Category: Retirement

As a young investor, you have a powerful ally on your side: time. When you start investing in your twenties or thirties for retirement, you can put it to work for you.

The power of compounding. Many people underestimate it, so it is worth illustrating. Let’s take a look using a hypothetical 5% rate of return.

How does it work? A simplified example goes like this: Let’s take a look using a hypothetical 5% rate of return on a principal of $100. After a year, you earn 5% interest, or $5. Another year, another 5%, which adds $5.25 this time. In the third year, your 5% interest earned amounts to $5.51, bringing your balance to $115.76. The more money you deposit, the greater that 5% returns. Let’s look at another hypothetical example. If you were to start with a $1,000 principal in an account that earns 5% interest per year, and contribute $1,000 a year to the account, you would end up with a total of $7,078.20 after five years. That’s a total of $1,078.20 earned in compound interest from $6,000 in contributions. That compounding continues, even if you stop making deposits. All you really need to do is let that money stay put.¹

The earlier you start, the greater the compounding potential. If you’re investing for retirement in your twenties, you may gain an advantage over someone who waits to invest until his or her thirties.

Even if you start early & then stop, you may be in a better position than those who begin later. What if you contribute $5,000 to a retirement account yearly starting at age 25 and then stop at age 35 – with no new money going into the account for the next 30 years. That is hardly ideal. Yet, should it happen, you still might come out ahead of someone who begins saving for retirement later.

1. This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

How do you picture your future? Some see retirement as a time to start a new career. Others see it as a time to travel. Still others plan to spend more time with family and friends. With that in mind, here are some things to consider.

What do you absolutely need to accomplish? If you could only get four or five things done in retirement, what would they be? Answering this question might lead you to compile a “short list” of life goals, and while they may have nothing to do with money, the financial decisions you make may be integral to pursuing them.

What would revitalize you? Some people retire with no particular goals at all. After weeks or months of respite, ambition may return. They start to think about what pursuits or adventures they could embark on to make these years special. Others have known for decades what dreams they will follow … and yet, when the time to follow them arrives, those dreams may unfold differently than anticipated and may even be supplanted by new ones.

In retirement, time is really your most valuable asset. With more free time and opportunity for reflection, you might find your old dreams giving way to new ones.

Who should you share your time with? Here is another profound choice you get to make in retirement. The quick answer to this question for many retirees would be “family.” Today, we have nuclear families, blended families, extended families; some people think of their friends or their employees as family.

How much do you anticipate spending? We can’t control all retirement expenses, but we can manage some of them. The thought of downsizing your home may have crossed your mind. One benefit of downsizing is that it can potentially lead to no mortgage or a more manageable mortgage payment.

Could you leave a legacy? Many of us would like to give our kids or grandkids a good start in life, but leaving an inheritance can be trickier than many realize. Tax laws are constantly changing, and the strategies that worked years ago may have more limited benefits today.

Keep in mind this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax or legal professional before modifying any part of your overall estate strategy.

How are you preparing for retirement? This is the most important question of all. If you feel you need to prepare more for the future or reexamine your existing strategy in light of recent changes in your life, conferring with a financial professional experienced in retirement approaches may offer some guidance.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Want to give your child or grandchild a financial head start? A Roth IRA might be a choice to consider. Read on to learn more about how doing this may benefit both of you.

Rules for setting up a Roth IRA. If your teen has an earned income, you may be able to set up a Roth IRA for them. For example, if your 15-year-old has earned $6,500 at a summer job, you can set up an account for them up to $6,500 (the maximum annual Roth IRA contribution). The amount cannot exceed the teen’s income. Keep in mind that money that you contribute to the Roth IRA can count as a gift within your $17,000 yearly gift tax exclusion ($34,000 for a married couple).¹

Looking ahead to the future. If money is withdrawn from a Roth IRA before age 59½, a 10% federal tax penalty may apply. There is, however, a notable exception. Up to $10,000 of investment earnings can be taken out of a Roth IRA at any time if the money is used to buy a first home. In this instance, the IRS may waive the early withdrawal penalty. Should your teenager become a parent someday, a portion of those Roth IRA assets might also be utilized to pay college tuition costs for themself or their child.^2,3

This article is for informational purposes only. It’s not a replacement for real-life advice, so make sure to consult your tax professional before modifying any Roth IRA strategy. Tax-free and penalty-free withdrawals also can be taken under circumstances other than first-home purchases, such as the owner’s death. The original Roth IRA owner is not required to take minimum annual withdrawals. To qualify for the tax-free and penalty-free withdrawal of earnings, the teenager must meet a five-year holding requirement and occur after age 59½.

