Now that we are over a week into 2021, now is as good a time as ever to make sure your retirement plan paperwork is current and reflects your personal choices. Mostly, I would worry about your beneficiary designations. Has anything changed with your beneficiaries over the past 12 months? Have you had any major life changes that may require updates to your beneficiary listings? If so, don’t delay in making updates. The sooner you do so, the better. Plus, it’ll be one less thing you need to worry about. Also, this is a good time of year to check on your investments and make any tweaks you feel are necessary. Of course you can also just leave things as is if you find that changes are not needed. If you have a financial advisor or wealth manager, the beginning of the year is also a really good time to check in with them and talk about both your long-term and short-term goals. You might want to set a few goals for the year and make sure you are on the right path with the goals you have that may take years to reach. If you find that nothing needs to change, then you at least have the comfort of knowing you checked.
Welcome back, everyone! I hope you all had a wonderful, safe, and relaxing holiday season. Now that we are a few days into 2021, it’s a good time to start putting your financial plans for 2021 into action. What are your goals for the next 361 days? It doesn’t have to be anything crazy. It could be something as big as purchasing a home or making a push to finish paying off a mortgage or car loan. Or maybe it’s something smaller like saving up a certain amount of money or cutting back on certain expenditures. Or maybe you just want to get better with your budgeting over the next 12 months. Whatever your goals/plans are, you’ll find it easier to reach them if you get started early. If you are looking to pay something off or save up a certain amount, then you may want get started by looking at what you will need to pay or save monthly to meet your goals and then determine what spending habits need to change to meet those goals. If you want to do something like budgeting, starting on Google and seeing what advice regarding budgeting it out there is a great place to begin. Of course, if you want further help or already have an existing relationship with one, you can also always speak with a certified financial planner or wealth manager to get the advice you need/want. So, what are your financial goals for the next year?
I know it’s a couple of day early, but I just wanted to wish all my loyal readers a Merry Christmas and Happy Holidays! In a year that has seemed like a decade and where we’ve had to redefine the way we live, work, and interact with others, I hope you and your family are able to at least enjoy some time together this holiday season. I also wish you, and those most important to you, health and happiness this Christmas and into the New Year. I’ll be back next week with a end of the year post, but for now…Merry Christmas and Happy Holidays!
We are less than two weeks away from the end of 2020 (which we can all agree, probably can’t come soon enough!). As the year wraps up, now is a good time to review your budgeting and expenses over the past 12 months and see where, and how, you spent your funds. If you had a budget you were working in, did you meet your benchmarks? Did you spend more than intended in certain areas or less? Where there legitimate reasons for overspending? If you don’t have a budget, did you find yourself spending more than you thought on particular items/services? Do you want to get your expenses in order or under control? Use the answers to these questions to help guide you as you prepare your finances for 2021. If you find your expenses or spending habits make you a bit uncomfortable, you may want to consider getting more serious about budgeting. If you need help with getting your finances in order, I encourage you to meet with a certified financial planner or wealth manager who can help you both organize your money as well as place it in a spot where it can grow or help your future.
Many Americans choose to make charitable donations with their retirement funds. For some it’s a way to give back to the community, while others use it as a way to support causes that are important to them. Whatever the reason for donating–if you choose to do so–you should understand the ramifications of that decision as well as the most efficient way to make a donation. It’s been a while since I’ve written about it, but qualified charitable distributions (QCDs) are probably the most efficient and effective way to make a charitable donation from your retirement funds. In case you forgot what a QCD is, it’s a charitable donation of up to $100,000 to a qualified 501(c)(3) charity made from an IRA. A QCD can offset any RMDs that need to be made for that year, but can only be made if you are 70 1/2 years old. QCDs offer a similar tax outcome to itemizing your charitable giving, if that matters to you. And yes, QCDs are allowed this year even though RMDs are suspended. Which leads me to my next part of charitable giving–the tax implications. While I cannot offer tax advice, I can advise you to speak with a tax professional if you are making substantial charitable donations in the hopes of taking advantage of tax incentives for doing so. That goes for whether you are over 70 1/2 and are making a QCD or are not yet retired, but want to make a substantial donation to your favorite charity. A tax professional should be able to give you a good idea as to how a donation may impact your taxes and whether it’s overall a good idea. However, if you want to know how a QCD or other charitable giving might affect your nest egg or financial plans, you will want to also speak with a certified financial planner or wealth manager.
While I try to be somewhat positive with what I write in this blog, sometimes I find that I have to be real and that being real sometimes requires being a little cynical. This is one of those “being real” blogposts. Retirement doesn’t always happen how you want it to and, with that in mind, sometimes you need to think about those worst case scenarios. For example, how much would an early retirement change your plans? What if you are forced to retire sooner than anticipated due to injury or downsizing–can you handle tapping into your nest egg sooner than expected? These are things you need to think about and, ideally, have a plan to handle such situations. In fact, you probably should think of at least a few “worst case scenario” situations regarding retirement and make plans for how you would tackle them if they occurred. For example, if you were forced to retire early are there assets you could sell or tap into to make ends meet before reaching into your nest egg? What if you find yourself in the opposite type of scenario and don’t have enough saved for when you plan on retiring? Will you work longer or change your retirement plans? Thinking about these worst case scenario situations won’t be pleasant, but it is an important part of planning. You need to be prepared for whatever may come your way and at least thinking about such bad situations is a part of that. If you need help with planning for retirement or want to discuss having a backup plan, of course I always encourage you to speak with a certified financial planner or wealth manager. What’s your worst case retirement scenario?
