Cash Flow

Using the Bucket Strategy to Meet Retirement Cash Needs

Josh Bitel Contributed by: Josh Bitel, CFP®

Using the Bucket Strategy to Meet Retirement Cash Needs

If you are in or close to retirement, you are probably concerned about the recent market uncertainty. You may be wondering how your investment portfolio can be structured to provide the income you need, without putting the portfolio in a vulnerable position. 

The Bucket Strategy (not to be confused with the “Bucket List”) describes a cash distribution method to provide you with income from your portfolio during any kind of market cycle. 

Consider that we have four buckets, and that every investment within your portfolio fits into one of these buckets. This strategy can provide cash needed in retirement, even if equity markets drop or stay low for extended periods of time. 

Bucket 1:

The first bucket is designated for cash needs of one year or less. This bucket contains cash and short-term securities that mature in less than one year to support your needs for the next 12 months. 

Bucket 2:

The second bucket starts generating cash flow in the 13-36 month range, or years two and three. This bucket contains short-term bonds and fixed-income type securities that have a small amount of volatility, but are primarily designed for preservation of capital. The holdings in this bucket will pass on interest income that ultimately flows into the first bucket. 

Bucket 3:

The third bucket is structured to generate cash flow needs in years four and five, and primarily contains strategic income and higher yielding bonds (lower quality, longer maturing and international type bonds). However, they do pass on interest income that flows into the first bucket, much like bucket #2. 

Bucket 4:

The fourth, and last, bucket is made up of equities (stock investments) and other assets that have higher volatility like gold, real estate, commodities, etc. Many of these assets will produce dividends to help replenish the first bucket, if the dividends are set to pay in cash and not reinvest. Ideally, when the market is volatile, as we’ve been seeing lately, this bucket is left alone to ride out the market cycle and replenish as we recover.

The Bucket Strategy is designed to provide enough cash flow to get through roughly a 6- or 7-year period without needing to liquidate the stock portion of the portfolio. This should provide you with the confidence (and more importantly, cash) needed to enjoy your retirement and start working on your Bucket List! 

Talk to your financial planner to see how the Bucket Strategy might work for you.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.

Retiring? Here’s How to Maximize Your Last Year of Work

Nick Defenthaler Contributed by: Nick Defenthaler, CFP®

Retiring? Here's How to Maximize Your Last Year of Work

So you’ve decided to hang ‘em up – congratulations! Retirement is an extremely personal decision made for a multitude of reasons.

Some of our clients have been able to afford to retire for several years and have reached a point where the weekly grind isn’t as enjoyable as it once was. Probably dozens of thoughts are running through your head. What will life look like without work? How will I spend my days? Where do I/we want to travel? Do I want to work part-time or volunteer?

With so many emotions and thoughts churning, you might easily miss potentially good opportunities to really maximize your final year of full-time work. In this blog, I’ll touch on planning concepts you should consider to get the most “bang for your buck” as you close out your full-time career:

Maximizing Employer Retirement Plans (401k, 403b, etc.)

If you aren’t already doing so, consider maximizing your company retirement plan. If you are retiring mid-year, if appropriate, adjust your payroll deduction to make sure you are contributing the maximum ($25,000 for those over the age of 50 in 2019) by the time you retire. If monthly cash flow won’t allow for it, consider using money in a checking/savings or taxable account to supplement your cash flow so you can max out the plan. Making pre-tax contributions to your company retirement plan is something you should consider.  

“Front-Load” Charitable Contributions

If you are charitably inclined and plan to make charitable gifts even into retirement, you might consider “front-loading” your donations. Think of it this way: If you are currently in the 24% tax bracket, and you will drop into the 12% bracket once retired, when will making a donation give you the most tax savings? The year you are in the higher bracket, of course! So if you donate $5,000/year to charity, consider making a $25,000 contribution (ideally with appreciated securities and possibly utilizing a Donor Advised Fund) while you are in the 24% bracket.

This strategy has become even more impactful given recent tax law reform and the increase in the standard deduction. (Click here to read more.) This would satisfy five years’ worth of donations and save you more on your taxes. As I always tell clients, the more money you can save on your tax bill by being efficient with your gifts, the less money in the IRS’s pocket and more for the organizations you care about!

