Author: dev

Retirement marks the beginning of a new chapter in your personal journey, an opportunity to explore, learn, and enjoy life at your own pace. It also represents the culmination of many years of hard work and careful planning. Until this point, your career has likely played a starring role in your life, providing you with structure, purpose, and fulfillment. When you’re ready to step away from work and into your well-earned retirement, it’s important that you find new outlets for these things.

So, how do you make sure your “golden years” are genuinely golden? Here are ten tips to help you navigate retirement and make it a fulfilling and joyful period of your life.

1. Start With a Vision

Retirement is your blank canvas, and you are the artist. Before you put away your work tools, take some time to envision what you’d like your retirement years to look like. Do you dream of traveling the world? What about diving into your favorite hobby? Perhaps you’re hoping to enjoy your new-found freedom in the company of friends and family.

It may seem simple, but many people don’t stop to consider what their retirement will look like until it arrives. Whatever you’re imagining, your retirement should reflect your personal dreams and goals.

2. Experience New Things

Having new experiences isn’t just about having fun, although enjoying yourself should be a priority in retirement. Experiencing new things can help keep your mind active, which in turn can help delay or slow the onset of age-related cognitive decline. These experiences might include learning a new language, picking up a new hobby, or traveling to a new place.

Exposing yourself to new challenges and sensations is emotionally, physically, and intellectually stimulating. These experiences can help you maintain your adaptability, which can be important as you age and encounter new life circumstances. It’s never too late to try something new, and retirement offers the freedom to do the things you might not have been able to do while you were working.

3. Find Your Purpose

It’s crucial to replace the sense of purpose you derived from your professional career with a new purpose in retirement. Purpose gives you a reason to wake up in the morning, an enthusiasm that permeates your life, and fuels your days with meaningful activities.

Discovering your purpose in retirement ensures that this stage of life is not just about stopping work, but rather about pursuing new passions, contributing to society, or achieving personal goals, all of which can provide satisfaction and joy.

4. Create a New Routine

Your career likely provided structure to your life, so you’ll have to find new ways of creating structure once you’ve retired. Creating a new daily routine can help do that.

Routines foster a sense of purpose, aid in time management, and promote productivity. They can also involve social activities, which help combat loneliness and keep you engaged. Each of these things  contributes to your overall well-being and can make the transition from working life to retirement life easier to manage. Moreover, a routine ensures you are consistently committed to making the most of this phase of your life.

5. Stay Connected

Maintaining meaningful social connections is essential at all stages of life, particularly during retirement. These connections help stave off feelings of isolation and loneliness, contribute to a sense of belonging and interconnectedness, and can even improve cognitive health. Social interactions provide outlets for learning, personal growth, and emotional support, all of which serve to enhance your overall quality of life. Spend time with family and friends, join clubs or groups, volunteer, or consider part-time work or mentoring to stay socially involved.

6. Embrace Leisure

Retirement is something you’ve worked hard for, so don’t shy away from enjoying it. Savor the freedom of unhurried moments, like immersing yourself in the rich flavor of your morning coffee or diving deep into a captivating novel. Take afternoon naps or leisurely walks and embrace the slower pace that retirement affords. This period of your life is a well-deserved respite, a chance to reflect, rejuvenate, and reorient towards the pursuits that bring joy and contentment. Take pleasure in this slower rhythm; it’s not laziness, it’s a celebration of your life’s work.

7. Give Back

Finding ways to give back – whether that involves donating, volunteering your time, or offering some other benefit – can enrich your retirement years with the purpose and satisfaction that comes from knowing you’re making a difference in your community. Whether it’s a local school, a food bank, or an animal shelter, there are numerous opportunities to give back and make an impact.

8. Prioritize Your Health

Your health is the most important aspect of your retirement, as it affects your ability to enjoy it. Schedule check-ups with your doctor and keep close tabs on any existing medical conditions to make sure you stay in good physical and mental health. Regular exercise, a balanced diet, and adequate sleep can go a long way toward ensuring you’re physically fit to make the most of your retirement years but don’t forget to consider your mental health, too.

9. Maintain Financial Security

Financial concerns contribute to anxiety no matter what age you are, but that anxiety can be exacerbated once you’re no longer earning a regular wage. That’s why it’s so important to maintain your financial security by making smart, well-thought-out decisions when it comes to spending and investing your hard-earned money.

Ensure you have a clear understanding of your various sources of retirement income and expenses. If you could use some professional guidance, consult with a financial advisor who can help you make the best use of your savings, investments, Social Security benefits, and other income streams. With life expectancies rising steadily, your retirement could last longer than you initially planned for. An advisor can help you adjust your plan to account for your longevity and ensure your nest egg goes the distance.

