Successful Retirement Planning for Senior Executives – Six issues to consider before riding off into the sunset



If you are a senior executive, you probably know all too well that the hours you spend fulfilling your corporate responsibilities don’t leave much time for personal financial planning.   With the help of your financial advisor and some advance planning, you could set the stage for a financially secure rest-of-your-life.

A key issue?  Deciding when to retire.  Ask your financial advisor about a comprehensive cash flow analysis that incorporates all of your assets, including retirement income and projected expenses like medical insurance costs, charitable gifts, vacations, etc.  “The information contained in this spread sheet helps provide the foundation for all of your retirement planning,” says Colleen Betzler, principal, chief operating officer,  and senior financial advisor at Brinton Eaton, an SEC-registered investment advisory firm in Madison, New Jersey.  “It’s your financial advisor’s job is to review the cash flow and let you know whether you are in good shape to retire when you want to.”  Below are some of the issues the two of you should discuss:

·         Determine a realistic spending plan for when you are no longer working.   What are you spending now versus what you expect to spend in retirement?   Initially, many people actually spend more after they retire.  You may have a lot of extra time to travel and indulge in leisurely pursuits, some of which may be quite expensive or perhaps previously paid for by the company, e.g., country club membership.  It should all be documented as part of the cash flow analysis.

·         Plan for future health care costs.  If you are retiring before age 65, you may have to foot the bill for additional insurance costs.  Although Medicare kicks in at 65, executives still need a supplemental plan.  “Sometimes companies will pay for it; it usually depends on the executive’s tenure,” explains Betzler.  “Some firms grant a set amount toward an executive’s benefits and when that is exhausted, he or she can participate in the plan at their own expense.”  Whatever your company’s policy, factor it in to your plan.

·         Assess your children’s needs before you retire.  Discuss education expenses, including any post-graduate costs that you may be assuming.   ”Generally, it’s a good idea to retire after all of your children’s educational expenses are met, but that depends on your particular situation,” says Betzler.

·         Review your pension plan and understand all of its options.   Different plans have different features.  If yours has a lump sum or annuity, for example, your financial advisor can run several different scenarios in order to help you decide how to choose.  Says Betzler, “A pension is not going to increase with inflation and if you die an untimely death and have a single life annuity, your family could wind up with zero.  Conversely, if you elect a lump sum, it could grow to a significant sum, market conditions permitting.  It all depends on your risk tolerance, tax profile, and other personal factors.”

·         Pay attention to your annual compensation deferral.  A deferred compensation plan is a non-qualified plan under which you can elect to defer the receipt –and therefore the taxability – of a portion of your current salary and/or bonus to a future period, such as the start of retirement.   In comparing the overall benefit of deferred compensation to receiving the income as you earn it, consider the stability of the company and your tax brackets now and in the future.  For example, do you anticipate that your income tax rate will decrease in later years?  Also, be sure to weigh the risks of deferral against the tax benefits as you determine when and how much to defer and the optimal timing of the payout.

·         Contribute the maximum to your 401(k) plan.  The income tax deferral, the tax-sheltered growth, and the ability to obtain matching contributions from your employer combine to make 401(k) plans typically one of the most attractive retirement savings strategies for executives.  Employees may also be able to make after-tax contributions (subject to IRS limits) to a 401(k) plan – your financial advisor can provide counsel.

About Brinton Eaton
Based in Madison, NJ, Brinton Eaton is an SEC-registered investment advisory firm with a long history of serving individuals and their families across multiple generations.  The firm helps its clients protect, grow, administer, and ultimately transfer their legacy of wealth through a full range of integrated services, including  financial/tax/estate/retirement planning, investment management, charitable giving, and business succession planning.  Brinton Eaton’s clients tend to be corporate executives, professionals, entrepreneurs, retirees, and multi-generational families.  For more information, visit www.brintoneaton.com.

8 Wise Ways to Spend Your Tax Refund

For more tax advice visit Tax On Tax Off Dot Com!

 

Tax season is upon us, and however much you dread completing your return this year, there’s always solace to be had in the potential of a sweet reward: the refund.

The average tax refund in 2011 was over $2,900, according to CNNMoney. Receiving such a large check typically feels like free money, and the desire to spend it on a big-screen TV or perhaps a plane ticket to Vegas is often difficult to overcome. However, there’s nothing “free” about your refund–it’s still you’re hard-earned money! To avoid wasting the potentially lucrative lump sum, consider these eight tips for spending your tax refund wisely.

1. Adjust Your Withholdings
If you consistently receive a large refund, it’s a sign that you’re withholding too much from your paycheck.The money you get in one lump sum every April could be saved, invested or used to pay down debt throughout the year, so update your W4 and strive to “break even” with the IRS. Use the IRS Withholding Calculator to help you determine how much to withhold.

