Financial Planning

Ask Jake: What is FIRE (Financial Independence, Retire Early)?

When it comes to discussing retirement planning, it’s hard to overlook trends that come in this area. One current trend that’s getting attention in the financial world is financial independence, retire early (FIRE).

Today, we’re talking to Jake Sturgill about the FIRE trend, which investors might qualify for FIRE, and some takeaways that can strengthen any retirement plan, regardless of investor age.

How Early is FIRE Retirement?

Financial independence, retire early. Investors who choose the FIRE route want to retire earlier, rather than later. For some, this could be extremely early, say, in their 30s or 40s, but the goal to become financially independent and retire early certainly isn’t limited to younger investors.

FIRE is more about how you approach retirement planning than when you retire. It’s a lifestyle choice that shapes your entire approach to financial planning. When you choose to set a goal to retire early, you choose to save aggressively to achieve that early financial independence and set aside savings to see you through an extended retirement.

Typically, people who choose FIRE are higher income earners who opt to live a minimalist lifestyle in order to save even as much as 50-80% of their incomes annually until they achieve their retirement savings goals. If you are able to maintain this lifestyle and desire to leave the workforce early, the strict savings required can pay off with that early retirement date.

Even if, for reasons of age, income, or other life circumstances, FIRE isn’t a reasonable retirement objective, it doesn’t mean that ambitious savings goals and a desire to prepare your lifestyle for retirement aren’t for you.

In fact, if anything, the FIRE movement should inspire you to re-evaluate your retirement savings plan and determine whether it is aligned with your desired retirement age — even if it’s a more traditional one.

I Missed the FIRE Truck. Do I Have Other Options?

Maybe you think you’re beyond the point of saving for an early retirement. You missed the boat… Or in this case, you could pardon the pun and we could even call it the “FIRE truck”. I think my toddler, who frequently plays fireman, would appreciate this phrase!

Truly, it’s never too late to consider your financial future and look for ways to double down on important savings goals. If your goal is early retirement, you want to work your way back to the present moment and evaluate how you can balance your investments, savings rates, and lifestyle choices to enable your future self the option to reduce the number of years you “have” to work.

If your goal isn’t early retirement, or if that’s not a realistic goal, provided your age and/or circumstances, there are still ways that FIRE thinking can apply to your retirement planning, especially when you consider how your current lifestyle plays into your financial future.

It’s all about balance.

Whether you are aiming for early retirement or want to explore options for a more traditional retirement, you want the scope of your financial planning to encompass the things that are important to you personally. Your career, your family, your desired retirement lifestyle… All of these are factors to bear in mind when strategizing for the future.

Retirement planning typically isn’t something that you finalize in one session and recognize within the next year or decade. Yes, FIRE is an attractive option, but it’s not the only route that leads to a satisfying, well-funded retirement. At the end of the day, you and your financial planner need to be on the same page about planning a retirement that makes sense for you, your priorities, and your ideal financial future.

Want to learn more about retirement planning? Have another burning financial question? Reach out to Jake Sturgill today with your financial questions or for an in-person consultation!

    What is the Difference Between an Account Rollover and a Transfer?

    An important financial planning activity is reviewing your financial plan to ensure that everything is on track to help you meet your financial goals. Life changes, market shifts, and any number of factors can cause plans to change.

    One common change that investors make during their financial journeys is to move funds from one retirement account to another. Whether this move occurs for tax purposes, because of a change in employment, or for another reason, it’s important to consider how this change will be made: as a rollover or transfer.

    Of course, if your situation involves moving retirement accounts from your former employer, you have a variety of options from which to choose. These include:

    • Leave the money in your former employer’s plan, if permitted
    • Roll over the assets to your new employer’s plan, if one is available and rollovers are permitted
    • Roll over to an IRA
    • Cash out the account value

     

    Because of this, it’s important to understand the differences between transfers and rollovers, as well as the benefits and drawbacks of each. Today we’re going to explore these options to help you get a better understanding of how a rollover or transfer could impact your financial planning activities.

    What is a Transfer?

    A transfer involves transferring funds from one account to another. Generally, transfers move from one account of the same type to another, such as moving funds from a 401(k) plan at a previous employer to a 401(k) plan offered by your current employer.