Greater earning potential, thanks to the magic of compound interest. Setting up a Roth IRA for a teenager is a great way to introduce them to basic financial concepts, such as compound interest. Giving your teen a hands-on learning experience may help them understand the value of saving for the future. You may also be facilitating the development of your children’s or grandchildren’s financial habits.

There are a few things to consider when setting up a custodial Roth IRA. Setting up a Roth IRA for a minor is often referred to as a custodial IRA. Until the child is able to take it over, you act as the custodian of the account. Individual state laws determine when the minor child is able to take over management of the Roth IRA for themselves.

A tax professional can provide guidance that may help ensure that you and your minor child are following all federal and state regulations.

1. Investopedia.com, November 11, 2022
2. IRS.gov, 2023
3. IRS.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Investment firms have a client service feature that may be a benefit to certain investors. They will ask you whether you would like to provide the name and information of a trusted contact.¹

You do not have to supply this information, but it may offer some advantages. The request is made with your best interest in mind – and to lower the risk of someone attempting to make financial decisions on your behalf.¹

Why is setting up a trusted contact so important? While no one wants to think ill of someone they know and love, the reality is that there is $3.4 billion worth of suspicious transactions a year related to elder financial exploitation, according to the Financial Crimes Enforcement Network.²

The trusted contact request is a response to this reality. The Financial Industry Regulatory Authority (FINRA) now requires that investment firms make reasonable efforts to acquire the name and contact info of a person you trust. This person is someone that investment firms can contact if they suspect the investor is making an “unusual financial decision” or appears to be suffering a notable cognitive decline.³

Investment firms may put a hold on disbursements of cash or securities from accounts if they suspect the withdrawals or transactions may involve financial exploitation. In such circumstances, they are asked to get in touch with the investor, the trusted contact, and other agencies, if necessary.³

Who should your trusted contact be? At first thought, the answer seems obvious: the person who you trust the most. Yes, that individual may be one of the best choices – but keep some factors in mind.

Ideally, your trusted contact is financially savvy, or at the very least, has some basic financial knowledge. You may trust your spouse, your sibling, or one of your children more than you trust anyone else, but how much does that person know about investing and financial matters?

You should have a high level of confidence that your trusted contact will behave ethically and respect your privacy. This person may be given confidential information about your investments.

It is encouraged that your family members know who your designated trusted contact is. That way, any family member who might be tempted to take advantage of you knows another family member is looking out with your best interest in mind, which may be an effective deterrent to elder financial abuse. It should be noted that the trusted contact may, optionally, be an attorney, a financial professional, or a CPA.³

Your trusted contact is your ally. If you are being exploited financially or could be at risk of such exploitation, that person will be alerted and called to action.

As the old saying goes, money never builds character, it only reveals it. The character of your trusted contact should not waver upon assuming this responsibility.

1. FINRA.org, 2023
2. FinCen.gov, 2023
3. FINRA.org, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Preparing for retirement can look a little different for women than it does for men. Although stereotypes are changing, women are still more likely to serve as caretakers than men are, meaning they may accumulate less income and benefits due to their time absent from the workforce. One study estimates that 66% of caregivers are women. Women who are working also tend to put less money aside for retirement. According to one report, women contribute 43% less to their retirement accounts than men.^1,2

These numbers may seem overwhelming, but with a little foresight, you can start taking steps now that may help you in the long run. Here are three steps to consider that may put you ahead of the curve.

1. Talk about money. Nowadays, discussing money is less taboo than it’s been in the past, and it’s crucial to taking control of your financial future. If you’re single, consider writing down your retirement goals and keeping them readily accessible. If you have a partner, make sure you are both on the same page regarding your retirement goals. The more comfortably you can talk about your future, the more confident you may be to make important decisions when they come up.

