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Retirement Planning Blog

on 04 May, 2017

how much should you save to save 1 million dollars for retirement

It's time for the million-dollar question. Literally. How much do you need to save to have $1 million in retirement savings? Apparently, if you’re 21, you only need to save $25 a week to be set for a comfortable retirement. Ah, to be 21 again.

Because that ship sailed long ago for us, we need to make sure that we are financially prepared for our retirement. $1 million seems to be the magic number that comes up often when we talk about retirement savings. This is based roughly on the idea that you can fund your retirement with a 4% draw, supplement with Social Security, and have enough money for a 30-year retirement with a comfortable, if not extravagant, standard of living.

But with lingering low interest rates, market volatility, and lengthening average lifespans, a 4% withdrawal strategy may not work for many Americans. What to do about it?

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on 07 April, 2017

Financial Illiteracy and the Great 401k Experiment

Note: This is the second part of a month-long series on financial awareness in the U.S., 401(k) plans, and how investors are planning – or not preparing – for retirement. If you have an employer-sponsored retirement plan, read on for insights on how a lack of financial education can tie into people’s experiences with their 401(k) plans.

Financial Literacy: A Must for Retirement Success

Financial wellness is the ground-spring for a happy and financially secure retirement. As common sense may indicate, this begins with well-informed retirement planning decisions. But many Americans fall short in their knowledge of even the basics, as numerous consumer surveys document, year after year. And in turn, this knowledge gap can lead into broken retirement dreams: crushing debt, depletion of savings, scaled-back lifestyles, and other headaches that undermine Americans’ post-work standard of living.

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on 04 May, 2017

Time to diversify

You’ve heard it before: the best laid plans of mice and men often go astray. Through all stages of our personal and financial lives, we know there will inevitably be twists and turns. The market goes up, the market goes down. But there are safer routes than others for our money. While there’s no foolproof Waze app for retirement savings and investment, there are directions we can take—and avoid!

First, Let’s Look at Your Withdrawal Rate.

Two key players in the viability of your financial plan for retirement are the size of your retirement nest egg and the pace at which you plan to spend it. This is your withdrawal rate. After putting in the time and consideration to determine the magic number for your retirement and your intended rate to spend it down, you may have reservations about your actual investment portfolio and whether it will perform as expected to sustain you over time.

Since no one can say how long you will live, our lens of The Rule of 100 helps add perspective to this all-important strategy of making sure your retirement income will last.

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in 401(k)
on 30 March, 2017

Will Your 401k Help You Meet Your Retirement Goals

When it comes to retirement saving plans, Americans can have a variety of options. For millions, employer-sponsored plans are a primary savings vehicle – especially 401(k) plans.

It’s no surprise as to why. A 401(k) plan offers a number of benefits, including tax-deferred accumulation, a high contribution limit for pre-tax savings, and in many cases an employer match.

As retirement nears for many Americans, it brings up an important question: How will their 401(k) plan prepare them to enjoy a comfortable, meaningful post-work lifestyle?

Even with these benefits, some Americans are dissatisfied with their 401(k) because they perceive shortfalls in other areas. Personal perceptions of there being limited investment options, "low" access to personal financial guidance with some plans, and a lack of money control are just a few investor frustrations.

There is also the issue of subpar financial knowledge. Surveys indicate many people don’t understand 401(k)s, even though these plans dominate the workplace savings landscape.

According to the Investment Company Institute, as of December 31, 2016 Americans held $7 trillion in all employer-based defined-contribution plans. Of this, $4 trillion was in 401(k) plans – or 57.1% of total defined-contribution plan assets.

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on 25 April, 2017

how much money do you need to retire jpg

The “magic number” to retire comfortably – as worry-free as possible – has always been a hot topic between financial professionals and their clients. Do I have enough to do what I want? Did I save enough for retirement? Have I been living beyond my means? Do I have to keep working for another few years? Will I live to 100? These questions echo in almost everyone’s head, especially late at night. And, for some, they can get louder closer to retirement – when that “magic number” really matters. Luckily, there are many magic numbers.

One Magic Number Does Not Fit All

Take a look at your income before and imagine it after the gold watch. An income replacement number for retirement is often initially based on the income you have prior to your retirement. However, that figure may not apply to the actual income you need after you retire.

What’s your lifestyle now? What will it look like in post-retirement? Traveling around the world? Downsizing and becoming fulltime grandparents? Start a Second Act career? Supporting your kids if they move home? Living large and blowing it on a Porsche? Well, not everyone has retirement plans. So it doesn’t make sense that a “magic number” for one individual, couple or family is universal.

