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NewsAugust 08, 2022
We all know it’s important to save for retirement. So why is it that when it comes to saving, most Americans fall short? If you’re worried about your retirement savings game, this blog is for you.
Retirement can be a time of great joy, but it can also be a time of great stress. Many people spend their whole adult lives anticipating the independence of retirement, but saying goodbye to one’s constant source of income may be frightening when the time comes. According to the Federal Reserve, about a quarter of Americans have no retirement savings at all, and almost two-thirds of non-retired adults are concerned about being able to meet their retirement savings goals.
The COVID-19 pandemic has caused a lifestyle shift that is having an immediate effect on finances and planning. In addition, if you’re retired, market declines and economic uncertainty may induce concern as you assess your financial situation.
While there are many factors that affect your overall financial health, it is important to consider how your retirement plans may change in light of recent circumstances. Here are a few considerations to keep in mind as the ticking clock to retirement nears.
Set Your Retirement Savings Goal
Retirement planning is a big, intimidating goal—but it doesn’t have to be. There are so many variables to consider. How much will you need for vacations? Could you end up facing big medical expenses? What age will you stop working entirely? How long will you actually live? Research has found that those who have written goals and a written plan for achieving those goals are 1.2–1.4 more likely to succeed. Other studies have shown that having a plan can double your savings rate.
If you start saving early, with small amounts of your income, you’ll be able to fund a comfortable retirement and still enjoy life along the way. The more time your money has to grow, the more money you’ll have when it’s time to stop working.
Here are some ways you can help your nest egg grow:
If you’re trying to catch up on a previously set goal, your money moves and savings rate need to be more aggressive. Use our free online calculators to get a good estimate of how much you need to save in order to alleviate the stress of living on a fixed income.
In addition to being aggressive with how much you save, you’ll want to be fairly aggressive in how you invest those savings. You should meet with your financial advisor to discuss riskier investments in order to compound at higher rates of return over an extended period of time.
Plan for Social Security
Social Security is a great tool for retirees. It’s important to understand how to get the most out of your benefits, though.
You can start taking Social Security as early as age 62. But you’ll receive a smaller check each month than you will if you wait until your full retirement age. If you wait until after your full retirement age, your Social Security income will increase up to 8% for every year you delay, up to age 70. After age 70, there’s no further increase for delaying. If you want to maximize your benefits, it’s important to know when to start taking them and how much they’ll be worth if you do so.
Consider Tax Strategies Early On
One of the most important things to consider while you’re still saving for retirement, is how to minimize taxes down the road. While tax laws and rates are likely to change, there are ways to plan for these unknowns and set yourself up for a potentially better tax outcome.
One way that many people do this is by using an IRA or Roth IRA. An IRA is a tax-deferred account, which means that your money grows without being taxed until you withdraw it in retirement. Withdrawals from an IRA are also taxed as income, so it’s important to consider whether or not you’ll need some of your money before retirement and make sure that you’re taking withdrawals accordingly (you may need to pay penalties if you take withdrawals before age 59 1/2).
A Roth IRA works in reverse: contributions are made with after-tax dollars, but any growth within the account is tax free when it’s withdrawn in retirement. This can be a great option for those who expect their tax rate will be higher during retirement than it was when they were working full time.
Spreading your savings across a diverse selection of accounts with a variety of tax strategies is another way to grow your retirement savings. Consider an appropriate mix of tax-deferred Roth accounts based on your tax bracket. For example, if you’re in a high tax bracket (32%-39%), you would want to consider diversifying your accounts, i.g. 401(k), 403(b), and others.
Use the Backdoor Roth IRA to Increase Savings
For 2022, the AGI phase-out contribution range for Roth IRAs for married couples filing jointly is $204,000 to $214,000 and for single taxpayers and heads of households is $129,000 to $144,000. If your current income is too high and makes you ineligible to contribute to a Roth IRA, there’s another way in. First, contribute to a traditional IRA. There is no income ceiling for contributions to a non-deductible traditional IRA, although there is a limit to what can be contributed.
