Banking & Finance 2019

Banking Finance

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LOCAL EXPERTS WEIGH IN FINANCIAL PLANNING SAVING FOR RETIREMENT AFTER 50 CREATING A BUDGET

SPECIAL ADVERTISING SECTION OF THE BANGOR DAILY NEWS

2019

Contents Financial Planning

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LOCAL EXPERTS WEIGH IN

Financial plans (and why you need one)

04

THE ADVANTAGE OF WORKING WITH A FINANCIAL PLANNER Charitable Giving

08

GIVING BACK

The advantages of giving back & how to be charitable when money is tight

Banks & Credit Unions

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BANKS & CREDIT UNIONS

While digital banking has blurred the lines, differences remain

Family Finances

14

MERGING FINANCES

The benefits of a joint bank account and how to merge your finances after tying the knot

16

WHAT IT COSTS TO RAISE KIDS TODAY

18

SIMPLE WAYS TO KEEP A BUDGET

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8 WAYS TO START SAVING NOW Student Debt

22

COLLEGE SAVING SUGGESTIONS

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TIPS TO PAY OFF STUDENT DEBT EARLY Retirement Planning

26

HOW TO SAVE MORE AFTER AGE 50

28

WHAT TO DO WITH OLD 401(K)S

32

STREEETCH THOSE RETIREMENT SAVINGS

Banking Finance

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Publisher RICHARD J. WARREN

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Financial Planning

LOCAL EXPERTS

Weigh In

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FINANCIAL PLANS (AND WHY YOU NEED ONE) clear understanding of personal expenditures and savings rates is essential for securing a strong financial future. A financial plan can help everyone from the extraordinarily wealthy to those struggling to make ends meet.

“A financial plan is simply a plan for your money and lifestyle, a roadmap with directions as to how to arrive at a time when you have a choice to live to work rather than work to live,” said Annette Lease, a financial planner for Machias Savings Bank.

And according to the Financial Planning Association, a financial plan identifies goals and objectives that take finances to achieve and creates a plan for making those things happen. A financial plan can serve as a road map that people can look to for years to come as they work toward securing their financial futures.

“For some, it’s a tedious, time consuming, rather-have-a-root-canal experience,” said Lease. “For others, it’s a framework to guide them through financial decisions which provides them peace of mind.”

Whether you aim to retire by age 50 or to reduce your debt, a financial plan can be just what you need to turn your dreams into a reality. Here are some steps for devising a financial plan.

Identify what you want. You must identify what you want to achieve. Goals may include buying a home, retiring early, providing for a child’s education, or having more time and money for travel. “The one I see most often is college vs. retirement savings. A successful plan may be developed to meet the needs of most but not all of your goals,” said Lease. Putting your goals on paper may inspire you to pursue them more vigorously.

Audit your finances. Conduct an audit of your finances so you can get a clear grasp of your current situation. Make a list of all of your assets, and then subtract existing debts to figure out your net worth. While you’re tabulating, find out how much you bring in and spend each month so you can get a clear picture of your spending habits. This will help you make smart choices in regard to spending and saving.

Eradicate existing debt. One of the key parts of a financial plan is to pay down high-interest debt to free up money for the future. Focus on paying off credit card balances, high-interest loans or balances for other accounts where interest is high. A debt consolidation loan may be worth exploring if you’re having trouble paying down high-interest debt.

Start saving. Building savings is essential to reaching many goals. It also is key to help avoid financial ruin during emergency situations, such as home or car repairs, disability that takes you out of work, etc. Start small by having a certain percentage of money deposited into a separate account automatically. Then watch it grow. Investing in the right products also can help you grow your savings.

“I believe that the greatest gift we can give our adult children as we age is our own financial and physical independence. This doesn’t happen without planning and caring for ourselves along the journey of life,” said Lease.

PHOTO: ©ASTAROT/ ADOBE STOCK

This article provided by Metro Creative Services. Additional reporting for this story was provided

by Joshua Archer.

Remarks from Machias Savings Bank representatives ©2019 Machias Savings Bank. Member FDIC. This article is not intended to provide legal, tax, investment, or financial advice. NonDeposit Investment Products are not FDIC Insured, No Bank Guarantee, May Lose Value.

bangordailynews.com • 3

Financial Planning

Financial Planner THE ADVANTAGE OF WORKING WITH A

nvesting requires some measure of risk. Risk understandably makes people nervous, especially in regard to their finances.

Investing is an important component of securing your financial future, and the risk involved with investing should never prevent you from putting your money to work.

“The challenge is knowing what you need, then finding the right person or program that fits your needs and personal style,” said Annette Lease, a financial planner for Machias Savings Bank.

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Lease. “However, the fact is that this can be a time consuming and, to some extent, expensive proposition.”

Financial planners can expand your investment options. Financial planners sometimes have access to products that are not directly available to everyone. Some financial product providers work exclusively through intermediaries (i.e., planners), so working with a financial planner can give investors more options in regard to how to invest their money.

Financial planners do the legwork.

Even seasoned investors with a firm grasp

The challenge is knowing what you need, then finding the right person or program that fits your needs and personal style.”

Many people, including both novice and experienced investors, overcome their fears about investing and risk by working with certified financial planners, who can do a lot more than make suggestions.

Financial planners can make sense of complex products. Financial jargon can be hard to understand for those who do not work in finance. Financial planners simplify the complex array of products available to their clients, helping them understand each of their options as well as which of those options is best for them. “I believe that everyone should have access to a financial planner and planning programming,” said 4 • BDN BANKING & FINANCE • 2019

of financial products and services may not have the time to stay up on all the latest investment options. Financial planners do so for a living. A good planner will inform his or her clients of the latest products available and then help clients decide if such products are right for them. That’s a lot of work that busy professionals often do not have the time to do on their own.

Financial planners are certified. Investors should only work with certified financial planners. Certification standards vary by country, but certified planners have been vetted by third party organizations and have met rigorous professional standards.

“Planners have the ability to bring calm and framework to the planning process.

They should be objective and understand the goals of all involved parties. In so doing, they can assist in prioritizing and creating realistic goals as they work through a planning process with you,” said Lease.

In addition, to maintain their certification, certified planners are required to provide their clients with straightforward advice and put clients’ needs ahead of their own. Those that don’t could be held financially accountable for providing misinformation or bad advice to clients. Investing is complicated, and many investors find working with certified financial planners is an effective way to secure their financial futures.

This article provided by Metro Creative Services. Additional reporting for this story was provided by Joshua Archer.

