Start 2015 Planning for the Future
Written by Martin X. Shields
For all of our clients we act as their Personal CFO providing guidance on a wide range of financial planning matter they may face in their life. Although the areas we counsel our clients in can vary widely depending upon their circumstance, the most common need is retirement planning. Many times these discussions occur when a client is still working and they need to implement the correct plan in order to be well positioned when they retire.
As we are beginning a new year, we thought it would be beneficial to highlight a few basic tenets of successful retirement planning.
· It’s not what you make it’s what you save – This is probably one of the most important points to remember in order to retire successfully. A good rule of thumb is to save 10-15% of your compensation annually but increasing that number can be beneficial. We have never found a case where someone has saved too much for retirement.
· Save early and often – The earlier you can start saving for retirement, through the power of compounding, you will be in a much better position to retire compared to the alternative of saving more later in your career.
· Don’t be afraid to take on risk – Recent data shows that millennials are less inclined than other generational groups to take on risk with their investments. The problem with this approach is that under most conditions being overly conservative will not provide enough growth in a portfolio to properly prepare for retirement. Working with a professional investment advisor will prepare you to understand the important relationship between risk and return and to minimize your fear of volatility.
· Tax deferred beats taxable – Whenever possible, it is best to save into a tax deferred account such as a Roth IRA and 401(k) or a Traditional IRA or 401(k). The preferential tax treatment received by these accounts can play a big role in retirement success.
· Emergency reserve fund provides a foundation – Having an emergency reserve fund may not seem like an important requirement for retirement planning but without an emergency reserve fund many individuals are inclined to tap their retirement accounts for emergency cash needs. In these circumstance they are paying penalties and ordinary incomes tax on the distributions from tax deferred accounts.
· Pay down debt – For most individuals and couples it is best to have all major debt paid down when retiring. It can be difficult to fund a retirement with a large mortgage or boat loan that needs to be paid in retirement.
· Determine how to manage the equation – A big part of the retirement equation is determining how much you will need to spend in retirement and where income will come from to fund your goals. There are many ways to make the equation work but you first need to start understanding the components of your equation.
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Bouchey Financial Group, Ltd. [“Bouchey Financial”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, no portion of this discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Bouchey Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Neither Bouchey Financial’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if Bouchey Financial is engaged, or continues to be engaged, to provide investment advisory services. Bouchey Financial is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Bouchey Financial’s current written disclosure Brochure and Form CRS discussing our advisory services and fees is available for review upon request or at www.bouchey.com. Please Note: Bouchey Financial does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Bouchey Financial’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Remember: If you are a Bouchey Financial client, please contact Bouchey Financial, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.