1. 15% Rule, leads to plenty of money
at retirement
Save 15% of your gross income
and continue to save 15% as
your income rises
-This should provide enough for
a comfortable retirement
-If you have children and want to
help with their college costs, you need to save more
2. FREE MONEY
Maximize your 401K’s, IRA’s, and
TSA’s, put in the maximum amount of money you can.
-Tax Deferral adds to your growth
-IRS discount on taxes
-Automatic/forced saving, you get
used to it and you won’t miss the money
-Pre-tax, IRS helps when you contribute
-Company matching “FREE
MONEY”
-Tax Free Roth IRA’s
3. Rainy days and Monday’s
-Have an emergency fund
-Build up 3-6 months expenses in
cash reserve
-Use money markets to get the best
short-term rate
-Use for planned purchases needed
within 2 years
4. Nike formula - - Just Do It!
Invest in stocks, bonds, anything
- - just invest
-Get into the habit of investing
-Enjoy it, it is fun to own stock
in America’s great companies
-If you know a company well, own
it, enjoy the process, teach
your children
-3 rules: Start, Stay, and
Invest More
5. Save money for your children’s education to help
them
support themselves
Educate your children
-Save money for their college
education
-Use custodial or minor accounts
to shift taxation to children’s zero tax brackets
-College or technical school
graduates earn twice as much as high school graduates
Annual income Lifetime
income ages 22-65
College
graduates
$44,200 $3,038,000
High
school graduates 23,244
1,597,000
High
school drop-outs 15,340 1,054,000
6. 70/10 Rule for those you love
For those of you who have dependents
you LOVE…
Insure your income with paycheck insurance,
70% long term
disability protection
Insure your income with life insurance,
10 times your income,
15 times if you have children
7. Think Big, Think Nice, in Minnesota invest in
your home
Stretch to buy a home, as nice and big
as possible
-We live in Minnesota, we spend
a lot of time indoors
-Real estate continues to be a good
investment
-Once your have completed 1-6, then
if you want, buy a lake home;
Minnesota is the land of 14,000
lakes
Copyrighted by Valtinson Financial Services 2000
Seven Smart Decisions About Your Money in Retirement
™
1. Protect your “nest egg” from the last 5 things
in your life that can wipe you out.
-Doctor’s and Hospital Bills
Medical
insurance before age 65 and Medicare Supplement
Insurance
at age 65
If
you are retiring before age 65 explore medical insurance options:
group, COBRA, private, and duplication of insurance.
Are there any coverage gaps before age 65?
At
age 65, Minnesota Open Enrollment Law, You can purchase any
Medicare Supplemental
Insurance
plan offered by any company in Minnesota (regardless of your
health condition).
You
can also elect prescription drug coverage (even if you are
currently taking medication).
-Nursing Home and In-Home care costs,
use insurance to transfer the risk
Nursing
home costs can wipe you out. Explore nursing home insurance
to see if it is appropriate and affordable for you. You
must be in good health to purchase this insurance. Premium
costs rise quickly with age, buy it when you are healthy.
-Bad investments – Hire an investment
advisor.
Hire a professional to help you with your investments.
When you are retired there is less time
and no future earnings to recover from a bad loss.
The market place is changing daily and it is very difficult
to keep up with all of the changes. Get professional
help and advice.
-Law suit – Liability umbrella insurance
to protect what you have
You're
driving on a winter day in Minnesota and you accidentally
slide on the ice through a stop sign and hit someone.
They will sue you for the sum of your house, investments,
pensions, real estate, toys, assets and the liability limit
on your insurance policy. You should add up all of your
possessions and buy an umbrella liability policy for that
amount. You can add a rider to your home owners and
auto policy for about $150-250 a year.
-Estate tax – Wills, trusts,
and how your assets are titled should be reviewed.
Estate
tax can slice 37 – 55% off your estate. Proper planning
can usually reduce this to $0 if your estate is less
than $1.3 million. There are many additional strategies
for estates over $1.3 million. Prepare an estate plan
using wills, trusts, and an ownership.
2. Inflation - - Be careful
-Costs go up each year and plan
for 30-40 years of retirement
-Everything you buy will double
in cost while you are retired
A car for $20,000 at age 65,
will be $40,000 at age 85
-Your income will need to double
during retirement
-You need to prepare for inflation,
it continues to reduce your income and lifestyle
The
U.S. Government states the inflation rate (CPI, Consumer Price
Index) for the U.S. economy is 2.5%. In reality, for
retired people it is 4-6%. Why? The two main expenses
for
retired people are Health Care – increasing at 10-20% per
year and leisure activities increasing at 7-9% per year.
Nursing
Home costs rise 12-15% per year.
The current average daily cost in a Minnesota
nursing home is $147/day
(147 x 30 days
= $4,410/month, $4,410 x 12 months = $52,920 per year)
What would a $52,920
annual expense do to your income and lifestyle if your spouse
were in a nursing home?
Inflation is real
- - plan for it.
3. You’ve paid your fair share, Don’t Pay Twice
TAXES, TAXES, TAXES, the IRS hits
you 4 ways:
-Taxation on your income, pensions,
and IRA’s
-Taxation on your investment earnings
-Taxation on your social security
benefits
-Taxation on your estate you leave
to your heirs
-Set up an income distribution plan
to minimize the taxes you pay
-75% of all Americans overpay their
taxes, you need to arrange your finances to minimize taxes
There are many
rules and cross over formulas in the tax code. One
wrong move could trigger 2 to 3 other taxes you didn’t
know about. (ex. Social Security income inclusion rules
and tax-exempt interest)
4. Plan to live a long time
-Medical technology and advancements
will add years to your life
-Your “nest egg” may need
to last longer than you planned for
-Stay invested and keep a
portion of your money in the stock market
People are
living longer and longer. Medical technology currently
being tested will add 10-15 years to your life. Be prepared
to live to 100.
5. Stay Balanced
Balance and diversification in your investments
-Maintain enough savings
for emergencies and any known purchases within 2 yrs.
-Keep 3-5 years of income
in bonds and fixed accounts for security
-The rest, keep invested
in conservative stocks of America’s leading companies
Be
prepared for known and unknown financial needs and commitments
Balance
your portfolios with the right amount of cash, bonds, and
stocks
6. Manage it well
Managing the withdrawal of your investments
and savings
-How much to take, from which
account, and what are the tax consequences
-Coordinating with your pensions,
social security, and your IRS RMD
(Required Minimum
Distribution at age 70 ½ on your IRA’s and Pensions)
-Time frame, income
needs, risk tolerance, asset allocation, and implementation
Mismanagement
of your investments, withdrawals, and sale of your assets
can create unnecessary tax consequences and penalties.
Get advice on tax matters.
7. Enjoy yourself, spend your money, and have fun
-Be thrifty, be conservative,
but remember, you can’t take it with you
-Spend your money on
yourself
-Spend your money on
your spouse, children, grandchildren
-Spend your money on
your favorite charity, church, or cause
-Make a difference with your
success (there are creative ways to do this)
Enjoy
yourself. Spend your money and have fun. If you
have taken care of numbers 1-6, life will be a lot
more fun. The purpose of planning is to protect yourself
and cover your risks, so when you are retired you can
spend your money, be with your family, and enjoy yourself.
© Copyright 2001 Valtinson Financial Services