Fourth Quarter Planning ChecklistIt’s hard to believe the year is almost over, but October is already upon us. Soon the holidays will be here and then we will flip the calendar to 2020.
These last few months are also your last opportunity to make important financial decisions before the end of the year. It’s a great time to review your strategy and make adjustments as you head into 2020. Below are a few items to include on your end-of-year planning checklist: Review your tax strategy. The deadline for filing your 2019 taxes may be in April 2020, but that doesn’t mean you can’t get started on your planning today. In fact, by starting your planning now, you can take advantage of deductions and other opportunities. For example, there may be deductions that you haven’t fully used. You could make a contribution to your favorite charity before the end of the year to take advantage of the charitable deduction. You could make contributions to tax-deductible retirement accounts, like an IRA. Do you have any outstanding medical bills? You may be able to deduct those costs if you pay them before the end of the year. Also, consider whether you can defer income until next year. Perhaps you’re due a sizable bonus or other compensation. Perhaps you could defer that income until after January 1 so it’s not included in your 2019 return. If you’re considering selling appreciated assets, like stocks, you may want to wait until after the beginning of the year to delay the capital gains. A financial and tax professional can help you identify these opportunities and make informed decisions. Increase your contributions. Will you maximize your contributions to your 401(k) and IRA this year? If not, you still have time to do so. In 2019, you can contribute up to $19,000 to a 401(k), or up to $25,000 if you are age 50 or older. You can contribute up to $6,000 to an IRA, or up $7,000 if you are 50 or older.1 This also may be a good time to consider your contributions for 2020. The IRS has not yet announced the 2020 contribution limits. However, increasing your contribution rate could help you accumulate more assets. Even a moderate increase of a percentage point could compound to significant savings over time. Think about increasing your retirement savings as you head into 2020. Check your benefits. The fall is usually open enrollment season for many employers. This is a good time to review your health coverage and other benefits to see if they still fit your needs. If you’re nearing retirement and have access to an HSA through your employer, you may want to consider making contributions. An HSA can be a tax-efficient funding source for health care costs and you can take the assets with you into retirement. Adjust your allocation. Finally, this may be the right time to review your allocation. Your needs and risk tolerance could change over time. It’s common for people to become more risk-averse as they approach retirement. It’s important that your allocation changes along with your tolerance for risk. A fixed indexed annuity (FIA) might help you take some of the risk out of your strategy. FIAs offer the potential to earn interest based on the performance of a market index. If the index performs well over a certain time period, you may earn more interest, up to a limit. However, if it performs poorly, you simply earn less interest; you don’t lose money due to market declines. Ready to start on your fourth-quarter financial checklist? Contact us at Humphrey Financial. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation. 1https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000 Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Annuities contain limitations including withdrawal charges, fees, and a market value adjustment which may affect contract values. Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged. 19305 - 2019/9/25
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Are you preparing to retire? If so, this is probably an exciting time. You’ve worked and saved your entire career to get to this point. Very soon, you’ll be able to spend your time as you wish, without the constraints of career and work.