I don’t mean to state the obvious with the title, but I feel like it’s worth mentioning, especially as we head into a winter that may be like none other that we have seen. The next few months seem to be on course to create a lot of anxiety for many Americans. We are currently in the middle of a pandemic that many healthcare professionals are predicting will see a second wave of infections over the next month or so. There is also a transitional period occurring politically that is fraught with unpredictability. And then there is the added stress of the holiday season. Those first two stress points have the ability to shake up the markets and have impacts on the investments that could further impact your portfolio. The third stress point is always there, but could be further complicated by job losses or worry about what the future may hold for your nest egg. I’m not going to sugarcoat it, it can be a bit scary, especially when you don’t know what might happen to send the stock market on a wild ride. While I don’t have any magic solution to your anxiety, I do want to make sure you realize that you are not alone in your worries. Sometimes there’s not much you can do aside from track your investments, make necessary changes and adjustments, and keep living life. We will get through this and we will eventually return to normal. It may be a “new” normal, but it will be much more normal than what we have been going through for most of 2020. Now, as you head into this holiday season, I suggest you focus your time and energy on family and friends and the people who mean the most to you. Yes, you can check your portfolio daily and adjust as needed, but try not to let it be all you think about. Take some time to think enjoy what’s around you and don’t let fear or stress overpower you. Of course, if you do have concerns about your retirement plans, I suggest you speak with a certified financial planner or wealth manager who should be able to relieve any concerns or answer any questions you may have.
Did you know that the total amount of student loans held by Americans is larger than that of credit card debt? That may be a bit surprising to some. While I am well aware that most of my clients and readers of this blog are beyond their student years and probably paid off their student loan debts years ago, it’s still worth talking a bit about as the topic has become relevant over the past few years, particularly during the recent election season. There has been a lot of discussion centering around how much student loan debt has impacted the spending habits of younger generations and possibly hindered their interest in buying homes and starting families, as well as spending on big ticket items in general. Heck, there’s a really good chance that you have a child or grandchild currently paying off students debts, so for some of my readers it might just be a personal topic. Ideally, those younger generations would find jobs that pay enough to efficiently pay down those debts and allow them to save up for those big “adult” purchases (i.e. a car, a house, etc.). However, more often than not and for a number of different reasons, that is not the case. So, what does this have to do with you and your financial/retirement planning? Well, probably nothing, but it is worth noting. Furthermore, it may have long-term impacts such as slower economic growth as fewer younger people are spending on the large ticket items that can help fuel booms. Furthermore, if you have kids and grandkids weighed down by student debt, you may want to talk with them about their situation and educate them about what they can do to better their situations. Maybe they need a second job or maybe they need some guidance on smart spending habits. Whatever it is, don’t be afraid to help them get on the right path. Also, if you were planning on relying on your children to help with your retirement, such as moving in with them or having them pay for some of your needs, you may want to know whether their student loan debt early in their adult lives may have long term impacts (i.e. they aren’t able to save enough for the future). Lastly, if you are a retiree considering going back to school–and yes, they do exist–you will want to know whether taking on any student loan debt is doable. Obviously, you really only want to go back if you can do so without taking out any loans, but if you can do so for a small amount, it may be worth considering. Again, while you may not be directly impacted by student loans, it may have a long-term impact on the economy that affects your portfolio and investments, especially if it takes markets and the economy longer to recover from downturns due to enough people not spending. So, what do you know about the student debt situation and does it impact you?
I believe I wrote about this a number of months ago as the election season was starting to ramp up, but I feel the need to mention it again: Don’t let politics drive your portfolio decisions. In the weeks leading up to the election, it can be easy to get caught up in the theories and predictions about what might happen if a particular candidate wins or a certain party gains power. Some will take those predictions and make portfolio decisions in the hopes of getting ahead of the curve regarding how the markets might react to certain administrations. First off, it is incredibly difficult to predict how the markets will react to elections. What economic pundits predicted at the start of the past two administrations did not come to pass with the markets performing much stronger than expected. Rather, you should make your portfolio as you normally would and ignore the election when doing so. Don’t give you portfolio any special treatment between now and Nov. 3. That can be hard to do, especially with the news cycle (and social media and conversations with friends) being filled with election talk, it won’t be easy. However, trust me, it will be worth it to keep your portfolio on the same road it’s be going on.
It’s well known within the retirement planning industry that about half of all Americans are having a tough time with their retirement finances. That’s a lot of people. Furthermore, uncertain economic times can push the number of those struggling north of 50%. Considering how many retirees are out there–and it’s impressive due to one of the largest demographics reaching retirement age (*cough* Baby Boomers *cough*) as we speak–that’s a lot of Americans struggling to either save for retirement or stretch out their finances in retirement. With all that said, I want to remind you that you are not alone if you are struggling to either save or make your nest egg last. Many people do and there’s nothing wrong with asking for help in doing so. If you can afford it, a good wealth manager or financial planner can be a huge help. Despite the tone some of my blogposts, I fully understand that saving for retirement is no easy task and it’s been particularly tough over the past 15 years or so. That doesn’t mean you should give up on it, though. In fact, I want to encourage you to save as much as you can and to take steps to maximize your saving, regardless of where you are in your life. Something is better than nothing. So, are you struggling with saving for retirement? You’re not alone, but what are you going to do about it?