Americans Remain Committed to Retirement Saving

Americans remain committed to retirement savingDefined contribution (DC) plan participants’ contribution activity remained strong in 2021, according to an ongoing Investment Company Institute (ICI) study. ICI tracks contributions, withdrawals, and other activity in 401(k) and other retirement plans, based on data covering more than 30 million accounts in employer-based DC plans. The latest data indicate that Americans remain committed to retirement saving and investing. Only 1.2 percent stopped contributing to their plans in the first three quarters of 2021, compared with 2.2 percent in the first three quarters of 2020, and 5.0 percent in the first three quarters of 2009 (another time of financial market stress).

“Despite the economic hardships brought on by the lingering pandemic, the long-term mindset of retirement savers continues to serve them well,” said Sarah Holden, ICI senior director of retirement and investor research. ICI has been tracking DC plan participant activity through recordkeeper surveys since 2008.

Americans Remain Committed to Retirement Saving

Read about how early and consisting investing in your employer 401k can help you win the retirement race.

By |2022-03-11T09:54:11-07:00March 14th, 2022|Current Affairs, Retirement|

5 Simple Steps to a Happy Retirement

simple steps to a happy retirementIn my business, I talk extensively about the financial aspects of planning for retirement. But financial independence is only one piece of the big picture. Your financial advisor can help you get that piece solidly in place. The rest of the picture is up to you.

Taking these simple steps to a happy retirement can help you make the most of your golden years.

Explore new interests and activities before you retire. For many people, work is a central part of their identity (I’m a nurse. I’m a business executive. I’m an electrician.).  Discovering new parts of your identity can help provide a new sense of purpose and avoid a sense of loss. Explore volunteer interests or part-time work you can continue after retirement. My father-in-law began a private investigation company after he retired from the FBI. The new activity was interesting and the work made him feel productive.

Create a satisfying daily routine after retirement. Once the “honeymoon” phase of not working wears off, many people get bored in retirement. It’s important to take time to experiment and find a new daily routine that you find enjoyable and that keeps you mentally and physically active.

Keep mentally active and try new things. Keeping mentally sharp helps your overall well-being. Easy everyday activities might be crossword puzzles, sudoku, cards games and reading. You can also gain new knowledge by taking a community college class (either in person or online). My mother took a community college choir class for many years after she retired. It was something she really enjoyed, gave structure to her week, and helped form an important new friend group.

Stay physically active. Regular exercise helps boost the immune system, reduce stress, lower blood pressure, strengthen heart health, and improve sleep. Even something as simple as a daily walk can have significant health benefits.

Remain connected to family and friends. People who are isolated and lonely are at greater risk for dementia and shorter lives. Connecting with your family and friends provides an important sense of closeness and community. Arrange regular get-togethers (i.e. weekly coffee klatch, daily walk with friends, weekend dinner with your parents or children). When you can’t see others in person, meet up with video chat.

For more simple steps to a happy retirement, check out this article from AARP, 10 Secrets of a Happy Retirement.

By |2022-01-13T08:39:34-07:00January 17th, 2022|Retirement|

Win the Retirement Race

Eng-WEBA 401k account through your employer is one of the best tools to use for retirement savings. It’s an investment account that allows your money to grow tax-deferred or, in the case of a Roth 401k, tax-free. It can help you win the retirement race.

These retirement savings accounts make it very simple to put your saving and investing on auto pilot. It even gives you options to rebalance your investment portfolio on a regular basis.

If you’re just starting out and have less than $50,000 in your 401k, a target date retirement fund is a simple option. These funds “target” your retirement year based on your age and invest accordingly; the investment vehicle provides a diversified portfolio all-in-one fund using a variety of stocks and bonds. They’re professionally managed and therefore require very little monitoring.

As your account balance grows, you may consider adding more funds to the mix.

How many years before retirement?

Your time horizon calculates how long you will be investing and when you want to retire and begin withdrawing money from your account. It’s a key factor in how and where you invest. In general, the longer amount of time you have, the more aggressive you can afford to be and the more stock market volatility you can withstand.

