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"personal wealth management"
By Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management May 28, 2013 05:30 PM
Am I taking too much risk? To answer this question, we'll often look at our portfolio, focusing on the mix of stocks and conservative investments.
But just because some investors have a heftier allocation to stocks doesn't mean they're taking more risk than other folks with less aggressive investment mixes. Instead, we need to look beyond the mix of stocks and conservative investments--to the rest of our financial lives.
Consider two hypothetical investors. Both are age 40 and both have $200,000 portfolios. His portfolio consists of $100,000 in bonds and $100,000 in a diverse collection of stocks. Her portfolio consists of $75,000 in bonds and $125,000 in a similarly diverse mix of stocks.
By Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management April 09, 2013 07:00 PM
Is it possible to have too much money in tax-deferred retirement accounts? That might seem like an odd question given the oft-repeated advice to shovel as much as you can into 401(k) plans, traditional Individual Retirement Accounts and Roth IRAs.
And, indeed, if your employer offers a 401(k), 403(b) or similar plan, you should contribute at least enough to qualify for the company's full matching contribution. That match represents extra money that it would be foolish to pass up. Even without an employer match, your contributions to a 401(k) or traditional IRA may be tax-deductible. If you do the math, you may find the investment growth on these initial tax savings can end up paying for the taxes due when you make withdrawals. And, of course, tax-free growth is the big appeal of both Roth IRAs and Roth 401(k) plans.
The downside: It's difficult to tap these various retirement accounts before age 59½ without getting hit with early withdrawal penalties.
To be sure, there are exceptions. For instance, you may be able to borrow from your 401(k). But borrowing can be risky. In fact, 401(k) loans have to be repaid right away if you lose or leave your job. If you can't come up with the money to repay the loan, you could get hit with taxes and penalties.
By Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management March 27, 2013 02:15 PM"How much can I safely pull out of my retirement savings each year?" As we try to figure out if we have enough to retire, this is a crucial question--and folks are frequently disappointed with the answer.
Financial professionals often suggest relatively modest annual withdrawals, maybe equal to just 4% of a portfolio's value, as a precaution against weak market performance or high inflation. But there's another reason for this caution: longevity risk. At issue here is the risk that retirees might outlive their savings. And, yes, it's a very real risk.
When today's 65-year-olds were born in 1948, the life expectancy for men was around age 73, while for women it was 79, according to figures from the Social Security Administration. But such averages can be a bad guide for today's retirees because they are dragged down by those who die before they reach retirement age.
By Jonathan Clements, Director of Financial Education, Citi Personal Wealth Management March 12, 2013 08:24 PMIf you're approaching retirement and want to get more from Social Security, consider a strategy known as "file and suspend." It can be particularly useful for married couples, especially when one spouse has earned significantly more than the other.
Let's say Jack is the primary breadwinner and has reached his full Social Security retirement age, which is 66 for those born between 1943 and 1954. His wife Jill is 62. They're a traditional couple where Jack has worked fulltime and Jill spent several years out of the workforce raising their children. If Jack started taking his benefit now, he would receive $2,400 based on his lifetime earnings, while Jill would get $600 a month based on her earnings record.
One possibility: Jack might apply now for Social Security--but then immediately suspend collecting. Why bother? Because he applied for benefits, Jill can claim a spousal benefit based on his earnings record. That spousal benefit could be as much as half of Jack's benefit, but it's reduced because Jill is 62 and hence younger than her full retirement age. Because of that reduction, her benefit would be $840, which is still more than the $600 she could receive based on her own earnings record. If Jill wanted a larger monthly check, she could wait to claim her spousal benefit.