The Balance: Saving For Retirement And Your Kids College

Student loan statistics never cease to disturb. In the United States, there are 44 million borrowers with $1.3 trillion in outstanding debt. With that kind of debt burden on new graduates, it’s no wonder that many parents want to try and find a way to save for both their children’s college expenses and retirement.

The reality is, it may not be possible for every parent to save for both retirement and their children’s college. However, there can be ways to find a balance when attempting to accomplish these goals.

Think About Maximizing Your 401(k)

Borrowing from a 401(k) to fund college costs is a plan that can quickly backfire. With early withdrawal penalties and taxes, it’s an expensive option that should probably be avoided. If possible, it may be wise to max out your employer matching contribution to increase the amount that’s saved toward retiring. This can help someone saving for retirement reduce their personal savings burden.

Check Out Your State’s 529 Plan Options

Planning for college is hard when tuition costs keep rising, but in some states, a 529 plan can help by allowing you to prepay tuition costs, locking in today’s prices. Not every state sets up their 529 plans that way, however, in some, the plan acts as a normal savings account.

Get Help With Financial Aid

Taking on the entire burden of school costs without looking into financial aid can be a huge mistake, especially since about 66 percent of full-time students in the 2014-2015 school year qualified for some financial aid. Have your child work with the school’s financial aid counselors to determine which programs, grants and scholarships they might qualify for.

Automate Savings Deposits

Planning to save money and really saving it are two different things. One way to ensure you actually save for both your retirement and your kids’ tuition is by automating your savings deposits. In addition to automating your 401(k) through work, you can automate transfers from your checking account to your kids’ tuition funds and your IRAs every week or month. There are also some bank programs and apps that can allow you to regularly save $1 with every debit card purchase. Some of these programs also help you save the change, the difference between your sales totals and the next rounded up dollar.

Consider Opening an IRA

Every year, you can deposit a good chunk into an individual (non-employer) retirement account called an IRA. You can choose between a tax-deferred Traditional IRA or a tax-free Roth IRA. If you’re in a high tax-bracket now, the Traditional IRA can help you reduce your tax burden, which may leave you more cash to save toward your dual goals. Choosing a Roth means you can take tax-free distributions later on, which reduces the amount you need to have saved.

Even if you can’t fully fund your kids’ tuition costs, the savings you amass can reduce the number of loans they need, putting both you and your child in a much more secure, comfortable financial position during your future golden years.

Be Ready For The Next Market Correction

Some retirement investors have a portion of their investment in stocks, and this may have served them well.  Stocks have recently been on a roll – and many are near all-time highs. Some investors may think the market is a bit extended.   Aside from relying on luck, what could you do to prepare your retirement nest-egg for the next downturn? Practical tips that you can evaluate and easily implement were provided recently in a Money Online article written by Walter Updegrave. Let’s take a look at the planning he suggests:

Steps To Take Before The Next Market Correction

  • Review Your Stock Holding Allocation

    Could you be too heavily weighted in stocks?  Some may recommend a high percentage of stocks, say 60 to 70 percent, in your investment mix when you are young and just starting out is fine.  Perhaps that may be a good strategy for some to begin with that allocation, but as you near or are in your post-working life, a smaller percentage may be more prudent.  There is no single stock or fixed-income mix that is best for everyone. When the bear growls, you want to be sure your retirement nest egg is protected.  Having a nice percentage of your investment mix safely in cash may not only dampen the volatility of your portfolio, but may give you some dry powder to buy if stocks become really cheap.
  • Tweak Your Budget

    While you are at it, think about your overall retirement budget. It can be as simple or as elaborate as you like. Pay special attention to such things as health care and insurance as well as prescriptions drugs, which may cost more as you get older. Conversely, the amount of money you spend on clothing for work or gas for commuting may decrease.
  • Can You Generate Other Income?

    If your evaluations indicate you may not have enough saved, consider a side-gig after leaving full-time employment. Many folks find that freelancing, consulting, or other such endeavors not only bring in extra dollars, but they are fun and keep the mind sharp.
  • Remember: Patience and Preparedness Go A Long Way!