Health Care

This is typically a retiree's largest expense. How will you and your family go about obtaining medical coverage upon retirement? Will you continue to receive benefits on your employer plan? Will you use COBRA insurance? Will you be age 65 soon and enroll in Medicare? Are you retiring young and need to obtain an individual plan until Medicare kicks in?

No matter what your game plan, make sure you talk to the experts and have a firm grip on the cost and steps you need to take so that you don’t lose coverage and your insurance is as affordable as possible. We have trusted resources to help guide clients with their health care options.  

Those are just a few of many things you should be thinking about prior to retirement. With so many moving parts, it really makes sense to have someone in your corner to help you navigate through these difficult, and often confusing, topics and decisions. Ideally, seek out the help of a Certified Financial PlannerTM (CFP®) to give you the comprehensive guidance you need and deserve!

Nick Defenthaler, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He contributed to a PBS documentary on the importance of saving for retirement and has been a trusted source for national media outlets, including CNBC, MSN Money, Financial Planning Magazine, and OnWallStreet.com.


Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Generally, if you take a distribution from a 401k prior to age 59 ½, you may be subject to ordinary income tax and a 10% penalty on the amount that you withdraw, in addition to any relevant state income tax. Contributions to a Donor Advised Fund are irrevocable. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Can You Change Your Spending Habits in Retirement?

Sandy Adams Contributed by: Sandra Adams, CFP®

Can you change your spending habits in retirement?

I recently had some interesting conversations with clients, many of whom have been exceedingly good savers during their entire adult lives. These clients most often grew up in households that modeled frugality and modesty in spending, and they have followed suit. As they plan to enter the ranks of the retired, they find themselves with more saved than they are likely to spend, based on the lifestyle to which they have become accustomed. So now what?

In our conversations about “what could you spend” and “spending on things that would bring value and meaning to their lives,” these clients still struggle in many cases to imagine needing or wanting to spend even a fraction of the excess that they have accumulated. Why? I like to say it is because changing your spending “stripes” later in life is just hard to do.

When clients have learned to live a certain way with money, making significant changes may simply not be comfortable. Clients have shared stories about the challenge of hunting down the best clearance deals, something they do to compete with friends, or the fun in finding the best travel deals, even though they can afford to pay top dollar. And while circumstances may dictate how they spend their wealth in the future, these clients wouldn’t spend it now any other way. They have built the lives they want and enjoy. 

On the flip side, we work with clients who have developed lifestyles that are extremely “high-end” and keeping up with that lifestyle in retirement can take an extreme amount of saving and planning, particularly with longevity in the mix. Conversations with these clients about what expenses can be cut in retirement can be difficult. Even though some expenses go away (mortgages get paid, etc.), added expenses like travel, hobbies, etc., might come into play, especially in early retirement. Once you have become accustomed to a lifestyle, it is hard to cut back. I have found that many clients, given the choice, will work longer or save more prior to retirement rather than take less retirement income (i.e. cut back on their retirement lifestyle).  

So the answer to the question: Can you change your spending habits in retirement?

Probably not. Habits developed over a lifetime are very difficult to break.

My best suggestion:

Work with a financial advisor earlier rather than later to develop a retirement savings plan that allows you to spend whatever you want for your retirement lifestyle. The earlier you start your plan, the better your chance for success. If you or anyone you know needs assistance with developing a retirement savings plan, contact our Center Planning Team. We are always happy to help.

Sandra Adams, CFP®, CeFT™, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.


Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Three-Legged Stool Strategy

Tim Wyman Contributed by: Timothy Wyman, CFP®, JD

Tim Wyman, CFP®, JD Center for Financial Planning, Inc.® 3 legged stool strategy

Generating income in retirement is one of the most common financial goals for retirees and soon-to-be retirees. The good news is that you can “recreate your paycheck” in a variety of ways.

