The Balance: Saving For Retirement And Your Kids College

Student loan statistics never cease to disturb. In the United States, there are 44 million borrowers with $1.3 trillion in outstanding debt. With that kind of debt burden on new graduates, it’s no wonder that many parents want to try and find a way to save for both their children’s college expenses and retirement.

The reality is, it may not be possible for every parent to save for both retirement and their children’s college. However, there can be ways to find a balance when attempting to accomplish these goals.

Think About Maximizing Your 401(k)

Borrowing from a 401(k) to fund college costs is a plan that can quickly backfire. With early withdrawal penalties and taxes, it’s an expensive option that should probably be avoided. If possible, it may be wise to max out your employer matching contribution to increase the amount that’s saved toward retiring. This can help someone saving for retirement reduce their personal savings burden.

Check Out Your State’s 529 Plan Options

Planning for college is hard when tuition costs keep rising, but in some states, a 529 plan can help by allowing you to prepay tuition costs, locking in today’s prices. Not every state sets up their 529 plans that way, however, in some, the plan acts as a normal savings account.

Get Help With Financial Aid

Taking on the entire burden of school costs without looking into financial aid can be a huge mistake, especially since about 66 percent of full-time students in the 2014-2015 school year qualified for some financial aid. Have your child work with the school’s financial aid counselors to determine which programs, grants and scholarships they might qualify for.

Automate Savings Deposits

Planning to save money and really saving it are two different things. One way to ensure you actually save for both your retirement and your kids’ tuition is by automating your savings deposits. In addition to automating your 401(k) through work, you can automate transfers from your checking account to your kids’ tuition funds and your IRAs every week or month. There are also some bank programs and apps that can allow you to regularly save $1 with every debit card purchase. Some of these programs also help you save the change, the difference between your sales totals and the next rounded up dollar.

Consider Opening an IRA

Every year, you can deposit a good chunk into an individual (non-employer) retirement account called an IRA. You can choose between a tax-deferred Traditional IRA or a tax-free Roth IRA. If you’re in a high tax-bracket now, the Traditional IRA can help you reduce your tax burden, which may leave you more cash to save toward your dual goals. Choosing a Roth means you can take tax-free distributions later on, which reduces the amount you need to have saved.

Even if you can’t fully fund your kids’ tuition costs, the savings you amass can reduce the number of loans they need, putting both you and your child in a much more secure, comfortable financial position during your future golden years.

Spring Your Retirement Plan Into Action!

When you think ahead to your retirement years, you may envision a leisurely lifestyle that is just as charmed and relaxed as spending a leisurely spring day traveling with family or visiting with friends. While spring arrives seasonally whether you prepare for it or not, retiring comfortably can require ample planning and effort. If you have not already started to nurture your nest egg, spring is as good of a time as any to get started.

Preparing for the Future

Before you begin actively creating a plan for your non-working years, you may want to think through the actual experience of being retired. When you work for a living, you can either continue working or sometimes pick up more hours to get extra income if needed. When you are not working, your nest egg is likely non-renewable.  If you run out of income, you simply have no financial means left to support yourself.  Have you thought of that scenario?   If you outlive your cash in the last stages of your life, the consequences can be stressful. This is especially true if you are not physically able to re-enter the workforce.

Adjusting Your Lifestyle

Have you thought about changing your lifestyle?  If not, consider this; changing your lifestyle can serve two purposes.  First, it could allow you to save and invest more money regularly.  Second, it can prepare you to live comfortably on less money after you retire. Simply scaling back, however, is may not be enough to properly prepare for your future retirement goals.  Funding a retirement account can be essential for most people who plan to retire comfortably.  If you are unsure of all of your options available for retirement or how each investment works, you may want to consider talking with us.

Fund Your Account Now

If you are still a decade or two away from retiring, you may think that you have ample time to start saving and investing.  However, the power of time can work magic on a small nest egg.  When you invest now, your money will grow more substantially. This means that you may have to contribute less overall than you would if you start saving later. On the other hand, if you wait, you will could have to make large contributions that may be unmanageable.

