that have insufficient savings and may need to continue to invest. Sometimes the outcomes can override the risks taken. 

v  Meanwhile, many corporations are offering a choice for pension plan assets as either a lump sum payout or periodic lifelong payments.  Both are options and depend on life expectancy, so these decisions are circumstantial and unique to each individual.


Posted by: Patrick Carroll at 9:54 AM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.






Friday, July 24, 2015

What to do when a Family Member Dies

The passing of a loved one or spouse changes life forever. Shock and grief can overcome a family, which can halt important decision making. It is important to follow these steps after a loved one passes.

1.Call your family member’s employer or past employer

  • Notify the employer of the bad news because there could be retirement savings or pension payments.

2. Consult a lawyer.

  • A lawyer can assist with the organization of financials. Grieving people can be too emotionally overwhelmed to deal with complicated issues.

3. Call social security if you have been widowed.

  • There are survivor benefits available if your spouse received social security and you did not. If you already receive social security there could be more benefits available.

4. Request or gather important documents of your loved one.

  • Recent credit card statements, birth certificate and death certificate, last two year  tax returns, insurance policies, investment documents (401(k) etc), last checking and savings account statements, last mortgage statement, and a credit report.

5. Consider and plan for your future.

  • This is the most important step, many times after a loved one passes purpose is hard to find. Planning financials and the future will help put the purpose back into your life.

Posted by: Patrick Carroll at 9:54 AM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.






Friday, July 24, 2015

The Retirement We Imagine, the Retirement We Live: Examining the potential differences between assumption and reality

Financially, how might retirement differ from your expectations?  As you approach or enter retirement, you may find that your spending and your exit from your career don’t quite match your expectations as few retirees find their financial futures playing out as precisely as they assumed.

Realistically, few retirees actually outlive their money.  The vast majority of retirees are wise about their savings and income: they don’t spend recklessly and if they need to live on less, at a certain point, they live on less. Health crises can and do impoverish retirees and leave them dependent on Medicaid, but that tends to occur toward the very end of retirement rather than the start.

The common guideline for new retirees is that you will need to retire on 70 to 80% of your end salary.  According to some analysts, you may not need to withdraw that much for long.  In the initial phase of retirement, you will probably want to travel and explore new pursuits and hobbies – all the things you have been putting off.  So in the first few years away from work, you may spend as much as you did before you retired.  After that, you might spend less.  In the big picture, households run by those 75 and older typically spend about half as much per year as households headed by people in their late forties.

In short, the retirement you live may be slightly different than the retirement you have imagined.  Fortunately, retirement planning and retirement income strategies may be revised in response.


Posted by: David Shober at 9:52 AM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.






Thursday, April 23, 2015

Retirement Success

There are different measures of retirement success, and these are all personal. Some people may measure their retirement success through income, health, or family. Some measures for success may overlap and some will be different.

 Income replacement is usually a measure of successful retirement for most people. Some people may find that they want to spend more time with family. Others may value longevity and good health. Some people may want to make a difference by donating to charities. Meeting your own expectations at retirement may also measure how you view your retirement success; but the most important aspect is doing what makes you happy. 


Posted by: Patrick Carroll at 10:32 AM
 | permalink


This material is intended for historical purposes and may be outdated. Its contents should not be relied upon as current information. For more up-to-date information regarding these topics, contact your financial professional.