Remarks from Machias Savings Bank representatives ©2019 Machias Savings Bank. Member FDIC. This article is not intended to provide legal, tax, investment, or financial advice. Non-Deposit Investment Products are not FDIC Insured, No Bank Guarantee, May Lose Value. bangordailynews.com • 5

Financial Planning

Financial Planning GUIDING YOU THROUGH LIFE’S MILESTONES COURTESY DEIGHAN WEALTH ADVISORS OUR FINANCIAL needs grow and change, just as we mature and develop in life. Deighan Wealth Advisors helps our clients simplify their financial lives, providing holistic advice applied to each client’s individual situation, no matter the life stage. Whether in the accumulation, preservation, or distribution phase, we advise our clients in how to better their lives with sound financial and investment guidance. A financial plan is an important guide, no matter where you are in life.

PLANNING FOR LIFE

LUCIE E. ESTABROOK, CTFA

JENIFER L. BUTLER, CFA, CFP®

JENNIFER L. EASTMAN, JD

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The Stevensons are in their thirties, both employed, with a second child on the way. Though they carry the average debts of their age, mostly mortgage and student loans, they would love to have one parent spend a few years at home while the children are young. Can they afford to do so? What impact will it have on their retirement savings and the aggressive stance they have taken toward debt? What should be their priority financial considerations?

For many families, grappling with the tension between debt reduction and savings can be overwhelming and confusing, particularly when the expenses of children enter the financial picture. A basic emergency fund can seem out of reach when the costs of childcare and medical expenses add up quickly. Thorough financial planning can compare the costs of childcare to reduced income with a stay at home parent.

Young professionals should not

sacrifice retirement savings—at minimum, contributing up to a company match, if available. Saving for that emergency fund can be invaluable when unexpected expenses arise, but college funds and proper insurance coverage are important too. Where can they afford to save? What can they not afford to skimp on? A qualified financial professional can help create a sustainable, realistic budget that meets current needs, saves for the future, and aims for the goal of financial security, establishing a long term relationship to guide you along the way.

PLANNING FOR RETIREMENT Joe and Kathy are five years from retirement. “I’ve been collecting a paycheck since I was 16-years-old. What happens when the checks stop?” asks Joe. They’ve each worked most of their lives and worry about how they will manage without a steady income flow. Kathy tracked spending over the past year to estimate what they should expect in retirement. Some expenses would decline when they were no longer working. The mortgage would be paid off. They wouldn’t spend as much on gas or car maintenance.

What other expenses might take the place of their day-to-day work-related expenses? Will they be able to keep their summer camp? Help the grandkids with tuition? What if they experience a health scare?

The best way to know how well you will stick to a budget in retirement is to give it a try! One rule of thumb is that you’ll need 75% of your current income in retirement. Some folks need more, some significantly less. We often tell folks to give retirement living a test drive by living on 75% of current income for at least a few months – preferably a full year. Are there monthly outflows that can be reduced or eliminated? Are there ways to make charitable contributions benefit both the charity and your tax bill? When is the best time to file for Social Security? Which account should be tapped first for retirement income? Don’t leave your financial future to chance. A good financial planning professional will look at your individual circumstances to help answer these questions and many more in your pursuit of a worry-free retirement lifestyle.

PLANNING FOR SOCIAL SECURITY Dale wants to retire next year at age 62, but is uncertain whether to begin receiving social security retirement benefits, or wait a few more years.

There is no clear “right choice” and timing is everything! Full retirement age (FRA) for most falls somewhere between age 66 and 67, and the social security system has strong incentives in place to encourage retirees to wait until they reach their FRA date. If you choose to collect as soon as you are eligible (62) but before your FRA, your annual FRA benefit will be permanently reduced by approximately 25%. Delaying benefits until age 70 will permanently increase your benefit by as much as 32%. Early retirees must ask themselves whether they will be able to meet all of their life goals with this level of reduction. Equally concerning is the impact of earned income on social security benefits taken before FRA. A 62-year-old receiving social security benefits and receiving more than the allowed amount of earned income will see benefits reduce at the rate of $1 for every $2 above the limit. Many retirees have experienced suspended benefits after unknowingly tripping over these rules.

The foregoing are just a few of the details to know before filing for social security. Others include the effect of certain government pensions, disability, and marital status. Each person’s situation is unique. A knowledgeable financial planning professional can make all the difference.

Financial planning needs vary greatly with our individual circumstances and life plans. At Deighan Wealth Advisors, we can lift some of the weight of your financial stress, no matter the life stage. bangordailynews.com • 7

Charitable Giving

BUDGETING FOR CHARITY

Ultimately ccording to data from Charity Navigator and Giving USA, slightly more than $410 billion was given to charitable causes in 2017. Philanthropy helps nonprofit groups and the people they serve, and such charitable efforts also benefit donors.

Perhaps the greatest benefit of charitable giving is helping others and the way that makes volunteers and donors feel. But there is also a financial benefit to charitable giving. Charitable donations are often tax deductible, and budgeting for such donations can teach people how to properly manage their money.

Donors who want to make the most of their charitable dollars can consider the following tips.

Stick to one or two causes. Being a “giver” doesn’t mean you have to contribute to every cause that draws your attention. It is important to believe in the cause you’re donating to and that the message and efforts resonate with your values. This way you can focus your attention directly, and it will not seem like a financial burden. That might require you to narrow your donations down to one or two causes.

Treat charitable giving as any other monthly bill.

Look at giving to charity as a necessity rather than a luxury. Create a recurring “bill” that you pay each month and factor it into your overall spending budget. Some charities may even be able to arrange for automatic deductions from your bank account.

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Pays Set up a specific savings account.

Much like you might create a separate account for a Christmas club or vacation savings, create an exclusive account for charitable endeavors. Over time, that account balance will grow and the money can be used for whichever causes you deem fit.

Donate what you can. You need not donate hundreds of dollars to make a huge difference. Organizations can benefit greatly from small donations.

Do not avoid donating because you think your donations are too small to make a difference.

Find out if your company will match. Ask your employer to match your donations. Even if they decline, drawing attention to a cause may inspire your bosses and coworkers to donate.

Nonprofits benefit greatly from wordof-mouth. Simply talking up a charity to others can make a big impact.

Being Charitable WHEN MONEY IS TIGHT

The term “charitable giving” is often associated with financial donations.

But charity is not exclusive to donating dollars, and those who want to give back but can’t fit donations into their budgets can explore various ways to make an impact without writing a check.

Volunteering According to the United States Bureau of Labor Statistics, roughly 63 million people volunteered through or for an organization at least once between September 2017 and September 2018.

Volunteering is a popular and rewarding way to give back to one’s community. Nonprofits and charitable organizations may fall short of meeting their missions if not for the valuable services provided by volunteers, so pitching in can be just as valuable as writing a check.

