At some point during their lifetime, most people wonder whether they’ve done enough – if they’ve made a positive impact, says Jeff Bucher, a financial advisor who helps working-class Americans plan their golden years.
“For most people, I think that concern increases as they get closer to retirement – they wonder what their earning years have bought for themselves and the people they care about, which may extend to their greater community,” says Bucher, who, through his firm, Citizen Advisory Group, (www.citizenadvisory.com), has contributed to the local Boys & Girls Club, the Make-A-Wish Foundation and to development of an Olympic training center for wrestling at Ohio State University, his alma mater, where he earned a wrestling scholarship.
“You don’t have to be super-wealthy to make a significant contribution to others. The smarter you are with the wealth you do have, however, the more of an impact you’ll be able to have.”
If you want to make a difference with your money, you’re better off having your financial affairs in order. Bucher offers a few suggestions.
- Now is the time to design a lifetime income plan. Simply attaining a minimum figure in savings probably won’t work; such figures do not account for family emergencies, inflation, etc. Social Security does not cover what it used to, and its future is uncertain at best. You need to establish a laddered, inflation-adjusted income using safe and dependable accounts that will provide a check every month. This should be informed by a plan that maps out your lifetime income needs to ensure that you do not outlive your money. For example, if you need $3,000 a month now, at a 4 percent inflation rate you will need $3,649.96 in five years. In 10 years you will need almost $4,500 per month.
- Consider holding off on retirement. Many people are understandably eager to retire as early as possible; others fear Social Security benefits will vanish, so they want to get what they can as quickly as possible – at age 62. But if you’re counting on those benefits as part of your income, you should wait until you’re eligible for the full amount. That’s age 66 if you were born from 1943 to 1954, and age 67 if you were born in 1960 and later. If you’re in the older group, retiring at 62 cuts your benefits by a quarter; for the younger group it’s nearly a third. “Chances are, you’ll be better off mentally and physically if you wait anyway,” Bucher says. “Many studies show that people live longer and are more vital the longer they remain employed.”
- Know when to transfer investments out of tax-deferred plans. If you’re working for a company that provides a match for 401k contributions, by all means, contribute up to the maximum match. “That’s free money – you’d be crazy not to take advantage,” Bucher says. But anything beyond that should be invested in something that’s more tax efficient: Roth IRA, municipal bonds, life insurance or real estate. No one expects taxes will go down – they’ll be going up. Uncle Sam already has a lien on your IRA or 401(k); don’t let his lien, the taxes you’ll owe, continue to grow. Go ahead and pay now. Your future retired self will be glad you did.
About Jeff Bucher
Jeff Bucher is president of Citizen Advisory Group (www.citizenadvisory.com), and is an Investment Advisor Representative of AlphaStar Capital Management, an SEC Registered Investment Advisor. He has a life and health insurance license with the state of Ohio. His membership affiliations include the exclusive Ed Slott’s Master Elite IRA Advisor Group™, National Association of Insurance and Financial Advisors (NAIFA), the National Association of Fixed Annuities (NAFA) and the Forum 400. He has earned Top of the Table honors through the Million Dollar Round Table (MDRT). Bucher is a former standout wrestler at The Ohio State University, where he earned an athletic scholarship and honed his leadership skills en route to earning four varsity letters.
Imagine a bright, golden vista filled with soothing, warm sunshine – perhaps it is California’s Highway 29. You’re driving this scenic route after crossing the Golden Gate Bridge on a Tuesday during working hours. That’s right, you’re going to Napa.
Of course, this is precisely the kind of thing you’re getting used to doing on Tuesdays – not only because you’re becoming a wine connoisseur, but also because Tuesdays no longer belong to hours under the glare of fluorescent lights in front of your work computer. Aah, you’re retired.
“That’s the dream, and as a native San Franciscan I know it well. I myself have traveled the byways of food and wine in the Bay Area. More Americans could be living their dream during retirement, wherever they go to play,” says Stephen F. Lovell, a nationally recognized retirement expert who emphasizes a comprehensive approach for well-being during one’s golden years.
“Many baby boomers will retire in the next few years, and for many of them that dream has a nightmarish tinge—they’re worried they’ll run out of money.”
Lovell, president of Lovell Wealth Legacy, (www.lovellwealthlegacy.com), says 2015 can and should be the start of that good life. He offers three simple ways to bring your dream into reality.
- Revise your budget at the year’s beginning. Ask yourself: How do I spend my money? Many of us believe we have a reasonable idea of where we put our money, but unless you account for your spending, you may miss out by not putting away enough for your happy retirement.
