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Michael's Blog

To Delay or Not To Delay; Retirement

These days, more and more people are putting off retiring by the time they reach 65. Instead, these Baby Boomers are opting to continue working until they are a bit older, usually by the time they reach 70. There are a variety of reasons why they are delaying retirement, with one of the chief reasons being that they truly love their jobs and want to continue to be productive in them for a longer period of time. Of course, retiring past the standard 65 years old carries a number of benefits. It is worth exploring these advantages to determine whether it’s wise to begin planning to retire later in life.

You Can Earn More Money


One of the most obvious
benefits of delaying when you retire is that you can earn more money. This is because, naturally, the longer you work, the more money you put in toward the time when you eventually retire. Many people believe that their standard of living will decrease after they stop working. In addition, the longer you hold off on withdrawing funds from your retirement accounts, the more interest they will accrue over time. Over the course of a few years, that money can really add up. You also will not have to downgrade your lifestyle if you put off retirement for a few more years.

Higher Social Security Benefits


If you wait until you are 70 years old to
retire, you can collect a higher social security benefit. Legally, you can begin collecting when you reach 62 years of age, but your monthly benefit is reduced by 30 percent. By the time you reach 70, when you begin collecting social security, you can earn an additional eight percent per year. In other words, if you were to claim at 66, your monthly benefit would be $1,000. If you were to claim at 62, however, you would only receive $750. Planning ahead and waiting to collect your social security benefits at 70 would increase your monthly benefit to $1,320.

Longer and Healthier Life


Individuals who put off retiring until a later age tend to be happier and healthier overall, which can increase their life
expectancy. Working longer keeps your mind sharp and keeps you feeling useful and productive. Additionally, the longer you work, the longer you can continue to receive health benefits paid by your employer if the company provides them. These health benefits are much better than options you would need after you retire, which you would have to pay for out of your own pocket. This is especially true if you are not yet old enough to qualify for Medicare.

Allows You to Explore New Career Opportunities


Just because you decide you want to put off the time you eventually retire, it doesn’t mean you have to stop working altogether. If you have worked for the same company at the same job for many years but are burned out, you might want to try your hand at new career opportunities. Many people chase dreams and start their own businesses. Perhaps there is something you’ve always wanted to do that involves something you truly love and believe in. This is the time to embark on it. Some people choose to get a job on a part-time basis, which allows them to continue collecting for when they eventually retire but allows them to stay busy and earn money.

These are all compelling reasons why you might want to wait to retire. Weigh out the benefits and decide whether this is the right path for you.   A well thought out retirement plan will allow you to feel comfortable when choosing the "right time" for you to retire- we can help you achieve your goals.

 

 

                                                                                                                                                                      

 

Rising Rates Increase The Appeal of Lump-Sum Pension Payouts

 

It began in December 2015, the Federal Reserve started a policy of raising interest rates to more common historical levels. This was the first rate increase since 2006, and there have been additional hikes in the months since. While rising interest rates can be a negative for borrowers as the cost of their loans will likely go up, it can bring up some interesting options for those who are about to retire. 

A Lump Sum Might Be Attractive

Because of low interest rates and the havoc that they can cause on actuarial tables for pension funds, many retirement plans have offered lump-sum payments. These payments, as the name would suggest, provide one lump sum that's tied to the amount that a retiree or his company's plan has saved over a working career. Defined-benefit plans have a concern that they might not be able to pay out as much as they've promised the with low returns. Additionally, the increased life expectancy that's been common in the post-World War II world has led to an expectation that retirees will get more from their plans. 

Monthly Payments Could Be Less Attractive

Traditionally, a
pension payment is much like an annuity that pays a set amount of money for the life of the retiree. This takes much of the planning process out of play, as the payments will remain stable for years, if not even decades. Many who are looking to retire like the stability of the guaranteed monthly payout as opposed to the lump sum option that provides a single payment that will have to last for the life of a retiree. If you're looking for this stability, you might opt for the annuity option over the lump sum payment. 

How To Decide On Your Payout Option

Raising rates could make it more beneficial for retirees to take the lump sum option, as they could expect to get more income from investing their money over time. It might even make sense to take the money and run as soon as possible because of the time value of money. You could see your income go up as the interest rates on common debt instruments rises. This is the opposite of what your planning should be like in an era of declining interest rates. In this latter scenario, it's possible that your income from bonds could go down over time. The higher rates go, the more likely it is that they might get cut in the future. 