    More commonly, transfers are used to move funds from one IRA to another, since you can move funds between accounts without incurring a tax penalty. However, if you need to move funds from a Traditional IRA to a Roth IRA, you must perform a Roth conversion, and make the necessary adjustments when you file.

     

    What is a Rollover?

    A rollover occurs when you move funds from one type of account to another, such as from a 401(k) to an IRA, either directly or indirectly. During a direct rollover, funds move straight from Account A to Account B. During an indirect rollover, you take possession of funds for a period of time before putting them into the second account.

    There are limits to the way that you conduct rollovers, especially indirect rollovers, and it’s important that you work with a financial professional to help you understand how your funds will move and how to make those moves without incurring tax penalties.

     

    How to Choose between a Transfer and a Rollover

    Sometimes, the account types or the transfer initiator will determine whether your account transition takes place as a transfer or a rollover. In these instances, your financial advisor or another party will inform you of how the move will operate.

    When you have the option to choose between transfer or rollover, it’s important to consider the account types that you’re working with and the potential tax implications of each option. While there may not be direct penalties associated with transfers or rollovers, long-term impacts might make one a more favorable option than the other.

    As always, when it comes to challenging financial questions, it’s a good idea to discuss the matter with your financial advisor for a personal recommendation that meets your unique needs. To learn more about financial planning, contact Puckett & Sturgill Financial Group today for a consultation!

     

       

      Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation. 

      Ask an Advisor: How Much Do I Need for Retirement?

      Transcript

      David: 00:08

      Hello, I’m David Hemler, and we’re here with Jake Sturgill on our Ask An Advisor series with Puckett & Sturgill Financial Group. And Jake, one of the questions that I know you’re often asked as well as I am is: how much do I need to retire?

      Jake: 00:23

      Saving for retirement is an incredibly complex decision and conversation. And, to your point exactly, it’s got to be one of the most common questions that we’re asked. And there’s a lot of rules of thumb out there. But, at the end of the day, it’s an incredibly personal decision, and there’s no ‘one size fits all’ approach.

      David: 00:42

      Those rules of thumbs, they can be both a benefit and maybe, at times, a detriment as well. Yeah.

      Jake: 00:48

      Especially if you don’t understand the decisions and the pros and cons involved with all the decisions. Some basic tenets that you are going to want to consider and then really factor into this decision-making framework are: what sort of lifestyle do you want to live? In other words, how much money do you think you’d like to spend? When would you like to retire? And how long do you think you’re going to need that money to last? Because, at the end of the day, nobody knows when their final day will be. There’s no way of predicting that, but these are all critical elements.

      David: 01:19

      A lot of pieces to the puzzle to put together, figuring it all out.

      Jake: 01:24

      Absolutely, but I think if you’re like most people, you don’t want to necessarily live a lesser standard of living, you want to maintain your standard of living throughout retirement.

      David: 01:34

      I know I’ve read and see a lot of things in the literature in financial planning about this 60 to 80% of your preretirement income needed in retirement. Would you agree with that rule of thumb? Does that fit into the picture a lot?

      Jake: 01:47

      Certainly, and I think it’s well-documented that you don’t necessarily need to replace all of your income in retirement. Because, after all, in retirement you’re not going to be saving for a retirement. You might pay a little bit less in taxes, and you might even spend less or just spend differently than you were in those years saving up to retirement.

      David: 02:05

      Mm-hmm (affirmative). Where do we go from here then, Jake?

      Jake: 02:08

      I would encourage you to meet with your financial advisor to get an objective opinion and look at things like: how much have you accumulated so far? What’s your asset allocation? What’s your savings rate? And what’s your time to retirement?

      David: 02:22

      Mm-hmm (affirmative). So, a lot of pieces to this puzzle for us to figure out. And we, the folks here at Puckett & Sturgill, the advisors, we’re happy to help you. Just give us a call, or click on our email and send us a question of your own. Thanks.

      It’s Your Turn to Ask

        How to Stay on Track with Long-Term Financial Commitments

        Just as New Years resolution gym-goers start to give up their good habits in the first or second month of the year, people abandon all kinds of resolutions or goals within the first months of the New Year. By February, about 80% of all resolutions have been ditched

        Good habits are necessary for health and overall wellness, and it’s no different with financial health. Just like with health-related resolutions, where it takes time to plan regular gym visits and healthy meals, it takes consistency and a plan in order to pursue the long-term financial results you’re looking for.

