Category Archives: 401(k)

September 4, 2018

Live Webcast – 6 What Ifs of Retirement Planning

Informative webcasts brought to you by carborough Capital Management

Join us for a live webcast presented by David Sizemore, CFP®

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Register for our live webcast below.

Scarborough’s Educational Webcast Series presents: The 6 What Ifs of Retirement Planning. Retirement can be full of questions and it’s common for retirees and those approaching retirement to have fears about maintaining a comfortable lifestyle in an era of volatile markets and rising costs. Please join us for a webinar as we outline six common “What Ifs” of retirement and present some strategies to address them.

Please join us for this informative webcast. We encourage you to forward this invitation to your family, friends, or anyone who is nearing retirement.

 

Click a link below to register for a session.

Wednesday, September 19th @ 10am Eastern

Wednesday, September 19th @ 6pm Eastern

Get to know David.

Click here to learn more about  David Sizemore, CFP®.

July 9, 2018

Live Webcast – Take Control of Your 401(k)

Informative webcasts brought to you by carborough Capital Management

Join us for a live webcast presented by Jonathan Szostek, CFP®, CRPC®

401k, defined contribution plan management
Learn the the information you need to help you make more informed decisions when it comes to your 401k. Register for our live webcast below.

The 401(k) plan has become the single largest source of retirement savings for a majority of American workers. By design, they require people to manage their own investments. In many cases people do not have the time, talent, or tools to do so effectively or efficiently.

Learn how to take control of your 401(k). Join us for an educational webinar to learn how to more effectively manage your 401(k).

You’ll learn:

  • Important plan features and option of typical plans*
  • Opportunities you may be overlooking
  • Actionable steps you can start today

We encourage you to forward this invitation to your family, friends, or anyone who has questions about their 401(k).

 

Click a link below to register for a session.

Wednesday, July 25th @ 6pm Eastern

Get to know Jon.

Click here to learn more about Jon Szostek.

 

* Every 401k plan has unique characteristics. To maximize your plan you need to know all of your specific plan options.

June 13, 2018

The New College Graduate’s Guide to Investing

401k advisor annapolis in maryland at SCM

The New College Graduate’s Guide to Investing

By Jonathan W. Szostek, Vice President of Investments, CERTIFIED FINANCIAL PLANNER®, RICP®, AIF®, CRPC®,  Scarborough Capital Management

Getting financially organized is no different than getting organized in any other aspects of your life.
Since you’re already balancing so many things as you start your life after college, you can consider your investments just another piece of the puzzle.

Congratulations, graduate! You’ve made it through all the tough years of school, and now it’s time to set out on the rest of your life. And while your immediate concerns may be focused on finding that first post-college job, or setting out on some grand adventure, you’re also in a unique position to make the financial decisions that will set you up for success from here on out.

Unless you were a finance major, you probably didn’t learn a whole lot about investing money during your college career. And what you already know is probably a little confusing—maybe even downright scary.

After all, investing can be a complicated process. But we’re here to tell you that it doesn’t have to be—and that you’re in a prime position in life to maximize the benefits of a sound investment strategy.

Starting From Scratch

You have a college degree (again, congratulations). You may already have a new job (if so, congratulations again). Maybe you just moved into a hip downtown apartment with some friends. You’re establishing yourself as a genuine, bona fide adult.

And as you get acquainted with your new adult responsibilities, you may find that your money is flying out to cover things like rent, utilities, and food (not to mention those delightful student loan payments) faster than it’s coming in. The whole thing may be a bit overwhelming… but don’t panic!

Getting financially organized is no different than getting organized in any other aspects of your life. How did you move all your things into that new apartment? How did you manage all that classwork in college? You had a plan, and you stuck to it.

Since you’re already balancing so many things as you start your life after college, you can consider your investments just another piece of the puzzle. It’s the perfect time to get used to budgeting for your future—after all, what’s one more thing at this point? Start planning for it now, and it can become second nature.

Get acquainted with the basics of investing, and consider sitting down with a qualified financial advisor to custom-tailor your investment strategy.

Save into a 401k

One of the easiest ways for a new college grad to get started making investments is with a 401k. If offered by your employer, these specially designed accounts may help you maximize your retirement savings, and the sooner you start contributing to one, the better off you could be.

