Category Archives: retirement at Scarborough

November 5, 2018

Nine-Point Retirement Checklist

401k advisor annapolis in maryland at SCM

9 Steps to Help Your Retirement Assets Last

By Gregory S. Ostrowski, Managing Partner, CERTIFIED FINANCIAL PLANNER®, CRPC®  Scarborough Capital Management

9 Steps to Help Make Your Retirement Assets Last
What should you be thinking about when nearing retirement? Here’s nine tips to help ensure that you can make the most of life’s next chapter.

What should I be thinking about when nearing/considering retirement?  It’s one of the most common questions we’re asked and it’s critical to review your personal finances and plan how to spend money after you retire.

Retirement means different things to different people. To some, it could mean having additional time to visit family. To others it might present more opportunities to volunteer in the community. And to some it might even mean having the chance to get a little more golf or tennis in with close friends.

But while some of these things can be very low or even no cost (think hiking or reading in the shade), many of them will still require money.

If you’re getting to the point where the idea of retirement is becoming more of a reality, but you haven’t yet considered its financial impact, here are nine tips to help ensure that you can make the most of life’s next chapter.

Take stock. All this step requires is that you examine your assets and liabilities. In other words, did you leave a 401(k) at an old job? Have you checked your main stock portfolio lately? Do you have a number of outstanding loans? Do you have too much cash saved in a low-interest savings account, or even worse, a basic checking account?

Once you can get a handle on what you have and where you have it, record everything in a simple spreadsheet or in a notebook. Once you do, you can move on to step two.

Evaluate expenses. The financial world has lots of plans for people to save for retirement, but very few people talk about how to spend during retirement. This fact alone can get the best saver off track very quickly.

For example, if someone said to you that you’d have $1 million in the bank for retirement, you may say, “hey, that’s great!” But in reality, that sum might only equate to about $40,000 to $50,000 per year of income. Would this be enough for you and your spouse for the rest of your lives?

For this step, first, figure out all of your current expenses – and yes, we mean all of them. Even those “inexpensive” stops to the coffee shop can add up. Again, this can be as simple as making a list and totaling it up.

Next, figure out what expenses you will still have after retirement, those that you may be able to cut, and even those that may come up.

For example, you may have a car payment, and that won’t change. But what about your mortgage payment? Could that be adjusted if you downsized? Relocating could reduce not only the cost of the mortgage, but also property taxes, utilities, and maybe even travel expenses if you move closer to places you visit frequently.

In terms of what could arise, some people have the dream of wanting to own a beach or mountain home as a vacation spot, or even simply taking more vacations. These costs will add up fast, so be sure to give your best estimate.

And if you think this step doesn’t matter, please reconsider that thought. Just a few years of outpacing your budget at the beginning of retirement could mean trouble later.

Formulate a plan. This is the most involved part of planning for retirement and where you should consider reaching out for help.  At Scarborough Capital Management we’ll help provide visibility on your retirement picture and can develop side-by-side scenarios of what retirement might look like under various circumstances.

If you’ve created a budget and have an idea of what you’ve already set aside and what you’ll be spending, you have the basis to build your plan. With that, we’ll really be looking at two things – money you currently have, and money you may still need to make.

What to do with cash. Volatility in the stock market has often caused retirees stress, as they have fewer years to recoup any losses they suffer as a result of a market dip. While it might be a good idea to keep 40 percent to 50 percent of your assets in some type of bonds or cash in retirement, the smart investor knows that taking all of your money out of the stock market or other interest bearing vehicles may not be a good idea.

The reason is that without any capital gaining interest, any money that’s just stored “in a mattress” for instance can’t keep pace with inflation. This “longevity risk” could be more risky than having a solid, diversified portfolio.

Timing of investment account withdrawals. How much you withdraw early on and how the market performs can be some of the most important factors in your retirement picture. In this case, the guidance of a professional may be key in helping you avoid some serious mistakes.

Timing of income, such as employer pensions or deferred compensation plans. Depending on your circumstances, you may have some flexibility in when you commence your pension or deferred compensation benefits. In other cases, there may be pre-defined dates and timelines for income.

Further, many large employers are also offering lump-sum pension payout options versus a monthly check over time. Be sure to evaluate these decisions as part of your broader plan.

Timing of Social Security benefits. As recently as early 2016, the Social Security system had more than 550 claiming scenarios. Recent legislation has reduced that amount somewhat, but commencement of benefits (or delaying them) is a decision that should not be made lightly. There is no “one size fits all” advice in this arena, so it’s important to examine your options to see how they fit your situation.

