Month: July 2023

Financial Planning for Retirement: Steps, Plans, and Rules

Posted on by Colette Nichol

Financial Planning for Retirement: Steps, Plans, and Rules

Financial planning for retirement is crucial for anyone who wants a successful retirement or work-optional lifestyle.

By Michael Urch, CFP, Senior Wealth Manager of 360 Financial

As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning. He prides himself on being a professional advisor who puts planning before products.

 

Tips on Essential Financial Planning for Retirement

Surprisingly, some people spend more time planning their annual vacation than they spend planning their retirement. We want to make sure that our clients have a plan in place and that they are confident that they will be able to retire knowing they will not run out of money.

Financial Planning Topics Covered:

  1. How to Plan for Retirement
  2. How to Save for Retirement
  3. Top 5 Retirement Planning Tips to Maximize Your Employment Benefits
  4. How to Invest for Retirement
  5. Why Diversification Is Important
  6. Why You Need to Know Your Risk Profile
  7. Working with a Fiduciary Financial Advisor
  8. Tax Planning and Retirement
  9. Estate Planning and Retirement
  10. Common Questions about Financial Planning for Retirement:
  11. Work with a Financial Advisor Online or In Person

How to Plan for Retirement 

There are two essential financial summaries to put together at the beginning of retirement planning. 

1) A net worth statement. This is a summary of all of the things you own (assets) and all of the money you owe (liabilities). It is a snapshot of your financial resources available for retirement.

2) A cash flow statement or budget. This is a summary of the annual income you expect to receive in retirement from social security and other sources, as well as your annual retirement expenses. (+)

Generally, you will have more expenses than income in retirement. You will then want to work with an advisor to create a plan to replace the rest of your income stream using the assets from your balance sheet.

How to Save for Retirement

It is important to regularly set-aside money for retirement.

The most common way to do this is by contributing to a 401(k) plan or 403(b) plan. IRAs and Roth IRAs can also be used as well as contributing to brokerage accounts. HSA’s are becoming a more common form of retirement savings as well. A general rule of thumb is to contribute 10% of your personal income to retirement, but we like to customize savings plans for our clients based on their specific situation. Schedule a 15-minute call if you want to talk to an advisor about personalized retirement savings strategies. (+)

Top 5 Retirement Planning Tips to Maximize Your Employment Benefits

  1. Contribute enough to get the employer match on your retirement accounts.
  1. Consider contributing to a Roth 401(k)/403(b) if you expect to have your income increase in the future.
  1. Evaluate whether you should choose a health insurance plan that allows you to contribute to an HSA. If yes, maximize your HSA for retirement
  1. Review your benefits packet for any deferred compensation benefits and make sure you are utilizing them.
  1. Make sure that you are utilizing all tax benefits (health insurance is pre-tax, FSA and dependent FSA accounts, etc.)
retirement planning

How to Invest for Retirement

Equities (stocks) are an asset class that has historically beaten inflation for the long-term.

The longer someone’s time-frame for investing and the further that they are from retirement, the more they should allocate to stocks. As retirement approaches, it may make sense to add more bonds to your overall allocation. These are the general rules of thumb, but it would be best to discuss your specifics with an advisor. (+)

Why Diversification Is Important

Risk cannot be eliminated when investing.

However, investment risks can be reduced through diversification. By having exposure to multiple companies and asset classes, our clients are able to have more confidence that if any one company or sector of the economy performs poorly, other investments in the portfolio can help sustain the investments.

Why You Need to Know Your Risk Profile

Knowing your risk profile is critical.

One of the most disastrous scenarios possible would be for someone to make a poor investment choice and sell out of their investments during the first market downturn in retirement.

It is extremely important to understand the level of risk that you are comfortable with and then to create an investment policy statement that guides portfolio decisions.

Working with a Fiduciary Financial Advisor

Is your financial advisor held to a legal standard of acting in your best interest in managing your investments and providing financial planning advice?