2. Be proactive about your retirement. Do you have clear, defined goals for what you want your retirement to look like? And do you know where your retirement accounts stand today? Being proactive with your retirement accounts allows you to create a goal-oriented roadmap. It may also help you adapt when necessary and continue your journey regardless of things like relationship status or market fluctuations.

3. Make room for your future in your budget. Adjust your budget to allow for retirement savings, just as you would for a new home or your dream vacation. Like any of your other financial goals, you may find it beneficial to review your retirement goals on a regular basis to make sure you’re on track.

Retirement may look a little different for women, but with the right strategies – and support – you’ll be able to live the retirement you’ve always dreamed of.

1. Caregiver.org, 2023
2. TRowePrice.com, March 13, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

New retirees sometimes worry that they are spending too much, too soon. Should they scale back? Are they at risk of outliving their money? This concern may be legitimate. Some households “live it up” and spend more than they anticipate as retirement starts to unfold. In 10 or 20 years, though, they may not spend nearly as much.

By The Numbers

The initial stage of retirement can be expensive. The Bureau of Labor Statistics figures show average spending of $70,570 per year for households headed by pre-retirees, Americans age 55-64. That figure drops to $52,141 for households headed by people age 65 and older. For people age 75 and older, that number drops even further to $45,820.¹

Spending Pattern

Some suggest that retirement spending is best depicted by a U-shaped graph — It rises, then falls, then increases quickly due to medical expenses.

But a study by the investment firm BlackRock found that retiree spending declined very slightly over time. Also, medical expenses only spiked for a small percentage of retirees in the last two years of their lives.²

What’s the best course for you? Your spending pattern will depend on your personal choices as you enter retirement. A carefully designed strategy can help you be prepared and enjoy your retirement years.

1. Bureau of Labor Statistics, 2023
2. BlackRock.com, 2023. (Based on a 2017 landmark study that looked at retirement spending.)

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Medicare takes a little time to understand.

As you approach age 65, familiarize yourself with its coverage options, costs, and limitations.

Certain features of Medicare can affect health care costs and coverage.

Some retirees may do okay with original Medicare (Parts A and B), others might find it lacking and decide to supplement original Medicare with Part C, Part D, or Medigap coverage. In some cases, that may mean paying more for health care than you initially figured.

How much do Medicare Part A and Part B cost, and what do they cover?

Part A is usually provided with no charge; Part B is not. Part A is hospital insurance and covers up to 100 days of hospital care, home health care, nursing home care, and hospice care. Part B covers doctor visits, outpatient procedures, and lab work. You pay for Part B with monthly premiums.¹

It’s best to prepare for the copays and deductibles linked to original Medicare. In addition, original Medicare does not cover dental, vision, or hearing care, nor prescription medicines or health care services outside the U.S. It pays for no more than 100 consecutive days of skilled nursing home care. These out-of-pocket costs may lead you to look for supplemental Medicare coverage as a way of paying for extended care.^2,3

Medigap policies help Medicare recipients with some of these copays and deductibles.

Sold by private companies, these health care policies can pay a share of certain out-of-pocket medical costs (i.e., costs greater than what original Medicare covers for you). You must have original Medicare coverage in place to purchase one. The Medigap policies being sold today do not offer prescription drug coverage.⁴

Part D plans cover some (but certainly, not all) prescription drug expenses.

Monthly premiums are averaging $55.50 this year for these standalone plans, which are offered by private insurers. Part D plans currently have yearly deductibles of no more than $545.⁵

Creating a Medicare strategy is integral to your retirement preparation.

Should you try original Medicare for a while? Should you enroll in a Part C HMO with the goal of managing your overall out-of-pocket health care expenses? There is also the matter of eldercare and the potential need for interim coverage if you retire prior to 65. Discuss your concerns about Medicare in your next conversation with your financial professional.

1. Medicare.gov, 2023
2. Medicare.gov, 2023
3. Medicare.gov, 2023
4. Medicare.gov, 2023
5. NCOA.org, October 13, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

Expectations vs. Reality

Predicting exactly what your retirement will be like is about as possible as a meteorologist predicting the weather correctly every single time. In fact, few retirees find their financial futures playing out precisely as they assumed. But, understanding some of the more common assumptions about retirement may help you get closer to your goal than most.

