Tag: Determine

If you are over 70 1/2 and have retirement accounts or you have an inherited IRA, you will likely need to take RMDs, or Required Minimum Distributions, by the end of the year.  Failure to do so would result in a penalty of 50% of the amount not taken.

Post 70 ½ RMDs

Once you reach age 70½, you must withdraw at least a minimum amount each year from your tax-deferred retirement savings accounts. This includes your IRAs and any qualified retirement accounts such as 403bs, 401ks, etc. Your annual RMD for 2015 is equal to your retirement account balances as of December 31, 2014 divided by your life expectancy factor according to the Uniform Lifetime Table. (If your spouse, however, is more than ten years younger than you, you will need to use the Joint Life and Last Survivor Table.

Note that if you are still working full time at age 70 ½ you can delay your RMDs for your current workplace retirement accounts until April 1 of the calendar year following the year you retire.  Click here for more information and assistance with your calculation.

Inherited IRAs

You must take RMDs by Dec 31st of the year after funds were inherited.  To determine your RMD for this year you will need to take the balance from December 31st, 2014 and divide by the factor (which is age based) on the single life expectancy table.

Here is the table for RMDs for inherited IRAs and here is a calculator to aid with the calculation

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Retirement planning can be more complex for women for various reasons.  Women live longer, take time away from work to care for their parents or children, and are often paid less than their male counterparts. 

To compound matters further,  many married men are deciding to retire much earlier than originally anticipated.  A husband’s early retirement can have profound effects on a woman’s ability to fund her retirement throughout her lifetime.  With careful planning, however, these issues can be successfully navigated to provide peace of mind that the couple will have adequate funds.

Many baby boomers are burnt out from working 20+ years in their careers and feel a burning desire to quit and travel the world.  Many men and women are leaving their corporate jobs whether by choice or by design.  Retiring in your 50s, may mean that your spouse will need funds to last 40 or more years.   Unfortunately, women, due to their higher risk of longevity, bear the brunt of a husband’s desire to retire early.   The wife may continue to work after their husband retires to provide additional income, and thus feels increased stress due to suddenly being the sole breadwinner.  Ironically, she may feel as though she needs to retire later to offset the impact of her husband’s early retirement.  Financially, a wife, especially if she has been the lower earner or worked fewer overall years than her husband, will also have lower Social Security spousal and survivor payments, if her husband chooses to take benefits early.

How can women improve planning around her husband’s desire to retire early?

  • Discuss any early retirement decision as a couple and ensure that you are both ready for other emotional, financial, and psychological change.  Be supportive and see how you can make each other’s lives more enjoyable in the interim, to see if retirement can be delayed.  It may mean that you take more time off or even phase into retirement over time.  Most importantly, balance the short term benefits of leaving work with the long term tradeoffs.
  • Try to delay taking Social Security.  If you are both healthy, you should try to delay claiming until at least your full retirement age.  Work with a fee-only financial planner to determine the optimum strategy to maximize your lifetime income based on your age and life expectancy. You can go to livingtoo100.com to get an estimate of your life expectancy.
  • Create a life plan along with your financial plan.  Determine how your lifestyle will change after retirement and make sure to share household responsibilities.  Create an ideal day, week, month, year in retirement.  Write it on paper.  Create a Pinterest board or scrapbook of things you want to do or see in retirement.
  • Realize there are significant tradeoffs.  Early retirement may mean that you can’t gift to the kids as much as you wanted or fund lavish travel plans.  Discuss how that might affect your retirement satisfaction in the long run.
  • Maximize your pension payments through a “pension max” strategy.  If you want to choose a pension benefit that provides maximum yearly income and a small survivor benefit, you need to ensure that your spouse is able to support his or her lifestyle should something happen to you.  A “pension max” strategy using laddered insurance will be necessary to offset the impact of an early death of the person who receives the large pension.
  • Consider long term care insurance—this can ease the burden of taking care of a spouse and help protect assets so that the caregiver spouse can have sufficient funds for the balance of his or her life.

