Legislative Updates

With so much attention focused on the rifts among and between political parties and the news media, it may seem as if little actual legislation is making its way through our democratic process. However, while President Trump’s major initiatives – Affordable Care Act repeal, tax reform and infrastructure improvements – haven’t been enacted, Trump has signed more than 40 bills since taking office in January.1

Although the political situation may present frustration for people trying to make prudent decisions about their financial future, we remind you that finances are personal. Your financial decisions should reflect your own goals and timeline. We are happy to evaluate your retirement income strategy and make recommendations utilizing insurance products to help you work toward your objectives.

Here is an overview of some of the recent legislation Congress has passed:

  • Securing our Agriculture and Food Act (H.R. 1238) – This bill authorizes the Department of Homeland Security to protect efforts related to food, agriculture and veterinary defense from acts of terrorism and other high-consequence events that pose a risk to homeland security.3
  • Public Safety Officers’ Benefits Improvement Act of 2017 (S. 419) – This bill revises requirements for the Public Safety Officers’ Benefits program, which provides death, disability and education benefits to public safety officers who are killed or injured in the line of duty, as well as to their survivors. The bill includes provisions to expedite the payment of benefit claims.5

Content prepared by Kara Stefan Communications.

1 Jennifer Hansler. CNN. Aug. 3, 2017. “President Trump has signed 43 bills into law. Here’s what they do.” http://www.cnn.com/2017/06/29/politics/president-trump-legislation/index.html. Accessed Aug. 18, 2017.

2 GovTrack. 2017. “H.R. 3364: Countering America’s Adversaries Through Sanctions Act.” https://www.govtrack.us/congress/bills/115/hr3364. Accessed Aug. 18, 2017.

3 GovTrack. 2017. “H.R. 1238: Securing our Agriculture and Food Act.” https://www.govtrack.us/congress/bills/115/hr1238. Accessed Aug. 18, 2017.

4 GovTrack. 2017. “S. 1094: Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017.” https://www.govtrack.us/congress/bills/115/s1094. Accessed Aug. 18, 2017.

5 GovTrack. 2017. “S. 419: Public Safety Officers’ Benefits Improvement Act of 2017.” https://www.govtrack.us/congress/bills/115/s419. Accessed Aug. 18, 2017.

This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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IRS News to Know

As we head into the final quarter of 2017, it’s a good idea to stay cognizant of any tax issues that may affect your finances come April 2018. Now is the time to review your investments and income distribution plans to help ensure you don’t trigger additional taxes or penalties later on.

We can help retirees create income distribution strategies that provide a reliable stream of income. As some income-generating strategies could increase your tax liability in a single year, we recommend clients also consult with an experienced tax professional to understand issues regarding their specific situation. We are happy to make a recommendation from our network of professional colleagues.

One common income distribution strategy is to transfer assets from an employer-sponsored 401(k) plan to a self-directed IRA. This move can give some individuals more investment choices. The IRS encourages eligible taxpayers to consider requesting a direct trustee-to-trustee transfer, rather than doing a rollover. However, if you do not conduct a direct trustee-to-trustee transfer, it’s important to understand the rules related to personally withdrawing money from one account and depositing it to another. The IRS allows a 60-day window to do this without penalty. If an individual misses that deadline, he may qualify for a waiver to extend the deposit window. The IRS will generally allow an extension for one or more of 11 circumstances, including the death of a family member or because the taxpayer becomes seriously ill. Furthermore, a taxpayer can use a new self-certification procedure to apply for the waiver of the 60-day period to avoid possible early distribution taxes.1

Speaking of IRAs, one income distribution strategy that early retirees may be able to take advantage of is IRS Rule 72(t). Normally, someone who retires before age 59 ½ would be subject to a 10 percent penalty on early withdrawals from a retirement plan. However, Rule 72(t) waives this penalty for individuals who make a series of “substantially equal periodic payments” for five years or until the retirement account owner reaches age 59 ½ – whichever is longer. The allowable amount is based on life expectancy and must be calculated using one of the IRS approved methods.Since every situation is different, individuals are encouraged to consult with a qualified tax professional before making any decisions.

