Be Ready For the Next Market Correction 

Many retirement investors have a considerable percentage of their investment in stocks and this has generally served them well. Stocks have recently been on a roll – indeed booming – at or near all-time highs. Some pundits think the market is a bit extended. So what should you do to prepare your retirement nest egg for the next downturn? 

How a Market Crash – or Even a Downturn – Can Wreck Your Plans

Here’s a scenario that may be more common than you think: Sam, aged 54, has been working for 30 years and is closing in on his retirement. He has been lucky in that he was able to save a little of each paycheck and put that money into a qualified plan. He followed the general recommendations given by the plan administrator and therefore has a fairly high percentage, about 70%, of his total in stock mutual funds and individual issues. Consequently, over the years, his account has blossomed into a very nice six-figure sum.

Early 2018 was relatively rough for some investors and Sam took notice. He became more than a little concerned that his money was evaporating before his very eyes. He decided to re-evaluate but exactly what should he do?

A scenario such as this shows why it is critical to plan for any downturn, especially one that might occur in your post-working years. Take effective steps now that will safeguard your hard-earned savings, especially if you are near or in your golden years.

Steps to Take Before the Next Downturn

  • Review Your Stock Holding Allocation
    You may be too heavily weighted in stocks. Many advisors recommend a high percentage of stocks in your investment mix when you are young and just starting out, say 60 to 70 percent. Perhaps it is wise to begin with that allocation but as you near or are in your post-working life, a smaller percentage may be much more prudent. There is no single stock/fixed-income mix that is best for everyone. However, when the bear growls, cash is king. Having a nice percentage of your investment mix safely in cash will not only dampen the volatility of your portfolio but will give you some dry powder to buy if stocks become really cheap.
  • Tweak Your Budget
    While you are at it, create a “golden-years” budget. It can be as simple or as elaborate as you like. Pay special attention to things such 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, advising or other such endeavors not only bring in extra dollars, but they are fun and keep the mind sharp. 
  • Remember: Patience is a Virtue
    Finally, don’t panic if the stocks head south. Position your portfolio well and realize all down markets are followed by the inevitable upswing. Having some cash will give you the ability to purchase quality issues cheaply.

Tanking stocks can have a big negative impact on your nest egg. Planning now makes good sense.


You Still Have Time For Retirement Resolutions

A few weeks into a New Year and many think about various aspects of their lives. One of the primary areas that are commonly reviewed is personal finance. If you are thinking about retiring within the next few years or longer, you may want to create a resolution or two so that you can plan better for your non-working years. However, some people believe that it is simply too late for any type of plan to be effective or beneficial. While it is better to start preparing for non-working years early in your adult years, starting now is better than not making any preparations. These are some of the areas that you can resolve to address in the near future.

Set Retirement Goals

Everyone has some dream about what their life may be like after they stop working in a full-time position. For some, the goal is to continue working on a part-time basis, others want to travel and some may simply want to be closer to family. A primary resolution should be to define your goals. Without specific goals, it is not possible to plan properly for the future. After all, maintaining your lifestyle if you travel frequently may be much more expensive than if you stay close to home.

Eliminate Debt

Another resolution should involve eliminating debt. Debt cannot usually be paid off quickly, so resolve to create a feasible debt reduction plan. When you pay debts off now, you can reduce the amount of income that is needed after you retire. For example, if you pay off your mortgage, car loans and credit card balances, you may be able to live on several thousand dollars less each month. By reducing the income that is required to live comfortably, you can feasibly retire with less money saved up.

Prepare a Budget for Retirement

In addition to making a plan to eliminate debt from your life over the course of the next few months or years, you also need to prepare a budget for your non-working years. This budget will include estimated income from all sources after you quit working. It will also include reasonable estimates for expenses. Your planning should focus on cost-of-living adjustments related to inflation. If you plan to relocate to a new town after you retire, your budget should be realistic for that specific area.

