Employee Education
You Can’t Afford to “Wing It” When It Comes to Retirement!
Having a written plan makes it more likely you will stick to your plan.
You’ve heard this before: Failing to plan is planning to fail. This couldn’t be more true than when it comes to retirement. According to a recent survey conducted by the Transamerica Center for Retirement Studies (TCRS), more than one-third (37 percent) of workers don’t have any strategy for their retirement. These people are truly winging it…leaving their futures to chance.
The study also found that almost half (47 percent) of all workers have a strategy, but it’s not written down. Such a plan is better than nothing, but most likely it’ll be incomplete.
Fewer than one in five workers (16 percent) have a written plan, which is ideal. Research in behavioral economics shows that having a written strategy increases a person’s commitment to carrying out the plan.
So what should go into a successful retirement strategy? Read more, and check out additional links, from MoneyWatch’s Steve Vernon.
The Value of Time
When recent retirees are asked whether they would have done anything differently about their retirement planning process, many say they wish they’d started sooner. The mistake that people at all income levels make with retirement accounts is not starting at a younger age.
Time is an important ally when saving and investing, because it allows you to recover from periodic bouts of market volatility. It took five and half years after the vertigo-inducing drop that deleted $11 trillion from stock portfolios for the Dow Jones Industrial Average to regain all of its losses and reach a new high. Those who did not panic and sell their stock investments in 2008-2009 have fully recovered.
Having time on your side makes it easier to accumulate money for retirement, because those who start early don’t have to set aside as much every month. Each decade you delay starting to save means you’ll have to approximately double your savings rate to meet your goal. For example, if socking away 5% per year starting in your early 20 will get you to your goal, waiting until your 30s may mean having to save 10%, and so on.
Time gives you the luxury to be able to develop a plan, and to adjust your savings strategy as you move through your first job, while building your career and preparing for the transition to retirement.
While you’re young, it’s fun to spend money and live in the moment. But, if this describes your philosophy of money, you should motivate yourself to start saving sooner. The longer you wait to save, the more you ultimately will need to save. By making small adjustments in your savings rate now, the easier it will be for you in the long run.
(c) 2013 Kmotion, Inc.*
*Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.
Rx: Seven Steps to Financial Wellness
The goal of good health should be at the core of decisions you make about money.
As any wise person will tell you—and many have, from the Roman poet Virgil to Gandhi—health is wealth.
The irony is that the converse is also true—a growing body of research suggests that financial problems actually can lead to health problems. Financial stress has been shown to cause anxiety, migraines, sleep disorders and other physical ailments, including high blood pressure and heart disease.1 And it’s not a rare occurrence. A 2015 survey by the American Psychological Association (APA) showed that 72% of Americans reported feeling stressed about money at least some of the time during the past month.2 Stress levels are particularly high among parents, younger generations and those living in lower-income households. Over the past decade, psychologists coined the term Money Anxiety Disorder (MAD) to describe a condition of constant worry and unease about money. The emotions that arise from worrying about money can lead to health issues that affect job performance, relationships, and feelings about work-life security.
What triggers financial stress?
Not all people react the same to financial roadblocks, but there are several major causes of money-related stress:
• Fearing the possible loss of a job
• Comparing financial situation to others’ — being anxious of “having enough”
• The effects of piling debts
How to face health-related money anxiety
Many Americans resort to eating unhealthy foods, or eating and drinking to excess, as coping mechanisms for financial stress. Health experts warn this can lead to long-term health issues, and instead they recommend deep breathing exercises, which have a proven calming effect on the central nervous system. Regular exercise and sticking to a healthy diet can also be very helpful.
De-stressing about money
Financial experts often suggest taking a direct approach to analyzing your relationship with money so that you can manage financial stress. Some recommend taking one or more of the following steps that can help lead to financial wellness.
1. Understand the role of good health in your life – Money is never a substitute.
2. Prioritize your savings and control your spending – Warren Buffett said it best: “Do not save what is left after spending, but spend what is left after saving.”
3. Budget – You cannot manage your finances without a plan.
4. Plan for life events – Experts suggest setting aside specific “buckets” for nearterm emergencies, education and long-term retirement.
5. Locate a trusted source for advice – This could be a colleague at work, an investment professional or a close relative who is sensible about money.
6. Participate – Get the most out of the benefit programs you’re offered at work.
7. Choose carefully – Select “sleep well” investments that don’t cause anxiety.
By following these guidelines, you’ll be able to put financial wellness in the right perspective. Ultimately, the goal should be to know how to deal honestly with your feelings about money in ways that don’t compromise your health.
Good News on Tax Saver’s Credits
Laws that were enacted as part of the Bipartisan Budget Act of 2015 include new rules that could mean larger tax credits for some workers.
Bigger Retirement Savings Contributions Credit
The Saver’s Credit is an important tax credit that many American workers who save for retirement may be missing out on. Low and moderate-income savers who meet IRS requirements may be able to take a bigger tax credit (“Saver’s Credit”) of up to $2,000/$4,000 (singles/couples) for making eligible contributions to an employer sponsored retirement plan or IRA. To see if you qualify, visit www.irs.gov and enter “Do I qualify for the Retirement Savings Contributions Credit?” in the search box.
Investing In Your 20s And 30s: Millennials Think Differently
Millennials are often criticized in the press for putting off financial planning and being too risk-averse. According to a 2014 survey, millennials devote less than one-third (28%) of their portfolio…
Retirement in Motion
Having a core set of current planning documents, including a will, power of attorney and health care proxy, is critical to ensuring your wishes are carried out after you die.
