Category Archives: Retirement Planning

Ideas to help preserve and grow your money

3 Things That Affect When You Should Apply for Social Security

My Comments: As you approach your retirement and your 62nd birthday, this question becomes increasingly relevant.

Retirement is that point in your life when you essentially quit working for money and instead money starts working for you. The challenge is to make sure it’s working hard enough to keep you from running out of money before you run out of life.

Social Security benefits have become an absolute requirement for millions of Americans to maintain an existing standard of living as they age.

by Brian Stoffel \ April 17, 2017

You can choose to take Social Security as early as age 62 and as late as age 70. When to claim your benefits is a question many retirees take a long time to consider. To make the best decision, it’s important to look at how your monthly benefits change based on when you begin receiving them.

Currently, the average retirement benefit check from the program is $1,360, and the average retirement age is the earliest option, 62. But if recipients waited, these checks could get much bigger. Here’s what it would look like for those born in 1954 and earlier:

As you can see, those aren’t small differences. On the one hand, if you wait until age 70, your monthly benefit will be a whopping 76% higher than if you claim right away. On the other hand, if you do decide to delay your benefits that long, you’ll go almost a decade with no Social Security income coming in even though it was an option.

While there are tons of different variables that affect when you should apply for Social Security benefits, the following three questions often play an outsize role.

1. How do you feel when you get up and go to work in the morning?

This may seem like an odd place to start, but hear me out. Most people worry about having enough money to retire — that is an important concern, and we’ll get to it in a bit. But there’s one big blind spot to tackle first: hedonic adaptation.

You’ve likely heard hedonic adaptation being used in the context of getting used to lifestyle improvements, as in, “Even after buying the new car to keep up with the Joneses, Mark was still miserable — that’s hedonic adaptation for you.”

But in truth, it works both ways: We can have much less materially, and not be nearly as depressed about it as we’d expect.

If you want proof, I point you toward a Merrill Lynch/Age Wave survey that came out in 2015. When respondents of different ages were asked how often they felt happy, content, relaxed, and/or anxious, here’s how they responded:

https://infogram.com/percent-who-said-i-often-feel-1ge9m8ny434omy6

And lest you think that this was just a survey of wealthy respondents, it was “nationally representative of age, gender, ethnicity, income, and geography.”

The bottom line is that if you hate your work and you can make ends meet on Social Security plus other sources of income, you shouldn’t wait to apply for benefits.

2. Can you make ends meet?

Of course, we can’t forget entirely about money. In the survey mentioned above, 7% of retirees said retirement was less fun and more stressful than pre-retirement years. The main culprit: financial concerns.

Almost all retirees report spending less in retirement than while they were working, and these expenses continue to fall as people age. Of course, everyone has heard about rising healthcare costs — and it’s true that healthcare expenses do jump. But there’s a host of other realities that keep costs down: less money spent on transportation costs commuting to and from work, a drop in food costs as you can make your own food more often, and a house finally being paid off in full, to name a few.

In general, you’ll need to calculate how much income you’ll get from three streams:

  • Social Security and/or pensions
  • Withdrawals from your own retirement accounts, using the 4% rule
  • Other forms of income

The “other” forms of income could come from rental properties you own or even part-time work.

The bottom line is that you should try living for six months on this income to ensure that it’s suitable.

3. Have you coordinated with your spouse?

Finally, we have to deal with the sobering reality that one partner often lives longer than another. In that situation, Social Security has a simple rule: The surviving spouse gets to either keep his or her current benefit, or assume the benefit of the deceased — whichever is larger.

It’s important to remember that, statistically speaking, wives will live longer than their husbands. And if husbands were the higher earners, they may want to consider waiting as long as possible to claim their benefit, as it maximizes what their wives will receive after they pass away.

In this respect, there are a dizzying number of variables to consider, and I suggest doing further reading to figure out which will be best for you and your partner.

In the end, if you can answer these three questions accurately, you’ve got a good grasp on the factors affecting when to claim Social Security benefits.

Source: https://www.fool.com/retirement/2017/04/17/3-things-that-affect-when-you-should-apply-for-soc.aspx

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Forget the 4% Retirement Rule…

My Comments: With much of my time these days building a new business around retirement planning, the question of how long your money will last has huge implications.

The 4% rule evolved in years past using the assumption that it would keep you from running out of money before you died. That assumption is not longer valid, given the age to which many of us live, the increasing cost of health care, and the likelihood of a major market crash on the horizon.

