Naperville Retirement Planning Can Make Your Golden Years Your Greatest Years

Retirement may seem like a very far-off prospect, but rest assured that it will come sooner than you think. It is never too early to start planning for your future and, in fact, the sooner you can start planning, the better. Planning on your own, however, isn’t the best way to get results. There are Naperville retirement planning firms that make it their life’s work to ensure you live comfortably in your old age and get the rewards you deserve for all of your hard work. By entrusting your finances to them and seeking advice on how to plan for retirement, you can have the golden years you’ve dreamed of.

Naperville retirement planning services such as those offered by Platinum Financial Associates Inc., can show you smart, doable ways to start saving now. If you’re not making the most of your finances, saving can be difficult. Even if you are able to save regularly, you might not have your savings in the best account—one that’s going to draw interest for you and earn you money. When you work with professionals, you’ll be able to save more money towards your retirement and to make sure that money is in the best possible place.

You also have to keep in mind that everyone’s retirement needs are different, and it takes skilled experts to determine yours and to tailor your retirement plans to meet those needs. Don’t go it alone; get the help and guidance you deserve.

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Money Management in 15 Minutes or Less

Get your financial life in order by squeezing in a quarter of an hour for these easy but effective moves.

Stephanie AuWerter; Real Simple and Money editors

With longer workdays complicating the already Herculean task of juggling job and family, you probably don't have a minute to spare. And financial tasks all too often fall to the bottom of the to-do list. According to government time-use studies, the average American rarely gets to money-management chores; those who do will spend a scant 15 minutes a day on them.

Failure to make time for your finances, however, can be detrimental to your future. Fortunately, you don't need more than a coffee break to make some smart moves with your money—moves that can cut your expenses, potentially boost your savings and help protect your family's finances. "The key to meeting long-term goals is to break them into short-term steps that are easier to accomplish," says Carnegie Mellon economist George Loewenstein. Even if you have less than an hour to spare, these small steps may result in a big payoff.

Get on Track for Retirement

Believe it or not, you can devise a smart investing plan for retirement in just 15 minutes. And the potential reward is huge: A 2011 report from banking giant HSBC found that people who have even a rudimentary plan for reaching retirement goals are ending up with up to three times as much money as those without one.

The information contained herein represents the opinions of a third party and does not necessarily represent the opinions of Platinum Financial or Susan S. Lewis Ltd. and are unaffiliated with any of the entities referenced above.

Step 1. Figure out your monthly contribution target by taking five minutes to input basic info, like your projected retirement age and current contribution rate, into an online income calculator. 

Step 2. Coming up short? Use the remaining 10 minutes to pump up your 401(k) contributions on your plan's Website. If you can't invest as much as the calculator recommends, commit to automatically increasing the amount you're contributing at the time of your raise—a feature many large employers offer.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Know the Score

The 2011 National Foundation for Credit Counseling reports that only four in 10 Americans know their credit score. A good reason to be among them: This number determines what interest rate you'll get on loans and credit cards. 

How to check. Pony up $20 to get your score at MyFICO.com. The FICO scoring model, the one most commonly used by lenders, ranges from 300 to 850. A score of 740 or higher entitles you to the best rates; if yours is lower, there are a few steps you can take to quickly boost your number. 

Start by getting a free credit report from each of the three agencies that track consumer credit at AnnualCreditReport.com. Read the reports carefully, looking for mistakes. Any errors—about one in five has them, according to a May 2011 estimate from the Policy & Economic Research Council—could be costing you points. Report any problems to each of the bureaus and the lender (there's a form at each Website). 

Next, call your card issuer to ask for an increase in your credit limit, because how much you tap of your available credit is a key factor in determining your score. The more unused credit you have, the better you look—ideally, you should use no more than 10% of what's available to you. 

Target Your Savings

Want to save money for a rainy day or a sunny vacation week but never have enough leftover cash to stash for these goals? Have the money taken directly from your paycheck, so you'll never miss it. Only about 20% of workers split their paycheck among multiple accounts, though many employees with access to direct deposit can do so, reports electronic-payments industry group NACHA. In 2010 the association found that those who take advantage save $90 more a month than those who don't. 

How to do it. If you don't have dedicated savings accounts for each of your goals, set them up. Opening accounts online takes 10 minutes tops. Next, contact your payroll department to see if you can split your paycheck; if so, figure on filling out a form, adding another five minutes. Not an option? Set up automatic transfers from your checking account so that the money is moved on payday.