Your employer may even offer to match your 401k contributions up to a certain point, which is something you should definitely take advantage of—after all, it’s free money! This is usually done as a percentage of your salary, and it’s a good indication of what your minimum contributions should be.

For example, if an employer offers to match the first 3% of your salary contributed to your 401k, you should contribute at least 3%; otherwise, you’re losing the matching money. You should always look to save as much of your income as you can, even though it may be tempting not to. But think of it this way: if you’re not taking advantage of an employer’s 401k matching, you’re effectively reducing your savings rate.

Get Help from Technology

One of the biggest advantages today’s graduates have when it comes to investing (and to a lot of things, really) is technology. There are apps out there that make investing and budgeting easier than they’ve ever been before. Some of these apps even go so far as to make personal finance management into fun, using colorful graphics and game-like elements to keep users engaged.

It’s a far cry from the ledgers and spreadsheets of yesterday. And it’s generally every bit as effective, as long as you’re aware of a few key things.

The first thing you should look into is a good budgeting app. Many budgeting apps make it easy to see all of your accounts, keep tabs on your debt, and set up monthly budgets with automatic alarms for overspending. What more could you want?

But the key to getting the most out of any budget is to actually pay attention to it. While an app can tell you when you’ve hit your monthly limit on takeout food, it can’t stop you from ordering more the next time you’re hungry!

Get Started Now

No matter how you plan to save for retirement, the key is to start doing it as soon as possible. Investments tend to grow over time so the sooner you start, the better off you can be.

If you’re ready to start saving, your best bet is to talk with a professional and come up with a strategy that fits your exact needs. Having a qualified financial advisor on your side will give you a huge advantage not just in tackling your everyday expenses, but in putting away the money you need for a long and comfortable retirement.

And yes, you may have just graduated college, but that doesn’t mean it’s too early to start thinking about retiring—it makes it the perfect time to start planning.

 

 

 

 

 

Related Posts:

What retirement might look like for Millennials

Why saving early on in life is underrated

14 Questions for Joining Finances with Your Significant Other

 

 

March 27, 2018

Live Webcast – After Tax Money In Your 401(k)? Hate Taxes?

Informative webcasts brought to you by carborough Capital Management

Join us for a live webcast presented by Jon Szostek, CFP®, RICP®, AIF®, CRPC®

 

after tax FB adPlease join us as we outline an important strategy for those with after-tax assets inside their 401(k).

  • Learn how to determine if you have after-tax assets inside your 401(k)
  • Learn how you may be able to “unlock” the assets, allowing for tax-free growth inside a Roth IRA
  • Review of IRS Notice 2014-54
  • Ongoing strategies with a goal to make the most of your retirement dollars

We encourage you to forward this link to your family, friends, or anyone who has questions about their 401(k).

 

Click a link below to register for a session.

Wednesday, March 28th @ 10am Eastern

Wednesday, March 28th @ 6pm Eastern

 

Get to know Jon.

Click here to learn more about Jon Szostek.

November 29, 2017

How To Make Your Annual Bonus Work As Hard As You Do

401k advisor annapolis in maryland at SCM

How to make your annual bonus work as hard as you do.

By Jay Sprinkel, CRPC®, Managing Partner,  Scarborough Capital Management

wealth management advisor annapolis md with SCM learning
Here are a few suggestions to make your annual bonus work as hard as you do and keep working long after you’ve retired.

Many times when people receive an annual bonus, they’ll think about all of the great things they can potentially do with it. Bolster an IRA account. Continue saving into a child’s college fund. Or even take a vacation.

But sometimes, those plans get put on hold or simply forgotten. The funds are deposited into a checking account, and before the person knows it, the money has gone to dinners out, some new clothes, an unforeseen car repair and maybe even a new gadget.

So what happened?

Mainly, brainstorming and dreaming of what the best course of action to take with the bonus stopped short of actually planning. In order to prevent this, here are a few suggestions to make your annual bonus work as hard as you do and keep working long after you’ve retired.

Tax implications

The first thing to think about in terms of a bonus is how it could potentially be taxed. Some people think that a bonus is taxed more than your regular salary. While this may be true in some cases, it’s not that way for all.

The easiest way to think about it is that your bonus is a lump sum raise that gets added to your annual salary. This could move you up into the next tax bracket, causing you to pay at a higher rate. (And this adjustment is what gives the impression that a bonus is taxed more.)

