Retirement Planning

Ask These Questions Before You Sign a Retirement Community Contract

Retirement communities are popular options for those who want to spend their golden years in a neighborhood full of peers, activities and even luxurious amenities. In many cases, a retirement community will offer unique services for each phase of your retirement. You may transition over time from independent living to assisted living to skilled nursing care.

Joining a retirement community can be a wise decision for a number of reasons. One is that it lets you lead an enjoyable and independent retirement but also have the security of nearby support and medical providers if needed. You also may enjoy having a nearby network of like-minded retirees. Socialization can be an effective way to minimize the risk of health issues and cognitive disorders.

However, it’s important to do your due diligence and find the right community for your needs and budget. Every community will put its best face forward during the sales process. Not all communities are the same, though. Below are a few questions to ask so you can make the most informed decision:

How is the community’s financial stability?

Many retirement communities require a hefty upfront deposit and an ongoing commitment for sizable monthly payments. These costs may make sense given the level of support, amenities and activities included with the community.

However, the value of a retirement community depends on it being around for the duration of your retirement. Remember, you could live in the community for several decades. To fully realize the benefits of your contract, you’ll want to stay in the community for the long haul.

Don’t hesitate to ask about the community’s financial stability. What’s its occupancy rate? If there’s a high level of vacancies, will that change in the future? Can you see the community’s balance sheet? What happens to your deposit and monthly payments if the community can’t stay solvent? These questions and others are valid and justified, so ask as many as you need to feel confident about your decision.

Are there any features or amenities that cost extra? Or is everything included in the base cost?

Most retirement communities offer flashy brochures that feature a wide range of fun activities and outings. However, don’t assume that something is included in the normal fee just because it’s featured in marketing materials. Many retirement communities offer a standard level of service and then additional amenities for an extra cost.

For example, it’s possible that some group outings cost extra. The community may have an association with a nearby golf or tennis club that may be available at additional cost. There could be different levels of dining options. Also, it’s possible that your costs may change if you transition to assisted living or skilled nursing care. Ask plenty of questions to see how the costs will add up now and in the future.

Will your long-term care insurer help pay for some of the costs?

If you’re healthy and moving into the independent living section of the community, long-term care may not be top of mind. However, it’s possible that you may need to move to assisted living or skilled nursing in the future. If so, you’ll likely want to take advantage of your long-term care insurance.

Check with your insurer to make sure that this community and its various levels of care are in fact covered by your policy. If they’re not, find out why and whether it’s possible to gain coverage. It would be unfortunate to pay a large deposit for a community and then find out after-the-fact that it’s not covered under your insurance.

Ready to develop your retirement strategy? Let’s talk about it. Contact us today at Peak Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

 

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

 

17849 – 2018/7/30

Self-Employment and Retirement: Tips to Reach Your Goals

Self-employment is a dream come true for many people. You get to set your own schedule, make your own rules and earn income doing what you love. Self-employment can bring challenges and complications, but for many people the benefits far outweigh the costs.

However, self-employment can present difficulties when it comes to planning for retirement. Traditional employees are able to participate in their employer’s 401(k) plan or pension. They may even receive a matching retirement contribution from their employer. Self-employed individuals don’t have that option.

Many self-employed workers believe they can simply delay retirement as long as they want. If they love what they do, they may think they won’t have to retire at all. However, chances are good that you will have to stop working at some point. You could become physically unable to work, or you may simply decide that you want to pursue other activities.

The good news is you can plan ahead by taking action today. Below are a few tips to help you prepare for retirement:

 

Put your retirement contributions on autopilot.

One of the most complicated parts of self-employment is deciding how best to allocate your resources. You have normal bills and expenses like traditional employees, but you also have the option to invest money into your business. You can also put money away for retirement and future financial goals.

Far too many self-employed individuals choose to fund their business or current expenses over retirement. Given the option, they choose the priorities that feel most urgent. You can avoid this risk by putting your retirement savings on autopilot. Set up automatic transfers to your retirement accounts so you don’t have the option of using the money for other purposes. That could help you accumulate retirement assets quickly.

 

Contribute to a SEP IRA.

Qualified accounts such as 401(k) plans and individual retirement accounts (IRAs) are popular savings tools, primarily because of their unique tax treatment. Most of these plans are tax-deferred, which means you don’t pay taxes on your investment growth as long as the funds stay in the account. Some also offer current tax deductions.

As a self-employed individual, you may have another option—the SEP IRA. A SEP IRA operates much like a traditional IRA. You can deduct your contributions, and your funds grow tax-deferred. Your distributions are taxable, however, and you could face a penalty if you take a withdrawal before age 59½.

A key difference between the SEP IRA and traditional IRA is the amount you can contribute. In 2018 you can contribute 20 percent of your net income, up to $55,000, to a SEP IRA.1 This entire amount is tax-deductible. Keep in mind, though, that if you have employees, you are required to make contributions on their behalf, too.

