Downsizing in Retirement

By: Allison Pearson

Do you and your partner share the same goals & expectations for the future throughout your changing life phases?

My son recently headed off to college. It was an important life transition, not just for my son, but for me and my husband as well. Seeing our child move out of the house and start a new phase of his life inspired us to evaluate our outlook for retirement – or, more accurately, how we would approach our next stage of life and how we envisioned living it.

The notion that the traditional definition of retirement is changing is no longer a revelation. It’s not even a remotely provocative concept these days.

We've all seen the headlines about how people are working longer because they're living longer, or simply because they want to remain active, engaged and productive. I'm personally very much on board with this – I plan to continue working into my "retirement" years, although not necessarily in the same capacity as what I'm doing now, or on the same full-time schedule.

In other words, I plan to downsize my career to some extent when I reach that point when I feel ready to shift some of my focus to other life goals, activities and interests. I think that's what I look forward to most in retirement, and how I define this next stage of life for me: It's a time to focus on whatever you choose to focus on, so long as you're able to maintain the lifestyle you're comfortable with financially.

"Our careers have always been the center point of our conversations about retirement, but now we are starting to consider other aspects of our plans for how we'll live in the future."

My husband and I are both in agreement that, barring any physical limitations as we get older, we intend to continue working, contributing and generally remaining active for as long as possible. Our careers have always been the center point of our conversations about retirement, but now we are starting to consider other aspects of our plans for how we'll live in the future. In other words, we're trying to develop a common vision of retirement that is both fulfilling and financially viable.

Where to Live in Retirement – The Housing Dilemma

The concept of downsizing is typically used in context with housing, of course. And as I look toward the future I (somewhat hazily) envision for myself and my husband, figuring out what will work best for us in terms of the size, cost and location of the place we call home has become a rather pressing topic. In fact, our initial conversations on the topic were my first indication that my vision of retirement was not entirely aligned with my husband's – at least when it came to housing.

Before I go into how the housing situation exposed this gap in our retirement vision, I'll give some background on the practical aspects of our downsizing dilemma.

Our situation is probably familiar to a lot of people in our stage of life. We realize it would make sense to downsize for a number of reasons – cost chief among them, but also the desire to have a smaller property to maintain. But we're also at the mercy of the ups and downs of the real estate market.

We purchased our current home 15 years ago in the midst of a classic "buyer's market" and were pleased to see it appreciate considerably since the 2008 recession as the location is very favorable and home prices in general have enjoyed a steady climb.

Now that we've reached this point and the housing market is strong, we feel we should consider selling, as it appears we're solidly in a seller's market – but are we? After all, a healthy real estate market means we have a good chance of making a profit on the sale of our current house, but as we peruse listings in the area, I was disheartened to realize that there's no way we'll find another house with a comparable value. Even the smallest houses we'd consider are now going for around what we originally bought our current house for. As it stands, we don't have the opportunity to make a profit on the sale of or current house that we could add to our retirement savings, or even make enough money so that we could have a very small mortgage or eliminate it altogether. That was eye opening!

Of course, I'm not implying that one should consider their house to be a retirement nest egg. The unpredictability of the real estate market makes that idea a very risky bet! But the Catch-22 nature of trying to buy in a seller's market is simply a complicating factor as my husband and I attempt to downsize as one of many aspects of our lives in preparation for retirement.
 

Getting back to the vision side of things, our discussions about downsizing bring to mind a time several years ago when we purchased a property in Utah. It was in a fairly remote, secluded location – more or less rural compared to where we live now.

I had always considered the Utah land to be an investment property, so it took me by surprise when I learned that my husband had always assumed that's where we would live when we retired. I told him that wasn't what I had in mind at all – I envisioned having a smaller, more manageable house but still wanted to be located in a suburban area with easy access to grocery stores and other conveniences.

"You can believe you share the same vision as your partner, when in fact you have very different ideas about what your future needs will be."

We have since sold the Utah property, but it's a good example of how you can believe you share the same vision as your partner, when in fact you have very different ideas about what your future needs will be.

How to Live in Retirement – A Shared Vision

The housing detail – while it's certainly an important one – is nonetheless a relatively tactical decision and I'm confident we'll be able to come up with a compromise that works for both of us. In fact, finding a house that's slightly more off the beaten path than I'd prefer could allow us to find something that's more affordable and gives us the financial lift we’re looking for with the sale of our current house. But we've agreed that we will not rush out and do anything unless it makes good sense. We love our home and views of the mountains and don't want to have to give that up.

Still, the fairly stark contrast between our preferences on this point opened my eyes to the larger, more philosophical question of whether we shared the same vision of retirement. In other words, not just where to live, but how to live.

Perhaps the reason it's so difficult for me and my husband – and for most couples, I assume – to find common ground when it comes to our long-term outlook is because of the uncertainty involved. Strictly from a health perspective, it's very difficult to know what we can expect to be capable of 20 or 30 years from now. It's also a rather scary and unsettling thing to think about, so the natural tendency is to block it out of your mind entirely – you can worry about it later.
 

With so much of our future unknown – and unknowable – how can we ever be sure that we're both moving toward a shared vision of retirement, or of our future together in general? For me and my husband, I think the best solution is to make retirement an ongoing conversation. It's a key piece of our future that should come into play whenever we're discussing finances, career paths, housing decisions, major purchases, and our college-aged son's financial situation and future as well.

I've written about talking with your parents about their retirement and educating your kids about money in my previous columns. And I firmly believe that communication is absolutely critical to financial success and maintaining a healthy relationship with money. It can be a difficult thing to discuss, but having honest, open conversations with your family members can help ensure everyone is better prepared for those important transitions – both expected and unexpected – in our lives.

