FPA-NENY Educational Articles

20 Birthdays and Milestones That Matter Most in Your Financial Life

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Just like certain birthdays and life milestones carry extra personal significance, there are certain points in life that carry extra financial weight.

Starting in the late teens and running through virtually every decade thereafter, the calendar of your life is dotted with dates and milestones, some representing key financial decision points and others that trigger important money-related developments.

The list below draws from input provided by members of the Financial Planning Association, the nation’s largest organization of personal finance experts. Add them to your calendar now so you won’t forget them later!

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Age 18 to 21 (depending on the state). This is the age at which the law requires that funds kept in a UGMA (Uniform Gift to Minor’s Act) or UTMA (Uniform Transfer to Minor’s Act) college savings plan

be turned over to the child, according to Peter T. Palion, a Certified Financial Planner™ with Master Plan Advisory in East Meadow, NY.

For people in the Jewish and Latino communities, B’nai Mitzvahs and Quinceañeras, respectively, symbolize a person’s move from childhood to adulthood. To mark the occasion, some people create donor-advised funds (DAF) on behalf of the person, says Portland, OR-based Certified Financial Planner™ Arlene S. Cogen. “The DAF allows the recipient an opportunity to make grant recommendations to the charities and causes they care about.”

Age 19: This is the age up to which a parent/guardian can claim a child as a dependent, unless the child is attending college, in which case he/she can be claimed as a dependent until age 24.
First “real” job after graduating (from high school/college/graduate school). That first step into the working world is a good time to start contributing to an employer’s retirement plan, such as a 401(k) or 403(b). Setting aside even a modest amount out of a paycheck each month, and doing so sooner rather than later, gives a person the opportunity to take advantage of compound growth in their investments, which can mean tens of thousands, even hundreds of thousands, of dollars more in savings down the road.

Age 26: This is the cut-off point, where kids can no longer remain on a parent’s health insurance plan and must purchase their own insurance.

Birth of your first child: A good opportunity to invest in a life insurance policy and disability insurance to replace your income and protect your family financially should the unexpected occur, and to establish a college savings plan on the child’s behalf, such as a tax-favored “529” plan.

Mid-20s to mid-30s: With earnings/salary likely on the rise and new financial responsibilities to meet, now is a good time to establish a relationship with a financial professional to provide ongoing guidance and recommendations for meeting your goals, growing your assets and managing your money. To find a personal finance expert in your area, check out the Financial Planning Association’s searchable national database at www.PlannerSearch.org.

30s and 40s. If you have a spouse and/or children, and you want to have a say in how your assets and your affairs are handled should the worst happen, it’s important to put in place the legal documents to ensure your wishes are carried out. That includes a will, powers of attorney, guardianship of children and more.

Mid-40s to mid 50s. This is the optimal age range to invest in some form of long-term care insurance to protect against a potentially financially devastating need for care later in life. People tend to qualify for much lower premiums at this age if they’re in good health, notes Certified Financial Planner™ Brett Spencer of D3 Financial Counselors in Chicago, IL. “Many will find the mid-50s to be an ideal time to buy, but for others that do not feel as optimistic about their health or for those that are more risk-averse, they may decide to purchase earlier.”

Age 50: Here’s when people become eligible for higher “catch-up” contributions to a retirement savings plan. Tax law raises contribution limits by anywhere from $1,000 to $6,000, depending on the type of plan.

50s and 60s: This is the time for more serious contemplation about targeting a retirement date — or making a plan to continue working.

Age 55: A special exception to rules governing withdrawals from qualified retirement plans [401(k)s and the like] allows people who have been separated from employment (laid off work, etc.) at age 55 or older to start taking money out of their plan penalty-free earlier than they otherwise could, according to Spencer.
Age 59½: The age at which people can start taking penalty-free distributions from a qualified retirement plan such as a 401(k).

Three to five years before your target retirement date: Time to begin positioning your assets to transition from the accumulation phase to the distribution/decumulation phase of life — the point where you start spending down the assets you worked so hard to build. The transition includes taking stock of the income sources you’ll rely upon for retirement to assess if they’ll be adequate to support you throughout retirement, whenever it happens.

