How to Choose Between an IRA and a 401(k)

No matter where you are in your career, it is never too early to plan for retirement. If you’ve been avoiding setting up a retirement savings plan because you don’t know where to start, you’re not alone. The two main types of retirement savings plans are a 401(k) and an IRA—but how do you know which one is best for you? Determining which kind of retirement savings plan is right for you will depend on which option fits your specific lifestyle. Here, we will look at a few of the key differences between the two and when it’s advisable to invest in an IRA or a 401(k).

What is a 401(k)?

A 401(k) is a retirement savings plan through your employer. Contributions are normally deducted straight from your paycheck into your 401(k). The money put into your 401(k) will grow over time as it is invested on your behalf into mutual funds, stocks, and bonds. You can contribute up to $19,000 a year to a 401(k) and there are no income restrictions. Money in your 401(k) cannot be taken out until you reach age 59 ½ without a 10% penalty, but after you are 70 ½ you must take minimum distributions. Your contributions are tax-deductible, but you will pay income taxes on money you withdraw from your 401(k).

There are a few ways to tell if a 401(k) is a good retirement investment for you:

– Your employer offers a 401(k) and will match your contributions, essentially giving you free money.

– Automatic paycheck deductions will make you less tempted to spend the money. It is gone before you ever have it in your hands.

– You have reached your IRA’s maximum annual contribution. You could use a 401(k) to maximize your savings.

– You want to take advantage of the tax benefits of a 401(k). Because the contributions to your 401(k) are taken out of your paycheck before taxes, you could reduce your taxable income and therefore fall into a lower tax bracket. This could allow you to receive higher income tax returns.

What is an IRA?

An IRA, or individual retirement account, is the other most popular retirement savings plan. An IRA is not through your employer and will therefore stay with you no matter how much your lifestyle changes. You can invest up to $6,000 per year until you are 50, at which point you can invest $7,000 per year. Like a 401(k), you cannot withdraw money before age 59 ½ without paying a 10% penalty and you must make minimum withdrawals after you are 70 ½.

Your IRA contributions may be tax deductible depending on your financial situation, but any withdrawals will be taxed as income. However, this is different if you have a Roth IRA. With a Roth IRA, you pay taxes up front on your contributions, but you do not have to pay taxes when you withdraw later. There are no income limits with a Roth IRA and because you pay taxes up front, you can withdraw your funds at any time without paying a penalty. There is also no mandatory minimum distribution requirement at a certain age, so you do not have to touch your contributions until you are ready.

A traditional IRA or Roth IRA may be right for you if:

– Your employer doesn’t offer a 401(k) match or any other retirement plans. IRAs allow you to save and invest on your own terms, even if you don’t have access to a retirement savings plan through your employer.

-You change jobs a lot or don’t plan to stay with your current employer. An IRA stays with you no matter where you go or who you work for.

-You are in a lower tax bracket. Especially if you are young, you can invest what you can in a Roth IRA now while paying the lowest possible taxes.

-You want to control how your money is invested. Whereas with a 401(k) you are paying someone to make investments for you, IRAs give you control over what kind of investments your money goes to.

The Takeaway

At the end of the day, the most important thing is that you pick a plan and start saving consistently. When you are looking at your options, don’t be afraid to compare different plans and services provided. There are so many variables that go into saving for retirement and it can be hard not to become stagnant with worry about the what-ifs. Focus on what you can control: making steady contributions to a retirement savings account that fits your lifestyle.

5 Tips for Talking to Your Parents About Retirement

retirement

Many adult children eventually find themselves switching roles with their aging parents. Whereas you were once the child in need of guidance, your parents gradually seem to need your help more and more. Suddenly, you realize that you’re the one with concerns about your parents’ health and finances. If you are concerned about your parents’ retirement plans – you’re not alone. Studies show that approximately 26% of Americans ages 50 to 64 don’t have any kind of retirement savings. If your parents are facing retirement with no plan, it’s not too late to intervene. Here are some tips for opening a dialogue with them about retirement options.