"I firmly believe that communication is absolutely critical to financial success and maintaining a healthy relationship with money."

Your vision for retirement is a very personal thing. But when you're expecting to share the rest of your life with your partner, you want to make sure your visions are at least somewhat aligned. Keep those lines of communication open, and remember: the future is what you make it, so it pays to remain focused on your goals and prepared for the unexpected.

_____

Investing involves risk, including possible loss of principal.

Diversification does not assure a profit or protect against loss in a declining market.

This article originally appeared on https://www.jackson.com/financialfreedomstudio/articles/2017/downsizing-in-retirement.html


Allison Pearson.jpg

Allison Pearson currently serves as Vice President of the National Sales Desk for Jackson National Life Distributors LLC (JNLD). She is responsible for the Career Development Program, coordinating recruiting efforts and training and supporting the Sales Desk management team in strategic initiatives. Allison joined Jackson in 2002 as Director of Recruiting with Human Resources.

How to Not Go Broke Supporting Adult Children

by David Ragland

You’ve worked hard, you’ve saved, you’ve downsized, and the nest is finally empty. Life is good. But then one of your kids loses his job. Or she starts falling further into debt. Or decides to send your grandchild to a private school he can’t afford.
Now what do you do? Is your only choice to dip into retirement to support an adult child? How do you manage the feelings of guilt and obligation versus your own needs?

Your Retirement Reality

Once the nest is empty, the kids are off the payroll, right? Or just theoretically? Because your retirement may depend on it, know that it is never too late to talk to your kids about money. Even if that “kid” is approaching middle age.
This is particularly true because during your last ten years in the workforce when you’ll most likely reach your maximum wealth-building potential and accumulate a significant portion of what you need for retirement. This is the time to put more into your 401K, downsize and reduce expenses, and really focus on reaching your retirement goals. Sure, there will be unexpected expenses, but ongoing unexpected expenses from your children shouldn’t be one of them.

Build Your Financial Support Team

But I know. You love your kids. You’ve made sacrifices for them since they were born. Shifting the dynamic can be hard when children become adults and their financial footing is still wobbly.
“These can be really difficult situations,” says Wendy Dickinson, PhD and licensed psychologist at GROW counseling in Atlanta. “When we have parents who are in a crisis because of a failure-to-launch young adult, or an adult child in a health crisis, or perhaps an adult child dealing with an addiction that becomes a bottomless money pit, one of the first things that we do is a thorough assessment. We need to determine 1) what is the goal 2) what would the parents not be able to live with and 3) to what extent the parents are willing to learn to set boundaries.”
Dickinson says that setting a goal is extremely important because it will guide the rest of the process:

  • Does the parent unit want to require the young adult to be responsible for their decisions?

  • Do they want to appropriately financially support them during a difficult time?

  • Do they want to provide for some but not all of their needs?

Essential to the process of goal setting is clear communication and a willingness for the parents to be open and vulnerable about what they are feeling and what they need.
“I always spend some time talking to parents about what they could NOT live with – it’s really helpful in establishing a threshold of behavior. For example, would they not be able to live with their grandchildren being hungry? Or their kids/grandchildren not having the medical attention they need? Sometimes parents will say they are not going to pay for anything, except unlimited counseling if their son/daughter is willing to participate with a goal of getting better. I find there are usually exceptions to what parents are willing to pay for, and in the process of setting boundaries it’s important to be clear about these exceptions upfront if possible.”
Finally, Dickinson says, the parent unit needs to learn to set boundaries. This can be a challenging because boundary setting has most likely been difficult for these parents during their child-rearing years. “Much could be written about navigating the process of boundary setting, but regarding the topic of money, I specifically think it’s important to be clear, consistent and compassionate,” says Dickinson.
“Clear and consistent relate to the goal-setting process and learning how to have difficult money conversations. The compassion that is critical is in separating the feeling from the behavior. It’s OK to empathize with your child even if you are standing firm on the financial support. Often parents interpret ‘boundary setting’ to mean they have to be cold, stoic, or disconnected. Rather you, as the parent, are the biggest cheerleaders for your kids – your encouragement can be the very thing that pushes them to take a risk and realize that with a little work they are able to achieve financial autonomy.”

Rounding out the Team

In addition to finding a counselor who can provide guidance and recommend strategies, you can also lean on your financial planner, accountant and/or attorney. You want a team that has your back especially as you get older. They need to understand your goals and your challenges — including your children’s financial situations — and be there to help you draw the line. They may need to play the bad guy and that’s OK.
You may also want to talk to your financial planner about including your adult child in a meeting so they can see the realities of your budget, as well as the benefits of a financial plan. And unless you can really afford it, don’t distribute an inheritance before you die. We’re all living longer and the expenses associated with aging continue to rise. You may need that money.
The challenges of family and money are nothing new, but how you deal with it can be. Communication is key as is finding the support you need to stay focused on what’s best for your situation. And know that regardless of how old your children are, it’s never too late.

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David Ragland

David Ragland is a Certified Financial Planner™ (CFP®), Certified Divorce Financial Analyst® (CDFA®) and Chief Executive Officer of IRC Wealth, a private asset management company based in Atlanta. Holding both a BBA and a Master’s degree in Accounting from the University of Georgia, David began his career in the tax division of Ernst & Young. He then served as CFO for several companies, gaining experience in taking companies public and propelling them on to the INC 500 List of Fastest Growing Companies. A vibrant, energetic speaker, best-selling author of Wealth Made Simple (yes, really), businessman and Ironman triathlete, David Ragland understands and articulates the core ingredients that motivate, energize and push people across their personal finish lines.

Happy, Birthday, Barbie!