A 2011 rule from the IRS relates to the “portability deadline.” This is the rule that allows a surviving spouse to absorb any unused portion of a deceased spouse’s estate tax exemption amount. The surviving spouse must file an estate tax return on behalf of the decedent in order to qualify for the portability rule, even if the estate is under the filing threshold and typically would not be required to file an estate tax return. A new IRS guideline grants a permanent automatic extension of the time to file an estate tax return just to claim portability, extending it from nine months to up to two years after the decedent’s death.3

Also, as a reminder, 2017 is the first tax year in which taxpayers age 65 and over are subject to the same 10 percent threshold of adjusted gross income (AGI) for deducting unreimbursed medical expenses as all other taxpayers (in previous years the threshold was 7.5 percent for those 65 and over). Eligible medical and dental expenses must be over 10 percent of the taxpayer’s 2017 AGI in order to claim the deduction.4

Content prepared by Kara Stefan Communications.

1 IRS. April 19, 2017. “2016 Tax Changes.” https://www.irs.gov/newsroom/2016-tax-changes. Accessed Aug. 14, 2017.

Investopedia. 2017. “Rule 72(t).” http://www.investopedia.com/terms/r/rule72t.asp. Accessed Aug. 18, 2017.

3 Michael Kitces. Nerd’s Eye View. June 28, 2017. “IRS Extends Portability Deadline (Retroactively) Under Rev. Proc. 2017-34.” https://www.kitces.com/blog/rev-proc-2017-34-automatic-extension-deadline-form-706-portability-dsue-amount/?utm_source=FeedburnerRSS&utm_medium=feed&utm_campaign=Feed%3A+KitcesNerdsEyeView+%28kitces.com+%7C+Nerd%27s+Eye+View%29. Accessed Aug. 18, 2017.

4 IRS. Dec. 15, 2016. “Questions and Answers: Changes to the Itemized Deduction for 2016 Medical Expenses.” https://www.irs.gov/individuals/questions-and-answers-changes-to-the-itemized-deduction-for-medical-expenses. Accessed Aug. 14, 2017.

The content provided in this blog is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. You are encouraged to consult your personal tax advisor or attorney.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice.

Investing involves risk, including the potential loss of principal.  Any references to reliable income generally refer to fixed insurance products, never securities or investment products.  Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Behave Yourself 

“Overconfidence is a very serious problem. If you don’t think it affects you, that’s probably because you’re overconfident.”1

That’s a quote from Carl Richards,  a financial advisor, author, speaker, columnist and New York Times sketch artist who is well known for capturing the ethos of behavioral finance in simple words and pictures.

The study of behavioral economics and behavioral finance has come a long way in helping us understand how society’s collective actions can impact the investment markets and why, on an individual basis, we make the financial decisions we do.2

This knowledge in turn can help us control the impulsive decisions that may be costly and also lead to more purposeful actions that may improve our individual financial situation. A new study from the Deloitte Center for Financial Services defines 10 different behavioral biases that are common among investors. Three of them are:3

  • Passive decision making, or thinking that the easiest path is the best one
  • Loss aversion, when we prefer to avoid losing money over acquiring gains
  • Overconfidence; thinking that because you believe in an idea, it’s going to work

The thing about human nature is that we are all prone to impulses. If we don’t control them, our financial strategy may be affected — and possibly, our financial future. That’s one reason why working with a financial advisor is so important.

Not only can we help you create a financial strategy designed for your specific situation, but we can also help you stay on track to pursue your financial goals. So if you’re feeling an impulse to make a change, contact us first. We can help you differentiate between behavioral impulses and sound financial decision making.

Another interesting aspect of behavioral finance can be observed in our children. Much like other personality traits, they seem to develop tendencies either to buy or have an indifference to money at an early age. You may have witnessed this among your own children — raised in the same household with the same values — but they have completely different approaches to spending money.

While some of these instincts are inherent, we should make it a priority to teach our children and grandchildren sound financial principles. Not just when they’re young, but throughout their lifetime.4 Sharing stories of your own successes and bad money decisions can help shape their behavior. Because, as behavioral finance demonstrates, we never stop having perfectly natural human impulses. But our awareness, and our responses to them, may make  a difference.

Content prepared by Kara Stefan Communications.

Nocturne Capital. Sept. 6, 2016. “14 Great Behavioral Finance Quotes.” http://www.nocturnecapital.com/blog/2016/3/31/15-great-behavioral-finance-quotes. Accessed Sept. 23, 2016.
2 Michelle M. Waymire. Nasdaq.com. Aug. 15, 2016. “A Fly-By History of Behavioral Finance.” http://m.nasdaq.com/article/a-fly-by-history-of-behavioral-finance-cm665269. Accessed Sept. 23, 2016.
3 Michelle Canaan and Jaykumar Shah. Deloitte. June 1, 2016. “To save or not to save for retirement, that is the question: Is behavioral economics the answer?” https://quicklookblog.com/2016/06/01/to-save-or-not-to-save-for-retirement-that-is-the-question-is-behavioral-economics-the-answer/?linkId=27837898. Accessed Sept. 23, 2016.
4 M.P. Dunleavey. Time. Sept. 22, 2016. “My Kid Loves to Spend. Here’s How I’m Dealing With It.” http://time.com/money/4504314/children-money-behavioral-economics/. Accessed Sept. 23, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Retirement Matters 

If you’re wondering how much of a Social Security payout you may receive, one number to keep in mind is 35.

