Posts Tagged ‘finances’

Managing the Emotions of Volatile Markets — a Survey

Thursday, October 4th, 2018

The financial markets in 2018 experienced lots of ups and downs we haven’t seen in a long time. How do you stay focused on your goals when the markets get volatile? Take this short quiz to uncover your feelings about investing.

  1. When do you plan to stop working?
    1. 40 years or more
    2. 20 years
    3. 10 years or less
  1. When the stock market drops 10% or more, how do you feel?
    1. I pay no attention.
    2. I become a little concerned, but generally stick to my investment game plan.
    3. I freak out.
  1. How often do you check your retirement account balance?
    1. Once a year
    2. Occasionally
    3. Every day
  1. Which of the following statements captures your feelings about losing money in the short run?
    1. Markets go up and down every day. Over longer timeframes, their historic tendency has been to rise.
    2. I check to see if my asset allocation is significantly out of balance, but generally don’t do anything about it. Markets eventually recover.
    3. I feel sick, and want to sell everything.
  1. What’s the most important factor when thinking about risk and reward in your retirement plan?
    1. It’s time in the market, and not timing the market, that counts.
    2. I accept risk as a normal part of investing. Without some level of acceptable risk, I cannot expect to get a reasonable return.
    3. The risk of losing money in the markets is intolerable to me.

Score your answers:

Give yourself 20 points for each answer “a”; 15 points for every “b” and 5 points for each answer “c”. Total your score.

80 to 100 points (Green light): You are comfortable with maintaining your long-term investment strategy through volatile markets.

40 to 79 points (Yellow light): The risk of loss is somewhat concerning to you, whether that’s because you are getting closer to retirement age or feel anxious when markets go down. Think about resetting your asset allocation to be more conservative.

20 to 39 points (Red light): The risk of losing money is weighing heavily on you. Spend some time to understand how stocks, bonds and cash investments have performed historically, and consider working with a financial advisor who is sensitive to your feelings and who may be able to suggest investment products that seek to limit losses.

The scores are based on generally accepted investment principles and are not intended as investment advice or recommendations. There is no guarantee that a particular investment strategy or asset  allocation will meet your objective. Additional factors should be considered as part of a comprehensive review of your individual financial situation.

Employees Prefer a Retirement Paycheck

Tuesday, October 2nd, 2018

The shift away from traditional pension plans means today’s employees are largely responsible for their own retirement security. Yet many seem to long for the “good old days,” at least in the sense of knowing they will receive a monthly income throughout retirement.

What role should companies play in the retirement security of their employees, especially as it relates to steady retirement income? And how can employees best meet the need for a retirement income they can count on? Those were among the questions explored recently with about 1,000 U.S. employees.

While 54% of the survey’s respondents said they retain primary responsibility for their own retirement security, 27% said companies are primarily responsible, and 19% believe it’s the government that has primary responsibility. Asked if they would prefer a set retirement paycheck for life from their employer over a lump sum of money to invest themselves, 58% preferred the steady paycheck. Interestingly, that sentiment came not only from Baby Boomers, but also from Millennials.

Employees want to partner with employers

Employees continue to want to partner with their employers in the planning and execution of their retirement savings, the survey found. In fact, they said they want companies to be more involved in providing for their retirement security in the next five to 10 years; 61% of respondents agreed with that sentiment, compared to just 9% who said the employer should be less involved.

When asked whether they would prefer to set aside part of their salary into a company-sponsored retirement plan or into the Social Security program, about three-quarters said they prefer to channel their money to the company plan. In fact, 56% said they would prefer to save on their own rather than paying into Social Security, if those were the only two choices. Forty-four percent preferred Social Security to saving on their own.

This information, which was gleaned from MetLife’s Role of the Company Survey2, released in April 2018, aligns with research that found a crisis in financial confidence among single female retirees; close to half of those surveyed are not confident their savings will last through age 90.3

Annuities and advisors increase confidence

The concept of a paycheck for life could be realized, even without traditional pension plans, through the purchase of annuities. Among single retirees, 71% of women with an annuity felt confident that they could live the retirement lifestyle they want, compared to 56% of those without an annuity. The figure was 68% for single male retirees, whether or not they owned an annuity.

