By Carl Trevison and Stephen Bearce To determine how much you will need to fund your retirement, it’s helpful to estimate what your budget will look like. These four questions could help you identify your retirement lifestyle and plan for the related costs. What will I be doing? Do I plan to continue working past age 65 or after I reach my full retirement age? Full time or part time? Are there hobbies I want to pursue that will either cost money or make money? Is there volunteer work that may also have costs associated? Do I plan to travel? Where? Are there things I enjoy that have related costs? Where will I be living? Will I stay in my current home or downsize to something smaller or a rental property? Will I move to a retirement community or assisted living facility? Will I sell my home and replace it with an RV or other alternative living option? What situations could impact my expenditures? What health care coverage do I need for my health conditions? Do I have an emergency fund for unexpected situations such as a health care crisis or property loss due to a natural disaster? What if I stop working sooner than expected? What happens if I experience a significant income loss? What barriers are keeping me from investing? I have nothing extra to invest. I have education loans or other debt. I don’t know how to start an investment plan. I have time to start saving later. Next steps Prepare rather than panic. Create an outline from your answers to these questions. It should give you the framework to calculate the income you may need to support your retirement lifestyle. Decide to adjust your spending patterns today. Choose something you really don’t need and redirect that…
By Carl Trevison and Stephen Bearce Scammers are relentless when it comes to finding new ways to take advantage of people. They may claim to be contacting you on behalf of your bank, a government agency, a shipping/delivery company or any person or business with which you have a relationship. Their methods and messages can be very convincing. They employ a variety of scams (auto warranty renewal, problems with a Social Security payment, debts owed to the IRS, health insurance renewal, or a relative stranded and needing money for transportation) and often present a sense of urgency to attempt to gain information and/or money from their targets. The following tips could help you avoid becoming a victim of fraud: Verify the source Be certain that the person calling or contacting you is who they claim to be. Scammers can make calls and texts look s if they are coming from your bank or an actual business. Even a text or email that seems to have been sent by a friend may be coming from a phone number or account that has been hacked. Contact the person, bank, or business directly to confirm the legitimacy of the communication you received. If you did not initiate the communication using what you know is a legitimate telephone number, email address, or website account location, do not give out any personal information including your address, birth date, Social Security or account numbers, or PINs. Be vigilant On phone calls you receive: Don’t answer a call from an unfamiliar number. If you do answer a call from an unknown number, if prompted, do not enter a response to stop receiving calls. Hang up. If you do answer a call, ask questions before you answer any questions. Some scammers immediately ask “Can you hear me?” If…
By Carl Trevison and Stephen Bearce As a parent or grandparent, you likely want to teach children sound money habits and help them become financially successful adults. There are a variety of ways to instill good financial habits. The following two approaches allow you to gift assets to children while providing them with hands-on investment experience that may prove useful in the future. Custodial accounts Custodial accounts can be opened for your children before they turn 18. They can be a useful vehicle to teach them about the principles of money and investing. With these accounts, custodians control how investments are managed. Sharing account statements and the way you make decisions on your children’s behalf can be an opportunity to teach smart investment principles. There are a couple of considerations you will want to think about as you determine whether such an approach is right for you and your family. First, when funding these accounts, keep in mind that control of these accounts transfers to the child when the custodianship ends. This generally happens when the child reaches age 18, 19 or 21, depending on state law. You may not want your child to have control of more financial assets than they can handle at that age. It is also important to know that special tax rules, the “kiddie tax” rules, may also apply. The income or capital gains generated in these accounts could be taxed at trust income tax rates for children under age 19 (age 24 if a full-time student). This means your young child may have to file an income tax return of their own, and the tax bill could be higher than if you held the assets in your own name. Your tax advisor can help you determine how these rules would apply to your situation….
