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How Gen Xers Can Get Their Retirement Saving Back on Track

Steps that may help to address a savings shortfall.  

 

Provided by MidAmerica Financial Resources

  

Were you born within the years 1965-1980? That makes you a member of Generation X, and it means you are between ages 35-50. Gen Xers now constitute “the sandwich generation” – how time flies.1

  

Broadly speaking, GenX is the first generation that has had to save for retirement without traditional pension plans. In addition, most Gen Xers will probably retire after 2033 – the year in which Social Security predicts its trust funds will run dry, barring federal government intervention.1

 

With eldercare responsibilities, kids, and student loans, this demographic is challenged to save for retirement. In fact, 34% of Gen Xers participating in a recent Northwestern Mutual survey stated they had no idea how much retirement income would be sufficient for them. In April, Bankrate found that just 12% of Gen Xers direct more than 15% of their incomes into savings; about 40% were saving 5% or less of their incomes. More disturbingly, 46% of Gen Xers who responded to a May Allianz Life retirement preparedness survey indicated that they would “just figure it out when I get there.”1,2

    

What steps can Gen Xers take to keep up or catch up for retirement? First of all, meet with a financial professional to talk about your savings effort so far. That kind of conversation should help to illuminate just how far you have to go in terms of attaining a comfortable retirement. Maybe the distance toward that goal is shorter than you think; maybe it is longer. It must not be casually guessed.  

    

Here are some other steps toward greater retirement savings...

   

Max out your retirement plan contributions. If you are already doing this, great. Many Gen Xers are not doing this. Perhaps the contribution is thought of as a lump sum that is hard to part with every year, rather than a series of incremental salary deferrals. Arrange monthly or per-paycheck contributions, and things look more manageable within the household budget. Some employer-sponsored retirement plans offer employees the option of automatically increasing their contributions with time, which helps.3

   

If you own a business or work as a solopreneur, consider SIMPLE plans, SEP-IRAs, or Solo(k)s. As these plans allow employee and employer contributions, business owners have used them to dramatically increase their retirement savings. In 2016, the maximum employee deferral for a SIMPLE plan is $12,500 with a $3,000 catch-up contribution allowed. As much as $53,000 can be contributed to a Solo(k) annually.4,5

 

Vow to make those additional $1,000 catch-up contributions when you turn 50. They should not be scoffed at. Every dollar counts, and the extra $1,000 you pour into your workplace retirement plan or IRA means greater yearly contributions that can foster greater yearly compounding.

 

Attack debts. The money you save has to come from somewhere else in your life, and if you cannot immediately find some additional dollars to save, debt is likely the reason. There are many debts you cannot eliminate within a year, but there are other debts you can. Attacking the smallest first still frees up some money per month and means fewer per-debt interest charges in your financial life. Put an extra $30 a week into a retirement account, and you put $1,560 more into your retirement savings per year.

 

A debt-free retirement ought to be one of your financial objectives. Perhaps you will become debt-free by age 65, perhaps you not – but that goal is certainly worth striving to realize.

 

Revise your monthly budget. Take a second look and see how many needs there are, then how many wants you are accommodating. Recognize the little things: if you spend $6 a day on coffee, that money ($180/month) has effectively become one of your “fixed” monthly expenses.

 

Tell your kids they will have to pay for their college education. Refrain from providing “college aid” out of the Bank of Mom & Dad. Helping your kids with their college costs (or tacitly agreeing to help them with their college loans) is a path toward retirement insecurity. There is no “retiree financial aid” and you may still have outstanding education debt of your own to tackle.      

 

As a Gen Xer, you have a real challenge to save adequately for retirement, but you also have some time on your side. Make the most of it. You definitely do not want the task of figuring it out “when you get there.”

 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com.

www.mid-america.us

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

    

Citations.