The IRS caps the contribution limit to $6,000 or $7,000 if you are 50 or over. After the funds clear, convert the traditional IRA to a Roth IRA. That way the funds can compound for the future and be withdrawn tax-free, as long as you meet the withdrawal guidelines.
Don’t Forget HSAs
With healthcare costs growing and the proliferation of high-deductible health plans (HDHP), the health savings account (HSA) is a golden retirement planning opportunity. This tool can not only be used to pay for healthcare expenses but can also be used to squirrel away additional funds for retirement.
Regularly Review and Increase Savings
While many start off saving 15% of their income for retirement, you may not be able get there right away. Or you could be living a little “too” comfortably and decide you’re ready to stash away more.
For the former scenario, you can start small to take advantage of the crucial role that time plays in compounding your investment returns. Try increasing the amount you contribute to your retirement accounts by 1% every year until you reach at least 15% of your salary. For those who are ready to up their savings game, instead of upgrading to a larger home or purchasing a new car with your extra cash, try to make do with what you have to minimize your expenses and funnel your extra cash to your savings.
To Summarize
Remember: Retirement isn’t an age. It’s a financial number. Keep that goal in mind and remember that saving for the future is a marathon—not a sprint. The name of the game when it comes to saving money for retirement is starting early.
It’s important to look at your finances and see if any of the above strategies could help you in the long run. If you’re like most people, qualified-retirement plans, Social Security, personal savings and investments are expected to play a role in growing your retirement nest egg. Once you have estimated the amount of money you may need for retirement, a sound approach involves taking a close look at your potential retirement-income sources and making amendments where needed.
At Agemy Financial Strategies, we want you to know we’re here to help you navigate retirement and answer any questions that come up during your retirement process. As Fiduciary advisors, it’s our duty to act on your behalf in finding the right solutions for your individual wants and needs.
For more information on our retirement and financial planning services, contact us here today.
3 Topics to Cover With Your Financial Advisor as You Near Retirement
NewsAugust 03, 2022
Are YOU ready to retire? As you get closer to retirement, it becomes increasingly important to have in-depth conversations with your financial advisor about the years ahead. Here are some important questions to consider in your financial planning journey.
As soon as you transition from your working years to life as a retiree, you’ll need a plan for how to turn the money you’ve saved (along with other sources of income like Social Security or an annuity) into a steady paycheck that will allow you to live the retirement you want.
When you meet with your chosen financial advisor, it’s natural to want to discuss the rate of return on your investments and the progress you’re making on your financial goals. But don’t let the conversation end there — especially if you’re nearing retirement. At Agemy Financial Strategies, our financial advisors are equipped to help you design a strategy for creating income in retirement based on your unique needs and goals.
Here’s three topics you should cover with your financial advisor as you countdown to a work-free future.
What Does My Ideal Retirement Look Like?
As you get closer to retirement, you’ve likely started to think more specifically about what you want this new time of your life to look like. Where will you live? How will you spend your time? What hobbies or activities do you plan to pursue? And if you’re part of a couple, hopefully you and your partner have started having these conversations to make sure you’re both on the same page.
The first step in making sure your retirement dreams come true is very simple: talk about them! Discussing your goals for retirement early on can help ensure that both of your visions are aligned and that there aren’t any potential obstacles down the road. But if you wait too long or don’t discuss it at all, things can get complicated quickly.
In order to avoid disagreements and hurt feelings, it’s important for couples to talk about their expectations for how much time they want to spend together once they stop working full-time.
Once you have established your roadmap to retirement, it’s a good idea to share your vision with your financial advisor. They can help you translate that vision into dollars and cents by helping you determine the following:
Your cost of living (including property, income and estate tax implications) and any of the following:
How Can I Maximize Income From My Savings?