Conclusion

Retirement is a significant transition, representing at once the closing of one life chapter and the beginning of another. It’s an exciting new phase filled with opportunities, but taking advantage of those opportunities may require you to adjust your mindset and way of living. By planning ahead, staying active and engaged, and taking care of your health and finances, you can help make your retirement years fulfilling and enjoyable.

Could you use help planning for your retirement or reviewing an existing retirement plan? Connect with a member of our team at your convenience. We look forward to hearing from you.

Best,

Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder I Senior Managing Partner

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions.

What is truly important to you in life? Is it the welfare and security of your loved ones? Is it the ability to provide for your family, even in times of uncertainty? Your response to these questions sheds light on the essential role insurance can play in our lives.

Insurance isn’t just a box to check off your to-do list; it’s a crucial risk management tool that protects your most valuable assets — your health, your home, your car, and ultimately, your family’s financial well being. To help you navigate the often-complex world of insurance, we’ll discuss some different types of insurance and how much coverage you may need.

Covering the Bases

As you determine your insurance needs, here are a handful of the most fundamental forms of coverage to account for in your financial plan. From auto and homeowner’s insurance to disability and long-term care, these can help mitigate the financial impact of unexpected life events on your family and loved ones.

Auto Insurance

If you own a car, auto insurance is a must. In addition to being a legal requirement in  most jurisdictions, the right policy can safeguard you from financial burdens that may result from an accident or theft.

How much auto insurance you need and how much is required by law are two different questions. While the required minimums vary by state, it’s often recommended that you follow a standard 100/300/100 structure. This entails $100,000 of personal injury protection, $300,000 of total accident injury protection, and $100,000 of property protection. Your individual auto insurance needs may differ based on your circumstances and driving habits.

Homeowner’s or Renter’s Insurance

Homeowner’s insurance protects what’s likely your most valuable financial asset: your home. It covers damages to the structure of your home and the personal property within it, while simultaneously providing liability coverage for accidents that happen on your property. Without sufficient coverage, you risk financial hardship from unexpected events like fires, natural disasters, or legal liability, which may jeopardize your home and financial stability.

Renter’s insurance, on the other hand, does not provide coverage for the physical building you live in. This is the responsibility of your landlord, who should have their own insurance policy for the property. Instead, renter’s insurance covers your personal belongings, liability for accidents that occur within the rented premises, and sometimes living expenses if the rented space becomes uninhabitable due to a covered event.

For homeowners, consider a policy that covers the cost of rebuilding your home at current construction costs, not its real estate value. Renters, who won’t require as much coverage, should seek a policy that covers the replacement cost of personal
possessions.

Health Insurance

As healthcare expenses continue to rise, having a health insurance plan that covers a broad range of services, including hospitalization, prescription drugs, and preventive care can help shield your loved ones from potentially-burdensome medical bills. Your individual coverage needs will depend on factors like age, health status, family medical history, lifestyle choices, and those of your dependents. Balance the cost of premiums with your out-of-pocket exposure. Higher-deductible plans often have lower premiums but can leave you with high costs when you need care. At a minimum, look for a policy that protects against catastrophic health-related expenses that could jeopardize your financial stability.

Disability Insurance

Disability insurance helps you maintain your standard of living should an accident or disability render you unable to work. It replaces a portion of your income to alleviate some of the burden imposed by day-to-day expenses during challenging times for you and your family.

Disability insurance policies are broadly separated into two categories: short-term disability and long-term disability. The former provides temporary relief, usually for a period of up to six months, while the latter provides coverage for extended periods, often lasting for years or until your retirement date. The recommended coverage is usually around 60-70% of your income, although specific needs may vary based on your lifestyle, the needs of your family, and your existing financial obligations.

Life Insurance

Life insurance provides financial support to your loved ones upon your passing or incapacitation. This is particularly important if your family or other dependents rely significantly on your income. Life insurance can be used to cover outstanding debts, pay for your funeral, and even provide a living allowance for your loved ones. This support can help ease what’s bound to be a difficult transition for those you care about.

Universal life insurance provides coverage that lasts until the time of your death or incapacitation. These policies often include a cash value component that can grow over time and that you can tap into when needed. Term life insurance, by contrast, lasts for a finite period (typically between 10 and 30 years) but may entail lower premiums. For coverage, a common guideline is to carry 10-15 times your annual income, but your needs are likely to evolve over time. That’s why it’s essential to periodically review your life insurance coverage as your circumstances change.

Going a Step Further

These forms of insurance can serve as a safety net for your family in several key areas, but the list above is far from exhaustive. If you’ve already addressed the basics and are looking to add another layer of protection, these are some other options you may consider.

