Stress is literally a killer. It exacerbates any health issues that you have. Improve your health by de-stressing your finances. In a March 2024 Bank Rate survey, 47 percent of U.S. adults said money has a negative impact on their mental health, including causing stress. Interestingly enough, middle generations are more stressed about money than younger and older generations, with 54 percent of Generation X (ages 44 to 59) and 50 percent of millennials (ages 28 to 43) reporting that money is a source of stress.
The Financial Planning Association offers pro bono (free) planning services, which can be especially helpful for serious medical conditions. Start by scheduling a money “check-in” with your partner and see where you stand.
Meet with your financial representative or, better yet, a Certified Financial Planner, and review your situation with them. Here are some questions which might help:
There are several things you should have a handle on. How much money have you (or you two) saved, and whose name is it in? Am I the beneficiary on the IRA accounts? Another is: where should I be in retirement savings for my age? Will it last through my retirement?
Make a simple list of accounts with their current balances listed and whether it is a TOD (Transfer on Death) account or not. If the accounts are IRAs, are you the beneficiary if it’s your partner’s account?
A question for you to answer for your Financial Advisor is what income you will need in retirement; it can consist of Social Security and interest or dividend income from your investments. You can find out what you will get from Social Security on SSA.gov. Did you know that if you wait until you are 70 years old to “take” Social Security, you get 30% more?
Ask your advisor to show you how much income you could reasonably get from your investments. A quick and dirty way to calculate it can be to take your principal amount, let’s say $500,000.00, and multiply it by 0.04 (4%). That will yield $20,000.00 per year or $1,667 per month.
Knowing these items should help you decide if you need more savings or a plan to downsize in the future.
Many feel that investing in the stock market with a historic return of 10% puts them in a better income situation. Using our example above at 10%, your return would be $50,000 per year or $4,167 per month.
Which brings us to our next set of questions, about RISK. To induce you to take a risk, you must demand a higher return. For example, companies with low credit ratings have to offer a higher interest rate to get people to buy their bonds.
The stock market (stock is an ownership share in the company) is a VERY risky investment. You can lose 100% of your money. Bonds are less risky. A bond is a loan to the company, and they pay interest to you on that loan. Bonds are stable, and in case of bankruptcy, a bondholder may get some of their money back. Prices of bonds fluctuate with changes in interest rates.
Very generally, your portfolio balance between stocks and bonds will change over time as you age and your circumstances change. Young people generally invest the most in stocks and are looking for growth. They can take a loss as they have years ahead of them of earning power.
Middle-agers start to invest a portion in bonds or higher-quality stocks, and when you are at retirement, your portfolio will largely consist of bonds and high-quality dividend-paying stocks. There has been a historic allocation of 60% stock and 40% bonds over time. However, since the pandemic, there has been much discussion if that holds true any longer.
So, the first thing you must do is get an understanding of your risk tolerance. Your advisor has questions to help you understand where your comfort level is, and that will affect your portfolio. Where you are in your investment life stage will play a large role in helping you understand what risk you can tolerate.
If your husband, wife, or partner usually handles all of this, go with them to the next appointment and ask the questions. Advisors would MUCH rather answer questions than have an unhappy client.
An advisor can help mediate between partners with different risk appetites. Investing is a process. Get started and ask questions!
Are you concerned about your debt situation? Ask your advisor to guide you in this matter as well. There may be some options that you can take to better your net worth. Bank credit cards often offer no interest for several months when transferring balances.
Regular small investments of time can keep your financial plan on track and reduce your stress levels!
Call 941-914-1560 or visit AccessAdvisorsLLC.com today for more information.
Sources:
*Bank Rate March 2024 Survey