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What Does a Biden Win Mean for the Economy?

Wed, 11 Nov 2020 16:27:58 GMT

In true 2020 fashion, the presidential election has been a rollercoaster ride. On Saturday, November 7, four days after election day, most media outlets projected Joe Biden as the next President of the United States.1

However, the call for Joe Biden didn’t come without suspense, as the country waited for days for ballots to be counted in Pennsylvania, Arizona, Georgia, and Nevada.1 As of Monday, November 9, President Trump and many members of the GOP claimed that the election had been marred by fraudulent activity, and they vowed to pursue legal options to resolve those alleged issues.2

Barring any legal rulings that change the outcome, it appears that Joe Biden will be sworn in as the 46th president on January 20, 2021. What does a Biden presidency mean for the economy, the financial markets, and for your nest egg?

Taxes

What does a Biden win mean for the economy? It’s difficult to say. One certainty is that a Biden administration would pursue a wide range of tax increases. Biden’s tax plan includes income tax increases for those making more than $400,000 along with increases in payroll taxes, corporate taxes, and capital gains. The Tax Foundation estimates that the Biden tax plan would reduce GDP by 1.62% over the long-term.3

COVID and Stimulus

However, there are some who think a Biden presidency could positively impact the markets and the economy. David Wessel, director of the Hutchins Center at the Brookings Institute, said that the coronavirus pandemic and any possible stimulus are the biggest near-term economic issues.4

He added that the paths each candidate may take on those issues are substantially different. Biden is expected to push for a large stimulus package for both individuals and businesses. “In fact, that’s the scenario the stock market seems to be expecting and welcoming, even though Joe Biden is talking about raising taxes on investors,” Wessel said in an interview with NPR.4

Energy Prices

Some also speculate that a Biden presidency may lead to higher energy prices. A recent study from GasBuddy reported that “a Joe Biden presidency would favor more environmental controls with respect to drilling and emissions, increasing fuel mileage standards, alternative vehicle power like electricity, expanded tax credits benefiting fuel efficient vehicle owners, and evolving from fossil fuels.”5

Patrick DeHaan, head of petroleum analysis at GasBuddy, added, “Biden would end drilling, curbing U.S. oil production and end fracking, which could potentially send oil prices and thus gas prices higher.”5

Is Biden or Trump better for the economy?

Since it’s election season, there’s always speculation about which candidate will be better for the economy and the financial markets. However, the truth isn’t so clear.

According to Michael Townsend, vice president of legislative and regulatory affairs at Charles Schwab, “Markets are not historically affected by which party wins the White House and/or control of Congress, and that seems to be the case again this year.”6

This year has been one of uncertainty, and that will likely continue in 2021, regardless of whether Joe Biden is president or not. Let’s connect today to analyze your strategy and take action to protect you from market and tax risk. Contact us to start the conversation.

1https://www.cnn.com/2020/11/07/politics/joe-biden-wins-us-presidential-election/index.html

2https://www.theguardian.com/us-news/2020/nov/08/donald-trump-concede-legal-challenge-republicans-joe-biden-golf

3https://taxfoundation.org/joe-biden-tax-plan-2020/

4https://www.npr.org/2020/11/03/930722317/how-the-presidential-election-winner-could-effect-the-economy

5https://www.marketwatch.com/story/why-a-biden-presidency-may-lead-to-higher-gasoline-prices-11603992805

6https://www.azcentral.com/story/money/business/economy/2020/11/03/how-biden-trump-election-win-affect-stock-market/6127375002/

Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

Who are You Thankful for This Year?

Wed, 11 Nov 2020 16:26:20 GMT

Who are you thankful for this Thanksgiving? You likely have some relationships in your life that are extra meaningful. Perhaps you're thankful for a spouse or partner? Or maybe your children? Or perhaps siblings, friends, or even coworkers?

Do any of those individuals rely on you for financial support? Do you have a spouse who relies on your income? Or perhaps minor children who depend on your financial means?

If so, this may be a good time to not only reflect on how much you appreciate them in your life, but also how their life may be impacted if something were to happen to you. It’s never pleasant to think about negative things that could happen in our lives. However, a failure to plan for possible threats could leave your loved ones exposed to risk.

Below are three common risks that can disrupt a family and create serious financial hardship. If you haven’t planned for how to protect your loved ones from these risks, now may be the right time to do so.

Death

Death is inevitable. It’s also unpredictable. It’s never fun to think about your own passing, but it’s also unwise not to do so. At some point, you will pass away. If that happened sooner rather than later, how would it impact your spouse, children, or others who rely on you for financial support?

Life insurance can be an effective way to manage the risk. You pay premiums in exchange for a certain amount of death benefit paid to your beneficiaries upon your passing. Your premium is based on a wide range of factors, including the type of policy, the death benefit amount, your age, and your health.

Life insurance also doesn’t have to be expensive. One way to keep the cost down is to use term insurance, which provides coverage for a limited period of time, like 15 or 30 years. After the period ends, you can renew the policy or let it lapse. This can be a cost-effective way to protect loved ones temporarily. For example, you may use term insurance to provide financial support while you have minor kids in the home.

Disability

More than 25% of all adult workers will suffer a disability at some point that keeps them working for a year or more.1 What would happen to your loved ones if you were unable to provide income for an extended period?

Disability insurance mitigates this risk by providing income if you are physically unable to work. There are two-types of disability insurance: short-term and long-term.

Short-term coverage provides financial support for a limited period of time, like several weeks or months. Long-term coverage can provide support for a year or even longer, depending on the terms of your policy.

Many employers offer disability coverage as part of their benefit program. However, it’s possible that your employer plan has gaps in coverage. For example, it may offer only short-term protection or it may only provide coverage for specific types of disability.

If you haven’t reviewed your disability protection, now may be a good time to do so. It’s possible that you, and by extension your family, are exposed to risk. A financial professional can help you implement the right risk mitigation strategy for your needs and your budget.

Long-Term Care

Long-term care is a very real possibility for many seniors. Those turning 65 today have a 70% chance of needing long-term care at some point in the future. On average, women need long-term care for 3.7 years and men need it for 2.2 years. Much of the discrepancy is due to women having a longer life expectancy than men.2

Unfortunately, long-term care can be costly. In 2019, the average monthly cost for an assisted living facility was more than $4,000. Even in-home care services average more than $4,200 a month. Very often, these costs aren’t covered by Medicare.

Long-term care insurance can help you, your spouse, and your family manage the cost. You pay a premium and then the insurer pays some or all of your long-term care expenses. Most policies even cover in-home care. You can often choose among a wide range of coverage options to tailor the policy to fit your needs and budget.

This is the time of year to reflect on those you appreciate the most. It’s also a great time to evaluate your risk strategies so you can better protect those who are most meaningful to you. Let’s develop your risk protection strategy. Contact us today so we can start the conversation.

1https://disabilitycanhappen.org/disability-statistic/

2https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

3https://www.genworth.com/aging-and-you/finances/cost-of-care.html

October Recap: Markets Stumble but GDP Surges

Wed, 11 Nov 2020 16:23:41 GMT

The recovery in the financial markets hit some turbulence in October, as investors wrestled with anxiety about increasing COVID cases. However, a surge in gross domestic product (GDP) in the third quarter may signal that the economy is on the rebound. 1

Through October 28, all major indexes had mostly recouped most of their losses from the COVID crash in March. However, all were down for the month of October. Below is each index’s return from October 1 through October 28:

S&P 500: -2.73% 2

DJIA: -4.54% 3

NASDAQ: -1.46% 4

Here are the year-to-date returns of the major indexes:

S&P 500: 0.40% 2

DJIA: -8.14% 3

NASDAQ: 21.04% 4

What spooked the markets in October? There are a few factors, but as is the case with most things in 2020, COVID may be the primary factor.

COVID Cases Ramp Up

The COVID numbers are surging in the United States, suggesting that the end of the pandemic may be nowhere in sight. On Wednesday, October 28, the seven-day average for new daily cases hit an all-time high of 71,832, an increase of more than 20% in only a week.5

Twenty-nine states hit record levels for daily new cases in October. Forty states had an increase of 10% just in the last week of October.6 Thirty-six states had increases of at least 5% in COVID-related hospitalizations in the final week of October.5

The surge in cases is leading to a new round of business closures and regulations. Illinois recently stopped indoor dining at bars and restaurants.7 Investors may be spooked by the prospect of a second round of closures and its impact on the economy. A new report from Yelp found that 60% of businesses that were shutdown for COVID will never reopen.8

Stimulus Outlook

The uncertainty of a second stimulus may also be a drag on the markets. In fact, Gary Cohn, former president and CEO of Goldman Sachs and former White House National Economic Council Director, says it is a primary factor driving the markets’ poor performance in October.9

He added in a recent interview that, “no one thinks we’re going to have stimulus until after the election,” and that, “we know that the markets do not like unpredictability.” He said that there was “100% probability” that stimulus won’t happen until after November 3rd, and possibly not until after the inauguration.9

Fund Flows

Some recent data on mutual fund flows may provide insight into how investors feel about the financial markets. Through October 21, equity funds (including mutual funds and ETFs) saw net outflows for 11 consecutive weeks. That means more money flowed out of these funds than flowed into them.10

On the other side, taxable fixed-income ETFs have seen four straight weeks of net inflows. That may mean that investors are leaving equities for fixed income securities, even with interest rates near zero.10

GDP Surges in 3rd Quarter

On a positive note, GDP surged by 33.1% in the third quarter, beating analyst expectations of 32%. The third quarter number is the largest quarterly GDP gain on record, easily beating the previous high of 16.7% in the third quarter of 1950.11

Of course, the third quarter surge comes after a 31.4% decline in GDP in the second quarter. Even with the increase in the third quarter, the economy is still projected to contract by 3.5% in 2020.11

The markets and the economy have rebounded, but the future is still uncertain. This may be a good time to explore options that can protect your assets from market volatility. Contact us today at Safety First Financial Group. We can help you explore these options and implement a strategy to protect your financial future. Let’s connect today and start the conversation.