Once you know how much you’ll need to achieve your retirement goals, crunch some numbers to see if you’re on track financially. If you need to course correct, your financial advisor can walk you through a range of options to help you get closer to your goal.
This might include things like:
What Kind of Legacy Do You Want To Leave Behind?
As you approach retirement age, you may feel a greater urgency to make sure your estate planning documents are in place and that your legacy goals are covered. While an estate planning attorney can draft or update your will or trust and powers of attorney for health care and finances, your financial professional also plays a role. They can help to ensure that your financial assets are aligned with your desire to leave your wealth behind as part of your comprehensive financial plan.
For example, if you want to leave money to a charity but also want to provide for your children’s education, the financial professional can help you consider the best way to accomplish both goals through careful asset allocation and investment management strategies. They can also discuss the best practices to save on taxes.
Your financial professional should be able to provide assistance with developing an estate plan that includes a will, revocable living trust, powers of attorney for health care and finances, beneficiary designations for retirement accounts, life insurance policies, trusts, annuities and other investments. They should also assist you in determining what assets need to be transferred out of your name following death.
Why Agemy Financial Strategies
If you are like most Americans, your retirement plan is likely to be a combination of personal savings, 401(k) plans and Social Security. Once you have estimated the amount of money that you may need for retirement, a sensible approach involves taking a close look at your potential retirement income sources and making amendments where needed.
For over 30 years, we’ve helped our clients plan and prepare. This way, when the unforeseen occurs, their clients are uniquely positioned for success. We work hard to deliver a dependable retirement income strategy, in any market, so that clients can enjoy the “best” of their lives during retirement. We are ready and waiting for all your retirement questions! Tune into the Financial Strategies podcast each week or drop us your question online here.
At Agemy Financial Strategies, we want you to know that we are committed to helping you achieve your retirement goals. As Fiduciary advisors, it is our duty to act on your behalf by finding the right solutions for your individual wants and needs.
For more information on our retirement and financial planning services, contact us here today.
National Mountain Climbing Day: What is a Financial Sherpa?
NewsSherpa |ˈsher-pə | NOUN |
– a member of a Tibetan people living on the high southern slopes of the Himalayas in eastern Nepal and known for providing support for foreign trekkers and mountain climbers.
Happy National Mountain Climbing Day!
Did you know that some of the world’s greatest mountaineers relied on sherpas? Sherpas have been credited with high achievements for assisting mountaineers throughout history. In the financial world, we often see the same correlation with retirees trying to reach their goals at a certain age. But without the guidance of experienced financial advisors they end up running out of money during their retirement.
When you bring on a trusted financial advisor, you’re not handing off your nest egg and the control that comes with it. Instead, you can think of it as having a financial sherpa by your side to guide you through planning for retirement. Financial sherpas can help you reach the summit in all financial aspects.
Here’s what you need to know about Financial Sherpas with Agemy Financial Strategies.
Financial Sherpas
A Financial Sherpa is a financial services professional who believes in a contrarian philosophy of how to grow and protect your wealth. Wealth you will ultimately need for your retirement, hence the importance of protection.
Throughout life, you may need more help or more focus towards a certain aspect of it. For example the older you become the more likely you will need to have a will and estate plan in place so your family has a roadmap to your finances, should the unexpected occur.
You may need a portion of your wealth to fund your children’s education, invest in your business or to purchase a piece of property. Hence the importance of liquidity. It is our belief that you are ultimately better served focusing your attention on Distribution & Protection strategies as opposed to simply Accumulation ones.
We are Your Helping Hand
Sherpas need to liaise with the clients, support them along the track and then run ahead to make sure the tea is on the boil when clients arrive at camp. As a financial sherpa, we are here to be your first point of contact on all things financial planning. We will be on hand to answer your questions, look ahead to potential risk and strategize to help ensure you have a financial safety cushion when you reach retirement.