Your benefit is based on your 35 highest years of earnings. If you work less than 35 years, the calculation uses zero for your annual income in the years you’re short. Here is an article that provides a description of how Social Security benefits are calculated.1

Social Security benefits were established during the Great Depression to help ensure Americans would not retire in poverty.2 However, they’re not meant to be the “end-all” retirement income plan. If you haven’t taken a good, hard look at all of the savings and assets that you’ve acquired to create a financial strategy for retirement, that’s where we can help. We can help identify potential retirement income gaps and create a financial strategy using a variety of investment and insurance products to help you pursue your financial goals.

It’s also important to assess your current financial strategy and determine what assets to draw from first, particularly in light of their tax status during retirement and the option to delay taking Social Security to potentially optimize your benefit. You should talk to a financial advisor and tax advisor about how to create a tax-efficient retirement income withdrawal strategy.

A common mistake in retirement planning is underestimating your life expectancy — maybe based on your parents’ or grandparents’ age — and not saving as much as you need. However, it’s more likely for people to live longer than previous generations, and also have higher medical bills.3 Even if one spouse dies young, it doesn’t mean the other won’t live late into their 90s.

Women who took time out of the workforce to care for dependents can be particularly vulnerable during retirement. One recent study found that, in a 10-year break early in their career, the shortage of contributions to Social Security and a retirement plan could result in a loss of up to $1.3 million in retirement savings.4

You also should consider the impact of inflation throughout retirement. Even though the inflation rate has been low in recent years, it can still make an impact over the long term. For example, an average 2 percent inflation rate over a 20-year timeframe can reduce the buying power of a dollar to just 67 cents.5

Also investigate the investment fees associated with your retirement account, as they can have a tremendous impact. A recent analysis revealed that many teachers who invested in 403(b) retirement plans could have account balances 20 to 50 percent higher had they invested in lower-cost holdings over their savings period.6

The same issues can be found with company-sponsored 401(k) plans. A plan that offers funds from only one fund family may not give you enough choices. It is also important to understand the fees you are paying.7

Our firm is not affiliated with or endorsed by the Social Security Administration or any governmental agency and does not provide tax or legal advice.

Content prepared by Kara Stefan Communications. 

Squared-Away Blog. Center for Retirement Research at Boston College. Oct. 20, 2016. “Your Social Security: 35 Years of Work.” http://squaredawayblog.bc.edu/squared-away/your-social-security-35-years-of-work/. Accessed Oct 23, 2016.
2 Ibid.
3 Jeff Brown. U.S. News & World Report. Aug. 3, 2016. “What’s Your Plan B for Retirement?” http://money.usnews.com/investing/articles/2016-08-03/whats-your-plan-b-for-retirement. Accessed Oct. 23, 2016.
4 Financial Planning. Oct. 9, 2016. “How retired clients can deal with small COLA: Retirement Scan.” http://www.financial-planning.com/news/how-retired-clients-can-deal-with-small-cola-retirement-scan. Accessed Oct. 23, 2016.
5 Jeff Brown. U.S. News & World Report. Oct. 13, 2016. “Pros and Cons in Investing with TIPS.” http://money.usnews.com/investing/articles/2016-10-13/pros-and-cons-in-investing-with-tips. Accessed Oct. 23, 2016.
6 Tara Siegel Bernard. The New York Times. Oct. 21, 2016. “Think Your Retirement Plan Is Bad? Talk to a Teacher.” http://www.nytimes.com/2016/10/23/your-money/403-b-retirement-plans-fees-teachers.html?_r=0. Accessed Oct. 23, 2016.
7 Jill Cornfield. Bankrate.com. Sept. 27, 2016. “Q&A: Fees and Your Retirement Plan.” http://www.bankrate.com/one-to-million/qa-fees-and-your-retirement-plan/. Accessed Oct. 23, 2016.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 

