Retirement the Machiavellian Way

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When someone says “Machiavellian,” you might think of a lying schemer, a power-hungry politician, or ruthless individual who believes the ends justify the means. But this characterization isn’t quite fair to the political philosopher Niccolo Machiavelli. He gave practical advice to the prince of Florence about how to rule, and was concerned with him being successful, not evil. Possibly his most important piece of advice was to focus on what you can control, not on matters of chance.

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Are You Ready for Endless Summer?

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It’s time to start planning your summer, and whether you’re going to laze around on the beach, visit friends, or take a trip, it’s important to also start thinking about your retirement plan. On average, we spend more time every year planning for vacations than planning for retirement – and retirement is much longer than any vacation you will take. Summer is definitely a time to relax, but it’s also the perfect time to think about what you want your future retirement, the endless summer, to look like.

Start off with the “What”

If you and your spouse are traveling together, use the hours on the plane or highway to start discussing what you want your retirement to look like, your goals, and general timeline. If you have time off, you can “practice” retirement by trying out new activities like volunteering, spending more time with friends and family, or picking up a new or forgotten hobby, it can be a good way to plan how you will fill your time and find happiness in retirement. Consider if you want to travel a lot when you first retire and if you will move. Once you have a vision for your retirement, you can move onto figuring out how much it will cost.

Move on to the “How”

Think about how you afford the vacations you currently take: Do you save for them, or have a specific vacation budget? Planning for how you will afford retirement is a much more detailed process, which is why it helps to have a professional at your side. Start thinking about how much your desired lifestyle in retirement will cost you, and then begin calculating how much you will need to withdraw from your retirement accounts. It’s also important to consider any income from your investments, and plan for when you should start taking Social Security.

Think of all the details that go into planning a vacation: There are the travel arrangements, the hotel, activities, and setting a budget. While it’s certainly important to enjoy both vacation and retirement, the stakes are much higher when it comes to retirement and there are even more elements that go into planning this 30-plus year vacation.

Here at Peak Financial Freedom Group, we can help you create a plan for the longest vacation of your life. We’ll take your unique retirement goals into account, and help you put all the pieces of the puzzle together. If you’re taking the time to plan a vacation this summer, consider also taking the time to come in for a no cost, no obligation financial review.

What is a Phased Retirement Program?

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Some look forward to their last day of work, some are disappointed to leave coworkers and a purposeful career, and others are somewhere in between. There are many things to love about retirement, like the freedom to travel, spend time with family and friends, and just wake up whenever you want, but hopefully there are also things you love about your career. For people who experienced a sense of accomplishment from their work and like to be busy, suddenly having little mental stimulation can be less than ideal. One solution is to phase from full-time to part-time before retirement.

Transitioning to part-time employment can give you some of the freedom of retirement while keeping familiar routines and relationships in place. It can help you figure out a plan for what you will do with your time after retirement before you actually retire, since transitioning into retirement is no small task. Unfortunately, only 5% of companies offer a formal phased retirement program according to a recent Forbes article. So, if you want to officially transition to part-time before retiring, you’ll probably need to forge your own path.

If your company doesn’t have a formal phased retirement program, you can prepare a proposal for your part-time schedule. Plan which tasks you will still handle and how you will still do them with a reduced schedule, and how you will pass on your expertise, insights, and connections to younger coworkers. It’s important to emphasize how your skills and knowledge can still benefit your company even if you won’t be there full-time. Also articulate how stepping back from your role might give younger workers the opportunity to assume leadership roles while still benefiting from your mentorship.

Formal phased retirement programs are rare, but that doesn’t mean there’s not an interest both on the employee’s and employer’s sides. If you don’t think your company’s culture will be amenable to your request, you can see if any of your colleagues are also interested in transitioning to part-time. A group is likely to gain more traction and share ideas about the logistics of reducing hours and workload.

One crucial thing to consider if you will receive a pension is how working part-time will affect your benefits. Salary just prior to retirement is typically a factor in determining a pension benefit. And, benefits such as healthcare and paid vacation time could also be affected.

Here at Peak Financial Freedom Group, we can take your unique retirement goals into account when helping you create a comprehensive retirement plan. When and how you retire are important, and the decisions you make leading up to retirement can affect you for decades to come. If you’re ready to start planning for the future, click here to sign up for a free financial review. 

Life in 2050

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2050 seems like a long time away, but 2019 seemed far away in 1989. Back then, did you think a cell phone would fit into your pocket? Or that you could shout at Alexa to order you more paper towels without getting off the couch? Technology has transformed the way that we live over the last 30 years, and there’s no telling how it will change life by 2050. Here are some predictions for what your retirement in 2050 could look like.

