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Retirement Planning Blog

on 18 December, 2019

how much income will you need in retirement

Calculating how much income you will need for retirement isn’t necessarily an easy task. Your health expenses will probably increase, but your mortgage payments may decrease or stop. Meanwhile, other expenses might continue to change over time.

Of course, you likely won’t have to deal with payroll taxes as much. Chances are you will also see expenses tied to employment, from transportation to a professional wardrobe, decline as well. But other costs may appear in retirement, from pursuing long-sought hobbies to traveling or spending more time with loved ones.

Although you may not even know where to start when trying to estimate how much retirement money you will need, there are a few rules of thumb that you can follow to help get you started.

Start With Your Current Lifestyle and Income

The first thing to look at is the amount of income that you need right now. This will give you a baseline to work off. Say your current lifestyle costs $60,000 of income per year to support. Your future retirement lifestyle will probably need an income that is somewhere near that level, unless major medical expenses arise (which can happen).

If you needed much more income than that to support your future lifestyle, you might consider delaying Social Security. Your benefits will accrue with each year you wait. If you kept on working, it would also give you more time to invest and grow your nest egg. Ultimately, that would help you be even better prepared for the transition to a secure and comfortable retirement.

Since your current income supports your present lifestyle, it's a natural starting point to estimate your retirement income needs.

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on 21 November, 2019

financial conversations you should have during the holidays

Ah, the holidays… an annual time of food, fellowship, and fun with family, friends, and loved ones. Everyone returns home and catches up on all of the family happenings over the past year.

But the holidays can also be stressful and fast-paced, as people have cookies to bake, presents to wrap, and shopping to do. Not only that, they may have various other year-end projects at home or at work. Those who have lost loved ones or who hurt in other ways might also find these times unbearable, since the holiday season tends to be an emotional period.

Even so, it’s still an ideal time for families to get together and discuss their financial concerns with their loved ones.

Why? Because people usually aren't as preoccupied by work and day-to-day matters at this time of year. The holiday festivities may be one of the few times when everyone is together. There are also many decisions that must be made before the year ends.

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on 12 December, 2019

how long might you spend in retirement

People are living longer than before, leading many to ask: “How long could my retirement really last?” In generations past, retirement represented a relatively short period of time in most peoples' lives. They would work until they were 60 or 65 and then live perhaps a few more years before passing away.

But this has become a thing of the past. Today, some retirees could live for as long as another 30 years after they finish with their careers. Many of them are now travelling around the world, starting new businesses, or doing charity work.

The answer to this question will depend upon many factors, such as your projected longevity, financial resources, and current health. If you come from a family of long-lived forebearers, then you may have a good chance of living that long yourself. If you smoke or drink heavily, then your lifespan may not last as long as it would if you quit doing those things.

Thanks to advances in medicine, technology, and wellness, people's lifespans are longer than before. The National Vital Statistics Report from the Department of Health and Human Services revealed that the average American's lifespan has increased by 30 years over the past century.

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on 18 November, 2019

target retirement age planning for retirement

Several factors come into play when you plan for your retirement. Your age, longevity, and the returns that you will earn from your retirement portfolio are just a few. In some form or fashion, all of those can play into your target retirement age.

But one frequently overlooked factor is the day that you will stop working. You may think that you will keep working until you are 70. Nevertheless, this is often an overestimation of how long you will stay in the workforce.

The fact is that you will probably not continue to work for as long as you think you will. That might be due either to health factors or the need to care for parents (or maybe other elderly family members).

This factor can substantially impact your retirement plans by either forcing you to forego retirement goals such as traveling and hobbies or live a significantly diminished lifestyle.

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on 06 December, 2019

required minimum distributions retirement

Uncle Sam can be one of your key partners in your retirement saving. If you have money in a traditional IRA or an employer-sponsored retirement plan, then that money automatically receives tax-deferred status in the eyes of the IRS. Other accounts like SIMPLE IRAs and SEP-IRAs also benefit from this tax-favorable treatment.

Generally, your contributions to those accounts are tax-deductible. The money inside the account grows tax-deferred, or without taxes on the earnings over time, as long as withdrawals aren’t taken.

But you can’t enjoy this tax-deferred growth forever. Required minimum distributions are one way that Uncle Sam ultimately collects his tax dues.

Once you reach age 72, the IRS sets required minimum distributions (or RMDs) for you. You will be required to start pulling a certain amount of money out of your traditional IRAs and qualified plan balances every year.

The same goes for other kinds of IRAs with pre-tax money status. And this money will be taxed at your top marginal tax bracket, regardless of how long it's been in the account.