Update Insurance Coverage

Many people who are preparing for the future fail to take into account changing insurance needs after leaving the workforce. As you get closer to retiring, determine if you will continue to need life insurance. Analyze your need for different types of medical insurance and long-term care insurance. Each retiree is in a different position, so there is no catchall rule regarding how much or what types of insurance you need to have. Remember to update your budget with the premiums for these various insurance products. It is also wise to take into account deductibles that are associated with each policy when determining how much money you will need.

Some people are so discouraged by their late start at planning for this stage of life that they simply throw in the towel. However, you can see that your initial efforts in each of these areas can help you get on the right path. Even though you think that you may be far behind others who are your age, you may be in a better position than you appear to be at first glance. When you make these important resolutions and start acting on them quickly, you can move forward with confident footing as you approach your non-working years.


Adding Stepchildren to Your Estate Plan 

As we look ahead to a new year, we think of our goals and priorities. Some of these goals can involve getting an Estate Plan together. If you want to leave part of your estate to your stepchildren, you are required to specify that in your will. If a stepparent dies without a will, the children will not get any part of the estate even if the deceased stepparent wanted them to. Stepchildren do not have automatic inheritance rights possessed by adopted and biological children.

Legally speaking, stepchildren are not entitled to any inheritance unless they are specifically named on the will. This fact can be traced back to the colonial days when America was under the British common law. Due to the prevalence of negative stepparent stereotypes at the time, the centuries old legal system did not encourage strong legal relationships between stepchildren and stepparents.

Blended Families and Estate Planning

What are blended families? The term blended families refers to a family situation where either the husband or the wife has kids from a previous marriage. Blended families can take any of the following forms:

  • Families where both spouses have children from a previous marriage.
  • A family where both husband and wife have children from previous marriages in addition to their own biological kids as a couple.
  • Married couples where either the husband or the wife has kids from a previous marriage.

Blended families often have to deal with complex issues when it comes to estate planning. Problems can arise between the parents or the children and their spouses. Some of the challenges individuals from these families face include:

  • Scuffles over the division of responsibilities or authority.
  • The need to protect their estate from previous spouses.
  • Potential delaying of the stepchildren’s assets perhaps until the death of the parent’s spouse.
  • The possibility of stepchildren being disinherited by the living spouse.

Estate Planning Asset Protection Strategies to Protect Stepchildren

The number of blended families continues to rise as divorce rates in first marriages and remarriages rise. On average, about 50 percent of marriages and 60 percent of remarriages always end up in divorce in the US. With the help of an estate planning attorney, these families can come up with some form of asset protection to make sure that the surviving offspring remain a part of their estate.

Stepparent Will

The stepparent should make sure they have a will which specifically names the stepchild/children as a beneficiary. If a stepparent dies without a will, his/her estate will be inherited by the legal spouse or the closest living relative but not the stepchild.

Irrevocable Life Insurance Trust (ILIT)

ILITs allow stepparents to provide for their children through life insurance and use the remainder to provide for their spouse. The parent purchases a life insurance policy using the name of the child and pays the premium for the rest of his/her life. The child will receive the inheritance upon the death of the parent. An irrevocable life insurance trust is a good way to ensure that stepchildren are not disinherited.

Bloodline Trusts

A bloodline trust is intended to benefit your child and his/her offspring. The trust protects a child from creditors and former spouses by keeping the money in the family. The child is the trustee.





Could Your Retirement Be Delayed?

As we watch 2020 in the rearview mirror, we look ahead with the scars from the year. And while many people spend years dreaming about the day they will retire, for some, this vision may not become a reality as soon as they would want. If you have a sneaking suspicion that you may be a person who needs to delay retirement, then here’s what you need to know. Many factors contribute to a delayed retirement. Here are three of the most common ones.

1. You Have Too Little Money Saved

If you retire at age 67 and live until age 95, then you’ll need roughly 28 to 30 years’ worth of income saved up in order to retire. So, assuming this is true, just how much money would you need to have saved if you do live that long? A CNBC article says that a 30-year retirement requires at least a million dollars to fund it.