For over 30 years, Agemy Financial Strategies has helped our clients plan and prepare. This way, when the unforeseen occurs, their clients are uniquely positioned for success. We work hard to deliver a dependable retirement income strategy, in any market, so that clients can enjoy the “best” of their lives during retirement.
Our Fiduciaries provide retirement planning services designed to educate clients as to their best options for meeting their current financial needs, achieving their long-term financial goals, avoiding common retirement-planning mistakes, and enjoying a lifetime of financial stability.
Our goal is to give clients confidence in a custom developed robust retirement portfolio and provided investment options designed to generate interest and dividends regardless of market conditions. This is income that can be spent or reinvested for dependable “organic” portfolio growth.
As a fiduciary and Registered Investment Advisor, you can be confident we will recommend only what is in your best interest.
Let’s Get Climbing
Specializing in retirement income planning, or as we like to say, “helping you make it down the mountain.” Many financial advisors and financial planners will help you to build your assets and “get up the financial mountain.” However, Mr. Agemy, “a financial sherpa,” and his team focus on helping investors who have already “climbed the wealth accumulation mountain, plan and strategize to have enough income in retirement to have a safe and pleasurable journey “back down” and enjoy the best of life. Agemy Financial’s objective is to see that their clients can retire and stay retired.
Our purpose is to educate retirees – whether that be planning for retirement, legacy planning, wealth management, or just holding your hand when it’s time to leap into retirement. Celebrating 30 years in business, and we remain steadfast in our dedication to serve and educate retirees.
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 are 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.
Five Things You Never Knew About Estate Planning.
NewsJuly 20, 2022
If you hear the phrase “estate planning” and immediately tune out, you’re not alone. If you don’t think estate planning is a priority, here’s five reasons you might change your mind.
Think estate planning isn’t for you? Think again.
Estate planning is often overlooked when it comes to preparing for 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 can spell out your healthcare wishes and ensure that they’re carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so.
Being intentional with your estate planning is a gift to your loved ones. Doing so not only benefits them, but it can also provide a great deal of peace for you, too. Consider these five tips below to determine whether you feel your estate planning is up to speed and to help ensure a seamless transition of assets once you’re gone.
1. You Should Begin Estate Planning Early
A lot of people put off or wait to plan for their estate until they get a little older. However, life can be cruel and unfair, and tragedy strikes every day. If you have an accumulation of assets of any size, you should be planning your estate. The earlier you begin, the easier it will be to continue to grow your estate and keep a detailed record of your wishes.
Planning your estate is extremely important because it helps you to avoid probate court when you pass away. This is a lengthy process that can cost your heirs thousands of dollars in legal fees (as well as the obvious stress). If you have a will in place at the time of your death, the probate process is much quicker and less expensive for your family members.
2. Estate Planning is for Everyone
Maybe it’s the word “estate.” It sounds fancy and, well, it sounds like money, but some people assume that you only need to undergo estate planning if you have numerous assets worth a lot of money. However, there is no minimum amount that you need to make estate planning worth it. In reality, those with less should be focusing on estate planning more, as it allows them to be as cost effective as possible. Since estate planning consists of determining how everything you own will be divided amongst your family or friends, it’s essential for everyone to complete as a part of their retirement plan.
If you do not want your family members fighting over your belongings after your death, then it is best for you to plan ahead and figure out what goes where. This can be done through the process of making a will or trust. A will is a document that names who receives your assets after you pass away, while a trust is an arrangement by which someone else manages your assets until they are passed onto someone else.
Whether or not a person has any assets does not matter when it comes down to how important estate planning really is for everyone involved!
3. You Can Make Changes to Your Estate Plan
If you are like most people, you will be in a very different place in life than you are now when you first create your estate plan. This is why it’s important to have an estate plan that can easily adapt to your changing needs.