2 https://www.metlife.com/about-us/newsroom/2018/april/for-retirement-employees-prefer-steady-paycheck-over-managing-th/

http://www.limra.com/Posts/PR/News_Releases/LIMRA_Secure_Retirement_Institute_Single_Retirees_Feel_More_Vulnerable_to_Longevity_Risk.aspx

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The same research shows that working with a financial advisor can have a significant impact on retiree confidence. Three out of four single men and women retirees who work with an advisor were confident in living the lifestyle they want, while 66% of single men and 54% of single women who do not work with an advisor feel that way.

October Checklist

Wednesday, September 26th, 2018

  • Audit third quarter payroll and plan deposit dates to ensure compliance with the Department of Labor’s rules regarding timely deposit of participant contributions and loan
  • Verify that employees who became eligible for the plan between July 1 and September 30 received and returned an enrollment Follow up for forms that were not returned.
  • For calendar year safe harbor plans, issue the required notice to employees during October or November (within 30 to 90 days of the beginning of the plan year to which the safe harbor is to apply). Also, within the same period, distribute the appropriate notice if the plan features an EACA (Eligible Automatic Contribution Arrangement), QACA (Qualified Automatic Contribution Arrangement) and/or QDIA (Qualified Default Investment Alternative).

What Happens To Your Pension When You Die?

Friday, September 14th, 2018

Written by Carla Seely for Bernews.com.

What happens to your pension when you die?

Anyone who knows me will know one subject I skirt around and immensely dislike talking about is death; I don’t even like using the word – it is just so final.

For me personally, I am not sure whether I am afraid of dying, or if I am more afraid about being told I am going to die and only have a certain amount of time to live. I don’t want the pity stares or the “I am so sorry” comments.

I can’t imagine what my mum at age 63 felt when she was told she had terminal cancer and only 1–2 years to live. She never made it to her 65th birthday, but what she did do was make sure her affairs were in order and that her estate would be distributed as per her wishes.

A common question we get in the pensions industry is in regard to what happens to a balance in a pension upon death. It’s a valid question, and the answer depends on whether it is pre or post retirement, what type of pension product you have now and what option you might select in the future.

First things first: your company’s pension plan, whether it is a defined contribution or defined benefit, will have an option to designate a beneficiary; this also applies to individual pension plans. A beneficiary as it relates to your pension plan means, in the simplest terms, the person[s] whom you designate to receive the retirement funds in the event of your death.

When you enroll in your company pension plan or open an individual pension plan, there will be a section to fill out regarding your beneficiary designation: it will ask for the specific details of the beneficiary and what percentage of the pension balance you wish to leave them in the event of your death.

The amount designated to the beneficiary will be represented as a percentage, e.g. 100% to a spouse. You may elect to have multiple beneficiaries, e.g. 50% to a spouse and 50% to a sister, but most importantly, if there is a balance in your pension plan, who you leave it to and how you decide to split it is entirely up to you.

It is also important to note that a beneficiary does not need to be a family member – you can leave it to anyone, including a charity. However, one disclaimer is that if you put down a beneficiary that is under the age of 18, you must include a trustee who will take care of the funds until the minor becomes of age.

Once you retire and you want to start receiving a retirement income from your pension, you need to study the options available with the company that administers your pension plan, and also see what the competitors are offering to ensure you select a retirement option that supports your retirement goals.

Whether you choose an annuity with monthly payments or select the drawdown method to receive retirement payments, each retirement options has its own set of rules regarding how any residual balance would be treated with regard to a beneficiary.

Sit down with your pension provider and make sure you understand each option and the impact each option will have on retirement. The last thing any retiree wants is to discover they are locked into an option that isn’t working.

As I tell all my clients, we all work hard for the money we make and we can’t change our fate, but we can make intelligent decisions about our retirement.

– Carla Seely is the Vice President of Pension and Investments at FM Group. If you would like any further details, please contact her at cseely@fmgroup.bm or call +1 441 297 8686.

