Life Insurance Before Age 40

Millennials have good reasons to obtain coverage now.

Provided by Benjamin Bogetto

Do you plan to buy life insurance before you turn 40? Maybe you should. You may save money in the long run by doing so.

At first thought, the idea of purchasing a life insurance policy in your thirties may seem silly. After all, young adults are now marrying and starting families later in life than past generations did, and you and your peers are likely in excellent health with a good chance of living past 80.

In fact, LIMRA – a life insurance research and advocacy group – recently surveyed millennials and found that 30% thought saving for a vacation mattered more than buying life insurance coverage. The perception seems to be that insurance is something to purchase when you start a family or when you hit your forties or fifties.¹

  

Getting a policy before you marry or start a family may be a great idea. The reasons for doing so might be compelling.

  

Your premiums will be lower. The older you become, the more expensive life insurance becomes. Data compiled last summer by Life Happens, a non-profit life insurance education effort, confirms this.

Life Happens asked several prominent U.S. insurers to supply their preferred premium rates for healthy non-smokers aged 25, 35, 45, and 55 buying a $250,000 whole life policy (the kind designed to build cash value with time). The average preferred premium rates for 25-, 35-, and 45-year-olds fitting this description were:

25-year-old male: annual premium of $1,987

35-year-old male: annual premium of $2,964

45-year-old male: annual premium of $4,747

25-year-old female: annual premium of $1,745

35-year-old female: annual premium of $2,531

45-year-old female: annual premium of $3,947

  

The numbers starkly express the truth – whole life insurance premiums more than double between age 25 and age 45.²

  

Premiums on term life policies are even lower. Term life insurance is essentially coverage that you “rent” for 10, 20, or 30 years – it cannot build any cash value, but in some cases, a term policy can be adapted or exchanged for a whole life policy when the term of coverage ends.

   

If you are young, term coverage is remarkably cheap. NerdWallet recently researched term life premiums for healthy 30-year-olds. It found the following sample rates for 20- and 30-year term policies valued at $250,000:

30-year-old male: annual premium of $156 for a 20-year term policy, $240 for a 30-year term policy

30-year-old female: annual premium of $141 for a 20-year term policy, $206 for a 30-year term policy

The downside of term coverage is that you are “renting” the insurance. Just as you cannot build home equity by renting a house, you cannot build cash value by “renting” a policy.³ 

A whole life policy may become quite valuable. As Life Happens notes, the average such policy bought at 25, 35, or 45 may have a guaranteed cash value of anywhere from $100,000-200,000 when the policyholder turns 65, assuming the policy is kept in force and no loans are taken from it. Universal life policies permit tax-deferred growth of the cash value.^1,2

Make no mistake, a whole life policy is a lifelong commitment. It must be funded every year or it will lapse. That should not scare you away from the value and utility of these policies – the cash inside the policy can often be borrowed or withdrawn. Sometimes families use cash value to fund college educations or help with medical expenses or retirement. Such withdrawals can lessen the death benefit of the policy, but what is left is often adequate. Cash withdrawals from a whole life policy are usually exempt from taxes, just like the death benefit.¹    

    

Maybe this is the time to put time on your side. Age-wise, life insurance will never be cheaper than it is for you today. Getting coverage now – even if you are single – may be a money-smart move as well as a great life decision. 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC

Bogetto Financial is not affiliated with First Heartland Capital, Inc.  

Bogetto & Associates does not provide legal or tax advice.  These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.

Citations.

1 - cnbc.com/2016/10/17/think-about-life-insurance-sooner-rather-than-later.html [10/17/16]

2 - lifehappens.org/product-selector/comparing-the-cost-permanent-and-term-life-insurance/ [1/26/17]

3 - nerdwallet.com/life-insurance#basic [1/26/17]

Financial Health...For Now & Tomorrow

Contact us Today

Website - www.bogettoandassociates.com

Telephone - 314-858-1602

Email - peter@bogettoandassociates.com

10805 Sunset Office Drive, Ste. 202

St Louis, MO 63127

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Bogetto & Associates Presents: Monthly Economic Update

