What Does Saving Money Really Mean to You?

ST. CROIX INSIGHTS

What Does Saving Money Really Mean to You?

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

I thought I was saving money for retirement. It turns out there is another side of the coin.

 

My Aunt Hank

My Aunt Hank, one of my all-time favorites, used to wear electrical tape around her shoes because she couldn’t afford to purchase new shoes. When I took her grocery shopping she would ask for a 6-pack of pop because she couldn’t afford a twelve pack of Coco-Cola (or so she said – I knew better!). Or stealing the sugar from the restaurant and bringing a few packets home for coffee in the morning. Now that’s a real life example of saving money at its core. How many of you would do that? Today, our shoes get a little dirty and we’re on amazon.com buying new ones.

 

Hudson Retirement Saving Strategies

Retirement & Taxes 

I bet we all have a host of ways we try to save money, day-in and day-out, and my guess is you’re pretty successful at it.  At the same time, I bet you’ve overlooked a major expense that we’re all going to face when we retire: taxes. You’ve saved all these years into your IRA, 401k, 403b, SEP or Simple IRA plan but haven’t considered helping prevent your retirement accounts from being consumed by taxes. Uncle Sam is the uncle who shows up and never leaves. If you’re not careful, he’ll eat you out of house and home.

 

With the exception of a Roth IRA, contributions are contributed on a pre-tax basis and upon distribution, these types of accounts (IRA, 401k, 403b, SEP, Simple IRA) are taxed at the ordinary income rate. The tradeoff is tax-free growth since taxes are paid upon distribution at retirement.

 

A Bigger Trade Off

But, here’s the bigger trade off. What happens to your retirement accounts when you die? Heirs potentially encounter not only income taxes on the account, but also potentially estate taxes. You need to add it all up – all of your retirement accounts, your home, your investments, and even your business to determine your federal estate tax rate. I also failed to mention any State taxes which you may need to include. It doesn’t take long before over 50% of your retirement accounts could be eroded by taxes. Chances are you haven’t worked all these years just to pay taxes, have you? I’m all for paying my fair share, and my fair share alone. I would rather see my family and favorite charities benefit from the fruits of my labor and planning.

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Ask yourself- can my portfolio support my lifestyle in my retirement? 

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How Much Money Do I Need To Retire?

ST. CROIX INSIGHTS

 

How Much Money Do I Need To Retire?

BY BRETT ANDERSON/ST.CROIX ADVISORS, LLC

How much money do I need to retire? That’s the $64,000 Question

A key phrase that started with a 1950’s game show where you were asked a series of questions and with the correct answers you’d win $64,000.  When you get right down to it, it’s probably no different when you meet with a CERTIFIED FINANCIAL PLANNER™ (CFP®) such as me.

Retirement Questions to Ask

I have to ask you a host of questions including:

  • Where do you want to retire?
  • What type of lifestyle do you want to have in retirement?
    • Travel – where, how often, the type?
    • Grandkids – are you going to spoil them?
    • How are you going to deal with sickness and healthcare costs?
  • What sources of income will you have?
    • Social Security?
    • Can your investment keep up with that darn ‘I’ word- inflation?
  • Do you want to only live off of earnings from your investments, or do you mind eroding principal during your lifetime?
  • Can your current investment portfolio sustain your lifestyle for 25, 30 or 40 years?  At first glance, most may dismiss living 30 or 40 years in their retirement years.  However, I’m here to tell you that for over 25% of the individuals reading this, it’s possible.
  • Do you want to leave money for your kids or your favorite charities?
  • Let’s not forget about our favorite Uncle, Uncle Sam. He plays a major role in your decision process.
  • And the list goes on…

Oh, how it would be easier if we could just answer the questions correctly and receive that $64,000.  But, when I start asking questions that could have several different answers, there isn’t always an easy ‘winning number’ to identify.  It can be evolving and sometimes a moving target.

Retirement Savings

If you have a significant other, agreeing on a number of factors listed above helps to provide the clarity you’ll need to get the process started.

Sometimes, when you start the financial planning process, you’ll discover that your budget can’t support your “dream retirement lifestyle”.

Stillwater Retirement Planning

That doesn’t mean you can’t have a close second “dream retirement lifestyle”.  Just because you can’t stay at a JW Marriott every vacation, but instead you have to settle for a Courtyard by Marriott, what are you really giving up?  Maybe you will have to walk or drive a block or two to the beach instead of having a home right on it, but I figure this way, you just saved yourself a few bucks, and potentially a few headaches.  Just redesign and retool to achieve your dreams.  It takes time, energy and resources to plan your retirement and the rest of your life.  One of the best parts of what we do is helping people plan their retirement and navigate that moving target.

Also, sign up for our eNewsletter blog that includes timely financial matters, news, and planning strategies that you can implement today.

Ask yourself- can my portfolio support my lifestyle in my retirement? 

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