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How to Maximize Retirement Income from Social Security Benefits

How to Maximize Retirement Income from Social Security Benefits

When thinking about retirement, the most important thing is to start saving early. However, it’s also important to realize that saving is not enough on its own. You need to plan strategically for how you will fund your retirement years, which means considering all forms of income and how to maximize them.

When you pay into Social Security, you’ll receive a retirement benefit in an amount that depends on several factors. When you know about these factors early in your working life, you can plan around them and maximize your retirement income. And of course, even if you’re near retirement, it’s also important to understand how Social Security works, so you can pick the right time to start drawing your benefit.

 

What to Know about Social Security Benefits When You’re Starting Your Career

Your Social Security benefit is primarily determined by your earned income during your working years. In general, the more you earn, the higher your benefit will be. However, there is a maximum Social Security benefit. In 2019, this maximum is $2,861 per month. No one can receive more than that, but many people will end up receiving much less, mainly due to a couple of key factors. One of these key factors is their work history.

The federal government calculates the final benefit you receive based on your lifetime earnings, averaging your salary over the 35 years during which you earned the highest amount. The Average Wage Indexing Series is used to account for inflation in this calculation. However, it is critical to know that if you work fewer than 35 years, your salary is essentially considered “$0” each year that you’re short of 35. This will reduce your average salary calculation and therefore your benefit. It’s true that you only need to work for one decade to qualify for Social Security, but you’ll need to put in at least 35 years to reap the maximum benefit.

The second factor that can bring down your Social Security benefit is when you claim it. You’ll need to work until your full retirement age to get the maximum benefit. The full retirement age depends on when you were born. The government has increased the full retirement age from 65 to 67, although the increase is happening incrementally over a 22-year period that began in 2000. For people born in 1960 and later, the full retirement age is 67. Check the Social Security Administration’s chart to view your full retirement age.

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That being said, you can claim your Social Security benefit at 62. However, that benefit will be lower than it would be if you waited until full retirement age. Basically, your benefit will be reduced a certain percentage for each month before your retirement age. If you were born in 1960 or later and your full retirement age is therefore 67, you can claim your benefit at age 62, but that benefit would be reduced by about 30%.

After your full retirement age, the Social Security benefit actually increases incrementally up to 70 years of age. Thus, if you want to maximize your Social Security benefits, don’t claim any until you are 70. Past 70, no further increases occur, so it’s time to cash out.

Understanding these rules early in your career can help you plan for the future effectively. However, it is important to understand that people often need to claim the benefit before reaching age 70—and that’s okay. In an ideal world, you would be able to hold off until 70, but life has a habit of getting in the way.

Similarly, it is important to maximize your earnings for 35 years, but within reason. If you take a year or two off, you may want to plan to work another year or two, so that you don’t have those zero-salary years included in your benefit calculation. The 35-year average also makes it possible to eliminate some low-earning years, such as those right after high school or college.

 

Your Income and Earnings in the Years Before and After Retirement

Two other important considerations have to do with the years leading up to and following retirement. One concerns penalties: people in early and full retirement have earning limits beyond which their benefit is affected. Currently, early retirees can earn $17,640 in gross wages or net earnings without penalty, but every $2 earned above this amount will result in a $1 reduction from your benefit. In the year leading up to your full retirement age, you can bring in $46,920 before you’re penalized. For every $3 earned above this amount, $1 will be subtracted from your benefit. Once you reach your full retirement age, your earnings will not affect your benefits.

The other important consideration is taxes. Up to 85 percent of your payout can be subject to federal taxes, depending on your filing status and overall income. If your combined income falls between $25,000 and $34,000 for single filers or $32,000 and $44,000 for joint filers, you’ll have to pay taxes on up to 50% of your Social Security income. Above these ranges, you’ll be taxed on 85 percent of your benefit.

Given all this, you may want to think about reducing your overall taxable income in retirement. By distributing funds evenly over the span of a few years without sudden increases, you can decrease your adjusted gross income, but this will require some planning.

 

How Married Couples Should Strategize for Social Security

Another important consideration is the strategies married couples should use when it comes to claiming Social Security benefits. In general, there are two primary strategies. You can claim your own benefit, or delay this claim and receive half of your spouse’s payout. Your marriage needs to be at least 10 years old to qualify for this strategy. This approach can be especially helpful if one spouse was a particularly high earner.

Generally, one spouse will begin receiving payout earlier, whether at 62 or full retirement age, while the other waits until age 70 to maximize their benefit. Typically, the spouse who earned more delays their claim.

This Is How You Know How Much to Save for Retirement

This Is How You Know How Much to Save for Retirement

One of the most difficult questions to answer in relation to retirement savings is how much money is enough, especially when one considers the risks involved in investing. Realistically, individuals need to think more about how much they can invest than how much they should invest. The two numbers may be radically different depending on personal situations.

People who consider saving for retirement important should make it a priority and enshrine it within their budgets. The first step is to get a sense of how much people will need in retirement and what that would look like in terms of monthly savings now, even if that number is not immediately feasible. Another approach is to ask how much the amount currently being saved will amount to in the future.

Some individuals figure out how much they must contribute now in order to live as they would like during retirement and translate that into their current investments. Whatever is left after making that deposit is how much individuals have to live on here and now. Of course, this strategy can leave individuals struggling to make ends meet.

Investors still face the question of how to determine the amount they will need in retirement. This is not an easy question to answer, but it is an important one. People who arbitrarily choose to save a certain amount for retirement each month may be in for a surprise when they get close to 65 and realize how little they actually have to live on after retiring.

Several free online calculators exist that can make the math much simpler. Individuals choose an investment strategy (from conservative to aggressive) and indicate how much they are currently saving to see what the monthly retirement income will be.

 

Thinking about How Much Money Is Really Needed during Retirement

Still, there is the question of how much monthly income is enough during retirement. Certainly, it is quite difficult for individuals to imagine how much they will need to achieve their goals. A good strategy when it comes to this question is to start broad and then get more specific over time. As individuals get closer to retirement, they will have a better sense of what they will need. When just starting to save, people can generalize much more.

Some financial professionals recommend that individuals set a goal of getting their take-home, after-taxes pay today. However, it is also important to adjust for inflation, which can be up to three percent per year, so it is best to round up rather than down. Once retirement is within 10 years, then it is time to get more specific with the numbers.

Budgets often change radically once individuals retire. Some expenses, such as transportation to work, will fall away, while new ones will arise. For example, individuals may need a travel budget for visiting grandchildren.

Individuals also need to think about longevity. In other words, it is not enough to ask how much they need each month. People also need to think about how long they will need the income. Average life expectancy now is about 90 years for men and 92 years for women.

However, current health concerns and familial patterns also need to be factored in. Some people will live significantly longer than that. Getting caught off guard can have undesirable consequences.

