4 Ways to Show Customers You Are Listening to Them (www.FuturityFirst.com)
When we are loyal to a product, service or company, we want them to do and be their best. Sometimes, we even share our thoughts in hopes that they will take our ideas or suggestions as what they are: thoughtful ideas for improvement.
Have you ever wondered if your favorite brand hears you? Or, as a small business owner and keeper of a brand, have you ever wondered how you can help your customers feel heard and valued? Here are a few ideas from Michigan State University alum and Michigan entrepreneur, Jenna Kator, founder of the Jenna Kator Collection (JK).
1. Ask for their ideas.
Some companies are hesitant to ask for feedback and ideas because it opens them up to criticism. Remember, if you don’t find out now what your customers like (or dislike), you might just find them walking out the door. Ask for ideas on your Facebook page, start a discussion on Twitter, solicit their feedback with surveys in the bag as they leave. Find ways to show them that you are open to their ideas. Jenna is constantly soliciting feedback from her fashionistas. Which color or style do they like best on her new handbag designs? Her loyal customers are always happy to share their ideas.
2. Reward their suggestions.
When I worked at General Motors, we had a suggestion department (where I did a short stint), and if an employee had a suggestion worth implementing, the employee would get some type of reward for sharing their idea with the company. There is no reason a small business cannot do this as well. Customers like knowing that you value their ideas. Jenna is great at recognizing loyal customers by replying to their ideas on Facebook and thanking them for sharing. She also highlights the boutique owners who carry her handbags by showcasing their merchandising ideas as well. She is building a loyal following with both her boutiques and their customers.
3. Send them a thank-you note.
When a customer spends time giving you a suggestion, whether it is in person or online, send them a thank-you note to let them know you appreciate them. Appreciation can go a long way towards building customer loyalty. It also keeps those great ideas coming back to you and not to your competition. I’ve been a loyal JK customer since she started her business I was a professor at Michigan State when she came and shared her new business with our Retailing Student Association. Whenever I order a new handbag, I always find a thank you note tucked inside. She has not forgotten me, even though I have moved away to teach in North Carolina.
4. Highlight your customers in your advertising.
Jenna loves featuring her best customers in her advertising too. She holds contests, asking customers to send in pictures with their favorite JK showpiece, then she features them on Facebook and Twitter. The customer photos are a great way to build brand loyalty when customers can see themselves using her product on her social media sites.
What can you do today to show your loyal customers that you are listening to their great ideas?
Mishra, Karen. “4 Ways to Show Customers You Are Listening to Them.” Web log post. Entrepreneur. N.p., n.d. Web. 22 Oct. 2015.
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
When you really need a financial advisor (www.FuturityFirst.com)
A new survey from Financial Engines, which offers online financial advice through employer-sponsored retirement plans, finds that a majority of investors want at least some guidance from a human when they get close to retirement. Fifty-four percent of employees participating in retirement plans, such as a 401(k), who are not working with a financial advisor said they want one. Financial Engines surveyed more than 1,000 employees between the ages of 18 and 70.
“Money and financial decisions are emotional. Our survey shows that people still want to talk to somebody,” said Kelly O’Donnell, executive vice president, at Financial Engines.
But concerns about the cost of financial advice, lack of retirement assets and uncertainty about how a financial advisor could really help were the top reasons stopping retirement investors from hiring an advisor, Financial Engines found. (See the chart below for the reasons among surveyed investors for not working with a financial advisor.)
Nearly 6 in 10 investors in target-date funds who aren’t working with an advisor want one, according to the Financial Engines survey.
Target-date funds, which are designed to be set-it-and-forget-it portfolios without the help of a financial advisor, are popular because they are a default option in many retirement plans.
Eighty-three percent of employers with a retirement plan now offer a target-date fund, Deloitte found, up from 77 percent in 2013. Assets in target-date funds reached $700 billion last year, according to investment research firm Morningstar.
Financial Engines found that 44 percent of “do-it-myself” retirement investors not currently working with an advisor wanted to work with one in the future. “These investors are looking for an advisor to validate their approach,” O’Donnell said.
