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Category: Financial Planning
Building a Philanthropic Legacy: Making a Meaningful Impact
High earners have a unique opportunity to make a positive, meaningful, and lasting impact on society through philanthropy. By leveraging your financial resources, you can begin building a philanthropic legacy that resonates with your values and can continues for generations to come.
Understanding the Power of Philanthropy for High Earners
With ample financial resources at your disposal, it is important to recognize your potential to make a positive impact on society through strategic giving. Your financial success grants you the power to create a better world through your philanthropic efforts – embrace the responsibility that comes with your financial success. Use your position of influence to address pressing social issues, support important causes related to your personal values and passions, and encourage positive change on a broader scale. Even a small effort can inspire others to do the same.
Philanthropic Vehicles
There are several philanthropic vehicles available to high earners looking to make an impact. Each resource has its own benefits and considerations – choose one that coincides with your own goals, level of involvement desired, and tax implications. Some options are:
- Private foundations are private organizations set up for charitable purposes, typically with limited funding sources. The benefits of a private foundation are flexibility and complete control over charitable giving.
- Donor-advised funds are established as public charities and managed by a third party, leaving donors with the benefits of simplicity and professional guidance.
- Charitable trusts are irrevocable trusts created for charitable purposes. These are set up to benefit you, your beneficiaries, and a charity simultaneously. Other benefits include tax advantages and the ability to plan long-term.
Talk to a financial advisor, like Blakely Financial, to learn more about each philanthropic vehicle and discover how to best leverage your financial resources when building a philanthropic legacy.
Effective Giving Strategies
To begin developing effective giving strategies, it is essential to establish a clear philanthropic mission. Once your charitable goals are set, identify causes and organizations aligned with your values. Research the past success of potential recipients to ensure your donations are being utilized effectively. Consider prioritizing your giving in areas where your contributions can make a significant and lasting difference.
Incorporating Charitable Giving into Long-Term Financial Planning
When creating your long-term financial plan, consider integrating philanthropy to ensure sustainable giving. Determine the percentage of your income or assets you would like to allocate to charitable endeavors and explore different techniques like planned giving, endowments, multi-year grants, and more to maximize the impact of your donations.
Philanthropy also offers the opportunity for various tax advantages including deductions, exemptions, and estate planning benefits. It is important to understand these benefits and stay informed about the latest laws and regulations. Work with a financial advisor to seek out the best strategy for aligning your philanthropic goals and financial objectives and maximizing the tax benefits of your charitable contributions.
Engaging in Impactful Philanthropy Beyond Financial Contributions
Philanthropy goes beyond simply writing a check – high earners can also contribute their time, expertise, and networks to make an even more meaningful impact. Consider volunteering your time, serving on boards, or offering pro bono services in your professional field. Additionally, explore social entrepreneurship or impact investment to leverage your business knowledge for social good. Encourage your family to get involved as well, allowing values to be passed down and creating a legacy of giving.
Building a Legacy
Your charitable efforts can continue beyond your lifetime and leave a lasting legacy. Encourage family involvement to pass down the values of giving and develop a succession plan to ensure these endeavors continue after you’re gone. By building a philanthropic legacy as a high earner, you are making a meaningful impact with your high income that extends far beyond your financial success.
If you are looking to make an impact and begin building your philanthropic legacy, the Blakely Financial team is here to help. Contact us to get started today.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securing Your Future: Tips for a Successful College Planning Journey
Education expenses represent a significant financial commitment that accompanies us throughout our lives. Whether you’re considering having children in the future or you have teens nearing college age, we are here to equip you with essential knowledge and guidance for success in education planning.
Plan Based on Career Development
Work with your children to create a plan based on career development. When it comes to selecting a college, it is crucial to consider schools with programs and styles that align with future goals and aspirations. While small details are important, keep your eyes on the big picture: future success! Research the schools your children are considering and be sure to explore the degree programs each school offers to ensure they are properly equipped to help develop the skills and knowledge needed. The right college can make all the difference!
Private vs Public Universities
When selecting a school, it is important to understand the details of the school and program. Each college or university offers a different price level dependent on many factors including program length, region/state, and type of educational institution.