February 2017

THE MONTH IN BRIEF

Stocks advanced again in January. The Dow Jones Industrial Average closed above 20,000 for the first time, and the S&P 500 gained 1.79% on the month. As January ended, politics took center stage: investors focused first on the controversy surrounding President Donald Trump’s executive orders, then on earnings and economic indicators. As the forex market sensed that the new administration might prefer a weaker currency, the dollar stumbled. Growing haven demand sent prices of metals higher, while prices of energy futures fell. Consumer confidence plateaued at a high level, while home sales declined. While the latest consumer spending report was solid, the first estimate of fourth-quarter growth was unimpressive.1

    

DOMESTIC ECONOMIC HEALTH 

Was 2016 really the poorest year for U.S. economic growth since 2011? Yes, according to the Bureau of Economic Analysis. It said that the economy expanded 1.9% in Q4, which means our GDP was only 1.9% for the whole year. It appears 2016 will be recorded as the eleventh straight year in which our economy grew less than 3%.2

  

The manufacturing and service sectors kept growing in December. Data from the Institute for Supply Management’s purchasing manager indices showed the pace of expansion picking up for the factory sector – that PMI improved 1.5 points to 54.7. The service sector PMI remained in good shape at a mark of 57.2. Industrial output rose 0.8% for December; hard goods orders fell 0.4% in that month, but actually rose 1.7% minus defense orders.3,4

Consumer spending was strong in December. The latest Department of Commerce report showed personal spending rising 0.5% and personal incomes 0.3% in the last month of 2016. (A month earlier, spending had advanced 0.2%, and incomes, 0.1%.) Retail sales grew 0.6% in December, but were flat minus gas and auto sales.4

The Department of Labor’s December employment report underwhelmed some analysts. Employers added 156,000 net new jobs to their payrolls, which left total 2016 hiring growth at 2.2 million – the lowest yearly figure since 2011. On the bright side, hourly wages averaged $26.00, thanks to a 2.9% annualized increase, the best seen since June 2009. The U-3 unemployment rate was at 4.7%; the U-6 rate counting underemployment, at 9.2%.5

     

Two respected consumer confidence gauges went opposite ways in January. Falling 1.5 points to 111.8, the Conference Board’s index remained at a high level. The University of Michigan’s consumer sentiment index finished January at a solid reading of 98.5, rising slightly from its preliminary mark of 98.1.4 

     

By one measure, consumer inflation was rising. The Consumer Price Index showed a 2.1% yearly advance in December, up from 1.7% a month earlier. In contrast, the Federal Reserve’s preferred inflation gauge, the core PCE price index, showed yearly inflation at 1.7%. Meanwhile, the headline Producer Price Index rose 0.3% in December, to bring its 2016 advance to 1.6%.4

President Trump signed a number of executive orders during his first ten days in office, including an order that temporarily prohibited citizens of seven predominantly Muslim countries from entering the United States. Foreign governments, tech firms, and some Wall Street market participants pondered the long-term effects of the order. Another executive order stated that for every new regulation implemented by a federal agency during Trump’s administration, two regulations would have to be revoked. A third, widely expected executive order took the U.S. out of the Trans-Pacific Partnership.6

GLOBAL ECONOMIC HEALTH

At long last, the European Central Bank met its inflation target: in December, euro area consumer prices rose at an annualized pace of 1.8%. That was the most inflation seen in the euro area since Q1 2013. (As recently as May, the region had year-over-year deflation.) Core inflation, however, was still under 1% in December. January ended with Eurostat, the European Union’s statistics agency, announcing Q4 euro area economic expansion of 0.5%, the best in three quarters.7

      

On January 17, U.K. Prime Minister Theresa May released a 12-point plan to invoke Article 50 of the EU Treaty and begin the Brexit process in March. A week later, the U.K.’s high court ruled that Parliament had to vote to permit this. Assuming Parliament greenlights the plan, the precise terms of the Brexit must still be determined, and Parliament must vote on them as well. Parliamentary approval of those terms would mean a softer Brexit; parliamentary disapproval would mean a hard Brexit, with the U.K. having to renegotiate trade deals, treaties, and immigration laws with other European nations.8

    

America’s departure from the Trans-Pacific Partnership could be a boon for China, and it may also significantly impact the economies of other Asian nations. The economy of the P.R.C., which grew at the slowest pace in a quarter-century in 2016, could presently benefit from the adoption of the 16-nation Regional Comprehensive Economic Partnership treaty, a TPP alternative that excludes the U.S. If America puts protectionist measures into place, increased trade with China would help the economies of Indonesia, Malaysia, Vietnam, Thailand, and the Philippines, which all send 10% or more of their exports here.9,10 