On March 9th, Barbie celebrates her 58th birthday. Whether you loved Barbie as a little girl or thought she was a negative role model for women, there is no denying her part in women’s toy history. Ruth Handler created the Barbie doll and co-founded Mattel, Inc. with her husband when she saw her daughter choose paper dolls of grown-up women over baby dolls. Ruth developed a toy that allowed little girls to imagine the future. Barbie has had a lot of success as well as controversy over the years. In the 90’s, Barbie-related merchandise sales reached $1 billion annually and Mattel estimates three Barbie dolls are sold every second. Some women believe that Barbie’s various careers broke down gender barriers and served as inspiration to girls showing them they could be whatever they want. Others thought that her clothing and “Dream Houses” would encourage girls to be materialistic. In 1992, a women’s group criticized a talking Barbie doll for the phrase “math class is tough.” Barbie’s physical appearance has perhaps been the most controversial, with some claiming she set unrealistic expectations for girls. In 2016, Mattel released a new range of Barbie dolls that included three new body shapes and a variety of skin tones. Barbie has been working full time for 3 decades and she has had a number of fascinating careers from teacher to astronaut. As she nears retirement, let's take a look at her retirement plan.

Barbie nears retirement

Barbie knew to begin investing early. She established her 401k and put away a little bit each month. She eventually increased her contribution to the maximum of $18,000 a year. She has accumulated $420,000 (her 401k took a big hit in the 2008 financial meltdown).

401k accumulation = $420,000

According to her my Social Security Account, she can begin collecting at her Full Retirement Age of 66 years and 10 months.

Social Security = $2,613 per month

Current Salary = $95,000

Barbie used the T.Rowe Price Retirement Calculator to see if she was on track.

Here are her results:

Barbie t rowe price retirement

Barbie t rowe price retirement

Barbie will need to make some adjustments to meet her goals

  1. To replace her income at 75% she will actually need $5,938 per month. If Barbie waits until age 70 years to collect her social security, her monthly benefit will increase to $3,337 ($724.00 more per month).

  2. She may consider working a couple more years or increasing her 401k contribution (after the age of 50, the maximum is $24,000)

  3. Barbie used the T.Rowe Price Retirement Calculator to see if she was on track. See if you are on track!

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Women & Retirement: Don't Wait, Start Saving Today

Poor and alone isn’t the retirement any of us dream about. And the following statistics conjure up some very scary images:

(Sources: Dee Lee’s Everywoman’s Money: Financial Freedom; Social Security Administration.)

  • More than 50% of all marriages fail.
  • After a divorce, the average woman sees her standard of living drop by as much as 30%.
  • The average age of widowhood is 56 years old.
  • The average woman lives to 80. (The average man, age 74.)
  • The poverty rate for elderly women is twice that of elderly men.

Fortunately, it’s never too late to start investing or to invest more!

Of course, the steps you need to take to ensure that you have enough money during retirement depend, in large measure, on your current age and situation. Here’s a breakdown of some things to consider, depending on just how long you have until retirement.

Gen X

As a group, younger women tend to be savvier than their older sisters about managing their money. And that’s a good thing because getting an early start is half the battle. During your younger years, the key is to save whatever you possibly can. That’s because the magic of compounding becomes all the more powerful the longer your time horizon. Consider this: If you save money throughout your 20s and then quit saving at 30, chances are you’ll come out dramatically ahead of someone who starts saving in their 30s and contributes for twice as long.

Baby Boomers

Perhaps, surprisingly, for a generation of women who accomplished so much in the workplace and in politics, boomer women are less in charge of their financial lives than their younger sisters.

Older baby boomers are starting to set their sights on the end of their working days. But for many women of this generation, early retirement isn’t a likely option. In fact, many will have to work longer or even take on a second job to make up for years of poor retirement savings.

Recognizing that many people are nearing retirement unprepared, the government is making it easier for them to save. Folks aged 50 or older will be able to make slightly higher contributions to their IRAs via “catch-up” contributions of up to $6,500 in 2014. Increased contributions will also be permitted in 401(k) accounts. This might not sound like a lot, but over several years, it can make a big difference.

Divorcées and Widows

One issue that can affect women of any age is divorce. When Prince Charming turns out to be more toad than prince, many women feel unprepared to manage finances on their own.

While nobody wants to assume they’ll wind up getting divorced or widowed at an early age, the fact remains that you need to take personal responsibility for making sure you have a comfortable retirement. With a bit of planning, it shouldn’t be too hard. By saving more now, you’ll free up time during retirement to focus on the things that really matter, like showing your granddaughter what being a happy old lady is all about!

So how much will you need to retire?

That depends. A quick rule of thumb is you will need 80% of your pre-retirement income in order to live comfortably. For others you’ll need more — that is, if your idea of retirement involves more than shuffleboard and a rocking chair!

Recommended reading: The Random Walk Guide To Investing by Burton G. Malkiel

Top IRA Trouble Spots

by Stacy Francis, CFP®, CDFA

Individual Retirement Accounts (IRAs) now hold more assets than any other retirement savings vehicles, but many people do not understand how they work and many IRA owners make critical mistakes that can cost them money. Here are some ways you can ensure that your IRA works for you.

1. Begin your required minimum distributions on time. Regardless of whether you are still working, you must begin taking an annual minimum required distribution from your traditional IRA no later than April 1 following the year you turn 70 1/2. You have much more flexibility with a Roth IRA and are not required to take distributions. However, for a Traditional IRA you will have still penalties if you don’t withdraw enough or you don’t withdraw it on time. You will owe up to 50 percent of the difference between the amount you took out and the amount you should have taken out. Why is the IRS so strict about taking distributions from a Traditional IRA and not a Roth IRA? The IRS wants your tax dollars. You must pay taxes on your distributions from a Traditional IRA while distributions from Roth IRAs are generally tax-free.