So what do investors want advisors for? To determine how much was needed to save in order to reach a retirement goal, to figure out how to convert savings into income during retirement and to evaluate overall financial wellness, said the surveyed investors. Each goal received an average of about 70 percent of surveyed investors saying that it was extremely or somewhat valuable.
It’s one thing to want financial advice and another to pay for it. Many advisors still charge a standard 1 percent annual fee for the assets they manage. It often doesn’t make financial sense for advisors to pursue clients with small account balances.
Most robo-advisors, which provide automated investing advice, offer lower-cost guidance compared to the traditional 1 percent fee. Robo-advisors had an estimated $8 billion in assets under management as of July, a 34 percent increase from last year, according to financial research firm CB Insights. By 2020, assets in these services could grow to nearly $2.2 trillion, management consulting firm A.T. Kearney estimates. (That’s still a relatively small piece of the overall asset management pie — Vanguard alone has about $3 trillion in global assets under management — but clearly significant.)
Yet whether it’s financial advice from humans or an automated service, Financial Engines’ survey may understate the true demand for financial guidance. All the responses from the investors surveyed were before the recent market volatility that started in late August.
“Investors want advice even more during volatile markets,” O’Donnell said.
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
How to make sure your adult children can retire well (www.FuturityFirst.com)
How can you make sure your adult children are ready for retirement?
Many studies have found that younger generations have positive financial habits already, even though many are facing financial challenges that are exacerbated by overwhelming student loan debt. In a T. Rowe Price survey of over 1,500 millennials with a 401(k), more than three-quarters said they track expenses carefully and two-thirds stick to a budget. Saving for retirement is actually their top priority, tied with paying down debt.
“It’s encouraging to learn that millennials are so receptive to saving for retirement and are generally practicing good financial habits,” said Anne Coveney, senior manager of Retirement Thought Leadership at T. Rowe Price. So the good news is your child may already be well on the way to securing his or her own financial future, but you still may need to guide them and share with them some helpful tips.
1. Encourage them to take full advantage of the employee benefits packages at work — that can help them understand how prudent decisions today will benefit them later.
2. Urge them to increase their savings to their 401(k) or workplace plan every year — at least enough to get the company’s matching contribution. Continue to increase those contributions by 1 or 2 percent each year until they are contributing 15 percent of their salary to a retirement plan.
3. Remind them to save money outside of their 401(k) at work as well. Suggest they contribute to a Roth IRA in addition to their workplace plan or instead of one, if their employer does not offer a retirement plan. A Roth IRA allows their after-tax contributions to grow over time, and earnings and contributions can be withdrawn tax-free in retirement. (In fact, if they are in a pinch, they can withdraw their Roth IRA contributions at any time without penalty.)
4. Finally, make sure they understand they should have enough savings to cover at least three to six months of living expenses. Remind them to use their cash cushion — not their retirement savings — to pay for unexpected expenses. This final piece of advice will help ensure they don’t undo all of the positive savings goals they have already achieved.
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
Tips for Retaining Your Client’s Heirs (www.FuturityFirst.com)
Financial advisors put a lot of time and energy into developing strong relationships with clients and managing their estates. So you would think that the heirs of these clients would remain loyal to their parent’s advisors and want to continue on with the relationship. Unfortunately, that is rarely the case. When children inherit their parent’s wealth, they are more likely than not to leave their parent’s advisor and find a new one.
That’s why it’s important for advisors to start working with their clients’ children early on to forge relationships with them with the aim of continuing to managing that wealth after the original client has passed away. Accordingly, here are some tips for retaining heirs.
Look into the Future
The majority of advisors seem to fail to forge relationships with their affluent clients’ children, so it’s no surprise that the kids don’t feel any incentive to remain with the parents’ advisor. The kids may have a different style or approach to their wealth than their parents did and they want to shop around to find an advisor that seems more aligned with their tastes.