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Jobs After Age 55 

The good news is 62- to 64-year-olds experienced the largest increase in jobs between 2007 and 2014.1 The not-so-good news is that many of those jobs are not of the upscale, high-paying variety.2

New research from the Center for Retirement Research at Boston College offers insights into the type of work that older people are securing today:3

  • The jobs are high on service and low on physical labor
  • Service jobs: managers, sales supervisors, accountants, real estate sales, property management
  • Low-skilled jobs: truck drivers, janitors, nursing aides, child care, retail, cab driver
  • Valued skillsets: dependability, outdoor work
  • Jobs that pay around 10 percent less than those of younger workers

A survey of households and individuals from the latest census found that, between 2008 and 2012, older workers (62+) with a college degree had less than a 50 percent chance of finding work, while those without a college degree had only a 35 percent chance.4

During an economic downturn, it’s not uncommon for employers to lay off employees, and many older workers end up getting more pink slips than others. One reason may be because they tend to earn more, so some workplaces may be inclined to hire younger, lower-paid employees to improve profit margins.5

While this may sound like age discrimination, lawsuits along those lines have become harder to win. In 2009, a court ruling made it more difficult for workers to sue for age discrimination. Plaintiffs must now prove that advanced age was the main reason for being let go — not just a contributing factor.6

Even aging workers who continue working at the same company will likely find their income doesn’t increase as much as it did when they were younger. A 2015 Federal Reserve study found that, from ages 45 to 55, wages decrease by 9 percent; they then drop another 9 percent from ages 55 to 65.7

The job situation may be more challenging for women, in part because they tend to live longer than their husbands and are therefore more likely to spend some part of their retirement living on one income. According to U.S. Labor Department projections, about one in seven women work past age 65, and within eight years that number will rise to nearly one in five.8

Working longer isn’t all bad, from a financial or social standpoint. It enables people to save longer, give their retirement assets more opportunity to accumulate, decreases how long they’ll have to live on their retirement savings and enables them to save money via employer-based health insurance.9 Plus, work provides cognitive and social engagement, which for many is a lot more fun than sitting at home or even traveling alone.

Content prepared by Kara Stefan Communications. 

Quoctrung Bui. The New York Times. Aug. 18, 2016. “More Older People Are Finding Work, but What Kind?” http://www.nytimes.com/2016/08/18/upshot/as-more-older-people-seek-work-they-are-put-into-old-person-jobs.html?_r=0. Accessed Sept. 19, 2016.
Ibid.
3 Ibid.
4 Ibid.
Bob Sullivan. CNBC. July 7, 2016. “For older workers, getting a new job is a crapshoot.” http://www.cnbc.com/2016/07/07/for-older-workers-getting-a-new-job-is-a-crapshoot.html. Accessed Sept. 19, 2016.
6 Ibid.
7 Teresa Ghilarducci. PBS. Jan. 14, 2016. “Why women over 50 can’t find jobs.” http://www.pbs.org/newshour/making-sense/women-over-50-face-cant-find-jobs/. Accessed Sept. 19, 2016.
8 Nick Timiraos. The Wall Street Journal. Feb. 22, 2016. “How Older Women Are Reshaping U.S. Job Market.” http://www.wsj.com/articles/older-women-reshape-u-s-job-market-1456192536. Accessed Sept. 19, 2016.
9 Kerry Hannon. Forbes. July 3, 2016. “5 Tips To Help Women Work Longer.” http://www.forbes.com/sites/nextavenue/2016/07/03/5-tips-to-help-women-work-longer/#74c7bf943156. Accessed Sept. 19, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 

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The New Real Estate Sector 

Real estate is no longer just for people looking to make a move.

A combination of the housing market decline and a barrage of television shows featuring novice real estate investors have people fixing up homes then listing properties with hopes of making a profit.1

The real estate investment craze has become so mainstream that in September [of 2016] it was named a separate, unique sector in the Global Industry Classification Standard.This 11th sector is the first to be added to the industry standard since it was first developed in 1999.3

Real estate holdings previously resided within the financial sector. This new classification will include Equity Real Estate Investment Trusts (REITs); note however, that mortgage REITs will remain in the financial sector.4

The separation between financial and real estate offers an opportunity for investors to diversify even more between the two sectors.5 The new sector will include all equity REITs and real estate management and development companies.6

At the time of the launch, the S&P 500 allocated a market weight of over 3.23 percent to the new sector, while the Russell 2000 Value Index assigned it a 12.21 percent weighting.Some investment analysts predict that this higher visibility of the real estate sector could prompt greater investor demand and lower volatility for the overall market.8

On the first day of trading, the official real estate sector rose 0.75 percent, although it is anticipated that underlying securities will meet headwinds when interest rates begin to rise.9 However, positive signs in the housing market have homebuilders feeling increasingly confident.10 

A September [2016] survey gauging builder confidence showed increases in current home sales, expectations of future sales and home-buyer traffic from the month before.11

It’s important to consider any investment within the context of your own goals, risk tolerance, investment timeline and the composition of your overall portfolio. You should speak with a qualified financial advisor before making any decisions about your personal situation. 

