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Ease Into Retirement With a Smart Pre-game Strategy

Ease Into Retirement With a Smart Pre-game Strategy

Retirement is a major milestone — a moment to turn a new page to a chapter you’ve probably dreamed about for decades. People look forward to unencumbered schedules, freedom to travel, spending more time with relatives or moving to a dream home on the beach. Retirees often have big expectations about what a life of leisure may bring only to find out that they miss the routine and camaraderie of going to work each day. Or that moving to their favorite vacation destination means leaving all their friends behind.

It’s not uncommon for retirees to experience a surge of well-being and happiness directly after retirement, followed by a decline in life satisfaction as time passes. But you can avoid some of the stress and anxiety that retirement can bring with a smart pre-retirement strategy to help smooth out the transition.

Dip Your Toe in Retirement Waters

The day after you retire might seem like plunging into the deep end of the pool – your daily work-life routine suddenly stops cold. So, instead of jumping in, consider wading into retirement with a transitional job. Maybe your current employer will let you step down to part-time work for several months — or you can explore a new opportunity with a bridge job that keeps you in the workforce (and keeps your retirement account growing) while lightening your schedule. Your WellCents financial professional can help you figure out how much income you’ll need in order to make a gradual transition into retirement.

Retire to Something Else

Prior to your last day at work, make plans and lay the groundwork for what you’ll retire to — not just the job you’ll retire from. Join a community or volunteer organization now. Get to know them and what the possibilities are so that when you retire you’ve already found a group you like, and are ready to fully engage in — or ramp up — your participation. 

Relocate With Confidence

Moving closer to children and grandchildren or relocating to a favorite vacation destination can sound like the perfect retirement plan. But it can also lead to disappointment — family may be busy with other activities or your vacation spot might be lonely without a group of friends. Invest in your new community before you make the big move. Plan longer trips to the area so that you can take part in local activities, meet people, start new friendships and have something to do outside of your family circle.

Invest in Prep

Just like the time and financial investment you make toward retirement readiness, investing effort and energy into retirement prep can yield big rewards. Talk to your spouse, family and friends about the dream you have in mind for your golden years and discuss how it aligns with theirs. Make a plan and start investing in your dream well before your last day of work. Contact your WellCents financial professional to check your financial readiness and figure out the best time to kick off your retirement pre-game.

Source: https://www.apa.org/monitor/2014/01/retiring-minds

 

Gen Z — Start Investing Now!

Gen Z — Start Investing Now!

If you’re a member of Gen Z — those born after 1997 — now is a great time to start investing for retirement. The power of compounding returns is one of the best ways to grow wealth over time. And the earlier you start, the less you have to set aside each month to reach your goals.

Consider that a one-time $10,000 investment you make at age 20 would increase in value to more than $70,000 by age 60, assuming a 5% interest rate. Meanwhile, it would only grow to approximately $43,000 if you make it at age 30. And the same investment at age 40? That would grow to a mere $26,000. As you can see, when it comes to investing, time really is money.

Here’s how to make the most of your investment dollars.

Find a Way to Invest

Even coming up with $200 can feel like a daunting task at this point in your life. Not only is your starting salary likely to be lower today than it will be in a few years, but you might also have student loan debt and other bills to contend with.

The good news is that you don’t have to invest a lot to begin building your wealth and preparing for retirement. Start with what you can afford, even if it’s only $50 per paycheck. Look for ways to free up a small amount of money in your budget each month so that you can contribute to your 401(k) and start putting that money to work.

Have a Plan

Create a plan for increasing your contribution down the road. If your employer offers a 401(k) match, try to invest enough to get the maximum. That match represents free money — and it’s the best deal you’ll find in the world of investing. Once that money is in your account, it begins growing, and it can boost your overall portfolio down the road.

Plan to increase your retirement account contribution each time you get a raise. Depending on your company, you could even plan an incremental increase in your contribution each year. For example, you could arrange to increase your contribution by 1% each year up to a certain percentage of your income.

The important thing is to get started and then up those contributions as often as you can. Get in the habit of investing, and you’ll be more likely to reach your long-term wealth goals even if you have to start small.