 

The Process of Finding the Right Balance in Retirement Savings

Once individuals have a rough idea of how much they need to save today using the strategies mentioned above and online calculators, then it is time to start thinking about how much can realistically get stashed away. While it can prove painful to increase savings and thus decrease spending money, individuals should also think about the benefits of saving.

The government, as well as many employers, incentivize saving for retirement. Employer retirement plan contributions are made before taxes. Depending on your tax bracket, putting $6,000 away for retirement in a year may only shrink your take-home income by about $4,500. When employers match contributions, that is basically an increase to salary, albeit a benefit that will not be seen until years down the road. Typically, individuals should save at least up to the employer match.

Most people worry that they are not saving enough for retirement, but there is also the risk of saving too much. Giving up today’s financial goals for the future is not always a wise decision. For example, prioritizing retirement savings over a down payment for a home does not always make sense. Individuals need to take stock of their goals and think about what they want for themselves both now and in the future.

Finding the right balance takes time and requires periodic reevaluation, so individuals should look at it as an ongoing process rather than a one-time assessment. Ultimately, saving for retirement is not all-or-nothing. Individuals can put away money for the future while also saving for a mortgage down payment, but they may not achieve the numbers they were hoping for as quickly as they would like. Sometimes, this is okay. Other times, individuals need to think about what is more important to them.

Spotlight on Annuities As Part of a Retirement Income Strategy

Spotlight on Annuities As Part of a Retirement Income Strategy

People have a wide range of different vehicles available to them when it comes to saving and investing for retirement. One of the more complex options that individuals tend to overlook is annuities. An annuity is an insurance product that can be used for steady, predictable income during retirement. Individuals invest in an annuity with an agreement about when payments for it will be received in the future. The income from an annuity may come monthly, quarterly, annually, and even in one lump sum depending on the agreement that is made. The size of each payment depends on several different factors, including the desired repayment period.

Through an annuity, investors can choose to receive payments for the remainder of their lives or only for a set period. The decision affects payout totals, as does the type of annuity. A fixed annuity provides guaranteed payments, while a variable annuity pays an amount that is dependent on the performance of underlying investments. The downside of annuities is the high expense, which is one reason why many people steer away from them. Ultimately, however, they can prove to be a great choice for many people provided that they do their research and ensure that the investment will work well with their individual situation.

 

How Exactly Does An Annuity Work?

While the idea behind annuities is simple, these contracts tend to be highly complex. In the most basic sense, an annuity is a contract with an insurance company to bear the risk of investment. You can pay for annuities in a lump sum or through a series of payments during what is called the accumulation phase. When the annuity begins to pay you back, this is called the payout phase. Payout can start immediately, or it can be delayed for years or decades. One example of an annuity that virtually every American depends on is Social Security. You transfer risk to the Social Security Administration, and in return you receive payments based on how much you paid into the system.

While the federal government guarantees Social Security, insurance companies back traditional annuities. A guaranteed payment is only as secure as the insurance company taking the payment. This fact also means that there is some risk involved in annuities. While the risk in variable annuities is inherent, even fixed annuities can prove problematic if an insurance company grows unstable. Individuals should make certain that they invest with respectable and dependable organizations in order to reduce this risk, especially since most individuals use annuities to provide guaranteed income in retirement.

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What Are the Benefits of Annuities for Retirees?

Perhaps the greatest benefit of making annuities part of a retirement portfolio stems from research undertaken by Mark Warshawksy, Robert Veres, and John Ameriks. They found that annuities reduced portfolio failure rates across the board. In other words, annuities help to protect you against running out of money in retirement. While this means the most when viewed through the framework of longevity, it is worth pointing out that this vehicle had benefits across the spectrum. At the same time, this benefit is a double-edged sword, because the same researchers found that annuities can also limit the potential upside of investment by decreasing overall gains. Thus, while annuities provide some stability, they do so at a price, as the money could be invested in riskier vehicles with higher potential returns.

Another benefit of annuities has to do with legacy. Most people assume that annuities decrease legacy since payments are limited, but this is not the case. A study found that annuities actually help people to spend less of the asset during retirement, particularly if they live a long life. This fact translates to a greater legacy for the heirs. Part of the reason behind this is the liquidity of an annuity, which is not the same for other types of retirement investments. While no investment portfolio should have only annuities, knowing that a deposit of cash is coming on a specific date makes it less necessary to dip into other vehicles that take a long time to turn into cash.

 

Who Would Not Benefit from An Annuity?

Not everyone needs an annuity in their retirement portfolio. Most notably, people who are not concerned about running out of money during retirement would not benefit greatly from an annuity since the money could be used for an investment with a bigger payoff. Also, people who feel like they receive a sufficient fixed income from Social Security may not need to necessarily focus on adding to that fixed income. The other consideration is life expectancy. Individuals with serious health conditions will not get the most from an annuity, of which much of the value derives from longevity. However, people with these conditions who want to make sure a spouse is provided for may benefit immensely from annuities. At the end of the day, individuals also need to think about diversification. Without a lot of money to invest, annuities should not be high on the priority list. Even with a decent nest egg, no more than 25 percent of total savings should be placed in annuities, according to most financial professionals.

 

What You Need to Know about Retirement Savings and Divorce

What You Need to Know about Retirement Savings and Divorce

Going through a separation or divorce is hard enough on its own, but the situation grows even more complicated when it comes to money. One of the more confusing aspects of the financial ramifications of divorce pertains to retirement savings. Generally, spouses will need to split retirement assets, but the process behind this is not always clear. In some cases, one spouse will maintain an asset entirely. Understanding this process is key to handling the tax implications, as well as reformulating a strategic plan to get individuals where they want to be when it comes time to retire. The key determinant in how an asset is divided has to do with the type of account it is.

IRAs are handled differently than qualified plans, even when two former spouses agree to split both types of assets in the same way. Individuals divide an IRA using a “transfer incident to divorce” claim, while qualified plans, including a 401(k), require a QDRO, or Qualified Domestic Relations Order. Sometimes, courts will use one of these terms to cover both types of assets, but the paperwork must be in the proper order with the right designations to avoid additional headaches and hurdles down the road. With either assets, individuals need to remember to update their beneficiaries, although some divorce decrees require keeping a former spouse on the paperwork.

 

Key Points for IRA Asset Division

When dividing an IRA, it is important to treat the transaction as a transfer incident to divorce in order to avoid taxes. Without this declaration, both parties may end up losing money unnecessarily. The IRA custodian will classify the transaction as either a transfer or a rollover depending on the ultimate decision on the division of assets, as well as the wording of the official decree. After the transaction is completed, the recipient becomes the legal owner and that person will need to deal with any tax consequences arising from future distributions or the movement of funds. In other words, the former owner of the account does not face ramifications for how the new owner manages the funds, so long as the label “transfer incident to divorce” is used.

