Goldstone Financial Group: Which Investment Vehicles Are the Best?

In this episode, Goldstone Financial Group representatives took to Chicago’s streets to ask residents about their most pressing financial questions.

Anthony and Michael Pellegrino provide answers.

Are mutual funds the best place to invest my money?

Michael Pellegrino:

Mutual funds can be a great vehicle for investment, but they certainly aren’t the only one available. Every person’s financial needs, situation, and goals are different; one person might be better suited by investing in bonds or stocks – or maybe mutual funds are preferable. Muddling through the possibilities can be difficult for anyone who hasn’t worked in the financial sector for years, so I would highly recommend making an appointment with an experienced financial advisor to understand your options.

My husband’s retiring, how will an annuity help us?

Anthony Pellegrino:

First things first – there is no single annuity. They come in a variety; fixed annuities are high-interest and tax-deferred, while variable annuities have high fees and fixed hybrids limit downside risks. Another option might be an immediate annuity, which would offer money right away, but prevent investors from having cash access. Like any other investment, its suitability varies depending on the financial needs and situations of the investor.

That said, annuities tend to get a bad rap. Michael and I generally tend not to like them, but there are a few great options out there. You need to enlist an advisor to help you make the best choice for your particular set of circumstances.

Am I better investing in ETFs?

Michael Pellegrino:

Exchange Traded Funds (ETFs) do offer another option for investors. They came onto the investment scene in the last few years as an alternative to mutual funds. Like the latter investment type, ETFs allow investors to maintain multiple ownerships within one vehicle and thereby diversify their portfolio. ETFs also tend to have lower internal costs than mutual funds – but again, it’s best to consult a financial advisor before you settle on an investment plan.

Goldstone Financial Group: Are Hidden Fees Cutting Into Your Retirement Fund?

 

When most people begin to plan for retirement, their goals are usually simple. They want to put aside enough money to live the lifestyle they want and have a little left to pass onto their beneficiaries. They imagine that by saving and investing, they are already well on the path to a successful retirement – but in some cases, covering the basics won’t be enough to secure financial stability later in life.

Too often, people overlook small but crucial details. They might have a substantial savings account and a few investments, but they haven’t realized just how much of their retirement fund they lose to fees each year.

As Anthony and Michael Pellegrino point out in this episode, seemingly small costs can add up quickly. Mutual funds, for example, are positively riddled with small financial demands that run the gamut form 12B-1 costs to sub-account fees and trading expenses. All told, these administrative expenses can claim two percent or more of a person’s investment earnings for the year. To make matters worse, these costs are applied internally, so the client might never realize how much those fees carve out of their profits!

As an institutional fiduciary, Goldstone Financial Group can lessen the impact of administrative costs by bundling them into a single wrap cost – a fee which takes care of advisory costs, covers third-party money manager expenses, and allows for unlimited trading. By packing the fees into one institutionally-managed bundle, Michael explains, Goldstone advisors can lower administrative costs overall by shifting clients out of retail investment and into a more cost-effective institutional setting.

However, avoiding hidden fees is only half of the battle when it comes to savvy investment. Knowing who is managing your money and what their qualifications are, Anthony stresses, is just as crucial to your financial health. While the vast majority of client-facing financial professionals call themselves “advisors,” only registered fiduciaries are legally obligated to put their client’s best investment interests above their own.

Brokers, Anthony goes on to explain, are trying to sell a product. When they convince their clients to invest, they earn a commission. The nature of their occupation incentivizes them to sell more, even when the investment might not be in the client’s best interests.

All of Goldstone’s advisors are registered fiduciaries; as such, they have a legal and moral responsibility to put their clients’ financial interests above their own. Regardless of whether clients choose to sign on with Goldstone or another investment firm, however, Anthony and Michael believe it to be critical that they sift through hidden fees early and find a registered fiduciary to help them plan for retirement. Otherwise, clients run the risk of losing significant portions of their retirement savings to unnecessarily high fees and unscrupulous “advisors.”

Notes on U.S. Infrastructure

The American Society of Civil Engineers has given the U.S. an overall infrastructure grade of D+. Throughout the next decade, it will take more than $4.5 trillion to fix our aging infrastructure — including upgrades to roads, mass transit, wastewater treatment plants and the electrical grid.1

We’ve reached the mission-critical stage. One industry analyst observed, “We’re at the point where our infrastructure is becoming an impediment to productivity and long-term economic growth.”2

The idea of national infrastructure may remind us of personal retirement preparation. If you are still working and thinking about retirement options, consider your own “infrastructure” situation. First, are you considering relocating or downsizing, or are you committed to aging in your own home? If you prefer the latter, it’s a good idea to check out your home from top to bottom to see whether you need any major repairs or maintenance while you’re still earning a paycheck.

This inspection should include considering a new roof, checking for mold buildup in your crawl space and researching new windows or other energy-efficient features that can help lower your utility bills. Even replacing older appliances could impact your household budget once you’re living on a fixed income.