A household’s discretionary spending on nonessential goods and services like a second smart phone case or the premier movie channel is could top 30 percent. And that is often twice what you intended—but you don’t see it until you budget. “Budgeting puts you in the driver’s seat,” Lovell says. “From there you can control where you spend. You’re buying on purpose, and sometimes you get a nice surprise. That alluring vacation is now within reach.”
- Be proactive about your financial interests before visiting a professional. Knowing which financial products may work best for your personal needs and how to protect your hard-earned money from unnecessary taxation is not what most laypeople excel at. That job is best handled by working with a professional. But, as with your health, you reap the benefits of being aware of your needs and of initiating the process of looking after yourself.
“Remember, 40 percent of retirees underestimate their life expectancy, according to an Ernst & Young study,” Lovell says, “so if you don’t want to run out of money, create your financial plan to cover this extended retirement period. Then, you odds for a comfortable retirement are improved.”
- Consider alternatives to stocks, bonds and cash. Many new investment types have appeared to solve planning and retirement issues. Yet most investors limit their choices by relying exclusively on stocks, bonds and cash. From 2000 to 2013, the stock market, for all its ups and downs, wound up at roughly the same place, around 1527. At a 2 to 3 percent investment cost per year, many investors, for all their efforts, lost money! “I educate my clients by bringing to their attention the wide universe of investment types. Results are that more suitable solutions are uncovered and then applied for the client’s benefit.”
About Stephen F. Lovell, MBA, ChFC®, CLU®, CFP®, CFS, BCM, CRPC®, AEP®, RHU®, AIF®
Stephen F. Lovell is a thoroughly credentialed, nationally recognized financial professional. Since 1990, he has been gathering various licenses — in insurance, securities, real estate, commodities and as a registered principle — to offer his clients a thoroughly comprehensive perspective on their wealth. He is president of Lovell Wealth Legacy, (www.lovellwealthlegacy.com), and a branch manager at LPL Financial. Lovell has earned several professional honors and memberships. Since walking with his mother as a child for the March of Dimes in San Francisco, he has been active in local and national charities. More recently, Lovell has taken to the airwaves as a radio host at KDOW, where he hosts a weekly show about pursuing financial success and, of course, enjoying the fruits of that financial success.
Nearly half of all American women, no matter their background, share a fear that may seem odd given the wealth of some: They are afraid of losing their financial independence, otherwise known as “Bag Lady Syndrome,” according to a 2013 study.
Of those who harbor BLS anxiety, 60 percent were the primary breadwinners for their households, according to the Allianz poll of 2,200 women ages 25 to 75.
“Financially, women’s needs are different from those of men, and the financial industry isn’t meeting them,” says Lance Drucker, CEO and president of the New York City-based Drucker Wealth Management, (www.DruckerWealth.com).
“Women typically live longer than men, so they need more retirement savings. Further compounding the problem is the fact that, in many cases, women are paid less for the same job as men. Finally, many have fewer earning years because they dropped out of the labor force for a time to have and raise their children.”
Drucker, author of “How to Avoid Bag Lady Syndrome (BLS): A Strong Woman’s Guide to Financial Peace of Mind,” offers seven action steps that women can do to address their financial insecurity:
• Identify your pain as well as your goals. Answer the following questions: What keeps me up at night? What worries me most about my money & my future? What do I want to do with the rest of my life? When can I afford to retire? Can I afford to stay retired? Can I travel, change careers, or go back to school?
• Create a budget that includes fixed and variable monthly costs as well as one-time expenses. Based on your budget, start building a cash cushion that will cover six to nine months of fixed expenses. The ultimate goal of retirement planning is to create an income stream that is sustainable and will support your retirement needs.
• Create a balance sheet of savings and investments. This includes your savings account, stocks, bonds, mutual funds, investment real estate, cash value life insurance, annuities, retirement accounts, individual retirement accounts, 401 (k) plans and other assets. Then further break it down by pre-tax and post tax-accounts.
• Review insurance coverage and needs. Are you supporting anyone else? Is there a need for Life Insurance? Who will take care of you if you get sick? Do you have Long Term Care Insurance? One mother can raise 10 kids, but 10 kids can’t take care of one mother… Younger and healthier women may be tempted to overlook the importance of this step, but failure to anticipate potential health issues can be very expensive.
• Address your estate-planning needs. Do you have a will, a durable power of attorney or a health care proxy? Have you updated your beneficiary designations on your retirement accounts? Does it make sense to put your assets in a trust to avoid probate? Answers for these questions are important.
• Develop your investment strategy. Is there a purpose to your current investment approach, or are you just accumulating funds? We recommend something we call a “4 Bucket Approach to Purposeful Investing” that has been designed with the help of a Wharton Business School professor.