Download a Shopping Buddy

Coupons can reduce the bite groceries and other household goods take out of your budget—25% of take-home pay for the average family—but you can't spend hours perusing the Sunday circulars. Fortunately, there are apps for that. Download these:  Coupon Sherpa. Delivers coupons to your phone for in-store scanning (free for iPhone and Android). ·         CardStar. Stores your merchant loyalty cards on your phone so you won't miss out on points or discounts (free for iPhone, Android, BlackBerry, Windows Phone).

Adapted from the December 2011 issue of Real Simple. © 2011 Time Inc. All rights reserved.

For more Naperville retirement planning information, contact us today!

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Social Security Statements Now Available Online

Seal of the United States Social Security Administration. It appears on Social Security cards. (Photo credit: Wikipedia)

An important part of planning for retirement is knowing how much you can expect from Social Security. Once you know that, you can determine the amount you'll need to provide through personal investments and other sources to make up the difference between your Social Security payments and your anticipated income needs.

Now, you can access information about your estimated Social Security benefits more easily than ever. As of May 1, 2012, workers age 18 and older can view their personalized statements electronically through the Social Security Administration's website at www.ssa.gov.

The online statement provides a complete earnings history; the total Social Security and Medicare taxes you paid during your working career; and estimates of your retirement benefits at age 62, your full retirement age, and age 70, as well as estimates of your disability and survivor benefits.

This is the same information that had been included in the paper statements that were previously mailed once a year to all workers age 25 and older. The Social Security Administration suspended these mailings in April 2011 to save money. The online data will be updated annually, so it might be a good idea to get in the habit of checking your statement each year.

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Costs of Caregiving

More than 65 million Americans — about one out of three adults — provide care for someone who is ill, disabled, or aged.¹Although these caregivers are unpaid, the total value of their efforts is estimated at $450 billion annually — more than the value of paid home health care and more than the 2010 retail sales of Wal-Mart, the world’s largest retailer.^2–3

Not surprisingly, about two-thirds of all caregivers help someone who is age 50 or older, typically a parent, a spouse, or a friend.⁴ Most people volunteer out of love and a sense of duty, but the high expense of professional care is an important factor. The average annual cost of nursing-home care exceeds $77,000.⁵

Unpaid informal caregiving, although free, could still have a significant financial impact. Seven out of 10 working caregivers reported having job difficulties, from changing their schedules or turning down a promotion to taking unpaid leave or giving up work entirely.⁶ For caregivers who live nearby or with the person receiving care, average out-of-pocket costs range from $4,570 to $5,885 annually. For long-distance caregivers, who often have substantial travel and lodging expenses, the average annual cost is $8,728.⁷

Of course, the financial burden is only one aspect of the cost of caregiving. Studies show that many caregivers also suffer physical and emotional effects, especially back problems and depression.⁸ The old expression, “Physician heal thyself,” may be appropriate. When you provide care for someone else, it’s important to take care of yourself (see chart).

As with many aspects of life, financial resources can make a significant difference. Only 3% of caregivers with six-figure incomes report suffering fair or poor health themselves, compared with one-third of those who have household incomes under $30,000.⁹

If you haven’t factored the cost of long-term care into your retirement needs, it may be wise to give it serious consideration. If you are caring for a loved one — or receiving care — a sound financial strategy could help alleviate some of the stress. We are available to discuss your situation and help you consider your options.

1–2, 4, 6–9) Family Caregiver Alliance, 2011
3) Deloitte Global Services, 2012
5) 2012 Field Guide, National Underwriter

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent Naperville Retirement Planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

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Pick Up This Split for Long-Term Retirement Income

The number of Americans aged 90 or older almost tripled from 1980 through 2010 and is projected to quadruple by 2050.¹ Of course, reaching 90 is still an unusual accomplishment, but the average 65-year-old can expect to live another 19 years.²

A portfolio that provides steady income for both the short and the long term could help you enjoy a long, comfortable retirement. You might consider a split-annuity strategy to meet your needs.

A Contract for the Future

An annuity is a contract with an insurance company in which you agree to make one or more payments in exchange for a current or future income stream. Animmediate annuity typically begins to pay an income to the contract holder immediately, whereas a deferred annuity begins paying an income at a specified time in the future.