That’s why today’s financial industry leaders are suggesting that advisors focus on forging better relationships with their clients’ children and family members when their clients are still alive. Retaining these next of kin as clients during times of wealth transfers can be key to the continued success of your business. And by doing so you may also be helping your clients’ children, as you may indeed be the person who is best suited to manage the estate, being so familiar with it over the years.
It’s imperative that advisors not only think about managing their current clients’ affairs to the best of their ability, but to be able to do for their next of kin as well if they want to continue to grow their business. Wealth needs to be looked at not just in terms of dollars, but also in terms of the next generation of wealth creators.
Teach Them Well
Helping the next generation retain the family’s wealth should in fact be part of an advisor’s goals. That means helping to teach the next generation about money management, saving and being fiscally responsible so that they don’t squander any inheritance. It’s also a good idea to have a conversation with your clients’ heirs about the basics of being a beneficiary and a trustee to an estate. Giving them a crash course in the basics of investing, inheritance taxes and the purpose of insurance is a good idea as well.
While all these ideas may sound good, advisors should remember that being able to talk to a client’s children is not a given. You need to get permission first. You may also want to learn a bit about the family’s dynamics and learn about what kind of relationship the parents and kids have. If the relationship is strained, conducting a family meeting over wealth and inheritance is probably not an ideal situation. Also, parents may not want you to mention to the children the nature of the inheritance for fear that it will lessen the kids’ drive to achieve their own wealth and success.
By contrast, some of your clients’ adult children may already be wealthy from their own successes and may be looking for someone to manage their own estates as well. If that is the case, then you want to set up a separate meeting and treat the next of kin as a separate client who isn’t attached in any way to their parents.
Don’t forget that the adult children have a whole new set of needs and concerns — they’re likely in a very different financial position and stage of life than their parents were. The good news is that the next generation of wealth builders seem to be more open to guidance and advice than the previous one.
The Bottom Line
Don’t overlook the future wealth of your clients’ children as they could be the best option for maintaining control over your business’s assets. Keeping the next generation on could also be a boon to growing your firm.
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
How changing these words can help advisors hook clients (www.FuturityFirst.com)
Do your clients come to you for investment strategies or investment solutions?
The words you use with clients have an important emotional weight behind them, and a session at the Sage Advisory Perspectives on the Future 2015 conference offered some hard numbers to support which words you should use in your discussions with clients.
Gary DeMoss, a director at Invesco Consulting, offered four communication principles for advisors to have more productive discussions with clients who were happier at the end of them. Advisors should use these principles in their conversations, in their literature and on their website, DeMoss said.
Based on the focus group work of Frank Luntz, who tested participants’ emotional responses to language, Invesco worked with Maslansky and Partners to find out what advisors were saying that made clients and prospects shut down. They played videos of advisors talking about how they could help investors while the focus group participants measured their level of positive and negative emotions using a dial. Smaller percentages indicated anger and fear while higher percentages showed respondents were more comfortable with the language used.
The first principle Invesco’s focus group uncovered is that fear- and guilt-based language needs to go. Instead, give clients andprospects a positive, hopeful message, DeMoss said.
Invesco asked the focus group participants what they wanted an advisor to help them with: managing longevity risk, inflation risk or market risk. When the participants heard a pitch that mentioned managing market risk, the response rate fell to 37 percent (responses to inflation and longevity risk fell even lower to 19 percent and 10 percent respectively).
“What if I said it a little bit differently?” DeMoss said. “’I want to make sure that you can participate in the gains while reducing your downside risk.’” The response rate jumped to 63 percent when the statement was phrased that way. When inflation risk was rephrased as “the ability to afford to maintain your lifestyle,” the response increased to 81 percent. When participants heard they’d have enough money to support themselves for the rest of their lives, instead of longevity risk management, the response rate went up to 90 percent.
“I’m still talking about market risk. I’m still talking about inflation risk. But I’m talking about it in a way that makes people say, ‘OK, I get this now. I want to do something about this,’” DeMoss said.
