Blog - Leonard Financial Solutions

What is an Automatic Investment Plan and is it Right for You?

5/31/2021

Looking for easy but effective ways to save for retirement? An automatic investment plan, or AIP, might be right for you. This program allows you to contribute money to an investment account - 401(k), 403(b), IRA - at regular intervals. You can automatically deduct these payments from your personal account or your paycheck.

Here at Leonard Financial Solutions, many clients enjoy having an AIP because it lets them mindlessly put away money each month. Because everything is automated, there’s not much you have to do, either. If you’re already automating your bill payments, you’re a good candidate for an automatic investment program.

Let’s learn more about what an AIP is, the benefits to expect and how it can help you reach your retirement goals.

How Does Automatic Investing Work?

Many people delay investing because it’s intimidating or they're afraid of the risk. This is especially the case when you’re already living paycheck to paycheck and you don’t have money to just throw away. Thankfully, an AIP does not require you to have investing knowledge - getting started is as simple as opening a bank account.

Additionally, when you put your investments on autopilot, you stop your fears from getting in the way. Emotional investing is when people invest money based on an emotion like greed or fear. This is why so many people buy at market tops and sell at market lows. But rarely is investing out of emotion a good thing.

Why Should I Have an Automatic Investment Plan?

If you’re not putting some of your paycheck aside for retirement every month, you’re missing out on opportunities to secure your financial future. Here are some of the reasons why you should automate your investments:

It stops you from spending money that you should be putting away. Once you start making automated investments, you won’t even notice this money isn’t there!

It avoids arguments between you and your spouse. Rather than fighting over how much money is put away, it’s already decided for you.

It saves time and relieves stress. Everything is done for you so that you can sit back and enjoy more of your free time. It also provides you with peace of mind for your future!

It prevents you from making poor investment decisions. Things like day trading and micro-investing apps can steer you down the wrong path. Automated investing prevents these poor decisions.

Ready to Set Up Automatic Investments? Schedule a Consultation Today.

Whether you’re ready to set up an automatic investment program, or you have questions about doing so, contact Leonard Financial Solutions. Our retirement planners in New Jersey will go over your financial picture and determine the best ways to save for retirement while living today!

Ways to Start Investing with Little Money

5/29/2021

One of the most common concerns our retirement planners in New Jersey hear from clients is that they don’t have enough money to put away for the future. When you’re already having trouble paying for basic necessities like food, housing or clothing, how can you put money away for retirement?

No matter how much (or little) you make, saving for retirement is incredibly important. Social Security only covers a portion of your income, so you can’t live on this entirely. We hate to be the bearers of bad news, but if you have no money saved up, you may not be able to retire at all.

Fortunately, there are ways to save for the future without hurting yourself today. Below are some of the suggestions we recommend to our clients who want to invest on a small paycheck.

Try the Cookie Jar Approach

There is absolutely nothing wrong with the cookie jar approach. In fact, it’s a great strategy for those who haven’t been very good at saving. Start with just $10 a week if you have to. It might not seem like a lot, but it ends up being over $500 at the end of the year. You can do this with physical jars or an online savings account.

Start an Automatic Investment Plan

An automatic investment plan (AIP) automatically invests money for you. This is a hands-off way to start building a nest egg, and it comes out of your paycheck so you’ll still “get paid first.” You don’t need any investing experience, either. You can usually get started with an AIP with just $500.

Invest in the Stock Market

Believe it or not, you can get started with as little as $1 - or at least very little upfront money. This gives you the opportunity to warm up to the stock market and familiarize yourself with the best investments. A financial planner in NJ can help keep you on track and prevent you from making emotional decisions.

Enroll in Your Employer’s Retirement Plan

An employer sponsored retirement plan is another great way to grow your money. You can make small payments that you won’t even notice are missing from your paycheck! And, you can gradually increase your payments as you grow more financially stable. For example, some people start out with a 1 percent contribution, then 2 percent and so on.

Try Low Initial Investment Mutual Funds

Mutual funds are investment securities that allow you to invest in a portfolio of stocks and bonds in a single transaction. The only problem with this approach is that most mutual fund companies require a minimum investment of $500 to $5,000. If you’re on a tight budget, that $500 might be hard to swing.

As you can tell, there are many ways to invest your money without having to sacrifice today. To determine what your best options are, contact Leonard Financial Solutions. You have to start somewhere, and once you do, your future self will thank you!

5 Strategies for Growing Your Income During Retirement

5/21/2021

Even the best retirement plans can often use a boost. Between increasing taxes, rising health care costs, inflation and unpredictable investment returns, many people run through their retirement savings faster than they anticipated. Luckily, there are many creative strategies for growing your income during retirement.

