Can You Still Receive Social Security If You Move Abroad?

July 17, 2017

Many evenings when the rest my household is in bed, you can find me watching HGTV’s Househunters International. As a French speaker, I pay special attention to episodes featuring little villages in the South of France or francophone Caribbean islands. Is this where my husband, Steve, and I should retire and restore a 19th century country house? Or maybe we should consider Italy, where we got engaged and the cost of living seems so inexpensive?

We’ve been ex-pats before and we both know how wonderful it is, as well as the financial implications. As I wrote in a previous post, if a U.S. citizen or resident alien (green card holder) is considering living abroad, they need to make sure they understand the financial and tax basics for U.S. taxpayers living overseas.

Before you buy that surf shack in Costa Rica, keep in mind that Uncle Sam follows you everywhere, even if you’re retired. You’ll file a U.S. tax return every year and you may need to file a state tax return (especially if you still maintain a property in the U.S., even if you rent it out). You’ll also need to report any non U.S. bank and securities accounts annually to the Treasury Dept.

Maybe you weren’t expecting that you’d still pay U.S. taxes, but you can accept that, since you can’t imagine giving up your U.S. passport. Here’s what else you need to keep in mind before retiring overseas.

You’ll probably pay foreign taxes

Even if you don’t have earned income, you will still be subject to the tax laws as a resident of the foreign country, so may have to file there in addition to your U.S. return if you receive distributions from your 401k, IRA, pension, etc. That’s something you’ll definitely want to research before you make your retirement decision. U.S. taxpayers are taxed on their worldwide income, so even if you’re retiring to one of the few countries without an income tax, such as Bermuda or the Bahamas, you’ll still have to pay U.S. taxes. In general, deductions and credits can sometimes soften or eliminate the impact of foreign taxes paid.

You can still receive Social Security benefits

In most situations, you will still be able to receive your Social Security benefits when living outside the United States as long as you are eligible for payment. Generally, you can have them sent to the foreign country, or deposited in a U.S. account that you have maintained. However, there are some countries where you can’t, and some additional restrictions on some non-citizens, so do your homework. See this Social Security Administration brochure for the complete lowdown. Use this Payments Abroad Screening Tool to see if you’ll be able to receive payments abroad or if you will face restrictions.

Medicare won’t cover you overseas

Health insurance is a critical decision when thinking about retiring overseas. Generally, Medicare does not cover care you receive outside of the United States (see overview), so you will need health insurance in the country where you move. If you travel to the United States frequently, or plan to move back to the U.S., you may want to sign up for both Medicare Part A and Part B anyway, so you’ve got insurance when you are in the U.S.

If you plan to be permanently in the foreign country and don’t travel frequently to the U.S., you could still consider signing up for Part A, which for most does not require a premium, but could cost you dearly to adopt should you change your mind and move back later. You should weigh the pros and cons of keeping Part B as part of your retirement budget based on your long-term plans and what kind of health insurance you will have in your retirement destination.

You’ll want – and need – a tax professional

When we lived overseas, our federal tax return was 50-70 pages. If you’re living abroad, I strongly encourage you to find a tax professional, such as a CPA, who is knowledgeable about ex-pat taxes. Without tax guidance, you may find yourself overpaying or underpaying taxes, and running afoul of reporting regulations on foreign accounts. It’s worth every penny to get good guidance in this category.

You’ll need a U.S. mailing address for your U.S. accounts

Maintaining your U.S. accounts, such as credit cards, brokerage accounts and even your 401k, has significant advantages. You’ll be able to maintain your U.S. credit score. It’s much easier to pay bills – such as quarterly estimated taxes – and wire funds from your U.S. account. Most ATM cards from major American financial institutions will work around the world for a small fee.

If you ever want to change brokerage firms or open an additional account, such as a 529 for a grandchild, you’ll need to have a U.S. mailing address. If you plan to sell your home, register as an overseas voter and get a new driver’s license in your new country of residence and don’t plan to have continued state residency, the address could be a trusted friend or relative’s home – just make sure to sign up for online delivery of statements and bills to your email address.