Be aware of what that change could mean and be sure to consult your tax professional for your specific situation. And while this article should not be construed as tax advice, some of these suggestions may offer insight into what to speak to your tax advisor about.

Maxing out your 401(k)

In 2017, you’re able to contribute a maximum of $18,000 to a 401(k) plan, or $24,000 if you’re 50 years old or older. If you haven’t yet reached this limit, your bonus could be a great addition. Also, if you’re in your late 20s or early 30s, this money could be worth more down the road due to compounding interest. Don’t fall into the trap of thinking that you can just play catch up later. Do it now and you won’t have nearly as much catching up to do down the road.

For example, if you get a $5,000 bonus, put it in an account earning 5 percent annually and do absolutely nothing to it, you would have over $10,000 in about 15 years. You just doubled your bonus by not doing a thing.

The thing to be aware of here is if your employer will let you do this. Some only let you contribute up to a certain amount, and you may not get the full match if you spread out your contributions. Check with your human resources department for more information on your situation.

Pay down debt

Debt, especially the high interest credit card kind, should be dispatched as quickly as possible. If you have $4,000 of credit card debt at 10 percent interest and pay only $100 a month, it will take you slightly over four years to pay it off at a cost of around $900 in interest.

Alternatively, you can simply take that lump sum bonus and pay the entire bill. You can use the money you saved in interest towards a vacation for yourself instead of helping send a credit card company executive on one.

College savings

If you have young children it may seem like just when you finally get caught up paying for necessities, something else comes up. It’s easy to see your bonus as a way to cover these expenses, but it may also be a good idea to use some of it to start saving for their college education.

With a college savings plan, you can take advantage of some great tax benefits when you use the money you save towards educational expenses. Be sure to check with your financial professional for specifics on how these plans work and which might be right for you given your situation.

Have fun!

If you’ve taken some of your bonus and paid off debt or put it to work in some type of savings or investment account and still have a little left over, it’s still perfectly fine to use the rest as a treat. Carve out a portion just for you or your family for a fun purchase or better yet a memorable vacation. More and more people have been minimizing their physical possessions and investing more in experiences, which they say makes them happier.

Everyone is going to have different needs and goals with respect to their money. Whatever yours may be, it’s best to take stock of your personal financial situation and then allocate the money toward whatever has the most leverage for you. Start thinking about this today, and if need be, contact your financial professional for more guidance on these topics.

 

Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results. Diversification and asset allocation do not guarantee positive results. Loss, including loss of principal may result. 

Examples used are for hypothetical purposes only. They are not intended to portray past or future investment performance for any specific investment. Your own investments may perform better or worse than these examples. These examples do not include taxes, which could have a dramatic effect on your results.  

September 28, 2017

Live Webcast – After Tax Money In Your 401(k)? Hate Taxes?

Informative webcasts brought to you by carborough Capital Management

Join us for a live webcast presented by David Sizemore, CFP®

 

after tax FB adPlease join us as we outline an important strategy for those with after-tax assets inside their 401(k).

  • Learn how to determine if you have after-tax assets inside your 401(k)
  • Learn how you may be able to “unlock” the assets, allowing for tax-free growth inside a Roth IRA
  • Review of IRS Notice 2014-54
  • Ongoing strategies with a goal to make the most of your retirement dollars

We encourage you to forward this link to your family, friends, or anyone who has questions about their 401(k).

 

Click a link below to register for a session.

Tuesday, October 10th @ 6pm Eastern

Thursday, October 12th @ 10am Eastern

 

Get to know David.

Click here to learn more about David Sizemore.

May 1, 2017

Men Save More Than Women. What’s Behind This Gender Savings Gap?

401k advisors capital management maryland

Scarborough Capital Management’s recent survey found that not only were women more likely to have less saved in their 401(k) than men, but 17.1% of men spend 10 hours a year managing their 401(k) while only 6.2% of women spend an equivalent amount of time.

According to Joshua Goldsmith, CFP®, CRPC®, a financial planner with Scarborough Capital Management, there’s an important factor that allows for this gap. “The main reason is one that is unfortunate and is a subject that has been discussed a lot lately. In the past women typically were not given a fair shot at opportunities for jobs, promotions and income. This affected how much, on average, a woman could save in her 401(k) relative to men,” says Goldsmith.