In the hypothetical illustration below, an individual purchases a $300,000 immediate fixed annuity, which offers a guaranteed annual interest rate of 3%, and a $200,000 deferred variable annuity, which carries more risk but pursues growth through investment options (subaccounts).

The immediate fixed annuity provides an annual income of $35,000 for 10 years. Meanwhile, the variable annuity accumulates tax deferred. Assuming the variable annuity subaccounts grow at a 6% average annual rate, the annuity value could reach $379,660 after 10 years, when the fixed annuity is exhausted. If the subaccounts keep growing at the same 6% rate, the investor could continue taking $35,000 annual withdrawals for another 16 years (see graph).

Withdrawals of annuity earnings are taxed as ordinary income and may be subject to a 10% federal income tax penalty if made prior to age 59 ½. Withdrawals reduce annuity contract benefits and values. Most annuities have surrender charges that are assessed during the early years of the contract if the annuity is surrendered.

Generally, annuities have contract limitations, fees, and charges, which can include mortality and expense charges, account fees, investment management fees, administrative fees, and charges for optional benefits. Any guarantees are contingent on the claims-paying ability of the issuing company. Annuities are not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association.

The investment return and principal value of the variable annuity investment options are not guaranteed. Variable annuity subaccounts fluctuate with changes in market conditions. The principal may be worth more or less than the original amount invested when the annuity is surrendered.

Variable annuities are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the variable annuity contract and the underlying investment options, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

1) U.S. Census Bureau, 2011
2) National Vital Statistics Reports, Volume 59, Number 4, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent Naperville Retirement Planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

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There’s Still Time to Catch Up

It’s not surprising that worker confidence in affording a comfortable retirement fell to a record low in 2011, considering stock market volatility and the sluggish economy. Workers aged 45 to 54 expressed even less confidence than the general population.¹ Could it be that they might feel there is less time to save more, or that they may need to recover from losses?

If you’re age 50 or older, you can make up for lost time not only by maximizing contributions to retirement plans but also by taking advantage of catch-up contribution limits.

In 2011 and 2012, the IRA contribution limit remains at $5,000 for regular contributions and $1,000 for catch-up contributions. Although an extra $1,000 might not seem like much, it could make a significant difference by the time you’re ready to retire (see chart). You have until the April tax filing deadline to make IRA contributions for the previous year. So there still may be time to make a 2011 contribution, and you have until the April 2013 filing deadline to make contributions for 2012.

The maximum contribution limit for many employer-sponsored retirement plans — including 401(k)s, 403(b)s, and 457s — increased to $17,000 in 2012, up from $16,500. However, the $5,500 catch-up limit remains the same. Be mindful that some employer-sponsored plans may have maximum limits that are lower than the federal contribution limit. If you are eligible and financially able to take advantage of the $22,500 annual limit, you could do so by deferring $1,875 from your paycheck each month.

Contributions to a traditional IRA are generally tax deductible (income limits apply to active participants in employer-sponsored retirement plans), and any earnings accumulate tax deferred. Distributions from traditional IRAs and most tax-deferred retirement plans are taxed as ordinary income and may be subject to a 10% federal income tax penalty if taken prior to reaching age 59½. Withdrawals from tax-deferred plans must begin no later than April 1 of the year after the year in which the account holder reaches age 70½ (with certain exceptions).

If you are concerned about your ability to fund a comfortable retirement, making maximum regular and catch-up contributions may help you get back on track to pursue your long-term goals.

1) Employee Benefit Research Institute, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent Naperville retirement planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

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Rethinking the Role of Household Debt

Many people aspire to pay off their home mortgages before entering retirement. But shedding debt has become more difficult in recent years, partly as a result of weak economic conditions and the housing crisis. In 2010, 39% of households headed by someone aged 60 to 64 had first mortgages, compared with just 22% in 1994.¹

After more than a decade of free spending and rapidly rising household debt, Americans began taking steps to reduce their debt burdens. By the second quarter of 2011, consumer debt had fallen about 15% from the 2007 peak of $11.4 trillion, but was still close to double the amount owed in 1999 (when adjusted for inflation and population).²

Of course, there are some compelling reasons why pre-retirees may want to avoid carrying large amounts of debt and become less dependent on home equity. As retirement looms and opportunities to reduce debt and increase savings become more limited, these issues may become much more critical.