1https://www.cnbc.com/2020/10/29/5-things-to-know-before-the-stock-market-opens-october-29-2020.html

2https://www.google.com/finance/quote/.INX:INDEXSP

3https://www.google.com/finance/quote/.DJI:INDEXDJX

4https://www.google.com/finance/quote/.IXIC:INDEXNASDAQ

5https://www.cnbc.com/2020/10/28/covid-cases-hospitalizations-continue-to-surge-as-us-reaches-critical-point-in-pandemic.html

6https://www.cnn.com/2020/10/28/health/us-coronavirus-wednesday/index.html

7https://www.cnbc.com/2020/10/28/5-things-to-know-before-the-stock-market-opens-october-28-2020.html

8https://nypost.com/2020/09/17/majority-of-covid-19-business-closures-are-permanent-report/

9https://finance.yahoo.com/news/stimulus-donald-trump-gary-cohn-markets-100-percent-probability-deal-wont-pass-before-the-election-214720697.html

10https://lipperalpha.refinitiv.com/2020/10/u-s-weekly-fundflows-insight-report-etf-and-fund-investors-focus-on-fixed-income-during-the-fund-flows-week/

11https://www.cnbc.com/2020/10/29/us-gdp-report-third-quarter-2020.html

How has the COVID Pandemic Changed Retirement Planning?

Thu, 29 Oct 2020 02:23:05 GMT

The COVID pandemic has changed nearly every aspect of society. It’s changed the way we work, the way we learn, and even the ways in which we travel and dine. The pandemic also disrupted the economy and the financial markets, triggering record unemployment and bringing the longest bull market in history to an end.

Given the financial volatility we have seen during the pandemic, you might think that Americans are also changing their retirement strategies. However, a new survey from Forbes and YouGov suggests that’s not the case.

The survey reached out to 9,675 people to learn more about their retirement planning. Many of the questions and answers focused on three main areas:

CARES Act Distributions

As the COVID pandemic hit the economy, the government passed the CARES Act to provide assistance to those who were impacted. One piece of the CARES Act allows 401(k) and IRA account holders to withdraw up to $100,000 without paying an early distribution penalty. They can also pay the taxes over a three-year period. ¹

While the pandemic may have created unemployment and other financial emergencies, few Americans are tapping into their retirement savings. According to the survey, only 4% of respondents took a 401(k) hardship withdrawal and 5% took a hardship withdrawal from an IRA. ²

Most of those who took a withdrawal were younger in age. Among those ages 25 to 34, 8% reported taking a withdrawal. However, among those 55% and older, only 2% said they took a withdrawal from a retirement account. ²

Working Longer

While few respondents said they had tapped into their retirement savings, 11% said they planned to work longer before retiring. Those ages 45 to 54 were most likely to give this response. ²

The decision to work longer may be due to market volatility in 2020. However, it also could be due to a surprising reason - employers suspending their 401(k) matching contributions. Nearly 4% of respondents said their employers had suspended matching contributions, but that number could increase. ² In the years following the 2008 financial crisis, nearly 20% of employers with more than 1,000 employees suspended their matching contributions. ³

If you’re concerned about volatility or if your employer has suspended contributions, consider meeting with a financial professional. Working longer is an option, but it’s not your only option. A financial professional can help you implement the strategy that’s right for your goals and needs.

Asset Allocation Changes

In the survey, only 5% of respondents said they had made a significant change to their asset allocation and only 4% said they had lowered their 401(k) or IRA contributions. In fact, 72% of respondents said they hadn’t made any changes to their retirement strategy at all. ²

While sticking to a long-term strategy is generally a good idea, there may be times when a change is warranted. If you haven’t reviewed your strategy recently, now may be a good time to do so.

Let’s talk about your strategy and whether it’s still right for your goals. Contact us today at Safety 1 ^st Financial Group. We can analyze your strategy and help you make adjustments where needed. Let’s connect today and start the conversation.

1 https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers

2https://www.forbes.com/sites/advisor/2020/05/11/how-covid-19-has-changed-retirement-planning/#7f6080b6830d

3https://www.forbes.com/sites/advisor/2020/04/10/covid-19-employers-suspending-401k-matching-contributions/#30e0b7cd285f

4 Milestones to Hit Before You Consider Retirement

Thu, 01 Oct 2020 15:30:43 GMT

Thinking about retiring in the next year? If so, this is an exciting time. After a career that has likely spanned decades, you can now look forward to the next chapter of your life.

While you’re probably excited to retire, it’s important that you don’t make the leap too early. It’s not uncommon for retirees to realize that they weren’t quite ready to leave the working world. The result is that they return to work in some capacity.

You can avoid that outcome by making sure you’re fully prepared before you pull the trigger on retirement. Before are four financial milestones that could indicate you’re ready for retirement. This list isn’t comprehensive, but if you meet these four major markers, retirement may be in your near future.

You have a retirement budget.

A budget is always a valuable financial tool, but it’s especially important in retirement. A budget helps you control your spending and make sure you’re on-track to hit your financial goals. Without a retirement budget, it can be easy to fill your newfound free time with costly activities like travel, dining, and shopping. If you spend too much in the early years of retirement, you may not have enough assets left in the later years.

Unfortunately, many Americans don’t regularly use a budget. In fact, according to a 2019 poll from Debt.com, nearly a third of all households don’t use a budget. ¹ If you’re among that group, now may be the time to start using one. A budget could be the key that helps you maintain your assets and your income through a long retirement.

You have an emergency fund.

Emergencies happen. There is always the potential for a home repair, costly medical procedure, or other unplanned expense. As you get older, the possibility of a costly medical bill may be even more likely. While Medicare may cover most of your care, it doesn’t cover everything. In fact, Fidelity predicts that the average 65-year-old couple will spend $295,000 out-of-pocket on health care in retirement. ²

An emergency fund can help you handle medical costs, home repairs, or any emergency bill that may pop up. When you’re working, it’s often advised to have a few months worth of living expenses in an emergency fund. However, in retirement you may want to plan for a longer period of time. After all, you no longer have a salary to replenish the emergency fund.

You have little revolving debt.

For many of us, debt is a fact of life. From mortgages to car payments to student loans and credit cards, debt is often a necessity. As you reach retirement though, debt can be a serious financial burden. Every dollar you spend servicing debt is a dollar that isn’t used to cover living expenses or to grow your assets. Debt could force you to drain your retirement assets more quickly.

If you have significant levels of debt, especially high-interest credit card debt, you may want to rethink retiring soon. Develop a plan to tackle that debt and free up cash flow. A financial professional can help you implement a strategy.

You have a retirement income plan.

Finally, perhaps the most important question to answer is where your income will come from in retirement. You’ll likely receive Social Security benefits, and you also may have retirement savings in a 401(k) or IRA. Perhaps you also have a pension, annuity, or other source of income.

A retirement income plan maps out exactly how your income will be generated and how much income will come from each source. A financial professional can help you develop a plan that protects your assets and maximizes your income. They also may be able to help you generate income that is guaranteed for life, no matter how the market performs or how long you live.

Think you’re ready to retire? Let’s talk about it. We can help you analyze your needs, goals, and concerns and implement a strategy. Contact us at Safety 1 ^st Financial Group today and let’s start the conversation about your next chapter.

1 https://www.prnewswire.com/news-releases/fewer-americans-are-budgeting-in-2019----although-they-think-everyone-else-should-300824384.html

2https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs

*Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged. Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. 20416 - 2020/9/17

COVID Economic Update: Fed Chairman Says Recovery Will Take Years

Thu, 01 Oct 2020 15:16:04 GMT

On Wednesday, September 16, Federal Reserve Chairman Jerome Powell offered his assessment of the economic recovery. The press conference offered some positive news, but also a sobering prediction that a full economic recovery will take years. 1

The good news is that the Fed has cut its 2020 median unemployment rate projection to 7.6%, down from a 9.3% forecast in June. The Fed also adjusted its projected 2020 GDP reduction to 3.7%, down from a 6.5% decline that was projected in June. GDP, which stands for gross domestic product, is a broad measure of economic growth. A decline in GDP means the economy is contracting rather than expanding. 1

Powell also said that the Fed had shifted its focus to employment growth rather than inflation control. That means the Fed expects to keep interest rates at or near zero until the economy is near maximum employment and inflation is projected to exceed 2%. He added that it will likely take years before the economy has reached those thresholds. 1

While low interest rates may be good for borrowers and investors, Powell’s comments indicate that the Fed believes the economy is years away from a full recovery. He indicated that unemployment is still four times higher than the pre-pandemic level. 1

“That just tells you that the labor market has improved, but it’s a long way from maximum employment,” Powell said. 1

Stock Market Returns

The investment markets continue their recovery from the downturn that hit in March of this year. Through September 16, the indexes have the following year-to-date returns:

S&P 500: 3.39% ²

DJIA: -2.90% ³

NASDAQ: 20.19% ⁴

While the markets have mostly recovered from their losses earlier in the year, volatility can strike at any time. That’s especially true should the COVID pandemic worsen or if the economy suffers continued damage. There also may be increasing uncertainty as the election approaches.

If you're concerned about risk, let’s talk about it. There are a wide range of strategies and tools we can implement to minimize risk and protect your retirement income . Let’s connect today and discuss your needs, goals and concerns. At Safety 1 ^st Financial Group, we welcome the opportunity to help you implement a strategy based on your objectives.

1 https://www.cnn.com/2020/09/16/economy/federal-reserve-september-meeting/index.html

2 https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_nHNjX8_WMNLKtQbPmoKICQ7:0,_BHtjX7uKPNqttQbohYywCQ7:0

3 https://www.google.com/search?q=INDEXDJX:.DJI&tbm=fin&stick=H4sIAAAAAAAAAONgecRozC3w8sc9YSmtSWtOXmNU4eIKzsgvd80rySypFBLjYoOyeKS4uDj0c_UNkgsry3kWsfJ6-rm4Rrh4RVjpuXh5AgAzsV5OSAAAAA#scso=_hH9jX4eyE5m1tAbHirPABA7:0

https://www.google.com/search?q=INDEXNASDAQ:.IXIC&tbm=fin&stick=H4sIAAAAAAAAAONgecRoyi3w8sc9YSmdSWtOXmNU4-IKzsgvd80rySypFJLgYoOy-KR4uLj0c_UNjCxMjYtyeBaxCnr6ubhG-DkGuzgGWul5Rng6AwDeg85uTgAAAA#scso=_139jX-TyCIy3tAbe4bnYBg7:0

What Would Your Social Security be Worth If You Viewed It as an Asset?