        A couple months into the year, it’s easy to lose sight of those ambitious long-term financial commitments you might have thought about or even decided to make a reality this year and beyond. This is especially true if you haven’t taken the time to put the steps in place to ensure you stay on track.

        Today, we’re going to dive into what constitutes a long-term financial commitment, why they’re important, and ways that you can work to stay on track if you decide to take one (or more) on. 

         

        What qualifies as “long-term”? 

        It’s important to first designate financial commitments as short- or long-term. While shorter-term commitments might be achieved in 0-2 years or even 2-10 years, long-term ones can generally be classified as those with a timeline of 10+ years.

        Depending on your commitment level, ability to put money away, and unique desires for financial performance, your financial commitments might take varying amounts of time, compared with others. You may even find that one part of your financial plan will move more quickly than another, due to unique factors impacting each portion.

        When you work with a financial advisor to establish and track your financial commitments, you can work to figure out feasible timelines for your financial commitments. Generally, retirement plans, 529 education plans, and other big ticket savings goals qualify fall into the long-term financial commitment category, but again, these can vary between individuals. 

         

        Why think in the long term?

        Going through the process to develop and create long-term financial commitments leads to a better understanding of your unique financial priorities and helps you to solidify a timeline for reaching future goals. Typically, long-term financial goals also lead to measurable short-term goals. This snowball effect is a good thing, since it can keep you focused on the big picture, even while you celebrate the little victories along the way.

        Additionally, a combination of short- and long-term financial commitments and goal setting might even lead to a greater mutual understanding between you and your spouse on financial priorities and your overall desired financial future, whatever that may look like.

        Lastly, we can’t forget the primary reason for financial benchmarking: to pursue financially a great desire, such as funding a grandchild’s education or having a comfortable retirement, that otherwise you would not be able to achieve. 

         

        What makes a good long-term financial commitment?

        Ideally, you should strive for your financial commitments to be specific, measurable, and attainable. This is true whether you are saving for retirement or for an investment property: specificity, measurability, and attainability are each important characteristics.

        That being said, goals can change. What you want in retirement, what you want to do with a property you want to buy, what your granchildrens’ aspirations are for college and beyond… these might change over time.

        What doesn’t change is a commitment to building the capital to make those goals, however they change, a reality. If a goal is centered around motivations that are relatively stable, like having a solid retirement plan and/or being able to spend time and money on your family, it will be important to you.

        How can you stay accountable to long-term financial commitments?

        Hand in hand with these considerations is a practical step: Record your thoughts on paper, or some place you can access them to review them. Consider taking a novel approach to naming accounts by calling them by the specific goal they are setting out to achieve. As your priorities shift or change, knowing the reasons you set out on this long-term goal in the first place will, at the very least, help you stay dedicated, motivated, and informed when making adjustments. 

        A second practical step is breaking down your larger commitments and goals into bite-sized pieces. Setting yearly, quarterly, or even monthly and weekly, if that’s the type of progress that makes you feel in control, makes taking on long-term goals manageable. Part of what makes a goal specific, measurable, and attainable is the ability to break it down to these increments, should you need or want to. 

        If you are working on specific savings goals, setting up automated payments can assist in meeting the smaller goals, taking the pressure off you to move money into certain accounts by certain dates. Automated payments or earmarking and immediately disbursing income to savings accounts can help you to prioritize the little steps that are working towards achieving the larger, long-term commitment.

        You may also find it helpful to track your progress through apps or spreadsheets, or some other form of reporting. Your financial advisor can be an invaluable resource in helping you to keep track of investments, savings goals, and other factors that impact your progress as you work toward various financial commitments.

        As your priorities change, you might also adjust your long-term plans, which is reasonable and even necessary at times. Again, your advisor can also help with these adjustments and make recommendations when plans seem to veer too far off-course. 

