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Retiring Soon? You Need to Be Doing These 7 Things Now

Retiring Soon? You Need to Be Doing These 7 Things Now

Feb 2021

Retirement can be a rewarding and exciting time. Make the most of yours by preparing ahead so you can relax and focus on all the fun stuff ahead.Are you in the final countdown to retirement? Congratulations! This can be an amazing time full of new opportunities. Put yourself in the best position possible for your next adventure with these seven retirement readiness tips.


1.  Revamp your budget. If you’re retiring soon, some expenses will likely go up — like medical and travel. But others will probably go down. You may not need to spend as much on clothes for work, and you may not even need a second car if you’re married. If you’re going to lose employee-sponsored health insurance and are not yet Medicare eligible, you’ll have to budget for purchasing insurance privately or buying it through one of the Affordable Care Act exchanges. And while you may have hoped to have all your debt paid off before retirement, unfortunately for many this is not the case. But you should at least audit all your debt including: mortgages, home equity lines of credit, cars, credit cards and other loans. That way you can budget for those expenses during retirement. Or you may decide to work a few more years part time to help expedite that process.


2.  Know Your Tax Strategy. Your taxes may change dramatically once you stop working, and different sources of income may be taxed at different rates. For example, IRA or 401(k) plan withdrawals are taxed as ordinary income, but for Roth IRAs or Roth 401(k) plans, withdrawals can be tax free. You may be subject to capital gains if you withdraw from a taxable investment account and required minimum distributions may push you into a different tax bracket once you reach age 70½. Consult your tax advisor to know what you can expect in your particular situation.


3.  Have a Social Security Plan. Your benefits will be reduced if you start taking Social Security before your full retirement age, which is probably about 66 to 67 depending on when you were born. If you wait, your checks will be higher. Determining exactly when to opt in can be a


complicated decision that would also benefit from an open discussion with your financial advisor. Taking benefits early can affect how much you can earn without your Social Security

benefits being reduced. Many people don’t realize that a large portion of their benefits may also be taxable.


4.  Get a handle on Medicare. What you’ll end up paying for your Medicare benefits depends on several factors, including your income. Medicare is a complicated program and you don’t want to be figuring it all out at the last minute, so now is a good time to do your homework and speak to your financial and/or Medicare advisor. According to research from Fidelity Investments, the average 65-year-old couple will spend more than a quarter million dollars for health care over the rest of their lives. Having Medicare and the right supplemental insurance is critical in planning for this phase of your life.


5.  Finish your estate plan. If you haven’t already, take care of your will, durable power of attorney, healthcare power of attorney, and/or advanced directives. Other documents such as a trust, guardianship designation or letter of intent may also be appropriate. Consult an estate planning lawyer regarding your specific needs.

6.  Reassess investments. Hopefully you’ve been keeping a watchful eye all along, but if not, it’s especially important to reevaluate your allocations before retiring. Your portfolio may not have time to recover from a serious market downturn. Check risk in all your retirement accounts. Make sure your market exposure is appropriate given your age and risk tolerance.

7.  Plan your free time. You’re retiring soon and that means your life is about to undergo major changes — and not all of them financial. Your daily rituals will be different and you may not be seeing a lot of the same people day to day. While sleeping in and hitting the links may be satisfying in the short term, for some it may gradually give way to boredom or depression. Consider joining some clubs or volunteering to keep yourself busy and meet new people. Couples who may have never spent all day long together may also need a little time to readjust to a new routine.

Source: https://www.cnbc.com/2018/11/02/if-youre-planning-to-retire-in-2019-heres-how-to- make-sure-youre-prepared.html

Tags: estate planning, retirement, budget, estate

I’ve Depleted My Emergency Fund. Now What?

I’ve Depleted My Emergency Fund. Now What?

Jan 2021

Perhaps you’ve lost a job, faced an illness or have been delt a family crisis that emptied out your emergency fund. What are your next steps?


Take stock of your situation. First of all, stay calm. It’s much harder to make difficult decisions when you’re upset. Try not to panic and seek the support of friends and family — and the advice of a financial advisor. Every situation is different, so there are no hard and fast rules that apply to everyone, but here are some general points to consider as you navigate stormy seas.


If possible, stay current with bills and try not to use credit cards to bail yourself out. And if you must use credit, use the one with the lowest interest rate and try to negotiate an even lower rate with your creditor than what you currently have.


Hit the pause button on spending. Next, enact a short-term spending freeze. No restaurants, no new clothes and no vacation. Nothing non-essential until the crisis passes and you have some money back in your emergency account. Review your budget. Go through every single line item and see what you can reduce, pause or eliminate.

