Focus on Your Retirement Strategy Scorecard So You Can Relax
Wouldn’t you love to live like it’s summer vacation forever? With a strong financial retirement strategy, you can. How? When it comes to finances, looking at the long-term game is often the smartest course of action. That’s why we suggest setting up your own personalized “retirement strategy scorecard,” a method that can help you get started and guide you along the way.
Whatever you want out of retirement, your retirement strategy scorecard can be a great tool to help you get there. Get out the SPF and get ready to relax–summer vacation in retirement can last, well, all year with proper planning.
Financial Retirement Planning: Start where you are
Seasons change, but where you start makes a big difference. Take account of where your finances currently stand by reviewing your resources. Make sure you have these documents on hand to get started on your retirement strategy scorecard:
- A net worth statement, which analyzes how much cash flow you’ll need to support your retirement lifestyle
- A high-level look at your 401(K) plan or other retirement accounts, and your current investment allocation
- An analysis of the rest of your portfolio, which can outline what’s included in any funds beyond your 401(k)
Then look beyond the basics
When planning for retirement, a lot of people fail to realize they should take resources into account beyond their 401(k) and other funds. When you’re putting together your retirement big picture, take these into an account:
- Mortgages: How much do you owe and how long do you have to pay it off?
- Social Security benefits: Make sure you log into the official Social Security Administration website to determine your benefit level
- Benefits from previous partners, which can include retirement benefits, interests in accounts, or life insurance
- Your own permanent life insurance policies, to determine if there’s cash value
Analyze your retirement options
Now that you know where your finances stand, you can start planning the fun part: everything that’s possible once the next phase of your life begins.
Don’t be afraid to dream big. See this as an opportunity to reassess your wants and needs. Retirement is relatively responsibility-free, which can be disorienting after a successful career. It’s a chance to recapture your spark, to build your next step intentionally.
Wherever you want to go, whatever you want to do, develop a plan that points the way.
Give your plan a practice run
You wouldn’t buy a car without a test drive. The same goes for your retirement plan. Once you’ve analyzed your options and have a good idea of how you’d like to spend your time and structure your life, consider taking some time off to take your retirement ideas for a spin.
Immersing yourself in these activities can give you a good idea of how well reality meets expectations. If the two don’t quite match up, fear not. There’s plenty of time to alter your plan and create a retirement life that truly works for you.
One thing to consider: think about picking up a part-time job in an industry that you’re interested in. Studies show that a successful retirement isn’t necessarily all about leisure—working in retirement can actually bring you greater happiness.
Get your goals down on paper
Taking time to outline goals makes a big difference when it comes to achieving them. If you have an idea in mind, writing it down can actually help you turn it into a reality—according to a recent study, 76% of participants with written goals achieved those goals, compared to 43% of people who didn’t write them down.
Draft your plan, create a map for your next phase, and dig into the details. Outline the steps you need to take to get where you want to be and keep them at the front of your mind. Continuously review them as your circumstances change and your priorities shift. They’re your goals—you get to choose what’s important and where your future goes.
It’s about more than just finances
If you think the most common retirement planning pitfall is a lack of finances, think again. It’s actually a lack of vision. Summer vacation is about enjoying the moment, leaving stress behind, and leaning into life’s smaller, simpler moments. Embrace that mindset when you embark on the retirement planning process, but don’t forget to enjoy the present, too.
The retirement strategy scorecard’s added power is its ability to deliver peace of mind not just for tomorrow, but also for today. To get started on a retirement plan that can help you live your next chapter like it’s summer vacation forever, contact Lane Hipple at our Moorestown, NJ office by calling 856-638-1855, emailing email@example.com, or to schedule a complimentary discovery call, use this link to find a convenient time.
Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents of it on social media platforms. I have no right to distribute the articles, or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.
Clarity is Key if You Want to Reach Your Personal Financial Benchmarks
When it comes to your money goals, it’s important to focus attention on your short-term and long-term financial goals. Gaining clarity on which of your money goals fit into which category can help you properly budget and save for them accordingly.
