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Jennifer Lang Financial Services, LLC.
​Smart Money Strategies
Wisdom For the Life You Want

Learn how to make smarter choices about retirement

9/29/2019

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Five Keys to Investing for Retirement

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Making decisions about your retirement account can seem overwhelming, especially if you feel unsure about your knowledge of investments. However, the following basic rules can help you make smarter choices regardless of whether you have some investing experience or are just getting started.

Don't Lose Ground to Inflation
It's easy to see how inflation affects gas prices, electric bills, and the cost of food; over time, your money buys less and less. But what inflation does to your investments isn't always as obvious. Let's say your money is earning 4% and inflation is running between 3% and 4% (its historical average). That means your investments are earning only 1% at best. And that's not counting any other costs; even in a tax-deferred retirement account such as a 401(k), you'll eventually owe taxes on that money. Unless your retirement portfolio at least keeps pace with inflation, you could actually be losing money without even realizing it.

What does that mean for your retirement strategy?
​First, you'll probably need to contribute more to your retirement plan than you think. What seems like a healthy sum now will seem smaller and smaller over time; at a 3% annual inflation rate, something that costs $100 today would cost $181 in 20 years. That means you'll probably need a bigger retirement nest egg than you anticipated. And don't forget that people are living much longer now than they used to. You might need your retirement savings to last a lot longer than you expect, and inflation is likely to continue increasing prices over that time. Consider increasing your 401(k) contribution each year by at least enough to overcome the effects of inflation, at least until you hit your plan's contribution limits.


Second, you need to consider investing at least a portion of your retirement plan in investments that can help keep inflation from silently eating away at the purchasing power of your savings. Cash alternatives such as money market accounts may be relatively safe, but they are the most likely to lose purchasing power to inflation over time. Even if you consider yourself a conservative investor, remember that stocks historically have provided higher long-term total returns than cash alternatives or bonds, even though they also involve greater risk of volatility and potential loss.

Note:  Past performance is no guarantee of future results. All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful. And diversification alone can't guarantee a profit or eliminate the possibility of loss.

Note:  Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in such a fund. 

Invest Based on Your Time Horizon
Your time horizon is investment-speak for the amount of time you have left until you plan to use the money you're investing. Why is your time horizon important? Because it can affect how well your portfolio can handle the ups and downs of the financial markets. Someone who was planning to retire in 2008 and was heavily invested in the stock market faced different challenges from the financial crisis than someone who was investing for a retirement that was many years away, because the person nearing retirement had fewer years left to let their portfolio recover from the downturn.

If you have a long time horizon, you may be able to invest a greater percentage of your money in something that could experience more dramatic price changes but that might also have greater potential for long-term growth. Though past performance doesn't guarantee future results, the long-term direction of the stock market has historically been up despite its frequent and sometimes massive fluctuations.
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Think long-term for goals that are many years away and invest accordingly. The longer you stay with a diversified portfolio of investments, the more likely you are to be able to ride out market downturns and improve your opportunities for gain.

Consider Your Risk Tolerance
Another key factor in your retirement investing decisions is your risk tolerance--basically, how well you can handle a possible investment loss. There are two aspects to risk tolerance. The first is your financial ability to survive a loss. If you expect to need your money soon--for example, if you plan to begin using your retirement savings in the next year or so--those needs reduce your ability to withstand even a small loss. However, if you're investing for the long term, don't expect to need the money immediately, or have other assets to rely on in an emergency, your risk tolerance may be higher.

The second aspect of risk tolerance is your emotional ability to withstand the possibility of loss. If you're invested in a way that doesn't let you sleep at night, you may need to consider reducing the amount of risk in your portfolio. Many people think they're comfortable with risk, only to find out when the market takes a turn for the worse that they're actually a lot less risk-tolerant than they thought. Often that means they wind up selling in a panic when prices are lowest. Try to be honest about how you might react to a market downturn, and plan accordingly.

Remember that there are many ways to manage risk. For example, understanding the potential risks and rewards of each of your investments and its role in your portfolio may help you gauge your emotional risk tolerance more accurately. Also, having money deducted from your paycheck and put into your retirement plan helps spread your risk over time. By investing regularly, you reduce the chance of investing a large sum just before the market takes a downturn.