A registered investment advisor must manage investments as a fiduciary, and a CERTIFIED FINANCIAL PLANNER™ professional must give advice while acting as a fiduciary. We recommend working with a fiduciary whenever possible.

Your retirement plan should reflect your goals and vision for your life.

Tax Planning and Retirement

One of the largest expenses in retirement is taxes.

Why not work with an advisor that can help you avoid tipping the IRS? Roth conversion strategies, RMD strategies, charitable giving strategies, gain/loss realization strategies – all these and more should be on the table for discussion every year in retirement.

Estate Planning and Retirement

Are you planning to leave an inheritance?

Or do you want to plan on spending as much as possible while you are living? Should you have trusts in place to help manage your assets in the event that you are incapacitated? As with all financial planning topics, everything is related and it is important to think about your estate plan while putting your retirement plan together.

estate planning

Common Questions about Financial Planning for Retirement:

How do I prepare my finances before retiring?

Create a budget based on your spending today.

Then imagine yourself as being retired. Based on what you are spending right now, how much do you want to be spending in retirement? Finding out the right number here is important. With it in mind, you can work with an advisor to see whether it is achievable.

 

What is the safest place to put my retirement money?

Asset allocation in retirement is extremely important.

You have to balance different risks. One of the risks is market risk. This is the risk of stocks decreasing in value due to market volatility. Inflation is another significant risk. If you are only considering market risk, it may seem “safer” to have all of your money in treasury bonds, but it is important to not forget the long-term risk of inflation, which stocks are well suited to overcome.

What are most retirement plans missing?

The one thing that I see as most impactful in a retirement plan is a sense of purpose.

It is important to go beyond the numbers and the money that makes retirement possible and ask: what is this money for? Retirement can be more than simply “not working.” I recommend sitting down with a blank page of paper and asking: “what is going to give me a sense of purpose in retirement.”

Work with a Financial Advisor Online or In Person

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

Schedule a 15-minute Call

 

About the Author

Michael Urch

Michael Urch Senior Wealth Manager and CFP

Michael Urch is a Senior Wealth Manager at 360 Financial. Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning.

Prior to joining 360, he spent nine years honing his skills first at a Fortune 100 Financial Services Company and then at independent, planning-centric firms. He graduated magna cum laude from Bethel University with a BA in economics and finance, as well as a minor in mathematics.

Michael lives in Golden Valley, Minnesota with his wife, Bri and their three children. When he is not working, he enjoys exploring parks and reading books as a family, hiking, and playing guitar.

Schedule a Call with Michael Urch, Senior Wealth Manager

 

Other Articles and Guides 

Financial Planning vs. Financial Advisor – What’s the Difference?

Financial Planning in Minnesota

401k Retirement Planning Essentials

 

Schedule a Call

At 360 Financial, our clients come first. You deserve personalized attention. You’ll be happier and more confident in your financial future when you have an advisor who always puts your needs and best interest first. Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, succession, tax, and estate planning.

Schedule a 15-minute Call

 

Financial Planning in Minnesota

If you need financial planning assistance and a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

WEBINAR: Midyear Outlook 2023: The Path Toward Stability

Posted on by Trone

July 20th, 2023

Midyear Outlook 2023: The Path Toward Stability

Mike Rogers and Brian Bohnsack will deliver market insights on what we can expect in the economy, policy, stocks, and bonds for 2023.

Our 2023 investing outlook started with a theme of returning to normalcy. Considering 2022’s market volatility and the aftereffects of the pandemic, the idea of finding balance was certainly a welcomed change. It’s a theme we could all embrace six months ago and what we will continue to rally around through year-end.

That’s not to say that 2023 hasn’t come with its own set of challenges. We saw two regional banks fail in rapid-fire succession in March—and another closed its doors in May. Collectively representing over $530 billion in assets, the trio ranks as the second, third, and fourth largest bank failures to date. We also held our breath as a last-minute deal to raise the debt limit came together as the clock ticked closer to default. Despite the market gyrations these events caused and a banking sector still on tenterhooks, the overall financial system seems stable.