Retirement income might be visualized using a “Three-Legged Stool”. The first two sources, or legs, of retirement income are generally Social Security and pensions (although fewer and fewer retirees are covered by a pension these days). The third leg for most retirees will come from personal investments (there is a potential fourth leg – part-time work – but that’s for another day). It is this leg of the stool, the investment leg, that requires preparation, planning, and analysis. The most effective plan for you depends on your individual circumstances, but here are some common methods for your consideration:

  1. Dividends and Interest

  2. 3–5 Year Income Cushion or Bucket

  3. The Annuity Cushion

  4. Systematic Withdrawal or Total Return Approach

Dividends & Interest

Usually, a balanced portfolio is constructed so your investment income – dividends and interest – is sufficient to meet your living expenses. Principal is used only for major, discretionary capital purchases. This method is used only when there is sufficient investment capital available to meet your income need, if any, after Social Security and pension.

3-5 Year Income Cushion or Bucket Approach

This method might be appropriate when your investment portfolio is not large enough to generate sufficient dividends and interest. Preferably five (but no less than three) years of your income shortfall is held in lower risk fixed income investments and are available as needed. The remainder of the portfolio is usually in a balanced investments. The Income Cushion or Bucket is periodically replenished. For example, if the stock market is up, liquidate sufficient stock to maintain the 3-5 year cushion. If stock market is down, draw on the fixed income cushion while you anticipate the market recovery. If fixed income is exhausted, review your income requirements, which may lead to at least a temporary reduction in income. 

The Annuity Cushion

This method is very similar to the 3-5 year income cushion. A portion of the fixed income portfolio is placed into a fixed-period, immediate annuity with at least a 5-year income stream. This method might work well when a bridge is needed to a future income stream, such as Social Security or pension. 

Systematic Withdrawal or Total Return Approach

Consider this method if your portfolio does not generate sufficient interest and dividends to meet your income shortfall. Generally speaking, in a balanced, or equity-tilted, portfolio, the income shortfall (after-interest income) is met at least partially from equity withdrawals. Lastly, set a reasonably conservative systematic withdrawal rate, which studies suggest is near 4% of the initial portfolio value, adjusted annually for inflation. 

After helping retirees for the last 30-plus years create workable retirement income, our experience has shown us that many times one of the above methods (and even a combination) can help with re-creating your paycheck in retirement. The key is to provide a strong foundation – or in this case – a sturdy stool. 

Where Did It Go?

Do you ever find that you have too much month at the end of your money? Be honest, in the blink of an eye, extra money seems to vanish. For those still in their earnings years, one of the keys to accumulating wealth, thus achieving your financial objectives, is to stop the disappearing act. Transfer dollars from your monthly cash flow to your net worth statement by adding funds to your savings accounts, taxable investment accounts, and retirement accounts (such as employer sponsored 401k and 403b accounts) and IRAs (Traditional or ROTH). Another smart move is to use funds from your monthly cash flow to pay down debt … which also improves your net worth statement.

Saving money and improving your overall financial position is easier said than done. The truth is that saving money is more than simply a function of dollars and cents; it requires discipline and perseverance. You may have heard about the “paying yourself first” strategy. The most effective way to pay yourself first is to set up automatic savings programs. The 401k (or other employer plan) is the best way to do this – but you can also establish similar automated savings plans with brokerage companies and financial institutions such as banks or credit unions. 

Just as important, be intentional with your spending. Rather than thinking in terms of a budget (which sounds a lot like dieting), think about establishing a “spending plan”. Planning your expenses as best you can will help ensure that you spend money on the things that add value to your life and should help keep your money from mysteriously vanishing at the end of the month.

For a free resource to help track your cash flow, email Timothy.Wyman@CenterFinPlan.com.

Timothy Wyman, CFP®, JD, is the Managing Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® For the second consecutive year, in 2019 Forbes included Tim in its Best-In-State Wealth Advisors List in Michigan¹. He was also named a 2018 Financial Times 400 Top Financial Advisor²


¹ The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research is based on an algorithm of qualitative criteria and quantitative data. Those advisors that are considered have a minimum of 7 years of experience, and the algorithm weighs factors like revenue trends, AUM, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of 29,334 advisors nominated by their firms, 3,477 received the award. This ranking is not indicative of advisor's future performance, is not an endorsement, and may not be representative of individual clients' experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating. Raymond James is not affiliated with Forbes or Shook Research, LLC. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. Any opinions are those of Center for Financial Planning, Inc.® and not necessarily those of Raymond James.