Even though this has been the case for a while, fortunately, strides are being made in the right direction to close this gap. Goldsmith explains, “As mentioned earlier, the good news is women are starting to gain more opportunities in jobs, promotions, and income due to increased awareness about this problem that has gone on too long. This in turn has increased the average balance that women have in their 401(k)s now compared to the past.”

According to Gregory Ostrowski, CFP®, CRPC®, a financial planner with Scarborough Capital Management, one of the best things men or women can do to potentially improve their results is to delegate the responsibility. “A group like ours can help facilitate a better understanding of the options you have to save and in which to invest. Further, we can do it with you and for you. We’ll counsel clients along the way, educating them on their various assets, but helping take the burden off them,” says Ostrowski.

In addition to helping investors have more confidence with professional help, there’s even more that can be done. Ostrowski believes that in order to have investors see the best results, education and engagement are key. “We find that the more our clients understand how to best use the tools their employer has given them, the more they engage in developing a broader financial plan.”

This lack of education can be detrimental. “For example, many 401(k) plan designs leave an employee completely overwhelmed, often resulting in “analysis paralysis” or simply accepting of a “default” investment choice if given the option. Many times, the default option is a cash-type instrument. If I’m only earning 1 or 2% on my money over the course of my career versus 6 or 7%, we’re talking an entirely different outcome (and lifestyle),” warns Ostrowski.

“I don’t know if there is a “one size fits all” for everybody in regards to time spent managing your 401(k).” says Goldsmith. The Annapolis-based financial planner advocates for professional help, and explains, “We spend the time researching your investments and working with you to see if any changes in the market, economy or your life might warrant something else other than a simple rebalance.”

It appears that even though steps are being taken to try to close the gender savings gap, there’s still much work to be done.

The full results of the survey can be found at http://scmadvice.com/401k-pulse-report/.

 

Methodology

Research Now conducted a nationally representative digital survey on behalf of Scarborough Capital Management. The survey was conducted from February 10, 2016, through February 17, 2016, and consisted of 1,004 Americans throughout the United States older than 18 with 401(k)s. The margin of error is +/- 3% for the national sample.

 

About Scarborough Capital Management

For over two decades, Scarborough Capital Management has provided comprehensive wealth management services to busy individuals and families who don’t have the time to develop and manage a portfolio. What sets the company apart is its inherent interest in helping everyone from mid-level employees to top-tier executives prepare for retirement. Scarborough Capital Management’s services include a comprehensive array of financial planning support for people in all stages of life, including 401(k) and 403(b) Management, Thrift Savings Plan (TSP) Management, Wealth Management, Personal Pension Analysis, Social Security Analysis and Financial Planning. Advisory services are offered through Scarborough Capital Management (SCM), a Registered Investment Advisor. For more information about Scarborough Capital Management, visit http://exciting-wish.flywheelsites.com.

Contact Us

Download the full survey now.

April 26, 2017

Born After 1980? Here’s Your 10 Point Guide To Investing

401k advisor annapolis in maryland at SCM

Born after 1980? Here’s your 10 point guide to investing

By David Sizemore, CERTIFIED FINANCIAL PLANNER®, Retirement Advisor,  Scarborough Capital Management   

investment advisors annapolis md

If you were born in the 1980s or ‘90s, chances are you are have a pretty busy life with mounting financial responsibilities. Student loans, maybe a mortgage or possibly even young children to care for. And while it may seem decades away, saving for retirement is something that should be getting as much attention today as driving your kids to soccer practice or a trip to the grocery store.

While you may know that putting money away for your future self is important, you can’t help but wonder if you’re doing it correctly, or, how start in the first place. Below we’ll outline 10 points to consider and how you can address each.