You’ll need a bank account in your new country

Even though you may maintain a U.S. mailing address for your existing bank and brokerage accounts, you’ll need a local bank in your new home in order to handle local bills. You may want a credit or debit card there too, which could make it easier to open accounts for utilities and handle local transactions. Remember that you’ll need to report your accounts annually under FBAR (see above) if they have more than $10,000 value at any time during the calendar year.

I hope that retiring abroad will be our next great adventure. If you think it may be yours, check out this State Department guide to retiring abroad – and watch some Househunters International.

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Every Person Under Age 30 Needs To Read This RIGHT NOW

July 07, 2017

Over the past few weeks I have had the opportunity to watch my oldest child graduate from college and listen to a lot of conversations among her friend group about the terror they are experiencing regarding finding their first “real job.” Not a lot has changed since my friends and I graduated, at least in the terror department! Although, things are much different in the starting salary arena.

The first thing I noticed in their conversations about what they expect is that starting salaries today are what the next-level-up-in-the-organization’s salaries were when I was starting my career. And, as my kids would tell you, back when I graduated from college I still had to walk to work eating raw food until people invented the wheel and fire. But I digress.

As I listen to these young people debate the next couple years of their lives, I can’t help but wish for some magic power that would get them to listen to me about saving money. As they ruminate over how much they’ll make and what kind of apartment they can afford, all I can think about is the tremendous opportunity they have that will slowly buy surely whittle away that they’ll never get back if they don’t take advantage: time.

The mind-blowing power of compound interest

As a number crunching financial geek, I totally understand that compound interest works exceptionally well the longer the time period. And I vaguely recall seeing examples about how much it pays to save early, so during the course of a meeting with a 23 year-old new-hire this week, I went online and found this blog from Darwin’s Finance.

It shows what happens when a 25 year-old invests $5,000 per year (which is just about $200 per paycheck, which is easier to find than you might think) until age 35 and then stops (11 years, $55,000 total invested) vs. a 35 year old who invests $5,000 per year until age 60 ($130,000 total invested).  The net result still surprises me almost every time I look at it, and I’ve seen the results A LOT.

Assuming a constant 8% rate of return, the person who starts at age 25 reaches age 60 with a balance of ~$615,000 and the 35 year old who invests more than twice as much ends up at age 60 with ~$432,000.  That’s a HUGE difference, nearly $200,000. I shouldn’t be surprised by this result, yet I am every time I re-run the numbers. Starting earlier means you can save less (a LOT less!) and still have more! Mind: blown.

Take advantage of this!

For people who are early in their careers, I will make it a point to share this (and make sure that my daughter sends this to her friends on social media) and do everything I can to encourage them to participate in their 401(k) plans, open a Roth IRA, or simply save every dollar possible starting with their first paycheck.

The only negative I can find in these numbers is this: I showed this to a friend who is 40+ and has recently gone through a divorce and is starting all over again and he said the numbers depressed him. The good news is that even for the 40+ crowd (of which I’m a long-standing member), there is still time to save a substantial amount of money for retirement. I’ll address some “late starter” thoughts in a future post.

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7 Steps To Your Financial Independence Day

July 04, 2017

Happy 4th of July! To honor the theme of independence, I’d like to share an oldie but goodie, written by my colleague, Greg Ward, updated for 2017. Enjoy and have a safe celebration.

To honor our nation’s birthday, why not declare your own personal “Financial” Independence Day? To me, financial independence equates to not having to worry about money, so if you are worried about your finances, take these seven steps to economic freedom:

Step 1 – Establish an emergency fund

Failing to set aside money for an economic emergency or a rainy day is a sure way to get you in trouble if and when the rain comes. Arm yourself against such things by putting aside six to twelve months of expenses in a safe, liquid account such as a savings account or a money market fund.  You won’t make a lot, but you’ll have something to help you weather the storm.  A well-funded emergency fund is the first step to a worry-free financial life.

Step 2 – Pay off high-interest debt

Borrowing money at a high interest rate is a form of voluntary slavery. Emancipate yourself by committing extra payments to the debt with the highest interest rate. Once that’s paid off, use the newly freed money to make an even bigger payment on the debt with the next highest rate, and continue this process until all high-interest debt has been wiped away. If you are truly averse to debt, you can continue the process until your low-interest debt, such as your mortgage, is paid off too. Not owing ANYONE money may be the ultimate form of economic freedom.  See how a little extra payment can go a long way toward paying off debt with our DebtBlaster calculator.