Integrate Retirement with Your Other Financial Goals
Make sure you have an emergency fund; it can help you avoid needing to tap your retirement savings before you had planned to. Generally, if you withdraw money from a traditional retirement plan before you turn 59½, you'll owe not only the amount of federal and state income tax on that money, but also a 10% federal penalty (and possibly a state penalty as well). There are exceptions to the penalty for premature distributions from a 401(k) (for example, having a qualifying disability or withdrawing money after leaving your employer after you turn 55). However, having a separate emergency fund can help you avoid an early distribution and allow your retirement money to stay invested.

If you have outstanding debt, you'll need to weigh the benefits of saving for retirement versus paying off that debt as soon as possible. If the interest rate you're paying is high, you might benefit from paying off at least part of your debt first. If you're contemplating borrowing from or making a withdrawal from your workplace savings account, make sure you investigate using other financing options first, such as loans from banks, credit unions, friends, or family. If your employer matches your contributions, don't forget to factor into your calculations the loss of that matching money if you choose to focus on paying off debt. You'll be giving up what is essentially free money if you don't at least contribute enough to get the employer match.

Don't Put All Your Eggs in One Basket
Diversifying your retirement savings across many different types of investments can help you manage the ups and downs of your portfolio. Different types of investments may face different types of risk. For example, when most people think of risk, they think of market risk--the possibility that an investment will lose value because of a general decline in financial markets. However, there are many other types of risk. Bonds face default or credit risk (the risk that a bond issuer will not be able to pay the interest owed on its bonds, or repay the principal borrowed). Bonds also face interest rate risk, because bond prices generally fall when interest rates rise. International investors may face currency risk if exchange rates between U.S. and foreign currencies affect the value of a foreign investment. Political risk is created by legislative actions (or the lack of them).

These are only a few of the various types of risk. However, one investment may respond to the same set of circumstances very differently than another, and thus involve different risks. Putting your money into many different securities, as a mutual fund does, is one way to spread your risk. Another is to invest in several different types of investments--for example, stocks, bonds, and cash alternatives. Spreading your portfolio over several different types of investments can help you manage the types and level of risk you face.

Participating in your retirement plan is probably more important than any individual investing decision you'll make. Keep it simple, stick with it, and time can be a strong ally.

To learn more, contact us today. 

The dollar cost averaging you do when you make automatic contributions to the investments in your retirement plan account involves continuous investment in a security regardless of changes in its price. You should consider your financial and emotional ability to continue making purchases during times when prices are low. Dollar cost averaging does not guarantee a profit or protect against a loss.
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Mutual funds are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest. ​
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3 Strategies That Will Help You Protect Your Retirement Principal From Market Volatility ~ Replay

8/30/2019

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The Dow dropped 800 points this week. The largest drop so far for 2019.

In this episode, financial services professional Jennifer Lang shows her clients: 3 Strategies That Will Help You Protect Your Retirement Principal From Market Volatility.

In this webinar you will learn:
  • The impact taxes will have on your retirement income
  • How to compare annuities side by side
  • The best age to take social security
  • How to create and use a liquidity bridge to maximize social security payouts
  • Free eBook for attending

To learn more or to schedule a free phone consultation, log onto: JenniferLangFinancialServices.com
​



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5 Steps for Managing Longevity in Retirement

8/22/2019

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While retirement has many hard-to-predict moving parts, like what your spending might look like, perhaps one of the most difficult questions to answer is this: “How long will you live?”

Thanks to advances in healthcare and technology, people are living longer. According to the Social Security Administration, the statistical average for a 65-year-old man is to age 84. For a 65-year-old woman, it’s 87.

Economists call the possibility of spending decades in retirement a “longevity risk.” Still, keep in mind those numbers are just averages. What someone’s longevity looks like on a personal level will depend on their family history, health status, and lifestyle choices over the years, among other things.

For many people, the uncertainty adds up to financial concern. In one survey, almost two-thirds of surveyed Americans said they worried about running out of money in retirement more than death!
However, if you are to have a Retirement Plan that guides you across the Arc of Retirement, you will need some guestimate of how long you might live. That way you don’t underspend or overspend your financial resources.

Here are five steps to help keep longevity risk at bay and tame the uncertainty.