    Finally, it may help to work with an Advisor that can help you strategically position your retirement portfolio.  Also, exercising patience can be a virtue as well.   Position your portfolio well and realize all down markets are followed by the inevitable upswing. 

Having a strategic plan and some cash may help you feel more comfortable with the retirement road ahead.  We are here to help you navigate your journey.

Budget For Retirement Travel

For many people, the dream of traveling in retirement is strong. You may want to plan trips to see your adult kids and grandkids a few times per year, and you likewise may have bucket list trips in mind. Because you do not have a job to rush back home to, retirement is an excellent time of life to travel more. However, some people may not properly budget for their trips. This inevitably means that trips simply do not happen or that financial stress makes them less enjoyable. Learning how to budget properly for your trips is essential if you want to enjoy them fully.

Add Traveling Expenses to Your Budget

The first step to take when planning for trips is to properly fund them. One of the easiest ways to accomplish this is to incorporate traveling expenses into your regular budget. Many retirees create an annual budget, and they break this down into a monthly budget. Even when retirees incorporate a line item for traveling expenses into their budget, they often fail to budget enough money for these experiences. Depending on your plans for various trips, a single trip may easily cost you several thousand dollars or more. If you plan to travel at least a few times per year, your budget will need to be adjusted accordingly.

Prioritize Your Trips

If you are like most retirees, you may have a lengthy list of desirable amazing destinations. However, these you may only be able to visit a few destinations each year. You may want to prioritize the trips that you want to take so that you can cross those off of your list first. Remember to factor in costs for your trips to visit family with your recreational trips. Determine which trips that you want or need to take each year. This is essential if you want to properly allocate funds in your budget for all of your planned trips.

Research Expenses

The expenses for each of your planned trips could vary substantially. For example, you may have plans to drive to a few national parks and to take a trip to Europe a few months later. The Europe trip may be much more expensive. With both types of trips, you may need to essentially create a detailed itinerary. Research accurate costs for each aspect of your trip so that your budget is realistic. Remember to factor funds for food and gas.

Look for Savings

Remember, seniors often qualify for special savings at restaurants, theaters, stores, hotels and more. When you begin planning each of your trips seriously, spend time analyzing all discounts available. Look for alternatives, such as staying at a different hotel that may offer a senior discount. Take advantage of senior discounts, but be aware that other discounts and savings may also be available. For example, you can travel during a non-peak season to likely save a substantial amount of money. You can buy plane tickets on non-peak days or in the very early or very late hours of the day. These are only some of the many ways that you can potentially save hundreds or thousands of dollars on your trips.

Traveling may be one of your primary goals in retirement, but your dreams of taking amazing trips may not happen if you do not have money available. As you can see, you should work on budgeting properly for them in various ways in order to have funds available for your trips. You can get started today by adjusting your budget and researching desirable destinations that you want to visit within the next year. By doing this, you can get the wheels in motion for taking exciting trips to amazing locations.

Getting Organized In Retirement

Once you reach your retired years, you may think that your previous planning efforts would put you in the clear from a financial standpoint. However, the numbers that you use in your projections are in flux. This means that you must stay organized and keep on top of your financial status if you want to enjoy financial peace of mind in the years to come. However, monitoring your efforts on a monthly basis may be overkill. Furthermore, when your oversight of your finances and budget is too frequent, it can be difficult to spot trends and potential issues. With this in mind, it is great to take organizational steps at the beginning of each year. When you fall into this habit, you can stay on track to meet your future financial goals.

Review Last Year’s Spending

Your personal budget in your retired years will fluctuate considerable, and many retirees notice that their expenses tend to increase over the years. For example, our budget may have been well- organized initially, but it was riddled with uncertainties. After all, you did not know with certainty what the inflation rate would be like, which service providers would increase rates and more. When you keep your budget updated based on realistic numbers, you can better plan for the future. A smart idea is to review your average expenses for all categories over the last year and to update your budget accordingly for the next year. Projecting your budget for the next several years is also a smart idea.