Age 62: The age at which people become eligible to claim a reduced (20% to 30%, depending on age) Social Security benefit.

Three months before turning 65: This is the time to apply for Medicare, says Spencer. Applying in advance allows a person to avoid penalties for applying late. “You may decide to delay Medicare if you are still working and covered through a health plan, but you should be aware that you will have a limited time window (currently two months) to apply for Medicare after you stop working and are off of your employer’s plan,” explains Spencer.

Age 65 to 67: The “full retirement age” range at which people, depending upon their year of birth, become eligible for full Social Security benefits.

Age 70, the latest a person can elect to start drawing Social Security benefits. Waiting that long can translate into a significantly higher monthly payment.

Age 70½: This is when anyone with a qualified retirement plan [401(k), traditional IRA, etc.] must begin taking annual required minimum distributions (RMD) from their plan. RMDs do not apply to Roth IRAs.

Annually, at least, throughout your adult life, take stock of your finances, your assets, revisit the financial plan you (hopefully) put in place with the help of a financial professional, and based on that assessment, make any necessary adjustments to the plan and how your assets are allocated.

The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION. The marks may not be used without written permission from the Financial Planning Association.

Surviving the Sandwich: A Financial Balancing Act for People with Adult Kids, Aging Parents

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If you’re feeling pressure to provide some kind of financial support to your aging parents as well as to your children while still trying to meet your own monetary goals and obligations, if you find yourself struggling to set your financial priorities because you feel pulled in multiple generational directions, you have company as a member of the Sandwich Generation.

 

Younger baby boomers and members of Generation X are most likely to find themselves “sandwiched.” A Pew Research Center study from 2015 found that in the United States, nearly half — 47% — of people in the 40-59 age range not only have one or two parents age 65 or older, they are also either raising a young child or have provided financial assistance to a grown child in the preceding 12 months.

In a perfect world, you would have enough money to meet your own financial needs and goals, while also offering financial assistance to an adult child and/or an aging parent if and when they need it. But many people don’t have that luxury. Instead, they’re faced with difficult either-or choices. And sometimes, given the emotions and family dynamics involved, those choices aren’t so clear-cut, says David Emery, a Certified Financial Planner with Marshall Financial Group in Doylestown, PA. “You have all these competing forces in play. It takes a lot of thought to sort out.”

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Making sense of it all starts with gaining a clearer understanding of those competing forces:

  • You (and your spouse/partner). The highest financial priority for most individuals and couples, whether they’re sandwiched or not, should be to set aside enough for a secure retirement, where the nest egg provides a comfortable level of income for as long as it’s needed, according to Emery. For many people, saving enough for retirement, while also addressing current financial needs, is a formidable enough challenge that becomes even more daunting when providing financial support to an aging parent or adult child becomes a consideration.
  • Your aging parents. Close to 30% of adults who have a 65+ parent actually provided that parent with financial assistance in the preceding 12 months, according to the Pew study. Providing financial support to an aging parent or parents may take away from the ability to save for your own retirement.

 

There’s also the financial impact of taking the time to care for an aging parent. According to a separate study by the MetLife Mature Market Institute, nearly 10 million adult children over the age of 50 in the U.S. care for their aging parents. The average worker who does so sacrifices more than $300,000 in lost wages, workplace benefits and Social Security benefits, according to the MetLife analysis.

 

  • Your adult/college-age children: Some 61% of parents with adult children provided financial assistance to an adult child in the preceding 12 months, the Pew study found. That support may take the form of stopgap financial help (such as a loan or a monetary gift) to an adult child who’s struggling to make ends meet, for example, or payments to fund a child’s education (college, post-graduate work, etc.). Here’s another situation where helping an adult or college-age child financially can detract from one’s own retirement savings efforts. “This can be a big stress point, because you love your children and you want the best for them,” notes Emery.

