Retirement Planning

Restricted Stock Units vs. Employee Stock Options

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Some of you may be familiar with the blanket term "stock options." In the past, this term most likely referred to Employee Stock Options (ESOs), which were frequently offered as an employee benefit and form of compensation. But over time, employers have adapted stock options to better benefit both their employees and themselves.

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ESOs provided the employee the right to buy a certain number of company shares at a predetermined price, for a specific period of time. These options, however, would lose their value if the stock price dropped below the predetermined price, making them essentially worthless to the employee.

Shares promised

As an alternative, many employers now use another type of stock option, known as Restricted Stock Units (RSUs). Referred to as a "full value stock grant,” RSUs are worth the "full value" of the stock shares when the grant vests. So unlike ESOs, the RSU will always have value to the employee upon vesting (assuming the stock price doesn't reach $0). In this sense, the RSU is a greater advantage to the employee than the ESO.

As opposed to some other types of stock options, the employer does not transfer stock ownership or allocate any outstanding stock to the employee until the predetermined RSU vesting date. The shares granted with RSUs essentially become a promise between the employer and employee, but the employee receives no shares until vesting.

RSU tax implications

Since there is no "constructive receipt" (IRS term!) of the shares, the benefit is not taxed until vesting.

For example, if an employer grants 5,000 shares of company stock to an employee as an RSU, the employee won't be sure of how much the grant is worth until vesting. If this stock value is $25 upon vesting, the employee would have $125,000 of income (reported on their W-2) that year.

As you can imagine, vesting dates may cause a large jump in taxable income, so the employee may have to select how to withhold taxes. Usual options include paying cash, selling or holding back shares within the grant to cover taxes, or selling all shares and withholding cash from the proceeds.

In some RSU plan structures, the employee may defer receipt of the shares after vesting, in order to avoid income taxes during high earning years. In most cases, however, the employee will still have to pay Social Security and Medicare taxes in the year the grant vests.

Although there are a few differences between the old-school stock options and more recent Restricted Stock Unit benefit, both can provide the same incentive for employees. If you have any questions about your own stock options, we’re always here to help!

Repurposed from this 2016 blog: Restricted Stock Units vs Employee Stock Options

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


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. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Kali Hassinger, CFP® and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. This is a hypothetical example for illustration purpose only and does not represent an actual investment.

Is the Diversified Portfolio Back?

Robert Ingram Contributed by: Robert Ingram

Is the diversified portfolio back?

(Repurpose of the 2014 blog: ‘Why I Didn’t Like My Diversified Portfolio’)

As our team finished 2018 and began reviewing the 2019 investment landscape, I couldn’t help but to think of a Money Centered blog written by our Managing Partner, Tim Wyman. As Tim shared:

“I was reminded of the power of headlines recently as I was reviewing my personal financial planning; reflecting on the progress I have made toward goals such as retirement, estate, tax, life insurance, and investments. And, after reviewing my personal 401k plan, and witnessing single digit growth, my immediate reaction was probably similar to many other investors that utilize a prudent asset allocation strategy (40% fixed income and 60% equities). I’d be less than candid if I didn’t share that my immediate thought was, “I dislike my diversified portfolio”.

The headlines suggest it should have been a better year. However, knowing that the substance is below the headlines, and 140 characters can’t convey the whole story, my diversified portfolio performed just as it is supposed to in 20xx.”

This may have been a familiar thought throughout 2018. Interestingly though, Tim’s blog post was actually from 2015. He was describing 2014.

THE FINANCIAL HEADLINES – Same Old, Same Old?

The financial news about investment markets today still focuses primarily on three major market indices: the DJIA, the S&P 500, and the NASDAQ. All three are measures for large company stocks in the United States; they provide no relevance for other assets in a diversified portfolio, such as international stocks, small and medium size stocks, and bonds of all types. As in 2014, the large U.S. stock indices were at or near all-time highs throughout much of 2018. Also in that year, many other major asset classes gained no ground or were even negative for the year. These included core intermediate bonds, high yield junk bonds, small cap stocks, commodities, international stocks, and emerging markets.