So what to do? Whatever you decide, it’s a crap shoot. However, these thoughts from Dan Caplinger might be helpful.

by Dan Caplinger \ June 11, 2017

Whenever you’re striving toward a financial goal, it’s helpful to have a number in mind. That’s why the 4% retirement rule is so popular among retirement savers: It gives you a way of figuring out exactly how much money you should aim to save toward retirement. Yet there are several ways in which the 4% retirement rule falls short of working perfectly, and some investors feel more comfortable merely using the rule as a starting point and then looking to improve on it.

The appeal of the 4% retirement rule

People like the 4% rule because of its simplicity. To figure out how much you can afford to withdraw from your retirement savings, just multiply it by 4%. You can use the rule to reverse-engineer how much you need to save. If you expect to need $40,000 per year in retirement, then save $1 million, because 4% of $1 million is $40,000.

The 4% rule does have analytic origins, going back to research in the early 1990s that looked at the historical returns of various types of investments. The conclusion of the research was that with a balanced portfolio between stocks and bonds, you could start by taking 4% of your savings the first year, and then increasingly that amount by the rate of inflation every year after that. So as an example, if you saved $250,000 in your retirement account, then the first year, you’d withdraw $10,000. If inflation was 3%, then in year 2, you’d withdraw $10,300. Subsequent payments would grow with inflation, keeping your theoretical purchasing power constant. If you did that, according to the research, you would be able to make your money last at least 30 years into retirement.

Some problems with the 4% rule

The seeming simplicity of the 4% rule hides some flaws. The first is that it’s based entirely on backward-looking performance data. Admittedly, the analysis included some very tough market environments, including the Great Depression. However, there’s no guarantee that future markets might not be worse, and that could lead to the rule no longer working as intended. In particular, bad performance early in retirement has an especially adverse impact on the 4% rule, because the reduction in principal value increases the percentage of your entire portfolio that you withdraw each year. For instance, if you withdraw 4% the first year and then your portfolio loses 50% of its value, then the next year’s withdrawal under the rule will be around 8%.

In addition, there are reasons to believe that current market conditions differ from what have usually prevailed in periods in which the rule worked well. Most notably, interest rates are extremely low, and that has reduced the amount of income that the bond side of the investment portfolio can produce. This will therefore require sales of assets to finance the withdrawal amounts in retirement. Moreover, the risk of capital losses on bond investments is higher than normal because of the low rate environment.

On the flip side, the 4% rule is too conservative in certain circumstances. Because the rule is designed to deal with a worst-case scenario, it is usually far more cautious than it needs to be. That means you’ll have money left over at your death, and while that might be useful for your heirs, you might have missed out on a more secure retirement by not spending as much as you could have.

Can you improve on the 4% rule?

Researchers have looked at the question of how to get better results from the 4% rule. Some of the proposed changes include the following:

  • If you’re willing to allow for the potential of reduced withdrawals if the market performs badly, then it can dramatically extend how long a portfolio can last. Even if you only cut your withdrawal by 5% or 10%, it can nevertheless be enough to allow you to increase your withdrawal slightly without jeopardizing long-term viability.
  • If the market does exceedingly well early in retirement, then it can be viable to boost your withdrawal rate slightly.
  • Making personal adjustments for life expectancy can be useful. For instance, some retirees are living well into their late 90s, making a 30-year period too short and requiring a smaller withdrawal percentage. Yet for others, 30 years is longer than they have a legitimate right to expect, and so a larger percentage might make more sense. Just keep in mind that once you make a decision, it’s hard to go back and change it if it turns out you were too pessimistic in your assessment.

As a starting point, the 4% rule is a useful way to estimate how much you’ll need when you retire. By understanding its limitations, you can look at making refinements that will more accurately reflect your own personal retirement savings needs. That way, you’ll have a retirement strategy that will work best for you.

Source: https://www.fool.com/retirement/2017/06/11/forget-the-4-retirement-rule-heres-a-smarter-way-t.aspx

Planning for Retirement: a Checklist Approach

My Comments: Some of us are organized and some of us are not and the rest of us are ‘sorta/kinda’ organized. I’m in the ‘sorta/kinda’ organized group.