 

Downgrade cell service, drop online subscriptions and reduce extracurricular activities for kids and yourself. Place your gym membership on hold if you can, and work out at home or outdoors. Plan your meals to lower food costs and use coupons at the grocery (and anywhere else you can). If you have services for your house, pool or lawn put them on hold and go the DIY route when possible.

 

Talk to your lenders and see if you can negotiate a temporary reduction in payments for your house, car and personal loans. Especially now, many banks and creditors are extending a helping hand to pandemic-impacted clients. You may be able to get a forbearance on your mortgage while you recover financially.

 

Earn extra money. Sell your surplus clutter to raise some emergency cash fast. If you have extra TVs, furniture, electronics, kids toys, exercise equipment or anything else, post it on letgo, eBay or Facebook Marketplace. Put your proceeds right in the bank.

 

Can you pick up a side hustle? Sell your writing or graphic design services on Fiverr. You might also find part-time work with one of the companies that are still performing well during COVID-19.

 

Avoid this if possible. Raiding your 401(k) might sound tempting right about now, but avoid this drastic course of action if you can. While briefly pausing contributions may make sense, taking out large sums can set your retirement goals back for years. And there’s the opportunity cost of not remaining fully invested.

 

As soon as you’re right side up and paying all your bills again, begin rebuilding your emergency fund — and feel proud of yourself for having prepared for the unexpected in the first place.

Is Social Security 'Going Broke'?

Is Social Security 'Going Broke'?

Feb 2021

Social Security’s financial cliff is coming closer into view. Experts project that the fund that pays for government retirement benefits through FICA taxes will be depleted within the next 15 years.

The Trust Fund was set up to hold excess amounts of FICA taxes from when the Baby Boom generation dominated the workforce. But now that Boomers are retiring, the number of workers per Social Security beneficiary is dropping from 5.1 workers per beneficiary in 1960 to a projected 2.1 workers per beneficiary in 2040.

Taxes coming in are now less than benefits going out, and the shortage comes out of the Trust Fund. Once the Fund runs out, benefits would be paid through taxes from a decreasing pool of workers. Without any changes to the system, it’s likely that either taxes will rise or benefits will shrink sometime around 2035.

Possible Solutions

There are policy proposals that could potentially address these issues. The last major reform of Social Security was in 1983 during the Reagan administration. At that time, the retirement age was raised, taxes were imposed on up to half of a recipient’s Social Security payments and many people lost benefits they were receiving through Social Security Disability.

Many of the same proposed solutions are reappearing this time around: Increase the age that workers receive full retirement benefits, cut benefits and index lifetime benefits to account for longer lifespans (therefore reducing monthly payments). One recent proposal could fix the shortfalls while making room for some benefit increases: Currently, workers pay the FICA tax only on the first $132,900 of wages. Once they hit that threshold, they’d no longer pay FICA tax that year. Raising the threshold to wages over $400,000 could wipe out the projected deficits.

Even if the Trust Fund runs out, it’s highly unlikely Social Security would go away — although unpleasant changes might be necessary. But don’t panic: There are several non-legislative ways that this crisis might be avoided or mitigated. As Yogi Berra said, “It’s tough to make predictions, especially about the future.

Immigration is a complex and fraught issue in the current political environment with wide-reaching consequences — including an impact on Social Security. Many undocumented immigrants pay into the Social Security system but don’t receive benefits. In 2010, the government estimated it received a net surplus of $12 billion from undocumented immigrants. Legal immigrants can qualify for Social Security once they meet certain qualifications, including earning enough work credits. An influx of such workers could increase the pool of those paying into the system, boosting the ratio of workers to beneficiaries.

Workers staying in the workforce longer could similarly extend the length of time until the trust fund’s depletion. This could happen under a variety of circumstances. For example, the growing utilization of telework may allow some older workers to remain in the workforce longer and continue to contribute into the system. On a less-positive note, the inability of many workers to afford retirement could create the same net effect.

Plan, But Don’t Panic

Don’t wait for someone else to solve the Social Security dilemma. Create an online account and get your Social Security benefits estimate. Then make an appointment to speak with your financial adviser about how much you should realistically expect Social Security to contribute to your retirement and plan accordingly.