Sun, 20 Sep 2020 14:15:56 GMT

How much is your Social Security benefit worth? Social Security can provide you with an estimate of your benefit at retirement, but that’s in terms of how much income you’ll receive each year. How much would that income be worth if it were valued as a lump sum asset, like your 401(k) or IRA balance?

There’s no easy answer to that question. It depends on a few factors, like the amount of your benefit, when you file for benefits, and how long you live. A writer from the Washington Post recently attempted to estimate the value of Social Security benefits.

He assumed a monthly benefit amount of $1,500 dollars, which is pretty close to the average benefit of $1,503 in December 2019. ¹ According to the Social Security Administration, a $1,500 monthly benefit for a 65-year-old man with typical life expectancy, has a value of $200,910. For a 65-year-old woman, the value is $218,085. ²

These values increase when you include Social Security cost-of-living adjustments, also known as COLA. These are annual benefit increases to help seniors keep up with inflation. When you factor in historical COLA, the value of a 65-year-old man’s $1,500 monthly benefit increases to $266,105. For a woman, the value increases to $295,350. ²

Social Security provides a helpful foundation to fund your retirement, but you’ll likely need additional assets, like a 401(k), IRA, annuity, or even a pension. Fortunately, there are steps you can take to increase your Social Security income, such as:

Work longer. Your Social Security benefit is based on an average of your highest-earning 35 years of compensation. By working longer, you may be able to replace some of your lower-earning years from earlier in your career with higher-earning years. That could significantly increase your benefit amount. ³

Delay filing. You get your full benefit if you file at your full retirement age (FRA), which is between 66 and 67 for most people. ⁴ However, you can increase your benefit by delaying your filing past your FRA. You can delay all the way to age 70, and you receive an 8% credit for each year you wait. That means if you delay your filing from age 66 to age 70, you could increase your benefit by 32%. ⁵

Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at Safety 1 ^st Financial Group. We can help you analyze your needs and options, and implement a plan. Let’s connect soon and start the conversation.

1 https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

2 https://www.washingtonpost.com/business/2020/05/14/thanks-social-security-you-are-probably-better-shape-retirement-than-you-think/

3 https://www.ssa.gov/oact/progdata/retirebenefit1.html

4 https://www.ssa.gov/benefits/retirement/planner/agereduction.html

5 https://www.ssa.gov/benefits/retirement/planner/delayret.html

The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov 20362 – 2020/8/20

Paying for College in a Post-COVID World: What’s the Right Strategy?

Tue, 15 Sep 2020 13:43:54 GMT

Starting college is supposed to be a milestone moment, not just for the student, but also the parents. You pack up the car and make the drive to your child’s dorm. You may set up furniture, meet their roommate and even take a tour of campus. Eventually, the move-in process ends, and it’s time to leave your child on their own, ready to start the next chapter.

COVID changed that experience for many families, just as it has impacted nearly every corner of society. Many colleges moved their classes online. And many schools that previously planned on opening in-person reversed those decisions. ¹

No matter where your child is attending school, it’s a costly proposition. In-state public schools had average tuitions of $11,260 for the last school year. For out-of-state public schools, the average cost is $27,120. Private schools are even more costly, at an average tuition of $41,426. ²

That’s a difficult expense, even during normal times. But it may be more challenging in the current environment. Perhaps you’ve lost a job or seen reduced income. Or maybe you’re worried about your financial future as the pandemic continues to impact the economy. The cost of college only compounds these issues.

Fortunately, there are some steps you can take to manage the cost and protect your financial future. Below are a few steps to consider:

Cut back on expenses.

Budgeting and cutting expenses are always helpful strategies, but they’re especially important during times of crisis. This doesn’t just apply to paying for college, but also saving for retirement and other financial goals.

Take some time to go through your monthly expenses and look for areas to cut back. You also may be able to work with your lenders to minimize some bills. Many mortgage companies, credit card companies, and others are offering forbearances during this crisis. You may be able to put your payments on hold. Contact your lenders for more information.

Consider using your Roth IRA or CARES distributions.

Tapping into your retirement accounts could be an option, although it may have some adverse consequences for your finances in the future. If you have a Roth IRA, you can always withdraw your contributions without facing penalties or taxes.

You could also take distributions from your IRA or 401(k) via the CARES Act, which was passed earlier this year. Under the CARES Act, you can withdraw up to $100,000 from a 401(k) plan with no penalties and the ability to pay the taxes over a three-year period. That could be an option to cover tuition payments. ³

However, even if you don’t pay penalties, a distribution from a retirement account could have other consequences. You’ll not only lose the distribution amount, but all future tax-deferred growth on those funds. That could limit the amount of assets you have available when you retire. Explore all options before tapping into your retirement funds.

Reevaluate your options.

Another option is to simply reevaluate the college experience. If your child’s school has moved to online only, consider whether it makes sense to pay in-person tuition for an online education. Perhaps your student could transfer to a community college or even an online-only school at a far lower rate. They can earn credits and then transfer back to their desired college when in-person classes are back in session. It reduces the cost, without a substantial change to the learning experience.

We’re here to help you explore all your options in paying for your child’s education. Let’s connect soon and start the conversation. Contact us today at Safety 1 ^st Financial Group.

1 https://www.insidehighered.com/news/2020/08/12/hundreds-colleges-walk-back-fall-reopening-plans-and-opt-online-only-instruction

2 https://www.usnews.com/education/best-colleges/paying-for-college/articles/what-you-need-to-know-about-college-tuition-costs#:~:text=Among%20ranked%20National%20Universities%2C%20the,News%20in%20an%20annual%20survey.

3 https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers

COVID Economic Update: Is a Second Stimulus on the Horizon?

Tue, 01 Sep 2020 16:25:42 GMT

As the COVID-19 pandemic stretches into its seventh month, leaders in Washington are debating a second stimulus bill. On August 8, President Trump signed executive orders that extended the federal unemployment benefit, but reduced the amount from $600 per week to $400. The orders also suspended the payroll tax through the end of the year, and suspended interest on federal student loans. ¹

However, even as President Trump signed the orders, Republicans and Democrats continued to negotiate terms for a second stimulus package. Democrats support a $3 trillion package known as the HEROES Act, while Republicans have their own $1 trillion HEALS Act. ¹

It’s unclear whether the final bill will include direct stimulus payments to Americans. Both Republicans and Democrats have endorsed the idea. However, it’s difficult to predict at this point what stimulus payments may be included in the final legislation.

Market Update

Despite the uncertainty surrounding COVID, the election, and the overall economy, the financial markets continue to climb. After suffering deep losses earlier in the year, two of the three major market indexes are in positive territory. Through August 10, all index year-to-date returns are:

S&P 500: 3.53% ²

DJIA: -2.57% ³

NASDAQ: 22.24% ⁴

If you're concerned about risk, let’s talk about it. There are a wide range of strategies and tools we can implement to minimize risk and help protect your financial future. Let’s connect today and discuss your needs, goals and concerns. At Safety 1 ^st Financial Group, we welcome the opportunity to help you implement the right strategy for your objectives.

1 https://www.forbes.com/sites/advisor/2020/08/10/does-trumps-executive-order-mean-theres-no-second-stimulus-check-coming/#170371841d71

4 https://www.google.com/search?q=NASDAQ:NDAQ&tbm=fin&stick=H4sIAAAAAAAAAONgecRoyi3w8sc9YSmdSWtOXmNU4-IKzsgvd80rySypFJLgYoOy-KR4uLj0c_UNzKtyzQyKeRaxcvs5Brs4Blr5AQkAEbRSnEgAAAA#scso=_7a0yX-q3AcyxtQbPt7HICg1:0

Does 2020 Have You Cash Strapped? Ways to Raise Cash Quickly

Fri, 21 Aug 2020 15:24:42 GMT

It appears that a second round of stimulus is on the way. On July 27, Senate Republicans introduced the HEALS Act, which, among other things, would issue $1,200 stimulus checks to qualifying Americans. The Democrat-led House passed the HEROES Act in May, which also offered $1,200 stimulus payments. There are many points in which the two sides disagree, but a second round of stimulus payments seems to be mutually-agreed upon. ¹

Of course, if the second stimulus package is like the first, most families would receive a few thousand dollars, depending on their income level and how many people are in the family. While that may be helpful, it also may not be enough to replace lost income or overcome a financial hardship.

Fortunately, you have other options available to access cash in the event of an emergency. Below are three such options. It’s helpful as well to consult with a financial professional before you make any big decisions. They may be able to help you explore other options that you haven’t considered.

401(k) or IRA

Do you use a 401(k) or IRA to save for retirement? Those assets are meant for the future, but you can access them now if that’s your only option. Under the CARES Act, you can withdraw up to $100,000 from a 401(k) or IRA, even if you are under age 59 ½. You won’t pay the 10% early distribution penalty, but you will pay taxes, although you can spread them out over three years. ²

Keep in mind, though, that a distribution from your retirement savings is really just taking money from your future self to cover today’s expenses. If you take a distribution, you lose the opportunity to grow those funds on a tax-deferred basis for the future. That could put you in a difficult financial situation when you retire. Consider other options before tapping into your retirement funds.

Roth IRA

If you have a Roth IRA you may have even more flexibility. If you’re over age 59 ½, you can take a tax-free withdrawal from your Roth at any time, assuming you’ve held the account for more than five years. If you are under age 59 ½, you can withdraw your contributions tax-free and penalty-free at any time.

Of course, this presents the same challenge as taking a withdrawal from a 401(k) or IRA. You’re taking withdrawals from your future retirement assets to pay today’s expenses. Again, you may want to explore other options before going this route.

