Mullooly Asset Management

Fiduciary Fee-Only Financial Planner | Investment Advisor in Wall, NJ

Retirement Planning

Everybody worries about retirement, it's part of life. This category page covers topics to help individuals get ready for retirement. Believe it or not there are steps you can take early on in life to set up a comfortable retirement.

How to Simplify Your Financial Life

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Retirement isn’t something that materializes overnight.  We spend a large amount of time preparing for it, but the worry and anxiety doesn’t automatically disappear. Taking an active role in an attempt to simplify your financial life is crucial to a happy retirement.

Unfortunately, a lot of retirees have financial regrets later in life.  About 70% of Baby Boomers wish they had saved more or started saving earlier in life. In a survey by the Insured Retirement Institute, more than half of the respondents said Social Security was a must for them in order to sustain their lifestyle past their working years.  Getting a head start on retirement saving can lessen the reliance on Social Security in retirement.

However, all hope is not lost. The Center for Retirement Research at Boston College reports that the average retirement age has decreased thanks to a higher life expectancy, more education, less laborious jobs and more. So, while Baby Boomers may not feel very confident about their retirement, newer generations may have a bit of a brighter outlook when it comes to reaping the benefits of all their hard work through the years.

There is enough going on in your life near retirement and trying to make sense of your financial assets shouldn’t be one of them.  There are ways to keep things simple, or at least make them MORE simplified than how they currently are.  When it comes to retirement planning, the KISS (Keep It Simple Stupid) method is the way to go.  Here are a few ways to make sure your retirement in financially as simple as it can be.

Consolidate as Much as Possible

Are you one of those people who has three different bank accounts, two different IRA’s, a few old 401(k)’s and some other accounts that you’re entirely sure what they are or where they came from?  Well if so, you’re not alone, but it’s time to consolidate.

By picking one institution to hold all your assets, you make it a lot easier for yourself to keep track of your resources. If you can, consolidate your accounts to just one checking and savings account, which requires selecting one main credit card to carry in your wallet. Having trouble deciding which one to keep? A good rule of thumb is to choose the credit card you have had the longest since you’ll have most likely built up the most credit.

Finding just one financial professional to manage everything for you in one place is another way to consolidate your financial life. With fewer usernames and passwords to remember and fewer statements to organize every month, these steps can help you keep everything under control as you transition to retirement.

Go Automatic and Paperless

The beauty of technology today is that you don’t have to worry if you paid your credit card bill this month.  You don’t have to worry if you paid your utility bill this month.  Automatic payments make it easier to stay up to date on any type of payment you might have.

Another great piece of technology is the ability to go paperless for pretty much every account out there.  If you have one financial professional (see above), having all of your financial statements in one place, ready to view at any time, makes it much easier to stay organized. You’ll still get a notification every month once your payment and statement are ready, and you can easily download your statement right to your computer if you prefer to have your own copy saved for easy access.

By not having to constantly organize and shred paper, you’ll free up more time to enjoy other things in your retirement, like spending time with your family, pursuing a new passion and working on abandoned home projects. Less clutter will naturally make you feel more organized and in control of your financial future moving forward.

Focus on What Brings the Most Value

In 2020, we live in a “subscription” lifestyle.  One downside of automating payments is potentially losing sight of what you’re still paying for.  Keeping an eye on which subscriptions you actually use and enjoy is another way to consolidate expenses and simplify your life.  The same can be said for insurance policies.  As you approach retirement, some insurance policies may not be appropriate for your situation anymore.  It’s important to review your policies.  A financial planner can help make these assessments for you.

Being cognizant of what you’re paying for a monthly basis can really add up over time.  Saving a few bucks here and there can give you the ability to better allocate those dollars to things you truly care about.

Small Steps Lead to Less Stress

Simplifying your financial life isn’t just on the physical balance sheet either.  It’s also a mental battle too.  Keeping things simple also means focusing on things you can control.  There is a lot that goes on that is out of our control.  In retirement, focusing on what is within your power is one way to keep things simple.  We all deserve to enjoy a nice, simple, stress-free retirement.  Getting bogged down in things outside of our control is unnecessary worry and stress.

There are a handful of other ways to keep your financial life simple as you go into retirement.  Working with a financial planner can help you identify all the different ways to make the most of your retirement.  Having a plan will ease financial stress and make sure you’re as ready as you can be!  If you don’t have a financial planner, we’d be happy to speak with you.  Click here to schedule an initial call with our team.