“Pecking order” of accounts. Various types of accounts – like a Roth IRA or tax-deferred annuity or checking account – have various tax treatments. Understanding the characteristics of all your assets – in conjunction with your goals, timeframes and legacy wishes – will help you determine a tax-efficient strategy to draw on your assets during retirement.

Review protections. You may be paying for insurance you don’t need (for instance, an old life insurance policy that has adequate cash-value to maintain itself); in other cases it might be beneficial to add coverage you don’t currently have (such as an umbrella policy or long-term care insurance).

You may find though that after going through the budgeting process that you have a gap between what you have and what you are planning on spending. If you’re going to maintain your spending plan you’ll need a small income stream during this period of your life.

In fact, this exact scenario has caused a number of retirees to go back into the job market. This doesn’t have to be a bad thing either. Some of these individuals have earned some extra income by looking for employment at places they find enjoyable or meaningful, such as a garden store, library, or even community center.

In other words, it doesn’t have to be viewed as work if you find enjoyment or meaning from it, and if you’re setting your own schedule.

As a final note, sometimes it may seem like planning for retirement can be too daunting of a task to take on, but it doesn’t have to be.

While these steps are not meant to be exhaustive, they are designed to help retirees see that with some preparation and professional assistance, you can help put your mind at ease and enjoy everything that you worked so hard to achieve.  Call us; we’d love to help you.

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®

webcast, retirement planning
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®.

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.

December 5, 2016

9 Ways Retirees Can Earn Extra Income

401k advisor annapolis in maryland at SCM

9 Ways Retirees Can Earn Extra Income

By David Herman CRPC®, CCPS®, Vice President of Investments, Scarborough Capital Management

retirement advisors annapolis
There is expected to be 24 million independent workers in the U.S. by 2018, according to MBO Partners. Will you be one of them?

The idea of retirement used to be sitting in a relaxing chair and reading a book or playing golf four days a week. Retirees today are much more active than those in years past, and not just with leisure activities either. More and more people are taking on work in order to gain additional income, some because they need to, sure, but some because they want to stay active in a different way.

The idea of work is changing too. It’s no longer only resigned to a part time job at a big box store or other retail location. With the tools available today, retirees are tapping into their entrepreneurial spirit and seeking out projects and gigs that bring them not only income but enjoyment as well. And many of these options can be started by simply alerting people in your existing personal networks either via social media or word of mouth. (Just be sure to check on business licensing requirements in your area for some of these options.)

If you’re at the point where you’re nearing retirement and still want to keep bringing in some money, read on for some ideas that just might spark a new chapter in your life.

  1. Consulting

Chances are you’ve developed some great work experience in your field (or fields) over the years. Use this expertise to teach others how to get ahead.

For example, if you were a human resources professional, you could run training seminars on employee retention and wellness programs. If you worked in logistics, you can visit smaller companies and give advice on their supply chain.

By setting up a simple website and establishing an LLC (which is easier than you may think), while creating some PowerPoint presentations and print materials, you could be on your way to consulting in no time.

  1. Freelancing

While a cousin of consulting, freelancing is slightly different. Here, you’re doing a project that’s going to be delivered to the client. For example, if you spent years in marketing or advertising, you may be able to pick up some freelancing work in copywriting or graphic design.

Additionally, your past employer may still want to keep you on as a freelancer to retain some of your expert talents, fueling the company even after you stop coming into the office.

  1. Handiwork

Did you spend off hours during your working years fixing up household items and doing DIY projects? If so, handiwork can be a way to supplement your income stream.

People living in retirement communities may have lots of folks nearby that don’t have the tools or skill to repair a broken fence or stop a leaky faucet, and word of mouth for this type of work can spread quickly. Just be sure to check the licensing requirements of your city or town, as well as any homeowner association rules and regulations if applicable.

  1. Crafts

Websites like Etsy have made it possible for crafters to showcase and sell their creations to virtually anyone. No longer do you have to wait for a local or regional craft fair to make some money. Simply create your craft, take some photos, list it, and sell.

  1. Tour guides

Have you lived in a city for a while and know every street forwards and backwards? Do you love history or architecture? Becoming a tour guide can give you a chance to spend some time talking about the places you enjoy while meeting people and spending time outdoors.

  1. Coaching or refereeing

Did you play a sport in high school or college, or do you closely follow a professional league? Getting into coaching or refereeing is a great way to stay connected to something you enjoy while making some money on the side. While the pay may not be as good as some of these other options, there are however lots of youth sports associations around today, giving you the potential for many more opportunities depending on your location.

