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Comprehensive Financial Planning Can Help You Live Your Values in 2021 Thumbnail

Comprehensive Financial Planning Can Help You Live Your Values in 2021

Let’s kick off 2021 with some positivity … and a pop quiz!

A recent study by Valuegraphics analyzed more than 500,000 surveys in 152 languages and determined that there are 56 values that drive all of human behavior. While the results did show some significant cultural differences between how these values are ranked, the top responses show that there is a lot of commonality when it comes to the really important things in life.

So, of those 56 values, can you guess the top three? On today’s show – and in the shownotes below – we discuss these values and how a comprehensive financial plan can help support them. We also tie this theme into some interesting new data about retirement prep and a potential sequel to the SECURE Act that’s being discussed in Congress.

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1. Is an “average” 401(k) good enough?

We’ve talked before about some sobering numbers that suggest too few Americans are financially prepared for retirement. So, on the one hand, the latest 401(k) data from Fidelity is encouraging. Here are the average 401(k) balances for accounts under Fidelity’s stewardship in Q4 of 2020, broken down by 10-year age ranges of the account holders:

  • 20s: $10,500 (7% annual contribution rate)
  • 30s: $38,400 (8%)
  • 40s: $93,400 (8%)
  • 50s: $160,000 (10%)
  • 60s: $182,000 (11%)
  • 70s: $171,000 (12%)

You can almost see the wheels turning in folks’ heads at different stages of their lives when you look at these numbers. A typical 20-year-old, just starting a career, dealing with some student debt, is still learning to “pay yourself first” every month. Folks in their 30s and 40s are trying to save more but also looking to buy a home and raise children. Then, as folks see the goalposts of retirement getting closer, their contributions go up another level, most likely including some catch-up contributions. And, in many cases, those folks keep working right into retirement and keep making 401(k) contributions into their 70s.

So, as I said, on the one hand it’s great that Americans are opting-in to employer-match 401(k) programs or setting their own up with the help of a fiduciary advisor.

But, on the other hand …

Let’s do some back-of-the-napkin math. Imagine you’re preparing to retire, and you have a 401(k) worth $200,000. If you used an annual withdrawal rate of 5%, that would give you $10,000 per year. That’s just not going to cut it for most folks, even under ideal circumstances. Now think about what happens if your roof starts leaking, if your car breaks down, or if you or your spouse have an accident.

2. “Securing” your retirement.

Note that the Fidelity data doesn’t show what other sources of retirement income its account holders might have. But those averages suggest that Americans still have a long way to go when it comes to taking control of their retirement planning.

At the end of 2019, the government tried to nudge folks to grab that throttle via the SECURE Act, which allowed working seniors to save and invest longer and encouraged younger workers to start participating in long-term investment plans. Now, Congress is discussing the Securing a Strong Retirement Act. Three key provisions of this proposed legislation are:

  1. Require new defined contribution plans to enroll participants automatically with at least a 3% contribution rate. The contribution rate would then increase automatically by 1% per year until it reaches 10%. The rationale here is that studies have shown people are far less likely to opt out of a retirement plan they’re already enrolled in, often because they don’t want to deal with the hassle of unenrolling.
  2. Increase the age that seniors must start taking required minimum distributions (RMDs) from their retirement accounts from 72 to 75. It’s common for seniors to take distributions anyway once they reach this age range. But from my perspective, pushing the RMD age out a couple more years can make it easier for seniors to keep saving and investing money they don’t need to live on.
  3. Increase the catch-up contribution limits for individuals 60 and over to $10,000 for 401(k) and 403(b) plan participants and $5,000 for IRA plan participants. Personally, I think there’s an argument that these limits should be even higher, especially if we want to encourage seniors who have the means to contribute more to their nest eggs. But much like Joe Biden’s Social Security proposals, these ideas are still just ideas until the legislation moves a little further through Congress.

3. Securing your values.

OK, time’s up! What were the top 3 values across all cultures?

  1. Family
  2. Relationships
  3. Financial Security

Throw in good health and a strong sense of purpose and I’d say that’s a solid foundation for a fulfilling retirement.

But, as we’ve said again and again on our show, folks don’t end up living their dream retirement by happenstance. They see where they want to go and they start putting a plan in place that will allow them to get there.

I truly believe that, while you can’t buy happiness, you can work with a fiduciary advisor to guide your assets towards the people, places, activities, and values that will make your journey worthwhile and your destination rewarding. Let’s talk about your own list of top values and how my team at Keen Wealth can help you start working towards your goals for 2021 and beyond.

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About Bill

Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

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