While retirement is a major accomplishment and an important milestone, it’s not always a joyous occasion. Some retirees struggle to make the transition. In fact, a recent study in the Journal of Population Ageing found that retirees are twice as likely to experience symptoms of depression than those who are still working. ¹ What could be depressing about not working anymore? Everyone’s situation is unique, so there aren’t universal answers to that question. However, there are a few common challenges that many retirees face, especially in their first year of retirement. You can make the transition easier by planning ahead. Below are a few issues you may want to consider as you finalize your retirement strategy: Lack of Purpose If you’re like many people, you’ve worked in some form or another for several decades. In fact, you’ve probably spent more of your adult life working than with any other activity. Even before you started your career, much of your time was probably focused on school or extracurricular activities. For many, retirement marks the first time in their life where there isn’t a primary mandatory activity. You don’t have to wake up at a certain time to be at work. There aren't any tasks to complete or meetings to attend. Your time is yours to manage as you please. While the freedom of retirement might be appealing, you may feel like you don’t have any purpose. You may want to think about how you will spend your time in retirement. What is important to you? What does your ideal day look like? Do you want to travel? Or perhaps learn a new hobby? Think about what your purpose will be and what activities will make you happy. Loneliness For many adults, work isn’t just a source of income. It’s also their primary place to socialize with other adults. Think of your network of associates and friends. How many of those relationships were formed during work-related activities? Once you retire, you won’t have an office or workplace to go to. That means you may not have a natural opportunity to socialize with others. Think about ways in which you can get out of the house and interact with other adults. For example, you could join a golf league, or a club related to a favorite hobby. You could volunteer for a local charity. Some retirees even take low-pressure part-time jobs just so they can spend time around other people. Overspending Once you retire, you’ll have more free time available than you’ve likely ever had in your life. You also may have more money available than you’ve ever had, between your retirement assets, defined benefit pension income, and Social Security. Many retirees fill their free time with costly activities, like travel, shopping, and dining out. It’s natural to want to enjoy your retirement. However, be careful not to overspend during the early years of retirement. You could put yourself in a difficult financial situation in the later years. A financial professional can help you develop a budget and implement an income strategy. Ready to plan your upcoming retirement? Let’s talk about it. Contact us today at Humphrey Financial. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation. 1 | https://www.usatoday.com/story/money/2019/06/11/depression-during-retirement-how-cope-and-prepare/1416091001/ Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19149 - 2019/8/19 Fall is here. Ok, it’s not actually official until September 22. However, the unofficial start of fall arrived in late August. Starbucks added pumpkin spice drinks to their menu. For many, that’s a surefire sign that cooler weather, football, and fall bonfires are right around the corner.
While fall may be a favorite time of year for many people, it hasn’t historically been a great season for investors. In fact, September is historically the worst month for stock market returns. Going back to 1950, the Dow Jones Industrial Average (DJIA) has a -0.8% average return in September while the S&P 500 has a -0.5% average return.1 Those averages are worse than the average return for any other month. September isn’t down every year, but it happens frequently enough that the phenomenon has generated a nickname - the September Effect. What’s the cause of the September Effect? And how can you prepare? Below are some tips and guidance to help you plan. Why does the September Effect happen? There’s no clear answer why the September Effect happens. Or even if it’s a real phenomenon at all. Some people think it’s related to tax planning. People sell down positions before the fourth quarter in order to harvest potential tax losses. The widespread selling causes a downturn in the market. Others suspect that the phenomenon is related to the end of summer. People think about their portfolio and investments over the summer, but don’t take action because they’re busy with vacations and other activities. After summer is over, they sell positions and make adjustments and, again, the widespread selling causes a slight downturn. Of course, there’s also the possibility that there is no actual cause. It’s possible that the phenomenon is completely coincidental. It doesn’t happen every year. In fact, over the past 25 years, the median return in September for the S&P 500 has been positive.1 It’s possible that there is no actual September effect and the historical returns are a matter of circumstance. How do you prepare for the September effect? you may be curious about how you should prepare for the September effect, or if you should at all. The short answer is that it usually isn’t wise to plan your retirement strategy based on short-term expectations. While September may have a history of being negative, that doesn’t mean it always is. Also, it’s incredibly difficult to predict the market’s movement in the short-term, if not impossible. You could make changes to your strategy in expectation of a downturn and the market could do the exact opposite. Instead, focus on your long-term strategy. Your retirement planning approach should be based on your unique goals, needs, and risks. That strategy shouldn’t change just because one month may have poor returns. If you don’t have a long-term retirement strategy, now may be the time to develop one. Let’s talk about it. Contact us at Humphrey Financial. We can help you analyze your needs and implement a strategy. We can help you analyze your goals and possible risks and implement a plan. Let’s connect soon and start the conversation. 1https://www.investopedia.com/ask/answers/06/septworstmonth.asp Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19184 - 2019/8/23 Who handles the money in your household? If your home is like most, it depends on the kind of financial planning involved. A new study from UBS found that 85 percent of married women handle the day-to-day financial management in their household. However, the same survey found that only 23 percent of married are in charge of their long-term planning. The remainder defer that work to their husband.1