However, if the division is not properly labeled, the current owner will end up paying taxes and early withdrawal penalties on the entire amount received by the new owner. In order to avoid mislabeling, it is important to include both the division percentage breakdown and the dollar amount of assets being transferred. Furthermore, all sending and receiving IRA account numbers should be listed to avoid any confusion. Both sending and receiving IRA custodians need to agree with what the language indicates, in addition to the judge handling the case.

 

Special Situations with IRA Division

The courts must approve the division agreement or else the IRS will consider the amount sent to the recipient as ordinary income. Also, the recipient will not be able to place the funds in an IRA since it would not be an eligible transfer, and the tax deferral benefit is lost. Sometimes, recipients will demand compensation for that loss.

Another special situation occurs if the IRA being transferred was funded in part by nondeductible contributions. In this case, both parties will need to calculate the dollar amount of nondeductible contributions and report this on Form 8606 to the IRS. This form is very important, and calculations can prove tricky, so sometimes it makes sense to hire a professional for assistance. Otherwise, both people may pay unnecessary taxes down the line.

 

divorce paperwork

Considerations of Qualified Retirement Plans

When it comes to qualified retirement plans, particularly a 401(k), individuals need to understand the specific technicalities. Federal law provides a wide range of protections for these assets, but some notable exceptions involve seizure and attachment by creditors and lawsuits. Both divorce and separation proceedings make it possible for someone to ask for attachment of qualified plan assets through a QDRO. Such an order divides qualified retirement plan assets among formers spouses and/or children and dependents.

Like transfers incident to divorce, QDROs eliminate tax obligations, provided that they get correctly reported to both courts and IRA custodians. Through this order, the recipient has a wider variety of options. The funds can be transferred to a new or existing qualified plan, or they can be deposited into a traditional or Roth IRA. In the latter case, the money is taxed as a conversion but is not penalized. Any sort of transfer that does not fall under the QDRO umbrella will incur both taxes and penalties, so getting the right paperwork in order is extremely important.

 

The Takeaway Message

In the end, dividing retirement assets in a divorce can seem complicated, but it does not need to be provided that individuals do their homework and accurately report all information. The primary concern needs to be to get a transaction declared as a “transfer incident to divorce” or QDRO in order to avoid tax consequences. All custodians, as well as the courts, need to agree with these declarations. Lacking attention to detail in this matter could mean that the process becomes much more expensive and time-intensive than necessary.

6 Important Risks to Consider When Saving for Retirement

6 Important Risks to Consider When Saving for Retirement

Most people think about putting money away for retirement as “savings.” However, these accounts are really a form of investing today’s income in the hopes that it grows and provides a nice nest egg for the future. As with any investment, retirement accounts come with a certain amount of risk.

The amount of risk with which someone is comfortable depends on the person, as well as the situation. With retirement, individuals often try to reduce risk as they approach their sixties to protect the money that they have saved since there is less time for rebound.

Managing risk when it comes to retirement savings starts with understanding what risks exist. This is particularly true in light of the fact that more investment decisions are falling to the individual than ever before. Some of the key risks involved with retirement savings include:

 

  1. Inflation

Perhaps the most obvious (but still frequently overlooked) risk is inflation. Because of high inflation rates, the money that is put aside now will simply not be worth as much in terms of purchasing power in the future.

Since 1981, the inflation rate has been about 2.8 percent annually. That means people need to earn a return on investments of 2.8 percent just to break even when it comes to inflation.

Furthermore, inflation tends to be higher for retirees largely because of healthcare costs, which have actually grown at a rate that outpaces general inflation. Individuals should always think about inflation in terms of their low-risk investments, which may not even break even if they have a very low rate of return.

 

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  1. Sequence of Returns

The phrase “sequence of returns” refers to the state of the market during the time withdrawals are made. When retirees need to withdrawal from an investment account during a bear market, they will deplete their savings far more quickly than in a bull market.

This is exacerbated by the fact that depleting one’s savings limits the amount of money left to generate returns going forward. While most people focus on the average rate of return before retirement, afterward it is quintessential to consider the sequence of returns. Perhaps this consideration becomes most important when thinking about when to retire.

Ideally, individuals retire during positive market performance. This minimizes the need of liquidating investments to generate an income. When the liquidation happens, individuals may find themselves running out of money before predicted.

 

  1. Longevity

While the subject of longevity may seem morbid, it is a critically important consideration for people facing retirement. When it comes to retirement risk, longevity refers to how long individuals will actually live. Funding a retirement that lasts 20 years is significantly less challenging than making the same money last for 30 years.

While no one can predict exactly how long they will live, this consideration does have an impact on how fast individuals spend money once they have retired. Even individuals with a very solid foundation will have trouble generating enough income for 30 years. Yet people today are living longer than ever before, with many individuals living until their late nineties.

 

  1. Interest Rate

Current interest rates are considered fairly low. Retirees should recognize this fact because it means that they can generate only limited returns with “safe” investments, such as Treasury notes. While these notes once generated a return of more than 5 percent, or even 7 percent in the early 1990s, they now have a return of about 2 percent, which does not even cover inflation. As a result, individuals may have to save more than they initially thought when they started saving a few decades ago.

Another strategy is to move these investments into more aggressive accounts with the potential for greater yields, but this comes with the risk of losing considerably. While rates could increase, it leaves many people just starting to save relying on riskier options for the time being.

 

  1. Health

Healthcare costs continue to increase rapidly. People who do not plan for these expenses may find themselves going bankrupt when something happens. Before retirement, individuals need to think critically about their needs and prepare as best as they can. Looking at current health and genetics can say a lot about likely needs in the future. This will help direct people toward the best options for them.

Individuals also need to consider the level of care that they want. Private nursing homes cost much more than other options. To offset health costs, individuals can purchase long-term care insurance or supplemental policies for Medicare. However, it may also be prudent to save more than initially thought necessary for healthcare expenses, just in case.

 

  1. Taxes

Laws can change quickly, creating completely new tax situations. These risks are hard to predict, but they could really take a bit out of retirement plans. For example, taxes could skyrocket, which leaves individuals with traditional retirement accounts with much less money than they thought when they start to withdrawal funds.

On the other hand, people who prepare for this issue by investing primarily in Roth accounts may kick themselves if taxes are much lower when they start making withdrawals than they currently are. Many people try to mitigate this risk by investing in both traditional and Roth accounts so that they can be more strategic in how they withdraw down the road.

5 Last-Minute Retirement Strategies You Need to Know

5 Last-Minute Retirement Strategies You Need to Know

It is important to begin saving for retirement as early as possible. Fortunately, it is never too late to take control over retirement planning. Even in the decade leading up to retirement, there are important steps that individuals can take to maximize their savings. This is particularly true if they need to catch up in order to meet their goals.