 

How to avoid being squeezed financially in situations where you feel compelled to offer support to an aging parent, an adult or college-age child, or both? Here are some suggestions:

  1. When possible, pay yourself first. That is, make meeting your financial goals and obligations top priority. Emery’s recommendation: If at all possible, “keep on track with your retirement plan, because while you can’t borrow for retirement, you can borrow to help pay for a college education.” What’s more, the younger a person is, the more time they have to catch up with their retirement savings or to pay off a debt. But with retirement looming closer, you may not have the same margin for error.
  2. Balance emotional factors with financial practicalities. Financial decisions tend to be more clear-cut when emotions are removed from the equation. But because many sandwich situations involve emotionally sensitive family dynamics, those should not be overlooked or downplayed, says Emery. “It comes down to values. If someone really feels strongly about making a child’s college education a top financial priority, for example, then you should account for that.”
  3. Put it all out on the table for discussion. What type of support (financial and otherwise), and how much support, is the sandwiched individual or couple willing and able to provide? Who’s going to pay for what? Does it involve a loan or a gift? How much debt is each party willing and able to shoulder? In the case of a college education, how much aid is available, and in what form? Open communication with each of the involved parties is “very important” to getting everyone engaged and hopefully on the same page in finding answers to questions like these, asserts Emery. If possible, open the dialogue before there’s a financial crunch, to avoid having to make major decisions in the middle of a crisis.
  4. Make a formal plan. As you’re talking through the aforementioned issues, put the details down in writing, as part of a financial plan that you can refer to and update as circumstances dictate. If a loan between family members is involved, for example, be sure to put terms for paying back the loan in writing. This helps all relevant parties stay accountable to the decisions that were made, Emery says. Be sure to revisit the plan when life circumstances and needs change, as they almost certainly will.
  5. Enlist an objective third party for perspective and guidance. Emotions sometimes can derail family financial discussions and impede sound decision-making. A financial professional with expertise handling family finances can serve as a much-needed sounding board, voice of reason, intermediary and strategist in sandwich situations. To find a Certified Financial Planner™ in your area, search the Financial Planning Association’s national database of personal finance experts at PlannerSearch.org.This column is provided by the Financial Planning Association® (FPA®) of Northeastern New York, the principal professional organization for Certified Financial PlannerTM (CFP®) professionals. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process. Please credit FPA of Northeastern New York if you use this column in whole or in part.

    The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION. The marks may not be used without written permission from the Financial Planning Association.

Best Financial Advice for 2017: Experts’ Top 15 Money Tips for the New Year

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If you follow the Chinese zodiac, 2017 is the Year of the Rooster. But it might as well be the Year of the Question Mark for all the uncertainty surrounding financial markets, government policy and the global geopolitical landscape.

 

What does all the uncertainty mean for your money? What steps should you consider taking in the year ahead to provide yourself with a measure of much-needed financial clarity in the face of such a cloudy future? Read on as some of the country’s leading personal finance experts offer their suggestions for handling your money in 2017.

 

  1. Stick with a long-term financial plan and investment strategy. “Don’t let emotional reactions to short-term events, market volatility or the incoming Trump administration’s policies influence your decisions,” advises Dr. Robert Tucker, MD, MBA, AIF, vice president at Plancorp, LLC, in St. Louis, MO. “Stay with the basics of regular savings, diversification, periodic rebalancing and tax-loss harvesting if the opportunity presents.”
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  1. Focus on things you can control in your financial life by paying attention to such things as mutual fund expense ratios (generally speaking, the lower the better), asset allocation strategy (diversification appropriate to age and other factors) and personal savings, suggests Certified Financial Planner™ Maureen M. Demers of Demers Financial, North Andover, MA. “Don’t make investment decisions [based] on the things which you have no control over,” such as the latest political controversy playing out on social media.

 

“Every couple days another industry or company is being mentioned by the new [Trump] administration as a potential target of inquiry,” echoes Ian M. Weinberg, a Certified Financial Planner™ who heads Family Wealth & Pension Management in Woodbury, NY. “Don’t let that noise shake your planning and your portfolio decisions.”

 

  1. Fund an individual retirement account (IRA) and/or a 401(k) type retirement plan — preferably to the maximum amount allowed by tax law. “If the option to fund an IRA or similar plan for 2016 exists, be sure to do so before the April 15 tax filing deadline,” Tucker recommends. “Don’t forget about funding an IRA or Roth IRA for children who had earned income in 2016. And make your 2017 IRA contributions early in the year to take advantage of tax-deferred growth.” Also keep an eye out, as retirement plan contribution limits may increase for 2017, according to Weinberg.

