When 4% is better than 44%.

When did you first start saving? Some people are much more disciplined and save from their very first dollar earned, others, not so much. With my own child, it has been a “do as I say, not as I have done” scenario. When I first started working, my family dynamics were different than for my daughter. I have insisted that she start depositing into her 401(k) from her first paycheck, which she has done. But what is the true cost of waiting?
If you start saving at 25 and plan to retire at 70, you’ll need to save just 4% of your income; meanwhile, if you start saving at 45 and plan to retire at 62, that percentage is 44%. The visualization uses data collected by the Center for Retirement Research at Boston College, which assumed you had a real rate of return of 4%, earned an average wage and were saving enough to replace 70% of your preretirement income in retirement (which includes Social Security benefits), among other assumptions.
By the way, if you’re thinking that barely anyone waits until their 40s or later to save for retirement, you’d be mistaken: Data show that more than 1 in 5 people don’t start saving until their 40s or older.
So take advantage of the biggest saving asset you have – time.


A timely tax question.

Q: I have a Roth that the deposits have been in for well over 5 years and I am thinking of converting some regular IRA funds to a Roth this year due to lower earnings. Does it make sense to open a new Roth to receive the conversion dollars?
A: Yes, it does if you plan on using some of the assets in your current Roth within the next few years. If you do not plan on making any Roth withdrawals for over 5 years, then it is not necessary.


It’s time to start your holiday sinking fund.

What is a sinking fund? It is a saving account that you establish for a specific purpose. We are a mere 7 weeks from the December holidays and if you have your eye on a computer or flat screen TV, now is the time to start saving. The average laptop computer costs around $700. If that is on someone’s wish list and you’re paid twice a month, you will need to save $50 per paycheck for the computer. If your dream is a flat screen TV, I have seen prices for large ones as low as $500, so we are talking about saving just $35 per paycheck for that purchase.
These items certainly make our lives easier and more enjoyable, but are not worth going into debt over. Determine the cost, make, and model of that “want” item on your list and start your sinking fund now.


It’s fall shopping time!

Throughout this year, I have been telling you when to spend money so you do so wisely. Here are some of the October shopping bargains to take advantage of:
Buy your blue jeans now. Much like the month of October, denim is in a down time between back-to-school shopping and the holiday season. Retailers want to sell off back-to-school denim and make room for the winter trends that will appear on gift lists, so keep your eye out for October deals on jeans.
Looking for a new car? This may be the one time I say it’s ok to not buy used. October is prime time for striking a deal on a new car that happens to be stamped with last year’s date. Auto dealers are eager to make room on their lots for 2020 models.
Lastly, shop off season for bargains. This is most likely the last month when shoppers will see patio furniture, yard tools, and summer-themed decor in stores until next spring. Look for deals on air conditioners, too, and get ready for next summer now, for less.

Spend wisely, then you will be able to save more.


There’s nothing like a warm smile vs a cold computer screen when planning your retirement.

Most, but not all of my clients are retired. All of my clients share a couple of things though: they like access to a person vs. only a screen. All of us have integrated the world of tech into our everyday lives. We text, we email, we pay our bills online, book vacations, any number of daily activities without talking to a real person. I have found time and again, even with clients that started out using programs to help plan their retirement, they prefer a smile, an actual person looking at rebalancing their accounts, and being able to pick up the phone to ask anything they need of me. Being able to meet with your CFP© Professional for regular reviews, or just to ask for advice on buying car, is proving to be the point of comfort for most when planning for their retirement.


The New Jersey contingent is coming!

