We’re wrapping up our series of SPF 15 (Sound and Practical Finance) tips with these suggestions for people aged 70 and over. You can check out all our SPF 15 posts on our website. If you have any questions or comments about this series, please feel free to contact us. We’d love to hear your ideas. If you have not already done so, begin taking your Social Security. Up until age 70, Social Security benefits accumulate thanks to delayed retirement credits. So, there is a benefit to deferring Social Security until then. There is no benefit to delaying those payments past the age of 70, even if you don’t need the money right away. Take the payments and reinvest them. Don’t forget to take your Required Minimum Distributions. RMDs start at age 72. This means you must begin taking withdrawals from your traditional IRA, 401(k) or other tax-deferred retirement accounts so you can pay the tax you’ve deferred on them. If you don’t start taking your RMD each year once you reach age 72, you will have to pay an excise tax on the amount not distributed. An immediate annuity may be a good choice for you. The longer you live, the longer you are expected to live. If you have good genes and a healthy lifestyle, then you may want to consider guaranteed income choices that provide income for life. Not all annuities are worth their fees, though, so be sure to run through your options with a fiduciary advisor before your commit to a plan. Move toward less risky investments. Once you reach age 70, you don’t have as much time to make up a loss as you did when you were 30. Check your retirement portfolio allocations with a certified financial planner to make sure they match your risk tolerance. Reassess your risk tolerance. It changes as you age and begin to withdraw from your retirement accounts…. | Read More »
Financial Planning
Sound and Practical Finance tips (SPF 15) for people in their 60’s
With retirement becoming a reality for many people in their sixties, decisions about how much and when to apply the protection becomes the driving force behind many of the financial decisions they make. The following Sound and Practical Financial (SPF 15) tips can help: Understand your full retirement age, which is currently 66 for people born between 1943 and 1954 and increases by phases each birth year after. If you were born anytime after 1960, your full retirement age is currently 67. Your benefits and any applicable spousal benefit will be reduced incrementally if you choose to begin taking Social Security before you hit your full retirement age (FRA). Know exactly what your Social Security monthly benefit will be before you turn it on, and factor this into your retirement budget. According to the Social Security Administration, the benefits an average wage earner will receive is designed to replace about 40% of pre-retirement income. The maximum monthly benefit in 2021 for someone who retires at FRA is $3,113 and the average benefit will be $1,522. Ask yourself if you are ready to retire if this will be your main source of income. It is important to understand that you don’t have to claim Social Security when you retire. If you retire before you reach your FRA, and have other resources that will allow you to do so, you should consider delaying your Social Security benefit to allow that money to grow. This will increase the size of the benefit you will receive each month for the rest of your life. Delaying your payments until your reach FRA will also mean you can leave a higher benefit for your surviving spouse once you pass away. If you are married, you can take one spouse’s benefit early while letting the other’s grow. Sit down with a fiduciary advisor who can run a Social Security analysis on your accounts and offer you some… | Read More »
SPF15 tips for people in their 50s
When you consider protection in your 50s, both from the sun and for your money, the key is application. It is one thing to buy the sunblock, it is quite another to use it effectively. Similarly, the trick with money management in your 50s is how well you understand and apply the concepts as they pertain to your own situation. Here are our Sound and Practical Finance (SPF) 15 for people in their 50s. Anyone over 50 is eligible to make catchup contributions to their retirement account, including 401(k), 403(b), SEP and 457. This means you can exceed the $19,500 limit by up to $6,500 annually. This can make a big difference as the interest that extra money earns compounds. People over 50 also can contribute an extra $1,000 annually to their traditional IRA for a total of $7,000 annually. To the extent that you can afford it, we recommend maximizing these accounts. Understand the difference between a Roth IRA and a traditional IRA as it relates to your own anticipated tax status when you retire. If you will be in a lower tax bracket when you retire, it probably makes sense to direct most of your retirement savings into a traditional IRA and pay the taxes when you withdraw. If, however, you think you will be heading into a higher tax bracket, you should invest in a Roth IRA, from which you can withdraw at will without paying taxes, when you retire. If you don’t qualify to contribute to a Roth IRA (due to income limits) and your employer offers this option, you can look into a Roth 401(k), which has no income limits. Consider splitting your contributions between Roth and traditional accounts to retain a portion of the current-year tax break. Begin looking at ways to trim your budget so you can direct more money into retirement accounts now and spend less on day-to-day expenses in the future…. | Read More »
15 Sound and Practical Finance (SPF) tips for people in their 40s
We have noticed that sunscreen application gets a little more rigorous as we age. People understand both from a vanity and medical standpoint that too much sun exposure can speed up the aging process and possibly lead to skin cancer. So, people in their forties use sunblock. Retirement also looms a little closer for people in that age group and they start wondering if they’ve done enough to make their money last their whole lives. Toward that goal, here are our SPF 15 (Sound and Practical Finance) tips for people in their forties. Evaluate your career. These are your peak earning years so make sure your paycheck reflects that. If you love your job and do it well, don’t be afraid to ask for a raise or to move to another company that offers better pay and benefits. Remember, your Social Security will be based on your top 30 earning years. Make the most of them. Toward that end… …Challenge yourself to achieve an advanced degree or certification in your field. This will not only add to your skillset, it will also likely increase your salary. Increase your contributions to your retirement accounts. Sit down with a fiduciary financial advisor to make sure your account allocations match your risk tolerance, which can change as we age. Do not dip into your retirement accounts to pay for things like weddings, vacations or even college tuitions. You can’t take a loan out to pay for your retirement. Define success your own way and don’t compare your life to anyone else’s. Such comparisons aren’t accurate anyway and they can lead you to overspend money and time fretting when you should be enjoying these years. Start thinking about specific retirement goals like a timeline and activities. It’s not enough to fund your retirement, you have to know how you will spend your time when you get there. Don’t panic if the market isn’t going… | Read More »
Sound and Practical Finance tips (SPF 15) for people in their 30’s
As we mentioned in last week’s post, good financial habits are like sunscreen – the earlier you begin to apply them the more you’ll thank yourself as you age. Last week, we addressed the specific needs of people in their 20s. This week, we are offering 15 SPF (Sound and Practical Finance) Tips to make life easier for people in their 30s: Finish paying off your student loans. If you took out a standard loan with a 10-year repayment schedule, and you completed college in your 20s, now is the time to wrap up that payment schedule. Then, to lighten that financial burden for the next generation… Open a college savings account for any children you have. Do this as soon as possible to allow those funds to earn compound interest. Consider buying a home but make sure it’s one you can comfortably afford. Shop around for the best mortgage rate and don’t panic purchase an overpriced house. Aim to have a year’s worth of salary saved for retirement. It will grow over time. Establish a good credit history by paying off your credit cards each month and making car, house and educational loan payments on time. If you have children, name a legal guardian for them. You will need a will to do this. Check the beneficiary designations on your life insurance policy. Do this annually to make sure they are current. Maintain an emergency fund with three to six months of income in it. Increase your job skills, obtain certifications and/or advanced degrees. Do the work now to increase your earning capacity later. Educate yourself about your finances. Read books, listen to podcasts, attend seminars and sit down with a financial advisor at least once a year. Achieve financial independence from your parents if you have not already done so. Pay for good insurance policies, including health, homeowners or renters, life and car. Plan your meals ahead of… | Read More »