Looking Beyond the Headlines

Here at The Center, our team continues to apply a variety of resources in developing our economic outlook and asset allocation strategies. We take into account research from well-respected firms such as Russell Investments, J.P.Morgan Asset Management, and Raymond James. Review the “Asset Class Returns” graphic below, which shows how a variety of asset classes have performed since 2003.

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This chart shows the historical performance of different asset classes through November of 2018, as well as an asset allocation portfolio (35% fixed and 65% diversified equities). The asset allocation portfolio incorporates the various asset classes shown in the chart.

If you “see” a pattern in asset class returns over time, please look again. There is no determinable pattern. Because asset class returns are cyclical, it’s difficult to predict which asset class will outperform in any given year. A portfolio with a mix of asset classes, on average, should smooth the ride by lowering risks that any one asset class presents over a full market and cycle. If there is any pattern to see, it would be that a diversified portfolio should provide a less volatile investment experience than any single asset class. A diversified portfolio is unlikely to be worse than the lowest performing asset class in any given year. And on the flip side, it is unlikely to be better than the best performing asset class. Just what you would expect!

STAYING FOCUSED & DISCIPLINED

As during other times when we have experienced strong U.S. stock markets and periods of accelerated market volatility, some folks may be willing to abandon discipline because of increased greed or increased fear. As important as it is to not panic out of an asset class after a large decline, it remains equally important to not panic into an asset class. In the case of the S&P 500’s outperformance of many other asset classes, for example, many have wondered why they should invest in anything else. That’s an understandable question. If you find yourself in that position, you might consider the following:

  • As in the five years leading up to 2015, the S&P 500 Index (even with the recent pullback in stock prices) has had tremendous performance over the last five years. However, it’s difficult to predict which asset class will outperform from year to year. A portfolio with a mix of asset classes, on average, should smooth the ride by lowering risk over a full market cycle.

  • Fundamentally, prices of U.S. companies relative to their expected earnings are hovering around the long-term average. International equities, particularly the emerging markets, are still well below their normal estimates and may have con­siderable room for improvement. This point was particularly relevant in 2018 and continues to be as we begin 2019.

  • Through 2018, U.S. large caps, as defined by the S&P 500 Index, have outperformed international equities (MSCI EAFE) in six of the last eight years. The last time the S&P outperformed for a significant time, 1996-2001, the MSCI outperformed in the subsequent six years.

  • What’s the potential impact on a portfolio concentrated in a particular asset class, if that asset class experiences a period of loss? Remember, an investment that experienced a loss requires an even greater percentage return to get back to its original value. For example, an investment worth $100,000 that loses 50% (down to $50,000) would actually require a 100% return from $50,000 to get back to $100,000.

MANAGING RISK

Benjamin Graham, known as the “father of value investing,” dedicated much of his book, The Intelligent Investor, to risk. In one of his many timeless quotes, he says, “The essence of investment management is the management of risks, not the management of returns.” This statement may seem counterintuitive to many investors. Rather than raising an alarm, risk may provide a healthy dose of reality in all investment environments. That’s important in how we meet financial goals. Diversification is about avoiding the big setbacks along the way. It doesn’t protect against losses – it helps manage risk.

Often, during times of more volatile financial markets like those we have experienced during the last couple of months, the benefits of diversification become apparent. If you have felt the way Tim did back in 2015 about your portfolio, we hope that after review and reflection, you might also change your perspective from “I dislike my diversified portfolio” to “My diversified portfolio – just what I would expect.”

As always, if you’d like to schedule some time to review anything contained in this writing, or your personal circumstances, please let me know. Lastly, our investment committee has been hard at work for several weeks and will be sharing 2019 comments in the near future. Make it a great 2019!

