3 Steps to Stop Your Retirement Nest Egg from Breaking
Do you and your spouse have different ideas of how to invest your retirement nest egg? What should you do if one partner wants to invest more aggressively than the other?
Will Dividends or Interest Boost My Retirement Savings More?
Can dividends or interest boost your bottom line? Learn why both dividend- and interest-yielding positions have a place in your investment portfolio.
What Is the Best Way to Reduce Risk in Your Portfolio?
Learn how to grow your investments at a steady rate by reducing risk in your portfolio.
What Percentage of Your Retirement Portfolio Should Be Bonds?
How should you invest your retirement portfolio if you want it to both grow and have little risk? Are bonds appropriate for preparing for retirement?
Do You Have to Stop Working When You Reach Retirement Age?
By Douglas Goldstein CFP® - helping olim handle their U.S. investments from Israel
Does reaching retirement age mean you have to stop working?
In Israel, the official retirement age for a man is 67. For women, it fluctuates between 60 and 62, depending on date of birth. Retirees until the age of 70 (or 69 for a woman born before 1950), are eligible for a state pension, but entitlement is affected by additional sources of income. From 70 onwards, a state pension is given regardless of other income.
So what is the best age to retire? Before making a decision, ask yourself the following questions:
Are you physically able?
As you age, your regular routine may become tiring. You may also develop health issues that make working full time difficult. So before you decide to keep on working, make sure that it’s realistic. In your retirement plan, make provisions for the possibility that future health problems may affect how long you can work.
Why do you want to keep working?
Do you want to keep working because you fear outliving your savings? If so, working as long as possible lets you amass more savings, and have fewer years of withdrawals.
But what if you don’t have to keep working for income? If your desire to keep working is based on factors such as wanting to maintain routine or enjoying the contact with your colleagues, there are other solutions. Perhaps you could work part-time or find a hobby that will provide a social life.
It’s not only about money
Before making your decision, meet with your financial planner, tax advisor, and pension planner to discuss your estimated streams of retirement income. At the same time take all relevant issues into account, and make your final decision after considering both the financial and emotional factors.
For more information about how to decide when to retire, read chapter 5 of The Retirement Planning Book. Click here for a free download.
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.
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.
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.
Steps You Need to Take 5 Years before Retirement
By Douglas Goldstein CFP®- helping olim handle their U.S. investments from Israel
Will you have “enough” money to live comfortably? The months and years before retirement may be filled with trepidation and financial worries. In order to minimize financial concerns before retirement, here are some steps you should take in the five years leading up to it:
Organize your assets for tax efficiency
Most retirees underestimate the impact taxes will have on their retirement income. If you have an idea of what your retirement tax bracket will be, work with your advisor to arrange your assets in a way to create the greatest tax efficiency when you start withdrawing. Selling assets might trigger large capital gains taxes, and there may be additional taxes on pension payments.
Know your pension options
For some people, delaying taking Social Security or other pensions until as late as possible might make sense. Learn more about timing claiming benefits at: Profileperspectives.com/social-security. Be sure to check with your Israeli pension advisor in Israel about taking Bituach Leumi and withdrawing your work pension as a lump sum or in monthly payments.
Don’t be too conservative
While it may be tempting to reduce your exposure to risk-based investments pre-retirement, if you get too conservative, you could inadvertently diminish your portfolio’s capacity to generate enough income to meet your needs. A balanced and diversified portfolio of both stocks and bonds may be your best strategy for maintaining capital growth while reducing portfolio volatility. But beware of taking risks without consulting with a licensed advisor first.
Find your retirement ambition
Studies show that retirees who stay engaged and productive are happier in all aspects of their lives. Explore new interests that can be enjoyed now and more fully developed as you cross the retirement threshold. These might include volunteering, mentoring, or starting a new hobby or business.
The five years before retirement is a critical period for ensuring a smooth transition into your next stage of life. Get in touch if you’re concerned about how to handle your investments for retirement: doug@profile-financial.com.
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 Can You Increase Your Retirement Income?
By Douglas Goldstein, CFP® - helping olim handle their U.S. investments from Israel
How can you increase your retirement income and avoid risk? That’s tricky, and a lot of folks simply opt to put their money in the bank. But the good news is that there are other options, aside from the bank, for reducing risk and generating more retirement income.
While banks present a lower risk than the markets, bank deposits historically have low yields. This is very significant in retirement because you need sufficient income from your investments to replace your paycheck. Your bank savings may not grow if interest rates are low, and may even lose value over time due to inflation.