        Periodic meetings with your financial advisor should be an essential part of your planning as you work toward your long-term financial commitments. Not only can your advisor help you to monitor progress on your financial commitments, but they can help you to put the pieces together to establish goals and benchmarks that will help you to bring your ideal financial future into focus. They also provide a professional perspective that can objectively view your existing commitments to determine whether they align with your desires or whether they should be tweaked to make the most impact.

        Set up an appointment today

        Our advisors at Puckett & Sturgill Financial Group are the CFP® professionals who can help you take the steps necessary to develop and keep track of your long-term financial commitments. Set up an appointment today! 

          Ask an Advisor: What Do I Need to Know About Social Security?

          Transcript

          Jake: 00:08

          Hi, I’m Jake Sturgill, with Puckett & Sturgill Financial Group, and our Ask An Advisor series. Today, I’m going to be asking Paul Sorenson about Social Security, and the things that our clients need to know about Social Security.

          Paul: 00:24

          Social Security, Jake, as you know, is one of the first things that many clients ask us about, is, “I know I have a decision to make at some point in the future, whether it’s now, or 20 years from now, or next year, or I already made a decision.” It’s something that we get asked about a lot.

          Paul: 00:41

          The bottom line is, everybody’s circumstance is different when it comes to Social Security. So the planning surrounding Social Security is very specific, and there’s a lot of complexity involved with that decision. It’s something we talk about regularly. And as a part of that, people ask us, “When should I start thinking about it?” With our clients, we start thinking about it, no matter their age, we at least add it as a part of the plan. Because we do approach things from a holistic standpoint. So it’s always top of mind as a part of our planning, as a baseline, a foundational piece of the planning that we do for a client.

          Jake: 01:12

          Right, and so if we’re starting and incorporating it into the planning process, really as soon as possible, when should people start to think about actually taking it or claiming Social Security?

          Paul: 02:28

          Right. Just because you can start at 62 doesn’t mean you should do it as early as possible.

          Paul: 02:33

          Yeah, yeah. You may have a whole pool of assets that help you delay that decision, or help change that decision for you. It’s a very individual decision.

          Jake: 02:41

          It’s such an important decision, because pensions are, as I’m sure you’ve seen with your clients, largely going away. Maybe fewer and fewer people have them. So Social Security is becoming such a foundation and core component of a retirement income plan. Taking all these factors into consideration, there’s a lot that goes into that process, and it’s unique to everybody.

          Jake: 03:06

          If you have any questions about Social Security or your retirement income plan, please contact us. Visit our website, email us, give us a call at the office. We’re always just a phone call or an email away.

          It’s Your Turn to Ask

            Savings Rates for Retirement

            As you plan for retirement, there are a few items that may get a larger amount of your attention as you try to fit everything into place. Things like your ideal retirement date, investment performance, and predicted retirement budget are likely some of the top considerations that come to mind when you think of your retirement plans.

            However, as you look toward your retirement, it’s important to remember an essential factor that sometimes gets pushed to the side: savings rates.

             

            What is a Savings Rate?

            According to Investopedia, a savings rate “is a measurement of the amount of money, expressed as a percentage or ratio, that a person deducts from his disposable personal income to set aside as a nest egg or for retirement”. The amount you save will generally goes directly into various savings vehicles such as your bank account, 401(k), IRA, and taxable investment accounts so that when you ultimately retire you have accumulated enough money to pay for your future living expenses.

            What Savings Rate Should I Aim For?

            There are lots of rules of thumb regarding savings rates. How much you need to save is often a reflection on the type of lifestyle you want to live, your current age, your current assets, and your remaining time to retirement. Unfortunately, these generic rules sometimes lead to generic recommendations that may or may not suit your needs.

            You may have seen figures of the “ideal” percentage that investors should aim for when saving for retirement, but these recommendations are certainly not ideal for everyone. Depending on your age and personal income, this percentage could vary. It’s important to find the figure that works for your lifestyle, this year and in years to come.

            Younger individuals with more time to work and save will often need to set less money aside, as a percentage, annually than older individuals who are coming up on their retirement years. For those close to retirement age and without significant existing savings, a more aggressive saving rate may be ideal.

            Additionally, individuals with particularly high annual income may find that they need to set aside yearly savings at a higher rate than those with lower incomes, if they desire to maintain a similar standard of living into their retirement years. Again, this can vary, depending on whether existing savings or outside payouts are at play.