Recently, we have had three families of relatives move from New Jersey to Florida, with more planning to do so. While I think living in Florida is wonderful for a host of reasons, Kiplinger’s has rated the States from a tax standpoint for retirees. Here is what they found:
For those choosing to stay in New Jersey:
Our ranking: Mixed tax picture
State income tax: 1.4% (on up to $20,000 of taxable income) — 8.97% (on taxable income over $500,000).
Average state sales tax: 6.97%
Estate tax/inheritance tax: No/Yes
Go to New Jersey’s full state tax profile
The Garden State has been taking big steps to reduce its tax burden on retirees. It does not tax Social Security benefits or military pensions. And a law passed in 2016 means seniors may also qualify to exclude part of their retirement income from state income taxes. By 2020, a couple filing jointly, with an income of $100,000, could exclude all of that. To top that off, the estate tax is being phased out. What’s keeping New Jersey from being a retirement idyll? Stubbornly high property taxes—the highest in the country, in fact.
For the contingent that has decided to join us in Florida:
Our ranking: Most tax-friendly
State income tax: None
Average state and local sales taxes: 6.80%
Estate tax/inheritance tax: No/No
Go to Florida’s full state tax profile
One of Kiplinger’s top ten most tax-friendly states for retirees, the Sunshine State is very popular with retirees, not just because of its abundant sunshine but also because of the absence of a state income tax. Permanent residents are entitled to a homestead exemption of up to $50,000, regardless of age, and seniors may qualify for an additional exemption.

We welcome the transplants from New Jersey and all of the other unfriendly tax States.


I’m all for savings – but this is not the best way.

I read an article in USAToday recently that stated many Americans are saving for retirement by cutting back on spending. The article stated that Baby boomers are willing to cut back their vacations, Gen X-ers will downsize their homes, and the millennials won’t eat out or go to the clubs as often. I have written articles about cooking at home vs. eating out, not putting yourself in a position where you are mortgage poor, or taking a vacation that you cannot pay cash for, but that is only part of the retirement saving story.
Not enough Americans are saving pre-tax to their potential. Many employees only save to the company match. An employee under the age of 50 can contribute up to $19,000 pre-tax, with employees over the age of 50 being able to add an additional $6000. You will either pay Federal income tax, or pay into your retirement fund. My pick is to save to my retirement.
Many of the people polled for the article state that they will just work longer. If you love what you are doing, then working longer is no big deal. Take advantage of the opportunity you have in front of you, save more pre-tax, then look at areas of spending where you might be able to spend a little smarter.


This is how I buy a car.

Last week, I had two clients ask for advice on buying a car. Both are retirees, one sees themselves driving 3 more years, the other, maybe 10 more years. My advice to them starts the same – figure out the make, model, and options you want, then look for a lease return car to buy. We have been buying lease return cars for years – let me tell you why.
When people lease cars, they have to keep up the maintenance and appearance of the car, as well as keeping the mileage low. If the car is not maintained, and the mileage goes over the contracted amount, the lessor ends up paying a huge price to get out of the lease. Buying a lease return can get you a practically new car without the new car price. All of the depreciation that occurs when driving a new car off the lot is no longer an issue, and many of them still have factory warranties. The price you would pay for a lease return is thousands less than buying new. I also love going to the “no haggle” type dealerships because it tends to level the field a bit.
Do your homework, know what you want, and what you are willing to pay. You may want a specific car, but don’t let a dealer think you need something different.


Parents and money… not an easy conversation.

I have written before about talking to my Mom and In-laws about their finances. It is never an easy conversation, and often a hard one to bring up. My Father passed away at the age of 50 – this was a sudden death that rocked our world emotionally and financially. A number of years later when we were all together for my Daughter’s Bat Mitzvah, I brought up the subject of my Mother’s passing, asking my siblings what they wanted from her home. This may have seemed crass, but we were all together for a happy occasion, my Mother was not ill, so the discussion was easier. Here are a few more tips regarding talking to your parents about their finances.

Don’t make the conversation about money.
If they have not retired, ask them what their retirement might look like. Ask what types of plans they have, where they want to live, how they plan on spending their time, etc. This will lead to how they plan on financing everything.
Ask them for advice.
This may be a bit sneaky, but it is an easy conversation opener. Share ideas about what you are thinking for your own retirement savings, then ask what they are doing so you can learn by example.
Use a current event.
If a family member or good family friend has passed or entered into a long term care facility, this can be a great conversation starter. By discussing the choices, or lack thereof, that they have can be an opener to ask questions of your parents.

It takes a bit of thought to get the conversation going, but once you open the door, the conversation should flow.