Posts Tagged ‘retirement’

The Stock Market Drops. Now What?

Thursday, February 7th, 2019

The Stock Market Drops. Now What?

In October 2018, the Dow Jones Industrial Average, a widely followed measure of stock-price performance of 30 of the largest U.S. companies, dropped 1,380 points in just two days. While that sounds scary, it was just a 5% move, taking the index back to mid-July 2018.

Still, you might have noticed that when your funds have been doing well, you feel pretty euphoric, but when they’re down, you feel a lot worse than the pleasure you felt when they were doing better. This is a psychological effect known as loss aversion, and it’s believed to be hard-wired in to our brains. The best way to respond to these emotional swings is to try to take emotion out of the equation altogether. Over long market cycles historically, markets have moved up, although, as always, they fall eventually. It’s that long historic sweep that you should focus on, not short-termmovements. You should also pay attention to the things you can control in investing and ignore what you cannot change. Here are a few tips to keep inmind:

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Is There a Secret Formula for Financial Wellness?

Tuesday, February 5th, 2019

There are many prescriptions to get to financial health. Here are four proven strategies to help you get there:

 Setting and sticking to a budget

In 2017, 78% of Americans said they were living paycheck to paycheck, up from 75% three years earlier.1 Part of the reason may be that only 41% of us use a budget,2 even though it’s one of the best ways to keep track of where our money goes.

Fortunately, it’s a pretty easy problem to fix. Try writing down what you spend every day for six months. At the end of six months, add up what you have spent in major categories (living expenses, transportation, dining out, and so forth), and see if what you’re spending money on brings you joy. If it doesn’t, time to create a budget! Budgeting is the process of taking control of your money, rather than trying to figure out where it went. Budgeting looks forward, not backward.

Saving for emergencies

Just 39% of U.S. households have the savings for an unexpected

$1,000 outlay,3 such as making out-of-the-blue house or car repairs. Many experts think you should have three to six months of living expenses stashed away. Saving up doesn’t need to be hard. Simply put $40 or $50 a month into an account, and let it build — it will help you feel more secure financially.

Paying down debt

The average household has $134,058 in debt, including credit cards, mortgages, and auto and school loans.4 We suggest attacking two kinds of debt first:

  • High-interest-rate credit cards: Every dollar you spend paying down a credit card that charges 19% per year is like getting a 19% return on that money.
  • Small credit-card balances: Maybe you signed up for a store credit card and used it once or twice. Carrying a small balance may not seem like a big deal, but retiring this type of debt can give you an emotional boost.

Planning for retirement

The median working age couple has only $5,000 saved for retirement, according to a Federal Reserve study.5 Unfortunately, most people don’t start saving until it’s too late. There’s even a big cost if you delay savings just one year. Look at how much money a 26-year-old gives up by delaying the start of contributions by just 12 months:

Your Starting Age Your Contributions by Age 65 Your Account Value at Age 65 The Cost of Waiting One Year
25 $48,000 $324,180  
26 $46,800 $299,008 $25,172

This is a hypothetical illustration intended to show how a one-year delay in investing might affect savings. It is not intended to depict the performance of any particular investment. Assumes monthly contributions of $100, an annual 8% hypothetical rate of return in a tax- deferred account, retirement at age 65, and no withdrawals. Savings totals do not reflect any fees/expenses or taxes. The accumulations shown would be reduced if fees and taxes had been deducted.

You may be able to achieve financial health simply by following these four guidelines.

1 Source: http://careerbuilder.com. National survey conducted online by Harris Poll on behalf of CareerBuilder from May 24 to June 16, 2018.

2 Source: U.S. Bank, CNN.com, October 24, 2016. https://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html

3 Source: https://www.bankrate.com/banking/savings/financial-security-0118/

4 Source: https://www.nerdwallet.com/blog/average-credit-card-debt-household/.  Balances as of June 2018.

5 Source: https://www.marketwatch.com/story/the-typical-american-couple-has-only-5000-saved-for-retirement-2016-04-28

 

February Plan Sponsor Checklist:

Thursday, January 31st, 2019
FEBRUARY PLAN SPONSOR CHECKLIST:

FEBRUARY PLAN SPONSOR CHECKLIST:

• Update the plan’s ERISA fidelity bond coverage to reflect the plan’s assets as of December 31 (calendar-year plans). Remember that if the plan holds employer stock, bond coverage is higher than for non-stock plans.

• Issue a reminder memo or email to all employees to encourage them to review and update, if necessary, their beneficiary designations for all benefit plans by which they are covered.

• Review and revise the roster of all plan fiduciaries and confirm each individual’s responsibilities and duties to the plan in writing. Ensure than each fiduciary understands his or her obligations to the plan.

The Ins and Outs of Long-Term Care

Wednesday, January 23rd, 2019

The Ins and Outs of Long-term Care

Imagine for a moment that your elderly mother slips and falls and breaks an arm and a leg. She is hospitalized and undergoes rehab — for 12 weeks. Most people think of chronic illnesses when they think of long-term care, but accidents can also trigger the need for extended nursing care, as well as physical and occupational therapy.

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When Employees Ask For Advice About Retirement Savings

Friday, January 11th, 2019

When Employees Ask For Advice About Retirement Savings

Employees may ask you for advice about how much of their income they should be saving for retirement, how much they should already have saved, and how much they will need. It’s never a good idea to give one-size-fits-all answers to these important questions, but it’s good that you’re interested in helping participants learn more.

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How Student Loan Debt Impacts Retirement Savings

Thursday, January 3rd, 2019

FMI: How Student Loan Debt Impacts Retirement Savings

If your workforce includes recent college graduates, it’s likely that some of them have debt associated with their college years. Student debt may play a large part in the finances of these young (and even not-so-young) employees; that’s why a complete picture of employee financial wellness should consider it. (more…)

January Plan Sponsor Checklist

Tuesday, December 18th, 2018

January Plan Sponsor Checklist

JANUARY PLAN SPONSOR CHECKLIST:

• Send payroll and employee census data to the plan’s recordkeeper for plan-year-end compliance testing (calendar-year plans).

• Audit fourth quarter payroll and plan deposit dates to ensure compliance with the Department of Labor’s rules regarding timely deposit of participant contributions and loan repayments.

• Verify that employees who became eligible for the plan between October 1 and December 31 received and returned an enrollment form. Follow up for forms that were not returned.

Boost Your Savings Once The Kids Leave The Nest

Thursday, December 13th, 2018

FMI - Boosting Savings After the Kids Leave the Nest

For many couples, retirement planning takes on fresh importance once their children leave the nest, especially if  they have put off savings during the child-rearing years. If this is your situation, think about directing a greater share of your income toward your retirement. It may be helpful to devise a strategy several months before you face an empty nest, figuring out how far behind you are in building your nest egg. Having a written budget is critical, as is auto-depositing your contributions. That way you’re not tempted to spend your increased income once the kids are launched.

When Plan Participants Leave Your Company

Tuesday, December 11th, 2018

FMI: When Plan Participants Leave Your Company

What happens when plan participants leave your company?

There is a provision in the Tax Cuts and Jobs Act passed December 22, 2017, that affects plan participants who terminate employment with an outstanding loan. Before passage of the law, the loan would have been due immediately.

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Accelerated Retirement Is Possible If You Follow The Right Roadmap

Friday, December 7th, 2018

FMI - Retirement Planning

Everybody imagines retiring early, but few people manage to do it. A recent Willis Towers Watson survey reported that far more working Americans are planning to retire after age 65 (46%) than before it (30%).1 Here are five steps you can take to jumpstart the process.

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