    

WORLD MARKETS

Key emerging market benchmarks had declined in the weeks after Donald Trump’s presidential election victory, but they rallied in January. India’s Sensex added 3.87%; Argentina’s MERVAL, 10.99%. South Korea’s KOSPI gained 2.03%. Brazil’s Bovespa was up 7.41% for the month. Hong Kong’s Hang Seng improved 6.18%, while the MSCI Emerging Markets index rose 5.45%. As for China’s Shanghai Composite, it gained 1.17%.11,12

December brought major gains for the key European indices, but they mostly went sideways or negative in January. The FTSE Eurofirst 300 declined 0.49%. France’s CAC 40 fell 2.33%; Russia’s Micex, 0.69%; Great Britain’s FTSE 100, 0.61%; and Spain’s IBEX 35, 0.39%. Germany’s DAX benchmark stood out with a 0.47% advance. To round out the global data, the MSCI World rose 2.35%; Canada’s TSX Composite, 0.64%. Japan’s Nikkei 225 lost 0.38%; Australia’s All Ordinaries, 0.77%.11,12 

        

COMMODITIES MARKETS

In December, energy futures soared while metals stumbled; in January, the inverse occurred. Gold and silver, respectively, advanced 5.07% and 10.50% last month. That took gold to a January 31 settlement of $1,209.80 on the COMEX, while silver closed out the month at $17.57. Meanwhile, platinum gained 8.66%, and copper, 8.80%. January was also a fine month for ag futures: cocoa slipped 2.15%, but coffee rose 8.92%; corn, 2.35%; cotton, 4.94%; soybeans, 2.68%; sugar, 4.10%; and wheat, 1.77%.13

Across the energy patch, there were broad losses. Natural gas fell hardest, dropping 16.21%. Unleaded gasoline gave back 6.97%; heating oil, 4.75%; and light sweet crude, 1.97%. Oil was at $52.84 on the NYMEX when the closing bell rang on January 31. The U.S. Dollar Index slid 2.54% during the month to close at 99.60 as January ended.1,13 

     

REAL ESTATE

The latest reports from the Census Bureau and the National Association of Realtors showed that both new and existing home sales had retreated in December. The pace of new home buying tumbled 10.4% while resales fell 2.8%. The year-over-year numbers? New home sales rose 12.2% in 2016; resales, 0.7%. Why such a tiny increase in resales for 2016? Some prospective homeowners had a hard time finding anything suitable to buy as the year went on. The NAR said that the total existing home inventory in December was the smallest seen in this century. (In fact, inventory had shrunk 6.3% in 12 months.) Its report showed the median sale price of an existing home at $232,200 in December.14,15

  

Pending home sales did rise 1.6% for December after a 2.5% November fall, the NAR noted. The annual gain for the S&P/Case-Shiller home price index improved 0.2% in November to 5.3%. Housing starts rose 11.3% in December, while permits for new construction declined 0.2%, the Census Bureau stated.4

   

Another factoid from last year deserves mention. During 2016, interest on a conventional home loan averaged 3.65%, the lowest number recorded by Freddie Mac since it began tracking rates in 1971.14 

In January, mortgage rates were notably higher than that – but as Freddie Mac data reveals, they still declined month-over-month. Between December 29 to January 26, the average interest rate on the 30-year FRM fell 0.13% to 4.19%. Average interest rates on the 15-year FRM and the 5/1-year ARM, respectively, decreased 0.15% and 0.10% over the same period to 3.40% and 3.20%.16,17 

    

LOOKING BACK…LOOKING FORWARD 

The post-election rally fizzled as the month ended, leading to these January 31 closes: Dow Jones Industrial Average, 19,864.09; S&P 500, 2,278.87; Nasdaq Composite, 5,614.79; Russell 2000, 1,361.82. Unlike the big three, the Russell took a January loss, slipping 0.35%. The CBOE VIX was also a January loser, down 14.74% to a month-end close of 11.99. With a 16.36% January gain, the PHLX Gold/Silver index outperformed all other consequential U.S. indices.1

