10 Key Ingredients to Demand From Your Retirement Plan

he 10 Key Ingredients to DEMAND for a Successful Retirement Plan!

If a client is working on their retirement plan, it is very likely they have not only personal goals and dreams, but also a minimum level of expectations from their financial planner. Heck, the truth is, a client shouldn’t have just a minimum level of expectations, they should have specific things from a retirement plan that they DEMAND!

With life expectancies being greater than ever, retirement could likely be the longest phase of their life. Therefore, I believe that it is absolutely imperative that you have a plan in place that is well-equipped to not only spend and enjoy your retirement years, but also make sure you don’t make the mistake of “living too long”.

If you have any doubt that retirement planning needs to be an essential part of a financial planner’s practice going forward, take a look at these statistics:

• Nearly 80 Million baby boomers are approaching or entering retirement

• By the year 2020, these baby boomers will control approximately two-thirds of the financial assets in the U.S.

• 75% of investors switch or add investment professionals within 15 years of retirement because they doubt the professional who got them to retirement knows how to get them through retirement*

• 68% of investors surveyed between ages 55 and 70 consolidated their assets as a result of completing a retirement income plan; an additional 19% said they would like to consolidate**

What do these facts tell us? Retirement planning is not only a huge opportunity for financial professionals, but it is also a huge challenge!

Retirement planning is an extremely sophisticated process, and I strongly encourage retirees not to attempt this on their own. In addition to the risk of outliving your assets, you’ve got other money predators to stay away from such as taxes, inflation, stock market and interest rate volatility, health care, social security, and much more.

So the point of this article is to review what I believe to be the “10 Key Ingredients” to a successful retirement plan that every planner should focus on, and every client should DEMAND:

1. Growth Potential – I think it’s safe to say you want your money to grow. However, the real reason why you should want your assets to grow is not to become enormously wealthy, but to ensure that you can keep pace with things like inflation, taxes, planned obsolescence, technology changes, rising healthcare costs, long-term care, etc. Just about every retiree I work with tells me that they do not want to spend their principal, but would rather live off the income generated from their principal. Therefore, if you want your income to keep pace with inflation, then you should demand a well-diversified and well-balanced portfolio to allow you to keep pace with your changing lifestyle over the long-term.

2. Safety Provisions – Clearly the two biggest financial fears most investors and retirees face are losing money and running out of money. These fears are not only understandable, but also the most critical! I always tell my clients that “90% of my job is avoiding large losses”. If you are taking income from your retirement assets and suffer significant losses in your portfolio, it can be extremely devastating… and also dramatically increase the probabilities of running out of money. Therefore, every client should demand a retirement plan that contains clear strategies to properly insulate you against suffering large investment losses and outliving your income.

3. Tax Efficiencies – Everyone’s least favorite uncle is a man named “Uncle Sam”. I have yet to meet someone who truly enjoys paying taxes… whether an ordinary income tax, capital gains tax, or tax on dividends and/or interest. John D. Rockefeller once said; “The fastest way to accumulate wealth is to make sure you never pay tax on income you don’t use.” That may be one of the most brilliant statements I’ve heard aside from Einstein’s theory on compound numbers. Therefore, a successful retirement plan should entail two pieces. First, your money should grow with as little (or no) tax consequences as possible. Second, your income should be received in the most tax-efficient way that is legally possible. The truth is, we can’t beat the unbeatable opponent (the IRS). However, our job as financial professionals is to work as master technicians in helping our clients avoid unnecessary taxation.

4. Income We Cannot Outlive – With the explosion of baby boomers and the improvements in modern medicine, today’s life expectancies are greater than ever. When Social Security was first enacted in 1931, the average life expectancy for a male was approximately 59 years old… and yet Social Security didn’t start paying benefits until age 62! Today the average male’s average life expectancy is approximately 85 years old… so you can see why we are having such a tremendous battle with Social Security benefits. Many studies show that by the year 2030, more than 2/3 of the people alive (in the U.S) will be above the age of 60… WOW! So the message here is that retirement plans today should demand an outlook consisting of at least a minimum of 30 years.