Why do so many women defer their long-term financial planning to their spouse? According to the study, 82 percent of women said they think their spouse is more knowledgeable about long-term financial planning.1 Partnership is always important in marriage, especially when it comes to financial planning. Finances are often a major cause of arguments and disagreements, so it’s helpful for both spouses to be involved in decision-making. It’s also important for women to take control of their financial future because they may face challenges and risks that men do not face. Below are two such challenges. If you haven’t developed a long-term financial strategy, now may be the time to do so. A financial professional can help you get started. Longevity People are living longer than ever, primarily because of advances in health care and increased understanding about health and nutrition. However, women usually have the edge on men in terms of life expectancy. According to the Society of Actuaries, the average 65-year-old man has a 50 percent chance of living to 87 and a 25 percent chance of living to 92. However, a 65-year-old woman has a 50 percent chance of living to 92 and a 25 percent chance of living to 96.2 This means that many women can expect to outlive their husbands. While that idea may not be pleasant to think about, it’s an important planning consideration. A longer lifespan means a longer retirement. That means you’ll need to make your assets and income last longer so you can live comfortably. Career Earnings Many women also may earn less over their career than their husbands or even their male counterparts in the workplace. According to a study from PayScale, a salary website, the average woman hits her peak in annual earnings at age 44. Men, on the other hand, hit their peak at age 55.3 PayScale also found that women earn less over the course of their career. The average woman has a peak annual income of $66,700. Men peak at just over $100,000.3 There are a number of reasons why this earnings gap exists. Some women may take time off to care for children. Others may sacrifice their career so their husbands can pursue a more demanding and time-consuming career. Others may suffer from the well-known pay gap that exists in the United States. Regardless of the reason, it’s important for women to know that the earnings gap exists so they can plan accordingly. Career earnings often translates into savings. A woman who has less career earnings may also have fewer assets saved for retirement. Ready to take control of your long-term financial planning? Let’s talk about it. Contact us today at Humphrey Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 1https://www.thinkadvisor.com/2019/03/07/many-women-defer-to-spouses-on-big-financial-decisions-ubs/ 2https://www.fidelity.com/viewpoints/retirement/longevity 3https://www.cnbc.com/2019/06/11/gender-pay-gap-womens-earnings-peak-11-years-before-mens-payscale.html Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19093 - 2019/8/ Not Your Parents’ Retirement The world has changed significantly in the past few decades. Thirty years ago, there weren’t cell phones. Computers weren’t widely owned. There was no Uber or Airbnb. Social media was unheard of and virtual reality was the stuff of science fiction.
The world changes quickly, and not just in terms of technology. Retirement has changed significantly in the past few decades as well. The next generation of retirees will face challenges that previous generations didn’t face. The good news is that you can overcome these potential challenges if you plan ahead. Below are a few ways in which retirement has changed over time. Do you have a strategy to address these challenges? If not, now may be the time to develop one. A financial professional can help you get started. Longevity People are living longer than ever. Usually, that’s a good thing, but a long lifespan can create financial challenges. According to the Society of Actuaries, today’s retirees can plan on a long lifespan. They estimate that a 65-year-old couple has a 50 percent chance of one spouse living to age 94 and a 25 percent chance of one spouse living to 98.1 If you retire in your mid-60s, there’s a chance your retirement could last 30 years. That means you’ll need your assets and your income to last that long. That could be difficult, especially if you overspend in the early years of retirement. Income Sources There was a time when retirees could count on income from Social Security and an employer defined benefit pension to fund their retirement. Those days are long gone. Defined benefit pensions are quickly disappearing from employer benefit options. In fact, the percentage of Fortune 500 companies that offer defined benefit pensions has dropped from 59 percent in 1998 to 16 percent in 2017.2 While you can likely count on Social Security income, it may not be enough to fund a full retirement. That means you may need to take withdrawals from your savings and investments to generate income. You’ll likely need an income strategy to make sure you savings lasts through a long, fulfilling retirement. Health Care Health care costs have risen dramatically in recent decades. Medicare helps cover some of those costs, but it doesn’t cover everything. In fact, Fidelity estimates that the average retiree will spend $285,000 out-of-pocket on healthcare.3 That figure is above and beyond what is covered by Medicare, and includes things like premiums, deductibles, copays and more. How do you plan for high out-of-pocket healthcare costs? One effective strategy is to budget for them. You also may want to consider an investment strategy that generates enough income to cover potential health care costs. Complexity Retirement income. Healthcare costs. Budgeting. Longevity. How do you plan a retirement strategy that considers all these potential challenges and more? For many retirees, the complexity of managing these issues is the real challenge. Fortunately, you can address retirement issues head-on by developing a personalized retirement income plan. A retirement plan can help you project your income, budget your spending, and make sure that your assets last as long as you need them to. Ready to plan for a 21st-century retirement? Let’s talk about it. Contact us today at Humphrey Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation. 1https://www.fidelity.com/viewpoints/retirement/longevity 2https://www.planadviser.com/mere-16-fortune-500-companies-offer-db-plan/ 3https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs\ Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19094 - 2019/8/1 Life’s a BeachIt’s vacation season! Where are you travelling to this summer? Are you headed to the beach to soak up the sun and enjoy the waves? Or are you more of a lakes and mountains person? Perhaps you’re travelling to historical sites or a favorite national park.