Step 3 – Save more for retirement

According to our research, over 90% of employees are saving for retirement, but less than 30% are confident in their ability to achieve their retirement goals. Take the worry out of retirement by running a retirement projection, and applying any recommended changes. For many, it’s simply a matter of socking away more. For others, it may mean working a few more years, or investing a little more aggressively. Whatever you do, don’t rely solely on your employer or the government. Financial independence comes from self reliance.

Step 4 – Manage your income taxes

Don’t let fear of the tax man cause you undue worry. In the spirit of the Boston Tea Party, say no to higher taxes by contributing to tax-deferred accounts like a traditional 401(k), IRA or even your HSA. You can avoid income taxes in the future by contributing to a Roth retirement account today, or save for specific expenses completely tax free by contributing to a flexible spending account or health savings account. There’s nothing wrong with paying your fair share, but that doesn’t mean you have to give Uncle Sam an interest-free loan every year, which is exactly what you are doing if you receive a large tax refund every year. Take back what’s yours by adjusting your tax withholding so that you pay what you owe while keeping what you deserve.  Knowing you WON’T owe the IRS money is another step toward financial freedom. The IRS has a nifty withholding calculator you can use to estimate the appropriate number of allowances to claim on your W-4 tax withholding form.

Step 5 – Invest in and out of the U.S.

America may be the land of the free and the home of the brave, but it only represents about half of the world’s economy, so make sure to diversify your investment portfolio so that it includes both foreign and domestic holdings. Complement your U.S. stocks and bonds with international stocks and bonds, and don’t overlook investing in emerging markets (as long as you have the tolerance for the volatility, that is). Round out your portfolio with a decent level of exposure to real assets such as commodities and real estate. That way, when you read about the economic problems in Europe and the U.S., or about the possibility of higher interest rates or rising inflation, you can take comfort in knowing you have exposure to assets that may actually perform well in these types of environments.

Step 6 – Have adequate insurance

No one ever expects to get into a car accident, become disabled, end up in a long-term care facility, or die young, but the reality is that such things will happen, and being without adequate insurance is a sure way of putting you and your loved ones in a financial mess. Maintain your financial independence by insuring against such risks. A well developed insurance plan offers peace of mind, so review your coverage periodically to ensure you are prepared for whatever life throws your way. A good insurance agent can help you understand the risks, and make sure you are adequately protected.

Step 7 – Have an estate plan

You’re working hard to achieve the American Dream, don’t lose it for lack of planning. Learn how to maximize wealth transfers by utilizing tax credits and exemptions. You can also minimize estate taxes and probate fees through proper asset titling and the use of trusts. Your estate plan should include a will, a financial and healthcare power of attorney, and a healthcare directive (also called a living will). Without an estate plan, you may have to rely on the government to decide who gets your stuff when you pass on. A good estate plan allows you to control your assets “beyond the grave,” thus preserving your financial independence. There are a number of websites that provide access to inexpensive estate planning documents, including www.nolo.com and www.legalzoom.com.

Our country was founded on the principles of life, liberty, and the pursuit of happiness. I don’t know about you, but for me, happiness comes from knowing I’ve done all I can to protect me and my family from financial hardship. If you wish to live financially independent as I do now, take these steps, and choose to live financially free! There’s nothing more patriotic than that.

How To Protect Yourself In Case You Lose Your Pension

June 30, 2017

Over the last few months I have talked to a lot of people who are concerned that their company’s pension plan has changed for the worse, and I have a hunch the next few months will see more of the same. The state of Michigan is considering a complete overhaul to their teacher pension plan, placing the majority of the retirement savings burden on teachers, a trend I see only increasing as state and local governments face budget woes.

These are people from many different employers all across the country. Many others have seen an employer’s pension plan get frozen, terminated, or taken over by the PBGC. What was just a generation ago almost a “given” has become increasingly rare, and even when it exists there is ever increasing skepticism about the long term viability of the pension plan.

