Retirement Insights Tip #6 – Changes in Spending

By | July 29th, 2019|Markets, retirement|

Spending habits change over time. Typically, spending peaks at the age of 45 and starts a slow decline. This is an important piece of the retirement planning puzzle. We often talk about distribution strategies at retirement age. A solid estimate of spending is necessary to strategize for your future.

This chart illustrates what college-educated households spend on major expenditures at specific ages. Most Americans’ peak spending years are between ages 45 and 54, and thereafter spending tends to lower at older ages. Note that the largest expenditure category at all ages is housing, while the category that older people spend significantly more on than younger people is health care.

Video series: Why Should I Invest?

By | July 25th, 2019|Markets|

In this first short video, Nobel laureate Eugene Fama explains two key steps to investing: knowing why you want to invest and understanding your tolerance for risk. Everyone has different reasons for investing and different risk aversions. Stay tuned for  our 3 part series on risk, rewards and markets.

 

Retirement Insights Tip #5: The Power of Tax Deferred Compounding

By | July 22nd, 2019|irs, retirement|

Deferring the tax on investment earnings, such as dividends, interest or capital gains, may help accumulate more after-tax wealth over time than earning the same return in a taxable account. This is known as tax-deferred compounding. This chart shows an initial $100,000 after-tax investment in either a taxable or tax-deferred account that earns a 6% return (assumed to be subject to ordinary income taxes). Assuming an income tax rate of 24%, the value of the tax-deferred account (net of taxes owed) after 30 years accumulates over $79,000 more than if the investment return had been taxed 24% each year.

Choosing to shelter investment growth in tax-deferred accounts over the long term may result in more wealth for retirement. The value of tax deferral in this example is equivalent to a .7% higher annual return over the time period. TAXES CAN WAIT!

Retirement Insights Tip #4 – Retirement Savings Checkpoints!

By | July 15th, 2019|Markets|

2019 Guide to Retirement
Achieving a financially successful retirement requires consistent savings, disciplined investing and a plan, yet too few Americans have calculated what it will take to be able to retire at their current lifestyle.  This chart from JP Morgan Asset Management ( for household incomes of $100,000 or more) helps investors to quickly gauge whether they are “on track” to afford their current lifestyle for 30 years in retirement based on their current age and annual household income.  This analysis uses an appropriate income replacement rate (detailed on slide 15), an estimate of how much Social Security is likely to cover and the rate of return and inflation rate assumptions detailed on the right to determine the amount of investable wealth needed today, assuming a 10% gross annual savings rate until retirement.  It is important to note that this analysis assumes a household with a primary earner who plans to retire at age 65 when the spouse is assumed to be 62.  If an investor’s current retirement savings falls short of the amount for their age and income, developing a written retirement plan tailored to their unique situation with the help of an experienced financial advisor is a recommended next step.

Call our office for a complimentary Retirement Savings and Distribution review.

Retirement Insights Tip #3: Social Security Timing

By | July 9th, 2019|retirement|

Deciding when to claim benefits will have a permanent impact on the benefit you receive. Claiming before your full retirement age can significantly reduce your benefit, while delaying increases it. In 2017, full retirement age began transitioning from 66-67 by adding 2 months each year for 6 years. This makes claiming early even more of a benefit reduction.

Surprisingly few Americans understand the benefits and trade-offs related to claiming Social Security at various ages. The top graphic illustrates these trade-offs for people who are currently 65 and older whose full retirement age (FRA) is 66. Delaying benefits results in a much higher benefit amount: Waiting to age 70 results in 32% more in a benefit check than taking benefits at FRA. Likewise, taking benefits early will lower the benefit amount. At age 62, beneficiaries would have received only 75% of what they would get if they waited until age 66. FRA for individuals turning 62 in 2019 is 66 and 6 months, and it will continue to move 2 months every year until 2023, when it will reach and remain at age 67. The Social Security Amendments Act of 1983 increased FRA from 65 to 67 over a 40-year period. The first phase of transition increased FRA from 65 to 66 for individuals turning 62 between 2000 and 2005. After an 11-year hiatus, the transition from 66 to 67 will complete the move.

The bottom graphic shows the trade-offs for younger individuals, which will penalize early claiming to a greater degree. The percentages shown are “real” amounts – cost-of-living adjustments (COLA) will be added on top, providing an even greater difference between the actual dollar benefits one would receive. The average annual COLA for the past 34 years has been 2.6%.

QUARTERLY MARKET REVIEW – Q2 2019

By | July 5th, 2019|Markets|

Click on the link below for a detailed analysis of quarterly performance of the global equity and fixed income markets.

CLICK HERE TO READ THE 2ND QUARTER 2019- QUARTERLY MARKET REVIEW

 

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