Tag Archives: retirement

Disadvantages of Continuing to Work After Retirement

More individuals than ever are choosing to delay their retirement and continue working after turning 65 and current statistics have revealed that up to 20% of men and women over this age are either still actively employed or seeking a position. 

While there are advantages to remaining employed during this time of your life, there are also a number of disadvantages that must be taken into consideration.

Working after Retirement can Affect Social Security Benefits

First and foremost, it’s crucial to keep in mind that working after turning 65 will usually have a negative effect on your Social Security and Medicare benefits. For instance, both of these benefits can be affected by the amount of income you earn after you’ve officially retired. 

If you’re receiving Social Security payments during 2021, you haven’t yet reached full retirement age and income from your post-retirement job exceeds $18,960, your benefit will be reduced by $1 for every $2 earned over this limit. However, once you officially reach full retirement age, you’ll be able to work without having your Social Security benefits reduced.

It’s Not a Guaranteed Solution for a Shortfall in Savings

Although continuing to work after officially retiring – even part-time – provides a good way to supplement any personal savings you may have, keep in mind that you won’t always be able to control your employment situation. For instance, if you become ill or are injured, you may have to stop working completely – regardless of whether you can afford to or not. As such, it’s crucial to prioritize retirement savings while you’re still young and healthy.

You’ll Have Less Time to do the Things you Enjoy

The most obvious disadvantage of continuing to work after turning 65 is that you will be left with less time than ever to do the things you enjoy – which is usually the main objective of retiring. However, this may not always be a serious issue if you happen to find a position that you enjoy.

You Could Experience Additional Stress

As most individuals become older, they look for ways to reduce the amount of stress in their lives – and going back to work will certainly not be the way to do this. This will be the time to consider the real reason why you’re returning to work – are you bored sitting at home day after day or do you truly need the extra money to cover unexpected medical bills? If you don’t really need to extra money, it may not be worthwhile to subject yourself to the unnecessary stress of going back to work. 

Although many new retirees feel compelled to remain as active as possible, it’s important to remember that this is the time of your life when you should seriously consider slowing down a little to enjoy your golden years as much as possible. If you truly are bored being at home day after day, consider donating some of your free time to a charity or other worthy cause that you feel strongly about. 

Continue reading
keeping busy retirement

Why it’s Crucial to Keep Busy after Retiring

The idea of no longer having to wake up to an alarm every weekday morning and being able to choose how they want to occupy their days is an idea that’s highly appealing to most working people – especially after having spent 40 or more years in the workforce. 

However, many of these individuals suddenly find themselves at a loose end because of not knowing what to do with all the free time they now have – which can result in them experiencing severe bouts of depression.

Below are some reasons why you should keep as busy as possible after retiring:

Ease the Boredom

Although most people literally count down the years until they’ll be able to retire, many of them end up being caught off-guard when they are left with endless amounts of free time. Many jobs also provide a level of mental stimulation, which also comes to a sudden stop they day that the office job comes to an end. 

While some people will take on new hobbies or interests after retiring, others may find that this alone doesn’t provide the mental stimulation they need. As such, taking on a part-time job could be highly beneficial for them – not just to alleviate boredom, but also to supplement income.

Keep up with Social Engagement

If you’re a person who doesn’t enjoy being aloe, chances are that you’ll miss the daily bustle and routine at your workplace after retiring. 

Many older individuals have worked with the same colleagues for a number of years, meaning that many of them will have become friends during this time. Opting to continue working part-time will help ensure that these relationships can continue to thrive. In cases where your part-time position is at a different company to that where you worked previously, it will provide an opportunity to make new connections and friends.

Keep those Cognitive Skills Sharp

Getting involved in various activities after retiring will not only help ensure that you have a good amount of company during this time of your life; research has shown that individuals who continually interact with others will possess cognitive skills that are far better than those who decide to isolate. Although poor cognitive skills will not render an individual incapable, they do make it more difficult for a person to successfully interact with others.

Supplement Income

Many retirees discover too late that the funds they had set aside for this time of their lives will not be sufficient for them to make ends meet. Taking on a part-time position can help supplement existing retirement income to the point where you may even have a little cash left over at the end of the month to treat yourself after covering essential expenses. 

Although the thought of literally being able to sit and do nothing all day seems highly appealing – especially to individuals who have had fast-paced careers, the truth is that most people won’t be happy doing this for long. If you would like to learn more about building a sizeable retirement fund, contact us today. 