Life Insurance

Do you have a permanent life insurance policy? If so, you may be able to tap into the policy’s cash value. You can withdraw your premium payments on a tax-free basis.

You can also take a loan from the policy. Loans are tax-free, but they have to be repaid over time. If you pass away before repaying the loan, the balance is deducted from the death benefit.

Depending on your assets and needs, you may have other options available. Let’s talk about it. Contact us today at Safety 1 ^st Financial. We can help you analyze your options and implement a strategy. Let’s connect soon and start the conversation.

1 https://www.cnbc.com/2020/07/28/how-the-1200-stimulus-checks-in-the-heals-act-could-differ-from-the-first-payments.html

2 https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers

Is the pandemic teaching us a lesson about retirement?

Mon, 17 Aug 2020 17:18:50 GMT

The coronavirus pandemic has touched nearly every aspect of our lives. Perhaps nothing has been impacted as much as the way we work. While millions of Americans have lost their jobs during the pandemic, those who remain employed have seen their work change drastically.

In many professions, work-from-home has become the norm; not the exception. Some people have seen their work paused during this time. Others are on a mini sabbatical until their work gets back to normal. And for those who have lost their job, this may be a frightening time as they try to navigate an uncertain job market.

In many ways, this time could be seen as a small trial run for retirement. Your schedule isn’t clearly defined. You may be spending much of your time at home. Your work responsibilities may be limited or cut significantly. There are lessons you can take from this time and apply to your retirement. Below are a few of the biggest takeaways:

Create a schedule.

During normal times, our schedule is often dominated by work obligations. You have to be at the office or your workplace at specific times. You have meetings and conference calls. You may have projects due by a specific time. Everything else in life often seems to get scheduled around work.

But during this pandemic, much like retirement, traditional work schedules have become blurred or even nonexistent. Work-from-home allows you to complete things during non-traditional working hours. You may find that personal tasks bleed into the work day.

If your work responsibilities have been cut or if you have lost your job, you may have found that time has lost its normal structure. How many of us have asked during this time, “What day is it again?”

You may find it helpful to maintain a schedule, even when you aren’t required to. Set the alarm and get up by a certain time. Keep a morning routine. Block off time for activities like fitness or work or even a new hobby. A schedule will help you maintain some normalcy and reach your goals.

Have a greater purpose.

Much like our schedules, very often our purpose in life is dominated by work. For many people, the pandemic has made them reevaluate the role work plays in their lives. It’s similar to the process many retirees go through right after they end their careers. Without the purpose that comes from work, they may feel lost and even depressed.

This could be a good time to evaluate what is most meaningful to you. Sure, work is important, but after retirement you may need to find a new purpose. It could be family or friends. It may be a new hobby or a dedication to volunteer services. The choices are limitless. You just have to find the passion that is right for you.

Build your community.

Our social lives also often revolve around work. If you go into an office or workplace everyday, you may spend more time with your coworkers than anyone else in your life. Working from home can be a difficult transition, especially if you thrive on social interaction.

Retirement can make for a similarly difficult transition. If you’re nearing retirement, consider who your social circle may be after retirement, and how you’ll connect with them. Video conferencing solutions, like Zoom, have become popular during the pandemic, but they’re not just for work. You can use those platforms to connect with friends, family, coworkers, and more, even if you can’t connect in person.

Ready to plan your transition into retirement? Let’s talk about it. Contact us today at Safety 1 ^st Financial Group. We can help you analyze your goals and implement a strategy. Let’s connect soon and start the conversation.

Economic Update: COVID Resurgence Could Threaten Recovery

Tue, 11 Aug 2020 18:36:40 GMT

The United States set a somber record on Thursday, July 16, 2020, with more than 75,000 new COVID-19 cases. In fact, the U.S. set new single-day COVID-19 records 11 times between June 17 and July 16. Dr. Anthony Fauci predicts the country will soon top over 100,000 new cases each day. ¹

COVID-related deaths are also increasing in some states. Florida set its single day record for COVID deaths on July 16, with 156. Nine other states also set single-day death records the same week. ¹

The resurgence in coronavirus cases has led some states to enact new measures. More than half of all states now have some kind of mask mandate. California has even rolled back its reopening, closing bars, indoor dining, gyms, and more. ²

What does this mean for the economic recovery? And what does it mean for your financial future? It’s impossible to predict what will happen in the short-term, but knowing where things stand today may help you make important decisions with your strategy.

Stock Market

The stock market continues to rally in spite of the increasing COVID numbers and the return of restrictions. As of July 16, the S&P 500 is nearly back to even for the year. In fact, it’s up 43.71% since hitting a low 2237 on March 23. ³ NASDAQ set a record-high on July 9 when it reached 10,617. ⁴

The continued gains are good news for investors, especially after the sharp decline in March. However, that decline also shows us just how quickly the market can turn, especially if state governments introduce new orders that close businesses.

If you’re concerned about another potential downturn or future risk, this could be the right time to explore risk-protection strategies. For example, products like annuities allow you to participate in a portion of the market upside but also protect you against losses. A financial professional can help you determine which risk-management strategy is right for you.

Unemployment

While the number of new unemployment claims has declined for 15 consecutive weeks, unemployment numbers are still much higher than they were pre-COVID. In February, there were approximately 200,000 new unemployment claims each week. That number exploded to 6.867 million new claims in one week in late March. While new claims have declined since that point, they’re still more than double their level during the height of the Great Recession in 2009. ⁵

Stimulus

In March, the government passed the CARES Act, which, among other things, provided direct stimulus payments to many Americans. A recent study found that 74% of recipients had used all of their stimulus payments within four weeks. ⁶

As the coronavirus pandemic continues to impact Americans, Congress is considering a second round of stimulus payments. In May, the House of Representatives passed the $3 trillion HEROES Act to provide a second round of direct stimulus payments. ⁶

In an interview in mid-July, Treasury Secretary Steve Mnuchin indicated that a second round of stimulus payments was a possibility, even if it doesn’t align exactly with the HEROES Act. Senate Leader Mitch McConnell and President Trump have also recently expressed their willingness to negotiate a second stimulus package.

While stimulus payments may provide a nice boost, they’re not a replacement for long-term strategy. At Safety 1 ^st Financial Group, we can help you analyze your needs and goals and implement strategies to limit your risk exposure. Let’s connect soon and start the conversation.

1 https://www.nytimes.com/2020/07/17/world/coronavirus-updates.html

2 https://www.theguardian.com/us-news/2020/jul/15/california-coronavirus-shutdown-businesses-restaurants

3 https://www.google.com/search?q=INDEXSP:.INX&tbm=fin&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyePq5uEYEB1jpefpFAAAU6wGESAAAAA#scso=_Ap0RX4PNDdvRtAbPobiYBQ1:0

4 https://www.cnn.com/2020/07/09/investing/stock-market-supreme-court-trump/index.html

5 https://finance.yahoo.com/news/coronavirus-jobless-claims-unemployment-week-ended-july-11-175149759.html

6 https://amp.usatoday.com/amp/112232064

Is it time for an economic recovery?

Wed, 22 Jul 2020 16:05:25 GMT

The first half of 2020 has been a rollercoaster ride. The COVID-19 pandemic completely altered our way of life and threw the economy into a tailspin. Most states have started the reopening process, but there is still significant uncertainty about the long-term impact of coronavirus and how long the pandemic will continue.

Federal Reserve Chairman Jerome Powell recently said the economy faces a “long road” to recovery, and predicted the process may take through 2022. 1 While the recovery may be a long-term journey, there have been some signs of hope in recent months:

Stock Market Returns

The stock market had been enjoying the longest bull market in history before the coronavirus pandemic hit.2 The bull market came to an abrupt end starting in late February. On February 20, the S&P hit a high of 3373. From that point through March 23, the S&P fell to 2237, a decline of 33.7%. 3

However, since that time, the market has increased to 3115 through June 18. That’s an increase of 39.25%. The S&P is nearly back to its pre-COVID levels. 3

Of course, it’s impossible to predict the future direction of the markets. Just because the market has been on an upswing doesn’t mean it will continue. A spike in cases or a second round of shutdowns could send the markets back into a decline.

Unemployment

The pandemic has driven unemployment to record-high levels. Through mid-June, the country had 13 consecutive weeks with more than 1 million new jobless claims. Prior to the coronavirus pandemic, the record for a single week was 695,000 in May 1982. 4

The good news is that jobless claims have been declining. At the beginning of the pandemic, weekly jobless claims exceeded 6 million. In fact, up until late-May, they exceeded 2 million. So while jobless claims remain at record highs, they are on the decline. The amount of continuing claims has also dropped from 25 million in early May to just over 20 million in early June. 4

Consumer Spending

Consumer spending was impacted significantly by the COVID-19 pandemic. That’s not surprising, given most states were effectively shut down for two months. In April, consumer spending dropped by 16.4%, a record monthly decline. 5

In May, consumer spending set another record—this time for biggest monthly increase. The figure rose by 17.7%, driven by large increases in clothing (188%), furniture (+90%), sporting goods (+88%), and electronics (+55). 5

Consumer spending by itself doesn’t mean the economy is on the path to recovery. There are still plenty of uncertainties in the economy. However, it is a good sign that consumer spending is nearly back to its pre-pandemic levels.

This is uncharted territory for all of us. The situation and data changes so fast that it’s impossible to project where the economy may be headed. A comprehensive strategy that aligns with your goals and risk-tolerance can keep you on track to meet your long-term objectives.

Let’s connect today and talk about your concerns, questions and challenges. At Safety 1st Financial Group, we can help you develop and implement a strategy. Contact us today and let’s start the conversation.

1 https://www.marketwatch.com/story/fed-sees-rates-near-zero-through-2022-says-asset-purchases-will-continue-2020-06-10

2 https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html

4 https://www.cnbc.com/2020/06/18/weekly-jobless-claims.html

5 https://finance.yahoo.com/news/consumer-spending-comes-back-with-a-vengeance-in-may-morning-brief-100600715.html

Do you know about these 4 sources of retirement income?

