Tag Archives: Debt

Financial Perspective: Where can you find the money to build a safe, predictable retirement?

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Dave Stanley
Integrity Financial Service, LLC

“You are likely to be retired much longer than you think. A recent study suggests that 50% of those born now will live beyond 100.”   Dave Stanley

For how long do you think you will live? Do you believe you’ll live into your late 70s? Are you confident you’ll follow in the path of your parents, who were alive and well into their mid to late 80s?

The average joint life expectancy (men and women together) is approximately 88 years for more than 49% of the population. A full 20% of Americans live to age 95!

Depending on your unique perspective, that’s either good news or bad news. It is good because many people want to live for as long as possible, provided they are in decent physical and mental health. However, a long life can be bad news when it puts you at risk of outliving your money in retirement.

Something else to consider is that these numbers are averages. There are many exceptions to the rule, especially if you are the beneficiary of excellent genes, have tried to stay fit and healthy, and have managed stress properly. More people are hitting triple digits, and you could very well be one of them.

Longevity is a possibility. Therefore, creating a portfolio to help you maintain your current standard of living in 30 plus years of retirement is challenging. Having less money in retirement is a concern for retirees and pre-retirees. Nearly all seniors know someone who has beaten the odds and has lived for a longer time than they planned.

Many retirees and pre-retirees had had someone in their own families who went through hardship and deprivation because they ran out of many at a time when they needed it the most.

The logical solution to not having enough money for retirement is to start earlier and save more. That is not always easy to do, however. Many people are barely making ends meet and do not have much discretionary money to create retirement income. You may fall into that category and worry that you will not have any money to build a retirement account.

How do you find money to finance a retirement plan?

Developing a saving and income-planning mindset is valuable at any age.

Understandably, you might have a tight budget due to where you are in your career track. Or, you might have family, medical, or debt issues that make saving a tough proposition.

Fortunately, there are some ways you can free up cash or find the money you never knew you had, to fund a retirement plan. Here are three things you can do right now to free up money for retirement.

1. Debt restructuring. Take a look at all your debt, including student loans and consumer debt. Perhaps you can negotiate lower rates or pay debt off more slowly. For example, instead of paying more than the minimum due on a debt, take that money and put into something like a dividend-paying whole life insurance policy, annuity (depending on your age), or dividend-paying stocks. When you pay your debt off TOO fast, you lose the opportunity to grow that money.

2. IRA or 401(k) Use every advantage to contribute the maximum amount of money allowed.  As you age, begin to move a higher percentage to assets that are not as volatile, such as annuities. Ask your financial expert and tax advisor to see if you might transfer your 401(k) funds to a self-directed IRA and purchase an income annuity.  Always consider this with the big picture in mind, make sure you seek licensed and authorized professional advisors.

  

3. Live a simpler lifestyle. Making your car, major appliances, and other big-ticket items last longer can add up to thousands of dollars you can use to fund your post-career life. Eat out less often, never pay full retail, and look for every bargain you can find.

No matter your current financial situation, you can and should set aside money for a time when you will no longer get a paycheck. Starting early and being consistent, along with small lifestyle changes, will help you avoid common mistakes and achieve a better retirement lifestyle.

Here is a word to the wise.  Before making any decisions about where and how you invest your retirement money, always consult a licensed and authorized professional.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management

Financial Perspectives: Should you have debt when you retire?

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By Dave Stanley
Integrity Financial Service, LLC

“Obligating yourself with debt is borrowing against your future income, be careful, that obligation can cause big problems when you retire.”  Dave Stanley

Unless your parents made some weird deal with the hospital, you were probably born kicking and crying but debt-free. In a perfect universe, you would have remained that way, spending most of your life as solvent as possible. Then you would skip blissfully into retirement without being shackled to a boatload of debt. You’d have a million in your 401k, maxed out life insurance policies, and guaranteed income from annuities.

The reality, however, is a lot different for most pre-retirees and retirees. Life has its’ own plans, and sometimes it goes off the rails a bit. Even the best-planned people can end up underwater, sideways, and paying lots of unexpected bills. According to financial researchers, more than 41 % of Boomer retirees have credit card debt, and another 35% have car loans with balances over $14,000. Many older retirees also carry debt into retirement, although the number is substantially less.

 

How can debt impact retirement?

You may be thinking, “So, why is having debt so terrible? I have cash flow from my retirement accounts that I can use to pay it. Is it that much of a problem?

The answer to those questions, unfortunately, is “Yes.” Many retirees discover that having a lot of debt when you no longer work means having a more stressful, hand-to-mouth existence that could last 30 or more years after leaving the workplace.

Even worse, debt might be the tipping point that causes some retirees to run out of money long before they die. Having a lot of debt significantly constricts cash flow, making it difficult, if not impossible, to maintain emergency funds, pay for vacations and leisure activities, and pay for out-of-pocket health care costs and preventative medicine.

While many who are planning their retirements believe that having some money in the market will offset some of the problems created by debt, they forget that even historic market gains cannot offset high credit card rates. Often, we forget about the toll that anxiety over finances takes on our health and emotional well-being. Having debt hanging over one’s head can also cause various mental and physical ailments that could reduce life expectancy or require nursing home care. 


How much debt is acceptable?

Those close to retirement are probably wondering how much debt they can bring with them and not feel too impacted. There are rules of thumb in the financial services industry that say you should have no more than 28% of your pre-tax household income servicing principle, insurance, interest, and taxes on a mortgage and no more than 36% of that income to consumer debt payments.

 

That’s while you are still drawing a paycheck.

