Various Stages of Retirement to Consider

While you’re formally employed, there would have been various steps of the career ladder that you navigated along the way. Your retirement years will work in much the say way, with various stages to take into consideration. Below is a simple breakdown of what you could expect to encounter during each of them with regards to finances.

 

Stage One – the Beginning of Retirement

Otherwise known as the honeymoon phase, this is when a lot of retirees tend to be the most active. The initial excitement of now being able to engage in activities that they couldn’t partake in before due to time constraints is experienced during this time. In addition, younger retirees are usually in better health, meaning that they will want to do as much as possible during this time. 

As a result of being more active during these first few years, you could find yourself spending more money – especially if you’re traveling more than you did before. However, it’s crucial that your retirement funds be carefully managed during this time. Failure to do so could result in you struggling to make ends meet later on.

 

Stage Two – Slowing Down

This stage starts taking place approximately ten years after you’ve retired, and you find that you’ve grown tired of traveling and any other leisure-related activities that you were enjoying at first. You may find that you’re also ‘starting to feel your age’ at this point, causing you to slow down a bit. 

Age-related health conditions may also start making their appearance during this time, resulting in you having to spend a bit more money on medication and other required treatments. During this time, you could notice an increase of between 3% and 5% on your cost of living each year. 

 

Stage Three – Nearing the End of your Life

This stage of retirement takes place when you’re reaching the end of your life. Although it’s difficult to determine exactly when this stage will arrive, it normally tends to be when individuals become frail and more inactive. During this stage, you might find that you’re no longer interested in activities that you once enjoyed and you may even find yourself staying home a lot more than before.

During this final stage of your retirement years, you will most likely also see a decrease in your regular monthly expenses. However, increasing healthcare expenses or even the cost of relocating into an assisted living facility could cause your living expenses to skyrocket. As a result, you can expect an average cost of living increase of as much as 5% per year if you intend keeping up with your current lifestyle. 

It’s important to keep in mind that the information above is merely a basic guideline because no one ever knows how your living conditions or circumstances could change after retiring. As such, now is the right time to start putting a retirement plan into place. If you would like to learn more about compiling an effective financial plan for retirement, speak to our team today. 

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How much does that Second Job really Pay?

Many families are finding it more and more difficult to make ends meet each day, which has resulted in a number of individuals taking on second (or even third) jobs to ensure that they can keep meeting their monthly obligations. While it can seem like a good idea to have more than one job at a time, there are some aspects to consider beforehand.

 

Increased Mental and Physical Fatigue

Taking on a second job could result in you wearing yourself down mentally, emotionally and physically – far quicker than if you were only working at one job. While it may sometimes be possible to overcome these feelings after a while, it’s essential to evaluate your position every few months to determine whether the additional fatigue is worth what you’re being paid at the second job or not. 

 

Less Focus on your Main JobMain

Another issues you may encounter when taking on a second job is that you won’t be able to give as much focus to your main job as you did before. Over time, this could become problematic, especially if the lack of focus prevents you from being able to perform, as you should.

 

Less Family Time

When taking on a second job, it not only means that you’ll be spending more hours working; you will unfortunately also be spending less valuable time with your family. While this may not seem important initially, young children can often become upset when they aren’t able to spend as much time with a parent as they did previously. 

 

Take Additional Expenses into Consideration

Many individuals only see the initial amount of money they’ll be earning after taking on a second job. However, it’s essential to take additional expenses that will be incurred into consideration. 

For instance, your gas bill will more than likely increase as a result of driving to and from your second job. You may be required to purchase uniform or other items that can only be used while working or even cover the cost of additional meals out while on the job. 

Another expense that many parents forget to take into consideration when looking at taking on an additional job is that of childcare – especially if the second position is going to require night shift hours. Many sitters will charge higher than average rates for taking care of children during evening hours. 

Before agreeing to take on that additional job, it’s essential to calculate how much of your extra earnings will be going towards job-related expenses. If you’re only going to be netting a dollar or two per hour after deductions, it will probably not be worth your while to take the position.

Another point to consider before taking on additional employment is taxes on the earnings from it. As such, it may be a good idea to chat to a professional financial advisor beforehand. They may be able to help you trim your existing budget in such a way that you won’t need to take on additional employment in order to make ends meet. 

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Why a Budget is Essential for Financial Success

While virtually everyone wants to accumulate as much wealth as possible, few are actually doing anything to achieve their goals and dreams in this regard. However, the fact remains that the only way to become truly successful with your finances is to compile a realistic budget and stick to it as religiously as possible.