Continue reading
retiring early

To FIRE or Not to FIRE? That is the Question

Over the past few years, more and more individuals have entertained the idea of retiring at younger ages than ever before – resulting in the start of the FIRE (Financial Independence, Retire Early) movement. This concept has become especially attractive among high-earning individuals in their 20s, 30s and 40s and it involves living frugally and saving as much as possible during the early years.

Advantages of FIRE

Don’t be Stuck in a Job you Dislike

The main appealing factor of FIRE is the freedom you’ll have in that you get to choose how to spend your time. If you don’t have to go to work each day, you can generally do whatever you like. In fact, many FIRE retirees live in a state of almost-permanent vacation by traveling, playing their favorite sports and doing exactly as they please while they’re still young enough to be able to enjoy activities like these to the fullest.

You’re Saving more than You’re Spending

Although there aren’t many hard and fast rules regarding good financial planning, the aspect of saving more than you’re spending certainly is one of them. 

This rule is the main cornerstone of FIRE as well in that the path to achieving it involves highly disciplined spending and saving habits. Many FIRE retirees are known for saving as much as 50% of their disposable income, with some even saving 70% to 75%. Many of these individuals invest in index funds and/or purchase properties that will provide them with passive income after they’ve stopped working. 

Disadvantages of FIRE

Extreme Frugality isn’t for Everyone

Saving 50% or more of your income can become extremely restrictive on your budget, especially if you’re paying for a mortgage or have kids in college. Many individuals who tried the FIRE strategy have admitted to feeling miserable because of having such limited funds available to spend. 

Before taking the leap into the FIRE lifestyle, keep in mind that the extreme frugality that’s usually required to make it work can become mentally and physically exhausting.

It can become Lonely

Although you may be able to FIRE and think that you’ll be able to enjoy spending more time with friends, this may not always be the case – because most of them will still be working at their jobs. As such, you’ll still have to wait until they can get time off so that they can join you for vacations or other fun activities.

Tax Structures may Change over Time

A number of individuals plan their FIRE strategy around the fact that they will be able to rely on potential Social Security payouts and Medicare to help cover medical expenses at a later stage of their lives. However, it’s crucial to keep in mind that Social Security may not be available forever and Medicare costs could rise to higher levels than initially imagined – putting a huge damper on potential FIRE plans.

Although joining the FIRE movement can be tempting, you’ll need to ensure that the funds you’ve set aside will be able to carry you through several decades. Contact us today if you’d like to learn more about setting up a good retirement investment portfolio.

Continue reading
retirement

Why so Many Individuals Cannot Afford to Retire

Several individuals look forward to the day when they’ll no longer have to wake up to an alarm clock and spend eight hours a day stuck inside an office. However, this idea is little more than a dream for a number of older individuals who have fallen short of being able to save the money they need to retire. Below are some of the reasons why so many older individuals aren’t able to afford to retire.

Seniors are Hoping to Work for Longer

A number of older individuals haven’t saved money for retirement because they had hoped to continue working throughout this time of their lives – either full-time or in a part-time capacity. However, these intentions often don’t go according to plan, with more than 50% of individuals being forced into retirement sooner than they’d hoped because of health or employer-related issues. 

One Third of Seniors Have No Savings

Up to a third of Americans have not set aside any savings for retirement, and the majority of those who have been saving are still far behind where they should be. Several reasons were provided for this deficit such as:

  • Prioritizing repaying student loans or starting college savings accounts for children
  • Having too much consumer debt that prevents money from being saved
  • Planning to rather save larger amounts of money at a later stage in life instead
  • A general lack of desire to start saving

Reduced Focus on Saving

Most financial experts strongly recommend having a minimum of 70% of your annual income saved before retiring. However, research has revealed that the amount of individuals who are actively saving money has declined rapidly over the past 30 years – to the point where up to 50% of Americans cannot come up with $500 to cover the cost of an unplanned emergency. One of the main reasons why people are saving less nowadays is that many of them have experienced income reductions that prevent them from being able to even cover the bare necessities. 

Higher Cost of Living

Even people who were under the impression that they were setting enough money aside for retirement could find themselves falling short because of continually rising living costs. Economists have warned that seniors throughout the country don’t have enough money saved to sustain their current lifestyle. Residents of Hawaii, Alaska and South Carolina seem to be faring better than seniors in other states such as New Jersey, North Dakota, Minnesota and Massachusetts. 

There are a number of reasons why individuals who are close to retirement age or are in the process of retiring don’t have sufficient savings to carry them through this time of their lives. In many instances, simply recognizing the reasons why they haven’t got enough saved is the first and most crucial step towards sitting down and compiling a plan that will at least help them to have a little extra cash set aside for when they’re no longer able to work.