Higher Rates Make Returns Lower

Taking the lump sum option for retirement gives you more options for getting income in old age. With rates going up, many pension plans want to get the liabilities off the books. Rising rates could make the size of these lump sum offers lower going into the future, which will cut down on the flexibility that retirees who take the smaller cash payout will have. Therefore, it should pay to take the offer sooner rather than later.

Getting ready to permanently leave the workforce can be a stressful time for many Americans. Having the option to take a lump sum or a monthly annuity can add to this stress as it can be difficult to know what to do. In addition to the concern over the way rates might impact a person's retirement, life expectancy should also be a consideration. Those who do not expect to live decades into the future would likely come out ahead with the lump sum, and increasing rates could even compound the advantageous position that these retirees might enjoy.

 

 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. You should speak with your advisor about your specific situation.

 

 

 

Are You Ready For 7 Saturday's?
Data shows, You Spend More In Retirement!

One of the most significant problems with most people’s retirement plans is that they do not account for changes in spending levels over the years. Most retirees will likely plan for inflationary adjustments, but is it really reasonable to think that your inflation-adjusted costs for property taxes, healthcare, income taxes and more will all remain the same? If you have ever opened an old budget file on your computer that you created years ago, you may be well aware that budgets can change very dramatically from year to year. With this in mind, the best planning efforts for your later years in life will include increasing rather than decreasing levels of expenses. 

The Issue of Healthcare Expenses

If you are like most adults who are preparing to
retire, your planning efforts may include most of your medical expenses being paid for through Medicare. However, the media is filled with stories about pending changes to Medicare coverage. In addition, the reality is that most seniors tend to need more rather than fewer health services as they get older. The bottom line is that your medical expenses can increase rather dramatically throughout your retired years, and your financial plan needs to take this into account. Without properly planning for what may equate to several hundred dollars or more per month in additional expenses, there is a very real chance that your budget may fall short of meeting your needs. 

Preparing for Tax Changes

Taxes are also a great unknown when you are preparing to retire. This includes your property taxes as well as income taxes. These tax rates can vary from year to year, and it may seem more likely that they will increase rather than decrease in the future. Even if your incoming cashflow remains steady, you may still pay a higher percentage in taxes. This can detract from the overall amount of money you have available to spend when you are retired. In some cases, this may equate to several hundred dollars or more less per month. 

Increased Living Expenses

Some people believe that living expenses will naturally decline as you get older. For example, you may plan to spend your first few years out of the workforce on the golf course. While golfing can be expensive, your health will eventually decline, and you may find yourself golfing less frequently. The thought of spending your days at home in front of the TV or curled up with a good book sounds very affordable. However, you may need in-home care at some point, cleaning or landscaping services to care for your home and more. You may even need to sell the home and move into an assisted living facility. These long-term care facilities can cost a modest fortune. You can see that these increased living expenses are not simply inflationary adjustments. They add new expenses to the budget. 

How to Create a More Realistic Budget

If you are serious about being financially prepared in retirement, you need to create a budget that is as realistic as possible. One smart idea is to consider living more frugally during your first few years, and this can help you to stretch your funds for a longer period of time. Remember that funds that you do not take out of your account immediately will have more time to grow over the years. You may also want to create a separate budget for every five-year period of your life rather than one budget that is supposed to cover a 20 or 30-year span.

We are here to answer your pre-retirement or retirement questions.  

 

Don't Make Rookie Retirement Mistakes!

 

Financial independence is a goal that many people have in life. Working for decades is hard enough, but many people end up making mistakes financially once they retire. Over time, the decisions that you make leading up to the point where you retire are essential to your success. A lot of people end up regretting spending too much money or investing too little once they get to retire. Here are some of the biggest mistakes that people make when they retire, and things that you can do to improve your chances of staying retired.  

