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How to Save for Retirement

by seniorne
written by seniorne

Great tips! Here are a few additional ideas to consider when saving for retirement:

  1. Open an IRA: An Individual Retirement Account (IRA) is a great way to save for retirement outside of your employer-sponsored plan. Depending on your income level, you may be able to contribute up to $6,000 (in 2023) annually to a traditional or Roth IRA. Consider working with a financial advisor to determine which type of IRA is best for you.
  2. Consider a Health Savings Account (HSA): If you have a high-deductible health plan, you may be eligible to contribute to an HSA. Contributions are tax-deductible, and withdrawals for qualified medical expenses are tax-free. Plus, any unused funds roll over from year to year, so it can be a great way to save for healthcare expenses in retirement.
  3. Delay Social Security: You can start receiving Social Security benefits as early as age 62, but your monthly benefit will be reduced if you do so. If you can afford to wait, delaying Social Security until your full retirement age (between 66 and 67, depending on when you were born) or even later can result in a higher monthly benefit.
  4. Consider downsizing: As you approach retirement, you may want to consider downsizing your home or relocating to an area with a lower cost of living. This can free up extra funds that you can put towards your retirement savings.
  5. Don’t forget about inflation: Inflation can erode the value of your retirement savings over time. When calculating how much you need to save, be sure to account for inflation and adjust your savings goals accordingly.

Remember, saving for retirement is a long-term process, and it’s never too early (or too late!) to start. By taking the time to establish a savings goal, create a budget, and seek professional help, you can set yourself up for a comfortable retirement.

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Young female explaining her senior father how to fill in paper
Retirement Planning

Increasing Financial Confidence of Older Americans and Adult Children

by Guest Blogger
written by Guest Blogger

Do These Things for Better Retirement Planning

Retirement planning is at the forefront of a lot of Americans’ minds, considering a top concern is not having enough money. Magnifying this is stock market cycles surrounding COVID-19. Those who felt confident at the beginning of 2020 now have reason to question their preparedness. Moreover, adult children are getting increasingly involved, asking new questions related to economic concerns, healthcare costs and living arrangements.

Are older Americans and their children/caregivers on the same page? We asked more than 1,300 American adults 65 and older to share their perspectives on personal finances, retirement decisions and discussing these matters with their children. We also asked more than 1,300 financially independent adult children the same questions about their parents.

I hope our insights will help you navigate your own conversations with loved ones.

1. Don’t be Afraid to Talk about COVID-19 and Stock Market Gyrations

Many older Americans and their adult children are talking about personal finances during the COVID-19 pandemic and feel similarly about financial security. Both groups similarly report (at 43 percent) being “concerned” or “very concerned” about financial security. However, talking about it now and having these conversations is the first step toward better preparedness.

2. Make Financial Plans to Pay for Future Healthcare

We asked those 65 and older their greatest financial concerns, and affording healthcare was number one. Grown children had the same concern about their parents.

Men in the 65-and-up age bracket have much less concern about having ample funds, with men being far more likely than women to cite no financial concerns (19.6 percent vs. 12.4 percent) and women being more likely to say running out of money is their primary financial fear (25.9 percent vs. 19.1 percent).

As one might expect, financial fears depend largely on income, and those on the lower end of the scale have more urgent concerns like paying for medical care and ensuring they have enough money, while higher-income individuals fear not being able to maintain their current lifestyle.

3. Discuss Finances and POA – Older Americans Are Comfortable With It

For adult children of people at or near retirement age, there is little reason for fear over discussing financial matters with parents — but adult children were far more likely than their parents’ group to report discomfort with the idea. In fact, only about one in 10 people in the 65-and-older group said they were “very uncomfortable” or “uncomfortable” with the idea of discussing their finances with their adult children, while more than 16 percent of the adult children’s group said the same.