Manage Finances Responsibly

Many financial professional will likely advise you to avoid debt when possible.   Most likely, your parents have told you the same!  When you do take on debt, it is often a smart  decision to pay it off as soon as possible. You may want to think about having a well-funded savings account. The money in this account can help you to avoid taking on debt when an unexpected situation develops.

Visualize the Future

It can sometimes be challenging to stay on track preparing for the future while you are trying to enjoy living in the present.  However, if you want to enjoy the future that you are dreaming about, it is wise to take steps today to adjust your finances and to prepare your life for the years ahead. Visualizing the future that you are dreaming about can help you to maintain focus on the efforts needed to achieve your goals. If you have not already started planning for your non-working years, now is the perfect time to develop a plan, a strategic plan based on your specific situation.  We are here to help you develop that plan and assist you in achieving your goals.

Be Ready For The Next Market Correction

Some retirement investors have a portion of their investment in stocks, and this may have served them well.  Stocks have recently been on a roll – and many are near all-time highs. Some investors may think the market is a bit extended.   Aside from relying on luck, what could you do to prepare your retirement nest-egg for the next downturn? Practical tips that you can evaluate and easily implement were provided recently in a Money Online article written by Walter Updegrave. Let’s take a look at the planning he suggests:

Steps To Take Before The Next Market Correction

  • Review Your Stock Holding Allocation

    Could you be too heavily weighted in stocks?  Some may recommend a high percentage of stocks, say 60 to 70 percent, in your investment mix when you are young and just starting out is fine.  Perhaps that may be a good strategy for some to begin with that allocation, but as you near or are in your post-working life, a smaller percentage may be more prudent.  There is no single stock or fixed-income mix that is best for everyone. When the bear growls, you want to be sure your retirement nest egg is protected.  Having a nice percentage of your investment mix safely in cash may not only dampen the volatility of your portfolio, but may give you some dry powder to buy if stocks become really cheap.

  • Tweak Your Budget

    While you are at it, think about your overall retirement budget. It can be as simple or as elaborate as you like. Pay special attention to such things as health care and insurance as well as prescriptions drugs, which may cost more as you get older. Conversely, the amount of money you spend on clothing for work or gas for commuting may decrease.

  • Can You Generate Other Income?

    If your evaluations indicate you may not have enough saved, consider a side-gig after leaving full-time employment. Many folks find that freelancing, consulting, or other such endeavors not only bring in extra dollars, but they are fun and keep the mind sharp.

  • Remember: Patience and Preparedness Go A Long Way!

    Finally, it may help to work with an Advisor that can help you strategically position your retirement portfolio.  Also, exercising patience can be a virtue as well.   Position your portfolio well and realize all down markets are followed by the inevitable upswing.

Having a strategic plan and some cash may help you feel more comfortable with the retirement road ahead.  We are here to help you navigate your journey.

Budget For Retirement Travel

For many people, the dream of traveling in retirement is strong. You may want to plan trips to see your adult kids and grandkids a few times per year, and you likewise may have bucket list trips in mind. Because you do not have a job to rush back home to, retirement is an excellent time of life to travel more. However, some people may not properly budget for their trips. This inevitably means that trips simply do not happen or that financial stress makes them less enjoyable. Learning how to budget properly for your trips is essential if you want to enjoy them fully.

Add Traveling Expenses to Your Budget

The first step to take when planning for trips is to properly fund them. One of the easiest ways to accomplish this is to incorporate traveling expenses into your regular budget. Many retirees create an annual budget, and they break this down into a monthly budget. Even when retirees incorporate a line item for traveling expenses into their budget, they often fail to budget enough money for these experiences. Depending on your plans for various trips, a single trip may easily cost you several thousand dollars or more. If you plan to travel at least a few times per year, your budget will need to be adjusted accordingly.

Prioritize Your Trips

If you are like most retirees, you may have a lengthy list of desirable amazing destinations. However, these you may only be able to visit a few destinations each year. You may want to prioritize the trips that you want to take so that you can cross those off of your list first. Remember to factor in costs for your trips to visit family with your recreational trips. Determine which trips that you want or need to take each year. This is essential if you want to properly allocate funds in your budget for all of your planned trips.

