Category: Medicare

Due to inflation, Social Security beneficiaries will be eligible for a record-high cost-of-living adjustment in 2023.  

For instance, the government may offer COLA on Social Security payments each year. The COLA adjustment made by the Social Security Administration (SSA) for 2021 was 1.3%; for 2022, it is 5.9%. In contrast to the 1.3% rise in 2021, recipients of Social Security will get a 5.9% boost in payments in 2022. 

There is joy among retirement communities since the highest cost-of-living adjustment in 40 years is expected for the millions of people who retired through the federal civil service program. This also applies to everyone eligible for retired military pay or Social Security: between 8% and 11%. 

For the largest group in the country, a COLA in that range—or possibly more—would be the largest rise in decades. The average COLA in January of this year was 5.9%. It was 4.9% for federal employees under the more recent FERS retirement program. 

However, many clouds do have a silver lining. The nation’s largest rise for the greatest number of individuals, the yearly COLA catch-up, is no exception. Any record inflation catch-up in 2023 is fantastic, whether it is 8%, 11%, or higher. 

No matter how much of a record COLA there is, it won’t ease the financial hardship that many seniors are experiencing. It won’t make up for the historic inflation that the country and the rest of the world are experiencing, particularly after years of quite mild price rises of 2% to 3%. 

Living expense increases and inflation will be included in the January 2023 COLA. You now pay for products using pricing information from 2021. 

The COLA’s precise value will not be revealed until October. That is when the July, August, and September inflation-tracking CPI statistics will be released. This news will be very significant, but it will not be enough for many individuals. And the COLA news is considerably worse for federal employees who have retired or who will retire under the newer FERS scheme.

Due to a diet-COLA provision, FERS retirees get one percentage point less than CSRS/Social Security beneficiaries if inflation rises beyond 3%. That is greater inflation protection than most retirees in the private sector receive. But it’s not nearly enough to keep up with necessities like gasoline, food, and clothing. In addition, many retirees have greater medical and home care expenditures, which are not completely represented in CPI figures. 

Retirees, such as those covered by the FERS program, are not completely protected against inflation during high-inflation years. They lose purchasing value year after year during times of strong inflation, like the current one. There are ideas that would replace the COLA with a government metric that accounts for the increased expenditures of older retirees, who are supported by organizations like the National Active and Retired Federal Employees. 

The good news is that the preparations are being made for a possibly record-high inflation adjustment! 

On the other hand, it would be a reaction to an unprecedented increase in inflation, implying that more people are living paycheck to paycheck. And before things get better, they can certainly always get worse. 

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Many startup employees are drawn to the idea of a sizable payout and an early retirement, but the tactic may depend more on luck than competence.

Trevor Ford quit his position at Lending Tree over two years ago to work at Yotta, an online banking startup, where he had access to a 401(k) plan and a substantial employer match.

Yotta, like many early-stage startups, didn’t provide its employees with a 401(k) plan when Mr. Ford started working there. Instead, as equity compensation, Mr. Ford received incentive stock options, which allowed him to purchase company shares at a reduced price. He thinks investing in early-stage equities offers a better chance to build wealth than participating in an employer’s 401(k) plan with matching contributions.

The 33-year-old Mr. Ford, who resides in Austin, Texas, stated that the equity “may be valued well into the seven figures, hopefully, and maybe more.” That would be sufficient to retire on. However, Mr. Ford’s equity won’t be worth anything unless Yotta is a profitable public corporation. Yotta recently provided access to a 401(k) plan but does not match employee contributions (Mr. Ford makes a minor contribution).

Employees who switch from a corporate position with a typical 401(k) plan to one at a startup that offers equity have a rare chance to get a sizable payoff when they are still relatively young. Although there is a much higher chance of success than with a conventional retirement plan, the equity is worthless until it is purchased or the business goes public.

Jake Northrup, a certified financial planner in Bristol, Rhode Island, specializes in assisting Millennials with managing their equity compensation. Investing in a 401(k) is comparable to running a marathon, while investing in company equity is comparable to sprinting. If a startup succeeds, Mr. Northrup continued, “you might be able to achieve financial independence at a very young age via your company shares.” According to him, about 20% of his clients have benefited in some way from equity.

In part, because he saw his friend Andy Josuweit, the founder and CEO of Student Loan Hero, earn a sizable payment when LendingTree bought the startup for $60 million in cash in 2018, Mr. Ford is relying on the stock. According to Mr. Ford, at age 31, he obtained a sum of money that changed his life.

Of course, not every startup succeeds. According to research done this year by CB Insights, a company that examines venture capital and startups, 70% of startups fail.

Chris Chen, a certified financial adviser of Lincoln, Massachusetts-based Insight Financial Strategists, said, “You have to keep in mind that things might not work out. When you’re between your twenties or in your thirties and working for a startup, it may seem time will never end, but eventually, you’ll have to retire.”

Among the initial dozen workers of a rapidly expanding tech startup in Missouri, Annie Fennewald spent nearly seven years there. Ms. Fennewald, 44, could retire around eight years sooner than she had anticipated in May after selling her stock through a private equity deal.

Despite receiving a seven-figure payout, Ms. Fennewald claimed that her equity wasn’t her only retirement strategy.

She said, “I always thought of stock as a lottery ticket.” Although I didn’t bank my retirement on it, it might be valuable. She made the maximum contribution to the company’s 401(k) plan when it became available four years ago. When a startup has 50 or more employees and exits early-stage funding, it frequently offers a 401(k) plan.