1. Be Honest, But Gentle

Ambushing your parents with a bunch of questions is definitely not the best way to start a healthy conversation. Be direct, but give them time to prepare for your chat. Tell them you are worried about their retirement plans and ask when would be a good time to talk. Start by getting an idea of whether or not your parent shares your concerns. If they do, these concerns will be a good place to start a conversation. If not, get prepared to make your argument as respectfully as possible.

2. Don’t Lecture; Ask Questions

The important thing to keep in mind is that this is a two-way conversation. Lecturing your parent about what he/she should or shouldn’t be doing is not likely to lead to anything productive. Ask your parent lots of questions. Do they have any savings? What do they expect their retirement expenses to be? Do they have any debt? These questions can open a dialogue and give you a better understanding of how prepared they are for retirement. Ask to see documents if they have them and go over the information together so you both know all the details.

3. Be Realistic About Your Ability to Help

Some parents assume their adult children will be able to care for them in their later years. Be honest about your ability to help them in the future. If you are not prepared to provide housing, care, or financial assistance, now is the time to make them aware of this. Keep in mind that helping a retired parent doesn’t have to involve fully supporting them forever. Even putting some of your money aside into an emergency fund for your parent(s) could be quite helpful.

4. Let Them Make Their Own Choices

Ultimately, the retirement choices your parents make are theirs and theirs alone. As much as you may want to intervene and do what you think is best, you have to respect the fact that these decisions are theirs to make. You can provide them with as much information as you possibly can to help them make an informed decision about their financial future, but you cannot dictate their choices. Be patient and understanding.

5. Keep the Conversation Going

Talking to your parents about their retirement plans is not a once and done deal. This is likely a lifelong conversation that you will need to have repeatedly as your parents get older and their financial circumstances continually change. Creating an open dialogue will make both of you feel more comfortable voicing your concerns when they come up over the years. Check in with your parents every once in a while to ensure that they are still on track with their retirement goals.

Where your parents are at financially when they retire is the result of decades worth of financial decisions and life choices. There is no way for you to turn back the clock and reverse everything for them. However, starting a dialogue now about money and retirement can help your parents prepare for life in their golden years.

How to Avoid Bankruptcy in Retirement

bankruptcy in retirement

Bankruptcy filings for retirees are rapidly increasing across the US. As poorly funded pensions and retirement savings shrink, retirees look to bankruptcy to put a stay on some of their monthly payments. Rising healthcare costs, adult children living at home for longer, and the financial inability to properly save for a retirement that extends into longer lifespans have all contributed to the rising senior bankruptcy rate. How can you avoid this trend and spend your golden years in peace? Here we look at a few ways to make sure you aren’t filing for bankruptcy after retirement.

1. Settle Your Debts

Regardless of how much you have invested into your retirement, if you’re carrying a mountain of debt into retirement you could end up financially strapped pretty quickly. Paying off as much debt as possible before retirement should be your number one goal. High interest credit cards are the most important to pay off, followed by your mortgage and car payment. The less debt you carry into retirement, the more money you will have to cover your living expenses. If you are struggling to tackle your debt and you are approaching retirement, sit down with a debt negotiation attorney to figure out what your options are.

2. Be Clear with Children and Other Family Members

It is very tempting to be generous with family members and other loved ones. However, you need to be realistic about when you can actually afford to help and how much this will impact your retirement savings plans. Parents should not feel obligated to pay for college, a wedding, or other big life events if they do not have the means to do so. The best thing to do is communicate these financial boundaries early. Adding more debt to your plate in order to help a family member can be disastrous for seniors looking at retirement. After all, if you do not prioritize your financial health over that of your loved ones, you could end up becoming a financial burden to them later on.