Looking for more information?

Download Your FREE Copy of Our Minnesota Estate Planning Checklist

    Generational Wealth and the Gift of Financial Freedom

    Posted on by Marisa Mullis

    Those who receive an inheritance with the passing of a loved one are potentially given the gift of financial freedom if they choose to manage the wealth carefully.

    Did you know that only about one-third of adults have a prepared will, and about 40% with investable assets of $1 million or more never discuss their estate plans with their children? The reality, however, is that the percentage of squandered inheritances is troubling. Studies indicate that 70% of inheritances are exhausted by the second generation, and a whopping 90% is gone by the third.

    There are a variety of causes for the money to deplete so quickly, including spending sprees on unnecessary expenses (fancy toys, expensive clothes, jewelry, and lavish vacations), poor financial decision-making, taxes, and a lack of communication between parents and children.

    While family conversations about legacy and inheritance are important first steps in estate planning, discussing money matters can be stressful and emotional, so it’s common for parents to avoid the topic instead. Other reasons that may make parents hesitant to talk to their children about passing down their wealth include:

    • Entitlement – Children may feel as if they are better than everyone else because they are receiving a significant amount of money.
    • Motivation – Knowing that one day they will have money passed to them will affect their motivation to pursue their own financial journey.
    • Wealth management – Parents want children to understand how to manage money and if they know money will be given to them one day, they may be inclined to consider what material things they will buy instead of understanding the value of managing their finances.
    • Understanding the value of a dollar – Having to work for your own money forces you to understand the value of a dollar and that money isn’t made easily.

    At what age should parents and children discuss estate planning and inheritance?

    Children can benefit from understanding the emotionally and financially complex world of financial planning as early as their 20s. They can learn the structure, details, and management of an estate plan and the importance of wealth preservation when it is passed down in the future. Being prepared can help to mitigate problems, challenges, and risks that could appear later on.

    Beneficiaries that are intent on making their inheritances work for them can take steps toward financial independence by considering the following:

    • Resist the urge to spend the money and continue living as you were before.
    • Consider safe investment opportunities based on your risk tolerance.
    • Consult a financial professional.

    How can parents get started talking to their children about their wealth?

    Transparent communication

    Parents should be open and honest with their children about their finances. This can open the door for questions and essential conversations on what the parents expect and hope for when it comes to the financial management of their assets.

    Share values

    Both parents and children can share their values and work to align expectations. Once children understand their parent’s wishes, parents may be more open to discussing inheritance regardless of the children’s age.

    Schedule an appointment with a financial professional

    Consider scheduling an appointment with a financial professional who can help you manage your inheritance by creating investment and savings strategies and long-term goals.

    Create a plan

    Preparation is critical when it comes to pursuing any long-term goal or strategy. A financial professional has the skills and experience to help both parents and children understand how to manage their finances now, and design a plan for the future with the knowledge that estate and tax law and the market may be completely different than it is today.

    Schedule that appointment today and get a head start on working to preserve your hard-earned wealth for generations.

     

    Read More:

    How Does Wealth Management Work?

     

     

    Important Disclosures:

    The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

    This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

    All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

    This script was prepared by LPL Marketing Solutions

    Sources:

    How to Talk to Your Kids About Their Inheritance – Bloomberg

    Twilight Of A Golden Age: The Retirement Of A Once-Strong Middle Class | Seeking Alpha

    Family inheritance talk: How to help build trust and plan for tomorrow | Wells Fargo Conversations (wf.com)

    LPL Tracking # 1-05371057

    Are You Retirement Ready? 5 Ways to Help Your Parents Prepare for Retirement

    Posted on by Marisa Mullis

    The sandwich generation is a term commonly used to describe those between the ages of 40 and 59 who are responsible for raising their family and are also often helping their aging parents manage their ongoing needs. Those members of the sandwich generation typically manage the burdens of the old and young at once. They may support a grown child, aging parents, and young children.1

    The key for many people in this generation is to provide guidance and support to their parents without derailing their own life and long-term goals. Here are some tips that may help.

