Category: Retirement

The Benefits of a Modern Retirement Plan

The Benefits of a Modern Retirement Plan

If you are like most people approaching retirement, you are probably wondering if you’re financially ready. You may have a pension. You plan on collecting social security. You may have put money into your employer’s 401k plan. You and your spouse may each have an IRA and some money in the bank. You may have some life insurance or an annuity or a long-term care policy.  

Does that mean you can retire when you want? The answer is: it depends.

There are lots of things that can happen in the 20 to 40 years you will be retired. Here are a few things that may cause you to ask questions.

Question #1: Is your Social Security safe? 

The Social Security trust fund is currently projected to be able to pay full benefits until 2035. How will it affect you if the funds run out? A retirement plan should answer that question.

Question #2: Is your pension safe?  

Company and public employee pensions are underfunded. What happens if your company, city, or state goes bankrupt? It could happen.

Question #3: How long will your retirement savings last?  

You may be planning on your investments continuing to grow at the rate they have in the past, but what if they don’t?  

Question #4: How risky are the investments in your portfolio?  

Many people have been lulled into believing that all they need to do is put their money into a low-cost index fund. The index lost nearly 50% in 2009 and 34% in March 2020. If you’re still investing in stock index funds as you near retirement just because they’re “cheap,” you may be taking on way more risk than you realize.

Question #5: How much will it cost if you or your spouse need to go into a nursing home?  

Long-term care insurance may pay for it, but the insurance is not free.  For some people buying a policy makes sense, while for others it might not.  A financial plan can help answer whether a long-term care policy is right for you.

Question #6: What happens if inflation comes roaring back?  

Living on a fixed income after you retire makes inflation a much bigger threat than when you were working.  

Question #7: How does living too long or dying too soon affect your retirement plan?

Critical decisions are often made during the retirement process without enough consideration of how long you will live. While a plan can’t answer how long you’ll live, it can project how your plan will be altered if you live longer or shorter than you think.  

 

In the past, retirement planning was a static process. Planners took the information supplied by their clients and provided a book of charts and graphs designed to show their financial condition for decades in the future. The technology limited what you could do.  

New computer programs allow Financial Planners to run thousands of tests to analyze a number of different scenarios. The new planning process also allows people to check, update, and re-review their plans as time passes and conditions change. These programs allow scenarios to be run in real-time and can be generated for a modest cost by Certified Financial Planners™ (CFP®s) who specialize in retirement planning.

Fearing Retirement Failure?

Fearing Retirement Failure?

Retirement planning is complicated.  It may not be rocket science, but there are a lot of variables that can affect how you are going to do financially 10, 20, 30 or even 40 years down the road.  As a result, too many people don’t do any planning.  Even worse, because they don’t have a plan they don’t give enough thought to saving for retirement.

A fifth of Americans don’t have even $5,000 saved.  Nearly half of all Americans now expect that they’ll have to work beyond the traditional retirement age.  Those numbers indicate that most people have put off retirement planning and saving, which brings to mind the old refrain “if you fail to plan, you are planning to fail.”   The truth is that you can do it, but most people need help.

There are so many variables in life that tend to make planning difficult.  How long will you live?  What will your health be like as you age?  What will returns be on stocks and bonds before and through your retirement?  How fast will the cost of living go up?  Will your income increase between now and your retirement?  How much income will you need when you retire?  What will the tax rate be in the future when you are retired?

That’s where having a financial planning advisor is so helpful.  They are not prophets, but they can create a plan with conservative assumptions that can be updated from time to time to provide guideposts and milestones on your way to retirement.  Advisors who specialize in retirement planning can begin a discussion with anxious individuals and couples and offer the appropriate level of support.   An advisor’s job is to help you create a path to financial success and to teach and encourage the behavior that helps get you to your goal.

A good advisor helps remove the fear of failure and encourages good financial habits.   Time is your most valuable asset and the clock is ticking.  Call us today to get started.

Don’t “Guess” Your Way to Retirement

Don’t “Guess” Your Way to Retirement

Participants in a recent study answered that they arrived at the appropriate amount they’d need to fund their retirement by guessing.

Retirement is too important and too final to go into with guesses.

When you tell the boss that you’re leaving your position, you should have a plan for what comes next.  If it’s a promotion, another job for more pay, or something that gives you more responsibility and a clearer career path, that’s a good thing.  On the other hand, if you’re leaving to start your retirement, with years (or decades) without a steady paycheck, you had better know what you’re doing and have a clear plan.

Retirement comes with more than just leisure time.  We continue to age, visit the doctor more often, and our skills get outdated, making it more difficult to get another job if we find ourselves in need of additional income.

True story: I knew a retired rocket scientist who got a job in the tool department of a hardware store to supplement his retirement pay to maintain his standard of living.

