Blog - Leonard Financial Solutions

What are the Three Pillars of Retirement Planning in New Jersey?

5/31/2022

The three pillars of retirement planning in NJ are also known as the “three-legged stool,” an old phrase that financial planners once used to describe the most common sources of retirement income: Social Security, pensions and personal savings. However, things have changed over the years, so the three-legged stool looks a bit different from what you may remember.

Let’s learn more about these three pillars and how they will affect your retirement planning.

Pillar 1: Pensions - 401(k) Plans

For younger workers, the pension leg has been mostly replaced by 401(k) plans. These plans are some of the best tools you have for your retirement. They allow you to contribute a portion of your wages to individual accounts. Some companies will even match the employee contribution up to a certain percentage.

Pillar 2: Social Security

The 2021 Annual Report of the Social Security Board of Trustees warned that Social Security could run dry in two decades. However, this is more of a myth than reality. As long as employers pay payroll taxes, Social Security will not run out.

That being said, Social Security is only meant to replace about 40 percent of your income. This means that you can’t rely on Social Security entirely to cover your expenses. To determine your Social Security benefits, review your account online. You can get your full benefits at 66 or 67.

Pillar 3: Personal Savings

The third leg is personal savings. Recessions and stagnant wages have made it difficult to save, but it’s more important than ever for people to do this. Some of the best ways to save for retirement include IRAs and annuities. The earlier you start, the better, as this will give you more time to save. And, you won’t have to contribute as much.

Retirement Financial Services in New Jersey

The government has considered possible options to help Americans save more for retirement, but ultimately, the future rests on your shoulders. By maximizing all three pillars - contributing to your 401(k) plan, maximizing your Social Security benefits and creating a savings account - you can prepare yourself for retirement.

Because all of this can be confusing, the first step is to speak with a financial advisor in New Jersey. Your financial advisor can help with all aspects of retirement planning, including Social Security and Medicare. For a free consultation, speak with Leonard Financial Solutions today!

Inflation and Retirement - How to Protect Your Savings

5/15/2022

Rising inflation has people worried about all types of things, including retirement. While this may be reversed gradually, it’s also possible that inflation is here for the longer term. So what happens if you were planning to retire in the next few years?

Concerns over your retirement during a time like this are certainly warranted. Prices have been increasing on everything from food to housing. In April, the consumer price index noted an 8.3 percent increase on goods and services from last year.

However, putting off retirement isn’t necessarily something you need to do. It’s important to sit down with your financial advisor, share your concerns and go over your options. Inflation is a part of the U.S. economy, and while it’s high right now, it’s not a reason to panic - at least yet.

Tips for Protecting Your Retirement Portfolio During Inflation

With inflation high and the stock market uncertain, here are some steps you can take to protect your retirement portfolio.

Keep contributing

If you’re still making the same income, continue contributing to your retirement plan. You can take advantage of dollar-cost averaging, which means you’re investing your money in equal portions at regular intervals. You might not get as big of a return as if you were to invest lump sum money, but it is lower risk.

Diversify your portfolio

Your portfolio should include a mix of different assets, such as CDs, stocks and bonds. Even within these, your portfolio should have both growth and value stocks and mutual funds or exchange-traded funds. Also, investing in equities is a good way to outrun inflation.

Have cash on hand

It’s important to have cash available in case of an emergency. The best way to do this is to set up a savings account that is separate from your investments. This way, if you need money in a pinch, you don’t have to dip into your assets.

Get rid of debt

A more concerning issue than inflation is debt. Many Americans still have mortgages, credit card debt and even student loan debt. And if you have any adjustable rate debt, this could be a big problem with rising inflation. Paying off debt should be a top priority.

Manage your emotions

You want to make smart decisions - not emotionally charged decisions. This is why it’s important not to panic. If you do have concerns, talk to your financial advisor first. You don’t want to make a decision based on emotion and have that negatively impact your retirement savings.

Keep working in retirement

And the best way to preserve your savings? Keep working. You don’t have to work a 9-5 job. You can work part time or choose an entirely new field that you’ll enjoy more, such as retail or home health care.

If you are concerned about your investment strategy, contact Leonard Financial Solutions today. We can look over your retirement plan and determine the best ways to handle retirement and inflation.

The Great Resignation and an Early Retirement

5/5/2022

The story behind the Great Resignation was that the pandemic allowed people to take some time off work and rediscover the purpose of life. Then in 2021, roughly 47 million people quit their jobs for better work. Employers have been responding with signing bonuses, higher salaries and the option to work at home.