#socialsecurity #retirement #usa

Sources

https://www.ssa.gov/policy/docs/ssb/v66n4/v66n4p37.html

https://www.cnbc.com/2019/12/08/this-is-what-experts-really-want-to-see-happen-to-fix-social-security.html

https://www.ssa.gov/oact/NOTES/pdf_notes/note151.pdf

8 Things About 401(k)s Every Baby Boomer Should Know

8 Things About 401(k)s Every Baby Boomer Should Know

Feb 2021

For those considered baby boomers, retirement has now become reality with 10,000 people retiring daily. Unfortunately, research shows that 54 percent of older Americans do not have enough savings to fund their retirement.

If you’re on the pre-retirement end of this age group, it’s never too late to start setting money aside. Here are eight facts about 401(k)s that could help you prepare for your golden years.

Retirement Is Expensive: Although it can vary from one person to the next, the current total cost of retirement is estimated at $738,400.

Social Security Won’t Be Enough: It depends on your income, but even someone earning $100,000 annually will only get $2,670.37 per month. This calculator can help you determine your projected earnings.

The Money Stays with You: The best thing about a 401(k) is that the money travels with you from one job to the next.

It’s Never Too Late: Even those who are over 50 can begin to set money aside in a 401(k). In addition to saving money, you should also look for ways to boost your income during your final working years.

You Can Catch Up: The new tax plan may change this, but those over 50 can make catch-up contributions to make up for lost time.

The Money Won’t Wait Forever: Halfway through your 70th year, you’ll be required to begin withdrawing money from your 401(k).

There Are Penalties for Early Withdrawal: Before retirement age, the money will need to stay in place unless you can roll it over to another type of account.

You Have Investment Options: You may not realize that you can choose where your money goes within your 401(k).

Good fiduciary risk management is about preparing for the future and simultaneously protecting your current finances. If you haven’t begun saving for retirement through a 401(k), it isn’t too late. Check with your employer on available options, talk to an advisor, and take advantage of any opportunities you can find to save.

Tags: social security, retirement

NFPR-2019-85 ACR#324835 09/19

When Does Collecting Social Security Early Make Sense?

When Does Collecting Social Security Early Make Sense?

Feb 2021

Full retirement age (FRA) for Social Security benefits is currently between 66 and 67, depending on when you were born. Benefits are determined based on your 35 highest years of earning on record with the Social Security Administration, but will be higher or lower depending on when you file. If you file at FRA, you’ll get your full monthly benefit.

For each year you delay past FRA, however, your benefit will be increased by 8% until the age of 70. The earliest you can currently file is age 62. For each month ahead of FRA you file, benefits are decreased by a certain percentage. If, for example, you elect to begin receiving benefits at 62 when your FRA is 67, your monthly payment will be approximately 30% lower. But despite this fact, 62 is the most common age to claim Social Security benefits — often because, unfortunately, people are just not in a position to wait.

Determining the timing of Social Security benefits is an important decision that can have lasting consequences. You want to make a choice that’s in your long-term best interest. In many cases, it’s advisable to wait to receive the larger benefit, but everyone’s circumstances are different so it’s a good idea to have a discussion with a qualified financial advisor when determining what’s best for you. But here are some factors in favor of electing to receive benefits early.

You’re currently in or anticipate poor health. If you have a progressive health condition or a family history that makes early health complications more likely, then you may want to consider taking benefits early — while you’re still well enough to take advantage of your retirement years.

You’re unable to continue working and need the money. Job loss and/or disability can sometimes make it unfeasible to wait until full retirement age. If your employer-provided or private disability insurance along with other resources can’t cover your basic needs, then you may have no other option but to collect early.

Your spouse can take benefits later. This approach might let you access some Social Security income immediately, while allowing your spouse’s benefits to continue to grow. You should probably run the numbers with a professional financial advisor, however, to make sure this strategy makes sense in your specific situation.

You have qualified dependents on your tax return. If this is the case, your dependents might qualify for benefits when you take your own. Again, this is another instance where it makes sense to have an expert help determine if this is in your best interest.

You can afford to. If you dislike your job and don’t need the additional funds provided by waiting until your full retirement age or beyond, then you may want to embark on this exciting time of life as early as possible.

Social Security is a central component to most retirees’ financial plan. It’s important to make a thoughtful and well-researched decision regarding how best to use this resource to finance your retirement.

Sources:

https://www.msn.com/en-us/money/realestate/why-do-so-many-people-claim-social-security-at-62/ar-BBTbXg1

2. https://www.investopedia.com/articles/financial-advisors/012216/filing-early-social-securitywhen-it-makes-sense.asp

tags: social security, retirement

Securities are offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services are offered through NFP Retirement, Inc., a subsidiary of NFP Corp. (NFP). Kestra IS is not affiliated with NFP Retirement Inc. or 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.


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