Tag

savings

The State of Retirement

By | 2020, Money Moxie | No Comments

When asked, “When are they going to retire?” Most people reply with a specific age or date, something they have pinpointed and are looking forward to with anticipation. Unfortunately, only 53 percent of retirees leave the workforce based on their planned time-frame. Forty-seven percent are unexpectedly forced into retirement at an early age. This staggering number supports the importance of having a retirement plan that prepares you for all outcomes, those you anticipate, and those you don’t.

In a Federal Reserve study of non-retirees, 40 percent responded they feel their retirement savings are on track.

Sadly, 25 percent responded that they have not prepared for retirement and have no retirement savings. This can be due to many factors. They may work for a company that does not provide employees with retirement savings options such as a 401(k). Often they feel like they should do something but are overwhelmed and do not know how to start or where to turn for advice. If you are in this situation, please reach out to us for assistance.

The number of DIY investors with self-directed accounts changes as they reach their retirement years. This could be for a number of reasons. One is the complexity of turning a lifelong savings plan into an income-producing plan. Like climbing a mountain, the greatest risk comes on the way down. The same is true with retirement savings. Many fear taking on the wrong type of risk and jeopardizing their future income.

Source for all data: Federal Reserve Bank of St. Louis

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How Do You Stack Up?

By | 2020, Money Moxie, Newsletter | No Comments

It is no secret that Americans need to save more for retirement. The amount of money an individual or couple will need to carry them through their retirement years varies based on numerous factors, including age, standard of living, location, expected fixed income sources – like a pension and Social Security – and more. Everyone needs to know where they stand based on their specific needs. Have they saved enough, or do they need to save more? Here are some shocking statistics that illustrate that Americans are falling short.

Source: Federal Reserve’s Survey of Consumer Finances

This chart shows the average retirement savings account balance of active savers. Averages can be deceiving as there are many balances far above the number shown. The issue lies in the realization that there are a significant number of accounts with balances far below the average. This creates a future financial crisis for these savers. Living today on the income they receive is doable. However, it will be almost impossible for these savers to maintain their standard of living in their elder years if they continue at the same rate of saving.

We are not proponents of Rule of Thumb planning. We prefer planning using actual key information specific to each client’s situation. But, in this situation, it helps us illustrate a reality. This chart shows how much someone should have in their retirement savings based on age. The amount shown is a multiple based on a $100,000 income.

Rule of thumb would say, based on the desired income amount you want in retirement, you should have saved a multiple of your current income. The amounts illustrated are multiples of a $100,000 income. For example, if you are age 45, you should have already saved 3 to 4 times your income. If you are 65, you should have saved 9 to 11 times your income. How are you doing?

The good news is there is always hope. If you are not on track, regardless of your age or situation, we can help create a roadmap to get you back on track, one step at a time. Contact one of our Wealth Advisors for more information.

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This Is What We Recommend In an Old Bull Market

By | 2019, Newsletter, Viewpoint | No Comments

Economies fluctuate. They always have. They probably always will. These cycles are imperfect and a little chaotic. That’s what makes them so difficult to predict.

Most people would say we are currently in a bull market and we have been in it since March of 2009. That makes it over 10 years old and the longest bull market ever.

Bull markets don’t die of old age. However, some of the current data is positive, and some is negative. That means a recession in the next twelve months is unlikely, but we should expect a rough road ahead.

What should we be doing ten years into an economic expansion? We should get our finances in order. That means more than just our investment portfolios. We should take a good look at all of our savings and spending as well.

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Where to Park Cash

By | 2019, Money Moxie, Newsletter | No Comments

Let’s say you received an inheritance, or you sold your home or business, or you earned a big bonus. Where do you park your cash while you decide how to make the best use of it? The best short-term account is the one that best matches your needs. Call us to talk about what would be best in your situation. Here are a few ideas to consider:

Savings accounts, money market accounts, and certificates of deposit are FDIC or NACU insured up to $250,000 and offer a fixed rate of return. Other investments are not insured and their principal and yield may fluctuate with market conditions.

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Your Leading Indicators

By | 2018, Executive Message, Money Moxie | No Comments

Dear Financial Partners and Friends!

Leading economic indicators are predictive changes that give us clues about the future direction of the economy. Lagging indicators are after the fact. They confirm what has already happened.

Just as the economy has leading and lagging indicators, so does your personal financial preparedness. Regardless of your age, or alternatively, your personal lifecycle, ask yourself where you are in the following questions.