One of the most significant differences will be whether the school is public or private. Public colleges are mainly government-funded. They tend to have a wider selection of programs, more research opportunities, and a larger student body. Private colleges rely heavily on tuition, fees, donations, and endowments for funding and can be either for-profit or non-profit organizations. They often have more money available for grants and scholarships in addition to federal financial aid.
The following are the estimated average costs of a full year of college at private and public colleges (via LendingTree):
- Community college (public, in-state): $4,864
- Community college (public, out-of-state): $8,622
- Private community college: $15,460
- Public two-year (in-district): $17,580
- Public four-year (in-state): $25,290
- Public four-year (out-of-state): $40,940
- Private four-year: $50,900
College Savings Plan
A college savings plan is a crucial piece of the college planning puzzle and the foundation of any successful college financing plan. Think of your savings as a down payment on the total cost of college, similar to a down payment on a large purchase like a car or a home.
Only 33% of families use a college savings plan to save for their child’s education. Whether you’re a new parent or already have children nearing their college years, it’s never too early or late to start saving to give them the best opportunities for success. Setting aside money over a long period of time takes discipline and even sacrifice, but can yield surprisingly positive results when done regularly. Work with a trusted financial advisor to help you navigate the process and create a plan tailored to your own goals and budget.
Financial Aid
Financial aid is a broad term for money used to help pay for college. It can include loans, grants, scholarships, and work-study funds. Ideally, you want to get the most from grants and scholarships to therefore have the least amount of loans possible.
Colleges are the largest source of grant aid, with annual awards based on both need and merit. The federal government has two central grants, the Pell Grant, and the Supplemental Educational Opportunity Grant, which are reserved for those with high financial need. The federal government’s main contribution to financial aid is student loans, both Direct Subsidized and Direct Unsubsidized, which are available to all students regardless of their financial needs.
Many colleges will have a net price calculator available on their website which can be used to estimate how much grant aid a student will receive from the school based on their financial and academic information. Use this to compare your estimated out-of-pocket cost at several schools and factor affordability into your college planning decisions.
College is a significant investment, and understanding the financial aspects from college funding to school selection is crucial. The Blakely Financial team is here to help. Contact us today to get your college planning journey started.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Electing Delayed Social Security Retirement Benefits
What is it?
You can elect to delay receiving Social Security retirement benefits.
You can choose to delay receiving Social Security retirement benefits until you are past normal (full) retirement age. Perhaps you want to work longer because you enjoy it, or maybe you want your retirement benefit to be higher when you finally do retire.
Your benefit will be increased by the delayed retirement credit.
If you are eligible to receive Social Security retirement benefits but you delay receiving benefits until after normal retirement age, you will be eligible to receive the delayed retirement credit. The delayed retirement credit increases your retirement benefit by a predetermined percentage of your primary insurance amount (PIA) for each month you delay receiving retirement benefits up to the maximum age of 70. The amount of the credit you receive depends upon two factors:
- What year you were born
- How many months you delayed receiving retirement benefits past normal retirement age
If you were born in 1943 or later, you will receive 2/3 of 1 percent more per month or 8 percent more per year if you delay receiving retirement benefits. So, for example, if your normal retirement age is 66, and you delay retirement until age 70, your benefit at age 70 will be 32 percent more than it would be at age 66. If your normal retirement age is 67, and you delay retirement until age 70, your benefit at age 70 will be 24 percent more than it would be at age 66.
Although the delayed retirement credit increases your Social Security retirement benefit, it does not increase your PIA.
When can it be used?
You must be eligible to receive delayed retirement benefits.
In order to receive delayed retirement benefits, you must meet the following criteria:
- You must be at least one month older than normal retirement age, and
- You must be fully insured for retirement benefits (in most cases have 40 quarters of coverage).
You must apply for benefits.
Receiving delayed retirement benefits is not automatic. You must apply for benefits when you want to begin receiving them. The Social Security Administration (SSA) recommends that you contact an SSA representative two or three months before you want to begin receiving benefits. You can call the SSA at 1-800-772-1213 for more information.
Strengths
Your retirement benefit will increase.
If you continue to work past normal retirement age and delay receiving Social Security retirement benefits, you may increase your retirement benefit in two ways. Not only will you receive a delayed retirement credit, but your earnings after normal retirement age may be substantial enough to increase your average indexed monthly earnings (AIME), upon which your benefit is based.
Your surviving spouse’s benefit will increase.
