Get Your 401(k) On Track

The median 401(k) balance for people nearing retirement is $149,400, enough to provide a mere $9,000 annually in retirement, according to the Wall Street Journal. Try living on that, even if you add Social Security.

Need to do better? Resolve to use your 401(k) benefit for all it’s worth. You’ll typically find 401(k) investments in these asset classes:

1. Bonds: short-, intermediate-, and long-term. Bonds also are classified by investment grade, such as “high-yield” investments in “lower-quality” bonds
2. Large cap equity funds: growth, value, or a blend of growth and value
3. Small cap companies: growth, value, or a blend
4. Mid cap companies: growth, value, or a blend
5. International companies: growth, value, or a blend. There also are “global funds” and “developing-market funds” internationally.
6. Real-estate funds
7. Socially responsible funds
8. Money market accounts (MMAs) and other fixed-return investments, such as guaranteed investment contracts (GICs)

Learn about your investment options by studying your 401(k) plan’s enrollment books and by looking at the past performance reports on investment funds within the plan. At the same time, always recognize that past performance is no predictor of future performance.

If you don’t have a lot of investment experience, target funds and lifestyle funds offer a quick way to invest in a diversified portfolio.

Once you choose a strategy and pick a mixture of stock funds, bonds, and fixed investments, it’s up to you to follow your 401(k) statements closely and reallocate your blend of funds every six months or at least yearly.

And if you need help planning for your retirement, talk to a Hopewell Federal Credit Union investment adviser to get on the right track.

 

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Downsizing Offers Advantages

Is it time to sell that big family home and move to smaller quarters? Eleven percent of people age 55 to 64 are making plans to downsize within three years, according to a Forbes report on a MetLife Mature Market Institute study.

Sale prices are headed back up from the declines we saw between Dec. 1, 2005 and Aug. 1, 2010. The national average sales price increased 7.9% from $179,000 to $193,000 for the year ending December 1, 2010, according to Zillow.com.

Downsizing should help stretch retirement funds due to a smaller mortgage loan or no mortgage, lower taxes, lower insurance premiums, and lower utility bills. Adults-only communities usually provide yard and exterior home maintenance for a fee. Retirees also can save money by moving to an area with a lower cost of living. Visit Yahoo! Real Estate (realestate.yahoo.com/homevalues) to scout home prices in areas where you may want to resettle.

You also should research taxes in areas you are considering. The Retirement Living Information Center (retirementliving.com/RLtaxes.html) provides state comparisons for income tax, property tax, sales tax, and even fuel tax. Twenty-seven states do not tax Social Security income. Several states give tax breaks for military pensions and other retirement income. And some states provide property tax breaks aimed at helping retirees.

When it’s time to downsize, look at the floor plan for your new home and decide what fits and what doesn’t. Then decide what to keep, give, sell, donate, store, or toss. It may take some work, but downsizing can be rewarding—both personally and financially.

And remember, whether you stay or relocate, you can maintain all your familiar Hopewell Federal Credit Union services. Talk to us about how we can serve you no matter what your address is.

Real Reasons to Hire a Financial Advisor

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Scott Webb
“Advice For Life”
Webb Financial Group LLC
“The Wealth Management Firm”

What is the biggest reason you hire a financial advisor? If you read and believe the media hype, you might think it is to outperform the stock market.  This is very difficult to do.  In fact, most fund managers can’t over a 10 year period.  I did a research paper back in 1988 and could not find any empirical evidence that a fund manager could outperform the indice they were trying to beat.

If a financial advisor can’t do this then why hire them?  Here are some compelling reasons from Sally Krawcheck(Former president of Smith Barney), Linked In, March 26, 2013.

1. Ask you questions you don’t want to talk about: How to take care of your aging parents? Do you have a will?  What would you do if you lost your job?  These are great questions you need to address by somebody that talks about this every day.

2. Put together a financial plan: When are you going to retire? How much life insurance is enough? Am I paying too much in taxes? How do all my investments work together?