Most Americans do not have that much money in their retirement accounts, not by a long shot. The median savings amount among Baby Boomers is only $200,000. For those who do not have enough saved for retirement, the solution may be to work longer and to save more in the process.

In order to get ahead of this trend, it’s necessary to create a plan for the retirement years. It’s impossible to hit a target that you don’t have.

2. The Amount of Education You Have Plays a Role

Retirement is delayed among those who have advanced degrees. The reasons behind this are at least two-fold. For one thing, those who took the 10 or 12 years necessary to get advanced degrees stay in school longer and therefore, join the workforce later in life. This delays their ability to contribute to retirement savings accounts and to save the money necessary to retire.

The kind of work that people in this demographic do also contributes to their decision to stay in the workforce for a longer amount of time. The work isn’t physically demanding and often pays a higher salary. As a side benefit (and another related contributing factor), this demographic of workers usually work at jobs that they actually like. For them, retirement isn’t much of a motivation. They like what they do, so they stay in the workforce for a longer time. Thus, they choose to delay their own retirement. 

3. You Have Too Much Debt

According to Market Watch, having too much debt can take a big bite out of your retirement savings. The more debt you have to pay down, the less money you have to contribute to your retirement savings.

The sad reality is that most of us will be expected to contribute the majority of the funds in our 401(k) accounts but that isn’t the only challenge facing future retirees. The amount of social security that they can expect is going down and the age at which they can take from their social security accounts keeps getting pushed back. Due to all of these challenges, most people aged 50 or over only have about $10,000 saved.

One of the biggest contributors to debt during a person’s retirement years is the cost of healthcare. Healthcare costs eat up over a quarter of a million dollars on average during a person’s retirement years. Some of this debt comes from illnesses like diabetes or cancer. Some of the expense comes from having to pay for healthcare out of pocket. If those healthcare costs come before retirement, say in the case of a catastrophic illness, then retirement will be delayed for an indeterminate amount of time.

Final Words on Delayed Retirement

If you’re one of those lucky people who love what you do, then you may not care that your retirement gets delayed by 5, 10, 20, 30 years or more. However, if you count yourself among those who either has not saved enough or who has too much debt, then you need to take a serious look at your finances. The only way you will be able to retire is to take control of your finances and to create a plan for retirement. If you find yourself in that boat, then your best bet may be to talk to a financial planner about what you can do to turn the tide of your finances.


Your New Year’s Retirement Resolutions 

As we head into 2021, 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 to become a different person and 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 many of us do anything about making sure our family is taken care of when that time comes. It is almost a little selfish not to plan ahead for the inevitable. 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) is a great option for the person who is nearing their time to retire (or also for those who are far away from it). It is 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 have to 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 can help a person increase their odds of having a comfortable lifestyle because for most people, it helps them grow the funds that they put into it at a nice clip. The earlier a person starts their IRA investing, the larger their returns tend to be over time.

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. Just go ahead and add an extra ten to twenty percent to whatever number you believe would allow you to retire comfortably. Then, you will have a margin of error built into your figures.

Take Stock of the Healthcare Picture

The picture of healthcare 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 an odd hybrid type system that changes all the time. It is a good idea to take a look at the particular mechanics of the healthcare system as you reach the age when you could retire. Just having some idea of what is or not covered can help you get a better grasp on what moves you need to make to protect yourself in this area.


So, You’re Retiring In A Few Years 

After a stressful 2020, you’re thinking more-and-more about retirement.While the bulk of your retirement prep work and heavy lifting has been completed by the time you are a couple of years from retirement, there are still a few boxes you’ll want to check off before finally saying adios to the workforce. Let’s go through them. 

1. Social Security Decision 

You’ll need to decide when to collect Social Security benefits. The earliest age is 62. Unless you are retiring early and need the benefits to help cover expenses like health insurance, it’s advantageous to wait. At 62, your benefits would be reduced by 25% or more. You won’t collect 100% of your benefits until you’re 66 or 67, depending on what year you were born. When you wait to collect, keep in mind that benefits increase by 8 percent  per year up until you are age 70. 