Given our dramatic weather pattern swings, we should also prepare for the possibility of a natural disaster that could affect our daily living. Consider how you might plan for a long-term disruption in power or clean water supplies, such as installing a generator, solar panels, tiles and/or a battery pack. While it may seem farfetched, remember that the citizens of Puerto Rico probably never thought they would have to adapt for long-term power outages, as seen after Hurricane Maria.3

One way the U.S. is trying to address some of these issues is by incorporating green stormwater infrastructure (GSI) in sewer overflow control and integrated wet-weather plans. The idea is to evaluate the performance of GSI systems for future development.4

With all the discussion about funding at the federal level, one little-known fact is how much infrastructure is controlled at the local level. In fact, 40 percent of the nation’s bridges and 46 percent of all public roads are owned and maintained by counties. Furthermore, counties help fund one-third of the nation’s airports and 78 percent of public transportation programs.5

The news isn’t all bad. According to the World Economic Forum, the U.S. international ranking for overall infrastructure quality improved from 25th to 12th place last year out of 138 countries. However, when it comes to specific categories, we show mixed results — the U.S. ranks second in road infrastructure spending but ranks 60th for road safety. The U.S. also lags behind other developed countries when it comes to infrastructure resilience and future sustainability.6

Content prepared by Kara Stefan Communications.

1 Merrill Lynch. 2018. “Getting a Bigger Bang for the Infrastructure Buck.” https://www.ml.com/articles/getting-a-bigger-bang-from-the-infrastructure-buck.html#financial-research-and-insights. Accessed April 20, 2018.

2 Ibid.

3 Camilla Domonoske. NPR. April 18, 2018. “Puerto Rico Loses Power — Again.” https://www.npr.org/sections/thetwo-way/2018/04/18/603569966/puerto-rico-loses-power-again. Accessed April 20, 2018.

4 Water Environment Federation. April 4, 2018. “Data analyses confirm GSI value in overflow control.” http://stormwater.wef.org/2018/04/data-analyses-confirm-gsi-value-overflow-control/. Accessed April 20, 2018.

5 Mary Scott Nabers. Infrastructure USA. April 9, 2018. “County government — a critical component of America’s greatness.” https://www.infrastructureusa.org/county-government-a-critical-component-of-americas-greatness/. Accessed April 20, 2018.

6 Hiba Baroud. PBS News Hour. Feb. 18, 2018. “Measuring up U.S. infrastructure against other countries.” https://www.pbs.org/newshour/nation/measuring-up-u-s-infrastructure-against-other-countries. Accessed April 20, 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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Lifetime income default options: a win for employees

Lifetime income default options: a win for employees

Choosing a retirement plan can be one of the most important decisions you make as you map out your financial future. Especially now, when Social Security again appears to be in jeopardy while defined benefit plans are already on their way out, a need for reliable options for working people is pertinent as ever. Unfortunately, too many employees put off thoughts of retirement as unfeasible or premature. Lack of planning often leads to hasty decision-making when the time comes to make vital choices about life after work.

That’s why default options are extremely useful for employers to introduce. Simply put, their implementation demonstrates a commitment to the well-being of the workforce that can pay off greatly in the long run. Lifetime Income Default Options offer their recipients a fixed rate of income during the years after retirement, with the option to opt out of the program rather than the need to opt in. Since many people underestimate how long they will live after they retire (and therefore don’t plan on having as much money), this option, helps provide a long-term safety net.

The major dilemma of retirement planning, income level vs. liquidity, is a choice not to be taken lightly. Some people may not be aware of it, but these lifetime income options offer a sort of compromise. To begin, their money is placed into a diversified fund that readjusts along with the market, so income level stays steady while their savings are accrued, then at a preset time (usually at age 48) allocations to a deferred annuity begin, with full conversion achieved about a decade later. This gradual approach helps to neutralize changes coming from interest rate adjustments, typically a driving force in annuity price changes.

The strategy assures employees that they will receive a baseline amount of income in retirement. If they choose, they can adjust their level of savings as they see fit. This saves them from getting locked into a strict amount and gives them the flexibility to spend the amount of money they feel most comfortable with.

These plans have already generated a great deal of interest that only looks to gain more momentum as the word spreads. It’s important not to let stagnation or complacency with existing, less than adequate plans get in the way of your employees’ needs. These plans offer a reliable way for your employees to retire with greater financial stability, and can encourage greater savings pre-retirement. In the end, what’s important is that people are able to use the tools at their disposal for a comfortable and prosperous retirement. A plan that offers employees flexibility while helping to provide for long-term financial safety is a win for them, and a win for you as a leader.

Is $1 million enough to retire?

Is $1 million enough to retire?

For many, having $1 million saved for retirement sounds like plenty, but when you break down the numbers, what once seemed like a fortune might seem like just passable or maybe even too little to maintain the lifestyle you have or fund the one you want.

Obviously, there’s no single answer for whether $1 million is enough to keep someone afloat during retirement—ostensibly, a frequent first-class jetsetter is going to need much more than that while someone opting for only simple pleasures may be satisfied with less.