5. Income Growth Potential – In order for your income to grow, your assets must grow at a rate that exceeds your withdrawal rate. This means that, as much as some of you don’t want to hear this, investing a portion of your monies in the stock market plays a vital role in your retirement plan. Many of you may think that you can accomplish adequate retirement income by simply investing in bonds and CD’s, but that is usually not the answer. For example, if you consider investing in bond’s or CD’s, and you factor in inflation and taxes, using these income-producing investments may not accomplish the growth you need over the long haul in order for your income to grow (especially considering the fact that interest rates over the past decade have been historically low). Therefore, this is where the demand for professional money management plays a key role in a financial planner’s retirement strategy.

6. Maintain Control – Although I mentioned earlier that a successful retirement plan should virtually guarantee that you not only have the income you need, but that you also never run out. In the old days, this could only be accomplished through an annuity. The huge downsides to these “old school” annuities were that you would give up the two most important things… control and access to your money. In other words, an annuity would pay you a fixed income for life, but you would no longer have access or control to these monies. Not an option!! In a retirement plan, you should demand that you maintain total control over your assets, both during accumulation as well as distribution, so that you can choose how and where to invest or spend these hard-earned monies.

7. Maintain Access – Similar to the previous demand for control, you also should demand that you have access to your monies in the event that you need them. Although every retirement plan should include setting some monies aside for unexpected events or emergencies, sometimes life brings about severe changes that no retirement plan is prepared for. Because there are so many moving parts in our retirement lives such as our health, interest rates, taxes, inflation, health care costs, long-term care needs, etc., you need to be certain your money is not “locked up” in the event you might need to access it.

8. Full Transfer to Beneficiaries — Another common theme I hear from my retired clients is the importance of leaving a legacy. At a bare minimum, every retirement plan should demand that there is a plan in place to ensure that whatever money you don’t spend will efficiently pass on to your children, family, loved ones, or charities.

9. Professional Supervision – Retirement should be one big vacation, where you get to enjoy all of the things you love such as traveling, dining out, buying nice things, gifting or spending money with our families, donating, etc. The very last thing you should be focusing on in retirement is worrying over your money and your financial plan. In every important aspect of our lives, there are professionals out there who are passionate about taking care of you. Therefore, you should demand to enjoy your retirement, and leave the worries about your finances to the professionals.

10.Consolidation – One thing I have learned from my clients is that when you retire, the last thing you want to do is receive multiple statements from many different companies. I believe a retirement plan should adopt Warren Buffet’s philosophy, which is “Put all you eggs in one basket. But first, make sure you know everything about that basket. Then, make sure someone is watching over it very closely”. Having a consolidated financial life in retirement can not only lead to less stress and worries, but also greater success.

New Book Teaches Wise Retirement Planning and How to Pay As Few Taxes As Possible

How should you invest your money? Should you contribute to your company’s 401k, put the money in a Roth IRA, or just buy mutual funds? Can you expect to receive any money from Social Security when you retire? How much of your retirement money will the IRS take in taxes? These are the important questions Rick Rodgers expertly answers in “The New Three-Legged Stool” with clear explanations, followed by practical, concise instructions to make the most with the money you have. This tax-efficient approach to retirement planning is one that readers will refer to again and again.

“The New Three-Legged Stool” refers to the three types of investments you should have, and balance properly to support your retirement. These three investments are Tax-Deferred Savings, After-Tax Savings, and Tax-Free Savings. Rodgers takes the reader through an explanation of why each of these types of savings is important, how to invest in it, and how to withdraw the money to achieve the maximum benefit at the time of retirement. Tax-Deferred Savings include company 401(k) plans and IRAs (including SEP and SIMPLE plans). After-Tax Savings include mutual funds, bank and brokerage accounts, and investment real estate-anything that isn’t technically a retirement account. Tax-Free Savings are Roth IRA’s and Roth 401(k)s that have no immediate tax benefits. Rodgers devotes considerable time to explaining the benefits and disadvantages of these investments, and why a healthy balance must be achieved among all three.