3. Downsize

Retirement comes with a lot of big life changes. More leisure time, the freedom to travel, and the ability to explore new hobbies come hand-in-hand with some harder lifestyle changes. With the inevitable reduction of income in retirement, retirees often find they cannot afford to keep up with their day-to-day expenses. Buying a smaller home or renting and downsizing to one vehicle instead of two or three can help you establish a leaner budget before retirement. This should make it easier to embrace a reduced retirement income.

4. Be Smart About Social Security Benefits

The biggest concern most people have about retirement savings is running out of money. Getting a part-time job to boost your retirement portfolio can help buoy your finances in retirement. Most retirees need about 80% of their pre-retirement income to maintain their lifestyle. Your Social Security benefits will mirror the average of your pre-retirement wages. It is important to keep in mind that your social security benefits will likely not cover even half of your retirement expenses. The longer you can go without tapping into social security, the better your financial situation will be in retirement. Even if you have the option to start using your Social Security, only do so when it is absolutely necessary.

5. Invest!

The shakiness of the market over the last two decades has many Americans making uber conservative investment decisions about their retirement. Investing doesn’t have to be scary. In order to keep up with cost of living adjustments and to give yourself a generous nest egg to work with in retirement, it is important to invest savings into a diversified portfolio of common stocks. Especially if you are a few decades away from retirement, it is a good idea to use the time you have to put your assets into money market funds. Investing your money, as opposed to letting it sit in a bank, can make all the difference for your funds in retirement.

Many seniors and those approaching retirement age have anxieties about the financial realities of retirement. Veitengruber Law can provide the services you need to establish a robust retirement plan. From asset protection and debt management to bankruptcy litigation, we can help you get the peace of mind you need. We also work with a diverse network of professionals who can help you invest, downsize, and make a comprehensive retirement plan that will be effective. Don’t wait until you are enjoying your golden years to have second thoughts about your retirement plan. Take action today to secure your financial future.

What is the Roth IRA 5-Year Rule?

roth ira

Retirement plans are not a one size fits all deal. There are many different options for saving, investing, and insuring your golden years. The Roth IRA has been a longtime favorite for retirement savings because of the tax-free withdrawals people can enjoy during retirement. But as with any kind of tax break, it is important to pay close attention to the fine print. Not every withdrawal from your Roth IRA will be tax-free. Many people with a Roth IRA don’t know about the five-year rule. This rule requires those holding a Roth IRA to wait five years before making tax-free withdrawals from their investment earnings. Before you consider investing in a Roth IRA, you need to know how the five-year rule is applied and how it will impact you as an investor.

Once you make your first Roth IRA contribution, you will need to wait five tax years before you can withdrawal your earnings from this account without being subject to taxes. This five-year period applies across the board no matter the status of the account owner. If the owner were to pass away, the beneficiary would also be expected to wait the full five-year waiting period before taking out any earnings tax-free. It is important to note that the five-year rule only applies to investing earnings, not direct contributions. Any money you put directly into your Roth IRA is considered an after-tax contribution and is available to take out before the five-year waiting period is over. You can always remove direct contributions, but the earnings you make off of these contributions must follow the five-year rule.

Even after five years have passed, you will still need to meet specific criteria to make a tax-free withdrawal. To avoid taxes and penalties, you must be age 59 ½ or older to withdrawal earnings from your Roth IRA. There are some circumstances that may allow you to make early withdrawals from the account without penalty. If you are disabled or intend to use the withdrawal for a big life circumstance, like buying your first home, you may be able to take a distribution without paying taxes or fees. Inherited Roth IRAs still follow the five-year rule from the date of the original account owner’s first contribution, not the date of inheritance.

The five-year period goes by tax years, not calendar years. This means you could make a contribution on the last day of a tax year (the day before your income taxes are due) and the contribution will count for the previous calendar year. This can shorten the waiting time to make a tax-free withdrawal by one year. For instance, if you make a contribution to your Roth IRA the day before your taxes are due in 2020, the contribution will count toward your 2019 tax year. Therefore, you will be eligible to make a tax free withdrawal of earnings in 2024 instead of 2025.