Check Your Debt Balances

Part of your planning efforts to prepare for your retired years may included paying off all outstanding debts. However, you can accumulate new debt in retirement. For example, you have had a financial emergency that resulted in credit card debt, or you may have needed to use auto financing to buy a new car. Therefore, get in the habit of always checking your debt balances each year. Your goal should always be to eliminate debt balances as soon as reasonably possible.

Analyze Investments

Just as you need to monitor your progress with debt reduction, you also need to analyze your investment accounts. Your future income is based on how much money you withdrawal from your accounts now as well as how well your investment accounts grow. It is just as important to stay on top of these accounts in your retired years as it was to stay on top of them in your pre-retirement years.

Update Your Net Worth

You do not necessarily need a specific net worth figure to retire. You simply need to have low enough expenses that you can live comfortably on the income that you have available. This is a simplistic description of finances in your retired years. For example, you need to take into account inflation, increasing medical expenses and more. However, when you update your net worth figure while taking these other steps, you can see how your wealth is increasing. Seeing how much progress that you have been between last year and this year can help you to feel more relaxed. Keep in mind that many retirees who properly manage their finances may see their net worth continue to increase over the years.

Financial management does not end after you retire. In fact, preparing for retirement is only the first step. Once you are retired, you must stay on top of all aspects of your finances so that you can ensure continued financial freedom going forward. Remember that it is easier to correct issues sooner rather than later.  A yearly review is common for our clients, if you need help staying on track and maximizing your retirement goals, call us today.

This Could be Your Biggest Expense in Retirement

No matter what your age, it’s important to start preparing for the time when you eventually retire. One of the biggest financial issues you may encounter by the time you’re ready to stop working is how much money you will need for your health care. In general, this can be a sizable amount. On average, a person of 65 would need around $190,000 to pay for costs related to their health. This estimate doesn’t even take into account any preexisting chronic conditions or disabilities.

Unfortunately, the one mistake people could make regarding retiring is that once they reach the age of 65, they will be eligible for Medicare and that it will cover all their needs. However, in reality, Medicare isn’t free and people are responsible for covering their premiums, deductibles and copays. Retirees who require coverage for dental care, prescription drugs, vision or hearing are also required to either buy additional insurance or pay for these things out of pocket.

However, there is good news. There is a lot you can do to manage the costs of your medical care. Planning ahead can really be a lifesaver for your costs once you retire. These are ways you can ensure that you are covered:

Health Care Investment Account: Creating an investment account for your estimated medical costs can be a great idea. You should ensure that it’s kept separate from your other retirement money. Estimating how much you will need for the future can help you to be successful at saving for these costs. Additionally, these types of accounts also allow you to save money on your taxes.

Consider Long-Term Care Insurance: Over half of people 65 or older will require long-term care at some point in their lives. Getting a long-term care insurance policy can ensure that your future health needs are met if you require assisted living, home care or a nursing home. This option is also expensive, but it is well worth it if you save early on and already have chronic health conditions or a family history of certain conditions.

Take Care of Your Health: Obviously, if your health is better after retirement age, it will be easier on you from a financial standpoint. Your health care expenses will be less than that of someone who isn’t in good health. Eat a well-balanced diet, incorporate physical activity into your everyday routine, maintain a healthy weight and get a good night’s sleep daily. This offers you a dual benefit in enjoying better health than your peers and helping you save money in the long run.

Use COBRA: If you had health insurance through your last job, you can take advantage of COBRA to continue using it after you retire. COBRA allows you to use your work health insurance for up to 18 months after you leave the job as long as the company employs at least 20 employees.

These are great ways to go about planning for the time you eventually retire. They can help you to save plenty of money on any medical related costs and can bring you a sense of ease.

10 Reasons You May LOVE Being Retired

If you are like many people, you are probably looking forward to the time when you can retire. It marks the end of an era and serves as a reward for all the hard work you have done over the years. Retirement is a time you can truly enjoy yourself and reap the rewards of all those years of being in the workforce, no matter what your chosen profession.

Since Valentine’s Day is the day of LOVE we thought we should take a look at the many reasons you may LOVE being retired!   After all, when you’re retired, you don’t have to plan your Valentine’s Day plans around your work day.

