Category Archives: Retirement Play of the Day!

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Do You Need a Financial Coach?

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Sally and Roger have been married for over 30 years. Roger is 60 and Sally is 58. They have never saved much of their paychecks, so Roger has a small amount, about $100,000 in his 401k. Like Roger, Sally had good intentions to set money aside for retirement, yet it seems something else always took precedence such as needing a new car, loaning money to the kids, or fixing something at the house.

The concept of retirement has always felt like it was “out there” on the horizon. Now, reality is hitting them like the proverbial “ton of bricks”. Sally wants to stop working and devote more time to the grandkids. Roger knows that the only way that can even be a remote reality is if he just keeps working. His health is ok so he and Sally decide that will be their retirement plan. Roger will keep working until he just can’t physically do it any longer. They have a $500,000 life insurance policy on Roger so that will help Sally should anything happen to Roger.

This scenario may sound far-fetched or it may resonate with many of you. It’s called the “Work Until I Die” retirement plan. Many Americans have embraced this plan because they don’t think they have an alternative. Most don’t think they are qualified to meet with a financial advisor because those people only deal with people who have “real money”, whatever that is. As a result, millions of Americans drift into the “retirement years” unaware that help is out there. Help can take the form of a traditional financial advisor or it can be a Financial Coach.

What is a financial coach? A financial coach works on your financial life instead of investing your money and/or selling you financial products. Some people work with both. Not all financial advisors are equipped to be financial coaches. For example, a financial coach can help you put a personal budget together, teach you about Medicare and Social Security and educate you about other financial topics that will impact your financial life.

A financial coach will help you develop good money habits that will last a lifetime. You don’t have to have a lot of money. In fact, many people come to a financial coach in debt to get help building good spending and budgeting habits.

Sally and Roger can benefit from a Financial Coach. They are at a point where they don’t know what they don’t know. Knowledge is power and they need to be educated about how they can retire on their own terms. They may find that Roger won’t have to work until he dies. With some belt tightening with their budget and a few other changes they will be surprised at how their retirement looks after working with a financial coach.

Financial Coaches like financial advisors are not miracle workers. They are trusted advisors who are vested in your financial health. Like a coach in sports, they can get you into shape financially and then help you stay there into your retirement years, whatever you envision those years to be.

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Do These Three Things Today If You are Turning 60

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Turning 60 can be a landmark for many of us. You might be getting ready to retire or think about your next employment gig. Even if you plan to continue working in some capacity there are still things that you need to be aware of and, in some cases, act to avoid surprises down the road. If you are 60 or getting there soon, you still have time to get your finances in order if you do plan to retire in the next few years. Here are three things that I recommend you do right now.

  1. Get Social Security Benefit Information. Remember those update we used to get from the Social Security Administration every year. Yeah, they don’t do that anymore. But you can still find out about your retirement benefit by using the Social Security Retirement Estimator. It shows what your estimated retirement benefit from Social Security will be at different ages.

    This is an important step as most people have no idea how much they will receive from Social Security upon retirement. So, if you do this when you are 60 you still have time to make any necessary adjustments. When you take your Social Security benefit will impact your monthly check in a significant way. If you were born in 1960 or later, your Full Retirement Age (FRA) is 67. If you choose to receive benefits before you reach that age, your benefit will be reduced by 6% per year. Let’s say your FRA benefit is $2,000 per month. If you decide to take your benefit at age 62 the amount you receive will be $1,400!

    Luckily the opposite is true as well. IF you delay receiving your benefit until age 70 your benefit will increase by 8% for every year beyond your FRA. Let’s use that same $2,000 FRA example. If you delay receiving your benefit until age 70 you will receive $2,480, a 24% increase (8% x 3 years).

    Hopefully you can see why some advance planning can have a big impact on the benefit that you receive!

  2. Compute the Income You Expect from Retirement Plans. Just as we did with Social Security, we need to figure out what we will receive in income form our retirement plans whether that is a pension, 401k or other defined contribution plan or both. So how do you figure this? Common practice today is to use what is known as a safe withdrawal rate. The common rate used today is 4%. The idea is that if you withdraw 4% of your retirement savings each year it will last your lifetime. The idea is based on the premise that if you have a portfolio of 50% stocks and 50% bonds it should yield around 6%. Keep in mind that the S&P 500 index averaged 10% from 1926 to 2018. So, if you withdraw 4% per year that leaves 2% to cover inflation.

    Let’s use the example of a retirement plan balance of $500,000. If we apply the 4% safe withdrawal rate you would receive $20,000 per year. If you have a million dollars you would receive $40,000 per year.

  3. Increase Retirement Plan Contributions. If after looking at your Social Security benefit and income from your retirement plans you don’t think you will have enough income in retirement, then now is the time to increase your contribution. Before you begin let’s look at some calculations you need to do.

    First, you need to estimate how much income you need in retirement. Then you need to figure out what you expect from Social Security and your retirement plans. As an example, you have determined that you need $100,000 per year to live comfortably in retirement. Your expected sources of income are:

  • Social Security for you and your spouse – $40,000 per year
  • Your pension will provide $15,000 per year
  • Your spouse has a 40ik with $750,000 that will produce $30,000 per year
  • Total income will be $85,000 per year

With that you have a shortfall of $15,000 per year. As we learned earlier you may be able to delay Social Security to get a little more. You can also start increasing your contribution to your 401k or other defined contribution plans. This year you can contribute $19,000 plus a catch-up provision of $6,000 since you are over age 50. You may also be able to contribute to an IRA account depending on your adjusted gross income.

For other ideas, please check out my Guide to Getting Started When You are Starting Late.

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You can work in retirement and receive Social Security

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Yes, that is correct. There is a misconception that you will “lose” Social Security benefits if you work in retirement and earn over a certain dollar amount. The reality is that Social Security will withhold a certain amount over the thresholds for 2014 which are $15,480 and $41,400. One or both of these will apply depending on your W-2 earnings and your Full Retirement Age. In any event, you will get the withheld benefits back and you will continue to earn Social Security credits if you continue to work in retirement so don’t worry about “losing” benefits because you won’t. Click here for a FREE Guide to Social Security.

Posted on

You can work in retirement and receive Social Security

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Yes, that is correct. There is a misconception that you will “lose” Social Security benefits if you work in retirement and earn over a certain dollar amount. The reality is that Social Security will withhold a certain amount over the thresholds for 2014 which are $15,480 and $41,400. One or both of these will apply depending on your W-2 earnings and your Full Retirement Age. In any event, you will get the withheld benefits back and you will continue to earn Social Security credits if you continue to work in retirement so don’t worry about “losing” benefits because you won’t. Click here for a FREE Guide to Social Security.

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Medicare Penalties are for life!

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When should you enroll in Medicare? As with most things in life…it depends. There are three enrollment periods depending on your birthday and whether or not you are and/or will be covered by a company health plan. Get to know these enrollment options and make sure that you enroll on time because once a penalty is assessed it stays with you for life! Want to know more? Click here to get a FREE copy of your Guide to Medicare.