Robert Ingram is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.®


Any opinions are those of Bob Ingram, CFP® and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The MSCI is an index of stocks compiled by Morgan Stanley Capital International. The index consists of more than 1,000 companies in 22 developed markets. Investments can not be made directly in an index.

Bond woes: “Why do we own bonds if we think they aren’t going to do well in a rising rate environment?”

The Center Contributed by: Center Investment Department

Hoping for capital gains is not a good reason why you should own bonds. Actually, owning or  buying bonds in this low and rising interest rate environment with the hope that you'll be able to sell them later at a higher price may not work out. BUT…just because you can’t sell this investment at a profit later does not make the investment a bad idea.

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A great real life comparison is a car. We own a car to get our family and us from one place to another, hopefully safely. Many components go into the makeup of a safe driving automobile. The engine is key in making the car go. Stocks act much like the engine of a car.  They make our portfolios go/grow. But, would you ever drive a car that wasn’t equipped with brakes or an airbag? Brakes and airbags are similar to the bonds in our portfolio. Bonds help you control some of the risk of owning stock. For most people, the reason to own bonds is to slow down our bottom-line losses experienced in our portfolio during major market declines. Without this moderation (and sometimes even with it), investors tend to panic when stock prices fall.

So in a nutshell, “Why own bonds?”

They make the scary times less so. When the stock market experiences an extended decline, investors look around for where to turn. Cash and Bonds are usually the place they turn to.A volatile stock market can happen suddenly and unexpectedly. Waiting to add bonds until something happens means you are going to suffer much of the downside before you actually add them to the portfolio. You have to have already had them in the portfolio for them to help. Talk with your financial planner to make sure you have the proper amount of your portfolio invested in bonds so you can hang on to your investments through those difficult times. A portfolio makeup that allows you to stay the course over the long term is much more likely to get you to your destination!


https://www.marketwatch.com/story/why-bonds-are-the-most-important-asset-class-2015-06-10 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.

IRS Announces Increases to Retirement Plan Contributions for 2019

Josh Bitel Contributed by: Josh Bitel

Several weeks ago, the IRS released updated figures for 2019 retirement account contribution and income limits. 

IRS Increases Retirement Plan Contributions for 2019

Employer Retirement Plans (401k, 403b, 457, and Thrift Savings Plans)

  • $19,000 annual contribution limit, up from $18,500 in 2018.

  • $6,000 “catch-up” contribution for those over age 50 remains the same for 2019.

  • An increase in the total amount that can be contributed to a defined contribution plan, including all contribution types (employee deferrals, employer matching and profit sharing), from $55,000 to $56,000, or $62,000 for those over age 50 with the $6,000 “catch-up” contribution.

In addition to increased contribution limits for employer-sponsored retirement plans, the IRS adjustments provide some other increases that can help savers in 2019. A couple of highlights include:

Traditional IRA and ROTH IRA Limits

  • $6,000 annual contribution limit, up from $5,500 in 2018 – the first raise since 2013!

  • $1,000 “catch-up” contribution for those over age 50 remains the same for 2019.

Social Security Increase Announced

As we enter 2019, keep these updated figures on the forefront when updating your financial game plan. As always, if you have any questions surrounding these changes, don’t hesitate to reach out to our team!

Josh Bitel is a Client Service Associate at Center for Financial Planning, Inc.®

Are You Retirement Ready?

Sandy Adams Contributed by: Sandra Adams, CFP®

In our work with clients, one of the most common questions we get is, “How will we know when we are ready (and able) to retire?”  That can be a tricky question, because there are two sides to being ready for the next phase of your life – the technical side and the personal side.  While certainly you need to be financially secure for the next decades of your life, you also need to be comfortable with the transition from your life as a career individual to what you now wish to become in your next phase – and that is not as easy as it sounds.

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From a financial-readiness perspective, many clients target age, monetary or benefit milestones to help them determine when they will be ready to retire:

  • “When I have $1 million in assets saved, I will be ready to retire.”

