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Which Retirement Plan to Choose

Which retirement plan to choose? See also 1-minute video: Which retirement plan should I choose?

There are two basic types: those offered through your employer and those you can open on an individual basis. Both types are designed to help you accumulate the wealth you will need to fund your retirement.

First, those offered by your employer. These plans typically have various investment choices that are like mutual funds selected by the employer or plan sponsor. Contributions a usually tax-deductible and the money grows tax deferred, but withdrawals are subject to standard income taxes rules at the time of withdrawal. Often times the employer offers a match for a portion of the amount contributed up to a limit. These plans may allow contributions up to $24,000 depending upon your income and age. There are special rules as to when you can withdraw the money and rules for when you must withdraw assets. The rules are stricter than those that apply to IRAs.

Second, are those you can establish yourself. There are two basic types: Traditional IRA and a ROTH IRA. They both accept post-tax dollars as contributions, however, in some cases the contributions to the Traditional IRA can be tax deductible. The current maximum contribution is $6,500 per year per person. They both allow the assets inside to grow without tax liability. Depending upon with whom  you open the account, there may be access to thousands of different types of assets ranging from stocks, bonds, certificates of deposits, mutual funds, exchange traded funds, and others. The Traditional IRA requires distributions near age 70 ½ and these distributions are subject to standard income taxes at the time of withdrawal. The ROTH IRA assets can be held until death and no taxes are applied to the withdrawals.

Many times it is worth using as many types as legally possible within your current budget needs. Look to them to build your retirement nest-egg.

 

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney.

 

Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

 

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ROTH IRA - Better than sliced bread.

Roth IRA – Better than Sliced Bread (See 1-minute video: Roth IRA, Contribute or Convert.)

The tax code as few taxpayer friendly provisions, but the creation of the ROTH IRA is the exception. A ROTH IRA is a type of account into which a taxpayer can contribute after-tax dollars and then never pay taxes on the growth or withdraws. Yep, no more taxes.

Not having to pay taxes can be a huge advantage especially when the growth is extended over many years. It also permits you to better control your income program in retirement.

There are only two ways to get money into these accounts.  The most common way is a direct contribution from savings/checking account. But do note that the amount you can contribute varies whether under or over 50 years of age. And there is a maximum regardless of age which changes from time-to-time. Further, you can not contribute more than you earn such as from a job. Earnings from investment do not count.

The second method is to convert assets already in an IRA or qualified retirement plan from work to a ROTH IRA. There are no limits on how much can be converted. That’s the good news. The sad news is that to make the conversion, every dollar converted is considered income and subject to income taxes. So, it might be smart to convert a portion each year rather than all at once to avoid bumping you into a higher tax bracket.

Investigate the ROTH IRA, and it may be better than sliced better for you.

 

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FA Client articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney.

 

Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

 

 

 

 

 

 

                                                                       

 

 

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5 Mistakes to Avoid in Retirement

1-minute video: 5 Mistakes to Avoid in Retirement

 

5 Mistakes to Avoid in Retirement

Retirement offers many enjoyable opportunities. However, if you are not careful, many may never come to pass.

Mistake #1 Retiring with insufficient funds. We all started with nothing – or less. And we see lots of money in our accounts we can hardly conceive of how we might not have enough. But the truth is many people just do not do the number crunching to see if their nest egg can last. Unretiring is no fun and embarrassing Do the math or get someone who can.

Mistake #2 Spending too much too soon. Commonly people have many pent-up aspirations that they want to do right away. Many take money and doing them in quick succession can quickly deplete a significant nest-egg. Yes, retirement is a time to do the things you could never do while working but there is likely a balance between what you want to do and what you can afford. Find the balance.

Mistake #3 Healthcare costs. Healthcare cost have no where to go but up. Do you have enough budgeted? Many mistakenly believe Medicare will cover many cost. In fact there are many gaps in coverage relative to what you might have had while working. Investigate what you will get from Medicare and decide how you will handle the gaps if they arise.