 

  1. Consider converting a traditional IRA to a Roth IRA. Personal federal income tax rates likely will drop in 2017, posits Weinberg, and that generally makes converting to a Roth IRA more attractive, he explains, because taxes associated with the conversion will tend to be lower. Roth IRA assets are good to include in a portfolio because they are not taxed when withdrawn (distributed), unlike distributions from a traditional IRA, which are taxed as ordinary income.

 

  1. “Make it automatic!” recommends Certified Financial Planner™ Christine Haviaris of TTR Wealth Partners in Pearl River, NY. That is, automate contributions to retirement accounts, savings accounts, college savings accounts and the like, and do the same with bill payments, to remove the guesswork and the temptation to forego a contribution or skip a payment.

 

  1. Calculate and track your net worth. “This is a great way to keep score and lets you know if you are winning or losing,” says Todd W. Minear, a Certified Financial Planner™ with Open Road Wealth Management in Kansas City, MO

 

  1. Treat your household finances like a business. Practice fiscal responsibility like a well-run business would, suggests Certified Financial Planner™ Kris Garlewicz, who heads Prosperifi in Rosemont, IL. Create financial statements for yourself and allocate capital accordingly, making purchases only when they align with your overall objectives. “Be deliberate and thoughtful to everything you do, and take good care of those around you.”

 

  1. Consider becoming your own boss or launching a small business in 2017. Corporate income tax rates are likely to decrease this year, perhaps to as low as 15%, significantly less than the 25-35% ordinary income tax rates many employees currently pay. “That 20-point [tax rate] spread is reason to consider becoming an independent contractor or going into business for yourself,” says Weinberg.

 

  1. If you have an adjustable-rate mortgage (ARM), consider refinancing it, Weinberg suggests. Current trends indicate interest rates will continue to creep up in 2017, so now may be a good time to refinance from an ARM to a fixed-rate mortgage.

 

  1. Review your overall financial plan. “The new year is a great time to refine your goals, review last year’s spending, refine insurance coverage and be sure estate documents are in order, including health care directives and powers of attorney,” observes Tucker.

 

  1. Get a second opinion on your financial standing and your financial plan, if you have one. “Often, two sets of eyes are better than one,” Minear explains. “Do you really need the high premiums of that whole life policy? What about that annuity? Does it still make sense? You may own some financial products that were purchased years prior. As we all know, things change, so if your situation has changed, it may make sense to change the tools used to implement your plan.”

 

  1. Give back. “Whether you donate money or time, the act of giving can have a profound impact on your life as well as the lives of others,” says Minear.

 

  1. Hit the pause button with regard to major changes in your estate plan. “Speculation abounds with regard to potential changes in the tax code and wealth transfer regulations,” notes Tucker. “It may be best to defer any major rewrites until the picture becomes clearer.”

 

  1. Share your knowledge and wisdom with others. “Most children need financial education. Figure out a way to deliver this,” recommends Minear. Talk informally with kids and grandkids about a financial mistake you’ve made and what you learned from it, for example. Show them bank statements and other financial statements and explain what they mean. Give them a glimpse of an investment statement to provide a context for a discussion about the time-value of money and the merits of a long-term investment strategy.

 

  1. Pick up a book about behavioral finance, Minear suggests. “Knowing why and how you make financial decisions will help you in the future.” Two of his recommended reads: Thinking, Fast and Slow by

Daniel Kahneman and The Little Book of Behavioral Investing: How Not to be Your Own Worst Enemy by James Montier.

This column is provided by the Financial Planning Association® (FPA®) of Northeastern New York, the principal professional organization for Certified Financial PlannerTM (CFP®) professionals. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process. Please credit FPA of Northeastern New York if you use this column in whole or in part.

The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION. The marks may not be used without written permission from the Financial Planning Association.

Retirement Investing: Finding the Right Balance Between Growth, Protection

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What’s the first thing people look at when they open their investment account statement? Usually their eyes go right to the bottom line, to see how much their shares of stock, or their mutual fund portfolio, or their retirement plan assets, have lost or gained in value.