            What Else Should I Consider?

            As with the other factors playing into retirement planning, it’s important not to view savings rates in isolation. Focusing too hard on this one part of the puzzle could leave you open to making poor decisions regarding other components of your retirement plan.

            Ultimately, you want to consider your personal savings rate as one of the tools that will help you to achieve the retirement lifestyle that you wish to live. Considerations of retirement age, location, standard of living, hobbies, healthcare needs, and more are important factors that make your individual retirement plan unique.

            If you plan to live a lifestyle fairly similar to the one you enjoy now, setting a dedicated portion of your annual income now can help you to fund your needs in the future. Savings rates are a helpful tool that can give you guidance in determining what amount of savings makes sense for your desired goals.

            If you’d like to learn more about planning for your retirement, contact Jake Sturgill today for a consultation!

              Expecting a Tax Return? Consider These 4 Ways to Use It

              Depending on your withholdings, you might be in for a solid tax return from the 2019 tax season. Last year, the IRS returned $324 billion to taxpayers with the average tax return at about $2,900. Before those funds arrive in your account, consider these options to help your tax return work for you.

              First: Revisit Your Financial Plan

              If you haven’t already, consider checking in with your financial advisor before you make any plans for your returned funds. Your check in should be a good reminder of your established financial goals and should also help you to ascertain that your existing plans are on track to meet those goals.

              Once you know where you stand with your financial planning, you can set your mind to other financial goals or even to a fun expenditure or two.

              Option 1: Add to existing savings accounts 

              Tax-smart investment accounts can include IRAs, HSAs, and 529 plans. You may find that the extra thousand or more that comes in the form of a tax return can provide a nice boost to one of your savings plans.

              Or maybe this you’re ready to open a new savings account. Favorable annual percentage rates (APY) could be an opportunity to open a new account with your tax return.

              Your financial advisor can help you to understand rates and provide guidance on choosing an account that might work for your savings goals. Depending on the minimum balance requirements and accessibility and your own desires and needs, you might find that a new savings account with a high APY is a smart way to use that extra cash. 

              Option 2: Invest

              If you’re looking to make money with your money, investing your tax return may be an option to consider. Stocks, savings bonds, and interest bearing accounts are some ideas for investing your tax return, each with different benefits that will change depending on your specific financial situation.

              Whether you have a robust investment portfolio or are interested in diversifying your investments, you may find that investing your tax return is a viable idea for your financial planning. Your financial advisor can provide more information about investment options and whether or not they’re a good fit for your tax return spending.

              Option 3: Give

              The season of giving may be over, but giving to charity and family is always an option for those looking to be tax-smart and feel good about how they spend their money. This can potentially serve as an addition to the charitable donation deductions you claim on the next year’s taxes, but it also gives that warm, fuzzy feeling that comes with helping a cause you care about. 

              Option 4: Invest in Personal Development

              Attending a class, whether for recreation or to become more qualified in your field, or starting a side business, could be a unique way to invest in your future. Though you’d be spending your tax return rather than saving it, personal development usually isn’t considered frivolous spending. If you’ve been waiting for a time to invest some cash in a personal project, this tax return season may be the time to do so.

              Choosing an Option

              Regardless of the amount of money you received in your tax return and your financial status, consider having a conversation with your advisor about your financial plan and how your tax return may or may not play into it. If you want to learn more about investing, our CFP® professionals at Puckett & Sturgill Financial Group would love to have a look at your unique situation and discuss the possible options for using your tax return this year.

                Stock investing involves risk including loss of principal. 

                Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax. 

                Prior to investing in a 529 Plan investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such states’s qualified tuition program.  Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing. 

                There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio.  Diversification does not protect against market risk.

                3 Career Transition Options to Consider

                Going from full-time employment to retirement is a major transition, both personally and professionally. With modern life expectancies and new medical breakthroughs every year, statistically speaking, you may look forward to a longer retirement than any previous generation.

                But with that extended retirement come some challenging questions: How much do I need to save for an extra 5-10 years of retirement? Will I get bored of early-bird specials and parcheesi every day for 25 or more years?

                For many retirees, a planned career transition that extends the working years by some measure into the retirement period makes sense both personally and financially. After all, a job can be about so much more than the paycheck. Working as you transition to, or even during, retirement can provide fulfillment and allow you professional flexibility that suits your changing lifestyle.