By 2050 there will likely be 9 billion people on earth, and the majority will live in cities. Our cities may not look like a science-fiction fantasy, but virtual and augmented reality will transform the way we get information and interact with our surroundings. The augmented reality market is expected to reach $55 billion by 2021 and there is increasing demand for augmented reality in healthcare, construction, retail, and e-commerce. For example, augmented reality will help engineers and architects see what a building project would look like before it’s built and make alterations to the plans ahead of time. This will mean our cities can be built faster and better.

The population will have a higher average age due to increased lifespans. Scientists predict that on average, women will live to be 89 to 94 and men will live to be 83 to 86 by 2050. Expert foodies are hopeful that there will be less factory farms and more small and regional producers. If this is the case, it will be easier for people to eat fresh, local food instead of processed food. This could not only contribute to your happiness, but your health as well. A longer life is a gift, but one you must plan for: Think about if your nest egg will support you in the year 2050 and beyond. An evolving retirement plan could be necessary if your retirement is going to last 30 plus years.

The healthcare industry may also focus more on individual health in relation to happiness, and general wellness. There are already breakthroughs in the fields of gene therapy and personalized medicine. Medical advancements come at a cost, and there is already a rising cost of healthcare in retirement that you should plan for. A solid retirement plan anticipates the costs that Medicare care will not necessarily cover.

There are many reasons to look forward to the future, and also reasons to worry. There’s no telling how retirement could be different in 2030, let alone 2050. If you’re concerned about outliving your nest egg or market volatility, contact the professionals at Peak Financial Freedom Group. We can help you create a retirement plan that makes you look forward to your future. Click here to schedule you no cost, no obligation financial review today.

Check Your Blind Spots When Planning for Retirement

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It’s not enough to save for retirement, you have to plan for it. And planning for retirement is more than deciding where to go on a trip or when to start collecting Social Security – it’s anticipating your healthcare needs as you age, including your long-term care needs. These are often distinct from medical costs, and include help with daily activities like bathing, housekeeping, and mobility. Since most long-term care costs are not covered by Medicare, they can end up in our blind spots when we’re planning for retirement.

Many Americans don’t consider the fact that they will likely require some form long-term care during their lifetime. In fact, 70% of people aged 65 today will, according to the government. This means that even if you don’t end up needing long-term care, your spouse probably will. And according to a Bipartisan Policy Center report, a 65 year old today can expect to spend $138,000 on long-term care costs over their lifetime. Even if you’ve taken the rising cost of healthcare in retirement into account, you may not have considered that the average cost for a year in an assisted living facility is $45,000 and a year in a nursing home is $97,000.

There are a few different ways to pay for long-term care such as Medicare and Medicaid, traditional long-term care insurance, and using your personal savings. There are a few long-term care myths, and one is that all costs are covered by Medicare. Medicare only provides limited benefits for long-term care, and does not cover extended stays in nursing homes or non-skilled living assistance. Medicaid benefits are typically only available after you’ve depleted your savings.

Long-term care insurance is becoming more expensive, but if you already have a long-term care policy, it is typically less expensive to keep it rather than buy a new one. The older you get, the more expensive a policy tends to be. If you don’t have a policy and plan on using your savings, keep in mind that withdrawing large amounts from your traditional retirement accounts may have a significant impact on your taxes.

It’s likely that relatives will be involved with long-term care, whether by contributing money, time, or making decisions on behalf of the person needing long-term care. That’s why it’s important to start planning now with your relatives and a financial planner to avoid placing too large of a burden on your family members when it comes to daily activities like bathing, housekeeping, and mobility.

At Peak Financial Freedom Group, we can help you take long-term care costs into account when creating a retirement plan. There may be many retirement costs in your blind spot, and long-term care is a significant one. Don’t wait until you need long-term care to figure out how to pay for it, click here to schedule your no cost, no obligation financial review today.

When Retirement Isn’t Your Choice

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If you’re nearing retirement age and know you’re not financially prepared for retirement, your solution may be to work longer. While forgoing an early retirement can be prudent, your career might not last as long as you’d like it to. According to the Center for Retirement Research, 37% of retirees had to stop working sooner than they anticipated. And, the longer they planned to work, the less likely they were to reach their goals. The truth is that retirement isn’t always voluntary. There are many reasons why Americans end up retiring earlier than they planned, such as job loss, health issues, and unexpected caregiving responsibilities.