As experts in retirement planning in New Jersey, here are five strategies we recommend to our own clients.

Delay Social Security Benefits

While there are some instances where it makes sense to take your Social Security benefits early, most of the time, it’s best to wait. If you claim Social Security at 62, your benefit will be reduced by as much as 30 percent. For every year you wait to take your benefits before full retirement age, your benefit increases by 8 percent.

Earn Extra Income with a Part-Time Job

While it might not be everyone’s favorite option, you can work part-time to collect more money in retirement. There are many seasonal and part-time opportunities available - and you only need to work 10-15 hours a week to make it worth it. Plus, these gigs can provide you with socialization and keep your skills sharp.

Use the Bucket System

The “bucket system” lets you divide your money among different kinds of investments based on when you’ll need it.

The “Now” bucket should cover your basic expenses for up to one year.

The “Soon” bucket will be your source of income for the next 10 years. You may need to replenish this bucket by selling some investments.

The “Later” bucket shouldn’t be tapped into until a decade into retirement, allowing this money to be invested more aggressively into stock funds.

Get Income from Your Investments

Dividend-paying stocks can make up a decent chunk of your stock portfolio. Look for companies that have a record of regularly increasing dividends over time, such as Caterpillar (CAT) and 3M (MMM). These stocks have yields of 2.5 percent to 4 percent. You can also get income from your bonds, exchange-traded funds or mutual funds.

Purchase an Annuity

An annuity is a contract between you and an insurance company. You’ll make a lump sum payment or series of payments and receive regular disbursements. The purpose of an annuity is to help protect you from outliving your income. You can even buy an annuity that has survivor benefits so that you’ll continue to receive payments after your spouse dies.

Because each person’s circumstances are different, it’s important to contact retirement financial services in New Jersey. This way, you can discuss your unique situation and the best ways to grow your income during retirement. For creative solutions that will work for you, contact Leonard Financial Solutions today.

4 Expenses that Can Hurt Your Retirement and How to Plan for Them

5/19/2021

One of the benefits of retirement is that your expenses usually decrease. However, you are living off a fixed income, so financial setbacks can still happen. Even the most solid-proof spending plans can get off track due to unexpected costs like health crises or household emergencies. The good news is that you can beef up your retirement savings by planning for these potential expenses.

Below are four expenses that can hurt your retirement and the best ways to plan for them.

Long Term Care

According to one study, 70 percent of adults who survive to age 65 need long term care at some point. Average costs for a semi-private room are around $6,800 a month and Medicare won’t cover this. If you’re paying thousands of dollars a month for this type of care, you can run through your retirement savings very quickly.

To prevent this from sabotaging your retirement goals, you may want to consider buying long term care insurance. Premiums are cheaper when you’re younger, so it’s best to shop for this insurance before retirement.

Caring for Family Members

Some people end up caring for their grandchildren, taking in their adult children or caring for elderly parents or spouses. The physical and financial demands of caregiving can compromise a healthy savings plan. According to the AARP, typical family caregivers spend thousands of dollars of their own money each year to help their loved ones.

While you can’t predict all health problems that may arise, you can start having conversations early on. For example, if your parents’ health is declining, you can talk to them about their options. These conversations aren’t the most pleasant to have, but planning early can protect your future livelihood.

Home Repairs

Paying off the family home feels great, but you’re not in the clear when it comes to the costs of homeownership. You’re still responsible for your property taxes, which can be $1,000 or more a month in some states, as well as household maintenance. The Bureau of Labor Statistics reports that the average senior spends $2,300 a year on home repairs and maintenance.

Retirement financial services in New Jersey can help by building flexibility into your retirement plan. This way, you can pay for that new roof or siding without having to dip into your retirement savings. Also, you’ll need to plan for homeowners insurance as well.

Transportation

Many retirees assume they don’t have to worry about transportation because they’re no longer commuting back and forth to work. But you’ll still need a car to run errands and stay socially active. The costs of owning and maintaining a car can quickly add up, especially if you own the car instead of leasing it.

In your retirement plan, you should account for gas, car repairs, maintenance and auto insurance. And, if you end up needing a car that’s safer, newer or more affordable, you’ll want wiggle room in your budget to do this.

Retirement is a wonderful time in life, but many seniors worry about living on a fixed income. By working with a financial planner in New Jersey, you can ensure a solid and robust retirement plan that allows you to live your best life. Contact Leonard Financial Solutions today and let’s chat!