 

Enjoy a More Fulfilled Retirement

While you may already be a responsible spender who follows a strict budget, this may not be enough on its own to ensure a retirement that you’ll be able to enjoy. Saving a portion of everything you earn is a crucial step for ensuring a decent retirement. 

Compiling a budget can help you see how much money you have left over after monthly expenses such as rent or mortgage, groceries, transport and other essentials have been paid for. If you’re overspending, you’ll either have to cut back somewhere or find a better paying position so that you can start contributing to various retirement accounts. Having enough funds saved for retirement will make all the difference between being able to enjoy your golden years or having to work one or more jobs just to pay the rent and put food on the table.

 

It Prepare for the Unexpected

No one ever knows when or if any type of emergency situation will occur, such as a vehicle breakdown, a burst water heater or a damaged sewer line that floods your property. In most cases, instances like these will happen at the worst possible time – which is why it’s crucial that you prepare for them as much as possible beforehand.

Your budget should include an emergency fund that amounts to between three and six months’ living expenses. This will help ensure that you don’t incur any debt if a financial crisis occurs. The easiest way to build your emergency fund is to set aside an amount from each paycheck you receive in a dedicated account. 

 

It can Reveal Bad Spending Patterns

Compiling a budget will not only enable you to see where your money goes; it will help reveal whether you’re overspending on any item in particular. For example, are you spending a few hundred dollars a month on takeout? Do you ever watch all 150 channels that are aired by your cable provider?

Seeing everything on paper will help you re-evaluate where you could be overspending. Once financial drains have been identified and stopped, those funds can then be allocated towards retirement saving or towards building a decently sized emergency fund. 

While many individuals prefer to use a good old-fashioned pen and paper for compiling their budgets, various apps and budgeting software programs are now available than can assist with this process as well. If you would like to start managing your finances in a more responsible manner but you’re unsure of how or where to get started, speak to one of our team members today. We look forward to assisting you in any way possible. 

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Avoid Making these Retirement Mistakes

Retirement is something that many people look forward to while they’re still working. As such, it’s important to ensure that you have planned correctly along the way for this time in your life. Below are a few mistakes you should do everything possible to avoid making.

1.  Filing for Social Security benefits at the Right Time

 

Many retirees will rely almost entirely on Social Security benefits to make up the bulk of their income once they’re no longer working. This means that you’ll have to ensure that you’ll be able to obtain the maximum allowable benefits possible from this source. 

One of the best ways to ensure that you can obtain as large a payout as possible from Social Security is to only file after you have reached full retirement age (FRA) and not as soon as you’re eligible to apply. Keep in mind that some other aspects such as spousal and disability benefits can also play a role in the amount of Social Security income you eventually receive.

 

2.  Continuing to Accumulate Wealth after Retiring

Very few retirees will have sufficient liquid assets or cash savings to last them through their golden years. As such, many of them will have to continue generating some form of income after officially retiring. This could mean continuing to work part-time for some individuals, while others may be able to rely on CDs, stocks and bonds to keep afloat financially.

While you may not need to generate as much income as you did prior to retirement, it’s strongly recommended that you generate enough to cover basic living expenses such as groceries, gas and entertainment costs. 

 

3.  Not Correctly Strategizing 401(k) or IRA Withdrawals

Although several individuals work extremely hard and save a good amount of money towards their retirement, too many of them still see large chunks of it disappearing because of tax penalties that are charged when they withdraw their money. 

If you want to avoid being penalized (and who doesn’t, especially after working so hard to save that money in the first place?), it’s crucial to establish a withdrawal system that will minimize tax penalties as much as possible. This can be done by taking your Require Minimum Distributions (RMDs) into consideration. It’s also essential to confirm that your existing withdrawal strategy takes life changes into account, such as potentially increased healthcare expenses or a reduction in income after you’re no longer employed full time. 

 

4.  Not Curbing Living Expenses – Even after Downsizing

The main goal of downsizing is to help keep your monthly expenses as low as possible after retiring. However, several retirees find themselves paying higher transportation, tax, food and utility related costs because they fail to take the cost of living in their new location into consideration. 

It’s crucial to take all of these expenses into account before relocating – especially if you’re moving out of state. This will prevent you from having to relocate again at a later stage just that you can remain afloat financially. 

 

Every retiree’s personal and financial circumstances will be unique. If you would like to chat with a professional about restructuring your financial plans, contact us today. 