According to the Employee Benefit Research Institute, almost a third of American workers predict that they will work until age 70 or older, but only 7% of people surveyed actually ended up working until age 70. This can be an issue because older workers tend to have a harder time getting hired, and when they do, they often have to work for a lower salary. Spending what would normally be your highest earning years unemployed can be especially detrimental to your retirement plan, especially if you’ve waited to prepare for retirement until your 50’s.

Your mind might be ready to work into your 70’s, but your body might not be. Workers are sometimes forced to retirement earlier than they planned because of health issues. No matter how healthy you are now, anything could happen in the next few years. And, your job may be taking a toll on your health if it is physically demanding, or requires you to sit for long periods of time or lose sleep.

Even if your health remains perfect as you age, you might have a family member who requires your care. Caring for aging parents, a spouse, or grandchild can make you need to catch a retirement curveball if they require enough of your time and attention that you leave your job. Unfortunately, caring for your loved ones can be a time consuming but unpaid job that might disrupt your retirement plans.

If you get hit with a retirement curveball, a financial advisor can asses your situation and help you create a plan. Don’t assume you’ll be able to work for as long as you want – unexpected job loss, health issues, and unexpected caregiving responsibilities happen all too often. To prepare for the unexpected, contact the professionals at Peak Financial Freedom Group. We can help you create a comprehensive retirement plan that may help you if you have to stop working earlier than you expected to. Click here to schedule your no cost, no obligation financial review to learn how prepared for retirement you are now and how you can protect yourself from the unexpected.

How the Rules of Homeownership Have Changed

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Are you thinking about downsizing in retirement? Maybe you plan to make your vacation home your primary residence once there’s no office to commute to everyday. Or, maybe you’re considering buying a property to rent out to generate income in retirement. Either way, if you’re thinking about buying a house you should probably take some time to learn how it will impact your tax situation. It may have been a while since you bought a home, and the rules of homeownership have changed in the past few years thanks to tax reform.

If you itemize your taxes, then you have the opportunity to deduct your mortgage interest. This is a way to help make homeownership more affordable. Around 21% of taxpayers claim this deduction, saving them an average of $1,950 in 2016. But the following year, tax reform almost doubled the standard deduction to $12,000 for single filers and $24,000 for married couples filing jointly, thus reducing the number of people who chose to itemize. If you used to itemize but now take the standard deduction, keep in mind that you can no longer deduct your mortgage interest on your current home, or any new home you might buy.

As an experienced home owner, you likely know that property taxes are a cost to consider and plan for. Tax reform capped the state and local tax deduction at $10,000. This now means you can deduct up to $10,000 in total, not per property. Therefore, this could make owning multiple homes more costly, especially in states and cities with high taxes. Also, you can no longer deduct mortgage interest on second homes bought after the new law took effect, which is one thing to consider if you are thinking about buying a second home.

You may not be able to deduct all of your mortgage because the mortgage interest deduction is now capped at $750,000 instead of $1 million for new mortgages. Home equity loans are also no longer deductible, so be sure to review and plan carefully before committing to such an illiquid asset.

These homeownership rule changes could also impact your ability to sell your home, especially if it is worth over $750,000 or comes with high property taxes. This could ultimately change your decision to downsize in retirement, invest in a rental property, or buy a vacation home.

Buying a second home and moving in retirement are big decisions. If you need help navigating the new tax code when deciding how second homeownership will affect your overall retirement plan, contact the professionals at Peak Financial Freedom Group. We can help you create a comprehensive retirement plan that helps to minimize your tax burden, so click here to schedule your no cost, no obligation financial review.

Exploring Alternative Investments

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We’re living – and retiring – in unique times, and some retirement strategies reflect this. Many of those nearing retirement are on their own, as companies typically don’t fund pensions now. As Americans live longer, nest eggs need to stretch further. In a time of low interest rates, some high net worth individuals are exploring alternative investments to help grow their wealth.

Alternative investments are geared towards high net worth individuals with investment experience because of their high minimum investment requirements. Examples of alternative investments include private equity, hedge funds, managed future, real estate, commodities and derivatives contracts. Compared to mainstream investments like stocks and bonds, alternative investments have low liquidity, and may be more difficult to value. The risk and return vary widely among different types of alternative investments.

Because interest rates are at a historical low, some are looking to alternative investments to grow wealth more aggressively. Real estate tends to be a popular alternative investment because of the option for renting out the property while waiting for its value to appreciate. Some look to gold in times of crisis because it can be an effective inflation hedge. One option is to hold gold bars, coins, and jewelry, and another Is to invest in gold exchange-traded funds or gold futures and options. Private equity seeks long-term appreciation from the growth of private companies, as opposed to public markets.