Dealing with Debt and Dwindling Equity

In the past when retirees owned their homes free and clear, they could often count on them to provide additional financial resources during retirement. For those who wished to stay in their homes during retirement, housing expenses could be significantly reduced once a mortgage was paid off.
Others might opt to downsize to a smaller home or move to a lower-cost area, using the extra money from a home sale to supplement their retirement incomes. However, this might not be an option for those who are unable to sell during a weak housing market or are unwilling to sell for a low price. Because of falling home values, some homeowners may have less equity and might even have to take a significant loss if they sell their homes.
This is not just a problem affecting middle-income homeowners. Affluent homeowners have also been affected by rising debt levels and reduced home equity. Nationwide, high-end homes lost 38% of their value after the marked peaked in 2006, and lower-end homes fell even more.³

Refocusing on Saving

When times are tough, it’s not uncommon for investors to reduce or discontinue making retirement plan contributions in order to meet their obligations. Pre-retirees who are able to reduce or eliminate debt can direct their efforts toward saving and investing more for the future.

In the years preceding retirement, many workers are in their peak earning years, which makes this a particularly critical time to save as much as possible for retirement. Workers aged 50 and older not only may be able to maximize their retirement plan contributions but also could take advantage of catch-up provisions that enable them to contribute even more.

The most recent housing downturn has drawn attention to the potential risks created by carrying too much debt into retirement. Money dedicated to service debt is no longer available to spend or save. This simple fact could have larger implications not only for the economy as a whole but possibly for your own financial future.

1–2) The Wall Street Journal, September 7, 2011
3) USA Today, June 6, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional Naperville Retirement Planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

For Better, For Worse: Communicating About Retirement

A recent survey suggests that many couples are not communicating clearly about retirement goals and strategies, even as they approach retirement age. The couples surveyed were at least 46 years old with a minimum annual household income of $75,000 or at least $100,000 in investable assets.1
Only 41% said they handle decisions on retirement savings and investments together, and 73% disagreed on whether they had a detailed strategy for retirement income. Many couples also disagreed on when they would retire and whether they would continue to work in retirement.2

In general, wives expressed less confidence than husbands about handling retirement-related financial decisions. This trend is of special concern considering that women often have longer life expectancies than men and may eventually have to make financial decisions on their own.3

Talk It Over
Recognizing and working through these kinds of issues could help prevent unpleasant outcomes. Even if you and your spouse communicate well about retirement, it may be helpful to discuss these basic topics:

When each of you plans to retire.
Where you would like to live. What kind of lifestyle you envision.
Whether either or both of you plan to continue with some type of work.
How much income you expect when you retire, your expected sources of income, and your confidence in the amounts they could provide.
How well you both understand your investments. Whether you both know where official documents are located and have all necessary account information.
Preparing for retirement can be a major challenge. Making sure you and your other half are in agreement and working toward common goals may help you avoid wasted effort and lost opportunities.

1–3) financial-planning.com, June 29, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional Naperville Retirement Planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

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Leaving Your Home Out of the Retirement Equation

Plummeting prices and increased borrowing cut U.S. home equity by more than 60% during the Great Recession. Although the recession officially ended in June 2009, home prices have not recovered (see chart).1–2
In this type of market, it’s not surprising that many homeowners who borrowed against their home equity have found themselves owing more than their homes are worth. Homeowners with a second mortgage are more than twice as likely to be “underwater” than are homeowners with only a first mortgage.3

The good news is that housing values typically recover from downturns. But no matter which way the market heads, it’s probably not a good idea to count on the value of your home to help fund your retirement.

Potential Risks of Downsizing
Although moving to a less expensive home could be appropriate for some people, the falling market of the last few years demonstrates that you may not always be able to sell your current home at the price you expect. Transaction fees and moving expenses could also leave you with substantially less cash than you were anticipating.


It might be more realistic to view downsizing or moving to a different area as a personal choice rather than a way to pay for retirement. If you place too much emphasis on your home equity in your retirement strategy, it could lead you to underestimate how much you may need to save for a comfortable retirement.

Shifting into Reverse
A reverse mortgage may allow homeowners age 62 and older to borrow against the value of their homes. They don’t have to pay back the loans during their lifetimes for as long as they continue living in them. This strategy may be appropriate for some retirees, but it also involves substantial fees — and the amount you can borrow is typically much less than the actual value of the home. Because a reverse mortgage loan must be paid back after you stop living in the home for one year or more, it’s likely that either you or your heirs may eventually be forced to sell it, risking exposure to the uncertainties of the housing market.