One of greatest strengths in “The New Three-Legged Stool” is the examples it offers in the form of various retirees’ stories. The book opens with “The Un-Funniest Story Ever Told” about a successful businessman with an estate worth over $4.4 million. Because the man never consulted a retirement planner or made an effort to do estate planning, when he passed away, his children ended up paying 85.8% of their father’s retirement account in taxes! Many more examples of retirees’ experiences are illustrated in the book, often comparing two people’s strategies to see which ends up being more beneficial.

Besides telling readers how to manage their money according to the current IRS tax laws, Rodgers provides an explanation of how the IRS functions, why it tries to get as much money as possible, based on the U.S. Government’s failure to handle its money properly, and the origins of Social Security, as well as the approaching crisis that by 2017 more money will be withdrawn than is annually contributed to Social Security.

Rodgers closes with advice on finding a good retirement advisor and how to do estate planning, including writing a will or setting up a trust to protect your hard-earned money so you will have enough for the remainder of your life and money left over for your heirs. Several useful charts accompany the discussions, illustrating how much money a person will need to live on, depending on current income, age of retirement, expected longevity, and when a person chooses or is required to draw income from various retirement accounts, including Social Security.

Rick Rodgers has produced a much-needed, well-organized, friendly to read, and refreshingly short book (202 pages) that will give readers much to think about and plan for, and which they will return to time and time again. I hope Rodgers will update the book as time goes by so it is current and future readers can equally benefit from it as tax laws change.

Common Retirement Planning Errors Everyone Makes

When it comes to retirement planning, it is up to you to make sure it will be secure; the stakes are quite high and since there are no do-overs, the last thing you want is to have to worry about money issues instead of looking forward for your twilight years. In order to be certain that you will be enjoying your financial freedom and a comfortable retirement lifestyle, it is important that you avoid a few mistakes. In case you are already making the following errors, don’t panic as there is still time to deal with them.

1. Forgetting to establish a budget for the retirement years

The first thing you need to do for an efficient retirement plan is to determine the actual sum of money you will need when you reach the adequate age. In fact, this is the main reason why so many seniors are heavily financially dependent on their adult children and relatives. If you want to be worry-free when you retire, you need to calculate how much money you need and then even subject your initial estimations to a test for a couple of months to analyze if you would be able to manage.

2. Aggressive investments

More often than not, the first impulse of people who are getting close to the retirement age is to start investing heavily in stocks. Purchasing stocks is one of the riskiest methods of retirement planning, especially nowadays when the stock market can crash at any time. According to experts in the field, you should play it safe and plan to save money by dividing investments into various sources. If one of them fails, then you can count on the other ones for your retirement.

3. Ignoring inflation

Perhaps the most common mistake people make when they calculate the retirement savings is to ignore inflation. In spite of the fact that you have established a rock solid budget for the golden age and you are proud of it for the time being, never forget to account for inflation. What is now worth around $80,000 can very well balloon to nearly $130,000 in just ten years.

4. Erroneously calculating your life expectancy

More often than not, people tend to calculate the amount of savings needed for retirement based on the average life expectancy of their gender. Even though this approach seems legitimate at first, do not forget the fact that there are 50% chances you can surpass the average life expectancy. In other words, when you calculate the suitable amount of savings you will need when you are retired, it is best to add 5 or 10 years more, just to be on the safe side.

5. Relying too much on Social Security

Even though inflation plays a major role in the decreasing value of Social Security, the main reason you should not count on it too much resides in the fact that its future remains uncertain at this time. In the eventuality that the government will decide to cut more benefits in order to balance the federal budget and you reach the golden years without sufficient savings, then you are completely out of luck. Therefore, it would be a good idea to leave out Social Security – at least partially – from your retirement planning.