2. Get Your Finances Simplified 

Do you have multiple brokerage accounts, savings accounts, checking accounts, 401(k)s, IRAs, and other retirement savings accounts? Perhaps, you have lost track of an account? 

First, simplifying and consolidating your various small financial accounts into a larger one will make it easier for your heirs to step into control if you had a medical emergency, needed long-term care, or passed away.  

Second, you can reduce paperwork, possibly save some cash, and better keep track of your income to expenses ratio by having everything neatly confined. For example, aggregation with a single provider can offer some economies of scale like cheaper expense ratios. 

Lastly, if you have lost track of an account, then you are missing a piece of your financial pie that could make a big change in how retirement unfolds.  Look at: and as good places to start tracking lost and unclaimed funds. 

3. Give Your Portfolio A Health Checkup 

Ideally, your portfolio at this point should be moderate-risk. It should be about half stocks and half bonds. If the stock market is causing you any worry, then consider a move to more steady stock funds like VEIPX or TWEIX, who have both held up well in previous downturns. 

A bucket system may help protect you against your biggest retiree risk:  forced sells during plunges. During plunges, the bucket system allows you to have enough cash and bonds that you won’t be forced into selling stocks to pay your debts. You will divide your nest egg into three buckets:  

• Bucket one – cash for living expenses not otherwise covered in the next few years. 

• Bucket two – short and intermediate term bonds to cover money you will need in the first ten years of retirement. 

• Bucket three – diversified stocks for money needed in the distant future.  

4. Make A Plan With HR 

Schedule a time to speak with your company’s human resources department about your retirement. Topics you will want to ask about include:  

• Are unused vacation days paid upon retirement? 

• Is receiving profit-sharing payouts, bonuses, 401(k) match, or any other income aspect impacted by your planned retirement date? 

• If retiring before Medicare-age, what retiree health benefits are offered? 

• If a 401(k) is left as-is versus rolling it over into an IRA, can distributions still be taken? How? Is there a fee? 

• If a pension is available, what are the options for payout? 

One note on lump-sum pensions to keep in mind is that extending your retirement may not increase your pension. Lump-sum pensions are calculated based on interest rates. The higher the interest rate, the lower the pension. Extending your retirement when interest rates are rising can actually result in your pension going down, not up. 

5. Study Medicare Closely 

Medicare is a difficult beast to navigate, and the sales pitches you get from supplement insurers only add to the confusion. So, you will want to start studying now, understanding how Medicare works, what coverage gaps exist for you, and what you need versus don’t need in supplements. Here are some highlights you’ll want to consider:  

• Upon turning 65, Social Security beneficiaries are automatically enrolled in Medicare parts A (hospital care) & B (doctor and outpatient visits.) If you are delaying your SS payment, then it’s up to you to enroll on your own.  

• If delaying your SS claim and you are still covered by your employer’s health plan, then you will likely find it beneficial to go ahead and sign up for part A at age 65 since there is usually not a premium.  

  • You may want to opt out of part B since it charges you a monthly premium for service. 
  • You may also want to opt out of part D, which covers prescriptions. The caveat here is if your employer’s offered insurance is as good as what Medicare offers. If it is not as good, and you select to opt out, then you will face penalties when you sign up in the future. 

• To ensure you are not left without coverage, plan to sign up for part B around six weeks prior to retirement. You have eight months after leaving your job to sign up for part B without penalty. 

• Decide if you want Medicare Advantage. This is basically a combination of parts B & D with a supplemental medigap plan to cover the copayments, deductibles, and other traditional healthcare costs that Medicare doesn’t include. These plans provide private insurer medical and drug coverage within a network, meaning you will need to carefully research your plan options and determine if your preferred health care providers are in the offered network of a plan. 

6. Should An Annuity Be On The Agenda? 

Without a traditional pension, an immediate annuity might be a good option for you. A common strategy is to calculate fixed monthly expenses – car note, mortgage, insurances, utilities – and buy an annuity that gives a congruent payment. Basically, you give an insurer a lump sum of money in exchange for them paying you a monthly amount each month for either the remainder of your life or a specified amount of years. If you choose a joint-and-survivor annuity, that payment continues through your spouse’s life should he/she outlive you. 