Whatever your vacation plans may be, there’s no doubt that it’s nice to get away, relax, and recharge. If you’re like most people, you probably dread the end of your vacation and the return to the daily grind. Fortunately, there’s a light at the end of the tunnel. Retirement is your opportunity to leave the working world behind and live life on your terms. You can hit the beach, the mountains, the golf course, or pursue any other activity that you enjoy. Of course, to truly live life on your terms in retirement, you’ll need a strong financial foundation. If you don’t have the right strategy in place, you may not have the means to enjoy your golden years. Below are a few tips to consider as you approach retirement. Implement these ideas and your retirement can be one long vacation. Use a budget. According to a recent study from Debt.com, 33 percent of Americans don’t use a budget.1 If you’re among those who do use a budget, you’re off to a good start. However, if you don’t use one, now may be the time to start doing so. A budget is one of the most powerful financial tools at your disposal. You can use it to track your spending and make informed purchasing decisions. Your budget can keep your spending under control so you can boost your savings. A budget can also be helpful when you enter your retirement. You’ll likely enter retirement with more assets than you’ve ever had. It can be tempting to spend that money on vacations, shopping, dining out, and more. Retirement can last several decades, though. If you spend too much in the early years of retirement, you may not have enough assets left in the later years. A budget can help you control your spending and make your assets last. Create guaranteed* income. One way to preserve your assets is to develop income streams that cover your expenses. If you have enough guaranteed* retirement income to fund your regular expenses, you can use your savings to fund discretionary costs like travel. Social Security is a common source of guaranteed* income. If you’re fortunate enough to have a defined benefit pension, that can also be a source of guaranteed* lifetime income. However, you may need additional income to cover your expenses. An annuity may be an option to consider. There are several different types of annuities you can use to generate guaranteed* income. For instance, some annuities offer a guaranteed* withdrawal benefit. Your funds have the potential to grow and you can withdraw up to a certain amount each year. As long as you stay within the withdrawal limits, the income is guaranteed* for life. This kind of guaranteed* income can give you financial predictability and certainty. Minimize risk. Nothing can derail your retirement plans like a costly emergency. For retirees, health care expenses can be especially dangerous. Fidelity estimates that the average retiree will spend $285,000 out-of-pocket on health care costs like deductibles, premiums and copays.2 You can take steps now to minimize those costs. For example, a health savings account (HSA) could help you pay for out-of-pocket medical expenses. Long-term care insurance could help you pay for extended care, either in your home or in a facility. Also consider the importance of life insurance in retirement. If you have a spouse who is dependent on your defined benefit pension benefit or other income, life insurance could be a key risk protection vehicle. If you pass away, your spouse may face serious financial challenges, and that could limit their ability to enjoy the remainder of their retirement. Ready to plan your ideal retirement? Let’s talk about it. Contact us today at Humphrey Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 1https://www.prnewswire.com/news-releases/fewer-americans-are-budgeting-in-2019----although-they-think-everyone-else-should-300824384.html 2https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19007 - 2019/6/27 What's up with risk and return?In an ideal world, you could save money and prepare for retirement without any risks or threats. Unfortunately, risk is a natural part of any financial strategy. There are a wide range of risks that could potentially derail your plan. Medical emergencies, disability, job loss, and more could cut into your savings and limit your ability to retire comfortably.