 

Protect your most valuable asset—your income.

Finally, if you’re a self-employed worker, your most valuable asset may be your ability to generate income. Disability is a very real threat, and it’s a dangerous risk to your current standard of living and your retirement. The Council for Disability Awareness estimates that 1 in 4 adults will become disabled at some point in their lifetime.2

You can minimize this risk by purchasing disability insurance. These policies replace your income if you become physically unable to work. If you suffer an injury or illness that prevents you from working, the disability policy pays you some or all of your lost wages. You can use this money to maintain your lifestyle, pay medical bills and even fund your retirement.

Ready to plan your retirement strategy? Let’s talk about it. Contact us today at Peak Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

 

 

1https://www.kiplinger.com/article/retirement/T047-C000-S003-sep-ira-contribution-limits-for-2018.html

2http://disabilitycanhappen.org/overview/

 

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

17700 - 2018/5/30

What’s Your Early Retirement Plan?

Are you one of the millions of Americans who wants to retire early? A recent study from MSN found that two-thirds of millennials want to retire before age 65.1 That’s well before Social Security’s full retirement age of 67. While early retirement may be a desirable goal, it can also be a challenging one.

Early retirees face a number of difficult obstacles. They spend more time in retirement, which means they have to fund more years with distributions from their savings. If they retire before they’re eligible for Social Security or Medicare, they’ll become even more reliant on personal savings and investments.

Even with these challenges, though, you can retire early if you stick to your plan. Below are a few questions to ask yourself as you get started. You may also want to work with a financial professional to help you analyze your needs and goals and develop a more detailed plan.

 

What’s your funding need?

Every good plan has to start with a goal or desired outcome. In your retirement plan, your goal should be your funding need or retirement number. That’s the amount of money you need to save to fund your retirement.

It may be difficult to predict how much money you’ll need in retirement. That’s especially true if retirement is decades away. However, you can use your current expenses as a starting point to estimate your living expenses in retirement. Consider how your life may be different in retirement. Perhaps you’ll downsize to a more affordable home, or maybe you’ll have lower debt payments. Also, be sure to factor inflation into your estimate.

Once you have a spending estimate, think about how many years you may live in retirement. It’s possible that you could live into your 80s or even 90s. If you retire early, that means you could live in retirement for 30 or 40 years. Multiply your spending estimate by your number of years in retirement, and you’ll get a ballpark figure of how much money you may need to fund your lifestyle.

 

How much do you need to save each month to hit your target?

Fortunately, you won’t be entirely dependent on savings in retirement. You will likely have other sources of income, like Social Security or a pension. You may also receive rental income, investment income or other cash flow. Subtract that income from your funding need. The difference is the amount you’ll need to withdraw from savings every year in retirement.

You can then work backward to estimate how much you’ll need to save each year to hit your target. Set up automatic contributions to your retirement accounts so you can stay on track. Also, be sure to implement an investment strategy that minimizes risk but also offers growth potential.

Your financial professional can help you develop these estimates. They can identify risks and possible expenses that you haven’t considered. And they can help you implement an investment strategy that’s aligned with your goals and risk tolerance.

 

Do you need to make changes to your retirement plans?

It’s possible that even if you maximize your savings, you’ll still fall short of your goal. This shortfall is known as a savings gap. If you can’t save enough to overcome this gap, you may need to make changes to your plans. For instance, you could push back your planned retirement date to help you save more money. Or you could consider part-time or seasonal work in retirement.

You could also scale back your planned spending in retirement. You could move to a more affordable location or downsize to a smaller home. You could also travel less and eat at home more often. Go back to your retirement spending estimate and look for areas where you can make cuts.

Ready to develop your early retirement strategy? Let’s talk about. Contact us at Peak Financial. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

 

1http://www.businessinsider.com/millennials-not-saving-enough-to-retire-early-2017-6

 

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

17596 - 2018/4/19

New Surveys Find Baby Boomers Are Unprepared for Retirement

According to a pair of recent surveys, baby boomers aren’t quite ready for retirement. A Gallup study found that more than half of Americans are worried they won’t have enough money for retirement.1 A separate study from the Insured Retirement Institute showed that 42 percent of baby boomers have no retirement savings, and of those who do, 38 percent have less than $100,000.2

If you’re a baby boomer who’s behind on retirement savings, you’re not alone. Many others are in the same position. Unfortunately, the longer you wait to take action, the fewer options you may have available. Time is your strongest asset, so it pays to take action early. Below are three tips to help you do just that. You may also want to consult with a financial professional to help you develop a customized plan.

 

Maximize qualified account contributions.

Qualified plans such as 401(k) accounts and IRAs are popular savings vehicles, primarily because of their tax treatment. These accounts are tax-deferred, which means you don’t pay taxes on growth as long as the funds stay in the account. Tax deferral may help you accumulate assets faster than you would in a taxable account. Additionally, your 401(k) may offer matching employer contributions, which could provide additional savings.