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Why it’s Essential to Set Financial Goals

If you want to be financially successful, it’s essential for you to set money-related goals at the beginning of your journey. Once you’ve done this, you’ll be able to chart your progress along the way and see whether any adjustments may be needed along the way. 

 

Goals Enable you to Set Up a Realistic Financial Plan

Determining what your financial goals are will give you the opportunity to compile a realistic plan to help achieve it. Simply receiving your paycheck and paying recurring bills without realizing where all of your money is going will not allow you to make the most of your finances over time. For instance, if you would like to retire with a balance of $1 million, you’ll need to know how much will have to be saved and/or invested each month and how long you still have to get to that amount.

 

You’ll be Able to Track your Progress

Being able to track your progress will not only allow you to see if you’ll be able to realistically achieve your financial goals; if one of your goals is to eliminate all of your consumer debt within a specified timeframe, seeing the amount of money owing shrink each month will be an excellent motivator over time as well. 

 

Goals Help Keep you Focused

Another reason why it’s essential to set financial goals is that they help keep you focused. In other words, it will make it easier for you to ‘keep your mind on the prize’ so to speak. 

Regardless of whether you’re saving to buy a car, house or even an overseas vacation, it’s a good idea to take pictures of the items you’re saving for and place them in a spot where they can be seen regularly. This has been proven to be one of the best motivators around that will help prevent you from overspending on impulse purchases.

 

Enjoy a Sense of Achievement

Although it may seem like it’s taking forever to achieve some of your larger financial goals, there’s little else that feels as good as that sense of achievement you experience once one has been reached. 

Once you’ve achieved your first financial goal, you’ll be even keener to see how quickly you can reach any others you’ve set. Consider giving yourself a small reward for each goal you achieve – maybe treat yourself to a coffee that you don’t usually purchase, for instance. 

 

Enjoy Peace of Mind

Once you start achieving your financial goals, you’ll be rewarded in another way that you may not even realize initially – being able to enjoy peace of mind in knowing that your financial future will be more secure than it was before. 

If you’re unsure of how to go about setting realistic financial goals, you may need to enlist the help of an experienced financial adviser. They will be able to let you know whether you’ll need to reduce current expenses or increase your income in order to achieve your financial goals. Contact our team today to learn more about planning ahead for a financially secure future. 

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When does it make Financial Sense to Dig into your 401(k)?

Your 401(k) allows you to set aside a predetermined amount of money each month that can then be used to live on after you’ve retired. Although you do have the option to dig into these funds before you reach retirement age, it’s usually not recommended that you do this. However, there may be one instance where it would make sense for you to do this. 

 

When it’s Possible to Repay it Quickly

In most cases, the only time you should ever consider accessing the funds in your 401(k) account early is if you’re in a very tight financial situation and you know that it will be able to be repaid within a few months at the most. 

While you will still lose out on potential interest that could be earned on the amount you’ve withdrawn, you won’t be jeopardizing your final payout amount as much as if you took longer than a few months to repay your loan. For instance, if you’re faced with sudden unexpected medical expenses that you don’t have the money to pay for or your home is in danger of being foreclosed upon, but you’re assured of obtaining additional funds within the next month or two that will cover the full cost of the loan you’ve taken out, it may be a good idea to borrow against your 401(k).

 

A Serious Disadvantage

While you may plan to rely extensively on social security payouts each month after retiring, more and more information is being revealed stating that these amounts will not be nearly enough for seniors to live on – especially if they suffer from serious health conditions or you live in a high cost of living area. 

If you borrow funds from your 401(k), you lose out more than once. The first time is when you miss out on the potential interest you could have earned on that loan amount and the second will be because the amount of money you’ll have left to live on after retiring will be reduced quite substantially. 

 

Start Preparing for Retirement Now

If you’re still in your 20s, you may think that there is still a lot of time left to start planning for your retirement. However, this is not the case. The sooner you start making contributions to your 401(k) in your 20s, you’ll be able to contribute smaller amounts each month than if you wait to start making payments once you reach your 30s. Over time, this could amount to a difference of $100,000 or more that you’ll have to live on during your retirement years. 

Many employers still offer to match employees’ 401(k) contributions up to predetermined amounts or percentages, which is why it makes even more sense to start contributing to this account as soon as possible. If you are seeking further financial advice regarding how to prepare for retirement, get in touch with our team today. We look forward to working with you and helping you plan for your future. 