If you’re a baby boomer and come out shy of the million dollar mark, know that you’re very much not alone. According to a survey from GoBankingRates, only 22% of individuals ages 55-64 and older have $300,000 or more set aside for the future and about 29% of those over 65 have nothing saved at all.

In fact, most Americans (81%) don’t actually know how much they’ll need to retire. But thanks to some general guidelines and user-friendly retirement calculators, it’s easy enough to estimate your target savings and see whether $1 million will allow you to afford the post-work life of your dreams. But how?

One rule of thumb is to plan on replacing 70-90% of your current income with savings and social security once you leave the workforce. That means if you make the American median annual household income of $55,775, then you should anticipate needing $39,042.50-$50,197.50 per year during retirement. However in an article for AARP, Dan Yu of EisnerAmper Wealth Advisors said that for the first 10 years of retirement, you are more likely to be spending 100% of your current income.

Another way of looking at it is by first calculating the bare minimum of how much you’ll need per year and then working backwards to see how much you need to save. Investopedia recommends using the 4% sustainable withdrawal rate, what they describe as “the amount you can withdraw through thick and thin and still expect your portfolio to last at least 30 years,” as a means of calculation. That means if you have $1 million saved, then your yearly budget will be around $40,000. If your retirement aspirations lean more towards golf resorts than improving your home garden, even with the additional $16,000 or so per year that you’ll receive through social security, $1 million will clearly not sustain you for long.

There’s also the added variable of your expected lifespan. While it may seem bleak to confront your own mortality, you need to calculate your yearly saving and spending with a time frame in mind. According to the CDC, the average life expectancy in the United States back in 2014 was 78.8 years old. But given that more Americans are living past 90, and a 65 year old upper middle class couple has a 43% chance that one or both partners will live a full 30 years more, you may end up stretching your savings for longer than you could have ever imagined.

Where you plan on living also has a massive impact on how far $1 million will get you. While a retiree in Sherman, Texas could lead a nice cushy life for 30 work-free years with a retirement account of just $408,116, a retiree in New York City would need more than 5 times that. SmartAsset calculated that the average retiree in NYC needs $2,250,845 in savings, allocating $47,000 per year for housing alone. Even a nest egg in Brooklyn isn’t much better—that too requires more than $1 million. Perhaps for that reason, New York City isn’t on Forbes list of best places to retire in 2017.

Even with the most careful planning, there are always going to be a few financial surprises along the way that may set you back more than a few pennies worth. Whether they’re negative like medical emergencies and subsequent health expenses or positive, like travel fare to a destination wedding, they’re still taking a bite out of your bank account that may not have been in your original budget. For this reason, it’s important to use the above guidelines and calculation tools as a rough estimate, and be on the safe side by saving more than you think you’ll need.

3 Biggest Regrets of Baby Boomers Once They Retire

3 Biggest Regrets of Baby Boomers Once They Retire

As the adage goes, “a life without regrets is a life not lived,” but it is also “better to regret what you have done than what you haven’t.” The three biggest regrets of retired baby boomers center on the things they have not done and teach the next generation to make more informed choices.

  1. Not Saving for Retirement Earlier

A rare absolute rule of finance is that people should start saving for retirement as early as possible, with the best time to start being in one’s twenties. Life expectancies are growing and show no signs of slowing down, so more money is needed to be stretched out for a longer period of time. Starting to save and invest as soon as one enters the full-time workforce can make a dramatic difference in the amount of money that accumulates by the time a person is ready to retire.

Many baby boomers failed to start saving on time and properly because they did not understand just how much money would be needed for their retirement. Some also did not know that receiving social security benefits or taking money out of retirement accounts before it is needed can have tax consequences that can substantially lower savings. Finally, many people tend to forget to adjust for inflation when considering whether they are satisfied with the rate of return on their investments.

  1. Not Working Less and Traveling More

A study of 2,000 baby boomers commissioned by British Airways revealed that one out of five boomers regrets not doing more traveling around the world. The survey data also indicate that only 9% of American workers get more than nine vacations days per year and that only 37% of Americans took all of their vacation days in 2015, suggesting that working too much may be an issue whose scope extends far beyond just the baby boomer generation.

A 10-year research project conducted by Karl Pillemer, Professor of Human Development at Cornell University, into the lives of 1,200 people aged 65 and older also revealed that lack of travel during one’s youth is a common regret. He writes, “To sum up what I learned in a sentence: When your traveling days are over, you will wish you had taken one more trip.”

  1. Not Working More

It might sound surprising given the decades of work they’ve done, but more than two-thirds of middle-income baby boomer retirees wish they had worked longer, and not for expected reasons. One might assume that people would want to continue working to keep earning their salaries, but for many baby boomers, wanting to keep working is about the work. People who are passionate about their careers and enjoy their work want to keep doing it. For this reason, many baby boomers return to the workforce on a part-time basis or as consultants. A number of baby boomers also enjoy working during their later years because they find that it keeps them mentally sharp, physically fit, and gives them a sense of purpose.