By Carl Trevison and Stephen Bearce Before you make the decision to move on from your job, review this checklist of important financial considerations. Some involve making sure your personal finances are in order, while others can help you explore all the implications of leaving your current job. Review your current retirement benefits. Check the schedule for your employer’s 401(k) and profit-sharing contributions to see how long you have to work to claim any matched funds. If you’re close to being fully vested (meaning you’re entitled not just to the dollars you contributed but also to the dollars your employer did), it may be worth sticking it out a little longer. Keep in mind that some plans require that you be employed on the last day of the plan year to get employer contributions for that year, even once you are vested. You may want to wait until after the plan year ends before you terminate employment so you don’t lose those contributions. Make a plan for your employer retirement account. If you have an employer-sponsored retirement plan, such as a 401(k), 403(b), or governmental 457(b), understand your options for your account. You may decide to take your money out and pay the associated taxes. And if you are younger than age 59½, there may be additional tax penalties for early withdrawal. Another option is to roll over your account into your retirement account at your new employer (if they allow it) or into an individual retirement account (IRA) that you set up. Some company plans allow you to keep your money in their plan; however, you will continue to be subject to the rules of that plan regarding investment choices, distribution options, and loan availability. If you have any concerns about the future viability of the company you are…
By Carl Trevison and Stephen Bearce When financial markets fluctuate, perhaps in reaction to world events, inflation, or a change in interest rates, even the calmest investors can start to question their financial strategies. But volatile markets can present opportunities to review and reaffirm investment strategies, says Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute. “Financial markets are frequently volatile — that’s their nature,” she says. “Even so, during periods of uncertainty, investors may start to question their investment decisions. Having a plan in place can provide the guard rails to help steer through and beyond the volatility.” In addition to reaffirming and focusing on your plan, here are some strategies you can use to help weather economically turbulent times. Match your investments to your time horizon The simplest way to feel more comfortable about your investments is to align them with your financial calendar, no matter what happens in the financial world this month or year. For example, do you need some of your money fairly soon or want it close at hand in case of an emergency? If so, McMillion says you should consider investments such as cash holdings and short-term bonds that shouldn’t lose much, if any, value over the short term. On the other hand, if you won’t need some of your investment money until you retire multiple years in the future, equities or longer-term bonds are worth a closer look. Those investments carry more risks but also offer potentially better returns. Know what to expect from your investments Some investors lose confidence because they don’t fully understand how their investments work. In that case, McMillion says, some knowledge of typical asset behavior is a good thing. Consider reading up on different types of investments and asking questions of your financial…
By Carl Trevison and Stephen Bearce Your retirement could last 20 years or more. Now could be the time to ask yourself, “What do I want to do when I retire?” It’s an important question to ask sooner rather than later, as the answer could impact your retirement savings plans, so that you can align the retirement you want with the retirement you can afford. The first two steps in that process are: (1) decide what you want to do, and then (2) determine the potential costs. The answers to these questions could help you take the first step toward creating the retirement lifestyle you hope to achieve. What will I be doing during my retirement days? Do I plan to continue working past age 65 or after I reach my full retirement age? Full time or part time? Are there hobbies I want to pursue that will either cost money or make money? Is there volunteer work that may also have costs associated? Do I plan to travel? Are there things I enjoy doing that have related costs? What are the activities that make up my ideal retirement day? Where will I be living in my retirement years? Will I stay in my current home or downsize to a smaller home or a rental property? Will I move to a retirement community or assisted living facility? Will I sell my home and replace it with an RV or other alternative living option? What situations might occur that could impact my retirement expenditures? What health care coverage do I need for my specific health conditions? Do I have an emergency fund for unexpected situations such as a health care crisis or loss of property due to a natural disaster? What if I stop working sooner than expected? What happens if I experience a significant loss…
By Carl Trevison and Stephen Bearce A heath care directive is a legal document that lets you express your health care preferences and, if you wish, designate authority to someone to make care decisions for you if you cannot make them yourself. Some may think this is needed only near the end of life, but that’s not its only use. There other times when it can prove useful: Any time you become severely ill or incapacitated—even if for just a short time period If you are a young adult who is over 18 and heading to college Health care directives generally do three things: One part, often referred to as a living will, lets you express your preferences about end-of-life care if you become unable to make decisions yourself. A power of attorney (POA) for health care (also known as a durable POA for health care or health care proxy) lets you designate a trusted person to make decisions for you when you are unable to communicate or make them yourself. A privacy authorization under the Health Insurance Portability and Accountability Act (HIPAA) makes it possible for health care providers to share private medical information with the agent you designate. Short-term incapacitation While the coronavirus is top-of-mind, other serious illnesses or limiting medical conditions could create incapacitation. Examples include surgery that will require a longer-than-usual recovery period, cancer treatments, side effects from specific medications, and mental health issues. During such times, it may give you peace of mind to have someone you trust who will be able to communicate with medical professionals, share that information with you later, and even make decisions for you if necessary. Potential benefits include: Helping to ensure that doctors communicate important medical information with your agent, who can keep other family members or caregivers informed….
