Monthly Archives: September 2015

The Perils of Retirement Plan Comparisons

What You May Need to Know about Peer Messaging Programs at Work

Retirement Plans – Apple Orange Comparison

Is it smart to compare retirement plans with your peers?

If you could see how your retirement plan savings compares to that of your peers, would you want to know?

One of the latest approaches for encouraging employees to increase 401(k) retirement plan contributions is a technology called peer messaging.

Using a web-based dashboard that aggregates savings data for the company and the financial group hosting the plans, peer messaging allows employees to see where they stand among their peers in terms of how much they have saved for retirement. Users can view data among their age group and employees overall, and then have the option to change retirement plan contributions from the dashboard.

On the surface, peer messaging actually sounds like a revolutionary way to increase retirement savings (especially considering Americans are not saving enough1). But these programs can also make it far too easy to make changes without considering the total financial impact.

For instance, let’s say an employee in her 30s is using the peer messaging platform and sees that her retirement savings is below average for her age group. Prompted by the inherent need to compete – and possibly the fear of not saving enough for retirement – this employee immediately increases her contributions.

What this employee may not have considered is the amount of money that will not be available for other expenses, such as credit card debt or down payments for a home or vehicle. When she increases the amount of money going into the retirement plan, she may be decreasing the amount of money available to accomplish other financial goals – some of which may need to take priority over retirement savings.  

Employees who hold 401(k) retirement plans may want to consider speaking with a financial advisor before funneling more money into their retirement plans. This way, account holders can see all of the cards they are holding before they decide to make changes that can have a lasting financial impact.


Retirement Plan Tip: Max Out Contributions Before End-of-Year

If you are looking for ways to save on income taxes next year, then you may want to look at what is happening in your retirement plan right now.

Saving for Retirement – Income Tax Planning

Save on Income Taxes: Make Maximum Contributions to Retirement Plans

The maximum amount you can put into a 401(k) or 403(b) retirement plan in 2015 is $18,000 – or $24,000 if you are 50 years of age or older – to take advantage of federal and state income tax savings.

But do you know if you wait until the end of the year, you may not be able to contribute enough to reach the maximum amount?

Some retirement plans may only allow a certain percentage per paycheck to be put away in a 401(k) or 403(b) retirement account. That means, if you wait until December to see how much you have contributed over the year and you find that you have not reached the $18,000 or $24,000 limit, then you may lose out on significant tax savings when you file in 2016.

What kind of significant savings are we talking about? At the highest marginal tax rate (39.6 percent), a contribution of $18,000 can possibly save more than $7,000 in federal taxes. For $24,000 in retirement plan contributions, the savings can be an additional $2,000. That does not include potential savings in state taxes.

Another important point: If you wait until the end of the year to make large deposits to your retirement account, you may run into cash flow issues.

Employees who own a 401(k) or 403(b) retirement account may want to consider reviewing contributions to date. Because there are a few months left in the year, there may be enough time to “catch up” to that limit, if necessary.

Otherwise, you may find yourself sacrificing tax savings that could have been going back into the retirement plan, funding a dream vacation, or supporting any other financial goals.

Why Financial Advisors Talk about Life Insurance

The Role of Life Insurance in Your Financial Plan

Financial Life - Insurance for Family Protection

When you meet with a financial advisor for the first time, one of the areas you are likely to discuss is life insurance. Whether you have an existing policy or not, many advisors like to cover this topic right off the bat because of the implications it can have on the overall financial plan.

If you have an existing policy, then the advisor may want to talk about whether or not it is enough coverage. If you do not have a policy, then you may end up discussing the various types of life insurance and comparing the risks and benefits of each.

Either way, there are a couple of important reasons why life insurance plays a central role in creating a sound financial plan.


One of the largest benefits of having a life insurance policy is the protection it provides for your finances, should something happen to you. If you want to make sure your spouse, children or other dependents are taken care of financially, then you may need to purchase a life insurance policy that covers the amount of your income after you are gone.

For example, if you are the sole breadwinner in the family and you have a mortgage, college tuition and the rest of the household expenses, then you may want to consider a life insurance plan that allows your family to continue living the same lifestyle.

