Gen Xers — Are You on Track for Retirement?
Gen Xers — Are You on Track for Retirement?
Did that AARP notification take you by surprise? If so, you’re not alone. Some members of Generation X — those born between the early 1960s and late 1970s — are feeling caught off guard by how quickly retirement is approaching
When it comes to preparing for retirement, 34 percent of Gen Xers are likely to say that they have no strategy planned according to the Transamerica Center for Retirement Studies. This is a higher percentage than both Baby Boomers and Millennials. The average Gen X household has about $64,000 in retirement savings, and it’s not surprising that many feel concerned about the prospect of their golden years.
Ok Xers, it’s time to put together a strategy and look for ways to align your timeline with your goals. Here are a few things that can help you get on track.
Get
Specific, Really Specific
First of all, you
need to determine your timeline for retirement and the lifestyle you want. Think
about your expectations for things like housing, travel, entertainment and hobbies
along with their associated costs. Once you have an idea of the monthly income you’ll
need to support your desired retirement, you can work backward to see what you should
set aside now, as well as what other tools and strategies can help you reach your
goals.
Manage
Sandwich Obligations
People call Gen X
the “sandwich generation” for good reason. You’re dealing with aging parents at
the same time your kids are going to college. There’s a good chance that you have
some monetary obligations causing additional stress as you prepare for retirement.
Put together a plan that prioritizes retirement savings and look for other ways
to support your parents and children. You might not be able to help financially
as much as you’d like, but now is the time to make sure you’re taking care of your
needs. You can’t help others if you fall too far behind yourself.
Get
Debt Under Control
If you have debt,
start to address it immediately. Tackle high-interest debt first, getting rid of
the most expensive obligations, and work your way down from there. Negotiate with
creditors for lower interest rates. You don’t have to be completely debt free by
the time you retire. But the less you have, the better your position will be.
Consider
Long-term Care
Custodial care can
quickly eat up a lifetime of retirement savings. But the right long-term care policy
can help defray costs during this time. Most policies take your age into
account when determining price. The earlier you sign up, the more affordable it’s
likely to be. This is one area in particular where procrastination can be
costly.
Make
Catch-up Contributions
Once you turn 50,
IRS rules allow you to set aside more money in tax-advantaged retirement accounts.
This is a good time to ramp up your retirement savings and bolster your portfolio.
If you need to beef up your retirement accounts, start doing so now. If you’re
lucky enough to get a yearly bonus, this is a good use for it.
Think
About Social Security
Those born
in 1960 or later can begin collecting benefits at age 62, but they’ll receive less
each month than if they wait until their full retirement age at age 67. Consider
your timeline and lifestyle preferences as well as your tax-advantaged retirement
accounts. Work with a WellCents financial professional to help you weigh when you
should start collecting Social Security and balancing it with withdrawals from other
accounts.
Bottom
Line
Gen Xers are known for their independence. But you don’t need to go it alone when it comes to your retirement. Take advantage of the resources available to you to make sure you’re on track to the retirement you want. Contact your WellCents financial professional today.
Sources
Understanding Your Retirement Summary Plan Description
Understanding Your Retirement Summary Plan Description
Investing in an employer-sponsored Retirement plan is a powerful tool to boost your retirement readiness. But did you know that all Retirement plans are not created equal?
While they all share certain features, such as the ability to
lower your taxable income by deferring and investing pretax dollars to save for
retirement, plans can differ in terms of how quickly you become fully vested, whether
you’re able to take a loan against your Retirement balance and whether your company
will match some of your contributions.
The “Retirement plan” derives its name from the section of the
IRS tax code that applies to it, and the official plan documents are quite complex
for the average investor to understand. Luckily, your employer is also required
to provide you with a document called a Summary Plan Description, which details
many important features of your Retirement in plain English so that they’re
easier to understand.
If you don’t have this document in your possession, simply contact
your HR department or benefits manager to request a copy. You can find very helpful
information inside it, including:
How to qualify for the plan. This might include an age
requirement as well as a minimum duration of service within your organization.
Employer match. Your employer may match a certain percentage
of your Retirement contributions up to a certain amount. For example, they might
match 100% of your first 3% of contributions and then 50% of the next 3%. If you
have this benefit, your Summary Plan Description will specify the details.
How long it will take to be vested. Each Retirement plan
has a specific vesting schedule, and this refers to how long it takes you to own a percentage of your employer’s contributions.