  1. You’ll start to have a lot more payments – don’t miss them. It may seem tedious, but the time you spend on the front end here is going to pay for itself multiple times over down the road. With whatever system you use (spreadsheet, financial software, old fashioned paper), make sure you track money going in and out, as well as your bills and loan payments, along with associated due dates. Pay on time and keep the late fees and interest at bay.
  1. A contingency fund is critical. Undoubtedly, you’ve heard and read about having some money set aside in the event of some unforeseen major expenses. This could be the loss of a job, medical expenses or even a larger than expected car repair. Instead of putting these costs on a credit card (which could cost you hundreds or even thousands in interest), think ahead and put at least three to six months expenses into this account.
  1. Pay off a little debt and your confidence can grow. By paying off your smaller debts and loans first, it may help you stay more diligent in paying off the larger sums. The thinking goes this way: if you see progress in getting loans paid, no matter how small, it will give you confidence to get the larger ones paid off sooner. It’s not the only way to pay down debt, but it for some it definitely works.
  1. Look into a Roth 401(k). If you think your tax rate is going to be more in your later years due to increased income and a higher tax bracket, a Roth 401(k) plan taxes your money as it’s going in, not as you withdraw. And unlike a typical 401(k) plan you don’t pay taxes on your investment earnings.
  1. The market is volatile, but stock is ok to invest in. The stock market has shown signs of volatility since November, but that doesn’t mean that it shouldn’t be an option at all. Keep a relatively balanced portfolio and adjust based on your risk tolerance.
  1. Examine your 401(k) options when you change jobs. You may be tempted to take a quick cash out and go on a vacation or make a cosmetic improvement on your home. But beware, if you cash out, taxes and penalties will probably far outweigh the benefit of your purchase. Instead, you may want to leave your 401(k) where it is, roll it into your new employer’s plan, or roll it into an IRA account.
  1. Do your research before purchasing a home. Buying a house can be stressful, so make sure you have as much info on the process as possible to reduce your anxiety. Track interest rates, look at fluctuations in home prices in the areas you’re interested in, and even consider if a new build would make sense. Buying a home is not like ordering something from Amazon. Once you sign it’s much harder to return it.
  1. Your children may be young, but they’ll be off to college before you know it. Meaning, start saving now. A 529 college savings plan is a great way to get started, since it allows you to avoid paying federal taxes on the contributions and withdrawals, as long as that money is used for educational expenses. You may even be eligible for a tax deduction, depending on the state you live in.
  1. Insurance is something you buy before you need it. Make sure you sit down with an insurance professional, as well as a financial professional, to sort out the options that are right for your situation. Term life (low cost, good coverage, but the policy will expire), universal life (lower coverage and more expensive than term, but allows for a cash component), and whole life (most expensive of the three, but provides coverage for your entire life) are three options that you should consider.
  1. Giving back doesn’t have to involve dollars. Just because your paycheck may not allow you to give large donations doesn’t mean you can’t do something for your favorite charitable and social causes. By giving back your time instead money, it can help you stay on budget, while also giving you a greater understanding and sense of contribution to the cause you’re helping.

Your next steps

Now that you have an idea of what to do, the next step is simply doing it. And if you need help, seek it out.

At Scarborough, this is exactly what we do. We can help you get on your way to saving for retirement, no matter where you live, and for as little as a dollar a day.

  • We’re personal – Your individual advisor helps you develop your personalized strategy for saving.
  • We help you earn more – Our clients contribute 4% more, on average, than typical 401(k) savers.
  • We help you keep your money where it is – You can get advice from us without having to move money out of your existing 401(k), and changes can be made using the tools that your employer has already provided.
  • We’re thorough – We don’t just look at your income. We look at your hopes, goals, and risk tolerance, then develop a personalized investment strategy. We consistently review your goals and risk tolerance, contact you to discuss your plan and rebalance your portfolio if needed, and provide unlimited access to your advisor.

If this sounds good to you, visit us as www.scmadvice.com or give us a call to learn more about our 401(k) management program. Your future self will thank you for it – trust us.

 

 

Opinions, estimates, forecasts and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice.

This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.  Past performance does not guarantee future results.  Diversification and asset allocation do not guarantee positive results.  Loss, including loss of principal may result.

Investors should consider carefully the investment objectives, risks, charges, and expenses of the municipal fund before investing. This, as well as other important information, is contained in the official statement. Please read it carefully before investing or sending money. Withdrawals for non-qualified expenses may be subject to additional penalties and taxes. Consult your tax advisor regarding the state and federal consequences of the investment. Participation in a 529 Plan does not guarantee that the contributions and investment return will be sufficient to cover future higher education expenses. Investment involve risk and you may incur a profit or a loss.