Your home might have substantial value, but it also provides shelter and may have sentimental value. You may be in a stronger position to make decisions about your home if you leave it out of the retirement equation.

1) Federal Reserve Bank of New York, 2011
2) National Bureau of Economic Research, 2010
3) The Wall Street Journal, June 8, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from A Naperville Retirement Planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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Rising Popularity of Roth IRA as Retirement Vehicle

Roth IRAs are quickly catching up to their older counterpart, the traditional IRA. About 19.5 million U.S. households owned Roth IRAs in 2010, compared with 38.5 million households who owned traditional IRAs. But the Roth IRA has been in existence only since 1998, while the traditional IRA has been around since 1974.1

What’s fueling the growth of this retirement vehicle? Americans may be attracted not only by the tax advantages offered by the Roth IRA, but by the flexibility it may offer.

Consider the Trade-Offs

Taxes. The main difference between a Roth IRA and a traditional IRA is that Roth IRA contributions are made with after-tax dollars, whereas contributions to a traditional IRA may be tax deductible. The difference when you withdraw your money, however, is that qualified distributions from a Roth IRA are free of federal income tax if you’ve satisfied the requirements. By contrast, distributions from a traditional IRA are taxed as ordinary income. (Roth IRA distributions may be subject to state income taxes.)

Eligibility. Anyone under the age of 70½ with earned income is eligible to contribute to a traditional IRA. There are no age limitations associated with a Roth IRA, although you must have earned income in order to contribute.

Income eligibility restrictions are associated with both types of IRAs. Eligibility to contribute to a Roth IRA phases out at higher modified adjusted gross income levels: $107,000 to $122,000 for single filers and $169,000 to $179,000 for married couples filing jointly in 2011. Although there are no income limits to contribute to a traditional IRA, investors who are active participants in employer-sponsored retirement plans cannot deduct their contributions if th

Image by Curious Expeditions via Flickr

eir modified AGIs exceed $66,000 for single filers or $110,000 for joint filers.

Contribution limits. There is a $5,000 annual contribution limit to all IRAs combined in 2011. Investors age 50 and older may make an additional $1,000 catch-up contribution.

RMDs. Traditional IRAs are subject to annual required minimum distributions (RMDs) that must begin after you’ve reached age 70½ (the first distribution must be taken no later than April 1 of the year after you turn 70½). However, no RMD rules apply to Roth IRAs. Thus, if you don’t need the money, you can leave Roth IRA assets to your heirs, who can also benefit from tax-free distributions. Failing to take an RMD may result in a 50% tax penalty on the required amount that was not withdrawn. Beneficiaries of either type of IRA are required to take RMDs (based on their own life expectancies).

Withdrawal considerations. Withdrawals from either type of IRA prior to age 59½ may be subject to a 10% federal income tax penalty. Exceptions to the penalty include the owner’s death, disability, and a qualified first-time home purchase ($10,000 lifetime maximum). Regular Roth IRA contributions (not earnings) can be withdrawn at any time for any reason without any tax liability or penalty. For a tax-free and penalty-free withdrawal of earnings, qualified Roth IRA distributions must meet the five-year holding requirement and take place after age 59½.

If you are looking for a way to help manage your income tax liability in retirement and possibly leave a tax-free legacy to your heirs, you may want to consider a Roth IRA.

Call us today, we are your Naperville Retirement professionals.

1) Investment Company Institute, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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Deciding When to Begin

A presidential commission has recommended increasing the early retirement age for Social Security to 64 and the full retirement age to 69. Fortunately, the plan, if adopted, would be phased in slowly and wouldn’t be fully implemented until 2075.1

Currently, most Americans can choose to start collecting benefits at full retirement age, which ranges from 65 to 67 depending on the year they were born, or to receive a reduced benefit as early as age 62. This is an important decision, so it’s a good idea to consider all the factors involved.

It’s About Monthly Income

If you claim benefits at age 62, the amount you receive each month would be about 70% of your full retirement benefit. Each month you wait to claim benefits after age 62, your monthly benefit increases slightly, so that at full retirement age you would be entitled to 100% of your full retirement benefit. For each month you wait to claim Social Security after full retirement age, your monthly benefit will continue to increase until you reach age 70, when you could be entitled to about 132% of your full benefit.