Wed, 15 Jul 2020 20:40:20 GMT

What’s your biggest retirement fear? If it’s running out of income in retirement, you’re not alone. According to a recent study from Transamerica, the number one fear for Baby Boomers is outliving their assets and running out of income.1 Boomers aren’t alone. Generation X is also projected to be far behind on their retirement savings, with an average balance of only $64,000. 2

These numbers may explain why 52% of workers expect to work beyond age 65. Among Boomers, that figure jumps to 68% who expect to or are already working past age 65. 3

Continuing your career into your late 60s or even early 70s is one way to accumulate more savings and protect your retirement income. However, it’s not the only option. Depending on your goals and needs, you may just need slightly more income to reach your objectives.

Below are four creative ways to stabilize your income in retirement:

Participating in the sharing economy.

The sharing economy is based on individuals sharing their own goods and services with others. Uber is an example. Airbnb is another. There are a growing list of websites and apps that allow you to earn money simply by sharing your own goods, such as your car or extra space in your house.

Granted, you may not want to drive an Uber around town. However, that’s not the only option. If you’re an empty nester with extra space, you could rent bedrooms to guests. There are some services that let you rent out storage space. There are even services for renting out tools or other useful goods.

The best thing about the sharing economy is that you can participate as much or as little as you like. You set your terms, prices and schedule, so it doesn’t come with the commitment of actual employment. Be creative and research opportunities to generate extra income in a way that fits your lifestyle.

Be a coach or consultant.

After a career that spanned decades, your most valuable asset may be your experience and knowledge. Why not use that knowledge to generate income after you retire?

You could use your industry contacts to become a consultant. Or you could coach or mentor younger individuals in your industry who want your advice. There are plenty of websites that offer a platform to do this.

Another option is to talk to your former employer about consulting opportunities. They may want to retain your experience and knowledge and may be willing to do so in a flexible way. Don’t assume that retirement means completely walking away from your career, contacts and experience

Tap into your life insurance.

Do you have life insurance that has a significant amount of cash value? Did you know you can tap into that cash value for supplemental retirement income?

You can take withdrawals from your life insurance policy. If you’re withdrawing your own premiums, the distributions are tax-free. If you withdraw earnings, the distributions are taxable.

You also may be able to take tax-free loans from the policy, assuming you have enough cash value after the loan to support the death benefit. You repay the loan over time. If you pass away with a remaining balance, that amount is deducted from the death benefit. A financial professional can help you determine if your life insurance makes a good source of supplemental income.

Guarantee your income.

Your concern may not be the amount of your income but rather the certainty of it. You may have to rely on withdrawals from your savings to provide retirement income. Market volatility could make those withdrawals unpredictable. There’s also the risk that you could run out of income if you have a long retirement.

One way to minimize those risks is to guarantee your income using a tool like an annuity. You can take up to a certain withdrawal amount every year. Assuming you stay within the policy’s withdrawal limits, your income is guaranteed for life, regardless of how long you live or how the market performs.

We can help you develop your retirement income strategy. It starts with an analysis of where you are today and where you want to go. Contact us today at Safety 1st Financial Group. Let’s connect soon and start the conversation.

1 https://www.kenoshanews.com/business/investment/personal-finance/these-are-baby-boomers-top-3-retirement-fears/article_b5d4a1e0-f853-5beb-9ce6-392d0bd1aa70.html

2 https://www.fool.com/retirement/2020/06/16/gen-xers-are-alarmingly-behind-on-retirement-savin.aspx

3 https://www.kenoshanews.com/business/investment/personal-finance/more-than-half-of-workers-expect-to-work-past-65-heres-why-you-should-plan/article_3789fd58-82d9-57c0-bfeb-73900f3cb27e.html

Can life insurance help pay for college?

Mon, 06 Jul 2020 15:16:12 GMT

Do you have an old permanent life insurance policy that has accumulated cash value? Having an unused life insurance policy isn’t a bad thing. It’s certainly better than the alternative.

However, your needs today may not be the same as they were when you purchased the policy. You may have purchased your life insurance when you were younger. Perhaps you had young children in the home or a spouse who relied on you for financial support. Maybe you were still in the early stages of your career and saving for the future.

Today, your situation may be much different. You may be nearing retirement with a sizable nest egg. Maybe you don’t have a mortgage or other debt that would be a burden to your spouse if you passed away. Perhaps your children are grown and no longer financially dependent on you.

You may feel like your life insurance policy is no longer necessary. Why not surrender the policy and take the cash value?

Just because your old policy is no longer needed for its original purpose, doesn’t mean it isn’t useful. In fact, you can use it to achieve other goals, like providing supplemental income, leaving a legacy for family, and more.

One effective purpose for the policy is to use it to support your grandchildren’s education. In fact, life insurance can be a flexible, efficient tool to support your grandchildren as they further their education.

Tax-efficiency. As you may know, cash value accumulates inside a permanent life insurance policy on a tax-deferred basis. You don’t pay taxes on the growth as long as the funds stay inside the policy.

However, you also may be able to take tax-free distributions from the policy. One way to do this is by taking withdrawals. When you take a withdrawal, your premiums come out before your gains. Premium distributions are tax-free. Withdrawals of gains are taxed as income.

Another way to take a tax-free distribution is to take a loan from the policy’s cash value. You don’t pay taxes on the distribution, and you repay the loan over time. If you pass away before repaying the loan, the balance is deducted from your death benefit.

Flexibility. You can take a withdrawal from a life insurance policy at any time for any reason, assuming you have enough cash value in the policy to support the death benefit. That differs from other college savings tools, like 529 plans, which require you to use withdrawals for qualified education expenses.

That flexibility could help you support your grandchildren in whatever way they need. For instance, maybe they need help with tuition, but maybe they need more help with other expenses, like food or rent. Or perhaps you have a grandchild who is charting his or her own path and skipping the traditional college experience. You can use your policy to help them in whatever way you like.

Financial aid. It’s always important to check with financial aid professionals before making gifts. However, generally speaking, life insurance cash value belonging to grandparents does not count as an asset on a financial aid application. That means you can support your grandchild without hurting their chances to earn scholarships, grants and other forms of aid.

You don’t need to have an existing policy to make use of this strategy. If you’re in relatively good health and have assets you would like to use to support your family, you may benefit from purchasing a new policy. We can help you evaluate your goals and determine the right strategy.

Let’s connect today and discuss how you can best help your grandchildren make their dreams reality. Contact us today at Safety 1st Financial Group and let’s start the conversation.

How Many Sources of Income Should You Have in Retirement?

Mon, 22 Jun 2020 15:02:50 GMT

How many sources of income do you plan to have in retirement? If you’re like most Americans, you’ll have income from Social Security. You also may have retirement savings like an IRA or 401(k) that can generate income. What other sources will you have available? How many should you have?

According to a new study from the National Institute on Retirement Security (NIRS), the magic number is three. The study found that retirees who have a combination of three income sources - Social Security, personal savings, and a defined benefit pension - are least likely to be in poverty in retirement. Less than 10% of retirees with all three income sources were in poverty or near poverty.1

Poverty is more common among those retirees who have fewer than three sources of income. Among retirees who have only savings and Social Security, but no defined benefit pension, more than 20% are either in poverty or near poverty.1

Nearly 40% of retirees rely solely on Social Security for income. Among that group, more than half are either in poverty or near poverty.1

Of course, a defined benefit pension isn’t a common benefit these days. Only 16% of Fortune 500 companies offer one.2 It’s also possible that you haven’t saved as much as you would have liked by this stage of your career. If you’re lacking a defined benefit pension or personal savings, how do you replace those streams of income?

Use catch-up contributions to boost your savings.

Are you quickly approaching retirement and feel like you’re behind on your savings? The good news is there is still time to save money and create income for yourself in retirement. If you are age 50 or older, you can contribute up to $19,500 to your 401(k) in 2020, plus an additional $6,500 in catch-up contributions, for a total allowable contribution of $26,000.3

You can also contribute up to $6,000 to an IRA, plus an additional $1,000 in catch-up contributions if you’re 50 or older.3 Look for ways to trim your budget and increase your contributions ahead of retirement.

Change your plans.

Another option to boost your retirement income is to adjust your retirement plan. For example, by working a few years longer, you can give yourself more opportunity to save. You also may be able to delay your filing for Social Security, which could increase that source of income.

You could also work part-time in retirement. While that may not be ideal, part-time or seasonal work could provide a much-needed income stream to supplement Social Security or savings.

Guarantee your income.

You may not have access to a defined benefit pension, but that doesn’t mean you can’t have guaranteed* lifetime income. You can use financial vehicles like annuities to generate income that is guaranteed* for life, regardless of how long you live or how the financial markets perform. That stable income can act much like a pension.

Ready to plan your retirement income? Let’s talk about it. Contact us today at Safety 1st Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

1https://www.cnbc.com/2020/01/31/americans-shouldnt-rely-on-one-source-of-retirement-incomehow-many-actually-do.html

2https://www.planadviser.com/mere-16-fortune-500-companies-offer-db-plan/

3https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values. 20090 - 2020/5/18

Is it more difficult to get life insurance now?

Mon, 15 Jun 2020 12:44:50 GMT

The coronavirus pandemic is impacting every corner of American life and most sectors of the economy. For the life insurance industry, the pandemic presents a two-sided threat. In many cases the fallout is being passed onto potential life insurance buyers.

The risks for life insurance companies are twofold. On one hand, the epidemic presents heightened mortality risk for insurers, especially among older policyholders and those with existing medical conditions.

On the other hand, the financial fallout from the pandemic has driven many people to a more stable asset, which has pushed the yields for 10-year treasuries down to less than 1%. That’s problematic for life insurance companies because they traditionally invest 70% of their assets in long-term bonds and treasuries.1

With life insurers facing lower returns and greater risk, they’re changing their offerings. Penn Mutual Life Insurance has stopped selling policies to those 70 and older and those in poor health. Prudential has raised premiums and halted sales of 30-year term policies. Other insurers are limiting their sales of certain types of policies, particularly universal life policies that have guaranteed* death benefits and interest rates.1

If you have a need for life insurance or estate planning protection, what are your options? Below are a few steps to consider:

Review your estate planning documents.