The clock starts with your first contribution to any Roth IRA. Once you get through the five-year requirement for one Roth IRA, any additional Roth IRAs will also be considered “on hold” for five years. Since the five-year waiting period can be applied across other accounts, the earlier you start contributing to a Roth IRA, the less likely you are of running into problems with the five-year rule. Start making contributions well before you plan on needing to make a withdrawal.

A Roth IRA is a great way to save for retirement. Understanding the tax rules surrounding your Roth IRA can help you make the most of your contributions.

What to do with Your Old 401(k) When Changing Jobs

401k

When you are looking forward to a new job, your retirement savings plan is typically not the first thing on your mind. However, for many of us, an employer-sponsored 401(k) is one the biggest and most financially beneficial perks of a job. Your 401(k) is your future. It is a huge factor in your ability to retire when you are ready and live comfortably in your golden years. That being said, what happens to your old 401(k) when you leave your current job? The best decision will often depend on your specific financial circumstances. Here, we look at the four options you have for your 401(k) when you are starting a new job.

1. Leave it

Of all the options available to you, leaving your 401(k) where it is with your previous employer is the easiest option. The money in your account will continue to grow tax-deferred and be available to you upon retirement. If the plan comes with low fees and good investment options, you may want to stick with it. There are some cons to keeping your 401(k) with your previous employer. Depending on the employer, you may not be able to make additional contributions, take a plan loan, or make a partial withdrawal once you leave. Some employers will charge higher fees if you aren’t an active employee. There is also the risk that you could miss important updates about your plan, or forget about the account entirely. This option will highly depend on your individual circumstances and the details of your former employer’s plan.

2. Roll it into your new plan

While this may not be an option with all plans and every place of employment, this option will allow your retirement savings to continue growing, tax-deferred. You will be allowed to make contributions to the account, typically after a mandatory probation period ends. If your new employer has a better plan (lower fees, better investment options, etc.), it might be worthwhile to take your money with you. There are two ways you can roll your old 401(k) into your new one:

  • Direct rollover: The administrator of your old plan transfers the money directly into your new 401(k) account.
  • Indirect rollover: The administrator of your old plan transfers the money directly to you. Then you must manually apply the money to your new account. This option is typically for people who are in need of a short-term loan. Your employer will withhold 20% for taxes in case you decide to keep the money outright. If you add the money to your account in full within 60 days, the 20% will be returned to you when you file your tax returns.

3. Roll it into an IRA

Instead of rolling over your savings into another 401(k), you could put those funds into an individual retirement account (IRA). Because this account does not have to be connected to an employer, it is a great option for those leaving their job to go back to school, become stay-at-home parents, start their own business, or for those who do not have access to another 401(k). The money can be sent directly or indirectly, only this time you will not have to pay taxes like you would with a 401(k) or a Roth IRA. With an IRA, your money will be able to grow tax-deferred and you will have access to a wider variety of investment options than with a 401(k). An IRA also does not require you to pay fees if you withdraw your money for college, to buy your first home, or to pay off medical debt.

4. Cash Out Your 401(k)

When it comes to deciding whether or not to cash out your 401(k), it really depends on you and your specific circumstances. Most financial planners and asset protection attorneys will advise against it; taxes and penalties will cause you to lose a big chunk of the money you and your employer have invested. However, you know your financial situation best. You may need a big lump of cash to go back to school, as an emergency fund when one parent decides to stay home with the kids, or to start your own business. If you are considering cashing out your 401(k), you MUST make sure you understand what it will cost you.

When you cash out your 401(k), your employer will typically withhold 20% of your balance to pay off the IRS. You will also have to pay state taxes and, if you are under 59 ½, a 10% early withdrawal fee. It is also important to understand that by cashing out this money early, you will be missing out on the money your account could be making in the years between now and retirement. A 401(k) with $50,000.00 when you are 35 will turn into $216,000 by the time you retire at 65. If you were to cash out this 401(k) now, after taxes, fees, and penalties, you would receive approximately $35,000.