What can be done?

  1. If you have a pension…be thankful.
  2. Then, be prepared to see it change between now and retirement (even if you are retiring in the near term).
  3. Most importantly, take control of your financial life & get yourself in a position where no matter what actions your employer takes regarding the pension plan, you can retire comfortably.

OK, that sounds like reasonable advice, but how do you do that?

How to take control

In order to do it yourself, here are two things that will help you prepare:

Have a plan! Aka, think big picture.

  • Understand when you want to retire, how much you’ll spend, how much income you will have, and the financial resources available to you. (Get help from a financial planner if needed)
  • Run a retirement calculator to get a sense of where you are tracking toward your long term goals.  Determine how much you need to save between now & then.

Dig in to the details. This only takes a few minutes, so don’t be intimidated. But do make the time.

  • Understand your current budget and where your money goes. Where can you save more?  Where can you spend less?
  • Make sure your investment dollars are invested for optimal growth without too much risk. Do you have the right mix of stocks, bonds, cash and other assets?

When you have a fairly clear vision for your future, you can take actions that will help you reach your goals without feeling like you’re leaving your employer in control. Start with your big picture, dig into the details, and take control of your financial life. If your company pension goes away, gets frozen, gets taken over by the PBGC, or just never existed in the first place – it won’t matter because you will have prepared yourself for the future with or without your pension.

 

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The Difference Between a Financial Wellness Benefit & Your 401(k)

June 20, 2017

Before I joined Financial Finesse as a member of the Planner Team, I worked for a large wealth management institution as a 401(k) plan specialist. As a 401(k) plan specialist, my role was to help design and implement 401(k) plans for companies as well as educate their employees about their retirement accounts. One of my bigger frustrations in that role was that I was pigeon-holed into discussions solely about retirement contributions and asset allocation.

Although these topics are important when it comes to retirement planning, as I tried to educate people about how to save for retirement, I quickly found that the real problem people were facing wasn’t that they didn’t know how much to contribute or how to invest. The reason they weren’t making full use of their 401(k) savings accounts stemmed from a lack of emergency savings or a budget.

This often leads to using a credit card or 401(k) loans to get through unexpected events like medical issues or family emergencies, and definitely gets in the way of being able to save for retirement. In order to help people achieve a secure retirement, I realized that they first needed help achieving a secure today.

A lack of solutions

As I looked for a way to help, I found myself stumped. I was trained to help people avoid estate taxes but not how to help someone who was overwhelmed by medical debt. My meetings were supposed to be focused on getting more money into 401(k) plans and helping people choose the best investments, not how to put together a budget or handle debt. The compliance rules in the industry kept me from REALLY being able to help with the other stuff, the stuff that had to be overcome before I could be of any use with my training and work objectives. It broke my heart to be sitting in 401(k) enrollment meetings, talking to people sometimes in tears over a financial crisis, feeling completely unable to help.

Finding a way to help

I knew that I really needed to be helping people navigate these barriers before my work as a 401(k) specialist would have any meaning. I started looking around for solutions, even something that I could offer as part of my meetings so that they could help themselves. That’s when I came across Financial Finesse, a company that provides employees with a workplace financial wellness benefit. I knew instantly I had found a new home. For the first time I could:

  1. Focus on financial wellness vs. just trying to get more money into the accounts I managed.
  2. Help “everyday” people with their daily financial needs vs. strictly helping affluent people become more affluent.
  3. Stop being judged by sales quotas and instead be judged based on whether or not I changed lives for the better.

The difference between your financial wellness benefit & your 401(k)

While employees often come to us with questions about their 401(k) and companies often hire us to satisfy their fiduciary duty as a 401(k) plan sponsor, my colleagues and I spend more of our time helping people deal with the rest of their financial picture – how to choose the right mortgage, how to pay off credit cards, deciding the best way to deal with their student loans, etc. The big difference is that we take a look at your TOTAL picture, not just the balance in your 401(k). And that’s what I love the most about my job – helping people with what they really need.

Your 401(k) is one piece of your financial wellness puzzle. Working with a planner through your workplace financial wellness benefit helps you to see where it fits in among all your other priorities. If you’re fortunate enough to work for an employer that offers you a financial wellness benefit, I encourage you to take advantage today.