The next finding is especially important considering many advisors’ move to a fee-based pricing structure. Invesco asked the participants what they least liked to pay: commissions, fees, charges or costs? “Fees” had the most negative association among the respondents. They understand there are costs associated with advisors’ services, and were much more comfortable with that word.
“They totally understand that you’re not free,” DeMoss said, “so I frame it with the word ‘cost’ and then I talk about fees.”
Another word bandied about these days is transparency, but DeMoss found that respondents had a much higher positive response to “straightforward fees” than to “transparent fees”: 58 percent versus 20 percent.
He noted that “transparency” has been hijacked by politicians over the last seven or eight years.
The second principle is to stop talking about mansions and vacation homes, and focus on plausible, credible messages. Clients aren’t looking for a dream retirement (11 percent), DeMoss said; they want a comfortable retirement (57 percent).
Should your conversations with clients focus on securing their financial freedom or financial security? Before the Sept. 11 terrorist attacks, investors were more interested in financial freedom, but today, they just want to feel secure.
“There’s a different message today. There’s a different level of skepticism,” DeMoss said.
Another example: When respondents were asked if they would invest their portfolio in a single well-diversified fund that would seek to maximize upside potential while limiting downside risk, emotional responses were evenly split. By simply adding the phrase “a portion of,” positive emotional responses jumped to 90 percent.
“If we don’t qualify it, they think we want everything,” DeMoss said.
The third communication principle is to avoid jargon. “The language that we use in our industry is influenced by the language that is used in the culture,” DeMoss said. Dollar cost averaging and open architecture may be immediately clear to advisors who use those terms every day, but clients don’t always know what they mean.
Even the fairly un-jargony term “nest egg” was panned by respondents for “investment income.”
“They hated the word ‘nest egg.’ They were offended by the word ‘nest egg,’” DeMoss said. “Retirement paycheck” was only slightly better received than nest egg because it implies they’re still working, he said.
Finally, advisors need to get rid of generic conversations and emphasize the personalized strategies they can create for their clients. “People don’t buy features, they buy benefits,” DeMoss said, so product discussions should focus on what they do before what they are.
DeMoss recommended advisors focus on “you” and “your”: “It’s all about you, it’s all about your. Every time we show that in our dial sessions,” DeMoss said, the dials show respondents’ feelings are more positive; “‘Oh, this is about me. Thank you for making me feel important in this conversation.’ It is such a powerful pronoun.”
Invesco found that respondents would prefer an advisor who had more time for them, even if they get them a lower return in their portfolio.
DeMoss asked attendees to choose which common phrases resonated better with clients.
- Do clients prefer to make voluntary contributions to their retirement plan or automatic contributions?
- Do they want to maximize their gains or minimize their losses?
- Are “new and improved” strategies more appealing than those that “work as advertised”?
- Are clients looking for long-term strategies or recovery strategies?
- Do investors want strategies that are not correlated to the market or that are diversified?
- Do your clients expect you to be experienced or knowledgeable?
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
How to Keep Your Clients Forever (FuturityFirst.com)
Focus on building relationships with your clients to grow your business. You want to be the first person a potential client thinks of and reaches out to. You can be that business on top of minds of your clients by being authentic and consistent in all your interactions with them.
Here are 5 ways to build meaningful relationships with your clients:
Express your gratitude.
Any time you help your clients in any way, say ‘thank you’ for being part of their experience. You can even give your clients thoughtful gifts that match their personalities and tastes so they remember you by it – something that’s ‘evergreen’. Accompany your thoughtful gift with a handwritten card.
Keep track of clients’ important dates.
The best place to keep all the important dates for your clients and prospective clients is a CRM platform. You can find the one that matches your budget and business size without going broke. The important dates you want to keep track of are birthdays, anniversaries and any special events. Plus make any special notes about their family, friends and professional accomplishments that you can mention in one of your upcoming interactions.
Leverage social media.
