Summer is an important season to pay attention to your health. You need to watch your sun exposure, make sure all that extra sunlight isn’t disrupting your sleep and keep the weight you might gain from those ice cream sundaes under control. It’s also the perfect time to take a look at your financial health. Here are five areas you can analyze to make sure you’re in good financial shape moving forward: Do you have a budget and are you sticking to it? Are you adjusting your budget for inflation? It isn’t enough to spend less than you make, you also need to account for rising costs of essentials like food, fuel, clothing and housing. Are you saving enough for an emergency? Ideally, you should have saved three to six months of living expenses to tide you over in case of an unforeseen emergency like job loss, illness, natural disaster, fire, major appliance replacement or vehicle repair. Are you paying off your debt in the most effective way? The first step is to analyze your debt situation and review the applicable interest rates. Then, set up a payment plan and stick to it. Do you have an income gap and, if so, how will you address it? A retirement income gap occurs when your income stream from Social Security, pensions, and/or rental property is not enough to cover your retirement budget. Before you retire, you need to know how you will cover this gap. Will you withdraw from an IRA? If so, how much can you afford to withdraw without losing principle? Do you have an annuity? If so, what will your start date be to turn on your payment stream? How will taxes impact your retirement budget? It is important to know the difference between qualified accounts, like traditional IRAs and 401(k)s, and non-qualified accounts, like your checking or savings accounts. You will need to pay taxes on withdrawals… | Read More »
There’s a lot of inspiration in a slice of pie. Much like retirement planning, it all starts with a seed. If you plant the seed early enough and water it just right, it grows into a tree with apples plump enough to sustain you when you need to harvest them. You have to time the apple harvest carefully to maximize the flavor of the apples and their ability to sustain their nutritional value. And then there’s the dough, a perfect blend of two very common ingredients – butter and flour. But, you need to cut that butter into the sifted flour exactly right for the flakiest dough, and only the best bakers can manage that. Most people need a little help. Just like life, you’ll want to add sugar and spice to your pie, and everyone’s preference is different. You have to figure out what proportions best suit you before you seal the crust. Sometimes you need to tweak the recipe to suit your own needs. We can help with that. We’ve been helping people bake their perfect slice of retirement pie for more than 40 years. Happy Pi Day from all of us at Winch Financial. We hope your pie is extra delicious today.
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 »
We call the large maple outside our house the Squirrel Tree and enjoy sitting on our porch watching them play. As the leaves turn and begin to drop, our neighborhood scurry picks up its pace, cheeks puffed out with an impressive amount of seeds and busy members filling random holes with winter stores. I have often thought about sending an emissary, perhaps a friendly chipmunk or two, into that tree to advocate for a more organized winter plan that would keep those critters out of my flower boxes and still protect them from winter’s ravages. Squirrels habitually dig so many holes and store so many seeds that they forget some of them, which is okay for us humans, who get free shrubs and trees out of the deal. Still, it seems like a dangerous waste of effort for those squirrels. Humans can mimic that behavior when they look up from their busy days and notice winter’s inevitable encroachment. We raise our children, walk our dogs, buy our groceries, clean our houses, build our careers, repair our appliances, launder our clothes, rake our leaves until, one day, we look up and realize our retirement is looming and we may not have enough money to last us the rest of our lives. So, we scurry. We take a reluctant peek at our 401(k), cobble together a budget, consider a timeline and schedule a frantic meeting with a financial advisor. In the past, with pensions providing a reliable safety net and healthy interest rates offering a secure place to grow your savings account, this dash to the finish line approach worked. But, pensions have given way to employer sponsored retirement plans, and interest rates remain indefinitely stuck at historic lows. So, the burden for a successful retirement lands squarely on us and our time to start planning is now. It’s never too early to start retirement planning, but it is sometimes too late…. | Read More »
If you think you don’t have enough money to retire, you probably don’t. Increased longevity already was straining previously healthy accounts as people found themselves having to fund retirements that lasted longer than their working years. Add to that a bond market that paid almost nothing and then a global pandemic, and you have a whole generation rethinking their golden years. But, that’s okay, because technology has also developed in ways that make an extended career more palatable for many. Many jobs now offer work-from-home options, and plenty of those that can’t offer that mutually beneficial perk still provide flexible work schedules and accommodations for the physical limitations aging workers might face. If you have an area of expertise, you can take advantage of inexpensive social media marketing and easily accessible video conferencing software to monetize your advice. You can develop a robust second career as a consultant from the comfort of your favorite family room chair. The key is to take an honest inventory of your resources including financial, physical and emotional. Do you have enough money to last your whole life? Have you factored in health care costs? Will you be physically able to continue your job past a traditional retirement age? Armed with this information, you can meet with a financial advisor, preferably one with a fiduciary relationship to you, meaning they must act in your best interest. Together you can look at both hard numbers like how much you’ve already saved in your retirement account and less tangible factors like your current job satisfaction and any potential health concerns, to map out a plan. Some of the happiest retired people are actually not retired at all. They have found a way to linger over their morning cups of coffee, and still participate in the work force in meaningful ways. This hybrid retirement keeps the mind active, the soul engaged and the retirement account healthy.