Discuss your personal and professional experience with an organization to find a volunteering opportunity that suits you and your skill set. In addition to charitable organizations, schools, hospitals, libraries, and religious institutions may have volunteering opportunities for those who want to give back.

Item donations Donating time and money may be among the most popular ways to give back, but those are not the only ways to donate to organizations and people in need. Go through your closet and donate clothes you no longer wear. Instead of selling furniture you plan to replace, contact local charitable organizations to see if they would like your furniture, or donate pieces that they can then sell to finance their operations. Some donated items, such as vehicles, may earn donors tax deductions.

Medical donations Donating money or dropping off canned goods at food banks may be the first things many people think of when mulling charitable donations, but medical donations also present a great way to give back. The American Red Cross notes that blood donations help millions of people and a single blood donation can end up helping more than one person. The Red Cross also notes that roughly 36,000 units of red blood cells are needed in the United States alone each day, while nearly 7,000 units of platelets and 10,000 units of plasma are needed daily. Donating blood, plasma or platelets can help save lives, and making such donations does not require substantial commitments of time.

Charitable men and women without much room in their budgets to make donations can still make a difference by giving back in other ways. bangordailynews.com • 9

Banks & Credits Unions

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Banks

Credit Unions

WHILE DIGITAL BANKING HAS BLURRED THE LINES, DIFFERENCES REMAIN

BY ALAN CROWELL

n the increasingly digital world of banking with more and more competition for depositors’ dollars, the differences between small community banks and credit unions are tending to blur. Nonetheless, each institution retains unique benefits for the consumer.

Consolidation has lessened the presence of big banks on “Main Street” over the past decade. At the same time, new financial technology and internet banks have created growing competition for new accounts and loans for banks and credit unions alike.

Downward pressure on interest rates has also lowered rates that both Main Street banks and credit unions can offer depositors, shrinking the difference that 10 • BDN BANKING & FINANCE • 2019

once separated credit unions and banks.

This new environment means more choices for customers and increasing competition for banks and credit unions alike. But small community banks and Maine credit union officials say their ties to the communities they serve and their person-to-person relationships with customers set them apart.

Jon Prescott, president and CEO of Katahdin Trust Company, said a personal relationship with customers is at the heart of the way his bank does business.

“We feel like we pair our financial expertise with a real passion for getting to know our customers,” said Prescott.

Prescott, who grew up in Island Falls and joined the bank after graduating from

the University of Maine about 30 years ago, said the vast majority of his staff was born and raised in the community where they are employed.

“It really comes down to that we are serving our friends and neighbors,” said Prescott.

Tim Brooks, vice president of corporate marketing for the Maine Credit Union League, said credit unions have a long and well-deserved reputation for looking at the business of loans and deposits as a means of helping their members solve problems.

One of the first credit unions in Maine made an inaugural loan to a family that needed to buy a cow, said Brooks.

Credit unions, which have members rather than clients, were originally formed

to improve the financial lives of members, said Brooks. Personal relationships and understanding the needs of members is at the core of the way credit unions do business.

“You are working with someone who is trying to support you rather than someone who is just trying to loan you money,” said Brooks.

But while banks and credit unions may appear more similar than different when viewed through the prism of an increasingly digital banking landscape, there are still fundamental differences between the two types of institutions that affect their relationships with customers.

The single most important difference is that banks are for-profit institutions and are ultimately owned by and beholden to

shareholders. Credit unions are not-forprofit cooperatives that are owned by their member-owners.

While banks are expected to return profits to their shareholders, credit unions are required to distribute all profits back to their members, typically in the form of higher interest rates for deposits and lower fees and interest for loans.

The other main difference between the two is accessibility. Banks, as for-profit companies, are free to offer their services to anyone and because there is no limit to the area they can service, usually have more brick-and-mortar branches.

Credit unions, however, as membershipbased organizations, are required to restrict membership to groups of people based

on different criteria, such as, for example, where people work, live, attend school or worship. In some cases, however, the membership criteria are quite broad and because there are many credit unions, just about anybody in Maine should qualify to join at least one credit union.

While those differences are very real and meaningful for customers, or members, however, they are not as stark as they once were.

One former difference is that while most credit unions were originally formed to serve relatively small populations—the employees of a business, the congregants of a church or the population of a single county—many have greatly expanded their charters. bangordailynews.com • 11

Banks & Credits Unions

For example, a credit union formed to Brooks said credit unions also offer In the years before the great recession, serve the employees of Bath Iron Works in mobile apps and online banking platforms many lenders, including many that 1956 has expanded to serve eight Maine that essentially serve as a “branch” that operated mostly or exclusively online, counties that represent more than half the members carry with them. At the same time, approved loans that burdened consumers state’s population. he said, it is important to credit unions that with more debt than they could manage.

Tim Brooks also points out that many they maintain the sense of friendliness and When the inevitable downturn came, credit unions are part of a “shared branch” customer service that is part of their heritage customers lost their homes and often had cooperative that allows their members in this new digital age. to file for bankruptcy. to pre-form transactions in other co-op That sense of connectedness to both One problem customers of online-only member branches both in Maine and community and customers is what makes financial institutions faced was very often outside of the state. credit unions special, he said. the extreme difficulty in finding anyone At the same time, many small One way credit unions maintain a con- willing or capable of helping them modify community banks like Katahdin Trust have nection is by giving back to their communities their loans when they could no longer keep expanded in recent up with payments. decades, often filling a Community banks Community banks and credit unions say the personal void created as larger and credit unions say relationships they strive to build with their customers and regionalized banks the personal relationhave consolidated ships they strive to members help keep their customers out of trouble and when and pulled back from build with their custhe unforeseen happens, they work with them to help...” towns and small cities tomers and members to more profitable help keep their cusurban areas. Katahdin Trust, which was by raising money and food to combat hunger tomers out of trouble and when the unfounded in Patten in 1918, didn’t open its and also by providing financial education in foreseen happens, they work with them third branch until more than 50 years later, schools and other venues to help Mainers bet- to help them avoid foreclosures and other but now has 16 branch offices. ter manage their finances. negative outcomes.

But perhaps the biggest and most Prescott said his bank also raises money That service-after-the-sale philosophy set important effort to improve convenience to combat hunger and Katahdin Trust both credit unions and community banks and reach more customers is through online employees also volunteer their time to offer like Katahdin apart from online banks banking and mobile apps that can allow financial education in schools. during the great recession and their physical customers to transact most, if not all of their And, like Brooks, Prescott said the presence in Maine communities continues to transactions without walking into a branch. commitment to working with customers one- be a defining asset in a digital age.

Prescott said community banks have on-one is central to his bank’s philosophy.