Before wide-ranging retirement reform called the SECURE Act was passed, the age for starting required minimum distributions was 70.5. If you turned 70.5 in 2019, the old rules apply to you. Check with an experienced tax advisor for guidance with your situation.

There is no capital gains treatment available for traditional IRAs and qualified plans, save for one exception. The sale of company stock held inside a 401(k) plan can be spun off and sold separately under the Net Unrealized Appreciation (NUA) rule.

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on 13 November, 2019

2020 irs contributions limits retirement plans

It's here. The IRS has posted the new income and contribution limits for all types of retirement plans and accounts for 2020. The IRS also covered income and contribution limits for different medical savings accounts.

Many of the income thresholds and contribution limits were raised. Meanwhile, a few stayed the same or changed very little.

Millions of Americans save and accumulate money for retirement using IRAs and qualified plans (or non-qualified plans for highly compensated and key employees). And every year, the IRS updates the income thresholds and contribution limits for a wide variety of retirement and medical savings accounts. This is done to keep pace with inflation.

The changes to contribution limits for retirement plans and other accounts in 2020 are listed as follows:

2020 irs contributions limits retirement plans image 1

Defined-benefit plans will also see change in 2020. The limit for defined-benefit plan annual benefits rises from $225,000 in 2019 to $230,000 in 2020.

And what about the income limit for the Saver's Credit (also known as the Retirement Savings Contributions Credit)? The credit for low-income and moderate-income workers is $65,000 for married couples filing jointly, up from $64,000.

For heads of household it is set at $48,750, up from $48,000. And for singles and married individuals filing separately, it's now $32,500, up from $32,000.

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on 03 December, 2019

financial fails in retirement to avoid

Retirement planning is, in many ways, a guessing game. You can’t be sure of exactly how long you will live. How much income you will need might not be clear. And you don’t know if you will need long-term care support.

Even so, prudence dictates that we have some roadmap for these unknowns. It’s better to plan for these contingencies. Otherwise, you could wind up in financial trouble at some point in your retirement years.

Here are five financial fails to avoid in retirement so you will be better prepared when you retire.

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on 08 November, 2019

retirement red zone pic

When a football team gets the ball inside the opposing team’s 20-yard line, they are considered to be in the “red zone." There it's more likely that they will score.

If you are within ten years of retirement (either before or after), then you are in what many financial professionals consider to be the “retirement red zone.” Famously coined by Prudential, the retirement red zone is a crucial stage for your long-term lifestyle.

Why? Because how your retirement portfolio behaves during this period can substantially affect your standard of living during your golden years.

Just as it's critical that a football team can come away with points from the red zone, it's also imperative that you manage your assets well during this critical period.

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on 26 November, 2019

questions to ask financial advisor during annual review

As the end of the year approaches, now is an excellent time for you to schedule a meeting with your financial advisor. An annual review of your financial situation is an ideal reason to come together.

Not only can you review the financial progress that you made during the year. Your annual review meeting also provides the opportunity to go over your investment portfolio, insurance coverage, and overall financial plan. It’s a crucial moment to see whether any changes are needed, especially if your circumstances have changed somehow.

Of course, money matters and retirement are a moving target. So, you can also set new goals and update your estate plan if necessary.

All of that being said, if you do have a meeting on the books, you might be unsure of the “ballpark” questions to ask your advisor during your financial review. Below are four questions to help guide your discussion and make the most of your annual review meeting time.

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on 06 November, 2019

safe money solutions

As you gear up for retirement, you may have heard of “safe money solutions.” Are they right for you? It’s an important question, especially since retirement planning is more difficult than it's ever been in history.

Past generations could count on company pensions that would pay them every month without fail until they died. But the disappearance of these pensions, coupled with the increase in longevity for retirees, has left many people with more questions than answers.

While Social Security will cover at least some of their expenses, most retirees will have to rely on income from their own investments and savings to make up the difference.

However, what many call a bewildering amount of financial choices in today’s market can leave people feeling frustrated.

According to the Investment Company Institute, nearly 120,000 regulated investment funds are available to retirement savers today. And what about other options? There are more annuities than hedge funds available, which doesn’t even begin to cover the universe of countless other instruments that can be tapped for retirement goals.

All that being said, what if you are looking for some choices that help guard your money and maximize income for retirement? Safe money solutions might be worth a look. And what are they? Generally speaking, a safe money solution:

  • Provides some protection for your principal.
  • Might pay out retirement income with higher confidence than, say, an equity position might give.
  • Offer some growth potential with a guaranteed interest rate or other interest-earning opportunities.

Fixed-type annuities, bonds, and Treasuries are among the asset types that can be called “safe money solutions.” But among all of these, annuities are the only instrument capable of paying out a guaranteed income stream for life.

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