Content prepared by Kara Stefan Communications. 

Jeff Reeves. USA Today. May 21, 2016. “As rents keep rising, more investors turn landlords.” http://www.usatoday.com/story/money/personalfinance/2016/05/19/rents-keep-rising-more-investors-turn-landlords/84037794/. Accessed Sept. 19, 2016.
2 Paul Sullivan. New York Times. Aug. 26, 2016. “Real Estate Strikes Out on Its Own in the Stock Indexes.” http://www.nytimes.com/2016/08/27/your-money/real-estate-strikes-out-on-its-own-in-the-stock-indexes.html. Accessed Sept. 29, 2016.
3 Ibid.
MSCI and S&P Dow Jones Indices LLC. March 8, 2016. “S&P Dow Jones Indices and MSCI Revisions to the Global Industry Classification Standard Structure.” https://www.msci.com/documents/10199/37f69ddd-2fa0-4b95-9970-5e929a97f7b8. Accessed Sept. 19, 2016.
5 Melda Mergen. Columbia Management Investment Advisors. Sep. 6, 2016. “What the new real estate sector means for investors.” https://blog.columbiathreadneedleus.com/what-the-new-real-estate-sector-means-for-investors. Accessed Sept. 19, 2016.
6 Ibid.
7 Ibid.
8 Ibid.
Fred Imbert. CNBC. Sept. 19, 2016. “S&P real estate sector rises in first day of trading.” http://www.cnbc.com/2016/09/19/sp-real-estate-sector-rises-in-first-day-of-trading.html. Accessed Sept. 19, 2016.
10 Diana Olick. CNBC. Sept. 19, 2016. “Homebuilder sentiment jumps to 65 in September, highest level in nearly a year.” http://www.cnbc.com/2016/09/19/homebuilder-sentiment-jumps-to-65-in-september-highest-level-in-nearly-a-year.html. Accessed Oct. 14, 2016.
11 Ibid.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Retiring Takes Effort 

The first things that come to mind when thinking about retirement may be rest and relaxation, but before you reach that point, you need a financial strategy that can support your post-career plans.

A recent study found many current retirees are worried about just making day-to-day expenses:1

  • The median annual income for married retirees is $48,000; $19,000 for singles
  • 25% of today’s retirees are still paying off credit card debt
  • 60% retired sooner than expected, typically due to downsizing or other employment-related reasons or health issues

Even if you are sufficiently prepared for retirement, it’s good to establish a budget and stick to it. The Employee Benefit Research Institute recently found that nearly half of households spend more money in the first two years of retirement than they did while they were still employed.2

It’s important to recognize that retirement is much like your career — you get out of it what you put into it. That goes for both your finances and your enjoyment. Being financially prepared for retirement means more than just having enough income, you also need to plan for unexpected expenses, potentially large health care bills and the possibility of long-term care.3

We’re here to help you create a financial strategy to help you feel confident that these types of expenses won’t prevent you from living your preferred retirement lifestyle.

But let’s talk about something other than financial preparedness for just a moment. Keeping in mind that people live longer — but not necessarily healthier — lives these days, have you thought about what you’ll do on a day-to-day basis during retirement? Without a “lifestyle plan,” many retirees sink into a state of isolation, lack of mobility and bad habits.

Some people think, “I’m doing nothing but playing golf when I retire” — an admirable goal indeed. But if you eventually grow tired of walking the course five to seven days a week, it’s good to have fallback options to fill your schedule. Here’s a possible idea: Most community colleges offer courses for retirees, so why not go back to school and study something you’ve always been interested in? Not only will you engage your mind, you’re likely to meet other retirees who share your interests. Maybe team up and start an “encore career.”4

In Australia, a nonprofit organization started an initiative called the “Men’s Shed,” a place where retired men show up every day to drink coffee, debate the issues and work on community projects.5

There are plenty of occupations and hobbies out there that let you work on what you enjoy, without the constraints of working 40 hours a week. Whether you’re already retired or getting ready for it, just remember that what you put into retirement is often what you’ll get out of it.

