Retirement articles

Planning for Retirement

Retirement is certainly considered to be the most important financial goal. This makes planning for retirement a must, and the earlier you start the easier it gets. However, starting your retirement planning late is certainly better than never, and a financial advisor or wealth manager can certainly assist in getting you toward where you need to be.

Financial planning for retirement starts by looking at your retirement need and setting a realistic goal. Many financial professionals recommended that you should save around 10% of your income each year for retirement.  Retirees generally need at least 80% of their pre-retirement income to maintain their lifestyle during their retirement years. However, if you have visions of frequent travel, golf, or any other expensive hobbies this figure can actually double. Work with a financial advisor to help you determine what this magic number is for you and the strategies designed to help you maximize your retirement income.

If you are fortunate enough to start saving and planning for retirement in your 20’s or 30’s, you have the most important financial planning weapon on your side, and that is time. Time allows your money to compound and grow. With the help of a good financial planner and the proper allocation, by the time you are in your 60’s you may have plenty of assets to stop working. However, not everyone has that luxury.

Two-Thirds of workers age 55 and older have less than $100,000.00 in their retirement accounts which is inadequate unless they are in a rare financial situation. If you are behind, you might need to look at reducing your spending, or make sure you are maximizing your possible retirement accounts such as a 401(k), Traditional IRA , or Roth IRA to name a few. If that still isn’t enough, you might need to downsize residences, borrow the equity in your home, keep working, or delay taking your social security payments so that your monthly check will be larger once you to start to collect.
Even if you have plenty of assets, retirement takes planning. Other common questions include: What is the appropriate way to take distributions? How can I minimize the tax burden? What affect will inflation or the increasing cost of healthcare of have on my nest egg? How do I properly manage risk in my portfolio? What is the best type of account for my retirement needs? Is insurance a good idea? The list goes on and on.

At JHM Wealth Management Inc., we work with our clients to design a complete retirement plan to address their retirement goals. This includes the accumulation of sufficient funds to meet their needs, as well as the distribution of those hard earned assets. Servicing all of Southern California, we have three convenient offices located in the San Fernando Valley, Los Angeles, and Orange County. Please do not hesitate to contact our offices to see how we can be of value to you.

Retirement Income Planning

It’s no secret that retirement is the single largest financial concern for most investors. Retirement income planning is a lifelong process. Throughout your working years, your financial planning will undergo a series of stages in which you will evaluate your process and make decisions to ensure you reach them.

The first step in retirement income planning is determined how much of a nest egg you’ll need to retire. Financial planning studies show that a retiree will typically need at least 80% of his/her pre-retirement income to maintain their standard of living. Of course this figure will change according to one’s lifestyle during retirement. To be safe, you may want to use a target income similar to what you are making now. Research shows that you do not want your withdrawal rate to be over 6%, but 4-5% is even safer. For example, if you want a retirement income of $50,000/year, you need to save around $1,000,000 (50,000/.05).

Next you need to figure out how much you need to put away each month to reach that goal. There are many factors to consider when calculating how much you will need to save each month to accrue a large enough nest egg from which you can pull enough income: Your current age, intended retirement age, life expectancy, current earning, income sources during retirement, amount of current retirement savings, expected savings contributions, cash outflows during retirement, portfolio return, inflation, etc. The earlier you plan and start saving, the less you’ll have to save each month to reach your goal.  Sitting down with a financial advisor to run through the figures pertinent to you is advisable.

Now the question becomes where are you going to save? Which types of accounts are going to be the most beneficial? The most common types of retirement accounts are 401(k)’s, IRA’s, and Roth’s IRA’s. However there are many more potential options including 403 (b)’s, 457’s, Profit Sharing Plan, Defined Benefit Plans, SEP IRA’s, ESOP Plans, Annuities, Etc. These plans offer different benefits and limitations’, so consulting with a financial planning or wealth management firm is prudent.