If you elect to receive delayed retirement benefits, then die, your surviving spouse (at normal retirement age) may receive 100 percent of the benefit you were receiving. Therefore, if your spouse has a life expectancy substantially greater than your own, you might consider delaying retirement so that your spouse may receive a higher benefit after you die.
Your delayed retirement credit isn’t counted toward your family maximum.
When you retire, your family may be eligible to receive benefits based on your PIA. These benefits may be limited by the family maximum, which generally ranges from 150 to 180 percent of your PIA. However, if you delay receiving retirement benefits, your delayed retirement credit won’t count toward your family maximum and can be paid whether or not your family’s benefits are limited by the family maximum.
Tradeoffs
Delaying retirement won’t necessarily increase your lifetime retirement benefit.
Just because you receive a higher monthly benefit when you delay retirement doesn’t necessarily mean you’ll receive a higher overall lifetime benefit. If you delay receiving retirement benefits, the amount of each benefit check will be higher, but you’ll receive fewer benefit checks than you would have if you begin receiving retirement benefits at normal retirement age. How many fewer checks you receive will depend upon how many years you delay receiving retirement benefits.
For example, assume the following facts apply to you:
- You delay retirement by 4 years, and retire at age 70 instead of at age 66, making you eligible for an 8 percent delayed retirement credit for each year you delay retirement. You will receive 48 fewer benefit checks.
- Your PIA is $1,000, so if you retire at age 66, your annual benefit will be $12,000. If you retire at age 70, your monthly benefit will be increased by $320, so your annual benefit will be $15,840.
- Assume that even if you’ve saved or invested all or part of your benefits, your real rate of return is 0 percent.
Using these factors, it would take you more than 12 years from the time you retire at age 70 to reach the point at which your benefits would crossover with the amount you would have accumulated if you began receiving benefits at age 66 (does not take into account annual cost of living increases):
| By this Age | Accumulated Benefit if Retirement Age is 66 | Accumulated Benefit if Retirement Age is 70 (32% credit has been earned) |
| 70 | $ 48,000 | $0 |
| 76 | $120,000 | $95,040 |
| 82 | $192,000 | $190,080 |
| 83 | $204,000 | $205,920 |
If you were to die before reaching this crossover point, your lifetime benefits would be lower than if you had retired at your normal retirement age. Conversely, if you were to die after reaching this crossover point, then your lifetime benefits would be higher. That’s why life expectancy is one of the factors to consider when deciding whether to delay receiving Social Security retirement benefits.
The delayed retirement credit won’t increase benefits paid to most family members.
When you earn the delayed retirement credit, your retirement benefit will increase. However, because the delayed retirement credit doesn’t affect your PIA, benefits that are paid to family members won’t increase (unless you die, at which time your surviving spouse may receive the same benefit you were receiving).
How to do it
Decide whether you want to delay receiving retirement benefits by comparing your options.
You can estimate your retirement benefit online using the Retirement Estimator calculator on the Social Security website (ssa.gov). You can create different scenarios based on current law that will illustrate how different earnings amounts and retirement ages will affect the benefit you receive.
Consider the following questions before making your decision.
- Why do you want to delay receiving retirement benefits?
- Can you afford to delay receiving retirement benefits, or do you need Social Security retirement income as soon as possible?
- Do you expect to live long enough to benefit from delaying your retirement benefits?
- How important is it to increase the amount of survivor income available to your spouse?
Apply for delayed Social Security retirement benefits.
Three months before you’re ready to retire, fill out an application for benefits with the SSA.
Don’t forget to apply for Medicare benefits at age 65. See Questions & Answers.
Tax considerations
If you continue to work past normal retirement age, you will continue to pay Social Security or self-employment tax on your covered earnings. Even though your earnings may increase your AIME (and thus your retirement benefit), you may not be able to recoup those payroll taxes.
Questions & Answers
If you delay receiving Social Security retirement benefits, can you still receive Medicare at age 65?
Yes. Anyone age 65 or older who is entitled to receive Social Security benefits is eligible to receive Medicare, even if he or she has not yet filed an application for Social Security benefits. However, enrollment in Medicare is automatic only for individuals who are receiving Social Security retirement benefits for at least four months before reaching age 65. If you elect to delay receiving retirement benefits, you will need to apply for Medicare benefits online, in person, or through the mail.
