Powering Your Retirement Radio Dan Leonard

Hello, and welcome back to Powering Your Retirement Radio. In today’s episode, I want to discuss the most often question I get these days: "Should I buy Treasury Bills?” I also want to discuss what happened with Silicon Valley Bank (SVB).

It seems like several times each week. Someone calls to ask what I think about buying Treasury Bills. I first want to know why they want to buy them. Is it because they have extra money languishing in the bank, or do they want to move money from their current investments to something guaranteed?

Either way, you can make a case for it, but you need to determine if it is shifting money that is already invested. What will cause you to change your investments in the future? If it is cash in the bank, then it is a little less complicated. With rising interest rates, you should plan to buy bonds that you plan to hold to maturity, in my opinion. You can trade them, but that changes the simplicity of buying a 3- or 6-month Treasury Bill that will mature at par.

I will tie in with why this is what happened that caused the failure of SVB. Being forced to sell longer-dated Treasury Securities that were in a paper loss position because of interest rate increases. If they didn’t face a run on the bank and could have held to maturity, they would have gotten all their money back. Unfortunately for SVB, they were forced to realize the loss and caused the second-biggest bank failure in US History.

Have a listen for the complete story.
 
For more information, visit the podcasts website: https://poweringyourretirement.com/2023/03/24/treasury-bills

Welcome back to Powering Your Retirement Radio. I want to discuss Long Term Care or Extended Care. This is insurance and not an investment. Insurance, in the long run, is better to have and not need, than to need and not have. It is also better to buy it before there is a need because, at that point, it is either very expensive or not available.

So why do you need Extended Care Insurance? You need it because of the unknowable circumstances around your future health, not just yours but, if you are married, your spouse as well. As counterintuitive as this sounds, Extended Care Insurance is not for someone who falls ill or needs care. It is for the surviving spouse. I hear all of the jokes and uncomfortable laughter around; they’ll hold a pillow over my head… No, they won’t.

Extended Care isn’t just for end-of-life situations. It covers you if there is a car accident, if you have a stroke or if some other issue where you need prolonged care during your recovery. No one wants to be a burden to their children, and even fewer people want to leave a healthy spouse without enough money to live on because the assets went toward their care.

So what is there to do? There are a few options, including Traditional Long Term Care Insurance, which is not very popular, but still available. There is Hybrid Life Insurance that provides a Long Term Care Rider. And finally, there are Long Term Care Annuities.

Here is a quick overview, which will hopefully give you enough information to determine what makes sense for you. As always, I am happy to chat if you have questions.

Traditional Long-Term Care Insurance: This is what most people think of.  It’s a use-it-or-lose-it policy where you pay in for your lifetime, and if you never need it, there is nothing to be paid out. This is the insurance I personally own, only because I got it when I worked at Genworth, and it was inexpensive at the time. Given the cost of care, my premiums over my expected life span will equal roughly 6 months' worth of coverage in a nursing facility. Since the average stay is 3 years, I am comfortable with the fact that I have it, even if I don’t need it.

Hybrid Life Insurance with a Long-Term Care Rider: This is a life insurance policy with a death benefit that can be converted to pay for long-term care needs if needed. The good part is that if you need long-term care, you have a predetermined amount of coverage. If you don’t need it, there is a death benefit for your heirs, so the money you paid in premiums is not a sunk cost you can’t recover. If you collect on the death benefit, you don’t lose your money, but the growth of the funds is more like investing in a CD rather than the market. The key is that you have protection since you have insurance and you aren’t spending the assets meant to provide your retirement income. This can be purchased over your lifetime or a set number of years, usually 10 or 20 and you are subject to underwriting on these policies.

Annuities with a Long-Term Care Rider: These are usually on a fixed or index annuity and are purchased with a lump sum with some kind of multiple, say 1, 2, or 3 times the amount deposited if you need long-term care. So you invest $100,000 in the fixed annuity, and it grows like any other fixed annuity, and like the hybrid policy above, if there is a need for long-term care, the multiplier kicks in, and your $100,000 now covers $200,000 or more of long-term care bills. There is some underwriting, but it generally has a better issue rate than the hybrid or traditional policies.

The quick recap is that a traditional policy is less expensive than a hybrid policy, but with no way to recoup the expense if you don’t need it. Hybrid is good for a person who is a planner but wants some protection. The caveat is that you also need to be insurable. The annuity will likely get you coverage in a situation when you can’t get a hybrid policy, but you need to have a

How can you save $1,000,000 in your 401k between the ages of 30 and 60? We'll cover strategies for maximizing your contributions, making smart investment decisions, and taking advantage of employer matching programs in this episode.
Maximizing Contributions
The first step in saving $1,000,000 in your 401k is to maximize your contributions. If you're 30 years old, you have 30 years to save, so the earlier you start, the more you can save. The contribution limit for a 401k is $19,000 in 2022, with an additional $6,500 catch-up contribution for those over 50. Consider increasing your contribution rate by 1% each year to reach the maximum contribution limit. In my experience, you do not need to maximize your contribution from the start. Being consistent over the years yields a far better outcome.
Investment Decisions
Making smart investment decisions is key to growing your 401k balance. Start by understanding your risk tolerance and investing in a mix of low-risk, moderate-risk, and high-risk options. Consider using a diversified portfolio, which you can adjust as you near retirement age. You need help making investment decisions that align with your goals. This is where consulting a financial advisor is something to consider.
Employer Matching Programs
Many employers offer matching contributions to 401k plans. If your employer offers a match, make sure to contribute enough to take advantage of the full match. This is free money, so make sure to maximize this opportunity. If your employer does not offer a match, consider other savings options, such as a traditional or Roth IRA.
Compound Interest
Compound interest is a powerful tool for growing your savings. Over time, the interest you earn on your 401k contributions can compound, increasing the growth of your balance. Consider using an online calculator to see how much you can earn through compound interest over time. At some point, the amount you contribute annually will be smaller than the interest you receive.
Saving $1,000,000 in your 401k between the ages of 30 and 60 is an achievable goal with the right strategies in place. 

