Late on Retirement Planning?

Tips to Jumpstart Your Savings

It’s graduation season. Do you have a graduate who finishing up on college? If so, this is a time to celebrate your child’s accomplishment and their entrance into adulthood.

It also may be a time to celebrate your new freedom. You have one less dependent in the house and one less tuition bill to pay. You might see a healthy boost in your bank account and budget in the near future, especially if you’re now an empty-nester.

Before you start spending all that extra cash, this could be a good time to review your retirement strategy. If you’re behind on your savings, you’re not alone. Many people wait until after their kids graduate and leave the home before they get serious about saving for retirement.

The good news is there’s still time to get back on track. Below are three steps you can take today to boost your savings and take back control of your retirement strategy. If you’ve waited until your kids were grown to get serious about retirement, now is the time to take action.

Use a budget.

Do you use a budget? If the answer is no, you have company. According to a recent survey, 60% of Americans don’t use one. ¹ That’s an unfortunate statistic because a budget is one of the most powerful financial tools at your disposal.

A budget is especially important if you now have a boost in cash flow because you’re no longer supporting a child or making tuition payments. You can use your budget to plan and analyze your spending so that additional cash flow goes toward retirement instead of unnecessary purchases.

There are a variety of online tools you can use to create your budget. A spreadsheet can also be effective. The key is to set spending goals for each type of purchase and then regularly review your budget to make sure you hit your targets.

Boost your contributions.

The most effective way to boost your retirement assets is to simply contribute more money to your retirement accounts each year. Once you turn 50, you have an opportunity to increase your savings rate through something called “catch-up contributions.” A catch-up contribution is simply an extra allowable contribution amount for those approaching retirement.

In 2019, you can make a regular contribution of up to $19,000 to a 401(k). However, if you are 50 or older, you can contribute an additional $6,000, giving you a total allowable amount of $25,000. You can contribute up to $6,000 to an IRA, plus an additional $1,000 if you are 50 or older. ² Catch-up contributions can help you boost your savings and get your retirement back on track.

Guarantee* your assets and income.

As you approach retirement, you may find that you have less tolerance for risk. That’s natural. After all, you don’t have as much time as you once did to recover from a substantial market loss.  Of course, you also need to keep growing your assets, so you can’t avoid risk completely.

How do you balance a need for growth with aversion to risk? One way is with an annuity. Many annuities offer growth opportunities with downside guarantees*. For instance, a fixed indexed annuity allows you to earn interest that is linked to a market index. If the index performs well, you may earn more interest. If it performs poorly, your principal is protected from loss.

Annuities also offer ways to create a guaranteed retirement income stream. You can convert a portion of your assets into a cash flow that will last for life, no matter how long you live. That could provide some certainty and predictability as you head into retirement.

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

1 https://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html

2 https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000

*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.

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 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, no representation is made 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, or specific advice for your situation. 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.

18775 – 2019/4/16

How to Find Hidden Assets in Your Strategy

Remember hunting for Easter eggs as a child? There were few thrills more exciting than racing around the yard or a park to find as many eggs as possible. Your eggs may have contained candy, money or other prizes.

As an adult, you may be too old to participate in a traditional Easter egg hunt. However, there may be another egg hunt that could be far more lucrative. It’s a hunt for hidden retirement assets. Many people fail to inventory their available retirement assets. In doing so, they fail to identify assets that could play an important role in their retirement strategy.

Below are four often-overlooked retirement assets. Some of these eggs may be hiding in plain sight. If you haven’t created an inventory of your retirement assets, now may be the time to do so. You could have some valuable eggs waiting to be found.

Old 401(k) Plans

There was a time when workers stayed with one company for most of their career. Those days are long gone. According to data from the Bureau of Labor Statistics, wage and salaried workers have been with their current employer for a median of only 4.6 years. In fact, the average worker changes jobs 11 times from age 18 to 48.1

When you leave a job, you also may leave behind a 401(k) balance. It’s possible that you still have balances held in former employers’ plans. Make a list of old employers and identify the ones where you may have participated in a 401(k) plan, profit-sharing plan or other qualified retirement plan. If you have an old balance, you could roll it over into an IRA and invest it according to your strategy.

Life Insurance Cash Value

Do you own permanent life insurance policies? If so, those policies may have a cash value that you can use in retirement. Permanent life insurance policies have a death benefit, but they also have what’s called a cash value account. When you make a premium payment, a portion of that payment is allocated toward the cash value.

Your cash value account grows on a tax-deferred basis. The method of potential growth depends on the type of policy. Whole life insurance pays dividends, while universal life policies pay interest. Variable universal life policies allow you to invest in the financial markets. Depending on your type of policy and how long you’ve owned the insurance, you could have a significant amount of cash value.

You can use that cash value to provide supplemental income in retirement. For instance, you can withdraw your premiums tax-free. You can also take tax-free loans from the policy.. Review your life insurance policies and see whether you’ve accumulated cash value that you can use in retirement.