By Carl Trevison and Stephen Bearce Paying down debt is often difficult, especially in a challenging economic environment. You may be wondering which to tackle first — pay down your debt or invest for the future. Balance is best A balanced approach to wealth management serves both today’s needs and tomorrow’s goals. For some that may mean paying off some debt today while simultaneously investing for the future. Your own needs and circumstances will be unique. The following guidelines can help you evaluate alternatives and find an approach that fits your situation and goals. Don’t forget your emergency fund In addition to paying down debt and settling on an investment strategy, make it a priority to set up an emergency reserve. Traditional “rules of thumb” suggest setting aside three to six months or more of living expenses in traditional savings or very short-term, highly liquid, low-volatility investments. While ideal, that goal may not be realistic for everyone. Start by building up a reserve of a month’s expenses and make it a goal to increase your emergency fund over time as resources permit. Your future first When making decisions about debt and investing, be a long-term thinker. Consider “what position do I want to be in 10 or 20 years from now?” Then evaluate what actions today should be most effective in helping you achieve your long-term financial goals. For example, if you have high-interest debt that is compounding, this could eventually become a serious impediment to reaching your long-term goals. In contrast, you might not be in a hurry to retire low-interest debt if the potential return on long-term investing would be greater. When making decisions about debt reduction vs. investing, keep in mind that the need to eventually pay off principal is certain but investment returns are not. Investment…
By Carl Trevison and Stephen Bearce For most investors, the key to success is simple: Buy low and sell high. But how often have you seen this scenario played out? (You may have done it yourself.) When the market is up, an investor feels good and buys stocks. When the market is down, that same investor gets scared and sells. Although reacting like this may feel instinctively right at the time, buying high and selling low is unlikely to result in a profit. Why do investors do this? The reason may have a lot to do with us making investment choices the same way we do many important decisions: using both our heads and our hearts (i.e., logic and emotion). When there’s market volatility—including both market highs and market lows—our emotions tend to take over and we may make illogical choices going against our best interests. Rather than falling victim to the potential perils of emotional investing, you may want to be completely logical: get into the market when it’s down and out when it’s up. This is known as “market timing.” While this approach sounds rational, the problem is it’s extremely difficult, even for experienced investors, to do consistently. There’s an old saying: “No one rings a bell” when the market reaches the top of a peak or the bottom of a trough. Translated, that means anyone attempting to time the market finds it difficult to know exactly when to make their move. For example, if you think the market has reached a peak and get out and then share prices keep rising, you’ll miss out on the additional profits you could have made by waiting. And after you get out, how do you know when to get back in? If you act too quickly, you’ll forego better bargains…
By Carl Trevison and Stephen Bearce / Photo Credit: Karolina Grabowska Understanding the current health of your finances starts with having a solid plan in place, but it depends on following the plan so you stay on track and continue working toward your financial goals. That’s where a financial wellness check can be useful. It can help you make sure you’re hitting the right milestones in your plan — and also help you check that your plan is working for you. Where to start? Here, John Knowles, lead strategy consultant of Retirement Solutions at Wells Fargo Advisors, shares six questions that can set up your financial wellness check. Are you adding to your investment accounts on a regular schedule? Saving often and early is rule No. 1 because of the power of compounding. When you leave any investment gains in your account rather than taking them out, those gains have the opportunity to start earning returns as well. Taking full advantage of your employer’s retirement plan — typically a 401(k) — is a good place to start. That includes contributing enough to qualify for any potential company match, something Knowles stressed to his daughter when she entered the workforce. “If the company is going to match you up to 5%, put 5% in at least,” he says. Those nearing retirement may want to explore “catch up” contributions that allow you to add more to certain retirement accounts. Are your estate planning documents up to date? Estate planning documents should include a will, health care power of attorney (POA), durable POA for financial matters, and a list of your accounts and their respective contacts and account access information. You might also consider including a net worth statement, life insurance policies, property deeds, and a list of assets for your children, such…
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