3. Identify risks in your portfolio: You might own 5 investments all in one asset class.  You might have all your money in stocks at age 65 and not know how much risk you have.

4. Talk you through market volatility: Research has shown that historically the stock market has recovered over time.  It is important if you have long term goals to be patient on not sell at the bottom depending on your personal situation.

5. Identify your biases with objectiveness: This is a huge one.  In 1996 I met with a worker from Owens Corning with all his money in Owens Corning stock.  He would be a lot wealthier today if he would have diversified.  He had worked there for 30 years and told me the company wasn’t going anywhere…

These are some points that some people might not think about when they are planning their future.  My opinions are general in nature and not intended for any specific individual.  Hopefully you find a good advisor that addresses these concerns for you.

Webb Financial Group LLC and can be reached at scott.webb@lpl.com, (740)454-6113 or http://www.webbfinancialgroupllc.com.  Securities are offered through LPL Financial, member FINRA/SIPC. Insurance products offered through LPL Financial or its licensed affiliates.

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Not Credit Union Guaranteed
May Lose Value

Does Spring include Graduation? Be Prepared!

Each spring thousands of college graduates leave the safe haven of university life for the real world. From paying off student loans to the shock of auto insurance rates, there’s a host of new financial experiences awaiting these grads, and some situations for which they’re totally unprepared.

A 2012 study published in the International Journal of Business and Social Science found that 70% of undergraduates own credit cards. The report also states that very few students use their card for tuition but that most of the students would use credit cards for school supplies, textbooks, and food. Almost half the respondents say they only use their credit cards during emergencies.

The cost of credit
Perhaps the most unsettling surprise for recent college graduates surrounds the long-term impact that poor credit decisions can have during and after college.

To help avoid getting into credit trouble, college students and recent college grads should get copies of their credit reports to have a clear picture of their financial situations. Credit reports also can show the deep impact debt can have on credit histories, and allows you to spot any inaccurate information. Individuals can obtain a free copy of their credit report from each of the three major credit reporting bureaus–Equifax, Experian, and TransUnion–once a year.

In addition to obtaining a credit report, young grads also will want to regularly check their credit score. A credit score is a number from 300 to 850 and is used by potential lenders to determine the interest rate on loans and whether credit is granted, and at what cost. A credit score also can be obtained from each of the three credit reporting bureaus–but at a cost of around $15.

It’s never too early to start saving for retirement
One of the most serious mistakes young grads can make is to put off saving for retirement. Those in their late teens and early 20s may think that planning for retirement makes little sense, considering that it’s an event that won’t take place for another 40 years. But retirement is a process as well as an event. What occurs in the many years that lead up to retirement has a profound effect on the quality of retirement once it arrives.

Save for a rainy day
Many financial experts recommend you have three to six months of your salary and income put away in case of an emergency or unexpected expense. It’s important that this money be liquid, which means that you can withdraw it without penalty at a moment’s notice. You also will want to earn as much interest on it without incurring risk, which may make a money market account your best option. While you’ll never lose the money deposited into this account, you’re not guaranteed to increase the value either.

Call Hopewell Federal Credit Union today. We’re ready to provide the services and support you need–as you get started and as you move through life

401(k) Hardship Withdrawals: Know the Stakes

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A sudden job downgrade, not being able to keep up with mortgage payments, or an expensive medical bill could leave you desperately looking for an immediate source of income.

Your 401(k) should be the last place you look for quick money. But if you’ve exhausted all other options, and your employer plan allows hardship withdrawals, you might have no choice but to tap in to your 401(k) retirement plan to help ease your financial burdens.

Before you do:

* Comb the fine print in your 401(k) plan to find out what qualifies as a hardship. Usually it must be an immediate and heavy financial need pertaining to certain expenses.
* Find out if you are eligible to take a hardship withdrawal. The IRS says you must exhaust other, specific options first.
* Learn how much money is available to you. It’s usually restricted to the amount you have contributed to the plan, without earnings, but not always.

