Financial Planning

Social Security Isn’t Enough: How Social Security Fits into a Well-Rounded Retirement Plan

If you’re nearing retirement age, you know the Social Security process and how much you will likely receive. With that information, you may have also anticipated that your Social Security benefit would not be enough to sustain you in retirement and, by itself, would not fully allow you to enjoy your retirement plans.

How Much Social Security Might You Expect?

Social Security checks recently have averaged around $1,831, with maximum benefits at full retirement age capping at $3,627. For many, this is well below their average monthly earnings and often insufficient to cover monthly expenses, especially with rising inflation costs. The poverty line for 2023 was around $1,215 per month, which puts many people receiving only Social Security fairly close to the poverty line.1

Exactly How Short May Social Security Leave You

Exactly how short on funds you will be in retirement based on just receiving Social Security will largely depend on your income pre-retirement. If you had an average income of $65,000, your Social Security would replace about 40% of your average income. If you make over $150,000 annually, your Social Security income replacement will drop to around 20%.2

Save Up and Retire the Way You Want

While Social Security is an excellent supplement to your retirement savings, it should only be part of the monthly income you receive. So, how do you ensure you can retire the way you want? Take advantage of your time before retirement by saving as much as possible, following the few tips below.

Max Your 401k Contribution

If you have a 401k with an employee match, contribute up to the maximum amount they will match. The match is free money that will have the ability to grow along with yours and provide a boost to your savings. Your contributions are also tax-deferred, which means you will save a little on taxes.2

Consider a Roth IRA

Roth IRAs are a different type of savings vessel that allows you to save money that is already taxed at your current tax rate so that you will not need to pay taxes when it comes time to withdraw the funds. If you fall under the maximum guidelines for contributing, it is an excellent time to consider putting funds in one.2

Why It Is Better to Rely on Savings Than On Social Security

There are many benefits to basing your retirement income on your retirement income instead of the benefit you will receive from Social Security. Not only can you control how much you will receive from your monthly savings, but you will also have greater flexibility. If you have a significant project or expense, you will be able to take money out of your retirement account to cover the cost. In contrast, funds from Social Security will only be released in the specified amount on the specified date.2

 

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess.

LPL Tracking #540922

Footnotes:

1 What Social Security Will Look Like When You Retire?, Investopedia, https://www.investopedia.com/articles/personal-finance/022516/what-will-social-security-look-when-you-retire.asp#:

2 Why You Shouldn’t Count on Social Security, US News, https://money.usnews.com/money/retirement/social-security/articles/why-you-shouldnt-count-on-social-security

Sources

https://www.investopedia.com/articles/personal-finance/022516/what-will-social-security-look-when-you-retire.asp#:

https://money.usnews.com/money/retirement/social-security/articles/why-you-shouldnt-count-on-social-security

3 Financial Planning Steps

Organization, efficiency and discipline can be considered as three primary steps of financial planning. Organization is knowing where your money comes and goes. An efficient portfolio means working towards a better chance of profits, and discipline can help keep you on the right track.

Statistics tell us that the average credit card debt per person – including all people who pay off their cards each month – is over $5,500. Many folks struggle to handle the big picture of their personal financial world.

If you are one of these folks, you can learn what the steps of financial planning are and even get started today, either on your own, using resources on the Internet, or by hiring a financial professional.

An important first step of financial planning is organization. You can work towards your financial goals in life by organizing your finances and understanding money flows, both inflows (like your paycheck) and outflows (bills).

If your financial life isn’t terribly complicated, an Excel spreadsheet may suit your needs perfectly. However, using something a little more sophisticated, such as Mint, Quicken or other online budgeting tools may become necessary, as you and your financial life continue to evolve.

There are a million ways to approach organization, but the “how?” may be nowhere near as important as “when?” In some cases, the answer to when you should start organizing is now.

Whatever method you choose, once you set up the system you can enter historic information as far back as 12 months (if you have it). This may require digging out the old bank, investment and credit card statements. It may not be as intimidating as it sounds. In today’s connected world, you might be able to simply download the transaction history from your bank, investment or credit card companies, and import it directly into your Mint or Quicken file. You still need to go through things, but much of the data entry may already be done for you.

