The definition of retirement in the Merriam-Webster dictionary is as follows, “withdrawal from one’s position or occupation or from active working life.” I find this definition rather vague. If I was to define retirement, I would describe it as having the option to not work full-time if one chooses. As a CFP®professional, I look at retirement from a financial perspective, yet have expanded my view to include evaluating lifestyle. I see too many people retire who don’t know what to do with themselves, or find their health declining, or worry that their money won’t last.
In what can only be described as my personal mid-life crisis, we are in the middle of a whole home renovation that has us displaced for up to six months and wondering what we were thinking. Nevertheless, the house has been through the demo phase and is starting in on the rebuild phase as I write this. Our home is not getting any bigger, but she is getting a much-needed update and freshening. For another perspective on the home renovation topic, see Jonathan Stolz’s blog post.
I always find it instructive when we ask clients a few questions to assess risk tolerance, something that is not an easy task given the emotions attached to investment dollars. One question is how much of a loss you would be willing to accept in a one-year period. A lot of people pick 0-5%, but some are more realistic and pick 15-20%. Historically, you would need to have an equity investment allocation of 50% or lower to avoid larger one-year losses.
Recently, we worked with a client with an aging mother living in the United States but who has health benefits in a different country. One of the client’s concerns was having to cover a potential health bill for his mother because the family would prefer she seek care in the United States rather than go back to her country to use her government issued health care.
We’re in the midst of an election year that, according to polling, very few Americans are excited about. Those seeking relief from political debate will need to wait to the end of 2025 and perhaps beyond thanks to the expected political battle over the expiration of the 2017 Tax Cut and Jobs Act (TCJA)1, which sunsets on December 31, 2025.
In this installment of financial planning basics articles, we discuss an aspect of setting up and managing your 401k account that a lot of people ignore or don’t put a lot of thought into – beneficiary designations.
It can be nerve-racking investing at all-time highs in the stock market. Should it be? The data says no.
I personally don’t believe in New Year resolutions – I think you can start doing something new, different, or better at any time that is right for you! Having said that, the beginning of the year is a great time to get a jump on managing your taxes. Taking advantage of new IRS rules and limit adjustments for 2024 starts now.
When a client is moving for one reason or another, a common question we get is whether they should rent or buy their next place. Earlier in my career, I would have started immediately analyzing the options to get to the financial answer, but now, I usually start talking through the non-financial factors to consider. Will you need to move further from work/family/friends to buy? Will your new neighborhood be equally walkable, and if not, is that important to you? How long do you plan to stay in the area?
Managing your debt may seem like a daunting task but the benefits of careful planning are invaluable. Debt is a major concern for many Americans and for good reason. If left unmanaged, many growing liabilities can eat up your current income, reduce your current and future savings, and even prevent you from buying a car or house. If you could create a plan to pay down your debt and untangle yourself from the institutions to which you are beholden, wouldn’t you? It is not always easy to “find” more cash to throw at liabilities.
A core tenant in financial planning is to focus on the controllable. For most of our clients, how much they contribute to their savings while working, and how much they plan to spend in retirement, have the greatest impact on the success of the plan. Investment returns matter as well, but to a much smaller degree than most people realize, and the returns are unpredictable in nature. This is of course in stark contrast to what is most often written about in financial publications – which is the next “hot” investment idea.
As the leaves begin to change and our thoughts shift towards the year-end holidays, it is also time to start thinking about upcoming changes in 2024 and some strategies to consider before the clock strikes midnight on December 31st.
Retirement plan contributions: 50+ catch-up retirement contributions