Retirement planning is far more complex than just your investment allocation and selection of funds.

The many moving parts of Social Security claiming strategies, pension strategies, budgeting, withdrawals, and planning for large expenditures all come into play.  Work with a fee only financial planner to ensure that you are making appropriate decisions.  A decision to take early benefits may reduce cash flow stress in the short term, but have longer term negative repercussions.

Sorting it all out with a map of your retirement landscape and how to navigate that map, can help you sleep better at night knowing that important decisions you make about retirement are sound.

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Most people think they’ll be ready to retire when they hit a certain age or accumulate a set amount of assets. Unfortunately, they rarely do the math to determine whether their savings will sustain them after they retire. According to the 2015 Retirement Confidence Survey by the Employee Benefit Research Institute, only 48% of workers reported that they or their spouses have tried to calculate how much money they’ll need to live comfortably in retirement, and people who did attempt this calculation generally ‘guesstimated’ the numbers.

The EBRI found that most Americans spend more time preparing for the holidays than for retirement.

To stay out of financial trouble after you retire, it’s important to start planning well ahead of time. And that involves taking a hard look at the numbers.

Work the problem

Retirement projection is a big math problem, and to get the right answer, you must plug in the right figures. To start, you must have a good grasp of how much income you can expect from retirement income streams such as Social Security and pensions.

The next step is crucial: understanding how much you’re going to spend in retirement. This can be much tougher to predict, but accurate projections can mean the difference between having adequate funds for the rest of your life and outliving your savings. Neglecting this important step before making the decision to retire is unwise; deciding when to retire should be based on your financial capacity.

That’s because once you’re retired, your main source of income ends, and expenses will be covered out of savings, investments and retirement income streams. Spending is perhaps the biggest variable in retirement planning calculations. It’s easy to be complacent during working years, when a steady paycheck is coming in. So it makes sense that a huge paradigm shift occurs when the paychecks stop and cash flow shortages have to be covered from savings. Creating your own paycheck from your savings can be overwhelming.

Set a retirement spending plan

For all of these reasons, establishing a realistic retirement budget is critical. To do this effectively, consider these steps:

1. Envision your life during retirement. Make a list of what you’ll be doing and how you’ll be living. What will a typical day look like? What kinds of hobbies or volunteer work will you participate in? Will you embark on a second career? How much will you travel? Will you move to another location or maintain two residences? How much support will you provide for your kids and grandkids? What is on your bucket list and how much will realizing it cost?

2. Keep track of your current spending for at least three months. Be sure to include expenses that occur less frequently, such as insurance and dues.

3. Review this spending record. My clients are often surprised to see where they’re spending their money. This exercise enables them to align their spending with their goals, values and desires. They’re more committed to a spending plan once they have determined where their money is going because this prompts them to set priorities to ensure that they don’t spend frivolously or on items that aren’t priorities.

4. Make changes in your spending now to reflect the retirement lifestyle you envision. How will your expenses change upon retiring? Does your spending jibe with the goals you identified in the first step? Be sure to revise entries for certain expense categories, such as travel, entertainment and housing, to reflect these goals. Don’t forget to account for uncovered medical expenses and supplemental health insurance premiums, including Medicare Part B.

Watch your withdrawal rates

Once you have put together a spending plan, you can determine how much of your expenses would be covered from your investments. Most financial planners recommend that people who retire at 65 withdraw no more than 4% of savings annually. If you withdraw much more than that, you’re likely to outlive your funds, so you might need to work longer. If you retire earlier than 65, you will likely need to adjust that withdrawal rate downward, as you’ll be making withdrawals longer.

Consider working with a financial planner who specializes in retirement planning. He or she can walk you through the planning process and potentially give you confidence about the capacity of your investment portfolio to provide adequate income after you retire. The planner can also help you realize that you’re not on track and need to make changes.

