Tips

As younger workers enter the workforce and the baby boomers make their exit, the importance of savings has reached a new generation. A common rule of thumb for those just entering the workforce is to contribute approximately 15 percent of their income to their retirement. Unfortunately, this percentage is often not met by many, especially for fresh college graduates paying down student loans.

Compounding returns can be a powerful force, but you have to start saving early and often to truly take advantage of it. For every 10 years you delay funding your retirement, it’s possible you will have to roughly double the amount you save. It’s important to make sure you’re saving enough to reach your goals.

Colorado Saving Rates

The Bureau of Economic Analysis rated Colorado at 106.41 on the Nest Egg Index, indicating that Coloradans are more capable of saving money for retirement than Americans are as a whole. However, it does not necessarily mean that they’re saving enough.

As of November 2018, the national average savings rate is 6 percent of household income. This is significantly lower than the recommended 15 percent recommended by financial planners, but the rate is still trending up since its low point of just over 2 percent in 2005.

The age old question: when can I retire? As financial planners, we are often faced with the question: can I retire early? Retirement in your 50’s or early 60’s is a possibility, but there are some additional items to plan for if you are thinking about leaving the work force early. Here are a few considerations to be aware of if early retirement is in your future.

Health Insurance Costs:

Don’t take your employer-provided health care plans for granted. Typically, the biggest expense that individuals in early retirement face is health insurance premiums. While waiting to qualify for Medicare at age 65, you have a few different options. Once you leave the workforce, you have the option to sign up for COBRA benefits which provides continuing coverage of group health benefits for up to 18 months following separation of service. COBRA usually requires the former employee to pay the full premium for health coverage up to 102% of the employer plan cost. While COBRA coverage is more expensive than coverage for active employees, it can still be cheaper than insurance available through the private insurance marketplace. Getting quotes from the private insurance marketplace and under the Affordable Care Act can help you plan for healthcare expenses.

Whether you’ve been on top of your finances from the beginning or you’re just now getting around to a full financial checkup, your 60s are an important time to carefully consider your financial health. Are you financially prepared for retirement? Have you created a list of potential expenses now that you’re nearing your retirement years? As you approach your 60s, make sure to add these items to your financial checklist.

Keep Paying Into Your Retirement Accounts

Ideally, you want to keep funding your retirement accounts until you are ready to retire. Qualified retirement accounts may be tax-deferred, which means that you’ll pay taxes on withdrawals. Does your employer offer matching contributions? If you don’t take full advantage of the match, you’re turning away free money. In your 50s, you’re also eligible for catch-up contributions, which can help increase your available funds in retirement.

Evaluate Your Retirement Asset Mix

Take a look at how you’ve positioned your retirement accounts. Do you have a good mix of pre- and post-tax accounts? Roth IRAs have no required annual minimum withdrawals after 70 ½ and can give you more flexibility in retirement. Depending on your current tax bracket and income level, you may want to adjust how you make your contributions, or convert some old IRA’s. As retirement nears, you should revisit your current investment allocation. While bonds generally see less growth than stocks over the long-run, they offer some stability as you start to rely more, or even entirely, on your savings.

Title Your Accounts

If something happens to you, what happens to your money? Adding a beneficiary can clear up any potential confusion. With this strategy, you can make it easier to pass your funds to heirs in the event of your death. Keep in mind, that beneficiary designations will override your will. Review them about once per year or after any major life changes like marriage, divorce, or the birth of a grandchild to make sure your money is going where you want it to.

Solidify Your Retirement Plans

What does life in retirement look like to you? Are you going to be downsizing into a smaller home or will you finally be able to move into the dream home that you’ve been thinking about for years? Will you be staying in your current city or moving to a new one, perhaps to get away from the cold or to be closer to your family?

There’s not a single person who doesn’t appreciate receiving a large sum of money, whether it is a bonus from work or a refund of taxes that have been over-paid throughout the year. However, it’s easy to have spent this large sum of money before it’s in your pocket. Most of us have felt the disappointment of not receiving expected funds. In the event you haven’t already spent the money, what do you do with it once it does actually hit your bank account?