2. Don’t wait until the last moment. Don’t wait until the April 1 deadline to take out your initial minimum withdrawal. Don’t forget that you’ll have to make another withdrawal by December 31 of the same year. Watch out because these withdrawals in the same year could bump you into a higher tax bracket and increase your tax liability. Don’t let this happen.

3. Name a “real” beneficiary. One of the biggest mistakes is not naming a real (human) beneficiary. If you do not name a person, your assets will most likely go to your estate and this will cost you more money. That’s because if you hadn’t already started taking distributions yourself by the time of your death, the IRA assets must be distributed to your estate’s heirs within five years of death. Or if you had started, distributions must be paid out to the heirs over what would have been your remaining life expectancy. Either way, leaving your IRA to your estate deprives your heirs from “stretching out” the tax-deferred assets over their own lives and creates a bigger tax bill.

4. Name a contingent beneficiary. This allows the primary beneficiary to “disclaim” (reject) the IRA inheritance if he or she doesn’t need the money so that it automatically passes to the contingent, who typically is younger and can stretch out the inheritance longer.

5. Name the right beneficiary. Your spouse or parent isn’t always the best choice to name as the primary IRA beneficiary. An adult child might be a better choice. If you choose a young child you will want to consult a professional to find out if you need to set up a trust in their name to control the assets and distributions.

6. Changing your beneficiary. Don’t forget to change, in writing, your beneficiary in the event of a marriage, divorce, birth of a child, death of a beneficiary or similar circumstances.

2 Comments

Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

How To Increase Your Retirement Confidence

by Manisha Thakor

How are we Americans collectively feeling about our retirement prospects? Survey says (and most financial advisors would concur), not so great.

Consider this comparative data from an annual study by the Employee Benefit Research Institute:

  • In 2007, the EBRI study found that 27% of wage earners felt “very confident” their retirement plans were on track. Another 43% felt at least “somewhat confident” they were making their desired progress.

  • By 2013, those numbers had dropped to 13% and 38%, respectively.

Importantly, in 2013 a whopping 28% felt “not at all confident” that they would have enough money to retire, up from a mere 10% who gave that gloomy assessment in 2007. Ouch.

What’s the key to an investor’s confidence?

The number “$250,000” provides one indication. That’s the amount in long-term savings quoted by a 2012 Wells Fargo Retirement Survey as a clear dividing point on the confidence front. 88% of those surveyed with more than $250,000 in savings felt confident they were on track to retire. Only 57% of workers below that mark believed they’d enjoy a secure retirement.

Importantly, 61% of those with $250,000 in assets earned $150,000 – or less – a year.

Point being, this study suggests financial confidence doesn’t stem from outrageous compensation or blind luck. Rather, confident responders were methodical, disciplined and big on planning, according to the leaders of the study. Those with savings above $250,000 contributed a median 12% to their 401(k)s; below that, it was a median 7%.

Unfortunately, not enough of us are placing serious emphasis on retirement planning. In a recent survey by Aegon, employees ranked retirement saving plans lower on the perk desirability scale than flexibility, vacation and compensation. In other words, we’d rather bargain for today’s quality of life than tomorrow’s security.

Next question: how do those “confident” folks know $250,000 (or more) in long-term retirement savings is enough?

Likely, they have explored the relationship between their desired level of spending in retirement and their current level of savings, relative to their current age. If you haven’t used a retirement calculator before, a great starter is Choose To Save’s “BallPark Estimator.” It takes less than 15 minutes to complete and will give you a solid starting point for how much to target in ultimate retirement savings. After doing this exercise, you may be surprised how much more calm and in control a few hard numbers make you feel!

Alternatively, the chart below, from Fidelity Investments, gives a rough starting point for how much a person should have in targeted savings at different stages of her working lifetime. Find your current age to determine your target savings, as a multiple of current earnings:

Source: Fidelity Investments

Source: Fidelity Investments

If a review of this chart indicates you’re behind schedule in your retirement savings, don’t despair. Get motivated instead. Look over your current levels of saving and spending to see where rejiggering is possible. By identifying a concrete retirement savings target and then taking small daily steps towards it, your confidence can grow commensurately with your increased savings.

[For more MoneyZen in your life, follow Manisha on Twitter at @ManishaThakor, on Facebook at /MThakor, or visit MoneyZen.com.]

Comment /Source

Manisha Thakor

From Manisha's linkedin profile page:

Manisha Thakor is the Director of Wealth Strategies for Women at Buckingham Strategic Wealth and The BAM Alliance. 

Manisha and her colleagues provide both evidence-based wealth advisory services for high-net-worth households and core asset management solutions for women and families nationwide with $80,000 or more in investible assets. 

An ardent financial literacy advocate for women, Manisha is the co-author of two critically acclaimed personal finance books: ON MY OWN TWO FEET: a modern girl’s guide to personal finance and GET FINANCIALLY NAKED: how to talk money with your honey. She is on Faculty at The Omega Institute and serves as a Financial Fellow at Wellesley College. Manisha is also a member of The Wall Street Journal’s Wealth Experts Panel, a member of the 2015 CNBC Financial Advisor’s Council, and wearing her financial educator’s hat serves as a part of TIAA-CREF’s Women’s Initiative. 

Manisha's financial advice has been featured in a wide range of national media outlets including CNN, PBS, NPR, The Today Show, Rachel Ray, The New York Times, The Boston Globe, The LA Times, Real Simple, Women’s Day, Glamour, Essence, and MORE magazine.

