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Sustainability Should Be a Priority When Planning For Retirement

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The local annuities market has grown over the last few years. At the same time, fewer individuals are opting for conventional life annuities, which is quite interesting since conventional life annuities are the only products that provide guaranteed returns for the rest of the retiree’s life. However, these products tend to be expensive (particularly ones that adjust for inflation) and income yields are low.

While some people are prepared for retirement, most are not saving enough. These retirees hope that the market will make up for any lack in capital and are opting for living annuities, which offer more flexibility and the potential to earn higher returns.

The real issue here is a lack of savings. If you find yourself in this category then don’t despair: Proper planning and rational investor behavior can help you manage the problem.

The key is planning

Investors need to examine their financial positions and speak frankly about their options long before they retire. This may be a painful exercise but will present you with more options and ultimately choices. Having as much information about where your funds are invested and what the best performing unit trusts are, help make these choices less daunting. Think about how much you have saved and how long you will need support yourself during retirement. The key risks most retirees face are outliving their money and inflation eroding their savings. Developing a plan will help you account for these risks. As our life expectancy continues to increase it is advisable that you limit your consumption during the early retirement years.

Facing the facts

A lot of capital is required to enjoy the same lifestyle after retirement. If you retire with less than you need you can offset it by drawing more income early on, but this is not sustainable. Spending too much after saving too little is guaranteed to end badly.

You can consider delaying your retirement a few years to save a bit more. It tends to be easier to extend your career rather than go back to work after retirement. This may not be the most attractive option available, but it allows you more time to save, less time to live off those savings and gives your capital more time to grow.

You should not underestimate the impact this extra time will have on your savings. Extending your career in your twilight years may not be that appealing, but it is a better option than having to survive on a low retirement income or running out of money too soon. While some factors may be out of our control we can at the very least influence the longevity of our savings.


Fully Vested and Planning for Retirement

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Just as I was getting my monthly budget together, the quarter was up and I was given the opportunity to invest in the company sponsored 401K plan…fully vested immediately.  The company matches up to 5% of my salary.

It has been a LONG TIME since I had a company matched 401K opportunity. So effective this week, I am investing 20% of my corporate job’s income in the 401K. I can change it at any time, but I have some catching up to do.

What do you think? I’ve picked a pretty mixed portfolio but lean toward more aggressive options.  I’m so excited.

Any tips or trips would be greatly appreciate for this as really it’s been years and I was in a VERY different place back then.

I have an idea of how this will affect my take home pay, but won’t know for sure until the end of this week when I get my first check with the deduction taken out.  Then I will post my new monthly budget.


Financial Goals: 2017 & Beyond!!!

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For the past couple of years I’ve made our family’s financial goals public, sharing them with you all and tracking along throughout the year to see how we did (see 2015 goals here and 2016 goals here). We met our financial goals the past two years and hope this year will be no different.