  • “When I am eligible to collect Social Security, I will be ready to retire.”

  • “When I am eligible to collect my company pension OR I have reached my XX anniversary with my company, I will be ready to retire.”

  • “When I am eligible to receive Medicare, I will be ready to retire.”

The real answer is, some or all of these may be true for you, and some or all of these may be false.Every client situation is different and no general guideline can determine whether or not you are financially ready to retire. Unfortunately, it is far more complicated than that. There are numerous financial factors that go into determining financial readiness.Let’s take a deeper look into the issues.

Financial Readiness Issues:

Retirement Savings:

Do you have enough saved?

  • What might your other retirement income sources be (Social Security, Pensions, etc.)

  • How much income will you need (what are your fixed costs versus lifestyle wants in retirement), and

  • What are your longevity expectations (how long might you expect to live based on health, family history, etc.—expect it will be longer than you think!).

Where are your savings?

  • Do you have retirement savings outside of retirement plans?

  • Do you have some after-tax and reserve cash/emergency reserve savings?

  • Do you have different types of accounts to provide tax diversification going into retirement (i.e. IRAs/401(k)s, ROTH IRAs, after tax investment accounts)?

Debt:

Have you paid down your debt or do you have a plan to be as debt free as possible by the time you retire?  This will allow you to control your retirement income for other fixed expenses and wants; it is desirable to have as little debt/fixed expenses as possible going into retirement as possible.

Retirement Income:

A large part to being retirement ready is understanding your retirement income sources, options and strategies and using them to your best advantage.  Take the time to consult with your planner to choose the option that works best for you and your family circumstance.

  • Pensions: Do you understand all your options, including the income options available to your spouse as a survivor upon your death.  We find that in many cases it makes sense to choose an option that includes a lifetime income option for you with at least a 65% survivor income benefit for your spouse if you were to die first.

  • Social Security: While many are under the false impression that because you are allowed to take Social Security benefits as early as age 62, they should, we might recommend otherwise.  For most individuals now approaching Social Security claiming age, Full Retirement Age for claiming Social Security is now age 66 and delaying benefits until age 70 results in an 8% per year increase in benefits.  Knowing and understanding the Social Security benefits, rules and strategies that can be employed, especially for married couples, to ensure the largest lifetime benefit can be an added supplement to long-term retirement income. We find that our most successful married couples in retirement employ a strategy where the lower Social Security earner draws at Full Retirement age while the higher Social Security earner waits to draw at age 70, insuring the highest possible Social Security benefit for the spouse that lives the longest.

Investments:

Preparing for retirement involves making appropriate adjustments to your investment strategy.  You should work with your financial planner to adjust your asset allocation to one that is appropriate for your new goals and time horizon. We find that our most successful retirees tend to have asset allocations ranging from 40% Bond/60% Stock to 50% Bond/50% Stock.

Insurance:

  • For those retiring before age 65 (Medicare eligibility) and without retiree healthcare, finding health insurance to bridge them to Medicare is a must. 

  • Retirement readiness does require addressing the issue of Long Term Care funding Having a plan, no matter what your choice, is something that must be done before retirement.

Estate Planning:

While not exactly monetary, having your estate planning documents (Durable Powers of Attorney, Wills and possibly Trust or Trusts in place) updated prior to retirement is a good idea.Part of this is making sure accounts are titled properly, beneficiaries are updated, and account holdings/locations and management are as simplified as possible going into your last phase of life.

Once you have determined your financial retirement readiness, you need to determine your personal retirement readiness, which may be even more difficult for many folks.  Why?  Many have spent the majority of their lifetimes to this point building careers that established them with titles, credentials and stature. They built reputations, networks, social and business circles and were well respected because of the work that they have done.  And now they are moving from that phase of their lives to another and that means starting over.  What will they be now?  What will their lives mean?  And to whom?