At JHM Wealth Management, Inc. we work with our clients to design a comprehensive retirement plan to help them work toward their goals. This includes the accumulation of sufficient funds to meet their needs, as well as the distribution of those hard earned assets to ensure they are not outlived. Serving the Greater Los Angeles, San Fernando and Orange County areas, please do not hesitate to contact our office to see how we can be of value to you.

Retirement Investments

When you invest for retirement, you typically have three main options.

1)You can put the money into a retirement account that’s offered by your employer, usually called Defined Contribution Plans. Defined Contribution Plans are retirement investments that your employer provides, or “sponsors”. Here are the names of different Defined Contribution Plans.

• 401(k) plans are the most common type of defined contribution plan. 401(k)’s are the version that corporations offer to their employees. Roth 401(k)’s are a subgroup that has different tax treatment.
• 403(b)’s are for employees of public education entitles and most other nonprofit organizations.
• 457’s are for state and municipal employees of qualified nonprofits
• Thrift savings plans (TSP’s) are for federal employees

Most Defined Contribution Plans basically work the same way. You decide how much you want to contribute, and your employer outs the money into your individual account on your behalf. The investment usually happens through payroll deduction. Your employer will have a limited selection of investments for you to choose from and you decide what you want the money in your plan to be invested in. When you leave your job, you still maintain ownership over your account. Many employers also agree to kick in some of their own money once you’ve decided to put your money in. This is called a matching contribution and a great way to add to your retirement investments.

2) You can put the money into tax-advantaged retirement account of your own, such as an IRA. IRA’s offer similar tax breaks to 401(k)’s, though some of the eligibility rules differ. An IRA is an account type that has certain tax characteristics because the US Government wants us to save for retirement; we enjoy tax deferral within an IRA. However, there can be penalties if you don’t use an IRA for its intended purpose.

• IRS’s are tax-deferred. This means that any earnings are not taxed each year-they’re reinvested for more growth. This keeps your retirement account working harder and allows your un-invested cash to build compound interest.
• Another potential benefit is the ability to deduct contributions from your taxable income. This allows you to pay taxes on less money in the current year, even though you saved it and have it as an asset. Not all IRA’s have this feature, and not every taxpayer can enjoy this benefit, but it can be helpful for some.
• IRA’s are intended for your retirement savings. This means that the IRS does not want you to take the money out until you reach “Retirement Age”- as determined by the IRS which is currently 59 ½ years of age in 2012. If you take your assets out of an IRA before that age, you may have to pay a 10% penalty on the amount you withdraw. You may have to pay Income Tax on that amount as well-this can add up!
• There are limits on how much you can contribute to an IRA because these limits change yearly. I suggested you head over to IRS.Gov and search for “Publication 590” for all the details, rules, and regulations. If it turns out that you need to get money out of an IRA before the IRS-defined retirement age, you should check to see if you qualify for any exceptions to the 10% penalty. A good CPA should be able to help you with this.
• You may have different options in retirement investment planning within an IRA. Money Markets to CD’s and other options with greater risk/reward characteristics such as bonds, stocks, and mutual funds.

3) You can put the money into a regular investment account that doesn’t have tax advantages, or put the money into an annuity account that has tax advantages. If you’ve put all the money you’re allowed into tax-favored plans and you want to save even more for retirement, you’ll have to use a regular investment account or an Annuity.

Retirement investment planning is also beneficial for self employed persons. They also set up and- in most instances-control your own tax-advantaged retirement program and put aside more each year than the average wage earner.

At JHM Wealth Management, Inc. we can help you develop the proper plan and choose the investments suitable for your goals and risk profile. We take our financial planning process very seriously and strive to help our clients achieve a comfortable and fulfilling experience while investing for retirement. Serving the Greater Los Angeles, San Fernando and Orange County areas, please do not hesitate to contact our office to see how we can be of value to you.

Retirement Plan Distributions

Retirement plan distributions are often a key source of income during retirement. Depending on the type of retirement income plan, the distributions can occur at different ages. With social security replacing typically only 20-40% of pre retirement plan distributions are important in maintaining a similar life style. When considering a retirement plan distribution, one should consider key factors such as when to take distributions, the amount of need retirement income, expected life expectancy, desire to leave assets to leave assets to the next generation, and taxation.