Research Expenses

The expenses for each of your planned trips could vary substantially. For example, you may have plans to drive to a few national parks and to take a trip to Europe a few months later. The Europe trip may be much more expensive. With both types of trips, you may need to essentially create a detailed itinerary. Research accurate costs for each aspect of your trip so that your budget is realistic. Remember to factor funds for food and gas.

Look for Savings

Remember, seniors often qualify for special savings at restaurants, theaters, stores, hotels and more. When you begin planning each of your trips seriously, spend time analyzing all discounts available. Look for alternatives, such as staying at a different hotel that may offer a senior discount. Take advantage of senior discounts, but be aware that other discounts and savings may also be available. For example, you can travel during a non-peak season to likely save a substantial amount of money. You can buy plane tickets on non-peak days or in the very early or very late hours of the day. These are only some of the many ways that you can potentially save hundreds or thousands of dollars on your trips.

Traveling may be one of your primary goals in retirement, but your dreams of taking amazing trips may not happen if you do not have money available. As you can see, you should work on budgeting properly for them in various ways in order to have funds available for your trips. You can get started today by adjusting your budget and researching desirable destinations that you want to visit within the next year. By doing this, you can get the wheels in motion for taking exciting trips to amazing locations.

Getting Organized In Retirement

Once you reach your retired years, you may think that your previous planning efforts would put you in the clear from a financial standpoint. However, the numbers that you use in your projections are in flux. This means that you must stay organized and keep on top of your financial status if you want to enjoy financial peace of mind in the years to come. However, monitoring your efforts on a monthly basis may be overkill. Furthermore, when your oversight of your finances and budget is too frequent, it can be difficult to spot trends and potential issues. With this in mind, it is great to take organizational steps at the beginning of each year. When you fall into this habit, you can stay on track to meet your future financial goals.

Review Last Year’s Spending

Your personal budget in your retired years will fluctuate considerable, and many retirees notice that their expenses tend to increase over the years. For example, our budget may have been well- organized initially, but it was riddled with uncertainties. After all, you did not know with certainty what the inflation rate would be like, which service providers would increase rates and more. When you keep your budget updated based on realistic numbers, you can better plan for the future. A smart idea is to review your average expenses for all categories over the last year and to update your budget accordingly for the next year. Projecting your budget for the next several years is also a smart idea.

Check Your Debt Balances

Part of your planning efforts to prepare for your retired years may included paying off all outstanding debts. However, you can accumulate new debt in retirement. For example, you have had a financial emergency that resulted in credit card debt, or you may have needed to use auto financing to buy a new car. Therefore, get in the habit of always checking your debt balances each year. Your goal should always be to eliminate debt balances as soon as reasonably possible.

Analyze Investments

Just as you need to monitor your progress with debt reduction, you also need to analyze your investment accounts. Your future income is based on how much money you withdrawal from your accounts now as well as how well your investment accounts grow. It is just as important to stay on top of these accounts in your retired years as it was to stay on top of them in your pre-retirement years.

Update Your Net Worth

You do not necessarily need a specific net worth figure to retire. You simply need to have low enough expenses that you can live comfortably on the income that you have available. This is a simplistic description of finances in your retired years. For example, you need to take into account inflation, increasing medical expenses and more. However, when you update your net worth figure while taking these other steps, you can see how your wealth is increasing. Seeing how much progress that you have been between last year and this year can help you to feel more relaxed. Keep in mind that many retirees who properly manage their finances may see their net worth continue to increase over the years.

Financial management does not end after you retire. In fact, preparing for retirement is only the first step. Once you are retired, you must stay on top of all aspects of your finances so that you can ensure continued financial freedom going forward. Remember that it is easier to correct issues sooner rather than later.  A yearly review is common for our clients, if you need help staying on track and maximizing your retirement goals, call us today.

This Could be Your Biggest Expense in Retirement

No matter what your age, it’s important to start preparing for the time when you eventually retire. One of the biggest financial issues you may encounter by the time you’re ready to stop working is how much money you will need for your health care. In general, this can be a sizable amount. On average, a person of 65 would need around $190,000 to pay for costs related to their health. This estimate doesn’t even take into account any preexisting chronic conditions or disabilities.

