Short on Retirement Savings? Here’s What You Need to Do
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
More than 10,000 baby boomers cross the retirement threshold every day, and nearly one in four of them of haven’t saved enough to retire comfortably. If you’ve reached that point and realize your retirement savings won’t last your lifetime, it’s time to have an uncomfortable conversation with a financial advisor because there are several things that need to be done. But it all starts with having a plan.
Create a realistic plan
Establish realistic goals based on what you expect to happen. That should include a new time line for critical milestones, such as when you expect to stop working, when to start Social Security and Bituach Leumi, and when (or if) you will need to begin digging into your capital. Crunch the numbers to come up with a pre- and post-retirement spending plan as well as an investment strategy to maximize your income and capital growth.
Start living like a retiree now
By adjusting your lifestyle you can lower spending to make a significant difference in how much you can save. Reducing your budget now can also prepare you for the transition of living with a lower income as you move into retirement. The pre-retirement years may be the ideal time to downsize your home, your car, and your lifestyle.
Delay retirement to the “new 65”
For many people, regardless of where they stand financially, 70 is the “new 65” when it comes to retirement age. There are several advantages to working longer:
• You can maximize your Social Security and Bituach Leumi benefits.
• It will reduce the number of years you’ll actually live in retirement.
• It will give you more time to build your nest egg.
If you delay retirement, reduce your spending, and increase your savings, you gain the huge benefit of time to allow your money to work for you. It may not be the retirement you envisioned, but it doesn’t have to be the disaster many are facing today. Learn more about improving your retirement income by watching a short video here.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
How to Keep Financial Harmony in Your Marriage
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
What’s the best way to achieve financial harmony in a marriage?
When two people get married, they don’t only join their lives together, but also their money. If differences in money attitudes and practices are not addressed early on, people can become set in their ways, making it more difficult to overcome any disagreements. However, where there is love, there are also ways to heal the financial divide.
Find shared values and purpose
Couples need to come together with a shared vision of their future based on joint values. If they share a mission and purpose, their decisions will have greater clarity and conviction and it should be easier to maintain financial harmony. Shared goals can provide the motivation to spend/save according to an agreed-upon plan.
Create a plan
At the core of any successful enterprise – be it a business or marriage – is a spending plan or budget. With shared goals and purpose, couples can better prioritize their spending and find it easier to agree on financial decisions. Budgets should be created as a couple and tracked together monthly.
Keep separate finances
When finances are merged, it can sometimes lead to a struggle for control. Make sure that money doesn’t become a power issue. While both partners don’t need to balance the checkbook or pay the bills, everyone needs to be happy with the division of labor.
Making joint spending/saving decisions is important. However, not every financial decision needs to be approved by your spouse. Allowing some individual control over a personal spending budget can go a long way to relieving the stress of having to account for every shekel spent as a couple. Decide on an amount where each person can spend without having to “check in” with the other.
Read my blog, ProfilePerspectives.com/sharedsavings, for an in-depth discussion of the pros and cons of maintaining a shared savings account.
Communicate!
As with any other issue in marriage, open and honest communication is the key to finding financial harmony. Couples who make time to discuss money issues regularly usually achieve a financial consensus.
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
What You Should Know About Low-Risk Investments
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
Recently, a new client told me that his portfolio mostly contained low-risk investments. When I saw that the majority of his investments were mutual funds, I asked him why he believed mutual funds were “low-risk,” as his funds contained stocks. What he was missing was the mutual funds contained stocks which are risky, so even though the funds were diversified, he was exposed to a lot of risk.
What is a low-risk investment?
An example of a low-risk investment is a bank deposit, or CD (certificate of deposit). A CD pays a fixed interest rate and matures on a specific date. It is “safer” than a stock, the value of which can fluctuate dramatically, since if the CD investor holds the CD until maturity, he knows he’ll get his principal and interest paid in full. Investors looking for a low-risk investment that produces income choose CDs because they pay interest on the original deposit.
Furthermore, CDs are normally insured by the FDIC for up to $250,000 if the bank fails and doesn’t pay back the initial deposit on maturity.
However, though a CD carries a low level of risk, you can still lose money if you sell it before its maturity date. Moreover, if rates of inflation are higher than interest rates, the real value of your money diminishes compared to the original purchase. Additionally, CDs also include an element of liquidity risk, especially if you invest in a long-term CD.
What to think about if you want to invest in CDs
There are many reasons to invest in a CD. It may be worth forfeiting the possibility of higher returns in the stock market for relative peace of mind in preserving your principal.
If so, consider buying CDs through your broker, as CDs purchased through a brokerage account can offer higher returns than if you buy them as an individual through a retail bank.
To learn more about CDs and other low-risk investments, listen to my podcast at: GoldsteinOnGelt.com/low-risk
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Can I Safely Withdraw My Principal in Retirement?
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
As a cross-border financial advisor, one question I hear nearly every day is, “Can I afford to withdraw my principal in retirement?” For most of my clients, the short answer is, yes, but it is important to know how much and from which accounts you can dip into your principal.
When withdrawal is part of a strategy
The financial planning industry’s “4 Percent Rule” is commonly applied in determining how much principal you can draw down annually without risking outliving your money. Based on historical worst-case scenarios for a portfolio allocation of 60% stocks and 40% bonds over the last 100 years, 4% is considered a safe withdrawal rate in most situations. However, since each person’s situation is different, don’t rely on a rule of thumb as customized financial plan.
A simple calculation to determine how much capital would be needed to generate a desired level of income using the 4% strategy is to multiply your income need by 25. For example, if you need $100,000/year in retirement, you would need $2.5 million of capital at a withdrawal rate of 4%.
When withdrawal can be done conservatively
According to a survey by AARP, only a quarter of retirees dip into their principal, largely due to their fear of outliving their assets. Many retirees simply adjust their spending to be able to live off their income, even though they may have adequate principal to use. However, if withdrawing principal is done properly, with caution and attention to tax efficiency, retirees should have nothing to fear.
Determining how much principal you can safely withdraw each year should be an annual calculation. Factors such as your living needs, interest rates, market performance, inflation, and your general outlook on the future will affect the calculation. Work with your financial advisor to review your retirement income plan throughout your retirement. To learn more about income planning, download the Retirement Planning Book (for free) at Profile-Financial.com/rpb
Douglas Goldstein, CFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation about handling your U.S. investments from Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.