Changes like marriage, divorce, the birth of a child, or even new laws can make your old estate plan inadequate. As your situation changes throughout your life, you can easily make changes to your established estate plan. You’ll be able to change beneficiaries as needed, adjust the amount of assets that each beneficiary receives, or add in new beneficiaries if your family or close circle grows. Up until the day you pass away, estate plans can be legally changed, if the changes are done so without coercion and under the right frame of mind.
Reviewing your plan on a regular basis – and keeping your estate planning advisor up-to-date on any life changes – will help ensure your plan continues to work.
4. Plan Ahead if You’re Giving to Charity
It’s not uncommon to feel like the world is moving too fast, and you’re constantly being pulled in a million different directions. That’s why it’s so important to take time to plan ahead. If you have any loved ones who depend on you, it’s crucial that they know what they can expect from you when the time comes. This means having conversations about your end-of-life care and what kind of care you’d like to receive if you become incapacitated.
Planning ahead also gives you time to decide whether you want any of your assets to go to charity. If this is the case, having the conversation early will give peace of mind there’s no surprises to come after you die. Do you want part of your estate to go to a favorite charity? Intestacy laws leave no room for charitable contributions. So, the only way to be charitable in death is to create an estate plan. And, if you have concerns about taxes, charitable estate planning can afford you tax breaks you otherwise wouldn’t qualify for.
5. You Don’t Have to do it Alone
Estate planning can be intimidating, and it can also involve some complex rules and laws, creating pitfalls for those less experienced. A full-service Fiduciary advisor can help you navigate the process and put an effective plan in place.
Final Thoughts
Estate planning is not simply who gets your stuff when you die. Sure, that’s a part of it and an important part. But estate planning also includes planning for yourself in the event of your incapacity.
Working with a financial planner is a great way to ensure that your finances are in good standing now and in the future. It’s important to have a trusted advisor at your side when it comes to your family’s finances—someone who can help you make informed decisions about estate planning, retirement planning, and everything else in between. At Agemy Financial Strategies, we’re here for you! We’ve been helping our clients live better lives for over 30 years and we’re ready to help you, too.
Our mission is simple: we want our clients to feel confident knowing they have someone looking out for them and their estate planning needs. To schedule a consultation and discuss your options for estate planning, contact Agemy Financial Strategies here today.
The Financial Side of a Gray Divorce.
NewsDivorce is hard, but a divorce later in life presents a unique set of challenges. Understanding how your finances are affected by your gray divorce can save you a great deal of worry and stress.
Experiencing a gray divorce may not have been in your retirement plans, but if you’ve found yourself in the middle of one, you’re not alone. Bill and Melinda Gates were separated after 27 years of marriage. And now experts say ‘gray divorce’ is on the rise. According to Pew Research Center, divorce rates for those 50 and older have more than doubled within the past 25 years.
What is a Gray Divorce?
A gray divorce, or silver divorce, is a divorce between two individuals 50 or older. The term was coined as research showed the phenomenon of the overall divorce rate going down while the “gray-haired” demographic’s rate of late-in-life divorce was on the rise. The 50+ crowd currently makes up a quarter of all divorces and 1 in 10 is 65+.
AARP conducted a study titled The Divorce Experience: A Study of Divorce at Midlife and Beyond. Some of the findings consisted of:
Who initiates divorce in later life?
Participants’ age when divorced
Gray Divorce Reasons
There are a multitude of reasons why people decide to get divorced later in life. Some of these reasons are the same for younger couples deciding to split — infidelity, lack of intimacy or unrealistic expectations, to name a few. However, many gray divorces have more unique causes.
No matter your reasoning for getting a gray divorce, you’ll need to determine the best way to legally separate from your spouse in the most financially beneficial way.
Collecting Financial Information
Ending a marriage can be a difficult process for both spouses involved. However, it can be significantly beneficial for you to collect your financial information early within the divorce process in order to know the entirety of your financial situation. By doing this, it can help you maintain some control during this stressful time.