You want to have an established online presence: not only through your own website but through any social media channels your target audience frequents. Hint: it’s about your clients and not about you. Provide content of value, share your expertise freely without asking anything in return and build trust with your potential and existing client base for years to come. Keep growing your online community and be active and engaged to stay on the radar of your clients and remind them how great you are.
Do the Ask.
You need to own it and ask for referrals. You’ve done the work and established your cred, now ask your clients to spread the word about you. Ask them to refer their business contacts to you as their way of saying ‘thank you’ for all the invaluable service and expertise you’ve provided to them. Do the Ask and feel good about doing it.
Keep in touch with your clients.
This recommendation ties in closely with the tip #3 where you expect to keep track of your clients’ important dates. Leverage this intelligence to reach out to your clients on those dates versus on predictable holidays via ‘oh so boring’ holiday cards. Stand out from the businesses’ crowd and tailor your communications to events and happenings that are personal to your clients.
Retaining existing clients is more rewarding and cost effective than constantly acquiring new ones. Invest time and resources in increasing your clients’ retention and see your business skyrocket.
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
How to Draw Down Your Retirement Savings (FuturityFirst.com)
Saving for retirement is challenging, no doubt. But if you want to know what’s really tricky, consider spending that money in retirement.
Retirees in the past often relied on a simple rule for retirement income: Draw down 4 percent of your savings every year and you will be all set. But the retirement landscape has changed.
For one thing, people are living longer, and their money has to last all that time. One in four people who are 65 years old today will live to age 90, and one in 10 will live to 95.
Low interest rates also complicate the picture for savers. A one-year certificate of deposit came with a yield of just 0.28 percent, on average, through most of September, according to Bankrate. That’s hardly enough to generate much retirement income.
Then there is the changing nature of retirement saving itself. Many people retiring now are able to count on pension and Social Security payments for the bulk of their retirement income, with investment income the icing on the cake. An AARP Public Policy Institute analysis of Census Bureau data found that in 2012, median income from Social Security for those receiving it was $13,972, and median income from pensions and retirement savings was $12,000. For these people, drawdown decisions matter, but represent just a portion of retirement income.
But as more and more people retire without defined benefit plans, their own savings, often in 401(k) accounts, will be increasingly important — and investors’ choices about how to use them will be more complex.
“You need to have the safety in terms of predictable income, and you need to have part of your portfolio in risk assets. You could be looking at 30 years” of retirement, said Dan Keady, senior director of financial planning at TIAA-CREF.
Some investment pros say the 4 percent rule, first broadly proposed by William Bengen, a former financial advisor, in 1994, can still apply, but differently.
“We talk about the 4 percent guideline as a starting point,” said Judith Ward, a senior financial planner with T. Rowe Price.
Take longevity, for example. At T. Rowe Price, financial planners recommend that people planning for retirement assume that their money will have to last for 30 years, said Ward. Clearly, if retirement assets remain flat, a 4 percent drawdown will not last that long.
That’s why Ward and others recommend that retirees use a 4 percent withdrawal rate as a loose target, but then adjust their drawdowns depending on market conditions. When markets are in a downturn, “great, tighten the belt,” Ward said. Conversely, a strong market can enable retirees to draw down a bit more, since they will still be leaving plenty of savings in the portfolio.
“People need to every year come back and look what’s going on,” Ward said.
Another approach is to consider annuitizing some retirement savings. Annuities have gotten a bad rap at times for high fees and opaque terms, but as Americans live longer, more experts are pointing to them as tools to help your money last.
“An annuity is really like an additional pension for some people,” said Keady, adding that it “adds some stability to where you are getting your income.”
In addition to providing more stable income, annuities help offset the risk that investors will outlive their assets. And having an annuity that throws off income reduces the chance that retirees will have to draw on invested savings at a time when the market is weak.
“Most people don’t want to be paying for basic, necessary expenses out of something that gyrates up and down,” Keady said.
One annuity option to consider is longevity annuities, which start paying out at some date in the future, like when an investor turns 80. The investor spends less for the annuity because of the delay, but receives protection against outliving savings.