Until you are ready to start the next phase of your life knowing your purpose – what you want to wake up for every day – you are likely not ready for retirement.  Those that have not given the thought to their mission, values, and their “why” for their next phase will be left feeling lost and will likely fail at retirement and find themselves wanting to go back to their former lives.

How can you find your purpose?

  • Ask yourself what is most important to you? (family, friends, spirituality, charity,etc)

  • Ask yourself what are your life priorities? (family, health, knowledge, etc.)

  • Ask yourself what you want to let go of and what you want to give yourself to.

  • Realize that the rest of your life can be the best of your life if you embrace it with an open mind and enthusiasm.

  • Consider reading the book “Purposeful Retirement” by Hyrum Smith if you need more help!

“Am I ready to retire?”  It is not a simple question and there is no simple answer.  It may take months or years to answer all of the questions and make all of the preparations.  If you think that retirement is in your not too distant future, the time is NOW to start planning.  Don’t let retirement sneak up on you…work with your financial planner and be Retirement Ready!

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc.® Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Webinar in Review: Year-End Tax and Planning Strategies

Josh Bitel Contributed by: Josh Bitel

In November of 2017, the Tax Cuts and Job Act of 2018 passed with numerous changes to our tax code. This year we provided a refresher on some of those changes as well as some planning opportunities to think about as 2018 wraps up.

If you weren’t able to attend the webinar live, we encourage you to check out the recording below. 

Check out the time stamps below to listen to the topics you’re most interested in:

  • (04:20): New 2018 Marginal Tax Brackets

  • (06:30): Highlights of the 2018 Tax Cuts and Jobs Act (TCJA) – comparing 2017 with 2018

  • (14:24): Planning charitable gifts under the new tax law

  • (19:15): Healthcare coverage overview – Health Savings Accounts (HSAs) and Medicare

  • (25:30): Roth IRA conversions as an attractive planning opportunity

  • (33:20): How to utilize your employer retirement plan most effectively

  • (36:30): How we help mitigate taxes & tax efficient investing

  • (41:30): Updates to gifting and intra-family gifting for 2018

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:

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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

Employee Benefits Open Enrollment: 2018 Game Plan

Robert Ingram Contributed by: Robert Ingram

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Now that the Fall season is upon us and the holidays are right around the corner, it is also the annual benefits open enrollment season for many employers.  I know it can be tempting to quickly flip through the booklet checking the boxes on the forms without too much consideration, especially if things haven’t changed too much in your situation.  You’re certainly not alone.  However, setting aside some extra time to review your options is important for not only understanding the benefits you have and what might be changing, but also for identifying potential gaps in your coverages or underutilized opportunities.

Below are some benefits that, if offered by your employer, you should keep top of mind as you are making your elections.

Retirement plan contributions (401(k)/403(b) )

  • Are you contributing up to the maximum employer match? (Take advantage of free money!)

  • Are you maximizing the account?  ($18,500 or $24,500 for age 50 and over in 2018)

  • Traditional 401(k) vs. Roth 401(k) options? 

Click here for a summary of 2018 retirement plan contribution limits and adjustments

Health insurance plans

  • Review and compare your available plan offerings (e.g. PPO vs HMO). Want to explore some of the differences between plan types in more detail? Click here.

  • Focus on more than just the premium cost. Think about the deductibles, copays, and the annual out-of-pocket maximums

  • Consider your health history and the amount of services you use. For example, are you likely to hit the deductible or maximum out-of-pocket costs each year? The benefit of lower premiums for a high deductible plan may be outweighed by higher overall costs out-of-pocket.  Are you less likely to hit the deductible but you have excess cash saving just in case?  A lower premium, high deductible plan could make sense.

Health Care Flexible Spending Accounts vs. Health Savings Accounts

Flexible Spending Accounts and Health Savings Accounts both allow you to contribute pre-tax funds to an account that you can then withdraw tax-free to pay for qualified out-of-pocket medical expenses.  There are, however, some key differences to remember.