It is likely there are personal reasons you’ll love being retired. These are the 10 most notable.

1. Less Stress

Being retired means you no longer have all the same obligations as when you were working. Your kids have probably all flown the nest and are living on their own. You may have also already fully paid off your mortgage. As a result, there are far fewer demands on you, which means you experience less stress as a retired person.

2. Go to Bed and Wake Up When You Like

With retirement comes the ability to go to bed and wake up whenever you want. No longer do you have to set an alarm to wake you up early in the morning. You can turn in late and sleep in to enjoy whatever you like the next day. Sip your coffee in your pajamas while watching your favorite morning news program, talk show or game show. Since there are no obligations in terms of when you go to bed and when to rise, you may also find your sleep improving and that you’re feeling more rested each day.

3. Avoid Annoying Commutes

One of the best things about being retired is that you no longer have to deal with having to commute to work on a daily basis. Whether you rode public transport or drove to work, you no longer have to endure the crowds and excessive traffic during rush hour. It also leaves open more time for important appointments in the middle of the day, such as for medical or dental purposes.

4. You Can Wear What You Want

You no longer have to worry about planning what to wear to work. Instead, you can wear whatever you like and can dress casually in your favorite pair of worn jeans and T-shirts or even baggy sweats. After retirement, you no longer have to worry about wearing corporate pressed suits, uniforms or even business casual attire.

5. Spend More Quality Time with Your Spouse

If you and your spouse are both retired, you can spend more quality time together. Even if you’re the only one retired, you can still spend more time with your loved one. It can make planning date nights easier or you can simply spend time together in the comfort of home.

6. Be More Spontaneous

Being retired means it’s the perfect time to be more spontaneous. If you want to get out of the house and go for a refreshing walk in the park in the middle of the day, you can. You can even go away on a trip to another city, state or even country. Now that you have so much free time, you can be as spontaneous as you like.

7. Do Things You Love

While you were working, you no doubt had limited time for certain things. Once you’re retired, you can pursue creative outlets and do other things you enjoy. You may even want to take a course at your local community college that allows you to engage in a specific activity.

8. Exercise More

After retiring, you have more time to exercise. You can go running, walking, biking or swimming whenever you like or even hit the gym a few times per week.

9. Enjoy Cultural Pursuits

You have more time to go to the library to read, visit museums and go to art galleries. These cultural pursuits may have been difficult to enjoy while you were working.

10. More Relaxed

Finally, after you retire, you can relax more in general. You can experience the type of freedom that wasn’t there when you were working.

You don’t need cupid to tell you that planning for a successful, stress free, retirement is important.  We are here to guide you and help you fall in love with your “golden years”. 

How a Divorce Can Affect Your Retirement

Divorce can be hard on many levels. One of the things that can be crucial is the financial split of the couple’s assets. These assets include retirement benefits and investments. Figuring out how benefits should be divided, or if they are even able to be divided, can be a minefield if not navigated properly.

It is often that one of the spouses becomes the couple’s treasurer, but it is important that both partners are aware of the couple’s financial situation. This is especially true when it comes to investments. If one spouse was not as attentive to the tax responsibilities, it could affect the other spouse’s share. If the spouse was deceptive about the couple’s investments, this could make issues between the couple even worse. Hiring a forensic accountant can help find discrepancies or deceptive practices by the responsible spouse.

When it comes to retirement benefits, there are only certain things eligible  to be split during a divorce. Those eligible are considered community property, and include things like military pensions, GI Bill benefits, IRAs, employee stock option plans, and 401(k) plans. Benefits that are not considered community property are Social Security benefits, Worker’s compensation, and any military injury compensation. It is often advised that if the spouse’s benefits are sizable that the other spouse should petition to split the benefits. Benefits are usually split by percentage instead of a money value in case the value of some of the benefits fluctuates between the time of evaluation and actual settlement.

There are some other exceptions and considerations  when it comes to benefits. For instance, if a spouse invested money or started a 401(k) before the marriage and continued to pay into them during the marriage, the amount invested before the marriage must be deducted from the total amount before any valuation can be made.

