Women and Financial Literacy: Facts You Should Know

Agemy Financial Strategies

March 23, 2022

As National Women’s History Month comes to a close, we take a look at why financial planning for women is more important today than ever. Whether you are a working woman, a retired woman, a stay-at-home mom or a mom with a son or daughter in college, you have to think about your retirement now. This is your money and your financial future. It’s time to take charge and start taking some steps that’ll help you move closer to your retirement dreams. 

Let’s give a shout-out to all the women out there first and foremost—because there’s no doubt that women have been making serious strides lately.

Managing money and financial planning can be a tough task if you don’t have the proper information at hand. Women especially bear the brunt of this while caring for a family and having a retirement plan in place. However, the barrier is closing between segregated duties, and more men and women are sharing financial tasks as a result of women becoming more confident about managing money, according to an annual survey on women and investing by OppenheimerFunds of New York.

Women Investors Breaking Financial Barriers

According to the Fidelity 2022 Money Moves Study, women currently ages 18-35 years old are starting to invest nearly a decade earlier than women ages 36 and older. On average, this younger generation of women started investing in a brokerage account at age 21, compared with age 30 for older women who started to invest during the same age frame.

Beyond opening a brokerage account by age 21, the study shows that younger women also opened a retirement account even earlier, at age 20, compared with their older peers who opened one at age 34. Not surprisingly, the pandemic has caused many people to reevaluate their finances and in the case for some younger women, this was the time to start investing with 50% reporting they have started to invest in the past six months, or they plan to do so in the next six months.

Those are some great reasons to celebrate. But there’s work to be done… A recent study found that only 12% of women are very confident they’ll be able to retire comfortably. Meanwhile, more than half of women (55%) expect to retire after age 65 or don’t plan on retiring at all.

Taking the initiative to educate yourself about complex financial decisions will help you achieve your financial goals. Here are a couple facts and tips on women and financial planning which can help you better prepare for the future.

Women can Struggle with Financial Literacy

Financial literacy is the most important and fundamental stepping stone to building and maintaining wealth. A lack of financial confidence keeps many women from pursuing education in personal finance. It’s because of this, that women are less likely than men to view themselves as financially savvy. As a result, women are less prone to negotiate salaries and attain financial independence.

Here’s The Facts:

  • Only 9% of women think they’re better investors than men are. However, women are less risk-averse and tend to seek financial advice, so their investments often perform better.
  • 23.3% of all Certified Financial Planners are women.
  • Only 18% of women between ages 60 and 75 passed a financial literacy quiz on retirement. 35% of men passed the same quiz.

Income Disparity & Gender Wage Gap

Women playing an active role in the workforce is a unique situation. An unfair wage gap and life interruptions have slowed career progress and have forced some women to struggle with basic living expenses.

On the brightside, the pay gap between men and women is narrowing. However, this development is progressing slowly. The pandemic caused income disparity across the board which had many women face financial challenges to their overall well-being and threatened their ability to gain financial independence.

Here’s The Facts:

  • The gender pay gap is higher among educated men and women. Women with a bachelor’s degree earn 74% of what men with a bachelor’s degree make.
  • The lifetime earnings of a woman with a bachelor’s degree is $1.32 million. The average lifetime earnings of a man with a high school diploma is $1.53 million.
  • Women ask for raises just as often as men do, but are only likely to get the raise 15% of the time, while men who ask get the raise 20% of the time.

Retirement Planning Priorities

Women tend to live longer than men. As a result, they must draw out their retirement savings for a longer period of time. Trends show women risk falling into poverty if they don’t have sufficient funds for retirement.

Single women of all types — unmarried, divorced and widowed— from age 44 to 64 are underprepared for retirement. One of the worst outcomes of not prioritizing savings is missing opportunities to leverage time in your favor. Money kept in interest-bearing accounts for years can grow into a substantial asset. Employer-offered accounts include tax advantages and sometimes match plans that double savings.

The wage-earning gap also limits available Social Security benefits — a built-in foundation that some seniors rely on for retirement expenses. As a result of these challenges, fewer resources and a lack of planning, women are more likely to encounter poverty in old age and be forced to rely on government programs for living expenses.

Here’s the Facts:

  • 84% of women who will retire after 65 plan to do so for financial reasons.
  • Nearly 50% of women have less than $25,000 in savings, compared to 36% of men.
  • 54% of women plan to work after they retire – including 12% who plan to work full time
    and 42% who plan to work part time.

Overcoming These Challenges

There are steps you can take as you get ready to start thinking about your retirement future. These include:

  • Start by assessing your financial picture: You’re going to have to be honest with yourself about where you stand when it comes to saving for retirement and how much you know about investments. Once you know where you stand, you can figure out how far you have to go.
  • Align your choices and values: Spend time considering what you want to value and prioritize in your life. Do you value time with family and friends? Traveling? A strong financial foundation — i.e., saving for emergencies and making retirement contributions?  If you realize that you are spending money on things you know you don’t value, it is time to reconsider your financial strategies.
  • Put Your Needs First: As a woman, we understand this is fighting against your natural instincts. Especially when it comes to financially helping your kids. But in doing so, women often put the goals and objectives of others before their own needs. Start focusing on yourself and your needs and redesign your relationship with money. Then move on to helping others.
  • Learn About Investing: When you know what your investing options are and how they work, you’ll feel empowered to make the kind of financial decisions the “future you” will thank you for. Check out informative news articles and financial podcasts as a fun way to stay up to date with the latest financial news and investment trends.
  • Get Help From a Professional: When you get the right information from the right people, you can make the right decisions.That’s why we always recommend working with a Fiduciary Financial Advisor who can guide you through your financial journey with your best intentions at heart. A Fiduciary you can trust can help you set short- and long-term goals and bring all the pieces of your financial life together.

Final Thoughts

Planning for retirement should look different for women and men given the different life cycles – and it’s never too late to start your journey to financial planning. You can improve your financial welfare by making a plan for how you will use your income wisely. The power to make positive and healthy spending and saving choices is yours. But a dream without a plan is simply a wish. You need to take the first step in taking control of your finances.

A great way to get started is by reaching out to a trusted Fiduciary Advisor. Your financial advisor should provide the education, time frame, and comfortable setting appropriate for your needs. And, if your advisor does not listen or pay attention to what you want for your financial future, find someone else to work with. At Agemy Financial Strategies, we have all of the tools you need to make the leap towards a healthy financial future. Our firm exists for the purpose of helping people achieve their personal and financial goals. Our philosophy is to deliver quality financial programs and teach principles for successful living. By working with us, you can envision your roadmap to success.

Click here to instantly book the day and time you’d like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guildford, CT and Denver, CO are looking forward to speaking with you.

Happy National Women’s History Month from the entire team at Agemy Financial Strategies!