Investing Too Little

Perhaps the biggest retirement mistake is investing too little throughout your working life. There are a lot of people who want to retire on as little money as possible so they can quit the rat race. However, you need to make sure you have a sizable nest egg for when you decide to retire. There are a lot of people who struggle financially the rest of their life because they did not save enough. In addition, one market swing can wipe out a huge chunk of your portfolio because you did not plan carefully. Always make sure that you run through several financial scenarios before you decide to retire. This is one of the best ways to prevent financial issues later on in life.

Not Budgeting

When living on a fixed income, it is essential to control your expenses. One of the best ways to do this is through budgeting. A lot of people get a false sense of security with how large their financial portfolio is. However, you have to remember that this fund needs to last for the rest of your life. Making small changes in your financial planning can have major positive impacts on the amount of time this money will last. Always make sure that you are planning for the future in any way that you can financially.

Health Issues

Although investments in stocks and bonds are important, you health is even more important than that. A lot of people concentrate too much on their job and their career while they are working. Instead they should be looking for ways to improve their overall health and well-being. Over time, health issues can cost a lot of money if they go without being dealt with. Before you officially retire, you need to make sure you have a health screening to check for anything major. Your investments will not cover a major heart attack or other financial issue later in life. In fact, the number one worry of people who are about to retire is health-related expenses. All of these things can be greatly reduced if you simply start investing in your health today.

Final Thoughts

Overall, retirement is a goal for many people in life. There are a lot of people who want to retire and never have to think about money again again. If this is your plan, you need to be on a strict budgeting plan so that you do not eat into your principle. A lot of people wrongly assume that they will only live for ten or so years after they retire. However, many people end up living for two or three times that span. Over time, this is a major issue that you have to deal with in a variety of ways. Not only do you need to make sure you have the financial support to do this, but you need to have a plan for your health expenses as well.

We are here to answer any questions you have regarding your current plan or the retirement road ahead.

 

 

 

Life Insurance, It's Not For You, It's For Them!

Life insurance is one of those things that many people prefer to avoid thinking about because it often conjures up dark images. While we all know that our end will come, it may be difficult to realistically imagine that time. Many people are jarred into realizing the importance of buying life insurance after a close friend or family member has passed away or even after hearing a news story about a tragic death that hit close to home. The reality is that we are all mortal, and there very likely will come a time when your loved ones will be left to fend for themselves without you. Consider these important questions to determine your need for life insurance.

How Will Your Loved Ones Live Without Your Income?
Many households are run on a paycheck to paycheck basis. Some people may have a modest amount of savings, but it may take two incomes to pay the monthly bills. Your spouse and children may quickly run out of money without your income to support them.
Life insurance benefits are most commonly used to supplement lost wages and to eliminate debts after an income-producing adult passes away. By eliminating debts with insurance proceeds, your loved ones will need less money to live off of each month. Some people will purchase enough insurance to pay off all outstanding debts including the home mortgage. The surviving spouse may even be able to support the family through is or her income alone after the debts have been eliminated. Others will purchase enough coverage so that the proceeds can be invested to generate supplemental income.

How Will Your Spouse Be Able to Retire?
While some life insurance is needed to help your loved ones to survive on a monthly basis, you also need to think about the future. Your income may currently be instrumental in your spouse’s ability to
fund a retirement account. Without your income, your spouse may be forced to work for many years past the traditional retirement age. this can create an unnecessary hardship on him or her. It is wise to purchase extra coverage to fund a retirement account.

Do Your Kids Need Financial Assistance Getting Their Adult Lives Started?
If you have kids, you may be well aware of their financial dependence on you, and this will often not simply evaporate when they turn 18. Many children need financial assistance buying their first car, paying for their wedding, paying for college and more. Some parents will purchase additional death benefits so that their kids’ lives are not financially impacted by a death.

How Much Coverage Do You Need?
This is a complicated question that often requires you to create a solid financial plan for the future. Funds can be used strategically in different ways, such as to purchase income-producing assets, to pay off debts and more. Your current lifestyle, debts and assets all must be taken into account. It is wise to work with an experienced life insurance expert to review your financial needs.

Death is something that can unfortunately happen at any time. Some people will live well into their 90s or beyond, but others have a life that is cut short far too soon. Because you cannot predict what will happen or when life insurance benefits will be needed, it is imperative that you purchase coverage as soon as possible.

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Check the background of this financial professional on FINRA's BrokerCheck