If you don’t have the time, the facility or the patience to enter this historic information, don’t give up. Tracking your information from today forward can be valuable as well. Think about it: In a year, you’ll have 12 months’ worth of history in your system.

As you generate this history (or review the old history), patterns of your spending habits can emerge. Perhaps you spend much more on golfing than you realized, or maybe your home decorating expenses were greater than your mortgage payments over the last year. Each of these patterns can help you to understand where your money goes. Once you know that, you can begin to control it.

Quicken or Mint.com also organizes your investments, which takes us to the next step: efficiency.

If you have a couple of old 401(k)s from former employers, you can look at all investment accounts from a top-down perspective, using these tools. For many folks, it may be the first time you see all your investments in one place.

This is when you can adjust your allocation for a more comprehensive portfolio. You might think your investments were diverse enough but find that you bought the same investments in multiple accounts. Possible future allocations may include spreading your money across many different broad asset classes.

Now we’re into the place where the rubber meets the road. After you organize everything in an efficient manner, you should work on maintaining this organization over time. This may require some level of discipline.

You may need to balance your checkbook at the end of the month and keep your information up-to-date when you receive the credit card and investment statements. The automated tools can help a lot, but you might not want to just let it go on autopilot. You may decide to sort through the information to understand what’s going on with your cash flow and investments. You might need to change your spending habits or rebalance your investments if they get out of line.

But what takes the most discipline may be maintaining your investment allocation as planned when the market is very volatile. You might be tempted to pull out of the market after a big loss or start buying in when the market has a huge run-up. Keeping you disciplined is quite often the major benefit of having a financial professional, who can help you maintain the proper long-term perspective of your investment allocation and not let emotions rule the actions.

 

 

 

Important Disclosures

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This article was prepared by AdviceIQ.

LPL Tracking #1-05175139

12 Estate Planning Must-Dos

Many of you already have estate documents, probably executed many years ago. You need an estate attorney to look over your documents every 10 years or so. Here are a dozen points to review.

  1. Do you have a will and powers of attorney for health care and property? These are part of every complete estate plan. With health-care power, you choose an agent to act on your behalf if you become unable to make your own decisions. With durable power for property, you select an agent to act if you are incapacitated and can’t sign a tax return, make investment decisions, make gifts or handle other financial matters. Make sure your health-care power addresses the Health Insurance Portability and Accountability Act. This governs what medical information doctors can release to someone other than the patient.
  1. Do you need to change any beneficiaries, executors, trustees, guardians or others named in your documents? Are all still living? Can someone you recently found fill a role better?
  2. Any updates needed to addendums to your will that specify who gets what of your personal property? Often I read wills that mention addendums for personal property and the addendums don’t even exist.
  3. Did you move to a different state since the execution of your estate documents? If so, seek out a local estate attorney to check any legal differences for planning between your old and new states.
  4. Do you still need your trust documents or can you decant, which allows you to change some provisions? Consider this technique of emptying the contents of an irrevocable trust into another newly created trust if you are unhappy with your irrevocable trust. Not all states allow decanting. You may also want to discuss possibly moving assets out of a living trust (where a trustee holds them, a technique sometimes used to avoid probate) and holding them in the name of an individual. This discussion will weigh the income tax benefits of a step-up in cost basis, the original cost of an asset, versus other reasons to keep the trust. (“Step up” means that the cost basis of an asset resets to the fair market value of the security as the date of the holder’s death – potentially a much higher value than when they bought the security.) The higher the cost basis, the less capital gains tax your heirs pay when they sell the asset. You may also want to see whether you need an irrevocable life insurance trust, a device once used to move assets, typically life insurance, out of a taxable estate. Now that thresholds are higher – individuals can leave $12.92 million in 2023 ($12.06 million for 2022) and married couples $25.84 million ($24.12 million for 2022) tax-free – you may not need to move assets. Also check when your life insurance expires. Consider how long to keep it if you think you might outlive the policy.
  1. Have your children passed the ages specified in a children’s trust (in which you designate money for such specific purposes as education, home down payments or weddings once the kids reach stipulated ages)? If your estate documents call for a trust to give children access to money at certain ages after you die, you may be able to delete that language if the kids are older than the specified ages.
  2. What happens if one of your kids gets divorced? A trust can help you protect assets for your child or grandchild.
  3. Do you have heirs with special needs? Don’t assume typical estate documents help such an heir. Seek out a financial advisor and attorney who specialize in this planning.
  4. Check beneficiary designations on brokerage accounts, insurance policies and retirement accounts. Anybody you don’t want there?
  5. If you filled out a brokerage account application (or any beneficiary designation), understand the firm’s policy when one beneficiary dies before the others. If you want the share of the assets to pass by blood line – to the deceased’s children, for example – you may need to put in language specifying per stirpes (distribution of property when a beneficiary with children dies before the maker of the will). Otherwise, the remaining listed beneficiaries may simply divide the assets.
  1. Often a parent names a child on a bank account so the child can access or use the money if the parent can’t act. Understand that if you name your child as a joint owner on an account, the money passes to your child no matter what your will dictates. The child splitting the money with someone else constitutes a gift, though one probably not subject to gift tax now that gifts of less than $5.34 million aren’t taxed. Still, think carefully so you keep the family peace.
  1. Do your heirs know where to find all your important information? Let someone know the password to the app where you keep all your passwords – you must remember digital assets now, too.