I am, however, heavily invested these days in teaching others a process to follow when thinking about their future retirement. I’ve created an internet school called Successful Retirement Secrets™ where I’ve written and published two courses on the topic. (click on the image to the right to explore them…)

Meanwhile, for those of you who need help being an organized person, this checklist from Laurie Burkhardt with help from Kelly Henning is a great way to get started.

Laurie Burkhardt, CFP  \ June 26, 2017

As financial planners, we are often asked, “Will I be OK in retirement?” Before looking at a client’s assets and expenses in order to answer that question, we ask corresponding questions such as, “What do you want your retirement to look like?” Each individual’s perspective on retirement is unique. Some people want to remain in their current house and community. Others wish to downsize and stay in the area close to family and friends. There is yet another group that wants to leave the expensive Northeast states and move south or west. Thus, it’s crucial to expand on a client’s retirement goals earlier rather than later.

The checklist below illustrates different items to think about as retirement approaches, from ten years before until right after retirement begins. The earlier one starts planning for retirement, the more prepared one should be not only financially, but also emotionally.

A Strategic Pre-Retirement Checklist

Five to ten years before targeted retirement:

  • Brainstorm retirement goals and dreams of what retirement will look like.
  • Think about where you want to live and whether you want to downsize.
  • Revisit goals and time frame annually.
  • Obtain annual credit report.
  • Pay down mortgages and other debt to strive to become debt-free by retirement age.
  • Revisit progress toward achievement of retirement goal, and adjust retirement contributions and/or spending as appropriate.
  • Review estate planning needs and update documents, titling and beneficiaries as needed. Consider long-term care insurance.

One to five years before targeted retirement:

  • Attend pre-retirement workshop and/or consider personal life coach to help prepare for transition.
  • Get comprehensive medical, dental and vision exams while still covered by employer insurance plans.
  • Consider Social Security claiming strategies.
  • Request estimate of pension or retiree medical benefits.
  • Get educated about Medicare options.
  • Revisit estimated budget for income and expenses anticipated in retirement.

Six to 12 months before targeted retirement:

  • Income tax planning
    • Speak with accountant about expected new income bracket and how to plan for it.
    • Discuss possible Roth conversions or other tax planning strategies.
    • Are you eligible for any outside retirement plan contributions?
  • 401(k) Plan
    • Plan to max out contributions for current year.
    • Confirm that all funds in 401(k) accounts are vested.
    • Confirm whether funds are pre-tax only, or pre-tax and after-tax.
    • Coordinate with wealth manager to keep 401(k) funds in plan or roll to an outside IRA.
    • If rolling to an outside IRA, open new account and obtain account number and custodian address/wire instructions for future deposit.
    • If retiring between 55 and 59 ½, consider waiting to rollover due to options to take penalty-free withdrawals from 401(k) in year of retirement, or take 72t distributions for at least 5 years.
  • Pension Benefits
    • Obtain all pension benefits available through current employer.
    • Determine whether or not a lump sum pension option is available and whether it is preferable for you.
  • Other Qualified and Non-Qualified Retirement Benefits
    • Obtain information on all additional plans offered by the company and information on vesting, tax, and transfer of these accounts.
  • Social Security Benefits
    • Login to http://www.ssa.gov, create account and obtain a current benefits statements.
      • Be sure to complete this step for spouse.
      • If divorced, contact Social Security directly at (800) 772-1213 and obtain information on taking benefits as ex-spouse.
    • Coordinate Social Security Analyzer tool with benefits statements to determine claiming strategy.

Two to three months before retirement:

  • Review Paid Time Off
    • If you have any accumulated sick days, vacation time or other PTO days, determine if/how you will be paid for these days.
  • Advise Supervisor and HR Representative in writing of desired retirement date.
    • A specific date may be agreed upon(e.g., first week in January depending on payroll and other items).
    • Consider date which you will be eligible for year-end bonus or other benefits, including 401(k) matches, profit sharing, or stock options.
  • Request Retirement package of paperwork from HR.
    • Depending on the size of the company, HR will generally provide its own packet of paperwork and forms that need to be completed.
  • Determine date for exit interview with HR/supervisor.
  • Make final decision on all insurance, including medical, dental, vision and life insurance (timing will depend on company policies).

One month before retirement:

  • Obtain the paperwork to roll your 401(k) (or other retirement accounts) out of the plan into an outside account, if that’s the choice you’ve made.
    • Complete paperwork and contact HR to see if plan administrator signature is required.
    • Paperwork will be sent in following retirement date.