2017 Financial Goals:

  • Pay $30,000 Toward Debt. This may seem like no big deal since we had this same goal last year and met it, no problem. But this year will be different because our salary is going to decrease a bit. Hubs is going back to school and mid-way through the year I’ll be leaving my part-time job. I’ve kept hinting that I have some news on the job front but I’m still not in a place where I’m able to share it. Probably within the next few weeks I’ll be able to elaborate on this. Overall, though, our salary will be down this year compared to last year.
  • Fully Fund A Roth IRA. Our first two years of debt payment were narrowly focused on debt payoff at the exclusion of all else. When I started my full-time job in August 2015, a 7% retirement contribution was required (and is matched by my employer). In the past year (we’re almost at the 3-year mark for our debt payoff journey), I’ve tried to add in a little extra balance. That means more of a focus on savings for retirement and on spending a little bit for fun (e.g., monthly date nights, kids’ activities, etc.). I’m still continuing to do my mandatory pre-tax retirement contributions (it goes into a 401(k) type thing, but the education equivalent…I think it’s a 401(c) or something??) I’ve also tried to separately put a little money into a Roth the past couple years, but we’ve only managed to do about $1,500 or $2,000ish each year. This year the goal is for us to have 1 fully funded Roth at the maximum allowance (I believe it’s still $5,500). In the future we’ll work toward having 2 fully funded Roths, but I think just having 1 will be a good goal for this year, as we still work diligently to reduce our debt.
  • Mom & Dad Getaway. This is still a very new and not fully fleshed out goal but one that has been floating around in my mind for quite awhile. For newer readers, hubs and I have twin 4.5 year old girls. One of our favorite (pre-baby) passions was to travel. We used to travel a LOT. In fact, that’s one of the reasons we have in our mind for why we want to be debt free: so we can have the freedom to travel! In February 2015 we set a goal to go on a cruise for my Mom’s 60th birthday and we did! We saved up for over a year and in April 2016, we went on a family cruise. It was a lot of fun and I’m glad we did it. But it kind of re-kindled this flame in my heart – this desire to travel with my husband! In the past nearly half-decade since we’ve had kids, we haven’t had a single overnight away from them. Not one. We love our kids, but I also think we’re now at the point that it would be healthy and good for us to have a little mini-getaway solo. It likely wouldn’t be for long (we’re thinking 4 days/3 nights) and it likely wouldn’t be extravagant (maybe drive out to San Diego since that’s only a few hours drive). So I’m sure it won’t be as costly as the cruise was. We don’t have defined or “set” plans in place, but we’ve talked to hubs’ mom about it and she’s volunteered to come out to Arizona and watch the girls for us so we wouldn’t have to be paying for childcare. I don’t know when this would be (maybe over summer; maybe not until fall), but it will happen sometime in 2017. It needs some work to make the goal more defined, but it’s a definitely goal we have for this year.

 

I know this is a get-out-of-debt blog, so some of the things I talk about (e.g., savings, spending) may be a little controversial. I am proud, overall, on how frugal we have been and how much we’ve been able to reduce our debt. I think ours is a success story. If we had less debt, we may have just been able to go gung-ho the whole time (we did for a solid 2 years!!!) and just eliminate the debt in its entirety. But with the amount of debt we’re grappling with, I didn’t think it was possible for us to be “gung ho” for a solid 5-6 years. I knew we would end up falling off the wagon. Therefore, we’ve purposely built our budget in a way where we can SUCCEED. That includes building in a little “wiggle room” for a monthly date night, weekly dance class for the kids, and having friends over for dinner every couple of months. These “life” things are important to us and we wouldn’t be able to make it through to the finish line if we didn’t allow them.

It’s been so encouraging to watch our debt shrink. We now owe $75,000 according to our most recent debt update. Here are our long-term goals:

2017: $30,000 toward debt payments

2018: $30,000 toward debt payments

2019: DEBT-FREE by the middle of the year!!!!

2019 still seems so far off! But then, we started this journey in 2014 and that feels like it was just yesterday! So I know 2019 will be here before we know it. We’re over half-way there!!! I hope you’ll continue to stick around while we’re on our journey. And I wish you luck on your journey as well.

 

What are your 2017 financial goals? Do you set annual goals for yourself and/or your family?


Enjoying Your Golden Years: Ways to Avoid the Top Retirement Home Buying Mistakes

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Choosing a place in retirement to call home is not a search to take lightly. Not only is it possible to end up in a place that is a poor fit for your lifestyle and personality, you can easily spend too much, go with the wrong financing alternative, or neglect to plan for the long term. Whether you hope to live in a retirement home or in a house that you buy, it’s important to head in with a plan, vetted by a personal finance adviser. Before you do any of this, though, you should look at kind of mistakes that others have made before you. You need to be careful to not repeat them.

Location

Whether you believe your home in retirement should be your own or like the idea of a managed retirement center, you can’t make informed decisions without experience. Buying without trying, however, is a common mistake.

Move to each location for a week to give it a test drive. There are all kinds of things that you can discover this way — that you don’t like the people, that you can’t stand being far from your friends and family, or that poor availability of public transportation makes your life more difficult. It’s even possible to find a location irksome for unpleasant noise levels or smells. It’s never a good idea to skip the trial part.

Know Yourself

If your friends have bought homes in retirement, you may decide that it’s the right choice for you, too. If you keep hearing all the time that West Somerset, Dorset, North Norfolk and other such places are the best for life in retirement, you may decide that there’s nothing left to do but to go to one of these places, yourself.