² The FT 400 was developed in collaboration with Ignites Research, a subsidiary of the FT that provides special-ized content on asset management. To qualify for the list, advisers had to have 10 years of experience and at least $300 million in assets under management (AUM) and no more than 60% of the AUM with institutional clients. The FT reaches out to some of the largest brokerages in the U.S. and asks them to provide a list of advisors who meet the minimum criteria outlined above. These advisors are then invited to apply for the ranking. Only advisors who submit an online application can be considered for the ranking. In 2018, roughly 880 applications were re-ceived and 400 were selected to the final list (45.5%). The 400 qualified advisers were then scored on six attrib-utes: AUM, AUM growth rate, compliance record, years of experience, industry certifications, and online accessibil-ity. AUM is the top factor, accounting for roughly 60-70 percent of the applicant's score. Additionally, to provide a diversity of advisors, the FT placed a cap on the number of advisors from any one state that's roughly correlated to the distribution of millionaires across the U.S. The ranking may not be representative of any one client's experi-ence, is not an endorsement, and is not indicative of advisor's future performance. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. The FT is not affiliated with Raymond James.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Tim Wyman, and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Dividends are not guaranteed and must be authorized by the company's board of directors. Past performance is not indicative of future results. A fixed annuity is a long-term, tax-deferred insurance contract designed for retirement. It allows you to create a fixed stream of income through a process called annuitization and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face fees called surrender charges. Plus, if you're not yet 59½, you may also have to pay an additional 10% tax penalty on top of ordinary income taxes. You should also know that a fixed annuity contains guarantees and protections that are subject to the issuing insurance company's ability to pay for them. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

5 Financial Tips for Recent College Graduates

Robert Ingram Contributed by: Robert Ingram

financial tips for recent college graduates

Congratulations Class of 2019! This is an exciting time for recent college graduates as they begin the next phase in their lives. Some may take their first job or start along their career path, while others may continue their education. Taking this leap into the “real world” also means handling personal finances, a skill not taught often enough in school. Fortunately, by developing good financial habits early and avoiding costly mistakes, new graduates can make time an ally as they set up a solid financial future.

Here are five financial strategies to help get your post-college life on the right path:

1. Have a Spending Plan

The idea of budgeting may not sound like a lot of fun, but it doesn’t have to be a chore that keeps you from enjoying your hard-earned paycheck. Planning a monthly budget helps you control the money coming in and going out. It allows you to prioritize how you spend and save for goals like buying a home, setting up a future college fund for children, and funding your retirement.

Everyone’s budget may be a little different, but two spending categories often consume a large portion of income (especially for younger people early in their careers): housing costs and car expenses. For someone who owns a home, housing costs would include not only a mortgage payment, but also expenses like property taxes and insurance. Someone renting would have the rental cost and any rental insurance.

Consider these general guidelines:

  • A common rule of thumb is that your housing costs should not exceed about 30% of your gross income. In reality, this percentage could be a bit high if you have student loans, or if you want more discretionary income to save and for other spending. Housing costs closer to 20% is ideal.

  • A car payment and other consumer debt, like a credit card payment, can quickly eat into a monthly budget. While you may have unique spending and saving goals, a good guideline is to keep your total housing costs and consumer debt payments all within about 35% of your gross income.

2. Stash Some Cash for Emergencies

We all know that unexpected events may add unplanned expenses or changes to your budget. For example, an expensive car or home repair, a medical bill, or even a temporary loss of income can cause major financial setbacks.

Start setting aside a regular cash reserve or “rainy day” fund for emergencies or even future opportunities. Consider building up to six months’ worth of your most essential expenses. This may seem daunting at first, but make a plan to save this over time (even a few years). Set goals and milestones along the way, such as saving the first $1,000, then one months’ expenses, three months’ expenses, and so on, until you reach your ultimate goal.

3. Build Your Credit and Control Debt

Establishing a good credit history helps you qualify for mortgages and car loans at the favorable interest rates and gets you lower rates on insurance premiums, utilities, or small business loans. Paying your bills on time and limiting the amount of your outstanding debt will go a long way toward building your credit rating. What goes into your credit score? Click here.

