It’s that time of year again. Halloween is here. It’s time to stock up on candy, carve your pumpkin, and find the perfect costume. Soon, scary movies will be on television and you’ll have little ghouls and goblins showing up at your door for trick-or-treating.
This may be the scariest time of the year, but it only lasts a month. The truth is there could be gaps in your retirement strategy that could come back to haunt you for years or even decades. Below are a few common retirement planning mistakes that can have frightening long-term consequences. If any of these sounds familiar, it may be time to meet with a financial professional.
Having the wrong allocation.
Asset allocation is an important part of any retirement strategy. Your allocation influences your risk exposure and your potential return. Generally, risk and return go hand-in-hand. Assets that offer greater potential return usually also have higher levels of risk. You can use asset allocation to find the right mix of assets for your retirement income goals and risk tolerance.
Having the wrong allocation can be problematic. For example, many people have less tolerance for risk as they approach retirement. As you get closer to retirement, you have less time to recover from a loss and thus less tolerance for risk. However, if you don’t adjust your allocation, you could have more risk exposure than is appropriate. A downturn could substantially impact the amount of income you have set aside for retirement.
One way to protect your assets and reduce your risk exposure is to use a fixed indexed annuity (FIA) for part of your allocation. FIAs offer potential interest that is tied to the performance of an external market index, like the S&P 500. If the market performs well, you may earn more interest, up to a maximum amount set by the insurance company.
However, if the index performs poorly over a given period, you won’t lose any premium. Most FIAs have a principal guarantee* which means you won’t lose money due to market loss. You may earn zero interest, but your contract value won’t go down.
Not guaranteeing* your income.
Income is the name of the game in retirement. One key to a successful retirement is having income that meets or exceeds your expenses. However, much of your income may be unpredictable. While Social Security income is guaranteed, your income from your personal savings may not be. It can be difficult to plan your retirement when you don’t know how much income you will have or how long it needs to last.
Again, an FIA can help you manage this risk. Many FIAs offer optional benefits called guaranteed* withdrawal riders. With these features, you’re allowed to withdraw a certain amount each year. As long as you stay within the allowed withdrawal amount, the income is guaranteed* for life, no matter how long you live or what happens in the financial markets. This predictable income can help you make more informed financial decisions and live comfortably in retirement.
Not working with a financial professional.
Are you more of the DIY type? That’s an understandable approach, but it could also create some frightening risks. For instance, you may not see potential risks, like gaps in your asset allocation. Or you may not fully estimate your income need for a long retirement.
A financial professional can use their knowledge, experience, and resources to develop a customized strategy for you. They can identify gaps in your plan and recommend appropriate strategies, such as FIAs or other financial vehicles. Sometimes an outside opinion can help you identify risks that you didn’t see yourself.
Ready to take the terror out of your retirement strategy? Let’s talk about it. Contact us at Quest Financial. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. 19301 - 2019/9/24
It’s hard to believe the year is almost over, but October is already upon us. Soon the holidays will be here and then we will flip the calendar to 2020.
These last few months are also your last opportunity to make important financial decisions before the end of the year. It’s a great time to review your strategy and make adjustments as you head into 2020.
Below are a few items to include on your end-of-year planning checklist: Review your tax strategy.
The deadline for filing your 2019 taxes may be in April 2020, but that doesn’t mean you can’t get started on your planning today. In fact, by starting your planning now, you can take advantage of deductions and other opportunities.
For example, there may be deductions that you haven’t fully used. You could make a contribution to your favorite charity before the end of the year to take advantage of the charitable deduction. You could make contributions to tax-deductible retirement accounts, like an IRA. Do you have any outstanding medical bills? You may be able to deduct those costs if you pay them before the end of the year.
Also, consider whether you can defer income until next year. Perhaps you’re due a sizable bonus or other compensation. Perhaps you could defer that income until after January 1 so it’s not included in your 2019 return. If you’re considering selling appreciated assets, like stocks, you may want to wait until after the beginning of the year to delay the capital gains. A financial and tax professional can help you identify these opportunities and make informed decisions. Increase your contributions.
Will you maximize your contributions to your 401(k) and IRA this year? If not, you still have time to do so. In 2019, you can contribute up to $19,000 to a 401(k), or up to $25,000 if you are age 50 or older. You can contribute up to $6,000 to an IRA, or up $7,000 if you are 50 or older.1
This also may be a good time to consider your contributions for 2020. The IRS has not yet announced the 2020 contribution limits. However, increasing your contribution rate could help you accumulate more assets. Even a moderate increase of a percentage point could compound to significant savings over time. Think about increasing your retirement savings as you head into 2020.
Check your benefits.
The fall is usually open enrollment season for many employers. This is a good time to review your health coverage and other benefits to see if they still fit your needs. If you’re nearing retirement and have access to an HSA through your employer, you may want to consider making contributions. An HSA can be a tax-efficient funding source for healthcare costs and you can take the assets with you into retirement.
Adjust your allocation.
Finally, this may be the right time to review your allocation. Your needs and risk tolerance could change over time. It’s common for people to become more risk-averse as they approach retirement. It’s important that your allocation changes along with your tolerance for risk.
A fixed indexed annuity (FIA) could help you take some of the risk out of your strategy. FIAs offer the potential to earn interest based on the performance of a market index. If the index performs well over a certain time period, you may earn more interest, up to a limit. However, if it performs poorly, you could earn zero interest; however you don’t lose money due to market declines.
Ready to start on your fourth-quarter financial checklist? Contact us at Quest Financial. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about investments and potential insurance products as deemed appropriate by a licensed fiduciary. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Registered Investment Advisor and Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency. Advisory services offered through ChangePath, LLC, a Registered Investment Adviser with the SEC. ChangePath, LLC and Kincaid Financial Resources are unaffiliated entities.
Licensed Insurance Professional. We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives. Investing involves risk, including the loss of principal. No Investment strategy can guarantee a profit or protect against loss in a period of declining values. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity products are backed by the financial strength and claims-paying ability of the issuing insurance company. The information is not intended to be investment, legal or tax advice. The agent can provide information, but not advice related to social security benefits. The agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. For more information, contact the Social Security Administration office, or visit www.ssa.gov.