STEP 1: Establish a Benchmark Age for Income Planning
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When you reach your 50s, one of the most important steps is planning for how much income you will need in retirement. Not only that, it’s equally important to chart out from where those income streams will come.

Because it’s the endpoint of the retirement timeline for receiving lifelong income, the age you expect to live to is a critical benchmark. Working with your trusted financial professional and your spouse, come up with what we can call a “probable longevity number.”

Some planning software programs use life expectancy in their long-term forecasts for retirement asset growth, income and spending. A more prudent strategy would be to use age benchmarks that go beyond life expectancies. Why?

Going Beyond Life Expectancy
As statistical averages, life expectancies don’t necessarily capture the full picture. The Social Security Administration observes this in relation to their life expectancy data:

“When you are deciding when to start receiving retirement benefits, one important factor to take into consideration is how long you might live.

According to data we compiled: A man reaching age 65 today can expect to live, on average, until age 84.0. A woman turning age 65 today can expect to live, on average, until age 86.5.

And those are just averages.
About one out of every three 65-year-olds today will live past age 90, and about one out of seven will live past age 95.”

What’s more, among people who are married, the odds are high for one of them to live past life expectancy.

According to the Society of Actuaries, there is a 72% chance one of them will live to age 85. What about age 90? There is a 45% probability that one spouse will reach that age. Probabilities for other select ages can be seen in the graph below.
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​By establishing an age benchmark that goes beyond just expected lifespans, your income strategy can benefit from the increased security of this "better-safe-than-sorry" approach. Many financial professionals report using benchmarks that go into mid-to-late 90s, according to this 2016 article by InvestmentNews.

Work with a financial professional to find a prudent, and appropriate, age benchmark that’s right for your income planning timeline.

STEP 2: Set Up Your Baseline 30-Year-Retirement-Plan for 3 Scenarios
Using your “30-Year-Retirment-PLAN” create three retirement income plans for the following longevity scenarios:

1. Living to the “Most Probable Longevity Number” (MPLN)
2. Living to 10 years less than the MPLN
3. Living 10 years beyond the MPLN

Having these three scenarios mapped out can be beneficial in a number of ways.
It can help you structure different timelines for lifelong-held goals and objectives. It gives some backup plans if something doesn't go according to your primary plan. And it helps you visualize, on paper, how spending, income, or other factors can be adjusted if changing circumstances call for it.

STEP 3: Cover Your Living Expenses with Guaranteed Lifetime Revenues
Within each scenario from STEP 2, follow these principles:

List your Priority #1 “basic survival expenses” that are essential and non-discretionary. Traditionally, these expenses include:
  • Home: mortgage P&I, insurance, real estate tax
  • Household: cash, groceries
  • Utilities: garbage, power, water, sanitary, cell phone
  • Medical: out-of-pocket doctor, dentist, eyecare, drugs, Medicare premiums
  • Income Taxes: federal, state, city

Plan to cover your Priority #1 expenses with guaranteed lifetime income streams, no matter how long you live. Some options in your income toolkit might include:
  • Traditional lifetime annuity pension; and/or,
  • Social Security benefits for both you and your spouse; and/or,
  • Private annuity payouts; and/or,
  • Required minimum distributions from 401(k), 403(B), 457, IRA, and Roth accounts.

Planning for Reliable Lifelong Income Certainty
Keep in mind that annuities are the only private-sector financial products capable of generating a guaranteed lifetime income. For retirees who worry about having enough income each year, here's another helpful guideline to keep in mind: Spend less than you earn every year and save the surplus.
There is another strategy that follows the arc of retirement across the decumulation phase. From the “go-go” (60-75), to the “slow-go” (75-90), into the “no-go” (90+) years, reduce your expenses as much as you can each year to mitigate inflation.

This strategy calls for doing this while maintaining an acceptable and comfortable quality-of-life. Besides a "decreasing spending" strategy, there are other possibilities with different kinds of income payouts that you can use to combat inflation.

STEP 4: Test for Sequence Risk
Repeat STEP 3 using at least two different “Sequence Risk” scenarios. 