Can you delay receiving Social Security retirement benefits until you’re 71 or older?
Yes, but there’s no advantage to waiting longer than age 70 to begin receiving Social Security retirement benefits. You can earn the delayed retirement credit only up until age 70. In addition, if you want to work, any money you earn from working after age 70 won’t decrease your Social Security retirement benefit. So why wait?
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Wealth Management for Enjoying Life: Balancing Lifestyle and Financial Goals
Wealth management goes beyond simply accumulating money; it’s also about achieving a fulfilling and enjoyable life. As a high earner, it is crucial to find a balance between your desired lifestyle and your long-term financial goals. In this article, we explore strategies for effectively managing your wealth and ensuring its longevity while also maximizing the enjoyment and experiences your wealth can provide.
Define Your Lifestyle Goals
Envision the life you desire. Think about your passions, dreams, and generally what brings you joy. Do you love to travel? Are you an art lover looking to begin a collection? Identifying these unique lifestyle goals will allow you to begin long-term financial planning. These lifestyle preferences can guide your financial goals and decisions, ensuring your financial plan aligns with the goals that truly matter to you.
Create a Comprehensive Financial Plan
To successfully manage wealth and achieve your goals, it is important to develop a comprehensive financial plan. It can be helpful to work with a financial advisor to evaluate your current financial situation. From there, you can together set clear objectives and customize a plan featuring saving strategies, investment strategies, risk management, tax optimization, and estate planning to work towards these objectives.
Prioritize Your Spending
In order to maintain a healthy balance between wealth and lifestyle, it is crucial to be thoughtful with your spending. Constant overspending could jeopardize the preservation of your wealth for the future. Establish priorities in your spending and differentiate between short-term indulgences and long-term financial health and security. To avoid frivolous spending, create a budget and stick to it. Don’t forget to factor enjoyment into this budget – it’s all about balance!
Diversify Your Investments
Diversification of your investment portfolio is essential to managing risk and maximizing returns. Consider traditional assets, such as stocks and bonds, as well as alternative investments like real estate or private equity. This diversity will open up opportunities to experience new ventures aligned with your interests while also enhancing your long-term financial security.
Continuously Review and Adjust
Managing your wealth is not a one-time ordeal. It is extremely important to regularly review, evaluate, and adjust your plan as your circumstances change and your goals evolve. Make sure you are taking market conditions and emerging opportunities into consideration as well. Conducting periodic reviews with your financial advisor will help ensure that your financial strategy and objectives remain aligned.
Give Back and Make a Difference
While enjoying the benefits of your wealth, consider philanthropy as a way to create a positive impact on your community. Philanthropic efforts could include engaging in charitable activities and supporting causes you care about, whether they are local, national, or global. These efforts can provide a sense of purpose and fulfillment. Talk to your financial advisor about developing a philanthropic strategy that aligns with your values and leverages your resources to spark meaningful change.
Overall, wealth management is about building and maintaining your finances while also enjoying the benefits that come with your wealth. Defining your goals and creating a plan will allow you to embrace the opportunities that wealth brings while maintaining your financial well-being. While the balance between lifestyle and financial goals can be tough, the Blakely Financial team is here to help. Contact us today to speak with an advisor about securing your financial future.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
The Benefits of Owning Property
June is National Homeownership Month, making it a great time to explore the benefits of owning property. Real estate holds great investment potential and can be a rewarding long-term strategy for building wealth. Owning property offers a range of advantages, which can be extremely beneficial to your financial security. Here we’ll delve into these benefits, highlighting why owning property can often be a smart financial move.
Builds Equity
Owning property allows the owner to build equity over time. Equity is the portion of your property that you own, calculated by subtracting your remaining mortgage balance from the property’s current market value. As you make mortgage payments and property values appreciate, your equity grows. Building equity means you are more likely to make a profit when selling the home, even with an outstanding balance. With higher equity, you have a better chance of selling the property for more than you still owe on the mortgage, even if the market changes. Homes are one of the few types of assets with the potential to appreciate in value, giving you the opportunity to build long-term wealth.
Increases Your Net Worth
Net worth is the value of your assets minus your liabilities. Any property you own is an addition to your portfolio of assets and over time, as property values rise, your net worth will also increase. Historically, real estate has shown long-term appreciation, making it a valuable component of a diversified investment portfolio and a significant contribution to increasing net worth. Appreciation will vary by market.