If you have fallen behind with retirement savings or you’re unsure how to go about starting to save for this crucial time of your life, contact us today. 

Continue reading
retirement planning

What is the Right Time to Start Retirement Planning?

A commonly asked question when it comes to retirement is, “When is the right time for me to start planning for my retirement?” If you’ve only recently started climbing the career ladder, you may be thinking that you’ll still have a lot of time before you need to start preparing. However, if it’s one thing financial experts agree on, retirement planning should always start sooner rather than later.

Your 20s 

The concept of saving for retirement can seem virtually impossible when you’re still in your 20s because you may have just recently started a career and not be earning a decent wage yet – or you may still be struggling to repay student loan debt and think you don’t have enough cash left over to still invest for retirement. Alternatively, you may have other goals at this time of your life, such as starting a family – causing you to push retirement planning further away than you should. 

Below are just a few benefits you’d be able to enjoy if you start saving towards retirement in your 20s:

Take Advantage of Compounding Interest

Every year, your money will earn interest in two ways – on the money you’ve saved and on any interest earnings that you received in previous years. This means that the earlier you start saving, longer you’ll be able to take advantage of two forms of interest being earned towards retirement.

Enjoy Tax Savings

By placing your retirement funds into an IRA or Roth account, you’ll be able to take advantage of tax deduction of up to $5,500 for each year that you make these contributions.

You won’t have to Catch Up on Contributions at a Later Stage

Individuals who don’t make any contributions towards retirement savings during their 20s and 30s usually only realize how far behind they’ve fallen when they reach their 40s or 50s. By the time this happens, they will have to contribute a far higher portion of their earnings each month to ensure that they’ll actually have enough to live on when they’re no longer working.

Develop Healthy Savings Habits

If you make it a priority as early on as possible to start saving for retirement – and any other emergencies that may arise from time to time – you’ll develop good spending habits that will help prevent you from needing to borrow money if times get difficult. 

The Case for Starting to Save Later in Life

If you’ve waited until your late 40s or even 50s to start thinking about saving for retirement, you may be thinking that it’s too late to do anything about it. However, there are several reasons to get started, even if you intend to retire in the next five to 10 years. 

  • Most individuals reach their highest earning potential at this time of their lives
  • Several employer 401 (k) plans allow employees over 50 to contribute more money than younger employees

In short, it’s never too late to start saving towards retirement. If you would like to find out how to get started, contact us today to schedule an appointment with one of our financial advisors. 

Continue reading
retirement-portfolio

Why your Retirement Portfolio must be Diversified

When a retirement portfolio is diversified, it simply means that your investments have been set up in multiple places to help minimize the risk of losing everything you have. This means that if one of your investments experiences a loss, you’ll still have the rest of your portfolio to fall back on – while still earning reasonable profit on the rest. While it can be challenging to correctly diversify your portfolio, it’s a crucial part of planning a successful retirement

The Main Aim of Diversifying a Portfolio

Although a number of individuals think that diversification is necessary to maximize their return on investment, the truth is that the main reason why it must be done is to limit the impact that a volatile market may have on a portfolio. For instance, if an entire investment is placed in bonds, a large enough return may not be possible to support a retiree’s lifestyle. Alternatively, if everything is invested in domestic stock, the stock market’s volatility could cause the loss of a large part of your nest egg. 

  1. Limit your Losses 

When investing for retirement, your main goal should be to keep abreast of market averages and ensure that you’ll end up with enough money available after you stop working. It will not only be necessary to focus on your gains; you’ll need to keep in mind that there’s always the possibility that losses will be experienced – a large loss can totally derail your retirement plans. As such, the more diversified your portfolio is, the less chance you’ll have of experiencing big losses. 

  1. Less Overall Risk

Some individuals show interest in investing in high risk places that can provide significant returns, but it’s important to keep in mind that equally large amounts of money can easily be lost this way as well. While it can be fun to watch your money grow at a quicker than average rate, it’s recommended that some of your funds be placed into safe investment options like an IRA or bonds. Doing this will allow you to take a chance or two, but not at the risk of losing everything. 

  1. Keeping you on Track

Another aspect that’s essential when diversifying a portfolio is rebalancing. This refers to the practice of allocating money between various types of stock to find the right balance between risk and investing conservatively. For example, you might choose to spend a quarter of your stock investment budget on real estate, 5% on foreign stocks etc. Thereafter, you go back once a year to see how your balance has performed – and speak with a financial advisor if any changes need to be made. 