This is hardly the right way to go about building a life that makes you happy, however. Everyone has unique preferences, and you want to think about yours. While a coastal location might be very popular with some, you may personally hate windy locations, and the thought of storm floods may terrify you. Personally, you may prefer Liverpool city over West Somerset, for its Beatles connection (you can check it out online at EntwistleGreen.co.uk).

You may even decide that all your friends who have bought homes have ended up house-rich and cash-poor, and decide not to go down that path yourself. You need to exercise independent judgment every step of the way.

Don’t Underestimate Costs

Certainly, anyone would plan adequately for the initial payment up front, repairs, remodeling, maintenance, property taxes and so on. What they may forget, is how living expenses, transportation, healthcare and other expenses become more expensive each passing year. It wouldn’t be a bad idea to enlist an accountant for help finding out how much the actual costs will be over the next few decades. You will need to take these calculations into account when you plan to spend on a house. The more you need for day-to-day expenses, the smaller the home is that you will be able to afford.

Research Customer Satisfaction

Many retirement homes and communities think up innovative service offerings, and it can be easy to fall for them. Before committing to a location, however, it’s important to do considerable research talking to residents, looking online for complaints or lawsuits, and simply waiting to see how things develop. You don’t need to have your home waiting the very day that you retire, after all. Being an early adopter is never a good idea for a place that you need to go home in your golden years. If you are unsatisfied at some point down the line, it can be hard to find the energy to sell and move all over again.

Plan Ahead for Driving

Some retirement destinations provide easy access to public transportation, and others don’t — residents need to be able to drive themselves. Seniors can feel stuck in such locations, especially when they are no longer drive. It can also be a major source of annoyance to have no such easy access to important places nearby — stores, entertainment venues, places of worship so on. It’s always a good idea to be close to the places that you need to go to.

Consider Alternatives

Britain has many retirement villages — brand-new townships with every facility needed to be built right outside. It is one of the most important positives of these villages, that they also put hundreds of fellow residents within easy reach. Friends tend to be easy to make. Such villages are a viable and alternative to traditional retirement homes or flats where one is required to live one’s own. It’s important to investigate every alternative available.

Louise Fletcher has had a career in real estate ever since leaving school. Working in various positions, and niche’s over the years she has a lot of valued information to offer her readers.


Under Contract

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We are now officially under contract!!!

Not hubs & I (we still haven’t even started house-hunting, but plan to start in August!! Can’t wait!!!) – my dad’s Utah house!

After receiving a couple competing offers, we accepted one that we felt was more than fair (it’s actually over our listed asking-price). We’ve already completed inspection and all the requested repairs are super minor, so we’re paying a handyman to get it all fixed up.

At this point, the last hurdles are in regard to the buyer’s financing. Our realtor has been in contact with the lender and believes the loan will be funded without a problem. Given that the buying price is above the list price (and above the comparables our realtor pulled), we’re holding our breath and crossing our fingers that the appraisal comes in high enough to cover it. Fortunately, our realtor is a rock star and has made up a whole list of home improvements for the inspector and feels confident that the appraisal shouldn’t be a problem.

If all works out with buyer’s financing, we are set to close on August 15th! Super pumped!

Initially, we were thinking we wouldn’t make too much off the sale of this home. Remember, both my siblings were in favor of renting it instead of selling due to this reason.

But given our higher-than-expected sale price, we should stand to net nearly $100,000!!! Not too shabby!

The next question is what to do with the money.

My dad does have a decent-sized net worth but, to date, we’ve done next-to-nothing with his investments. Everything is still in the original investment accounts he selected and has not been touched. We want to be somewhat conservative because my dad is legally disabled and will never be able to work again (if interested, read more about his condition here). His physicians have said that his illness tends to have a life expectancy of 2-20 years. If he lives another 20 years, he could easily burn through all of his savings. He’s already in assisted living and his care is incredibly expensive. So we really need to be smart and manage his money wisely so that costs of his care don’t end up falling on the shoulders of my siblings and me.

I’m a fan of pretty boring investment strategies. Mutual funds and such. My brother has talked about perhaps investing in real estate back in the Austin area (which makes it less complicated and risky than an out-of-state rental). He’s even thrown out the idea of establishing an LLC for a rental property so my dad’s other assets are protected. Depending on cost, we could possibly pay for a rental with liquid cash without needing to withdraw from current investments (the alternative would be putting a large amount down and taking out a small mortgage).