Short-Term Financial Goals: The Basics
It may seem self-explanatory, but timelines for your financial goals are on a continuum, so it’s valuable to identify which types belong on your short-term list. Of course, these are the goals that are for your more immediate needs, but that could mean the next few months or the next few years.
As you think about your short-term money goals, here are a few common examples:
- Upcoming life transitions (marriage, new baby, buying a home)
- Saving for your emergency fund
- Paying off debt (credit cards, student loans)
- Travel plans
- Home repairs and improvements
If you don’t see some of your own goals on this list, it doesn’t mean they don’t qualify as short-term goals. As you work on your goal-setting, it can help to think in terms of what you hope to accomplish in the next five years versus what you hope to accomplish beyond that timeframe.
Clarifying Long-Term Financial Goals
Most often, long-term money goals are those “big picture” costs you’re working towards. They won’t be accomplished in months – or even in a few years’ time. Rather, they may take decades to achieve. They also tend to involve higher dollar amounts than your short-term goals.
Here are a few common long-term financial goals:
- Saving for retirement
- Putting your children through college
- Paying off your mortgage
- Starting or buying a business
Keep in mind that, although you will probably be making incremental progress toward these goals on a monthly or yearly basis, they are still long-term because their ultimate achievement is many years away.
Get Comfortable with the Gray Area
It’s easy to confuse your short- and long-term goals when they overlap a bit – which is normal. If it helps you, create a category of midterm goals for yourself, too. These may be goals you hope to achieve in five or ten years, but set the timeline that makes the most sense for you.
These middle-of-the-road money goals may be things like:
- Saving for a down payment on your own home
- Raising your credit score
- Buying a car with cash
- Working toward maxing out your 401(k) contributions
If the idea of midterm goals makes things feel fuzzier for you, rather than providing added clarity, try a different tactic. You can always take pieces and parts of your long-term goals and add them to your short-term list with specific timelines for accomplishment, too.
Estimating Realistic Time Periods
One of the more challenging aspects of financial goal-setting is that many people have a “gap” between when they would like to accomplish a money goal and when it is actually realistic to do so. While some goal periods are difficult to estimate, you’ll help yourself by having a good handle on your financial situation. If you haven’t created a budget yet, make this your first step. Once you know exactly how much you have coming in and how much you’re spending and where, you know how much extra money you have each month to put toward future goals.
For example, you may have a short-term goal to pay off your student loans in five years or less. When you do the math, though, you find that it will actually take you ten years based on your current income, pushing this goal into your long-term category instead. It can work the opposite way, too – you might realize that careful spending will give you enough to make a double mortgage payment each month, effectively cutting your payment timeframe in half. Either way, it’s easy to see how budgeting is a critical step in meeting your goals.
Budgeting and Saving 101
Knowing where you stand is crucial to the rest of the goal-setting process for a few reasons. First, it forces you to come face to face with your spending habits, which may have some room for improvement. Second, it shows you the math – and numbers don’t lie. Rather than setting arbitrary time periods for achieving your money goals, you’ll know what you can actually accomplish.
While there are different methods to use for setting up your budget, many people use a 50/30/20 budget as their baseline. This is where you use 50% of your after-tax income for your needs, 30% for your wants, and 20% for saving or paying off debt. You can use this calculator to get started, or try a budgeting app like Mint or YNAB (You Need a Budget).
Ideally, your budget will show you that you have excess income each month that can go into your savings. So, where should you store your nest egg until you need to use it? For short-term goals like your emergency fund, choose a high-yield savings account that you can access easily and that doesn’t have a minimum balance requirement. For midterm savings, you may be best served by a Series I Bond. For long-term savings, say for retirement, you want a tax-advantaged account like an IRA or 401(k).
Setting Financial Goals
Most people have multiple short- and long-term financial goals, and it’s impossible to give equal weight to all of them with limited resources. So, think about which goals help you fulfill a need versus those that help you fulfill a want. Even though it may be tempting to put more toward your vacation fund for next year, failing to put enough into your retirement savings could mean you can’t pay your bills once you retire. So, allocate your money toward your needs first – regardless of their timeframes – and then you can allocate the rest of your funds toward your wants.