Content prepared by Kara Stefan Communications.

Transamerica Center for Retirement Studies. April 2016. “The Current State of Retirement: A Compendium of Findings about American Retirees.” http://www.transamericacenter.org/docs/default-source/retirees-survey/tcrs2016_sr_retiree_compendium.pdf. Accessed Sept. 29, 2016.
2 Tanisha A. Sykes. USA Today. Sept. 28, 2016. “More free time could mean risky spending for new retirees.” http://www.usatoday.com/story/money/personalfinance/2016/09/28/spending-overspending-new-retirees-free-time/90498760/. Accessed Sept. 29, 2016.
Emily Zulz. ThinkAdvisor. Oct. 3, 2016. “Morningstar’s ‘Must-Know’ Stats About Long-Term Care.” http://www.thinkadvisor.com/2016/10/03/morningstars-must-know-stats-about-long-term-care. Accessed Oct. 11, 2016.
4 Knowledge@Wharton. Jan. 14, 2016. “The Retirement Problem: What Will You Do with All That Time?” http://knowledge.wharton.upenn.edu/article/the-retirement-problem-what-will-you-do-with-all-that-time/. Accessed Sept. 29, 2016.
Gavin Fisher. CBC News. March 17, 2016. “Kelowna’s ‘Men’s Shed’ replaces isolation with purpose in retirement.” http://www.cbc.ca/news/canada/british-columbia/kelowna-s-men-s-shed-replaces-isolation-with-purpose-in-retirement-1.3496600. Accessed Sept. 29, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Assessing Risk in Retirement Income

When it comes to investing, there’s no such thing as a “safe bet.” Every type of financial vehicle has some level of risk, even checking and savings accounts. Back in the 1920s, people believed that the safest place to keep their money was a bank, and they were right. But as they witnessed during the Great Depression, even those assets were not 100 percent safe. Bank runs caused banks to deplete their cash holdings, and they had to call in loans and liquidate assets to try to keep up with withdrawal demands, which subsequently led to bank failures.1 In response, the government created the Federal Deposit Insurance Corporation (FDIC), which insures deposits up to $250,000 per depositor, per FDIC-insured bank, per ownership category.2

Throughout history, bank deposit accounts have generally been considered the safest place to keep assets. However, today’s longer lifespans illustrate that risk takes many forms, including the potential risk of outliving your money if you don’t save enough, have a well-diversified financial portfolio to help outpace inflation and seek out multiple sources for reliable income streams. We can recommend a variety of strategies to help retirees pursue each of these goals, based on individual circumstances. Give us a call, and let’s discuss your options

Consider even Social Security. The agency projects that by 2034, its Trust Fund will be reduced to the point where it can pay out only 74 percent of promised benefits to retirees. While it’s unlikely this safety net will collapse, Congress will need to take steps to keep the fund fully solvent.3

However, individuals who invest in 401(k)s should be aware that even if their company closes or goes bankrupt, vested 401(k) assets belong to the account owner; the employer or the employer’s creditors can’t touch them.4

Another factor that can potentially affect your retirement assets is the impact long-term inflation can have on cost of living expenses for people who spend 20 to 30 years or more in retirement. Inflation has remained low for many years, and some market experts believe that, as a result, many investors are not well-prepared for a resurgence of inflation.5

With the knowledge that investing offers the possibility of growth but also the risk of loss, it’s a good idea to consider working with a financial advisor to help tailor a financial portfolio to your specific goals, timeline and tolerance for different types of risk. Your financial advisor may also suggest annuities, and although they are not investments, some annuity contracts credit interest earnings that are linked to the performance of an external market index. These types of annuities, often referred to as fixed index annuities, offer a combination of higher interest growth potential and guaranteed income. The guarantees are backed by the insurance company so it’s important to check out the credit rating and financial strength and experience of the issuing insurer.

Content prepared by Kara Stefan Communications.

1 History.com. “Bank Run.” http://www.history.com/topics/bank-run. Accessed Aug. 6, 2017.

2 Federal Deposit Insurance Corporation. June 3, 2014. “Deposit Insurance FAQs.” https://www.fdic.gov/deposit/deposits/faq.html. Accessed August 15, 2017.

3 Chris Farrell. Forbes/Next Avenue. June 24, 2016. “The Truth About Social Security’s Solvency And You.” https://www.forbes.com/sites/nextavenue/2016/06/24/the-truth-about-social-securitys-solvency-and-you/#2590b10b2199. Accessed Aug. 14, 2017.