Another strategy is a deferred income annuity. Ideally, these are bought at least 10 to 15 years out from retirement since they take 10 years to mature. However, if you’re taking an early retirement or expect your expenses to be greater in the next decade, a deferred annuity may be a good option. They are  much less costly than an immediate annuity, but they also have a major risk versus reward. Your heirs get nothing if you pass away before payments begin. The fix is to opt for return-of-premium benefits, but this reduces your payout quite a bit.  

In closing, the finish line is just around the corner, but now isn’t the time to slack off  just yet. You’ll want to make sure these important boxes are checked so that you can retire with the peace and confidence you have worked all these years to afford. 



Reasons For Inflation And Why You Should Plan For It In Retirement

Inflation is a reality in all economies, and generally occurs for one of two reasons, know as “demand-push” or “cost-pull.” Businesses and companies that want to retain their employees have to insulate them to some degree against the rising and falling of the value of a dollar. This means that few people will generally feel the full effects of the rising costs of living throughout the course of their working lifetime. The people that do generally feel and understand its full effect are elderly or people living on a fixed financial base of some kind. Here is a brief overview of the two types of inflation and why you should plan for it in retirement.

1. Cost-Push

When the cost of providing goods or services goes up, businesses pass these increases on to the consumer. One example of this is the minimum wage. When businesses have to pay their employees $8 an hour, they charge a corresponding amount for their goods or services to cover the cost of wages. If the minimum wage rises to $10, however, then they raise the price of their goods and services to adjust for the increase they now have to pay in wages. This creates an increase almost across the board in goods and services. Thus a person making a $10 minimum wage is no better off than when they were making $8 an hour, but they are also not worse off, since they did at least receive an increase in pay to adjust for the increase in the cost of goods and services. The people this affects negatively, however, are people living on a fixed income because their income generally does not adjust accordingly to the rise in prices.

2. Demand – Pull

When the demand for something rises, so does the cost. When there is a shortage of food, gas, water, housing or any other good or service, it also creates an increase in cost. Whenever there is a surplus of a good or service, it drives prices down. This is why retirees living in heavily populated areas or areas that grow in population often have to move to a less populous area where there is less demand. Businesses in areas where shortages create higher prices generally have to adjust the salaries of their employees accordingly in order to keep them, so those still in the work force are not generally as affected by this type of inflation as those who are unemployed or retired.

Regardless of when it occurs or how long it lasts, the expanding and contracting of the value of the dollar is an important thing for those planning for retirement to consider. It’s not a question of if it will happen, but when and for how long. While you may be able to live perfectly comfortably on $1,500 a month now, that doesn’t mean you will still be able to do so in 10 years -or at least not while living in the area where you are right now.

The good news is that currency values rise and fall around the globe, so there are almost always inexpensive places to live. The problem, of course, is how settled where you are now and how badly you want to stay there. If you like where you live and plan on staying there upon retiring, then it’s important to develop a good, solid financial plan for dealing with the inflating and deflating of the dollar over the course of the remainder of your life after retirement. It is certainly possible to live on a fixed financial base, but it also takes careful planning and a great deal of insight into the realities of the world of currency and finance.


The Good and Bad of Retiring Early 

This year has forced some to think about retiring early.  When it comes to retiring early, some of the benefits are obvious: you get to live your life without the constraints of work, and you are able to pursue your own interests. But there are other good reasons for retiring early, and there are some reasons why retiring early is not the greatest idea.

Your Dedication is Gone

One of the good reasons to retire early is that you are simply not dedicated to working anymore. When you are no longer emotionally interested in working, your performance deteriorates and your company suffers. 

Working Took its Toll

In some professions, such as construction and law enforcement, the physical and emotional demands of the job can become too much over time. After a few years in a high risk profession, your body and mind have simply had enough and it is time to go home and rest.