Investing in a Retirement Plan That Fits You

We have a tendency to think of our future and make requisite plans for the same. At school we get lessons that we need to achieve good grades and then we move onto college where we are told to secure a good job and lead a nice life. Now after achieving all this a time has come for you to think about your retirement investing. You may need to apply some basic rules when you think of your investing plan for your retirement. This article will assist you in creating a proper investing schedule for your retirement which will fit your needs.

Where you want to be in next 5 years?

Before you start planning for your future you must know as to where you really want to reach. If you have plans on travel and tours during retirement then you may not want to have hassles of a home and all those up-keeps that go with it. Investing in retirement is not only about making proper investment in plans but is also about adequate time management and handling of your assets. If you are house owner then you would have to get it cared if you are on tours. If on the other hand you sell your home, you may lose on its investment value, but you may add value to your life by relieving yourself from an obligation and recurring expenses spent on home maintenance.

Do You Need the Motor Home?

When you are thinking of finalizing your retirement investment plan you must also consider as to the type of vehicles you will need. The stereotype retirees usually purchase a motor home. Subsequently they get hit by its maintenance, immense gasoline bills and insurance etc. If you initially decide on a small vehicle you can save on the charges. Though this may not be a typical investment in retirement but at least you save money and money saved is money earned.

Make yourself fully conversant about the retirement investing.

You must do adequate research about an efficient retirement plan in which you can start investing. You can look at some of your associates or friends as to which type of plans they invest in and then work out a system which works best for your needs. Investing is not always about bonds or stocks and you must try to think ahead and try to manage what you can. This is itself a good investment.

Early Retirement Planning Advice

There is a famous nursery story about an ant who works hard all his life so that when the rains come he will be safe and protected with all the provisions he needs. The same lesson is to be exercised when retirement planning is taken into consideration. Effective and efficient retirement planning can be equated to early planning.

This planning is the keyword that will decide how you are going to spend the rest of the days. Given below are certain tips and strategies that are known to be beneficial to many, it might even help you too.

The mistake that many people commit can be easily explained. All their life they might be enjoying the benefits of a good salary. They will spend it on unnecessary activities. When the time for their retirement arrives, they are faced with the grim situation of how to proceed for the rest of their lives. Of course, retirement means no monthly paychecks. The best practice is to start a fixed deposit account and route a share of your monthly income to that account. With the passage of time, the amount will grow rapidly. By the time you are willing to retire (or forced to) you will find that you will be able to live off comfortably.

One will have to decide beforehand itself regarding the lifestyle that one will be leading during the retirement era. As a best practice, it is better to live with simplicity. All your life you have been throwing money for unnecessary activities. Retirement is a time where you will have to take good judgments regarding how to spend the money effectively. Unlike many developing nations, we are blessed with extra amenities such as the 401(k) plans. Make sure that you do all you can to enjoy the full benefits of programs like this.

Even if you are not being provided the 401(k) plan, there are various methods you could avail yourself of that will aid you in your retirement planning. Find out whether the 403(b) or the 457 plan has been made available to you. If so, consider yourself lucky because half of the stress from retirement can be alleviated with the help of these plans. Even if you are not being provided the above two plans, do not fret because help is always at hand in the form of IRAs. Some of the employers are known to provide their work force with different matching programs comparable to the 401(k) plans.

If none of the above mentioned options have been made available to you, then it is better to create an IRA with the nearest bank. The process of opening an IRA has been simplified greatly and provided you furnish them with the necessary documents, the entire process is going to be a breeze. Almost all of the users will welcome the tax-deferred growth of income. Opting for a Roth IRA has also been found to be efficient in certain cases for certain individuals. From all of these it can be learned that it is entirely up to our hands whether to make or break a retired life. Invest wisely and live well, the rewards will be great.