Give Yourself a Cushion

No matter your situation, there’s a good chance that, at some point, you’ll end up with an emergency where you must come up with a significant sum of money all at once. This can be stressful, and you might consider tapping into your retirement savings to help cover the cost.

However, it’s better to avoid using your retirement investments for emergencies since an early withdrawal can result in hefty penalties. Even if you get a 401(k) loan and avoid the penalties and taxes, anytime your money is out of the market, it’s not working on your behalf. You might replace what you withdrew, but you can’t replace the opportunity cost of time in the market. This is why establishing an emergency fund is so important.

Don’t Go It Alone

Investing for retirement can be daunting if you’re just starting out. Contact your WellCents financial professional to help you set realistic goals to grow your nest egg over time and give you a head start on the road to retirement.

Source: 

https://www.investopedia.com/financial-edge/0212/5-advantages-to-investing-in-your-20s.aspx 

What If I Can’t Save Enough to Reach my Retirement Goals?

What If I Can’t Save Enough to Reach my Retirement Goals?

You just ran the numbers on your retirement and realized that you aren’t going to be able to save enough to make it happen. Don’t panic: There are still things you can do to better your situation, especially if you’re willing to be flexible about your plans and your lifestyle.

The first step is to determine exactly where you are. In retirement, you may have income from a number of sources:

  • Social Security
  • Pensions
  • Investment income
  • An inheritance
  • Earned income from a side hustle

Next, estimate the likely cost of your future monthly expenses: rent or mortgage, utilities, automobile payments and insurance, credit card and loan payments, food, health care (insurance plus out of pocket) and emergency repairs. A good way to capture these categories is to look at your credit card statements and checkbook and list everything you’re spending on now. If you haven’t kept track of this on paper, most online bank and credit card services offer easy access to your transaction history.

Leave out or lower your estimate for anything you won’t spend as much on when you’re retired (your commuting cost should go down, for example). Now, what about potential costs for travel, hobbies and other post-retirement fun? Will you set aside money to give to grandchildren or other relatives in the years ahead?

Once you have your monthly income and expense estimates, compare the two. Are you still coming up short?

If you don’t have enough income to cover your projected expenses, there are some things you can do. But first, there are some things you should definitely NOT do:

  • Panic.
  • Shift into higher-risk investments to try to capture higher returns.
  • Decide your head hurts, avoid thinking about it altogether and assume your health and career will allow you to work long enough to make up the difference.

Here are some things you CAN do:

  • Make catchup contributions to an IRA. The tax code allows workers over 50 to make extra, pre-tax contributions to boost their savings.
  • Re-think your lifestyle. Do you really need to live on a golf course? Maybe you could live near a golf course and be just as happy.
  • Take on a side hustle to create a little extra income. This could be something that’s been a hobby – tying fishing flies, restoring old cars, or knitting comforters. Or work a few hours a week at a friend’s business. Be aware, however, that your earnings may have implications for your taxes and Social Security benefits. Because the tax code governing what portion of benefits can be taxed is complex and subject to change, you should talk to an accountant or financial advisor well versed in that part of the code.
  • Do you have two cars? Maybe one would do. Or perhaps you can do just fine with a used model with a reputation for reliability and longevity.
  • Downsize. Move to a smaller house or condo, and if you’re single, maybe take on a roommate.
  • Consider relocating to a lower-cost area. The cost of living in Knoxville, TN is about 17% below the national average, and there are plenty of other places below the norm: Cheyenne, WY (-8%), Green Bay, WI (-10%) and Sherman, TX (-14%) are just a few.
  • Tap your home equity to pay expenses.
  • Consider a reverse mortgage. However, be aware that the reverse mortgage products offered by various lenders are wildly different in their terms and risks. Look at this very, very carefully before committing.
  • Delay taking Social Security benefits. Waiting until at least your full retirement age boosts your monthly check significantly; your monthly benefit will increase by about 0.67% for each month you delay past your full retirement age, and will add about 8% for each full year you wait until you reach age 70. Your full retirement age depends on your year of birth. Use the calculator on The Social Security Administration website to figure all of this out for your particular situation based on your personal earnings record.