4 Surprises in Retirement

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Retirement is a big chapter in your life and is the reward for a lifetime of hard work. What do you plan on doing during your retirement?  If you’re here at the Jersey Shore it could mean more time at the beach.  For a lot of folks, it means more time to travel the world and spend more time with family. Retirement can be an exciting and validating time. However, it’s impossible to plan for EVERY twist and turn retirement can throw you.  With retirements lasting over 30 years nowadays, it’s expected to have some surprises along the way. Here are a few “common” surprises many people experience during their retirement:

Even in Retirement Your Home Will Be a Large Expense

Paying off your mortgage can be a great feeling. While your plans for retirement may be paying off your mortgage and using those additional funds to put towards your travel plans, taking trips to see loved ones, and fulfilling lifelong dreams, your housing will still be one of the largest expenses you will have to worry about during retirement. The upkeep on your home and increasing taxes can still take up a large chunk of your monthly budget. As any homeowner would know, there’s ALWAYS another project that requires your attention (and money) popping up around the house. There are certainly those who manage to keep housing costs down, but for many people it’s still a big-ticket item in their monthly budget.

Healthcare Costs Can Be Massive and Take You By Surprise

One of the largest expenses retirees will face in their later years is healthcare costs. This can account for up to an average of over a quarter of a million dollars. Those with major health problems will incur even more. Ways to help reduce this cost include health savings accounts and trying to stay as healthy and active as possible. Retirees should plan to have money earmarked for healthcare costs each year.  Working with a financial planner can help you create a plan for healthcare both before AND during retirement.  This isn’t something you want to leave to chance.

You Will Likely Continue to Work In Some Capacity

The traditional “retirement” has changed over the years.  Where it used to mean someone stops working completely, it can have many different meanings today.  Many people will continue to work into their retirement, but the type of work will often change. Some will use their retirement to launch a new type of career, some will work to pay for unexpected expenses, and some will work as a way to simply keep busy and meet new people. This is also the time when many people will volunteer for causes that they wish to support.

Your retirement should look the way YOU want it to.  If you want to take on part-time work, go for it.  If you want to never work another day in your life, go for it!  These decisions are all up to you, BUT whatever decision you make – PLAN FOR IT.

Retirement Can Last Longer Than Expected

The average retirement age used to be calculated based on life expectancy with most people assuming that they will be retired for around 15 years. With improved healthcare and advancement in medical technology, many people are actually living longer than the national average. As we’ve said in videos, podcasts, and other blog posts – retirement today can last some people upwards of 30+ years.  That’s a LONG time!  The financial plan needs to reflect that possibility and strategies change drastically when you’re planning for 30 years instead of 10-15 years.  Be sure that your retirement projections are adequate for a number of different possibilities.  Again, this is where working with a trusted financial planner really is valuable.

You can try and minimize the unexpected surprises. Expect the unexpected and plan for the items listed above to give you the best start at creating the retired life you always dreamed of. If you’re worried about the unknown of retirement, or if you’re prepared for retirement, get in touch with us.  We would be happy to help build you a financial plan and retirement plan that will help minimize any anxiety surrounding the next chapter of your life.  Click here to schedule an initial call with our team.  There is no cost or obligation involved!

 

A Jersey Shore Retirement Journal

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Have you been trying to stay on track financially?  Have you had trouble keeping spending in line here at the Jersey Shore?  After a few months indoors you might feel like splurging just a little.

Spending money is okay, but it needs to be tracked and organized. For many, apps on their phone or spreadsheets on the computer help them achieve this task, but even the best technology can fall short when it comes to building good habits.

That’s where bullet journaling comes in. What is it exactly? Bullet journaling is a simple, organized system that helps people kick start their to-do lists and stay on track with goals.  This can really help people keep track of their spending habits and make sure they’re all set to retire here at the Jersey Shore. [Read more…] about A Jersey Shore Retirement Journal

Planning for Retirement, Better to be Safe Than Sorry

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Retirees face several risks when planning for retirement. Some of the biggest risks retirees face are market risk (assets will decrease in value), inflation or purchasing power risk ($1 today might not get you the same amount of goods 10 years from now), business risk and interest rate risk. These all pose serious problems for retirees, but with the right plan in place these risks may possibly be mitigated.

Another risk retirees certainly should be planning for (but I’m not sure how many are), is longevity risk. Longevity risk is the risk that retirees outlive their assets. Life expectancy is only getting longer on average. This is overall a positive — because everyone wants to live as long as possible!

But the nuance here: as life expectancy rises, retirement assets must last longer.