If past is prologue, the old fashioned to keep up with technological advances, Getting to know customers as people relationship-based banking that both small offering the apps and online banking services can help banks and credit unions offer the community banks and credit unions espouse that customers want, although he admitted right financial products and also prevent could once again come in handy for their that effort requires money and staff time. them from getting over-leveraged. customers and members.

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Professional Opportunities Abound IN THE ‘PEOPLE HELPING PEOPLE’ INDUSTRY COURTESY OF THE MAINE CREDIT UNION LEAGUE CREDIT UNIONS in Maine and beyond live the shared philosophy of “People Helping People,” helping the people we serve in many ways. Our members are our neighbors. Our community is our home.

We are trusted financial services providers, local community partners, job creators, even ending-hunger advocates. We take each role seriously, and we work hard to exceed the needs of our members and move Maine forward.

Our ability to make a meaningful impact on the lives of so many Mainers relies on the strength of the people we employ. Collectively as one of the state’s largest employers, Maine’s credit unions provide desirable careers for people who are truly looking to make a difference. We have a talented and diverse workforce, and nearly half of our credit unions are led by female CEOs. “I have been working for the credit union movement for 35 years,” said Tina Jamo, CEO of Katahdin Federal Credit Union. “I began my career as a teller, and now I serve as CEO. There are so many opportunities

for advancement in this industry and many learning opportunities. Even as CEO, I’m still learning new things every day.”

Susan Whitehead, president and CEO of NorState Federal Credit Union, has been around credit unions most of her life. Her mother was employed by a credit union in Aroostook County, and with 31 years of her own direct work experience in the industry, Susan has a sincere appreciation for the credit union difference.

“Working for a credit union allows you to make a difference in the lives of your members and in your community,” said Whitehead. “At our credit union, we are always working to ‘pay it forward’ in the form of support for the Campaign for Ending Hunger initiative, Special Olympics Maine, or through our Random Acts of Kindness Committee, which identifies local causes that could benefit from a helping hand. We always help out as much as possible.”

Five County Credit Union’s Julie Marquis also has deep roots in the credit union movement. Like Jamo, Marquis began

working as a teller 26 years ago and has served as Five County Credit Union’s CEO for the last three years.

“The people I work with have a tremendous work ethic,” said Marquis. “We are all here to help our members and educate them about personal finance. We also have an unwavering commitment to community service as evidenced by the broad support we provide to local organizations like schools, youth sports programs, veterans groups, and animal shelters.”

Anyone looking for a sense of purpose and ownership in what they do for work should look no further than Maine’s growing credit union network. A variety of career opportunities are available. From teller positions to loan officers, management to IT, Maine’s credit unions offer many opportunities at locations across the state.

“I believe working for a credit union is the best-kept secret in the financial services industry,” said Marquis. “There are so many wonderful opportunities for people to pursue a rewarding career.”

Family Finances

THE BENEFITS OF

Joint Bank Accounts

nce a couple walks down the aisle and returns home from their honeymoon, various tasks must be performed. Couples should not overlook the importance of tending to their financial futures. One of the first steps is merging and managing bank accounts.

A study from Kansas City University found the number one cause of divorce in the United States is fighting over money and other financial problems. Therefore, being on the same page concerning finances and maintaining financial transparency can help reduce the propensity to clash over cash.

Merging bank accounts can be a good idea for newlyweds for various reasons.

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Improved efficiency: Having one account makes it easier to track income and spending and can make keeping track of money less complicated. Also, having only one bank means cutting down on statements or correspondence from multiple institutions.

Creates accountability: Not being able to hide debt or large expenditures or withdrawals makes couples accountable to each other. This creates transparency in a relationship and may help couples become closer as a result.

Greater communication: Some people are natural spenders and others savers. It’s easy to gloss over financial indiscretions when there are separate accounts. A joint account makes it easy to talk about spending habits and the flow of money in and out of an account.

Good in emergencies: According to the financial resource Money Under 30, having a joint bank account can ensure that a surviving spouse has uninterrupted access to funds in the event his or her partner dies. This may not be the case with individual bank accounts until the estate goes through probate.

Get better banking: Certain financial institutions may offer perks like no fees if customers maintain a specific balance or meet the criteria of debit card usage per month. Such requirements may be more easily reached with two people utilizing the account.

Combine with ease: Financial expert Dave Ramsay says it’s particularly easy to merge when individuals already were using the same bank or credit union.

Simply showing up with identification and transferring the balance of one account into the other and adding a signer is all that’s needed. In instances where couples use different banks, select a convenient institution and open up a new account together after closing the individual ones.

Merging Finances

AFTER TYING THE KNOT

appy couples experience various changes after tying the knot. One of those changes concerns couples’ finances.

According to an analysis of data from the National Survey of Families and Households, arguments about money are a frequent concern with married couples. Furthermore, there is a higher correlation between the risk of divorce and the prevalence of financial disagreements. While fights about money do not necessarily cause divorce, they can create rifts in relationships.

Even couples who have plenty of money may have disagreements about their finances. Arguments may stem from couples not understanding how their partner views money or the disparities in spending habits among partners. Couples who make early efforts to get on the same page concerning finances may have smoother waters ahead than those who delay such discussions.

• ESTABLISH GOALS TOGETHER. Couples should define their financial goals together. Is it a goal to save for early retirement? Is a house in the immediate future?

Is frequent travel a desire? Are we planning to contribute much to future children’s educations? These questions and more need to be addressed early on. By creating a financial plan together, couples can more clearly map out their financial futures.

• COMBINING ACCOUNTS MAY BE EASIER. Some couples want to maintain their full financial independence. But combining accounts can help couples avoid arguments about secrecy and concerns about partner spending. Combining accounts also affords couples a clearer picture of their spending and saving habits.

• ASSESS DEBTS AS A TEAM. One person may be bringing more debt to the marriage than another. It’s important for all cards to be on the table and to work together to eradicate debt. If a person will be coming to the marriage with poor credit, it may be worth it to keep things separate until a spouse works on remedying his or her finances, according to Credit.com.

• DECIDE HOW TO SPLIT EXPENSES. One partner may make more money than the other, and one may spend more time handling household needs or future childcare responsibilities. Couples need to agree whether one person pays for certain bills exclusively, whether they spend from one salary and save the other, or combine finances completely and spend equally, offers NerdWallet.

Engaged couples who develop a post-wedding financial plan may find their transition to being married much easier than those who delay such discussions. bangordailynews.com • 15

Family Finances

WHAT IT COSTS TO

Raise Kids Today generation ago, it was common to see families with four or more children. But things are a bit different today.

Pew Social Trends indicates that parents now have 2.4 children on average, a number that has remained fairly stable for two decades. In addition, since 1976, the share of mothers at the end of their childbearing years who have one child has doubled, from 11 percent to 22 percent.