1 - usatoday.com/story/money/2015/06/06/generation-x-retirement/28571965/ [6/6/15]

2 - nextavenue.org/gen-x-sleeping-through-their-retirement-wake-up-call/ [8/27/15]

3 - usatoday.com/story/money/personalfinance/2015/10/10/gen-x-retirement-saving-investing-generationx-401k/73227036/ [10/10/15]

4 - shrm.org/hrdisciplines/benefits/articles/pages/2016-irs-401k-contribution-limits.aspx [10/22/15]

5 - irs.gov/Retirement-Plans/One-Participant-401%28k%29-Plans [10/26/15]

 


Comprehensive Financial Planning: What It Is, Why It Matters

Your approach to building wealth should be built around your goals & values.

 

Provided by MidAmerica Financial Resources

 

Just what is “comprehensive financial planning?” As you invest and save for retirement, you will no doubt hear or read about it – but what does that phrase really mean? Just what does comprehensive financial planning entail, and why do knowledgeable investors request this kind of approach?

 

While the phrase may seem ambiguous to some, it can be simply defined.

     

Comprehensive financial planning is about building wealth through a process, not a product.

Financial products are everywhere, and simply putting money into an investment is not a gateway to getting rich, nor a solution to your financial issues.

 

Comprehensive financial planning is holistic. It is about more than “money”. A comprehensive financial plan is not only built around your goals, but also around your core values. What matters most to you in life? How does your wealth relate to that? What should your wealth help you accomplish? What could it accomplish for others?

   

Comprehensive financial planning considers the entirety of your financial life. Your assets, your liabilities, your taxes, your income, your business – these aspects of your financial life are never isolated from each other. Occasionally or frequently, they interrelate. Comprehensive financial planning recognizes this interrelation and takes a systematic, integrated approach toward improving your financial situation.

 

Comprehensive financial planning is long-range. It presents a strategy for the accumulation, maintenance and eventual distribution of your wealth, in a written plan to be implemented and fine-tuned over time.

  

What makes this kind of planning so necessary? If you aim to build and preserve wealth, you must play “defense” as well as “offense.” Too many people see building wealth only in terms of investing – you invest, you “make money,” and that is how you become rich.

 

That is only a small part of the story. The rich carefully plan to minimize their taxes and debts, and adjust their wealth accumulation and wealth preservation tactics in accordance with their personal risk tolerance and changing market climates.

   

Basing decisions on a plan prevents destructive behaviors when markets turn unstable. Impulsive decision-making is what leads many investors to buy high and sell low. Buying and selling in reaction to short-term volatility is a day trading mentality. On the whole, investors lose ground by buying and selling too actively. The Boston-based investment research firm Dalbar found that from 1994-2013, the average retail investor earned 5% a year compared to the 9% average return for U.S. equities – and chasing the return would be a major reason for that difference.* A comprehensive financial plan – and its long-range vision – helps to discourage this sort of behavior. At the same time, the plan – and the financial professional(s) who helped create it – can encourage the investor to stay the course.1

   

A comprehensive financial plan is a collaboration & results in an ongoing relationship. Since the plan is goal-based and values-rooted, both the investor and the financial professional involved have spent considerable time on its articulation. There are shared responsibilities between them. Trust strengthens as they live up to and follow through on those responsibilities. That continuing engagement promotes commitment and a view of success.

   

Think of a comprehensive financial plan as your compass. Accordingly, the financial professional who works with you to craft and refine the plan can serve as your navigator on the journey toward your goals.

 

The plan provides not only direction, but also an integrated strategy to try and better your overall financial life over time. As the years go by, this approach may do more than “make money” for you – it may help you to build and retain lifelong wealth.

                 

MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com.

www.mid-america.us

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. No investment strategy can ensure a profit or prevention of loss in times of declining value.

*Keep in mind that the investor returns reflect investment selection, as well as sales charges, fees, expenses, and transaction costs, whereas the S&P 500 Index returns do not. This study utilizes data from the Investment Company Institute and Standard & Poor’s to compare investor behavior with the returns of the overall equity market. The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds. Investor returns are determined using the change in total equity fund assets after excluding sales, redemptions and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs. The S&P 500 Index is an unmanaged index of large-cap U.S. stocks that is considered to be representative of the U.S. equity market.

 

    

Citations.

1 - fool.com/investing/general/2015/03/22/3-common-mistakes-that-cost-investors-dearly.aspx [3/22/15]





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