We suggest giving yourself permission to spend a small amount, possibly 10%, on something fun or frivolous. Maybe that’s a ski pass, a vacation, new technology, or a wardrobe boost. We suggest putting the rest toward a goal that will help advance your financial picture. The first priority is likely paying down credit card debt. After this is paid off, then consider paying down a car loan, student loan, home equity line of credit, or mortgage.

Another consideration is boosting savings. Once you have 3-6 months of emergency savings in the bank, you could fund retirement with a Roth IRA contribution. If you are on track for your retirement goals, you could fund a brokerage account for mid-term goals such as buying a house or vacation home, or an HSA for future health care expenses. If you are receiving a bonus, check with your HR team to see if you can invest the funds in your company 401(k) plan to defer the taxes.

A couple secondary options to consider include:

• Funding an account for health insurance premiums if you are planning to retire before Medicare age 65.
• Investing in a home renovation to boost the value of your home for a future home resale.
• You could also consider investing in residential or commercial rental real estate.
• Pursue further education or a designation that will help you advance your career.
• Your favorite charity or non-profit would be more than happy to receive a donation.
• Consider an impact investing opportunity.

Most people understand the concept of insurance. People pay a premium to an insurance company for the protection against a potentially catastrophic financial loss. Insurance companies are able to make money by pooling policyholders’ risks and charging a premium based on actuarial estimates.

The most common types of insurance policies are life insurance, disability insurance, and homeowners and auto insurance. But what happens when you want to insure something outside of the norm, say a personal item such as a laptop or expensive piece of jewelry? More and more, technology is starting to act as a disruptive force in the insurance industry that makes obtaining custom insurance more efficient for consumers.

There is a host of startup insurance firms that now allow you to quickly and easily insure single items, for varying periods of time. According to KPMG, this budding industry, nicknamed “Insurtech”, gathered over $1.7 billion from Venture Capital firms in 2016. One of the most popular companies, called Trov, is entirely app based. It got its start in Australia and the U.K., and recently made its way to the States. It can be very convenient if you want to insure an item for a specific period of time. For example, if you are going on a cross-country road trip with the family and you were worried about losing or damaging an expensive camera, all you’d have to do is send a picture of the camera to the app, tell them how long you want it insured, and you will receive a quote instantly.

Another on-demand insurance company is called Sure. It’s very similar to Trov, but you can also purchase baggage protection when traveling, rental car insurance, and insurance on your pet. As these on-demand and custom insurance companies start to mature, it will be interesting to see what other technological advancements will develop that will aim to make our lives easier as consumers.

This year, Federal open enrollment runs from Monday, November 12, 2018 – Monday, December 10, 2018 and it may be a good time for individuals and families to review and make changes to their health insurance coverage. Even if you have been covered under an employer-sponsored plan for many years and are not planning to make any changes, this year it might be time to consider opening a health savings account, also known as an HSA. To be eligible for an HSA you cannot be enrolled in Medicare and must have a high deductible health plan. For 2018 that means you have a deductible of at least $1,350 for individuals and $2,700 for families where the maximum out of pocket cannot exceed $6,650 for single coverage and $13,300 for family coverage.

HSAs are triple tax advantaged accounts offered through employers and some banks and financial institutions as a way for individuals and families to save for health care expenses as they would save for their retirement. Contributions made to the account are tax deductible regardless of income level. If you invest the funds, any growth is tax deferred and distributions are tax-free when withdrawn for qualified health expenses. Unlike a Flexible Spending Account, you do not have to use the funds you contribute by the end of each year. The balance rolls over year by year and if you are able to cover your current medical expenses through cash flow, the funds can be maintained in the account for future needs.

The IRS adjusts contribution limits to an HSA each year and for 2018 they are set to $3,450 for individuals and $6,900 for families, with a $1,000 catch up contribution if you are 55 or older during the year. While you cannot use HSA funds to pay your health insurance premiums, you can use the funds to pay Medicare premiums once enrolled. If funds are withdrawn for non-medical expenses, there is a 20% penalty until age 65. After age 65, funds can be used for any expense but are subject to taxes if not medically related.