                Here are a few career transition options you might consider:

                Part-Time Employment

                Transitioning from your full-time job to retirement may be as simple as paring down your role as a full-time employee and taking on certain responsibilities as a part-time one. If you appreciate the benefits at your current job or love your company’s mission, it may be worthwhile to explore what a part-time employment option might look like.

                On the other hand, you may want to look at part-time employment in an entirely different field. If you’re eager to escape office life but want a steady paycheck that will keep you from dipping too far into your savings, look into part- or flex-time jobs in your community.

                Entrepreneurship

                Have an old idea that refuses to let go? Maybe your retirement transitional period is the time to flex your entrepreneurial muscle and see what happens.

                Whether your new time flexibility allows you to spend more time turning a beloved craft into a full-fledged artisan brand or you want to chronicle your retirement travels on a monetized blog, there are endless options for exploring entrepreneurship during your retirement. If you plan carefully, you may even be able to supplement some of your retirement income needs with income from your small business.

                Consulting

                Many retired professionals find themselves facing retirement with not only too much time on their hands, but too much knowledge that simply has no outlet. If you want to put your years of industry knowledge to good use, you may consider consulting or coaching.

                Business consultants have the ability to control their schedules by choosing which projects to take and how many they want to take on during a year. They can also command a decent hourly or per-project rate that can offset retirement expenses and help to support a robust retirement lifestyle. If you have already have people asking you for advice during your spare time or have unique skills to offer to the next generation, consulting might be a worthwhile career transition option.

                When considering a career transition option, it’s important to look at the big picture: where do you see yourself in your retirement years? While an extra paycheck might be nice, if the idea of working during your retirement or postponing full-fledged retirement as you phase out of the career world makes you uneasy, then you may want to consider other ways to meet your retirement ideals.

                As always, when piecing together the unique components of your retirement, it’s important to consult your financial advisor. They can provide insight to your retirement budget, feasibility of retirement dates, and ways to fill financial gaps in your retirement plan.

                To get started with your personalized retirement plan, contact Jake Sturgill today for a consultation!

                  Ask an Advisor – Nonqualified deferred compensation

                  Different parts of the retirement planning equation have different benefits and are better suited to some individuals than others. To understand which parts are more ideal for your planning, it’s important to understand how different plans work.

                  Today, we’re going to talk to advisor Paul Sorenson about nonqualified deferred compensation (NQDC) plans. He’ll tell us some of the important items to consider when looking at NQDC plans and how they might fit into an existing retirement plan.

                  What are NQDC plans?

                  Nonqualified deferred compensation plans (NQDC) are offered by employers to employees to set aside tax-deferred compensation to be paid out at a later date. For employees who maximize contributions to their current employer-sponsored retirement plans like a 401(k) or 403(b) an NQDC represents an opportunity to save more for a future goal or retirement in a tax-deferred manner. Not all employees have the chance to participate in an NQDC plan but if you have the opportunity, it may be worth looking into this benefit a look to see if it might have a place as a part of your financial plan.

                  Unlike other qualified employer-sponsored plans, such as a 401(k) or 403 (b), NQDC plans usually allow you to defer receiving a portion of your compensation over and above what is allowed into a qualified plan. When you elect to participate, you choose how much to defer to the plan and your employer then segregates the chosen potion of your salary into a trust which is invested on your behalf. Since the compensation is not paid to the employee currently it is not taxed until some future date when it is actually paid out to the employee. 

                  There are many reasons employers offer NQDC plans but among the most common are their ability to help retain and attract talented employees as well as helping high-earning employees save enough of their current compensation to meet future needs. Typically high-earning employees are unable to save enough in a pre-tax 401k or 403b account to meet their retirement goals in full.