I’m open to various ideas, but I’m also a fan of EASY. Taking over my dad’s affairs has been incredibly time-consuming and, frankly, none of us has time for it. Meeting with an investment advisor once or twice a year is infinitely easier than dealing with rentals and such. That being said, in the past year that we’ve been in charge of my dad’s finances, his investments really haven’t performed great. He’s averaged about a 4% rate of return. I’d like to see closer to an 8-10% return, if at all possible. At only a 4% rate of return, we’re eventually going to eat into his nest egg. Fortunately, he had enough cash in the bank that we haven’t touched any investments at this point but eventually the liquid money will dry up and we’ll have no other option but to raid his investments in order to pay for his care.

What do you all think? If you were charged with caring for a parent’s estate, what types of investments might you make? What are your thoughts of investing in mutual funds versus investing in real estate?

Another possibility is to still invest in IRAs. My dad technically has an “earned income” because he received a generous severance package from his previous employer before having to leave due to his health issues (it’s paid out monthly for another year still). So would it be better to actually fund a retirement account versus buying mutual funds? Or is it better to keep the money more liquid than in retirement or real estate? Something like mutual funds that are easier to sell and claim the cash?? My dad is 60, by the way. I’d value any and all input you may have!


Year Of Becoming An Adult: Final Status

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Back in October 2014 I wrote about wanting to use 2015 to really “become adults.” To me, this meant taking care of some much needed issues that were in addition to my 2015 financial goals. I wrote a few posts throughout the year with updates (January update, March update, September update, October update), so this will be my final update of the series.

  1. Wills. Wills were actually drawn up at the beginning of 2015, but it took us awhile to actually get them notarized. This task was completed by mid-year. Final status = Complete
  2. Life Insurance For Hubs. We had intended to start working on this mid-year, but didn’t actually get around to applying until October. In November hubs completed all the bloodwork and in early December he was asked to supply some additional information (all stemming back to his mysterious illness at the end of 2013 where our medical bills are from). He finished everything on his end but we’re still waiting to hear back from the company. When I first applied for health insurance it took about 3 months to all be processed so I’m thinking this is normal (and not something directly related to his mystery illness). If he doesn’t hear back sometime in the next couple weeks we’ll check back with them but I’ve got my fingers crossed everything is in order and our next interaction will be mailing off a check to actually finish the process. Final status = Well underway, but waiting to hear back from insurance company
  3. Open Retirement Accounts. We opened up a Roth IRA in April 2015 and a 401(a) through my work in July 2015. I fund 10% of my pay to the 401, and we’ve saved a little extra here and there for the Roth (but a truly minimal amount…something I’d like to increase in 2016). Final status = Complete
  4. Open College Savings For The Kids. We opened up one 529 for each child in October 2015 and we’ve been funding them with $25/month each ($50/month total). Not a lot, but every little bit helps! Final status = Complete

Overall, not too shabby. I wish we’d started the life insurance stuff a bit earlier in the year so it was all wrapped up and done by now, but at least it’s well underway and if it doesn’t work out it will be because we were denied (not due to our own lack of trying). But hubs’ health has been great and, especially with his weight loss, I’m really hoping everything goes through smoothly and he’s able to be insured. It will certainly give me great peace of mind.

How have you done on your financial (or other) goals in 2015? Do you have any new goals or resolutions set for 2016? I’d love to hear them!

 


Move = Complete

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Hi friends!

I hope you had a great weekend! We arrived back in Tucson yesterday after a whirlwind of a trip and I have never been more thankful to sleep in my own bed!

Initially, my brother was going to go assist my Dad with loading a moving truck a month or so ago but, due to circumstances beyond anyone’s control, that didn’t happen. My sister and I were both unable to go for the originally scheduled move date but I decided to go over my Thanksgiving break since I had a few days off from work (though one is never really “off” in academia – I monitored my email daily).  At first I had booked a flight to go alone:  fly out on Monday, load on Tuesday, then fly back on Wednesday so I could spend Thanksgiving with my own family. But after some thought and discussion, we decided to make a family trip of it. I’m so grateful it worked out that way because I really needed the emotional support of having someone else there with me. Moves are stressful enough (one of the top 5 life stressors according to here), but I think things were exacerbated a bit being that this move was not exactly a happy, exciting, or even desired thing. It was more a chore of necessity to get my Dad somewhere closer to family where he can be helped and watched over better.