  • If you have student loans, plan to pay them down right away. Automated reminders and systematic payments can help keep you organized. To learn how student loans affect your credit score, click here.

  • Use your credit card like a debit card, spending only what you could pay for in cash. Then each month, pay off the accumulated balance.

  • Some credit cards do have great rewards programs, but don’t be tempted to open too many accounts and start filling up those balances. You can easily get overextended and damage your credit.

4. Save Early for the Long Term

Saving for goals like retirement might not seem like a top priority, especially when that could be 30 or 40 years away. Maybe you think you’ll invest for retirement once you pay off your loans, save some cash, or deal with other, more immediate needs. Well, reconsider waiting to start.

In fact, time is your BIG advantage. As an example, let’s say you could put $200 per month in a retirement account, like an employer 401(k), starting at age 25. Assuming a 7% annual return, by age 60 (35 years of saving), you would have just over $360,000. Now, say you waited until age 35 to begin saving. To reach that same $360,000 with 25 years of saving, you would need to more than double your monthly contribution to $445. Starting with even a small amount of savings while tackling other goals can really pay off.

Does your employer offer a company match on your retirement plan? Even better! A typical matching program may offer something like 50 cents for each $1 that you contribute, up to a maximum percentage of your salary (e.g. 6%). So if you contribute up to that 6%, your employer would add an extra 3% of your salary to the plan. This is like getting an immediate 50% return on your contribution. The earlier you can contribute, the more time these matching funds have to compound. 

5. Get a Little More Educated (about money and finances)

Ok, don’t worry. Forming good financial habits doesn’t require an advanced degree or expertise in all money matters. To build your overall knowledge and confidence, spend a little time each week, even just an hour, on an area of your finances and learn about a different topic.

Start with a book or two on general personal finance topics. You can find reference books on specific topics, from mortgages and debt to investments and estate planning. Information offered through news media or internet searches also can provide resources. And you can even find a blog not too far away (Money Centered Blog).

Robert Ingram, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® With more than 15 years of industry experience, he is a trusted source for local media outlets and frequent contributor to The Center’s “Money Centered” blog.

Why Retirees Should Consider Renting

Nick Defenthaler Contributed by: Nick Defenthaler, CFP®

“Why would you ever rent? It’s a waste of money! You don’t build equity by renting. Home ownership is just what successful people do.”

Sound familiar? I’ve heard various versions of these statements over the years, and every time I do, the frustration makes my face turns red. I guess I don’t have a very good poker face!

why retirees should consider renting

As a country, we have conditioned ourselves to believe that homeownership is always the best route and that renting is only for young folks. If you ask me, this philosophy is just flat out wrong and shortsighted.

Below, I’ve outlined various reasons that retirees who have recently sold or are planning to sell might consider renting:

Higher Mortgage Rates

  • The current rate on a 30-year mortgage is hovering around 4.6%. The days of “cheap money” and rates below 4% have simply come and gone.

Interest Deductibility

  • Roughly 92% of Americans now take the standard deduction ($12,200 for single filers, $24,400 for married filers). It’s likely that you’ll deduct little, if any, mortgage interest on your return.

Maintenance Costs

  • Very few of us move into a new home without making changes. Home improvements aren’t cheap and should be taken into consideration when deciding whether it makes more sense to rent or buy.

Housing Market “Timing”

  • Home prices have increased quite a bit over the past decade. Many experts suggest homes are fully valued, so don’t bank on your new residence to provide stock-market-like returns any time soon.

Tax-Free Equity

  • In most cases, you won’t see tax consequences when you sell your home. The tax-free proceeds from the sale could be a good way to help fund your spending goal in retirement.  

Flexibility

  • You simply can’t put a price tag on some things. Maintaining flexibility with your housing situation is certainly one of them. For many of us, the flexibility of renting is a tremendous value-add when compared to home ownership.

Quick Decisions

  • Rushing into a home purchase in a new area can be a costly mistake. If you think renting is a “waste of money” because you aren’t building equity, just look at moving costs, closing costs (even if you won’t have a mortgage), and the level of interest you pay early in a mortgage. Prior to buying, consider renting for at least two years in the new area to make darn sure it’s somewhere you want to stay.

