Banknotes

We hope you are staying safe and encourage you to use this time for “spring cleaning” of your estate and financial plans! During these unprecedented times, many of us are staying home more often and finding ourselves with extra time on our hands. Now, more than ever, it is important to make sure the many aspects of our financial futures are in order.

The coronavirus has radically affected the lives of everyone in this country – and, indeed, the world – in an unprecedentedly short amount of time. News of it on the radio, TV, and internet seems all-consuming. This piece is not intended as an update on the virus, because by the time it’s published any news contained herein will be outdated. Instead, the purpose here is to discuss the investing environment, both during this crisis and beyond.

“If you don’t know exactly where you’re going, how will you know when you get there?” That’s a very good question, posed by author and behavioral science academic, Steve Maraboli.

It resonates with financial planners who work to develop sound plans that help ensure long-term financial security for clients and their families. Financial decisions nearly always involve trade-offs – proverbial forks in the road, if you will. Absent a well-crafted plan, one is behaving as if it doesn’t matter which road is taken. Nothing could be further from the truth!

You’ve done everything you were supposed to do. You’ve saved, invested, and you have a total of $1,000,000 in your employer retirement plan. You even got the memo about Roth contributions, and $200,000 of your million is in Roth contributions. You’ve decided that now is the time to ride off into the sunset and enter the wonderful world of retirement. What’s next?

There’s no getting around it: Saving is hard. Right now, there are probably 100 more exciting things you would like to do with your money than save it. While retirement and other long-term goals may seem like distant dreams, time flies when you are having fun! And the longer you wait, the more challenging it becomes to realize the freedom you envision for yourself in retirement.

Congress’s well-intentioned plan to bolster retirements for working Americans – the Setting Every Community Up for Retirement Enhancement (SECURE) Act – will come with its own set of wrinkles and challenges for defined-contribution plan sponsors (e.g., 403[b], 401[k], etc, which I’ll collectively refer to as “401[k] plans,” for the purposes of this article).

I have to be brief and selective, but here are a few topics to consider carefully if you are tasked with administering the plan for your co-workers or employees.

With traditional pension plans all but gone, many workers have been left to rely on a 401(k) plan as their primary source of income in retirement. There’s just one problem with that: Multiple studies indicate that approximately 40 million Americans do not have a workplace retirement plan.

The Setting Every Community Up for Retirement (SECURE) ACT – a topic that Jeff Collins introduced in this space when it was only proposed legislation – was recently passed by Congress (with broad bipartisan support, no less), marking a significant victory for anyone actively planning for their non-working years. Put simply, the Act is the kind of retirement reform that may come along only once in a generation.

Will 2020 be the year? If so, congratulations are in order! You are about to embark on an exciting and rewarding chapter of your life – one you've been working toward, intentionally or not, for decades. Whether your plan is to retire cold-turkey or transition more slowly, there are a few things to keep in mind that will help make the process easier, less stressful, and, ultimately, more enjoyable.

Pensions are among the rarest of rarities and will never return. The future of Social Security is stressed, and the ultimate destination of our healthcare system is uncertain to say the least.

What’s a person to do? The answer is simple: Begin planning for retirement in earnest and implement your plan – the sooner the better. Here are three checklists, compiled by decade, that will help guide your planning and keep you heading in the right direction.