Whether you can take a loan against the money in your Retirement.
If loans are permitted, you’ll be required to pay back the loan with interest to
your account. The terms and conditions of these loans, if available, will be outlined.
How to access your account balance and make changes to your
investments. You can look up how to access your Retirement information online
or by phone — and learn who your point of contact for your Retirement is within
your organization.
The Summary Plan Description is a great starting point for understanding the features and benefits of your Retirement plan. But if you have additional questions, set up an appointment to meet with your financial adviser, who can explain the plan in greater detail an answer your questions.
How to Build Wealth
How to Build Wealth
Get rich slow with these simple strategies
— and a little discipline.
What does wealth look like to you? Your
mental picture might be different than others. But for a lot of folks, wealth isn’t
an over-the-top ride or a mega-mansion. Rather, it’s the freedom from financial
burdens and the confidence that you can retire to an enjoyable and relatively worry-free
life. Fortunately, that outcome is achievable for many people with some planning
and a little discipline.
Save Now and Often
If you haven’t been saving regularly and
consistently, start right away. The mantra is “pay yourself first.” Make saving
for retirement a priority, and make it easy by having contributions to your 401(k)
automatically withdrawn from your paycheck. You can arrange this through your HR
Department. If you want to save additional funds, consider regular, automatic
transfers from your checking account to a savings account.
Take Advantage of Tax-Deferred Growth
You don’t pay taxes on money put into your
401(k), and it grows tax free until you withdraw it. This means you have more of
your money working for you year after year. Upon retirement, you’ll owe taxes, but
you’ll have a larger account balance to draw from due to the tax advantages you’ve
enjoyed over the years.
Don’t Leave Free Money on the Table
Many employers offer a matching contribution
for the retirement plans they sponsor. If yours is one of them. they’ll match all
or a percentage of your 401(k) contributions up to a certain amount. That’s free
money — and there’s no better deal anywhere in the world of retirement savings.
So don’t miss out!
Build Equity
Owning a home can be an important component
of wealth, and comprises about a third of the overall net worth for American families.
The industry rule of thumb is that you shouldn’t pay more than 28% of your
gross income for housing (loan principal, interest, taxes and insurance). So buy
a house if you want to be a homeowner — but not so much house that it cripples
your ability to add to your retirement savings and build wealth. It’s tempting to
think, “I’ll be making more money in five years, so this mortgage won’t be a problem.”
But when in doubt, underbuy rather than overbuy. As you pay down your mortgage,
you build valuable equity that you may be able to borrow against should you need
to in the future.
Keep Spending in Line
Live within your means. Don’t overbuy housing,
transportation, entertainment, clothing or anything else. The less you spend, the
more you can save. And the earlier you start to save, the more time that money can
grow. Do you really need that top-tier cable package? Can you use coupons at
the grocery store? Your grandparents were right when they said, “a penny saved is
a penny earned,” and those pennies can really add up.
Manage Debt
Some debt can be necessary and useful.
It can help you afford a home, transportation or a college degree. But don’t get
in over your head. Weigh the costs and benefits of a new car payment versus increasing 401(k)
contributions for a more secure retirement. A big warning sign is the need to use credit cards to pay
for everyday expenses. Carrying high-interest debt — like a hefty credit card balance
— can seriously undermine your ability to build wealth.
Insure to Be Sure
You don’t want to lose the wealth you’ve
built in the event of an emergency, so insure yourself and your assets. A full-line
insurance agent can help you choose appropriate plans for home, auto, life, disability
and long-term care. They may suggest that you purchase an umbrella policy that protects
you from legal liability as well.
Get Expert Advice
Especially when you get into more complex
areas of investing and tax planning, it’s prudent to seek out professional advice.
Financial advisors aren’t just for the already wealthy — they can help you get there.
Discuss your personal vision of wealth with your advisor and work with them to start
turning that vision into reality so one day, your future self can raise a glass
to toast your present-day prescience and persistence.
Sources:
http://www.mortgagenewsdaily.com/08282019_homeownership.asp
https://www.investopedia.com/articles/pf/05/030905.asp
Should I Buy or Lease a New Car?
Should I Buy or Lease a New Car?
Your once reliable set of wheels is getting less reliable
lately, and you’re longing for that new car smell once again. You meander through
the local dealership lot trying to avoid the salesperson because you know the very
first question that they’re going to ask you is, “Do you want to lease — or buy?”
What’s the better choice?