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Dealing with Unexpected Medical Costs during Retirement

While you should be able to relax and enjoy your retirement years as much as possible, a possibility always exists that could result in you having to cover the cost of large and unexpected medical bills. If you’re unfortunate enough to land in this financial position, there are some steps you can take to try and reduce the effect that it will have on your retirement funds as much as possible. 

 

Never Rely Entirely on Medicare

Several older individuals are under the impression that Medicare will be able to handle all of their health-related costs after they reach the age of 65. However, this doesn’t always work according to plan, which is why it’s important to think about purchasing a Medigap policy from a private insurer and/or a Part D prescription medicine plan. 

Keep in mind that it will only be possible to purchase Medigap cover if you already have Medicare Part A (hospital services) and Medicare Part B (standard doctor services) sorted out. This alone will help you cover as many potential medical emergencies as possible that could occur after you’ve retired. 

 

Find out if there are any Alternative Options

If you’ve had the same prescription for more than a few years, you may have just been having it refilled – often without thinking about the out of pocket costs it incurs. However, once you’re no longer working, you’ll need to do everything you can to keep your out of pocket medical expenses as affordable as possible. One of the easiest ways to do this is to inquire about the possibility of generic medications

Using generic medications can help reduce your monthly prescription expenses by as much as 75%. Another way that you could reduce these costs is by changing to preferred healthcare providers or asking whether any prescription discount cards are available for your medicines. 

 

Find out about Potential Assistance Programs

When it comes to being able to obtain your prescription medicines at affordable prices each month during retirement, you should never be too shy or afraid to inquire about the possibility of there being any assistance available that could help shoulder the cost. 

Several organizations are available that can provide you with assistance if you’re struggling to cover the cost of your medications. For instance, if you require new prescription glasses, associations such as the Rotarians will often be able to assist you – along with providing an eye exam. The AARP will also be able to provide you with a host of information in this regard as well.

When it comes to keeping your medical expenses as low as possible during your golden years, the saying, “prevention is better than cure,” certainly applies. As such, you should do your part as much as possible by remaining active and consuming a healthy diet. This will help ensure that you’re able to make the most of these precious years without having to worry about trying to cover a multitude of health-related expenses. 

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Teaching Retirement Principles to your Kids

Very few teenagers and young adults give much thought to retirement because they think that there is still a lot of time ahead of them to plan for this part of their lives. However, there are a few ways in which parents can help their teens and young adults to understand how important it is to plan well in advance for this time of their lives. 

 

Find out what they are Expecting

An excellent way to instill retirement principles into your kids is to find out from them what they want to do with their lives. Would they like to retire early, travel as much as possible or buy a yacht, or do they simply want to earn a good living and retire sometime between 65 and 70? 

Either of these scenarios requires a lot of planning to execute, but it is possible for you to help them figure out how much their life plan will cost them (be sure to take inflation into account) and what it would take for them to be able to achieve these goals. 

 

Let them know that Circumstances will Change

Previously, most individuals relied entirely on their pension funds and Social Security to get them through retirement. However, these are no longer as reliable as they used to be, with Social Security now only paying out around 75% of planned benefits after 2033 and Medicare funding looking just as negative. 

This means that retirement will be completely different for anyone in their 20s, so it’s essential that they start focusing on retirement planning as soon as they become employed. As a result, you will need to teach your kids that it’s no longer a safe option to rely on any form of government funding when they retire. 

 

Teach them that More is Better

As we get older, we end up having to deal with several uncertainties in life. Some may pertain to health, while others pertain to employment status or other personal circumstances. Although the current age of retirement in the US is 65, Social Security will actually pay a higher benefit to any individual who continues working until they turn 70 – or even older. 

Keep in mind that it’s almost impossible to assume at the age of 25 whether you will still be physically able to work when you reach the age of 70. As a result, it’s essential to plan in such a way that you’ll be able to afford to retire when reaching the age of 55. This way, you will be able to save additional money towards your golden years if you’re still healthy enough and willing to work when reaching 70. 

As you can see, teaching your kids about how they can plan ahead for their retirement years need not be as complicated as you think. Everything comes down to them knowing how they would like to spend their lives when they are older, and showing them how they can achieve their financial goals with the right amount of planning. 

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Can you Save for Retirement and Pay for your Kids’ College Simultaneously?

While there’s nothing wrong with parents who focus on their kids’ goals with regards to college, research has indicated that more and more parents are now doing this at the detriment of their own retirement. Although it’s OK to provide support to your kids while they’re in college, it can be extremely difficult to balance that along with your own plans to retire in a decade or two. 