Every situation is different, but if you’re near or in retirement and thinking about selling your home, I encourage you to consider all housing options. Reach out to your advisor as you think through this large financial decision, to ensure you’re making the best choice for your personal and family goals.

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc.® Nick works closely with Center clients and is also the Director of The Center’s Financial Planning Department. He is also a frequent contributor to the firm’s blogs and educational webinars.


Any opinions are those of Nick Defenthaler, CFP® and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

New Year Financial To-Dos Help Keep You on Track

Kali Hassinger Contributed by: Kali Hassinger, CFP®

As we settle into 2019, the fresh calendar year provides an ideal opportunity to make plans and adjustments for your future. Instead of setting lofty resolutions without a game plan in mind, might I suggest that you consider our New Year Financial Checklist? Completing this list of actionable, attainable goals will help you avoid the disappointment of forgotten resolutions in February, and you’ll feel the satisfaction of actually accomplishing something really important!

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New Year Financial Checklist

  • Measure your progress by reviewing your net worth as compared to one year ago. Even when markets are down, it's important to evaluate your net worth annually. Did your savings still move you forward? If you're slightly down from last year, was spending a factor? There is no better way to evaluate than by taking a look at the numbers!

  • Speaking of spending and numbers, review your cash flow! How much came in last year and how much went out? Ideally, we want more income than spending.

  • Now, let's focus on the dreaded budget. Sure, budgeting can be a grind, so call it a “spending plan”. Do you have any significant expenses coming up this year? Make sure you're prepared and have enough saved.

  • Be sure you review and update beneficiaries on IRAs, 401(k)s, 403(b)s, life insurance, etc. You'd be surprised at how many people don't have beneficiaries listed on retirement accounts (or have forgotten to remove their ex-spouse)!

  • Revisit your portfolio's asset allocation. Make sure your investments and risk are still aligned with your stage in life, your goals, and your comfort level. I'm not at all suggesting that you make changes based on market headlines. Just be sure that the retirement or investment account you opened 20 years ago is still working for you.

  • Review your Social Security Statement. If you're not yet retired, you will need to go online to review your estimated benefit. Social Security is one of the most critical pieces of your retirement, so make sure your income record is accurate.

Of course, this list isn't exhaustive. The final step to ensure your financial wellbeing is a review with your advisor. Even if you don't work with a financial planner, at a minimum set aside time on your own, with your spouse or a trusted friend, to plan on improving your financial health. Do it even if you only get to the gym the first few weeks of January!

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®

Social Security Increase Announced

Kali Hassinger Contributed by: Kali Hassinger, CFP®

The Social Security Administration recently announced that benefits for more than 67 million Americans would be increasing by 2.8% starting in January 2019. This cost of living adjustment (COLA for short) is the largest we've seen since 2011 when the benefits increased by 3.6%. 

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The Medicare Part B premium increase was also announced, and it will only be increased by a modest $1.50 per month (from $134 to $135.50).The premium surcharge income brackets have also seen a slight increase in the monthly premium on top of the $1.50 standard.These surcharges affect about 5% of those who have Medicare Part B.The biggest change, however, is the addition of a new premium threshold for those with income above $500,000 if filing single and $750,000 if filing jointly. This will affect:

20181030a.jpg

While the Social Security checks will be higher in 2019, so will the earnings wage base you pay into if you're still working.  In 2018, the first $128,400 was subject to Social Security payroll tax (6.2% for employees and 6.2% for employers).  Moving into 2019 the new wage base grows by 3.5% to $132,900.  Those who are earning at or above the maximum will pay $8,240 in Social Security tax each year.  With the employer's portion, the maximum tax collected per worker is $16,780.  

Social Security plays a vital role in almost everyone's financial plan.  If you have questions about next year's COLA or anything else related to your Social Security benefit, don't hesitate to reach out to us.

Kali Hassinger, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.®


Source: https://www.cms.gov/newsroom/fact-sheets/2019-medicare-parts-b-premiums-and-deductibles