Your savings and investments also face market risk. Volatility is a component in nearly every financial market. Assets rise in value, but they can also fall. Depending on your allocation, those declines could put your investments at risk. Risk and return also tend to go hand-in-hand. Many of the assets that have the highest long-term historical returns also have the high levels of volatility. Assets that tend to have little risk exposure also may have limited return potential. How do you grow your assets without taking on too much risk exposure? One effective strategy is to align your allocation with your risk tolerance. Your risk tolerance is your own personal threshold for downside movement. Everyone’s risk tolerance is different. It should be based on your specific needs and goals, as well as other factors. Is your allocation aligned with your risk tolerance? Do you know your risk tolerance level? If not, now may be the time to review your plan. A financial professional can help you determine how much risk is right for you. Below are a few factors to consider as you get started: Goals Any risk tolerance analysis should start with a review of your goals. Why are you saving money? The size of your goal will influence your strategy. For example, assume you’re saving for retirement, which is a sizable goal. You’ll likely need to grow your money over a long period of time to reach your objective, so you may need to take some risk to get your desired level of return. However, assume you’re saving for a down payment for a home purchase. In this case, growing your money may not be as important as simply protecting it. An account or asset with little or no risk could be more appropriate for a goal of that size. Time Horizon When will you actually need to use your savings? The amount of time you have until you need to use your assets is known as your time horizon. The longer your time horizon, the more tolerance you may have for risk. Assume you intend to retire in five years. You may not have much tolerance for market loss. If the market declines, you may not have time to participate in the recovery. On the other hand, assume you aren’t retiring for 30 years. If the market declines, you have plenty of time to recover, so it may make sense to take on greater risk exposure in the pursuit of higher returns. Personal Preference Every person is different, so there’s no universal correct answer on how much risk is appropriate. Your personal preferences should be an important consideration. Some people are naturally more comfortable with risk than others. How do you feel when your investments decline in value? Does it cause stress and anxiety? Or does it barely register on your radar? If your risk level keeps you up at night or causes you to question your strategy, that could be a sign that you are allocated too aggressively. Ready for an allocation that is right for your risk tolerance? Let’s talk about it. Contact us today at Humphrey Financial. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19014 - 2019/7/1 The NBA Draft is right around the corner. On June 20th, a few dozen college basketball players will become instant millionaires as soon as their name is called. It’s a life-altering event, and for many, the culmination of a lifelong dream.
Unfortunately, the dream can turn into a nightmare for some professional athletes. A 2009 study from Sports Illustrated found that 60 percent of NBA players go broke within five years of retirement. More than three-quarters of NFL players face financial difficulty within two years of retirement.1 A multi-million dollar sports contract should be a blessing. However, many athletes aren’t prepared to handle that kind of money, especially when they cash in at such a young age. Many spend their earnings on cars, jewelry, and more under the false assumption that their career will last forever. Retirees often face similar challenges. On your retirement day, you aren’t called up to a podium on national television and awarded a contract worth millions of dollars. However, on the day you retire, you may have more money available than you’ve ever had in your life. You’ve probably spent years, or even decades, contributing to your 401(k), IRA, or other accounts. When you retire, you finally have the option to access those funds. It can be tempting to spend that money on vacations, shopping, dining out, and other fun activities. After all, retirement is your time to enjoy life. However, if you spend too much in the early years of retirement, you may find yourself short on funds in the later years. The good news is you can take action today to prepare yourself for a long retirement and avoid some of most extreme financial challenges. Below are the two financial tips Shaquille O’Neal gives to all NBA rookies. However, you don’t have to be a gifted basketball player to benefit from these pieces of financial wisdom. Incorporate these ideas into your strategy as you approach retirement. Tip #1: Only spend what you have to. As soon as he entered the NBA, Shaq spent $1 million to help his parents retire. After that large purchase, though, he adhered to a strict 75/25 rule when it came to spending. His first 75 percent of earnings went to savings. That left him with 25 percent of his earnings to spend on cars, jewelry, or whatever else he wanted. He suggest that all young athletes follow the same advice.1 Granted, it’s much easier to save 75 percent of your earnings when you make nearly $300 million over the course of your career. However, there’s still a lesson in here that you can apply to your retirement planning.1 Shaq allocates money to savings before he spent anything on discretionary items. In other words, he treats savings like a mandatory expense, not an option. You can boost your retirement savings by adopting the same philosophy. Treat your savings as something that has to happen before you can spend money on anything else. You may not be able to save 75 percent of your income, but perhaps you could save 