In my opinion, when you retire, the numbers should be much, much more conservative. If you find yourself rapidly nearing retirement and saddled with debt, you may want to consider other options. To pay off debt and still keep saving for retirement, you might try working a few years past your ideal retirement age, getting a second job or part-time “gig,” selling off things you don’t want or need, or perhaps negotiating lower interest rates on loans.

In most cases, you want to pay the high-interest debts first and not worry as much about the mortgage, especially if you have a reasonable fixed rate and continue to get the mortgage interest tax deduction. If you don’t have an ideal rate, consider refinancing to shorter terms or lower interest rates.


The final word:

Because individual financial situations differ, the amounts of debt that can potentially impact retirements will be different for everyone. In general, though, it’s a good idea to pay off as many debts as possible before you decide to retire. If you are already retired or are about to, consult a competent retirement specialist to find debt reduction strategies that are best for you.


Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management

Getting Married? 8 Tips for Newlyweds on Combining Finances

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By Brenda Long, Michigan State University Extension

 

Getting married? 83 percent of couples fight about money, according to Debt Reduction Services. Making household finances work is one way newlyweds can help make their marriage work.  Both should agree on how to coordinate household accounts and debt by having constructive conversations. Even though this is not the most romantic topic, it will contribute to a happier marriage.

 

Once the honeymoon is over, focus some attention on your shared financial lives. The Building MI Financial Future Financial Toolkit from the Michigan Department of Insurance and Financial Services offers these tips:

  • Request a free copy of your credit reports at annualcreditreport.com. This information tells you about your use, management and payment history of loans and financial obligations. You might also get credit score estimates from FICO. Then you can objectively analyze the strengths and any weaknesses in the reports, including high debt amounts or discipline about making timely payments.
  • List all sources of income and expenses. Using all pay stubs, account statements, monthly bills and debt obligations, disclose everything financial to each other. Then you can make a monthly spending plan for handling monthly expenses and establish a debt prevention and/or elimination plan.
  • Open a joint checking account to pay for household expenses. Pay for all marriage-related bills, including housing, food, necessary clothing, vacation, transportation, cell phones, etc. If neither of you had credit-related problems, both names can be on the account. If one person has poor credit, you may choose to have your account in only one name. Consider automating your household bills payments, plus setting up separate accounts for each of your savings goals.
  • Decide who is going to pay for what.
    • Option 1: Combine incomes and consider all expenses and debts as one.
    • Option 2: Assign certain payments to one or the other. This might depend on who had loan obligations prior to the marriage.
    • Option 3: Pay ongoing expenses based on the percentage of income contributed.
  • Discuss the relationship each of you has with money. Is one of you a saver and one a spender? Talk about the potential consequences and agree on a workable solution.
  • Consider opening a savings account for an “emergency or rainy day fund”. Unplanned emergencies happen.  As a couple, you should have a goal about how much is enough for unexpected expenses or emergencies. In addition, the recommendation is to set aside several months of earned income to prepare for an unplanned loss of future income. Decide together on a monthly amount to save which fits into your budget and is sustainable.
    • Tip: While many couples choose to pursue a joint checking account, this method may not work for all couples. Whether you have a joint account or separate accounts to pay household expenses, the key is to communicate, have a bill payment plan, and pay bills on time.
  • Update your beneficiaries. Check any employer-sponsored retirement plan, IRAs, annuities, and life insurance policies to update the beneficiary information.
  • Take care of your future selves now. Contribute to your employer-sponsored retirement plan and/or IRA. The recommendation is 15 percent of your combined gross pay or the maximum amount allowed by the IRS. This is a great time to talk about your retirement goals that will require financial planning and strategies.  Further, decide on a homeownership plan including thinking about if, where and when to buy a home and its cost. Discuss any education and professional training plans.

The first year of marriage typically includes many lifestyle adjustments. Setting goals and planning to save are best practices to help make your financial hopes and dreams come true. Having a spending plan shows your sense of control and willingness to set aside now for the future.  Discussing and agreeing on financial adjustments should make your financial lives go smoother. Financial planning takes time, patience, and discipline.  Find more information about spending plans, reasons for and ways to save, credit and debt, homeownership, and many other topics at MIMoneyHealth.org.

 

This article was published by Michigan State University Extension. For more information, visit http://www.msue.msu.edu. To have a digest of information delivered straight to your email inbox, visit http://bit.ly/MSUENews. To contact an expert in your area, visit http://expert.msue.msu.edu, or call 888-MSUE4MI (888-678-3464).

Your Community in Action: Financial health in the new year

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By ASCET Community Action Agency

 

Data from 2012 indicates that 60% of Michigan residents don’t have an emergency fund. What happens when their car breaks down or a family member gets sick? How do they find the money for these unplanned expenses?

 

Living pay check to pay check is stressful; it can feel like you will never catch up. Many people find money management training helps. With the right tools and dedication, it is possible to save up for that rainy day!

 

January is a great time to set goals for the upcoming year. If financial health is one of your New Year’s resolutions, there are many programs in Kent County that can help. For example, MSU Extension offers the Money Management Series. Money Management is a Personal Financial Education Program that gives participants information and tools to manage their finances, achieve goals and increase their financial stability. In this series, you will learn the following skills:

  • Making Money Decisions
  • Creating & Managing Spending Plans
  • The Importance of Saving & Investing
  • Credit Card Use & Paying Off Debt

After taking financial classes through MSU Extension, 84% of participants reported keeping track of spending and income as well as saving money regularly.  Are you ready to meet that New Year’s resolution of better financial health? The next series begins on February 8 in Grand Rapids!

 

Pre-registration is required. Learn more about the program and how to register online here. .  

 

Your Community in Action! is provided by ASCET Community Action Agency. To learn more about how they help meet emergency needs and assist with areas of self-sufficiency, visit www.communityactionkent.org