January ended with the bulls a little unsure of themselves. Wall Street and foreign stock markets reacted negatively. It is worth noting that stock market retreats have been common in the first February of a new presidency. The S&P 500 has had a median return of -1.47% in such Februarys over the last 50 years, advancing in only 42% of them. Then again, past performance is no guarantee of future results, and the six months from November to April traditionally trend bullish. If stocks do waver in February, it may not foretell how the market will behave for the rest of the year or even for March.21
          

UPCOMING ECONOMIC RELEASES:

The list of major news items appearing across the balance of February: the January Labor Department jobs report, data on January factory orders, and the latest ISM service sector PMI (2/3), the preliminary February University of Michigan consumer sentiment index (2/10), the January PPI (2/14), January industrial output and retail sales, plus the January CPI (2/15), January housing starts and building permits (2/16), January existing home sales (2/22), the final February University of Michigan consumer sentiment index and January new home sales (2/24), January capital goods orders and pending home sales (2/27), and the December S&P/Case-Shiller home price index, the Conference Board’s monthly consumer confidence index, and the federal government’s second estimate of Q4 growth (2/28). January personal spending figures and the January PCE price index will be released on March 1.

Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC

Bogetto Financial is not affiliated with First Heartland Capital, Inc.  

Bogetto & Associates does not provide legal or tax advice.  These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The BSE SENSEX (Bombay Stock Exchange Sensitive Index), also-called the BSE 30 (BOMBAY STOCK EXCHANGE) or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE). The MERVAL Index (MERcado de VALores, literally Stock Exchange) is the most important index of the Buenos Aires Stock Exchange. The Korea Composite Stock Price Index or KOSPI is the major stock market index of South Korea, representing all common stocks traded on the Korea Exchange. The Bovespa Index is a gross total return index weighted by traded volume & is comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The MSCI Emerging Markets Index is a float-adjusted market capitalization index consisting of indices in more than 25 emerging economies. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The FTSE Eurofirst 300 measures the performance of Europe's largest 300 companies by market capitalization and covers 70% of Europe's market cap. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The MICEX 10 Index (Russian: Индекс ММВБ10) is an unweighted price index that tracks the ten most liquid Russian stocks listed on MICEX-RTS in Moscow. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. The IBEX 35 is the benchmark stock market index of the Bolsa de Madrid, Spain's principal stock exchange. The DAX 30 is a Blue Chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. The MSCI World Index is a free-float weighted equity index that includes developed world markets, and does not include emerging markets. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. Nikkei 225 (Ticker: ^N225) is a stock market index for the Tokyo Stock Exchange (TSE). The Nikkei average is the most watched index of Asian stocks. The All Ordinaries (XAO) is considered a total market barometer for the Australian stock market and contains the 500 largest ASX-listed companies by way of market capitalization. The US Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. The Philadelphia Gold and Silver Index is an index of thirty precious metal mining companies that is traded on the Philadelphia Stock Exchange.  Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

Citations.

1 - barchart.com/stocks/indices.php?view=performance [1/31/17]

2 - thestreet.com/story/13969585/1/stocks-mixed-after-u-s-gdp-shows-mediocre-end-to-2016.html [1/27/17]

3 - instituteforsupplymanagement.org/ISMReport/NonMfgROB.cfm [1/5/17]

4 - investing.com/economic-calendar/ [1/31/17]

5 - blogs.wsj.com/briefly/2017/01/06/december-jobs-report-the-numbers-3/ [1/6/17]

6 - thehill.com/policy/finance/overnights/317002-overnight-finance-trump-signs-2-for-1-order-for-regs-dems-block [1/30/17]

7 - bloomberg.com/news/articles/2017-01-31/euro-area-inflation-surges-to-1-8-intensifying-ecb-debate [1/31/17]

8 - cnn.com/2017/02/01/europe/uk-brexit-bill-debate/ [2/1/17]

9 - smh.com.au/world/china-eyes-opportunity-as-us-pulls-out-of-transpacific-partnership-20170123-gtxbi1.html [1/27/17]

10 - bloomberg.com/politics/articles/2017-01-31/trump-trade-risk-to-next-asian-economic-tigers-seen-in-indonesia [1/31/17]

11 - markets.on.nytimes.com/research/markets/worldmarkets/worldmarkets.asp [1/31/17]

12 - msci.com/end-of-day-data-search [1/31/17]

13 - money.cnn.com/data/commodities/ [1/31/17]