Opportunity for Tax Deductions
Mortgage interest payments are tax-deductible. Additionally, in most countries, property taxes paid on the property you own are eligible for deductions. If you use a portion of your property for business purposes or rental income, further expense and depreciation-related deductions may also be possible. With all of these deductions, owning property can reduce your overall tax burden.
Passive Income Source
Investing in rental or other income-generating properties offers one of the biggest benefits of owning property – passive income. This means that the property can provide a steady and reliable cash flow with little maintenance involved. This recurring income can help cover mortgage payments, any other property expenses, and even additional income. This is a great option for those looking to diversify their income streams, make some money on the side, and/or increase financial security during retirement.
Before investing in income-generating property, work out the cash flows to ensure that it is profitable for you. You will want to assess whether your income from the property will be consistent before purchasing. Consider all your expenses and that this new rental income may be taxed differently than employment income.
Greater Security
Owning property offers a sense of security and stability in case of emergencies. It provides the assurance of having a place to call home without the risk of sudden changes in terms or potential eviction. Additionally, owning can act as hedge against inflation as property values tend to appreciate over time. Real estate owned becomes a tangible and valuable asset serving as a foundation for long-term financial security,
Owning property reaps a range of benefits to enhance your long-term financial health and build your wealth. When developing your investment strategy, consider the advantages of property ownership as it can be a powerful asset in building a strong financial future. Consulting a financial advisor can be helpful when making decisions regarding the purchase of property. Remember to consistently evaluate your financial situation to ensure your plan aligns with your goals. Contact Blakely Financial today to get started on your property ownership journey.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Managing Your Wealth: Tips for High Earners to Build and Maintain Wealth Over Time
High earners experience a unique set of financial challenges and responsibilities. Therefore, as a high earner, it is important to have effective wealth management strategies in place to both build and maintain wealth over time. High earners can build, maintain, and manage their wealth in the following ways:
Establish a Strong Financial Foundation
In order to maintain wealth, it is important to begin with a strong financial foundation. To build this foundation, start by tracking your income, expenses, and creating a budget. Doing so will allow you to understand where your money comes from, where it goes, and areas where you can cut spending to contribute to savings. Setting up an emergency fund will contribute to your strong financial foundation by helping you avoid accumulating debt in unexpected situations. Paying off any high-interest debt should also be a priority to avoid any unnecessary interest payments.
Implement Effective Tax Planning Strategies (Maximize Tax Advantages)
It is essential to optimize tax planning strategies as a high earner. Maximize your tax advantages through employer-sponsored retirement plans and tax-efficient investments. Working with a tax professional can also help you identify deductions and other strategies to optimize your tax planning and reduce your tax liabilities.
Diversification of Investments
By diversifying your portfolio of investments, you are able to mitigate risk and improve your chances of long-term growth. Explore various investment options like stocks, bonds, and real estate. Alternative investment options, such as private equity and venture capital, are also profitable options to consider. Seeking professional guidance will ensure you are making informed decisions to develop an investment portfolio aligned with your personal financial goals and risk tolerance.
Risk Management
As a high earner, it is essential to protect your wealth and minimize losses from any unexpected circumstances. One way to do this is through adequate insurance coverage including life, disability, and liability insurance. As mentioned earlier, risk management strategies should also be implemented with your investment portfolio to mitigate potential losses in the case of market downturns. Emergency funds also act as a buffer during any unforeseen circumstances. Working with a financial advisor can be helpful in developing a full risk management plan to protect your assets and income.
Estate Planning
If high earners want to ensure a smooth transfer of wealth, it is crucial to create an estate plan. By creating a will, trust, power of attorney, and health care power of attorney, you can minimize estate taxes and distribute assets per your wishes. An estate plan can be updated regularly to reflect any changes in assets, personal circumstances, or estate planning laws. A comprehensive plan will help you establish a legacy for future generations and reduce future stress.