When a couple divorces, they have to come to an agreement about how to divide their marital estate. Marital estate includes all assets and debts acquired during the marriage. Unless divorcing spouses agree on how to divide everything, a judge will evaluate and divide the marital estate using the state’s property division laws. Some states divide the estate equally (community property states), while others use an equitable distribution method, which means a fair but not necessarily equal division.
In order to resolve the allocation of your assets the court and your ex-spouse has to have a complete picture of your assets, debts, and expenses. Having all of your financial information readily available to you will put you at an advantage. The sooner you know what you’re dealing with, the better prepared you’ll be to resolve it. Being prepared will essentially allow you to move quickly through the disclosure process.
Try To Cooperate
Divorce is never easy, but it’s easier when spouses work together. If both parties are willing to cooperate and work toward a resolution, dividing the marital estate can go more smoothly and reach a resolution faster. But cooperation between divorcing spouses isn’t always possible, and sometimes, as the divorce progresses, spouses become less willing to work with one another.
Regardless of the relationship you have with your ex-spouse you should try and work together as much as possible. Having a divorce financial checklist is a great way to tackle this head one. Here’s a look at what information you’ll need to gather.
Assets
Take inventory of all your property and belongings, and make copies of all documentation related to these items. The following categories can help you keep track of this information:
Debts
Before the court can divide your estate, the judge must have a complete picture of your debts as well as your assets. If you and your spouse took on debt during your marriage, the court will evaluate it alongside your disclosed assets and assign it according to state law. In general, when a spouse has a debt that is considered separate or unique to that spouse—such as a student loan—the court will assign it to the spouse who acquired it. Gather information about the following even if the debt is in your spouse’s name:
Expenses
One of the most challenging parts of calculating your expenses is the fact that outgoings vary from month to month. For example, one month you might have only your car payment and fuel costs; the next month, though, you could be faced with hundreds of dollars in repairs when your battery dies, or worse. Don’t worry about getting everything exactly right; estimate as best you can while disclosing every expense you can think of.To help prepare for your divorce and plan your future budget, use this checklist of common expenses you might need to track:
If any of the expenses above were paid by third party contributors, you must make a note of the amount and frequency that the payments were made.
Create a Divorce Budget
Divorce can create financial instability, especially if you depend on your spouse’s income to cover some/all expenses. One of the best ways to become financially independent from your spouse during and after your divorce is to create a budget. By estimating your post-divorce income, you can use the information you’ve gathered about your expenses and debts to see how it balances against your income and assets.Asset management and budgeting can be crucial when planning for divorce-related expenses such as court costs and lawyer fees. A good financial advisor can assist you in finding ways to save money where you can while strategizing a new retirement plan for you.
Retirement Accounts
Besides a home, retirement accounts are often a couple’s most valuable assets—particularly for those who’ve been married a long time. Whether you live in a community property state or one that uses equitable distribution, retirement accounts are considered property that can be divided in a divorce—but only the portion of those accounts that is marital property.
Calculating the marital portion of retirement accounts can be complicated. It depends on the type of account or plan and when contributions went into the account:
401(k)s, pensions and other qualified plans: These accounts are split through a qualified domestic relations order (QDRO), which is based on the order of a judge and in accordance with the terms of the qualified plan and applicable law.
IRAs — Roth and traditional: These accounts are divided under what’s called a transfer incident to divorce. Even though money will leave the account, the account owner doesn’t owe income taxes because it’s part of a divorce settlement.
Social Security: Aspects of Social Security payments can change after divorce—your former spouse can receive Social Security benefits based on your record. Before applying for Social Security benefits based on a former spouse’s record, the two people must have been divorced for at least two years. However, Social Security benefits can’t be included as a marital asset, by law, and the actual benefit can’t be divided.
After you’ve divided up your various retirement accounts and the divorce is finalized, it’s important to revisit, and revise, the beneficiary designations on the accounts you still own. A common mistake is to leave an ex-spouse as the beneficiary.