Flexible Spending Account for health care (FSA)

  • Maximum employee contribution in 2018 is $2,650

  • Generally must spend the balance on eligible expenses by the end of each plan year or forfeit unspent amounts (use-or-lose provision).

  • Employers MAY offer more time to use the funds through either a grace period option (you have an extra 2 ½ months to spend the funds) or a carryover option (you can carry over up to $500 of the balance into the following year)

For more information on the FSA click here.

Health Savings Account (HSA)

  • Can only be used with a high deductible health insurance plan

  • Maximum contribution in 2018 for an individual $ 3,450  ($4,450 for age 55 and over)

  • Maximum contribution in 2018 for an family plan $6,900  ($7,900 for age 55 and over)

  • All HSA balances carryover (no use-or-lose limitations apply)

Click here for more information about the basics of using an HSA

Dependent Care Flexible Spending Account

  • Pre-tax contributions to an account that can be withdrawn tax-free for qualified dependent care expenses within the plan year

  • Maximum contribution in 2018 is $5,000 ($2,500 if married filing separately)

  • Use-or-lose provision applies 

Life and Disability Insurance

  • Employers often provide a basic amount of life insurance coverage at no cost to you (typically 1 x salary). 

  • You may have the option to purchase additional group coverage up to certain limits at a low cost.

  • Many employers also provide a group disability insurance benefit. This can include a short-term benefit (typically covering up to 90 or 180 days) and/or a long-term benefit (covering a specified number of years or up through a certain age such as 65).

  • Disability benefits often cover a base percentage of income such as 50% or 60% of salary at no cost with some plans offering supplemental coverage for an additional premium charge.

  • Life and disability insurance benefits can vary widely from employer to employer and in many cases only provide a portion of an employee’s needs.It is important to consult with your advisor on the appropriate amount of coverage for your own situation.

Like most things related to financial planning, your benefit selections are specific for your family’s own unique circumstances; and your choices probably would not make sense for your co-worker or neighbor.  We encourage all clients to have conversations with us as they are reviewing their benefit options during open enrollment, so don’t hesitate to pass along any questions you might have. If we can be a resource for you, please let us know.

Robert Ingram is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.®


This information has been obtained from sources considered to be reliable, but Raymond James Financial Services, Inc. does not guarantee that the foregoing material is accurate or complete. This information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. 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. Raymond James Financial Services, Inc. does not provide advice on tax, legal or mortgage issues. These matters should be discussed with the appropriate professional. Life insurance Guarantees are based on the claims paying ability of the insurance company.

When the Rubber Hits the Road: Steps to Take When you Find that you are Behind on your Retirement Savings

Sandy Adams Contributed by: Sandra Adams, CFP®

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So here you are.  You find yourself happily on cruise control — you seem to be making more money every year, you have the house and cars you always wanted, the kids are now in college and you take the family vacations you want when you want to take them.  And then — bam — traffic comes to a stop.  What?  How can this be?  How can we already be in our mid-50’s?  How can retirement be so close? How is it possible that we haven’t saved more towards our own retirement by now?  What do we do to make it to our goal on time?

If this sounds anything like you, you are not alone.  We find that many clients come to us looking for assistance with their retirement late in the game. They may not have balanced their multiple financial goals as evenly as they should or could have and they find themselves behind in their retirement goals as they approach their retirement years. 

The good news is that it is possible to get yourself back on track by taking few action steps:

  1. Make sure you have a strong savings/emergency reserve fund.  At a minimum, this is 3 - 6 months’ worth of living expenses.
  2. Make sure all unnecessary and high interest rate debt is paid off; if this has accumulated, it is likely a result of no emergency reserve fund.
  3. Attempt to maximize your contributions to your employer retirement plans (start by making sure you are meeting any company match, and increase your contributions over time to meet the maximum contribution as cash flow allows; ramping up contributions is more crucial if your time frame towards retirement is shorter).  *See here for our blog on 2018 retirement plan contribution limits.
  4. If you are able to save beyond your maximum employer retirement plan contributions, consider savings in either a ROTH IRA (if you are eligible under the current income limitations) or in an after-tax investment account to create diversification in your retirement investment portfolio.  What we mean here is that we want to have different tax buckets to draw from in retirement — we don’t want every dollar you access for income in retirement to be taxable in the same way.
  5. And lastly, partner with a financial planner to keep yourself and your retirement savings plan on track until retirement.  Having an accountability and decision making partner to help you determine where best to save, when and how to save more, when you might realistically be able to retire and how much you might be able to spend is crucial to a successful retirement.

It is easy to cruise through life and forget how quickly time is passing us by.  Before we know it, important life milestones are creeping up on us before we are prepared for them.  With the help of a financial planner, you can get yourself back on track and ready to meet the goals you’ve always dreamed of.  If we can be of help to you or anyone you know who might be in this situation, give us a call.  We are always happy to help!

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc.® Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.


Any opinions are those of Sandra Adams and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no assurance any of the trends mentioned will continue or forecasts will occur. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Roth IRA owners must be 591⁄2 or older and have held the IRA for five years before tax-free withdrawals are permitted. Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Diversification and asset allocation do not ensure a profit or protect against a loss. You should discuss any tax or legal matters with the appropriate professional. Raymond James is not affiliated with any of the companies listed above. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Why Retirement Planning is Like Climbing Mount Everest

Nick Defenthaler Contributed by: Nick Defenthaler, CFP®

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Mount Everest.  One of the most beautiful, natural wonders in the world.  With an elevation of just over 29,000 feet, it is the highest mountain above sea level on the planet. As you would expect, climbing Mount Everest is an incredibly difficult and dangerous feat. Sadly, over 375 people have lost their lives making the trek. One thing that might surprise you is that the vast majority who have died on the mountain, did not pass away while climbing to the top. Believe it or not, it’s actually the climb down, or descent, that has caused the greatest amount of fatalities.

Case in point, Eric Arnold was a multiple Mount Everest climber who sadly died in 2016 on one of his climbs. Before he passed, he was interviewed by a local media outlet and was quoted as saying “two-thirds of the accidents happen on the way down. If you get euphoric and think ‘I have reached my goal,’ the most dangerous part is still ahead of you.”  Eric’s quote really struck me and I couldn’t help but think of the parallels his words had with retirement planning and how we, as advisers, help serve clients.  Let me explain.   

Most of us will work 40+ years, save diligently, and hopefully invest wisely with the guidance of a trusted professional with the goal of retiring and happily living out the ‘golden years.'  It can be an exhilarating feeling – getting towards the end of your career, knowing that you’ve accumulated sufficient assets to achieve the goals you’ve set forth for you and your family. However, we can’t forget that the climb is only half way done. We have to continue working together and develop a quality plan to help you on your climb down the mountain as well! When do I take Social Security? Which pension option should I elect? How do I navigate Medicare? Which accounts do I draw from to get me the money I need to live on in the most tax-efficient manner? Even though you’ve reached the peak of the mountain – aka retirement, we have to recognize that the work is far from over. There are still monumental financial decisions that need to be made during the years you aren’t working that most of us simply can’t afford to get wrong. 

As with those who climb Mount Everest, many financial plans that are in good shape when entering retirement can easily be derailed on the descent or when funds start to be withdrawn from your portfolio – aka the “decumulation” phase of retirement planning. A quality financial and investment strategy doesn’t end upon retirement – this is the time when proper planning becomes even more critical.  Email me if I can help you on the climb – both on the way up and on the way down the mountain.  Learn more about our process here.

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, and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. Any information provided has been prepared from sources believed to be reliable, but is not guaranteed by Raymond James Financial Services and is not a complete summary or statement of all available data necessary for making an investment decision. Any information provided is for informational purposes only and does not constitute a recommendation. 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. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNERTM and CFP® in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.