 

That’s not surprising, given the inclination of so many people to prioritize higher returns on their investments in the quest to build a larger nest egg for retirement. But there comes a time when the proximity of retirement may dictate a shift in mindset, whereby protecting nest egg assets becomes just as important as growing them.

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“When people shoot for [investment] yield,” explains Certified Financial Planner™ Jon Swanburg of Tristar Advisors in Houston, Texas, “what often happens in doing so is they sacrifice surety and liquidity because they are so focused on return” on their investment. Surety is the assurance or guarantee associated with the value of one’s assets — the surety that an investment will not lose its original value, or principal, for example. Liquidity is the extent to which an investor has ready access to the cash value of an investment position. An ATM card provides the cardholder with instant access to liquid cash in a bank account, for example.

 

Investors regardless of their age or stage of life need to strike an appropriate balance between growth, surety and liquidity, according to Swanburg. But with retirement looming, the dynamic between the three might need adjusting to reflect the financial realities that often accompany the next phase of life: transitioning from the working world to a fixed income, switching from building to drawing down retirement assets, passing assets to heirs, etc.

 

“If an investor wants something with yield and liquidity, they are going to sacrifice surety,” says Swanburg. “If they are looking for something with surety and liquidity, they must give up yield. Retirement investing is finding the right balance between these elements so that an investor isn’t taking excess risks in one of these areas.”

 

While the right balance differs from person to person, based on a range of factors, including age, health, assets, lifestyle preferences and more, a few basic guidelines apply in positioning assets to last throughout retirement, however long it lasts:

 

For protection, maintain an adequate liquid cash reserve. To generate income in retirement, many people sell off equity assets such as stock market holdings. But when the value of the stocks in a person’s portfolio drops, so does the income-producing capability of those stocks. What’s more, selling shares of stock when their value has plummeted is hardly optimal. One alternative, Swanburg explains, is to maintain a cash reserve from which to draw when stock values drop — as a cushion to make up for that income deficit, and to keep from having to sell off more stocks (or some other asset) when their value is down. Financial professionals recommend building a cash reserve substantial enough to accommodate retirement income needs for a year or more. Those reserves can be stashed in an account that provides maximum surety (but in today’s low-interest-rate environment, an extremely modest return), such as an FDIC-insured money market account, high-yield checking or bank CD.

 

For protection, build a diverse asset portfolio. “You need assets that move in different directions from one another,” says Swanburg. That’s especially true with retirement approaching, when generally speaking there’s less time for assets inside a nest egg to recover from a sharp loss of value. A well-diversified portfolio of stocks, bonds and other conservative types of investments (for surety), perhaps real estate and/or alternative investments, and cash, should help mitigate volatility while still preserving upside potential, so the lows aren’t as low, the highs aren’t as high, but the opportunity for growth is still there. Asset allocation percentages will vary according to the individual, and they likely will change over time, as a person’s circumstances and needs change. As for the traditional 60% stocks/40% bonds rule of thumb, that diversification model may work for some, but it’s by no means ideal for many.

 

For growth (yield), stay invested in equities such as stocks. Based on historical data, few asset classes can match the long-term growth potential of stock market investments, according to Swanburg. And because it’s important to maintain a nest egg’s growth potential, it makes sense for many people to maintain a well-diversified exposure to equities. Their approach with those equity investments may need to change, however, Swanburg notes. “You may need to shift away from the high-flying [riskier] investments, in favor of equity investments that provide more consistent returns and limit volatility.”

 

For protection, consider shifting assets into a vehicle that provides guaranteed income. If the idea of securing an income source you can’t outlast is appealing to supplement other sources such as Social Security, retirement plan distributions, IRAs, a pension and/or systematic drawdowns from a stock portfolio, it may make sense to use some nest egg assets to purchase an annuity that provides a guaranteed income stream, either for a period of time or for a lifetime. Fixed annuities also provide surety, as the principal inside the contract is protected from loss.