A financial advisor who specializes in retirement planning can help facilitate discussions on several key issues, enabling genuine retirement planning to take place.

If you or someone you know is contemplating retiring, give us a call.  We’d be happy to sit down over a cup of coffee and discuss what you need to retire.

Universal Rules for Retirement

Universal Rules for Retirement

Universal Rules for Retirement

We have written a lot about retirement because it’s critically important for so many people. We have years of experience getting people prepared for retirement and beyond.

Here are nine things that people facing retirement need to know:

  1. When you retire your living expenses may not go down. In fact, the first few years after retiring you may spend more because you have more time for leisure activities such as travel and hobbies.
  2. Inflation is a very big problem for retirees. The cost of basic living expenses like housing, food, utilities, and clothing will go up over time but your retirement income may not keep pace. Inflation will erode the purchasing power of your savings and pensions. Most people will live decades in retirement. Create a plan to offset the effects of inflation.
  3. Try to determine how much of your basic living expenses are covered by Social Security and pension income. Fewer companies offer pensions today than ever before. This makes wise investment decisions more important than ever.
  4. Decide when to apply for Social Security. The longer you delay the higher your monthly payment. If instead of claiming at age 62 you wait until 70, their payments increase by more than 75%.
  5. It’s possible that both Social Security and pension benefits may face cutbacks in the future. Both are underfunded. These are serious concerns, especially for those who have many years before retirement.
  6. Everyone is eligible for Medicare at age 65. Read the Medicare rules carefully. If you don’t sign up during your initial enrollment window, you can face a 10% increase in Part B premiums for every year you don’t enroll unless you qualify for an exception. The average 65-year-old couple needs $285,000 to fund health care retirement costs. That does not include long-term care expenses.
  7. Be prepared for the possibility that your lifespan will be longer or shorter than the typical actuarial estimates. The median life expectancy for males is age 89 and for females is 91. 10% of males are still alive at age 98, 10% of females live to 100. Many elderly are concerned about outliving their savings.
  8. Make wise investment decisions to fill the gap between your guaranteed income and what you plan to spend. Avoiding major losses. Most people need investment advice. Find an Investment Advisor who is a fiduciary, preferably an independent fee-only advisor who is also a CFP® (Certified Financial Planner).
  9. HAVE A PLAN BECAUSE YOU ARE GOING TO BE RETIRED FOR MANY YEARS.

Check out our website to find out how a Korving & Co. Certified Financial Plannerprofessional can make your retirement plans a reality.

How Much Do I Need to Save Every Month to Retire a Millionaire?

How Much Do I Need to Save Every Month to Retire a Millionaire?

How Much Do I Need to Save Every Month to Retire a Millionaire?

In theory, $1,000,000 saved for retirement should allow you a pretty decent lifestyle during your golden years.  Getting there is not nearly as difficult as it looks, especially if you are young and smart about saving.  

Young people have an advantage that older folks don’t have: time is on their side and the magic of compounding allows them to put less money aside to reach that million-dollar goal.

Here’s how a 25-year-old can retire at age 65 with a million dollars:  put $322 each month into a tax-sheltered account, like an IRA or a 401(k), and if you invest it wisely and get 8% average annual return until you’re 65, you will be a millionaire.  Your total contribution to your retirement will be under $155,000, the rest is earning on your savings.

If you start later, here’s how much you will have to save monthly:

How Much Do I Need to Save Every Month to Retire a Millionaire?

Of course, this assumes that you invest to get an average annual return of 8%.  That’s not unreasonable if your portfolio is heavy in stocks and you have a long-term time horizon.  

If you play it too safe with your investments, you will see lower returns and therefore you will need to compensate by making larger contributions to have $1,000,000 accumulated by age 65:  

If you are like most Americans, you are a few years behind on your retirement savings.  However, please note that the examples assume that monthly contributions stay the same. In reality, as we get older and earn more, we can usually afford to put more money aside.  This may be a good time to meet with a financial planner to determine how to reach your retirement savings goal. Call or email us today.

How Unsteady Is Your Retirement Strategy?

How Unsteady Is Your Retirement Strategy?

How Unsteady Is Your Retirement Strategy?

The government’s General Accounting Office (GAO) reports that 48% of people aged 55 and approaching retirement have nothing in retirement savings. That statistic is not quite right, but the reality isn’t too much better.

The GAO counts those who have nothing in an IRA or 401(k) plan as having saved nothing for retirement. But what they don’t know – or know and don’t take into account – is that retirees may have sources of income outside of their retirement plan savings.

Having a traditional pension that pays you a guaranteed income for life is the equivalent of hundreds of thousands in retirement savings. It’s one of the major benefits that public sector employees enjoy. Many corporations have eliminated pensions and offer 401(k) type plans called “defined contribution” plans. However, some businesses still do offer these.