Individuals in this situation should not feel alone. A survey conducted a few years ago found that three out of 10 individuals over 55 have no retirement savings at all. About 25 percent of responders had less than $50,000. These situations are serious, but all hope is not lost. The key last-minute steps to take when it comes to saving for retirement include:

 

  1. Delay pulling on Social Security.

The age at which someone starts pulling on Social Security has a big impact on the monthly benefit. When individuals claim before their full retirement age, which is either 66 or 67 depending on birth year, the payments are reduced.

On the same token, payments increase by delaying retirement, at least up to the age of 70. Individuals who choose to retire at 70 will maximize their monthly benefit.

To see how much of an impact this will have in each individual’s particular situation, people can visit the Social Security website and track the payments that they would receive retiring between the ages of 62 and 70. People who are already behind on saving definitely need to make the most of this important benefit. The added effect is that this delay gives people even more time to save.

 

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  1. Diversify accounts to minimize taxes.

Once people retire and start to pull on their traditional 401(k)s and individual retirement accounts (IRAs), they will need to pay taxes on withdrawals. Furthermore, withdrawals become mandatory once individuals reach the age of 70 and a half.

These tax payments can significantly cut into the amount of money available for everyday living. People can help offset this issue by diversifying their retirement savings with a Roth 401(k) and/or a Roth IRA. Both of these accounts require that individuals invest after-tax money, but then no taxes are due upon withdrawal.

Diversification of accounts can help provide better planning for the future since individuals know more fully how much they will have to spend. With fluctuating tax rates, planning with traditional accounts becomes more difficult.

 

  1. Downsize or consider a reverse mortgage.

One of the best strategies that individuals can undertake to increase retirement savings is downsizing their home, which in turn reduces cost of living. People often find this step necessary to survive in retirement anyway. Doing it early can mitigate some of the headaches that would otherwise come down the round.

However, individuals who wish to stay in their home can consider a reverse mortgage to help cover monthly bills. Such a loan is only available to people over the age of 62.

However, it does come with disadvantages that individuals need to consider. People will need to repay the loan to move. Additionally, they will not be able to leave the home to children unless they pay back the money. Also, these loans often involve a number of fees.

 

  1. Reduce retirement savings fees.

Once people retire, they have the option to roll over the savings in a 401(k) into an IRA. If individuals have great investment options with the IRA and low fees, meaning less than one percent, then it makes sense to transfer money into that account. While this may not seem like a big deal at first, this move can easily translate into thousands of dollars of savings over the course of retirement.

The best part of this savings is that it requires only a one-time action on the part of the retiree and the savings will continue throughout retirement. These savings are quite significant when one considers how percentage fees compound.

However, individuals should make sure that they perform their due diligence before reinvesting the money. Any IRA should have adequate investment options for meeting realistic goals and charge low fees.

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  1. Create a strategic financial plan.

Ideally, individuals create a comprehensive financial plan for retirement savings early in life, but sometimes other factors get in the way. Even people who save diligently face emergency situations that require them to drain accounts.

When approaching retirement with less-than-ideal savings, it is more important than ever before to account accurately for monthly financial needs and figure out how to make the ends meet. Often, this means curbing spending right now to get as much into retirement plans as possible. Sometimes, individuals find that they will need to get a part-time job to cover their monthly expenses once they retire.

However, it is impossible to know these things without mapping out how much people’s financial requirements in retirement and their projected monthly expenses. Of course, much of this practice is prediction, but it also provides some needed guidance for future planning.

This Is How 401(k) Fees Could Affect Your Retirement Savings

This Is How 401(k) Fees Could Affect Your Retirement Savings

While many Americans look forward to their retirement years, saving for this time period can bring a lot of stress. A majority of workers participating in a 2017 AARP survey said they felt that they did not have enough saved for the various expenses, both expected and unexpected, that come with retirement. Part of this problem may relate to the hidden fees associated with retirement accounts, especially 401(k)s.

Often, people do not even know they are paying fees on their 401k, or have little choice in paying them, as their plan is selected by their employer. According to financial expert Robert Hiltonsmith, these fees can cost the average two-earner family more than $150,000 over a lifetime, an amount that accounts for nearly a third of all investment returns.

 

Understanding the Incredible Impact of Fees on Retirement Savings

Most people saving for retirement do not understand the impact that fees can have on their accounts. In fact, paying a single percent less in fees for an investment over the course of a lifetime can translate to enough money for an additional 10 years of retirement.

Consider three people who all invest $100,000 and achieve a rate of return of 8 percent. One person invests in an account with 1-percent fees and eventually achieves a total of $761,000. Another puts their $100k into an account with 2-percent fees. During the same time interval, this account will only grow to $574,000. The third person invests in an account with 3-percent fees. This account ends with $432,000. These figures demonstrate how seemingly small increases in fees can cut into overall savings.

In 2015 a law professor at Yale published a study concluding that a surprising number of 401(k) plans focus on high-fee funds, and ultimately recommended that employees pay close attention to the fees they pay.

Instead of putting money into plans with high fees, employees may be better off investing in a retirement account outside of their employers’ that will conserve a much higher percentage of their investment for the future. Pew Charitable Trusts has also researched this issue, noting that fees lower the amount of money available for compounding and thus have a reverberating effect on growth through the life of the investment. Unfortunately, many people think that fees are an inevitable part of saving for retirement, but this is not the case.

 

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Pushing through the Confusing Language of Fee Disclosures

Often, 401(k) plans bury the nature and number of fees in pages upon pages of statements and then use undecipherable names to describe them. Since 2012, retirement plan companies have been required to declare the amount and purpose of fees, but that does not mean they do not try to confuse the average investor. Even savvy investors may feel lost in a 30-page disclosure document designed to discourage people from asking questions. Phrases like “asset maintenance fee” and “required revenue fee” seem legitimate, but they actually just refer to revenue sharing and commissions.

To determine if you are paying too much in fees, you will first need to know what an appropriate amount is. In general, fees should be less than 1 percent, but many finance professionals note that they have seen fees as high as 3.25 percent. Some plan managers will try to justify a higher rate by saying that a small company needs to pay higher fees until they grow larger—this is not the case. Ideally, it should be under 1 percent, regardless of the size of the company.

 

Viewing Employers as a Key Partner in Fee Negotiations

The regulatory changes that took place in 2012 made employers responsible for the plans they select for employees on a fiduciary level. Employers have a duty to select plans solely for the benefit of their employees and are required to review fee disclosure documents within 90 days of receiving them. During this time period, it is possible to make changes to the plan. Company owners and managers can actually face rather significant fines if they do not review the disclosure since it is considered disregard for the welfare of employees both now and in the future. In other words, employees are not alone when it comes to negotiating for better fee structures and should view their employers as partners in this struggle.