Unfortunately, the one mistake people could make regarding retiring is that once they reach the age of 65, they will be eligible for Medicare and that it will cover all their needs. However, in reality, Medicare isn’t free and people are responsible for covering their premiums, deductibles and copays. Retirees who require coverage for dental care, prescription drugs, vision or hearing are also required to either buy additional insurance or pay for these things out of pocket.

However, there is good news. There is a lot you can do to manage the costs of your medical care. Planning ahead can really be a lifesaver for your costs once you retire. These are ways you can ensure that you are covered:

Health Care Investment Account: Creating an investment account for your estimated medical costs can be a great idea. You should ensure that it’s kept separate from your other retirement money. Estimating how much you will need for the future can help you to be successful at saving for these costs. Additionally, these types of accounts also allow you to save money on your taxes.

Consider Long-Term Care Insurance: Over half of people 65 or older will require long-term care at some point in their lives. Getting a long-term care insurance policy can ensure that your future health needs are met if you require assisted living, home care or a nursing home. This option is also expensive, but it is well worth it if you save early on and already have chronic health conditions or a family history of certain conditions.

Take Care of Your Health: Obviously, if your health is better after retirement age, it will be easier on you from a financial standpoint. Your health care expenses will be less than that of someone who isn’t in good health. Eat a well-balanced diet, incorporate physical activity into your everyday routine, maintain a healthy weight and get a good night’s sleep daily. This offers you a dual benefit in enjoying better health than your peers and helping you save money in the long run.

Use COBRA: If you had health insurance through your last job, you can take advantage of COBRA to continue using it after you retire. COBRA allows you to use your work health insurance for up to 18 months after you leave the job as long as the company employs at least 20 employees.

These are great ways to go about planning for the time you eventually retire. They can help you to save plenty of money on any medical related costs and can bring you a sense of ease.

10 Reasons You May LOVE Being Retired

If you are like many people, you are probably looking forward to the time when you can retire. It marks the end of an era and serves as a reward for all the hard work you have done over the years. Retirement is a time you can truly enjoy yourself and reap the rewards of all those years of being in the workforce, no matter what your chosen profession.

Since Valentine’s Day is the day of LOVE we thought we should take a look at the many reasons you may LOVE being retired!   After all, when you’re retired, you don’t have to plan your Valentine’s Day plans around your work day.

It is likely there are personal reasons you’ll love being retired. These are the 10 most notable.

1. Less Stress

Being retired means you no longer have all the same obligations as when you were working. Your kids have probably all flown the nest and are living on their own. You may have also already fully paid off your mortgage. As a result, there are far fewer demands on you, which means you experience less stress as a retired person.

2. Go to Bed and Wake Up When You Like

With retirement comes the ability to go to bed and wake up whenever you want. No longer do you have to set an alarm to wake you up early in the morning. You can turn in late and sleep in to enjoy whatever you like the next day. Sip your coffee in your pajamas while watching your favorite morning news program, talk show or game show. Since there are no obligations in terms of when you go to bed and when to rise, you may also find your sleep improving and that you’re feeling more rested each day.

3. Avoid Annoying Commutes

One of the best things about being retired is that you no longer have to deal with having to commute to work on a daily basis. Whether you rode public transport or drove to work, you no longer have to endure the crowds and excessive traffic during rush hour. It also leaves open more time for important appointments in the middle of the day, such as for medical or dental purposes.

4. You Can Wear What You Want

You no longer have to worry about planning what to wear to work. Instead, you can wear whatever you like and can dress casually in your favorite pair of worn jeans and T-shirts or even baggy sweats. After retirement, you no longer have to worry about wearing corporate pressed suits, uniforms or even business casual attire.

5. Spend More Quality Time with Your Spouse

If you and your spouse are both retired, you can spend more quality time together. Even if you’re the only one retired, you can still spend more time with your loved one. It can make planning date nights easier or you can simply spend time together in the comfort of home.