5 Money-Smart Ways to Use Your Stimulus Check

4/23/2021

If you received your third stimulus check last month, you might be wondering how you should be using this money. Certainly, you’ll want to use it for bills or payments you’re behind on first. But did you know that you can also use your stimulus money to build wealth?

If you’re on track with your spending and caught up on your bills, now is a great time to think about wealth management in NJ. Below are five money-smart ways to use your stimulus check and position yourself for a brighter future.

1. Save for Retirement

Putting away for retirement is always a smart decision. You have until May 17th, 2021 to invest in a traditional or Roth IRA for 2020. The maximum contribution for a 2020 IRA is $6,000 (or $7,000 for those over 50). If you’ve already invested the maximum for 2020, you can start investing for 2021. The contribution limits are the same.

2. Pay Off High-Interest Debt

Interest rates are low on certain debts such as student loans, mortgages and bank savings accounts. But they can be very high on credit cards - 15% or more. You can free up a lot of cash by paying off high-interest credit cards and paying down your debts.

3. Beef Up Your Emergency Fund

Many people are still not confident in their employment. The pandemic isn’t over so it’s possible your hours could be cut or you might have to take time off to quarantine or stay home with the kids. Having extra in your emergency fund protects you if these situations occur.

4. Support a Local Business

Many small businesses have been forced to close or cut back their hours due to the pandemic. If you know of local businesses in your area that are struggling, purchase a gift card from them or use their services. This could provide them with the business they need to stay afloat.

5. Invest the Money

If you’re in a healthy financial position, you can invest the stimulus money. Talk to your financial advisor in NJ about the best ways to invest your money. They can help you spread your money wisely across different assets, including savings bonds, savings accounts, stocks and CDs.

These are some of the ways that you can use your stimulus money for good. Of course, you always want to pay your essential expenses first - mortgage payments, car payments, etc. Once all of these expenses are paid, you can start thinking about retirement planning in New Jersey. To discuss the best ways to use your IRS stimulus check, contact Leonard Financial Solutions today.

How COVID-19 May Impact Your Retirement (and Ways to Get on Track)

4/21/2021

In the past year, COVID-19 has spread across the world, disrupting the health and financial stability of many individuals. Even when the pandemic is over, there will still be long lasting effects to deal with. And one of them could be your retirement savings. Depending on how the pandemic is affecting you personally, you may need to approach your retirement savings differently in the years to come.

Let’s cover some of the ways that COVID-19 may impact your retirement planning in New Jersey and how to prepare for the future.

You may have to dip into your retirement savings.

While the government has been sending stimulus checks and additional unemployment benefits, this may not be enough if you’ve lost your job. To pay for medical care and other essentials, you may need to dip into your retirement savings.

Borrowing from your retirement isn’t all bad. This money may allow you to stay out of debt and keep on top of your essential payments. However, you’ll want to have a plan to pay back this money so that you have it for the future.

Your retirement savings may need to be deferred.

Another hardship is not having enough money to contribute to your retirement account. If you lost your job or had your hours cut, your retirement savings will have to take a back seat for now. Unfortunately, if you’re not contributing to your account, this can negatively affect you in later life. You may have to work harder or longer to make up for what was lost.

You may have lost money in the stock market.

Historically, investments in stocks have yielded better returns than other types of investments. This is why stocks are a good investment strategy for people who are just starting their retirement plan. However, the stock market crashed in February 2020 because of the coronavirus. Many people lost money, and you might have been one of them.

Some stocks will never recover, and some younger investors may have lost savings that can’t be replaced. But things are looking up, especially if you own stocks in industrial, tech or electric vehicles. Talk to your retirement planner in NJ to see where you should be investing your money.

Tips for Getting Back on Track

If you’ve lost money this past year, there are ways to get back on track. Here are some of our best tips for those interested in wealth management in NJ:

Don’t make withdrawals from your retirement accounts
Consider new investments like lower-cost stocks
Diversify your portfolio to account for the pandemic
Work longer to recoup some of your losses
Avoid making fear-based decisions

Speak with a Financial Advisor in NJ Today

Leonard Financial Solutions can help you sort through your finances and determine the best ways to grow your retirement accounts even if you’ve suffered a job loss, a reduction in work hours or another pandemic-related hardship. Contact our team today to learn more about your options.

3 Reasons to Claim Social Security Benefits Early

4/6/2021

Most people become eligible to collect Social Security at 62 years of age. But you’ve probably heard that claiming your benefits early isn’t a wise choice. While it’s nice to receive monthly benefits, you’ll be slashing those benefits on a permanent basis. The closer you can get to full retirement age (the age you can collect your benefit without a reduction), the more money you’ll take home.

