It’s graduation season. Do you have a graduate who finishing up on college? If so, this is a time to celebrate your child’s accomplishment and their entrance into adulthood.
 
It also may be a time to celebrate your new freedom. You have one less dependent in the house and one less tuition bill to pay. You might see a healthy boost in your bank account and budget in the near future, especially if you’re now an empty-nester.
 
Before you start spending all that extra cash, this could be a good time to review your retirement strategy. If you’re behind on your savings, you’re not alone. Many people wait until after their kids graduate and leave the home before they get serious about saving for retirement.
 
The good news is there’s still time to get back on track. Below are three steps you can take today to boost your savings and take back control of your retirement strategy. If you’ve waited until your kids were grown to get serious about retirement, now is the time to take action.

Use a budget. 

Do you use a budget? If the answer is no, you have company. According to a recent survey, 60% of Americans don’t use one. ¹ That’s an unfortunate statistic because a budget is one of the most powerful financial tools at your disposal.
 
A budget is especially important if you now have a boost in cash flow because you’re no longer supporting a child or making tuition payments. You can use your budget to plan and analyze your spending so that additional cash flow goes toward retirement instead of unnecessary purchases.
 
There are a variety of online tools you can use to create your budget. A spreadsheet can also be effective. The key is to set spending goals for each type of purchase and then regularly review your budget to make sure you hit your targets.

Boost your contributions. 

The most effective way to boost your retirement assets is to simply contribute more money to your retirement accounts each year. Once you turn 50, you have an opportunity to increase your savings rate through something called “catch-up contributions.” A catch-up contribution is simply an extra allowable contribution amount for those approaching retirement.
 
In 2019, you can make a regular contribution of up to $19,000 to a 401(k). However, if you are 50 or older, you can contribute an additional $6,000, giving you a total allowable amount of $25,000. You can contribute up to $6,000 to an IRA, plus an additional $1,000 if you are 50 or older. ² Catch-up contributions can help you boost your savings and get your retirement back on track.

Potential Growth and Income 

As you approach retirement, you may find that you have less tolerance for risk. That’s natural. After all, you don’t have as much time as you once did to recover from a substantial market loss.  Of course, you also need to keep growing your assets, so you can’t avoid risk completely.
 
If you have not taken a recent look at your portfolio allocation to ensure it is aligned with your time horizon, risk tolerance and over all plans, it might be time to review your plans with a financial advisor.
 
Besides proper diversification and an appropriate blend of Stocks and Bonds, how can you balance your need for growth with your aversion to risk?
 
How do you balance your need for growth with your aversion to risk? One way to do it is with an annuity. Many annuities offer potential growth opportunities without downside market risk. For instance, a fixed indexed annuity allows you to earn interest that is linked to the performance of an external market index. Based on the performance of the index you may earn more interest however if the index performs poorly, your principal is protected.
 
Annuities also offer ways to create guaranteed* lifetime income streams. You can convert a portion of your assets into a cash flow that will last for life, no matter how long you live. That could provide some certainty and predictability as you head into retirement.
 
Ready to get your retirement on track? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and goals and implement a strategy. Let’s connect soon and start the conversation.
 
1 https://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html
 
2 https://www.irs.gov/newsroom/401k-contribution-limit-increases-to-19000-for-2019-ira-limit-increases-to-6000
 
*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.  Guaranteed lifetime income is through annuitization or an optional rider which may include fees.
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
 
18775 - 2019/4/16

​Another school year is nearly over. If you have kids, you know how fast time flies. One day you’re dropping them off at daycare or sending them to kindergarten. The next thing you know, they’re preparing for college. Blink and you might miss it.
 
If your child is in middle school or even college, you may feel like you’re behind on their college savings. Of course, at the same time, you may also feel like you’re behind on your retirement savings. Both are big financial goals, and both are important, but there’s also only so much money available to contribute to savings. How do you balance the two goals?
 
Savings for college is much different than saving for retirement. There are different variables and factors involved. Below are a few things to consider.
​
Time Horizon 

Time horizon is the amount of time you have before you actually need to use your savings. The longer your time horizon, the more risk you can afford to take. If you suffer a loss, you have time to recover, but as your time horizon shortens, you may want to become more conservative since you don’t have as much time to recover losses.
 
Depending on your age, your time horizon for college may be much shorter than your time horizon for retirement. You could have decades until retirement. On the other hand, if you have a child already in elementary or middle school, you may have 10 years or less until they’re ready for college.
 
Your time horizon should influence your saving strategy for both retirement and college savings. Don’t apply the same allocation to both goals. Rather, look at your time horizon and determine how much risk you can afford. Unless your kids are very young, you likely don’t have time in your college strategy to recover from a sizable loss, so you may want to take a more risk-averse position.

Amount 

According to the College Board, the average cost of tuition and fees in the 2017-18 school year at an in-state public college was $9,970. For an out-of-state public school, the cost was $25,620 and a private school was $34,740.¹  If your child attends college for four or five years, it’s possible the cost could be over six figures.
 
That’s a sizable amount, but it’s still not close to what you’ll need for retirement. Consider that you may live in retirement for several decades. You’ll need enough assets to cover your bills, your discretionary spending and more. Consider that Fidelity estimates the average retired couple will need $285,000 just to cover medical expenses. ²
 
While college is big financial goal, it’s usually not as sizable as your retirement need. Don’t delay saving for retirement. It’s too big of a goal to fund at the last minute. Even if you have to start small, it pays to start saving early.

Alternative Funding 

It’s also important to remember that your child has other funding options available for college. They could earn a scholarship or a grant. They may qualify for financial aid. Student loans aren’t popular, but they are an effective funding tool.
 
You may not have similar options available for retirement. You’ll likely receive Social Security benefits, but those payments usually aren’t enough to fund a full retirement. You’ll likely need to rely on your savings to make up the difference. While saving for college is important, don’t let it interfere with your retirement savings.
 
Ready to plan your college and retirement strategies? Let’s talk about it. Contact us today at Heritage Financial North. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
 
 
1 https://www.collegedata.com/en/pay-your-way/college-sticker-shock/how-much-does-college-cost/whats-the-price-tag-for-a-college-education/
2 https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs
 
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
18786 - 2019/4/18