Fast Track Your Retirement with These 6 Tips
Fast Track Your Retirement with These 6 Tips
If you hope to retire early, there’s a lot to think about. For example,
if you stop working before you’re eligible for Social Security, you need to plan
how you’ll draw from retirement accounts — assuming you can access those funds
without penalty. On top of that, if you’re not Medicare eligible, you’ll need
to consider healthcare costs. Orchestrating your early exit from the workforce
can be empowering, but it also requires planning and preparation. Here are a
few ideas that can help you retire early.
Be specific in your early retirement plan. The earlier you start, the more successful you’re
likely to be. Begin your planning with well-defined goals in mind. Figure out
your desired age for retirement and work out how much money you’ll need to achieve
the lifestyle you want. In many cases, it’s about starting with your end point
and working backward. A WellCents financial professional can help you review
your goals and set a retirement timeline that’s realistic. With specific and
measurable goals, it’s possible to retire sooner as long as you stay on track.
Downsize ahead of retirement. The single biggest expense most people have is
housing according to data from the Bureau of Labor Statistics. Downsizing ahead
of retirement can reduce your housing expenses, free up money for other costs
and make your goals more attainable. Plus, if you own your home, selling and
downsizing can provide you with additional capital to fund your retirement.
Cut back on large costs. In addition to reducing housing costs, look at
other big-ticket items you spend money on. Transportation and food are significant
costs for many households. Look for ways to reduce what you spend on these
expenses, especially eating out, as they can compromise your ability to live
comfortably in early retirement.
Make catch-up contributions. If you’re at least age 50, the IRS lets you make
additional contributions to your tax-advantaged retirement accounts. The more
funds you can set aside now, the earlier you can retire. Additionally, check if
you might be eligible for a Health Savings Account. This is additional
tax-advantaged money that you can use for healthcare costs before you’re able
to enroll in Medicare.
Pick up a side hustle.
If you’re looking for a little extra cash to set aside for retirement or to
make catch-up contributions, a side hustle can help a lot. Whether it’s Ubering
on the weekends or freelancing on Fiverr, you can generate extra funds to help
you retire early or provide you with enough income so that you don’t need to
work full time.
Plan to live in a less-expensive area after retirement. Geoarbitrage can be a great way to reduce living expenses and retire sooner. In some cases, retiring outside the United States is one way to reduce costs to the point where early retirement becomes possible. Just do your homework about healthcare, taxes and other important financial aspects of being an expat wherever you plan to reside.
Early retirement can become a reality if you plan ahead and take steps toward reducing your cost of living. Contact your WellCents financial professional to discuss your timeline and goals for retirement. As you approach early retirement, more frequent check-ins can help ensure that you remain on track.
Source
https://www.statista.com/statistics/247420/percentage-of-annual-us-consumer-spending-by-income-quintiles/
Money and Happiness
Money and Happiness
This thought has crossed the minds of many: “If only I could hit the lottery, then all my problems would be solved.” But the relationship between money and happiness isn’t as straightforward as you might think — at least according to those who study the issue closely.
What the Data Shows
Money is not a panacea for guaranteeing happiness. Researchers surveyed more than 3000 Swedish lottery winners five to 22 years after winning a prize of at least $100,000. Ultimately, they found that the winners’ happiness actually didn’t change much after hitting the jackpot. They weren’t significantly happier — or unhappier.
Another study of 1.7 million people across
164 countries, however, pointed to an income “sweet spot” — an earnings
range between $60,000 and $75,000 that correlates with improved levels of happiness.
Other data points to $75,000 being an optimal income level for happiness.
The Why Behind the Data
Why doesn’t more money translate to greater
degrees of happiness? One theory is that we’re all susceptible to a phenomenon called
hedonic adaptation, otherwise known as the hedonic treadmill. This refers to our
tendency to return to a happiness setpoint following both positive and negative
events over time. In other words, we eventually adapt to our current circumstances
— for better or worse.
Yet others suggest that the extent to which money means greater levels of happiness depends a great deal on how a person spends it. For example, money put toward purchasing experiences may be more beneficial for happiness than funds used to acquire possessions. Additionally, using money to foster meaningful connections with others or for altruistic purposes may also be a more effective way to promote happiness.
A Complex Issue
We can debate the extent to which money
can “buy” happiness. But for those who struggle to meet basic needs, having sufficient
funds to stay safe, sheltered and fed can provide a necessary sense of security.
It’s also important to note that the study investigating the “ideal income” finds
that the levels vary considerably depending by location. The cost-of-living ranges
tremendously across the U.S., so the relationship between money and happiness can
change significantly according to situation and context.
Financial wellness can be a significant part of overall wellness, but it takes its place among other areas of tremendous importance, including physical and mental health, personal relationships and sense of purpose. At the end of the day, the most meaningful question for each person may not be whether money can buy happiness in general — but rather how to maximize one’s own personal happiness using all available tools and resources, money included.
Sources
https://money.com/ideal-income-study/
https://time.com/collection/guide-to-happiness/4856954/can-money-buy-you-happiness/
https://greatergood.berkeley.edu/article/item/six_ways_to_get_more_happiness_for_your_money
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