Ensuring that you have a diversified retirement portfolio won’t only help you get the best possible return on investment; it will also prevent you from losing too much money if a portion of your investment experiences a loss. If you are keen to discuss your retirement portfolio with a professional advisor, call us to set up an appointment today. 

Continue reading
kids-saving-money

Why it’s Essential to Explain the Link between Work and Money to Kids

Financial experts agree that it is crucial for kids to learn about the value and appreciation of money from the earliest possible age, and the best place for them to obtain this information is at home from their parents. Children who have been taught the fundamentals of earning and saving money from a young age will be far more confident and successful as adults.

  1. Working Teaches Kids the Relationship between Money, Time and Possessions

It’s crucial for children to learn from a young age that money has to be earned. As such, parents or caregivers should discuss how important it is for them to work for their money, and one of the best ways to demonstrate this is to provide them with paid jobs that can be done around the house (not to be confused with regular chores though). For instance, younger children can be paid to clean baseboards or wash the family car. Older children can be encouraged to seek paid working opportunities like walking neighbor’s dogs or mowing lawns.

When children are working for their money, they will also realize that there is time involved with earning it. As they become more accustomed to working and earning money, they often realize that the plastic toy that they initially ‘had to have’ wasn’t worth the hours of labor they put in to buy it. 

  1. Teaching the Concept of Saving

Once children have earned money, they will usually be tempted to spend it right away. However, this is the right time for parents to teach them that they need to save a portion of each amount they earn. This can be done by implementing a rule stating that 20% of their earnings must be saved for a rainy day and a further 10% for charitable causes that they are passionate about. They should then be allowed to spend the remaining 70% however they like.

The above-mentioned percentages are merely a guideline – parents should adjust these accordingly if needed. Establishing this financial routine will help children learn to spend less than they earn, which will go a long way in preventing them from accumulating consumer debt as adults. 

  1. Part-time Jobs can Teach Time-management Skills

Many parents think that children should not have part-time jobs because ‘it will interfere with their education.’ However, many children’s schedules will allow for anything up to 10 hours of part-time work per week without it affecting their study time. 

Along with learning time-management, having a part-time job will also teach children valuable social skills, responsibility and work ethics – skills that are essential for them to succeed as adults. 

Teaching children the importance of working for their money from a young age will also help them deal with the discomfort of the fact that although not all work is pleasant, it simply has to be done. If you would like to learn more about investing for your child’s financial future, contact our team today.

Continue reading
retirement

Why Debt and Retirement are Not Compatible

Retiring with any form of debt is considered to be extremely risky because it not only adds a level of stress that you definitely don’t need during this time of your life; it will reduce the amount of money you’ll have to live on each month as well – and Social Security will almost certainly not be enough to bridge the shortfall in your finances. 

Below are just some of the reasons why you should do everything possible to enter retirement debt-free.

Interest Payments could be Used to Fund Living Expenses

The last thing you need to deal with during your golden years is having to throw money away in the form of interest payments and finance charges – which is what you’d be doing if you’re still carrying consumer debt by the time you stop working. 

It’s strongly recommended to pay all consumer debts – and preferably mortgages as well – in full by the time you reach your late 40s or early 50s at the latest. This will give you enough time to start putting additional funds away that will come in handy once you’ve stopped working.

Your Income could be Severely Limited

Many seniors are disappointed to find that they will have to live on a fraction of the funds they were used to enjoying while they were employed – which will only be more difficult to do if you’re still trying to pay off debt when you retire.

Eliminating consumer, mortgage and student loan debt before retirement will help provide you with just that little bit extra to get by with each month – which will be crucial if you haven’t been able to save a lot of money for this period of your life.

This is Not the Time of your Life to Stress over Finances

Your golden years are not the time to be stressing over how you’ll make the mortgage payment or repay that car loan you took out while you were still working. Retiring debt-free will not only provide you with an increased sense of financial security; dealing with less financial stress will allow you to focus your time and efforts on the more pleasurable activities such as traveling, engaging in a new hobby or even enjoying a few extra meals out every so often.

Get your Budget and Investments Sorted before Retirement

Before you can even think about retiring, it’s essential that you’ve inspected your budget and investment or savings portfolio to ensure that you’ll have enough money to live on once you’re no longer employed. Setting up an appointment with an accredited financial advisor will help you determine where you are on your financial journey and whether any adjustments will need to be made with regards to your savings and investment plans. 

If you would like to obtain additional information about ensuring that your retirement years will be as financially stress-free as possible, contact our advisors to schedule an appointment with one of them today. We look forward to helping you plan the best retirement possible.

