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Frequently, the news about retirement is pretty pessimistic. Pensions no longer exist for most workers, we aren’t saving enough, and Social Security is going to disappear. However, things may not be as bleak as they are often painted. If you’re a retirement plan sponsor, you may be wondering how you can help your employees prepare for retirement. Retirement plan consultants suggest three ways that anyone can use to help them retire:

• Start saving now. No matter what your age or financial circumstances, you’ll improve your retirement prospects if you start saving now. Ideally, you should set aside at least 10 percent of your income, but it’s more important to get started than to worry about exactly how much you can save. An employer-sponsored retirement plan can help you by allowing you to save pre-tax dollars, and the interest on your funds also accumulates free of taxes. You will be taxed at your normal rate when you withdraw funds. If your employer matches all or a portion of your contribution, that will immediately boost your savings.
• Choose appropriate investments. It’s important to balance your personal tolerance for risk against potential gains. While conservative investors might want to put all their funds into savings, like money market accounts or certificates of deposit, returns on those types of accounts are low, and often barely outpace inflation. Even conservative investors may need to have a portion of their assets in investments with a higher potential return, such as stocks, to help their portfolios grow.
• Maximize your retirement income. One way to increase your income in retirement is to work longer. You’ll have more time to save, and waiting to claim Social Security means you’ll get a larger benefit later. Even working part-time will help your retirement income. Other ways to maximize your retirement include downsizing your home and/or moving to a location with a lower cost of living.

Tags: retirement income, retirement

After several years of wallowing in financial upheaval caused by a severe recession and financial crisis, Americans are, once again, looking to the future. A renewed confidence has many people setting their sights on long term goals that, just a few years ago, may have seemed out of reach. However, as too many people have painfully learned, simply having a long-term goal, whether it’s an early retirement or a college education for your children, is not enough to realize your ambition.

A financial goal is a life destination which requires a map and a way to get there; and, assuming you have finite resources with which to successfully make the trek, they need to be used wisely or you are likely to come up short. If you have a long-term goal, financial planning can help you get there.

What exactly is Financial Planning

All of us have certain things in life we want to accomplish and many of them require financial resources. These are called financial goals. Living a secure and enjoyable retirement is a goal shared by most people. In addition to that, parents want to be able to provide a college education for their children, buy a bigger house, or expand their business, and while working towards all of those, they want to ensure the financial security of their loved ones. These all become intricately linked pieces of your financial puzzle.

A financial plan is about carefully forging those pieces and fitting them in their proper place so that they work effectively together towards your vision. If a piece is missing or doesn’t fit quite right, it could skew all of the other pieces. As you become financially successful, more pieces are needed to complete the financial puzzle, such as risk management, tax strategies, and estate planning. Because of their impact on the total financial puzzle, it is critical to have a wellconceived, integrated plan.

The financial planning process enables you to focus clearly on your specific goals while addressing all of your concerns so they are no longer obstacles. And, having a well-conceived, comprehensive financial plan enables you to shutout the constant drone of doom and gloom, because, in the long-term, your plan is all that matters.

Steps in the Financial Planning Process

The financial planning process involves four essential steps that, if followed diligently, will increase the likelihood of achieving your long-term goals; however, it does require discipline, patience and adherence to basic financial principles.

Establish Clearly Defined Goals

Very rarely does anything of financial importance happen accidently. In reality, absent a clearly defined, quantifiable goal that’s set along a realistic time horizon, chances are it won’t happen. Your goals need to be both realistic and inspiring enough to motivate you to action. It’s not enough to know what it is you want to achieve; you need to have a deep sense of why it’s important, and how it would make you feel when it’s achieved. To set a realistic goal, envision it, quantify it (what you need to save), and make sure you have the resources to fund it.

Assess Your Current Financial Situation

Financial planning is a continuous process of assessing where you are currently in relation to your goals. This enables you to make the adjustments in your strategies necessary to keep you on track. Your financial picture is comprised of a balance sheet (assets and liabilities) and a cash flow statement (budget and savings). Your objective is to constantly improve your financial picture – reduce debt, increase cash flow/savings, grow your assets - which could enable you to achieve your goal early, or enable you to target additional goals.