How Agemy Financial Strategies Can Help
A gray divorce can be complicated, costly and emotional. Having a trusted financial advisor by your side when you’re going through a divorce is a great benefit, especially if you’re retired and looking for ways to save money while protecting your nest egg.At Agemy Financial Strategies, we value the time we take to get to know you and your situation so we can create a plan specifically tailored to you.
Our purpose is to educate our clients so that we can help you get a clear picture of the assets and debts that make up your marital estate.Whether navigating a revised estate plan, looking to split investment assets or in need of a new retirement income plan, we want you to know we’re here to help you navigate any questions you have regarding these financial aspects of divorce. As Fiduciary advisors, it’s our duty to act on your behalf in finding the right solutions for your individual wants and needs.
Recovering from a divorce can take time, but having others there to help you through the process can get you back on your feet quicker.For more information on our asset management and financial planning services, contact us here today.
5 Financial Planning Moves to Make Turning 50
NewsJuly 06, 2022
From retirement security to living debt-free, turning 50 is your chance to make big moves in reaching your financial goals.
Reaching 50 is a huge milestone for many reasons. Your children have left home and may have a family of their own (hello “bank of mom and dad”).Your parents may need your help too, while your own future care is a looming worry. Retirement, which has seemed far in the future for decades, suddenly seems more real. 50 is an age where people reassess their financial life and aspects. You could even have your heart set on an early retirement. It’s time to make financial moves that will pay off in the future.
If you are in your 50s, are you set for retirement? Have you thought about how sturdy your financial plan is? Meeting with your trusted Fiduciaries at Agemy Financial Strategies can help you work through these items if you feel like you’re not fully prepared for retirement.
Pay Down Debt
Debt is probably the last thing you want to be dealing with before you retire. Calculate your current debt load and start paying off your larger debts first. Debt includes car loans, mortgages, credit card balances and personal loans.
A majority of retirees who have paid off their homes find it financially liberating to live without having a mortgage. By entering retirement without a big mortgage payment, you can live on less. If you’re in a situation where you can’t eliminate your mortgage, you could consider other options to reduce the cost.
Refinancing your home loan could give you a lower interest rate. If you decide to refinance your home, it’s important to look at the terms and conditions. Some people end up refinancing for what they think is a better deal, and end up having their refinance term be longer than their current mortgage.
Turn Savings into Income
You’ve saved for retirement for years. Now that retirement is approaching, how can you create a regular stream of income from these savings to help pay your outgoings? The first step in creating retirement income is to picture how you’d like to spend those years. This way you can understand how much money you’ll need and prioritize what’s most important. Next, create a list of goals to determine which things you might add or eliminate depending on your unique situation.
Based on your goals, create a realistic budget and find out how to revise it for different phases of retirement before making your withdrawal strategy. A withdrawal strategy helps you know how much you can take out of your savings and investments each year to cover your needs and wants. It should also outline which funds you’ll withdraw from during retirement and in what order, i.e., retirement accounts, taxable accounts, etc.
Most financial advisors will suggest the following order (least to the most tax-efficient accounts) because of tax implications and the assumption that your taxes will be lower later in retirement:
Taxable accounts – Non-Retirement Accounts
Tax-deferred accounts – Traditional IRAs and 401(k)s
Tax-exempt accounts – Roth IRA
The traditional approach has been that you can safely withdraw about 4% of the initial value of your retirement savings and increase that amount each year with inflation. However, it may no longer be safe with the current combination of low bond rates and high stock valuations. Add in the possibility of even higher inflation and longer average life spans, and you could face a significant chance of running out of money in retirement using the traditional 4% “safe” withdrawal rule. In which case, you can discuss other options with your advsor such as the 7% rule or r Annuitization. Be sure to discuss this method of retirement income with your Fiduciary. By purchasing an income annuity, you trade a lump sum of money for an income that’s guaranteed by an insurance company for as long as you live.