Learning From the Baby Boom Generation’s Actual Retirement Experience

Wednesday, September 12th, 2018

Soon-to-be-retirees are sometimes unclear about how their finances will actually look in retirement. You may be offering them financial wellness information, but may also be wondering what you can learn from the Baby Boom generation’s actual retirement experience. That’s the exact topic of an Insured Retirement Institute (IRI) annual survey and report, now in its eighth year. While the survey indicates a generally positive financial picture for current Boomer retirees, many are not confident with their preparedness. Fifty-eight percent of Baby Boomers have retirement savings in 2018, up from 54% in 2017. Of the Boomers who have retirement savings, 43% have $250,000 or more, up from 32% last year. Still, just 25% of Boomers think their money will last throughout retirement, and 28% said they are doing (or did) a good job with their financial preparation for retirement. As far as who is doing the best job of preparing for retirement, the survey shows it’s those who work with a financial professional; these have at least $100,000 saved compared to 48% of those without a financial professional.

Read more from the IRI report, Boomer Expectations for Retirement 2018, here: https://tinyurl.com/IRonlineBoomers.

Halfway Through The Year

Thursday, July 12th, 2018

As featured Bernews.com.

In our home, July marks our ‘check-in’ chats: discussions on any travel plans for the remainder of the year, whether we should upgrade any furniture or get a newer car, and so on. But our biggest and sometimes most ‘heated’ chat is regarding the semi-annual review of our finances and update of our ‘net worth statement’.

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Considering a Target-Date Fund for Your Retirement Plan?

Thursday, April 26th, 2018

Here’s what you need to know about this popular investment option

If you are like many investors, researching, selecting, monitoring, and adjusting your investments and asset allocation within your retirement plan can be a time-consuming burden. One possible strategy to consider may be a target-date fund.2 A target-date fund takes much of the decision making out of which asset classes to own, at which percentage weights, given your estimated retirement date. As that “target” date approaches, the manager of a target-date fund automatically adjusts your allocations to reduce your market risk. Here are some basic facts about target date funds that you should know before you buy:

It is a popular option for retirement plans. Target-date funds are growing in popularity as investment options in qualified plans. In fact, as of December 31, 2016, 88% of target-date mutual fund assets were held through defined contribution plans and IRAs, according to the data from the Investment Company Institute.3 (more…)

What Is Your Behavioral Finance?

Wednesday, April 18th, 2018

One thing I have learned during the course of my eighteen years in the financial industry is that a person’s view on money is like a fingerprint; no two views are exactly the same. They may have similar values, they may invest using similar methods but everyone treats money slightly differently from the next person. The question to ask is “What is your Behavioral Finance?”

Here are some of the typical behavioral traits people exhibit when it comes to finances:

a] Mental Accounting

The majority of people prepare a monthly budget and allocate certain parts of their pay cheque to certain bills. This “preparation” is slightly different with mental accounting. Mental accounting is the tendency for people to designate particular money for a specific purpose, without consideration for the big picture in terms of practicality. For example, a person can split their money and treat each portion differently, depending on which “account” it’s in. So, money in a savings account is treated differently than money meant for debt repayment. That is, even if a savings account is paying 1% pa in interest and their car loan is costing 7.5% pa in interest, the money they allocate to each “pot” they deem as equal because each “pot” of money has been designated for a purpose.

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Have a 401K Plan at a Former Employer?

Tuesday, April 10th, 2018

You may have had multiple jobs over your career, and left behind retirement account balances — critical building blocks for your retirement. Here’s a short guide to your options of what to do with a retirement account left with a former employer:

Roll it over to an IRA
• A rollover IRA allows you to continue any tax-deferred growth.
• A direct rollover IRA helps you avoid current taxes and early withdrawal penalties.
• You retain flexibility to select investments that fit your specific needs.
• A rollover IRA allows you to consolidate your retirement assets in one convenient place when you change jobs or
decide to retire. (more…)

Deciphering Investment Risk & Reward

Monday, March 26th, 2018

Over the course of my 18-year career in the financial services industry I have met many investors and based on our conversations, I can confidently state that only about half of them actually know what they have invested in. However, what is even more alarming is, their incomplete understanding of the risks associated with their investments. Risk and reward are two key components in understanding the type of investment you should be considering. (more…)