That leaves about 29% of Americans without pensions or savings, but that’s not the complete story. People who have saved or invested in investment accounts that are not classified as “retirement accounts” are included in that 29%. Your home is an investment and many older Americans own their own homes. Unfortunately, a lot of older homeowners still have mortgages and carry credit card debt.

So that 48% number is not as bad as it seems. But it is a fact that too many older Americans are increasingly reliant on Social Security for retirement income. That’s a problem.

Social Security is shaky and getting shakier. Its reserves will be depleted in about 15 years. If Congress does not fix that, the Social Security Administration will have to reduce benefits. With the rise of health care costs, a large part of people’s Social Security check will go to Medicare. Medicare Part B premiums are automatically deducted from one’s Social Security check.

The bottom line for those over 55 and hoping to retire one day is to think ahead. Do some planning and don’t assume that retirement is going to take care of itself. Your retirement savings are your insurance policy against having to reduce your lifestyle after your paycheck stops.  

Take the time to get a comprehensive retirement plan. The benefit of a plan is that it tells you, in actual numbers, how much money you will need to retire and how much you will be able to spend during retirement. Find an advisor – an experienced Certified Financial Planner™ professional – who will guide you. Do it now before time slips away.  

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DIY Retirement

The Risks of Do-It-Yourself Retirement Plans

Do-It-Yourself Retirement Planning?

A report recently published by the Federal Reserve Bank on the economic well-being of U.S. households discusses what people have saved for retirement versus what they will actually need, commonly known as the “retirement gap.”  The survey found that only 47 percent of DIY investors were comfortable with handling their own 401(k)s, IRAs or other outside retirement accounts.

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Do I Need a Financial Advisor?

Investment Approach

Not everyone needs a financial advisor. But if you are not sure about how your financial assets should be invested, or if you have made major errors when you invest, you are a candidate for getting professional financial advice.

Fees are the main barrier that keeps people from getting the kind of advice that would improve their financial lives.

But just as doctors get paid for keeping us healthy and lawyers for protecting our interests, getting good financial guidance is worth every penny. Solving our financial problems has a huge impact on our lives. Making sure we don’t run out of money during a retirement that can last decades is often people’s biggest fear in life.

People who are in good shape financially may not need assistance. However, too many times people need guidance but are reluctant to pay for what they need. Instead, they search the internet, or ask friends or family who are often not knowledgeable. And even if they get good advice, friends and family are not going to create a plan and make sure that the plan is followed. That’s not their job.

That’s were a professional investment advisor comes in. They’re paid to help you create a plan, to design a portfolio that aligns with your plan, to manage that portfolio and to alert you in case the plan needs adjusting. Like a physician conducting a periodic physical, a financial professional keeps track of your progress and fixes it when things go wrong.

If you think you may need help, find an advisor in whom you have confidence, pay them a fair fee for their services and you’ll be rewarded with peace of mind knowing that your financial future is in good hands.

5 Reasons Why You Should Work with a Professional to Create a Retirement Plan

  1. Focus your goals in retirement and how you will pay for them.
  2. Address your concerns and expectations for retirement.
  3. Identify things that could pose a threat to your retirement and manage them.
  4. Feel more educated, confident and in control of your financial future.
  5. Help you navigate the complexity of financially moving into retirement.

Let us help you create the plan that will give you confidence to face decades in retirement.

Financial Planning is the New Employee Benefit

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Some of the most progressive companies are introducing a new employee benefit: company-paid financial guidance.

Concerned about their employees’ retirement funds, and acknowledging the increasing scarcity of skilled employees, companies are looking for a benefit that is relatively inexpensive while making a big difference in employee satisfaction.

Financial insecurity troubles most people, from the entry-level employee to the highly compensated professional. Half of U.S. households are at risk of being unable to maintain their standard of living in retirement, according to one study. For most people, financial stress is a distraction from work and leads to lower productivity.

Money is the single largest source of stress for employees, ahead of work, relationships or health.
Employers are concerned about the impact employees’ financial problems are creating problems at work. Here’s what employers say they are most concerned about:
• Lack of retirement readiness 16%
• Paying down debt 15%
• Lack of emergency savings 13%
• Other 3%

Without professional guidance, most people take a seat-of-the pants approach. But that leaves them and their families wondering how they will survive the decades that they will spend after leaving the work force.

Many companies offer a retirement program, like a 401k, but are ill-equipped to do more than provide a menu of investment choices. To fill the information gap, more companies are offering financial-wellness programs. Others are considering such a move.

A program offered by Korving & Co. is a series of programs, provided by a CFP® (Certified Financial Planner™) professional. These are designed to educate participants about debt, investing, and retirement income planning.

Providing employees with professional education about these issues, on company time, in a relaxed setting is an economical way for companies to help their employees reduce stress. It also creates a great deal of good will and loyalty on the part of employees.

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