Most Americans Simply Are Not Prepared for Retirement: How to Plan Ahead

Majorca, SpainThe country’s largest money manager BlackRock, recently asked Americans who are participating in a defined contribution plan like a 401(k) how they see themselves as prepared for retirement. Most of those individuals said that they were prepared for the future and had a generally optimistic view towards retirement. This suggests, however, that individuals who are in workplace defined contribution plans may actually be too confident about their future returns.

Last year, 52% of people said they were on track to retire with the amount of money and the type of lifestyle they wanted. This year that number increased to 50% and approximately 70% of Americans believe they will able to save enough to meet their financial goals for retirement. One of the challenges with this, however, is that those same individuals had very optimistic feelings about what will happen in the future with regard to how much money they’ll be able to generate. 66% of the savers who participated in the survey, for example, expect that their returns over the next ten years will keep in pace with past performance.

Of those individuals who participated in the survey, 17% expected higher than current returns. Approximately two-thirds of those employees said that they did not know that Wall Street has anticipated lower returns in the near future.
Given that there is such a disconnect with retirement planning, it is no surprise that up to 60% of Americans across the country do not have a will either. Financial planning and estate planning can be difficult topics to discuss but they are both equally important for helping an individual accomplish all of his or her goals.


Tips for Finding Retirement Volunteer Opportunities

Many individuals picture their retirement as being a time of quiet solitude but unfortunately, sometimes this isn’t always how it plays out. Individuals may wish to find a volunteer position in order to help them give back to the community as well as find ways to fill their time that are both meaningful and important to them.

Some of the most important steps that you need to take when entering this process include:

  •    Ask yourself your purposes for volunteering. Without this knowledge it may be difficult for you to identify a position that appropriately fits your volunteer goals. There are many different motivations for being a volunteer including making new friends, giving back to your community, giving more meaning to your life or improving your individual life circumstances.
  •    Identify a volunteer job for which you seem like a good fit. If you have particular experience or skills that are uniquely suited to a position, this can be a sign that you would be an appropriate fit as a volunteer for that organization.
  •    Does the need match with your commitment? When choosing the appropriate volunteer position make sure that the hours that are required every single week, the intensity of the work you’ll be doing, and the duration of the work period is appropriate for the time and energy that you are able to give.

Many individuals in retirement seeking out volunteer opportunities are doing so because it is a great way for them to add in extra opportunities to their schedule but you do not want to be in the position of giving away too much of your time and finding that it interferes with your life.

Stay tuned to my blog to learn more about how to plan for and enjoy retirement to the fullest.

Boomers Should Be Saving

I recently came across an article on that I thought would be important for baby boomers to read.


Retirement (Photo credit: Tax Credits)

The message: keep saving for retirement.

The article noted that many people who could be saving are not doing so.

One study cited in the article showed only one-third of people aged 50 and older have not saved for retirement. But it is never too late.

An important method for saving for retirement is taking advantage of employer savings plans such as 401(k) plans, according to the story.

The article also suggested taking advantage of financial seminars such as those run by the AARP Foundation. The study showed those who took the courses were able to cut spending and pay down debt better than those who had not taken such courses.

Another study cited in the article showed more disturbing news: American teens are less financially literate than youths from other nations.

Maybe our children are following in our footsteps. That may not be such a good thing.


Should You Ever Borrow Money From Your 401(k)?

I recently came across an interesting article in USA Today about borrowing money from retirement accounts, and whether it is ever a good idea to do so. The article cited some surprising statistics. For example, a new study by TIAA-CREF showed that one in three Americans with a retirement plan have taken out a loan from the savings in their plan. Among those who did, 43% have taken out two or more loans. Another recent study indicated that one in five 401(k) participants who were eligible for loans had outstanding balances against their 401(k) accounts in 2012.

Scrabble Series Loan

(Photo credit:

Why are so many people adopting this strategy? According to Vanguard, 46% borrowed to pay debt; 35% to cover emergency expenses; 26% for the purchase of a home or to pay for a home renovation; 24% to pay bills following the loss of a job; 20% to pay for education; and 15% to pay for special events, such as a family vacation or wedding.