Life Insurance
If you don’t have a life insurance plan or have been living underinsured, now more than ever is a good time to consider you and your family’s needs. A general rule of thumb when it comes to life insurance is that your individual needs may vary based on such factors as:
The need for life insurance doesn’t start or end when you reach a specific age. Oftentimes, when people reach their 50’s their insurance may be reaching its expiration date. When this happens, it could mean that their life insurance could go up.
One option to consider is converting your term policy into a whole life insurance policy. Whole life policies, while significantly more expensive than term insurance, offer the flexibility of tapping into the policy’s cash value while you’re still alive. You can borrow against the cash value of a life insurance policy or simply elect to take money from it, which will lessen the death benefit payout. However, be careful if you make that move.
If your children have left home, you may also need to review your life insurance requirements. Do you need life insurance or can your spouse financially support him–or herself? It also could be time to think about long-term care insurance. Long-term care is often needed by older people and can be expensive without insurance. While Medicaid can be available, it often requires that people drain their own assets first. It’s always important to discuss long-term care insurance with your trusted Fiduciary or financial advisor.
Review Your Estate Plan
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 can spell out your healthcare wishes and ensure that they’re carried out – even if you are unable to communicate. It can even designate someone to manage your financial affairs should you be unable to do so.An estate plan generally includes a Last Will and Testament, as well as powers of attorney for medical and financial affairs. It is wise to have an estate plan early in life, particularly if you have any assets or property worth protecting.
If you die without a will, your estate may be tied up in probate for months or even years. This includes all accounts—checking, savings and retirement—unless they are held jointly by your family members. Probate can also include your home (or other real estate) and personal property until the will goes through probate.
The best way to ensure that your assets are passed onto the people you want is to include them in your will. If you become incapacitated or ill, having a power of attorney in place will simplify both your life and the lives of your family members. Your full-service retirement planning firm can assist you in this area.
Review Your Risks
Risk management helps you ensure that your assets are protected.
In your 50s, you need to learn how to manage risk successfully. Failure to do so can be detrimental to your retirement. You always have the option to help avoid investment risk by choosing only safe, guaranteed retirement income investments. Choosing to avoid risk is one of the smartest decisions you can make until you have learned the skills you will need to manage risk appropriately.
However, ALL investments, even the most conservative, come with different types of risk. Understanding these risks (from Intrust Bank) will help you make educated choices in your retirement savings plan mix:
Don’t forget about personal and family risk, too:
These risks tend to affect the personal lives of retirees.
Diversify Your Portfolio
All investors–whether aggressive, conservative, or somewhere in the middle–can potentially benefit from diversification, which means not putting all your eggs in one basket. If something were to happen to that basket, you’d lose all of your eggs. To mitigate that risk, it’s wise to spread out your assets. When applied to investing, this proverb directly speaks to the value of portfolio diversification.
When you reach your 50’s you’ll want to try and minimize the amount of mistakes you can make financially – especially ones that could derail your retirement plan. It’s important to review your portfolio with a trusted financial advisor to make sure you’re on the right track when it comes to diversification strategies.
At Agemy Financial Strategies, we will sit down with you and discuss how you can diversify your portfolio for maximum retirement income. Once you reach 50, you want to be able to reap all of the benefits from your investments, especially if you’re planning on an early retirement.
Let’s Get Started
Your 50s are a pivotal decade. Capitalize on these years by firming up plans and feathering the nest for a secure retirement.
It’s important to look at your financial plans and see if any of the above strategies could help you in the long run. If you’re like most people, qualified-retirement plans, Social Security, personal savings and investments are expected to play a role. Once you have estimated the amount of money you may need for retirement, a sound approach involves taking a close look at your potential retirement-income sources and making amendments where needed.
At Agemy Financial Strategies, we want you to know we’re here to help you navigate retirement and any questions that come up during your retirement process. As Fiduciary advisors, it’s our duty to act on your behalf in finding the right solutions for your individual wants and needs.
For more information on our retirement and financial planning services, contact us here today.