Supplemental Health Insurance

As the name implies, this is an addition to your primary health insurance that aims to fill gaps in your existing coverage. It can cover out-of-pocket expenses that your regular health insurance doesn’t cover, such as copayments, deductibles, and coinsurance. Some policies may also provide wage relief should an extended hospital stay or illness render you temporarily unable to work.

Long-Term Care

A long-term care policy can provide coverage for services that aren’t typically covered by regular health insurance, Medicare, or Medicaid. This includes assistance with daily activities over a prolonged period due to chronic illness, disability, or old age. It covers often-costly services such as in-home care, nursing homes, and assisted living facilities.

Umbrella Policy

This form of insurance provides additional liability coverage beyond your auto and homeowner’s insurance. It kicks in when the liability limits on these policies have been exhausted. You might consider carrying an umbrella policy if your net worth exceeds the liability limits on your car or home insurance.

Assessing Your Insurance Needs

Insurance is a risk management tool that safeguards your family’s interests and lays a secure foundation for your financial plan. To gain a comprehensive understanding of the different types of insurance and how they cater to your specific needs, consider consulting a financial advisor. They will help you understand the complexities of insurance coverage and guide you in making informed decisions. After all, the peace of mind that comes with knowing you are adequately insured is invaluable.

Best, 

Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder | Senior Managing Partner

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions.

A 1031 exchange – frequently referred to as a “like-kind” exchange – is a tax-management strategy that allows real estate investors to defer capital gains taxes on the sale of a property by reinvesting the proceeds into a new property of the same type. These exchanges can be powerful tools, but there are some rules and other considerations investors should be aware of before implementing a 1031. This guide outlines what a 1031 exchange is, what the benefits may be, and what requirements must be met in order to unlock those benefits.

Potential Benefits of a 1031 Exchange

The primary benefit of using a 1031 exchange is the potential for tax savings. Typically, when an investment asset is sold and a gain is realized, you incur a capital gains tax for the year in which the sale was made. If you hold the asset for more than a year before selling, capital gains taxes can be as high as 20% depending on your income. If you hold it for less than a year, the IRS treats it as a “short-term” capital gain and taxes it as ordinary income, which may be higher than 20%. By allowing you to defer this tax obligation, a 1031 exchange may help you lower your total tax burden in the near term and free up capital for reinvestment. Here are some of the ways deferring capital gains taxes with a 1031 exchange may benefit you:

Tax-Deferred Growth. By allowing you to reinvest the proceeds from one investment property into another one without paying taxes on the gain, 1031 exchanges afford you the potential for tax-deferred growth. Deferring your taxes means you can reinvest a larger portion of your proceeds and possibly grow your portfolio faster. The tax burden from this sale is deferred until the sale of the new investment property, at which point you may be able to use another 1031 exchange.

Diversification. A 1031 exchange can be a tax-efficient method of diversifying your real estate holdings. By allowing you to exchange one investment property for another, you can move from one geographic area to another or swap a property out for one with better growth or income-generation prospects. Diversification can provide multiple benefits, such as managing risk, increasing cash flow, and bolstering long term returns.

Estate Planning. When an investor dies, the cost basis of their property is “stepped-up” to its market value at their time of death. By using a 1031 exchange, you may be able to pass on a larger real estate portfolio to your heirs on a stepped-up basis, possibly reducing the tax liability they’ll ultimately be burdened with. Your heirs may also be able to take advantage of further tax deferral if they choose to sell the property in the future.

Types of 1031 Exchanges

A 1031 exchange can work in a handful of different ways depending on the circumstances of the property sale and property acquisition. The most common types include:

Simultaneous Exchange. The most straightforward type of 1031 exchange, a simultaneous exchange refers to when the sale of the old property and the purchase of the new property occur on the same day.

Delayed Exchange. More common than simultaneous exchanges, a delayed exchange refers to when the sale of the relinquished property occurs before the purchase of the replacement property.

Reverse Exchange. In a reverse exchange, the investor acquires the replacement property before selling the relinquished property. This type of exchange is more complex and may require the use of an exchange accommodation titleholder (EAT) who holds the property until the sale of the relinquished property is complete.

Improvement Exchange. Also known as a construction exchange, an improvement exchange allows an investor to use some of the exchange proceeds to make improvements to the replacement property.

Requirements for a 1031 Exchange

There are a number of requirements that investors must meet in order to qualify for a 1031 exchange, including:

Like-Kind Property. The property being sold and the property being purchased must be of “like-kind” according to the IRS. For example, a rental property can only be exchanged for another rental property, and a commercial property can only be exchanged for another commercial property. If you were to exchange a rental property for a commercial property, you wouldn’t be afforded the benefits of a 1031 exchange.