Prior to joining the Buckingham team, Manisha spent over twenty years working in financial services. On the institutional side she worked as an analyst, portfolio manager and client relations executive at SG Warburg, Atalanta/Sosnoff Capital, Fayez Sarofim & Co., and Sands Capital Management. After this she moved to the retail side and ran her own independent registered investment advisory firm, MoneyZen Wealth Management. 

Manisha earned her MBA from Harvard Business School in 1997, her BA from Wellesley College in 1992 and is a CFA charterholder. She lives in Portland, OR where she delights in the amazing Third Wave coffee scene and stunning natural beauty of the Pacific NorthWest. Manisha’s website is MoneyZen.com.

How to Make Your Retirement Dream a Reality

by Manisha Thakor

For entirely too many hard-working folks, there is a significant gap between the retirement life they desire and the one they will be able to afford if they do not adequately prepare for the future. Traditional goals such as living in an inviting home and devoting time to adventurous travel may not be realistic for individuals who haven’t calculated how much retirement money they will have and how much money they will need to support their ideal lifestyle.

This need for financial literacy is particularly acute for women, who face strong institutional financial headwinds in the form of lower pay and more years out of the paid workforce than men on average (for more on this read my blog post on “The 77/11 Effect”).

According to The Transamerica Center for Retirement Studies, many well-intentioned women are not prepared for the future. Their recent study on Women and Retirement reveals some sobering statistics:

  • 48 percent of women do not have any retirement strategy at all, despite the fact that 56 percent of women expect to self-fund their retirement through 401(k)s, retirement accounts, or other savings and investments.

  • 53 percent of women plan to retire after age 65 or do not plan to retire at all; most of these women cite reasons related to income or health benefits as the reason for this.

  • 54 percent of women are “not too confident” or “not at all confident,” compared to only 44 percent of men who share that sentiment; only seven percent of women are “very confident” in their ability to fully retire with a comfortable lifestyle.

Given the statistical reality that women live longer and earn less than men over the course of their lifetime, it is vital that we both develop a clear strategy for a comfortable retirement and take action on it.

The first step is to use a retirement calculator to determine how much money will be available to you at your current rate of savings. I like the “Ballpark E$timator” retirement calculator from Choose To Save.

The next step is to identify how much money you will need to live your ideal lifestyle. You may need to consult with a financial advisor to determine how the rate of inflation will impact what you can afford. A rough rule of thumb is 70-90% of your current income (ouch, I know).

Last but not least, you will need to compare the two numbers to see if you need to start saving more aggressively to meet your target. If you feel that you don’t have enough money to maximize your retirement account each month, you should also take a look at current expenditures that are not essential to your joy and livelihood. Using a digital tracking tool such as Mint or Hello Wallet can help you find hidden money, so you can channel more resources toward creating the future of your dreams.

These three steps are basic, but not easy. Investing a bit of time to calculate these figures can pay rich dividends in the future in terms of your ability to make the mid-course corrections to get your dream retirement back on track. Although it may be challenging to practice mindful spending, when you stay connected to what is truly fulfilling in the present as well as your hopes for the future, you will be more motivated to set aside money to sustain your ideal life.


[For more MoneyZen in your life, follow Manisha on Twitter at @ManishaThakor, on Facebook at /MThakor, or visit MoneyZen.com.]

Comment /Source

Manisha Thakor

From Manisha's linkedin profile page:

Manisha Thakor is the Director of Wealth Strategies for Women at Buckingham Strategic Wealth and The BAM Alliance. 

Manisha and her colleagues provide both evidence-based wealth advisory services for high-net-worth households and core asset management solutions for women and families nationwide with $80,000 or more in investible assets. 

An ardent financial literacy advocate for women, Manisha is the co-author of two critically acclaimed personal finance books: ON MY OWN TWO FEET: a modern girl’s guide to personal finance and GET FINANCIALLY NAKED: how to talk money with your honey. She is on Faculty at The Omega Institute and serves as a Financial Fellow at Wellesley College. Manisha is also a member of The Wall Street Journal’s Wealth Experts Panel, a member of the 2015 CNBC Financial Advisor’s Council, and wearing her financial educator’s hat serves as a part of TIAA-CREF’s Women’s Initiative. 

Manisha's financial advice has been featured in a wide range of national media outlets including CNN, PBS, NPR, The Today Show, Rachel Ray, The New York Times, The Boston Globe, The LA Times, Real Simple, Women’s Day, Glamour, Essence, and MORE magazine.

Prior to joining the Buckingham team, Manisha spent over twenty years working in financial services. On the institutional side she worked as an analyst, portfolio manager and client relations executive at SG Warburg, Atalanta/Sosnoff Capital, Fayez Sarofim & Co., and Sands Capital Management. After this she moved to the retail side and ran her own independent registered investment advisory firm, MoneyZen Wealth Management. 

Manisha earned her MBA from Harvard Business School in 1997, her BA from Wellesley College in 1992 and is a CFA charterholder. She lives in Portland, OR where she delights in the amazing Third Wave coffee scene and stunning natural beauty of the Pacific NorthWest. Manisha’s website is MoneyZen.com.

Could Your 401K Plan Be The Chink In Your Financial Armor?

by Teresa Kuhn, JD, RFC, CSA, Authorized Bank on Yourself Advisor and President, Living Wealthy Financial Group

If you have a 401 K plan, you might be able to relate to this:

A friend of mine's dad used to live for the time when he got his plan statement.  It was the highlight of his month, validating the good decision he made to put his whole nest egg into one safe, secure basket.  He couldn't wait to see how much he had accumulated since the previous month...

Fast forward a couple of years and my, how things have changed.  My friend’s father doesn’t even open his statements anymore, because he is afraid to. He knows that like millions of other Americans, he has had thousands of his 401 K dollars hijacked by the economic crisis.  Gone... vanished... POOF!