If you live an average life expectancy, you will collect the same amount in lifetime benefits regardless of whether you begin benefits at age 62, full retirement age, or 70. Benefits are reduced at younger ages because, in theory, you will be collecting them for a longer period of time.

It’s important to consider your current financial situation and health as you decide when to begin collecting benefits. If you expect to keep working while collecting early benefits, a portion of your benefit will be withheld if your annual earnings exceed the earnings limit. No earnings limit applies after you reach full retirement age.

If you are healthy and don’t need the money, it might be a good idea to wait to claim your benefits so you can lock in a higher monthly income. Calculating your breakeven age may help you decide. This is the age at which the total amount you collect by claiming early benefits would equal the amount collected if you waited until full retirement age. If your breakeven age is later than your probable lifespan, you might be better off taking early benefits.

There may be other factors to consider depending on your circumstances. Deciding when to collect benefits is a big decision that should be considered carefully.

1) The New York Times, November 10, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek Naperville Retirement Planning advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.

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Consider Your Retirement Needs, but Don’t Forget Your Retirement Wants

Image via Wikipedia

You might have read or heard that you need to replace about 80% of your pre-retirement income to maintain your standard of living in retirement. Although some research validates this guideline, consider that half of today’s retirees say their spending is higher or about the same as it was when they were working.1–2

The idea that you may need less income in retirement considers that your income tax burden may be lower when you quit working and that you probably are not contributing a large chunk of your salary to retirement plans. Variables that can influence the replacement ratio — positively or negatively — include your living expenses, overall debt level, health-care costs, and whether you will receive an employer-provided pension.

Rather than focusing on how much money you’ll need to get by in retirement, take some time to envision a retirement lifestyle that you can really get excited about. Unless you plan to spend retirement being frugal, there’s a good chance that you could need more than 80% of your pre-retirement income to fund the lifestyle you seek.

More Time, More Money?

Retirement may be the first time in your life when you are free to travel, play golf, go back to school, focus on hobbies, and pursue other interests that you simply didn’t have time for during your working years.

What a disappointment it would be to retire and finally have the time, but not the money, to do as you please. If you would find it difficult to afford your ideal retirement lifestyle on your current income, it could be an indication that you are underestimating how much income you’ll need in retirement.
Changing Needs

As we grow older, what once may have been considered a luxury can become a necessity. In their list of “basic needs,” more than half of baby boomers include an Internet connection, special occasion gifts, and pet care. Many baby boomers would add family vacations, dining out, professional haircuts/coloring, movies, and their children’s or grandchildren’s education to the list of basic needs.3 And for 98% of baby boomers, health-care coverage is not a luxury but a basic need, one that they are extremely concerned about being able to afford.4

Underestimating Costs and Spending

The danger of underestimating how much you expect to spend in retirement is that it could lead you to save too little or invest too conservatively during your working years. Among the 46% of workers who have attempted to calculate how much money they will need for retirement, 44% made changes to their retirement savings strategies as a result, with the majority of changes involving saving or investing more.5

To prepare for a retirement that you can truly look forward to, consider the luxuries that your retirement-needs calculation may not account for. It could mean the difference between living well and just getting by.

1) CNNMoney, October 8, 2009
2, 5) Employee Benefit Research Institute, 2010
3) MarketWatch, August 6, 2010
4) Society for Human Resource Management, 2010

The information in this article is not intended as Naperville tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent Naperville Retirement Planning professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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Protecting What May Be Your Most Valuable Asset

If you are young and healthy, you might think your chances of becoming disabled are fairly slim. And you wouldn’t be alone in your belief: 64% of workers believe they have only a 2% (or less) risk of suffering a disability that could sideline them for three months or longer.1

But statistics tell a different story: 43% of 40-year-olds will suffer at least one long-term disability (90 days or longer) before age 65.2 Despite this risk, 38% of working Americans say they would be able to pay their living expenses for only three months or less if their incomes were interrupted; 65% would not be able to cover expenses for one year. These findings become all the more alarming when you consider that the average long-term disability lasts for two and a half years.3

If you wouldn’t think of going without insurance coverage for your home, health, or car, it doesn’t make much sense not to protect what may be your most valuable asset: your ability to earn an income.