Investment Property. Both of the properties involved in the exchange must be investment properties, not personal residences or vacation homes. This means they must be held for business or investment purposes, such as earning rental income or appreciating over time.

Qualified Intermediary. Investors must use a qualified intermediary (QI) to facilitate the exchange. The QI holds the funds from the sale of the relinquished property and uses them to purchase the replacement property.

Time Limits. Starting from the date of sale, you have 45 days to identify replacement properties and 180 days to complete the purchase of one or more of those properties.

Interested in a 1031 Exchange?

A 1031 exchange may be a useful tool for real estate investors looking to defer the capital gains taxes associated with the sale of an investment property. While there are requirements that must be met, the benefits of this strategy can make it well worth the effort. As with any investment decision, think about consulting with a qualified professional who can help you determine whether a 1031 exchange makes sense within the context of your financial plan.

Best,

 

 

Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder | Senior Managing Partner

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions. There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to sell any securities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney. Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.

Healthcare is a key consideration within your financial plan, as these expenses can account for a significant portion of your spending. Even if you and your loved ones are in good health now, circumstances can change on dime and it’s difficult to predict what your needs will be down the road. Luckily, there are savings accounts specifically designed to help you cover these expenses, providing certain tax benefits that encourage you to save.

Two popular options are Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs). While both aim to help individuals save money for medical expenses, they differ in a number of key aspects. By understanding these distinctions, you can make a more informed decision about which of the two accounts better suits your needs.

How Do These Accounts Work?

Health Savings Accounts (HSAs) are tax-advantaged accounts for individuals with high-deductible health insurance plans that are funded with pre-tax dollars. The funds can be invested, potentially grown over time, and then withdrawn tax-free to pay for qualified medical expenses.

Flexible Spending Accounts (FSAs) are also funded with pre-tax dollars, but they’re typically offered by employers. The money in this account can be used to cover eligible healthcare costs but does not offer the same potential for investment growth.

If you could use a hand determining which option better suits your needs, we outline some of the key differences between these accounts that may bear consideration.

Eligibility

HSAs are only available to those enrolled in high-deductible health plans (HDHPs), so not everyone will be eligible to participate. Because of this requirement, those with more comprehensive health coverage, lower deductibles, or those who lack insurance altogether may not be able to fund an HSA. Conversely, FSAs are typically employer-sponsored and do not require a specific health insurance plan, making them accessible to a wider range of workers.

Rollovers & Contributions

One of the primary advantages of using an HSA over an FSA is that the funds within an HSA roll over from year to year, so the money you contribute to the account remains yours indefinitely. This rollover feature allows you to build a substantial balance over time that can be used to cover future healthcare costs.

FSAs, on the other hand, are subject to a “use it or lose it” policy. This means if you fail to use all of your FSA funds within the plan year, you lose the remaining balance. There are some exceptions, though. Employers have the option to offer a grace period of up to 2.5 months after the end of the plan year for employees to use their remaining FSA funds. Alternatively, they can allow employees to carry over up to $550 of unused funds into the following year. Employers can offer one of these options or neither – they cannot offer both.

HSAs also tend to have higher annual contribution limits than FSAs, allowing you to earmark more funds for healthcare expenses each year. These limits are adjusted each year to comply with IRS guidelines.

Ownership & Portability

HSAs are personally owned, so your account will remain with you even if you change jobs or retire. You can continue growing your account and using the funds within it for qualified medical expenses. Since FSAs are employer-owned, you risk forfeiting the remaining balance of your account when you leave your employer unless you’re eligible for continuation through COBRA. For this reason, HSAs are considered portable while FSAs are not.

Investments

A unique perk of HSAs is the opportunity to invest your funds, potentially growing your account balance over time. Similar to an IRA, 401(k), 529 College Savings Plan, or another tax-advantaged account, you can invest in a variety of securities like stocks, bonds, and mutual funds. This feature can make HSAs useful tools for investment growth, allowing your contributions to appreciate until you need to access them down the road. FSAs owners are not afforded the same investment opportunity.

Tax Benefits

Both accounts offer tax advantages, but the HSA provides a triple tax benefit: contributions are made pre-tax (and therefore entitle you to an income deduction), earnings and growth are tax-free, and withdrawals for eligible expenses are also tax-free. Withdrawals for non-eligible expenses may incur income taxes plus an additional 20% penalty. With FSAs, contributions are pre-tax, and withdrawals for eligible expenses are tax-free.