While claiming your Social Security benefits early will lock you into a lower monthly benefit for life, there are actually some situations where you’ll want to claim your benefits early. We’ll cover three of them below. Be sure to schedule a consultation with your financial planner in NJ for more detailed information based on your individual circumstances.

Reason #1. You’re worried you won’t live a long life.

Life is fragile, and none of us know how long we’ll live. But if you believe you won’t live a long life based on your current health or a chronic illness, it could be worth it to take your benefits early. You’ll break even if you live an average lifespan, but if you don’t, you’ll lose money. Claiming your benefits early allows you to come out ahead if you do end up living a shorter life.

Reason #2. You are ready to retire and need the money.

Are you ready to quit working but need a paycheck? Unfortunately, many Americans have jobs that place a great deal of stress on their mental and physical health. If you need to escape your current job situation, filing for benefits at 62 may be your ticket out. From here, you’ll have the flexibility to find a better job or transition to part-time work.

Reason #3. You have enough savings to fall back on.

If you’re one of the lucky ones who has enough money saved for retirement, taking your Social Security benefits now might make sense. It depends on how you look at things.

On one hand, you may not need the money right now so it’s smart to wait. But on the other hand, you might be afraid that Social Security benefits will change - the system is in trouble after all.

Claiming your benefits early gives you more income to live a better life in your 60s. You’ll take home less over your lifetime, but this may not be a big deal if you have enough saved for retirement.

Retirement Financial Services in New Jersey

Each person’s circumstances are unique, so there is no right solution for everyone. Knowing when and how to apply for Social Security in New Jersey can help you make the best decisions. Contact Leonard Financial Solutions for a detailed look at your financial picture and the ideal time to collect your benefits.

5 Things about Social Security You Probably Didn't Know

3/5/2021

Social Security is the backbone of most retirement plans, but there are still a lot of misconceptions about it. If you don’t understand Social Security in its entirety, or have unrealistic expectations for it, you could end up disappointed (and unprepared) in the long run.

Below are the top five things about Social Security a lot of people don’t know. We hope that by clearing up this information, you can work with your financial advisor in NJ to create a robust retirement plan that meets your needs and goals.

Social Security is not meant to be your primary source of income.

Many people in New Jersey rely on Social Security to get them through their retirement years, but this isn’t what these benefits are meant for. Social Security was meant to replace about 40% of pre-retirement income for average earners. The purpose of this money is to cover necessities rather than an entire lifestyle.

Heard that Social Security is going bankrupt? Changes are being made to prevent this from happening.

It’s estimated that the Social Security trust fund reserves will be depleted by 2034. Fortunately, the government is working on making changes to the program to prevent this from happening. While nothing is set in stone, several solutions have been proposed such as:

Raising the full retirement age
Raising the amount of income subject to Social Security tax
Raising Social Security tax
Reducing cost-of-living adjustments
Reducing benefits

The age you start taking your benefits makes a difference.

Many people are surprised to learn that the age they start taking their benefits matters. You become eligible for Social Security at 62 years of age, but you won’t receive your full benefits until you are 66 or 67, depending on the year you were born. If you start taking your benefits at 62, you will receive reduced payments. If you want to maximize your benefits, it’s best to wait until you’re closer to full retirement age.

Social Security is more than a retirement program.

Aside from providing retirees with supplementary income, Social Security also supports veterans, widows and dependent children of deceased or disabled workers. If you believe that you are eligible for any of these benefits, contact your local Social Security office. This program can be used strategically for various situations.

The average Social Security benefit is $1,503 (in 2020).

For the average American, receiving a monthly check from Social Security leaves them with just $18,036 in annual income. That’s only about $5,000 above the federal poverty level for a single person - and certainly not enough for most retirees to live off of. Most financial experts suggest having 70% to 80% of your final salary to maintain your quality of life. This is why saving for retirement early on is crucial.

Are you surprised by any of these Social Security facts? To learn more about your benefits, when to take them and how to continue saving for retirement, contact Leonard Financial Solutions today.

How Can I Start a Retirement Plan?

3/4/2021

Are you ready to start saving for retirement? Knowing where and how to start is overwhelming for most people. But unless you are independently wealthy, you’ll need to build a retirement fund. The Social Security Administration says Social Security benefits are expected to be depleted in 2034, so it’s unclear how well these benefits will cover the cost of living.