 

 

 

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This article was prepared by AdviceIQ.

LPL Tracking #1-05350101

Traditional vs. Hybrid Long-Term Care Insurance: Which is Appropriate for You?

Growing old is simply one thing you can’t avoid. The goal is to enjoy your retirement years as you imagined after a lifetime of working. One aspect of growing old that young people may overlook is long-term care insurance and how expensive it can be if you need it and don’t plan for it. According to Money.com, long-term care expenses can run upwards of $9,000 per month. When you are young, the prospect of declining health 30+ years down the road isn’t at the forefront of your mind. However, it can’t be overstated how critical it is to be prepared for the possibility that you may need care later in life.

For those that see a benefit to investing in a long-term care insurance policy, one question you may have is which type of policy to choose – hybrid or traditional?

What is long-term care insurance?

Long-term care insurance is typically used for expenses that Social Security generally doesn’t cover; for example, home health care, assisted living facilities, and nursing homes. Social Security provides retirement, disability, and survivor benefits instead of long-term care costs.

What is the difference between traditional and hybrid long-term care insurance?

  • Traditional long-term care insurance (use it or lose it) – Traditional long-term care is a stand-alone policy where you pay regular premiums over time. Should you need long-term care, the policy will pay for covered services up to a limit. If you don’t ever need care, the money you paid toward the premiums, much like homeowner’s insurance, are not returned to you or your heirs.
  • Hybrid long-term care insurance – Hybrid long-term care is what sounds like, a combination of long-term care insurance with life insurance. This type of insurance provides added financial security; if you need care, the policy can help cover those expenses. If you never need care, the policy offers a death benefit to your heirs.

How do the costs compare?

  • Traditional long-term care premiums are generally lower initially but tend to increase over time because of rate increases.
  • Hybrid policies typically have a fixed premium but tend to be higher upfront.

Which policy is more flexible?

  • Hybrid long-term care insurance is typically more flexible because the policies offer a “return-of-premium” feature that permits you to cancel the policy and recover a portion or all of your premiums paid should your long-term needs change.

Are there specific cons I should be aware of?

  • As in anything, you have the pros and cons. As mentioned earlier, traditional long-term care insurance is to “use it or lose it,” whereas hybrid will generally be distributed to your heirs if it isn’t used.
  • The cost of hybrid long-term care has a higher price than traditional long-term care. Also, it may not offer as significant long-term care coverage as a stand-alone traditional policy.

How do I know which one would work for me?

  • Consider consulting a financial professional to review your financial situation, help you design a strategy, and determine which type of long-term care could benefit you and your financial goals.