Building, maintaining, and managing wealth as a high earner requires careful planning. When building your wealth it is vital to prioritize saving and investing to ensure stability. It is also important to balance enjoying the present with preparing for the future. Remember to regularly review and adjust your financial strategies, keeping in mind personal changes as well as outside forces such as inflation. As a high earner, it is beneficial to seek professional guidance when creating wealth management strategies. Contact Blakely Financial today to begin your planning.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Planning Life’s Biggest Vacation: Setting Retirement Goals
Like a summer vacation, ‘life’s biggest vacation’ requires detailed planning. Retirement goals differ for everyone as they are dependent on your current lifestyle and how you see yourself living post-retirement. Making informed decisions when setting retirement goals will help you create a plan and guide you toward the happy retirement you’ve always dreamed of. Use these tips to start planning your retirement today!
Set Your Retirement Goals Early
Goals cannot be achieved if they are not identified ahead of time. When setting your retirement goals, consider where you would like to see yourself after retirement. What would you like to be doing? Where do you want to live? What are the interests and passions you would like to pursue? Answering these questions will allow you to begin road-mapping your retirement plan and solidifying your financial security.
To most effectively plan your retirement, ensure your goals are specific, measurable, and attainable. The earlier these objectives are set, the sooner you can begin saving and investing. You will be able to establish a solid foundation for a secure and enjoyable retirement early on, keeping your options open and avoiding unnecessary financial strain later on in life.
Create a Retirement Timeline
When do you plan to retire? Once you decide, you can set or adjust your goals to match your ideal timeline. To determine if this period is realistic, assess your current financial situation. Get a clear picture of your financial health by taking a look at your assets, liabilities, and investments. Use this information to make informed decisions about saving and investing for retirement.
Work backward from your ideal retirement age to set milestones along the way. These could include saving amount targets, investment goals and strategies, and other financial decisions that will impact and contribute to your long-term retirement goals.
Know How Much You Need to Save
When determining how much you need in your retirement fund, consider your basic needs, emergency funds, and leisure. Additionally, factor inflation and healthcare costs into your goals, as the cost of living tends to increase as time progresses. A general rule of thumb is to aim for between 70 to 85 percent of your pre-retirement income to maintain your lifestyle post-retirement.
It is important to know where these funds for day-to-day living expenses and beyond will come from without a steady paycheck. Keep in mind Social Security, pensions, and individual retirement accounts. Take advantage of any plans offered by your employer such as 401(k)s and IRAs. Contribute as much as possible to these accounts, especially if your employer will match your contributions. Also, think about diversifying your portfolio of investments, and considering risk along the way.
To calculate how much you need in savings, assess your current savings and estimate your future retirement income from various sources like Social Security, pensions, and rental properties. Calculate the retirement gap by subtracting your estimated future retirement income from your current savings. This will give you the amount necessary to bridge the gap. Divide the retirement gap by the number of years until retirement to determine your necessary annual savings. Remember that these calculations are just a starting point. It is important to regularly reassess your progress and adjust as needed.
Setting retirement goals allows you to take proactive steps toward achieving financial freedom and a comfortable retirement. Remember, retirement will not look the same for everyone. Your plans will differ depending on your age and aim and should be reviewed and adjusted periodically to stay on track. Planning your retirement can be overwhelming but talking to a financial advisor can significantly help you in your journey. Here at Blakely Financial, we want to help you embark on life’s biggest vacation fully prepared and ready to make the most of your years in retirement. Contact Blakely Financial today to get started.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.
Benefits of a 529 Savings Plan for Education
As the cost of education in the United States continues to rise, it’s becoming more and more important for parents to plan ahead. Fortunately, a 529 savings plan offers a solution to help alleviate the financial burden of education. The 529 savings plan is designed to help families save for education expenses by providing tax benefits and flexible investment options.
What is a 529 plan?
A 529 plan, named after section 529 of the federal tax code, is a way to save for college in a tax-advantaged way. Plans are offered by states, and you can choose to participate in any state’s plan. It’s important to compare benefits to pick which plan best suits your needs.
There are two types of 529 plans—savings plans and prepaid tuition plans.
- With a 529 college savings plan, your investments grow in an individual investment account (tax-free).
- With a 529 prepaid plan, you lock in a tuition payment at the current rates. The amount then goes into a general fund (rather than an individual investment account).
Between these two plan types, 592 savings plans are more common, as they have notable benefits.