A similar disconnect exists between retirement-age people and their adult children when it comes to giving their children (or caregiver) power of attorney. While majorities of both groups indicated that the plan would be to authorize power of attorney, those in the older age group were far more likely to say so (69.9 percent vs. 57.9 percent).

4. Caregivers, Be Prepared to Contribute to Healthcare Costs

How about those 65 and older receiving financial assistance from their children? Two-thirds expect to not need financial help, and just seven percent expect to need help (27 percent are unsure).

This is quite a different answer than their children provide. Just one-third of adult children expect their parents to not need financial help, and 39 percent do expect to provide financial support or already do provide it.

5. Mitigate Uncertainty by Working with a Financial Advisor

Most older adults believe they are prepared to tackle the challenges of retirement, though their grown children may not agree. However, knowing that the adult children of those 65 and older are largely uncomfortable talking to their parents about finances, it’s likely that adult children aren’t all that well-informed about where their parents stand in retirement planning.

About two-thirds of individuals 65 and older say they are prepared for retirement, but a troublingly large group (more than 1 in 10) say they are unprepared or very unprepared for a life without income from their jobs.

Consulting with a finance professional appears to have a considerable impact on the ease with which people think about retirement. In fact, having met with a financial adviser reduced by half the percentage of people 65 and older who feel unprepared for retirement.

By Jeff Hoyt

Jeff Hoyt is editor-in-chief at SeniorLiving.org, a comprehensive directory of living options. SeniorLiving’s mission is to help older Americans age with ease.

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How to Make Backdoor Roth IRA contributions
Retirement Planning

How to Make Backdoor Roth IRA Contributions

by Jeff Dailey
written by Jeff Dailey

Many investors are enticed by the long term benefits of a Roth IRA. Unfortunately for those who do participate in an employer sponsored retirement account, such as a 401k, and earn a high annual income (over $116,000 for single filers and $183,000 if you are married, filing jointly), you are unable to make a Roth contribution. How to Make Backdoor Roth IRA contributions
Fortunately, there are ways around this. There are steps outlined below that can be taken, which would allow a high income earner to move after tax funds into their Roth IRA. This is only possible because there are currently no income limitations for those who are looking to convert to a Roth IRA.
Step 1 – Determine whether or not there are other pre-tax IRA’s
Step 2 – If there is an existing pre-tax IRA, roll this account into a 401k (if available) to avoid the IRA aggregation rule. It is important to check whether or not the 401k allows for a rollover. You are also only able to roll over pre-tax funds.
Step 3– Contribute to a non-deductible IRA (You must have earned income for the year)
Step 4 – Invest funds in the non-deductible IRA
Step 5 – Keep invested (this is the step where you/CPA must be aware of the step transaction doctrine)
Step 6 – Convert to a Roth IRA
A CPA should be consulted prior and along the way as there are important obstacles to be prepared for. Obstacles such as the IRA aggregation rule and the “Step transaction doctrine.”
It is worth noting that this opportunity might not exist forever and the new administration may change the rules.
William N. Pugh, CFP®
Wealth Manager
www.Apriem.com
 

How to Make Backdoor Roth IRA Contributions

 