One week before retirement:

  • Confirm that HR retirement package has been completed and all relevant documents are signed.
  • Clean-up desk/emails, etc.
  • Remove any personal/private information from work email and computer.

Post Retirement

  • Submit 401(k) rollover paperwork following retirement date.

The Bottom Line

There are many decisions to consider as one prepares for retirement, from healthcare considerations to account logistics. Understanding the timeframe of essential tasks well in advance of your retirement date can be key to reducing stress in the months before you stop working. Employers will have deadlines on paperwork submission, some of which will be your last day of work or thirty days after.

Knowing these deadlines and seeking information in advance is essential. Use all available resources, such as your company’s human resources department and your various professional advisors, to help make the transition as smooth as possible.

Source article: https://www.investopedia.com/advisor-network/articles/090916/planning-retirement-checklist-approach/#ixzz5VuZQfiW8

11 Proven Ways to Boost Your Retirement Income

My Comments: Personally, I’m completely invested in #4, #6, #8, and #9. I’m working hard on #1 and #10. What you choose is entirely up to you.

Boosting your retirement income is not about accumulating more stuff. It’s about enjoying life, completing your bucket list of things to do, and having money to pay your bills. Remember, you’ll have your GO-GO years, your SLOW-GO years and your NO-GO years. All require money.

by Selena Maranjian | Apr 8, 2018

Many Americans feel they’re on shaky financial ground these days. Fully 39% said that they feel not too confident or not at all confident that they’ll have enough money with which to live comfortably in retirement, according to the 2017 Retirement Confidence Survey.

How much money will you need for retirement? The answer will be different for different people, and many of us will not amass our needed amount. Fortunately, we can boost our odds of having a happy retirement by taking some steps. Here are 11 strategies you might employ now or later to increase your retirement income.

1. Get rid of debt

For starters, aim to enter retirement without a mortgage or any other costly debt, as that can weigh on you when you’re surviving on a fixed or limited income. Having to make debt payments while retired can hurt your ability to make other necessary payments. If you can pay off such debt before retiring, you can enjoy more income in retirement.

2. Make the most of retirement savings accounts

Tax-advantaged retirement savings accounts such as IRAs and 401(k)s are another good way to boost retirement income, as the more money you contribute to them while working, the more you’ll have in retirement. There are two main kinds of IRA: the Roth IRA and the traditional IRA. In 2018, the contribution limit is $5,500 for most people and $6,500 for those 50 and older in both types of accounts. You can amass even more with a 401(k) account, as it has much more generous contribution limits — for 2018 the limit is $18,500 for most people and $24,500 for those 50 or older. Give particular consideration to Roth IRAs and Roth 401(k)s (which are increasingly available), as they let you withdraw money in retirement tax-free.

The table below shows how much money you can accumulate over various periods socking away various amounts:
Growing at 8% … $5,000 Invested Annually     $10,000 Invested Annually
10 years              $78,227                                   $156,455
15 years              $146,621                                 $293,243
20 years              $247,115                                 $494,229
25 years              $394,772                                 $789,544
30 years              $611,729                                 $1.2 million
Calculations by author.

3. Set yourself up with dividend income

Fill your portfolio with a bunch of dividend-paying stocks, and you can collect income from it without having to sell off any or many shares to generate funds. A $400,000 portfolio, for example, that sports an overall average yield of 3% will generate about $12,000 per year — a solid $1,000 per month.

Dividend income isn’t guaranteed, but if you spread your money across a bunch of healthy and growing companies, you’ll likely receive regular — and growing — payments. Here are a few well-regarded stocks with significant dividend yields:

Stock                      Recent Dividend Yield
Amgen                    2.8%
General Motors    4.2%
National Grid        5.1%
PepsiCo                  2.9%
Pfizer                      3.7%
Verizon                   4.9%
Data source: The Motley Fool (April, 2018).

A dividend-focused exchange-traded fund (ETF) can be a fine option, too, offering instant diversification. The iShares Select Dividend ETF (DVY), for example, recently yielded about 3.2%. Preferred stock is another way to go. The iShares U.S. Preferred Stock ETF (PFF) recently yielded 5.6%.

4. Keep working in retirement

Another way to boost your retirement income is to work during the first years of your retirement — at least a little. Working just 12 hours per week at $10 per hour will generate about $500 per month. Also, given that many retirees can find themselves restless and a bit lonely in retirement, a part-time job can help by offering more daily structure and regular opportunities for socializing.