Mistake #4 Taking Social Security Benefits too early. Social security was never designed and will never fund a comfortable retirement. And the dollars you get are greatly reduced from what you might expect if you take you benefits before your normal retirement age as Social Security defines it. For most, that age is 66 or older. Using your own assets and delaying retirement might be an alternative.

Mistake #5 Fail to make a estate plan. Estate planning deals, in part, with the disposition of your assets when you die. If you think you have trouble organizing them now, imagine how difficult it will be for your heirs when you are not around. Another area estate planning covers are health care decisions. You are one day likely going to need another person to help you make decisions and the time to make tentative decisions on life or death issues is now. Also, you need to find someone in whom you can place your trust in those final days.

 

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FA Client articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney. Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

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What is your risk tolerance?

1-minute video: What is your risk tolerance?

 

What is your risk tolerance?

All investments have risk and reward like a coin has two sides. Most people view only recent gains as a measure success of an investment choice to decide whether they should invest similarly again. But that is like Monday-morning quarterbacking in that the return received, after it has happened, is risk free. It does not consider the risk taken to get that return. Further, you can’t buy last year’s return.

So, looking prospectively, an investor needs to calibrate their appetite for risk against the potential reward. The percentage or amount you are willing to sacrifice if the investment goes badly is a measure of your risk tolerance. Every investment has its risks, but an investor should steer clear of those that exceed the loss they are willing to take to get the gain they seek.

However, in a well-diversified portfolio, an investor might buy investments that exceed their tolerance level if counterbalanced by safer, less risky investments. Modern Portfolio Theory is based combining differing risk levels, riskier than you would take if you only bought one investment, to create less risk overall. The result is greater returns for the amount of risk taken.

Risk tolerance varies depending upon your goals and the time horizon for when you need the money. Investing conservatively is likely the best route if the goal is important and soon to occur. However, for retirement savings, not only might it be years before you retire, you may be retired for decades and taking more risk is often necessary to insure you have the money you need when you need it.

The next time you evaluate whether to buy an investment, remember to review the return, but also how much risk was taken to get that return.

 

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney. Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

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Why is Asset Allocation Important to You

1-minute video: Why is Asset Allocation Important?

 

Why asset allocation is important to you.

The asset allocation decision is one of the most important investment decisions you will make. And as your life circumstances change, so will the appropriate asset allocation decision be made again.

The asset allocation decision integrate several important factors: your goals, when you need the money, your individual risk tolerance, your age and health are among issues to consider.

One overarching goal is to get the best return for the least amount of risk. Too often people invest based on a past record and total ignore the risk it took to get those returns. Further, past performance of an investment is no indicator to future performance.

But the appropriate allocation can lessen your risk and raise the chances you will have the money you want when you need it. Common, basic allocations will include stocks or stock based investments, bonds or bond based investment and cash. There is no perfect mix as no one knows the future, but through analysis you can develop a “good enough” mix of the assets to be used. And from time-to-time you will need to update the allocation due to personal life changes but also due to factors such as the economy, new laws, financial markets to mention a few.

So, take some time to get educated, assess what is important to you and the money that will take and then put effort into developing the “right” asset allocation for you.

 

 

This video and text is for information use only and is based on information believed to be true. Much of the information is readily available, but some is drawn from Advisor Products and FAClient articles. The reader acts on these ideas at their discretion and should consider consulting an accountant, financial advisor, or attorney. No promise is made that an idea or concept is appropriate or would work well for the reader. This is not an offer to provide legal advice or act as an attorney. Contact Steven Erickson JD, MBA, CFP(R), Accredited Wealth Management Advisor, Chartered Retirement Planning Consultant at 573-874-3888 This email address is being protected from spambots. You need JavaScript enabled to view it. , if you have questions or to set an appointment. Serving Clients in Columbia, Jefferson City, and the surrounding counties.

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