When a loved one passes away, there are so many things to do in the midst of grief. The last thing on a grieving mind is the risk of identity theft of the person who has recently passed away. Sadly, hackers have reached a new low by taking advantage of such a sorrowful time.

Identity theft hackers have been using information from hospitals and obituaries to steal a deceased person’s identity and file a fraudulent tax return. According to an AARP article, “With a name, address and birth date in hand, they can illicitly purchase the person’s Social Security number on the Internet for as little as $10.”

The term for this ugly practice is commonly referred to as “ghosting” because it can take six months for financial institutions, credit-reporting bureaus, and the Social Security Administration to register death records. This gives the “ghosting” hackers plenty of time to cause a lot of damage. Thankfully, the surviving family members are not necessarily responsible for the financial destruction.

To make it even worse, an article from ABC News warns of a “disturbing pattern of identity theft of financial information belonging to people who were dying. It’s easy to see how that could happen, since people who are gravely ill can easily lose track of the details of their finances.” Therefore, it is always important to help protect the identity of a loved one, especially one who is ill as well as the recently deceased.

For many people, their 40s and 50s are still a period of financial transition. Some people are opening their own businesses while others are considering retirement. No matter where you are at this point in your life, it is likely that you still have some financial goals to work toward. These tips may help you work towards a brighter and more financially secure future.

Pay into Retirement

If you have an employer sponsored 401(k) plan, we suggest creating a goal to contribute the maximum amount allowed based on the IRS limits ($18,500 in 2018). Alternatively, if you own a business and don’t have a 401(k) through an employer, you can may be able to set up your own retirement plan to contribute with tax-deferred funds.

While you are adding money to your savings regularly, also make sure to project your savings, ensuring you are on the right track. If you feel like you’re off track and you’re over the age of 50, you can contribute an additional $1,000 to your IRA and $6,000 to your 401(k) to help catch up.

Monitor Stocks and Bonds

It is important to keep your stock/bond allocation near it target design and may require periodic rebalancing of the account. This is something you should discuss with your Financial Advisor.

Becoming financially savvy can take decades. Each stage of life poses different challenges, some of which can make smart financial choices seemingly impossible. While it’s inevitable that there will be financial slip-ups throughout your life, following these tips in your 20s and 30s can help build a solid foundation for healthy finances.

Create a Monthly Budget

It is very difficult to save responsibly if you don’t first learn how to spend responsibly. Establish a budget, even a simple one, so you can track where your money is going. Remember: no budget is set in stone. You can always revisit your budget in a few weeks, months, or years to reassess your income and needs.

One popular and simple technique for budgeting is the 50/30/20 method. First, use 50 percent of your after-tax income on necessities like rent, groceries, insurances, and auto payments. Next, 30 percent of your income goes to your wants like shopping, travel, and entertainment. The remaining 20 percent of income goes right into savings.

Avoid Credit Card Debt

Credit cards can be a powerful tool, but to avoid losing money on interest payments, you need to pay off your balance in full each month. Spending only as much as you can pay off by the end of the month limits your credit card spending and can prevent you from falling into a pit of debt.

If you are already in debt, set up a repayment plan now and no matter what, avoid paying your credit card bills late. Playing catch-up puts a heavy strain your budget.

Filial Laws impose responsibility on a third party to cover support for poverty-stricken parents and relatives. The concept is derived from a term called filial piety, which is a key virtue in Chinese culture. This virtue essentially stands for respecting and taking care of elders. In more modern context, these laws allow the states to go after the assets of adult children if their parents were on government assistance. This issue often comes up if there has not been proper planning for long-term care needs.

With baby boomers growing older and living longer, almost 70% of people will need some sort of long-term care in their lifetime. Many people do not have the ability to purchase long-term care insurance, so they rely on their own assets to pay for care until they can qualify for Medicaid.

One of the most recent examples of these laws being enforced happened in Pennsylvania in 2012. In the case of Health Care & Retirement Corporation of America v. Pittas, the court ruled that a son was financially responsible for his mother’s nursing home costs during the 6 months that she spent in the facility. The total debt that the defendant had to pay was $93,000.