A Policy That Can Protect

An individual disability income insurance policy can help replace a percentage of your salary, up to the policy limits, if you should suffer an illness or injury that makes it impossible for you to continue working. The benefits can continue until you recover or for a predetermined number of years, whichever comes first. If you pay the premiums yourself, the benefits usually are not taxable. Some policies will pay if you can’t perform your current occupation, whereas others will pay only if you cannot perform any type of job.

Many workers have some type of short-term group disability coverage through their employers. Group plans rarely cover as much as the 70% to 80% of income that individual policies typically offer, and the benefits from group plans are taxable to the extent that the employer pays the premiums.
Your Future Could Be at Stake

In the absence of an adequate, long-lasting source of disability income, you could be forced to use your retirement assets to pay living expenses and medical costs. If you have to withdraw assets fr

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om a tax-deferred retirement account, the withdrawals may be subject to a 10% federal income tax penalty if you are younger than 59½ (depending on the severity of the disability), as well as ordinary income taxes. Even worse, tapping your retirement assets could interfere with progress toward your retirement goals, creating the possibility that you might not be able to attain the retirement lifestyle you envisioned.

The appropriate disability income strategy may help reduce the financial consequences if you lose your income because of an illness or injury.

1, 3) Council for Disability Awareness, 2010
2) 2010 Field Guide, National Underwriter

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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Everyone Procrastinates, But Why?

When it comes to procrastination, doing it now may mean having to do it later, too. In 2010, 24% of workers planned to postpone retirement. The poor economy and a change in employment situation were the most common reasons for workers to stay on the job.1

We can’t know whether any of these people postponed their retirement dates because they got a late start on their saving goals.

Everyone knows that procrastination is the enemy, yet not only do we all do it, sometimes we have no choice. Effective time management often requires us to put off one task until another is finished. Rather than wrestle with the inevitability of procrastination, a more useful exercise might be to examine why we procrastinate.

Not Knowing What to Do

Many people correctly assume that they don’t know much about finances, but one of the benefits of working with a Naperville Retirement Planning professional is access to strategies and education. Although there is no assurance that working with a financial professional will improve investment results, a professional who focuses on your overall objectives can help you consider options that could have a substantial effect on your long-term financial situation.

Afraid to Act

Waiting until your fears subside before deciding to act could be the stepping stone to two classic mistakes: basing your investment decisions on emotion and failing to recognize the opportunity cost of waiting. Risk is an inherent aspect of investing, and few people can assume risk without at least some fear. But inaction is also risky because time is one of the key ingredients to financial success. Procrastination can carry a high opportunity cost by decreasing the amount of time that your investments have available for compounding.

Life Happens

The day-to-day demands of having a career, raising a family, and caring for a home often take precedence over investment needs. Most people schedule time to get the oil changed, visit the dentist, and get their hair done. Why not then schedule regular appointments to review investment matters and measure progress toward financial goals?

Squandering time is one mistake that many people may never recover from. If you’ve been meaning to get around to some aspect of preparing for your financial future, now is the best time to get started.

1) Employee Benefit Research Institute, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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YOUR ASSETS AND YOUR RETIREMENT

What do you think of when you hear the term Naperville Asset Management? Many individuals are unclear about what asset management actually is. Asset management is a type of service that involves managing a clients assets to maximize ROI and meet their future financial needs.

An asset manager, also known as a wealth manager, will oversee the acquisition of stocks, mutual funds and other investments on the clients’ behalf. An asset manager will monitor and track these investments and their returns over the life of a client’s portfolio.

Why use an asset manager?
An asset manager is a great option for people who do not have the time, or experience, to manage and monitor their own portfolio.

An asset manager will track stock and mutual fund returns, monitor indexes and suggest actions based on market signals. Using an asset manager is advised if you have a substantial amount of money at stake since the slightest down tick in the market can result in thousands of dollars lost for your portfolio.

If you are looking for asset management services, you need the help of fund managers with asset managing expertise. You need to turn to Naperville asset management.

Asset management is also a critical part of Naperville retirement planning. Due to the state of the social security system, personal retirement planning has been brought to the forefront. Also, as life expectancy has increased, people now have to make a plan that will provide them with enough income to last into their 80’s and 90’s. An accountant or financial planner experienced in Naperville retirement planning can help make the long road ahead just a little easier.

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