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Retirement Planning

Can You Afford to Age in Place

by Jeff Dailey
written by Jeff Dailey

As many Americans are living longer these days, many may be asking themselves, can I afford to get older? Can You Afford to Age in Place
According to the Social Security Administration, the life expectancy of Americans is well into their 80’s.
We take a look at how elderly people are getting by and not breaking the bank as they age.
It’s inevitable that everyone will experience a sickness in their lifetime, but what would you do if the next time you fell ill it would bury you financially. Can You Afford to Age in Place
For many people over the age of 65 that’s just the case.
“I think that we do need to look at preparing, we have a terrible with medical expenses with seniors, we’re all really just one disease away from poverty and that’s especially true with seniors, because they don’t have a way to recoup that income,” says Shawna Wasko with the CSI Office on Aging.
While this is the case for many people there are places out there that can help seniors remain on their feet financially.
For 91 year old Peggy Mowry, one fall almost ended her financial freedom, but thanks to Hospice Visions, she has been able to remain somewhat independent.
“When I fell, I fell backwards and it took the hearing out of the left ear and my equilibrium doesn’t work well, so I had the therapy with the visions. I don’t really know the financial part, so I never received a bill of any kind,” said Mowry.
“We can provide that and also provide personal care several times a week in the home to assist them, instead of them having to pay out of pocket, or having to deal with insurances that won’t cover that,” said Lisa Schultz with Hospice Visions.
Some seniors have been financially prepared however taking care of themselves and loved ones can become difficult.
“Yes I do live here alone for the last over two years now and I’m very grateful to have the home that we’ve had for so many years here, but my husband has to be in a small care center in Boise and I go up every week or two, to see him,” said senior citizen Bonnie Barsness.
“I do like to see seniors think about, can you age in place in the home you’re in and is it time to sell the big place and get a smaller place? And, you’re able to keep care of it better,” said Wasko.
Thanks to medical technology seniors are living longer, but at what cost.
KMVT-TV / KSVT-TV

Can You Afford to Age in Place

Can You Afford to Age in Place

Can You Afford to Age in Place

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Dealing with the First Year of Retirement
Retirement Planning

Dealing with the First Year of Retirement

by Kendall VanBlarcom
written by Kendall VanBlarcom

The first year of retirement can be the hardest part of this new way of life. Many people find themselves feeling alone. They feel like no one cares too because everyone around them thinks they are envious of their new life of not working and doing whatever they want. The truth is that it’s not all that’s its cracked up to be. Actually, many retirees will go back to work just because they can’t handle the change in their life. Is that the answer, though? Many times, it’s not. Going back to work just brings back the old life. There’s going to be a point in which you’re not going to be able to work anymore, and then you’re going to have to deal with the first year of retirement. It’s best to work through it now. Dealing with the First Year of Retirement

Removing Yourself from Your Brand to Create a New One

Many retirees find themselves feeling lost because they have been referring to themselves in a way that they can’t anymore. For example, they may have identified themselves as “Jim from Ford.” After retirement, you are not from Ford anymore. You are just Jim. Dealing with the First Year of Retirement
Who is this person you are now without your company’s branding? Do you know?
Many people have an identity crisis in the first year of retirement. It’s normal and common among retirees. The only way to solve it is to start creating a new life. The old life is what gave you the identity you had, so now you need to make a new one. One that will give you an identity again that may be similar to the one you had before, but will be unique as well.

Dealing with the Loneliness of Retirement

Everyone gets up, gets ready, and heads out to work. You don’t have to do that anymore. You simply sit at home and you may head out and run some errands. Not exactly the hustle and bustle that you’re used to when you worked.
This loneliness you feel is again, completely normal and common. Chances are, you are feeling the loss of people around you because you are used to having all of them around.
What you can do is try to meet new people that you can incorporate into your new life. If you enjoy playing golf or other activities, you can start to do that during the week. This way you can start to have a daily schedule that will help you feel like you have a purpose. Sure, it’s fun and you may feel as though the day has to be productive, but remember, you are retired.
No one can tell you not to work. If you feel a desperate need to do some work, find something that you enjoy. Find something that may not cause you as much stress as your job did when you did work full time. If you can’t work because of financial reasons, consider volunteering. Many non-profits need your services, so your time will be appreciated.
The emotions that come along with being retired can be hard to deal with, but you can turn them to being more positive. All you need to do is change your life. When you change your life, you change the way you feel about it.
For more information on how you can make it through this stage of life successfully, contact Kendall Van Blarcom. He’s a personal consultant who can help you every step of the way through the first year of retirement and beyond.
Dealing with the First Year of Retirement

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Why Have An Estate Plan?
Estate Planning

Why Have An Estate Plan?