Another lesser-known benefit of investing in an HSA is you can withdraw funds penalty-free for any reason after turning 65. You will have to pay income taxes on the withdrawal if the funds aren’t used for qualified medical expenses, but you won’t be subject to the 20% penalty. In this way, an HSA can function similarly to a traditional IRA as a retirement savings vehicle.

Conclusion

Both HSAs and FSAs can be valuable tools for managing healthcare expenses and can provide certain tax advantages for saving. An HSA offers more flexibility with higher contribution limits, rollovers, and the ability to invest, but they’re only available to those with high-deductible plans. FSAs, while providing lower contribution limits and a “use it or lose it” structure, are accessible to a wider range of people.

Choosing between an HSA and an FSA depends on your individual circumstances, including your health plan, financial situation, and long-term needs. Understanding these differences can help you make the best decision for your healthcare and financial wellness. Consider speaking with a financial advisor or benefits specialist to get personalized advice.

 Best,

Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder I Senior Managing Partner

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions.

A crucial step in building a sound financial plan is ensuring you have access to cash when you need it, but that doesn’t mean you have to keep that cash in a bank account earning modest interest. For investors looking to maintain a certain level of liquidity while earning a greater return than a savings account can provide, money market investments may be worth considering.

But what exactly is the money market and what types of investments are included in it?

What is the Money Market?

The money market is comprised of short-term debt instruments from Treasury bills and commercial paper to savings accounts and certificates of deposit (CDs). In addition to having short maturities, these investments are characterized by their high liquidity, low risk, and relatively modest yields compared to some other securities.

For most individuals, investing in money markets means investing in a money market fund or bank account that contains a basket of these debt instruments. The money markets can be a source of income, diversification, and liquidity and thus play an important role in many investors’ portfolios.

Financial Instruments in the Money Market

There are many types of investments within the money market. Here are some of the more prevalent ones to consider.

Treasury Bills

Treasury bills are debt securities issued by the US Treasury with maturities ranging from four weeks to one year. Investors purchase these securities at a discount and receive their par value (full value) upon maturity. The difference between the purchase price and the price they receive upon maturity is what the investor earns. To illustrate, an investor pays $950 for a 6-month T-bill with a par value of $1000. When the bill reaches maturity in 6 months, the investor receives $1000 for a profit of $50. This payment is considered the interest earned on the bill.

Because they’re backed by the full faith and credit of the US government, T-bills are considered to be among the most stable investments. They can be purchased directly from the US Treasury or accessed indirectly through a money market fund or account.

Certificate of Deposits (CDs)

CDs are financial products sold by banks and other financial institutions that pay interest on a lump sum of cash over a specified period. The maturity of a CD can be anywhere from three months to five years, and there may be a penalty for accessing your cash prior to the maturity date. However, CDs can offer higher yields than savings accounts to make up for being less liquid and they’re insured by the federal government, which makes them a stable investment.

Commercial Paper

Commercial paper refers to unsecured loans issued by companies or financial institutions looking to fulfill short-term cash needs. These contracts tend to have maturities averaging 30 days and no longer than 270 days. Similar to Treasury bills, commercial paper is bought at a discount relative to its face value and investors earn a profit from the difference between these two prices.

Commercial paper contracts start at $100,000 or more and require the issuer to have a strong credit rating. As a result, many individual investors choose to purchase CPs through money market mutual funds.

Money Market Funds

Investors can gain exposure to the money market by acquiring shares of a money market mutual fund. These funds trade a high volume of low-risk, short-duration debt instruments (such as the ones described above) in addition to holding cash and cash equivalents. A number of different money market funds exist to meet different investors’ needs – some may hold primarily US Treasuries while others focus on tax-exempt securities.

Money market funds can provide investors with liquidity for when they need access to cash while offering higher yields than saving accounts.

Money Market Accounts

Money market accounts differ from money market funds in that they are a type of savings account set up at banks that are federally insured. These accounts often come with higher minimum balance requirements but can offer higher yields than other types of savings accounts depending on the bank. Eligible accounts are insured by the FDIC up to $250,000 for each depositor.

While many money market accounts may come with debit cards and the ability to write checks, issuers limit withdrawals based on federal regulations. These accounts are not meant for everyday spending, but they can provide cash liquidity when needed.

Start Investing in the Money Market

The money market may provide an opportunity to earn a greater return on your cash than you’d earn from a standard savings account while still affording you the liquidity you need to meet cash needs. As with any investment decision, consider consulting with a financial advisor before taking action. An advisor can help you assess your needs and identify a suitable allocation between money markets and
other investments.

Reach out to a financial advisor today to learn more about the money market or make adjustments to your investment strategy.

Best,

Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder | Senior Managing Partner

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions.

