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?
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?
It may not be obvious, but we have a retirement problem in this country and the economic crisis created by the efforts to combat COVID have exposed it. Not enough people have enough saved for retirement. The economic conditions that began back in the early Spring have forced many older workers into forced retirements that they were not fully prepared for. For those younger workers who suddenly found themselves on unemployment, there aren’t enough jobs that offer strong retirement benefits or high enough wages to allow them to look beyond the survival necessities (i.e. rent, food, gas, etc.). Demographics and class also play a role in whether people have the opportunities to save for retirement. While there are a lot of tools available today for anyone to save for retirement, the tools are not the issue. The issue is that fewer people have wiggle room financially to save enough for retirement. Most people with hefty retirement accounts either had jobs that paid well or spent years working for big companies that offered strong benefits. For many in the gig economy or working for small businesses, the opportunities to save and the benefits of things like matching contributions or stock ownership plans are just not there. And yes, there are more working in the gig economy or small businesses than many of us realize. So what’s the solution? Well, there was recent legislation passed that makes it much easier for small businesses to band together and offer retirement benefits as well as pushes back the age for requirement minimum distributions (RMDs). However, we may need to have a larger discussion about how we go about saving for retirement after these current economic conditions improve, particularly about pay and the cost of living in this country. There may also need to be further reform of the tools that we have, making them easier to use and understand. We will see what the future brings regarding all this.
If you’re serious about saving for retirement, then you’ve probably done a lot of research and reading about the strategies you can use to do it, the tools the use, and things to look out for. Over time, that knowledge can really build up and it can be tough not to want to share it with family and friends. Guess what? There’s nothing wrong with that. After all, knowledge is power. That means the more you–and in this case, others–know the better you can be when it comes to making financial and retirement decisions. Now, before I go any further, I want to caution to you to be careful when it comes to giving advice regarding taxes or particular investments. Furthermore, if you find that you’re gathering a large following or are taking payment in return for financial advice, you should be very careful and maybe should consider becoming a financial advisor or wealth manager so as to protect yourself and get the credentials needed. In regards to taxes or tax-based strategies, you can potentially open yourself up to some legal liability, particularly if you are not properly credentialed to do so and if things go south (in other words…don’t mess with people’s taxes or tell them what to do with their taxes if you’re not a CPA). Anyways, in regards to sharing your knowledge, maybe you’ve learned some really great tips from an financial advisor or maybe you really like crunching numbers and want to help others who aren’t so skilled. Don’t be afraid to share your knowledge and skills to help others obtain a better grasp of their finances and retirement savings. Even if it’s just a matter of helping a friend set up a spreadsheet to track their expenses or helping a family member research an investment opportunity, you can share what you know and help others. Of course, if you aren’t comfortable with helping others with financial planning or preparing for retirement, you could also always just pass on the name of a reputable wealth manager or financial advisor.
Is it possible to save too much for retirement? That may seem like an odd questions. However, the answer is…yes. The answer isn’t so much focused on finances, but rather how saving for the future is impacting your life in the present. Sure, we all want to have that seven-figure nest egg, but what if getting requires forsaking a lot within your current life? I’m not saying you shouldn’t budget and be smart with your money, but don’t get carried away with it. In other words, don’t be afraid to take a vacation from time to time. Or go out to dinner once a week. Or don’t be afraid to buy a reliable, new car to get you through to retirement. What you don’t want to do is enjoy living your current life with your sole focus being on retirement. On the flip side, you also don’t want to live too much in the present and not save enough for the future. However, that is for another blog post. Right now, I want to make sure that you find that nice balance where you are saving for retirement, but also able to enjoy life in the moment. So, yes, you can save too much for retirement, but it’s not so much because you have too much stashed away in your nest egg, but rather because you are not living enough in the present. Remember, saving for retirement isn’t easy, but it shouldn’t consume you or be too much of a burden on your current life. If you need some help with planning for retirement or advice on how best to save, you should speak with a certified financial planner or wealth manager.
I recently spoke with some family members in the Northeast who lost power during a big storm that rolled through. It took them four days to get power back. While they were able to get by just fine, it got me thinking about the importance of being prepared for emergencies. I know I’ve talked about such preparation in the past, but I feel like it’s something that should be brought up from time to time as it’s very important. As you plan for the future and set goals, make sure you are also preparing for the unexpected. That means having an emergency fund saved up or having a plan for divesting particular assets as a way to pay for unexpected expenses (i.e. medical bills, emergency home repairs, etc.). Having an emergency fund or emergency plan can go a long way towards protecting your nest egg and keeping you on track to meet your goals. Many people don’t think to build up an emergency fund and thus put all their hard work and savings at risk and don’t truly realize it. If you don’t have one, don’t worry, it’s never to late to start saving for an emergency. If you need help getting started, you should speak with a certified financial planner or wealth manager. So, are you prepared for an emergency?