Firstly, it’s crucial to determine how much you will be able to comfortably set aside for your own retirement as well as your kid’s college costs. All of these expenses must be considered in conjunction with each other so that you can see where changes might need to be made to one or both of them. 

Here are some questions that require honest and direct answers because they will help you determine what your financial limitations are:

 

Covering College Expenses

  • Are you going to pay for all or part of your child’s college journey?
  • How many years are left before your child starts college?
  • Will they attend public or private college?
  • Do you think your kids will qualify for any form of financial aid?
  • Will grandparents or any other family members be contributing towards college costs or not?
  • If your kids have specific academic, artistic or athletic abilities, id there a chance that they would be able to qualify for any scholarships?

 

Covering Retirement Savings

  • How do you want to live after you’ve retired? Do you want to simplify your life or would you like to travel more?
  • Does your current employer offer any form of retirement or pension plan where matching contributions are provided?
  • How many more working years do you have left before reaching retirement?
  • Will you or your spouse still work part-time after officially retiring or not?
  • Have you already got a Roth IRA or other form of IRA in place?
  • Are you going to need Social Security benefits to assist with your retirement? If so, it’s essential that you check online to see the amount you’ll qualify to receive
  • What sort of income are you expecting form your existing retirement account balance?

 

What you can do if it’s not Possible to Pay for College and Retirement

In cases where it’s just not possible to pay for college and secure your retirement financially, you might need to ask:

  • Will you be content with delaying retirement by a few years in an effort to boost savings balances?
  • Are you willing to cut back on living expenses now or after retirement? You may be able to reduce expenses right away in order to have enough money later on or you can think about reducing spending once you’ve retired
  • Are you willing to keep working into your retirement years?
  • Will you be willing to make investments that are more aggressive? (This might not always be a good idea)
  • Will you be willing to have your kids attend more affordable colleges or contribute towards their college costs?

It’s essential that you not wait until your kids have finished college before you start saving for retirement because it will be almost impossible to save enough money to live on. If you require more information about being able to retire comfortably and still contribute towards your kids’ college education, get in touch with us today. 

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Why you should Hire a Financial Adviser to Help with Retirement Planning

Financial advisers possess extensive knowledge when it comes to helping individuals to prepare for and achieve their long-term financial goals. They also have the ability to provide you with much-needed guidance when it comes to planning for major life events along the way such as purchasing a home and ensuring that you’ll be able to retire comfortably. Below are a few reasons why it makes sense to work with an accredited financial adviser. 

 

The Economy can – and will – Change

You may intend retiring with a lump sum of $500,000 in the bank. While this may be a fairly reasonable goal to achieve for many working folk, it’s important to take the fluctuating economy into consideration. For instance, a dozen eggs and a gallon of milk may cost you $6 today, but how much will these essential set you back by the time you retire? 

Your savings may not stretch as much as you had planned, resulting in financial difficulties during retirement. A financial adviser can help you to plan ahead so that your savings accounts and investments take inflation into account. 

 

Unexpected Events Occur

You may be in your 30s at the moment, with a good-sized 401(k) account and fantastic job that you love. While everything may be going according to plan at the moment, what would happen if you were suddenly unemployed and you needed money urgently? Dipping into your 401(k) will not only set you back with penalty fees and additional taxes; you will be robbing yourself of potential interest that could have been earned on those funds as well. A financial adviser will assist you with allocating your funds in such a way that you’ll be able to deal with unexpected life events without compromising your retirement savings. 

 

You may be Wasting Money

Several individuals earn more than enough to be able to save and invest towards retirement, but seem to experience difficulties in finding the money to contribute to an IRA or other type of investment plan. Financial advisers specialize in the area of budgeting, meaning that they will be able to help determine how your money is being spent and whether any cutbacks can be made. 

For example, you may be spending too much money on takeout, cable channels and other subscriptions. While these may only add up to a few hundred dollars a month, this will certainly add up substantially if it’s invested over a period of 30 to 40 years and not spent immediately. 

 

Your Health could Deteriorate

Although most individuals are healthy when they begin their retirement savings strategies, unexpected illness could derail everything. Your financial adviser will be able to work with you to help allocate funds to cater for potential situations like these. 

Although many people think they know enough to plan for their retirement without having to pay an adviser, the truth is that circumstances can change completely unexpectedly. Having an accredited financial adviser on your side could make all the difference between being able to meet your financial needs or rely on Social Security during your golden years. 

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