Two years away from retirement, this hard-working, thrifty man who thought he was doing everything right  is now faced with the very real possibility that he may have to work a lot longer that he planned.  All because of one ugly truth that no one bothered to tell him:

401K’s are not necessarily the safe vehicle they were marketed to be.

When the current economic crisis hit, millions of ordinary Americans saw their "safe and secure" 401K accounts losing hundreds, sometimes thousands of dollars. Unfortunately, a lot of those people were at or near retirement and had little time to recoup that lost money.  Then, to add insult to injury, many of them also discovered another dirty secret:

Many 401 K plans contain hidden, but very costly fees.

According to an article on thestreet.com:

"A 25-year-old employee who currently has around $25,000 in his or her retirement account, and whose annual contributions (and employer matches) total only $2,500, in a plan that is allocated 80% to stocks and 20% to bonds, could forfeit more than $660,000 by age 65 - if the plan charges excess fees totaling just 1% a year."

Just 1% in excessive fees can hurt you... big time! And, if your fee is charged based on a percentage of your balance.then becoming a diligent saver actually hurts you.

What if there was something you could do to help you avoid paying unnecessary fees and help you get back some of the thousands of dollars you've been giving away simply because you don't know the alternatives?  Would knowing this information help you reach your goal of having a safe, prosperous retirement? I believe it would.

That's why I sponsor webinars and workshops to educate ordinary people on how they can become their own sources of financing for major purchases, business expansion, college tuition, etc.

Using this simple, but effective system, you can accumulate wealth more quickly and safely than you ever thought possible, and accelerate the process of getting out of debt.

One of the ways I assist people in securing their wealth is to sponsor live workshops and online webinars. These information-packed one hour sessions are designed to provide you an introduction to the system I personally use to safeguard and grow my wealth without incurring unnecessary risk.

I know not everyone will qualify to use my system, and the purpose of these presentations is not to persuade you to do so.  I simply believe that everyone can benefit from learning as much as possible about how money really works.

Comment

Teresa Kuhn

Financial life designer and educator, Teresa Kuhn, JD, RFC, CSA, has a passion for formulating innovative blueprints that help her clients grow and preserve their wealth.

A respected financial educator, best-selling author, and strategist, Teresa Kuhn is the president and CEO of Austin, Texas-based Living Wealthy Financial Group. Through her radio show, Living Wealthy Radio, she is able to share her passion for learning the real truth about how money works with others. She has counseled thousands of ordinary Americans across the nation, helping them avoid exposing their wealth to eroding factors such as: Taxes, Inflation, Wall Street losses.

Using the unique cornerstone of Bank On Yourself, Teresa enables clients to take charge of their own money and liberate themselves from bondage to conventional financial wisdom that no longer works in the modern economy. Through proven and time-tested safe money strategies, Teresa and her team provide creative solutions that enable clients to remain financially sound through every life event including: College planning, Retirement income, Major purchases financing, Vacation funds, Emergency funds.

Shocking Statistics on Women & Retirement

by Manisha Thakor

"Do you ever worry about ending up old and poor?"

For many women, becoming the proverbial "bag lady under the bridge" is one of their worst nightmares. Myself included. I literally sit down with my husband and our financial planner twice a year to re-confirm that we are doing everything we can to make sure we do not outlive our retirement savings!

Unfortunately, this fear of ending up old and poor is actually a very rational one for a high percentage of women. 

Recently, I had the chance to hear Karen Wimbish, Head of Wells Fargo Retail Retirement Group, and personal finance guru Jean Chatzky present powerful data collected in a Harris Interactive poll in conjunction with the launch of a new website to help women prepare for retirement, Beyond Today. I'm always looking for useful resources to direct women to, and I think this site can help a lot of folks.

First up, the data: (Put your seatbelts on. The numbers are stark.)                

  • Nearly 1/3 of women between the ages of 40 and 69 are “can’t estimate” how much money they can withdraw annually from their retirement accounts and about 32% of women in their 40s and 50s estimate they will withdraw between 11% – 30% of their savings annually. These are unrealistically high annual withdrawal rates - leaving them vulnerable to outliving their savings.

  • While both men and women are under saved for their retirements, the women polled had saved less than men - with a median retirement savings accumulated to date of $20,000 for women surveyed versus $25,000 for men.

  • Worse still, despite longer expected life spans, when asked how much they were aiming for in retirement savings women aimed lower with a median goal of $200,000 versus $400,000 for men.

    A savvy, 30-year industry veteran, Karen was kind enough to speak with me about some of the factors driving this dreary data - and what women can do to improve the odds that their golden years really will be golden. 

    A couple of key themes kept coming up during out chart. First, while many women are absolutely at the table on a day-to-day basis for bill payment and major household expenditures, when it comes to financial planning or investing – women are more likely to report ourselves as a “joint decision maker” than are married men who are asked this question.  Men are more likely to see themselves as “the primary“ decision maker in financial matters – so there is a disconnect between men and women in terms of the role they see themselves playing.  The survey data also showed women to have less confidence in the stock market as a long-term tool for retirement planning.

What does all this potentially mind-numbing data mean for your life? 

  • If you are in your 20s and 30s: The best action step is to max out your tax advantaged retirement plans (401k type plans and IRAs). Karen points out a great way to do this is to commit to saving a set percentage of your income, rather than a fixed dollar amount, so as your income rises, so too do your contributions.

  • If you are in your 40s: That data shows that this group, which I'm a part of, are the most stressed-out set, sandwiched between entering our peak earnings years while trying to juggle family and elder care responsibilities. In this life stage, the key action step is not to put our heads in the financial sands.

