Driving in to this office today, I heard a Rolex commercial. It spoke of how wonderful the watch I and how happy you will make your loved one this holiday. The next line was how you can take 3 years to pay for the watch. Three years! If you have to make payments for a watch, you don’t need that watch. A Rolex, and every other item in that category are wants, not needs. Create a fund specifically for purchases of want items. When you have saved that cash, stop and ask yourself if you really want that item. If the answer is still yes, go buy it now that you can pay cash for it.

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We love eggs. We go through about 18 eggs per week. If cooked properly, your hard boiled eggs will crack and peel easily. This is the type of egg you want to crack – not the retirement nest-egg. Here are a few things people fall short of when planning for retirement that can lead to a scrambled mess.

I like to use age 90 for life expectancy in my planning. Often, a client will state that there is no way they will live that long. Underestimating your life expectancy will wreak havoc on your plans. Most people retiring at age 65 will live 20 years or more beyond that age. I prefer to err on the side of longevity.

Most of us save to some type of retirement plan – many only save to the corporate match. Not knowing what to save can be another crack in the retirement nest egg. Fortunately, doing a budget can solve this problem. Knowing how much income is necessary to replace your earnings + emergencies is essential to a secure retirement.

While at a friend’s house, another guest stated that they want to retire at age 62 and start taking Social Security. I quickly explained that he would be taking a permanent 25% cut in those benefits during his lifetime, and relegating his wife to a reduced benefit when he passes. Waiting until full retirement age, or beyond, can be a great boost to your retirement income. In fact, delaying taking your benefit past age 65 until age 70 allows for an automatic 8% per year increase in your social security payment.

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3 Rules to live by.
Ok, so most of us don’t like rules, however, if you follow these 3 rules, you can get and keep you financial life under control.

Spend less than you earn.
It seems like an easy rule to follow but 71% of U.S. workers are in debt according to CareerBuilder. Make a budget and stick to it. Having positive cash flow gives you control of your financial life.

Wait 24 hours for that big purchase.

You’ve had your eyes and an expensive piece of jewelry, or a new car, or even a vacation. Do your homework, find your item and price, then sit on the decision for 24 hours. If you still feel that the expenditure is worthwhile and you have the cash, make your purchase.

Save for a rainy day.

I cannot say it enough or more clearly – YOU NEED AN EMERGENCY FUND. When establishing your emergency fund, look at replacing income vs. covering expenses. You will have to stash a bit more this way, but you will be better off in the long run.

I hope you agree that these rules are essential and not that hard to deal with.

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“I would maintain that thanks are the highest form of thought, and that gratitude is happiness doubled by wonder.” G.K. Chesterton
I extend both thanks and gratitude to you and your family over the holiday season, and throughout the coming year.
Sincerely,
Nancy Hecht, CFP

This year has gone by fast, take advantage of these three moves before the year is over.

Bunch your deductions.
Many of us are receiving our property tax bills now. Look at your projected income for next year, if you are expecting a raise or bonus, you may want to delay paying your 2017 property tax until January, then also pay your 2018 property tax next year. By bunching these two tax bills in one year, you will have a bigger deduction.
Harvest your gains.
If you currently are in a 10% or 15% tax bracket, you can take capital gains from investments and pay a 0% capital gains tax. You may also want to review your investments to see if you can match capital gains with capital losses, thus reducing the tax on the gains.
Hurricane Irma losses.
Most years, you can subtract $100 from your total hurricane losses, then subtract 10% of your adjusted gross income to get your deductible loss. In September, Congress approved legislation that waives the 10% AGI requirement. You will be able to write off losses over $500.

Don’t let these tax saving opportunities pass you by.

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This time of year gets so busy preparing for all of the upcoming holidays. We spend hours on our guest lists, gift lists, and decorations. I have 3 financial things you must do before the end of the year.
1. Rebalance your portfolio. There have been a lot of investments that have grown this year, you need to rebalance to be able to keep those gains and stay in line with your risk tolerance.
2. Don’t forget to take your Required Minimum Distribution. If you miss this withdrawal, you will pay a 50% penalty.
3. Review and adjust your budget. I am assuming that you have a budget – if not – make one right now! Did you end up spending more in some areas vs. others? Did you pay off a debt? You need to review and adjust your budget annually to stay on track with your short and long term goals.

Set yourself up for a successful 2018 by attending to these “must do’s”

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Q: I turned 70 & 1/2 this year and have to take my first RMD (Required Minimum Distribution), I still work and contribute to my 401(k). Where do I have to take the withdrawals from?
A: This is a milestone birthday for taxes and retirement planning. Here is what you need to know:
If you have a Traditional IRA account you need to withdraw 3.65% of the 12/31/16 balance from the IRA and pay tax on the amount withdrawn. Congrats on still working, that gives you a bit of an RMD break. For those still working after 70 & 1/5 years of age and contributing to your 401(k) accounts, you need not withdraw from the 401(k).

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Do you remember the 1993 movie “Grumpy old men?” It was about a couple of retired guys that spent most of their retirement bickering with each other and fishing. You would think that a story about lifelong friends spending their retirement years on the water would be nice, but they were grumpy because the only thing they had to do was fish and fight. A successful retirement takes more than money, it takes purpose.
Most pre-retirees as concerned about not having a regular schedule and things to do vs. having enough money. Many retirees worry that they will not be able to fill their days or feel that they still have a purpose in life. A big part of retirement planning is what you will do in the 25 or more years you still have to live + making sure that you have planned financially.
If you plan diligently for your retirement dollars and time, it will be a retirement that is enjoyable.

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If you have been impacted by Hurricane Irma and are short on cash, this may be the one time to use your 401(k) as a piggy-bank. Storm victims will be allowed to tap into their 401(k) accounts under the hardship withdrawal rules if they have been affected by flooding and destruction by the hurricane. Additionally, the IRS is waiving the 6 month ban on making new contributions to your 401(k) that typically go with a hardship withdrawal. Distributions must be made no later than January 31, 2018.
This is an example of how the IRS can be your friend in a time of need.

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