Veitengruber Law has experience providing long-term planning guidance at any stage in your career. Protecting your assets and preparing for retirement will look different for every client. We offer personalized strategies to help you make informed decisions about your retirement goals.

5 Mistakes to Avoid if You Ever Want to Retire

People can spend their entire working lives dreaming about retirement. Retirement is a time to travel, to enjoy leisurely days, and to do the things we have always wanted to do. How comfortable our golden years will be depends a lot on how well we prepare for retirement. More and more often, would-be retirees are finding they must work long after they wish to retire because they did not save enough money to get by without working. If you want to avoid working into your 70s, here five common mistakes to avoid.

1. Start Planning Too Late

Most of us aren’t thinking about retirement when we first enter the work force.  Young workers believe they have plenty of time to save or that they can’t afford to put money towards retirement. But starting to plan for retirement as soon as possible can make a huge difference down the road. Every year sooner that a young worker starts saving for retirement takes about a year off how long they will have to work. Starting to plan for retirement too late can make it very difficult to make up the difference. Even if all you can only save a little, it is important to start saving as soon as possible.

2. Having Too Much Debt

It will be hard to make any serious plans for retirement if you’re struggling under a mountain of debt. It is important to include being smart about debt when you are planning for retirement. If possible, consolidate your debt. This could lower your monthly payments which would free up money you could put towards your retirement savings. If most of your debt is from credit cards with high interest rates, it may be worthwhile to look into refinancing that debt. Personal loans with fixed interest rates can help you save money by spending less on high interest debt.

3. Taking Money Out of Your 401(k)

It can be very tempting to cash out money from your 401(k), especially when sudden and expensive life events occur. A lot of people also end up cashing out their 401(k) when they leave a job. While using the money you have saved in your 401(k) before retirement can seem like a good idea at the time, it can really damage your ability to retire comfortably later. Early withdrawals can come with high penalties and taxes. In a financial emergency, it is better to take out a low-interest loan than cash out money from your 401(k). This will allow your retirement fund to remain untouched as it continues to grow. Another option is to borrow against your 401(k). This way, you are borrowing from yourself and paying yourself back as your 401(k) keeps growing.

4. Assuming Social Security Will Be Enough

The average Social Security retirement benefit is $1,411.00 per month which is about $17,000 per year. Assuming this will be enough, or even close to enough, to live off of in retirement can be a big mistake. If you earned more during your working years, you will collect more than that. However, the max benefit is $2,788 per month. For many retirees, this is simply not enough to pay for monthly bills, medical expenses, and other financial responsibilities.

5. Underestimating How Long Your Retirement Will Be

In the US, people tend to retire around age 62 or 63. Knowing when to retire can be hard as you do not want to retire too early and run out of money, but you also want to enjoy the personal benefits of retiring as early as you can. The hard part is you never know how long you will live into retirement. The money you saved might get you to 85, but what happens after that? On top of this, many people end up retiring earlier than they planned. Health reasons, downsizing, or a workplace closure can all cause older workers to retire early. For this reason, it is wise to work as long as possible.

The key to retiring well is to plan well. Get started as early as possible and follow these tips to ensure you can enjoy your golden years in peace and financial security. You work hard to provide for yourself and your family. Make sure all that hard work pays off in the end by taking steps towards your retirement goals today.

How to Budget for Travel in Retirement

travel in retirement

A lot of people anticipate that their retirement years will be a great time to travel. With more freedom and less time constraints, retirees can spend their days seeing the places they have always wanted to see. On the other hand, it can be hard to see the world on a fixed income. Luckily, jet-setting during your golden years is very possible if you take steps before retirement to budget appropriately for it.

First, you’ll need to be able to answer this question: What are your travel goals?