  1. Tutoring

If you were a teacher and still love to foster learning, yet don’t want to be held to full time work anymore, tutoring can be a good way to earn a bit extra in the late afternoon or over the weekend. Starting is as easy as talking to neighbors and friends who have children.

  1. Adjunct teaching

As a more formal way to teach than tutoring, adjunct teaching at a local community college can give you a chance to interact with learners that are a little bit older on more specialized topics. The pay can also be decent, and if you choose fall and spring classes, you’ll have your summers off.

  1. eBay or Craigslist

If you’re into antiquing, or simply just have too much stuff around the house and want to downsize, selling items online is a great way to generate some revenue.

It’s easy to set up accounts on both sites to get started. With eBay, shipping labels can be printed right from your computer and you can use mailboxes or the post office to drop off items. Craigslist seems to work better with larger items like bulky pieces of furniture that are more costly to ship.

Try it out, you may be surprised what certain older, refurbished pieces would fetch on the open market.

As you can see, there are lots of ways to earn an additional income stream during your retirement that can also help you feel fulfilled by the work you do. And with the tools we have today to connect and manage our work, it’s easier than ever to get started.

 

 

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.

 

 

November 14, 2016

The Role of Medicare in Retirement Part 3: Are you prepared?

401k advisor annapolis in maryland at SCM

How do you save or reduce healthcare costs, what to do if you retire before 65, and what’s next?

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

medicare and retirement annapolis in maryland
About 46% of those between the ages of approximately 52 and 70, “lack any retirement savings today.”

A recent study by the Insured Retirement Institute revealed that about 35 million of the 76 million Baby Boomers “lack any retirement savings today.”1 This equates to about 46% of those between the ages of approximately 52 and 70, which is a staggering and sobering realization.

As the population ages and retires in greater numbers, some of those who call it a career will be faced with some challenging financial hurdles to clear. One of the largest that will be encountered is the cost of healthcare, which is rising at a rapid pace.

“What about Medicare?” you ask. It’s true that Medicare may be available for those who have qualified, however it does have its limitations.

Before you panic though, there are ways to prepare for your future healthcare needs using Medicare as a supplement to your plan.

In this three part series, we’ll take a look at some of the basics of Medicare, what health care costs you’ll need to cover yourself, and how you can best manage this often complex wellness system.

Planning for healthcare needs and costs can be confusing and stressful, but it doesn’t have to be. As we’ve seen in parts one and two of this series, there are alternative options to Medicare that can supplement coverage. We do however know that it can be expensive, so in this segment we’ll talk about how to save or reduce your costs.

We’ll also talk about what to do if you have a gap in coverage from the time you retire to the time you are eligible for Medicare, and lastly, what steps you can take next.

How do I save or reduce costs?

There are several ways that saving for healthcare or lowering costs can be accomplished. A Health Savings Account, or HSA is one way to help pay for coverage

This account is funded with pre-tax dollars, and if used on qualified health expenses the money can be used tax-free. This is a good idea for those who are young and healthy, since it allows tax-advantaged growth in conjunction with a way to save for medical expenses.

It’s not the best idea however, for those who are nearing retirement and are planning on enrolling in Medicare, since once you enroll you’re no longer eligible to contribute to your HSA. Another note on HSAs is that they are only available if the individual or family has a high deductible health plan.

Don’t forget that equities (like stocks) are also an option. While this may not seem like a good idea to some, if you’re going to be retired for maybe 30 years, you’ll need to have some type of savings with growth potential. It’s easy to fall into the trap of thinking that all of your money should be in low-risk, conservative investments, especially after recent market volatility. But in reality, any of this “safe” money is going to be outpaced by inflation sooner than you may think.

Another way is to make sure that you are getting the benefits you deserve. It may be very frustrating and time consuming to deal with insurance companies, but taking the extra few minutes to look over your bills can save you hundreds. Mistakes can and do happen.

Lastly, ask lots of questions, especially prior to having a procedure done. Costs can add up, and sometimes what you think should be covered in-network actually isn’t. This can save you time, money, and headaches down the road.

What happens if you retire before 65 and have a gap between employer coverage and Medicare?

This can happen for a number of reasons, and while we may not be considering an early retirement, sometimes what we plan for in life doesn’t always work out the way that we thought. If you retire and are not yet eligible for Medicare, you may have a few options.