Home Equity

Thinking of downsizing in retirement? That could be a smart move. When you downsize to a smaller home, you may be able to reduce your costs for housing, taxes, maintenance, insurance and more.

If you have substantial equity in your home, you could also give your retirement savings a nice boost. For example, you could pocket the equity from the sale of your home and add it to your retirement assets.

Delaying Social Security

Technically, this strategy doesn’t represent an asset, but it is a simple way to increase your retirement income. You can file for full Social Security benefits once you reach full retirement age (FRA). Most people’s FRA lands between their 66th and 67th birthdays.2

However, you don’t have to file at your FRA. If you choose to delay your filing, Social Security will increase your benefit by 8 percent for each year that you wait up to age 70. That 8 percent increase is a permanent credit, so it could represent a significant pay raise, especially if you delay your benefit filing for several years.3

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

1 https://www.nerdwallet.com/blog/investing/leaving-401k-behind-job-change-costly/

2 https://www.ssa.gov/planners/retire/retirechart.html

3 https://www.ssa.gov/planners/retire/delayret.html

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 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, no representation is made 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, or specific advice for your situation. 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.

18692 – 2019/3/26

Do You Have Enough Income to Survive a Rainy Day in Retirement?

Everyone is familiar with the popular saying “April showers bring May flowers.” The arrival of spring also means the arrival of rainy weather. While rainy days are never fun, they signal the end of winter and the coming arrival of blossoming flowers and warmer weather. In retirement you might be able to avoid rainy weather by moving to a tropical climate.

Of course, you may not be able to avoid rainy days with regard to your financial strategy. Emergencies happen at all stages of life, including after you retire. Taxes could be a challenge and may stretch your budget. Medical expenses and long-term care costs could pose a financial threat. Market risk is always a concern.

One way to protect yourself from emergencies and unexpected costs is to boost your guaranteed* income in retirement. The more predictable, guaranteed income you have, the less vulnerable you’ll be to unplanned costs.

Not sure whether you have enough guaranteed income in retirement? Below is a three-step process you can use to evaluate your income and take action. If you haven’t projected your retirement income, now may be the time to do so.

Step 1: Establish your income floor.

Your income floor is the minimum amount of income you need to cover your most important expenses. The best way to determine your income floor is to develop a retirement budget. Granted, you can’t predict every cost you’ll face in retirement. However, you can probably make a reasonable projection based on your current expenses and your desired standard of living.

Highlight the expenses that are most important. These will include all your fixed expenses, which are the bills that have to be paid every month no matter what. You also may include a few discretionary costs, which are expenses that could fluctuate from month to month. For example, your most important expenses may include:

  • Housing
  • Utilities
  • Insurance premiums
  • Debt and credit card payments
  • Car payments
  • Medical costs
  • Food
  • Clothing
  • Cellphone bill
  • And more

Total up your most important expenses and see how much they cost on a monthly basis. Also, don’t forget inflation. It’s likely that prices will rise slightly between now and your retirement date. The sum of your most important expenses is your income floor. That’s the minimum amount of income you need each month to live in retirement.

Step 2: Project your guaranteed* income.

The next step is to project your guaranteed income in retirement. Guaranteed income is cash flow that will last no matter how long you live and that isn’t affected by market performance or other economic factors.

Social Security and pension benefits are good examples of guaranteed lifetime income. The amounts don’t fluctuate from month to month, and the income lasts for life. Distributions from 401(k) plans, IRAs or other investment vehicles may not be guaranteed, so you don’t want to include them in this calculation.

Add up your projected guaranteed income. Does it exceed your income floor? If so, you have enough to meet your bare minimum expenses. If it doesn’t, you may want to increase your guaranteed retirement income.

Steps 3: Fill in the gaps.

Ideally, you don’t just want your guaranteed income to match your income floor. You want it to exceed your income floor by a substantial amount. That way you can build a rainy day fund to cover life’s unexpected costs. Extra guaranteed income could help you pay for medical bills, home repairs or other emergency costs.

One effective ways to boost your guaranteed income is to include an annuity in your retirement strategy. Many annuities offer optional riders known as guaranteed minimum withdrawal benefits. These benefits allow you to withdraw up to a certain amount each year. As long as your withdrawal stays within the limits, the distribution is guaranteed for life. It doesn’t matter how long you live or how the market performs. Your income remains consistent and predictable.

Talk to a financial professional about how to use an annuity to boost your guaranteed retirement income. They can help you determine your income floor, project your retirement income and take action to protect yourself from financial rainy days.

Ready to boost your retirement strategy? Let’s talk about it. Contact us today at Sage Financial Partners. We can help you analyze your needs and implement a plan. 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.

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 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, no representation is made 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, or specific advice for your situation. 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.

18686 – 2019/3/25