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Digital Currency and the Future of Retirement Planning

Agemy Financial Strategies

March 16, 2022

Cryptocurrency is everywhere. From being used for charitable donations and even on our TV screens during the Superbowl commercials. But when it comes to the future of retirement planning, how do these new world assets come into play? 

With the popularity of cryptocurrency on the rise, everyone is eager to invest in it or invest it for retirement. Because crypto is so new, there are still rules and stipulations being crafted to be able to save it for retirement.

The IRS has rules in place stating you cannot contribute cryptocurrency directly into your Roth IRA, but there are currently no rules about adding crypto to your Roth IRA via purchase.

Here’s a look at digital currency and how planning for retirement could change.

Crypto & Roth IRA

Bitcoin IRA’s are retirement accounts designed to let you invest in cryptocurrencies. It’s important to be aware of the risk you are taking if you’re considering investing in crypto. Because crypto is so volatile, it would be considered unsuitable for somebody approaching retirement who cannot afford to ride out a downturn.

In 2014, the IRS considered Bitcoin and other cryptocurrencies in retirement accounts as property, so that coins are taxed in the same fashion as stocks and bonds. Thus, cryptocurrency held in a Roth IRA has an income tax basis for purposes of measuring gain or loss upon occurrence of a taxable sale or exchange.

Even though you can’t add cryptocurrency directly to your Roth IRA because of Section 408(a)(1). This section requires that contributions to IRAs need to be made in cash. You can however, add cryptocurrency to a Roth IRA by purchase, because cryptocurrency is considered a property.

Bitcoin IRAs

For those who are committed to include Bitcoin in their IRAs, self-directed IRAs (SDIRAs) allow for an alternative asset like cryptocurrencies. Recently, there have been companies designed to help investors include Bitcoin in their IRAs. Some of these companies include BitIRA, Equity Trust, and Bitcoin IRA.

One of the positives of adding crypto to your portfolio is that it can add further diversification to Roth IRAs, and others that cryptocurrencies which will continue to increase in popularity and price into the long-term future. However, one of the negatives is that crypto is characterized by being volatile, and this represents a huge risk for those investors approaching retirement who cannot wait out a downturn.

You should also be aware that fees for crypto IRAs are typically much higher than for “traditional” IRAs. There are also recurring custody and maintenance fees charged by providers of such services, and fees associated with individual cryptocurrency trades. A typical provider may charge 3.5% per transaction for each purchase and 1% or a flat fee for each sale. Cumulatively, those fees could negate the tax advantages offered by IRA accounts

Crypto & Charitable Donations

For charitably minded individuals, cryptocurrency investments held for more than a year could provide a unique opportunity to leverage highly appreciated assets to achieve maximum impact with charitable giving. Bitcoin and other cryptocurrencies can be donated to charity, just like stocks and other property. Donating cryptocurrency can, however, be a little more complicated.

Some benefits of using Crypto for charitable donations include avoiding Capital Gains taxes. Taxpayers can avoid having to pay capital gains taxes yet still claim the full donation as a charitable deduction if they donate the Bitcoin directly to the charity. If a taxpayer sells Bitcoin and donates the after-tax cash to a charity, the capital gains will be subject to short-term or long-term capital gains taxes, depending on how long they held the Bitcoin before selling it.

What’s more, if you itemize deductions on your tax return instead of taking the standard deduction, you may claim a fair market value charitable deduction for the tax year in which the gift is made and may choose to pass on that savings in the form of more giving. Donor-advised funds, which are 501(c)(3) public charities, can be a tax-efficient solution for accepting contributions of cryptocurrency, as the funds typically have the resources and expertise for evaluating, receiving, processing, and liquidating non-cash assets.

To substantiate your charitable income tax deduction, you are required to complete Form 8283 and obtain a qualified appraisal from a qualified appraiser for contributions of cryptocurrency valued at more than $5,000.

Final Thoughts

Investing in crypto is a tricky topic to say the least. Since there’s no one size fits all plan for everyone, it’s important to look at the risk and see if it’s something you believe you can take on. While holding crypto in your IRA can increase diversification, the extreme volatility of crypto makes it a poor choice for a retirement investment.

The good thing is that there are alternatives: crypto IRAs, which allow you to invest in crypto for your retirement accounts. Whatever your retirement strategy, there are risks to identify and manage as you navigate retired life. But one key factor remains the same: the more you prepare, the less nasty surprises you’ll face along the way. Plus using crypto for charitable donations could save you on Capital Gainss taxes and also may increase the amount available for charity by up to 20%.

At Agemy Financial Strategies, our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and provide you with the highest level of service.

Click here to instantly book the day and time you’d like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guildford, CT and Denver, CO are looking forward to speaking with you.

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What does Socially Responsible Investing (SRI) Mean?

Agemy Financial Strategies

March 16, 2022

The last few years have been ones of stress and uncertainty – but it’s also been a time that’s brought to light issues of social justice, climate change and social responsibility. Here, we look into how more and more investors are opting to align their portfolio with their greater social beliefs and ideals. 

Socially responsible investing (SRI), is an investment that is considered socially responsible due to the business company conduct code. Socially responsible investments can be made into individual companies with good social value, or through a socially conscious mutual fund or exchange-traded fund (ETF). And it’s not going away anytime soon. In fact, between 2016 and 2018 alone, assets being placed in socially responsible investments rose 38 percent. Of the $46.6 trillion of assets under management, one in four dollars was in SRI assets.

Becoming a socially responsible investor isn’t difficult — and can be even more lucrative than traditional investing. Here’s a look at SRI and what you should know.

Examples of Socially Responsible Investing

The abbreviation “SRI” has also come to stand for sustainable, responsible and impact investing. Some SRI practices use a framework of environmental, social and governance factors to guide their investing.

There are two inherent goals of socially responsible investing: social impact and financial gain. The two do not necessarily have to go hand in hand. When an investment is risking gambling itself as being socially responsible, it doesn’t mean that it will provide investors with a good return. An investor must still assess the financial outlook of the investment while trying to gauge its social value.

One example of socially responsible investing is community investing. Community investing goes directly toward organizations that have a track record of social responsibility through helping the community, as well as being unable to garner funds from banks and financial institutions.

The funds allow these organizations to provide services to their communities, such as affordable housing and loans. The end goal is to improve the quality of the community by reducing its dependency on government assistance such as welfare, which in turn has a positive impact on the community’s economy.

Understanding Socially Responsible Investing

Investors interested in SRI don’t select investments by the typical performance metrics or expenses, they make investments on whether a company’s revenue sources and business practices align with their values. Everyone has different values, how investors define SRI will vary from person to person. There’s no one size fits all in this scenario.

If you’re passionate about the environment, your portfolio will likely have investments in green energy sources such as wind and solar companies. If you care about supporting women, people of color and other marginalized groups, you may have some mutual funds that invest in women-run companies or hold stock in Black-owned businesses. Socially responsible investing is as much about the investments you don’t choose as the ones you do.