Last year, the Internal Revenue Service added an incentive to consider longevity annuities: Money that goes into those contracts is not counted when the government calculates the minimum required distribution of your retirement savings.
Whatever you do, it’s wise to start considering these questions sooner rather than later. Advice on saving for retirement is a lot more abundant than advice on how to draw down the money you salt away.
The good news, said Ward, is that that is starting to change. For financial experts, “I think its going to become much more the focus as the baby boomers start to retire in greater numbers,” she said.
Even if you don’t develop a full plan, thinking about the income you will have in retirement can encourage you to focus harder on saving.
“[People] begin not thinking about the nest egg, but they begin thinking about the income that can be produced from that nest egg,” Keady said. “All of a sudden, people realize, ‘Wait a second, I actually have to replace a paycheck.’ ”
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
How older Americans can cut student debt (FuturityFirst.com)
Student loan balances among borrowers in their 50s or older made up 17 percent—or about $204 billion—of the nearly $1.2 trillion in outstanding student loan debt in the U.S. last year, according to researchers at the New York Fed.
And while student loan balances have grown substantially for borrowers of all ages in the past decade, researchers say the fastest growth has been in total balances held by borrowers age 60 or older, which have increased nearly nine-fold since 2004.
“Student loan debt owed by older Americans includes debt borrowed or co-signed to help a child or grandchild pay for college as well as student loans for the borrower’s own education,” said Mark Kantrowitz, senior vice president and publisher of Edvisors.com, a college financial planning website. In financing their own education, “most of this debt is more recent…student loans borrowed when returning to college to finish an undergraduate degree, to switch to a new occupation or to obtain a graduate degree.”
Older borrowers are also more likely to have defaulted on loans (meaning they fell behind or failed to make payments), and many incorrectly believe their balances can be discharged in bankruptcy. “Student loans are cancelled when a borrower dies, not when the borrower retires,” reminds Kantrowitz.
In the fourth quarter of 2014, the average student loan balance for all borrowers was $26,700. If you’re still carrying student loan debt as you approach retirement, here’s what you need to do:
Don’t default on your loan
Make your payments on time. If your loan goes into default, the government can garnish your wages, withhold your tax refund and even take a portion of your Social Security benefits.
From 2002 through 2013, the number of Americans whose Social Security benefits were offset to pay student loan debt increased five-fold from about 31,000 to 155,000, according to the U.S. Government Accountability Office. Among those 65 and older, those whose benefits were offset grew from about 6,000 to about 36,000 over the same period.
Student loan borrowers who graduate, don’t postpone payments, track their progress, and communicate with their servicer increase their chances of successful repayment, according to an analysis by Navient, a loan management and servicing company.
Explore income-driven repayment plans
If you qualify for an income-driven repayment plan, you can lower monthly payments on federal student loans, which may help keep you from going into default. You’ll make payments based on 10 to 20 percent of your discretionary income. Any remaining balances on your federal loans will be forgiven after 20 to 25 years as long as you’ve made your payments on time. Go to the U.S. Department of Education’s website to find out more about the three income-driven repayment plans (“Pay As You Earn”, income-based, and income-contingent) for federal student loans.
Stretching out the term of your loan as long as possible through extended payments or income-based repayment can help to reduce the monthly payment to a more affordable level and improve cash flow, though keep in mind that you could end up paying more in interest over the lifetime of the loan.
Consider consolidation or refinancing options
Parents who took out federal PLUS loans for a child or a grandchild may be eligible for income-contingent plans, if the loan is consolidated. But, unfortunately, private student loans—including loans parents co-signed for their kids—are not eligible for income-driven repayment plans. For those, try to negotiate a lower payment with the lender.
Refinancing student loans may also help borrowers with excellent credit find lower interest rates.
“Refinancing all or some of those loans enables borrowers to receive a new loan at one interest rate that, depending on the borrower’s circumstances, tends to be lower than what they were paying previously,” said David Klein, CEO and co-founder of CommonBond, a startup student lending platform that refinances existing graduate student debt. “Many people just aren’t aware of the refinance options out there.”