 

 

 

 

Important Disclosures:

This material contains only general descriptions and is not a solicitation to sell any Long Term Care insurance product, nor is it intended as any financial advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by LPL Marketing Solutions

Sources:

Traditional vs. Hybrid Long-Term Care Insurance: Pros and Cons (2023) (annuityexpertadvice.com)

Is Hybrid Life and Long-Term Insurance Worth Buying? | Money

LPL Tracking # 1-05376456

A Fall Financial Checklist

For many, autumn is the best time of year. The return of cool breezes, comforting foods, and pumpkins can be invigorating. It’s also a bookmark of sorts, especially for your finances—a perfect time to take stock of your spending after the summer’s over to see what lies ahead. These tips can help you make simple, sensible choices and take action to make the most of your money, from your food choices to your financial options to protecting your most valuable assets.

Bask in the Bounty

Autumn is all about fresh food, and you can get more bang for your buck with these tips.

Fall Fruits & Veggies:

This one’s all about supply and demand: you can usually get good prices on in-season fruits and veggies because they’re so plentiful. So stock up on autumn produce like apples, beets, pomegranates, squashes, and sweet potatoes, to name a few. They’ll be bursting with flavor and health benefits—especially at the local farmers market—without busting your budget.

Store Up Soup:

Speaking of fresh vegetables, they go really well in soup, another fall favorite—making it easier for you to maximize the produce you buy. A bonus for your bottom line: soup also freezes quite well. It can last up to three months frozen, so you can make one large pot of it and feed your family for weeks.

Focus on Financials

It’s been said that planning is bringing the future into the present so you can do something about it now, and that’s especially true when it comes to your end-of-year finances.

Work Benefits:

Company benefits often begin on January 1, so pay close attention to your company’s open enrollment period to determine the best insurance option for you and your family. Consider benefits like a flexible savings account (FSA), a health savings account (HSA), and a 401(k) (especially if there’s company matching) to determine what would best suit your family. Two important things to keep in mind: just because your benefit choices worked for you this year, it doesn’t mean they will next year, and for an existing FSA, make sure to use your money if there’s an end-of-year deadline! Finally, any company-sponsored discounts (such as a weight-loss program or gym membership) need to be submitted by the end of the year, so make sure to submit the paperwork to cash in.

Education:

If you have kids in college, look ahead to the spring semester. Granted, you may think “They just went back to school,” but now’s the time to focus on financial education planning. Keep an eye out for federal financial aid (FAFSA) application deadlines (which usually open in early fall). Spring tuition for many colleges can be due as early as November and as late as January, so mark it on your calendar and plan accordingly—especially with holiday bills also on the horizon—to avoid getting docked with late fees.

Investments:

Things change all the time in the finance world, especially taxes and laws, and these tend to go into effect in the new year. If you’re looking ahead with your other investments, such as your stock portfolio or loans, be well educated about your options and about what’s happening—and expected to happen—going forward. The best course of action? Touch base with your financial advisor, who can steer you on the path that’s right for you.

Holiday Shopping:

Many times, I’ve paid the price (literally and figuratively) for waiting until December to take care of my holiday shopping—when you’re desperate, stock is depleted, and the calendar is dwindling down, you’ll tend to pay full price. But if you’re smart about it, you can plan ahead and enjoy the holiday rush.

During the next several weeks between now and Black Friday be intentional as you prepare for what you want to buy—and what you want to pay for it. Scour the internet, and keep a spreadsheet of prices; that way, you’ll get a sense of what you can expect to spend and what’s a good deal. Also, be sure to set aside a little money out of every paycheck for the holidays—or do what I do: know your calendar. If you get paid biweekly, two months out of the year have an extra payday; October is one such month this year. See if you can dedicate part or all of your extra check to your holiday shopping, which will really help when the January credit card bills arrive.

Don’t Wait for Winter

Take advantage of the lovely autumn weather to cut down your bills—and prevent costly ones.