SRI vs ESG vs Impact Investments

In the realm of SRI, you’ve likely heard other terms like ESG and impact investments. So, what’s the difference? Here’s a quick breakdown:

  • Socially responsible investing (SRI) entails screening investments to exclude businesses that conflict with the investor’s values. SRI excludes companies from an investment that are involved in certain businesses, e.g. gambling, alcohol, or fossil fuel. It’s useful for single-issue investors.
  • Environmental, social and corporate governance (ESG) investing focuses on companies making an active effort to either limit their negative societal impact or deliver benefits to society (or both). ESG rates companies on environmental, social and governance criteria to find the “good” ones. There are, however, no standardized criteria, so it depends a lot on who’s deciding what counts as “good”.
  • Impact investing is characterized by a direct connection between values-based priorities and the use of investors’ capital. Impact investing looks at the specific measurable impact of a company on a particular issue, e.g. climate change, gender lens investing, etc. Investors can see the measurable impact of their money alongside the financial returns.

How to Build a Socially Responsible Investment Portfolio

Creating an ethical portfolio doesn’t have to be difficult or intimidating. As long as you know the values that are important to you, you can start using your investment dollars for good. Here’s a couple tips on how to build an SRI portfolio:

Outline What’s Important to You

It may be helpful to specifically write down what you’re looking for in an SRI or ESG investment. Would you be comfortable owning stock in a company that scores lower in the environmental category if it had a majority-female board of directors? Knowing what industries you are and aren’t OK with supporting will make it easier to include or exclude certain investments.

How Much Help Do You Want?

There are a couple of avenues you can choose when it comes to creating an ethical portfolio. You can build it yourself, picking and choosing specific investments and monitoring them over time, or you can get some help. If you want maximum assurance that the companies you’re investing in support your personal definition of SRI, you may want to create your own SRI portfolio.

A majority of people prefer to make socially responsible investments when possible — but it takes some work to figure out how committed a company really is to ethical practices. This is where robo-advisors come in. Robo-advisors use algorithms to build and maintain an investment portfolio based on your risk tolerance and goals.

The upside of robo-advisors is they’re inexpensive, and several offer SRI portfolios that will do all the work of finding ethical investments for you. The downside is that they don’t let you add in specific investments you’re interested in.

Research with Care

An easy way to judge how socially responsible a company is is to review ratings from independent research firms. Two types of investments you may consider for a sustainable portfolio are stocks and funds.

  • Individual stocks generally shouldn’t encompass more than 5% to 10% of your portfolio, but if there is a company you expect will show strong growth, you may want to include it.
  • Mutual funds are an easy way to instantly diversify your portfolio, and there are more sustainable funds to choose from than ever before. Mutual funds include selected assets that adhere to criteria laid out by the fund manager. If your broker has a screening tool, it can likely help you sift through different fund options to find the right ones for you.

Final Thoughts

For many investors, socially responsible investing is a powerful way to align their investment portfolios with their personal philosophies.

When you’re getting started with investing, it’s important to research the options available to you. Now you know that Socially Responsible Investing (SRI) involves investing in companies that promote ethical and socially conscious themes including environmental sustainability, social justice, and corporate ethics, and fight against gender and sexual discrimination – how will you use this information?

If you’re interested in getting involved with SRI and looking to add it to your portfolio, Agemy Financial Strategies can be of assistance to you.

Our team of Fiduciary financial advisors only have your best interests at heart and are here to help you understand the ins and outs of investing for retirement income.

For more information on our financial advisory services, contact us here today.

 

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Financial Advice During a Crisis

Agemy Financial Strategies

March 02, 2022

Covid-19 has highlighted the importance of developing long-term business, financial and legal strategies that can provide a plan of action for even the most unprecedented times. What’s more, the Russia-Ukraine conflict has only escalated the effects on stocks in the U.S and throughout the world. Here’s how to best navigate and safeguard your money and retirement outlook amid a financial crisis. 

As we enter month three of 2022, many of us are still adapting to the constant COVID-19 changes. The recent Omicron Variant sent stocks plunging to their worst Black Friday since 1931. With all of these changes constantly happening, how can we covid proof our financial security?

Here’s a look at some financial advice to follow during a health crisis like COVID-19.

Covid Effects on The Economy

Thanks to the effects that COVID-19 is having on the U.S. economy, there’s an incentive to move money into a lower tax environment. Before the pandemic, there was already great concern about the federal debt, which was $22.8 trillion at the end of 2019. With the help of coronavirus relief spending and stimulus programs, the national debt now tops $26.5 trillion and is expected to grow.

The U.S. federal government was already facing the need to deal with the increase in budget deficits and the national debt that occurred as a result of the battle against COVID-19.

COVID-19 has added more of an incentive to contributing to retirement IRAs such as a Roth IRA. Consider the stimulus spending that happened last year, tax rates were low and were not likely to last. If you want to be in charge of how much money you’ll have in retirement, a good move is to get as much money as possible into tax-free accounts now.

The Russia-Ukraine War

As we all know COVID is no longer the main threat to the financial market with the war with Russia and Ukraine. The current, limited conflict has already increased turmoil in world financial markets and given support to agents and advisors who have encouraged clients to use non-variable annuities, universal life insurance, direct investments in bonds and other products designed to buffer the holder against volatility. In the medium term, the conflict could lead to enormous retirement planning complications for Russian citizen clients who live in the United States, U.S. citizen clients who live in Russia, Ukraine or other affected jurisdictions, and any U.S. citizen clients, anywhere in the world, who are married to spouses from Russia or other affected jurisdictions who are not U.S. citizens.

Sanctions imposed on Russian banks mean that clients may have trouble with everything from paying routine bills to getting the information needed to file tax returns. Americans who had planned to rely mainly on accounts in Russia to pay to retire there may suddenly have to look at what resources might be available to help them for retirement elsewhere.

Fresh Volatility to the Stock Market

The overall market has recently been reactive to inflation at a 40-year high, rising interest rates, the ongoing pandemic, and now, the devastating situation in Ukraine. This has only highlighted the fact that investors shouldn’t panic sell amid a crisis. If you did sell your investments off last week for instance, you would have lost to the market today.

We can’t predict if the market is going to crash because it’s already based on all publicly available knowledge. So while it’s human nature to act on emotion and the news we watch on TV, remember, the markets have more than doubled since the beginning of the COVID-19 pandemic when we saw the market drop over 30% in March 2020.

Generally speaking, stay the course, stick to your plan, continue to buy and always speak with your Fiduciary Financial Advisor before making such decisions.

Future-Proof Your Retirement

Don’t let the volatile stock market from COVID and war rattle your retirement savings plan.

Volatility is uncomfortable, especially as a retiree. For small investors, whose biggest exposure to the stock market is usually their retirement account holdings — 401(k), 403(b), 457 plans, the federal government’s Thrift Savings Plan, and Individual Retirement Accounts (IRAs). No one wants to go through watching their account balances fluctuate. However, it is part of the saving and investing process. Think of your assets separately. Money for now, money for a specific future need, and money for later, ten years or more.

