Coffee with Michele Clark, CFP ® and Jan December 2016

Come to the Community Room at Kaldi’s in Chesterfield, MO with your financial planning and tax questions and enjoy a cup of coffee with CERTIFIED FINANCIAL PLANNER™ professional Michele Clark and Jan Roberg Enrolled Agent.

There is no prepared presentation, just a casual conversation in a small group environment; your opportunity to pick our brains.  Feel free to invite family or friends who could benefit from an hour with us.  Open to registered attendees only, due to the size of the room.

Financial Planning and Tax Questions Answered

Coffee with Michele and Jan
Kaldi’s Coffee Chesterfield, MO
Wednesday December 7, 2016
10:30 am to 11:30 am

RSVP Information

RSVP online Clark Hourly Financial Planning and Investment Management RSVP or call 636-264-0732.  Space is limited.

Kaldi’s Coffee Chesterfield, MO address and map

Retirement Income: Estimating How Much You Will Need

Use your current income as a starting point

You have probably read financial press articles that discuss desired annual retirement income as a percentage of your current income. Depending on the article, that percentage could be anywhere from 60 to 90 percent, or even more. The appeal of this approach lies in its simplicity, and the fact that there’s a fairly common-sense analysis underlying it: Your current income sustains your present lifestyle, so taking that income and reducing it by a specific percentage to reflect the fact that there will be certain expenses you’ll no longer be liable for (e.g., costs associated with working such as lunches out, dry cleaning, commuting, etc.) will, theoretically, allow you to sustain your current lifestyle.

The problem with this approach is that it doesn’t account for your specific situation. If you intend to travel extensively in retirement, for example, you might easily need 100 percent (or more) of your current income to get by. It’s fine to use a percentage of your current income as a benchmark, but it’s worth going through all of your current expenses in detail, and really thinking about how those expenses will change over time as you transition into retirement.

Project you retirement expenses

Your annual income during retirement should be enough (or more than enough) to meet your retirement expenses. That’s why estimating those expenses is a big piece of the retirement planning puzzle. But you may have a hard time identifying all of your expenses and projecting how much you’ll be spending in each area, especially if retirement is still far off. To help you get started, here are some common retirement expenses:

  • Food
  • Housing: Rent or mortgage payments, property taxes, homeowners insurance, HOA fees, property upkeep and repairs
  • Utilities: Gas, electric, water, telephone, cell phone, Internet, cable TV, trash
  • Transportation: Car purchases or payments, auto insurance, gas, maintenance and repairs, public transportation
  • Insurance: Medical, Medicare Supplement, dental, life, long-term care
  • Health-care costs not covered by insurance: Deductibles, co-payments, prescription drugs
  • Care for yourself, your parents, or others: Costs for a nursing home, home health aide, or other type of assisted living
  • Taxes: Federal and state income tax, capital gains tax, personal property tax
  • Travel: for fun, to visit family, to go to family events such as weddings and funerals
  • Clothing
  • Debts: Personal loans, business loans, credit card payments
  • Education: Children’s or grandchildren’s college expenses
  • Gifts: Charitable and personal such as Christmas, birthday, wedding
  • Recreation: dining out, hobbies, leisure activities, season tickets to sports or entertainment
  • Miscellaneous: Personal grooming, pets, club memberships, household items

Don’t forget that the cost of living will go up over time. The average annual rate of inflation over the past 20 years has been approximately 2.3 percent. (Source: Consumer price index (CPI-U) data published by the U.S. Department of Labor, January 2015.) And keep in mind that your retirement expenses may change from year to year. For example, you may pay off your home mortgage or your children’s education early in retirement. Other expenses, such as health care and insurance, will increase as you age. To protect against these variables, build a comfortable cushion into your estimates (it’s always best to be conservative). Keep in mind that some expenses have historically gone up at a rate greater than inflation.  For example, in our retirement projections we inflate healthcare expenses at a rate of 6%.

Decide when you will retire

To determine your total retirement needs, you can’t just estimate how much annual income you need. You also have to estimate how long you’ll be retired. Why? The longer your retirement, the more years of income you’ll need to fund it. The length of your retirement will depend partly on when you plan to retire. This important decision typically revolves around your personal goals and financial situation. For example, you may see yourself retiring at 50 to get the most out of your retirement. Maybe a booming stock market or a generous early retirement package will make that possible. Although it’s great to have the flexibility to choose when you’ll retire, it’s important to remember that retiring at 50 will end up costing you a lot more than retiring at 65.

Estimate your life expectancy

The age at which you retire isn’t the only factor that determines how long you’ll be retired. The other important factor is your lifespan. We all hope to live to an old age, but a longer life means that you’ll have even more years of retirement to fund. You may even run the risk of outliving your savings and other income sources. To guard against that risk, you’ll need to estimate your life expectancy. You can use government statistics, life insurance tables, or a life expectancy calculator to get a reasonable estimate of how long you’ll live. Experts base these estimates on your age, gender, race, health, lifestyle, occupation, and family history. But remember, these are just estimates. There’s no way to predict how long you’ll actually live, but with life expectancies on the rise, it’s probably best to assume you’ll live longer than you expect.