by Jeff Dailey
written by Jeff Dailey

A recent study showed that in today’s economy, more and more people see estate planning as “discretionary” – something that can be put off until times are better. Unfortunately, disaster doesn’t know the difference between a bullish or bearish stock market, an employed versus unemployed person, or a younger individual versus an older individual. Simply put, the benefits of having a current, up-to-date estate plan far outweigh what happens if you don’t.
Let’s start with addressing what an estate plan does. An estate plan helps to document your preferences and instructions with regard to your financial affairs and more in the event of your incapacitation or death. The basic legal documents found in a typical estate plan include a last will and testament, a living will, a healthcare power of attorney and a financial power of attorney. Some individuals prefer to use trusts as a complement to, or sometimes in lieu of a last will and testament.
There are four components to a good estate plan, including:

  • having proper legal documents for your situation
  • a well organized catalog of all your important personal information and instructions for your family to access after your death
  • a documented legacy – all the personal stories, accomplishments, and heritage information that you want passed to the next generation
  • advanced communication – sharing your preferences, viewpoints and wishes with your loved ones.

People create estate plans for a variety of reasons. Some people have a strong desire to avoid probate. Remember, probate is simply the legal process whereby a court appointed person identifies all of your assets and liabilities and their value, pays your final bills, and distributes what’s left of your assets to your heirs according to law. Your probate officer is typically a close family member or friend, but can sometimes be an attorney or other professional. In some states, it’s actually quite a simple process. In other states it can be a little more complex.
If you want to know what strategies will help you better manage probate, a qualified estate planning attorney can assist you. He or she will make sure your beneficiary designations on your financial accounts and insurance policies are completed properly and will encourage you to consider various types of trusts.
Some people create an estate plan to make sure that their assets will be transferred in a tax efficient manner. Others who may be worried about creditors or the privacy of their estate settlement might find value in having a trust. Again, you’ll want to seek qualified legal assistance in creating an advanced technique like a trust.
Most importantly, an estate plan helps to ensure that your wishes and instructions are carried out in the manner you specify, that family harmony is maintained, and that your loved ones’ burdens in settling your affairs are minimized. Without a plan, the distribution of your property is provided for according to the law in the state where you resided or owned that property. Each state has this so called “intestacy law” which applies to individuals who die without a valid last will and testament. This body of law differs from state to state, but generally establishes an order by which your loved ones (e.g., spouse, children, parents, siblings, etc.) receive your property. This order may differ greatly from your actual intentions, which makes creating an estate plan one of the most important things you can do.
Provided by Greenberg Traurig

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5 Reasons to Meet a Financial Advisor
Retirement Planning

