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Retirement Planning Blog

on 15 May, 2018

retirement views by generation

Whether you are one of the estimated 75 million Baby Boomers, 66 million Gen Xers or 75 million Millennials, you have an opinion on your retirement, whether it's now or not quite here yet.

What's also important are the concerns you most worry about most and how ready you think you will be when your retirement day finally arrives. Perhaps not surprisingly, many of us differ in those retirement views by generation. And it matters because of how millions of Americans approach their financial affairs.

Spouses, parents, children, family members, friends, colleagues. These people are a few of many folks to whom Americans may turn for seeking second opinions, weighing their retirement anxieties against others' own, gauging their financial progress, and dealing with other money matters.

Luckily for all of us, companies conduct periodic research to give us insight into what drives our attitudes and behavior on planning for and living in retirement. Their studies can also show how our expectations may actually match up—or in many cases—differ from what we believe lies ahead for us. These results have the potential to enlighten us into action to better help us achieve what we each want for our own retirement.

In its just-published seventh annual Retirement Income Strategies and Expectations (RISE) survey of investors, Franklin Templeton Investments sought to understand perceptions and concerns about retirement savings strategies. The RISE survey specifically looked at how retirement concerns differ by generation.

Not only did the survey find differences between generations, it also uncovered differences between genders within the same generation.

on 10 May, 2018

51 percent of americans enough money retire well

The latest is in on how many people think they will be financially comfortable in retirement.

Nearly half of non-retired Americans said they foresaw an uncomfortable retirement, according to new findings from Gallup. Meanwhile, 51% predicted they would have enough money for comfortable living in the golden years.

What’s the verdict for after retirement? Good news on that front, as the numbers go up. Almost 8 in 10 retirees (78%) reported that they were financially comfortable.

It’s a trend that has been pretty consistent since Gallup started tracking the data in 2002. In past years, 72% and 83%, respectively, were the lowest and highest measures of retired Americans reporting financial retirement comfort.

on 08 May, 2018

how living benefits can help in retirement

Many people know about life insurance and how it may give financial protection. What about using life insurance in retirement? Just look online, and you will find all sorts of opinions on the subject.

No question about it, everyone’s retirement will be different. However, health costs may be a substantial expense for many households, as research shows. And while we all hope to get lucky and be like those octogenarians who take up running and finish a marathon, reality (and statistics) suggests we should be ready for the alternatives.

There’s good news. Consumer demands and care needs have evolved. In response, life insurance companies have come out with new-generation life insurance products – “hybrid” policies that have a death benefit, but that also let you accelerate those benefit proceeds for qualifying health situations.

in Annuity
on 03 May, 2018

are annuities taxable

Are annuities taxable? It's an important question if you are shopping for annuities with the goal of guaranteed income. An annuity can help us sleep better at night, knowing how much income the contract will provide each month and that it can last as long as we do.

But while guaranteed income may sound good, there is also the flip-side to consider. You may wonder about whether annuity contracts might pose a potential tax trap.

It's smart to consider the topic. And why? Because taxes are a primary concern for people in retirement. While released in 2010, a survey by Lincoln Financial Group still has relevance today. 

The study of affluent retirees found that federal income taxes were their largest expense. Among the respondents—age 62 through 75 with annual household incomes greater than $100,000—taxes were their largest expense. The survey results show that nearly 1 of every 3 dollars a retiree spent went to taxes.

Good news, though. A 2016 article by the Center for Retirement Research suggests that a "tax time bomb" may not be inevitable for many retirees. However, that premise is based upon 2007 U.S. household taxpayer numbers crunched by the Hamilton Project.

And other research, like a 2014 study on middle-income household awareness of retirement tax issues by Bankers Life, shows that taxes could well be a considerable chunk of future retiree spending. 

All of which leads back to that question: How could throwing annuities into the mix affect a tax bill?

on 02 May, 2018

how to get guaranteed income pensions go away img

Once upon a time, pensions were a staple of the U.S. retirement system. But in the last 20 years there has been a seismic shift in the way employees fund their retirement. In 1998, an estimated 50% of current Fortune 500 companies still offered their salaried employees a pension, or also known as a defined benefit plan. Today that number sits at just 5%.

With this type of plan, a company makes regular contributions to their pension fund and then provides monthly payments or “partial paychecks” to retired employees throughout their retirement. In that sense, pensions give retirees a source of 'guaranteed income.'

Working tenures in previous decades generally lasted much longer than they do now in our current highly-mobile, job-hopping workplace. You could be with the same employer for 20 or more years, with your defined-benefit pension accruing value over your career. Pensions were often a main motivation for people to stay with the same employer. After investing your work life with that company, you were financially rewarded in retirement.

At retirement, the pension would give the financial comfort of knowing where your money was coming from, month to month, from guaranteed monthly paychecks coming in the mail. For years, the U.S. retirement system was built on this foundation. Then, bit by bit, employer pension circumstances gradually began to change.

Company pensions started to dwindle in number, and while today's continuing shrinkage in pension plans can be attributed to many factors, one well-respected economist points out the effects of recent economic events.

on 26 April, 2018

 using life insurance for college education funding

It probably wouldn’t surprise you to learn that the cost of college tuition has gone up since back in the day when you got your degree. But how much college tuition has climbed may surprise you.

