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Retirement Planning Blog

on 10 April, 2018

7 ways retirement plans go bust pt 2

Editor's Note: This is Part 2 of a two-part series on different ways that a retirement plan can go bust. You can find Part 1 of this two-part series here.

In many ways, retirement is like a puzzle. It’s a matter of fitting different pieces together. You probably know what you want your retirement lifestyle to be. The next step is making that vision real. You put together a financial plan to make things happen.

But just planning for retirement isn’t a guaranteed formula for success. We also have to stick to the plan and, at times, revisit it to see if any adjustments should be made. After all, life throws curveballs and life situations change.

Even so, there are many situations that can throw a retirement plan off balance. Those variables can vary, from suddenly finding oneself as a surviving spouse to having personal health decline or taking on the responsibility of caregiver for parents.

While it isn’t a complete solution, understanding some situations that might put a financial plan on the rocks is a good starting point.

on 09 April, 2018

 americans feeling stress money matters

Editor's Note: This is the first 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.

If financial matters concern you, you aren't alone.

A recent survey conducted by Harris Poll on behalf of Purchasing Power, reveals that 87% of survey participants who are employed full-time (or have a spouse employed full-time) are at least somewhat stressed about their current finances. And 25% of the people feeling the heat over money matters measure their stress level as either "quite a bit" or "a great deal" of stress.

So what’s worrying everyone? Plenty. Household bills are the major cause of financial stress among the 900 participants in the Purchasing Power survey.

The primary stress triggers, ranked in order, are:

  • Household bills (mortgage/rent, utilities and transportation) - 47%
  • Lack of funds to cover unexpected expenses (car and home repairs) - 43%
  • Retirement planning (little/ no retirement savings, no post-employment plan) - 37%
  • Healthcare expenses - 34%
  • High credit balance - 30%
  • Accumulating credit card debt - 29%
  • Lifestyle changes (loss of/decrease in household income, elderly care) - 25%
  • Education (tuition, daycare fees, student loan payments) - 21%

 
In turn, these money stressors and others may have a profound impact on people's quality of life.

on 05 April, 2018

7 ways retirement plans go bust

Editor's Note: This is Part 1 of a two-part series on different ways that a retirement plan can go bust. Stay tuned for the second part of our series in the coming days.

Some investors face disadvantages in retirement due to a lack of planning. Lackluster savings, minimal guards against risks, no real strategies for high-cost healthcare or long-term care… These are just a few of myriad ways in how someone may be ill-prepared.  

But there is also the other side to consider. How about when someone does have an effective plan set? Then it's different.

Say that you have created what you feel is a rock-solid retirement plan. When you finally enter this phase of life, chances are you are quite confident about your financial future. Still, planning isn't a sure guarantee of success. Oftentimes, the question of whether someone sticks to their plan is just as important.

What you may not realize is there are several factors that could actually take a retirement plan off course. Those factors may range from being an overly generous parent or grandparent to losing your spouse and needing to adjust your lifestyle to a reduced income.

While it may not be rocket science or a magic formula, knowing these common plan-derailing pitfalls might help you avoid them.

on 04 April, 2018

financial literacy us 2018

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

Now that April is here, it’s National Financial Literacy Month. This is a good time to gauge our knowledge and comfort with money matters. Why? Well, because financial literacy is something that affects all of us.

In its research, the FINRA Foundation has found that financial literacy is “strongly correlated with behavior that is indicative of financial capability.” People with high literacy are more likely to plan for retirement, have an emergency fund, and avoid expensive credit card debt. In turn, those behaviors can lead to quality-of-life outcomes, including more financial wellness, more confidence, and more peace of mind.

But in the same breath, studies show a gap between what Americans say they know and how they actually rank in their financial knowledge base. A recent study brief by the FINRA Foundation drives it home.

In the study, nearly two-thirds of Americans failed a quiz on basic financial concepts.

on 02 April, 2018

 steps to create a retirement income plan

Remember those television commercials from a decade ago showing people walking around town carrying a giant orange “retirement number” under their arms?

That is what everyone thought a retirement plan should look like. A big number that you divvy up and draw down during your golden years. With that strategy you are taking 100 percent of the risks many retirees may face, from market volatility to longevity risk to healthcare risk.