14 - usatoday.com/story/money/2017/01/26/new-home-sales-prices-mortgage-rates/97081430/ [1/26/17]

15 - inman.com/2017/01/31/decembers-numbers-hows-real-estate-market-looking/ [1/31/17]

16 - freddiemac.com/pmms/archive.html?year=2016l [1/31/17]

17 - freddiemac.com/pmms/archive.html?year=2017 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=2%2F1%2F16&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=2%2F1%2F16&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=2%2F1%2F16&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F31%2F12&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F31%2F12&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F31%2F12&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=DJIA&closeDate=1%2F31%2F07&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=COMP&closeDate=1%2F31%2F07&x=0&y=0 [1/31/17]

18 - bigcharts.marketwatch.com/historical/default.asp?symb=SPX&closeDate=1%2F31%2F07&x=0&y=0 [1/31/17]

19 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [1/31/17]

20 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [1/31/17]

21 - schaeffersresearch.com/content/bgs/2017/01/31/how-to-trade-the-tricky-month-of-february [1/31/17]

Financial Health...For Now & Tomorrow

Contact us Today

Website - www.bogettoandassociates.com

Telephone - 314-858-1602

Email - peter@bogettoandassociates.com

10805 Sunset Office Drive, Ste. 202

St Louis, MO 63127

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Saving $1 Million for Retirement

How can you plan to do it? What kind of financial commitment will it take?

Provided by Benjamin Bogetto

How many of us will retire with $1 million or more in savings? More of us ought to – in fact, more of us may need to, given inflation and the rising cost of health care.

Sadly, few pre-retirees have accumulated that much. A 2015 Government Accountability Office analysis found that the average American aged 55-64 had just $104,000 in retirement money. A 2016 GoBankingRates survey determined that only 13% of Americans had retirement savings of $300,000 or more.^1,2

 

A $100,000 or $300,000 retirement fund might be acceptable if our retirements lasted less than a decade, as was the case for some of our parents. As many of us may live into our eighties and nineties, we may need $1 million or more in savings to avoid financial despair in our old age. 

The earlier you begin saving, the more you can take advantage of compound interest. A 25-year-old who directs $405 a month into a tax-advantaged retirement account yielding an average of 7% annually will wind up with $1 million at age 65. Perhaps $405 a month sounds like a lot to devote to this objective, but it only gets harder if you wait. At the same rate of return, a 30-year-old would need to contribute $585 per month to the same retirement account to generate $1 million by age 65.³    

The Census Bureau says that the median household income in this country is $53,657. A 45-year-old couple earning that much annually would need to hoard every cent they made for 19 years (and pay no income tax) to end up with $1 million at age 64, absent of investments. So, investing may come to be an important part of your retirement plan.⁴

 

What if you are over 40, what then? You still have a chance to retire with $1 million or more, but you must make a bigger present-day financial commitment to that goal than someone younger.

 

At age 45, you will need to save around $1,317 per month in a tax-advantaged retirement account yielding 10% annually to have $1 million in 20 years. If the account returns just 6% annually, then you would need to direct approximately $2,164 a month into it.⁴

    

What if you start trying to build that $1 million retirement fund at age 50? If your retirement account earns a solid 10% per year, you would still need to put around $2,413 a month into it; at a 6% yearly return, the target contribution becomes about $3,439 a month.⁴

  

This math may be startling, but it is also hard to argue with. If you are between age 55-65 and have about $100,000 in retirement savings, you may be hard-pressed to adequately finance your future. There are three basic ways to respond to this dilemma. You can choose to live on Social Security, plus the principal and yield from your retirement fund, and risk running out of money within several years (or sooner). Alternately, you can cut your expenses way down – share housing, share or forgo a car, etc., which could preserve more of your money. Or, you could try to work longer, giving your invested retirement savings a chance for additional growth, and explore ways to create new income streams. 

 

How long will a million-dollar retirement fund last? If it is completely uninvested, you could draw down about $35,000 a year from it for 28 years. The upside here is that your invested retirement assets could grow and compound notably during your “second act” to help offset the ongoing withdrawals. The downside is that you will have to contend with inflation and, potentially, major healthcare expenses, which could reduce your savings faster than you anticipate.