February 28, 2017

Professionals Suggest That Millennials Put At Least 15% Towards 401(k), While Survey Reveals 4 Out of 5 Do Not

401k advisors capital management maryland

Scarborough Capital Management’s recent survey found only 22.5% of individuals aged 18 to 34 put 15% or more of their paycheck into their 401(k), despite calls from professionals who say at least 15%1 is needed for retirement savings.

While most Millennials may not be reaching this goal just yet, the study offered some positive news. It revealed 72.8% of this age group are investing anywhere from 1 to 10% of their paycheck into a 401(k).

According to Gregory Ostrowski, CFP®, CRPC®, a financial planner with Scarborough Capital Management, this generation is forming good habits in saving for retirement. “Understanding the need to save, the ability to obtain ‘free money’ from an employer match — if available — and the overall concept of slicing off some of the budget for the future is a wonderful start,” he said.

But Ostrowski cautions that Millennials need to put away more than what they currently are for retirement.

“In reality, we need to see savings rates toward 15% to have the type of long-term outcomes most are looking for,” he said. “A 15% deferral rate over the course of a career puts a saver in a better position to have a similar lifestyle in retirement as they had during their working career.” The Scarborough survey did show that 58.5% of Millennials are able to save between 5 and 10%, which is at least a step in the right direction.

But while it’s easy to set a goal, it’s much more challenging to make sure it’s being achieved, especially given the circumstances Millennials have faced in recent years. Ostrowski agrees, stating, “So many recent grads have faced the perfect storm: they’re saddled with student loan debt, many have faced a brutally competitive job market, and those with jobs have seen little to no wage growth. It’s tough to carve off savings when everything’s already accounted for.”

But not all is lost, and Ostrowski believes that just because you may not be there yet doesn’t mean you shouldn’t begin. “Start small. At the very least, if your employer has a 401(k) match, do everything in your power to get it. If you can save 5 or 6% and you’re getting another 5 or 6% from them on top of that, then you have doubled your savings rate,” the Annapolis-based CERTIFIED FINANCIAL PLANNER™ professional said.

If a match isn’t possible for you through your employer, Ostrowski still believes it’s a good idea to save something. “Even if your employer doesn’t give a match, recognize the need to save and make it a point to work in increments over time. For instance, start at 4% and set a note on the calendar to increase by 1% every 6 months. I’ve advised hundreds of young savers over the years on this technique and it’s a great way to incrementally make moves in the right direction, and in a way that your cash flow is not crimped all at once,” he said.

Even during times of financial uncertainty and stagnant wage growth, it still remains a good idea to figure out a way to invest in retirement on a consistent and progressive basis.

The full results of the survey can be found at http://scmadvice.com/401k-pulse-report/.

 

Methodology

Research Now conducted a nationally representative digital survey on behalf of Scarborough Capital Management. The survey was conducted from February 10, 2016, through February 17, 2016, and consisted of 1,004 Americans throughout the United States older than 18 with 401(k)s. The margin of error is +/- 3% for the national sample.

 

About Scarborough Capital Management

For over two decades, Scarborough Capital Management has provided comprehensive wealth management services to busy individuals and families who don’t have the time to develop and manage a portfolio. What sets the company apart is its inherent interest in helping everyone from mid-level employees to top-tier executives prepare for retirement. Scarborough Capital Management’s services include a comprehensive array of financial planning support for people in all stages of life, including 401(k) and 403(b) Management, Thrift Savings Plan (TSP) Management, Wealth Management, Personal Pension Analysis, Social Security Analysis and Financial Planning. Advisory services are offered through Scarborough Capital Management (SCM), a Registered Investment Advisor. For more information about Scarborough Capital Management, visit http://exciting-wish.flywheelsites.com.
1https://www3.troweprice.com/usis/personal-investing/planning-and-research/t-rowe-price-insights/retirement-and-planning/retirement-savings/the-power-of-15-.html

 

Contact Us

Download the full survey now.

February 7, 2017

Want to be wealthy in retirement? Get active now!

401k advisor annapolis in maryland at SCM

Want to be wealthy in retirement? Get active now.

By Ian Arrowsmith, Managing Partner, CMFC®, CRPC® Scarborough Capital Management

retirement planning annapolis
About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95 according to the Social Security Administration.

It’s safe to say that 2016 was a pretty unexpected year for many of us. As we turn the calendar and look forward to getting back to a bit of normalcy, some of us may start to make New Year’s resolutions.

