Needing Retirement Income?

Many pre-retirees are concerned and wondering if they will have enough retirement income when they retire.  So how can they begin to improve their situation?

A simple and excellent strategy is to have all debt paid off by the time of retirement.  For many people this can be at least $1,000 to $1,500 per month of cash flow improvement.   And one of the best ways to possibly accomplish this is to begin years before retirement paying more each month towards your debt.  This can allow you to eliminate your debt much faster with the goal of paying it all off before your reach your retirement date.  In addition, you may also receive an intangible benefit… the great feeling that you owe no one, and the freedom that comes with this.

Don’t make this Social Security mistake!

One of the best financial planning strategies for Social Security is lost if the husband and/or wife begins taking benefits before their “full retirement age”.  Please seek competent professional advice before you or someone you know starts drawing Social Security.  There could be strategies available that benefit you if you will stop and consider them “prior to” filing your application…

Heard on the Street…

True story: this week my 7-year old son and I were driving home from church in a silent truck.  Then, all of a sudden, he yelled out “Everybody knows that!”.   Of course I replied asking, “Everybody knows what?”  His answer: “In 15 minutes you can save 15% or more on car insurance.”  Admittedly, this was not quite what I expected.  Then a few seconds later came his follow-up, “Dad, what’s a percent?

Many times we believe something just because we hear it over and over, regardless of whether we fully understand it or take time to research its validity.  Believe it or not, this happens in the investment world as investors buy into the “hottest stock tip” or become frightened after listening over and over to doomsday predictions.  Regardless of their specific situation or well developed plan, it somehow becomes easier to stray off path when the “noise” gets louder – whether from family, a friend’s so-called “successful investment story” or the news and media.  Remember, you must maintain faith in your plan.

Playing the “what-if” game can be dangerous just like following the latest trend can leave you at risk.  There’s a time to turn down the volume… and when things seem just too good to be true, don’t hesitate to ask your advisor.  It can be good to get a second opinion or an objective viewpoint before making a clouded or emotional decision that you come to regret down the road.

Saving early enough?

I attended a brief seminar last week that featured a former Department of Labor investigator.  As current trends in the qualified retirement plan area were discussed, the following statistic came up among pre-retirees: “the largest regret about my retirement is that I didn’t save enough (or at all) during the first five years I worked” – Did you know that by beginning to save when you get your first job, especially during the first 5 years, you can dramatically increase your retirement success rate?  Two key factors come into play: 1) your investments have longer to compound and grow, and 2) most who do so develop a positive habit of disciplined saving.  If this window has passed by, do you have loved ones you need to encourage to start investing now?  And if you are late, why not start now anyway?  Call us and we can help.

A look back

A look back reveals how far we have come since 2008 – consider these eight event-driven headlines that were seen in the 4th quarter of 2008:

  1. Dow falls below 10,000 (Oct. 6)
  2. Dow finishes worst weekly slide (Oct. 10)
  3. U.S. to buy preferred stake in 9 Financial Institutions (Oct. 13)
  4. Obama Elected President (Nov. 4)
  5. Auto Execs ask Congress for help (Nov. 18)
  6. Madoff charged with fraud (Dec. 11)
  7. Fed cuts Fed Funds rate to a range of 0%-0.25% (Dec. 16)
  8. Oil closes at $30.28 per barrel (Dec. 23)

Considering these and other major headwinds we have recovered from since the crash of 2008, we’ve survived some major events.  Sometimes it’s beneficial to look back can consider what we’ve been through as we continue to look ahead and plan for the future. [Source: Morningstar, Inc.]

Well-equipped for retirement?

According to the Population Reference Bureau, 76.4 million Americans were born in the period 1946–1966.  For retirement, a majority of these Baby Boomers must rely on the 401(k) system or equivalent defined-contribution plans (where the worker does a majority of the savings and, in many cases, may receive matching contributions from their employer).  This is because the key retirement predecessors, “defined-benefit” plans (such as pensions), have increasingly become a thing of the past.

What’s troubling is the Quantitative Analysis of Investor Behavior 2014 DALBAR survey results indicate that investors are not very effective in managing their own investment portfolios.  And among other things, the survey shows that workers aren’t saving enough for retirement.  To quote Dr. Olivia Mitchell, Executive Director of Wharton’s Pension Research Council “more than half of U.S. retirees will rely on Social Security for more than 50% of their total income.”  This will sadly leave them with the painful choice of a significant drop in their standard of living, or even more concerning, the risk of outliving their retirement savings.  One simple conclusion, workers should seek help to review and plan for their retirement – a second set of eyes to help them get, or even stay, on track.