 

Seek protection from inflation. Inflation — the rate at which the price of goods and services increases from year to year — erodes a person’s purchasing power, a particularly important consideration when on a fixed retirement income. What’s more, the cost of goods and services retirees tend to rely upon more than other age groups, such as healthcare and nursing home care, have been rising much faster than the overall inflation rate. So people who are approaching or already in retirement need a nest egg that addresses inflation risk. Stock market investments provide good inflation protection because they tend to track with inflation, meaning when inflation increases, the stock market tends to keep up pretty well. Certain types of bonds, such as Treasury Inflation Protected Securities or TIPS for short, come with an inflation-protection feature built in. So-called inflation riders are also available with some annuities, where annuity income increases either by a flat rate each year or at a varying rate that’s usually pegged to something like the consumer price index.

For growth, look beyond just stocks and bonds. Investors are turning to real estate and so-called “alternative” investments, not just to diversify their nest eggs (and thus dampen volatility) but to grow them. Vehicles such as managed futures funds, long-short funds, hedge funds (and funds of hedge funds) as well as hedge fund replication strategies and commodities are just some of the varieties that fall into the alternative category. These types of investments do come with risks, so be sure to work with a financial professional to evaluate if they’re right for you, and if so, to determine which types of alternatives may be most suitable.

 

For protection, look to insurance. Oftentimes it makes sense, particularly for pre-retirees and retirees, to protect their nest egg assets from risk by investing in some form of insurance. For example, some type of long-term care insurance can help protect against a financially catastrophic need for extended care due to a serious health issue. Also, maintaining some form of health insurance after age 65 to backstop Medicare can help protect a retirement nest egg and income stream from potentially steep healthcare costs. According to a recent estimate from HealthView Services, a healthy couple age 55 today retiring in 10 years, at age 65, would pay a total of $466,000 in health care expenses from age 65, on. Meanwhile, for people in their 40s and 50s, it’s worth considering short-term and long-term disability insurance, which can replace their income if they’re unable to work to earn money, so they don’t have to tap into their nest egg before it’s time.

This column is provided by the Financial Planning Association® (FPA®) of Northeastern New York, the principal professional organization for Certified Financial PlannerTM (CFP®) professionals. FPA is the community that fosters the value of financial planning and advances the financial planning profession and its members demonstrate and support a professional commitment to education and a client-centered financial planning process. Please credit FPA of Northeastern New York if you use this column in whole or in part.

The Financial Planning Association is the owner of trademark, service mark and collective membership mark rights in: FPA, FPA/Logo and FINANCIAL PLANNING ASSOCIATION. The marks may not be used without written permission from the Financial Planning Association.

Financial Planning Checklist for BABY BOOMERS

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Each generation has its own distinct set of financial issues to grapple with — money-related priorities to meet, challenges to overcome, dreams to fulfill and values to act upon. For Baby Boomers, the generation born between 1946 and 1964, many of those issues revolve around retirement.

 

For them, it’s not only about addressing immediate financial needs but also taking the appropriate planning steps to position themselves for a financially secure next phase of life, whether or not the next phase involves full retirement, continuing to work, or something in between. Add to that concerns about aging parents and “boomerang” adult children, and you get an idea of just how unique and complex financial planning can be for members of the Boomer generation.

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The following checklist details 15 key planning steps that financial professionals recommend Boomers consider taking as they contemplate how their 60s, 70s, 80s and beyond might unfold.

 