Start by maximizing your contributions, making smart investment decisions, and taking advantage of employer matching programs. By starting early and taking advantage of the power of compound interest, you can build a secure financial future for yourself and your family.
For more information, please visit the podcast's website: https://poweringyourretirement.com/2023/02/23/1000000 

How much should I save for Retirement Annually?
The amount you should save for retirement annually depends on several factors, including your age, income, current savings, and retirement goals. Generally speaking, financial experts recommend saving 10-15% of your income each year for retirement. However, it's important to remember that this is just a guideline, and you should adjust your savings rate based on your own individual needs. 
How much do I need to save to be able to retire?
The amount you need to save to be able to retire comfortably depends on several factors, including your age, income, current savings, and retirement goals. Generally speaking, financial experts recommend having saved 10-12 times your annual income by the time you retire. So, for example, if you make $50,000 per year, you should have saved at least $500,000 by the time you retire. It's important to note that this is just a guideline and that you should adjust your savings rate based on your own individual needs.
How much do I need to save for health care in retirement?
The amount you need to save for health care in retirement will depend on several factors, including your age, current health care costs, and your retirement goals. Generally speaking, financial experts recommend saving between 3-8% of your income each year for health care in retirement. However, it's important to remember that this is just a guideline, and you should adjust your savings rate based on your own individual needs.
What is a safe withdrawal rate in retirement?
A safe withdrawal rate in retirement is the amount of money you can safely withdraw from your retirement savings each year without running out of money. Generally speaking, financial experts recommend withdrawing no more than 4-5% of your retirement savings each year. However, it's important to remember that this is just a guideline, and you should adjust your withdrawal rate based on your own individual needs. 
What are the pros and cons of Dollar cost averaging?
The pros of dollar cost averaging include the following: 
1. Reduced Risk: By investing a fixed dollar amount over time, you will be able to spread out your risk and potentially minimize losses if the market drops. 
2. Lower Start-Up Costs: Dollar cost averaging allows you to start investing with a smaller amount of money, which can be helpful if you don't have a large sum to invest all at once. 
3. Emotional Benefits: Investing with a regular, fixed amount each month can help to manage your emotions and reduce the temptation to invest impulsively.
The cons of dollar cost averaging include the following:
1. Lower Average Returns: Investing regularly each month means that you may miss out on larger gains that could be made if you invested a lump sum all at once. 
2. Reduced Flexibility: With dollar cost averaging, you are limited to investing a fixed dollar amount each month, which can limit your ability to adjust your investments in response to changing market conditions. 
3. Opportunity Cost: By investing smaller amounts over time, you may miss out on larger investments that could potentially generate higher returns. 
What are the go-go, slow-go, and no-go phases of retirement? 
The go-go phase of retirement is the period of time when you are most active and able to do the things you want to do. During this phase, you are able to travel, participate in hobbies, and engage in social activities. 
The slow-go phase of retirement is when you may need to start slowing down a bit due to age or health issues, but you are still able to do some of the things you enjoy. 
The no-go phase of retirement is when you are no longer able to participate in activities as you have in the past actively, and you may need to rely more on family and friends for help.
 
For more information, visit the podcast's website: https://poweringyourretirement.com/2023/02/09/saving-for-retirement

Welcome to Powering Your Retirement Radio.
Having a long-term perspective when investing is important because it allows you to ride out short-term market fluctuations and focus on the underlying fundamentals of your chosen investments. It also gives your investments time to compound and grow, which can lead to greater returns over the long run. Additionally, it can help you avoid making impulsive and emotional decisions based on short-term market movements, which can be detrimental to your investment portfolio.
For more information, visit the podcast website: https://poweringyourretirement.com/2023/01/12/long-term/

Welcome back to Powering Your Retirement Radio.
Here are some key tax numbers for 2023 to keep in mind:
The standard deduction for individuals is $12,550 and $25,100 for married couples filing jointly. The personal exemption has been suspended. The top marginal tax rate for individuals is 37%. The income threshold for the 37% tax bracket is $518,400 for single filers and $622,050 for married couples filing jointly. The long-term capital gains tax rate for individuals in the top bracket is 20%. The annual contribution limit for 401(k) plans is $19,000 for those under 50 and $25,000 for those 50 and older. The annual contribution limit for a traditional or Roth IRA is $6,000 for those under 50 and $7,000 for those 50 and older. The estate tax exemption is $11.7 million per individual. It's important to note that these numbers are subject to change and that you should consult with a tax professional or the IRS for the most up-to-date information and advice on your specific situation.
For more information please visit the podcast's website: https://poweringyourretirement.com/2023/01/12/2023-tax-numbers-to-know/