So, while $1 million may sound like a huge amount of money to amass for retirement, it really is not – certainly not for a retirement beginning twenty or thirty years from now. Having $2 million or $3 million on hand would be preferable.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC

Bogetto Financial is not affiliated with First Heartland Capital, Inc.  

Bogetto & Associates does not provide legal or tax advice.  These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.

Citations.

1 - investopedia.com/articles/personal-finance/011216/average-retirement-savings-age-2016.asp [12/8/16]

2 - time.com/money/4258451/retirement-savings-survey/ [3/14/16]

3 - interest.com/retirement-planning/news/how-to-save-1-million-for-retirement/ [12/12/16]

4 - reviewjournal.com/business/money/how-realistically-save-1-million-retirement [5/20/16]

Financial Health...For Now & Tomorrow

Contact us Today

Website - www.bogettoandassociates.com

Telephone - 314-858-1602

Email - peter@bogettoandassociates.com

10805 Sunset Office Drive, Ste. 202

St Louis, MO 63127

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How Much Will You Spend When You Retire?

Will you have enough money to make ends meet?

Provided by Benjamin Bogetto

You may have heard that people spend less once they are retired. Statistically, that is true. The question is whether a retiree has enough income to meet his or her expenses.

Ideally, retirees should be able to live comfortably on 70-85% of their end salaries and draw their retirement fund down no more than 4-5% per year during a 30-year retirement. Are these two objectives realistic for the average retiree household?^1,2 

According to the most recently published Bureau of Labor Statistics data, a household maintained by someone 65 or older had a mean income of $46,627 in 2015 and a disposable income of $42,959 after taxes. That average retiree household spent an average of $44,664 in 2015. So, on average, seniors spent more than they had on hand.^2,3

Basic math tells us that 46,627 is roughly 70% of 66,500 and roughly 85% of 55,000. So, a retirement income of $46,627 would correspond to about 70-85% of a typical middle-class salary in 2015. In other words, it appears all too easy for the middle-class worker to transform into the financially challenged retiree.

Why is the average retiree household spending more than its net income? Three possible reasons come to mind. One, the cost of living may be rising faster for retirees than some assume. Social Security bases its cost-of-living adjustments to retiree benefits on changes in the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers). Some economists think Social Security should use a different yardstick. Two, annual health care costs may suddenly jump for some seniors. Three, it is not unusual for new retirees to spend more than they anticipate as they travel and enjoy life.⁴

How do average retiree expenses break down? Housing costs accounted for $15,529 of that aforementioned $44,664 in 2015 household expenses. Transportation costs took another $6,846. Health care costs made up $5,756 of the total ($3,900 of that went to health insurance, $672 for medicines). Another $1,298 went for mortgage costs.^2,3

 

When you spend more than you make in retirement, you dip into your savings. That fact takes us straight toward a larger problem.

  

Most baby boomers are approaching retirement with a savings shortfall. The 2016 Employee Financial Wellness Survey from PwC (PriceWaterhouseCoopers) found that 50% of baby boomers had less than $100,000 in a workplace retirement plan. So, drawing down that amount by 4% a year would bring them less than $4,000 in annual retirement income. Of course, some of these employees will be able to tap IRAs, brokerage accounts, or income streams from other sources – but when your workplace retirement plan savings are that scant after age 50, other sources must compensate mightily. For many retirees, Social Security will not take up the slack. The average projected monthly Social Security benefit for 2017 is just $1,360.²

 

From the numbers in this article, you can glean that the average American retiree faces more than a little financial pressure. If you are a baby boomer who has saved and invested for decades and wants to work longer to give your invested assets a few more years of growth and compounding, you may have above-average prospects for a comfortable retirement.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC

Bogetto Financial is not affiliated with First Heartland Capital, Inc.  

Bogetto & Associates does not provide legal or tax advice.  These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.

Citations.

1 - cbsnews.com/news/how-much-retirement-income-do-you-really-need/ [3/3/16]

2 - fool.com/retirement/2016/12/18/how-much-money-does-the-average-baby-boomer-need-i.aspx [12/18/16]

3 - bls.gov/cex/2015/combined/sage.pdf [8/16]

4 - fool.com/retirement/2016/09/24/heres-why-your-social-security-check-is-hardly-goi.aspx [9/24/16]

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Website - www.bogettoandassociates.com

Telephone - 314-858-1602

Email - peter@bogettoandassociates.com

10805 Sunset Office Drive, Ste. 202

St Louis, MO 63127

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Making & Keeping Financial New Year’s Resolutions

What could you do (or do differently) in the months ahead?