Your Finances Become More Flexible

Most people do not realize how expensive it is to work until they are no longer working. When you work any job, you incur expenses such as wear and tear on your car, transportation expenses such as gas or bus passes, work clothing costs, daycare and miscellaneous medical costs for work-related injuries. If you have planned your finances to allow yourself to retire early, then you will find that your money goes much further when you are not working.

Your Health Could Suffer

For some people, retiring early means abandoning the daily physical activity working required and giving up a big piece of their identity. Retiring early can cause physical and mental problems that could become very serious over time.

You Lose Your Social Circle

After years of working, you tend to take for granted the notion that you will see most of your friends at work five days out of the week. Even people who think that the people they work with are only acquaintances suddenly find that the loss of the social circle they developed at work is devastating.

You Didn’t Plan Well

When you retire before the age of 65, you run the risk of losing out on health insurance. Medicare automatically kicks in for every American when they turn 65, but what would you do until that age? Did you plan your retirement finances right, or will you run out of money? Many people forget to take inflation into account when they plan their retirement, and that makes retiring early financially dangerous.

There are two sides to every story, and that includes the story that goes with retiring early. The idea of walking away from work before the age of 65 can sound appealing, but there are plenty of variables to consider before you make that decision. If you do want to retire early, then talk about it with your family and ask your financial adviser if you have structured your savings properly to be able to live without a paycheck for the rest of your life.



Avoid Overspending During the Holidays 

It is not surprising that the holiday season is one of the most expensive for individuals. Giftgiving, decorating and holiday treats can tap into the budget if a few general rules are not followed. Here are five tips to avoid overspending this holiday season.

Set a Strict Budget

To alleviate the stress of spending over the holiday season, a strict budget should be set even before the holiday season begins. If a person is giving gifts to a few individuals, their names can be written down and a budget planned for each individual. A decision should be made on how much to spend and how many gifts will be given. A budget should also incorporate holiday spending on food and decorations. It is easy to get into the festive mood during the holidays but that is when overspending creeps up on a person and they spend more money than they should.

Avoiding Retail Tricks

When a person decides to shop for items, it is easy to get tricked by retail stores. Even when a budget is firmly in place, many people tend to overspend. While it all comes down to discipline, retail stores are good at enticing money out of people’s wallets. When shopping smart, a person should watch for decoy pricing, loyalty cards and loss leaders. Often, a retail store will entice a buyer with a low-priced item. Unfortunately, that item will be sold out and require a person to spend even more money. However, there is a good way to save money when shopping for gifts. Gift cards are often discounted at chain stores such as Office Depot, Best Buy or Costco. Using these as gifts can help save a few extra dollars.

Track Every Penny

One of the secrets to keeping a budget is to keep track of spending every day. While this is true throughout the year, it is especially important when a holiday season rolls around. Overspending during the holidays can quickly occur when a person is in a joyous mood or feels like they can splurge. Free online software that helps with budgeting can be used to track expenses or a simple pen and paper pad.

Spending On Yourself

It is easy overspend on yourself when out shopping for others—a person sees something that they like and treat themselves. In fact, statistics indicate that about 60 percent of individuals are giving themselves gifts during the holiday season. This can be limited by following an overall budget and writing down specific items to be bought when shopping online or in a brick-and-mortar store. Another caveat to watch out for is the purchase of gift cards. Over 70 percent of people shopping for gift cards will also purchase one item or more for themselves. Discipline must be followed so that a person does not overspend.

Set Limits on Spending

If a person’s budget is tight, they shouldn’t feel guilty about purchasing less than in previous years, or not at all. Living comfortably without stress is much more important than handing out material goods. If a person’s budget is tighter than other years, they should decide early on how many gifts they are going to give. Setting limits also includes spending money on holiday decorations or food. It can all be budgeted.



2020 Year-End Checklist

It is officially the fourth quarter, and while many cannot wait until the “unprecedented times” of 2020 are over, there is still a bit of housekeeping you will likely want to do before ringing in the New Year. Check these items off your financial year-end checklist before year-end to help keep you financially on track for 2021:

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