A budget for one yearly vacation is going to be very different from a budget for extended, more frequent travel to many different areas of the world. This is why it is crucial to determine what your travel goals are. Doing so will help you to plan accordingly. Make a list of places you want to see and get an estimate for how much it will cost to travel to each place.

In planning your retirement travel goals, you’ll need to make sure you don’t leave out any important travel costs. Remember to research costs for:

  • Flight tickets
  • Car rentals
  • Train tickets
  • Taxis/buses/subway fare
  • Dining
  • Tipping
  • Lodging
  • Sightseeing (guided tours, etc)
  • Travel gear
  • Souvenirs/other purchases

It’s a good idea to talk to other retirees who also have the “traveling bug” to see what their recommendations are or if they know of any good travel deals.

After you know your travel goals and approximate costs, you can figure this into your retirement plan. Before retirement, this may mean setting aside some of your savings into a travel fund with the goal of reaching a certain specified amount by the time you retire. Typically, it is considered safe to spend 4% or less of your total retirement savings per year without having to worry about running out of money. This 4% should also take into account everyday living expenses like taxes, food, health care and insurance. After retirement, you may continue to receive some kind of monthly income from Social Security, property you own and rent or investment proceeds. Make sure this income is calculated into your budget.

Look over the list of places you want to visit and put them in a list in order of priority. Next, create a timeline for your travels. This will not only give you concrete things to look forward to, but will help you figure out how much money you will be putting towards travel and when. This can give you a better idea of how travel will fit into your yearly budget. Maybe you will skip traveling a few years in a row to go on a dream trip. You may find your budget in retirement changes year to year depending on your travel plans. Be aware of the impact travel will have on your budget and plan accordingly. Maybe this will mean moving into a smaller house, eliminating a second vehicle, or even just spending less money eating out or on other unnecessary “luxury” activities.

During retirement, it is important to make every dollar count. Thankfully, with less time constraints, it is easier for retirees to stretch a dollar. Scheduling a trip during the off season is a great way to lower your overall cost. Take the time to watch airline deals online with sites like Expedia and Fly.com. Flexibility with when you travel (which will be possible in retirement) will allow you to take trips when they are most cost-effective. The longer you stay in one hotel, the more likely it is that you can negotiate a lower lodging rate. Combining long trips into one big trip can help you save on airfare.


Remember to always look for any senior travel discounts and do not be afraid to take advantage of every single one!


As with any kind of budget, you’re never going to be able to perfectly calculate exactly how much everything will be ahead of time. This is why one of the most important aspects of travel budgeting is leaving yourself a buffer. Spur-of-the-moment excursions, taxis, tips for staff and meals can sometimes exceed your planned allowance. A buffer will cover these extra expenses so you aren’t caught unprepared. Going with this rule, it is a good idea to get travel insurance. While it will make your trip slightly more expensive, it can save you big later if your travels are disrupted or a health issue forces you to cancel your trip.

Traveling can be a rewarding opportunity to have meaningful experiences in your golden years. If you are still preparing for retirement, now is the ideal time to assess where you are in achieving your retirement goals. Don’t let poor budgeting hold you back from living your retirement dreams!

Student Loan Relief for NJ Retirees

NJ retirees

A growing number of people entering retirement are struggling to afford their student loan payments. Some older borrowers may have taken out loans for themselves to go back to school later in life, while others co-signed loans for their children or grandchildren. As of 2015, the average student loan debt owed by borrowers 65+ was $23,500 and nearly 40% of those loans were in default.* Carrying student loan debt into your 60’s can make it extremely difficult to sustain your standard of living through retirement.

 

Even worse news is that an increasing number of borrowers in retirement have had portions of their Social Security retirement and disability benefits garnished for nonpayment of federal student loans. If a loan is in default, lenders can take up to 15% of a retiree’s monthly Social Security benefits. This can affect retirees’ ability to buy food, pay for housing or afford needed medication. If you are struggling to make student loan payments under a retirement budget, consider the following options.