As big as these numbers sound, they only represent 3 percent of the workforce. And many of the people who left their jobs last year weren’t actually ‘quitting.’ They were retiring. One million people were ‘normal’ retirements, and an additional 1.5 million chose to retire early.

If you’re also considering retiring early, there are a few things to know about doing so during the Great Resignation.

Social Security

When you transition to a new job, you’re probably thinking about pay and benefits, not Social Security. But time spent unemployed could cut into your long-term benefits.

For example, if you’re unemployed for 12 months, this means you’re not putting into Social Security. This matters because your Social Security benefits in retirement are determined by how much you earned and how old you are when you apply.

You only need to work for 10 years to qualify for benefits, but the Social Security Administration goes by your 35 highest-earning years. Therefore, chunks of time spent out of work can decrease your lifetime earnings.

401(k) Plan

If you plan to stop working, your 401(k) plan can be an attractive way to get money. According to a survey from Kiplinger’s Personal Finance and Personal Capital, nearly one-third of people with at least $50,000 in their retirement accounts withdrew from them in 2020. And nearly 30 percent took a 401(k) loan during this same period of time.

Taking money from your 401(k) can set you back years. To avoid having to work an additional few years, avoid tapping into your retirement savings. If you have no choice, talk to your financial advisor about your options, as some cash out retirement funds are better than others.

Other Retirement Funds

If you do decide to join the Great Resignation, make sure that you have all of your retirement money that you’ve built up at your jobs. An estimated one million 401(k) plans are forgotten about each year. Don’t let yours join this number. If you’re changing jobs, you could benefit from a rollover IRA. Also consider the benefits you could be missing out on, such as unvested 401(k) matches.

If you’re interested in joining the Great Resignation, schedule an appointment with Leonard Financial Solutions. We can help you understand your personal needs, including your debt, finances and healthcare costs.

6 Ways to Spring Clean Your Finances

3/20/2022

Wouldn’t it be nice if you could build wealth without putting in such hard work? But perhaps this is what makes building wealth so gratifying. It doesn’t just fall into your lap - it’s something you work towards every day. And for most people, part of this process involves sacrificing the things you want in the moment to give yourself a better future.

Fortunately, there are some simple ways you can add more money to your account each month. Just as you spring clean your home to give it a thorough scrubbing, you can spring clean your finances. And now is a great time to do this considering spring is here and tax day is just around the corner!

Below are six ways to spring clean your finances!

1. Clean Up Your Paperwork

The first thing to do is go through your paperwork - bills, statements, tax documents, etc. Many people keep their important files on a computer and then back them up on an external hard drive or the cloud. You may also want to keep some important documents in a file cabinet. The documents you no longer need can be shredded to avoid identity theft.

2. Review Your Monthly Budget

Once you go through your paperwork, you’ll have a better understanding of your finances. No one likes to budget, but it has to be done. Building wealth isn’t exactly convenient, after all.

Instead of looking at budgeting as a negative thing, reframe your thinking. You’re prioritizing where you want your money to go based on your idea of what a ‘perfect’ life looks like.

Some people want a big house to fill with expensive gadgets, while others prefer to travel and enjoy a passive income. As you review your budget, look at some of the ways you can cut your spending. Would you rather spend $100 on cable or put that toward a down payment for a house?

3. Cancel Unnecessary Subscriptions

As you look through your bills, watch for unnecessary subscriptions. Many people don’t realize how many subscriptions they’re paying for on a monthly basis - video and music streaming, gym memberships, box subscriptions, antivirus software, cloud services and more. List out your subscriptions manually or use an automated tool like Truebill. This way, you can tell what you’re paying for and what’s worth it.

4. Plan and Budget for Unexpected Expenses

It’s often the unexpected expenses - a broken water heater, multiple wedding gifts - that end up putting people over their budget. Rather than working backwards, plan ahead. Set aside some of your budget for irregular expenses, including travel.

5. Plan Your Retirement Contributions

Now is a good time to plan out your retirement savings for the year. Do you plan to max out your IRA or 401(k)? Take advantage of matching contributions? Schedule an appointment with your financial advisor in New Jersey so that you can make sure you’re on track with your savings goals.

6. Automate Your Savings

Many people find it beneficial to automate their savings. You can do this in a number of ways, such as by splitting your direct deposit to go into your savings account, setting up automated recurring transfers or using an automated savings app to save spare change. Automating your savings makes it easier to build wealth - and it takes the temptation out of spending!

