By preparing yourself financially and taking care of
yourself, your plans have a better chance of being bullet proof-regardless of
what life hands you. |
Planning for the Long Haul: Is Your Plan for Retirement Bullet Proof?The good news is we are living longer, but the bad news is
that having regular employment, good health and the premature depletion of
retirement assets is becoming a reality for many Americans. Despite plans for
retiring later (compared to previous generations) at age 69 or into the 70’s,
unplanned events are contributing to earlier retirement, despite the best
retirement planning preparation.
According to a 2018 survey by The Employee Benefit Research Institute (ERBI), 40% of participants in the
study plan to retire after age 70 citing personal financial concerns. However,
previous research studies by the same group revealed that many workers are
forced to retire before age 60.
Consider why the outlook for an unexpected early retirement is happening to
many people:
Layoffs and
Terminations- The ERBI survey revealed that 26% of workers terminate
out of their jobs before turning age 60. Older workers are often paid higher
wages than their younger counterparts and unfortunately are often the first to
be terminated. Even with an early retirement buyout, many have a hard time
finding work with the same pay rate and benefits. The change in income is creating negative consequences for many as suspended
savings contributions and premature liquidation is occurring when retirement
assets become necessary for living.
Health Issues- Despite
longevity increasing worldwide, many workers are forced to retire early due to
health reasons. What we do to our health in our younger years affects us later;
smoking, alcohol consumption, lack of a healthy diet and exercise and sleep
deprivation are the most significant contributors affecting our health later in
life with genetics being secondary.
Keeping yourself healthy and
employed is imperative to your retirement plan’s success. By preparing
yourself financially and taking care of yourself, your plans for retirement
have a better chance of being bullet proof-regardless of what life hands you. Click here for printable version
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 | Are Early Retirement and Pension Buyout Offers a Good Deal for You?In today’s
economy, offers of an early retirement buyout for a current employee or a
pension buyout directed at a former employee are becoming common as companies
look for ways to cut costs. Many large
employers are offering employees who are not yet at retirement age the option
to take an early retirement buyout. Each company has their reason for providing
the buyout, but mainly because it will save the company money to hire a junior
employee to fill a senior employee’s role when the yearly salary is a factor.
For companies
that had a pension plan for their employees, pension buyout offers have become
standard practice due to the increasing costs of administering pension plans. Even
though pension plans may not be currently part of the employer’s retirement
plan, there may be former employees that have the pension plan. Companies have
a desire to get the liabilities associated with the pension payments for
retired employees off their balance sheets well ahead of their retirement start
dates.
Both of these types of offers usually come
with several options:
- Take the value
of your early retirement or pension buyout as a lump-sum payment which can be
rolled over to an IRA. The advantage is the ability to manage this money
outside the employer’s plan, perhaps growing the value to a level that would
provide a more significant benefit than taking your payments every month.
- Take a monthly
payout now (earlier than your average retirement age) with tax consequences.
- Do nothing and
take your original pension payment (or a lump-sum if offered) at your planned retirement
age.
Factors to consider:
- Will taking one
of the buyout options put you in a better financial position than doing nothing
and waiting until your normal retirement age?
- Are you
comfortable managing a lump-sum yourself or do you prefer a financial advisor
you trust to help?
- Is your
financial or health situation such that taking the monthly payments now would
make sense?
These types of
offers are likely to continue given the unknown financial future, the tariff
environment, and the worldwide economy. If you receive an early retirement or
pension buyout offer, please contact our office for a consultation. I can help you evaluate your offer and make
the best choice for your personal situation. Click here for printable version
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In today’s
economy, offers of an early retirement buyout for a current employee or a
pension buyout directed at a former employee are becoming common.
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Although politicians like to use GDP as a goal in measuring
the health of the economy, stocks don’t track upward or downward depending on
the GDP. | GDP: Does It Affect Your Portfolio?Gross Domestic Product (GDP) is the total of everything
produced in a country, even if it is made by a foreign company or foreign
workers within a country’s borders. GDP counts the final value of a product,
but not the parts that go into producing it as a way to avoid ‘double
counting.’ In many countries, GDP is measured quarterly by adding personal
consumption expenditures plus government spending plus business investment plus
exports minus imports (GDP Standard Formula: C + G + I + (X-M). But does GDP
have a bearing on your portfolio?
GDP growth is a measure of an economy’s growth but is not an
accurate indicator of stock market performance. Although politicians like to
use GDP as a goal in measuring the health of the economy, stocks don’t track
upward or downward depending on the GDP.
There are continuing factors impacting the U.S. GDP:
- The U.S. has shifted from an Industrial Economy to a Service
Economy (not counted in GDP)
- We are becoming ‘more efficient’ consumers, purchasing fewer
non-essential goods than previously.
- Low energy prices = reduced economic expansion
Indicators that are relevant to stock market performance
include current economic conditions, changes in financial conditions for
companies, and future production forecasts. Two industries that affect the
stock market, regardless of the country of origin, are the automotive industry
and the technology sector. When production booms or lags in either of these, it
reflects in the stock market where the company is based.
However, when the stock market is over-performing or
under-performing, consumer confidence directly affects GDP. During a bull
market, there is optimism about the economy and consumer spending increases. As
a result, company valuations increase, expansion happens due to increased
product demand, companies can borrow easily, and more jobs are available. When
the stock market is underperforming, consumers are reluctant to spend, which has an impact on GDP.
If you have questions or concerns regarding the stock market
and how your portfolio is performing, now is a great time to review it and plan
for a market downturn. Click here for printable version
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 | Money Mistakes Parents Teach Their ChildrenMost parents want what is best for their children, but
sometimes have habits themselves that equate to teaching their children poor
financial habits. Children learn by watching their parents and other adults (modeling)
and as they mature their mistakes and bad habits become hard to correct. Bad
financial decisions can be especially detrimental when they become adults and
are responsible for their finances.
Teaching your children how to be frugal and manage their money will have positive long-lasting effects and not negative
consequences of overspending when it comes to their own money. Here are some common
mistakes parents should avoid:
Using Credit to Make Frequent Purchases- Children that
see their parents paying for everything with credit can’t understand the
concept of using cash because they don’t see the actual payment happen. Parents
that use credit for their own ‘rewards’ are enforcing spending by using credit
and leading their children toward spending and
credit problems without even realizing it.
Giving Children Money and Buying Items Each Time They Ask-
Children who are consistently receiving what they ask for each time don’t learn
delayed gratification. Often what they wanted and receive becomes less
rewarding when they move onto the next new one. This ties into goal setting and
teaching children to work (or wait) for what they want and is missed when
parents over-indulge their children.
Parents are Trying to Keep Up with ‘The Johnsons’- When
children see their parents buying items like their friends in proximity, they
get the idea that they need to do the same. Children (and their parents) don’t
see the income or debt side of what others do. Trying to keep up with someone
else’s spending and acting like them is not a healthy plan.
Failing to Set Budgets- Parents that have a budget set
for their monthly spending and give their children a spending budget model
positive behavior and are more likely to model using cash for purchases. For
most Americans, credit card spending is linked to buying outside of their
budget because they don’t have the financial resources to in cash.
Not Saving into an Emergency Fund or For Retirement-
Parents that don’t have either of these typically don’t see the importance of talking
to their children about saving. When parents model saving and speak to their
children about the importance of having money for an emergency or retirement,
their children model the same behavior as adults. Click here for printable version
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Most parents want what is best for their children, but
sometimes have habits themselves that equate to teaching their children poor
financial habits. |