If you can’t get the life insurance policy you need right now, it’s even more important that your estate planning strategy is appropriate for your needs. A will can help you direct assets to the right beneficiaries after your passing. More advanced tools, like a trust, can reduce taxes, probate costs, and other expenses so you can maximize your legacy for your loved ones. A financial professional can help you develop your legacy strategy.

Review your beneficiary-designated assets.

Life insurance isn’t the only asset that you can pass to beneficiaries. Your 401(k), IRA, annuities, and other qualified accounts all have beneficiary designations. Of course, those designations have to be correct for the assets to go to the correct person.

Now is a good time to review those designations and make sure they’re up to date. It’s common for people to forget to remove a former spouse or forget to add a new child to a beneficiary account. If you pass away, it may be too late to correct the mistake after you’re gone.

This also may be a good time to find ways to maximize these accounts. For example, if you have a traditional IRA, you may want to consider a conversion to a Roth. This strategy isn’t right for everyone, but it could potentially help you pass on those Roth assets to your beneficiaries tax-free, maximizing your legacy.

Work with a professional.

Life insurance companies may be tightening their rules and guidelines, but policies are still available. A financial professional can analyze options from a variety of carriers to find the policy that is best for your needs and your budget. They can also help you determine exactly how much coverage and what kind of policy is right for you.

Ready to implement a strategy for your legacy needs? Let’s talk about it. Contact us today at Safety 1st Financial Group. We can help you analyze your goals and develop a plan. Let’s connect soon and start the conversation.

1https://www.wsj.com/articles/some-americans-are-being-turned-away-trying-to-buy-life-insurance-11589103002

What's Next for a COVID-19 Economy?

Mon, 08 Jun 2020 15:00:41 GMT

The economic fallout from the coronavirus pandemic continues, even as states start to reopen restaurants, retail stores, and other businesses. The crisis brought an end to the bull market that started in 2009 and threatens to usher in a recession.1

What does the future hold for the stock market and the economy? When will the economy recover? And how will this crisis impact your retirement and your financial future?

It’s impossible to definitively answer those questions. In many ways, this event is unprecedented. We don’t know how long the virus will present a threat, so it’s impossible to predict how or when the economy may recover.

However, it is possible to make adjustments to your strategy to minimize risk and take advantage of potential opportunities. It’s also helpful to keep in mind the long-term nature of the economy and the financial markets. Nothing lasts forever, including recessions and bear markets.

Stock Market Performance

The financial markets have been a rollercoaster since the onset of the pandemic. On February 19, the S&P 500 closed at 3386. On March 23, it closed at 2237, a drop of 33.93%. Since that time, the market S&P has climbed to 2863 as of May 15.2

It’s important to remember that the stock market isn’t the same as the economy. A drop in the stock market doesn’t necessarily signal a recession, just like a rise doesn’t necessarily spell an economic recovery.

It’s also helpful to remember that bear markets are a natural part of investing. They aren’t always caused by global pandemics, but they do happen. There have been 16 bear markets since 1926. On average, they last 22 months and are followed by a 47% gain in the year following the market’s lowpoint.3 We can’t predict when the market will hit its low point, or if it already has, but if history is any guide, the market will recover at some point.

Economic News

While the stock market has bounced back somewhat since its March decline, the overall economic news continues to be negative. More than 36 million people have filed for unemployment since late March. In 11 states, more than a quarter of the workforce is unemployed.4

In the first quarter, the economy contracted for the first time since the 2008 financial crisis. GDP declined by an annualized rate of 4.8%. That’s not as steep as the GDP decline of 8.4% annualized decline in 2008. However, it’s possible the economy could face a greater decline in the second quarter. Consumer spending, which accounts for 70% of GDP, fell by an annualized rate of 7.6% in the first quarter. That’s the steepest drop for that metric since 1980.5

While states may be starting the reopen process, there is still significant uncertainty surrounding the crisis and the economy’s future. The good news is you can take action to minimize risk. Contact us today at Safety 1st Financial Group. We can help you analyze your goals and needs and implement a strategy. Let’s connect today and start the conversation.

1https://www.cnn.com/2020/03/11/investing/bear-market-stocks-recession/index.html

2https://www.google.com/search?safe=off&tbm=fin&sxsrf=ALeKk01UjyvpIcf62vDAgyulZ3dZuL1GWg:1589832165005&q=INDEXSP:+.INX&stick=H4sIAAAAAAAAAONgecRowi3w8sc9YSntSWtOXmNU5eIKzsgvd80rySypFBLnYoOyeKW4uTj1c_UNDM0qi4t5FrHyevq5uEYEB1gp6Hn6RQAAItD1MEkAAAA&sa=X&ved=2ahUKEwikycWrmr7pAhWWU80KHfhUBrcQlq4CMAB6BAgBEAE&biw=1536&bih=754&dpr=1.25#scso=_JerCXv0o9o70_A-NwLLYBg1:0

3https://www.fidelity.com/viewpoints/market-and-economic-insights/bear-markets-the-business-cycle-explained

4https://www.nytimes.com/2020/05/14/business/economy/coronavirus-unemployment-claims.html

5https://www.npr.org/sections/coronavirus-live-updates/2020/04/29/847468328/tip-of-the-iceberg-economy-likely-shrank-but-worst-to-come

2 Retirement Rules Made to be Broken

Tue, 26 May 2020 14:07:25 GMT

What’s your strategy for retirement? Is it based on your unique needs and goals? Or is it based on general ideas and conventional retirement wisdom?

There are plenty of “experts” online offering retirement wisdom for the masses. In fact, if you search “retirement” on Google, you’ll find more than 880 million results with retirement tips and strategies.

The problem with retirement advice for the masses is that it’s not customized to your unique goals. There are plenty of pieces of conventional retirement wisdom that aren’t right for every person or situation. Below are two examples of common retirement income rules and tips that may not be right for you:

You should plan on taking 4% withdrawals from your savings to fund your retirement.

There are many “back-of-the-napkin” formulas meant to simplify retirement planning. One of the most common is the idea that you can take 4% of your assets as income in retirement. The idea is that if you withdraw 4% each year, your assets will last at least 25 years.

There are a few problems with this idea. The first is that not everyone will spend money the same way in retirement. You may want to travel or pursue other activities in the early years of retirement. Some people may need to provide support to children or grandchildren. And some will face costly healthcare issues. Not everyone’s spending is the same.

This rule also doesn’t account for inflation. It’s unlikely that your spending will stay the same year after year, making it unlikely that you can take the same withdrawal each year.

A better approach is to develop a custom budget and spending plan and then implement a strategy to meet your income needs. You also may want to consider financial vehicles like annuities that can provide guaranteed* income to help you meet your goal.

You will spend less in retirement than you do now.

Another common piece of retirement advice is that your spending will go down after you retire. Perhaps you’ve heard the idea to plan on spending 80% of your current spending in retirement.

Again, the problem with this advice is that your spending will differ from others. Many retirees see their spending increase after they stop working. They fill their free time with travel, shopping, dining out, and other activities that cost money. In the later years of retirement, you could see your medical expenses rise as you face healthcare issues.

You may see your spending in certain areas decline after retirement, but that doesn’t mean your overall spending will go down. Consider building a retirement budget that is specific to your goals and your plans. That will give you a better idea of how much you may spend in retirement.

Ready to develop a retirement income plan that is specific to your needs and goals? Let’s talk about it. Contact us today at Safety 1st Financial Group. We can help you estimate your income need and implement a strategy. Let’s connect soon and start the conversation.

*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.

Have You Thought About Retiring Like This?

Tue, 19 May 2020 13:48:50 GMT

What comes to mind when you think about retirement? Spending time with grandchildren? Traveling to the beach or other favorite locations? Spending time on the golf course?

Those might be common paths in retirement, but many retirees are blazing their trail. You can chart nearly any course you want in retirement. Below are some examples of non-traditional lifestyles that are growing in popularity among retirees:

Retirement on a cruise ship

Did you know you can live on a cruise ship? There is one cruise ship - The World - that is specifically dedicated to retirees who live at sea. You don’t have to choose that ship, though, if you want to spend your retirement on a cruise ship traveling the world. Many cruise lines offer extended options so you can spend months or even years aboard a ship.

One study found that living aboard a cruise ship could be more comparable to an assisted-living facility. At the time of the study, a year on a Royal Caribbean cruise ship cost just over $3 3,000, versus $28,000, for a year in an assisted-living facility. This could be a legitimate option if you want to travel the world in retirement.1

Retirement in an RV

Perhaps you’d like to downsize, reduce your spending, and also travel the country. An RV may be the way to do it. There’s an entire community of retirees - known as workampers - who have downsized into an RV and travel the country. They’ll often trade labor or other services for free rent at campsites or other compensation.2

The benefits of a workamping lifestyle include reduced spending and perhaps greater financial flexibility. Of course, you’ll also need to be comfortable with a mobile lifestyle and a smaller living space. It’s not for everyone, but if you have a limited budget in retirement and want to explore the open road, this could be an option to consider.

Overseas

In 2018, more than 400,000 U.S. citizens collected Social Security retirement benefits while living overseas. Canada was the most popular location, with Japan, Mexico, Germany, and the United Kingdom rounding out the top five.3

Why retire overseas? The reasons vary for each person. Individuals may have a strong family or professional connection to a country. However, other retirees may choose a country because it offers an affordable cost-of-living, a warm climate, inexpensive health care, or other benefits.

Starting a business

Did you know that more than one-quarter of all new businesses in 2017 were started by those between ages 55 and 64? Entrepreneurship isn’t a young person’s niche anymore. Businesses started by those nearing retirement or in retirement increased 15% since 1996.4

In many ways, retirement could be the perfect time to pursue your entrepreneurial dreams. You have the time to invest in the project, and you may not feel the pressure to turn a profit immediately. Just be sure to stay within your budget and not risk your nest egg on your new venture. A financial professional can help you fit your entrepreneurial dreams into your retirement strategy.