Create an Actionable Plan

A financial plan is typically comprised of several strategies, each designed to address a different piece of your financial puzzle. Developing a systematic savings and investment strategy for accumulating the funds needed for your goal is obviously a key part of your financial plan. But, life happens, and your financial plan should also include strategies for dealing with life’s contingencies, such as an accident or illness, or even a premature death in the family that could derail the plan.

Priorities have to be established in order to shore up all aspects of the plan. Before allocating all of your resources towards your financial goal you need to create an emergency fund to cover at least six months of living expenses, and an insurance plan to protect your finances in the case of a disability or death of a family member. Each priority should have an actionable plan to achieve it.

Monitor and Measure Your Plan

The biggest mistake many people make is to create a financial plan and then put it on the shelf. A financial plan is a living, working document that needs to reflect your current circumstances as well as the impact of a changing environment. It becomes a benchmark against which your progress to your goals is measured.

As your personal circumstances change and evolve, your plan needs to be updated, and, very likely, strategies will need to be updated or added (i.e. increases in insurance amounts, a change in your asset allocation, a new tax reduction strategy). The more frequently you assess your situation and measure your progress, the more minor any adjustments to your strategies will be.

Seek Professional Guidance

Although financial planning is not rocket science – there are plenty of resources available to develop your own – it can become more daunting than the average person is able or willing to tolerate. The body of knowledge required to navigate multiple disciplines (i.e., investments, insurance, taxes, retirement planning, estate planning, etc) is beyond the capacity of most people. In addition, most people lack the discipline and patience to strictly adhere to a plan, especially when their emotions get the upper hand.

A competent financial advisor can more efficiently guide you through the process of planning your future, designing your strategies and navigating the complex universe of investments and financial products. Of equal importance, he or she can also be your financial coach, holding you accountable to your plan while coaching you through your emotions and encouraging you to the finish line.

Tags: reduce debt, debt, retirement, long term goals

Securities may be offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services may be offered through NFP Retirement, Inc. Kestra IS is not affiliated with NFP Retirement Inc., a subsidiary of NFP.

This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.

A report by Federal Reserve economist Joanna Stavins combined Equifax data with the 2015- 2016 Federal Reserve Bank of Boston’s Survey of Consumer Payment Choice (SCPC) on how consumers pay for purchases. Comparing self-reported measures with objective data, she found that people tend to have fewer credit cards with higher limits than they report. According to her research, it’s estimated that 44% of adults have revolving credit that they don’t pay off in full each month with an average balance of $6600.

The study also included average credit card balances for various age brackets. Debt is becoming an increasingly larger part of the financial planning landscape. And it has different implications at different ages. Here are the average balances for each age group in the study and how carrying debt can impact them at each phase of life.

Age <25:The average credit card debt for this age group is $2340*. You may be a recent graduate with your first real job, earning your own money for the first time in your life — finally paying your own way. But you’re also likely having your first experience trying to balance saving and paying off debt if you graduated with student loans. Having an extra credit card payment can make that juggling act even harder. Or it can delay independent living altogether. Adopting a “cash only” policy for things you want early in life can help stave off larger problems later.

Age 25-34:: With an average balance of $3240 on your credit cards, you might be buying your first home and starting a family. With growing credit card debt, it could push that first home purchase a few years down the road or out of site altogether. When planning to buy a home or start a family, it’s important to look at your overall budget ahead of time. This is a terrific opportunity to sit down with your financial advisor to help set you up for success and make this exciting time in your life as stress free as possible.

Age 35-44:Carrying an average credit card balance of $5480, you’re in your prime earning years and you may be on your second or even third home. There could be an even larger family at this point and temptation to start cashing in on your years of hard work and higher salary. While you certainly deserve to enjoy the fruits of your labor, it’s important not to sacrifice future happiness for today’s pleasures. Maintain and increase your contributions to your 401(k) and other retirement accounts. It’s often easier to bump up contributions after a raise or bonus. It will become increasingly harder to make up for lost time later.

Age 45-54:With life in full swing and an average credit card debt of $6250, you may be facing some additional financial challenges during this phase of life. You might need to fund an expensive college education for one or more kids, pay for a wedding or two — and you might even have to start pitching in to help your parents. It can be easy to lose track of your own financial goals with so much going on. Stay in regular contact with your financial advisor and start making catch-up contributions to your retirement accounts if you need to once you qualify.