6. Be More Spontaneous

Being retired means it’s the perfect time to be more spontaneous. If you want to get out of the house and go for a refreshing walk in the park in the middle of the day, you can. You can even go away on a trip to another city, state or even country. Now that you have so much free time, you can be as spontaneous as you like.

7. Do Things You Love

While you were working, you no doubt had limited time for certain things. Once you’re retired, you can pursue creative outlets and do other things you enjoy. You may even want to take a course at your local community college that allows you to engage in a specific activity.

8. Exercise More

After retiring, you have more time to exercise. You can go running, walking, biking or swimming whenever you like or even hit the gym a few times per week.

9. Enjoy Cultural Pursuits

You have more time to go to the library to read, visit museums and go to art galleries. These cultural pursuits may have been difficult to enjoy while you were working.

10. More Relaxed

Finally, after you retire, you can relax more in general. You can experience the type of freedom that wasn’t there when you were working.

You don’t need cupid to tell you that planning for a successful, stress free, retirement is important.  We are here to guide you and help you fall in love with your “golden years”.

How a Divorce Can Affect Your Retirement

Divorce can be hard on many levels. One of the things that can be crucial is the financial split of the couple’s assets. These assets include retirement benefits and investments. Figuring out how benefits should be divided, or if they are even able to be divided, can be a minefield if not navigated properly.

It is often that one of the spouses becomes the couple’s treasurer, but it is important that both partners are aware of the couple’s financial situation. This is especially true when it comes to investments. If one spouse was not as attentive to the tax responsibilities, it could affect the other spouse’s share. If the spouse was deceptive about the couple’s investments, this could make issues between the couple even worse. Hiring a forensic accountant can help find discrepancies or deceptive practices by the responsible spouse.

When it comes to retirement benefits, there are only certain things eligible  to be split during a divorce. Those eligible are considered community property, and include things like military pensions, GI Bill benefits, IRAs, employee stock option plans, and 401(k) plans. Benefits that are not considered community property are Social Security benefits, Worker’s compensation, and any military injury compensation. It is often advised that if the spouse’s benefits are sizable that the other spouse should petition to split the benefits. Benefits are usually split by percentage instead of a money value in case the value of some of the benefits fluctuates between the time of evaluation and actual settlement.

There are some other exceptions and considerations  when it comes to benefits. For instance, if a spouse invested money or started a 401(k) before the marriage and continued to pay into them during the marriage, the amount invested before the marriage must be deducted from the total amount before any valuation can be made.

When it comes to Social Security benefits, a couple must have been married at least 10 years for one spouse to have a claim to them. However, the claiming spouse cannot have their own Social Security benefit value exceed half of their spouse’s. If there is a possibility that a spouse will have a claim to the other’s Social Security benefits, they may request a delay in proceedings in order to pass the 10 year threshold. If the length of marriage is close to 10 years, the court may issue a continuance. If the spouse with the Social Security benefits dies after the proceedings are over, the surviving former spouse can collect 100 percent of their Social Security.

When married couples split up, the financial quandaries can be messy. Knowing the law, and getting advice from a financial expert is a good idea for both spouses involved. It is beneficial for both spouses to be well aware of the collective financial situation so surprising issues like back taxes or hidden assets can be avoided. Maintaining the financial futures of both former spouses is key to making sure the separation is a clean one with no resentment or animosity between those involved.

It’s Not Too Late For Retirement Resolutions

The first month of 2018 is behind us but it is not too late to take stock of various aspects of our lives. One of the primary areas that is commonly reviewed each year is personal finance. If you are thinking about retiring within the next few years or longer, you may want to create a resolution or two so that you can better plan for your non-working years. However, some people believe that it is simply too late for any type of plan to be effective or beneficial. While it is better to start preparing for non-working years early in your adult years, starting now is better than not making any preparations. These are some of the areas that you can resolve to address in the near future.

Set Retirement Goals

Everyone has some dream about what their life may be like after they stop working in a full-time position. For some, the goal is to continue working on a part-time basis. Others want to travel, and some may simply want to be closer to family. A primary resolution should be to define your goals. Without specific goals, it is unlikely to properly plan for the future. After all, maintaining your lifestyle if you travel frequently may be much more expensive than if you stay close to home.