The average life expectancy for a 65 year old male is 84.3 and the average for a 65 year old female is 86.6 according to the Social Security Administration website. Remember that life expectancy is simply an AVERAGE of when people of a certain age die. Some people wont’t live to their life expectancy while some people will outlive it by many years. It is impossible to predict where you will fall.

Running out of money while in the late retirement years is the worst case scenario for a retiree. What are you supposed to do then?  Unfortunately there is really no good answer to that question. This is a problem that can’t be solved after it happens — it needs to be prevented before it occurs.

There are several strategies to help prepare, so a retiree may not run out of money in retirement.

  • Plan for longer than the average life expectancy.  Many financial planning and insurance planning tools now build in an assumption that the person will live to at least 95 years old. Some even go as far as 120 years old! If a person dies with money left over, that money can be passed on to a loved one or left to a favorite charity.
  • Don’t flip 100% to defense in your portfolio as soon as you retire. A typical retirement age is 65 years old, give or take a few years. Meaning the retirement assets have to last for maybe another 30 years! During the early retirement years it would be wise to keep a portion of the assets invested in the market. This will also help to prevent against inflation risk.
  • Save more for retirement in your early years (20’s and 30’s). I fall into this category and can tell you from first hand experience, saving for retirement is on the back end of my priority list at the moment. But just know that the earlier you start to save for retirement the more time (compound interest) works in your favor.
  • Have a higher risk tolerance in your early years. Investing in the markets is scary. But there is no reward without risk. Higher risk investments make sense for younger investors because they have more time to make their money back in the event of losses. Taking high risks during retirement years is not advisable.

It may be tempting for a new retiree to splurge in their early retirement years. I understand the temptation; you’ve been working your whole life and you earned all this money. You should be able to spend it on whatever you please and enjoy the golden years. I urge retirees to think twice about behaving this way because it could seriously damage their financial future when it is needed most. Spending in retirement needs to be mapped out and adjusted accordingly on (at least) an annual basis. A retiree’s retirement assets are all they have to live on for the rest of their life. It’s far better to end up with money left over at the end of your life than to run out of it during retirement.

Retirees would be wise to live by the old saying, it’s better to be safe than sorry.

 

The Basics of a Roth Individual Retirement Account – Roth IRA

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A popular way for individuals to save for retirement is through a Roth Individual Retirement Account or Roth IRA.

Who can open a Roth IRA?

Any individual who has earned income may open and contribute to a Roth IRA. Earned income includes any money earned from salary, wages, tips or commission. It does not include income generated from dividends, interest and rental property.

If an individual has too much earned income they will not be able to contribute to a Roth IRA. The 2017 limit for Modified Adjusted Gross Income (MAGI) for an individual filing as single on their tax return is $118,000. So if an individual earned more than $117,000 they will not be able to make the full $5,500 contribution.

The 2017 income limit for married individuals is $186,000. So if together the married couple earned more than $186,000 they will not be able to make the full $5,500 contribution.

Roth IRA for retirementWhat makes a Roth IRA different from a Traditional IRA?

The main difference between these two types of retirement accounts is the tax treatment of the contributions and distributions.

Contributions to a Roth IRA are NOT tax deductible. Meaning that the individual pays taxes on the money he/she puts into the account each year. However, Roth IRA distributions are NOT taxed.  In order for the distributions to be tax-free, certain requirements must be met.

Contributions to a Traditional IRA are tax-deductible.  Distributions from traditional IRA’s are taxed as ordinary income.

Another main difference is the required minimum distribution (RMD). There is no required minimum distribution for individuals with a Roth IRA. This is because the money is already taxed on it’s way into the account. The government has no preference when the money comes out of the account because the taxes have already been taken out.

With a Traditional IRA an individual must begin taking the money out of the account by age 70.5.

What are the similarities between a Traditional IRA and a Roth IRA?

In both a Traditional IRA and Roth IRA the earnings grow tax-deferred. This means the individual with the account does not pay taxes on the gains or losses each year. Tax deferral of earnings is one of the main advantages to opening either a Roth or Traditional IRA.

The amount an individual can contribute to a Traditional IRA and Roth IRA per year is the same, $5,500. Also both types of IRA’s allow for individuals over the age of 50 to contribute an additional $1,000 per year.

The Roth IRA is a great way for young investors to start out. Most 20 and 30 year olds will not be close to the income limits, so the full contribution will be able to be made in most cases.

Both types of IRAs have their advantages and disadvantages, it all depends on the individual’s personal situation. Either way the most important thing to remember when it comes to saving for retirement is to actually SAVE MONEY!