Financial Newsletter 8.23

Process of Evolution

Typical spending patterns throughout retirement often undergo several distinct phases, influenced by a combination of personal preferences, financial circumstances, and health considerations. These phases provide a framework to understand how retirees allocate their resources over time.

1. 1. Early Retirement Years: In the initial years of retirement, individuals often engage in activities and pursuits they had postponed during their working years. This can include travel, hobbies, and leisure activities. Consequently, spending during this phase might be relatively higher as retirees indulge in these experiences. However, it’s essential to strike a balance between enjoying life and preserving funds for later years.
   2. Moderate Spending Phase: As retirees settle into their new lifestyle, spending tends to stabilize. The urge to explore fades, and a routine takes root. During this phase, healthcare costs may begin to rise, as aging bodies require more attention. Housing and day-to-day living expenses continue to be significant factors, and individuals may find themselves allocating funds to home maintenance and modifications to accommodate changing needs.
   3. Healthcare and Assistance: The healthcare spending pattern becomes more prominent as retirees age. Medical expenses, including insurance premiums, prescription medications, and occasional hospitalizations, can significantly impact financial plans. Long-term care costs, whether in-home assistance or nursing facilities, can be substantial and require careful financial preparation.
   4. Late Retirement Years: In the later years of retirement, spending patterns may taper off again. Travel and energetic pursuits might decline due to physical limitations. However, it’s important to anticipate potential increased costs associated with mobility aids, accessibility modifications, and additional healthcare needs.
   5. Legacy Planning: Towards the later stages of retirement, some individuals focus on legacy planning, which involves deciding how to distribute their assets and wealth after they pass away. This could involve bequeathing assets to heirs, charitable organizations, or setting up trusts. The spending during this phase might be influenced by considerations of leaving a financial legacy.

It’s important to note that individual circumstances greatly influence spending patterns. A well-structured retirement plan takes into account both short-term desires and long-term needs, ensuring that retirees can strike a balance between enjoying their golden years and maintaining financial security. Regular assessments of financial goals, health conditions, and market conditions are crucial to adjust spending patterns as retirement progresses. If you’d like to speak with a member of our team regarding spending plans for your retirement, click here.

Is it Beneficial?

Naming beneficiaries on investment accounts is a crucial aspect of estate planning that ensures the smooth transfer of assets to your chosen heirs or beneficiaries after your passing. This process involves designating individuals, organizations, or entities who will receive the assets held within the investment account upon your death. Deciding on primary and contingent beneficiaries requires thoughtful consideration to ensure your wishes are honored and potential complications are minimized.

When choosing primary beneficiaries, it’s important to select individuals or entities that hold significant importance in your life. Common choices include spouses, children, grandchildren, or charitable organizations. Consider their financial needs, age, and potential tax implications when making these decisions. Additionally, review and update your beneficiary designations periodically to account for any life changes, such as marriage, divorce, births, or deaths within the family.

Contingent beneficiaries play a crucial role in case your primary beneficiaries are unable to receive the assets, often due to their own passing. These secondary beneficiaries step in as recipients of the assets. It’s advisable to name contingent beneficiaries to avoid complications and ensure a clear distribution plan. Typically, these could be other family members, friends, or charitable organizations. By designating contingent beneficiaries, you provide a backup plan in case unforeseen circumstances arise.

An important concept related to beneficiary designations is the “per stirpes” designation. This term is of Latin origin and essentially means “by branch” or “by representation.” It comes into play when a primary beneficiary predeceases you, leaving behind their own descendants. With a per stirpes designation, the deceased beneficiary’s share is divided equally among their surviving children, ensuring a fair distribution among different branches of your family tree. This designation is particularly relevant for ensuring that assets are distributed to your intended heirs even if the primary beneficiary is no longer living.

In conclusion, naming beneficiaries on investment accounts is a critical component of your estate planning strategy. By carefully selecting primary and contingent beneficiaries, you can ensure that your assets are distributed according to your wishes and provide for your loved ones even after you’re gone. Regularly reviewing and updating these designations is essential to account for life changes and maintain the accuracy of your estate plan. Understanding the concept of per stirpes designation can also be valuable in ensuring that your assets are distributed fairly among different branches of your family in the event of unforeseen circumstances. Consulting with legal and financial professionals can provide expert guidance tailored to your individual situation.

Credit Where it is Due

Using credit cards wisely can indeed help you maximize your financial situation. Here are 10 guidelines to help you make the most of your credit cards while avoiding common pitfalls:

1. Create a Budget: Before using a credit card, establish a clear monthly budget that outlines your income, expenses, and savings goals. This will help you avoid overspending and accumulating debt.
2. Pay in Full and On Time: Aim to pay your credit card balance in full each month to avoid interest charges. Additionally, always make payments by the due date to maintain a positive payment history and avoid late fees.
3. Choose the Right Card: Select a credit card that aligns with your spending habits and goals. Look for rewards, cash back, or travel benefits that match your preferences.
4. Monitor Your Statements: Regularly review your credit card statements for any unauthorized or incorrect charges. This practice helps you catch and resolve any issues promptly.
5. Utilize Rewards: If your credit card offers rewards or cash back, take advantage of these benefits by redeeming them for things you would purchase anyway, such as groceries or travel expenses.
6. Keep Utilization Low: Aim to use no more than 30% of your available credit limit. High credit utilization can negatively impact your credit score and indicate potential financial stress.
7. Build Credit Responsibly: Using credit cards can help build a positive credit history, which is essential for future loans and better interest rates. Make consistent, timely payments to boost your credit score.
8. Emergency Fund First: Prioritize building an emergency fund before using credit cards for unexpected expenses. Relying solely on credit during emergencies can lead to unmanageable debt.
9. Avoid Cash Advances: Cash advances often come with high fees and even higher interest rates than regular purchases. Use your credit card primarily for purchases, not for withdrawing cash.
10. Be Cautious with Balance Transfers: While balance transfers can help consolidate debt and lower interest rates, be sure to read the terms carefully. Hidden fees or a temporary low interest rate that increases later might outweigh the benefits.

Remember, credit cards are tools that can work in your favor when used responsibly. By following these guidelines, you can maximize your financial situation, build credit, and enjoy the perks that come with using credit cards wisely.

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If you’ve been trying to find a time to review your financial plan, our advisors are available throughout New England. Click the button below to schedule a time to speak with a member of our team about your planning.

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The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.

Armstrong Advisory Group, Inc. does not offer tax or legal advice and no portion of this communication should be interpreted as legal or accounting advice. You are strongly encouraged to seek advice from qualified tax and/or legal experts regarding any tax or legal matters relevant to you.

ARMSTRONG ADVISORY GROUP, INC. – SEC REGISTERED INVESTMENT ADVISER
The information contained herein, including any expression of opinion, has been obtained from or is based upon, sources believed to be reliable, but is not guaranteed as to accuracy or completeness. This is not intended to be an offer to buy, sell or hold or a solicitation of an offer to buy, hold or sell the securities, if any referred to herein.

All investments involve the risk of potential investment losses. An investor cannot invest directly in an index. Diversification seeks to reduce the volatility of a portfolio by investing in a variety of asset classes. Neither asset allocation nor diversification guarantees against market loss or greater or more consistent returns. Bonds are subject to interest rate risk and if sold or redeemed prior to maturity, may be subject to additional gain or loss. Armstrong Advisory does not provide any tax or legal advice; please consult with your tax and legal advisers on such matters.