Home:

Fall is a great time to get your home ready inside and out for winter, which can offer big cost savings. Cleaning out your gutters in late autumn, when all the leaves have fallen, can help you avoid drainage trouble in winter, when it might also be difficult to remedy the situation. If your driveway or sidewalk needs repair, do it now before rain and ice seep into the cracks and holes, potentially causing costly underlying damage. And speaking of ice, if you live in a cooler climate, make sure that you remove outdoor hoses, turn off your water supply to outdoor spigots, and drain the spigots; otherwise, when the nighttime temperatures creep toward freezing later in the season, you may find yourself in a world of financial hurt when your pipes freeze.

Inside, you can cut down on future bills by ensuring your home is warm during the coming months. Have your furnace (and fireplace, if you have one) serviced and change its filter so it’s at peak capacity, and check your windows and doors for drafts and cracks, sealing where needed.

Car:

Much like you can with your home, taking necessary steps to winterize your car now can save you financial headaches down the (icy) road. Check your antifreeze level and temperature, tread life and balance of your tires (which should also be rotated), and the status of your wipers and windshield fluid. Have your heater and defrosters checked to make sure they are functioning well, and make sure you have an emergency kit.

 

LPL Tracking #1-05175159

Ask Jake: What is FIRE (Financial Independence, Retire Early)?

When it comes to discussing retirement planning, it’s hard to overlook trends that come in this area. One current trend that’s getting attention in the financial world is financial independence, retire early (FIRE).

Today, we’re talking to Jake Sturgill about the FIRE trend, which investors might qualify for FIRE, and some takeaways that can strengthen any retirement plan, regardless of investor age.

How Early is FIRE Retirement?

Financial independence, retire early. Investors who choose the FIRE route want to retire earlier, rather than later. For some, this could be extremely early, say, in their 30s or 40s, but the goal to become financially independent and retire early certainly isn’t limited to younger investors.

FIRE is more about how you approach retirement planning than when you retire. It’s a lifestyle choice that shapes your entire approach to financial planning. When you choose to set a goal to retire early, you choose to save aggressively to achieve that early financial independence and set aside savings to see you through an extended retirement.

Typically, people who choose FIRE are higher income earners who opt to live a minimalist lifestyle in order to save even as much as 50-80% of their incomes annually until they achieve their retirement savings goals. If you are able to maintain this lifestyle and desire to leave the workforce early, the strict savings required can pay off with that early retirement date.

Even if, for reasons of age, income, or other life circumstances, FIRE isn’t a reasonable retirement objective, it doesn’t mean that ambitious savings goals and a desire to prepare your lifestyle for retirement aren’t for you.

In fact, if anything, the FIRE movement should inspire you to re-evaluate your retirement savings plan and determine whether it is aligned with your desired retirement age — even if it’s a more traditional one.

I Missed the FIRE Truck. Do I Have Other Options?

Maybe you think you’re beyond the point of saving for an early retirement. You missed the boat… Or in this case, you could pardon the pun and we could even call it the “FIRE truck”. I think my toddler, who frequently plays fireman, would appreciate this phrase!

Truly, it’s never too late to consider your financial future and look for ways to double down on important savings goals. If your goal is early retirement, you want to work your way back to the present moment and evaluate how you can balance your investments, savings rates, and lifestyle choices to enable your future self the option to reduce the number of years you “have” to work.

If your goal isn’t early retirement, or if that’s not a realistic goal, provided your age and/or circumstances, there are still ways that FIRE thinking can apply to your retirement planning, especially when you consider how your current lifestyle plays into your financial future.

It’s all about balance.

Whether you are aiming for early retirement or want to explore options for a more traditional retirement, you want the scope of your financial planning to encompass the things that are important to you personally. Your career, your family, your desired retirement lifestyle… All of these are factors to bear in mind when strategizing for the future.

Retirement planning typically isn’t something that you finalize in one session and recognize within the next year or decade. Yes, FIRE is an attractive option, but it’s not the only route that leads to a satisfying, well-funded retirement. At the end of the day, you and your financial planner need to be on the same page about planning a retirement that makes sense for you, your priorities, and your ideal financial future.