While shrinking families may be based on many different factors, including postponing having children until later in life, the rising costs of raising kids may have something to do with it as well.

The U.S. Department of Agriculture says the cost of raising a child today has climbed to $233,610, which excludes the expenses of college. A 2011 article that appeared in the Canadian publication MoneySense estimated child-rearing costs to be $12,824 per year, which adds up to $243,656 by the time a child reaches age 18.

It’s also well documented that more adult children are living with their parents for longer than kids used to stay with mom and dad. Pew Research has found that roughly one-third of women and half of men between the ages of 18 and 34 are still living at home, surpassing records set in the 1940s. This means expenditures on child-rearing may continue long after kids reach adulthood. As a result, it is easy to see how having multiple children can be a major source of financial stress for the average middle-income family.

The financial planning resource NerdWallet estimates that the cost of raising a child today is higher than the DOA figures, coming in at roughly $260,000 — and that is just for the basic essentials.

Throw in tiered levels of care, including everything from more expensive choices for food and clothing, and extras for early childhood care, sports lessons, music instruction, and electronics/gaming, and the cost can get as high as $745,634.

Many different factors impact the size of modern families today, and the rising cost of raising children may be the most influential of such factors.

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bangordailynews.com • 17

Family Finances

18 • BDN BANKING & FINANCE • 2019

SIMPLE WAYS TO KEEP A

Realistic Budget uccessful financial plans often begin with the creation of a budget. A budget is an estimate of income and expenses in a given period of time. Budgets help with long-term goals like paying off a mortgage or sending a child to college as well as short-term goals like financing a dream vacation.

“You may have to reconsider that house you’re living in, that car you’re driving, and other excessive budget-busting essentials that along the way became a discretionary expense,” said Annette Lease, a financial planner for Machias Savings Bank. “Looking at one’s lifestyle when it’s not supported by the household’s income can be a daunting experience. But the real work comes when implementing the changes toward a lifestyle that we can afford.”

Not all budgets are alike, and when people hear the word “budget,” they may get apprehensive. Budgeting may require making some concessions in regard to spending habits, but it doesn’t have to put a complete damper on plans. In fact, with a budget in hand, people may be more free to spend because they will have a stronger grasp of their financial situation.

“Your budget should be driven by your attainable goals,” said Lease. “It’s a painful realization that the habits that got you here won’t get you to where you want to be.

Behavior modification is what’s in store and one has to possess a real desire, almost a purpose beyond oneself, to make this kind of change.”

Making a realistic budget does not have to be a chore.

Here’s how to get started.

List the necessities. Begin by calculating the costs associated with fixed needs, including rent/mortgage, utilities, food, and any other bills you have to pay each month.

Add existing debt. Debt includes any routine payments being made to credit card companies, student loan lenders, car payments, or unpaid medical bills.

Conduct a spending analysis over several months. Budgets are easier with fixed numbers, but unforeseen variables can affect spending every month.

These can include the extras for clothing, entertainment and much more. Average the cost of these expenses throughout your analysis period so you can get some idea of how much to allocate for them. “Once you have tracked your prior spending, you may be surprised that you have a negative cash flow and you’re not alone as nearly half of Americans spend more than they earn,” said Lease.

Use software or apps to help. There are plenty of resources available to help people calculate their budgets and get a picture of their financial habits. Resources such as Mint, YNAB (You Need a Budget) and various accounting programs can produce spreadsheets, pie charts and bar graphs as you work to create a budget.

Start trimming gradually. Quitting a certain lifestyle cold turkey can be jarring. Gradually cut back on your spending if your analysis suggests that’s the way to go.

Automate saving. Immediately removing a set amount from your paychecks by having it directly deposited into a separate account can remove the temptation of spending too much from your financial equation.

Budgets are a key part of a financial plan and can help people reach their goals.

This article provided by Metro Creative Services. Additional reporting for this story was provided by Joshua Archer.

Remarks from Machias Savings Bank representatives ©2019 Machias Savings Bank. Member FDIC. This article is not intended to provide legal, tax, investment, or financial advice. Non-Deposit Investment Products are not FDIC Insured, No Bank Guarantee, May Lose Value.

bangordailynews.com • 19

8 Ways

Family Finances

TO START SAVING NOW aving money is difficult for many people across North America. According to a 2017 GoBankingRates survey, 57 percent of Americans have less than $1,000 in their savings accounts, and 39 percent have no savings at all. A recent Ipsos survey on behalf of the accounting firm MNP found that more than half of Canadians are living within $200 per month of not being able to pay all of their bills or meet their debt obligations.

With such little room for error, even minor unexpected bills can pave the way to financial hardship.

Fortunately, many people do not have to make drastic changes to save more. Here are several ways to start saving more now.

1. Plan meals. Decide what you will make in advance and list all the ingredients, enabling you to shop for the lowest prices.

2. Cut the cord. Cutting ties with traditional cable television providers can save consumers substantial amounts of money. Streaming services like Netflix, Hulu, and Amazon Prime provide a slew of content for a fraction of the cost of mainstream cable.

3. Establish a goal. It’s easier to save when you have an end goal, whether it’s financing a vacation, buying a home or growing your family. Establishing a goal gives men and women something to strive for.

4. Make coffee at home. Make your daily coffee at home rather than paying several dollars per day for that morning cup of Joe.

5. Wait before checking out. Impulse buys can quickly add up. Store that online item in the shopping cart for a day or two to really think about if it is a necessity or just an impulse buy.

6. Shop quality not quantity. Bulk buys may seem advantageous, but not if the items break or wear out prematurely. When shopping, opt for quality merchandise that may cost more initially, but thanks to its durability, will save money in the long run.

7. Don’t worry about your neighbor. Trying to keep up with the Joneses, Smiths or Murphys is a recipe for overspending. Stick to your budget and make improvements or upgrades as you can afford them.

8. Rely on automatic deductions. Set up automatic deductions so a predetermined amount of money is deposited into a designated savings account each paycheck. Chances are you won’t miss it, and the savings will add up.

20 • BDN BANKING & FINANCE • 2019

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Student Debt

College Saving

Suggestions THAT WON’T BREAK THE BANK

he cost of college tuition concerns parents from all walks of life. While college continues to get more expensive, it remains a worthy investment.

In its 2015-16 “College Planning Essentials” report, J.P. Morgan Asset Management dispelled the growing notion that a college education is not worth the student loan debt many young adults assume to earn their degrees. The report noted that college graduates earn 38 percent more than high school graduates, even after factoring in student loans.

The report also noted that the return on investing in college is nearly $1 million more in lifetime earnings. What’s more, a 2013 report from the Georgetown University Center on Education and Workforce projected a shortage of five million college-educated workers by 2020, suggesting that college graduates will be in high demand by the start of the next decade.

