We’ve Moved! 6121 Excelsior Blvd. St. Louis Park, MN 55416

Joe Lucey

Thanksgiving!

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This time of year sees turkeys land in the freezer and age old family recipes come out to see the light of day again. While a delicious feast and time spent with loved ones are certainly the highlight of November, I like to pause and reflect on gratitude – the backbone of Thanksgiving.

Did you know that gratitude has proven health benefits? Studies have found that grateful people experience fewer aches and pains, and generally report feeling healthier. Interestingly, they also tend to take better care of their health by paying attention to nutrition, exercise and regular check-ups. All of those factors can contribute to a higher quality of life – and better overall health!

I have not seen a study on this, and yet I wonder whether grateful people have better financial health, as well. Gratitude has shown to have a positive effect on reducing anxiety, encouraging better sleep, and strengthening resilience. In my experience, resilience in particular can be a major contributor to one’s financial health. After all, most people I know have made big and small money missteps on their road to retirement. The ability to bounce back after a setback or a disappointment is key to making progress.

In the spirit of the season, I invite you to consider your own financial situation from the position of gratitude. Don’t judge by what your bank balance is or how your 401(k) is doing, but begin with feeling thankful for what you have. That starting point can give you a balanced perspective and help you unravel any financial concerns you might have.

As you consider your money situation, remember that you don’t have to do this alone. Financial planning can be extremely complex. No matter how smart my clients are or how much money they have saved, there always seem to be those nagging questions in the back of their minds. What happens if I pass away before my spouse? What will I do if I get sick? What will happen to my nest egg if the stock market takes a hit?

I want you to know that having those questions does not mean that you did not do a good job so far. As retirement approaches, most people would benefit from a consultation with a certified financial planner.  

Wouldn’t you rather know for sure that your plan is keeping you on the right track? Peace of mind and access to the right professionals – now, that is definitely something to be grateful for!

Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

When One Spouse Retires First

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It’s easy to think of retirement and dream of a relaxed stroll into the sunset with your significant other by your side. After all, many advertisements repeat this theme with salt-and-pepper-haired couples strolling hand in hand across a beachfront.

Yet, this is not always the case. Anymore, we often see couples retire at different times – perhaps one spouse actually enjoys going to work every day while the other can’t wait to retire. Different retirement times, however, can open financial and emotional rifts for couples. What if the retired spouse enjoys travel, or wants to spend long stretches with family? Did the couple consider the financial impact of one spouse retiring versus both spouses? What if the working spouse is resentful of the time or money the retired spouse spends on activities?

At our firm, we help with issues related to couples’ financial preparedness for retirement. If you and your spouse are looking toward retirement–either at the same time or years apart – give us a call.

With the proper planning, the financial piece of retirement doesn’t have to play into your marital dynamic. Based on your circumstances, a wide variety of solutions can help provide one or more retirement income streams while allowing an investment portfolio the opportunity to grow—possibly even throughout retirement. Many of today’s retirees hope to benefit from ongoing growth opportunities to help offset the potential long-term impact of inflation, rising health care and long-term care costs, and increasing longevity.

Now, couples with a big age gap may need a totally different set of strategies from other couples. For instance, if you have a significantly younger spouse, it may be more appropriate to invest a higher percentage of an investment portfolio in stocks than it would be for couples closer in age.

One way the IRS helps out couples with a large age gap is with an opportunity to reduce the size of required minimum distributions (RMDs) from tax-deferred retirement plans, which are generally required to start at age 70 ½. When the account owner is at least 10 years older than their spouse, and the spouse is the named beneficiary, the older spouse can use a different factor for their RMD calculation, which can result in a lower payout. The benefit to this rule is that it gives more of the older spouse’s funds the opportunity to keep growing while the younger spouse continues to work. This information is not intended to provide tax advice. Be sure to speak with a qualified professional about your unique situation.

Another retirement income option to consider for age-gap couples is a joint-and-survivor annuity. There are many different types of annuities to choose from, but joint-and-survivor actually refers to the type of distribution option that most annuities offer. If you purchase an annuity and choose this payout option, the annuity will continue to make payments to the surviving spouse, regardless of which spouse dies first.