5 Reasons to Meet a Financial Advisor

by Jeff Dailey
written by Jeff Dailey

5 Reasons to Meet a Financial Advisor

5 Reasons to Meet a Financial AdvisorAre you planning and preparing for your retirement? If you are, you may have some questions. After all, soon-to-be retirees want and should have all of their bases covered. Of course, you can find retirement advice online or seek answers from those you know. There are, however, a number of benefits to meeting with a professional financial advisor. In fact, five reasons why are outlined below. 5 Reasons to Meet a Financial Advisor
1 – Knowledge and Expertise
While anyone can claim to be a financial advisor, a small amount of research or recommendations from those that you know can help you ensure that you are dealing with a true professional. When doing so, you should receive valuable information. Most financial advisors are trained and experienced in the world of finance, as well as retirement. Generally, you should feel comfortable and trust the advice given to you by a financial advisor.
2 – Realistic Goals
Another benefit to meeting with a financial advisor is that he or see can make sure that your feet are on the ground. Unfortunately, many men and women get carried away with their retirement goals. If you want to start a business, you may be able to so. If you want to spend your days vacationing, you should also be able to do so. But, only if you have enough money saved. A financial advisor can let you know if it is even possible for you to meet your retirement goals in the remaining time that you have left to save.
3 – A Good Value for the Money
Yes, scheduling a meeting with a financial advisor will cost you money. Unfortunately, this is a problem for many. After all, to save for retirement, you are supposed to be saving money and reducing your expenses. While this is true, meeting with a financial advisor can be considered an investment. The small appointment fee is one that you can easily make a return on, should you adhere to the advice provided by your financial advisor.
4 – Easy to Schedule an Appointment
Many soon-to-be retirees don’t want to go through the trouble to find and then schedule an appointment with a financial advisor. Doing so doesn’t have to be difficult. First, ask for recommendations from those that you know and then call to make an appointment. The internet can also be used to research and find quality and reliable advisors. Your local bank may also be able to provide you with assistance.
5 – The Consequences
The consequences of not meeting with a financial advisor or not being prepared for your retirement are enough reason why you should schedule an appointment. At this point in your life, you should have been contributing to your 401(k) and you should also have an Individual Retirement Account (IRA) with money in it. If not or if you don’t even know what these accounts and plans are, you need to meet with a financial advisor right away.
As you can see, there are a number of benefits to scheduling an appointment with a financial advisor. A financial advisor does more than an accountant. In addition to helping you save money, they can also help you determine exactly how much money you need to retire comfortably. Yes, you can develop this total on your own, but financial advisors know to take other factors into consideration as well, such as medical emergencies and inflation. Do you?

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Retirement Planning

7 Retirement Questions Everybody Needs to Ask

by Jeff Dailey
written by Jeff Dailey

7 Retirement Questions Everybody Needs to Ask

7 Retirement Questions Everybody Needs to AskRetirement planning has been traditionally provided in one dimension, with a focus on financial matters only. But increases in longevity, and ongoing uncertainties about being able to fund your own retirement, require a whole new way of planning for retirement. A new multi-dimensional way of planning for retirement is required which not only addresses post-retirement risks, but also matters of the heart that help you live a happy and purposeful life. 7 Retirement Questions Everybody Needs to Ask
1. Purposeful Life
If you have led a busy working life as an employee or as a business owner, making the transition from your work or business can be a daunting prospect. A lack of preparation for the next chapter in your life may result in emotional and relationship difficulties. To avoid these outcomes, planning before you retire or sell your business can not only help your decision making process, but also help you design the next chapter of your life that you can look forward to.
2. Estate Planning
As you approach retirement, the importance of estate planning takes on a higher significance. You will need to consider the possibility of losing the ability to manage your own affairs and think about who you would like to take on this responsibility should this occur.
Consideration needs to be given on how to avoid estate disputes and making sure your estate planning objectives are clearly stated with strategies to achieve them.
3. Health & Aged Care
An ageing population will place additional requirements on aged care facilities and it is highly likely that you or your partner will require aged care. Early planning is required for aged care so that you can maximise the choices you have and also determine the optimum way to fund your needs. Discussions should be commenced with your own parents about their needs so that all family members are in agreement and that family harmony is maintained.
4. Retirement Planning
You may be retired for nearly as long as you working life. Post retirement risks require careful planning using a range of strategies that minimise the impact of inflation and sequencing risk.
You need to be comfortable with the retirement planning strategies used and they must be reviewed regularly.
5. Finance & Tax
If you still are running your own business in retirement, you should review or prepare a succession plan, so that your business can continue on without you, or your equity is able to be released if an unplanned event such death or incapacity occurs.
Consideration of the tax strategies available will also help you maximise your retirement options and convert business assets to retirement assets.
You might also consider starting to budget your lifestyle costs so that you see how much your retirement is going to cost.
6. Legacy
Retirement will provide you with the time to consider what legacy you would like to leave. Legacy planning is more than what you leave behind and is more about how you live. Successfully passing your wealth on to the next generation requires consideration of family values and communicating the family story.
7. Happiness
Consideration of what really makes you happy and how you can use money to create more happiness in your life is the foundation to start planning for your retirement. It may involve all of the above dimensions of retirement planning and will be different for everyone.