10 or even 20 percent. Your employer 401(k) could be a great tax-deferred savings options. You also may want to consider automatic contributions to an IRA or other account on your payday, so the money goes into the account before you spend it. Put your savings on autopilot and you’ll likely see your balance grow quickly. Tip #2: Create guaranteed* retirement income. “Learn what annuities are,” Shaq once said when asked what advice he gives to young players. Shaq famously put a large portion of his savings into annuities that offered guaranteed* income streams later in life. Those annuities gave him confidence that he’d have lifelong income, no matter what happened in his career or in the financial markets. An annuity could make sense as part of your financial strategy. There are a wide range of different types of annuities, but most offer some mechanism to provide guaranteed* income. Some allow you take an annual withdrawal. As long as you don’t exceed the withdrawal limits, the income is guaranteed* for life. Others pay you a guaranteed* income stream based on your age. A financial professional can help you determine what type of annuity is right for your needs. Ready to implement Shaq’s financial advice into your retirement plan. Let’s talk about it. Contact us today at Humphrey Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation. 1https://www.cnn.com/2015/12/04/sport/shaquille-oneal-and-charles-barkley-of-the-nba-impart-financial-advise/index.html *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18913 - 2019/5/24 Remember hunting for Easter eggs as a child? There were few thrills more exciting than racing around the yard or a park to find as many eggs as possible. Your eggs may have contained candy, money or other prizes.
As an adult, you may be too old to participate in a traditional Easter egg hunt. However, there may be another egg hunt that could be far more lucrative. It’s a hunt for hidden retirement assets. Many people fail to inventory their available retirement assets. In doing so, they fail to identify assets that could play an important role in their retirement strategy. Below are four often-overlooked retirement assets. Some of these eggs may be hiding in plain sight. If you haven’t created an inventory of your retirement assets, now may be the time to do so. You could have some valuable eggs waiting to be found. Old 401(k) Plans There was a time when workers stayed with one company for most of their career. Those days are long gone. According to data from the Bureau of Labor Statistics, wage and salaried workers have been with their current employer for a median of only 4.6 years. In fact, the average worker changes jobs 11 times from age 18 to 48.1 When you leave a job, you also may leave behind a 401(k) balance. It’s possible that you still have balances held in former employers’ plans. Make a list of old employers and identify the ones where you may have participated in a 401(k) plan, profit-sharing plan or other qualified retirement plan. If you have an old balance, you could roll it over into an IRA and invest it according to your strategy. Life Insurance Cash Value Do you own permanent life insurance policies? If so, those policies may have a cash value that you can use in retirement. Permanent life insurance policies have a death benefit, but they also have what’s called a cash value account. When you make a premium payment, a portion of that payment is allocated toward the cash value. Your cash value account grows on a tax-deferred basis. The method of potential growth depends on the type of policy. Whole life insurance pays dividends, while universal life policies pay interest. Variable universal life policies allow you to invest in the financial markets. Depending on your type of policy and how long you’ve owned the insurance, you could have a significant amount of cash value. You can use that cash value to provide supplemental income in retirement. For instance, you can withdraw your premiums tax-free. You can also take tax-free loans from the policy, though the loans do have to be repaid. Review your life insurance policies and see whether you’ve accumulated cash value that you can use in retirement. Home Equity Thinking of downsizing in retirement? That could be a smart move. When you downsize to a smaller home, you may be able to reduce your costs for housing, taxes, maintenance, insurance and more. If you have substantial equity in your home, you could also give your retirement savings a nice boost. For example, you could pocket the equity from the sale of your home and add it to your retirement assets. Delaying Social Security Technically, this strategy doesn’t represent an asset, but it is a simple way to increase your retirement income. You can file for full Social Security benefits once you reach full retirement age (FRA). Most people’s FRA lands between their 66th and 67th birthdays.2 However, you don’t have to file at your FRA. If you choose to delay your filing, Social Security will increase your benefit by 8 percent for each year that you wait up to age 70. That 8 percent increase is a permanent credit, so it could represent a significant pay raise, especially if you delay your benefit filing for several years.3 Ready to find the hidden eggs in your retirement strategy? Let’s talk about it. Contact us today at Humphrey Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation. 1https://www.nerdwallet.com/blog/investing/leaving-401k-behind-job-change-costly/ 2https://www.ssa.gov/planners/retire/retirechart.html 3https://www.ssa.gov/planners/retire/delayret.html Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18692 - 2019/3 Everyone is familiar with the popular saying “April showers bring May flowers.” The arrival of spring also means the arrival of rainy weather. While rainy days are never fun, they signal the end of winter and the coming arrival of blossoming flowers and warmer weather. In retirement you might be able to avoid rainy weather by moving to a tropical climate.