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Honestly, almost all over people in the world today face difficult situation. Moody’s rating agency said, the financial impact of the corona virus has been felt in several major corporate sectors. “Sectors that depend on trade and free movement of the most exposed people, such as airline passengers, shipping, and lodging and holidays include shipping lanes and restaurants,” said Benjamin Nelson, Moodys Vice President and Senior Credit Officer who wrote this report.

Many advisors, particularly younger advisors working in solo practices, can be more susceptible to stress, given the isolation of their practices to begin with. Many are staying sane by simply turning to other advisors to commiserate. Lisa Kirchenbauer, founder and president of Omega Wealth Management in Arlington said she found balance in exercise and walks outdoors, as well as meditation. “Everything is so fluid right now, every day is something new and changing,” said Kirchenbauer. So, there are some steps you need to do to help your financial health still sane during this pandemic.

Revisit your wealth plan with a professional

Couttesy : tqn.com

If their office is closed, you can make an appointment with them to meeting online. To help you reduce your anxiety about your plan you need to seek their advice. Hold firmly your asset allocation. See that you are always well-connected to your assets and can access the digital tools available from your financial institution to help you navigate your portfolio from home.

Consider A Roth IRA Conversion

Your financial adviser can help you determine if this strategy makes sense for you. The market stress and the potential drop of personal income will for 2020 makes a Roth conversion a top consideration for many people according to MarketWatch website.

Stop Using You Credit Card

Courtesy : sguru.net

In a pandemic that makes things change and are uncertain, you must stop using your credit card for non-essential expenses. Control the use of your credit card. And start thinking about investing more. Control monthly expenses and notice on your bill that unproductive spending must be stopped now.

Don’t Be Panic Buying

You do not live alone. You still have a family, friends, even all the people in your city have household needs too. Even your needs may vary from family to family, you must also consider the needs of others. Piling up too much food can result in your food becoming redundant. The government has given information that the food stock is sufficient. So you don’t need to pile up food that can later become wasteful and thrown away. You want to save money but instead, be a waste.

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Americans strive to do “better than the Jones’” by earning enough money (and accumulating debt) to buy fancy McMansions, nice cars, and family vacations. But the never-ending pursuit of the trappings of wealth can get in the way of the truly important things in life such as relationships, job satisfaction, and extracurricular pursuits. Debt accumulation is often the end result of aspiring to acquire “stuff and things” so we can impress others and make ourselves feel like we have succeeded. Acquiring material possessions rarely leads to happiness. In addition to increased debt, it impairs our ability to provide adequate savings for retirement. In fact, research shows that the average American has very little saved for retirement.

According to research from the 2014 Retirement Confidence Survey (RCS) conducted by the Employee Benefit Research Institute, 58 percent of workers and 44 percent of retirees report having a problem with their level of debt, and a sizable percentage of workers have virtually no money in savings and investments. Among the workers that responded to the RCS, 60 percent report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000. Only roughly 22% had savings over $100,000.

Mr. Anthony’s article offers some advice to live debt free and counterbalance the materialistic slant of today’s world.

First, he mentions a tip his father taught him– that he should always try to live on only half of what he earns each year.

Most Americans will need to save far more than they anticipated for retirement. Whereas a 10% savings rate was appropriate in the past when workers had robust pensions and could count on receiving Social Security, a retirement savings rate of at least 15% is now more appropriate. If you include additional annual saving for an auto reserve, future college expenses for your kids, and six months of cash for an emergency reserve, a number closer to at least 25% might be more practical. His father’s point was that you should try to live way below your means so that there would be a cushion of safety as well as turbo charged savings for future goals like retirement. If we live a frugal lifestyle, we won’t get too addicted to a cushy lifestyle.

Second, it is essential that we relax about what our “position” is in life and not fall prey to the belief that “we are what we own.”