Unfortunately, we couldn’t leave town until Wednesday because hubs’ work had him busy all the way through Tuesday evening (he worked late to finish up on time). So we made a 14-hour drive on Wednesday (some of it in snow driving only 20 mph). It was nice that we got to spend all day Thursday hanging out, enjoying good food, and visiting with extended family that I don’t get to see too often. On Friday we had movers, so we fortunately didn’t have to do any heavy lifting, but we still had to direct things which was rife with stress given that not everything could go (my Dad is downsizing), and this was quite troubling for him to see things get left behind.

After the truck was all packed, my family went and checked into a hotel (there was still a guest bedroom set that was left behind in my Dad’s house so he still had someplace to sleep but his other bedroom set was packed). We all took a long family nap, and then met back up with my Dad that evening to go see the Christmas lights at Temple Square. Besides it being the coldest weather the girls had ever experienced (bundled up in 4+ layers and still complaining of the cold in 23 degrees), they really enjoyed seeing all the lights! I can’t wait for Christmas this year – it’s going to be such a fun holiday with them!

We left town on Saturday morning, but split the return drive into two days so it wasn’t quite as grueling. Still not what I would consider pleasant by any stretch of the imagination, but far preferable to our 14-hour one-day drive. Plus – the girls got to see and play in snow!!! They’re obsessed with Frozen (they were late to the Frozen game because we didn’t let them watch movies until just relatively recently), and they kept pointing at the snowy mountains saying, “Look!!! Elsa’s ice castle!!!” Pretty adorable!

Financially speaking, the trip didn’t cost us anything since my Dad covered our costs for gasoline, lodging, and food (all of which was pretty minimal. It actually saved my Dad money for us to all drive compared to what my plane ticket had cost). The only other cost incurred was that of missed work for hubs. Yes, no one really works on Thanksgiving Day, but he could have worked over the weekend and was unable to since we were out of town.

Speaking of….I’ll be posting a debt update later today. I have to maintain a positive attitude and realize and acknowledge that November is always a relatively down month for hubs’ business. But, of course, it’s a bit disappointing to not have earned as much as we would have liked/needed in order to make our astronomically large planned debt payment (we’d planned for a $4500 debt payment and didn’t come anywhere near that). Those numbers will be up later.

But to end on a happy note, I’m so thankful that the first phase of this move is complete. My sister will be meeting the movers in Texas and overseeing as things are unloaded. She will also be the person to help actually set things up once they come off the truck. And, just like that, the burden has shifted off my shoulders and onto hers. I’ll still be primarily responsible for paying my Dad’s bills, but all the day-to-day things will surely fall to my sister now that he’s close to her.

Right now my Dad does NOT want to sell his old Utah house. We’re trying to take things in baby steps so, rather than pushing him too far, we decided it could just sit for now. I’ll be hiring a lawn-care company, his brother (my uncle) will check up on it regularly, and we will revisit the issue in the Spring or Summer. It’s likely we’ll make another family trip up there at that time so hubs can do some general handyman work around the house and we can finish clearing it out of its leftover contents.

I have to say – my Mom has been caring for her aging mother (my grandmother) for a half decade. My grandmother did not do a great job at planning for retirement so the financial burden of her care has fallen directly to my Mom as the only child. It pains me to see the stress it has caused my mother and the financial toll is not trivial (over $4,000/month). I hate that my siblings and I are in the caregiver role for our father, especially at such a young age. That being said, I am beyond grateful that my father took better precautions than my grandmother had, and that he actually has assets (both liquid and real estate) to help pay for his care. As stressful as the situation has been for us, I cannot begin to fathom how much worse it could be if all of these costs were falling directly onto our shoulders. My heart goes out to anyone who has had to financially take over caring for their parents. This has definitely been a lesson to me to get our financial house in order so we never leave our children with the burden that’s been placed on my mother in financially caring for my grandmother. It’s hard enough to take over as caregiver. The least we can do is make sure that we have ample money available to pay for whatever care we may need as aging adults.

Food for thought on this Monday morning. Have a good one!


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