But before you do any of these things, the most important step you can take is to talk to your financial advisor. Because they deal with the intricacies of the tax codes and Social Security every day, they can help you steer clear of landmines and set a course to that bright retirement you’ve been dreaming of.

Sources:

1. https://www.forbes.com/sites/investor/2017/06/09/what-to-do-when-you-havent-saved-enough-for-retirement/#368f06f06e20

2. https://www.aginginplace.org/are-there-taxes-on-social-security-for-seniors/

3. https://www.ssa.gov/planners/retire/1955-delay.html

4. https://www.kiplinger.com/slideshow/retirement/T047-S001-cheapest-places-where-you-ll-want-to-retire-2019/index.html

#save #retirement #future #wellcents

ACR# 336900 NFPR-2020-8

12 Strategies You Should Know to Build an Emergency Fund

12 Strategies You Should Know to Build an Emergency Fund

When it comes to preparing for a rainy day, the best time to act is now. Establishing a 3-month or $10,000 emergency fund is a critical pillar to your financial wellness - and it will help you sleep a whole lot better at night.

But how can you find room for this essential line item in an already tight budget? Here are 12 tips to help get you there.

  1. Set a target date to reach your goal. This can help bolster your motivation, especially if you need to cut back a little on your expenses (see #3). Remember it’s only temporary!
  2. Decide where your fund will reside. Consider a conservative option such as an FDIC insured savings account. This is not the place where you want to take on any significant risk - liquidity is the primary goal.
  3. Put your monthly budget on a diet. Trim the fat wherever you can. Cut down (or out) your latte habit until you’ve reached your goal. Dine out less, carpool to work, suspend some streaming services and do whatever else it takes to free up necessary cash.
  4. Eliminate a couple of big expenses. If you don’t want to feel the pinch on a daily basis, plan a staycation instead of pricey travel and bank the difference. Or, hold off on home improvement projects to make sure you can actually keep making the mortgage payments should disaster strike.
  5. Sell some stuff. If you’ve been looking to do a little decluttering anyway, now would be a great time to do some online selling or have a huge garage sale. You might be able to make a sizeable dent in funding your reserve and liberate some extra space in your attic and closets along the way.
  6. Leverage found money. Use an annual bonus, gifts or a tax refund to prepare for disaster. It may be easier and faster than trying to reign in your budget from every direction.
  7. Generate some extra income. If you have more room in your schedule than in your budget, take on a side hustle by doing some freelance work on Fiverr, or try Ubering your way to disaster preparedness.
  8. Renegotiate your debt. If you’re carrying a lot of revolving debt at a higher rate, ask your creditors if they would be willing to lower the interest rate. Or consider using a zero-interest credit card balance transfer promotion and sock away what you used to pay in interest charges.
  9. Pay yourself first. Until the emergency fund is in place, make setting aside whatever you can toward this goal a top priority, along with necessary expenses and timely debt payments. Making the payment an automatic transfer from your paycheck into a savings account is a great way to keep yourself honest.
  10. Confirm insurance coverage. If there’s an emergency, your emergency fund is only one potential resource at your disposal. Review your disability and homeowner’s coverage, medical plans, car insurance, and long-term care plan, and consider obtaining an umbrella policy for an extra layer of protection.
  11. Don’t stop once you’re done. After you’ve reached your emergency funding goal, contribute as much as you can on a regular basis to a well-diversified retirement plan. The government has increased the contribution rate for 401(k) plans to $18,500/year starting in 2018. Workers over 50 can make an additional “catch up” contribution up to $6000 for a total of $24,500 annually(2). And this does not include funds received as a company match. If you’ve already adjusted to a leaner budget, this may be the easiest time to supercharge your retirement savings so you can pursue your goal of enjoying your golden years in style.
  12. Reevaluate your emergency needs annually. Remember, as your expenses increase over time, your emergency fund will need to adjust accordingly. So, each year take a fresh look at what it will take to weather the storm and add to your fund as necessary. And most importantly, resist any temptation to tap your emergency fund in any situation other than a crisis. After all, you can’t put a price tag on peace of mind.