  1. Do you have a three-to-six-month emergency fund that matches your net income?
  2. Are you free of all debt?
  3. If you were to die suddenly, would your family have enough money to live now and through retirement?
  4. Do you have enough money saved for retirement? (See graph below.)
  5. Are the beneficiaries and contingent beneficiaries on your retirement accounts, life insurance policies, etc., the way you desire?
  6. Have you created will(s) and trust(s) and ensured they are up to date?

If you answered “Yes,” to all of these leading indicators, then you are financially prepared for the future. If you answered “Yes,” to most of these, then you are on the right path. If you answered “No,” to most of these, then you should take immediate action. Please come and talk with one of our expert wealth managers who have the experience, credentials, and training to get you to and through your retirement years.

So many changes can take place within a year’s time, that when it comes to your personal finances, it is better to be safe than sorry. The most important people in your life depend on you. Will they be harmed or helped by your preparation or lack thereof?

Bullish Best Wishes,

Roger M. Smedley, CFP®
CEO

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Where does all the money go?

By | 2018, Money Matters | No Comments

Why does the word budget feel like a personal judgment? Maybe it’s because creating a budget may uncover the spending we know is happening, but don’t want to address. It brings out some feelings of guilt.

Let’s ditch the word budget and call it a spending plan.  Now we are in control. The truth is following a spending plan provides some freedom. Regardless of our age, we need to have a plan. When starting out, a spending plan allows us to have what we need for today while also planning for future needs. It gives us the green light to spend a predetermined amount on things we want and enjoy. Without a plan, we spend first, then save what’s left over. This is a recipe for financial disaster. Too often there is nothing left over at the end of the month. The result, nothing gets saved for the future.

Later in life, we have some financial flexibility and incorrectly believe we no longer need to worry about a spending plan. This is also a recipe for financial disaster.  At retirement are income sources become limited. Making sure our nest egg is available to provide income for the lifestyle we want, throughout our retirement years, becomes paramount. After all, who wants to reduce their standard of living at the time we should be enjoying the fruits of our labor?

Creating a spending plan will take some thought and time but it doesn’t have to be overwhelming. Here are some tips:

  1. Look over your expenses for the past year to determine where your money is going. If you haven’t been tracking your spending, begin doing so.
  2. Categorize your expenditures by non-discretionary and discretionary.
    a. Non-discretionary includes things you must have; groceries, mortgage, rent, utilities.
    b. Discretionary includes things you like to have; cable, eating out, entertainment.
  3. Determine your goals – saving for retirement, down payment on a home, travel.
  4. Decide how much you need to put aside to reach your goals. Then break it down to a monthly amount.
  5. Review your discretionary spending to determine where you could cut back in if needed.
  6. Follow your spending plan. In the beginning, it will be hard and may require a few tweaks.
  7. Use an app or excel spreadsheet to help track your spending.
  8. Review and adjust regularly.

Now congratulate yourself. You have taken the first step to financial freedom!

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After 35 Years, the 401(k) Dominates Retirement Savings

By | 2017, Money Moxie | No Comments

The people who helped start the 401(k) revolution in 1981 lament what has become of it. At the time, the hope was just to help supplement a traditional pension program. The reality is that 401(k)s have replaced pension plans as the main retirement savings vehicle.

Herbert Whitehouse, a Human Resources executive for Johnson & Johnson, was one of the first to recommend his executives use a 401(k) as a tax-free way to defer compensation. “We weren’t social visionaries,” he says. They were looking for ways to cut expenses and retain top workers. However, because many companies have jumped on the bandwagon, pensions are becoming a thing of the past.

Traditional pension plans do have their weaknesses: bankruptcies could weaken or wipe out the plan, and it is difficult for employees to transfer the plan to a new company.

Enter the 401(k) with the promise that an employee could have enough savings for retirement. Teresa Ghilarducci, who directed the Schwartz Center for Economic Policy Analysis offered assurances to Union Boards and even to Congress that 3 percent savings would be enough. She now admits the first calculations were a little “too rosy.”

There were other issues policy makers didn’t take into account, such as workers yanking the money out of the 401(k) or choosing investments unsuitable for their ages.

Only 61 percent of eligible workers are currently saving. A whopping 52 percent of households are at risk of running low on money during retirement.4 These are scary numbers. It is no wonder people fear running out of money more than they fear death.5

The nation’s policy makers and some states have made proposals or started initiatives to help change the behaviors of savers and companies. One proposal would mandate retirement savings and the system would be run by the Social Security Administration. However, we are a ways off from having a solution to a societal problem that could be compounded by the Social Security trust fund running dry by 2034.6

The onus is on each one of us to save for retirement and implore our parents, children, friends, and even neighbors to help patch the holes in a sinking ship by saving for retirement.