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on 10 March, 2017

Can You Afford to Gamble with Your Retirement Money

The stock market has been surging to new highs. For the first time ever, the Dow Jones exceeded 20,000 in January. Then on the heels of President Trump’s first address to Congress, it charged ahead yet again. The Dow posted a 300-point jump, closing at over 21,000 on Wednesday, March 1. These gains come at a time when market volatility has also been on the decline. In early February the CBOE Volatility Index – more commonly known as the “investor fear index” – showed investor concerns on the decline.

However, even as the market goes up many people still worry about their investments. What will the market do next? Do they own too many stocks? When the market goes down, will it be just be a spill, a correction, or a crash? For that matter, do they have too much money in other risky, market-based investments?

For people close to retirement, this brings up an important question. Should you stay with your current portfolio allocation mix, or is it time to move into a safer strategy?

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on 21 April, 2017

More Americans Losing Sleep Over Money than Before Great Recession

Note: This is the fourth part of a month-long series on financial awareness in the U.S., and how investors are planning – or not preparing – for retirement. Here are some important takeaways that are keeping Americans from financial security and peace of mind.

For the first time in a long while, Americans are feeling more stressed than ever. If surveys are any indicator, money concerns are a big part of it. In fact, more Americans are losing sleep over money issues than before the Great Recession.

According to CreditCards.com, 65% of Americans report having insomnia over money issues – a 9-point jump from 56% in 2007. And what accounts for these new, high levels of stress? Here’s a quick look at the sleep killers for Americans in 2017.

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on 02 March, 2017

planning for longevity in retirement

Good news: People are living longer. But it does come with downsides. For one, increasing lifespans bring greater financial risk, like outliving your retirement money or forking over income for costly health expenditures. Then there is the evolving question of what a longer retirement looks like.

Just some decades ago, many Americans shared a common vision. You worked for the same company for years, often in exchange for a defined-benefit pension. Then you left your job and shifted into a post-work lifestyle, drawing on your pension and living comfortably.

However, times have changed. As evolving trends and statistical projections indicate, retirement could last as long as 20-30 years, or perhaps even 40 years! Now it’s hard to define what retirement should be. That brings yet another challenge: How can we prepare financially for an extended post-work lifespan?

If you wonder about what you can do, here are some quick tips you can put into action. Before we go into those, let’s address an important topic affecting the near future: the pace at which longevity has changed over time.

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in 401(k)
on 13 April, 2017

How can High 401k Fees Affect Your Retirement Success

Note: This is the third part of a month-long series on financial awareness in the U.S., 401(k) plans, and how investors are planning – or not preparing – for retirement. If you have an employer-sponsored retirement plan, here are some strong insights into how high 401(k) plan fees can be detrimental for retirement saving goals.

As prior posts have mentioned, the 401(k) is the retirement savings plan most used by U.S. employers. And millions of Americans use it for their retirement saving goals. It’s no surprise as to why.

For one, the IRS permits pre-tax employee contributions of up to $18,000 (2017 contribution limit). Plan participants aged 50 and up are able to make pre-tax, “catch-up” contributions of an additional $6,000. Many 401(k)s also come with an employer match, providing a powerful savings incentive for U.S. workers.

Yet while the 401(k) is a valuable retirement savings vehicle, it has its downsides. One negative is the presence of high cumulative fees within some 401(k) plans and their in-plan investment menu. Over time, costly high fees can dwindle away earnings, which also siphons off money that would grow with compounding.

So there is also the opportunity cost of the money investors could have earned if those funds remained within their 401(k). It could be a difference of thousands, if not tens of thousands of lost dollars in potential retirement income.

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on 24 February, 2017

How Does Longevity Risk Affect Retirement Planning Intro Image

It’s been said that the 70s are the new 50s. But if a new research study is any indicator, U.S. life expectancy may be set to grow even more. With current American life expectancy sitting at 78.8 years, researchers at Imperial College and the World Health Organization project that longer lifespans could be in store.

According to the researchers’ findings, U.S. life expectancy would lengthen to 83.3 years for women and to 79.5 years for men. The predictions jar against data published in December 2016 in a longevity report from the Center for Disease Control, which found U.S. life expectancy dropped in 2015 – the first time in 20 years.

Now, why does this matter? Longevity risk, or the possibility of running out of money in retirement. As life expectancy rises, the amount of post-work years for which you will need money may increase. According to the Social Security Administration, 25% of 65-year-old Americans today will live past age 90, and 10% of 65-year-old Americans will exceed 95 years of age. So, it’s important than ever to plan for old age in your financial future.

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