Employees should advocate for a joint disclosure assessment with their managers to make sure that the plan is the best for the future. When people take the time to learn what the fees mean and how they may be unnecessary, they can argue for a fairer structure and ultimately put everyone in a better position for retirement.

The Basics Behind Choosing the Best Retirement Account for You

The Basics Behind Choosing the Best Retirement Account for You

While historically people could count on Social Security and pension plans to provide a comfortable income during retirement, people today need to save and invest as they prepare for life after work. Luckily, there are wide variety of retirement plans available. However, understanding which vehicle is the best option can be confusing. Learning more about the specific advantages and disadvantages of various plans can help people figure out what they need for their particular retirement needs and goals. One way to categorize retirement plans is to consider those sponsored by employers versus individual retirement accounts.

 

Retirement Plans Sponsored by Employers

A great way to start saving is through employer-sponsored plans. The most basic employer-sponsored retirement account is the defined-contribution plan, typically a 401(k). A defined-contribution plan involves payroll deductions that go directly to an individual account within the company plan. Ideally, your company will match your contributions, which means that your employer will also put money into the account, up to a certain amount and based on how much you elect to contribute.

Employer-sponsored accounts are generally easy to set up, since the contributions are usually deducted directly from your pay each pay period. They’re also easy to maintain, because the plan administrator handles most of the statements and disclosure. In addition, 401(k) contribution limits are typically higher than those for individual retirement accounts—not to mention the fact that any employer matching is free money. Furthermore, contributions to 401(k) plans reduce your taxable income now. However, you’ll pay taxes on withdrawals from traditional 401(k) accounts during retirement.

In contrast, with a Roth 401(k), your payroll contributions are made after taxes, so your withdrawals during retirement are tax-free. A Roth 401(k) also has no income restrictions, unlike a Roth individual retirement account. Which you choose (traditional vs Roth 401(k)) basically depends on whether you think you’ll be in a higher income tax bracket during your retirement. Roth 401(k)s are often recommended for younger investors, who tend to fall in lower income tax brackets, but there may be good reasons for older investors to consider Roth 401(k)s as well. A financial advisor can help you make the best decision.

There are some drawbacks to defined-contribution plans, the most obvious of which is greater restrictions on investment choices. With an individual plan, you have much more control over where your money is invested. In addition, employer-sponsored plans often come with high management and administrative fees, which can take a significant chunk out of your savings. New employees should also make note of any waiting period before they can make contributions, as this is common. You may also have to wait until you’ve been with your company for a certain period of time (say, a year) before your employer will match your contributions.

 

office workers

 

Individual Retirement Accounts

The other main option when it comes to saving for retirement is the individual retirement account (IRA), which can be set up through banks, brokerage firms, and other financial institutions. These accounts hold various investments, from stocks and bonds to cash and mutual funds, reserved for retirement. Several different types of IRAs exist, each with its own tax and contribution rules, so it’s important to look through all the options. As with a 401(k) plan, you can select a traditional or Roth IRA, with Roth contributions made with after-tax income, in order to avoid taxation upon withdrawal during retirement. You can contribute to both a Roth and traditional IRA in the same year, provided that you qualify for both.

The main advantage of IRAs is the fact that you’re in the driver’s seat and make all the decisions, whether that means personally or choosing a professional to do so. Furthermore, an IRA comes with a very wide range of investment choices, so it becomes easier to diversify. However, there are some downsides, too. IRAs in general have lower annual contribution limits, although these limits increase once you turn 50. Contribution limits depend on your modified adjusted gross income. Furthermore, even traditional IRA contributions are not always tax-deductible. (Roth IRA contributions are never tax deductible.) The deductibility limits for traditional IRAs depend on your income, as well as your tax filing status and access to workplace retirement plans.

 

General Guidelines for Deciding on Retirement Contributions

The exact savings strategy you should use will depend on your individual circumstances, but some general guidelines can help you determine your contributions. For the most part, you should first take advantage of any workplace retirement plan that comes with employer matching. Outside of the 401(k), these plans might include 457(b)s, 403(b)s, and defined-benefit plans, which work much like a pension.

Once you’ve maxed out your 401(k) contributions, or at least the matching available from your employer, it might be time to consider an IRA. Additionally, people who do not have a retirement plan through their company should focus on an IRA. Here, the most important decision is whether a traditional or Roth IRA is more appropriate. Determining this will involve making some predictions about your tax status in retirement. People who will fall into a lower tax bracket in retirement will benefit the most from a traditional IRA. Furthermore, people who are self-employed or who own a small business should recognize that specialized accounts exist for them, including the solo 401(k) and specialized IRAs.

3 Valuable Lessons You Learn When You Start Saving for Retirement Early

3 Valuable Lessons You Learn When You Start Saving for Retirement Early

One of the most common questions people ask their financial advisors is, when should I start saving for retirement? Virtually across the board, financial advisors will say that you should start as early as possible—ideally when you’re in your 20s and have just launched your career.

Of course, there’s no reason to despair if you didn’t start a retirement fund right out of college. Not everyone in their 20s has the foresight to start saving for something decades in the future, especially since many employers do not offer a savings-matching program. If you started saving for retirement later in life, the situation certainly isn’t hopeless, but it is a bit more urgent. You’ll need to save more and be more focused to meet the same goals, since you’ll have less time to achieve them.

However, if you start early, you’ll enjoy a wide range of benefits, including the increased flexibility that compounding interest provides. You’ll also be able to take more chances with your investments, because you’ll have more time to recover from losses. Another major benefit of starting early is that it instills good habits early on.

When you start to plan for retirement in your 20s, you’ll learn several lessons that will serve you well for the rest of your financial future. These include:

 

  1. Learning the value of compounding.

If you’re in your 20s, you have a lot of time before you retire and can use this to your advantage. Making money grow over the course of 40 years is much easier than achieving the same thing in half that time. Even when your money just sits there, over time it can double, triple, or quadruple. The best way to understand the value of compounding is to think about the math behind it.

As a hypothetical situation, imagine you save $6,000 toward retirement each year until the age of 65 at a 7-percent rate of return. If you start saving at age 45, you will have about $246,000 in the account when you reach retirement age. If you begin saving at 35, the account would have about $567,000. However, starting at the age of 25 means you’ll amass nearly $1,198,000. In other words, starting at 25 nearly quintuples the final amount saved, compared to starting at 45. This happens even though you would only contribute an additional $120,000, or $6,000 annually, for the 20 years between age 25 and 45. This math underscores that your savings depend not only on how much you contribute, but also on how long you’ve been contributing.

 

financial planning

 

  1. Understanding how to maximize employee benefits.

Employers often provide some sort of retirement benefit for full-time employees. Most commonly, you’ll have access to a 401(k) plan through your company. Understanding these accounts and how they work sooner, rather than later, will make it easier to use them strategically down the line, when choosing the right investments becomes extremely important. When you start contributing to your 401(k) early, you’ll have some time to play with the account without serious consequences.