These are just some of the ways you can spring clean your finances. To schedule a consultation with a financial advisor, contact Leonard Financial Solutions today. We’ll get you on track with your savings goals!

Majority of Workers Expect Their Retirement to Include a Job

3/10/2022

For many Americans, a traditional retirement is not part of their plans. A new study from Voya Financial shows that 59 percent of baby boomers still in the workforce expect to continue working into retirement. For Generation X, that figure is 60 percent, and for millennials, it’s 49 percent. Overall, 54 percent of American adults say their retirement years will include some type of job.

If you’re close to retirement, you may be faced with the same dilemma. Do you keep working to maintain your same lifestyle, contribute to your retirement savings and keep your mind sharp? Or do you retire for good and spend time doing the things you always wanted?

Why More Americans Plan on Working During Retirement

The definition of retirement continues to change. At one time, retirement was about working until a certain age and then switching to no work. But today, people are faced with economic uncertainties from the pandemic, high inflation costs, an unpredictable stock market and high unemployment rates. With so many unknowns, many Americans feel that it’s safest to include some type of work in their future.

Furthermore, working in retirement offers mental benefits. In the same Voya Financial study, 56 percent of respondents said they wanted to continue working because it was good for their mental well-being. The American Psychological Association (APA) also states that delaying retirement or working in retirement can stave off cognitive decline.

A study from the University of Florida found that employed retirees report levels of health, well-being and life satisfaction on par with those who have not yet retired, despite significant differences in age. Not to mention, having an additional financial safety net is another boost for the mood. People can live better and do more in terms of traveling, home improvement, medical care and entertainment.

Should Your Retirement Plan Include a Job?

Whether or not your retirement plan should include some type of work is a highly personal decision. People who work in retirement often remain more active and socially connected, with better overall health and fewer medical issues. So, if you enjoy working and want to keep yourself busy, having a job might be best. And of course, it provides the practical benefit of more retirement savings.

On the other hand, you might very well be tired from working and ready to live your life the way you want. For the first time in decades, you can finally enjoy life without being tied to long working hours. Plus, if your job was known for stressing you out, you can eliminate this stress from your life and perhaps improve your mental and physical health even more than if you were to work!

In the end, many people end up working a part-time job to get the benefits of both worlds - shorter working hours but the social and mental benefits of employment. To discuss your retirement plan and which direction you want to move in, schedule a consultation with Leonard Financial Solutions today.

5 Questions to Ask Your Financial Advisor

2/28/2022

Are you meeting with your financial advisor in New Jersey soon? Make the most of your time by writing down important questions and topics you want to discuss. Your financial advisor is here to manage your money and help you choose how to spend, save and invest wisely. This is why knowledge is power!

Here are five questions to ask your financial advisor on a regular basis.

Is my investment strategy on track?

For many people, their investments are a large part of their retirement plan. If this is the same for you, you’ll want to make sure that your investments are doing their job. Ask to see recent reports and check to see if your strategy is reaching your goals. While it’s normal to see some fluctuation, your strategy should still be sustainable and meet your expectations.

Do I need to make any adjustments to reach my goals?

Retirement planning can change over time, so check on the progress of your plan and if you’re set to reach your goals. If you’re not, talk to your financial advisor about what steps you can take. You may need to contribute more to your retirement savings or maximize your company match.

What things should I focus on most?

Some parts of your retirement plan will be more lucrative than others. Ask your financial advisor about which things you should be focusing on, such as different investment vehicles or building out your 401(k) plan. Your advisor will identify where your efforts should go based on how well they’re performing.

Am I prepared for emergencies?

According to a survey from the Pew Research Center, 4 out of 10 Americans say they are struggling financially as a result of taking a cut in pay or losing their job altogether. While you can’t plan for everything, the pandemic has shown us that being proactive is important.

Work with your financial advisor to create an emergency preparedness plan that ensures you have enough money to fall back on.

How can I manage my taxes?

You probably have taxes on your brain starting in January or February, but you should always be thinking about them! There are things you can do throughout the year to make sure you are minimizing the taxes you owe. For example, your financial advisor may recommend making charitable donations, opening a health savings account or claiming certain exemptions.

When you meet with your financial advisor in NJ, make sure you ask them questions about your savings and how they are performing. While your financial advisor is your advocate, it’s still important to know what’s going on with your accounts so that you can retire with confidence.