Want to learn more about retirement planning? Have another burning financial question? Reach out to Jake Sturgill today with your financial questions or for an in-person consultation!

    What is the Difference Between an Account Rollover and a Transfer?

    An important financial planning activity is reviewing your financial plan to ensure that everything is on track to help you meet your financial goals. Life changes, market shifts, and any number of factors can cause plans to change.

    One common change that investors make during their financial journeys is to move funds from one retirement account to another. Whether this move occurs for tax purposes, because of a change in employment, or for another reason, it’s important to consider how this change will be made: as a rollover or transfer.

    Of course, if your situation involves moving retirement accounts from your former employer, you have a variety of options from which to choose. These include:

    • Leave the money in your former employer’s plan, if permitted
    • Roll over the assets to your new employer’s plan, if one is available and rollovers are permitted
    • Roll over to an IRA
    • Cash out the account value

     

    Because of this, it’s important to understand the differences between transfers and rollovers, as well as the benefits and drawbacks of each. Today we’re going to explore these options to help you get a better understanding of how a rollover or transfer could impact your financial planning activities.

    What is a Transfer?

    A transfer involves transferring funds from one account to another. Generally, transfers move from one account of the same type to another, such as moving funds from a 401(k) plan at a previous employer to a 401(k) plan offered by your current employer.

    More commonly, transfers are used to move funds from one IRA to another, since you can move funds between accounts without incurring a tax penalty. However, if you need to move funds from a Traditional IRA to a Roth IRA, you must perform a Roth conversion, and make the necessary adjustments when you file.

     

    What is a Rollover?

    A rollover occurs when you move funds from one type of account to another, such as from a 401(k) to an IRA, either directly or indirectly. During a direct rollover, funds move straight from Account A to Account B. During an indirect rollover, you take possession of funds for a period of time before putting them into the second account.

    There are limits to the way that you conduct rollovers, especially indirect rollovers, and it’s important that you work with a financial professional to help you understand how your funds will move and how to make those moves without incurring tax penalties.

     

    How to Choose between a Transfer and a Rollover

    Sometimes, the account types or the transfer initiator will determine whether your account transition takes place as a transfer or a rollover. In these instances, your financial advisor or another party will inform you of how the move will operate.

    When you have the option to choose between transfer or rollover, it’s important to consider the account types that you’re working with and the potential tax implications of each option. While there may not be direct penalties associated with transfers or rollovers, long-term impacts might make one a more favorable option than the other.

    As always, when it comes to challenging financial questions, it’s a good idea to discuss the matter with your financial advisor for a personal recommendation that meets your unique needs. To learn more about financial planning, contact Puckett & Sturgill Financial Group today for a consultation!

     

       

      Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation. 

      Ask an Advisor: How Much Do I Need for Retirement?

      Transcript

      David: 00:08

      Hello, I’m David Hemler, and we’re here with Jake Sturgill on our Ask An Advisor series with Puckett & Sturgill Financial Group. And Jake, one of the questions that I know you’re often asked as well as I am is: how much do I need to retire?

      Jake: 00:23

      Saving for retirement is an incredibly complex decision and conversation. And, to your point exactly, it’s got to be one of the most common questions that we’re asked. And there’s a lot of rules of thumb out there. But, at the end of the day, it’s an incredibly personal decision, and there’s no ‘one size fits all’ approach.

      David: 00:42

      Those rules of thumbs, they can be both a benefit and maybe, at times, a detriment as well. Yeah.

      Jake: 00:48

      Especially if you don’t understand the decisions and the pros and cons involved with all the decisions. Some basic tenets that you are going to want to consider and then really factor into this decision-making framework are: what sort of lifestyle do you want to live? In other words, how much money do you think you’d like to spend? When would you like to retire? And how long do you think you’re going to need that money to last? Because, at the end of the day, nobody knows when their final day will be. There’s no way of predicting that, but these are all critical elements.

      David: 01:19

      A lot of pieces to the puzzle to put together, figuring it all out.