4 Dana Anspach. The Balance. Nov. 22, 2016. “If My Company Closes, What Happens to My 401k?” https://www.thebalance.com/if-my-company-closes-what-happens-to-my-401k-2388225. Accessed Aug. 14, 2017.

Rebecca Ungarino. CNBC. Aug. 5, 2017. “Inflation isn’t stirring, but still the biggest risk to investors even as it’s ‘least apparent’: Brown Brothers.” https://www.cnbc.com/2017/08/05/with-inflation-dormant-investors-downplay-risks-to-the-economy.html. Accessed Aug. 6, 2017.

Investing involves risk, including the potential loss of principal. Any references to reliable income generally refer to fixed insurance products, never securities or investment products. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Retirement Stages

What’s so difficult about planning for retirement? You save; you retire; you spend.

If only it were that straightforward. Today’s pre-retirees and retirees have so much more to consider. Longer lifespans mean longer exposure to the possibility of inflation eroding your purchasing power. And then there are these concerns:

  • The global economy and its impact on everything from market volatility to interest rates to unemployment and wages
  • The decrease in company pensions and greater burden for retirees to provide more of their retirement income
  • The long-term solvency and viability of Social Security
  • How future legislation and the political environment might impact Medicare

It’s a lot to think about. That’s one reason it’s important to work with a knowledgeable financial professional to help you consider the factors that might impact your retirement. The good news is that many retirees now have the time, thanks to a longer lifespan, to plan for and enjoy a longer retirement. When it comes to your retirement income planning needs, we may be able to help with that; just give us a call. As an independent financial services firm, we help people create retirement strategies using a variety of insurance products to custom suit their needs and objectives.

Much as our younger adult life can be divided into stages — college, job, marriage, family and all manner of advancement rungs in a career — retirement can be broken into separate categories as well. It’s not all travel and country club parties, gardening and golfing, grandchildren and book clubs. In fact, those activities are generally characteristic of the first stage of retirement, when we tend to spend more time with family and friends, pursuing hobbies, travel and other “bucket list” items.1

One of the best things about the first stage of retirement is that Mondays are no longer dreaded; they’re just another day of the week. It may take some time, but some retirees learn to replace their office wear for roomy, comfortable workout pants and soft tees. Put these on, and you can just feel the stress melt away.2

During the second stage of retirement, you might not travel quite as much. You may even think about moving closer to your children or to a community with other people your same age. These are good instincts because it’s important at this stage to stay socially connected. 3

During this stage, if you’re concerned about the possibility of outliving your income, it’s natural to cut back on expensive activities like travel. In fact, now that you spend more time at home, you might consider getting an easy, low-stress part-time job. Or you could join the gig economy, working from home.4 It’s important to remain engaged, and, of course, extra money coming in wouldn’t hurt.5

In the third stage, when retirees move past age 80 or later, they may need daily assistance.6 Again, it’s a good idea to set up some type of regular relationship to avoid isolation and stay connected — even if you remain quite independent. This could involve sharing meals with a companion on a regular basis. Have someone you can call to change a lightbulb, move furniture around for better mobility or help you bake an old family recipe — and share it over a cup of coffee.

Each stage requires some degree of planning. Even during a “freewheeling, high-octane” first stage, you’ll need to lay some of the groundwork to help ensure your latter stages of retirement are enjoyable. This includes eating healthy, establishing an exercise routine that is sustainable throughout your lifetime and engaging in activities you can continue through old, old age. And, perhaps most important, work on strengthening relationships that will be with you forever.

Content prepared by Kara Stefan Communications.

1 BoomingEncore.com. “Three Different Stages of Retirement” http://www.boomingencore.com/three-different-stages-retirement/. Accessed Aug. 6, 2017.

2 Business Insider. April 16, 2017. “I retired at 52 with a $3 million net worth — here are 10 things that surprised me about early retirement.” www.businessinsider.com/early-retiree-shares-10-things-that-surprised-him-after-he-quit-his-job-2017-4. Accessed Aug. 6, 2017.

3 BoomingEncore.com. “Three Different Stages of Retirement” http://www.boomingencore.com/three-different-stages-retirement/. Accessed Aug. 6, 2017.

4 Mary Beth Franklin. Investment News. April 21, 2017. “Retirees embrace the gig economy.” http://www.investmentnews.com/article/20170421/BLOG05/170429976/retirees-embrace-the-gig-economy. Accessed Aug. 6, 2017.