Retirement Planning Process

Collaboration
To provide you with the best outcomes, retirement planning requires collaboration between your trusted advisers including your accountant, estate planning solicitor, health professional, financial planner, aged care consultant and succession planning specialist.
Once of your trusted advisers with an understanding of what is really important to you should take the lead role and coordinate the advice you receive to provide you with the best outcomes.
Review
A new way of planning for retirement requires a regular review of all 7 dimensions and is not a ‘set and forget’ process. Your personal and financial circumstances will change, necessitating an update of the strategies used to achieve your retirement objectives.
Irrespective of your wealth, a new way planning for retirement will assist you being able to live a purposeful and rewarding retirement.

By Geoff Ivanac

Geoff is a Fellow Chartered Financial Practitioner (FChFP), Chartered Accountant (CA) and a Chartered Tax Adviser (CTA).

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Reverse Mortgages Winning New Support

by Jeff Dailey
written by Jeff Dailey

Reverse Mortgages Winning New Support
House in HandsThanks to various program changes in recent years, reverse mortgages have been winning over everyone from financial advisors to community banks and the mainstream press, and even one nationally recognized personal finance commentator who has recently changed her view on the product. Reverse Mortgages Winning New Support
Few personal finance writers as widely read as Jane Bryant Quinn. For 30 years, she published a biweekly column for Newsweek magazine, and for 27 years she published a twice-weekly column that was syndicated by The Washington Post Writers Group to more than 250 newspapers. Quinn has also written columns for Bloomberg.com and has appeared on nationally-aired TV shows such as “CBS Morning News,” “The Evening News with Dan Rather,” “Good Morning America,” among many other programs. In her current gigs, Quinn contributes a regular column to the AARP monthly Bulletin and blogs on her own website JaneBryantQuinn.com.
Over the course of her illustrious career, Quinn has established herself as one of the nation’s most reliable voices for people trying to manage their money well. But it wasn’t until recently that she shifted her perception of reverse mortgages and the role they can play in retirement planning today.
Now onto her sixth book on personal finance titled “How to Make Your Money Last” (Simon & Schuster), Quinn chatted with RMD to discuss her new book, the biggest challenges retirees face today and the factors contributing to her change of heart on reverse mortgages.
RMD: What spurred you to write “How to Make Your Money Last”?
JBQ: Making your money last is the biggest worry people have. When they are in their pre-retirement years or early retirement years, they say, “How can I be sure not to run out of money?” That’s the thing that has scared them the most.
We are all living to much later ages than we expected and we might not have saved as much as we intended, which is the problem the Baby Boomer generation is facing—partly because of the stock market in 2007-2008, or problems with the economy where they weren’t able to retire as soon as expected.
They [Boomers] are saying, “I have X amount of savings, so how do I invest and parcel out those savings so I can be reasonably sure they can last 30 years?”
What do you hope this new book will accomplish?
JBQ: First, I hope it will help alleviate worries, because if you really don’t know how to parcel out your money in a reasonable way, you’re always going to be afraid you will run out.
My hope with this book is you can figure out what a reasonable lifestyle is—I call that “right-sizing” your life, which is matching your expected income to your expected expenses and seeing how much of your savings you can withdraw every month or every year.
There are two things with this book. The first is the financial part, which is the bedrock on which a comfortable retirement is built. The other is the emotional part.
Let’s say you’re a teacher, lawyer or reporter and then suddenly you don’t have a paycheck anymore. So you not only have to figure out the financial part, but you also have to figure out the emotional part—going from a working person to an engaged private citizen retired. That is something I look ahead for myself. How do you make that transition?
You need a financial base to work from , but you also need to think about what you’re going to do for the rest of your life. “How to Make Your Money Last” also talks about the various ways of addressing that question, because that is a huge question.
Apart from those aspects, what are some other key areas of discussion included in the book? What can readers expect to learn?
JBQ: I cover the kinds of things that people need to know. There is something about the joy and challenge of life after work, and also how do you work out right-sizing your life. Doing these projections is more complicated when you’re retiring than when you are doing a normal working budget, because you have to look at the income you get from investments and savings.