So, is borrowing against your retirement plan ever a good idea? According to the article, experts say it might be advisable to borrow to pay down debt or cope with emergency expenses, but you have to be fully aware of what you are doing and make sure that you are taking the money from the right place. “There are certainly situations where it is best to take out a 401(k) loan, for instance, when there is a medical emergency and a large expenditure on medical care cannot be covered using other assets,” says John Beshears, a Harvard University professor and co-author of a study on the subject, The Availability and Utilization of 401(k) Loans.

Others say 401(k) loans can be part of a sound financial plan. “I think loans, when used properly, can be a very important part of a successful plan,” says Mark Davis, a senior vice president with CAPTRUST Financial Advisors in Westlake Village, Calif. He adds that as long as the loans are repaid and participants continue to fully fund the plan while paying back the loan, there may not be a big downside.

Of course, loans such as these are not exactly “free.” Borrowers miss out on the capital gains they would have accrued, and loan repayments are subject to double taxation. And, if you are faced with the prospect of personal bankruptcy, it is advisable to keep the money in the 401(k) since it will be safe from creditors.

To learn more about this topic and read the full article, I invite you to click here.

Three Budget Proposals That Could Hurt Your Retirement Plan

A recent article in Forbes discusses three proposals in President Obama’s budget for fiscal year 2015 that could disrupt retirement plans nationwide. It’s a fairly long article, which I invite you to read in full by clicking here, but here are the “highlights.”


retirement (Photo credit: 401(K) 2013)

Mandatory minimum distributions on Roth IRAs.
Unlike traditional IRAs and other retirement planning vehicles, Roth IRAs are not subject to rules requiring minimum distributions at age 70 and a half. This change will reduce the amount of assets benefitting from tax-free growth, with the owner of the Roth IRA ultimately having less money available during the course of his or her retirement.

A cap on wealth inside an IRA.
This change would place a cap on the amount of contributions or accruals allowed in an IRA once the owner has achieved what the government terms a “secure retirement.” The cap is rather substantial, $3.2 million, but other retirement plans such as a 401(k) and 403(b) would count against the IRA cap. High net worth individuals should be aware of how this potential change will impact the way they use IRAs in their retirement plans.

A reduction in Social Security benefits.
The government has been exploring ways to protect the future viability of the Social Security system for years. According to the Forbes article, the current focus is on finding ways to eliminate aggressive Social Security claiming strategies, which allow wealthy beneficiaries to maximize delayed retirement credits by manipulating the timing of collecting Social Security benefits. The loss or reduction of certain claiming strategies could impact not only wealthy beneficiaries, but also middle and lower income families who were planning to use similar strategies in planning for retirement.

While it is impossible to predict which, if any, of these changes will be adopted, the prospect of changes to the law is one reason to have your plan reviewed over time.

Learn From These 6 Estate Planning Mistakes of NFL Players

In honor of the Big Game, a recent article explains six of the estate planning mistakes that NFL players commonly make. While not everyone will earn as much as an NFL star, the average American can still benefit from avoiding these mistakes in their own lives.

NFL Football player Troy Smith drinking Gatora...

(Photo credit: Wikipedia)

1. Living in the present, instead of planning for the future: NFL players earn most of their lifetime income in their 20s and 30s, and then retire early. As a result, it is especially important for them to plan for retirement early.

2. Choosing the wrong professional adviser: NFL players sometimes make the mistake of choosing a family member to help with financial planning instead of an estate planning professional. This can be a mistake if the family member is not experience in managing large quantities of assets.

3. Spending beyond their means: It is important to spend based on the cash you have available, not the salary total that appears in a contract.

4. Not maintaining liquid funds: Maintaining liquid funds to cover living expenses in case of an emergency is especially important for NFL players, who could experience a career ending injury at any moment.

5. Leaving assets exposed: Assets can be protected from creditors through trusts, incorporating limited liability entities, and under any state laws that protects specific assets, such as a person’s home.

6. Failing to see the bigger picture: Because NFL players retire earlier than most Americans, it is especially important for them to consider how they will live during retirement. Plans for a second career or to starting a business should be reflected in the estate plan.