 

Secondly, adjusting your current plan and asset allocation is a great duscussion to have with your Fiduciary advisor. By looking at how your overall retirement funds are invested, we can make necessary changes to keep your plan on track. Keeping a specific amount in cash to help ride out market fluctuations is extremely important, so always make sure your emergency fund is topped up.

It’s important to understand that some strategies can be more complicated than others. Sometimes certain strategies are better suited to certain individuals or families, so it pays to think this through. Remember, that with all strategies there is no one size fits all. Regardless of the direction you’d like to consider, it’s a good idea to talk with your trusted financial advisor who can analyze the pros and cons of all the options with you.

See How We Can Help

With the Russia-Ukraine conflict and the seemingly never-ending pandemic, investors are understandably nervous, and stocks are volatile. If you’re feeling stressed during these challenging times, and you’re looking for something you can control, this is it. At Agemy Financial Strategies, our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and provide you with the highest level of service.

Working with the advisors at Agemy Financial Strategies can help you get ready for sinking markets—and stay grounded when they show up. We can explain ways to rebalance and help protect your accounts moving forward and even suggest a few investments we might consider making while the markets ware down. Creating a retirement checklist with us is a great way to pinpoint your main goals, compare them to retirement realities and make a plan of how to connect the two.

Click here to instantly book the day and time you’d like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guildford, CT and Denver, CO are looking forward to speaking with you.

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3-retirement-realities-you-need-to-know

Agemy Financial Strategies

February 23, 2022

Many Americans have misconceptions about retirement planning. Unfortunately, these misunderstandings can lead to the difference between a retirement you want and a retirement you have simply come to expect. 

What works in theory doesn’t always work in reality. And that is certainly the case when it comes to retirement. Predicting exactly what your retirement will be like isn’t realistic, but, understanding some of the more common assumptions about retirement may help you get closer to your goal than most.

With that in mind, here’s the three most common misconceptions the Fiduciaries at Agemy Financial Strategies often hear from clients, and how to plan for the unexpected before stepping your foot over the golden bridge to retirement.

Reality #1: Replacement Rates Aren’t a One-Size-Fits-All

A simple online search will show you a common theme: You need to replace 70-80% of your final earnings in retirement from various sources such as Social Security, personal assets, and, for some, earned income. But those numbers are simply an average.

In early retirement you can expect your spending to go down. Then raise as retirement goes on. According to EBRI, average household expenditures totaled $55,000 for people 50-64 in 2017 versus $50,000 for those 65-74, and $39,000 for those 75 and older. What does this mean for your retirement plan? You might save more than you need if you base your retirement savings plan on the rule of thumb that would have you replace 70% to 80% of your pre-retirement income every year throughout retirement. Or on the other end of the spectrum, you have a false sense of hope you have enough retirement savings, but later find yourself cut short. This spells out exactly why a personalized retirement-income plan is your best option.

Realty #2: Healthcare Costs are Rising

Sure you have planned for healthcare in retirement. But have you budgeted enough? Health insurance, drugs, medical supplies, health services and out-of-pocket expenses quickly add up. According to a report by HealthView Services Financial, a healthy 65-year-old couple retiring in 2019 can expect to spend more than $387,000 for retirement health care costs, not including long-term care. This projection is based on the current value of the U.S. dollar and includes Medicare premiums, the costs of supplemental insurance and other out-of-pocket expenses for a man whose life expectancy is 87 and a woman whose life expectancy is 89.

Think you’re in good health so no need to worry? Another surprising fact from the HealthView report is that healthy retirees have higher total health care expenses than unhealthy retirees. That’s because healthy people tend to live longer. So even though short-term expenses for sick people are higher, longer life spans mean that total medical costs for healthy people exceed those for their less healthy counterparts. As daunting as these expenses seem, there are some things you can do to mitigate their effect and lessen the risk that they will derail your retirement. From HSAs to Medicaid and the Affordable Care Act, discuss your best options with your full-service financial advisors.

Reality #3: Taxes Could Get You

You’re still going to be paying income taxes. Your Social Security benefits might even be taxed. So where do you even begin?

Taxes are calculated on your income each year as you receive it, much like how it works before you retire. Different tax rules can apply to each type of income you receive. You should know how each income source shows up on your tax return so you can estimate and minimize your taxes in retirement.

The six most common types of retirement income are taxed according to varying rules:

  • Social Security Income:  A formula determines the amount of your Social Security that’s taxable. You might have to include up to 85% of your benefits as taxable income on your return.

  • IRA and 401(k) Withdrawals: IRA withdrawals, as well as withdrawals from 401(k) plans, 403(b) plans, and 457 plans, are reported on your tax return as ordinary income.

  • Pension Income: Most pension income is taxable. It will be taxed if you withdraw pre-tax money you contributed to the plan.

  • Annuity Distributions: Tax rules apply to any withdrawals or annuity payments you receive from an annuity that’s owned within an IRA or another retirement account. The exact requirements that will apply depend on whether your annuity was purchased with after-tax dollars.

  • Investment Income: You’ll pay taxes on dividends, interest income, or capital gains, just as you did before you retired.

  • Gains Upon the Sale of Your Home: You most likely won’t pay taxes on gains from the sale of your home if you’ve lived there for at least two years, unless you have gains in excess of $250,000 if you’re single, or $500,000 if you’re married.

For a headstart to get a complete overview of your retirement taxes, read our dedicated blog here. And don’t forget to further utlize our tax resources here. 

Other Considerations

Of course there are multiple other realities in retirement to be aware of; including remianing flexible in your retirement date, and even consider including a phased-retirement. Why? Because clocking in at a reduced work schedule allows freedom to focus on the other parts of life, such as family, travel and volunteering, while still earning a paycheck and employer benefits to keep your financial safety net in place.

Whatever your retirement strategy, there are risks to identify and manage as you navigate retired life. But one key factor remians the same: the more you prepare, the less nasty surprises you’ll face along the way.

When thinking about how to plan retirement, have you thought about creating a retirement planning checklist? At Agemy Financial Strategies, our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and provide you with the highest level of service. Creating a retirement cheklist with us is a great way to pinpoint your main goals, compare them to retirement realities and make a plan of how to connect the two.

Click here to instantly book the day and time you’d like to connect with us for your complimentary 30 minute consultation. Our financial advisors in Guilford, CT and Denver, CO are looking forward to speaking with you.

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3 Signs of Financial Anxiety

Agemy Financial Strategies

February 16, 2022

Financial anxiety is a feeling of worry, fear, or unease about your finances. Learn to read your body’s responses to conversations about money, and set regular money check-ins to keep financial anxiety under control.

Are you experiencing too much strain when it comes to your finances? The Covid-19 pandemic has made it hard for people to seek answers about their financial futures, and many financial planners are underestimating the financial anxiety that is causing.