5 Effortless Ways to Get Rich by Retirement

2/5/2022

Building wealth isn’t easy when you have an average salary and a list of bills. But you don’t have to earn a lot to retire comfortably. Instead, you need to approach your spending differently. You should pay yourself first, which means that whenever you earn money, you should set aside a portion for your future self. Anyone can do this, regardless of their salary.

Here are five effortless ways to get rich by retirement. Building wealth will have never felt so good!

Start Early (in Your 20s)

Unspent money gets better over time. If you have an average-paying job, putting away money early on is almost as good as shoveling away tons of money closer to retirement. And, when you’re young, you can invest your money more aggressively, which can help you build even more wealth down the line.

So how much of your income should you be setting aside for retirement? Ideally, 10-15 percent of your pre-tax income. And, you should start this in your 20s. This will help you build healthy habits that will last a lifetime - and give you enough to retire comfortably.

Spend Less Than You Earn

Another way to get rich is to spend less than you earn. And we don’t mean living within your means - we mean living below your means.

Start by analyzing your spending habits so that you can track where your money is going. Look for ways to save - can you cancel some subscriptions or cut back on eating out? Then, create a budget and stick to it. The money you save can be used for retirement, or at least to build an emergency fund.

Automate Your Savings

When saving money takes effort, you’re less likely to do it. Set yourself up for success by automating your savings. This way, you don’t have to do anything special to start building wealth.

While there are many ways to invest your money, one of the best strategies is to set up automatic contributions to your 401(k) or IRA. Your employer may even match your contributions!

Work with a Financial Advisor

Having a financial advisor is an effective way to ensure your money is being invested in the right places. After all, it’s not just how much you invest that matters but what you invest in.

If your portfolio is too conversative, your savings won’t grow fast enough. If it’s too aggressive, you could be left with nothing. Your advisor will also make sure that you’re using every advantage to your benefit.

Stick to Your Plan

Once you have a carefully laid out plan for retiring rich, make sure you stick to it. Even slight deviations can cause a gap in your savings. And while it may seem like all you're doing is working and socking money away, remember that you’re taking care of your future self, too. This way, you can ultimately work less and live better.

Leonard Financial Solutions can help you build wealth in a few simple steps. Schedule an appointment with one of our financial advisors to discuss your tax-free retirement.

Can You Combine Your Retirement Account with Your Spouse?

1/26/2022

A common question we hear from clients is whether or not they can combine their retirement accounts with their spouse. A joint retirement account makes sense, especially if you’re accustomed to combining money in a joint savings account. However, there is no such thing as a joint retirement account.

You can think of retirement accounts as being like credit scores. Each person has their own, and they can’t be combined when you’re married. But, there is a caveat. A spouse can name the other as a beneficiary. In this instance, your spouse would have access to your accounts and funds should something happen to you.

Why Both Spouses Should Open Up Separate Retirement Accounts

The IRS requires that 401(k) and IRA accounts remain in each person's name. This way, they can individually participate and contribute to their employer’s 401(k) plan. Over time, both plans will grow alongside each other, resulting in a diversified portfolio that includes a mix of short- and long-term assets.

Not only does having your own retirement accounts allow you to create a diverse portfolio, but also it allows you to receive the greatest tax benefits. For example, both traditional and Roth IRAs have the same contribution limits of up to $6,000. But with two accounts, you can make a total contribution of up to $12,000.

If One Spouse isn’t Working, a Spousal IRA is an Option

A spousal IRA may sound like a joint retirement account, but it’s not. However, it may be a great option if one spouse is unemployed or making a low income.

A spousal IRA allows the working spouse to contribute to an IRA that is in the name of the non-working spouse who has little or no income. This type of account allows both couples to contribute up to $12,000 annually. You can learn more about spousal IRAs here.

But…You Should Consolidate Your Retirements

Even though you can’t merge your retirement account with your spouse’s, you can consolidate your personal accounts to make your investments easier to manage. Consolidation is possible as long as the account is the same. For example, you can combine an SEP IRA with a traditional IRA, but you can’t combine a traditional IRA with a Roth IRA.

The benefits of consolidating your retirement accounts are:

View your portfolio holistically
Monitor your investments in one central location
Prepare your taxes more easily
Simplify your finances and retirement savings
Lower administrative costs

Even though you can’t combine your retirement accounts with your spouse, there are plenty of ways to maximize your savings, take advantage of tax breaks and prepare for a bright and healthy future. To discuss your retirement accounts and how to streamline them, contact Leonard Financial Solutions today.