A 50 percent option will continue to pay out half of the original amount to the survivor once the first annuitant dies, and a 100 percent option, while offering a lower original payout, guarantees the same amount for the life of both spouses. This can be a suitable component of a retirement income plan for couples with a significant age gap.

Whether you and your spouse are similar ages or decades apart, and whether you plan to retire on the same day or years apart, you should be planning for the financial – and emotional – components ahead. If you’re ready to plan, we can help. Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Ways to Help Increase Retirement Savings and Reduce Your Tax Liability

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As we head into the homestretch of this year, two things individuals may be seeking are ways to help maximize retirement savings and minimize 2017 tax liability.

One way to help do so is by contributing as much as possible to an employer-sponsored retirement plan. Many employers match worker contributions up to a certain point, so that’s just “free” money going into the account. Plus, the more you contribute, the less taxable income you will have to claim. For 2017, the maximum contribution limit for a 401(k) plan is $18,000; $24,000 for people age 50+.

If you’re already set up to max out your account, you might consider opening and/or contributing to an IRA. Even if you don’t get to claim a tax deduction for IRA contributions (although IRA contributions can also be made pre-tax, subject to certain limits), you can still benefit from additional retirement savings and tax-advantaged compounding. In 2017, the maximum for an IRA (Roth, Traditional or both combined) contribution is $5,500; $6,500 for people age 50+.

Here’s a little-known benefit available only for active duty military widows: They can contribute all or part of the service member’s $400,000 life insurance death benefit, and even an additional $100,000 for a combat-related fatality, to a Roth IRA within one year of receiving the payout. Because life insurance proceeds are tax-free, this benefit allows the money to be transferred to a tax-free retirement savings account, which also benefits from tax-free growth.

Another option for those who are already contributing large amounts to a 401(k) and/or an IRA is to consider purchasing an annuity. An annuity also enables tax-deferred growth, and there typically are no contribution limits. There is a wide variety of immediate, fixed rate, fixed index and variable annuities from which to choose. We’d be happy to evaluate your financial situation and recommend if an annuity may suit your needs and objectives.

One more tax-related bit we ran across: If you’re considering relocating during retirement to a low/no tax state, or even just wonder where your state gets its tax revenues, check out this breakdown compiled by Pew Charitable Trusts.

 

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice. Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Goals-Based Investing

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There’s a difference between monitoring an investment and checking its performance on a daily basis. Rather than being concerned about short-term volatility in the market, consider the future purpose or goal of what you want your money to pay for. This is the fundamental idea behind goals-based investing. You don’t just seek out investments that will yield a certain average annual return; you identify other factors that may matter more.

In goals-based investing, it’s not about how much your investment earns; it’s about how much you need your investment to yield. For example, let’s say you need about $50,000 to pay for your child’s college education. You save diligently from the time he or she is 10 years old through his or her last year in college – 12 years. During that time, you save $37,000. Your investment needs to earn an additional $13,000. There are a lot of factors here that will determine your return, but the point is that your investment need not be overly aggressive to achieve the return you desire. It should reflect how much risk you’re willing to take to yield the amount you’ll need to pay for your child’s education. Not necessarily more. Preferably no less.

If the investment earns more, you can put those additional earnings in your retirement savings bucket. If it earns less, you may need to tighten the belt on your finances and use more current income to pay for expenses during those college years, or get aggressive about applying for loans and scholarships. The point is, an investment should align with a goal – including its timeline for when you’ll need the money. The timeline can help you determine how aggressively to invest. The longer you have to invest, the more risk you may be able to take.

Just as the timeline matters, so does your age. Young investors with a longer investment timeline usually can be more flexible at choosing riskier investments – as long as those risks are aligned with their goals.

However, let’s say your last child came later in life. If you will turn 60 before he or she goes to college, you could consider saving for his or her college education via tax-deferred retirement plans. You can start tapping these funds after age 59 ½ and no longer be subject to an early withdrawal penalty, but keep in mind that distributions will be subject to income taxes at that point.

Defining each goal you want to achieve can help guide your investment strategy, which can include the type of account in which you invest, such as a tax-advantaged college savings account or a tax-deferred retirement account. Different goals may call for different types of accounts, so you may need to create an investment strategy for each individual goal and monitor several different types of investments.