  • If you are in your 50s, and 60s: You are heading into the "red zone" the critical years leading up to retirement where small shifts in how much you save and what you invest in can make the difference. Understanding the gravity of this period is key.

The key takeaway:  At all three stages making sure you are actively engaged with your finances and seeking to self-educate yourself is key. Reading blogs, visiting websites like Beyond Today, and engaging the services of a trusted financial advisor to meet with you on an annual or semi-annual basis can go a VERY long way towards increasing your financial confidence, sense of optimism for the future, and even household harmony.  Just as with your health, no one will ever care about your financial fitness as much as you do. 

What steps are you taking right now to plan for your retirement?   


Want more financial love? You can follow Women's Financial Literacy Initiative founder, Manisha Thakor, on Twitter at @ManishaThakor or on Facebook at /MThakor, and enroll in her innovative new online personal finance course called “Money Rules.”

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Manisha Thakor

From Manisha's linkedin profile page:

Manisha Thakor is the Director of Wealth Strategies for Women at Buckingham Strategic Wealth and The BAM Alliance. 

Manisha and her colleagues provide both evidence-based wealth advisory services for high-net-worth households and core asset management solutions for women and families nationwide with $80,000 or more in investible assets. 

An ardent financial literacy advocate for women, Manisha is the co-author of two critically acclaimed personal finance books: ON MY OWN TWO FEET: a modern girl’s guide to personal finance and GET FINANCIALLY NAKED: how to talk money with your honey. She is on Faculty at The Omega Institute and serves as a Financial Fellow at Wellesley College. Manisha is also a member of The Wall Street Journal’s Wealth Experts Panel, a member of the 2015 CNBC Financial Advisor’s Council, and wearing her financial educator’s hat serves as a part of TIAA-CREF’s Women’s Initiative. 

Manisha's financial advice has been featured in a wide range of national media outlets including CNN, PBS, NPR, The Today Show, Rachel Ray, The New York Times, The Boston Globe, The LA Times, Real Simple, Women’s Day, Glamour, Essence, and MORE magazine.

Prior to joining the Buckingham team, Manisha spent over twenty years working in financial services. On the institutional side she worked as an analyst, portfolio manager and client relations executive at SG Warburg, Atalanta/Sosnoff Capital, Fayez Sarofim & Co., and Sands Capital Management. After this she moved to the retail side and ran her own independent registered investment advisory firm, MoneyZen Wealth Management. 

Manisha earned her MBA from Harvard Business School in 1997, her BA from Wellesley College in 1992 and is a CFA charterholder. She lives in Portland, OR where she delights in the amazing Third Wave coffee scene and stunning natural beauty of the Pacific NorthWest. Manisha’s website is MoneyZen.com.

On the 12 Days of Christmas

by Susan Hirshman

As I was driving the other day, the song … On the twelve days of Christmas my true love gave to me….came on the radio.  It made me think – who really is our true love and what is it really that we want.

Who really is our true love?  Well, I am not Dr. Phil but we must first start with ourselves. And what is it that we really want? From a financial perspective most people tell me it’s “ peace of mind.”

So I took a little literary license and came up with a new song for the holidays.

On the 12 days of Christmas I gave to me the best gift of all…peace of mind….

Here are twelve things you should think about and examine

Day 1 – Review your life insurance coverage.  Is it working as projected?  Is the pricing up to date? Is the coverage in line with your needs?

Day 2 – Examine (or create) your retirement goals.  Are the assumptions realistic?  Is it a priority?  Are you on track?

Day 3 – Look at your emergency savings.  Do you have any? Is it liquid? What do you want it to cover?

Day 4 – Review your disability coverage.  Do you have any?  Do you know what your policy covers, for example is it your own occupation or any occupation?

Day 5 – Go thru your estate plan (or lack thereof.) Are the guardians you named for your children still the right choice?  Is the executor the right choice?  Has your life circumstances changed and those changes are not reflected in your will?

Day 6 – Appraise your need for long-term care insurance.  What is your family’s health and longevity history?  Do you have family members that would be willing and able to take care of you in the manner that you choose?

Day 7  - Assess your diet. Studies have found that discrimination based on weight in the work place is more prevalent for women than men, especially white women in professional occupations.

Day 8:  Study your portfolio performance.  Are you an emotional investor? Do you end up buying high and selling low?  How long do you usually hold on to a mutual fund?

Day 9: Take a break from TV.  Reduce your TV watching by less than 8 hours a year and you can gain financial success. Snookie won’t be able to help you but by taking a few hours to get financially educated (read Does this Make My Assets Look Fat? A woman’s guide to finding financial empowerment and success), then take around 5 hours to get organized and develop a plan, and then take an hour 2x a year to review your plan.

Day 10 – Re-evaluate your umbrella policy.  Do you have one?  Is it sufficient? When was the last time you revisited it? Experts report that only 10%of people have the proper umbrella policy.

Day 11: Make sure you are familiar with all your finances. Do you know what would happen to you financially if you were to get divorced? 25% of couples married for twenty years get divorced.  Furthermore, the “grey divorce” (people over 65) is the fasting growing group of people to get divorced

Day 12:  Go over your credit cards.  Understand your interest rates, payment options.  Make sure you are not paying more than you have to.

The Scoop on IRAs and Tax Losses

by Stacy Francis, CFP®, CDFA

My friend who is a stockbroker wrote heaps of sell tickets for his clients back in December of last year. This may seem controversial, considering that finance gurus always advise us to sell high and buy low and it has been a long, long time since stocks traded as low as they did at the time. However, selling stocks in a down market has one huge advantage: you can deduct the losses from your taxable income. Especially thinly traded, volatile stocks that have performed poorly throughout the year tend to be hammered to the ground in December, only to rebound in January as investors with a long-term, bullish perspective pick them back up again.