      Jake: 01:24

      Absolutely, but I think if you’re like most people, you don’t want to necessarily live a lesser standard of living, you want to maintain your standard of living throughout retirement.

      David: 01:34

      I know I’ve read and see a lot of things in the literature in financial planning about this 60 to 80% of your preretirement income needed in retirement. Would you agree with that rule of thumb? Does that fit into the picture a lot?

      Jake: 01:47

      Certainly, and I think it’s well-documented that you don’t necessarily need to replace all of your income in retirement. Because, after all, in retirement you’re not going to be saving for a retirement. You might pay a little bit less in taxes, and you might even spend less or just spend differently than you were in those years saving up to retirement.

      David: 02:05

      Mm-hmm (affirmative). Where do we go from here then, Jake?

      Jake: 02:08

      I would encourage you to meet with your financial advisor to get an objective opinion and look at things like: how much have you accumulated so far? What’s your asset allocation? What’s your savings rate? And what’s your time to retirement?

      David: 02:22

      Mm-hmm (affirmative). So, a lot of pieces to this puzzle for us to figure out. And we, the folks here at Puckett & Sturgill, the advisors, we’re happy to help you. Just give us a call, or click on our email and send us a question of your own. Thanks.

      It’s Your Turn to Ask

        How to Stay on Track with Long-Term Financial Commitments

        Just as New Years resolution gym-goers start to give up their good habits in the first or second month of the year, people abandon all kinds of resolutions or goals within the first months of the New Year. By February, about 80% of all resolutions have been ditched

        Good habits are necessary for health and overall wellness, and it’s no different with financial health. Just like with health-related resolutions, where it takes time to plan regular gym visits and healthy meals, it takes consistency and a plan in order to pursue the long-term financial results you’re looking for.

        A couple months into the year, it’s easy to lose sight of those ambitious long-term financial commitments you might have thought about or even decided to make a reality this year and beyond. This is especially true if you haven’t taken the time to put the steps in place to ensure you stay on track.

        Today, we’re going to dive into what constitutes a long-term financial commitment, why they’re important, and ways that you can work to stay on track if you decide to take one (or more) on. 

         

        What qualifies as “long-term”? 

        It’s important to first designate financial commitments as short- or long-term. While shorter-term commitments might be achieved in 0-2 years or even 2-10 years, long-term ones can generally be classified as those with a timeline of 10+ years.

        Depending on your commitment level, ability to put money away, and unique desires for financial performance, your financial commitments might take varying amounts of time, compared with others. You may even find that one part of your financial plan will move more quickly than another, due to unique factors impacting each portion.

        When you work with a financial advisor to establish and track your financial commitments, you can work to figure out feasible timelines for your financial commitments. Generally, retirement plans, 529 education plans, and other big ticket savings goals qualify fall into the long-term financial commitment category, but again, these can vary between individuals. 

         

        Why think in the long term?

        Going through the process to develop and create long-term financial commitments leads to a better understanding of your unique financial priorities and helps you to solidify a timeline for reaching future goals. Typically, long-term financial goals also lead to measurable short-term goals. This snowball effect is a good thing, since it can keep you focused on the big picture, even while you celebrate the little victories along the way.

        Additionally, a combination of short- and long-term financial commitments and goal setting might even lead to a greater mutual understanding between you and your spouse on financial priorities and your overall desired financial future, whatever that may look like.

        Lastly, we can’t forget the primary reason for financial benchmarking: to pursue financially a great desire, such as funding a grandchild’s education or having a comfortable retirement, that otherwise you would not be able to achieve. 

         

        What makes a good long-term financial commitment?

        Ideally, you should strive for your financial commitments to be specific, measurable, and attainable. This is true whether you are saving for retirement or for an investment property: specificity, measurability, and attainability are each important characteristics.

        That being said, goals can change. What you want in retirement, what you want to do with a property you want to buy, what your granchildrens’ aspirations are for college and beyond… these might change over time.

        What doesn’t change is a commitment to building the capital to make those goals, however they change, a reality. If a goal is centered around motivations that are relatively stable, like having a solid retirement plan and/or being able to spend time and money on your family, it will be important to you.