The key concept here is that true happiness is “wanting what you have.” As we get older and start to reflect on our lives, we realize that health, relationships, and experiences are far more valuable than all of the physical things that were once so imperative for us to acquire. In fact, we have learned by experience, that just because we bought that truck or went on our dream vacation, it did not fundamentally change our lives. Learning to love exactly where you are in your life at any one point in time is a concept that will result in great joy, peace, and satisfaction. Mr. Anthony writes, “life does not consist of the abundance of things, but of the abundance of enjoying where we are and who we are with.”

Finally, Mr. Anthony suggests that we should not place an unrealistic burden on ourselves regarding where we “should be” at certain ages or stages of our lives.

You should live the life that YOU want, not the life you think your parents, friends, or colleagues think you should live. You have the power to write the script of your life.

Our life goals, and especially our retirement goals are very important, as they help define our lifestyle and determine how much money we need to achieve our heartfelt desires. If we can live by the principles that Mitch Anthony outlines, we can have control over our money as opposed to our money and debt having control over us.

If you want to read more about goal setting for retirement, I suggest that you read Mitch Anthony’s book The New Retirementality. It will inspire you to be more intentional about planning for that next phase of your life. The book also provides valuable exercises to help you determine how you will spend your time and money to live a purposeful retirement. The Millionaire Next Door is also a great read to inspire you to downscale your life. The book, written by Tom Stanley and William Danko, presents research on the habits and lifestyle of wealthy Americans and how they accumulated millions by not flaunting their wealth, but instead by living a practical life.

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Can We Still be Smart Investors?

Any other week would be a better one in which to write a financially-themed article. While this article will be in the November issue, the context from which I write is immediately following the announcement that the House of Representatives voted NO on the Bailout plan. We all know that this sent the stock market tumbling, causing many people to feel fear— perhaps the first real time in our generation’s adult life (except maybe some from the dot com bust but that was “fun money” before we had families!!).

While a revised Bailout Plan will likely pass and a few more banks may fall by the time this is published, the events of the past few weeks have made many people question whether or not they are handling their money the “smartest” way.

As a fee-based financial planner who does not manage portfolios, I cannot recommend individual stocks or funds to buy and sell. Nor do I think that will help the families with whom I work at this juncture. I can, however, help you take a macro-perspective on what is smart for you and your family.

“Smart” begins with the basics:

  1. What is your family’s vision and what are you creating?
  2. What is your relationship with money? How do you handle fluctuations? How anxious are you?
  3. What are your financial goals? When do you need the money?


You’ve heard me say it time and time again if you read my column with regularity. What is the life you want to create for your family? What does it look like? How do you define success?

Are you living in a hillside cottage with a large yard or do you have an apartment with a home in Tahoe? Do you pick a new country to visit with your children every year? Do you want to settle into a community where you will root for the next 20+ years? Do your children walk to the locale public school or will they be attending a private school?

The vision you create for your family trickles down to the types of investments you make also called an investment vehicle (such as stocks, bonds, mutual funds). Before you can decide into which vehicle you will invest, you need to know for what you want the money.


A fascinating area of financial planning is how people relate with money. This alone can fill pages upon pages of articles and keep me reading for weeks (I am endlessly intrigued by this topic). At the very fundamental level, you have to know what is commonly talked about in the financial planning world as your “risk tolerance.” I find that concept hard to grasp, so with my clients I like to hear more about what keeps them up at night. What makes them anxious?

Is it any negative movement in a 401k or is it not having enough money in cash in a savings account? Do they ride out the drops like the one on Sept 29th with grace and ease saying “it’ll come back” or “this is expected” or do they run for the bank and hide their money in their mattress? Everyone is different and understanding your level of anxiety with investment fluctuations is an imperative input factor to deciding how to invest.