An alternative investment could bring balance to your retirement portfolio by helping you diversify and hedge against downside. Potentially higher income levels could make alternative investments a good strategy for high net worth individuals who have less to worry about during periods of market volatility. After all, you don’t want to let market volatility ruin your retirement. However, alternative investments also tend to be more complicated and less transparent, requiring a certain amount of investment know-how to make the best use of them.

For high net worth individuals, alternative investments could help to grow wealth. In a time when pensions are not the norm, and interest rates are low, it may be time to consider alternative investments. If you’re looking to diversity your retirement portfolio, contact the professionals at Peak Financial Freedom Group. Click here to schedule your no cost, no obligation financial review today to take the first step towards a comprehensive retirement plan.

Saving for Retirement While Reducing Your Taxes

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This tax season will be the first time Americans are filing under the new tax code, adding complexity, and possibly stress, to the already complex and stressful filing process. But, like with most things in life, a little preparation goes a long way. As you prepare for retirement, you’ll want to think about ways to decrease your tax burden and save money for the future. Maxing out your retirement account contributions, saving in a Health Savings Account, and taking advantage of deductions are some ways to help lower your tax bill.

You can lower you tax bill and save for retirement by maxing out your traditional 401(k) or IRA. The 401(k) contribution limit was raised to $18,500 for 2018, and to $19,000 for 2019. Those over 50 can contribute an additional $6,000. The limit for combined employer and employee contribution is $55,000. You can contribute up to $5,500 to an IRA for 2018, and up to $6,000 for 2019. Those over 50 can contribute an additional $1,000. If you haven’t maxed out your contribution yet, you can still do so by April 15th. So, if you have an IRA don’t forget about this important deadline.

You can use a Health Savings Account to help you save for the rising cost of healthcare in retirement, and there are benefits to pairing your IRA with a Health Savings Account. Your money is not taxed when it goes into or comes out of a Health Savings Account if you withdraw it to pay for qualified medical expenses not covered by insurance. You can let the funds grow in the account tax-free for as long as you want. If you wait until you are 65, you can spend the funds on anything you want without incurring a 10% penalty normally incurred for spending on something other than a qualified medical expense.

If you’re nearing the age where you’re thinking of selling your home, you know what a valuable asset it is. There are a few ways to use your home to decrease your tax burden: You can take a standard deduction for home-business expenses instead of calculating each individual expense. You can take a $5 deduction for every square foot of office space, up to 300 square feet. If you installed alternative energy equipment such as solar panels, geothermal pumps, and wind turbines on your property, you can take a tax credit worth 30% of what you spent on the equipment and installation.

At Peak Financial Freedom Group, we understand the value of the money you’ve worked so hard to earn. Let us help you create a comprehensive retirement plan that makes saving for retirement easier by taking your tax burden into account. Click here to schedule your no cost, no obligation financial review.

If You Have an IRA Don’t Forget About This Important Deadline

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Most people know that April 15th is Tax Day, but they may not know that it is also the deadline to contribute to an IRA. Even if you file for a tax extension, you must send your IRA contribution by April 15th. Contributing to an IRA is one good way to save for retirement, so make sure your contribution isn’t forgotten in the busy period leading up to Tax Day.

You can contribute up to $5,500 a year to your IRA for 2018 if you are under 50. If you are over 50, you can contribute an additional $1,000. You can no longer contribute to a traditional IRA after you turn 70 ½, but you can contribute to a Roth IRA for as long as you live. Due to a unique set of circumstances, you might be wondering if now is the time to convert to a Roth IRA.

If you make more than $199,000, you cannot contribute to a Roth IRA. You can contribute to a traditional IRA no matter how high your income is. However, there are limits as to what you can deduct from your taxes: If you have a retirement plan through your employer and your income is over $73,000 as a single person, or over $121,000 as a married person filing jointly, you cannot take a deduction if you contribute to a traditional IRA.

In general, you must earn income in order to contribute to an IRA, but you can contribute on behalf of a nonworking spouse. The working spouse can contribute the maximum amount to both his or her IRA and the nonworking spouse’s IRA. If you want to take advantage of this, you must do so before April 15th.

Note that you still have to make an IRA contribution by April 15th even if you file for a tax extension, unless you are contributing to a SEP-IRA in which case you must contribute by your tax filing due date. As with a tax return, you must mail the contribution by April 15th and it’s immaterial as to when it arrives at your financial institution. Make sure to clearly indicate to which year your contribution applies, especially if you are sending your contribution between January 1st and April 15th.

At Peak Financial Freedom Group, we want to make saving for retirement as easy as possible. With so many nuances to the rules regarding retirement accounts, it helps to have a team of professionals at your side. Click here to schedule you no cost, no obligation financial review today.