Here are some possibilities: You could be a cashier at a local retailer or deliver newspapers. You might do some freelance writing or editing or graphic design work. You might tutor kids in subjects you know well, or perhaps give adults or kids music or language lessons. Make and sell furniture or sweaters or candles. Do some consulting — perhaps even for your former employer. Babysit, walk dogs, or take on some handy person jobs. These days the internet offers even more options. You might make jewelry, soaps, or jigsaw puzzles and sell them online, or write e-books that you self-publish online.

5. Lock in income with fixed annuities

Give fixed annuities some consideration, as they can deliver regular income, and favor them over variable annuities and indexed annuities that often charge steep fees and sport restrictive terms. Fixed annuities are much simpler instruments and they can start paying you immediately or on a deferred basis. Below are examples of the kind of income that various people might be able to secure in the form of an immediate fixed annuity in the current economic environment. (You’ll generally be offered higher payments in times of higher prevailing interest rates.)

Person/People            Cost       Monthly Income      Annual Income Equivalent
65-year-old man       $100,000       $546                         $6,552
65-year-old man       $100,000       $522                          $6,264
70-year-old man       $100,000       $628                          $7,536
70-year-old woman  $100,000       $588                          $7,056
65-year-old couple   $200,000       $929                         $11,148
70-year-old couple   $200,000     $1,028                        $12,336
75-year-old couple   $200,000     $1,180                        $14,160
Data source: immediateannuities.com.

A deferred annuity can also be smart, starting to pay you at a future point, such as when you turn a certain age.

6. Consider a reverse mortgage

Look into a reverse mortgage, too. It’s essentially a loan secured by your home. A lender will provide (often tax-free) income during your retirement, and that money doesn’t have to be paid back until you no longer live in your home — such as after you move into a nursing home or die. It has some drawbacks, such as requiring your heirs to sell your home unless they can afford to pay off the loan, but if you’re really pinched for funds and no one is counting on inheriting your home, it can be a solid solution.

7. Borrow against your life insurance

Many people don’t think of this strategy, but in the right circumstances, it can deliver needed income. If you have a life insurance policy that no one is depending on — such as if the children you meant to protect with it are now grown and independent — you might consider borrowing against it. This can work if you’ve bought “permanent” insurance such as whole life or universal life, and not term life insurance that generally only lasts as long as you’re paying for it. You’ll be reducing or wiping out the value of the policy with your withdrawal(s), but if no one really needs the ultimate payout, it can make sense. Plus, the income is typically tax-free.

8. Move to a less expensive home or region

You can also beef up your retirement income by spending less in retirement on your home. You can achieve this by downsizing into a smaller home and/or moving to a region with lower taxes or cost of living. This strategy can shrink your property taxes, insurance costs, home maintenance expenses, utility costs, landscaping bills, and so on. The median home value in Massachusetts, for example, was recently about $341,000, but it was only $264,600 in Colorado, only $143,600 in South Carolina, and $114,700 in Arkansas.

9. Collect interest

Parking money in interest-generating investments is a strategy that varies in its effectiveness as the economic environment changes. When interest rates are high, it’s great. In times like these, not so much. If you park $100,000 in certificates of deposit paying 1.5% in interest, you’ll collect $1,500 per year, not a very helpful sum. Back in 1984, though, rates for five-year, one-year, and six-month CDs were in the double digits. If you could get 10% on a $100,000 investment, you’d enjoy $10,000 per year, equivalent to about $830 per month. If interest rates are sufficiently low, they won’t even keep up with inflation, which has averaged about 3% annually over long periods.

Bonds are another interest-paying option, but the safest ones (from the U.S. government) tend to pay modest interest rates, especially in low-interest-rate environments. Still, if you have a lot of money, you might make this strategy work by buying a variety of bonds that will mature at different times, generating income over many years.

10. Retire later

Here’s a very powerful strategy, but one that many people would rather not employ: Retire later than you planned to. If you can work two or three more years, your nest egg can grow while you put off starting to tap it. (In other words, it can ultimately deliver more income, and it will have to do so for fewer years.) You might enjoy your employer-sponsored health insurance for a few more years, too, perhaps while also collecting a few more years’ worth of matching funds in your 401(k).

Imagine that you sock away $10,000 per year for 20 years and it grows by an annual average of 8%, growing to about $494,000. If you can keep going for another three years, still averaging 8%, you’ll end up with more than $657,000! That’s more than $160,000 extra just for delaying retirement for a few years.