Mutual Funds and Exchange Traded Funds (ETF’s) are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks, including changes in credit quality, liquidity, prepayments, and other factors. REIT risks include changes in real estate values and property taxes, interest rates, cash flow of underlying real estate assets, supply and demand, and the management skill and creditworthiness of the issuer.

After a lifetime of hard work and careful planning, you deserve a comfortable retirement. Once you stop earning a wage, effectively maintaining your nest egg becomes more crucial than ever, and mismanaging your resources may keep you from achieving the lifestyle you’ve envisioned for yourself.

With that in mind, here are a number of common missteps made by retirees that you can learn from and avoid in your own life.

Spending Like You Used To

While it’s important to enjoy your retirement years, it’s critical to be realistic about your finances. Remain cognizant of the fact you’re likely not earning as much as you used to during your working years and you probably have more time on your hands, too. The first few years of retirement, in particular, can be a difficult adjustment period for retirees as they get accustomed to living on a fixed income.

Old spending habits can be hard to break. Start by identifying your various income sources – from Social Security to taxable and tax-advantaged investments – and then outline your current and future expenses. Be sure to consider not just your bills (medical, housing, etc.) but also how you’ll spend your time in retirement. Do you see yourself traveling the world? What types of leisure activities would you like to engage in? Use your projected monthly income and expenses to come up with a sustainable withdrawal strategy that’s reflective of your new reality.

Giving Too Much Away

Whether it’s spoiling the grandkids with toys and technology or providing some extra support to your adult children, giving too much money away is a frequent cause of financial strain for retirees. It’s okay to show generosity to loved ones, but keep an eye on your spending and ensure that it falls within your budget.

Remember that your children and grandchildren are likely far better positioned to recover from financial difficulties than you are, so be careful not to put your financial security at risk.

Forgetting to Account for Healthcare Costs

Even if you’re healthy and active today, it’s advisable to have a healthcare plan in place for any possibility; after all, you never know when you might need it. The average couple can expect to spend over $315,000 in medical expenses during retirement, underscoring the importance of maintaining adequate insurance coverage in addition to a medical fund.1 Consider your current health, whether you’re predisposed to any health conditions, and what you might require in terms of long-term care. Then build a buffer into your budget for the unexpected. Without a safety net, an injury or illness could result in hefty bills that eat into your retirement savings.

Accumulating New Debt

Another common mistake people make in retirement is taking on new and unnecessary debt by upsizing or making extravagant purchases. If you’re considering buying a larger home, a fancy new car, or flying around the world in first class, consider how those expenses fit into your financial picture and whether you’d have to finance them with debt. Having an emergency fund can help ensure you don’t have to use credit cards or loans to cover unexpected expenses. If you have outstanding debt, prioritize paying down the accounts that charge the most interest to keep them from accumulating and draining your nest egg over time.

Investing Aggressively

Your approach to investing should be reflective of your goals and circumstances, both of which change upon retirement and evolve over the course of retirement. If you had an aggressive investment allocation while working, you should consider a more conservative approach in retirement that’s less focused on long-term growth and more focused on capital preservation. Failing to adjust your allocation can expose you to undue risk and could result in losses that you don’t have the runway to recover from. A financial advisor can help you assemble the right mix of investments based on your circumstances.

Putting All Your Eggs in One Basket

Diversification represents a pillar of any well-rounded investment strategy. Whereas being too heavily invested in one asset can leave you vulnerable to adverse market movements, diversifying your investments across different asset classes and within those asset classes can keep you from being too exposed to a particular name or sector. Diversification can help you manage risk and smooth out your portfolio’s performance during volatile periods. This is another area where an advisor can help you.

Paying Too Much in Taxes

Taxes may be an inevitability but there are ways you can reduce your total tax obligation by planning proactively. For instance, a Roth IRA may allow you to make tax-free withdrawals during retirement and you can roll funds into a Roth from your tax-deferred retirement accounts. Take some time to understand the various rules surrounding retirement account withdrawals so you can avoid having to pay penalties for withdrawing funds too early or missing a required minimum distribution (RMD). A tax professional can work with you to manage your nest egg in a tax-efficient manner.

Thinking in the Short Term

Perhaps the most common worry in retirement planning is whether or not you have enough saved to last the rest of your life. Advancements in healthcare and technology are constantly extending life expectancies and improving Americans’ quality of life, which can make it more challenging to anticipate the full cost of retirement.2 That’s why it’s important to plan conservatively and not sacrifice your long-term financial stability by taking a short-term view. Thinking of your retirement in five-year blocks may help you achieve a more complete picture of your golden years.

If you need help developing a retirement strategy to support your desired lifestyle, a financial advisor can provide you with the guidance you need. Contact a financial advisor today to discover how you can protect your wealth after leaving the workforce.