The bright spots are the people that have benefited from the 401(k). For example, Robert Reynolds could retire comfortably at age 64 after saving for 3 decades. He says the formula is very simple, “If you save at 10 percent plus a year and participate in your plan, you will have more than 100 percent of your annual income for retirement.”7

Like it or not, we live in a world where 401(k) accounts have nearly eliminated pensions. Your financial future is your responsibility. So, make a personal commitment to save for your future.

 

1. The Champions of the 401(k) Lament the Revolution They Started, Wall Street Journal, Jan 2, 2017
2. The Champions of the 401(k) Lament the Revolution They Started, Wall Street Journal, Jan 2, 2017
3. The Champions of the 401(k) Lament the Revolution They Started, Wall Street Journal, Jan 2, 2017
4. The Champions of the 401(k) Lament the Revolution They Started, Wall Street Journal, Jan 2, 2017
5. http://www.marketwatch.com/story/older-people-fear-this-more-than-death-2016-07-18
6. http://money.cnn.com/2016/06/22/pf/social-security-medicare/
7. The Champions of the 401(k) Lament the Revolution They Started, Wall Street Journal, Jan 2, 2017

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How Much Should You Save For Retirement?

By | 2017, Money Moxie, Newsletter | No Comments

Research shows that we, as Americans, are saving far too little to support retirement lifestyles similar to our current lifestyles. There are three major headwinds that make things worse: people are living longer and will need more money, companies are doing away with pension programs, and Social Security benefits may be reduced if action isn’t taken to shore up the Social Security trust fund.

The pendulum has swung from the World War II generation of savers to the Baby Boom generation of spenders. Inertia has a way of making the pendulum swing back to where we will become savers again.

A perfect example is the Millennial generation. Their first financial experience is the “Great Recession” of 2008 and now they are outpacing the other generations for retirement savings. Rather than wait for outside forces to compel you, start to supersize your savings to make sure your retirement will be everything you dream.

Reference the infographic to see how you stack up to other people in your age group. The infographic shows how many times of your salary you should have saved, an example of how much that is, and what the median savings amount is per age.

Notice how the people in their 20s and 30s are on track for retirement savings. It is really in 40s, 50s, and 60s where people fall behind. This is due to a myriad of reasons such as not saving enough, losing a job, or a major medical expense.

If you are on track for retirement, congratulations. Keep up the good work. If you feel like you are behind, don’t despair. The best thing you can do is to get your ship sailing in the right direction: Get out of debt, pay down your mortgage, and start socking away money.

You should be saving 10-15 percent of your own money towards retirement. If that doesn’t seem possible, try to increase your retirement savings by 2 percent now and then increase it 1 percent each year.

Saving for the future is not always easy, but it is worth it. If you want a personalized analysis to see if you are on track for retirement, please contact one of our private wealth managers.

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Women Should Save 2 Percent More Than Men

By | 2016, Money Moxie, Newsletter | No Comments

In an age where women have an increased influence in the workforce, it doesn’t seem right that women have to save more than men for retirement. However, that is what the research from Hewitt Associates suggests.

There are several contributing factors to this need, some inherent and some that can be corrected. An inherent factor for women is a longer lifespan—living an average of three years longer than men after retirement. The extra 2 percent is needed for the additional insurance cost for a longer life. The lower average yearly salary for women ($57,000) compared to a man’s ($84,000) indicates that a woman should save a higher percentage to match the dollar amount men save. Some correctable factors include: waiting longer to start saving for retirement, investing more conservatively, and not taking advantage of the company match in a 401(k).

Women are able to close the retirement gap by taking a few simple steps.

• Invest early and increase contribution rates. One goal should be to contribute 10-20 percent of gross income into a retirement account. This doesn’t have to be done at once; contributions can be marginally increased each year.

• Ask for advice. Many women feel insecure about managing finances. A wealth management professional can help determine personal risk tolerance and how aggressively to invest money.

• Leave a 401(k) invested. If suspending work due to family reasons, don’t cash out a 401(k)—this avoids taxes and hefty penalties. A 401(k) can be rolled-over into an IRA or professionally managed account.

• Put off retirement for a few years. This may be painful but could mean a great deal down the road. Don’t sacrifice the future for the present.

Women have several challenges that make retirement preparation more difficult. Recognizing these issues and making small changes in their saving and investing habits can have a significant impact.

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