The first is through the Consolidated Omnibus Budget Reconciliation Act, better known as COBRA. Through this program, you are allowed to keep your previous employer’s insurance plan (typically for up to 18 months). This however, can be extremely costly and better options may be available.

Another is through the Affordable Care Act. Insurance can be purchased through the federal exchange, or through one established by your state. While this will provide insurance coverage (even with an income-based subsidy for some), it probably won’t cover everything. Deductibles, copays, and possibly even prescriptions could come out of pocket. More information on how to go about this process can be found on healthcare.gov.

Lastly, if you’re married and your spouse is still working, you can research coverage options through his or her employer. This may be more cost effective and provide better coverage than even what’s available through the exchanges, depending on your income level.

What are my next steps?

Personally, I recommend two main areas to focus on in terms of planning for future healthcare costs.

The first has to do with saving. It is never a bad idea to save earlier and more regularly than you think. With the power of compounding, the money you put away first could be worth the most down the road, so start this process right away. (When you’re 65, you will thank your 25 year old self that you did this…trust me.)

The other part is to make sure you stay informed and seek help if needed. Stay up to speed on healthcare news and studies that may be pertinent to your own situation, and take some time to really learn about your care options. But as healthcare continues to become more and more complex, no one is going to have all the answers. Given that, it’s perfectly acceptable and even recommended to ask a professional for help.

While no one knows what the future will hold, by preparing today for the healthcare needs of tomorrow, you can at least have greater peace of mind that you and your family will be better taken care of so you can enjoy the retirement you worked so hard for.

 

Sources

  1. IRI study – http://myirionline.org/docs/default-source/research/boomer-expectations-for-retirement-2016.pdf?sfvrsn=2

 

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.

 

 

October 31, 2016

The Role of Medicare in Retirement Part 2: Are you prepared?

401k advisor annapolis in maryland at SCM

How to cover the gaps in Medicare coverage and how much do you need to save for this?

By Shawn J. Walker, Managing Partner, CERTIFIED FINANCIAL PLANNER®, CRPC®Scarborough Capital Management

retirement advisors annapolis

A recent study by the Insured Retirement Institute revealed that about 35 million of the 76 million Baby Boomers “lack any retirement savings today.”1 This equates to about 46% of those between the ages of approximately 52 and 70, which is a staggering and sobering realization.

As the population ages and retires in greater numbers, some of those who call it a career will be faced with some challenging financial hurdles to clear. One of the largest that will be encountered is the cost of healthcare, which is rising at a rapid pace.

“What about Medicare?” you ask. It’s true that Medicare may be available for those who have qualified, however it does have its limitations.

Before you panic though, there are ways to prepare for your future healthcare needs using Medicare as a supplement to your plan.

In this three part series, we’ll take a look at some of the basics of Medicare, what health care costs you’ll need to cover yourself, and how you can best manage this often complex wellness system.

In part one of this series we discussed what exactly Medicare is and what all of its parts mean. In this segment, we’ll explore what to do if you want to cover the gaps in Medicare coverage and how much you’ll need to save, on average, for this care…

It sounds like there are lots of uncovered situations…should I look for more coverage?

Although Medicare will take a good amount of the burden off of your healthcare costs, it doesn’t alleviate all of them. It’s estimated that Medicare will only cover about 60% of your health care needs in retirement, so it’s critical that you have additional coverage and additional savings (which we will cover shortly).

Medigap – On the coverage side, one way to do this is through a Medigap plan. To purchase one of these plans, you must first have Medicare Part A and B plans. Next, you would purchase Medigap through a private insurer, paying them a monthly premium.

These plans can sometimes cover copays, coinsurance, and deductibles that regular Medicare doesn’t. Be aware though, these plans sold after January 1st, 2006 don’t include prescription drug coverage, so you’ll need Part D for that. Also, if you are married, your spouse would need a separate Medigap plan, as they only cover one individual.

Dental & vision – Since Medicare or typically Medigap plans don’t include dental or vision coverage, you’ll need to get those plans separately too. The good news is generally speaking, these plans can be relatively affordable and easy to get.

Long-term care insurance – Another area that may need to be considered is long-term care insurance, which also isn’t covered by Medicare. When an individual reaches a point where they have difficulty living by themselves on a daily basis, long-term care insurance can provide funds that can help that person receive the care they need.

This is insurance that covers the costs for assistance with what’s known as Activities of Daily Living (ADL), such as eating, bathing, and dressing. Additionally, this care may cover assisted living facilities, adult day care, and even at home care.

