Each year, we post a list of our favorite blogs that we published. This year we’re doing things a little different. We’re featuring the most important blogs for people in certain situations. These are the blog posts they should read, read again and consult whenever needed.
So, without further ado, we present to you Advance Capital’s most important blogs of 2022.
There have been 13 recessions since 1945, or about one every decade. So, many people have been in this situation. What’s most important to note is that recessions don’t last long – only around 10 months on average. Therefore, you don’t have to worry about them being retirement killers. Instead, you can take the following steps that will help you prepare for retiring in a recession.
Everyone’s experience in retirement is unique. But according to researchers, retirees share some common habits that can affect their happiness. Some offer attributes you may want to adopt and others you are best to avoid. Yet, they all can provide lessons on how to live a fulfilling retirement.
Getting in over your head: No one is going to tell you no. While that can be liberating, it comes with serious risk. With trading apps, in particular, relatively inexperienced traders can use options to chase bigger returns and take on more risk than they could achieve by simply buying a stock. Tragically, a young man in 2020 committed suicide after losing $750,000 on a day trading app.
The challenge is that the cost of college continues to rise and the rules surrounding financial aid are tricky. Today, families are forced to put aside more money over a longer period of time to cover educational expenses. Since 1980, college tuition and fees are up 1,200%, while the Consumer Price Index (CPI) for all items has risen by only 236%.
In a rising rate environment, you may want to retire sooner and take a larger pension before the rate hike locks in lower pension payouts the following year. Or, you may want to consider working a little longer with the expectation that rates eventually decline and your pension payout increases along with the benefit of extra years of service.
As a government employee, the Federal Employees Retirement System (FERS) Basic Benefit is a benefit available to you to help replace your current income and live a comfortable retirement. It is commonly referred to as the FERS pension. The size of your benefit can vary greatly as it depends on personal decisions you make during your working years.
How did you do this year? What do you think you could do differently next year? Asking questions like these can help you review and adjust your budget for the new year. It can be as simple as looking over past bank statements. Cancel any services you don’t plan to use anymore, such as gym memberships. And, then determine how you want to apply any of these newfound “savings”.
The funds in a tax-deferred retirement account, such as a 401(k) or traditional IRA, are yours. But you can’t simply withdraw them like in a checking or savings account. At least, not until you reach age 59 ½. If you take money out of one of those retirement accounts before age 59 ½, the IRS may hit you with a 10% tax penalty. And that is on top of the income taxes due on the amount withdrawn.
Over the short term, the stock market constantly rises and falls. Consider that the average pullback in stocks each year has been 14.0% over the past 42 years, as shown in this chart. Yet, annual stock returns were positive at the end of 32 of those 42 years – that’s 76% of the time!
Inflation is an investment risk. Your real return is simply the return you receive after the rate of inflation is taken into account. So, if a stock returns 10% in a given year and the current rate of inflation is 5%, the real return is 5%. While giving up a big chunk of your investment returns to inflation is a reasonable concern, the answer is not to try to earn an even higher return.
According to the Fidelity Retiree Health Care Cost Estimate, an average 65-year-old retired couple in 2022 may need approximately $315,000 saved to cover health care expenses in retirement. It’s no surprise then that health care costs are among retirees’ biggest financial worries. That’s why you should consider your health care options before you retire.
Bonds are kind of the “rocket science” of the investment world. They can be relatively complex, coming in the form of different maturities, coupons, yields, qualities and durations from a variety of issuers. Again, rocket science. The main thing for most investors to understand is that bonds generally provide diversification in their portfolios. They are meant to hold up your portfolio when stocks decline.