Taking your vision and translating it into financial goals is where I find the financial planning process helps the couples with whom I work the most. This makes the softer airy vision a dollars and cents reality. Smart investing requires that you know:

The amount the goal will cost
The Time horizon over which you are investing (that is, when do you need the money)?
The amount of money you are starting with for the goal
The amount you are contributing along the way

All of these factors will let you know what the return you need for your money will be. To say that another way, it will tell you how much you have to make each year on the investment to reach the goal. And different investment vehicles offer different possibilities for returns. Holding investments in cash will probably stay within a few % points, while stocks can jump all over the chart — in both directions. To get higher returns, you also will take on higher risk. The return you need combined with your personal tolerance for fluctuations will determine the investment vehicle.

For example:
If you already have $100,000 that you want to put toward a home down payment in one year, you only need a very conservative investment vehicle. Keeping that cash in a money market account would give you the best assurance that your money will be there when you want it.

I see many clients who come to me with next year’s house down payment in stocks or equity mutual funds. Perhaps that is how they built up the money or maybe they just like to participate in the market. In a week like the ones of late, however, a portfolio may drop 10%, making a $100,000 down payment now a $90,000 one. For the exceptionally daring individual, this may be okay, but as a financial planner, I advise people to match their investment vehicles with their time horizons.

If you want access to your money soon, keep it in a cash-equivalent vehicle. This way the market can jump all over the place and you can rest assured that you have what you need when you need it (caveat from the recent events: up to the FDIC insured limits of $100,000 – or more if you set up a certain kind of account designed to expand this limit) . The longer you have before you need the money, the more fluctuations you can likely tolerate. So while you may not be thrilled that your 401k invested in a mix of mutual funds, for example, has decreased, you will likely have more tolerance if you do not need the funds for another 30 years.


Granted there are those among us who will feel compelled to switch to other asset classes if ours are not performing just because of their personality and risk tolerance. Whether or not this is the smart way to go depends on your personal situation only. To help you handle the next bump, I encourage you to be prepared to act with knowledge and not emotion. The best way to do this is to partner with a financial professional who can help you ride out these rough times and stick with a “system” that works for your anxiety level and your goal achievement timeline. With a plan in place, you can approach the times when everyone else seems to panic with the desired calmness that comes with real knowledge of your own smart investing strategy.

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Many studies show that Americans are woefully behind on their savings for retirement.  In fact, according to the 2018 EBRI annual survey, roughly 60% of all workers surveyed have less than $25,000 saved for retirement. But things might not be as bad as they seem. 

A recent study by risk management firm Towers Watson attempts to debunk the magnitude of the retirement crisis in America.   The authors suggest that most retirees will be better off than predicted, since they don’t require as high a replacement ratio of preretirement income, as what is commonly recommended. They argue that the often quoted rule of thumb that retirees will need to fund 85% of pre-retirement income annually, may be too high.  In reality, retirement cash flow needs change over time.  As retirees age they move through the “go-go” years, the “slow-go” years, and then the “no-go” years.  We spend far less than we anticipate at the end of our lifecycle, due to diminished mobility and health.

In addition, the savings cycle is variable.  People will forgo savings early in their career, but ramp savings up substantially in the latter stage of their working years to make up for lost time.

I was recently asked to comment on the Towers Watson study by reporter Mandi Woodruff for an article in Yahoo Finance.  My instant reaction to this story was that individual investors have to take these rule-of-thumb numbers with a grain of salt.  The data on annual retirement savings is flawed (as the Towers Watson report points out).  For example, it does not include the value of pensions, real estate, or closely held businesses.  It also does not include the value of transfer payments and other governmental programs, so the resulting data set is incomplete. We cannot draw conclusions based solely on this data.

Gauging retirement readiness should be done on an individual basis.  More importantly, as a financial planner who specializes in retirement planning, I know that simple tools or rules of thumb are crude at best.  They are like applying blunt machetes in a surgical procedure.  They are not going to result in the precision that is needed for each individual’s situation.