 

Many lenders offer loan modification options for borrowers struggling to keep up with their payments. Some offer ways to temporarily reduce student loan payments through deferment or forbearance. Deferment will allow you to put off your loans for a designated time period, usually no longer than three years. Borrowers approved for deferment will not have to make payments during that time. Under some loan agreements, you may even be able to defer interest accrued during the deferment period.

 

Forbearance is similar to deferment, with some slight differences. Under forbearance, your loans will be paused or reduced for up to a year. Your interest, however, will still continue to accrue under forbearance. Many times, lenders will allow borrowers to apply for an elective forbearance with the understanding that this kind of loan modification can only be utilized a limited number of times. It is important to note that these types of interventions are effective for momentary financial struggles, but are not long-term solutions. These options will allow you to postpone repayment, but they do not take away the debt.

 

Under some circumstances, you may be able to file a special request to get your student loan debt forgiven. This request must include a written Complaint indicating the student loan debt is causing undue hardship on the borrower. The official legal Complaint will be served in court together with a Summons on the applicable lender(s). A judge will then decide whether or not to forgive all or some of the student loan debt. This decision will be based on the borrower’s income, their financial hardships, any medical hardships and whether or not the individual has previously tried in good faith to make the loan payments.

 

While you can file this Complaint yourself, the document must be in a special format and include very specific information about the borrower’s financial situation. Up to 40% of these cases result in at least a partial loan forgiveness for the borrower. While law firms do charge a fee to assist in these filings, it’s easy to see that you’d likely get a huge return on your investment of the expert help of an experienced attorney. At Veitengruber Law, we know what judges are looking for in these filings and can help you present a detailed case that is likely to be decided in your favor.

 

Student loan debt can be hard to manage at any age, and especially so for those living on a fixed income. Don’t let student loan debt drain your financial resources in retirement. Call us today to get individualized advice on your specific case.

 

*Statistics from AARP

Budgeting in Retirement: Living Well in Your Golden Years

budgeting in retirement

Having a well thought-out budget is the best way to start your retirement on the right foot. Retirees must plan to have a form of steady income and create a budget that fits their expected lifestyle. In retirement, financial priorities will change with your changing lifestyle. It can sometimes be hard to determine what kind of retirement budget is realistic until you have entered retirement. While some people overestimate their expenses in retirement, some people struggle to adapt to life on a fixed income. For these reasons, it is a good idea to revisit your budget several times a year.

Retirement involves a lot of big changes, but one of the biggest changes is how most people get paid. Instead of receiving a weekly or biweekly paycheck, retirees typically rely on income that pays out once a month. On top of this, many people find their monthly income reduced in retirement. It can be a big mental shift for people entering retirement to suddenly adjust to all of these changes. Sometimes the best way to adjust your budget in retirement is to go back to basics. Here is how you can take one month to monitor and analyze your retirement budget:

Throughout the month, keep all receipts, payment confirmations, and a tally of any cash spent. It is best to record these expenses daily so you do not accidentally leave something out. Use a spreadsheet, notebook, or app to track your expenses. In tracking spending for a month, you can get a good idea of where your money is going. At the end of the month, sort your expenses into categories: groceries, dining out, entertainment, phone, utilities, housing, insurance, transportation, etc. Be sure to factor in irregular expenses like holidays and birthdays. Your expenses in December are likely to be a lot different than your expenses in June, for instance.

Next, analyze the results. This analysis is meant to be a realistic assessment of your lifestyle as it relates to your spending and income. Where is your money going each month? If your monthly budget was based on your pre-retirement lifestyle, you may see some significant differences between your expected spending and your actual expenses. Maybe you spend less on transportation and entertainment, but you spend more on eating out and medical expenses. Pay attention to these shifts in spending and make sure you are adjusting your budget accordingly.