  • Envision what comes next. What’s on your retirement bucket list? Will you stay put or move someplace else? What type of housing do you see yourself wanting as you age? Will you retire fully or keep working? By answering questions like these about how you want your retirement to unfold, you’re creating a vision for your next phase of life. That vision can provide incentive to take the steps specified below.
  • Save with a sense of urgency. With retirement looming, it’s never been more important to stay on course with your retirement savings — or to make up for lost ground. Uncle Sam gives people 50 and over a carrot to save more in the form of “catch-up” provisions that raise the limit on the amount a person can contribute to a tax-deferred retirement plan. Take advantage of that and other retirement savings tax breaks, suggests Certified Financial Planner™ Ellen R. Siegel, founder of Ellen Siegel & Associates in Miami, FL.
  • Start attacking your bucket list now. If you’re healthy and have the resources along with the desire, there’s no better time than the present to start fulfilling your dreams and crossing items off the list.
  • Take stock of income sources and amounts. Which sources [Social Security, pension, 401(k) distributions, IRA distributions, stock dividends, etc.] will supply income for your retirement, how much will they supply and most importantly, will they supply enough to let you live the lifestyle you desire? It’s important to get a handle on retirement income, including Social Security benefits. Delaying benefits from age 62 to the full retirement age of 66 can generate 33% more in monthly Social Security income, while waiting until age 70 yields a 76% jump in income, according to an analysis from the Center for Retirement Research at Boston College.
  • Spend time analyzing spending. Track your monthly spending to give yourself a rough idea of how much income you’ll need for the next phase of life.
  • Work out a work plan. Do you want to keep working? Do you need to keep working? Among employed Baby Boomers, two-thirds plan to or already are working past age 65 or do not plan to retire at all, according to a Transamerica study. Whether it’s a matter of want or need, Siegel suggests putting forethought into your intentions about work. Also have a backup plan for if you’re planning to work but can’t, due to poor health or other reasons.
  • Consider an annuity — if it’s the right fit. For people who want a pension-like stream of guaranteed income, an annuity underwritten by an insurance company may make sense, Siegel suggests. Some annuities turn on the income spigot immediately, once the contract holder pays the insurance company a lump sum; others start providing income at a predetermined point in the future. Consult a financial professional to determine if you’re a good candidate for an annuity, and if so, for help figuring out which type is best for you.
  • Recognize the real risks. What happens to you financially if you live to the ripe old age of 95? What if you plan to continue working but can’t? What happens if the inflation rate spikes, prices for goods and services jump and you’re on a fixed income? These are genuine risks that need addressing in advance, says Leon LaBrecque, JD, CFP®, CPA, CFA, of LJPR Financial Advisors in Troy, MI.
  • Take aim at debt. Carrying an unmanageable debt burden into retirement can hamstring a person financially, particularly if they’re on fixed income, says Siegel. Start by paying down accounts with the largest balances and the highest interest rates.
  • Plan for health care and long-term care needs (and costs). According to U.S. government stats, about 70% of people will require some form of long-term care in their lifetimes. Meanwhile, total projected lifetime health care premiums and out-of-pocket expenditures for a healthy 65-year-old couple retiring in 2016 project to about $377,000 in today’s dollars. Medicare alone won’t cover those costs in most cases. Which is why, according to Siegel, people need to plan in advance for how they’re going to cover those costs. Health insurance, along with Medicare supplemental insurance, plus some form of long-term care insurance (stand-alone or as part of a life insurance policy or annuity contract) might be the answer, she says.
  • Get your affairs in order. Pull together all your important documents, beneficiary and account information for investments, credit cards, retirement accounts, bank accounts, annuities, life insurance policies, Social Security and pension statements, real estate property, personal property and debts, along with estate documents like your will, powers of attorney and living will, suggests Certified Financial Planner™ Alexander G. Koury of Householder Group Estate and Retirement Specialists
  • in Scottsdale, AZ. Not having one’s affairs in order can create quite a mess for family members and heirs.
  • Brace for the BOOMERang. Some 61% of parents with adult children provided financial assistance to an adult child in the preceding 12 months, according to a Pew Research Center study. Supporting an adult child financially “can interrupt your life, your career and your retirement, and it costs a lot of money you weren’t planning to spend,” observes Siegel. Is this a responsibility you’re prepared to take on financially and emotionally?
  • Prepare for aging parents. Close to 30% of adults who have a 65+ parent actually provided that parent with financial assistance in the preceding 12 months, according to the Pew study. Meanwhile, another study by the MetLife Mature Market Institute found that the average worker sacrifices more than $300,000 in lost wages, workplace benefits and Social Security benefits in caring for an aging parent. Is this a responsibility you’re prepared to take on financially and emotionally?
  • Plan now. If you don’t have a financial professional to rely upon to provide objective, on-target advice and to help develop a formal plan that includes strategies for handling many of the aforementioned financial issues, now is the time to get one. With a Certified Financial Planner™, you’re getting a financial professional who specializes in big-picture planning, based on your individual circumstances, needs and goals. A CFP® “can help you put together a retirement and investment strategy to help protect your assets,” explains Koury, “help you maintain your lifestyle, and make sure you don’t run out of money in retirement.”

 

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