We encourage you to set up an appointment to discuss your emergency fund and all your retirement needs with your 401k advisor today - your financial future just may depend on it.

Tags: budget, emergency fund, save

1. https://www.bankrate.com/banking/savings/financial-security-0118/

2. https://www.irs.gov/retirement-plans/401k-plan-catch-up-contribution-eligibility

NFPR-2019-71 ACR#324824 08/19

How to Save for a House?

How to Save for a House?

It's the biggest purchase most people ever make, and with good planning and some preparation, it can be a solid financial move.

If you don't already own a home, the idea of affording one can seem daunting. And with the national median house price expected to top $270,000 in 2020, just saving for the down payment can be a challenge(1). But it's one you can meet with a good plan and some discipline.

While there are various ways to buy a home with less than 20% down payment, many experts don't recommend doing so. You may be required by your lender to take out Private Mortgage Insurance (PMI) to ensure that they get paid back if you default on your loan(2). On an average home loan, that 20% down payment equals $54,000. Since the average household has about $8,800 in savings, that's a big gap to bridge(3).

1. https://www.washingtonpost.com/business/2020/01/06/experts-predict-what-housing-market-will-bring/

2. https://www.consumerfinance.gov/ask-cfpb/what-is-mortgage-insurance-and-how-does-it-work-en-1953/

Begin planning before you buy - several years before, if possible. Start by researching neighborhoods to find ones you like that are in your price range. Check statistics that can indicate greater stability: Crime rates, turnover, school performance and activity of religious and charitable organizations. Educate yourself about the home buying process. Real estate agents are generally anxious to sell you a house immediately, but find one who's willing to share what they know about neighborhoods, values and trends. Don't let them talk you into buying a "bargain" fixer-upper either unless you have some serious DIY expertise. Getting trapped in a broken house with problems you didn't anticipate - after spending your savings on a down payment - can be a nightmare.

This is also the time to start saving. You're probably not going to scrounge up $54,000 in a year, but look at your budget and see how much you can save each month. Some financial experts recommend the 50/30/20 rule:(4) Spend half your take-home pay on essentials such as housing, transportation and food. Allocate 30% on things you "want" but don't need - an occasional night out or vacation. Then save 20%. If your take-home pay is $3,000 a month, that would put $600 a month into savings. Not considering any interest earned, you'd have your down payment in seven and a half years. Reverse the rule - save 30% and spend 20% - and you'd cut that to five years.

Here are some ways to reach that 30%, or more:

  • Earmark yearly income tax refunds for the down payment fund. The average refund is about $3,000.(5) Do that four years in a row in conjunction with your $900 monthly savings, and you'll be close to your goal.
  • Cut expenses. Do you really need that supermax cable TV package? Can you delay buying new cars? Do you have to have a Hazelnut Mocha Coconut Milk Macchiato each and every morning? That alone could save $100 a month.(6)
  • Re-evaluate all of the recurring online purchases in your household. You may be surprised by the number of "vampire" charges - such as $3 for cloud storage or $10 for a streaming service - lurking on your credit cards.

3. https://www.cnbc.com/2019/03/11/how-much-money-americans-have-in-their-savings-accounts-at-every-age.html

4. https://www.investopedia.com/ask/answers/022916/what-502030-budget-rule.asp

5. https://www.cnbc.com/2020/02/14/how-to-use-2020-income-tax-refund-check-from-irs-to-spend-and-save.html+tax+refund+2020&ie=UTF-8&oe=UTF-8

6. https://www.cnbc.com/2020/02/14/how-to-use-2020-income-tax-refund-check-from-irs-to-spend-and-save.html+tax+refund+2020&ie=UTF-8&oe=UTF-8

Make a point to talk about your plans with your financial advisor. They can help you with tips, savings advice and maybe some ideas you haven't already thought of to reach your goal - and you just might be having that housewarming party sooner than you think!

#save #largepurchase #home #house #buying #wellcents


ACR# 342327 02/20
NFPR-2020-50


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