So what’s on your 2017 to-do list? Is it to get healthier? Or to put yourself in a better financial position for retirement?

What if I told you that working on your health goal could help you with your retirement goal?

80 is the new 70

According to the World Bank, since 1960, the average life expectancy of people in the United States has increased from 70 years old to 79 years old in 2014.1

And according to the Social Security Administration (SSA), “About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.”2

This is great news, but it comes with a bit of an issue. Living longer means needing to pay for more things, like housing, utilities, food, and clothing. If you decide to retire at 65, that means there’s a 25% chance you’ll need to have at least 25 years of money for retirement stashed away.

Let’s do a quick exercise to figure out exactly how much that could be. The US median household income in 2015 according to the US Census Bureau was $55,775.3 Some financial advisors estimate that you’ll need about 70% of your annual income each year in retirement, which means a couple earning exactly the median income should aim for approximately $39,000 per year.

Now, multiply $39,000 over 25 years, and we get $975,000. And this is if we want to keep our current lifestyle. If you decide to travel more or buy a vacation home, you could be looking at upwards of $1.4 million or more.

Rising costs of healthcare

If you’re struggling to make ends meet and save enough for retirement now, you’re going to have to figure out how to cut out expenses down the road. So how do we do that so we can feel more secure and have more fun?

One of the biggest expenses people have as they age is healthcare. While the uninsured certainly have lots to lose by not staying healthy, the insured aren’t completely off the hook.

According to research from the Henry J. Kaiser Family Foundation, those with employer-sponsored healthcare plans have been shouldering more of the burden over the better part of the last two decades. Since 1999, these families have seen their share of healthcare contributions go from $1,543 all the way up to $5,277 this year.4

While there may be hope that some of these costs will plateau at some point, nothing on the horizon tells us that they’ll be reduced any time soon.

Getting active is a method of saving

One of the best ways to ensure you can enjoy many, many more years is to become healthier. First and most importantly, it’s crucial to consult your physician before you start any fitness regimen or diet.

But after your consultation, try to stay out of your doctor’s office for maladies that can be prevented. You’ll not only feel better, but you’ll stand a better chance of avoiding higher ticket health-related costs down the road.

In a recent study published in the Journal of the American Heart Association, researchers were able to put a dollar figure on what we spend and save relative to our physical activity levels and cardiovascular disease.

(“For cardiovascular health, the American Heart Association recommends at least 30 minutes of moderate-intensity aerobic activity five days a week, or at least 25 minutes of vigorous aerobic activity three days a week, or a combination of the two.”)5

The study first looked at people who had cardiovascular disease already. What researchers found was that those that met exercise guidelines could save $2,500 over those that didn’t.5

What’s more, people without heart disease could also stand to save money. Those with at most only one heart disease risk factor who exercised under the guidelines were found to save $500 a year over those in the same group who didn’t meet the exercise guidelines.5

What does this mean for our average retired couple? Well, if both had heart disease and were staying active, they could save up to $5,000 per year, which is almost 13% of their annual retirement budget. This is not insignificant money we’re talking about here.

But even if both were healthy, they’re still saving at least $1,000 per year, which is enough for a great long weekend away and then some.

The best part? Many of the recommended activities are free. Fast walking, lawn mowing, and even “heavy cleaning” are all considered moderate forms of exercise, while vigorous activity would be actions such as running, race walking, lap swimming, or aerobics.

Next steps

Talk to your doctor and assess your health risks. After this conversation, speak with your financial advisor. With this information, you can establish or refine your retirement plan based on your health assessment. It may also be a good idea to consider some long-term care insurance as well.

Now that the holidays have settled down and we’re getting back to our routines, it’s the perfect time to get proactive about your health and your finances. Who knew you could get two resolutions accomplished at once?

 

 

Resources

  1. World Bank – http://data.worldbank.org/indicator/SP.DYN.LE00.IN?end=2014&locations=US&start=1960&view=chart
  1. Social Security Administration – https://www.ssa.gov/planners/lifeexpectancy.html
  1. Henry J. Kaiser Family Foundation – http://kff.org/interactive/premiums-and-worker-contributions/#/?coverageGroup=family&coverageType=worker_contribution
  1. Journal of the American Heart Association – http://newsroom.heart.org/news/exercise-can-help-keep-medical-costs-down

 

 

 

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