A 401(k) typically rises and falls with the stock market and continues to grow over time. Money for the account is taken directly out of your paycheck, so you never see it. If you’re lucky, your employer will match your contributions to the account at some percentage—this can be a major boon and add up quickly. Plus, this matching is essentially free money, so it makes sense to take advantage of it. Some employers will offer profit-sharing instead, which means that a portion of the company’s profits is put into your 401(k) account, reducing your tax liability.

 

  1. Keeping meticulous records and budgets.

People save money when they spend less than they bring in. The concept is simple, of course, but it’s a lesson many of us learn the hard way. However, saving for retirement will encourage you to become more discerning with your money, and you’ll soon learn to keep track of exactly where it goes. This skill will become more important over time, especially when it’s time to save for a down payment on a house or pay off a big debt. Ideally, people in their 20s should strive to live on about 85 percent of their income and save or invest the rest.

Keeping track of spending has become simultaneously more and less difficult. It’s easier than ever to buy things today; sometimes it only takes a few taps on a screen or one click of a button. Because of this, impulse spending can be hard to avoid.

At the same time, technology does a lot of the recordkeeping for us. Most of us no longer have to spend time adding and subtracting columns of numbers to balance a checkbook. In addition, smartphone apps can help track your spending; basic spreadsheets on your desktop computer are also effective. Whatever method you use, keeping track of spending can help you stay out of debt or pay off a large debt that must be wiped out before you can begin saving for retirement in earnest.

 

The Bottom Line: When it comes to saving for retirement, there really is no such thing as too soon. People who start saving early will set themselves up for success down the line by learning critical lessons about finance and investing. In addition, starting to save early, even if only a small amount, leads to significant gains because of compounding interest. If you think you can’t save, re-examine your finances to see if you can cut back on spending in some places. Putting aside even a little bit of money each month will help you establish a lifelong habit that will pay off enormously in the end.

Ways to Build a Lasting Legacy Plan

Retiring well requires implementing a set of plans that will last. Making these arrangements can feel cumbersome and bring up awkward family conversations, but it doesn’t have to be that way. Goldstone Financial Group’s owner and principal Anthony Pellegrino built his career on helping clients achieve financial success and make lasting plans that put families at ease. His commitment to legacy plans has ensured that his clients can enter their golden years with a champagne toast.

Why is a legacy plan so important? Studies show that traditional estate plans are 70% likely to be lost by the second generation and 90% by the third. Many clients have panicked reactions to this information, but there’s no need to start hoarding cash in your mattress. What you’ve done in an estate plan can be easily incorporated into a legacy plan that will last for generations.

Here are the top 5 ways to build a legacy plan.

To read the full article, click here!

Understanding the True Cost of Hidden Fees With Goldstone Financial Group

Anthony Pellegrino | Goldstone Financial Group

A 1% fee doesn’t seem like much at first glance. After all, basic math tells us that it would only claim a single dollar out of a hundred or ten out of a thousand. To a new investor or aspiring retiree, signing over one or even two percent of a portfolio’s earnings might seem like a reasonable — or even small! — price to pay for enjoying the remaining 99% later in life.

A 1% cost might not look like much — but appearances can be deceiving. When it comes to investments, administrative expenses that may have seemed almost negligible at first can burgeon into costly financial demands. Mutual funds are particularly notorious for their plethora of so-called “hidden fees,” which often carve a significant portion of a portfolio’s future value away in a series of small cuts. Worse, these costs are often applied internally and may not be visible on your monthly statement; if you don’t go out of your way to investigate your accounts, you may never know precisely how much of your profits minor fees claim each year.

To continue our example — one dollar out of a hundred isn’t much of a loss. However, the primary financial drain to your account isn’t the initial deduction, but the opportunity cost posed by losing that dollar. By giving it up, you sacrifice its potential to compound and grow as an investment asset. For robust retirement accounts, these 1–2% fees could end up costing a retiree hundreds of thousands in lost profits. In 2018, analysts from Nerdwallet applied these average fees to a hypothetical millennial and found that over 40 years of saving, the investor would lose more than $500,000 to average charges.

Let’s break this down further.

To read the full article, click here! 

Investment Advisory Services offered through Goldstone Financial Group, LLC a Registered Investment Advisor (GFG). GFG is located at One Lincoln Centre, 18W140 Butterfield Rd., 14th Floor, Oakbrook Terrace, IL 60181, Telephone number — 630–620–9300.

Social Security Updates

Good news for retirees: Social Security benefits are scheduled to increase 2.8 percent in 2019, the biggest bump since the 3.6 percent increase in 2012.The average beneficiary – who received about $1,405 a month in 2018 – can expect to see just over $39 more each month, or about $468 more over the course of the year.1

Such cost of living increases are meant to cover household expenses that rise due to inflation. However, if you can absorb those additional costs, you could think about redirecting that additional payout toward helping to meet your long-term financial goals. For example, an emergency savings account or a life insurance policy designed to pay for funeral expenses. If you would like help with this, please give us a call.

There are a few more updates to Social Security for 2019. For one, the supplemental benefit paid to those who are blind or disabled will increase to $771 from $750 per individual; to $1,157 from $1,125 for couples. Second, if you’re currently working while receiving benefits, you can earn a bit more before those benefits are reduced. Moving forward, you may now earn up to $17,640 before $1 is deducted for every $2 you earn. In the year before you turn your full retirement age, you may earn up to $46,920 before $1 is deducted for every $3 you earn until the month you reach your full retirement age. And third, for those who are still working and have not yet started receiving benefits, the maximum amount of earnings subject to the Social Security tax will increase to $132,900 from $128,400.2

Some advocate eliminating the earnings cap to keep Social Security solvent in the future. That’s because the brunt of taxes dedicated to Social Security comes from lower-income earners, while high earners avoid this tax on earnings above $132,900. In fact, due to the increase in income disparity in the United States, a much higher level of earned income is now exempted from this payroll tax compared to the 1980s – $300 billion in 1983 versus $1.2 trillion in 2016.3

Other changes in addition to eliminating the taxable income cap have also been proposed. One option, which could benefit both the Social Security fund as a whole and individual retirees, is encouraging retirees to delay claiming Social Security benefits. For every year delayed, one’s benefits increase 8 percent. Those who wait to take the benefit until age 67 receive about 43 percent more a month; those who wait until age 70 receive about 75 percent more in lifetime monthly benefits.4

Social Security benefits – both funding and payouts – can be complex. It is worthwhile to stay abreast of the policies, changes and strategies that can help maximize benefits. For additional information, try out this quiz – which also gives a detailed explanation of the correct answers to help you become better educated about Social Security.5

Content prepared by Kara Stefan Communications.