Income-producing investments
These two income-producing investments, while more risky than bank deposits, may be appropriate for some investors, and it’s worth asking a professional, licensed investment advisor if they’re right for you:
Bonds – A bond is a loan to a government or company over a set time period. When the bond matures, you get back your original sum (the principal), while during the time that you own the bond, you receive regular interest payments. Even though bonds are lower risk than stocks, they are not risk free. During a bond’s lifetime, market volatility can cause its value to go up or down, and there is the risk of default.
You don’t have to invest in individual bonds – a bond fund gives you the opportunity to diversify. These funds are managed for you, and you can also receive a monthly payment instead of the semi-annual payments received from individual bonds. Be sure to read the prospectus before investing in a mutual fund so that you understand the risks and expenses.
Dividend-paying stocks – Individual stocks may pay dividends, as well as REITs (real estate investment trusts), ETFs (Exchange Traded Funds), and mutual funds. While the dividend rate isn’t guaranteed (that is up to the board of directors to decide), dividend-producing investments generate income on a regular basis. (Don’t forget that the initial investment does carry risk of principal.)
Consult with a financial advisor
Before deciding on an income-producing investment, consult a financial advisor to find out which investment strategy is best for you. For more information about increasing your retirement income, watch the 9-minute video at Profile-Financial.com/videos/increase-retirement-income
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.
When you plan for retirement, you must have the right tools. What are the most important things that you need?
An emergency fund
Before you begin saving for retirement, create an emergency fund for unexpected expenses. This way, you will always have money available in a crisis and you won’t need to withdraw from savings or take a loan. Ideally, your emergency fund should cover at least 3-6 months’ worth of expenses. Keep this money liquid, in a bank account, so that you can withdraw it easily in a time of need. You might not earn much interest on it, but the purpose of this money is to be accessible in an emergency rather than growth.
Time
It’s never too early to start saving for retirement. Even if you are just beginning your career, you need to put money aside into savings, in addition to maximizing contributions to your pension and other tax-deferred accounts. The earlier you start saving, the more chance you have for compound interest to work its magic.
A retirement dream
Retirement isn’t only about ending your employment. It’s also about the life you’ll lead when you no longer need to go to the office every day. Do you want to study, travel, or take up a hobby? When you have clear retirement goals in mind, you’ll know approximately how much it costs, and it’s that much easier to plan. Of course, life always throws unexpected surprises your way, so a good retirement plan also takes into account what might happen if your health-related expenses are more than anticipated, or the market doesn’t act as analysts predict. A flexible strategy is critical to retirement success.
A financial plan
To realize your retirement goals, you need to create a financial plan. Not only can a plan help you assess how much money you’ll need to save, but it can help you determine the proper asset allocation and investment model. Consult with a financial planner to assist you in formulating a strategy.
What other tools do you need to plan for retirement? Watch this 9-minute video to find out: Profile-Financial.com/videos/tools
What Happens to Your Retirement Plans When You Make Aliya?
By Douglas Goldstein, CFP®, - helping olim handle U.S., IRA, investment, and brokerage accounts from Israel
As a Certified Financial PlannerTM sitting in Jerusalem, I work mostly with American immigrants who keep the majority of their assets in American investment accounts. When a recent oleh listed the various retirement plans that he held in the United States, he mentioned:
Although he had some upcoming financial obligations, most of the money was intended for long-term investment.
He told me that his biggest financial problem was that his investments and money “were all over the place,” and with his busy schedule he was unable to keep track of what was going on.
Although each of the accounts came from different sources, now that this oleh was no longer working in America and contributing to the retirement plans, he could roll the 401(k) and 403(b) plans to an IRA. This would give him flexibility to choose the types of investments that he wanted and still maintain the tax-deferred status of the retirement plans, as well as avoiding the penalties for early withdrawal.
When I suggested this option of rolling over his accounts into IRAs, the oleh asked if he could still do this, even though he is now living in Israel. This is a question that many dual citizens ask, often thinking that if they inherit or have an existing IRA in the United States they must cash it out. Cashing out an IRA and moving the money overseas is a taxable event, and often a bad idea.
The good news for this oleh, and also for all Americans living in Israel, is that you can maintain your existing tax-efficient IRAs in American brokerage accounts while living in Israel. To find out more about managing your American assets from overseas, download the “Toolkit for Opening U.S. Accounts from Overseas” for free at www.Profile-Financial.com/toolkit
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.