While such figures highlight the importance of a college education, they may do little to ease parents’ concerns about how to finance that education. While saving enough money for college may seem impossible, parents can take steps to decrease the likelihood that their kids will need to take on substantial loans to support their education.

• START EARLY. The earlier parents start saving for college, the more money their children will have to finance their education. Parents may not realize just how much college tuition is rising compared to other expenses. According to the U.S. Bureau of Labor Statistics Consumer Price Index, the cumulative percent price change of college tuition between 1983 and 2015 dwarfed the price changes of other expenses. For example, while the cumulative price change of housing rose 143 percent during that period, the cost of college tuition rose 722 percent over the same period.

The earlier parents start saving for college, the more they can take advantage of compound interest that many college savings plans offer.

• SCHEDULE AUTOMATIC MONTHLY CONTRIBUTIONS TO COLLEGE SAVINGS ACCOUNTS. Parents learn to expect the unexpected soon after their children are born.

Unforeseen expenses may tempt parents to reduce or skip their monthly college savings account contributions. Reduced or missed contributions can add up over time, however, potentially reducing the totals in your child’s account by a substantial amount. Set up automatic contributions with your bank or portfolio manager so you are not tempted to use the money you set aside each month for college to finance other expenses.

• INCREASE CONTRIBUTIONS EACH YEAR. Increasing your annual college savings contributions each year can help the accounts keep pace with the inflation rate of college tuition costs. While you might not match that rate, increasing contributions each year by as little as 5 percent won’t greatly affect your overall budget but can have a considerable impact on college savings.

Saving for college can seem like a daunting task. Yet parents of young children can quell their fears about college tuition costs by making a plan now and sticking to it until kids are ready to enroll in a college or university.

22 • BDN BANKING & FINANCE • 2019

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bangordailynews.com • 23

Student Debt

Early

TIPS TO PAY OFF STUDENT DEBT

ecent college graduates may be entering the job market with degrees in tow, but many also are leaving school with sizable amounts of student loan debt. According to a 2017 report from the Federal Reserve Bank of New York, student loan debt rose for the eighteenth consecutive year, while Debt.org reports that student debt in the United States totaled $1.4 trillion in 2017. Canadian students are not faring much better than their American counterparts, owing an average of $28,000 after four years according to the Canadian Federation of Students.

Student loan debt is a heavy burden that has short- and long-term effects on borrowers. Sizable student loan debts may affect young professionals’ ability to support themselves, while the Federal Reserve Bank of New York reports that such debt has contributed to a decline in the housing market, as fewer college graduates can afford to buy homes while still in their 20s.

The notion of paying off their student loans before they reach maturity may seem implausible to some borrowers. But there are a handful of ways for adults with sizable student debts to do just that.

Make more frequent payments. Many homeowners pay their mortgages off early by making biweekly payments. Doing so means they will make 26 half-payments, or 13 full payments, each year as opposed to the 12 full payments made by homeowners who pay on a monthly schedule. The same approach can be applied to student loans. That extra annual payment each year can gradually chip away at loan balances, helping borrowers pay loans off before they reach maturity.

Prioritize paying off high-interest loans. Many students finance their educations by taking out multiple loans. If these loans come with different interest rates, borrowers should pay off the high-interest loans first to reduce the amount they’re spending on interest. Borrowers will still need to make minimum payments on other loans, but any extra money they intend to pay each month should go toward paying down the high-interest loan.

Refinance loans. Many recent college graduates do not have lengthy credit histories, and some might be carrying low credit scores. Once such borrowers have shown that they can consistently make payments in full and on time, they can approach their lenders to refinance their loans in the hopes of getting a lower interest rate reflective of their creditworthiness. Refinancing may only be available to borrowers with private loans, but this strategy can save student debt holders a lot of money over the life of their loans.

Take advantage of offers from lenders. Some lenders may reduce interest rates for borrowers who agree to certain terms, such as signing up to receive e-statements or enrolling in automatic payment programs in which money is deducted directly from a borrowers’ bank account on the same day each month.

The savings created by such offers may seem insignificant each month, but can add up over time.

Paying off student loan debts early can be done, even for borrowers whose debts are tens of thousands of dollars.

24 • BDN BANKING & FINANCE • 2019

bangordailynews.com • 25

Retirement Planning

How to

Save More FOR RETIREMENT AFTER AGE 50

hether it’s advice from their parents, a response to television ads urging viewers to save for retirement, or their own financial savvy, many of today’s young professionals recognize the importance of saving for retirement from the moment they receive their first paychecks.

But some men and women over 50 may not have been so practical, and many such professionals may feel a need to save more as their retirements draw ever closer.

“If your financial health and saving for retirement hasn’t been a priority, make it one. If your employer offers a qualified retirement plan, participate as soon as you’re eligible,” said Annette Lease, a financial planner for Machias Savings Bank.

“The first step is to contribute enough to make sure you’re receiving your employer’s match—it’s a 100 percent guaranteed return on your money and your pre-tax contribution amount reduces your taxable income, furthering the benefit.”

Saving for retirement might seem like a no-brainer, but the National Institute on Retirement Security notes that, in 2017, almost 40 million households in the United 26 • BDN BANKING & FINANCE • 2019

States had no retirement savings at all. In addition, the Employee Benefit Research Institute found that Americans have a retirement savings deficit of $4.3 trillion, meaning they have $4.3 trillion less in retirement savings than they should.

“Stop spinning your wheels and pay off your debt, which is essentially paying yourself the interest expense savings,” she said. “Once you’ve paid off your debt and contributed the maximum to your employer’s qualified retirement plan, consider after-tax investments. They don’t have to be traditional stock investments.”

Men and women over 50 who have retirement savings deficits may need to go beyond depositing more money in their retirement accounts in order to live comfortably and pay their bills in retirement.

The following are a few simple ways to start saving more for retirement.

Redirect non-essential expenses into savings. Some retirement accounts, such as IRAs, are governed by deposit limits. But others, such as 401(k) retirement plans, have no such limits. Men and women can examine their spending habits in an effort to find areas where they

can cut back on non-essential expenses, such as cable television subscriptions and dining out. Any money saved each month can then be redirected into savings and/or retirement accounts. “Just make sure that you do your homework on the financials to ensure that the balance sheet allows for income generation,” Lease said.

Reconsider your retirement date.

Deciding to work past the age of 65 is another way men and women over 50 can save more for retirement. Many professionals now continue working past the age of 65 for a variety of reasons. Some may suspect they’ll grow bored in retirement, while others may keep working out of financial need. Others may simply love their jobs and want to keep going until their passion runs out. Regardless of the reason, working past the age of 65 allows men and women to keep earning and saving for retirement, while also delaying the first withdrawal from their retirement savings accounts.