When it comes to Social Security benefits, a couple must have been married at least 10 years for one spouse to have a claim to them. However, the claiming spouse cannot have their own Social Security benefit value exceed half of their spouse’s. If there is a possibility that a spouse will have a claim to the other’s Social Security benefits, they may request a delay in proceedings in order to pass the 10 year threshold. If the length of marriage is close to 10 years, the court may issue a continuance. If the spouse with the Social Security benefits dies after the proceedings are over, the surviving former spouse can collect 100 percent of their Social Security.

When married couples split up, the financial quandaries can be messy. Knowing the law, and getting advice from a financial expert is a good idea for both spouses involved. It is beneficial for both spouses to be well aware of the collective financial situation so surprising issues like back taxes or hidden assets can be avoided. Maintaining the financial futures of both former spouses is key to making sure the separation is a clean one with no resentment or animosity between those involved.

I Am Retired. Can I Get A Mortgage?

Most adults who are approaching retirement or who have reached this stage in their lives are aware that income is a major factor that mortgage underwriters focus on when applying for a home loan. The primary source of income that working adults have usually is from their full-time employment, and some income may also be derived from investments, royalties or other sources. After you retire, however, you do not have a job, and you may think that you cannot qualify for a home loan because you do not have salaried income. The good news is that this is not the case. There are actually several methods that underwriters can use to qualify you for a home loan after you have retired from a full-time job.

The Drawdown Method

Income is a major component that underwriters review for all home loan applicants. This income could come from a full-time job, but it does not have to. You obviously are receiving some type of income after you retire because you have to pay your bills. If this income is a drawdown from your various investment accounts, you can prove this source of income by providing your bank statements. The bank statements should ideally show the same amount being deposited into your account each month. Some underwriters may also need a letter from your financial institution confirming this drawdown arrangement. Keep in mind that this is only one source of income that underwriters may consider. For example, if you also receive rental income from a real estate investment, Social Security income or any other type of income, all sources of regular income that is expected to continue can be counted in the underwriter’s analysis of your loan request.

The Asset Depletion Method

If you are using capital assets to pay for your retirement, the underwriter can consider this as a source of income as well. For example, if you currently have $2 million in liquid assets, an underwriter may take 70 percent of this amount. Then, the underwriter will divide that amount by the number of monthly payments you desire for your home loan. If you apply for a 30-year loan, the figure will be divided by 360 months. If you have additional sources of income, such as from other investments or a pension, this income will also be included in the income calculation. This is a suitable method that can be used for retirees who have a lot of assets but who may not have a significant amount of income rolling in.

Other Important Qualification Requirements

Income is not the only qualification requirement that underwriters review when you apply for a new home loan. Just as is the case if you apply for a home loan at an earlier stage in your life, your credit scores are critical. They can play a role in your approval status as well as what your interest rate may be. Ideally, your credit scores should be in the high 700s to qualify for an excellent rate. Underwriters will also review your plans to live in the house or to lease it out, your down payment amount and your available liquidity after closing. Tax returns, bank statements, documents showing other sources of income, your credit report and other items will all be analyzed closely by the underwriter.

You can see that qualifying for a home loan after you retire is possible, but it also can be confusing. A smart idea is to reach out to a lender or mortgage representative for assistance. Through a consultation and through the pre-qualification process, you can learn more about your ability to obtain a mortgage in retirement.

Are You Afraid To Retire?

When a person thinks of retirement, they can have a thousand things running through their mind. They are sometimes met with a mix of emotions about the situation that they are going to be in. On one hand, retiring means that you get to sit back, relax, and enjoy the fruit of your labor. This is what you have been working all those years for; for the time you can live how you want to, and do the things that you have always loved doing. For some people, retiring is a beautiful thing, but retiring for others can be scary. There are fears that can cross their minds, making them wonder if retiring is a good idea after all.

A fear that people can have is whether the money that they have saved will be enough to last them the rest of their lives.  What if you live until 100?