Tax-free Growth and Withdrawals
A 529 savings plan works similarly to a Roth 401(k) or Roth IRA. You select the investment option you want, deposit money, and your funds build over time in the account. Your investment grows on a tax-free basis. Money can also be withdrawn tax-free if used to pay for qualified higher education expenses.
Anyone Can Contribute
According to Education Data Initiative, Americans on average aim to save $55,342 for their child’s college expenses. With a 529 savings plan, a parent isn’t the only one who can contribute. Any friend or family member can make gift contributions to a beneficiary’s account. For birthdays and holidays, loved ones can make a lasting impact on the beneficiary’s future, cutting down on future student loans. The funds can be used to cover the beneficiary’s education costs, which are more than just tuition; these also cover textbooks, room and board, and other academic expenses.
529 Savings Plans Can Be Used for More Than College Costs
Besides college expenses, the funds can also cover expenses for K-12 education. You can apply $10,000 per year toward private elementary or secondary school tuition expenses.
Flexibility to Change the Beneficiary
If your child chooses not to attend college or receives a scholarship, all is not lost. You can change the beneficiary to any other qualifying family member. This option helps families avoid paying taxes and fees on unused funds.
A Little Goes a Long Way
Small amounts truly add up over time and make a significant difference. Outstanding U.S. student loan debt reached $1.7 trillion at the end of 2020, according to the Federal Reserve. A 529 savings plan allows you to make a considerable dent in college costs, even if you start while the child is in high school. It is never too late—every penny counts.
The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that an education-funding goal will be met. In order to be federally tax-free, earnings must be used to pay for qualified education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10 percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses.
Blakely Financial, Inc. is an independent financial planning and investment management firm that provides clarity, insight, and guidance to help our clients attain their financial goals. Engage with the entire Blakely Financial team at WWW.BLAKELYFINANCIAL.COM to see what other financial tips we can provide towards your financial well-being.
Commonwealth Financial Network® or Blakely Financial does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.
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How to Evaluate Your Financial Health
As we approach the midpoint of the year, it’s the perfect time to check in on your financial health. To help you assess your financial health, we’ve compiled a list of key indicators to gauge your financial well-being. By reviewing these indicators, you can make informed decisions toward achieving your financial goals.
1. Do you stick to a budget?
A budget is an integral part of your financial plan. A budget can keep you from overspending and help you stay on track with saving. If you don’t have a budget yet, it’s not too late to create one. Alternatively, if you have a budget but it doesn’t seem to be working, you can change tactics.
There are several budgeting methods you can use, some of which include:
- The 50/30/20 budgeting rule: With the 50/30/20 budget, you allocate your income into three main categories according to percentages. 50% goes to “needs” (such as groceries, housing, and utilities), 30% goes to “wants” (such as entertainment, shopping, and takeout), and 20% goes to savings (towards an emergency fund, retirement, or long-term goals).
- Zero-based budgeting: The zero-based budgeting method (also known as the zero-sum budget) encourages you to give every cent a purpose. When you’re done allocating where your income goes, there shouldn’t be any money left without a plan for it.
- Cash envelope budgeting: The envelope system (also known as cash stuffing) allows you to physically portion out your monthly income in specific categories and sort them into envelopes. Similar to the zero-based budgeting method, you would make a plan for every penny.
2. How much do you spend?
The aim is to live below your means. If you spend less than you make, then you’re off to a good start.
Tracking expenses is a helpful way to determine if you’re living below your means. You can use a spreadsheet, write each expense down in a notebook, or use a budgeting app. After you have tracked your expenses for at least one month, you will have a realistic idea of how much you spend.
3. Are you saving?
Setting up direct deposit or automatic transfers into your savings from your checking account each payday are great ways to ensure that you are saving a set amount of money, rather than spending it.
4. Are you prepared for unexpected expenses?
Having an emergency fund for unexpected bills, emergencies, or major life events/changes is a necessary piece of your financial health. Ideally, you should have enough in your savings to cover 3-6 months of expenses.
5. Are you set to reach your financial goals?
In order to ensure you will reach your financial goals, it’s important to identify what your goals are. Write down your short-term and long-term savings goals, and be sure to make these goals measurable with deadlines. If you need a more sustainable approach to your finances, working with a financial advisor can make all the difference.
When you are financially secure, life feels more manageable. If your plan needs some tweaking, consult with your trusted financial advisor today to stay financially healthy.