Modern thinking has taught us that, as the average life expectancy continues to climb (Could age 90 be the new 70?), our real concern should be more than a magic number for retirement savings. It should be creating a retirement income plan that ensures we will have income in retirement that lasts as long as we will.

on 28 March, 2018

 gen xers money concerns

Generation Xers, you have probably heard yourselves referred to you as the "Sandwich Generation." For those of you on the upper end of Gen X’s age range (35 to 55) this means that, not only are you likely to be responsible for caring for your long-living parents. You will also likely provide some financial support to your children. For many Gen X parents, that may be helping with college tuition. 

And there you are in the middle, needing to build a retirement nest egg and prepare for your own future needs, like the possibility of long-term care. What's more, you have to account for all the other routine expenses facing retirees.

You may not be feeling like the middle of a sandwich as much as you are feeling like the middle of a famous chocolate sandwich cookie. The two rigid outside edges (financial support for both parents and kids) may seem like they are squishing you—and your financial future—in the middle.

In a recent survey, the Insured Retirement Institute found three key money risks that worry Gen Xers. Below are those money concerns, as well as some ideas to help you preserve your financial strength and maybe even “Double Stuf” your retirement resources in the face of them. But first you need to start the conversation.

on 26 March, 2018

 social security earnings test question

Choosing when to take your Social Security benefits — whether that moment is before, at, or beyond your Full Retirement Age (or Normal Retirement Age) — could be one of the most important decisions you will make for your retirement income plan.

Why is knowing your Full Retirement Age (FRA) so critical? Claiming your Social Security benefits prior to reaching your FRA results in a reduction of your benefit, a reduction that lasts for your entire life. Since Social Security is likely to be the largest “income asset” for many people, understanding what could reduce that payout, and potentially how to avoid that reduction, is paramount.

It's not just that. If you are working and take Social Security benefits before attaining your Full Retirement Age, the Social Security Administration will also reduce your benefits payments should your earnings exceed certain limits. This is called the "Earnings Test" by the SSA and financial professionals. According to Transamerica Center for Retirement Studies, 53% of workers plan to work past 65, and 56% plan to work after they retire.

Given that lots of Americans have working plans for their retirement future, how could the Earnings Test affect their benefits payments? For one, it isn't clear to many people exactly what earnings apply toward the Earnings Test -- and therefore what could affect their benefits payouts. 

on 22 March, 2018

market meltup over morgan stanley

The stock market certainly delivered an exciting start to 2018.

The S&P 500 climbed 7.5% between late December and January 26, when it recorded the last in a string of record closes at 2,872.87. That fateful Friday in January was also the day the Dow Jones Industrial Average reached its record high of 26,616.71.

That may have been the end of a much-anticipated "meltup," which CNBC reporter Sue Chang writes is defined as an unexpected rise in asset prices as a fear of missing out (FOMO) drives investors to surge into the market. Think of it as the opposite of a meltdown. But like a party that gets out of control, what often follows a meltup may be quite a slow clean-up.

One prominent analyst says 2018 peaked early and we shouldn’t expect much growth for the rest of the year.

"We think January was the top for sentiment, if not prices, for the year. With volatility moving higher we think it will be difficult for institutional clients to gross up to or beyond the January peaks," said Michael Wilson, chief U.S. equity strategist at Morgan Stanley Institutional Securities, in his weekly note on March 19, 2018.

"Retail sentiment indicators also look to have peaked in January and we do not see anything on the horizon to get retail investors more bullish than they were following a tax cut."

on 21 March, 2018

 planning for healthcare expenses in retirement

How should you include the price tag of healthcare costs in your retirement plan? Many people underestimate what their healthcare expenses may be. At times, it’s even to a great extent.

In a March 2017 survey by Voya Financial, 69% of baby boomers said they expected to pay “$100,000 or less” for healthcare expenses in retirement. Among retirees, 66% also expected their healthcare costs to be $100,000 or below.

on 19 March, 2018

asset based long term care

An income-rich retirement takes diligent effort to reach. Living well in the golden years means you have to start saving early. Over the years you save and invest some of your income in tax-advantaged retirement accounts, like a 401(k) or a Roth IRA. When retirement starts to draw near, it's time to create an air-tight financial plan that generates the income that would make your ideal retirement possible.

But, if you’re like the majority of Americans, you may not have planned for a big-ticket item that can derail even the best-laid retirement plan: the nest-egg-depleting cost of long-term care.

We know from recent studies that we are living longer than previous generations. However, most of us have our blinders on when it comes to planning for long-term care (LTC). A study by Northwestern Mutual revealed that 56 percent of Americans say that saving for LTC is one of their top financial priorities. But a whopping 73 percent haven't planned for this need.

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