The short answer is … it really depends. The longer answer depends
on your particular circumstances and priorities. Let’s drill down and look under
the hood (so to speak) of each option.
Leasing
Pros: With a lease, you generally can drive a new car at a lower monthly
cost. The leasing process is perhaps less onerous than buying, and you can get
into a new car every few years. With a lease, you can score some deductions if the
vehicle is used for business. So, the bottom line is that you often get more new
car for a lower initial cash outlay by leasing, and you can enjoy that new car smell
every couple of years.
Cons: When you lease, you aren’t building any equity toward your next
vehicle. So you’re starting from scratch each time. Additionally, you may have to
contend with costly end-of-lease charges, mileage overage costs and incidental damage
charges. You may even have to pay for new tires for a car you turn in.
Buying
Pros: When you purchase a car, you know for certain the price you’ll pay
without having to wonder about unexpected fees down the road. You can also build
equity in the vehicle over time, which can be particularly beneficial if you intend
to keep the car and drive it long after the loan period. Plus, since it’s yours,
you can customize your rims, your stereo or anything else you want as you wish (as
long as its street legal). And you can sell or trade in your vehicle whenever it
suits you rather than at a predetermined end-of-lease date.
Cons: Buying is usually more expensive than leasing at the outset. And
you can’t just turn it back in and walk away — you eventually will have to sell
or trade in the car. Finally, if you buy new, you’ll take a big depreciation hit
as soon as you drive off the dealer lot.
Your Ride, Your Reasons
Getting back to the original question, if the goal is to spend as
little as possible to get into that new car, and you think you’ll be ready for another
vehicle in a few years, then leasing likely makes the most sense. However, if you
can’t wait to rebuild your engine and add a mega-sized subwoofer in your trunk —
and you want more control over when your next purchase may be, than buying new might
be right for you.
But remember that the real cost of a car is not only the price tag,
it’s how much it costs you during the entire time you own it, including
maintenance, gas, repairs and insurance. When analyzing the per-month cost of leasing
vs. owning, remember to amortize the equity you have in the car over the entire
period of ownership.
If you’re still confused, ask your financial advisor to help you
run the numbers.
How Do I Save for My Child’s College and Retirement?
How Do I Save for My Child’s College and Retirement?
You juggle multiple financial priorities, whether it’s buying a
house, having children, starting a business or buying a car. Saving for
retirement and a child’s college fund at the same time is no different, but
that’s not to say it’s easy.
Get It Down on Paper
Start by setting a budget and timeline for both retirement and
college. While the college start date is probably somewhat fixed, you may have
more latitude concerning your retirement. Once the kids are old enough, include
them in the conversation about how much you can afford to help with college and
what they can do.
It’s important to set realistic goals about the types of
colleges within your budget. Don't let higher education costs get out of
control. If your child has their heart set on a specific school or major, there
may be ways to lower costs (e.g., subject-specific scholarships and grants). The
expectation shouldn't be that you're going to write a lot of checks. And always
have a backup plan or safety school.
Controlling College Costs
Explore ways to reduce college expenses. Help your child
identify special interests early on. Athletics? Music? Science? Math? Money may
be available for all of those IF your child is exceptional. Identify
colleges early too. See if they can attend special interest camps there to (a)
see how they like it, and (b) meet faculty who might recommend them for a
grant/scholarship.
Also, 529 plans can be a good way to divide retirement from
college savings and offer a number of benefits, including the option of contributions
by relatives. Coverdell Education Savings Accounts (ESA), sometimes called
education IRAs, are tax-advantaged savings vehicles that allow tax-free
distributions for qualified educational expenses. Read more about the rules and
restrictions of the program in the link below.
Reevaluating Retirement
Similarly, find ways to boost your retirement savings or scale
back your retirement goals. If time is tight, consider whether you can work a
little longer or adjust the kind of retirement lifestyle you’re budgeting for.
For example, could you downsize your home or move to an area with a lower cost
of living?
Also, make sure you’re contributing at least enough to your
employer-sponsored 401(k) to earn the maximum company match — this is free
money, and you don’t want to leave it on the table. What you also don’t want to
do, however, is ramp up your level of investment risk beyond what is
appropriate for your personal tolerance and your retirement timeline just to
try to boost returns.
The most important thing you can do during this juggling act is to sit down and have a frank conversation with your financial advisor about your goals. He or she may be able to come up with options you haven’t even considered.
Source:
https://www.irs.gov/taxtopics/tc310