11. Maximize Social Security

There are a bunch of ways to boost your Social Security income, too. You can increase or decrease your benefits by starting to collect Social Security earlier or later than your full retirement age, which is 66 or 67 for most of us, and you can make some smart moves by coordinating with your spouse when you each start collecting.

If you and your spouse have very different earnings records, for example, you might start collecting the benefits of the spouse with the lower lifetime earnings record on time or early, while delaying starting to collect the benefits of the higher-earning spouse. That way, you both get to enjoy some income earlier, and when the higher earner hits 70, you can collect their extra-large checks. Also, should that higher-earning spouse die first, the spouse with the smaller earnings history can collect those bigger benefit checks.

4 Financial Life Stages and How to Plan for Them

My Comments: As a financial planner, I’ve described the three primary phases most of us travel through in life: childhood, adulthood, and retirement. As a child, we’re dependent on others to maintain our lives; as adults we’re dependent on our ability to fend for ourselves and typically work for money; in retirement we’re dependent largely on our earlier ability to set aside resources and have money work for us.

These words from Sunita Abraham break down ‘adulthood’ into four financial stages and they are worth noting. Even if you’ve already retired, you may find it interesting for yourself and others in your family.

by Sunita Abraham \ October 10, 2018

Having a different financial planning strategy for different stages of one’s life cycle can help simplify the task of investing for various tenures

If the laundry list of “things to do” puts you off financial planning, then here is a way to make it easier. The elements that form part of the financial planning exercise include budgeting to generate savings, investing for goals, securing , protecting income through life and general insurance, managing debt and planning for the transfer of wealth.

While each element plays an important part in securing your finances, not all of them are equally significant at every stage in the life-cycle. Categorize the activities as critical, important, urgent and optional in each phase of your life. Focus your resources on those activities that are identified as critical and important that need immediate attention. Consider activities that are labelled as urgent only if they are also seen as essential. For example, while you may consider holding off increasing contribution to the retirement corpus in favor of paying life insurance premium, you should not consider doing it to fund a holiday even if it is urgent.

We tell you the four critical stages in a life cycle and how different financial planning approaches and tools can fit into each to make it a smooth ride for you.

The first income stage

When you first begin earning an income, budgeting is the critical financial skill that you need to master. Develop a suitable budget and build the discipline to live within your income so that you don’t fall into a debt trap. Once you learn to contain your expenses to available income, start building savings into your budget. The emergency fund will have the first claim on your savings and this is an urgent and important task.

Initiating some investments for retirement is an important task at this stage even though the goal may seem too much in the future to be relevant now. Investments for other goals are optional at this stage and can commence once your income and savings stabilize.

Unless you have dependents on your income, life insurance is optional at this stage and you need not assign scarce funds for life cover. However, a basic health insurance is important, particularly if you don’t have a health cover from your employee. Other products such as auto insurance and personal accident insurance should also be included as required. Servicing debt that you may have, such as student loan, is an important element, as is controlling debt use and building your credit history. A misstep can have long-term consequences on your borrowing ability in the future.

Estate planning is optional at this stage and you can consider it in the future when wealth has been created.

The dependents stage
This is the phase that is the most demanding since many of the elements of financial planning need to be serviced. You are likely to have dependants on your income and, therefore, life insurance is a critical element for security. Consider term insurance which gives you the required protection at the most efficient cost. Expand health insurance to cover your family too.

Your income and expenses would have both expanded and you should be better at budgeting and saving by this stage. Living by the budget is critical to be able to find the savings for the many short-, medium- and long-term goals you are likely to have at this stage. Revise and fine-tune your budget periodically to reflect your income and need for savings. Invest the savings to construct a portfolio that is aligned to growth, income or liquidity needs of goals.

Use a professional to help you do this efficiently if you find yourself procrastinating. Build basic estate planning into your finances by making clear nominations on your investments and insurance.

Debt management is a critical function at this stage given that your needs are likely to be more than availability of funds. Keep your ability to repay in mind while adding debt and ensure you do not harm your credit score or credit history. You should not have to meet debt repayment obligations at the cost of your retirement savings, insurance protection and essential goals like housing. Borrow primarily for appreciating assets where it will help grow your net worth over time.