You have worked throughout your life, and retirement is now your time to enjoy all that you have worked so hard for. If you were in a stable well paying job, you probably were used to living a comfortable life. Will you be able to splurge as much as you used to?  This is a difficult question for some to answer.  So what can you do to take care of this fear?

Find A Financial Planner

Budgeting is the best way to ensure that you have enough money to support yourself through this period. Approaching a financial planner is one way to take care of this and to ensure that your questions are answered and you are supported by someone knowledgeable in finances and retirement.  A financial planner can help you budget according to your previous income and savings, and can even help you understand how much you would need to keep aside for a rainy day and to take care of any medical expenses that might come your way.

If you are thinking of retiring, and haven’t already ended your work phase already, visiting a financial planner before is always a good option. They will be able to tell you if you can retire now or if you have to wait for a few years to be better situated.   We specialize in planning for retirement and are here to answer these questions and more.

Planning For Medical Expenses

Having medical expenses during your retirement is something that can cause some people to hold onto their jobs longer. Often, jobs come with medical care incentives and insurance, which can be a great boon in the case of a medical emergency. However, most companies ask you to forgo these health benefits once you retire, which can make retiring an incredibly scary experience. Planning and budgeting for this can be hard, which is why you should get a health insurance that gives you excellent coverage and which can keep you well situated in these instances.

Keep Yourself Busy

The fear of being by yourself and not having anything to do is something that some people retiring face. You might have been accustomed to getting up early in the morning and heading to work. You might be used to spending your entire day engaged in your job, and then coming home and spending time either with yourself or your friends and family. Retiring means that you have a lot more time on your hands, which can cause some people to get frustrated, bored or lonely. It can be important to find something that you like doing and keep yourself engaged in that. You can take up a small part-time job that lets you work from home, or even take up a hobby that you have always wanted to learn and cultivate that skill. Who knows what new passions you will discover.

There can be a lot to think about when planning for retirement.  We are here to answer your questions and help ease your concerns about this new chapter in your life. 

New Year Retirement Resolutions

As we enter a new year, it is a good idea to consider the resolutions you might be planning. You might want to do things like exercise more often or drink more water. However, you ought to also consider saving for retirement and reaching any other financial goals that you might have as well. Remember, this is the time of year when you get a clean slate and could do better in areas that you may have struggled with in the past.

Think About The Vital Documents You Need To Work On

It is not the most pleasant thing in the world to think about, but part of getting older is thinking about your will. We all know that we will pass away at some point, but not enough of us do anything about making sure our family is taken care of when that time comes.  With this in mind, the new year is the perfect time to sit down with an estate planner or any other expert who can help you get some of those documents in order.

Invest In An IRA

An individual retirement account (IRA) can be a great option for the person who is nearing your time to retire (or also for those who are far away from it). It can be a way to save and invest for your non-working years. You cannot allow yourself to fall into the false notion that the government, with its social programs, will be there to bail you out. We can only hope that such programs will exist for future generations.  Even if you are lucky enough to receive your full government entitlement benefits, it still may not be enough to get you through retirement comfortably.

Investing in an IRA could help a person increase their odds of having a comfortable lifestyle because it helps them grow the funds that they put into it.  To see more about IRA investments and to compare the different types, see the IRS website: Here.

Create An Emergency Fund

Life is far from predictable. You can estimate what your expenses will be for routine things, but it is unlikely that you will plan properly for those things that can sneak up on you. There could be emergency medical expenses, or any number of other issues that you have to face going forward. If you are wise with your planning, you will go ahead and put in some extra budget space for the things that no one sees coming.  Every retiree will need a different amount extra based on their situation but planning for emergencies is smart at any age.

Take Stock Of The Health Care Picture

The picture of health care in the United States is a pretty fluid thing. It is not like in other countries where there is universal coverage for a lot of people. Instead, the United States has a hybrid type system that changes all the time. It is a good idea to take a look at the particular mechanics of the health care system as you reach the age when you could retire. Just having some idea of what is or is not covered can help you get a better grasp on what moves you need to make next to protect yourself in this area.

Cheers to a happy and healthy 2018!

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