Look at your budget and find ways to increase your contributions. If possible, try to contribute the maximum amount. In 2018 you can contribute as much as $18,500 to a 401(k) and up to $6,000 to an IRA. If you’re age 50 or older, however, you can make something called catch-up contributions. These are additional contribution amounts above and beyond the normal limits. You can contribute an additional $5,500 to a 401(k) and $1,000 to an IRA.3

 

Consider using an annuity to increase your guaranteed* income.

Longevity is a difficult challenge in retirement. People are living longer, so it’s important to plan for a long retirement. However, it’s impossible to predict just how long you will live. A 65-year-old couple today has a 73 percent chance that one will live to age 90 and a 47 percent chance that one will live to 95.2 That means it’s possible your retirement could span several decades.

You can reduce the longevity risk by creating guaranteed lifetime income. Social Security and pensions are traditional sources of retirement income that’s guaranteed for life. However, annuities can serve as another source. You can use annuities to create lifetime income in a variety of ways. A financial professional can help you determine whether an annuity is right for your needs and goals.

 

Consider changes to your retirement plans.

Finally, if you’re saving as much as possible but still feel you’re off track, it may be time to re-evaluate your retirement plans. Some simple changes could reduce your funding need and eliminate your savings deficit. For example, you may want to consider working a few extra years to give yourself an opportunity to save more money. Or you could downsize to a smaller home to minimize your living expenses.

Also, don’t ignore the idea of working in retirement. Many retirees find that they have too much time on their hands. Even a part-time or seasonal job can help you fill your empty schedule and give you a stream of income so you can reduce withdrawals from your savings.

Ready to get your retirement back on track? Let’s talk about it. Contact us at Peak Financial. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

 

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
 

1http://news.gallup.com/poll/210890/americans-financial-anxieties-ease-2017.aspx

2https://www.planadviser.com/baby-boomers-not-enough-prepare-retirement/

3http://time.com/money/4990121/401k-ira-contribution-limits-2018/

 

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

17597 - 2018/4/19

Is the 4-Percent Withdrawal Rule Right for You?

If you’re like most retirees, you’ve spent much of your career accumulating assets to fund your retirement. You’ll likely rely on those assets to generate a portion of your retirement income. While you will probably have Social Security income and possibly even a pension, you may also need income from your savings.

Even if you’ve saved a substantial amount for retirement, it can be difficult to know how much to withdraw each year. If you take too much, you could deplete your savings and put yourself in a challenging financial situation later in life. Take too little, and you may struggle to cover your living expenses.

A popular strategy is to take four percent of your savings balance each year as a retirement distribution. The idea behind this recommendation is that four percent is a modest amount that will allow your savings to continue growing. It’s also a simple approach that makes it easy to plan your distributions.

This approach isn’t right for everyone, though. There are several reasons why the “four percent rule” may not be an effective approach. Below are a few areas in which this method may fall short:

 

Inflation and Market Volatility

In theory, the four percent withdrawal is supposed to change every year. You look at your account value annually or even more often, and then you adjust your withdrawal to reflect the new balance.

In practice, many retirees fail to make this adjustment, which results in a constant withdrawal amount that stays flat over time. This is problematic because it doesn’t account for inflation. As your cost of living increases, so too should your withdrawals. Otherwise, you may not be able to afford your lifestyle over time.

Another issue with a flat withdrawal is what happens during a market downturn. If you don’t adjust your withdrawal to reflect a lower balance, you could end up withdrawing much more than four percent. If that continues over time, you may deplete your account and limit your opportunities for growth.

 

Asset Allocation

Another issue with the four percent approach is that it doesn’t account for your specific asset allocation. A four percent withdrawal may or may not be modest, depending on your investment strategy. If you have a very conservative approach with little upside potential, a four percent annual distribution may deplete your account over time.

It’s impossible to prescribe an optimal withdrawal rate without knowing how the funds are invested. Your withdrawal amount should be based on your specific needs, goals and objectives, and it should be aligned with your allocation and investment strategy.

 

Spending Requirements

Finally, one of the biggest issues with the four percent approach is that it isn’t specific to your spending needs. Your plans for retirement are unique to your goals and objectives. Your income strategy should be unique, too.

You may want to spend money in the early years as you travel and pursue favorite hobbies, then cut back on your spending as you get older. Or maybe you want to be conservative early in retirement so you have assets to cover health care or long-term care later in life. Maybe you want to minimize your spending so you can leave a significant legacy for your loved ones.

There could be any number of factors and criteria that influence your income needs. A better approach may be to build a budget that includes your specific spending goals and your projected retirement income. Then you can determine exactly how much income you should take from your savings each year.

Ready to develop your retirement distribution strategy? Contact us at Peak Financial Corp. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

 

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

17378 - 2018/2/13