        How can you stay accountable to long-term financial commitments?

        Hand in hand with these considerations is a practical step: Record your thoughts on paper, or some place you can access them to review them. Consider taking a novel approach to naming accounts by calling them by the specific goal they are setting out to achieve. As your priorities shift or change, knowing the reasons you set out on this long-term goal in the first place will, at the very least, help you stay dedicated, motivated, and informed when making adjustments. 

        A second practical step is breaking down your larger commitments and goals into bite-sized pieces. Setting yearly, quarterly, or even monthly and weekly, if that’s the type of progress that makes you feel in control, makes taking on long-term goals manageable. Part of what makes a goal specific, measurable, and attainable is the ability to break it down to these increments, should you need or want to. 

        If you are working on specific savings goals, setting up automated payments can assist in meeting the smaller goals, taking the pressure off you to move money into certain accounts by certain dates. Automated payments or earmarking and immediately disbursing income to savings accounts can help you to prioritize the little steps that are working towards achieving the larger, long-term commitment.

        You may also find it helpful to track your progress through apps or spreadsheets, or some other form of reporting. Your financial advisor can be an invaluable resource in helping you to keep track of investments, savings goals, and other factors that impact your progress as you work toward various financial commitments.

        As your priorities change, you might also adjust your long-term plans, which is reasonable and even necessary at times. Again, your advisor can also help with these adjustments and make recommendations when plans seem to veer too far off-course. 

        Periodic meetings with your financial advisor should be an essential part of your planning as you work toward your long-term financial commitments. Not only can your advisor help you to monitor progress on your financial commitments, but they can help you to put the pieces together to establish goals and benchmarks that will help you to bring your ideal financial future into focus. They also provide a professional perspective that can objectively view your existing commitments to determine whether they align with your desires or whether they should be tweaked to make the most impact.

        Set up an appointment today

        Our advisors at Puckett & Sturgill Financial Group are the CFP® professionals who can help you take the steps necessary to develop and keep track of your long-term financial commitments. Set up an appointment today! 

          Ask an Advisor: What Do I Need to Know About Social Security?

          Transcript

          Jake: 00:08

          Hi, I’m Jake Sturgill, with Puckett & Sturgill Financial Group, and our Ask An Advisor series. Today, I’m going to be asking Paul Sorenson about Social Security, and the things that our clients need to know about Social Security.

          Paul: 00:24

          Social Security, Jake, as you know, is one of the first things that many clients ask us about, is, “I know I have a decision to make at some point in the future, whether it’s now, or 20 years from now, or next year, or I already made a decision.” It’s something that we get asked about a lot.

          Paul: 00:41

          The bottom line is, everybody’s circumstance is different when it comes to Social Security. So the planning surrounding Social Security is very specific, and there’s a lot of complexity involved with that decision. It’s something we talk about regularly. And as a part of that, people ask us, “When should I start thinking about it?” With our clients, we start thinking about it, no matter their age, we at least add it as a part of the plan. Because we do approach things from a holistic standpoint. So it’s always top of mind as a part of our planning, as a baseline, a foundational piece of the planning that we do for a client.

          Jake: 01:12

          Right, and so if we’re starting and incorporating it into the planning process, really as soon as possible, when should people start to think about actually taking it or claiming Social Security?

          Paul: 02:28

          Right. Just because you can start at 62 doesn’t mean you should do it as early as possible.

          Paul: 02:33

          Yeah, yeah. You may have a whole pool of assets that help you delay that decision, or help change that decision for you. It’s a very individual decision.

          Jake: 02:41

          It’s such an important decision, because pensions are, as I’m sure you’ve seen with your clients, largely going away. Maybe fewer and fewer people have them. So Social Security is becoming such a foundation and core component of a retirement income plan. Taking all these factors into consideration, there’s a lot that goes into that process, and it’s unique to everybody.

          Jake: 03:06

          If you have any questions about Social Security or your retirement income plan, please contact us. Visit our website, email us, give us a call at the office. We’re always just a phone call or an email away.

          It’s Your Turn to Ask