Financial anxiety happens when you have money, a job and all the hallmarks of financial security, but still worry that something bad is going to happen. For many people, the constant weight of that anxiety could be worse than a negative event that could be happening. Here are three signs of Financial Anxiety and how Agemy Financial Strategies can help you get back on track to finding answers to your financial futures.

1. You’re Just Scraping By

The Covid-19 Pandemic left more people living paycheck to paycheck.  It’s understandable to be anxious if you’re not sure whether you’ll be able to pay your bills. Or, maybe you’re not even sure if you’ll be able to buy groceries for the week. If you’re in a financial state that requires you to depend on every penny from every paycheck, you’re bound to experience anxiety.

The biggest problem with this type of anxiety is that it might continue to grow as you near the end of your budget every pay period. That keeps you in a constant cycle of anxiety, which can wreak havoc on your system. The best thing you can do to combat financial stress is to get your finances in order. You could see a financial planner, set a budget, or work out a savings plan with your bank.

Financial planners can help ease their clients’ financial anxieties by including a questionnaire on the topic in their client intake process and by undergoing training to help them better identify and manage these situations as they come up. At the end of the day Financial planners are there to help you get back on track and by answering the questionnaires truthfully they’ll be able to get a better understanding of your financial situation.

2. You Overspend

It might seem counterintuitive, but a lot of people actually spend more money when they’re under heavy financial stress. It can help to ease their worries for a while. When you buy something new that you enjoy, you can temporarily push aside feelings of anxiety. As you might expect, though, those “good” feelings don’t last long. The more you spend, the more your financial woes will grow. And those fears will continue to grow along with them.

Keeping your spending habits in check is one of the best things you can do to combat the anxiety caused by financial stress. To get started, look at your bank statement for the last month. Note down all of your income streams and group them together. Then, split your expenses into two categories: fixed and variable costs. Fixed costs include expenditures that are difficult to change such as your rent, utility bills, and any debt repayments. Your variable costs include your payments that are easier to adapt such as money spent on groceries, subscriptions services, and clothing. From here you’ll be able to see:

  • If you have more money going out of your account than coming in every month
  • Any areas where you’re overspending

3. You Have Strained Relationships

We hear it all the time…one of the main causes of divorce is money. It’s not necessarily the money itself that causes it but the behaviors around money that create tension in relationships. This tension can cause too much strain over time and result in divorce. Therefore, it’s best to be able to recognize signs ahead of time that you or your spouse may be under financial stress.

No matter how close the couple is or how long the relationship has spanned, no couple see EXACT eye to eye when it comes to finances. For example, one spouse could have had a childhood of watching their parents overspend or worrying about bills, or having to shut down a family business. Whereas the other spouse could have had a much more stable and privileged upbringing – alas causing them to see money management differently. The answer? Communication. Creating a household money “practice,” or getting into the habit of regularly checking in with your finances as a couple, is the simplest way to shape a relationship with your money, and your partner.

Here are some further recommendations on how to help ease the anxiety.

Identify Areas Where You Can Save

If your outgoing expenses exceed your income, don’t worry. You can either decrease your spending in certain areas or, if possible, focus on bringing in some extra income each month. You can even decide to do both, but it’s important not to overwhelm yourself when creating better financial habits—especially at the beginning.

Once you’ve identified areas where you’re overspending, you’ll have a clear indicator of where you should start cutting back. Beyond that, the easiest place to begin reducing your expenditures is your variable costs. However, if you want to make some more drastic savings, you can consider targeting your fixed costs. This means, for example, finding ways to save on rent or utility bills.

Create A Budget

Next, it’s time to decide how much money you want to save each month and to create a budget to support that goal. As you begin to make changes that free up some extra money, you’ll get an idea of how much you can start to put towards a savings fund.

Adopting a savings mentality can take a little while to get used to, but it’s all about taking small, consistent steps towards your goal. One of the best tools against financial anxiety is having a solid budget helps you navigate your finances and keeps your financial health in check. From here, you can start making some smarter, forward-thinking financial decisions.

This could include saving for an emergency fund or contributing towards your pension. By creating a buffer between you and life’s surprises, you prevent your future self from spiraling into financial stress—you’ll certainly thank yourself for it later!

Explore Your Mental Health

Think: What is my anxiety trying to tell me?

A body check-in teaches people how to step to the side and be able to observe and witness more of what’s going on so we’re not so consumed with it. Start paying attention to your emotions and how your body reacts when you discuss money or make financial decisions. How do you feel when you check account balances online? What about when you share information about your latest investments with a loved one? Identifying financial anxiety triggers will help you consider what is in the conversation that is triggering these feelings. Is it how you communicate with your partner? Are you feeling guilty or ashamed?

Take a step back and work on observing emotions rather than working off of them.

Schedule Regular Money Check-ins with Agemy Financial Strategies

One of the keys to a sound financial strategy is spending less than you take in, and then finding a way to put your excess to work. A money management approach involves creating budgets to understand and make decisions about where your money is going. It also involves knowing where you may be able to put your excess cash to work.

A Fiduciary is a person or organization that acts on behalf of a person or persons and is legally bound to act solely in their best interests. As Fiduciaries, the advisors at Agemy Financial Strategies only have your best intentions at heart.

Scheduling time with us (or your chosen advisor) to address finances and help you focus on immediate actions to see where you are overspending – or where to invest your money. Start by sharing money stories with us, how you’re feeling and then move on to discussing values and how they show up in the way you save, spend or invest. The goal of these conversations is to help you understand your feelings about money — an important step toward getting on the same page and easing financial anxiety for yourself, and for your family.

Final Thoughts

Money Management and Financial Anxiety go hand in hand when managing different aspects of your personal finances. At Agemy Financial Strategies, our job is to help ease those feelings of financial anxiety and help you improve your money management skills by regularly evaluating your current money management plan and making necessary changes that make sense for you.

When you create a roadmap of where you want to go, there will be changes along the way. At Agemy Financial Strategies, our team of financial advisors are here to help you through those changes and to help you understand the ins and outs of money management.

For more information on our financial advisory services, contact us here today.

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Bringing Meaning to Money Management

Agemy Financial Strategies

February 08, 2022

Generally speaking, money management refers to the processes of budgeting, saving, investing, spending, or otherwise overseeing the capital usage of an individual or group. But we’re all wired differently, and therefore mastering your finances looks different for everyone. Here’s how to create a money management plan that has structure and meaning to your unique needs and goals. 

Money management covers a broad domain of knowledge including everything relating to handling money wisely. Whether it’s budgeting, saving or investing in your personal assets. To embrace money management means to learn financial practices that help you accumulate wealth and security, while understanding the key to preserving that wealth.

Implementing the management of your money takes your unique needs, goals, and risks into consideration while focusing on your financial decision making and your previous habits that could stand in the way of your success. Here’s a look at the basics of money management and why it’s important to start implementing these practices into your financial strategy.