What this basically means is that the stock market will go up and down over time. History shows that over the long run (20 years or more), the market generally goes up 9% annually, on average, or more.
However, timing is critical. Depending upon when those down-and-recover periods come in relation to your projected retirement period (“Period A” vs “Period B” as examples shown below), sequence risk can have a substantial impact.
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​This can have a drastic effect on the overall performance of your retirement financial portfolio – and by extension, your retirement lifestyle. Your financial professional can help you create a strategy that helps guard against this risk.

STEP 5: Rinse and Repeat Your PLAN
Retirement isn't a set destination, but a moving target.
You don’t want to underspend or overspend in retirement. You worked hard to reach this point!
So, the best way to stay on track and optimize your finances is to update your PLAN each and every year, based on changing circumstances and the values of your various accounts.

If you work to develop a financial plan like the Step 1-5 Plan outlined above, you will be way ahead of the game!

Prepare for a Financially Confident Lifestyle
Do you need help in putting your financial and income goals in order? Do you think that your existing retirement plan could use a second look?

If you are ready for personal guidance, we  are ready to help you at JenniferLangFinancialServices.com you can request a no-obligation first appointment to discuss your retirement financial picture.

Click here to connect with us directly now.
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Your retirement goal-setting guide

8/15/2019

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Don't Let Your Retirement Savings Goal Get You Down

As a retirement savings plan participant, you know that setting an accumulation goal is an important part of your overall strategy. In fact, each year in its annual Retirement Confidence Survey, the Employee Benefit Research Institute (EBRI) reiterates that goal setting is a key factor influencing overall retirement confidence. But for many, a retirement savings goal that could reach as high as $1 million or more may seem like a daunting, even impossible mountain to climb. What if you're contributing as much as you can to your retirement savings plan, and investing as aggressively as possible within your risk comfort zone, but still feel that you'll never reach the summit?

As with many of life's toughest challenges, it may help to focus a little less on the end result and more on the details that help refine your plan.*

Retirement Goals Are Based on Assumptions
Whether you use a simple online calculator or run a detailed analysis, remember that your retirement savings goal is based on certain assumptions that will, in all likelihood, change over time. Assumptions may include:

Inflation: 
Many goal-setting calculators and worksheets use an assumed inflation rate to account for the rising cost of living both during your saving years and after you retire. Although inflation has averaged about 2.3% over the last 20 years, there have been years (e.g., 1979 and 1980) when inflation has spiked into double digits. (Source: Bureau of Labor Statistics) No one can say for sure where prices are headed in the future.

Rates of return: 
Perhaps even more unpredictable is the rate of return you will earn on your investments over time. Although most calculators use estimated rates of return for pre- and post-retirement years, returns will fluctuate, and there can be no guarantee that you will consistently earn the rate that is used to calculate your savings goal.

Life expectancy: 
Retirement savings estimates also usually use an assumed life expectancy, or other time frame that you designate, to determine how long you will need your money to last. Without a crystal ball or time travel machine, however, no one can make exact predictions in this arena.

Salary adjustments: 
Calculators and worksheets may also include assumptions for pay increases you might receive through the years, which could impact both the lifestyle you desire in retirement and the amount you save in your employer-sponsored plan. As in other areas, salary adjustments are just estimates.

Retirement expenses: 
Can you say for certain how much you will need each month to live comfortably in retirement? If you're five years away, the answer to this question may be much easier than if you're 10, 20, or 30 years away. In order to give you a targeted savings goal, retirement calculators must make assumptions for how much you will need in income during retirement.

Social Security, pension, and other benefits: 
To be as accurate as possible, a retirement savings goal should also account for additional benefits you may receive. However, these types of benefits typically depend on your earning history, which cannot be accurately assessed until you approach retirement.

All of these assumptions point to why it's so important to review your retirement savings goal regularly--at least once per year and when major life events (e.g., marriage, divorce, having children) occur. This will help ensure that your goal continues to reflect your life circumstances as well as changing market and economic conditions.

Break It Down
Instead of viewing your goal as ONE BIG NUMBER, try to break it down into a monthly amount--i.e., try to figure out how much income you may need on a monthly basis in retirement. That way you can view this monthly need alongside your estimated monthly Social Security benefit, anticipated income from your current level of retirement savings, and any pension or other income you expect. This can help the planning process seem less daunting, more realistic, and most important, more manageable. It can be far less overwhelming to brainstorm ways to close a gap of, say, a few hundred dollars a month than a few hundred thousand dollars over the duration of your retirement.