Six Easy Ways Boomers Can Catch Up on Retirement Savings

1/20/2022

Even though financial experts recommend saving for retirement as early as you can, many people have a hard time following this advice. During your 20s and 30s, you’re working on establishing a career, buying a home and starting a family. In your 40s and 50s, you’re sending your kids to college. There’s not much extra cash to put toward retirement.

With this in mind, it’s no surprise that almost 40 percent of adults 55 and older have less than $50,000 in retirement savings and about one-third have less than $10,000. But what happens when retirement creeps up and you don't have enough in your savings? Fortunately, there are ways that you can catch up.

Get a Hold on Your Finances

If you’re going to start planning for your future, you need to know what’s going on right now. Sit down, perhaps with a financial advisor, and get a grasp on your expenses. You may have to cut back on some of the things that provide you with immediate gratification, such as dinners out or the latest iPhone, but you’ll be using this money to secure your future.

Pay Off Your Debt

If you want to save money, you need to make sure that you don’t owe any. As you take a closer look at your finances, write down all of your debts, including credit cards, school loans and your mortgage. Focus on paying down the debts with the highest interest rates. You may also want to look into consolidating your debt into one easy payment.

Use a Financial Planning Tool

Planning for retirement can be overwhelming, but a financial planning tool will help clear the path for you. You can use this tool to plan your savings, pick the best investment strategies and track your short- and long-term goals.

Take Advantage of Your 401(k)

One of the easiest ways to bulk up your retirement is by utilizing your 401(k) account, if you have one. This is especially true if your employer matches your contributions, as it’s essentially “free” money. Make sure you’re contributing the maximum amount so that you can get the full match from your employer. Also, there are “catch up” contributions for people over 50.

Look at Social Security Payments

Social Security will be an important part of your retirement, and it’s recommended to hold off on payments for as long as you can. This way, you can collect your full payments. Consider that for every year you delay your payments from ages 62-70, you get an 8 percent increase.

Automate Your Savings

Once you’re on a good schedule to save, make it a habit. It’s easy to forget when you’re caught up in the busyness of life. That's why we often recommend automating your savings. Automation is effortless, and it ensures that you stay on track with your goals no matter what life throws at you.

In some cases, people need to delay retirement. Even a few years can make a big difference. You can continue working and putting money toward retirement without having to deplete your savings. To get a hold on your retirement, contact Leonard Financial Solutions. We have easy, effective ways to maximize your retirement savings while still living your best life.

Turning 65 in 2022? Here are 3 Things to Know.

1/7/2022

Turning 65 is a big deal. If 2022 is the year that you’ll be hitting this milestone, it’s important to know what to expect. So start planning that party because you have a lot to celebrate!

Here are some key points to keep in mind as you turn 65 years old.

1. You’re eligible for Medicare.

Medicare eligibility begins at 65, and you can even sign up for coverage three months before your birth date. You’ll want to enroll in Medicare on time because there are costly penalties that will make your Part B premiums more expensive if you don’t.

If you plan on signing up for Medicare, you’ll also need to select a Part D prescription drug plan as well. Even if you don’t take any prescription medications, it’s still worth having this plan. If you plan to join later, you’ll likely have to pay a late enrollment fee.

2. You can claim Social Security.

The earliest you can sign up for Social Security is 62, so if you’re turning 65, you may want to consider taking your benefits early. That said, waiting to claim your benefits until full retirement age (66 years) is often best, as this will allow you to get your full benefit.

Talk to your financial advisor in NJ about your options and when you should start claiming Social Security. If you’re still working and your retirement savings balance is strong, your financial planner will probably recommend waiting. But if you’re working less and need the income, you may find it best to take your benefits early.

3. You can keep working.

Some people retire at 65 years of age, but many don’t. In fact, 65 is no longer considered the full retirement age according to the Social Security Administration. By keeping your job, you can maintain your income and even receive group health insurance through your employer.

If you’re happy with your employer’s coverage, you can delay Medicare enrollment and avoid a late penalty. Or, you can sign up for Medicare Part A because it's generally free for enrollees. As secondary insurance, this can pick up the tab for hospital care that your primary insurance doesn't cover.

As you can see, turning 65 is a big year for Americans! Because everyone’s personal circumstances are different, it’s important to speak with retirement financial services in New Jersey. Leonard Financial Solutions will assess your current situation and the best ways to maximize your Social Security benefits.