John Wasik. Forbes. Nov. 2, 2018. “5 Things You Should Know About Social Security Changes.”https://www.forbes.com/sites/johnwasik/2018/11/02/5-things-you-should-know-about-social-security-changes/. Accessed Nov. 9, 2018.

2 Ibid.

Sean Williams. USA Today. Nov. 9, 2018. “Why the Social Security program will never run out of cash.”https://www.usatoday.com/story/money/2018/11/09/when-does-social-security-run-out/38452267/. Accessed Nov. 9, 2018.

Knowledge@Wharton. Oct. 3, 2018. “Delaying Social Security: How Lump Sum Payments Can Help.”http://knowledge.wharton.upenn.edu/article/delay-social-security/. Accessed Nov. 8, 2018.

Matthew Frankel. USA Today. June 2, 2018. “47% of American pre-retirees failed this basic Social Security quiz. Can you pass it?”https://www.usatoday.com/story/money/personalfinance/retirement/2018/06/02/pre-retirees-failed-basic-social-security-quiz/35343701/. Accessed Nov. 9, 2018.

Our firm is not affiliated with the U.S. government or any governmental agency.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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What Should You Look for in a Financial Advisor?

All financial advisors are not equally helpful. In this episode, Michael and Anthony Pellegrino illustrate why your choice of financial advisor could guide — or derail — your journey into retirement. The advice you receive will set the foundation for your financial future; you need to make sure that the person you turn to for help has your best interests at heart.

As Michael explains, there are two primary categories of advisors. The first is a fiduciary. All of Goldstone Financial Group’s advisors are certified fiduciaries and are thus legally obligated to put their clients’ needs above their own financial interests. The second category of advisors holds to a suitability standard. Unlike fiduciaries, suitability-grade professionals do not consider the client’s long-term financial health. So long as the advisor deems a product suitable for the situation at hand, they can sell it — regardless of whether it will still be useful in five or ten years. The only way that a client can be certain that their advisor has their best interests at heart is to sign on with a fiduciary.

However, a fiduciary certification alone doesn’t guarantee that an advisor is right for you. As Michael and Anthony Pellegrino point out in this episode, a genuinely effective advisor has other positive qualities.

Good Listening Skills

Even the best-qualified advisors will fall short if they don’t bother to engage with their clients. They need to listen to their clients’ goals, acknowledge their concerns, and ask the questions that will give them enough context to establish a solid financial plan.

Accessibility

Advisors should be accessible — and yet, many retirees find it difficult to schedule an appointment that lasts long enough for their advisor to address their questions and concerns fully. This issue is particularly pressing at larger firms that have higher turnover rates for advisors. With these organizations, clients might cycle through advisors every six months, and never get a chance to build a long-term, trusting relationship with any one person.

Proactivity

We exist in an ever-changing market environment. Retirees need advisors who can be proactive and adaptive in good and bad times alike. If an advisor is reactive and only makes a move after circumstances have changed for the worse, they won’t be as effective as someone who acted preemptively.

To sum up — when you look for an advisor, search for a fiduciary that you like and trust!

 

News Around the Internet

By Anthony Pellegrino | Goldstone Financial Group 

Where there is internet, is there more prosperity? Generally speaking, yes.

It costs much more to lay fiber to outlying communities than it does in larger metropolitan areas, which may contribute to the growing geographical discrepancy between income, education and even health care. Some places, like Indiana, hope to bring rural areas up to speed by expanding broadband access. Indiana, for example, is planning a $1 billion infrastructure update.1

Internet access opens the door for opportunities in a variety of areas, including education. Enrollment for online higher education classes is increasing each year, according to the report “Grade Increase: Tracking Distance Education in the United States.” Most of this enrollment (67.8 percent) is by students attending public institutions, with about half of students also attending on-campus classes. While online educational enrollment is rising swiftly, the number of students studying on a campus dropped by more than 1 million between 2012 and 2016.2

Keeping in touch with friends and the world’s current events is also simplified by internet access. Use of social media websites and apps is widespread among all demographics. According to a Pew Research Center study, while the share of teens using Facebook fell 20 percentage points over three years, a larger share of lower-income teens continue to use Facebook. Sociologists interviewed noted that higher-income teens often seek the prestige of the next “hot” social media platform, whereas lower-income teens continue to rely on Facebook to connect with a diverse network of friends and family.3

Unfortunately, the internet also has become a tool for negativity, particularly when it comes to bullying and misinformation. While social media has done much to establish and strengthen connections among people, it also enables the propagation of cyberbullying, a growing threat for teens and preteens. In 2018, 26 percent of parents reported their child had been a victim of cyberbullying. However, this share has dropped from 34 percent in 2016.4 First Lady Melania Trump has made cyberbullying her primary focus, encouraging adults to provide children with information and tools to develop safe online habits.5

Perhaps one of the most detrimental uses of the internet in recent years has been the spread of misinformation, particularly “fake news” stories that look like legitimate articles but which report inaccurate or fabricated facts and statistics. The problem is exacerbated by social media users who read and believe the stories, then share them with friends and followers.

Worse yet, these fake articles are circulated by bots on Twitter and other websites. A “bot” is an automated account made to look like a human user that is programmed to spread false information. More than 13.6 million Twitter posts shared misinformation linked to bots between May 2016 and March 2017.6

Sadly, people tend to be more interested in dramatized falsehoods than the truth. One researcher found that while true news stories tend to spread to no more than about 1,600 people, shared false stories on the internet tend to reach tens of thousands of readers, even though they originated from far fewer sources.7

Content prepared by Kara Stefan Communications.

1 Lindsey Erdody. Indiana Business Journal. Sept. 14, 2018. “Broadband blitz to lift economy, study says.” https://www.ibj.com/articles/70471-broadband-blitz-to-lift-economy-study-says. Accessed Oct. 4, 2018.

2 Online Learning Consortium. Jan. 11, 2018. “New Study: Distance Education Up, Overall Enrollments Down.”https://onlinelearningconsortium.org/news_item/new-study-distance-education-overall-enrollments/. Accessed Nov. 30, 2018.

Hanna Kozlowska. Quartz.com. Aug. 15, 2018. “Do teens use Facebook? It depends on their family’s income.” https://qz.com/1355827/do-teens-use-facebook-it-depends-on-their-familys-income/. Accessed Nov. 30, 2018.

Sam Cook. Comparitech. Nov. 12, 2018. “Cyberbullying facts and statistics for 2016-2018.” https://www.comparitech.com/internet-providers/cyberbullying-statistics/. Accessed Nov. 30, 2018.

Jordyn Phelps. ABC News. Aug. 20, 2018. “First lady Melania Trump speaks out against cyberbullying.” https://abcnews.go.com/Politics/lady-melania-trump-speaks-cyberbullying/story?id=57284988. Accessed Nov. 30, 2018.