2. Pay Down Debt
Paying down existing debt like student loans or credit card balances may not seem like much fun now, but doing so will lead you to guilt-free fun in the future. In addition to improving your credit score, you’ll have more money each month once minimum payments are behind you instead of throwing away money on interest rates.

3. Invest in Your Home
Now is the time to tackle those home improvement projects you’ve been putting off. Such improvements will ultimately lead to an increase in your home’s value so it’s a wiser investment. Extend the value of your refund by purchasing discount gift cards to Home Depot from sites like GiftCardGranny.com, where you can save an average of 15 percent instantly.

4. Donate to Charity
Remember, what goes around comes around. That’s why I recommend donating part or all of your tax refund. It is actually a tax write-off, so you can deduct your donation for next year’s taxes. Find a list of eligible organizations within the IRS Publication 78 and be sure to itemize your deductions.

5. Open a Roth IRA
Roth IRAs are all the rage these days, and for good reason. In addition to being more flexible than other retirement plans relative to investments, Roth IRAs grant tax breaks when money is withdrawn during retirement and won’t penalize you for withdrawing early either. Not convinced? Read this article from Kiplinger on why it’s a smart investment plan.

6. Improve Yourself
Whether you brush up on your networking skills or learn the basics of social media, continuing education is the key to better job prospects. Look for courses at your community college or find out when and where the next regional conference in your industry is happening.

7. Fund Your Emergency Fund
If the contents of your savings account is comparable to that of your childhood piggy bank, consider using your refund to raise it to a more adult-worthy level. Travel snafus, car accidents and medical emergencies are inherently unpredictable, and having the peace of mind to pay for the unexpected expense during such stressful situations is priceless. For more information, check out “Why You Absolutely Need an Emergency Fund” from Investopedia.

8. Stretch Your Spending
If you’ve been saving up for a big purchase or simply looking to use the tax return to supplement your income in the short term, consider how to stretch those dollars. Purchase discount gift cards for various stores to reduce everyday costs and use coupons to trim expenses whenever possible.

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Andrea Woroch is a consumer and money-saving expert for Kinoli Inc. As a nationally recognized media source, Andrea has been featured among top news outlets such as Good Morning America, NBC’s Today, MSNBC, New York Times, Kiplinger Personal Finance, CNNMoney and many more. She is available for in-studio, satellite or skype interviews and to write guest posts or articles.

Valentine gifts from the heart don’t have to cost much

According to www.valentinesday.org, there are over 190 million Valentine’s Day cards exchanged annually, making February 14 the second biggest card giving holiday, after Christmas. Valentine’s Day is third most important day for flowers, behind Christmas and Mother’s Day. Chocolate sales total over $1 billion (US) and more than $14 billion worldwide each Valentine’s Day.

However, if you are hoping to think a bit more economically this Valentine’s Day, the following list includes some ideas that GreenPath credit counselors came up with that have little or no cost.

“In some cases, these gift ideas might be even more special to the recipient than a store bought gift,” said GreenPath trainer Megan Bridgett.

1.Write a letter telling each loved one in your family what they mean to you.

Put it on nice paper and frame it in an inexpensive second hand store frame with a photo of the recipient.

According to one counselor, her then teenagers (now in their 20’s) saved their letters that she wrote and still have them. “So, don’t believe it when they tell you it is corny,” said Bridgett. “Affirmation is a great gift.”

2.Make CD’s of your favorite music selections personalized for the recipient.

Don’t use pirated music, though.

3.Offer a coupon to be a workout partner for a friend or relative, and keep each other accountable for your exercise goals.

What is better than planned time with people that are important to you, while getting healthier in the process?

4.Give the family heirlooms away before you die.

Instead of keeping grandmother’s crystal in the cupboard, give this special family gift to others to use and enjoy.

5.Give a coupon to wash windows this spring…

…or some other dreaded job.

6.Give your kids a coupon for one week of no bed making or other hated chore.

If you give it a little thought, your heart-felt gift can certainly make someone’s heart beat a bit faster this Valentine’s Day!

About GreenPath Debt Solutions

GreenPath Debt Solutions is a nationwide, non-profit financial organization that assists consumers with credit card debt, housing debt and bankruptcy concerns. Our customized services and attainable solutions have been helping people achieve their financial goals since 1961.

Headquartered in Farmington Hills, Michigan, GreenPath operates more than 50-full time offices in 12 states and also deliver licensed services throughout the United States over the Internet and telephone.

Log on to www.greenpath.org for more information.