5 Katy Read. Star Tribune. Sept. 4, 2016. “Get back to work! Working past ‘retirement age’ is beneficial.” http://www.startribune.com/experts-agree-working-past-retirement-age-is-beneficial/388305801/. Accessed Aug. 6, 2017.

6 BoomingEncore.com. “Three Different Stages of Retirement” http://www.boomingencore.com/three-different-stages-retirement/. Accessed Aug. 6, 2017.

This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Possible Perks and Perils of Buying Coastal Property

All over the world, from Miami to the Maldives, rising sea levels threaten coastal real estate.

Scientists say the daily high-water mark has been rising by nearly an inch a year in places like South Florida. During extraordinary high tides, saltwater even sneaks up the driveways of some multi-million dollar coastal homes.1

While projections vary, the general consensus is that sea levels could rise by anywhere from 3 to 6.5 feet by the end of this century. 2

Many people dream throughout their careers of owning a piece of real estate on the water, perhaps as a retirement first or second home. While oceanfront property demand remains strong and communities are still being developed, the potential effect of climate change is beginning to cast a shadow over this dream.3

According to the federal government, eight out of 10 of the most expensive natural disasters in U.S. history were caused by hurricanes.4 For anyone intending to purchase property near the ocean, it’s an issue that should not be ignored. It’s a good idea to speak with an experienced property and casualty insurance agent to understand a homeowner’s responsibilities regarding coastal property.

If your heart is set on the waterfront, a real estate agent with experience selling these types of properties can be helpful. Buying coastal properties requires a certain amount of due diligence. For example, it’s wise to find out:5

  • The different types of mortgage loans and qualifying criteria, because a loan for waterfront properties can take a lot longer than a normal home loan
  • Whether the structure’s building materials are designed to withstand local weather conditions
  • What’s allowed and what permits are required for any improvements you may want to make, such as adding a deck, dock or boat lift
  • If all the utilities you expect are available, such as cable television, internet access and cellphone coverage

Generally, mortgaged properties in flood zones require flood insurance sold by the federal government. While this insurance may be required to purchase the property, some homeowners later drop their policies. If you don’t have insurance and your house floods, the financial impact could be disastrous. Under some circumstances, the government may still offer assistance but it may not be nearly enough. For example, the average federal assistance in Florida is $4,000, compared to the average flood insurance payout of $51,000.6

Another flood insurance tip: There’s generally a 30-day waiting period before coverage goes in force, so you may not want to wait until your local news starts tracking a storm to purchase flood insurance. 7

Then again, coastal real estate can provide free housing for vacations as well as ongoing rental income. You should carefully consider whether you’re up for the task, which can include landlord duties, maintenance and upkeep, ongoing expenses and the inconvenience of an illiquid asset.8

Content prepared by Kara Stefan Communications.

1 Elizabeth Kolbert. The New Yorker. Dec. 28, 2015. “The Siege of Miami.” http://www.newyorker.com/magazine/2015/12/21/the-siege-of-miami. Accessed Dec 11, 2016.

2 Ibid.

3 Ian Urbina. The New York Times. Nov 24, 2016. “Perils of Climate Change Could Swamp

Coastal Real Estate.” http://www.nytimes.com/2016/11/24/science/global-warming-coastal-real-estate.html?_r=0. Accessed Dec 11, 2016.

4 FloodSmart.gov. Sept. 27, 2016. “Tropical Storms and Hurricanes.” https://www.floodsmart.gov/floodsmart/pages/flooding_flood_risks/tropical_storms_hurricanes.jsp. Accessed Dec 11, 2016.

5 Shannon Petrie. HGTV. 2016. “Waterfront Buying: Top 10 Tips from Agents.” http://www.hgtv.com/design/real-estate/waterfront-buying-top-10-tips-from-agents. Accessed Dec 11, 2016.

6 Harold Bubil. The Herald Tribune. March 23, 2016. “Flood insurance is getting expensive, but can you afford to be without it?” http://realestate.heraldtribune.com/2016/03/23/flood-insurance-is-getting-expensive-but-can-you-afford-to-be-without-it/. Accessed Dec 11, 2016.

7 FloodSmart.gov. 2016. “Protect What Matters.” https://www.floodsmart.gov/floodsmart. Accessed Dec 11, 2016.

8 Bankrate.com. Aug. 2, 2016. “Funding retirement with rental income.” http://www.bankrate.com/finance/retirement/funding-retirement-with-rental-income-1.aspx. Accessed Dec 11, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

 The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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