The growth stage
If you have managed your personal finances prudently so far, then this will be the golden stage for your finances. Your income would be high and seeing an upward growth trend, while your expenses would have stabilized resulting in growing savings. Being mindful of expenses is important even at this stage and the focus of budgeting would be to maximize savings.

Managing investments is critical in this period. Many of your goals would be close to being funded and the investments have to be rebalanced to reflect this. This is also the time to catch up on important goals like retirement with the excess savings being assigned to this. Where the goals are well in the future, the investments should reflect the ability to take risk to earn higher returns.

Life and health insurance should be updated and aligned to your situation.

Now that you have accumulated wealth, take time to plan how you would like to distribute your estate and formalize a Will. Make sure that the assets and investments do not have nominations that are contrary to what you have decided in your Will.

Servicing debt should not be difficult at this stage given the high income. But consider the funding needs of your other goals before you add to your debt burden.

The retirement stage
Budgeting becomes the focus of finances once again during retirement. The object now is to control expenses to stay within the available income. Managing the investments to generate income and protect the corpus from inflation becomes the primary investment activity at this stage.

Adequate health insurance is critical since health costs can throw your income off rails. Life insurance may be relevant only if it is required to protect retirement income for the spouse and debt should not be a big part of your finances at this juncture.

An important activity at the beginning of retirement is to simplify finances. This would include cutting down on multiple accounts and investments, organizing documents, updating details and consolidating investments to a few relevant ones. Make sure all your financial documents are updated and accessible.

Make optimum use of limited time, funds and energy by concentrating on the activities that are important and critical at each stage in your life. Over time you will find that you have knit together all the elements without finding the whole exercise too intimidating.

Source: https://www.livemint.com/Money/r946kZa4ZiqNghWh6GUP1H/4-financial-life-stages-and-how-to-plan-for-them.html

Caring for Your Aging Parents: How to Prepare

My Comments: Retirement is the third major time in people’s lives. It follows childhood and adulthood. Well, OK, a retired person is also an adult but retirement is a different stage. I describe it as when you turn off the ‘work for money’ switch and turn on the ‘money works for you’ switch.

Meanwhile, modern medicine is keeping us alive longer and longer. But it rarely happens that someone doesn’t gradually decline. And that gradual decline creates new issues for those of the next generation.

Since we as a society have never actively pushed elderly folks out the door to fend for themselves, all this means is that an infrastructure has to exist or be built, to look after aging parents. And if that applies to you, some preparation is necessary. Hence this article.

By Mike Piershale, ChFC | Piershale Financial Group, September 21, 2018

Caring for aging parents is something you hope you can handle when the time comes, but it’s the last thing you want to think about.

Whether the time is now or somewhere down the road, there are steps you can take to make your life — and their lives, too — a little easier.

It’s Time for a Chat
The first step is talking to your parents. How will you know when it’s the right time to do this? Look for indicators like failure to take medication, new health concerns, diminished social interaction, general confusion or even fluctuations in weight.

What can make things more difficult is when the parents are unwilling or unable to talk about their future.

This can happen for a number of reasons, including fear of becoming dependent, resentment toward you for interfering, reluctance to burden you with their problems, or because they are already incapacitated. Without their cooperation, you may need to do as much planning as you can without them. However, if their safety or health is in danger, you may still need to step in as a caregiver.

If you’re nervous about talking to your parents, make a list of topics that you need to discuss. This will help ease tension, and you will be less likely to forget anything.

If there is some reluctance on the part of your parents, it may be wise to cover your list over several visits so that it doesn’t sound so much like an interrogation.

Get Personal
Once you’ve opened the lines of communication, a good next step is to get as much information as you can to prepare a personal data record. This document lists information that you might need in case your parents become incapacitated or die.

Here is some information that should be included:
1. Bank and investment accounts
2. Estate documents like wills and trusts
3. Funeral and burial plans
4. Medical information
5. Insurance information
6. Names and phone numbers of professional advisers
7. Real estate documents

Be sure to write down the location of documents and any relevant account numbers. It’s also a good idea to make copies of all the documents you’ve gathered and keep them in a safe place.

Explore Living Arrangements
Eventually you’ll need to have discussions on more sensitive subjects like your parents’ wishes on medical care decisions and future living arrangements.

Where your parents eventually live will depend on how healthy they are. As they grow older, their health may deteriorate so much that they can no longer live on their own. At that point, you may need to find them in-home health care, health care within a retirement community or nursing home, or you may insist that they come to live with you.