Reconsider your current and future living situation. Housing costs are many people’s most considerable expense, and that won’t necessarily change in retirement.

3 MORE WAYS

To Save t’s never too early to begin saving for retirement. While millions of people have no doubt heard or read those very words before, surveys indicate that few people are taking that lesson to heart.

A 2018 survey from Bankrate.com found that 20 percent of Americans don’t save any of their annual income. Things aren’t necessarily rosier in Canada, where the financial institution CIBC reports that 32 percent of people nearing or on the cusp of retiring have nothing saved for retirement.

Saving for retirement can seem impossible in households where every dollar counts. But the following are four simple ways to save more for retirement without making dramatic lifestyle changes.

1. Turn raises into retirement savings.

Even men and women who have paid off their mortgages may benefit by moving to a region with lower taxes or staying in the same area but downsizing to a smaller home where their taxes and utility bills will be lower.

Adults who decide to move to more affordable areas or into smaller, less expensive homes can then redirect the money they are saving into interest-bearing retirement or savings accounts.

Many people begin saving for retirement the moment they cash their first professional paycheck. But even adults over the age of 50 sometimes feel a need to save more as their retirement dates draw closer, and there are many ways to do just that.

This article provided by Metro Creative Services. Additional reporting for this story was provided by Joshua Archer.

Remarks from Machias Savings Bank representatives ©2019 Machias Savings Bank. Member FDIC. This article is not intended to provide legal, tax, investment, or financial advice. Non-Deposit Investment Products are not FDIC Insured, No Bank Guarantee, May Lose Value.

According to the WorldatWork 2018-2019 Salary Budget Survey: Top Level Results, salary budgets in the United States are projected to rise by an average of 3.2 percent in 2019, while those in Canada are expected to rise by 3 percent. Working professionals can save more for retirement by converting some or all their raises into retirement savings. Pre-tax retirement accounts allow working professionals to put aside money before taxes are paid, so weekly paychecks will not be greatly affected if you choose to increase the percentage of your income you deposit into such accounts. Do this each time you receive a raise and your retirement savings will grow considerably.

2. Put bonuses to work.

Professionals who receive bonuses can speak to their employer and request that their retirement contribution rates be increased when bonuses are issued. Many 401(k) retirement plans allow workers to contribute as much as 80 percent of their paychecks. While that’s not sustainable for most people every pay period, increasing your contribution rate dramatically when your bonus is issued is a great way to save more for retirement. Contribution rates can then be returned to normal the following pay period.

3. Reinvest tax returns.

Working professionals accustomed to receiving tax returns can use that money to catch up on their retirement savings. Rather than spending tax returns or depositing them into traditional savings accounts, reinvest them into a retirement account. Speak with a financial planner to help you figure out how to accomplish this goal.

Even if it requires opening a new account, the long-term benefits or reinvesting returns are substantial.

Saving for retirement is important, and it’s never too late or too early to start setting aside more money for your golden years.

bangordailynews.com • 27

Retirement Planning

HOW TO HANDLE THOSE

Old 401(k)s pon making the transition to a new job or retiring, many people are unsure about what to do with their 401(k) or other retirement plans linked to their employer. Handling this transition can be costly, and many people might benefit from the advice of a professional financial advisor to help them navigate these waters without breaking the bank.

Some people may think they’re forced to cash out their retirement accounts when moving on to new companies. But, depending on a person’s age, that’s a potentially costly option that can incur heavy penalties. Fortunately, cashing out is not the only option people have as they try to figure out what to do with their retirement accounts after retiring or moving on to new companies.

Keep the money with your former employer Some employers allow former employers to keep their retirement savings in their plans. This allows people to avoid

28 • BDN BANKING & FINANCE • 2019

early withdrawal penalties and lets them continue to defer paying taxes on retirement savings accounts until they reach retirement age and need to start withdrawing money. Another benefit to keeping money in an employer retirement plan even after you leave the company is it protects you if there are rollover restrictions governing any additional accounts you might have transferred the money into.

Employers who do allow former employees to keep their money in retirement plans likely included certain language in those plans that govern how the account is managed after employees leave the company. For example, former employees may no longer be able to contribute to the plan or take out plan

loans. In addition, when the time comes to withdraw money, you may or may not be allowed to make partial withdrawals from accounts linked to former employers. Read the fine print to determine if keeping the plan with a former employer makes the most sense for you.

Rollover into your new employer’s retirement plan Some people have the option to rollover a 401(k) from a previous employer into their new employer’s plan. But not all companies allow this. If you are allowed to do so, this can make the transition that much easier while still allowing tax-deferred growth on your assets. In addition, if you can rollover into your new employer’s plan, you may be

allowed to take out loans based on the amount of your combined plan instead of just loans against new contributions.

Rollover and plan loan eligibility should be confirmed with your new employer.

Before rolling over money into your new employer’s plan, confirm your investment options under the new plan. If they pale in comparison to an IRA, you might want to rollover your retirement assets into an IRA that offers more investment options.

Rollover into an IRA Many people look to rollover an old 401(k) into an IRA, as traditional and Roth IRAs may offer a wider variety of investment options than a previous or current employer’s retirement plan.

Taxes differ depending on which type of IRA you choose to roll your funds into, so discuss your IRA options with your financial advisor to determine if this is the best way to go.

bangordailynews.com • 29

Retirement Planning

Retirement Planning ARE THERE FACTORS THAT IMPACT WOMEN MORE THAN MEN?

BY BARBARA A. APPLEBY, PRINCIPAL, BERRYDUNN WEALTH MANAGEMENT MANY women fall into the “sandwich generation”—a group loosely defined as people in their 40s to 60s who are “sandwiched” between caring for children and aging parents. The fact is, women are the ones who put aside their careers most often in order to step into the caregiving role, according to the Social Security Administration.

As more women have children later in life and more parents live longer lives, the ranks of women in the sandwich generation are likely to grow in the years ahead. If you find yourself sandwiched between caregiving demands, consider this: The day-to-day demands of caring for both an aging parent and children can put a tremendous strain—both emotional and financial—on the primary caregiver. On the financial side, primary caregivers may be forced to reduce their work schedule or even stop working altogether. This dilemma impacts not only the present situation of the primary caregiver but may eliminate the ability to save for retirement for some years.

The emotional cost can be equally high.

Both emotional and financial costs are especially high when adult siblings or other family members don’t agree on the best course of action for elder care, don’t pitch in to do their share, or don’t contribute financially to the cost of that care.

If you find yourself in this situation, it’s important to adopt the proper mindset.