Be aware though that these plans have benefits and drawbacks, and could be a great fit or pretty useless, depending on your situation. Also, since this coverage costs more to purchase the older that you are, it may be beneficial to look into when you’re younger and healthy. That’s why it’s best to do your homework and talk to financial and health professionals when looking into this type of plan.

How much will I need to save for this coverage?

It’s been estimated by various studies that for the average 65 year old retiring couple, a total of anywhere between $200,000 and $250,000 will be needed for healthcare (and this does not even include the cost of long-term care). This may seem like a daunting figure to prepare for in addition to other costs of retirement.

And what happens if you retire early? Well, your employer may still offer you healthcare coverage in this case, but this benefit is something that’s going away slowly. According to the Employee Benefits Research Institute, in the last nearly 20 years, the percentage of those in the private sector that can retire early and retain benefits from their employers has dropped from 29% to only 18%.

Also, if your employer promises healthcare coverage after you retire, take it with a grain of salt. There have been cases where employers have cut the coverage of retired employees, thus leaving these individuals scrambling for how to pay for care. If you are in this situation, be sure to factor in a contingency plan in the event that the rug gets pulled out from under you.

In part three of this series, we’ll take a look at ways that you can save or reduce your healthcare costs, what happens if you have a gap between retirement and Medicare eligibility, and what steps you should take next.

 

 

Sources

  1. IRI study – http://myirionline.org/docs/default-source/research/boomer-expectations-for-retirement-2016.pdf?sfvrsn=2

 

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.

 

 

October 24, 2016

The Role of Medicare in Retirement Part 1: Are you prepared?

401k advisor annapolis in maryland at SCM

What exactly is Medicare, how do I sign up, and what do all of the parts mean?

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

medicare and retirement consultants annapolis

A recent study by the Insured Retirement Institute revealed that about 35 million of the 76 million Baby Boomers “lack any retirement savings today.”1 This equates to about 46% of those between the ages of approximately 52 and 70, which is a staggering and sobering realization.

As the population ages and retires in greater numbers, some of those who call it a career will be faced with some challenging financial hurdles to clear. One of the largest that will be encountered is the cost of healthcare, which is rising at a rapid pace.

“What about Medicare?” you ask. It’s true that Medicare may be available for those who have qualified, however it does have its limitations.

Before you panic though, there are ways to prepare for your future healthcare needs using Medicare as a supplement to your plan.

In this three part series, we’ll take a look at some of the basics of Medicare, what health care costs you’ll need to cover yourself, and how you can best manage this often complex wellness system.

What exactly is Medicare, how do I sign up, and what do all of the parts mean?

Medicare is a healthcare insurance program for those over 65 years old or disabled, which is funded through the federal government.

Generally, you are eligible to register during a seven month window around the month that you turn 65. For example, if you turn 65 on July 1st, the window would start three months before July (April through June), and then extend three months after (August through October).

If you miss this window you may still register for Medicare Part A, provided you meet certain requirements. For Part B however, you would have to wait until the open enrollment period, which begins on January 1st and runs through March 31st. Also be careful that if you miss the open enrollment period for Part B, there may be a late enrollment penalty you’d have to pay.

Here are what the four parts mean:

  • Part A – This part will offer coverage if you are hospitalized and comes at no cost, provided you paid Social Security for at least 10 years.
  • Part B – For times you visit the doctor, receive physical therapy, and experience other “outpatient” costs, as well as have some preventative tests and screens, Part B can pick up the tab. This will cost you a premium though, and amounts will vary based on your situation.
  • Part C – The most confusing part, Part C, is also called “Medicare Advantage.” It is a combination of Parts A and B, and comes with lots of rules and regulations. Essentially, Medicare manages private plans and offers coverage that in some cases are superior to Parts A and B.

Now the drawbacks. First, not all coverage is better than what’s available in A or B, and second you’ll also pay a premium based on a variety of factors. Lastly, something very important about Part C is that if you have this coverage and also what’s known as “Medigap” coverage through a private insurer, the Medigap coverage won’t pay anything. In other words, don’t carry both.

  • Part D – Medicare Part D is actually managed by a private insurance company. This plan covers prescription drug needs, and is a bit more straightforward than Part C. With typical Part D coverage, you pay a premium and are then required to meet a small annual deductible before you receive benefits. Once you meet the deductible, your plan will pay some (or even sometimes all) of your costs up to about $2,500.

The confusing part though comes here. Once you reach that, you are responsible for all of your costs until you reach the next level of just over $4,000. At that point, you’re covered again and are only responsible for about 5% of costs from there up.