Age 55-64:Retirement is starting to loom large in the window and you need to start getting your ducks in a row. Hopefully, you’re carrying a little less debt now, on average $5360 on your credit cards — but it’s no time to become complacent. Have a plan to reduce debt as much as possible before your income stream dries up. Make sure you’re addressing healthcare financial risks by taking care of yourself and consider long-term care insurance if you don’t already have it.

Age >65:Congratulations on your retirement! Or maybe not so fast. Excessive debt can delay or even prevent retirement altogether. The average credit card debt for this age bracket is $3630. If you’re still carrying a balance, try to pay it down as fast as you can. If you’re not employed full-time any longer, consider a little part-time work or some temporary lifestyle adjustments to get the job done faster and enjoy your golden years debt-free.

*To account for people who declined to participate, the researcher made some statistical adjustments to keep study results nationally representative.

source: https://www.bostonfed.org/publications/research-department-working-paper/2018/credit-card-debt-and-consumer-payment-choice.aspx

Tags: reduce debt, debt and retirement, debt, retirement

An increasing number of Americans are facing an uphill battle just trying to save enough and earn enough on their savings to be able to retire on time. Carrying much higher debt burdens than previous generations, many pre-retirees have had to put their savings on the back burner to focus on debt reduction, which, for practical purposes is smart, but it is also the primary reason why some will need to delay retirement or drastically downsize their retirement lifestyle. In retirement, cash is king, and every dollar of debt is a direct drain on your cash flow. But, it’s never too late (nor too early) to take counter measures that will help you get back on track.

Should I try to pay off my mortgage before retirement?

The days of mortgage-burning parties are nearly a thing of the past. As a result of the home refinancing hey days of the last five to ten years, 67% of homeowners in their 50s and 60s are now carrying mortgage debt well past the age of 70. *

Financial planners are divided on whether it’s a good idea to try to pay down your mortgage as soon as possible. There are those who say that it may be a disadvantage to lose the mortgage interest deduction. The reality is, however, that many retirees don’t have enough personal deductions to be able to use their mortgage deduction with most only qualifying for the standard deduction. Also, if you enter retirement with 10 or 20 years paid on your mortgage, the interest portion has declined to the extent that it’s not generating enough of a deduction for many people.

The answer is, yes, you should try to pay down your mortgage by making extra principal payments when you can. The alternative, which is becoming more of preference for an increasing number of retirees, is to simply downsize and sell your home and apply the equity to a more affordable living space.

Do I save for retirement or pay down credit card debt?

Sadly, this is turning into a classic dilemma faced by a majority of Americans. Unquestionably, you should try to pay off all high interest debt before retirement. If your retirement assets are earning less than 6% a year, even 9% credit card debt will cost you vital cash flow. This is the time to get deadly serious about your credit card debt. Every penny you are paying towards debt needs to go towards your financial security, so you can’t begin implementing your debt payoff plan soon enough:

• Get on a budget: Set a monthly target for debt payments (and make it a stretch goal) and then budget everything else around that. Eliminate non-essential expenditures. Find ways to stretch your essential expenditures. Downsize your lifestyle now. Your goal should be to pay off your debt completely within a year. Oh, and STOP USING YOUR CREDIT CARD!
• Pay off smaller balances first: It’s easier and more motivating to check off the smaller targets first. It will help you build momentum as you tackle the bigger ones.
• De-clutter: It’s probably time to get rid of a lot of stuff anyway. You can raise more money than you think by getting rid of clothes, appliances, old cell phones, CDs, furniture and half the stuff in your garage by putting it all up for sale on E Bay.
• Save any excess cash flow: If you find ways to generate additional income it should be applied to savings. As soon as you reach your debt pay off goal, apply the budgeted debt payment to savings and don’t look back.

Should I just continue working or should I try to earn an income in retirement?

Recent retirees and Boomer pre-retirees have actually begun to forge a new normal for retirement by preparing for a new career well before their retirement date. Some have created a 'transitional' relationship with their employer, scaling back hours or changing their status to 'consultant.' Such arrangements can sometimes extend the working relationship with an employer. Some are branching out to start a business of their own or monetizing a hobby. Many boomers are already planning their new careers by hitting the books and learning new skills.