Of course, you may not be able to avoid rainy days with regard to your financial strategy. Emergencies happen at all stages of life, including after you retire. Taxes could be a challenge and may stretch your budget. Medical expenses and long-term care costs could pose a financial threat. Market risk is always a concern. One way to protect yourself from emergencies and unexpected costs is to boost your guaranteed* income in retirement. The more predictable, guaranteed* income you have, the less vulnerable you’ll be to unplanned costs. Not sure whether you have enough guaranteed* income in retirement? Below is a three-step process you can use to evaluate your income and take action. If you haven’t projected your retirement income, now may be the time to do so. Step 1: Establish your income floor. Your income floor is the minimum amount of income you need to cover your most important expenses. The best way to determine your income floor is to develop a retirement budget. Granted, you can’t predict every cost you’ll face in retirement. However, you can probably make a reasonable projection based on your current expenses and your desired standard of living. Highlight the expenses that are most important. These will include all your fixed expenses, which are the bills that have to be paid every month no matter what. You also may include a few discretionary costs, which are expenses that could fluctuate from month to month. For example, your most important expenses may include:
Total up your most important expenses and see how much they will cost on a monthly basis. Also, don’t forget inflation. It’s likely that prices will rise slightly between now and your retirement date. The sum of your most important expenses is your income floor. That’s the minimum amount of income you need each month to live in retirement. Step 2: Project your guaranteed* income. The next step is to project your guaranteed* income in retirement. Guaranteed* income is cash flow that will last no matter how long you live and that isn’t affected by market performance or other economic factors. Social Security and pension benefits are good examples of guaranteed* lifetime income. The amounts don’t fluctuate from month to month, and the income lasts for life. Distributions from 401(k) plans, IRAs or other investment vehicles may not be guaranteed*, so you don’t want to include them in this calculation. Add up your projected guaranteed* income. Does it exceed your income floor? If so, you have enough to meet your bare minimum expenses. If it doesn’t, you may want to increase your guaranteed* retirement income. Steps 3: Fill in the gaps. Ideally, you don’t just want your guaranteed* income to match your income floor. You want it to exceed your income floor by a substantial amount. That way you can build a rainy day fund to cover life’s unexpected costs. Extra guaranteed* income could help you pay for medical bills, home repairs or other emergency costs. One of the most effective ways to boost your guaranteed* income is to include an annuity in your retirement strategy. Many annuities offer optional riders known as guaranteed* minimum withdrawal benefits. These benefits allow you to withdraw up to a certain amount each year. As long as your withdrawal stays within the limits, the distribution is guaranteed* for life. It doesn’t matter how long you live or how the market performs. Your income remains consistent and predictable. Talk to a financial professional about how to use an annuity to boost your guaranteed* retirement income. They can help you determine your income floor, project your retirement income and take action to protect yourself from financial rainy days. Ready to boost your retirement strategy? Let’s talk about it. Contact us today at Humphrey Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation. *Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 18686 - 2019/3/25 |
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