According to the College Board’s "Trends in College Pricing 2017" report, students at public four-year institutions paid an average of $3,190 in tuition for the 1987-1988 school year, with prices adjusted to reflect 2017 dollars.

Fast-forward 30 years and that average is $9,970 for the 2017-2018 school year. If you weren’t a math major, don’t worry, we have a calculator. That's an eye-popping 213% increase. And that is not even taking into consideration the increased cost of room and board, not to mention everything else that causes the college cash register to keep ringing.

on 23 April, 2018

financial literacy matters for happy retirement 

Editor's Note: This is the last feature in a fourt-part series on financial education for April, which is National Financial Literacy Month. To see the first part of this series, click here.

As Benjamin Franklin is credited with saying, “An investment in knowledge pays the best interest.” But actually investing in gaining more financial knowledge is an activity that many Americans don’t seem to do.

While studies suggest that lots of people understand the value of financial literacy, the truth is many things compete for our time. When so much is going on, it’s easy to put learning time for money matters on the back-burner. Even so, what we know drives our money behaviors and decisions, and so a gap in knowledge can hit home in many ways.

This is a complex problem for several reasons. For instance, in one survey, GoBankingRates found that over half of Americans have less than $1,000 in savings. In another study by TD Ameritrade, 96% of Americans knew what they paid for streaming media services like Netflix, but only 27% knew what they paid in 401(k) plan fees.

In fact, the majority of investors in the TD Ameritrade survey thought they paid no employer plan fees, didn't know if their plans had fees, or didn't know how to determine the fees. Other studies have also captured similar data with investors and their familarity with their employer retirement plans.

All of this adds up to an ongoing cycle of money headaches, mistakes, and disappointments for many households. 

on 19 April, 2018

 taxes affect retirement

It would be nice to think that, once you retire and no longer are "bringing home the bacon," worrying about paying taxes would be a thing of the past. But that is not the way Uncle Sam works. 

In fact, unanticipated taxes in retirement can disrupt an otherwise well-crafted retirement plan. Perhaps it's not surprising as to why financial professionals call this situation a "tax time bomb." For this reason, it’s important to consider the impact of taxes when preparing your retirement plan, so you can make well-informed choices ahead of time and budget for taxes as part of your retirement expenses.

What you will pay in taxes during retirement is unique to you and to the make-up of your retirement income sources. But one thing that seems to be universal can be this: how big a tax bite that retirees may face.

on 18 April, 2018

equity market growth slowdown trend

Many economists and market watchers point to both national and global indicators that seem to suggest the heady days of continued market growth may be behind us. The stock market is in its 3rd-longest stretch without a new high since 2013, according to Bespoke Investment Group, which had a market commentary recently featured on MarketWatch.com.

"The Dow is around 9.2% lower from its late-January peak, while the S&P 500 is more than 8% short of its peak. By comparison, the S&P 500 achieved a max drawdown of more than 14% during a commodity and emerging-market selloff fueled by worries over China, according to Bespoke," MarketWatch reported.

Bespoke says the current slump hasn’t been unusually dramatic or long, but it has "kept equities in check after a very big run up in late 2017."

Several economic barometers have recently fallen short of expected growth projections. U.S. retail sales fell unexpectedly in January and then failed to meet expectations the following month. The U.S. added 103,000 jobs in March, well below expectations of 178,000, according to The Wall Street Journal, which noted that hiring remained strong.

Goldman Sachs’s global "current activity indicator" weakened notably in March. A record 74% of fund managers polled by Bank of America then said that the global economy was now in its "late cycle," according to a recent article in the Financial Times.

"Given that investors are already growing increasingly nervous about escalating trade tension — global equities have tumbled by more than 8 percent from their late-January peak — the bout of disappointing economic data could not have come at a worse time," the Times reported.

on 17 April, 2018

 working age investors financial literacy img

Editor's Note: This is the third part of a four-part series on financial literacy in the United States. You can find Part 1 of the series here. Stay tuned for more helpful articles on how you can reach the retirement you have worked hard to attain.

Like other working-age investors, you may have a 401(k) account — or another employer retirement plan. In anticipation of the future, you probably are socking away money for retirement. And if you are lucky, your employer is even contributing to help your nest egg grow even more.

But, with April being National Financial Literacy Month, now is a good time to be honest with ourselves. Many working-age investors don’t fully know what their investments are. Various studies, like the “Wellness in the Workplace” survey by KRC Research, have shown that, in many cases, the majority of working investors don’t understand their retirement plan make-up.  

So, take a moment to ask yourself about whether everything makes sense to you. It’s okay to admit not being fluent in your 401(k) – or even retirement in general – because money matters are hard enough for many of us. And when it comes to retirement issues, you aren’t alone.

A comprehensive barometer of U.S. adults’ readiness to make sound financial decisions is found in the TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) from TIAA Institute and the Global Financial Literacy Excellence Center. This report examines financial literacy across eight common activities: earning, spending, saving, investing, borrowing, insuring, understanding risk, and gathering information.

And the findings aren’t great.

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