Do retirees actually “outlive” their money?

Generations ago, as people retired, many lived in dire straits, sometimes “down to their last dime,” which led to the creation of Social Security. Today, Social Security is still around and a common supplement to one’s retirement strategy. True, health crises can sometimes impoverish retirees, but working with a financial professional may even help you prepare for this hard-to-anticipate cost.

Retiring on 70-80% of your end salary may not be feasible

A quick internet search reveals all sorts of sources instructing new retirees should strive to retire on 70-80% of their end salary, but it can be a tough one to achieve.

Most new retirees often want to travel, explore new pursuits, learn some hobbies, and finally get around to those things they had put off when they were too busy with work. So, in the first few years, some may spend roughly as much as they did before retirement.

For many retirees, median household spending increases on the way to a retirement transition. But, with a smart financial strategy, the annual median household spending in retirement tends to decline after age 65.¹

Practice makes perfect, even in retirement

On average, households headed by those older than 65 spend 28% less annually than younger households (a difference of more than $15,000). While healthcare spending increases in retirement, other household costs decline, particularly transportation and housing expenses.¹

Retirement may arrive earlier than expected

Most people retire closer to age 60 than age 70. Believe it or not, the average retirement age for current workers is 66. That means you could find yourself claiming Social Security earlier than you expected if only to avert drawing down your retirement savings too quickly.²

Living the life you want

In general, American retirees seem to have it pretty good. A recent survey found that 7 in 10 retirees are confident they will have enough money saved to live comfortably throughout retirement.³

Remain flexible in retirement

Your retirement may differ slightly or even greatly from the retirement you have imagined. Fortunately, it may be possible to create a flexible retirement strategy with the help of a financial professional. It’s never too late to start!

1. BLS.gov, 2023
2. NerdWallet.com, July 18, 2023
3. EBRI.org, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.

When our parents retired, living to 75 amounted to a nice long life, and Social Security was often supplemented by a pension. The Social Security Administration (SSA) estimates that today’s average 67-year-old woman will live to age 88. Given these projections, it appears that a retirement of 20 years or longer might be in your future.¹

Are You Prepared For a 20-Year Retirement?

How about a 30-year or even 40-year retirement? Don’t laugh; it could happen. The Society of Actuaries predicts that an average healthy woman that reaches age 65 has a 48% chance of living past 90, and a 26% chance of living to be older than 95.²

Start with Good Questions

How can you draw retirement income from what you’ve saved? How might you create other income streams to complement Social Security? And what are some ways you can protect your retirement savings and other financial assets?

Enlist a Financial Professional

The right person can give you some good ideas, especially one who understands the challenges women face in saving for retirement. These may include income inequality or time out of the workforce due to childcare or eldercare. It could also mean helping you maintain financial equilibrium in the wake of divorce or the death of a spouse.

Invest Strategically

If you are in your fifties, you have less time to make back any big investment losses than you once did. So, protecting what you have may be a priority. At the same time, the possibility of a retirement lasting up to 30 or 40 years will require a good understanding of your risk tolerance and overall goals.

Consider Extended Care Coverage

Women have longer average life expectancies than men and may require significant periods of eldercare. Medicare is no substitute for extended care insurance; it only covers a few weeks of nursing home care, and that may only apply under special circumstances. Extended care coverage can provide financial relief if the need arises.³

Claim Social Security Benefits Carefully

If your career and health permit, delaying Social Security can be a wise move. If you wait until full retirement age to claim your benefits, you could receive larger Social Security payments as a result. For every year you wait to claim Social Security past your full retirement age up until age 70, your monthly payments get about 8% larger.⁴

Retire With a Strategy

As you face retirement, a financial professional who understands your unique goals can help you design an approach that can serve you well for years to come.

1. SSA.gov, 2023
2. LongevityIllustrator.org, 2023. Life expectancy estimates assume average health, non-smoker, and a retirement age of 65.
3. Medicare.gov, 2023
4. SSA.gov, 2023

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2024 FMG Suite.