• Hire a Coach. Studies have shown that those investors that utilize a high quality financial advisor feel more confident, optimistic, and significantly more likely to stick to their plan versus do-it-yourself investors.
About Lance Drucker ChFC, CLU
Lance Drucker is CEO and president of NYC-based Drucker Wealth Management, a wealth management firm specializing in financial issues that affect women. He’s the author of “How to Avoid Bag Lady Syndrome (BLS): A Strong Woman’s Guide to Financial Peace of Mind” and offers resources at www.DruckerWealth.com to empower women to make smart financial decisions. He graduated from SUNY Binghamton with degrees in Accounting & Finance, and soon after joined the firm Drucker Wealth Management, founded by his father in 1959. He earned his Chartered Financial Consultant (ChFC®) designation in 1990 and his Chartered Life Underwriter (CLU®) degree in 1993, and in 2012, he received a Certificate in Retirement Income Planning from the Wharton School of Business. He is a multiyear winner of the 5 Star Wealth Manager Award, as well as a recipient of the Women’s Choice Award for Financial Advisors. As a proud sponsor of the Wounded Warrior Project, Drucker organizes the Polar Bear Plunge fundraiser for the WWP every January & has participated in the Tough Mudder challenge, and Spartan Race, which has helped to fund more than $2 million dollars for wounded warriors.
Retirees flock to Florida and Arizona for year-round sunshine and golf, but all things considered, they’re not the best states for happy golden years, according to a new survey.
Along with average number of sunny days, factor in cost of living, residents’ sense of well-being, quality of health-care, crime and, yes, humidity, and the best destination is (surprise!) South Dakota, according to a 2014 Bankrate report.
“As this report correctly suggests, pre-retirees need to consider a lot more than snow days and tradition,” says Rodger Friedman, founding partner and wealth manager at Steward Partners Global Advisory and author of “Forging Bonds of Steel,” (www.forgingbondsofsteel.com), a guide to developing an excellent working relationship with your financial advisor.
“Different states have different tax laws and other regulations that can have a major impact on your retirement funds. You need to be aware of these as you plan for where you want to live and how you want to live.”
Whether you’re considering one of the other top four “best states to retire” – Colorado, Utah, North Dakota and Wyoming, in that order – here are three tips for planning ahead:
New state – new income tax rules. Get to know them!
- Familiarize yourself with the tax laws of the state you’re considering for your new home. Two of the top five on Bankrate’s list – South Dakota and Wyoming — have no state income tax, along with five others: Nevada (No. 18 on the list), Texas (19), Washington (22), Florida (39), and Alaska (48.).
- Also, an itemized deduction in one state may not be an itemized deduction in another. If you use the long form (1040) to file federal income taxes, hire a reputable, experienced CPA for guidance.
- Look into how your new state taxes retirement income. States differ on taxing interest income from tax-free municipal bonds.
- Some states give tax credits for pensions; treat public and private pensions differently; or offer federal, military or blanket exclusions.
If you’re married, are you moving to a community property state?
There are nine community property states – those that divide all martially-acquired assets and debt 50:50 in the event of divorce. (Exceptions include an inheritance or gift received by one spouse and maintained separately in that spouse’s name.) Community property states are Idaho, New Mexico, Texas, California, Arizona, Wisconsin, Nevada, Louisiana, and Washington. Speaking with an estate planning attorney regarding how this issue may affect you may be money very well spent.
Have a lawyer review your estate planning documents.
Your existing estate planning documents should be reviewed by a lawyer in your new state of residence because statutes differ on the types of documents required and the powers bestowed upon each. For example, states are all over the map regarding the validity of a power of attorney document and the powers that may or may not be conveyed.
“During their careers, their ‘acquiring wealth years,’ many people live in places that have lots of jobs – and the higher cost of living that goes along with that,” Friedman says. “In retirement, many of them want to move to a state where they can enjoy the same or an even better lifestyle with less money.
For that, it’s essential to consider not only the cost of living but the state laws that affect your accumulated wealth and income.”
About Rodger Alan Friedman
Rodger Alan Friedman, author of “Forging Bonds of Steel,” (www.forgingbondsofsteel.com), advises affluent retirees and near-retirees in structuring their planning and investments for the next phase of their lives. He is a managing director, founding partner and wealth manager at Steward Partners Global Advisory in the Washington, D.C., metropolitan area. He has more than three decades of experience in the financial services industry, including senior positions at Smith Barney and Morgan Stanley.
Opinions expressed are those of Rodger Friedman and not necessarily those of RJFS or Raymond James. All opinions are as of this date and subject to change without notice.
Rodger Friedman is a Wealth Manager and offers securities through Raymond James Financial Services, Inc. Member FINRA/SIPC.