Eliminate Debt

Another resolution should involve eliminating debt. Debt cannot usually be paid off quickly, so resolve to create a feasible debt reduction plan. When you pay debts off now, you can reduce the amount of income that is needed after you retire. For example, if you pay off your mortgage, car loans and credit card balances, you may be able to live on several thousand dollars less each month. By reducing the income that is required to live comfortably, you can feasibly retire with less money saved up.  Of course, using those funds now may prohibit you from maximizing your financial preparedness for retirement.  We can help guide you through these planning decisions.

Prepare a Budget for Retirement

In addition to making a plan to eliminate debt from your life over the course of the next few months or years, you also need to prepare a budget for your non-working years. This budget will include estimated income from all sources after you quit working. It also will include reasonable estimates for expenses. Your planning should focus on cost-of-living adjustments related to inflation. If you plan to relocate to a new town after you retire, your budget should be realistic for that specific area.

Update Insurance Coverage

Many people who are preparing for the future fail to take into account changing insurance needs after leaving the workforce. As you get closer to retiring, determine if you will continue to need life insurance. Analyze your need for different types of medical insurance and long-term care insurance. Each retiree is in a different position, so there is no catch-all rule regarding how much or what types of insurance you need to have. Remember to update your budget with the premiums for these various insurance products. It is also wise to take into account deductibles that are associated with each policy when determining how much money you will need.

Some people are so discouraged by their late start at planning for this stage of life that they simply throw in the towel. However, you can see that your initial efforts in each of these areas can help you to get on the right path. Even though you think that you may be far behind others who are your age, you may be in a better position than you appear to be at first glance. When you make these important resolutions and start acting on them quickly, you can move forward with confident footing as you approach your non-working years.  Call us at the number below if you need to review your current retirement plan.

Bitcoin and Your Retirement Portfolio

Did you hear about the people that are mortgaging their home to invest in Bitcoin?  It seems that as more and more people become interested in Bitcoin, that more people are thinking about adding it to their portfolio. With the recent major price increase of this cryptocurrency, there seem to be two opinions; one side is saying that Bitcoin is just a fad and that it serves no real investment purpose, while the other side feels the gains are worth the risks. With so many people and opinions out there telling you what you should do, you need to know something before you start to trade Bitcoin or you want to put it in your investment portfolio.

The first risk factor you need to know about Bitcoin or another cryptocurrency, is that it is not regulated at all. Exchanges are regulated, but not the actual asset. That’s right, there is no government agency making sure that the asset is safe or regulated, it is more of a community regulation. This is an obvious risk for investors close to or in retirement, who are more concerned with investment security and safety. Another risk with Bitcoin, it is a volatile investment with the price of the cryptocurrency changing by the minute at times.  The price can literally go up thousands of dollars in a single day, but can also go down a thousand dollars in a single day.  This risk should really be taken into consideration as anyone investing close to or in retirement are likely not in a position to make up for sharp losses if the crypto price falls dramatically and does not go back up. Another thing to know is that Bitcoin is the biggest cryptocurrency but that does not mean that there are not other cryptocurrencies that are high risk as well, such as Ripple, Etherium and more.

Bitcoin and other cryptocurrency have another risk factor, security.  Yes, there have been hacks in the Bitcoin community recently.  One of the largest hacks came in December of 2017 worth 70 million dollars!   This currency is an online or digital currency so security is important and the industry is still navigating their way through these situations.

Adding crypto in your retirement portfolio can be risky, especially at a time in your life when most experts agree that you should reduce your risk to protect your accumulated assets.  Whether it be the stock market or the volatility of Bitcoin, risk is not your friend in retirement.   Make sure that you understand each risk in your retirement plan, have a diverse portfolio and understand that you should have a clear goal and strategy. Rather you are a day trader trying to make fast profits or you are a person trying to save wealth for retirement, you need to be sure that you add some cryptocurrency in your portfolio and that you are aware of the big price movements.

In speculative investments like this, it is wise never to invest more than what you can afford to lose.  Retirement is not the time to put it all on red at the roulette table!