This life phase could last one or two years, or it could last many more. In any case, try to treat this stage as a marathon and pace yourself; you don’t want to start sprinting right out of the gate and burn out too soon.

Encourage open communication with your family to figure out ways to share the financial, emotional, and time burdens.

Hold regular meetings to discuss issues, set priorities, and delegate tasks. Women are often conditioned to believe they have to “do it all,” but there is no reason why adult siblings (if you have any) can’t share at least some of the workload.

30 • BDN BANKING & FINANCE • 2019

SAME GOALS

DIFFERENT WORRIES

Men and women tend to have the same goals; it is how they get there that is different. We ask the same types of questions about our financial future. We all want to know:

As it turns out, many studies have shown that the way women feel about money and finances differs from men. Women worry far more about running out of money, healthcare expenses, and making good investment and financial decisions.

There is often basis in these concerns.

Over their lifetimes, women on average live longer and often work less—due to situations faced by those in the sandwich generation. Taking time away from paid work to care for children or parents can also mean taking time off from earning wages and contributing to retirement plans or social security. This can equate to overall lower savings for healthcare or other needs later in life.

Whether you are a woman or if there is a woman important in your life, be sure that your entire plan—savings, social security and pensions, investments, insurance, healthcare and estate planning— accommodates the unique differences in gender, both the practical and the emotional.

• What should I do next with my finances?

• Will I have enough money to live comfortably and feel secure?

• Can I take care of my family, from aging parents to children and grandchildren?

• Do I have the information I need to feel confident in my decisions?

• Do I have a smart financial plan, and does it align with my values and priorities?

• Should I change my investments? Do I need insurance?

It is in the answers to those questions that the differences between men and women are exposed. Good planning will take into account those differences whether you are a married couple or single.

bangordailynews.com • 31

Retirement Planning

Streeeetch

THOSE RETIREMENT SAVINGS any budding retirees plan to travel, relax and enjoy the company of their spouses when they officially stop working. But such plans are only possible if men and women take steps to secure their financial futures in retirement.

According to a recent survey by the personal finance education site MoneyTips.com, roughly one-third of Baby Boomers have no retirement plan. The reason some may have no plan is they have misconceptions about how much money they will need in retirement. Successful retirees understand the steps to take and how to live on a budget.

HAVE A PLAN. Many people simply fail to plan for retirement. Even men and women who invest in an employer-sponsored retirement program, such as a 401(k), should not make that the only retirement planning they do. Speak with a financial advisor who can help you develop a plan that ensures you don't outlive your assets.

SET REASONABLE GOALS. Retirement nest eggs do not need to be enormous. Many retirees have a net worth of less than $1 million, and many people live comfortably on less than $100,000 annually. When planning for retirement, don’t be dissuaded because you won’t be buying a vineyard or villa in Europe. Set reasonable goals for your retirement and make sure you meet those goals.

DON'T UNDERESTIMATE SPENDING. You will need money in retirement, and it’s best that you don’t underestimate just how much you’re going to need. No one wants to be stuck at home during retirement, when people typically want to enjoy themselves and the freedom that comes with retirement. Speak to a financial planner to develop a reasonable estimate of your living expenses when you plan to retire.

PAY DOWN OR AVOID DEBT WHILE YOU CAN. Retiring with debt is a big risk. Try to eliminate all of your debts before you retire and, once you have, focus your energy on growing your investments and/or saving money for retirement.

START EARLY ON RETIREMENT SAVING. It’s never too early to begin saving for retirement. Although few twenty-somethings are thinking about retirement, the earlier you begin to invest the more time you have to grow your money. Enroll in a retirement plan now so you have a larger nest egg when you reach retirement age.

32 • BDN BANKING & FINANCE • 2019

Ready to Retire?

BY THOMAS DUFF, PRESIDENT, DUFF & ASSOCIATES AND BRANCH MANAGER, RJFS; AND JOEL WEST, FINANCIAL ADVISOR THE ANSWER may not be as simple as you think. If you are contemplating retirement, there are two important areas of consideration.

First is the emotional aspect. What are you going to do to stay active, fulfilled and enjoy life?

How do you intend to replace the important social aspects that the workplace can provide?

How will you make your retirement years meaningful? These are important questions that should be considered.

The second question is the financial aspect of how to pay for your retirement. A general guideline is that a retiree will need an annual income of approximately 80% of the current working income to maintain a satisfying retirement lifestyle. While this is a good starting point, there is no substitute for a comprehensive budget. “Budgeting” frequently has a negative connotation, but in our opinion the opposite should be true.

A solid budget isn’t difficult and can give you the confidence you need to retire. Most people can quickly determine mortgages and electric bills within a budget, but what do you spend on an annual basis on your fourlegged friends, at the local coffee shop or your favorite hobby? These more obscure spending areas are where most people find the reality of their actual budget. We suggest keeping track of all expenditures for a minimum of thirty days and ideally for an entire year in order to accurately track spending and where you may be able to cut back to develop a solid knowledge of your actual spending.

As a retiree you need income. Most retirees can expect a Social Security benefit

as a portion of their income and when to begin the benefit is an important decision with long term repercussions for both you and your spouse. Some retirees are eligible for a pension, but pension options are fewer all the time. Most retirees will supplement their retirement income from savings. Those savings are most likely in the form of a taxadvantaged retirement plan such as a 403b or 401k or it may be money you accumulated outside a retirement plan. Determining what and when to withdraw are among the most important decisions a retiree can make to have a realistic lifetime retirement income plan. Another general guideline is that retirees, depending upon their ages and risk tolerance, can withdraw between 4 and 6 percent of their overall account values and expect that withdrawals should be sustainable. Again, this is just a guideline and should only be used as a starting point and is not a substitute for an actual income plan.

What about healthcare? Healthcare expenses for the majority of retirees will most certainly continue to increase through retirement. Most eligible workers can receive Medicare at age 65, but that has its limitations and there are important decisions to make regarding the supplements available. Be certain to make liberal estimates in what health care is likely to cost in retirement.

What if you still don’t have enough?

Then tough decisions will need to be made about possibly delaying retirement, reducing expectations or working part time.

Studies have shown that workers

spend more time planning a vacation than retirement. (1) Don’t be that person.

Retirement should be a meaningful and fulfilling phase of one’s life. Working with a financial professional to help guide you through these important decisions is generally more affordable than many might think and can be the difference in achieving a successful retirement.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are as of February 14, 2019 and are those of Thomas Duff and Joel West and not necessarily those of RJFS or Raymond James.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Duff and Associates, 470 N Main St., Brewer, Maine 04412, 207-989-6082. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Duff and Associates is not a registered broker dealer and is independent of Raymond James Financial Services.

(1) https://money.cnn.com/2014/08/19/ retirement/401k-investments/index.html

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