    #1: Get Ahead of Medicare and Medicaid Programs

    Find out if your parents qualify for any financial assistance programs. These programs may help defray some of the costs while creating more opportunities for savings. For those over the age of 65, Supplemental Security Income may be an option. 2

    #2: Evaluate Your Parents’ Financial Needs

    It may be helpful to spend some time discussing your parents’ financial needs. This effort may include taking a look at their current income and debts. It may involve finding ways to manage their expenses. It is also a good idea to consider how much money they need each month to manage their financial obligations during retirement. These expenses may include a mortgage loan payment or other long-term financial obligations that may carry over into retirement years.

    #3: Determine if Downsizing Is Beneficial

    Downsizing may mean moving to a new home that is smaller with a lower mortgage payment. It may mean moving from a house into an apartment or condo with fewer maintenance tasks. If the market conditions make sense, it might be time to consider a move to manage financial obligations.

    #4: Create a Budget for Retirement

    With a solid understanding of financial needs, it is then helpful to create a monthly budget. A budget shows if there is a need for more income. If there is, it may be time to consider options to manage financial needs, such as working a part-time job or using retirement savings differently.

    #5: Manage Expectations

    Sometimes it is necessary to consider limitations on spending to ensure there is long-term access to available funds. For seniors, it may mean controlling their spending on unneeded items. This evaluation could mean spending more time balancing accounts for those struggling with finances. Before heading into retirement, the key is to ensure there are clear expectations of what retiring is likely to be like for them and what your parent’s lifestyle will look like during retirement. 3

    It is important to talk to parents who may need some help in the years leading up to retirement to clarify where they stand in terms of finances. Doing so now may help determine what changes could create better financial results later. Working with a financial professional may be one step for your parents to consider.

     

     

     

     

     

    Important Disclosures

    The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

    All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

    This article was prepared by WriterAccess.

    LPL Tracking #1-05282505

    1 The Sandwich Generation, Pew Research Center,

    The Sandwich Generation

    2 How to Help Your Parents Retire Without Derailing Your Own Retirement, The Motley Fool,
    https://www.fool.com/retirement/2019/08/25/how-to-help-your-parents-retire-without-derailing.aspx

    3 How to Help Your Financially Struggling Parents, The Balance,
    https://www.thebalance.com/millennial-plan-to-help-parents-financially-4134994

    3 Ways Planning For Retirement is Like Planning For Summer Break

    Posted on by Marisa Mullis

    For kids, teens, and college students, summer break often represents freedom from schedules, responsibilities, and all those other drains on your time. Retirement actually can provide a similar level of freedom, but only if you’ve adequately prepared, planned, and saved. Below, we discuss three ways that planning ahead for your retirement can be like scheduling your summer.

    Deciding What to Do

    After spending decades at a 9-to-5, you may struggle to find ways to fill your time after retirement. Just like summer break, a couple of weeks of well-deserved decompression may turn into boredom.

    It’s important to have a plan to transition into retirement. Whether this means having a list of vacation destinations, a hobby to turn to, or an organization to volunteer with, giving yourself some options can help you remain active and engaged instead of simply vegetating.

    Deciding Where to Go

    Many new retirees spend a lot of time traveling now that they no longer need to worry about coming back to a pile of work or rationing a limited number of vacation days. As you spend time traveling during your working years, take note of the destinations you’d like to return to.

    Planning for retirement in general can look a lot like planning a vacation: you’ll need a budget, a destination, a timeline, and a Plan B. More than just longer vacations, retirement may also mean traveling to a new home – whether downsizing, moving closer to family, or even heading to a senior living community.

    When considering next steps, especially if debating an interstate move, take into account factors like:

    • The way your state treats and taxes retirement income
    • Whether the setup of your home allows you to “age in place”
    • Access to amenities
    • Access to necessities (like grocery stores and hospitals)
    • Transportation options
    • Cost of living

    By keeping these factors in mind, you’ll be able to find the best fit for your lifestyle now and in the future.