If you think you would benefit from a conversation about setting financial goals, contact Lane Hipple in Moorestown, NJ by calling 856-638-1855, emailing firstname.lastname@example.org, or to schedule a complimentary discovery call, use this link to find a convenient time.
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Illuminated Advisors is the original creator of the content shared herein. I have been granted a license in perpetuity to publish this article on my website’s blog and share its contents of it on social media platforms. I have no right to distribute the articles or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I have no right to distribute the articles or any other content provided to me, or my Firm, by Illuminated Advisors in a printed or otherwise non-digital format. I am not permitted to use the content provided to me or my firm by Illuminated Advisors in videos, audio publications, or in books of any kind.
What a change we have seen in the housing market in just the last two months. Mostly due to the 2022 usual suspects: historically high inflation and rising interest rates. In the first quarter, while interest rates and home inventories were still very low, buyers were flooding the housing market to pay top-dollar under previously unthinkable terms. To win a bid, buyers were making cash offers and waiving inspections, sometimes without even stepping foot on the property!
According to Zillow, the typical New Jersey home value in April 2022 was $454,982. This value is seasonally adjusted and only includes the middle price tier of homes. That represents a 15.9% increase over the past year.
Since the start of the year, however, mortgage rates have crept higher and higher, but that didn’t seem to scare off buyers until the Federal Reserve began increase the United States Fed Funds Rate in March.
2022 Mortgage Rates
The increasing home prices, combined with higher interest rates, have finally shrunk demand for new homes. According to Census Bureau data released on May 24th, new-home sales fell 16.6 percent in April, leaving the inventory of newly built homes to jump sharply to a nine-month supply. The new construction industry is considered to be balanced between buyer and seller when there are only enough unsold new houses to match six months of sales.
Home building stocks have taken a hit as a result of this change in the housing market. Specifically, the SPDR Homebuilders ETF (XHB) has dropped 30% since December of 2021.
If you have reason to believe this news will impact your financial strategy or retirement plan, please contact Lane Hipple today!
New data from the Consumer Price Index for Urban Consumers (CPI-U) shows a higher-than-expected inflation rate in April. Over the last 12 months, the average change in the prices paid by urban consumers for goods and services was 8.3% higher. As of this writing, the Dow Jones Industrial Average and the NASDAQ have each shed over 6% of their value over the past 5 days. Investors are looking for investment alternatives that can return something in this market environment. Here is why we see Series I bonds as a potential suitable investment that is attractive right now.
The interest is derived from a combination of a fixed rate and a variable inflation rate tied to CPI-U. Therefore, as inflation rises or falls, the interest rate will increase or decrease. It is set twice a year for a six-month period, and right now, any I bonds issued between May and October 2022 earns interest at 9.62% annually.
Although these are 30-year bonds, owners can redeem them after twelve months. There is a $10,000 purchase limit per person per year and they must be purchased direct from the Treasury Department. Additionally, if you earned a federal income tax refund, you can elect to use it to purchase up to $5,000 of paper I bonds. Lane Hipple cannot purchase I bonds for you, therefore, if you feel this is ideal, then you must purchase the bonds yourself from the Treasury.
To purchase or learn more, please go here https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm
You may have heard the strategy, “buy the dip”, but do you know how to “convert the dip”? That is a maneuver some financial planners are educating their clients on to maximize tax benefits. A Roth IRA conversion involves the transfer of assets from a traditional, SEP, or SIMPLE IRA, or from a defined contribution plan like a 401(k), into a Roth IRA. To convert, the account owner pays a one-time income tax on the amount transferred and the account becomes eligible to make tax-free withdrawals in the future. As a result, the Roth IRA is now growing tax-free. The following article from InvestmentNews.com, written by Jeff Benjamin, explains why now may be the right time to convert.