The Basics of Money Management

Not understanding the foundation of money can create some issues for you down the road. Without a firm, educated grasp of financial matters, you’ll likely end up like the majority of Americans; locked into years of debt, paying high fees, and unsure where all of your money is going.

Money management can help people accumulate wealth instead of potentially spending all of their money. When you accumulate wealth, you will be able to increase your capital, create security for your family, make positive investments, better your standard of living, and develop a cushion in the form of assets and savings. Overall, money management increases your lifestyle, providing security and greater opportunity for you and your family. Take a look at a couple steps below to see how you can begin to implement money management into your life.

  • Create Goals to Manage Your Money

The bottom line in money management is that you need to know where you’re headed. Without a clear destination, you’re more than likely going to keep going around in circles. That’s exactly what it’s like to be dealing with money without goals. However, if you establish your financial goals, you have a roadmap of where you’re at and where you want to end up financially. You’ll be prepared to intentionally use or save every dollar that comes your way.

By setting your goals, you’ll also be able to set some smaller goals that act as steps along the way. These small goals are basically milestones that help you to progress further down the path to your financial destination. Your goals will give you clarity and vision, helping you make the best decisions for reaching them.

  • Develop an Investment Strategy

Having a long-term investment strategy is often the key to strong and effective money management and wealth accumulation. When you create a long-term strategy, you’re more likely to keep your eyes on the prize and not be swayed by the many things that come your way.

An investment strategy helps people stay focused, moving towards their small milestones instead of veering off in every which way. They are better able to ignore the stepping stones that others are putting in their path in order to keep on heading in the right direction towards their own goals.

  • Money Management & Tax Efficiency

Understanding your taxes is a big part of money management. While everyone knows that they pay taxes, they’re not really aware of how much they pay. They certainly don’t know about unnecessary taxes and how they can actually hinder the accumulation of wealth. When you are managing your money, you aren’t thinking of your income as everything you make. Instead, you know that your income is really whatever you make after taxes, enabling you to better allocate your finances.

In regards to investments, you will want to consider your account location, essentially allocating your money based on their tax status. You will then do the same for your various investments, allocating them in the same manner. This will give you a better understanding of your overall wealth, your options for wealth distribution, and will help you accumulate wealth faster.

  • Portfolio Risk Management

In the financial world, risk management is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions. Poor management of risk is one of the main causes of investment underperformance. You need to be proactive when it comes to risk management, understanding the risk-return relationship and acting on it.

How much volatility an investor should accept depends entirely on the individual investor’s tolerance for risk, or in the case of an investment professional, how much tolerance their investment objectives allow.

When you have a seamless money management plan, you will understand the market risks and the likelihood of negative returns. You will be cognizant of the fact that holding your portfolio longer means more negative returns, yet also means a greater probability of a positive annual return.

Final Thoughts

From managing different aspects of your personal finances, to developing a coherent plan that maximizes financial growth while minimizing risk, money management is not to be taken lightly.

You can improve your money management skills by regularly evaluating your current money management plan and making necessary changes that make sense for you. When you create a roadmap of where you want to go, there will be changes along the way. At Agemy Financial Strategies, our team of financial advisors are here to help you through those changes and to help you understand the ins and outs of money management.

For more information on our financial advisory services, contact us here today.

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Retirement Planning for Couples this Valentine’s Day

Agemy Financial Strategies

February 02, 2022

With Valentine’s Day around the corner, what better time to sit down with your sweetheart to discuss all of your aspirations and goals for when you reach retirement? To help protect your lifestyle in retirement — and protect against the risk of outliving your savings — you and your partner can develop a holistic financial plan for every stage of your financial life. 

While it might not seem the most romantic of ways to spend the day, this Valentine’s Day is the perfect opportunity to evaluate your retirement plans to help you reach the dreams of a lifetime together. Here are some tips on how to discuss retirement planning for young couples, middle-aged couples and couples nearing retirement.

Young Couples: It’s Never Too Early To Start Planning

If you and your partner are at the start of your careers and life together, your financial concerns might focus on balancing immediate matters, such as buying your first home and starting your family, and paying down debt from student loans. Most Millennials are concerned with keeping up with the cost of living as well as the cost of meeting their children’s financial needs. Student loans, credit card debt and mortgage debt round out the top five.

Saving for the future should not take a back seat to your current expenses. Time is on your side if you use the power of tax-deferred compounding. Make an effort to start early and maximize your contributions on your 401(k)s and traditional IRAs. If both of you are working, be sure that you work together to save for retirement.

Compare the funds in your employers’ qualified plans and work as a team to select the best investments for your shared goals, instead of making these choices on your own. If one partner is not working outside the home, a spousal IRA may allow you to make contributions on their behalf. If one or both of you qualify for a Health Savings Account (HSA), this can be a way to save for future medical expenses while reducing your current taxable income.

Middle-Aged Couples: Protect Assets to Protect Against Outliving Savings

By now, you have had several years of planning and setting money aside for retirement. Both of your careers are on track, you’re earning more, you’ve built equity in your home, you’re saving to send your kids to college.

To continue on the right path, have you considered using dollar-cost averaging to build wealth over time? Dollar-cost averaging requires the investor to invest the same amount of money in the same stock on a regular basis over time, regardless of the share price. The number of shares purchased each month will vary depending on the share price of the investment at the time of the purchase. The idea being when the share value rises, your money will buy fewer shares per dollar invested. When the share price is down, your money will get you more shares. Over time, the average cost per share you spend should compare quite favorably with the price you would have paid if you had tried to time it.

As you both progress towards your retirement years, concerns about protecting your assets may rise. Especially as volatility starts to feel like the new norm. Roughly two-thirds of pre-retirees expect volatility to increase in the next 12 months!

It’s always important to meet with your Fiduciary financial advisor to work on a strategy that’s built for you and your unique needs and goals as a couple. As your portfolio becomes more conservative, including more fixed income, you might consider asset location as a strategy to enhance your returns.

Couples Nearing Retirement: Income Now and for Life

At this point, you and your partner should already have a strategy to maximize your qualified accounts such as Social Security. It helps you maximize benefits as a couple if the higher-earning spouse waits until full retirement age, or later, to begin collecting.

In many cases, this means the lower-earning spouse can start collecting benefits as early as age 62, then apply for spousal benefits later when the higher-earning spouse begins collecting. With smart planning, a couple can secure higher benefits the longer the high earner waits — and this could also mean higher survivor’s benefits for the spouse who lives longest.

To complement Social Security, you could convert a portion of your portfolio into a guaranteed income stream by investing in a single premium immediate annuity (SPIA). This is also the time to consider “turning on” the income stream from any annuity you have available to you.