Make Your Future Self a Priority, Whenever Possible
While every stage of life brings financial challenges, each stage also brings opportunities. Whenever possible, put a little extra toward your retirement.

For example, when you pay off a credit card or school loan, receive a tax refund, get a raise or promotion, celebrate your child's college graduation (and the end of tuition payments), or receive an unexpected windfall, consider putting some of that extra money toward retirement. Even small amounts can potentially add up over time through the power of compounding.

Another habit to try to get into is increasing your retirement savings plan contribution by 1% a year until you hit the maximum allowable contribution. Increasing your contribution by this small amount may barely be noticeable in the short run--particularly if you do it when you receive a raise--but it can go a long way toward helping you achieve your goal in the long run.

Retirement May Be Different Than You Imagine
When people dream about retirement, they often picture images of exotic travel, endless rounds of golf, and fancy restaurants. Yet a recent study found that the older people get, the more they derive happiness from ordinary, everyday experiences such as socializing with friends, reading a good book, taking a scenic drive, or playing board games with grandchildren. (Source: "Happiness from Ordinary and Extraordinary Experiences," Journal of Consumer Research, June 2014) While your dream may include days filled with extravagant leisure activities, your retirement reality may turn out much different--and that actually may be a matter of choice.

In addition, some retirees are deciding that they don't want to give up work entirely, choosing instead to cut back their hours or pursue other work-related interests.

You may want to turn a hobby into an income-producing endeavor, or perhaps try out a new occupation--something you've always dreamed of doing but never had the time. Such part-time work or additional income can help you meet your retirement income needs for as long as you remain healthy enough and interested.

Plan Ahead and Think Creatively
Chances are, there have been times in your life when you've had to put on your thinking cap and find ways to cut costs and adjust your budget. Those skills may come in handy during retirement. But you don't have to wait to begin thinking about ideas. Consider ways you might trim your expenses or enhance your retirement income now, before the need arises.

Might you downsize to a smaller home or relocate to an area with lower taxes or a lower overall cost of living? Will you and your spouse actually need two vehicles, or might you simply own one and rent another on the occasional days when you need two? Could you put that extra bedroom to use by taking in a boarder, who might also help out with household chores, such as mowing the lawn or shoveling the sidewalks? Or maybe you can cancel that expensive gym membership and turn the spare bedroom into a home workout room.

Jot down any ideas that come to mind and file them away with your retirement financial information. Then when the time comes, you can refer to your list to help refine your retirement budgeting strategy.

The Bottom Line
As EBRI finds in its research every year, setting a goal is indeed a very important first step in putting together your strategy for retirement. However, you shouldn't let that number scare you.

As long as you have an estimate in mind, understand all the various assumptions that go into it, break down that goal into a monthly income need, review your goal once a year and as major life events occur, increase your retirement savings whenever possible, and remember to think creatively both now and in retirement--you can take heart knowing that you're doing your best to prepare for whatever the future may bring.
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Click here to Learn More........

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How To Protect Your Retirement In a Down Market | Free Annuity eBook

8/7/2019

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Have you ever lost money in the Stock Market?

Last year we had a pretty good year in the Stock Market. Hopefully it will keep going up.

But what happens if it goes down?

How much more of your money are you willing to lose? 

How would that affect your income? 

How much would it affect your income if the market dips for another couple of years?
If you could lock in your returns and position your money so you could not lose any more money..... but you could reap the potential upside of the stock market..... Would it be worth 40 minutes to sit down and talk about it? 

The key to successful retirement planning is developing a plan that while based on your current financial situation, also meets your projected financial goals down the road. Let us help.

Visit us at  JenniferLangFinancialServices.com
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Financial Security Q&A For Retirees ~ Free eBook

8/1/2019

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What Will You Learn?
  • How will you pay for Long Term Care?
  • Should you retire if you are in debt?
  • Can creditors garnish Social Security Income?
  • Can you borrow funds from your 401(k)?
  • What are the types of annuities?
  • Can you borrow against your annuity?
  • Is a reverse mortgage right for you?
  • Do You need Life Insurance?
  • Do you need a Will? and more...
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I Want My Financial Security Q&A For Retirees Free eBook
Get The Book
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Worried About Saving for Retirement? You're Not Alone

7/28/2019

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​​Worried about retirement?
You're not alone
88% of Americans worry about saving for retirement.*
40% of Baby Boomers now plan to work “until they drop.”^

With pensions vanishing, 401(k) values dropping, and the future of Social Security uncertain, many Americans are in danger of outliving their retirement savings.