Be aware that:

* For at least six months after you receive the withdrawal, you may not make new pretax contributions and you’ll miss out on all or some employer matches during that time.
* You will have to pay taxes on the amount you receive, based on your tax bracket.
* If you’re younger than 59½ years old, you will have to pay a 10% early withdrawal penalty.
* In addition to the penalty, your plan might charge a fee to take a hardship withdrawal.

Don’t go into this without understanding the consequences. First and most important is that you’ll forgo the compound earnings you’d otherwise enjoy in retirement.

To drive this home, say you are 30 years old, in the 25% tax bracket, and want $10,000 to pay for your tuition this year. You will have to pay an employer withdrawal fee, an IRS early-withdrawal penalty, and taxes; and you’ll have to stop making elective deferral contributions for six months. The end result: You could come short approximately $194,000 when you retire–assuming you miss a 7% annual rate of return.

In some situations it is worth taking the hardship withdrawal, but it should be your last resort. Consult with your HR department and your tax and financial advisers; and evaluate your alternatives with a Hopewell Federal Credit Union loan officer.

Make Yours an Unconventional Retirement

Several alternative ways to live during retirement when you haven’t saved much may turn out to be more fun or in vogue than you think.

One of the most effective ways to cut your living expenses is to share housing. Moving in with a relative or friends now, before you retire, can allow you to start putting 50% or more of your income into savings. Continuing that pattern in retirement or starting it then allows you to keep living expenses low.

“The Golden Girls” TV show that aired from 1985 to 1992 depicted sharing living quarters as fun for those in their 60s, 70s, and 80s.

And working in retirement is becoming the new normal. In 2009, according to an AARP study, 17.2% of Americans age 65 and older were still working. A May 2011 Transamerica Center for Retirement Studies survey found that 50% of workers plan to remained employed after they retire, mostly in part-time jobs.

Working longer puts you in some very distinguished company. A recent Ledbury Research survey of 2,000 “high net worth” individuals found that 60% are not planning on traditional retirement. Barclay’s Wealth Management has dubbed them the “Nevertirees.” Included are the likes of Warren Buffett and Paul McCartney.

Making green choices to protect the planet and cut costs, exercising and eating right to protect your health and also cut expenses are increasingly common. Good habits can help you slash expenses now and in retirement.

IRAs and Hopewell Federal Credit Union: A winning formula

“Winning is never accidental. To win consistently, you must have a clear plan and intense motivation.” –Lou Holtz, legendary football coach

Great advice, especially when it comes to retirement. A retirement plan and determination will take you where you want to go–traveling, golfing, or relaxing by a lake.

Whatever you have in mind for your golden years, a Hopewell Federal Credit Union  individual retirement account (IRA) is a safe harbor for your retirement funds. There are more IRA types, and more maturity options than ever, so funds are available when you need them, now or later.

Financial institutions notify you when a certificate comes due, but keep track of due dates. Along with terms, such as grace period, due dates are spelled out in the contract and worth checking out. If you do nothing when an IRA certificate matures, it automatically will renew at the same terms but not necessarily the same rate.

Because you don’t have to keep your IRA in the same account forever, it pays to shop around. IRA rules permit you to transfer, tax-free, IRA assets to different financial institutions or brokers. And, if you leave an employer, you may be able to move accumulated pension benefits into an IRA. If you’re switching jobs, you also can use an IRA as a holding account for moving funds to your new employer’s plan.

And if you need some, but not all, of your IRA assets, it’s possible to move part of the withdrawal tax-free into another IRA and keep the rest of it. Of course, the amount you keep generally will be taxable and may be subject to the 10% early federal withdrawal penalty, and, in some states, an additional state penalty. Shifts are subject to certain rules to avoid penalties, so check with your tax adviser to be sure.

When you’re ready for a change, contact Hopewell Federal Credit Union about rolling over established IRA funds, adding funds to, or putting new money into an IRA. We have attractive savings rates and offer a safe place for your retirement funds.