Retirement

In this article, we examine a real life example of financial planning in action.

Several years ago, one of my clients came to me with a question.

Can I afford to retire early?

Jacki, she said, I really want to retire early. Can I afford to? (Some details have been changed to preserve client privacy.)

I did what financial planners do – I investigated. I asked a lot of questions, and did a lot of research. Let’s call my client Megan. I asked her: What do you imagine your life looks like if you’re not going to work each day? Would you stay in your current home, or live in a different style of home or even different state? What might you be willing to cut out of your current expenses, if you had to?

Then I did a lot of research. What social security or pension benefits, if any, would she qualify for? How much would it cost to live the way she wants in retirement? What would she do for healthcare, and how much would that cost? How much did she have accumulated in savings through her employer’s 401k and other resources?

After walking through several detailed scenarios and discussing the merits of each, Megan decided to retire. It might require some scaling back but at the end of the day, Megan felt the trade-offs were worth the extra time freedom she would gain by retiring early. She told me that she had confidence in her decision, and when her co-workers and loved ones questioned her (What are you going to do with all that free time? Are you sure about this?) – she could answer them confidently and with enthusiasm about what her life would soon be.

Can I afford to buy a sailboat?

Fast forward a couple years, and Megan’s enjoying retirement very much, but life is always different than you think it’s going to be. Megan called me with a new request: she really wants to buy a sailboat. She’s researched it, she says, and knows how much it will cost, where she will store it, how often she’ll use it, etc. She’s even been taking sailing lessons to brush up on piloting skills learned in her youth. She wants to know, can she afford it?

Fortunately, she had been following the initial financial plan we created a couple years earlier: living within her means, cutting back on unnecessary expenses, and investing the money she had available for potential compound interest growth.

After some more research, I was happy to be able to say, yes – spend the money on the sailboat! She was so excited to let me know when the boat was purchased, and has since spent many happy hours enjoying the boat with her friends and family.

When I think of what financial planning can do, I think of Megan’s sailboat.

I imagine Megan piloting the boat with confidence on a beautiful breezy summer afternoon, surrounded by good friends. The financial planning work she and I did together gave her the clarity to feel confident about some big decisions she made in her life. She understood the trade offs she might experience due to possible lower income in an early retirement. But she was able to make the decision that was best for her, with all the knowledge that a good financial plan can offer.

In the best case scenario, spending the time to work on a financial plan can deliver clarity around your finances in a way you never had before. And that clarity can lead to making more informed choices about what you do now with your money.

What’s your sailboat – or your dream for your future? What actions are you taking now to help you get there?

In this article, we look at millennials and retirement savings.

Millennial women may be saving less than millennial men

Millennials are the generation of people born between about 1981 – 1996, according to Wikipedia (link opens in new tab).

Recent research (link opens in new tab) indicates that millennial women are contributing 5% of their income towards a company retirement savings program like a 401k. But millennial men are contributing 8% of their income. Add to this the potential gender pay gap, and millennial women are saving even less.

On top of this, only 46% of millennial women feel confident about investing, according to this study (link opens in new tab). Another statistic from this same study: While a typical retirement costs $738,000, only 9% of American women have at least $300,000 saved. Of course, millennial women have some time to accumulate this amount of savings, but there’s no time to start like the present.

Start saving now – there’s no time like the present

It’s so important to save a portion of your income now, which can permit you to pay for yourself in the future when you are no longer able to work. With most people not receiving pensions from their employer, and social security typically only covering a small percentage of a person’s living expenses, the social safety net is not what it once was for retirees.

The good news is, millennials have a long time ahead of them in which to work, and save, for retirement. As a start, workers should typically save at least enough in their company’s 401k or other retirement savings program to earn the company match, typically around 3-5%. If they aren’t contributing at least this amount to their 401k, workers can be missing out on some valuable compensation which adds up over time.

Taking one step now towards saving, even if it’s a small percentage of your income, is still better than doing nothing. Talk to your financial advisor about your specific situation.

Get started now making good financial decisions for your future.

In this article, we look at a potentially costly mistake women make with money.

Women budget, men invest – but it doesn’t have to be that way.

I had a conversation the other day with another female advisor, where we discussed the need for our society need to do a better job educating women about investing and finances. She said, “Women budget, men invest.” As a female advisor with many female clients, I talk to women all the time about what they are doing with their money, and what they could be doing with their money – or rather, what their money could be doing for them!

A recent article in Investment News highlights this discrepancy between men and women. The article says, “falling short in the amount or percentage of income they invest could cost some women more in the long run than the gender pay gap”, according to Sallie Krawcheck, CEO and co-founder of Ellevest robo advisor.

She also says, “…women today invest less than men do…This gender investing gap costs women hundreds of thousands…over the course of their lifetimes – for some women more than the gender pay gap does.”

59% of women ages 20-34 defer investing and financial planning to spouses.

Also from the article: “According to a survey by UBS Group released earlier this year, 59% of women age 20 to 34 defer investing and financial planning to spouses.” While it’s perfectly logical, and frankly necessary, to divide up the myriad household responsibilities, at some point this can be a problem. Women typically live longer than men, so even women who remain married may become widowed and need to know more about their finances than they ever did before. Why not start learning about investing and financial planning now?

Read the full article here (link opens in new tab). And talk to your financial advisor about your specific situation.