What’s the solution?
Annuities offer a guaranteed income for life. You make a single lump-sum deposit or payments over time. Then after you retire, you receive a check each month. It’s that simple!

Annuities Offer:
  • A guaranteed income no matter how long you live
  • Protection against decreases in the stock market
  • A way to maintain your standard of living during retirement

Want to make retirement less scary?
Give yourself peace of mind with a guaranteed income annuity.
​To get started, contact us today!
Click Here To Compare Rates
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Hey Millennials! Think Your 401k Beats an IUL?

7/11/2019

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#investing #stockmarket #retirement #SocialSecurity #money #smallbusinessowner #video
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Did you know that there are safer alternatives to the stock market? Indexed Universal Life Insurance is a powerful wealth accumulation tool, you probably never heard of.

Indexed Universal Life Insurance has three important features:

1). When you're younger, you can put the money in to create a "forced savings plan".

2). When you're older, you can enjoy its supplemental retirement income.

3). If you get sick, the death benefit can be used for critical care and chronic care.
In this webinar you will learn:
*What is Indexed Universal Life Insurance
*How Does Indexed Universal Life Work
*What Is Interest Crediting
*What Are the Pros & Cons of Indexed Universal Life Insurance
*How Does an IUL Policy Compare to a 401(k)
*How To Pay Less Taxes In Retirement
*How To Create Non-Reportable Tax Free Income
*Free eBook for Attending

If you would like help from a professional who can guide you, WFGInsuranceQuotes.com can assist you. Connect directly with a financial services professional. You can request a personal strategy session to discuss your needs and goals.

At WFGInsuranceQuotes.com our goal is to educate consumers and help them learn the facts about the benefits of financial planning and estate planning with life insurance and annuities.

WFGInsuranceQuotes.com specializes in Business Loans, Key Man Insurance, Premium Financing, Life Insurance and No-Market Risk Annuities.
​Content Disclosure: 
Nothing contained herein shall constitute an offer to sell or solicitation of an offer to buy any security. Material in this publication is original or from published sources and is believed to be accurate. However, we do not guarantee the accuracy or timeliness of such information and assume no liability for any resulting damages. Listeners and viewers are advised to consult their own tax and investment professionals with regard to their specific situations.

(c) Jennifer Lang Financial Services, LLC.
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Is a 401(k) In-Service Withdrawal Right for Your  Situation?

6/23/2019

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If you have contributed for a long time to a 401(k) plan, chances are you have built up considerable assets. You are to be commended for this effort. It takes discipline and focus to accumulate wealth over time.

Having reached this point, you may now want to explore options outside of your plan. If you are past your late 50s, you might have an opportunity with an in-service withdrawal. Many people with 401(k) accounts assume that their funds are locked tight until they retire.

What they don’t know is that they might be able to access their funds while still working at their employer. This mechanism is formally called an in-service withdrawal.

But what exactly is an 401(k) in-service withdrawal, under what conditions can you take one, and what consequences are there for doing so?

What is an In-Service Withdrawal?
In the language of 401(k) plans, there are certain life events that are categorized as “triggering” events. During an approved triggering event, you are permitted to roll funds out of your 401(k) without facing a 10% early withdrawal tax penalty. Generally, however, you will have to pay taxes on the withdrawn amount.

On the other hand, an in-service withdrawal is an option that arises when you reach age 59.5. This process doesn’t need an approved triggering event, such as a leave from your workplace or retirement.

You still work for your employer, and once you turn 59.5, you can take a withdrawal from your 401(k) plan. From there, you would have a period of 60 days to move your funds into an IRA. If the 60-day deadline isn’t met, there would be consequences.

As a plan participant, you might be subject to any taxes that accompany a withdrawal.

