There are a lot of sources we can turn to for financial advice, tons of websites, articles, even a blog or two. Taking time to learn is important, but don’t ignore your common sense. Here are a few common sense tips for successful investing:
Start with your first paycheck, and continue through your last one.
Begin investing as soon as you can, be patient, and let time shower your investments with compound growth.
Cut Uncle Sam out of your picture.
Invest as much as you can in tax-deferred retirement plans, such as 401(k) plans. Your money will grow faster and you can afford to invest more now because you won’t have to pay taxes on the money until you retire.
Investing is a process, there are no miracles.
Your investment decisions won’t be right all the time, and some of your funds will underperform your expectations. But as you rebalance and weed out consistent underperformers over the years, you will generally achieve a reasonable overall investment return.
I am here to help you.
Seek professional help if you need it. As the fees on mutual funds shrink, professional advice is no longer expensive. Even if you are a do-it-yourselfer, consider a periodic checkup with a financial adviser to hone your portfolio’s performance.
Q: If I wait until I am age 70 to collect Social Security, will I get credit for the big increase current recipients will get next year?
A: Yes you will. All increases for cost of living will be credited to your record. Check SSA.gov to make sure your credits are correct.
Freedom means a lot of things, in retirement it means choice. You can determine what you do with your time whether it is indulging in a hobby, doing charity work, or gardening, the choice is yours.
If you follow these two steps you will maintain the freedom of choice.
Living on a budget:
A budget allows retirees to allocate their dollars to the things that matter most, while ensuring they don’t run short and end up in debt or take too much money out of retirement accounts. Budgeting also allows seniors to spend more purposefully so they can best enjoy their newfound freedom.
Live within your means:
Retirees must ensure they aren’t spending more than they can afford while maintaining a safe withdrawal rate. That means living within their means. It’s a lot easier to get used to spending less than you earn if you start before you actually retire.
These are two points that most people don’t want to deal with. Budgets and spending choices are not fun. Exercising these choices now, will give you freedom in retirement.
When it comes to retirement savings, many people only save to their company match percentage. I constantly tell those people to not use that as a marker. You are not doing yourself any favors. Dollars that are being deducted for Federal Income Tax could be going into your retirement instead. Let’s look at the average retirement savings by age:
According to Fidelity, the following is what the average American has saved for retirement.
20 to 29: $15,000
30 to 39: $50,800
40 to 49: $120,800
50 to 59: $203,600
60 to 69: $229,100
It is important to think about your many years of life in retirement as you are saving. Put the money in your pocket vs. that of the Federal Government.
Required minimum distributions are back. Last year due to the pandemic they were suspended, not anymore. Many of my clients are getting unpleasant surprises by the amount they have to withdraw. If you are age 72 or above, you have to withdraw a certain percentage of your Traditional or rollover IRA annually, those who still have funds in a 401(k) or 403(b) and are no longer working will have to take an RMD also.
So why the shock? Not having to withdraw last year along with most of the markets ending 2020 strong have left clients with higher 12/31/20 balances than they expected.
Please do not overlook your RMD, the penalty is large.
Earlier this year we contracted to have new gates and a complete new fence installed. The gates have been finished since March, one run of the fence was finished in July, and we have no idea when the other two runs of fence will be completed. Why? Here is a bit of what I have found out:
There are a lot of ships sitting at ports waiting to offload their cargo. The cause of the backup, say port officials, is strictly-enforced Covid restrictions at the ports, including those in Asia, as well as unprecedented demand for goods from China, South Korea, and other Asian exporting countries
Another reason is supply. For years, the price of 1,000 board feet of lumber has generally traded in the $200 to $400 range. It’s now well above $1,000. (One board foot is 12x12x1 inches.
The last reason is workers. When the ships were prevented from offloading, dock workers left to find other jobs.
Anyone willing to take bets as to when my fence will be completed?
Most people make their resolutions at the New Year, why wait? As we approach winter, we know there will be a lot you want to spend money on. Why not take the few months before the winter holidays to put some financial resolutions to work. Here are a few tips to get started:
Review Your Spending
I have often said it does not matter what you make, it is how you spend that will bring you financial success. Make a budget and stick to it.
Prepare For Holiday Spending
Take a look at who you want to buy gifts for and set a budget. Think about your holiday entertaining and start looking for deals on food items you can keep frozen until needed as well as paper goods you might need for serving.
Max Out Your 401(k)
If you have not contributed the max, see if your employer will allow you to withhold extra to get there. The fund will go in your pocket vs. that of the IRS.
Take the time you have to plan – you will have a much happier year end.
It’s Q & A time – this is an interesting one.
Q: Is it possible to get a loan for a wedding? My sister’s wedding is coming up, but we don’t have enough money and would like to help her.
A: Loans are available for almost anything, this would fall under the category of a personal loan and may carry higher interest. My question to you and your sister would be, why not scale down or postpone so you can pay cash for the wedding? We all have our dreams, but sometimes they have to change. My own wedding had to be drastically scaled down because my father passed away. Not going into debt for a wedding might be a wiser way for them, and you, to start this new chapter.
For the 38 years that I have been in business, I have always told my clients to pay themselves first. This means taking advantage of retirement accounts from your first paycheck. Deposit funds into your 401k, 403b, or IRA from the beginning of your career. Now congress wants to penalize those who have done so, invested wisely, and seen large growth in their IRA accounts.
The House Ways and Means committee would “require taxpayers to distribute retirement account balances that exceed certain thresholds,” according to the list, which is a draft of ideas lawmakers assemble before formally pitching them in the House or Senate. This proposal would require accounts at $5 million and over to take distributions prior to age 72 to get their balances down to a more “fair” balance. They account for less than a tenth of 1% of the roughly 70 million taxpayers with a traditional or Roth IRA, according to the most recent IRS statistics.
Some Democrats used the report from the Ways and Means Committee as evidence that the rich are using IRAs as a tax shelter rather than an account to build a nest. I thought the IRA was written as a tax shelter to help build a retirement nest – what am I missing?
There have been a lot of tax proposals put out by the administration since the second week of January 2021, nothing has been passed yet. If we open this door, where does it end? Please pay attention to what is being proposed.