Maria Temming. Science News. Nov. 20, 2018. “How Twitter bots get people to spread fake news.” https://www.sciencenews.org/article/twitter-bots-fake-news-2016-election. Accessed Nov. 30, 2018.

Maria Temming. Science News. March 8, 2018. “On Twitter, the lure of fake news is stronger than the truth.”https://www.sciencenews.org/article/twitter-fake-news-truth. Accessed Nov. 30, 2018.

We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Goldstone Financial Group TV: Should You Roll Over Your 401k?

Anthony Pellegrino | Goldstone Financial Group | Goldstone Financial Group TV: Should You Roll Over Your 401k?

 

In this ongoing series, Goldstone Financial Group principals Michael and Anthony Pellegrino answer personal finance questions from the residents of Chicago. This episode centers on employer-sponsored retirement accounts — and, more specifically, the strategies a retiree can use to grow the money they save further.

 

How limited am I to my company’s 401K options?

MICHAEL PELLEGRINO: Unfortunately, you probably are relatively limited. Most people only have a few options available when they sign on to a company 401(k) plan. If you do enroll, it’s crucial that you contribute — and if your employer offers a match, take them up on it! That’s free money in your account. Aside from that, I’d suggest working with an advisor to see if you’re eligible to make an IRA or Roth contribution.

ANTHONY PELLEGRINO: Another factor to consider is age. Most people assume that they can’t touch their 401(k) while they’re working, but you have more options once you reach 59.5 years of age. If you’re still working and contributing at that point, a fiduciary could help you put together an in-service rollover. You can go in and access some part or all of your 401(k) and then roll over those funds to an IRA. At that point, you have more options for your investment — and you don’t have to stop contributing to your 401(k), either! You’ll have two buckets to grow your investment, instead of one.

 

Should I leave my old 401k with my past employer?

MICHAEL PELLEGRINO: That’s one option, but you may have others. It’s important to look at the specifics of your 401(k) before you make any decisions. Again, though, an employer-sponsored plan is going to limit your options. It might be worth looking into rolling the money over into other investment vehicles — an IRA account, for example.

 

Should I take out money from my pension fund from a previous employer, or should I leave it there to grow over time?

ANTHONY PELLEGRINO: Those of us at Goldstone Financial Group specialize in these “lump-sum pension option rollovers.” People come to us all the time to ask about lump-sum buyouts, wondering whether they should take their pension money out all at once or access it in installments as “income” in retirement. In our view, a pension is just a large annuity. Once you start drawing income, you give up all access to its liquidity. You’re locked into that model, and you have no way to move the money you’ve saved into other investment vehicles. Worse, a pension does not come with death benefits — if a retiree were to pass on after spending decades with a company, their family would get nothing.

MICHAEL PELLEGRINO: As fiduciaries, we can create a comparison of your options and help you determine whether you should keep your 401(k) as is or roll those funds over into another investment vehicle.

Anthony Pellegrino on OnMogul

Anthony Pellegrino | Goldstone Financial Group | Planning For Long-Term Care? Goldstone Financial Group Can Help

Anthony Pellegrino, Goldstone Financial Group founder and firm principal, has dedicated his practice not only to helping individuals plan for their financial future but also remaining by their side as a partner in achieving their desired results. When Goldstone Financial Group helps a client prepare for retirement, they aren’t afraid to talk about the worst-case scenarios.

“Everyone likes to hope for the best – heck, we like to hope for the best,” Anthony Pellegrino says, “But we have to think about the practical issues, too. The last outcome we want is for a client to put away money every day for two, even three decades and then find themselves struggling to pay their bills after an unexpected and financially catastrophic life event.”

Read the full article here!

Is Your Portfolio Too Risky? Goldstone Financial Group Weighs In

Laptop on desk with finances

When it comes to money, most people prefer a predictable approach; they feel secure with the regular schedule of a paycheck or the guarantee of a reliable income. There are some who may find a thrill in the possibility of a riskier and potentially more profitable investment, but their worry exceeds their optimism. Understanding the actual level of risk can make a huge difference.

The calculated risks investments demand isn’t for everyone. However, for Goldstone Financial Group founder and principal Anthony Pellegrino, assessing risk is a way of life. Anthony Pellegrino has built his career on determining good investments from bad investments while guiding his clients towards a secure financial future. Assessing and determining the level of risk in investments, he explains is one of the most important aspects of his job – mainly because many of the people he connects with do not realize how risky their portfolio really is.

Read the full article on Patch! 

Goldstone Financial Group TV: Are Annuities Right for You?

When most people save for retirement, they do so with the expectation that after they cash their last paycheck, they will have enough money in savings and investment assets to carry them through the entirety of their lives. They feel secure in knowing that they have money tucked away, so they rarely consider the worst-case scenarios.

What if they face a massive investment loss shortly before or after their retirement? What do they do if they spend most of their savings in the first decade of retirement, only to live another ten years?

Without a steady paycheck, retirees don’t have a fixed source of monthly income or a way to guarantee that they will be able to pay their bills during their sunset years. They need a plan – and Goldstone Financial Group is prepared to offer a few suggestions.

In this episode, firm principal Anthony Pellegrino provides a few insights into how those planning for retirement can establish a predictable income stream before they lose the security of their monthly paycheck.

According to Pellegrino, one of the best options available to retirees today are annuities. These investment vehicles come in all varieties, each with their pros and cons. An annuity that works for one person may be financially damaging for another – and as such, it is essential to consult a certified fiduciary before signing up for one. In this video, however, Anthony Pellegrino provides two examples of annuities that may be helpful for some retirees.

 

Example #1:

At age 60, you place $250,000 in an annuity account. This account will give you a bonus of six, seven, or even eight percent for signing up if you agree to a ten-year term. Throughout the decade, that percentage bonus will generate an additional $28,000 for your retirement fund.

Some annuity packages also come with a Home Healthcare Doubler, which would effectively double your income during the years that you might need assistance with two or more of the six active daily living (ADL) needs such as bathing, eating, or walking. It is worth noting that the doubler benefits only apply up until a set age ceiling; after that, the income provided would revert to the original amount.

 

Example #2

Let’s assume that you place that same $250,000 in a different variety of account. In this scenario, you have the security of a floor beneath your initial contribution. Even better, the annuity is designed with a built-in inflationary hedge. Every time the market trends upward, you will see your annual income increase by the same percentage – and when the market trends downward, your income remains fixed at its previous yearly amount. As a bonus, these accounts can also be structured to include a clause for spousal continuation, which would allow the account holder’s spouse to take ownership of the annuity if they pass away.

Most retirees hope to build and build – but they don’t have a plan in place for establishing a stable income stream. Goldstone Financial Group can help! Reach out today to consult with a certified fiduciary.