Fortunately, you can start a retirement plan pretty easily these days. Working with a financial advisor in New Jersey is helpful as they can help you create a retirement plan that reaches your needs and goals. In the meantime, here are some basic tips on starting a retirement plan.

Start Small

You don’t need any more than $250 to $500 in savings to start a retirement fund. The key is to establish good habits that start preparing you for the future. There are many brokers that offer no-minimum, no-fee retirement accounts, so discuss these with a financial advisor who specializes in retirement planning in NJ.

When you meet with your financial planner, you’ll go over what you have in your savings, how much you’ll need to retire comfortably and how much you can afford to put away each month. Don’t worry - a good advisor won’t ask you to scrape together cash for last-minute contributions. The best approach is to put a little away each month.

Consider Your Investment Options

When you know what you should be putting away every month, you can then choose the best avenues to reach your goals. If you have a 401k, take advantage of it. This account allows you to grow your savings without paying income tax upfront.

If you don’t have a 401k, your financial advisor may recommend an IRA instead. There are two types of IRAs - Roth and traditional. You’ll probably benefit from one over the other. For example, people who are just starting their careers often benefit more from a Roth IRA.

Build and Maintain Good Credit

At Leonard Financial Solutions, we take a holistic look at our clients’ finances. Saving is important, but there are other things to keep in mind. We tell our clients to build and maintain good credit scores because this helps secure better loan rates and terms. This way, you’ll pay out less in interest rates and have more money to put toward retirement.

Keep an Emergency Fund

You should maintain at least a six months’ salary in a regular savings account. By having this money put away, you can make rational decisions when you’re faced with a crisis, such as a job loss or unexpected illness. Without these emergency savings, you’ll have to rely on credit cards or take out a personal loan, both of which make it harder to save for retirement.

Saving for retirement starts with good habits. You do not need to be rich to start a savings plan. And with the uncertain future of Social Security benefits, it has never been more important to protect yourself. To discuss starting a retirement plan that makes sense for you, contact Leonard Financial Solutions today.

Tips for Starting a Retirement Fund in Your 20s and 30s

1/26/2021

Financial security in retirement doesn’t just happen because you’ve worked hard all your life. It’s something that you need to plan for and work towards. This is a hard concept for a lot of young people because they’re not making a lot of money and struggling to pay their current bills. How can they save for retirement?

The truth is that retirement planning in NJ doesn’t have to disrupt your quality of life. By putting away a small amount of money today, you can build up your savings, grow your financial security and retire when you want. Below are some tips for starting a retirement plan you can live with.

Start Small, But Stick to Your Goals

Saving money is a rewarding habit, so it’s important to make it a priority. Start small and try to increase the amount you save over time. The sooner you start saving, the longer you’ll have to grow your money. Ask our financial advisors in NJ about your options for no-minimum, no-fee retirement accounts.

Know Your Retirement Needs

Experts estimate that Americans need 70 to 90 percent of their pre-retirement income to maintain their current standard of living. If you’re not sure how much money you’ll need to retire, you can use a retirement calculator or work with your financial planner in NJ to get a better idea. As you get closer to retirement, these numbers will be more accurate.

Contribute to Your Employer’s 401(k) Plan

Many employers offer some type of retirement savings plan such as a 401(k) plan. Sign up for this plan and contribute what you can. Even though your paycheck will be smaller, your taxes will be lower, your company will kick in more and the deductions are automatic. You’ll be getting paid every month while putting money toward your retirement.

Learn about Your Employer’s Pension Plan

Your employer may offer a standard pension plan as well. Ask for an individual benefit statement and speak with your financial advisor about whether or not this plan is right for you. There are pros and cons to using a pension plan to save for retirement.

Put Money into an IRA

If your employer doesn’t offer a 401(k) plan, consider opening up an individual retirement account (IRA). You can put up to $6,000 a year into an IRA and even more if you are 50 or older. IRAs also provide tax benefits, allowing you to keep more of your money. There are two options for IRAs - a traditional IRA and a Roth IRA. Talk to your retirement planner about which one is right for you.

Build an Emergency Fund

Another important thing to do is create an emergency fund so that you don’t have to rely on credit cards or your retirement savings if something goes wrong. Ideally, you’ll want to have six months saved up, but anything is better than nothing. Setting up automatic deposits is the best way to ensure your money is going to the right places.

You don’t need to have a high-earning career to retire rich. All you need is to start saving your money at a young age. This gives you plenty of time to grow your savings, make more aggressive investments and get used to automatic deposits. To learn more about retirement planning in New Jersey, contact Leonard Financial Solutions today.