Identify your sources of retirement income

Once you have an idea of your retirement income needs, your next step is to assess how prepared you are to meet those needs. In other words, what sources of retirement income will be available to you? Your employer may offer a traditional pension that will pay you monthly benefits. In addition, you can likely count on Social Security to provide a portion of your retirement income. To get an estimate of your Social Security benefits, visit the Social Security Administration website (www.ssa.gov). Additional sources of retirement income may include a 401(k) or other retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest, the rate of investment return, and other factors. Finally, if you plan to work during retirement, your job earnings will be another source of income.

Make up any income shortfall

If you’re lucky, your expected income sources will be more than enough to fund even a lengthy retirement. But what if it looks like you’ll come up short? Don’t panic–there are probably steps that you can take to bridge the gap. We can help you figure out the best ways to do that, but here are a few suggestions:

  • Try to cut current expenses now so you’ll have more money to save for retirement
  • Consider delaying your retirement for a few years (or longer)
  • Lower your expectations for retirement so you won’t need as much money (no beach house on the Riviera, for example)
  • Work part-time during retirement for extra income

The best way to determine if you are on track for the retirement you envision, is to get started now on a financial plan. You don’t have to go it alone; you can enlist the help of a professional.  Contact us today.

Based on an article Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016

 

Michele Clark Quoted in the News: St Louis Post Dispatch article about financial compatibility

The St Louis Post Dispatch quoted me in their article “Is Your Honey Good With Money? Better Find Out Before Tying The Knot.” in the Sunday paper.

I shared my thoughts on couples and financial compatibility.  As a financial advisor for twenty some years, I have worked with many different couples of various age ranges, so I was able to share some ideas for checking to see if you think about money in the same way.

Even if you don’t, one of the most important things to do is to talk about it before you marry.  Money squabbles are one of the leading causes of divorce.  Valentine’s Day has just passed and love is in the air, take a look at this article to make sure it stays that way!

Financial Resolutions

I believe that just about everyone has some sort of financially related To Do item sitting on their To Do list.  And they have every intention of taking care of it.  However, so many other more time critical things seem to keep the financial items from getting to the top spot of the list.

If you are going to resolve to get some of your financial To Dos To Done, what actually matters – how it got done or that it got done?  I will come back to that thought in a minute.

When people come to see me they have accumulated a list of tasks, and it is so easy to see how  that happens in our busy lives.

You take a new job – a nice jump up the career ladder.  Something needs to be done with that old 401(k).  But what?   You’re busy with the new job right now.   So you put it on The To Do List.

Your income is higher now with the new job, should you have more life insurance?  Or is the life insurance at work enough?  You did buy some whole life from that guy that came to the house when you first got married.  Is that still the right policy for you or not?  So you put that on The To Do List.

Your kids are getting older, and you haven’t saved as much as you had intended for college.  How much can you afford to put away for their college vs. how much should you be saving for our own retirement?  Well, the kids are in middle school, you have a couple more years, so you put it on The To Do List.

At work they keep changing your investment choices and you don’t know what to pick.  You don’t have the tools to see all of your investments together and create a diversified portfolio that incorporates all of your accounts, but you know that you need to do it one day.  But you don’t have the time right now.  So you put that on The To Do List.

Sometimes when potential clients meet with me in the free Get Acquainted meeting they tell me that they feel bad about not taking care of these things themselves.  I stress to them, that I do not want them to feel that way.  I tell them that when I have electrical problems at the house, I call an electrician.  And when I have serious plumbing problems I call a plumber.  I have had a handy man come to the house a few times to work though lists of little things that were annoyances.  Sometimes you call in a professional to help you with your list.  And it feels great to work on that list.

So if you are making a resolution to get your financial To Do items To Done, make a plan to either do them yourself, or to contact a professional to help you do them.  Because when you mark them off the list, what actually matters – how it got done, or that it got done?

Resolve to take action today!

Have a Wonderful New Year!

Shredding Event: Wildwood, Missouri

Wildwood, Missouri will host their third annual shredding event on Saturday, October 6th at 8:00am to 1:00pm at the St. Louis Community College – Wildwood campus at 2645 Generations Drive 63040.

I have to shred multiple times a day, because of the type of work that I do, so I have a good shredder that sits to the right of my desk, within reach of my seat.   But I do understand why a city would have a big shredding event once a year, because from time to time I hear from clients that they have just cleaned out of their file cabinets so they need to shred a bunch of papers or they have let a lot of their shredding accumulate and now it is a large pile.  If this sounds like your situation, you might consider collecting your papers for the shred event in Wildwood in a couple of weeks.    

Wildwood shredding event

Help protect yourself from identity theft, by making sure that your sensitive information is shredded, not just thrown in the trash.  Here’s what you’ll want to know about the event:

  • It is open to residents and nonresidents of Wildwood.
  • It is free.
  • Big, heavy-duty shredders are used.
  • Shreddings will be recycled, not sent to landfills.

What can be shredded

  • Paper
  • Paper Clips
  • Folders
  • CDs
  • Rubber Bands
  • Pill Bottles (without pills)

What Cannot be shredded

  • Cardboard boxes
  • Hard-drives
  • Batteries
  • Vinyl binders
  • Medical Waste (medicine/needles/etc)

Stop by St. Louis Community College in Wildwood Saturday October 6th 8:00am to 1:00pm and bring your boxes of shredding!