    Deciding How to Pay For It

    How do you afford your current lifestyle? What expenses do you expect to lose in retirement – and which ones might you gain?

    Just like planning a vacation, planning how you’ll fund your retirement can be an intricate process with many moving parts. Having a financial professional at your side can help streamline matters.

    Your financial professional will probably help you work backward to create your retirement financial plan. This planning can begin by evaluating how much your retirement lifestyle will cost, then figuring out how much income you’ll need to afford it. By looking at sources such as 401(k), IRA savings, a pension, Social Security, and taxable savings, your financial professional will scour all your potential areas of income and help you figure out the most tax-efficient way to fund your retirement.

    Retirement planning can take time and effort – but just as you wouldn’t embark on the vacation of a lifetime without doing a bit of preliminary research, you also don’t want to leap into retirement without a plan.

     

     

     

     

     

     

     

    Important Disclosures:

    The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

    This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

    This article was prepared by WriterAccess.

    LPL Tracking # 1-05367403

    Financial Independence for the Sandwich Generation

    Posted on by Marisa Mullis

    The “Sandwich Generation” faces a lot of struggles. If you’re unfamiliar with this term, it describes a demographic where usually middle-aged individuals must support aging parents at the same time they’re raising children. This situation can create an emotional and financial strain. In general, this generation spends over 1,000 hours on average taking care of aging parents and children, which costs an average of $10,000 per year.1 This situation may require their financial comfort to be put on the back burner. However, there are ways that the sandwich generation can work toward greater financial independence and a brighter financial future.

    Make a Plan to Tackle Debt

    Credit cards and other debt are among the most significant problems for people in the sandwich generation regarding financial independence. Over the past few years, credit card balances have reached record levels as consumers try to keep up with inflation. As these balances continue to soar, the sandwich generation is finding themselves paying a significant amount in interest and having a higher debt-to-income ratio.2

    Eliminating even a portion of high-interest debt may save you thousands of dollars in the long run. Come up with a plan to reduce your debt, whether paying high-interest rate debt down first or paying off lower balances and snowballing those payments to the next debt. Minimize your spending and put aside a certain amount of money each month specifically to reduce your overall debt.2

    Make Savings a Priority

    When you don’t have much money to put away in savings, you may forgo the entire idea. Even a little bit of savings each month will help you build an emergency fund and begin to put it away for retirement. If you have a 401k match, consider upping the percentage by even 1%. The money will be taken out pre-tax, and you will gain additional savings from the match. You may also want to set a specific amount of money each month to go into an emergency account to lessen the financial burden that comes with the unexpected. Even if it is $100 a month, it will eventually add up if you stick with it.1

    Find Ways to Lessen the Financial Burden

    Another way to start gaining financial independence is by finding ways to lessen the financial burden. If you have siblings, see if they are able to assist with the care of your parents to help lessen your financial costs. You may also want to find out what local resources are available for your aging parents, such as meal programs and free transportation. Many senior programs are available to help lower the cost of care and assist with some of the daily tasks you may typically have to perform.1

    While the sandwich generation will face more financial struggles than some members of other demographic groups, there are still small changes you can make that will enable you to work toward financial independence and improve your financial outlook.

     

     

     

     

     

    Important Disclosures:

    The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

    Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. All indexes are unmanaged and cannot be invested into directly.

    Asset allocation does not ensure a profit or protect against a loss.

    All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

    This article was prepared by WriterAccess.

    LPL Tracking #1-05370157

    Footnotes:

    1 Sandwich Generation: What the Term Means, How to Manage, Investopedia, https://www.investopedia.com/terms/s/sandwichgeneration.asp

    2 The ‘Sandwich Generation’ Is Financially Taking Care Of Their Parents, Kids And Themselves, Forbes, https://www.forbes.com/sites/jackkelly/2023/02/24/the-sandwich-generation-is-financially-taking-care-of-their-parents-kids-and-themselves/?sh=187c43542af4