Bottom line: Investigate all of your repayment options—and cut other expenses too—so you can get rid of that student loan debt before you retire.
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
Relocating in retirement? Experts say look before leaping (www.FuturityFirst.com))
If you plan to relocate when you retire, don’t wait until the last minute to hash out the specifics. You may need a decade or more to do it right.
A new address, whether out of state or close to home, can have major implications on your standard of living, target retirement date and potentially even the health of your marriage, said Craig Brimhall, vice president of wealth strategies for Ameriprise Financial.
Brimhall prompts his own clients to envision their future with a “dream book.”
“It’s good to have that conversation about where you plan to retire 10 to 15 years out, because it needs to be given a fair amount of thought,” he said. “The earlier you plan, the better.”
Before deciding where they’d like to live, for example, Brimhall encourages retirement planners to first determine what they hope to gain.
“There are a lot of different reasons why people want to relocate, and answering the ‘why’ component is most important because it determines the next questions and what homework you need to do,” he said.
For many, proximity to grandchildren is paramount, but that often translates into a higher cost of living.
Hidden costs
Others live modestly during their working years but desire a more luxurious lifestyle after they stop punching the clock—which requires a more aggressive savings and investment strategy during their peak earning years.
And still others seek warmer weather or lower taxes, but many of the most popular states with coveted zero-income-tax status—such as Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming—aren’t as retiree-friendly as they first appear.
“It’s worth unwrapping that piece a little more and taking a more granular look,” said Neil Krishnaswamy, a certified financial planner with Exencial Wealth Advisors. “Some states that don’t have an income tax may make up for it with higher sales or property taxes, so you want to look at the whole picture to determine true cost of living.”
Remember, too, that if you live half the year or less in an income tax–free state—like many ‘snowbirds,’ who flee to warmer climes during the winter months—you may still owe tax on retirement income earned in your home state.
Another consideration: If you plan to work even after you retire, out of necessity or by choice, you will want to consider employment opportunities when selecting a new locale.
The Center for a Secure Retirement reports that 28 percent of baby boomers who retired from their full-time career are either currently employed or have worked during retirement.
AARP’s livability index scores neighborhoods and communities nationwide for the services and amenities that impact seniors most, including housing costs, social outlets, entertainment, work opportunities and access to medical care.
Seniors who are still in early retirement—when relocation decisions are usually made—often fail to consider the importance of public transportation, explains Rodney Harrell, director of Livable Communities for the AARP Public Policy Institute.
Communication is key
“A lot of people don’t think about transportation, but when you can no longer drive, you need to have community amenities available, like alternative methods of transportation,” to reach retailers, grocery stores and health-care providers, he said.
As you define your relocation goals with a financial advisor, said Krishnaswamy at Exencial Wealth Advisors, it’s equally important to communicate with your spouse.
Married couples may agree on a destination but differ on the size of the home they feel they need—a one-bedroom condominium on the beach, a single-family home with grandkid-friendly guest rooms or a 55-plus community that will enable them to age in place.
Such decisions not only impact the couple’s quality of life but their available cash flow, as well. And disagreement inevitably creates tension.
For more information, contact our Recruiting Manager Allie Vossoughi at allievossoughi@ffig.com & 602-314-7580, or Thomas Shultz, Managing Director at thomasshultz@ffig.com & 602-314-7580, or Scottsdale Associate Managing Director Nancy Monaco at nancymonaco@ffig.com & 602-314-7580, or Scottsdale Associate Managing Investment Director Tom Bugbee at thomasbugbee@ffig.com & 602-314-7580.
Futurity First Gives Back!
Today our Futurity First and American Retirement Advisors team spent the morning volunteering with Packages from Home, an organization that sends care packages to our soldiers overseas! We carefully packed a variety of snacks and candy into a box along with letters we’d written beforehand expressing our gratitude for their service. We had a great time today working together to support our troops and are excited that we could make a small impact of the lives of our brave soldiers.
Nancy Monaco 