After you have identified the trends in your spending, figure out where you can cut expenses. Determine which expenses are needs (like bills, housing, transportation, etc.) and which expenses are wants (like entertainment, hobbies, and gifts). In retirement, your “needs” may change. While you may have needed two cars when you and your spouse were working, is this still a necessary expense? Are you eligible for discounts to your cell phone or insurance plan? While you want to make sure you cover your essential expenses first, finding ways to make cuts to necessary spending will give you more financial freedom in general.

Finally, it’s time to put all these insights into your finances to create a new plan for your budget. Identify five goals that make sense for your income and expected expenses. Goals help you align your budget with the intention of getting the most out of your income. Make your goals specific and give yourself deadlines. Find ways to keep yourself accountable. Sign up for auto-pay, use an envelope system to categorize your spending, or get your spouse or partner to join you in your strides to reach your goals. A budget is only as good as your ability to stick with it!

You can do this financial check-in every six months or whenever your budget seems to be spread too thin. Sticking to a budget will help you feel more secure and relaxed so you can enjoy your golden years. Get your finances back on track by taking a fresh look at your retirement budget as we move toward the New Year!

Retired in New Jersey – Do I Really Need a Car?

retired in New Jersey

Owning a car gives you the freedom to hop in and drive wherever you want, whenever you want. While most of us tend to see this convenience as a necessity, the cost of owning a car can be a major burden on your budget—especially after retirement. When it comes to deciding whether or not you really need a car, it is important to consider your individual needs. Here are some things to think about if you’re wondering if you can get by without a vehicle.

After retirement, of course you want to spend your money pursuing lifelong dreams and kicking back. But many people find themselves struggling to maintain their lifestyle with retirement savings. There are few choices that can make as big of a financial difference as the choice to give up your car. The following is a typical breakdown of monthly car expenses:

  • Car Payment: $300.00 per month
  • Gas: $150.00 per month
  • Insurance: $80.00 per month
  • Maintenance: $100 per month
  • Parking: $40.00 per month
  • Depreciation: $200.00 per month

These expenses add up fast!  The average car owner spends $870.00 a month on their car—and that’s not including the potentially huge cost(s) of unforeseeable repairs in the event that something breaks or you are involved in an accident. If you are a multiple-car household, these costs can absorb a huge amount of your budget. Even giving up just one car can save you thousands throughout the year.

So getting rid of your car can help you save big, but how will you get around without one? There might be more options than you think.

Most New Jersey cities, suburbs, and even some rural areas have public transportation in the form of buses, trains, and/or trolleys. On average, people spend about $120.00 per month on public transportation. In order to figure out if this is an option in the area you live, do a quick internet search to see what kind of services are available. Many counties in NJ have their own bus services for travel to popular destinations like local shopping centers, hospitals, or larger travel hubs. If you’ve always owned a car, the number of public transportation services available in your area may surprise you.

Even if public transportation can’t get you everywhere you need to go, there are plenty of other options at your disposal. Is your community walkable? Are there bike paths? Walking or biking around town is a great way to stay active in retirement with the added bonus of being able to explore parts of your area that you would typically zoom right past while driving.

Ride sharing is also an increasingly popular way to get around. With companies like Uber and Lyft offering rides to customers for around $1-$2 per mile, these affordable options give you the convenience of a car without all the hassle and expense. Especially if you live in an area where it is difficult to pick up public transportation, ride sharing services are a great way to get around while saving money.

With the average monthly cost of a car equaling $870.00 a month and the average cost of using public transportation or ride-sharing typically around $120.00 a month, you could save about $9,000.00 a month. That’s no small savings! All that extra money can put a little more cushion in your budget, allowing you to live more comfortably. You can use that savings to do the things you’ve always wanted to do, like travel or pick up a new hobby.

Not everyone can give up their car. But owning a car is not always a necessary expense. If you can get by without a car, you can save big. Look at all of your options to decide whether or not owning a car in retirement is the right choice for you.