Taking advantage of these losses in your regular, taxable accounts is a no-brainer. But at times, it can pay off to take tax losses in your retirement accounts as well.

Before you read any further, take note that you can never deduct losses in traditional IRAs or 401(k)s. The reason for this is simple: you already made a deduction when you put the money in the account!

However, if you have a Roth or traditional nondeductible IRA, you may be able save a few tax dollars, as long as your cost basis is higher than your current account value. Unfortunately, this type of transaction has several drawbacks.

First of all, in order to deduct a loss, you need to liquidate the entire account. When you want to build it back up again, all the usual limits and restrictions will apply to you. Furthermore, losses in these accounts cannot be deducted directly from your taxable income – they can only be used as parts of an itemized deduction. Therefore, they are much less beneficial for this purpose than losses in regular, taxable accounts.

To sum up, taking a tax loss in your Roth or traditional nondeductible IRA may make sense if you have accrued only a tiny balance and you itemize. If you have a large amount of money saved up, you don’t itemize, or your account is either a 401(k) or a traditional IRA, don’t bother.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Why You Need a Roth IRA

by Stacy Francis, CFP®, CDFA

I met with a new client last week; a woman in her early thirties eager to get started on her nest egg. A discussion of her financial goals and priorities revealed that she hoped the not-so-distant future would bring her not only a home of her own, but a few children as well. When I recommended a Roth IRA, she was all frowns. What's the point? she wondered.

This is such a common question; it deserves a blog of its own. After all, why would you make your contributions on an after-tax basis, when you could just as easily open a traditional IRA and cash in on your tax breaks right away? In this day and age, what could possibly beat the magic of instant gratification?

  1. With a traditional IRA, the withdrawals you make in your golden years are taxable, at your current rate. With a Roth IRA, once you’ve made your contributions, you never pay tax on the capital again (provided, of course, that you play by the rules). Since the amount you'll withdraw from the account will be much larger than the amount you put into the Roth, in most cases, your total tax bill will be considerably smaller with a Roth IRA. Remember? You don't retire off the money you set aside - but off the money you make off the money you set aside.

  2. If, like my client, you are aching to buy a home and start a family, note that you can withdraw money from a Roth IRA without becoming subject to the penalty tax, to pay for a first home or college tuition for yourself, your spouse or your children. No such exceptions apply for traditional IRAs.

  3. A Roth IRA is typically more beneficial for your heirs, should you kick the bucket.

Note, however, that there are strict income limits for contributions to Roth IRAs. Singles needs to make between $5,000 and $101,000 per year (phase-out between $101,000 and $116,000), while married couples must have an annual income of less than $159,000 (phase-out between $159,000 and $169,000). As long as you fulfill this requirement, chances are, a Roth IRA is a great option for you.

Recommended Reading: Jump-Start Your IRA!

1 Comment

Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

Your Financial Fitness Checkup

by Stacy Francis, CFP®, CDFA

Leaving the organic produce store yesterday, a flier on the revolving glass door caught my eye. It was entitled “HEALTH CHECKUP: Do You Have the Supplement Basics Covered?” and listed five types of supplements - multivitamins, enzymes, probiotics, fatty acids, and green vegetables - as the foundations for good health. Not only is it nice to know that I take all the necessary measures to ensure my physical well-being, this also translates very well to financial health.

Do you have the personal finance basics covered?

  • Do you make more than you spend? Are you able to pay all your bills in full, on time, or do you need to make more and/or spend less?

  • Do you have an emergency fund? Do you have enough money to cover six months worth of expenses, and is this money easily accessible?

  • Are you in the black? Do you pay off your credit cards in full every month? If not, draft a plan to get rid of those balances!

  • Have you thought about retirement? Do you have a 401(k), Roth IRA or similar, and do you contribute to it regularly?

  • Have you protected yourself against disaster? Do you have the insurance coverage you need, including medical, disability and homeowner’s insurance?

Yes on all? Congratulations! Chances are you’re in great financial health.

Comment

Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

6 Smart Money Moves in Your Thirties

by Stacy Francis, CFP®, CDFA

A couple of weeks ago, I attended my friend’s thirtieth birthday party. A week later, she called my office to schedule an appointment. While I was delighted to accommodate her, I couldn’t help but scratch my head a little. She never asked me about money before. What was going on? 

It turns out that like so many people entering their thirties, she suddenly felt overwhelmed with financial responsibilities. Would she ever be able to pay off her student debt? What about buying a home? And retirement, it had dawned upon her, wasn’t as far off as it had seemed before. Nor was the whole baby thing.

It is true that your thirties bring a ton of financial responsibilities - but it is also a decade of wonderful opportunities! Below are six smart money moves and stepping stones toward a prosperous future.

  1. Learn to prioritize and keep your expenses down. While a few people pick this up in their twenties, many people never do – and they rarely enjoy a better-than-average standard of living.
  2. Pay off your credit cards. Not only will you save a bundle on financing charges, but as your FICO score improves, you can obtain better rates for mortgages and many other things.
  3. Build an emergency fund. Most experts recommend that you keep enough money to cover six months worth of living expenses in an easily accessible account. This is especially true today.
  4. If you haven’t done so already, start saving for retirement. You are best off stashing this cash in an account that scores you tax benefits, such as a 401(k) or a Roth IRA.
  5. Watch your debt. Get into the habit of spending less than you earn, making room for savings. Stay clear of high-interest and toxic debt.
  6. Review your insurance coverage. Chances are you have some sort of medical insurance already. Other types to look into include long-term disability and homeowner’s insurance (if you are planning to buy a home).

You don’t have to deal with them all at once. Just keep them in mind, and work on them whenever possible.

Comment

Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.