Of course, these are just a few examples of non-traditional retirement paths. You can chart any course you want, and we’re here to help you make your dream a reality. Contact us today at Safety 1st Financial Group. Let’s connect and start planning your unique retirement.

1https://www.washingtonpost.com/travel/2020/01/23/did-you-know-you-could-retire-cruise-ship/

2https://www.today.com/series/starttoday/what-s-workamping-guide-downsizing-embracing-rv-lifestyle-t107322

3https://www.marketwatch.com/story/the-no-1-country-retirees-move-to-when-they-ditch-america-2019-07-26

4https://www.bloomberg.com/news/articles/2019-09-20/retirees-are-becoming-new-entrepreneurs

What is different about your 401(k) Statement?

Wed, 13 May 2020 19:04:42 GMT

You may see a new figure on your 401(k) statement soon. In December of last year, President Trump signed the SECURE Act, which stands for Setting Up Every Community for Retirement Enhancement. The bill’s goal was to make it easier for Americans to save for retirement.

One of the provisions in the bill changes the way 401(k) administrators report account balances to participants. At some point soon, your statement will not only include your account’s balance, investment performance, and other traditional information, but it will also include a projection of your future monthly income.

The change is designed to give you another perspective on your progress toward retirement. It’s often difficult to estimate your readiness by looking at a lump sum amount. However, if that lump sum is translated into monthly income, you may get a better idea of whether you’re on track to meet your goals.

If you aren’t on track, the good news is you can take action. Below are two steps you can take to enhance your retirement income:

Increase your contributions.

In 2020, you can contribute up to $19,500 to your 401(k). If you are age 50 or older, you can contribute an additional $6,500, bringing your total potential contribution to $26,000.1

Of course, you may not be able to contribute that much this year. Even a modest increase can have an impact on your savings and your future retirement income. One strategy is to gradually increase your contributions over time. Start by increasing your contribution by 1% each year. Eventually, you’ll be contributing the maximum amount.

Guarantee your income.

Another strategy you could implement is to strategize with products that provide guaranteed income in retirement. The SECURE Act makes it easier for 401(k) plans to offer annuities as a strategy option. These vehicles often provide guarantees on retirement income.

For example, you may be guaranteed to withdraw a certain amount of income for life, regardless of how the markets perform or how long you live. That could help you minimize risk and protect your cash flow in retirement.

Ready to boost your retirement income? Let’s talk about it. Contact us today at Safety 1st Financial Group. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.

1https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged. Annuities are long-term, tax-deferred vehicles designed for retirement and contain some limitations.

Guarantees provided by annuities are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC.

What Generation is Going in the Wrong Retirement Direction?

Mon, 27 Apr 2020 15:14:35 GMT

Every two years, Fidelity releases its Retirement Savings Assessment, a deep analysis of Americans’ readiness for retirement. Overall, the 2020 report showed that Americans have improved their retirement readiness. As a whole, Americans are ready to replace 83% of the income they will need in retirement. That’s up from 62% in 2006.1

However, there was one group that hadn’t made positive progress. It’s Generation X. It’s easy to forget about Generation X amid the ongoing social media war between Baby Boomers and Millennials. While Generation X isn’t as sizable as those groups, it is still sizable with 66 million members between the ages of 39 and 54.2

According to the Fidelity assessment, Generation X’s readiness has actually declined in recent years. Generation X had a readiness score of 80, down from 83 in 2016. They were the only generation to decline in readiness.2

There are a few possible reasons for Generation X’s decline in readiness. One is that they lag other groups in savings rates. Generation X saves an average of 8% of annual income, while Boomers and Millennials save 10%. Generation X also more mortgage debt and personal debt than other generations.2

The good news is Generation X still has time to catch up. Even the oldest members of Gen X have a decade or more until retirement. Below are a few steps you can take to get back on track:

Increase your contributions.

The simplest way to boost your retirement savings is to increase your contributions to your 401(k) and IRA. In 2020, you can contribute up to $19,500 to a 401(k) and up to $6,000 to an iRA.3

However, if you are 50 or older, you can contribute even more. Starting at age 50, you can make something called a “catch-up contribution,” which is simply an extra amount of money you can put in a qualified account each year. In 2020, you can contribute up to an additional $6,500 to a 401(k) and an additional $1,000 to an IRA.3

Even if you can’t contribute the maximum, it’s still helpful to increase your contributions. Try increasing by a small amount every year or even every six months. If you gradually increase your contributions over time, it may not put as much pressure on your budget.

Create a health care strategy.

Saving more for retirement is always helpful, but you can also improve your retirement readiness by reducing future costs. One of the biggest costs you’ll face in retirement could be health care.

Fidelity estimates that the average 65-year-old couple will spend $285,000 out-of-pocket in retirement.4 That figure includes a wide range of costs, like deductibles, premiums, and expenses not covered by Medicare.

You can also protect yourself against excessive health care costs by investing in your health today. Stay active. Watch your diet. Get annual physicals and other preventive services. The healthier you are, the less care you’ll need, which will reduce your out-of-pocket costs.

Protect your income.

For many people, the point of saving for retirement is to create income in the future. Yes, you will likely have income from Social Security and possibly a defined benefit pension. But if you’re like many Americans, you’ll have to generate much of your retirement income from your retirement savings.

How do you determine how much income to take each year? What if you live longer than expected and run out of money? What if you spend too much in the early years of retirement and don’t have enough left for the later years? What if the market suffers a downturn and threatens your retirement income?

One way to minimize these risks is to establish guaranteed streams of lifetime income. You can use retirement income vehicles like an annuity to create additional sources of lifetime income, which could potentially help reduce risk and uncertainty in retirement. A financial professional can help you determine if this is a good strategy for your needs.

Ready to take back control of your retirement? Let’s talk about it. Contact us today at Safety 1st Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

1 https://www.marketwatch.com/story/this-is-the-only-generation-less-prepared-for-retirement-than-they-were-even-two-years-ago-2020-01-30

2 https://www.pewresearch.org/fact-tank/2018/03/01/millennials-overtake-baby-boomers/

3 https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19500-for-2020-catch-up-limit-rises-to-6500

4 https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/press-release/healthcare-price-check-040219.pdf

How Can You Have a "Second Act" in Retirement?

Tue, 21 Apr 2020 14:14:53 GMT

Thinking of launching your next career after you retire? You’re not alone. The phenomenon has become so common that it’s inspired its own name - the “second act.”

Over the past three decades, the amount of people working past age 65 has doubled. Nearly 20 percent of adults over age 65 work in some capacity. By 2024, the Bureau of Labor Statistics expects 13 million people in that age group to be in the workforce.1

Some of those individuals are working because they need to financially. However, others are doing it because they’re simply not ready to retire, at least in the traditional sense. Fidelity estimates that the average 65-year-old man will live to age 87, and the average woman will live to 89. That’s more than two decades in retirement for many people, which could be plenty of time to have a fulfilling second career.2

In order to launch a successful second act, though, you’ll need to have a stable financial foundation. Below are a few tips to make sure you’re on solid ground before you start the next chapter:

Take care of healthcare.

Often in a second act, the reward is personal fulfillment, not necessarily financial compensation. While you may get compensated for your time, it’s possible that your new career may not come with benefits like health insurance.

Fortunately, if you prepare in advance, you may not need health insurance from your new pursuit. Start by estimating your healthcare needs. You become eligible for Medicare at age 65. However, there are many different types of Medicare options, especially in Medicare Advantage. As you approach retirement, start exploring the different options and find the one that best aligns with your budget.

Also, consider out-of-pocket expenses. Many services and treatments aren’t covered by Medicare. Even those that are covered often require copays and deductibles. Fidelity estimates that the average 65-year-old couple will spend $285,000 out-of-pocket in retirement.3

You can prepare for health care costs by putting away money today. One effective way to do so is with a health savings account (HSA). You can make tax-deductible contributions to an HSA and then allocate the funds according to your needs and goals. All growth is tax-deferred, and withdrawals for medical expenses are tax-free. By having a solid healthcare plan in place, you can give yourself the freedom to find the role that is most fulfilling for you rather than the one that provides the best healthcare.

Guarantee your income.

Again, this is about having the flexibility to find the role that is right for you without having to worry about financial issues. If you have sufficient income in retirement, you can focus on charting the path you want.

You’ll likely get Social Security in retirement. Maybe you even have a defined benefit pension or other income sources. You also may have to rely on your savings to generate income.

However, there are risks associated with taking retirement income from your savings. What if you live longer than expected and run out of money? What if the market suffers a downturn and threatens your retirement income?

One way to minimize these risks is to create a guaranteed stream of income. You can use financial vehicles like an annuity to create additional sources of lifetime income, which could reduce risk and uncertainty in retirement. That certainty could give you the flexibility you need to pursue your second act.

Ready to prepare for your second act? Let’s talk about it. Contact us today at Safety 1st Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

1https://www.aarp.org/work/employers/info-2019/americans-working-past-65.html

2https://www.fidelity.com/viewpoints/retirement/longevity

3https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/press-release/healthcare-price-check-040219.pdf

How Are Hackers Targeting Retirement Accounts?

Wed, 15 Apr 2020 17:30:10 GMT

In today’s digital age, cyber fraud is big business. In 2018, nearly $15 billion was lost to cyberfraud. The most pervasive type was account takeover, in which a fraudster uses login information to take over a person’s financial account and use the funds as they wish. That type of fraud accounted for nearly $4 billion in losses over 2017 and 2018.1

Credit cards used to be the most targeted financial account. However, there’s another type of account that is rapidly on the rise as a favorite target. Retirement account fraud more than tripled in 2017-2018 over the previous two-year period.1

How do they target your retirement account? Usually, by obtaining your login information. They may buy a database of logins that include yours. Or they could try and guess at your password if they have your sign-in ID and know personal information about you.

One popular tactic is phishing. That’s when a fraudster tries to trick you into revealing your information through a fake email or phone call. For example, they may send you an email pretending to be your account custodian. When you reply or call them, you could inadvertently provide them with the information they need to login and take control of your account.2

Fortunately, you can take steps to protect yourself:

● Change your password regularly. By doing that, you protect yourself from any potential leaks or database sales that include your information. By the time your password falls into the wrong hands, it’s already been changed. Set a monthly reminder to update all your important passwords.