Another vital aspect for when you’re nearing retirement is factoring in healthcare. If you retire before age 65, you have several options for health insurance until you reach eligibility for Medicare. Which options you are eligible for and are best for you depend on your individual circumstances. You may enroll in the state health insurance marketplace, continue your employment-related benefits through COBRA or state continuation, enroll in your spouse’s health plan, or apply for Medicaid. The Affordable Care Act (ACA) has made health insurance coverage when retiring before age 65 a much less challenging situation. This is especially true for people with medical conditions or limited finances—both of which could be obstacles for early retirees seeking coverage in the pre-ACA era.

If you’re unsure where to begin, it’s always best to consult with a trusted financial advisor.

For ALL Ages: Communication is Key

The first step in creating a retirement plan is communication.

Couples who work through later-in-life decisions with respect and care for each other have a solid retirement communication plan. They will find that their golden years can often be happier because they know themselves better and can find peace together. With the increased likelihood that couples will reach and surpass their 50th wedding anniversary, keeping marriage harmonious by resolving conflict with a team approach will yield great contentment and increased satisfaction in companionship.

Undoubtedly, there will be difficult conversations and compromises that need to be made on your journey. Couples planning for retirement may experience many challenges as listed above. Open honest communication can transform your relationship as you enter the next phase of your lives. Each of you should discuss your expectations as a married couple for retirement to ensure that both of you are on on the same page.  Once you have both communicated about your retirement expectations, it’s time to move onto the financial aspects of retirement with your Fiduciary.

Final Thoughts

Retirement planning for couples involves navigating the waters together and it could, possibly, be the most challenging period of your relationship.  This Valentine’s Day, don’t just dream about a lifetime with the one you love. Make the initiative to be proactive and work together as a team with your partner and your advisor to ensure that you are financially prepared for the future.

At Agemy Financial Strategies, finding the right financial advisor that fits your goals and lifestyle doesn’t have to be hard. The trusted team at Agemy is here for you every step of the way to make some real progress on your journey to retirement.

Contact us here today to get started on a retirement plan as a couple. 

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Taking Groundhog Day Out of Retirement Planning

Agemy Financial Strategies

January 26, 2022

Is your retirement plan stuck in a time-loop? The better you plan for retirement, the more likely you’ll be to enjoy your senior years to the fullest. That’s why it’s imperative that you don’t repeat any of these glaring mistakes when it comes to your retirement outlook. 

If you wake up every morning thinking that you need to get your retirement plan updated, or worse, started, you might feel like Bill Murray in the classic movie “Groundhog Day.” Truth be told, a lot of days in 2021 felt like Groundhog Day: a never-ending time loop of new variants, working from home, eating at home, exercising at home, visiting with friends and family in small groups, etc. But did you know there’s a way to get out of an retirement plan time loop, and it won’t require you to go through endless mornings with a clock radio playing The Beatles’ “Tax Man” song?

A common mistake that people make when planning for retirement is that they focus on their present financial situation or the few years that lie ahead. They don’t look beyond the horizon of retirement. By making these mistakes they fall into the mindset of “I’ll get to it later” or creating a highly flawed plan.

Money is important, but time is of the essence. A lot of time has been lost due to the pandemic, and the need for getting back on track must be acknowledged. The sooner you can start your quest for retiring at your preferred age, the better. Here’s a couple tips on how to not fall victim to this mindset and how to constantly evaluate and update your retirement plan for years to come.

Having No Plan in Place

Too often there are retirees who don’t have their goals and needs laid out. The importance of having these goals and needs in place for when retirement approaches is crucial. Many people forget to update those goals and needs as they change. It’s the people who establish a good plan early on who have the most success.

You shouldn’t wait until your next life stage begins because there is always another life stage inviting you to postpone taking action until tomorrow (more on this below). If people wait to postpone saving and investing until their forties, they may have to save at double the annual rate of people who start investing in their twenties.

As a general rule of thumb, if you save 10–12% of your salary between the ages of 22 and 65, you will have roughly the same ability to cover retirement expenses as an individual who saves 25 percent between 40 and 65. Establishing good habits early pays off. Make a plan and stick to it.

The Imperfect Plan

The second kind of mistake happens when people have a plan but it’s flawed. You think you’re looking ahead but you’re not looking clearly or far enough. Here are the most common investment mistakes we see and the most important ones you should avoid:

  • Not investing properly: This can mean choosing the wrong asset allocation, keeping too much in cash, taking an improper amount of risk, or using expensive investment products.
  • Not planning for your own personal situation: Generally speaking, retired people spend about 20% less than when they were working. Since they no longer commute or entertain business colleagues. However, this can work the other way. Many retirees spend more in retirement than when they were working. They travel more, perhaps eat out more often, attend more cultural events, and take up new hobbies. Your plan should be customized to a realistic appraisal of your own lifestyle and likely future preferences.
  • Not having an estate plan: Putting an estate plan in place is essential and should happen long before retirement. Effective estate management enables you to manage your affairs during your lifetime and control the distribution of your wealth after death. An effective estate strategy ultimately will spell out your wishes and ensure that they’re carried out – even if you are unable to communicate.

To combat these imperfections in your plan, try the following:

  1. Know where you stand. Know your net worth, current income, expenses and savings patterns.
  2. Set concrete, time-bound goals. Periodically check in to make sure that you hit your goals. Some people do a monthly money date to review monthly spending and saving patterns.
  3. Use a retirement calculator to determine how much you need to save each year to reach your goal. Then, you should adjust your spending to make that happen. It may mean something small, like limiting meals out, or something big, like downsizing your home or relocating to a less expensive city.
  4. Put together a disciplined, low-cost investment strategy. If you don’t have the time or expertise to do this, you can always contact the financial advisors at agemy financial for help.
  5. Rebalance your investment portfolio at least annually. Our Investment Section of our website has some great tools that makes this step incredibly easy to evaluate where you stand relative to your goal.

Revsiting Your Retirement Plan with Agemy Financial Strategies 

There’s a tendency to see your retirement plan as a static document — a map that you follow throughout your working life leading you toward the finish line. Even if you presume your retirement plan is up to date, do you really know if that plan still works for you? Will it truly create a lifestyle that will stir your soul in the next chapter? You have to update it periodically to ensure that it’s still in alignment with your shifting goals, savings, and priorities. Here are six times you should review it and consider updates with your trusted Fiduciary at Agemy:

  • Annually: Ideally, you should look over your retirement plan at least once a year. You may not have to make any changes, but if you do, it’s easier to make these small adjustments once a year than it is to make larger adjustments as you near retirement and realize you don’t have enough savings.
  • After a major life event: Adding or losing a member of your family, experiencing a major health crisis, or buying a new home can affect how much you need to or are able to save. You might have to divert some of those funds toward new living expenses, requiring a whole new retirement plan.
  • If you’re about to retire: Before you exit the workforce for good, look over your plan again to make sure you’ve met your savings goals and that you’re comfortable with your withdrawal strategy.
  • If you’re turning fifty: Adults 50 and older are allowed to make catch-up contributions to their retirement accounts. These can be up to $25,000 to a 401(k) in 2019 and $7,000 to an IRA, compared with $19,000 and $6,000, respectively, for adults under 50. If you weren’t able to start saving for retirement as early as you’d hoped, you can make up for it now.
  • If you’re divorcing: When you end your marriage, you may find that your retirement savings take a serious hit. Typically, retirement funds saved during a marriage (including 401ks, pensions and social security) will be considered as part of the marital assets during divorce and subject to some type of division.
  • If you need to rebalance: Your retirement portfolio may be composed of various assets that have different rates of growth. It is a good idea to reevaluate your investments to make sure they are delivering the returns you expect or want. If they are not performing the way you would like, you could consider rebalancing your portfolio.

