Talking QCDs in the Giving Season

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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.

What’s Your Worst Case Retirement Scenario?

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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?

The Student Loan Financial Discussion

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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?

Markets Going Boom May Also Go Bust Someday

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If you’ve been following the stock market over the past 30 years or so, then you are probably well aware of the fact that bubbles occur and eventually they burst. It happened a little over 15 years ago with the tech bubble, followed less than 5 years after that by the housing bubble. Those bursts were felt throughout the markets and the country. billions of dollars were lost during those bubble bursts, along with jobs in many sectors and homes in many regions. Why am I bringing this up? Well, I’m using it as a reminder that despite how good things may be–and let’s not kid ourselves, the stock market is still trending upwards–there will come a time when the fun ends. After all, what goes up, eventually comes down. So what can you, as a retirement investor do to take advantage of the good fortunes while also protecting yourself (as best as possible) from the bad? Diversify and make sure to review your investments at multiple periods throughout the year or when you hear of market changes. Diversification spreads the risk around and prevents all your money from going into one area of the market. If you diversify, you can limit the damage that a downturn in one market sector can do to your portfolio as a whole. Of course, along with diversifying, you want to track your investments. That means checking your portfolio at regular intervals and checking it when you hear of changes within market sectors that you are invested in. Tech companies struggling? Make sure your tech investments are safe. Homebuilding ramping up? Maybe you should look to make some investments in that area. Those are just a couple of examples. If you need help with your portfolio or just want to talk about your risk appetite, you should of course speak with a certified financial planner, wealth manager, or investment professional.

More Retirement Legislation Could Be Around the Corner

I’ve written about the SECURE Act a number of times over the past 11 months or so since it was signed into law. As you may well know, that legislation brought about some big changes, including raising the age for required minimum distributions (RMDs) up to age 72, allowed traditional IRA contributions past age 70 1/2, and eliminating the stretch IRA. Now, there could be even more changes coming to the retirement planning world in America. Recent bipartisan legislation introduced last week, and referred to as Secure Act 2, could take some of the parts of the original Secure Act even farther. Some of the key points of the legislation are the expansion of automatic enrollment to include 401(k), 403(b), and SIMPLE plans, raising of the RMD age to 75, increasing catch-up limits, and matching employer contributions for employees making student loan payments. That last part is interesting as it would potentially allow employers to make matching contributions under a 401(k), 403(b), or SIMPLE IRA for employees making “qualified student loan payments.” The legislation also includes a number of other somewhat minor changes to retirement plans and planning. While it’s still in the early stages, this legislation could have a major impact regarding how people save and when they start spending their nest egg. Obviously, things still have way to go, but I wanted to make you aware of potential changes that could be coming down the pike. It’s worth at least keeping an eye on.

Thinking Trust for Your Estate? Think Legal

While it may not be the right fit for every retiree, a trust is an effective and efficient estate planning tool in certain situations. For example, if you have young grandchildren that you want to leave money for, but you want to control how and when it can be used after you’re gone, then a trust might be the way to go. Or maybe you want to make sure your estate funds go towards a particular cause or entity, in which case a trust can control that. Regardless of your purpose for the trust, it’s important that it is set up properly, which the vast majority of times involves working with an attorney specializing in that area. Trusts are complex devices that, if not created properly, can lead to confusion and eventual frustration for family, friends, and/or organizations that may have expected to benefit from the funds. If you are considering a trust for your estate or for retirement, I strongly urge you to speak to an attorney about it. Not only that, but I encourage you to take the time to find an attorney that you are comfortable with discussing any matters related to your personal trust with. Finding the right attorney can make all the difference and a good one should be able to help you reach your desired goals or be frank with you about the feasibility of your plans. Along with talking with an attorney, you may also want to speak with a wealth manager or financial planner to further discuss your retirement plans as well as your estate plans. These conversations can go a long way towards helping you reach the desired end point for you and your money.

It All Starts With a Nest

You can’t plan for retirement without first thinking about the money you will be spending in retirement. Thus, your retirement planning–and everything that follows those initial plans–will focus on your nest egg. How you build that nest egg will have a monumental impact on what you can do when you actually most into your post-career life. If you take aggressive steps and keep on top of your nest egg, then you will probably have a good chunk of money ready for when you stop working. On the flip side, if you don’t take steps to properly build up a nest egg or make bad decisions when doing so, then you probably won’t have much flexibility in retirement or may have to work longer than intended to meet your goals. No matter how you slice it, your nest egg is essential to your retirement plans. Now, if your nest egg isn’t quite where you want to it be right now, don’t fret. You can always take steps to get back on track and then determine what’s realistic from there. There is no on-size-fits-all answer for that, but some steps would include re-evaluating your retirement goals, analyzing your portfolio and/or investment decisions, or working with a financial planner or wealth manager to really kick your saving into gear. Each person’s situation is unique regarding how much they need to save for retirement, so some may have a lot of work to do while others may be right on track. What’s key, no matter where you are in your saving journey, is that you never lose track of your nest egg and that you focus on building it up as much as possible. So, how big is your nest egg?

Struggling With Retirement Saving? You’re Not Alone.

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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?

When to Get Serious About Retirement

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Retirement can seem like a long ways off as you make your way through your career–and, of course, life–during your 20s, 30s, and 40s. However, when you get into your 50s, suddenly it might not seem so far off in the distance. Your early 50s, in particular, are a really good time to get serious about retirement. What does it mean to “get serious” about retirement? It means sitting down and taking a long, hard look at where your finances stand and when exactly you want to retire. You will also want to reassess your retirement goals and get a good understanding of what life in retirement will be like. What will your retirement budget be? Do you plan on paying down your debt before retiring? Are you going to move for retirement? These are some important questions you will need to ask yourself as you near retirement age. The answers may surprise you and will give you a good sense of what is realistic regarding retirement. Now, I’m not saying you need to wait until your 50s to get serious about retirement (the earlier you start, the better), but I am encouraging you to not wait until your late 50s/early 60s to start thinking about your post-work life. Remember, retirement is serious business that requires a plan and hard work, both before and during. Taking the time to properly prepare for it so that you can enjoy it is very important. So, are you ready for retirement?

Personal Finance is More Than Just Saving. It’s Spending Too!

A majority of the time, personal finance conversations/blog posts/podcasts center around saving. When spending money gets talked about, usually it has to do with paying down debts or making necessary purchase, such as homes or cars. However, it’s important to remember that finance is more than just saving for retirement or to own a home. It’s more than just worrying about debts. Spending is an important part of personal finance as well. Now, I’m not encouraging you to go out and spend like it’s going out of style. What I am encouraging you to do is to be smart with your money and to spend on things that are important to you. Is there a hobby that keeps you active and happy? Don’t be afraid to spend a bit on it. Of course–I’ll reiterate–don’t spend obscene amounts on it, but a few dollars here and there won’t hurt. Being happy and active can go a long way in life and is just as important to your well being as how much money you save. Spending can also be helpful in other ways, such as helping you to build credit, if you are a young saver. Having strong credit can help you down the road when you apply for car loans or mortgages by helping you to secure a favorable rate. The key though is that you don’t get too caught up in saving as you march towards retirement. Yes, you should of course work to meet your retirement saving goals and should save enough live comfortably after you stop working. However, you shouldn’t be afraid to spend a little on yourself. Don’t be afraid to plan a vacation from time to time or buy yourself that new piece to tech to make your life a little more efficient. So what will you spend money on?