This is where we can help. We’ll work with you to define each goal, establish which type of plan is most appropriate and what types of investments suit your timeline and tolerance for market risk. Then, we’ll help monitor how well those investments stay on track as you work toward your financial goals.

When all of these factions are aligned, you can be less concerned about day-to-day fluctuations. If you think you need to save more, you might want to consider different ways you can generate additional income sources that will allow you to save and invest more.

Perhaps one of the most significant benefits to a goals-based approach is that it makes us think about what we want in life in very tangible terms. Suppose you want to retire to a coastal community. That’s your goal, and how early you get started saving and investing and at what age you’ll want your money can help determine your investment allocations. The return on that investment will ultimately decide how much house you can afford when retiring to your coastal destination. When creating your financial strategy, you should also consider the sort of lifestyle you want to provide your family and how expensive a college you want your children to attend. As with investment risk, trade-offs may need to be made in order to pursue your financial goals.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. It’s important to consider any investment within the context of your own goals, risk tolerance, investment timeline and the composition of your overall portfolio. This information is not intended to provide investment advice. Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

The Nature of Risk and Reward

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Every investment carries some risk. However, it’s a misnomer to think that the bigger the risk you take, the bigger the reward you’ll receive. This may be especially true for those who are near or already in retirement.

Consider the story of the tortoise and the hare. The tortoise pursued a slow but steady pace to the finish line, while the hare took off at breakneck speed but got waylaid and finished behind the tortoise. It may be a fable, but investments can work the same way – particularly for pre-retirees who start making larger contributions to retirement investment accounts after they’ve bought their homes, raised their kids and paid for college. However, assuming higher risk may not be the best way to make up for lost time. Just because you start late doesn’t mean you should sprint to the finish.

For example, let’s say investors A and B each invest $100,000 for five years. Investor A earns 7 percent for four years on her moderate growth portfolio, then only 1 percent in the fifth year, for a total of $132,391. Investor B invests more aggressively for a 10 percent return in each of the first four years, but his portfolio return drops to a negative 10 percent in the final year. He ends up with $131,769. Not only does investor B take on more risk, but he ends up with less money than investor A. Investor A receives essentially the same return on her investment without as much concern for loss, because she has taken less risk.

Pre-retirees may be tempted to invest in riskier assets with the potential for higher returns because they need their portfolio to yield a certain amount of money to reach retirement goals. However, a higher average annual return usually means exposure to more risk, and this may not be the optimal way to achieve your financial goals.

Depending on your retirement goals, slow and steady can help get you where you need to go with less concern for volatility with investments. We can help you determine your capacity for risk and then work with you to create a financial plan that takes into account your tolerance for risk.

This hypothetical example does not represent any product and is for illustrative purposes only. It should not be deemed a representation of past or future results, and is no guarantee of return or future performance.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

The Risks of Aging

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On the popular television show “Star Trek,” the Vulcan character Mr. Spock was known for his salutation “Live long and prosper.” However, those two concepts may sometimes work at odds with each other, especially if people don’t have a plan for their retirement income. Many retirees can live a prosperous lifestyle, but without a retirement income strategy, they may run out of prosperity for the very reason that they live a long life.

The risks associated with aging may increase over time. The buying power of our retirement savings is more likely to erode due to the long-term impact of inflation. We are more likely to need part- or full-time assistance with daily activities as we grow older. Our health care expenses are likely to increase. We may lose friends and loved ones and become more isolated. And finally, we risk outliving our retirement income sources. In short, being able to both live long and to prosper may require substantial resources and a well-thought-out retirement plan.

There’s a silver lining, of course. More time means we can pursue more personal goals. Living longer allows us to watch our loved ones grow up and achieve their own successes and prosperity. A longer timeline has the potential to give our income sources more time to grow, which may help to smooth over periods of volatility. We can help you create a retirement plan that takes into account your goals and income needs; give us a call at (952) 460­-3260 to set up an appointment.

Many retirees can manage their household and their finances until they pass away, but that isn’t always the case. It’s a good idea to choose a power of attorney and complete the appropriate paperwork while you have the power to choose who you would like to look out for your interests. We encourage you to work with a legal professional who can help you make decisions to suit your personal situation. The risks that can be associated with aging may be many, but so are the people willing to help us face them.

 

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific retirement advice. Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.