Whether you already have a retirement nest egg or are considering an investment, the Rule of 72 can give you some idea of how fast your money will grow over time. Many financial advisors use this rule to help their clients understand the returns that they may get from a certain investment.
If you are looking for a quick, practical way to see how long it can take for your money to double, the Rule of 72 is highly useful. However, just as with other rules of thumb in finance, it’s only a back-of-envelope formula.
There are some limits to the Rule of 72, and it also assumes that you will get a certain average rate of return each year. Of course, financial markets don’t work that way, so any investment won’t have the same growth rate each year. For those near or in retirement, there is also the potential hazard of sequence of returns risk having an impact on how much money they might have for lifelong retirement income.
In this article, we will go over what the Rule of 72 is, how it works, and how you can put it to good use in your retirement planning and investments in general.
If your employer offers a guaranteed pension plan, then you may wonder whether it’s possible for you to retire early and still get your full pension benefits. Many pension plans follow the Rule of 85, which says that if your age and years of service to your employer total at least 85, then you can retire early without giving up any of your pension benefits.
This calculation is by no means universal. That being said, it’s probably among the most common formulas you will find in the pension arena today. In this article, we will go over the Rule of 85, how it works, what its limits are, and how you can use it in your retirement planning for income and other financial goals.
When planning for healthcare in retirement, you may have come across the Medicare “Income-Related Monthly Adjusted Amount,” or “IRMAA” for short. It’s a fancy way of referring to the extra monthly premium amounts that you might pay on your Medicare Part B and Part D coverages.
Those extra monthly premium amounts are basically “surcharges” on your Medicare premiums, and they can apply to those with Standard Medicare and Medicare Advantage plans. Whether IRMAA applies to you and other Medicare beneficiaries is determined by your modified adjusted gross income (MAGI) from two prior tax years.
While you obviously want to maximize your income in retirement, in some cases this can lead to those additional surcharges on your Medicare coverage. If your income exceeds a certain amount each year, then you may have to pay the monthly adjustment amount on top of any taxes that you owe.
This surcharge is also in addition to the monthly premiums that you will pay for Medicare Parts B and D, which cover doctor visits and prescription drug coverage. IRMAA can raise the cost of Medicare by hundreds or even thousands of dollars per year for those whose incomes are high enough.
It’s a big but little-known issue, to say the least. In this article, we will go over the basics of IRMAA, how it works with Medicare and retirement in general, and some possible strategies that can help keep them and other healthcare costs at bay.
As retirement nears, it’s natural to think about whether you have adequately protected your money. After all, you have carefully saved and built up your nest egg over your working life. Protecting your money from creditors is only too real of a concern should a financial disaster happen.
The good news is, yes, most of your retirement assets are protected in one way or another. The bad news is that the protection is mostly a matter of state law. As a result, the details depend on where you live.
In this article, we will talk about the various creditor protections that you may have in retirement. Keep in mind that this is general information and isn’t intended to be legal advice. If you have any questions about your personal situation, talk to your financial professional and to an experienced attorney.
Are you looking for an experienced retirement financial advisor to help you plan for a secure, comfortable future? Retirement has changed, and planning for it isn’t quite what it used to be. In the past, you worked for the same company for decades and were rewarded with a pension.
Those days are long gone, with pensions now largely a distant memory. People are also living longer, and thanks to advances in healthcare and technology, they can spend up to one-third of their adult lives in retirement.
The question then arises of how to make your money last for all that time. For starters, retirement doesn’t mean the same thing to everyone.
Some want to call it quits with work and enter into a more relaxed lifestyle. Others find meaning in continuing to work, remaining active in entrepreneurship, pursue consulting opportunities, starting their own business, or even embarking on a second-act career. Still, others might want to travel, visit foreign lands that they have dreamed of seeing, or get involved with causes or organizations which they care about.
No matter what, you will want to keep up your lifestyle in retirement. There are many things that can affect your retirement income, including healthcare, rising medical costs, taxes, changing housing situations, and long-term care needs.
The advisor whom you work with needs to understand all of these possibilities and more.
Being a competent retirement financial advisor is about far more than choosing investment strategies and growing your pot of money. It’s about making your money last for the rest of your lifetime, generating reliable income, and providing the resources to enjoy retirement as you see fit.
Suze Orman is a household name for personal finance. She has published many financial books, and millions of listeners tune into her interviews and radio shows. If you have ever heard Suze talk about annuities, you may wonder whether her annuity opinions are on the mark or are a nothingburger.
Yes, opinions are subjective, but even the self-styled “Money Lady” gets it wrong on annuities, especially fixed index annuities. That does a disservice to retirees and those planning for retirement. Ultimately, it limits their options that could help them reach their financial goals: paying them reliable monthly income, giving protection against market risk, offering guaranteed growth above what various fixed-interest assets may earn, and providing other benefits.
Another issue with Orman’s anti-annuity stances is that they often capture only part of the picture of a specific annuity kind or feature. Just like other financial products, annuities come in many flavors, and each one has its own strengths and purpose.
In this article, we will focus on Suze Orman and her public statements on fixed index annuities — and how these opinions miss the mark on how the unique guarantees of these products can help people in retirement.
LIFO means “Last-In, First-Out” – in other words, the gains or interest earnings in an account are distributed first and subject to taxes. FIFO means “First-In, First-Out,” referring to how your principal, or the original sum of money in the account, would be distributed first and would be taxed.
While they aren’t common terms, LIFO and FIFO generally come up in discussions around retirement assets or other financial holdings. For example, non-qualified annuities are subject to LIFO for tax purposes, and both LIFO and FIFO can apply to stocks that someone owns, as another example.
This article will look at both FIFO and LIFO and explain the basics of how they work.
If you are exploring ways to protect your family’s financial well-being, you may have come across permanent life insurance as one option. Whole life insurance is a type of life insurance that millions of Americans own, and it has its strengths and downsides, just as other life insurance kinds do.
As a permanent life product, whole life insurance lets you build cash value. It also offers a guaranteed death benefit, predictable premium payments, and the possibility of dividends that can pay your premiums or provide you with cash.
In later times, you can borrow against the cash value or use it eventually to pay premiums and keep your policy in force. Among the best benefits of whole life insurance are the payment of dividends and the fact that any dividends you earn will most likely be tax-free.
Life insurance policies are either participating or non-participating. A participating policy pays dividends to policyholders. These policies are usually sold by mutual insurance companies (which are owned by policyholders). Non-participating policies don’t pay dividends.
In this article, we will go over some basics of dividend paying whole life insurance so you have a foundation about which you can ask your financial professional for more information.
Do you have a 401(a) plan at work for saving for retirement? What is it, and how does it work?
401(a) plans are a type of retirement savings plan that offer tax-advantaged growth potential for those who use the plan. In this guide, we will explain how 401(a) plans work and some other essential details that are good to know.
We will also answer some typical questions about 401(a) plans that people often have. So, if you are looking to learn more about a 401(a) plan and how you might be able to take advantage of it with your employer, then read on!
You may be familiar with the Rule of 25x as a method for estimating how much you will need to save for your retirement. But most of us don’t really know what the Rule of 25x is or how it works. Is it still useful in today’s retirement world?
At its simplest, the Rule of 25x says, if you save 25 times what you would like your annual income in retirement to be, that sum could last for 30 years.
As with every retirement rule, whether it’s the three-legged stool for retirement income or the Rule of 120, the Rule of 25x is imperfect. It’s good to remember these imperfections when using the Rule of 25x for planning your retirement.
This article will examine how the Rule of 25x works, some of its problems, and alternative ways that you can work to ensure that you will have enough lifelong income in retirement.
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