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.
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.
You may have heard of acronyms called “LIFO” and “FIFO” in financial discussions with your advisor or in some other circles. But what exactly do they mean?
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.
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.
When it comes to saving and planning for retirement, there are several mistakes that can cost you big time. To avoid these crucial errors and set the groundwork for a secure retirement, it’s essential to think about the future, plan ahead, and ensure your financial goals are well-grounded.
Keep in mind these 24 costly retirement planning mistakes to avoid. While this isn’t an exhaustive list, it’s a good starting point, whether your “sayonara” to the workplace is on the horizon or you still have some years to go.
Detailed Look at 24 Costly Retirement Planning Mistakes to Avoid
We will go into each of these frequent mistakes in more detail, but here is a quick sum-up:
As you near retirement, it’s important to talk to your financial advisor about retirement. While the essentials of retirement planning don’t change, the 2020s have brought some unique conditions: huge market swings in a short time, fast-rising interest rates, and ongoing global economic uncertainty. For 2024, here are a few questions to ask your financial advisor about retirement. After all, you need to know that your advisor can competently guide you on your retirement goals, build a plan that lets you maintain your preferred lifestyle, and help your money last as long as possible.
This begins with having a conversation around your unique situation. It’s good to ask your financial advisor the right questions that help put everything in context. To help you get started, here are some questions to ask your financial advisor about retirement:
Tell me about what you do to help people with retirement planning.
How long have you worked as a retirement financial advisor?
Why do you do what you do, and what are you most passionate about in this field?
When do you think that I can retire, and what are my options?
Do I have enough money to retire?
What should my retirement goals be?
What do you think of my current financial plan for retirement?
How much can I spend in retirement? Will I be able to keep up my lifestyle?
How will I fund my lifestyle once I have retired?
What will taxes be like for me in retirement?
How long will my money last before I run out of income?
What can you do to help me be ready for major financial risks in retirement?
I have a pension. What could happen if something happened to my old employer or if my pension benefits were cut?
When should I take Social Security benefits?
What should I know and do about Medicare and health coverage in general?
What can healthcare cost me throughout my retirement years?
What do you do to help my retirement plan keep up with inflation?
What can happen if I retire in a recession or market crash? How do we plan for that?
What are some other ‘bad situations’ to keep in mind, and how can you help you plan for those scenarios?
Say I choose to delay retirement or keep working. What are the advantages and disadvantages of doing that?
What can we do to ensure that my spouse or I have sufficient financial resources in place should one of us pass away?
How much could long-term care cost us in retirement? How likely are we to need some sort of long-term care support?
What sort of life changes have you seen other people experience in retirement?
There are many safe money sources out there, but not all of them are created equal. Not all of these “safe money” guides give you the full picture or other details that may factor into your financial decisions. For example, many safe money options won’t protect your assets from the effects of inflation. Other safe money options may come with additional risks that their issuers might not tell you upfront.
In this article, we will go over safe money options to grow your retirement savings safe and sound. You have a variety of safe money options to accumulate money for your golden years, but their value can differ based upon your situation, need for liquidity, potential for growth, and more.
Let’s cover more of your safe money options available to you now — and how some safe money vehicles stand out more than others in different ways.
Are you worried about taxes in retirement? You may want to explore Roth deferral as part of your retirement-saving strategy. Roth deferral is a way to reduce your taxable income and drum up tax savings.
In this article, we will go over Roth deferral, what it is, and how to incorporate it in your tax-planning strategy. This article will also cover ways to use Roth deferral to save money on your taxes. Read on for more insights into this tax-smart money move.
With this option, you make after-tax contributions to your IRA or employer-sponsored retirement plan and then take tax-free withdrawals in retirement. This can be a great way to diversify your tax burden in retirement and maximize your income with tax-free dollars.
The ‘safest’ places to put your money are in low-risk investments and savings vehicles that provide guaranteed growth. These low-risk options include fixed annuities, CDs, Treasury securities, corporate bonds, savings accounts, and money market accounts.
You usually get the highest interest rates with fixed-type annuities of this bunch. There are other fixed-type annuities that can give higher growth potential than guaranteed-rate annuities, if that is something that appeals to you.
Retirement can be an uncertain stage in life. Markets go up and down, inflation rises and falls, and no one knows how long their retirement might last. You can explore options to grow your retirement savings with guaranteed interest earnings and then turn those funds into predictable income streams for retirement.
In this article, we will look at some of the more popular low-risk places to put your retirement money – and what each of those options can involve.
As a small business owner or an entrepreneur, you are used to taking the lead. But there is one frontier you may still need to master… the future of your retirement. That is a matter of doing what you can to ensure all your hard work leads to your ideal retirement lifestyle.
While a 401(k) plan is the dominant retirement bedrock for employed Americans, small business owners are in a different boat. You are your own employer.
So whether you have zero or 100 employees, you must make the choice to act toward building a strong financial future for yourself. Depending on the workplace benefits of your organization, you may also impact those aiding you in your entrepreneurial dream.
And Social Security benefits can help, but only to a point. A motivating factor for building up retirement savings is the fact that, as an entrepreneur, you bring home a certain level of income. Portfolio holdings, personal assets, and savings most likely will play into your needs as a high-income household, as Social Security can only go so far.
Not only that, chances are you make more than the income limit placed by Social Security. For 2024, the maximum amount of taxable earnings is $168,600, up from $160,200 in 2023.
And what is another focal point for small business owners? Over-relying on their business as their retirement safety net. But time and again, historical data has shown this to be true: It’s risky to put all of your eggs – namely, your retirement and financial comfort – into one basket. Read More
Start a Conversation About Your Retirement What-Ifs
Start a Conversation About Your Retirement What-Ifs
Already working with someone or thinking about getting help? Ask us about what is on your mind. Learn More
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