The prevailing attitude among a growing number of pre-retirees is that they aren’t going to limit themselves by trading a life of work for a life of leisure; rather they are going to take control and trade in work that they no longer want to do, for work they will really like to do. By taking control of their new working life, they are more likely to be able to find an enjoyable balance of work and lifestyle that will sustain them financially, mentally, and psychologically.

*Retirement time bomb: Mortgage debt. Securian research reveals growing burden for boomers and retirees – April 2013

Tags: reduce debt, debt, retirement

With the proliferation of investment and personal finance websites, investors have access to a boundless number of resources and tools once only available to financial professionals. And, while an increasing number of investors consider themselves to be at least somewhat selfdirected in their investment decisions, the ever-expanding world of investments and the increasing complexity of the financial markets require much more than a part-time approach to planning. With so much at stake, it would be important to seek the guidance of a qualified and trusted investment advisor, if for no other reason than to validate their own plans and decisions. Choosing the right investment advisor can, therefore, be one of the more critical decisions a physician makes.

When looking for any professional advisor, it is important to be able to match their characteristics, temperament, client profile and experience level to your own profile. In the case of an investment advisor, the more you know about your financial situation, your investment objectives and preferences, and your tolerance for risk, the more thoroughly you will be able to evaluate an investment advisor to determine if they are a match. Before meeting with an investment advisor, conduct a thorough assessment of your current situation and establish clearly defined goals and objectives.

Who Does the Advisor Work For?

Advisor or Salesperson: With hundreds of thousands of individuals calling themselves 'financial advisor' or 'wealth manager' or 'investment specialist', the challenge for investors is to wade through the marketing and advertising to be able to identify those financial professionals who truly put their client’s interests first. The financial services arena is vast and very fragmented among a number of different types of advisory models. Many advisor-types work for a financial institution, such as a bank, a stockbrokerage firm or an independent broker-dealer and are paid by their company to sell certain products and service. Other advisors have no allegiance to a company and are paid directly by their clients. Investors need to be able to determine which type of advisor is most likely to provide conflict-free investment advice.

Should You Pay Commissions of Fees?

Advisors who work for an investment firm or a bank may earn their income primarily through commissions paid by their company that generates its revenue from the sale of products and services. The more products an advisor sells, the more income he or she earns, and the more revenue the company generates. While these advisors must adhere to certain standards of 'suitability' when recommending investment products, they are not always required to place their client’s interests first as the “fiduciary standard” requires. Although most of these advisors have the best intentions of doing what’s right for their clients, they may come under pressure from their firms to produce a certain amount of revenue. This can be conflicting for advisors and drive them to recommend products that they otherwise wouldn’t in particular situations.

At the other end of the spectrum are advisors whose sole source of income are fees paid to them directly by their clients. In this way, advisors are not beholden to a particular firm or any particular investment products. They can search through an array of financial products to find the ones that are most appropriate for their clients. Because they don’t receive any commissions or fees from product sales, they can be completely objective in their advice.

Professional Guidance or Sales Process

Both commission-based advisors and fee-only advisors work with their clients through some sort of investment planning. Investors should never consider a recommendation unless their advisor has worked through the process of thoroughly understanding their financial situation, specific objectives, and conducting a thorough risk assessment. Investors need to be able to discern whether the analysis performed by their advisor is truly a financial map for achieving their objectives or simply a justification for a product recommendation. One key test would be to ask your advisor after a product has been recommended whether there is an equivalent investment product available that has fewer expenses or smaller fees. If they say no or hesitate, you may be in front of a product salesperson.

Background and Experience

It is important to treat the selection of an investment advisor much like the hiring of an employee. The right kind of advisor does work for you. Because your financial future is at stake, you need to ensure your advisor possesses a solid background and substantial experience for working with people in your specific situation. Their background should be completely void of any disciplinary actions by the regulators (check the FINRA broker-check website), and it should include progressive educational and industry accomplishments to demonstrate their commitment to their profession. Look for professional designations such as CFP®, ChFC, MFS, CFA as indications of their commitment to knowledge and ethical practices.

Advisors who have not experienced at least one complete investment or financial market cycle (generally, about five years) may not be seasoned enough. The more experience the better as long as it has been gathered working with people in situations similar to yours.