In part two of this series, we’ll take a look at what other coverage is available to supplement Medicare, and approximately how much you’ll need to save for healthcare.

 

 

Sources

  1. IRI study – http://myirionline.org/docs/default-source/research/boomer-expectations-for-retirement-2016.pdf?sfvrsn=2

 

 

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.

 

 

October 10, 2016

6 Questions to Help You Get Started Saving for Retirement

401k advisor annapolis in maryland at SCM

Six Questions to Help You Get Started Saving for Retirement

By Ryan A. Ansted, Managing Partner, CRPC®, Scarborough Capital Management

investment management md
Important questions to consider if you’re ready to put some money away for retirement.

While they are still offered in some industries, we might not be too far away from the day where the question “what’s a pension?” is as common as someone asking “what’s a pay phone?”.

It used to be that someone worked at one company for four decades, provided for a family, and looked forward to retirement with a great pension…but not anymore.

If you’re new to the workforce, you may have started wondering how you’re going to save for retirement. The below Q&A, while not exhaustive, can still give you some good ideas on what you may want to consider if you’re ready to put some money away for later…

My employer doesn’t offer a pension…what should I do?

If your employer doesn’t offer a pension as part of a benefits package, not to worry. There are a number of different options to consider.

If your employer does have something you can save into, it’s most likely referred to as a traditional 401k (or 403b for those in some non-profit, public education, or similar lines of work). It’s essentially a savings plan for retirement that’s offered through an employer.

An amount of money you decide on is taken out of your paycheck and put into this account tax-deferred. That means that you only get taxed on it when it’s taken out.

My employer doesn’t offer a traditional 401k, can I still save?

Yes, in your case, you may want to look into an IRA, or Individual Retirement Account. A traditional IRA works the same way that a traditional 401k would; that is, you put money into the account tax-deferred. It’s also open to anyone age 70 ½ or younger that earned taxable income.

What makes it slightly different than a 401k is the way your contributions may or may not be tax deductible, which is directly impacted by access to an employer-sponsored plan, marital status and filing status.

Additionally, to gain the benefit of fully or partially deductible contributions Adjusted Gross Income thresholds and income caps must be considered.1

Does the money always have to be taxed when I take it out?

No, in fact there are other options aside from “traditional” 401k and IRA accounts, those being called “Roth” accounts.

Contributing to a Roth 401(k) or Roth IRA means that you fund the account with after-tax dollars, but can take withdrawals tax-free*. So when you’re ready to withdraw these funds for retirement, you get to keep all of it that’s in the account. A Roth 401(k) doesn’t take away the requirement to start withdrawing funds after you turn 70 ½ though.

With a Roth IRA, there are other benefits. If you wanted to, you can withdraw your contributions at any time and not have to worry about paying a penalty (however, there are other guidelines for withdrawing interest you earn on your contributions).3 Also, the age of 70 ½ doesn’t factor in like a traditional IRA, or Roth 401(k), where contributions must stop and you must start taking withdrawals. With a Roth IRA, you don’t have to withdraw and can continue saving.

If I get a new job with a 401k and change jobs again later, would I lose that money?

Some people elect to not get involved with a company-sponsored plan because of the unknown of what would happen if they left the organization. But not to worry, as there are a few ways to go about this.

You could keep the money in your old employer’s account, but this isn’t always possible or advisable.

You could cash out your 401(k) however if you’re not 59 ½ you’ll be penalized 10% of the amount for early withdrawal, plus have to pay income tax on everything regardless of your age.

The better option to consider may be rolling the funds over into an IRA or to the plan your new employer offers.

This all sounds great, how do I get started?

Again, if your employer has a 401k plan start with your human resources office. They will be able to give you the appropriate information and forms and get you started.

If you’re looking for an IRA, there are several options you can consider. These include banks, brokers, mutual fund companies, and other investing services. Since there’s a wide range of services and differences in each, it’s best to do your homework and consult a financial professional if you have questions.

Given your situation, hopefully this helped get you thinking a little more clearly about what to do with your money and understand that having enough for retirement doesn’t have to be some unattainable goal. With a little guidance and some planning you’ll be well on your way to financial security.

 

 

 

*On qualified distributions.2

1 https://www.irs.gov/retirement-plans/ira-deduction-limits

2 https://www.irs.gov/publications/p590b#en_US_2017_publink1000231061

3  https://www.irs.gov/publications/p590b#en_US_2017_publink1000231064

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.

 

 

September 6, 2016

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