Often times, taking a retirement plan distribution before normal retirement age can lead to taxation plus a penalty. These plan distributions should be avoided if possible. There are times when retirement plan distributions can take place prior to normal retirement age without penalty. These include financial hardship and the first time purchase of a home. There are many options when it comes to retirement plan distributions and the need to make retirement income last even long is important due to increased longevity.

At JHM Wealth Management, Inc. we work with our clients to explain these choices and provide a retirement income plan for our clients. Serving the Greater Los Angeles, San Fernando and Orange County areas, please do not hesitate to contact our office to see how we can be of value to you.

Retirement Planning Services

Retirement planning services is very important for many people. The typical retirement period is now generally considered to be longer than any time in history and the price of health care and other services of concern to retirees continues to climb.

Retirement Planning requires the wise investment of the funds earmarked for retirement, during your working life in order to use them to 'replace the check' during retirement. Almost a third of US Citizens do not plan for retirement and enter their retired life with little or no wealth.
To begin to plan for your retirement, you have to know where you are starting from. It is very important to begin retirement planning early. As soon as you enter the workforce, you should start thinking about your retirement plan. At the very beginning, think about where you are financially and where you want to be in your future. A careful examination of your financial situation will give you an idea of where you can begin for planning for your retirement.

There are several options in retirement planning, but investment options for 25 year-old investor may be different from those for a 40-year-old investor. Planning for retirement is not a onetime exercise. This plan should be tracked regularly to determine progress and make changes, if necessary.

Planning for retirement takes into account:

• Inflation, as inflation can erode the value of money.  It is important that your retirement plan is coordinated in the effort to have returns greater than the rise of inflation.
• Greater life expectancy has risen globally, resulting in an increase in the number of years post retirement.
• Medical emergencies, unexpected medical events warrant the need for money
• Personal financial goals: establishing concrete financial goals also requires obtaining precise figures that reflect future changes in expense.

Entering retirement is not the end of good financial planning and investing. During your retirement years, you must continue to invest your money carefully so that you get the greatest benefits from it. The way, years into your retirement you can still be earning money and improving your financial situation.

If you work hard all your life you should be able to enjoy the same standard of living that you enjoy now. In fact, you should be able to be even more independent in your retirement year that is very possible. That being said no advice can take the place of experienced direction. Talk to a financial consultant who can help you developed a good financial plan and retirement planning advice so that you will be on the right track for saving for your retirement years.

At JHM Wealth Management, Inc., planning for retirement is part of our comprehensive financial planning process. Serving the Greater Los Angeles, San Fernando and Orange County areas, please do not hesitate to contact our office to see how we can be of value to you.

Retirement Planning

Retirement planning, in a financial context, refers to the allocation of finances for retirement. This normally means the setting aside of money or other assets to obtain a steady income at retirement. The goal of a retirement plan is to prepare an individual for a desired standard of living based upon unique needs, goals, and time frames. Planning for retirement is important to ensure that an individual does not need to work during his or her retirement years but may choose to work if desired. A client may have a complex situation with many retirement plans or may simply choose to live off of social security. Either way, proper retirement planning is necessary part of financial planning to prepare an individual for their retirement years.

In recent years, financial planners have been available to help clients develop retirement plans, where compensation is either fee-based or commissioned contingent on product sale. Retirement finances include many areas of client’s assets including stocks, bonds, real estate, insurance defined benefit plan, social security, and other retirement plans. Retirement planning advice should also center around debt, taxation, and cash flow as well. Retirement planning is about the future so the planning needs to address uncertainty, volatility, and variable dynamics. These factors raise significant challenges to those providing retirement planning advice.

Contact our office today to set up your own personal retirement plan and financial planning. Serving the Greater Los Angeles, San Fernando and Orange County areas, please do not hesitate to contact our office to see how we can be of value to you.

Financial Planning offered through LPL Financial, a Registered Investment Advisor