● Pick a difficult verification question. The infamous verification question can baffle even legitimate account holders. Many people opt for an easy question, so they’ll remember the answer. However, a difficult one would provide more protection. Choose something that only you will know. Often the verification question is your last line of defense.

● When in doubt, verify. You can always call our office to ask if something is legitimate or fake. If you receive a call or an email and it doesn’t seem to be right, please reach out to a professional who can help you determine the correct course of action. Very few financial issues are so urgent that you can’t take time to investigate their legitimacy.

This uncertain period could be the right time to review all the security features and passwords on your account. It also may a good time to review your strategy. Safety 1st Financial Group is here to help you protect your strategy from all risks, including cyber fraud. Contact us today to start the conversation.

1https://www.napa-net.org/news-info/daily-news/cyber-security-update-act-now-multiple-fronts

2https://fortune.com/2020/01/29/hack-retirement-savings/

What Would You Give Up for a Stable Retirement?

Tue, 31 Mar 2020 19:47:39 GMT

Do you make any sacrifices for lent? Perhaps sweets or some other unhealthy favorite food? Or are you trying to kick a more serious habit, like smoking or drinking? No matter what you’re giving up, lent is a great time to make a small sacrifice in your life and practice discipline.

Sacrifice and discipline are also important for retirement planning. It takes a significant amount of savings to fund a long, enjoyable retirement. In order to accumulate those savings, you may need to bypass some spending today.

A budget is always a helpful tool to manage spending. Unfortunately, many Americans don’t use one. According to a recent poll, a third of all Americans don’t use a budget.1 If you’re among that group, now may be the time to make a change.

Budgeting isn’t the only way to save money though. By making some sacrifices in your current lifestyle, you may be able to reduce your spending and put more money away towards retirement. Below are a few examples of things you could give up to boost your retirement savings:

Large Home

If you’re like most people, your home is probably one of your largest expenses. It comes with a mortgage payment, but that’s not all. You also have insurance, property taxes, maintenance, repairs, and more.

When it comes to housing, bigger isn’t always better. Yes, a bigger house may offer more space and may be nicer, but a larger and more expensive home also usually leads to higher costs. The more your home costs, the higher the insurance and taxes are likely to be. A larger home often generates higher costs for maintenance and utilities.

If you’re in the market for a home in the near future, consider staying well under budget. By simply moving down to a lower price range, you could save yourself thousands not only on your mortgage, but also all the other associated costs.

Travel, Shopping, and Dining Out

Going out to eat and shop is always fun, as are the occasional vacations. While the cost of a night out may not seem that significant as a one-time expense, those costs can certainly add up over time. A budget can help you manage your spending in these areas and more.

One way to manage these expenses is to simply cut down on the frequency. For example, if you go out to a nice dinner twice a month, try cutting back to once a month and putting the savings into your IRA. Instead of going on a few big trips a year, try taking one large vacation and some smaller trips over a long weekend. You don’t have to cut these items out of your life altogether. However, reducing the frequency of these discretionary types of spending could help you boost your savings.

Yearly Raises

Do you get an annual raise at your job? Does the raise make an impact on your finances or does it seem to just disappear?

One way to make that raise more impactful is to put it in your 401(k) or other retirement savings plan. As you get a raise, simply increase your contribution to match the raise amount. The increased salary will go straight into your retirement rather than into your pocket. Over time, those contributions could compound and add up to a substantial amount of additional savings.

Ready to develop your retirement budget? Let’s talk about it. Contact us at Safety 1st Financial Group. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.

1https://www.prnewswire.com/news-releases/fewer-americans-are-budgeting-in-2019----although-they-think-everyone-else-should-300824384.html

19634 - 2020/1/13

Don’t Forget These Costs in Retirement

Fri, 27 Mar 2020 18:33:33 GMT

Do you have a retirement budget? A budget can be a powerful tool to help you manage your expenses and stay on-track to reach your biggest financial goals. If you don’t have a budget, you’re not alone. A recent study found that a third of all Americans don’t use a budget.1

Of course, a budget has to be accurate. If you forget to include certain expenses in your budget, it won’t be a very effective planning tool. That’s what makes it so hard to budget for retirement. You can’t predict the future, so how can you know what your expenses will be when you retire?

You may not be able to make a precise projection, but you can estimate your spending based on your goals, objectives, and current spending levels. Some expenses may be obvious, like groceries, utilities, housing, and more.

But not all retirement expenses are quite so easy to predict. In fact, there are a few potentially sizable expenses that may not even be on your radar. Below are a few such expenses. If you haven’t budgeted for these costs in retirement, now may be the time to do so.

Taxes

That’s right. Just because you stop working doesn’t mean you’re done paying taxes. You could still face taxes in retirement on a wide range of income sources, including:

● Social Security

● Defined Benefit Pension benefits

● 401(k) distributions

● IRA distributions

● Annuity distributions

● Investment income

● Business income

● And more

You could also face property taxes, sales taxes, capital gains, and other forms of taxation. A financial professional can help you analyze your potential tax liability and build those costs into your retirement budget.

Health Care and Long-Term Care

Think Medicare will cover all your health care costs in retirement? Think again. While Medicare is a valuable resource, it doesn’t cover every treatment. Even when something is covered by Medicare, the coverage is often partial. That means you’ll likely have copays and deductibles in addition to your monthly premiums.

In fact, Fidelity estimates the average retired couple will pay $285,000 out-of-pocket on premiums, deductibles, copays, and for services not covered by Medicare.2 Assume you live 25 years in retirement. That’s more than $10,000 per year in out-of-pocket healthcare costs.

That $285,000 doesn’t include a major health-related expenses - long-term care. Long-term care is ongoing assistance with daily living activities like cooking, bathing, getting dressed, and even basic mobility.

So how much will you spend on long-term care? It’s hard to say. The U.S. Department of Health and Human Services estimates that 70% of retirees will need long-term care at some point. However, there’s wide variance in just how much care each person will need. Twenty percent of seniors will need care for more than five years. A third of seniors will never need it at all.3

The average man is expected to need long-term care for 2.2 years, while the average woman needs it for 3.7 years.3 That care can come in many forms. It could be provided by a family member or a part-time caregiver. It could involve adult daycare. Or it could mean moving to assisted living or even a nursing facility.

Every year, Genworth studies average long-term care costs around the country. In 2019, the average monthly costs were as follows:

Adult Daycare - $1,625

Assisted Living - $4,051

Full-time Home Health Aide - $4,385

Private Nursing Home Room - $8,517

You can’t predict what kind of care you will need or how long you will need it. However, it’s easy to see how those costs can add up if you need months or years of support.

“Other” Housing Costs

Will your mortgage be paid off before you retire? If so, that will likely free up a large chunk of cash in your budget. Even without a mortgage, though, you will still likely face housing costs like:

● Property taxes

● Homeowners insurance

● Repairs

● Maintenance

How much will these items cost you in retirement? It’s hard to say. The average homeowner spent $1,200 on insurance in 2019.4 They also spent an average of nearly $5,000 on repairs and maintenance.5 Of course, those figures depend on the size and value of your home. Downsizing is one possible way to keep these costs under control in retirement.

Inflation

Possibly the most difficult cost to budget for is inflation. That’s the gradual increase in prices for goods and services. Inflation varies from year-to-year but is usually minimal. However, over time, even a minimal amount of inflation can significantly increase prices.

Does your retirement strategy account for inflation? How will you grow your assets and income to keep up with rising prices?

1https://www.prnewswire.com/news-releases/fewer-americans-are-budgeting-in-2019----although-they-think-everyone-else-should-300824384.html

2https://institutional.fidelity.com/app/item/RD_13569_42402/retirement-planning-health-care-costs.html

3https://longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

4https://www.policygenius.com/homeowners-insurance/how-much-does-homeowners-insurance-cost/

19631 - 2020/1/10

Coronavirus: What are Your Options?

Fri, 20 Mar 2020 17:22:05 GMT

It’s been a volatile few weeks in the financial markets. In mid-February, we were still enjoying a relatively healthy economy. And then the coronavirus arrived. Between Friday, February 21 and Monday, March 16, the Dow Jones Industrial Average has dropped by 30.37%.1

The rapid decline has left many investors with two questions:

● How much further will markets drop?

● What can I do to protect my assets?

There’s no easy answer to the first question. If history is any guide, eventually the decline will stop, and the economy will recover. The second question is even more difficult to answer. There are certainly protection options available, but not all options are right for all investors. Your strategy should be based on your unique needs, goals, and tolerance for risk. Below are a few options you have available:

Shifting to a more conservative strategy.

You could transition to a more conservative strategy. Many people become more risk-averse as they approach retirement. If you haven’t reviewed your allocation in years, this may be the right time to do so.

Of course, a more conservative allocation could limit your participation in a recovery when it happens. Work with a financial professional to find an allocation strategy that limits your exposure to further losses, but still gives you an opportunity to participate in future upside.

Using market risk-protection vehicles.

Another option is to take advantage of market risk-protection vehicles like annuities. There is a wide range of different types of annuities that can limit your exposure to market risk and protect your future income. For example, some annuities guarantee your principal against downside market loss, but also give you the ability to earn interest. That could be a way to limit further losses but still maintain growth potential.

Life insurance is another possibility. Yes, you can use life insurance to limit your exposure to risk. Most permanent life insurance policies have a cash value account. If you have a whole life or universal life policy, this cash value account isn’t exposed to the financial markets. There is no risk of loss due to market decline. However, you may earn dividends or interest so you can grow your cash value on a tax-deferred basis.

Protect your income.

Are you planning on using your assets to generate income in retirement? If so, every day of losses may mean a reduction in future income. You can guarantee your future income by using financial vehicles like annuities. Many offer optional benefits that pay a guaranteed income stream in the future, no matter how long you live or how the markets perform. A financial professional can help you determine if an income guarantee is right for you.

Ready to protect your nest egg? Let’s talk about it. Contact us today at Safety 1st Financial Group. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.

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