Continue reading
staying-active

Too Much Free Time After Retiring? Give these Boredom Busters a Try

Most individuals worry about the financial stresses associated with retirement such as covering the cost of healthcare, dealing with unexpected expenses such as home or car repairs or even paying property taxes. However, emotional and mental issues can quickly become all consuming during this time of a person’s life as well. 

Many seniors find themselves becoming restless and bored within just a few months after retiring, meaning that up to 40% of them end up experiencing bouts of depression. This can be alleviated though, by engaging in some of the following activities.

Learn Something New

Retirement can provide you with the perfect opportunity to expand your intellectual horizons. If you have a few hours to fill in the day, consider visiting your community college to see what classes are on offer for older residents. You could find yourself learning about botany, ancient history or virtually any other subject that interests you. Alternatively, some museums also offer free educational programs.

Start a New Hobby

Starting a new hobby need not cost a lot of money. In fact, activities such as baking, painting, cooking, fostering pets for your local animal shelter or even learning a new language can be enjoyed extremely affordably, and you’ll often be able to find classes to learn more about your new found interest before delving in completely.

Consider becoming a Volunteer

If you don’t have a need to work part-time during retirement to keep busy, volunteering for a cause that you strongly believe in can help keep you active – even for one or two days a week. In most cases, all you’ll need to do to volunteer is approach the organization you’d like to work with and let them know of your intentions. Most charitable organizations will welcome any assistance they can get.

Stay Active

Just because you’re no longer working full-time, it doesn’t mean that you should go home and assume the position of a couch potato – a lack of exercise during your golden years has been shown to encourage the development of many mental and physical ailments.

It’s recommended that you get some exercise at least three times a week for approximately 30 minutes at a time. Even a gentle stroll around your neighborhood will go a long way in helping to alleviate boredom and keep that brain matter active.

Keep those Social Connections Active

Although many retirees lose touch with several of their social connections after they stop working, this need not be the case. Ensure that you keep in contact with family and existing friends as much as possible – it also wouldn’t hurt to make a few new friends along the way during this time. 

Your retirement years can be extremely gratifying if you have planned for it correctly ahead of time. Ensuring that you find ways to beat the boredom blues as much as possible will help you enjoy what should be the most relaxing time of your life. 

Continue reading
credit-cards-retirement

Are you Really Benefiting from those Credit Cards?

These days, a number of rewards-based credit cards are available to consumers and incentives such as air miles, discounts on store-specific purchases have never been easier to obtain – or so it seems. While many of these cards may seem to provide extremely attractive incentive options, it’s crucial to read the fine print associated with each of them before signing up.

Those Rewards Likely come with High Fees and Interest Rates

Accumulating rewards may seem awesome initially, but you’re totally defeating the object if your card comes with fees that actually outweigh the benefits you think you’re getting. 

In most cases, the average reward redemption value on these credit cards is around 1% of what you’ve paid to earn it. This means that if your interest rate is higher than 1% on the card, then the credit card company is the one who is really benefiting from this arrangement – and not the cardholder. 

Another thing to keep a close watch on is any annual fee that may be charged – these can often be quite exorbitant on rewards credit cards.

You’ll be Encouraged to Spend More

Basic human psychology suggests that when someone is offered anything that seems like a good deal, most people will be tempted to purchase it – even if they don’t need it. As such, companies that offer reward credit cards take full advantage of this type of thinking.

Before putting any purchase on your reward credit card, do the math to see how much you’ll really need to spend before you’ll qualify for any decent type of incentive. For example, it’s not worth spending an extra $1,000 on credit just to get a reward of $10.

Rewards may come with Limitations

That long list of potential rewards that can be earned with your credit card may seem tempting, but it’s crucial to read and understand all of the terms and conditions associated with using these cards. For example:

  • Rewards may expire – some credit cards rewards may expire after a predetermined period of time, so ensure that you’ll be able to redeem them before this happens
  • Rewards may be limited – some credit cards reward programs limit the amount of incentives that can be earned in a quarter or during a year, so you may not end up getting as much of an incentive as you’d initially thought
  • Beware of redemption thresholds – Unless your credit card offers cash-back rewards, you’ll have to convert accumulated reward points into something useful such as a gift card or even airline ticket. However, keep in mind that many reward programs require a minimum number of points to be accumulated before you’ll be allowed to redeem them for a reward – and this could mean that you’ll have to spend thousands of dollars before being able to take advantage of rewards you’ve earned

In most cases, consumers will benefit from using standard credit cards that charge lower interest rates and don’t charge annual fees of any sort instead of signing up for rewards-based options. Always ensure that all fine print is fully understood before signing up for any type of credit card – whether it’s reward-based or not. 

Continue reading