However, not everyone is in a position to sell their equity.

A customer of Columbia, Missouri’s Danielle Harrison, a certified financial planner, wants to retire but is holding out for her business to go public so she can cash in roughly $2 million in equity. Being entirely dependent on something like that isn’t easy, according to Ms. Harrison, proprietor of Harrison Financial Planning.

This sums up what you need to know if you’re a startup employee thinking about forgoing a more conventional route to retirement savings in favor of depending on stock.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].

Long-Term Financial Security: Safe Money Retirement Planning

Achieving long-term financial security is a crucial aspect of retirement planning. With increasing life expectancies and the potential for economic fluctuations, it’s essential to create a retirement plan that ensures financial stability throughout your later years. Safe money retirement planning focuses on strategies that protect your capital and provide a reliable income stream, minimizing risk and ensuring peace of mind. Here are key principles and strategies to help you achieve long-term financial security through safe money retirement planning.

Understanding Safe Money Retirement Planning

Safe money retirement planning involves selecting investment options and strategies that prioritize capital preservation and provide consistent, predictable income. The goal is to safeguard your retirement savings from significant market fluctuations and economic downturns, ensuring that your nest egg lasts as long as you do. This approach is particularly important for retirees and those nearing retirement who may not have the time to recover from substantial losses.

The Importance of Lifetime Income

One of the primary goals of retirement planning is to ensure a steady income stream that lasts throughout your retirement years. Lifetime income strategies are designed to provide regular payments that you can rely on, reducing the uncertainty and stress associated with managing your finances in retirement. Here are some key strategies to consider:

1. Social Security Optimization

Social Security benefits are a critical component of most retirement plans. To maximize your Social Security income, consider delaying benefits until you reach full retirement age or even later if possible. Each year you delay receiving benefits beyond your full retirement age, your monthly benefit increases. This can provide a significant boost to your retirement income, helping to ensure long-term financial security.

2. Annuities for Guaranteed Income

Annuities are insurance products that can provide guaranteed income for life. By purchasing an annuity, you can convert a portion of your retirement savings into a steady income stream. There are various types of annuities, including fixed, variable, and indexed annuities, each with its own set of features and benefits. Fixed annuities, in particular, are popular for their stability and predictability, making them a safe money option for retirees.

3. Bond Laddering

Bond laddering is a strategy that involves purchasing bonds with different maturity dates. This approach provides a regular income stream from bond interest payments while reducing interest rate risk. As each bond matures, you can reinvest the principal in new bonds, ensuring a continuous flow of income. High-quality bonds, such as those issued by the U.S. government or highly rated corporations, are considered safe money investments.

4. Dividend-Paying Stocks

Dividend-paying stocks can provide a reliable income stream while offering the potential for capital appreciation. Companies with a history of consistent and growing dividends are typically financially stable and less volatile than non-dividend-paying stocks. Including a selection of high-quality, dividend-paying stocks in your portfolio can enhance your income while maintaining a degree of safety.

5. Real Estate Investment Trusts (REITs)

REITs are companies that own, operate, or finance income-producing real estate. They are required to distribute a significant portion of their taxable income to shareholders as dividends, making them an attractive option for generating income. REITs can provide diversification and a hedge against inflation while offering a steady income stream.

Capital Preservation Strategies

Capital preservation is a key principle of safe money retirement planning. The following strategies can help protect your retirement savings from market volatility and economic downturns:

1. Diversification

Diversification involves spreading your investments across different asset classes, sectors, and geographic regions to reduce risk. A well-diversified portfolio can help mitigate the impact of poor performance in any single investment, enhancing overall stability. Consider including a mix of stocks, bonds, real estate, and other assets to achieve a balanced and resilient portfolio.

2. Asset Allocation

Asset allocation is the process of determining the appropriate mix of asset classes based on your risk tolerance, time horizon, and financial goals. As you approach retirement, it’s generally advisable to shift towards more conservative investments, such as bonds and cash equivalents, to protect your capital. Regularly reviewing and adjusting your asset allocation can help maintain the desired level of risk and return.

3. Safe Haven Investments

Safe haven investments, such as gold, Treasury bonds, and high-quality corporate bonds, can provide stability during periods of market turbulence. These assets tend to retain their value or appreciate when other investments decline, offering a hedge against volatility. Including safe haven investments in your portfolio can enhance resilience and protect your capital.

Maintaining an Emergency Fund

An emergency fund is essential for managing unexpected expenses and protecting your retirement savings. Having a cash reserve to cover unforeseen costs, such as medical emergencies or major home repairs, ensures that you won’t need to dip into your retirement accounts prematurely. Aim to save enough to cover three to six months’ worth of living expenses in a liquid, easily accessible account.

Working with a Financial Advisor

Navigating the complexities of retirement planning can be challenging. Working with a financial advisor can provide valuable guidance and help you develop a comprehensive, safe money retirement plan tailored to your needs and goals. An advisor can assist with optimizing Social Security benefits, selecting appropriate investments, and adjusting your plan as circumstances change.

Conclusion

Achieving long-term financial security through safe money retirement planning involves a combination of strategies that prioritize capital preservation and provide reliable income. By optimizing Social Security, incorporating annuities and bonds, investing in dividend-paying stocks and REITs, diversifying your portfolio, and maintaining an emergency fund, you can build a resilient retirement plan. Working with a financial advisor can further enhance your ability to navigate market volatility and secure a stable, worry-free retirement.

Contact Information:
Email: [email protected]
Phone: 2129517376

Bio:
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].