Many young people believe they need to be “safe and conservative” with their retirement accounts. Really, the opposite is true. Investors in their 20s and 30s can afford to take some risk with an account they will not use for 30 or 40 years.

How comfortable are you with risk and stock market volatility?

Even if you’re young and have a long time-horizon, you may find watching your retirement account bounce up and down to be unnerving. In that case, a more conservative strategy makes sense. You can add bonds to your investment mix to help bring income and stability to your portfolio.

Either way, staying invested in the market – rather than jumping in and out, and trying to time the markets – is a key to long-term success. Think of investing is a marathon, not a sprint, if you want to win the retirement race. Even after you retire, keeping investments in the stock market will help your money continue to grow and outpace inflation.

Win the Retirement Race


By |2021-10-12T10:39:00-07:00October 12th, 2021|Retirement, Taxes|

Helping Aging Parents Manage Finances

Helping aging parents manage financesHelping aging parents manage finances: it’s a sticky situation. As our parents age, we worry about their ability to make sound financial decisions. We know they’re targets for financial fraud. How do we protect them, while also respecting their desire to remain independent?

Carrie Schwab-Pomerantz, CFP®, is president of the Charles Schwab Foundation and has served two White House administrations on financial capability policy. In a recent article, she offered the following insights.

Helping Aging Parents Manage Finances

Communicate: Talking about money can be hard, but it’s the most important first step. Let your parents know you are willing to help and why. Be upfront about the fact that seniors are targets for financial exploitation. Ask them if they have any concerns and in what areas they might welcome some help. Look for cues that might indicate they’re confused or vulnerable. The more two-way conversations you have about money, the easier it will become.

Collaborate: Offer to become part of their team. Beginning a dialogue with their financial advisors and health care professionals will help you spot any troubling signs as your parents age. If you establish clear roles and responsibilities before troubles arise, your parents will be less likely to feel you’re hovering or controlling them. Instead, they’ll know you’re available and informed to offer specific support when needed.

Evaluate: Offer to help assess their assets and liabilities, income and expenses, and insurance needs. If they already have a financial plan, suggest a review. Once you understand their needs, remember to check in with them regularly. Their needs may change. By laying the groundwork now, you’ll be better prepared to help them. And knowing that may make your parents more willing to let you.

Early IRA Withdrawals

Larriva-WEBAs you approach retirement, conventional wisdom is to spend down taxable assets and delay IRA & 401k withdrawals until the Required Minimum Distributions (RMDs) begin at age 72. This can be an effective strategy. Yet, in many situations, it may be better to start early IRA withdrawals.

Counter-Intuitive Advice and Early IRA Withdrawals

When does this counter-intuitive strategy make the most sense? It’s relative to your marginal income tax-brackets over a seven- to 10-year period.

For example, a married couple both age 62 can earn up to combined income $106,150 (gross) before the $25,100 standard deduction and still be in only the 12 percent marginal federal tax bracket. If they have $800,000 in IRA/401ks, they can withdrawal some of that money and still be in a low marginal bracket.

If that couple waits until age 72, those retirement assets with 7 percent growth may double to about $1.6 million, and RMDs would start at $62,800 per year. That RMD income along with $57,000 per year for Social Security would put them in a 25 percent marginal tax bracket in the future. (See table.)

Another trap is related to future Medicare premiums (Part B), which typically begin at age 65. The more income you have in retirement, the more you will pay in Medicare premiums. If your adjusted gross income plus municipal bond interest is more than $176,000 for a married couple, then monthly Medicare can increase from about $148 monthly per person up to $505. Paying attention to the nuances in Medicare rules could save a couple up to $8,500 per year.

early IRA withdrawalsDetermining the best time for retirement distributions can be complicated. It’s smart to come up with a plan before you hand in your resignation. Your Perspective advisor will crunch the numbers and help you create the optimal strategy.

By |2021-08-16T13:12:45-07:00September 6th, 2021|Advisors, Health Care, Retirement, Taxes|