                  NQDC participation: Some important items to consider

                  NQDC plans can vary widely depending on what your employer offers but here are general items to think about:

                  1. Do I currently contribute the maximum to my current employer-sponsored qualified plan such as a 403(b) or 401k? If you do not maximize contributions to your qualified accounts, you may want to consider this option first, since these plans are tax-deferred and protected under the Employee Retirement Income Security Act (ERISA).
                  2. Do I believe my employer is financially secure? Should your employer fall into bankruptcy, the funds in NQDC plans might be accessible to the organization’s creditors which could mean your deferred compensation might not be paid.
                  3. Can I afford to set aside a portion of my compensation knowing that I won’t be able to access it until a date in the future? NQDC plans do not have loan provisions like other employer-sponsored plans, so accessing the compensation which has been set aside is not an option prior to the distribution date that has been set.
                  4. How does participation in an NQDC plan fit with the rest of my financial plan? Every NQDC plan is different so it is important to understand the distribution options, investment options, vesting options and service requirements available to you and along with the risks. Once you understand these risks these details the NQDC should become a part of your full financial plan. 

                  Every NQDC plan is different and it is important to understand the details and risks of your employer’s plan before choosing to participate. For many, NQDC plans present a possible option to ramp up their savings for the future, but for others investing in accounts outside of their place of employment or combining multiple savings vehicles might be a better option.

                  No matter what you decide, working with a financial professional, like a CERTIFIED FINANCIAL PLANNER™ professional, who can help you understand the options and set a strategy to pursue your needs, wants and wishes for today and well into the future is a good place to start.

                  If you are trying to understand how an NQDC plan might fit into your financial picture or are just ready to get started with a well thought out financial plan, contact Paul Sorenson at Puckett & Sturgill Financial group today!

                    This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. 

                    Don’t Forget the Quantity – Quality Balance when Planning Your Retirement

                    Finding balance in your retirement planning goes beyond having a diversified portfolio or a monthly income number to match your projected budgets. After all, you’re probably not going to spend your entire retirement watching every penny come in and go out.

                    Yes, planning financially for retirement is crucial. However, planning for quality of life during retirement is an important aspect of retirement planning that is often overlooked.

                    As Americans prepare to live longer during retirement than previous generations did, you need to consider how the shift toward a longer life expectancy impacts your retirement as a whole. Are you planning for a quality retirement alongside the quantity of retirement savings you’d like to have in place?

                    Quality of life conversations contribute to the financial projection for retirement, since the type of retirement lifestyle you plan on is an essential aspect of the retirement budget. But beyond your weekly tee times or macrame classes, what are some other quality of life issues to focus on in retirement planning?

                     

                    Your Location

                    Your retirement location contributes to many of the financial factors of your retirement plan. From tax rates to cost of living, you will need to factor in the cost of where you plan to retire.

                    If you don’t already live in the city or state to which you plan to retire, consider how a move will impact your financial situation. If you move sooner, are there benefits to be gained? How will a house sale factor into your financial plans, present and future?

                    Your financial advisor can provide insight into how these factors will contribute to your retirement planning and can provide advice on timing these steps.

                     

                    Your Network

                    You’ve probably heard that having a solid support network of friends and family can make all the difference during your retirement years. And research supports the idea that individuals in community tend to live longer, happier lives than those who are isolated.

                    If you want to enjoy the quality of life associated with being in a community of people you care about, it’s time to start making those connections now. If you want to maintain close relationships with your siblings, children, and/or grandchildren, make it a point to foster those relationships right now.

                    For other connections, look into hobby groups, charitable organizations, and community groups that focus on something you care about and would like to make time for during your retirement years. For example, if you enjoy crafting and would like to spend your retirement making quilts for the homeless, try to find crafting groups or classes that will help you to hone your skills and meet others that share common goals.

                     

                    Your Health

                    While longer life expectancy is good news for everyone, it’s important to consider how your health might fare during your extended retirement years. If you’re dealing with health issues, the quality of these extra years may not be as high as you’d like.

                    Of course, you certainly can’t look into a crystal ball and predict exactly what your health will do as you age, but there are steps that you can take now to improve your odds moving forward. For starters, you can work to prioritize your health now so that making healthy choices becomes habit.

                    Look into ways that you can adjust your diet or lifestyle to combat the likelihood of developing chronic conditions. And consider insurance options that will support your healthcare needs, should you require long-term care or care for a unique situation.

                    The consideration of retirement quality of life is an important one as you navigate the path toward retirement. For more information about developing a personalized plan to balance the quantity-quality factors in your retirement, contact Jake Sturgill for a consultation!