Best,

Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder I Senior Managing Partner

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions.

Neither Asset Allocation nor Diversification guarantee a profit or protect against a loss in a declining market.  They are methods used to help manage investment risk.

Converting an employer plan account or Traditional IRA to a Roth IRA is a taxable event. Increased taxable income from the Roth IRA conversion may have several consequences including but not limited to, a need for additional tax withholding or estimated tax payments, the loss of certain tax deductions and credits, and higher taxes on Social Security benefits and higher Medicare premiums. Be sure to consult with a qualified tax advisor before making any decisions regarding your IRA.

Endnotes

1 (May 16, 2022) Americans can expect to pay a lot more for medical care in retirement. CNBC, https://www.cnbc.com/2022/05/16/americans-can-expect-to-pay-a-lot-more-for-medical-care-in-retirement.html

2 (Aug. 13, 2022) Life Expectancy in the U.S. Dropped for the Second Year in a Row in 2021. CDC, https://www.cdc.gov/nchs/pressroom/nchs_press_releases/2022/20220831.htm#:~:text=AIAN%20life%20expectancy%20has%20declined,2020%20to%2076.4%20in%20

Whether you have a child or loved one who’s recently graduated or who’s gearing up to make the transition from college life to the “real world,” this major turning point will require numerous financial decisions. From finding a place to live and paying monthly bills to investing and saving for the future, college graduates may be faced with managing their own money for the first time.

However, many adults lack financial literacy – that is, they don’t understand how to effectively budget, save, invest, or handle other critical aspects of “adulting.” This can lead to poor financial decisions that may end up costing the average person over $1,800 per year.¹

So, how can you help your child or loved one avoid making some of these mistakes and improve their financial literacy? Here is a checklist of financial planning tasks that may help graduates step into life after college on confident financial footing.

Create a Monthly Budget

Many people don’t use a budget, and some may not even know how much they spent last month. Even if a young adult is living comfortably and paying bills on time, mapping out their monthly income and expenses can go a long way toward
reducing their spending, which may allow them to save more for the future and prepare for emergencies.

A good starting point for young adults may be using the 50/30/20 Rule. According to this budgetary plan:

● 50% of their income should go toward necessities, including housing, food, utilities, car payments, insurance, and debt payments.
● 30% of their income can be devoted to discretionary spending, such as dining out or entertainment.
● 20% of their income should go into savings or investment accounts to help advance their long-term goals.

Save For the Unexpected

Speaking of saving, it’s always good practice to encourage your children to start a rainy day or emergency fund. Ideally, they’ll want to build up a safety net of around three to six months worth of living costs in case they lose a job, suffer an injury, or have a significant expense pop up. However, starting small by setting aside even just $50-$100 per month can add up quickly. After all, no one knows when they may need an extra $1,000 for unexpected expenses.

Build Up Their Credit Score

A good credit score is essential for most financial goals, whether it’s opening a new credit card or buying a house. But recent college grads may not have had much time to build their credit history. To help them improve their scores and develop a history, here are three things to get them started:

1. Get a credit card or a secure card through their current bank, or have them added to yours.
2. Keep spending to a maximum of 30% of their credit limit.
3. Pay bills and debts on time each month.

Prioritize Paying Off Debts

After college, most young adults have already accumulated student debt to the tune of around $37,574, in addition to potentially having credit card debt.2 Even a single late payment can harm a credit score, so it’s essential they make at least the minimum payment on loans and credit card balances each month. Setting up automated payments can help them accomplish this. These debt balances can accrue interest, so encourage them to prioritize paying the full amount when they can or consider refinancing should rates move lower.

Save For Retirement

One crucial financial step many young adults overlook is saving for retirement. It’s never too soon to start preparing, and the earlier they do, the earlier they may be able to achieve a comfortable lifestyle after work. If a recent graduate’s employer has a 401(k) plan, encourage them to take full advantage of it – especially if their employer matches their contributions. Additionally, they can open an individual retirement account (IRA) to start saving on their own.

Grow Wealth With Smart Investments

College graduates should consider starting to invest and grow their wealth early. While building their portfolio may not offer an immediate payoff, growing wealth takes time, and the more runway they have, the more likely it is they’ll be able to reach their financial goals.

Next Steps

Managing money for the first time can be overwhelming. Go a step further in helping your loved ones by introducing them to your financial advisor so they can access the guidance they need as they embark upon a healthy financial life journey.

Best,

Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder | Senior Managing Partner

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions.