This Coronavirus pandemic is changing everything. Sure, you can tell yourself it’s only temporary and convince yourself that things will soon return to normal, but it’s highly unlikely that will happen (however, there’s nothing wrong with a little optimism!). For those of you Boomers out there getting ready for retirement, it will be different. First off, of course, is the fact that the economy and markets seem to have taken a turn. Yes, we are in a recession. That’s usually not a good thing, especially if you are planning on your portfolio or investments to keep making you money in retirement. On the flip side, if you are savvy with investing, this may be a chance to set your portfolio for when the markets rebound (not sure of when, though). This down market may lead to slower nest egg growth for Boomers who are still working and starting to think about retirement. This may lead Boomers to work longer, which may be more difficult than intended. It’s not uncommon for Boomers to be the ones forced out in favor of younger workers at companies when times get tough. On top of finances, you goals and desires for retirement may change as well during these times. Luxurious vacations may not be a thing to a while (particularly cruises) and many retirees may place more emphasis on spending time with family. You may even already find yourself re-assessing your retirement needs and desires as you read this. There’s nothing wrong with that. Just remember, that the vision and expectations of retirement change from generation to generation and it’s currently changing for the Boomer generation. Are you ready for the new retirement?
Wow, 2020 has been a wild ride so far. We started the year off with what seemed like a strong stock market, solid economy, and no fears of COVID-19. That quickly changed less than three months into the year as much of the country came to a standstill after Coronavirus reached our shores. It’s fair to say it’s been a bit of a rough ride since then. It’s also hard to say what the rest of the year will bring. However, 2020 has also brought some big changes to retirement saving and planning. First off, the SECURE Act was signed into law in late December 2019 and while the changes it brings about might not be immediately felt, it could have a big impact of how people save and when they plan to tap into their retirement accounts. Then, in late March, Congress passed Coronavirus-related legislation that waived required minimum distributions (RMDs) for 2020 and allowed for penalty-free Coronavirus distributions in certain situations. These changes are more immediate and can could provide relief for those out of work due to state shutdowns or layoffs. As we move into the second half of 2020 there is still a lot of uncertainty regarding what the future may hold. We are still struggling to maintain COVID-19 and there are differing views about how to combat the virus. It remains to be seen if further economic relief or short-term allowances may be needed to help people get through these times. So what does this all mean for you? Well, this is a good chance to really think about your retirement savings as well as get a little creative when it comes to saving. If you are nearing retirement, maybe you want to take advantage of the push back of RMD age that was part of the SECURE Act. Or maybe, if you find yourself not back at work yet, maybe you start thinking about your next career–possibly something you can do in retirement. Now is also a good time to assess your retirement savings plan and make sure it can still get you where you want to go and make the changes you need to. What will the second half of the year bring for you?
I want to start out by stating that this post is not meant to knock employer retirement plans. Such plans can be a great way to get started in saving for retirement or as another source of retirement savings. However, if you do reach a point where rolling a 401(k) or other employer plan into an IRA is a real opportunity/thought, then you should strongly consider doing so. First off, if you are still working and your 401(k) isn’t a huge amount, you could save yourself some serious tax money down the road if you convert to an IRA, especially a Roth IRA. That can be a huge boost when you do retire and don’t have to pay taxes when you take a withdrawal. One of the biggest advantages to an IRA, though, over an employer plan or other retirement accounts is the freedom you have to choose what to invest in. With an IRA you can invest in just about any stocks and markets you wish and can also invest in other things such as certain types of real estate (this can be complicated and not many IRA custodians can do this) and, in some instances, bitcoins/cryptocurrency. You also have more say in your investment strategies with an IRA over an employer plan. Since an IRA is yours–and not an employer benefit–you are the sole person who can decide things such as what you invest in, how much you invest in certain stocks, and when to buy and sell. This freedom can be very enticing for some people and can allow for better customization of goals and benchmarks when it comes to saving for retirement. If it’s too much you can also still start an IRA and have a financial advisor or wealth manager look after it too. You can also have an IRA and a employer-sponsored retirement plan. Many people do this as there are strategic advantages to having both. If you have questions about setting up an IRA or whether it’s even a good idea for your situation, you should speak with a certified financial planner or wealth manager.
Have you found yourself out of a job thanks to retirement? Are you living off of unemployment and savings at the moment? While this may not be an ideal scenario, it can be a good time to practice a bit what life will be like in retirement. In retirement, you probably will have to make your savings last, especially if you don’t plan on working or don’t have passive income as part of your plans. You will need to work on skills such as budgeting and planning. If you are living on unemployment benefits you are already doing the same thing as you need the money to last you until the next check. You will need to budget and plan for where and how you spend that money. Obviously, the necessities–such as rent and food–come first and then the luxuries–such as entertainment or ordering out–can come last. In retirement, you will be working to make your savings last. Now, of course, your nest egg should be enough for you to live comfortably in retirement and you should have a plan for how you will spend it. However, there’s nothing wrong with practicing before you get the retirement. This will give you a chance to get an idea regarding what your weaknesses are. Are there certain expenditures you always seem to make but don’t really need? Do you have trouble budgeting? Now is good time to work on those. Times are tough, but that doesn’t mean you can’t use them to your advantage.