Provided by Benjamin Bogetto

  

How will your money habits change in 2017? What decisions or behaviors might help your personal finances, your retirement prospects, or your net worth?

 

Each year presents a “clean slate,” so as one year ebbs into another, it is natural to think about what you might do (or do differently) in the 12 months ahead.

 

Financially speaking, what New Year’s resolutions might you want to make for 2017 – and what can you do to stick by such resolutions as 2017 unfolds?

   

Strive to maximize your 2017 retirement plan contributions. Contribution limits are set at $18,000 for 401(k)s, 403(b)s, most 457 plans, and the federal government’s Thrift Savings Plan; if you will be 50 or older in 2017, you can make an additional catch-up contribution of up to $6,000 to those accounts. The 2017 limit on IRA contributions is $5,500, and $6,500 if you will be 50 or older at some point in the year. (If your household income is in the six-figure range, you may not be able to make a full 2017 contribution to a Roth IRA.)¹

 

Under 40? Set up automatic contributions to retirement & investment accounts. There are two excellent reasons for doing this.

One, time is on your side – in fact, time may be the greatest ally you have when it comes to succeeding as a retirement saver and an investor. An early start means more years of compounding for your invested assets. It also gives you more time to recover from a market downturn – a 60-year-old may not have such a luxury, but a 35-year-old certainly does.

Two, scheduling regular account contributions makes saving for retirement a given in your life – month after month, year after year. You can contribute without having to think about it, and without having to wait months or years to amass a lump sum. Those two factors can become barriers for people who fail to automate their retirement saving and investing.

 

Can you review & reduce your debt? Look at your debts, one by one. You may be able to renegotiate the terms of loans and interest rates with lenders and credit card firms. See if you can cut down the number of debts you have – either attack the one with the highest interest rate first or the smallest balance first, then repeat with the remaining debts.

Rebalance your portfolio. If you have rebalanced recently, great. Many investors go years without rebalancing, which can be problematic if you own too much in a declining sector.

 

See if you can solidify some retirement variables. Accumulating assets for retirement is great; doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year – that may make the “how” and “how much” clearer as well.

 

The same applies to college planning. If your child has now reached his or her teens, see if you can get a ballpark figure on the cost of attending local and out-of-state colleges. Even better, inquire about their financial aid packages and any relevant scholarships and grants. If you have college savings built up, you can work with those numbers and determine how those savings need to grow in the next few years.

 

How do you keep New Year’s resolutions from faltering? Often, New Year’s resolutions fail because there is only an end in mind – a clear goal, but no concrete steps toward realizing it.

 

Mapping out the incremental steps can make the goal seem more achievable. So, can visualizing the goal – something as simple as a written or calendared daily or weekly reminder may reinforce your commitment to it. Two New York University psychology professors, Gabriele Oettingen and Peter Gollwitzer, have developed what they call the “WOOP” strategy for achievement. Its four steps: pinpoint a challenging objective that can be met; think about the best result that could come from trying to reach the goal; identify any obstacles in your way; and distinguish the “if-then” positive steps you could take that would help you realize it.²

    

Financial new year’s resolutions tend to boil down to a common goal – the goal of paying yourself first. That means saving and investing money for your future rather than paying your creditors or buying expensive consumer items bound to depreciate. Think ahead – five, ten, or even twenty or thirty years ahead – and make this the year to plan to accomplish money goals, both big and small.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Securities offered through First Heartland Capital, Inc. Member FINRA/SIPC

Bogetto Financial is not affiliated with First Heartland Capital, Inc.  

Bogetto & Associates does not provide legal or tax advice.  These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.

Citations.

1 - kiplinger.com/article/retirement/T047-C001-S003-making-ira-and-401-k-contributions-in-2017.html [11/7/16]

2 - usatoday.com/story/money/2016/12/20/five-doable-strategies-financial-success-2017/95521556/ [12/20/16]

Financial Health...For Now & Tomorrow

Contact us Today

Website - www.bogettoandassociates.com

Telephone - 314-858-1602

Email - peter@bogettoandassociates.com

10805 Sunset Office Drive, Ste. 202

St Louis, MO 63127

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