Peace of Mind in Financial Planning

It is no doubt that having a life insurance policy can provide you and your family with peace of mind. Another benefit of this insurance is it allows you to think about and create a financial plan for the future, knowing you are covered should something happen to you.

When you have confidence that your debts can be repaid, your everyday expenses can be sustained and your family can maintain a certain lifestyle, then it can be much easier to focus your thoughts on saving for dream vacations, building your own home, starting your own business, and planning for your retirement.

Overall, your financial advisor’s job is to ensure that you and your family are protected against unplanned events, whether that be market changes, loss of a job, or in this case, the passing of a family member.



All insurance guarantees are based on the claims paying ability of the issuing company

Financial Planning in Your 70s: What to Expect

The financial planning process for people in their 70s is different from any other stage, yet remains an essential component for overall financial health.

Checklist for Financial Planning in Your 70s

By the time you reach your 70s, you may be retired or you may be working full- or part-time hours. Either way, financial planning remains central to supporting yourself over the next 10 to 20 years.

Let’s take a look at how financial plans may differ for retirees and those who remain in the workforce.


One major difference in a retiree’s financial plan is the absence of employment income. If you are retired, then you may be receiving part of your monthly income from social security. You may also receive payouts from investments, and distributions from 401(k) and IRA retirement accounts. Whatever your arrangement, you have likely determined (prior to now) what your living expenses might be and what it takes to maintain a comfortable lifestyle.

However, just because you may have planned your retirement ahead of time does not mean there is no room for improvement. In fact, we often recommend that as part of a financial plan for retirees in their 70s, to take a look at their net worth once a year. This can be done by subtracting liabilities (such as car payments and mortgages) from assets (income, investments, etc.). Compare your net worth from year to year, and you can get a basic sense of whether or not you are living below or above your means.

One of the biggest challenges for retirees is balancing how they spend their money in retirement. If you spend too much money early on, there may be less to work with in your 80s and 90s – a time when you may need more cash for medical care or emergencies. If you spend too little, you may be living less comfortably without reason.

On the flip side, there may be more ways to save money in your 70s. Checking your Medicare Part D coverage every year is one way to ensure you are not paying too much for prescription drugs. Open enrollment begins October 15th every year and runs through December 7th.

Finally, the financial planning process in your 70s may include an estate plan. You may have begun this process already, but now you may want to look at how you can manage the assets found in your taxable estate. If you plan to leave an inheritance for your children or spouse, then now is an opportunity to help them plan for estate taxes upon distribution.


If you are in your 70s and still working (many are, by the way), then you have the advantage of generating additional income for retirement. Individuals who delayed financial planning until later in life can benefit from working later, too.

For example, it is possible you do not have to take the required minimum distributions from retirement accounts if you are still working, so that money can continue to be invested until you retire.

The benefits for employees are twofold: generate additional income and maintain investment in retirement accounts.

Of course, individuals who continue to work at this stage in life may need to be careful not to overspend, and to keep their sights set on saving and planning for retirement. After all, it is likely not too far off at this point. Performing a net worth assessment (described above for retirees) is also a good idea for employees.

While you are working part- or full-time hours, you may want to take a closer look at what your daily expenses are right now. Consider which items may not be relevant in retirement, such as gas to get to work, vehicle maintenance, eating out for lunch, business clothes, and so forth. This will help you get an idea of how much money you need every month, so that you can start putting away enough of your current paychecks. If you are working, then you may not need to apply for social security until later, which means you can claim more each month.

Like retirees, you may also want to look at your estate plan to determine how to reduce the tax burden for those who will receive an inheritance upon your passing.

Whether you are in the workforce or not, maintaining a solid financial plan in your 70s is essential to covering all of your expenses – expected or not – as you grow older. You may want to speak with a financial planner who can show you how all of the financial pieces fit together to influence spending and saving throughout the rest of your lifetime.

Related Content

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Financial Planning in Your 50s

Financial Planning in Your 40s

Financial Planning in Your 30s