Do you fall into any of the above categories? If so, Agemy Financial Strategies is here for you every step of the way to ensure you create healthy retirement planning habits for years to come.

The Bottom Line

Everyone should have a retirement plan. Nobody wants to keep working into their golden years and nobody wants to struggle with financial hardship during that period of time in your life. The sooner you put a plan in place, the higher your chances of succeeding.

If your retirement plan is stuck in Groundhog Day, call our office at 800.725.7616 and make an appointment to meet with us by phone, video conferencing or in the offices in both Guilford, CT and Denver, CO. We can get your current plan updated, and get you out of the time loop. Eventually, Bill Murray got to tomorrow in “Groundhog Day, and the same can happen for your retirement years.

For more information on money management and retirement planning, talk to one of our financial advisors here today.

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Helping Adult Children Without Sabotaging Your Retirement

Agemy Financial Strategies

January 19, 2022

If you have an older child or children, there’s probably a question on your mind: How can I help them financially without going broke myself? As your adult children face financial challenges, your first thought may be to help them out. But this may not be the best plan of attack for setting them – or you – up for a secure financial future. 

A large portion of the millennial generation are finding it extremely tough to pay their rent and utility bills, afford groceries and car payments. This leaves parents wanting to help their struggling adult children make ends meet. For baby boomers in or near retirement, this is a big consideration as providing financial support to a family member can affect their own retirement plans. How can you help them without breaking your bank?

Tables Are Turning

As the elderly population grows and a new crop of young adults are financially struggling to attain a solid financial foothold in trying economic times, individuals ‘sandwiched’ between aging parents and adult children are adequately referred to as ‘the sandwich generation’. Over the past decade, studies on sandwich generation caregivers have become more popular, with the Pew Research Center and National Caregiving Alliance (NCA) performing regular surveys on caregiving habits. Several striking statistics show what makes this hard-working group unique:

  • More than one in 10 adults with a child under 18 also care for aging parents, according to a report on sandwich generation demographics by the Pew Research Center.
  • These caregivers spend about three hours a day on unpaid care. Nearly three quarters of them are employed full-time. That’s 21 hours a week of caregiving on top of a 40-hour job.
  • About 60% of sandwich generation caregivers are women. Male and female caregivers spend about the same amount of time a day caring for their aging parents, but mothers, on average, spend about 45 minutes more daily on child care, regardless of employment status.
  • Sandwich generation caregivers spend an average of 86 minutes less a day on paid work, and nearly half an hour less sleeping.

Some adults spend years as a sandwich generation caregiver, while others experience only a brief overlap. However, a new (and worrying) generational shift is happening: According to a recent study, 1 in 3 parents say they have delayed or are willing to delay their retirement to help pay for their children’s college education.

Modern Day Money Management 

Parents need to learn to set expectations and limits … for their children and for themselves.

While financially caring for an adult child, it’s important to work together to find a solution. Teach children the concept of earning, budgeting and investing as early as possible. This may be done by giving them an allowance when they are younger or encouraging them to get a job when they are older. Teach them the important financial lesson of appropriately managing the money they earn, and consider allowing them to make small-scale mistakes along the way to help them learn.

If debt is an ongoing issue, you may want to get professional advice on debt management and payment strategies. Having too much credit card debt is not a good way to start off life. It can ruin your credit and force you to pay higher interest rates on new debt, which can cripple you financially. Instilling good financial habits in your children can set a positive foundation for their relationship with money in adulthood — and lessen the odds of them having to rely on “The Bank of Mom and Dad” as they grow up.

Figure Out How Much Help You Can Realistically Afford to Offer

You may need to have a candid talk about what you can and can’t do. Communicate with your children how much financial support you plan to give them, if any, during their adulthood. It’s a simple task but you’d be surprised at how many parents don’t prioritize their own finances.

There are many ways to go about helping your adult child without opening your checkbook. For example, you could offer to watch your child’s kids to reduce her daycare costs, or pick them up from school so it’s one less thing for them to stress about. If you’re not in a position to help your adult child right now, have an open talk with them about it.

Be honest and explain that there are certain things you as a parent are willing to do for your kids and certain things you won’t. Don’t be afraid to say “no” if you’re not in a position to help your grown kids financially.

Consider a Loan Instead of a Gift

It’s important to specify whether your financial help to your adult child is a loan or a gift.

If you decide on a loan, begin by writing a contract with a set timeline. How long it will take to be paid back and how frequent the payments will be. The payments can start out small and later increase, as your adult children find their footing. They write you a check every month, no matter how small it is, so there is some feeling of gratitude and payback. You should never feel guilty about making your child pay you back. This is a great way to hold them accountable which in turn would help them become more accountable later in life.

Get Professional Help

Giving your adult children money may help them in the short-term but may not give them the skills and tools they need to be financially successful. If providing financial assistance to your adult children is a priority for you, incorporate it into your own financial planning process. Sit down with your children and help them create a budget they can stick to. Look at what money is coming in every month and what is going out. See what can be completely cut out or reduced in the expenses column. If they are outspending what they make, devise a budget that is going to work within their parameters.

You won’t be doing your kids any good, though, if you give them so much financial assistance that doing so depletes your savings. Through your years of financial experience, you may have crossed paths with many financial professionals. Whether they were an acquaintance or you hired them to help you with your finances, you may know plenty of financial professionals that could help your children move toward a successful financial future.

A financial advisor or Fiduciary can help you plan for your and your children’s future, and develop a secure financial plan which includes debt repayment, saving for college, and developing a retirement investment strategy. They help you see the big financial picture and assist you in making financial decisions that align with your goals. The sooner your children begin to work with a financial advisor or planner, the sooner they can start achieving their financial objectives.

Final Thoughts

As a parent, it’s natural to want to help your children financially, but be careful not to do it at the expense of securing your own retirement. Above all, make sure you discuss your spending needs both as a family and with your financial advisor. You’ve put time and effort into building a sustainable retirement plan. Don’t derail your hard work by giving away more than you can afford.

Do you need assistance managing your retirement expectations with your loved ones? The trusted Fiduciaries at Agemy Financial Strategies are here for you every step of the way.

For more information on money management and planning, talk to one of our financial advisors here today. 

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