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Archive for Savings

It’s Important to Keep Saving After Retirement

Posted by Frank McKinley on
 February 26, 2021
  · No Comments

Just because you’re retired doesn’t mean you should stop saving. Carefully managing your money and looking for ways to save will help ensure you remain financially fit during retirement. Consider these tips: 

Construct a financial plan.
Most retirees fear that they’ll run out of money during retirement. To ease those fears, create a financial plan detailing how much money will be obtained from what sources and how that income will be spent. Make sure your annual withdrawal amount won’t cause you to deplete your savings. Review your plan annually to ensure you stay on course. 

Consider part-time employment.
Especially if you retire at a relatively young age, you might want to work on at least a part-time basis. Even earning a modest amount can help significantly with retirement expenses. However, if you receive Social Security benefits and are between the ages of 62 and full retirement age, you will lose $1 of benefits for every $2 of earnings above $18,960 in 2021. You might want to keep your income below that threshold or delay Social Security benefits until later in retirement.

Contribute to your 401(k) plan or individual retirement account (IRA).
If you work after retirement, put some of that money into a 401(k) plan or IRA. As long as you have earned income and meet the eligibility requirements, you can contribute to these plans. 

Try before you buy.
Want to relocate to another city or purchase a recreational vehicle to travel around the country? Before you buy a home in an unfamiliar city or purchase an expensive recreational vehicle, try renting first.

Keep debt to a minimum.
Most consumer loans and credit cards charge high interest rates that aren’t tax deductible. During retirement, that can put a serious strain on your finances. If you can’t pay cash, avoid the purchase. 

Look for deals.
Take the time to shop wisely, not just at stores, but for all purchases. When was the last time you compared prices for auto or home insurance? Can you find a credit card with lower fees and interest rates? When did you last refinance your mort-gage?

Evaluating P/E Ratios

Price/earnings (P/E) ratios are a common measure of stock value, both for individual stocks and the overall market. Calculating a P/E ratio is straightforward — it is simply the price of a single share of stock divided by the company’s per share earnings. 

When considering public companies, it seems reasonable that well-established businesses growing in a fairly predictable pattern would command a higher P/E ratio than a small private business. Typically, companies with higher growth rates command higher P/E ratios. 

The difficulty is deciding what a reasonable P/E ratio is for a particular company or for the overall stock market. It generally helps to follow the P/E ratios of stocks that interest you, along with companies in similar industries, to develop a feel for how the P/E ratios fluctuate. 

Reviewing a company’s P/E ratio for prior years can also be helpful. If a company’s growth rate in the past is expected to continue in the future and market conditions are similar, you might not expect much change in P/E ratios. But you also must evaluate whether changes to the company, its industry, or the overall stock market would cause an increase or decrease in the company’s P/E ratio. 

Financial Thoughts

Researchers found that investors with larger accounts follow more contrarian strategies, reflect the news in their trades, and experience subsequent gains, while smaller accounts tend to follow momentum-based strategies, fail to account for the news when placing trades, and incur trading losses. They also found that these trends were stronger for younger men. The study’s authors found that all groups of individual investors lose money, though individual investors with larger account sizes lose significantly less on average (Source: AAIIJournal, August 2020). 

Another study found that investors with a high level of financial literacy take too many risks, overborrow, and hold naive financial attitudes. However, this high level of financial literacy also lends itself to better retirement planning, since people with more financial literacy are more likely to have a retirement savings plan. In addition, financially literate households earn higher financial returns than illiterate ones. (Source: AAIIJournal, August 2020). 

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Categories : Financial Services, Retirement, Savings

How to Set Savings Goals – A Few Thoughts

Posted by Frank McKinley on
 January 18, 2021
  · No Comments

Setting clear, specific savings goals is one of the best ways to achieve your financial objectives, but it’s a task that many people struggle with. Unfortunately, establishing savings goals is a bit more complex than simply picking a number out of the sky and hoping you can eventually set aside that much cash. Below is a simple seven-step plan that you can use to set — and reach — your savings goals.

1. Select Goals

Before you start saving, it helps to know what you are saving for, since most of us find it easier to save money if we know it will eventually be used for a specific purpose. Common savings goals are creating an emergency fund with at least six months of living expenses or saving for retirement, a child’s college education, a down payment, or a vacation. Your goals will be as unique as you are; the most important thing is that you select them and make them as specific as possible.

2. Determine How Much You Need to Save

Exactly how much money do you need to accomplish your goal? For example, you may want to have $5,000 saved for your dream vacation, $30,000 for a down payment on your first home, or $1 million for retirement. Don’t pick a random number at this point — research how much you’ll actually need so you can be confident that your savings will be sufficient to achieve your goals.

3. Consider Your Timeline

Savings goals can generally be divided into three broad categories: short-term (those that you hope to reach in a year or less), mid-term (those that are roughly one to five years away) and long-term (goals you hope to achieve in five years or more). It’s important to know your timeline, since it will have a direct impact on how aggressively you need to save to hit that target and where you put your money.

4. Determine How Much to Set Aside Each Week or Month

For short-term goals, this step is fairly simple. Say you plan to get married in a year, and you want to have $10,000 saved toward that goal before your big day. To meet that goal, you’ll need to save roughly $833 per month for the next year, or $10,000 divided by 12. Determining how much you need to save to hit your long- and mid-term goals can be a bit more complicated, as you’ll need to take into account the growth of your in-vestments. Whatever the timeframe for your goals, making these calculations is important because it allows you to adjust your savings as your budget allows. For example, if you can’t afford to save the over $800 a month you need for the wedding, you have two options: You can ei-ther adjust your timeline or opt to keep it the same and save less.

5. Automate Your Savings If Possible

Once you know how much you need to save, you’ll likely find it easier to stick to your plan if you can automate your savings. Adopt the pay-yourself-first principle and set up automatic transfers to your savings or investment accounts. The key is to save the money before you ever have a chance to spend it, as well as to avoid forgetting to make the transfers.

6. Choose the Right Way to Save

Depending on your goals and timeline, you have different options for savings. Traditional savings ac-counts are a good option for short-term goals, since your money will be safe. Investment accounts and retirement accounts, like a 401(k) plan or IRA, are good options for longer term goals, since you’ll earn money as you save.

7. Watch Your Money Grow

Once you have your savings plan in place, keep an eye on how it is doing. You will need to periodically review your results and make adjustments as necessary. Please call if you’d like to dis-cuss your savings goals in more detail.

If you would like more information or to discuss
your savings goals or other financial concerns

Click Here
Categories : Blog, Financial Services, Savings, Savings Goals

Recent Newsletters & Blogs

  • Rebate Payments and Enhanced Unemployment Benefits
  • It’s Important to Keep Saving After Retirement
  • Financial Outlook – Special Issue 2021
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