If money is an issue, moving in with you may be the best or only option. Keep in mind this decision will impact your entire family, so talk about it as a family first.

Make It a Family Affair

The physical and financial responsibility of taking care of elderly parents may fall on several adult children, and usually not all are equally able to bear the burden. The result can be resentment, even hostility, and the breakdown of family cooperation.

The key to keeping harmony is communication. Family meetings on a regular basis are key to keeping tensions down and everyone informed. Families can talk over who can pay for care when it’s needed, and who can do physical work for a parent.

Even if a family member lives at a distance, there are things they can do. Consolidating accounts in one bank, setting up online access to paying bills and overseeing financial management are areas that can be handled from anywhere in the U.S.

Ask for Help
The key is to not try to care for your parents alone. Besides getting the family involved, there are also many local and national caregiver support groups and community services available to help you cope with caring for aging parents.

If you don’t know where to find help, contact your state department of elder care services, or call: 1-800-677-1116 to reach the Elder Care Locator, an information and referral service sponsored by the federal government that could direct you to resources available in your area.

Mike Piershale, ChFC, is president of Piershale Financial Group in Barrington, Illinois. He works directly with clients on retirement and estate planning, portfolio management and insurance needs.

One of the Oldest Rules for Retirement Saving Is Wrong, Experts Say. Here’s the Fix

My Comments: It’s Thursday when I post about RETIREMENT.

You’ve heard me say time and again that retirement planning needs to assume one of you (if you have a spouse) is going to be around until age 100. And in every one of those years between now and then, everything you buy will increase in price.

The only way to offset that need for additional funds is to have money invested in the stock market. Don’t count on extra money from Social Security. Don’t count on your bank steadily increasing the interest rate on your Certificates of Deposit.

by Elizabeth O’Brien \ May 1, 2018

You know that old rule of thumb to subtract your age from 100 to get the percentage of your portfolio that should be in stocks? Well as they say in Brooklyn, fuhgeddaboudit!

“You should not robotically reduce your equity allocation because you’re getting older,” says Rich Weiss, chief investment officer of multi-asset strategies at American Century Investments. Instead, most investors should pick a stock percentage that feels comfortable and keep it constant throughout retirement, experts say.

The old rule might have made more sense back when people weren’t living as long. Today, many investors will need their portfolios to last well into their 80s, 90s and even beyond. And you’re not going to get much-needed growth if you stay too cautious with stocks.

Target-date funds are growing in popularity. At the end of 2016, nearly half of all Vanguard investors were invested in a single target date fund — and those with the bulk of their savings in one of these vehicles may be too conservatively invested without realizing it. Designed to be a one-stop-shop for investors, these funds adjust your asset allocation for you and become more conservative as retirement approaches. Once they reach the target year, “the vast majority of target-date funds hit a low [stock] percentage and just stay there,” says Jamie Hopkins, professor of retirement planning at the American College of Financial Services and author of Rewirement: Rewiring The Way You Think About Retirement.

So how much equity exposure is right in retirement? The exact answer will depend on your circumstances, and on who you ask. Weiss says the sweet spot for stocks in retirement is between 35% and 55% of the overall portfolio. People with healthy nest eggs, which he defines as containing at least eight times your ending salary, can afford to stick to the lower part of that range, since their portfolios don’t need to generate as much growth, he says.

Those with inadequate savings should consider sticking to the higher part of the range. Stocks can be volatile over the short term, but over the very long term they have historically delivered positive returns. The Standard & Poor’s 500 has not returned less than inflation during any rolling 40-year period, according to an analysis by personal finance site Don’t Quit Your Day Job. The best rolling 40-year returns were 10.3% annualized after inflation, according to the site. You’re generally not going to find such consistent growth with other assets, such as bonds, real estate, or gold.

Of course, stocks can decline over the short term, and the risk of a downturn is why you don’t want to put all your eggs in the equity basket. It’s also why many financial advisors suggest that retirees keep at least three-years’ worth of expenses in cash or cash equivalents, such as a short-term bond fund, so that they can weather a bear market without having to withdraw from their stock portfolio.

Once you’ve decided on a comfortable stock allocation, you shouldn’t fiddle with it much, if at all. If market volatility keeps you up at night, that’s a sign that you didn’t set the right allocation to begin with, Weiss says. Many investors have been conditioned to use their age as a proxy for their risk tolerance, but in reality, Weiss says, “It’s wealth, not age.”