Not the Same as Hardship Provisions
It’s good to acknowledge that this kind of in-service withdrawal is “non-hardship.” In other words, the withdrawal won’t be used for any “immediate and heavy” financial need as defined by the IRS.  

That said, some 401(k) plans do come with hardship provisions, including for unreimbursed medical expenses, education costs, or purchase of a principal residence. In the event of a hardship, a 401(k) plan may permit penalty-free withdrawals so long as certain conditions are met.

However, not all 401(k) plans carry hardship provisions. Be sure to review your plan documents for the details of your options.

In-Service Withdrawal Not Available with All Plans
To be clear, not all employers offer an in-service withdrawal feature within their 401(k) plans. Each plan is different and has its own rules.

You can tell if your 401(k) plan does by reviewing your plan documents. What’s more, your plan documents will spell out any potential limits or conditions that may apply to an
in-service withdrawal.

The good news is many 401(k) plans do come with this feature. A 2016 survey by the Profit Sharing Council of America found that more than 70% of 401(k) plans allow in-service withdrawals.

What are the Approved Triggering Events?
As we talk about the ins-and-outs of an in-service withdrawal, you may wonder about what the approved “triggering” events are. Some of these include:
  • Having your job terminated
  • Becoming disabled
  • Retiring
  • Passing away

Beyond triggering or hardship events there are reasons employees take in-service withdrawals. Yet many employees have no idea this type of withdrawal can even be an option for them.

Reasons for Non-Hardship In-Service Withdrawals
Many retirement savers opt for an in-service withdrawal for a number of reasons. Some may want to preserve their wealth. Some plan participants might worry about holding onto or protecting what they accumulated. Others may want to ensure their retirement income will last as long as possible.

And as for others? They may simply want more options and flexibility. An in-service withdrawal may give them a greater range of potential strategies and financial choices than they currently have in their 401(k) plan.

For example, those who wish to maximize or protect their retirement income may want to purchase an annuity. Currently, annuities lie outside of most 401(k) plans.

A 401(k) has an average of 27 options in its investment line-up, according to the Brightscope and Investment Company Institute.

Other Potential Reasons for an In-Service Withdrawal
Market volatility, like that we have experienced of late, can motivate some plan participants to want to “take the reins” on their funds. They may want to look beyond their plan’s offerings.

Plan fees may be another concern for 401(k) participants who are concerned about their returns. However, the majority of employees could be in the dark when it comes to knowing about plan fees.

"Sixty percent of people don't know they're paying any fees at all in their 401(k) plan," says Laurie Rowley, president of the nonprofit National Association of Retirement Plan Participants.

According to an analysis of 401(k) plans by Brightscope, large plans have an average fee below 1%. Smaller plans have fees averaging between 1.5% and 2% of the account balance. But other plans can be up to 3.5% or more per year.

And there are different types of 401(k) plan fees being charged: administrative fees, investment fees and service charges, assessed, for example, when you take a loan from your plan.

By design 401(k) plans have a structure that allows for minimal individuality. You may get to choose a category of funds. However, options for more advanced planning options, such as a stretch IRA, typically aren’t available within an employer-sponsored retirement plan.

The Drawback to In-Service Withdrawals
Of course nothing comes without disadvantages. An in-service withdrawal is no exception. So, what are some downsides to potentially opting for a 401(k) non-hardship, in-service withdrawal?

Technically, IRAs don’t let you take out loans. On the other hand, you can take out a loan from your 401(k). Taking a 401(k) loan isn’t a decision that should be made in haste, though. With that said, you can use your IRA funds for certain purposes.

The IRS does permit penalty-free distributions from your IRA for qualifying education costs and first-time home purchases, for example. These situations follow strict rules. Not only that, all potential advantages and downsides should be thoroughly evaluated with professional financial and tax guidance before any decision.

Other Potential Downsides
Even though a large number of 401(k) plans may offer an in-service withdrawal feature, not all do. Be sure to check your plan documents if this is possible for you. If you don't have plan documents, ask your HR department for them.

As mentioned previously, withdrawals may be subject to taxation if they don’t meet the 60-day rollover deadline. The amount paid in taxes would reduce the balance that is withdrawn. In other words, you wouldn’t have the whole amount withdrawn to work with.

Another possibility? When you withdraw funds, you might pay an “opportunity cost.” That could be a missed opportunity of having that balance potentially growing with any investment growth in the 401(k) portfolio.