The best way to approach retirement planning is to work from the bottom up and determine the clients’ specific personal cash needs and requirements over the balance of their lives.  Quick on line calculators and rules such as multiple of final income or spending as a ratio of income can’t possibly apply to everyone.   These repeatedly quoted prescriptions for success insinuate that the planning process is static and deterministic, when in fact, it is a dynamic process based on many fluid assumptions and variables.  The ever changing-nature of a client’s personal life, tax laws, financial markets, etc. require that the plan is periodically updated.

Instead of a rules based approach, each client should be evaluated in a highly customized and holistic way.  That is the essence of true financial planning.  It’s not just about investments anymore. It is about how a person will fulfill their dreams and what money can do for them during their lifetime.  It is about career planning, lifestyle planning, legacy planning, tax planning, and cash flow planning.  More importantly, it also encompasses the “x factor” of a client’s behavior towards and attitudes about money in his or her life.

While many in the field of finance are touting the trend and threat of robo-advisors, holistic retirement planning lends itself far more to the human touch. Since many Baby Boomers are entering the distribution phase of their financial life, customized financial planning is becoming more important than ever.

Proper financial planning starts with an in-depth conversation with a client to better understand what makes him or her tick.  It requires listening, attentiveness, and is done best when there is an ongoing relationship with that client.  It is not a one and done event.

A detailed retirement plan projection often requires the client answering the following questions:

  • What are you needs, wants, and bucket list items in retirement?
  • When would you like to retire and how will you phase into the new lifestyle? Will you still want to engage in part time work once you quit your job?
  • How will you spend your free time?  What might a typical day look like?
  • How often will you be travelling and where will you go?
  • How often will you be connecting with friends and family?
  • Do you want to leave money to heirs or a favorite charity? How will gifts to kids and your charities change upon retirement?
  • How healthy are you and do you have a history of longevity in your family?
  • How much are you willing to save in order to achieve an early retirement?  And conversely, how much are you willing to cut spending before and after retirement, in order to retire early?
  • What are your plans for your home? Will you relocate?  Will you keep your second home?  Will you need any major improvements done? Will you downsize?
  • How often will you buy cars and other vehicles?  How much will you spend on each vehicle?

These questions not only help to determine annual and overall cash flow needs, they also can help assess behavior around money as well as risk tolerance.

I often use the metaphor of a jigsaw puzzle.  Each client walks into my office and figuratively drops the pieces of their life puzzle on my table.  Each puzzle picture is uniquely different.  It is up to the client and me to put these pieces together to develop a vibrant picture of their future retirement years.

While I think these rules of thumb to assess retirement readiness are not adequate, there are some principles that are highly correlative to retirement readiness.

I suggest that if clients are serious about wealth-building they should save at least 15% of their salary throughout your career and that should limit wealth in personal real estate to no more than 25% of your total assets.

These principles encourage strong savings mentality, keep debt to a minimum, and reduce exposure to a low return asset class (personal real estate).  Living below one’s means is a successful way to build wealth and a good lifelong habit.  A strong savings rate helps protect against longevity and poor investment returns, as well as having to heavily tilt retirement savings to the back end of a career–which makes the investor more susceptible to market corrections in the years just prior to retirement.

Finally, the personalized, holistic approach to retirement planning addresses the significant challenges that savers have with regard to retirement planning.  Having a planner that fully understands these risks and properly accounts for them will help the client feel more confident about his or her prospects for retirement.  For example, if the planner assumes conservative investment return assumptions, accounts for higher healthcare cost inflation, adjusts Social Security benefits to account for some reform, assumes a relatively long life span, and the clients still have a high chance of success, they will feel more confident about their upcoming retirement.  The peace of mind that is achieved through the financial planning process is something that a rule of thumb or quick on line calculator won’t necessarily provide.

While the savings statistics for Americans suggest significant shortfalls in retirement, working with a planner to determine how to maximize financial opportunities like Social Security and pension maximization, tax reduction strategies, and maximization of their human capital, is essential to preparing for a successful retirement.  Ideally, the process is started as early as possible to improve a retiree’s chance of success and ensure that their unique vision of  retirement is realized.

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