I also cover when to claim Social Security, life insurance, health insurance and annuities. Then there’s retirement savings plans and what you should be doing especially if you’re part-time employed, a freelancer, or a member of the “gig economy.” There’s another section on retirement spending, retirement investing, and what are reasonable withdrawal rates from savings to have your money last 30 years.
I also talk about your home and reverse mortgages.
On the topic of reverse mortgages, how in-depth does “How to Make Your Money Last” cover these products?
JBQ: I am very positive about reverse mortgages, but I wasn’t always. I have taken a new view on them, partly as a result of the new regulations passed last year.
There was an issue with people who took lump sum reverse mortgages later in life; they went through the money, found they couldn’t pay taxes and insurance and faced the risk of losing their homes. By and large, there was an issue for people later in life when they didn’t really understand what they were getting [with a reverse mortgage].
These new regulations, however, which look at people’s income compared with what they will get with a reverse mortgage, are very valuable and they have erased my concerns that there are dangers here for people in their 70s and 80s.
Reverse mortgages have been a controversial topic in the past, with the product suffering from a negative perception. What made you change your mind, so much as to include reverse mortgages into your new book?
JBQ: The fact that older people are now being protected from themselves, or aggressive sales people who might inappropriately tell them to take out a lump sum when they’re 80, only to find out they ran through the money and are now stuck—that should not happen any more with these rules.
There has also been a sort of discovery among financial advisers using the [reverse mortgage] line of credit. It’s a wonderful hedge against inflation to give yourself future borrowing power.
If you take a reverse mortgage credit line at age 62, you could probably increase the withdrawal rate from your savings [above the classic 4% rule] because now you have one more pool of money from which you can draw from. If the market is bad, you can draw money from the credit line. This can help you increase your income in retirement from your savings and investments.
But I caution, [reverse mortgages] are only for people who intend to stay in their homes for 15-20 years, because you have to amortize those upfront costs. If you are settled in your house, want to stay there and increase your annual income, you can do that with a reverse mortgage credit line.
In your opinion, what do you view are some of the biggest hurdles or challenges facing retirees today?
JBQ: Saving money. This is particularly true with people who don’t work for companies that have 401(k) or 403(b) plans. People who tend to retire with sufficient savings are those who have company plans where money automatically comes out of their paychecks. Those are the people most likely to acquire decent retirement savings.
The other half—and it is roughly half—are people who work for employers who don’t have retirement plans, or are freelancers working in the “gig economy.” They have much more trouble saving because it’s not automatic. There’s no easy way to have money slipped out of their paycheck and set aside for them every time it comes. They are living paycheck to paycheck, but they’re spending everything.
For the average person who’s working freelance, or working where there isn’t a 401(k) plan, they can start an IRA. However, to make it saving automatic, they need to have money taken out of their bank account every month. People who are living paycheck to paycheck might be afraid to do that.
It’s one of the great virtues of our Social Security system; that if you pay taxes, you’re automatically getting a retirement plan. The same is true for people signed up for 401(k)s. But people who don’t have those employers are stuck and it’s a disgrace that how much you can save depends on where you work and not who you are.
So how does home equity fit into the equation? Home equity has long-held this reputation of being a “sacred cow,” but will it become a vital component of retirement planning for more retirees today and in the future?
JBQ: Now that there’s been a big loss of home equity and it’s on the rise again, people might be taking a different view of it because they don’t expect home equity to rise rapidly. On the whole, I think people have just gotten over the idea that their home equity will go up by large amounts, so they’ll be more inclined to treat it more sacredly than they did in the past.
I’m in favor of paying off the house before you retire. I think it’s a very valuable thing. If you don’t have mortgage expenses when you retire, that is a huge plus going ahead.
Written by Jason Oliva

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