Endnotes

1. O’Brien, S. (Jan. 19, 2023) Lack of financial literacy cost 15% of adults at least $10,000 in 2022. Here’s how the rest fared. CNBC, https://www.cnbc.com/2023/01/19/heres-how-much-people-say-lack-of-financial-literacy-cost-in-2022.html 
2. Hanson, M. (Jan. 22, 2023) Average Student Loan Debt. Education Data Initiative, https://educationdata.org/average-student-loan-debt#:~:text=The%20average%20federal%20student%20loan,them%20have%20federal%20loan%20debt

Are you thinking about leaving your work life soon? Retirement can be an exciting milestone in your life, allowing you to spend your time however you choose. But to get there, you must prepare – both financially and emotionally.

To help you get a plan in place, here are seven questions you can ask yourself:

1. Are You Really Ready to Retire?

While most people leave the workforce around the age of 66, there’s no set-in-stone deadline.¹ Just because you’re reaching the age of retirement doesn’t mean you have to give up a job that you love. By the same token, if you’ve always dreamed of retiring early, you might just need help making a plan. Regardless of your situation, don’t feel pressured to retire until you’re ready to make the transition.

2. How Much Money Do You Need to Retire Confidently?

There’s no magic number or formula that tells you how much you need to save, especially because your costs will highly depend on what you want to do with your retirement years. To help create a clearer picture, use your current cost of living as a baseline, and don’t forget to consider factors like inflation or lifestyle adjustments. It’s important to remember that you’ll likely have a lot more time on your hands once you’ve stopped working, so think about how you’ll it – what will your hobbies and other activities cost?

3. How Much Will Health Care Cost?

Healthcare costs can quickly add up in retirement years – especially if you’re too young for Medicare, which you become eligible for at 65. You might be able to purchase health coverage through a previous employer with COBRA, or you can buy private insurance on your own. In addition to insurance costs, you’ll also want to consider long-term care expenses, as people 65 and older have a nearly 70% chance of needing these services, according to the Administration for Community Living.²

4. What Income Streams Do You Have?

As you start thinking about retirement, it’s critical to take into account all your sources of retirement income. This might include:

● Savings and retirement accounts
● Investments
● Supplemental income from life insurance
● Social Security benefits

To get a better picture of how confidently you could live off of these sources, compare this total retirement income with your intended spending habits.

5. Have You Created a Plan For Your Retirement Savings?

After spending most of your life accumulating wealth, retirement is the time to use it to achieve a reliable income stream. For many people, this might involve moving money from old 401(k) or 403(b) plans into an IRA with the help of a financial
advisor. Then, you can either set up periodic transfers into a checking account or withdraw a lump sum if you need the extra money.

When building a plan for drawing on your retirement savings, be sure to consider important age thresholds for retirement account withdrawals and social security benefits. Currently, you must be 59 ½ or older to draw from your retirement account without paying an early withdrawal penalty and you can start claiming Social Security benefits at 62. Once you turn 73, you may have to make Required Minimum Distributions (RMDs) from your tax-deferred retirement accounts every year.

6. Is Your Plan Financially Viable?

Before you get too far ahead of yourself, it’s crucial to think pragmatically about your retirement plan. For instance, have you accounted for inflation and the potential tax consequences of drawing from your investments? It’s important to note that transfers from 401(k)s and traditional IRAs are taxed as ordinary income. If you’re under 59.5 years old, you’ll also incur a 10% penalty for any withdrawals.

7. What Does Retirement Mean For You?

Finally, ask yourself what retirement really means for you. Do you want to keep working on passion projects, or spend more time with loved ones? Focus on what you want to do, as it’s not only important for your sense of fulfillment, but it will also help you plan your finances accordingly.

Retirement can be a truly freeing time, but it also involves some big decisions and a lot of forethought to do it right. You don’t have to make this decision alone. Your financial advisor can help you address your worries and help you determine if retirement makes sense for you financially, or help you get there if you’re not quite there yet.

Best,

Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder I Senior Managing Partner

This material is intended for informational/educational purposes only and should not be construed as tax, legal or investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Investments are subject to risk, including the loss of principal. Some investments are not suitable for all investors, and there is no guarantee that any investing goal will be met. Certain sections of this material may contain forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is no guarantee of future results. Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided at these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption of any kind. Please consult with your financial professional and/or a legal or tax professional regarding your specific situation and before making any investing decisions. Not associated with or endorsed by the Social Security Administration or any other government agency.

Endnotes
1 “United States Retirement Age.” Trading Economics, February 2023.
https://tradingeconomics.com/united-states/retirement-age-men
2 “How Much Care Will You Need?” ACL Administration for Community Living, February 18,
2020. https://acl.gov/ltc/basic-needs/how-much-care-will-you-need