In light of recent U.S. Supreme Court rulings, 401(k)s are thought to have high-level protection against creditors seeking repayment of debts you may owe. IRAs and pension plans are also protected, but there are many qualifying rules making this protection less ironclad.

If your creditor is the government or any government organization, there is no protection at any level from the long arm of Uncle Sam.

Need Help Exploring Your Options?
For 401(k) plan participants who want to be able to withdraw their money from their company-sponsored plan—while they are still working there—in-service withdrawals offer a potential solution to filling that need. Of course, an in-service withdrawal is only a means to an end. And it should be carefully considered before you commit to one. Think about seeking professional financial and tax guidance as you consider your options
.
As you get closer to retirement, it's important to start planning your retirement income strategy. Or you may need a refined or updated income plan that helps you achieve your specific retirement goals. If you would like assistance with exploring options (potentially outside of your 401(k) plan), assessing your current strategy, and taking steps to meet your goals, a financial professional can help you.

At WFGInsuranceQuotes.com. we can help. Connect with someone directly. You can request a no-obligation appointment or phone meeting to discuss your goals. Let's get started today!
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Three Retirement Options to Consider Aside From a 401(k)

6/16/2019

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​About 58 percent of Americans have access to a 401(k) or a similar employer-sponsored retirement plan. A 401(k) is an effective, convenient way to save for retirement. The money is automatically withheld from your paycheck using pre-tax dollars, and you can contribute up to a set limit each year — plus an additional “catch-up” amount if you’re age 50 or older. You’ll pay income taxes on contributions and earnings when you withdraw funds. If you access your funds before age 59½ you’ll also pay a 10 percent penalty tax. Also keep in mind, the money in your 401(k) is exposed to market volatility.

About 75 percent of employers with 401(k) plans offer a matching program. A typical employer match is 50 percent of the employee contribution, up to 6 percent of your salary. So if you have a 401(k), your first retirement-saving priority should be to max out your employer match — it’s free money!

But the 401(k) isn’t the only game in town. If you want to save more than the amount your employer will match, don’t have access to a 401(k), or want to ensure a guaranteed lifetime income, here are three options to consider:

Traditional IRA
You can contribute up to $6,000 to an Individual Retirement Account in 2019 — $7,000 if you’re 50 or older. If you don’t have a 401(k) or similar retirement account at work, you can deduct your full IRA contribution from your taxes. Married couples can each have their own IRA and can each take advantage of the full combined contribution tax-deferred. As with a 401(k), you’ll pay taxes on contributions and earnings when you withdraw funds. Also like a 401(k), you’ll pay an additional 10 percent penalty if you withdraw funds before 59½. A traditional IRA is subject to required distributions after age 70½ and you can’t make additional contributions to your account once you reach that age.

Roth IRA
Roth IRAs have the same contribution limits as traditional IRAs. You can’t deduct Roth IRA contributions from your current taxes, but you can withdraw both contributions and investment earnings tax-free after age 59½ if the account is at least five years old. Unlike a traditional IRA or 401(k), there’s no penalty for withdrawing contributions before 59½, although there is a 10 percent penalty on early withdrawal of account earnings. Unlike a traditional IRA, you’re not required to withdraw funds by 70½ and you can even keep contributing to the account after that age. You can contribute to both a traditional IRA and a Roth IRA, but your total contribution can’t exceed the annual limits set by the IRS.

Annuity
One key thing 401(k)s and IRAs (excluding annuities) have in common is that when your money is gone, it’s gone. Annuities, on the other hand, provide insurance against the risk of outliving your money after you retire, and may also provide protection from loss due to market downturns.

Life expectancy has been increasing, with the average 65-year-old expected to live to about age 84 for men, age 86 for women, and age 90 for at least one member of a married couple. And while most of us probably won’t live to be 100, about three percent of 65-year-old men and six percent of 65-year-old women can expect to see the century mark. Whether you live to be 80, 90 or even 100 and beyond, it’s important to consider an annuity that guarantees an income for life.

Not sure which retirement planning options are right for you? Make an appointment with a WFGInsuranceQuotes.com financial professional to discuss your options for a retirement income strategy that fits your needs and goals.
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