Here at Financial Finesse, we believe strongly in the importance of workplace culture and the power of doing well by doing good. This article is the second in our week-long series of posts where we highlight a specific part of our company culture that helps to make Financial Finesse one of America’s best places to work. This is just one part of our celebration of recent recognition by Inc., who listed us as one of the Best Workplaces in 2017 and Entrepreneur, who named us to the Small-Sized Companies: The Best Company Cultures in 2017 list.

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My Plan to Live in 43 Cities and Make Money Doing It

June 16, 2017

This spring has been an absolute blur for me: my daughter graduated from college, then six days later, my middle guy graduated from high school. Two days after that, my youngest started taking finals in his first year of high school. Granted, all I had to do was show up & root them on, but it’s been super busy and a bit emotional too. 

Any day now, my daughter will receive a job offer and become a full-fledged adult member of society, when I swear it was only a few days ago that I held her hand and walked her down the hallway to Ms. Linzey’s kindergarten class… Now I’m facing the fact that in three short years, my youngest will be a high school graduate, moving on to the next phase of his life. It’s time for me to ponder what I want to do once the kids are gone. 

The last two decades of my life have been way more about them than it has been about me, and for that, I’m a much better and happier person. But now that it’s time to start thinking about my next chapter, I realize that what I have jokingly referred to as my “Professional Hobo Plan” (PHP) is actually something I might be able to pull off.

Becoming homeless by choice

One of the beautiful parts of working at Financial Finesse is that in order to do my job, all I really need is a telephone, a solid internet connection and a nearby airport. From what I’m told, they have those three things pretty much everywhere now, which means that I can work from almost anywhere. So that’s what I plan to do. 

My current game plan for my PHP is to move around to a number of different cities for some yet to be defined period of time, long enough for me to feel more like a local than a tourist. Right now my list of places sits at 43, but it grows once in a while. Some places, like New York City, might require a 3 – 6 month stay (or longer) in order to learn the city like a local, while some, like Portland, Maine, might be more like a 2 – 3 week engagement. In between cities, I’ll come back home to Baltimore to see friends and family – and anyone is welcomed to come visit me during my travels. 

Living in 43 cities without going broke

This sounds like a cool plan in theory, but the question I’ve wrestled with was how to pull it off without going broke. I already went through a long and costly divorce and am not where I projected I’d be financially at this age, so I need to make up ground rather than lose ground toward my longer term goals. This is when a few conversations over beverages, random thoughts in the shower, time alone on a plane/train/automobile and some time playing on the internet gave me some ideas about how to fund this and even make it a positive impact financially. 

Making it a financial win

While going through my divorce, I actually lived on a boat for 3 – 4 years before moving back on to land and selling the boat. I moved primarily because my kids didn’t love winters on the boat, but once they’re gone, I can easily buy an inexpensive boat, which are in great supply with low demand in this economy, and spend my Bmore time on the boat. This would give me a place to stay while I rent my house for a 2 – 3 year window. 

I’ll have my Financial Finesse paycheck along with rental income, while my living expenses will consist of a cheap rickety boat & slip fees that are less than my property taxes. I figure I can save my entire income for a few years if my rental income is steady. And as an added bonus – in some cities there are opportunities to get paid to do house-sitting! Who knew??? I’m picturing a house-sitting income in one city that might pay for a non-house-sitting temporary home in my next city, so my effective cost of on-the-road housing is negligible, while my Bmore housing cost is a net positive cash flow. And, I get to see every cool city in the US and learn them like a local. I may even get a book written along the way…

Making the most of a flexible job

That’s the dream, the plan, the working model currently. I’m not sure if I’ll pull the trigger on this plan in 3 years or not. Life has a way of throwing things at us that make plans change. But if I do, it’s completely because this work-at-home when not traveling out to client sites allows me a lot of flexibility and freedom.  And — if I can get the US plan worked out – I could potentially expand the model to include some international cities. That might take more coordination because I do work at our client sites fairly often, but I have a few dozen US cities to hit before I start putting my International Hobo Plan (would I get sued if I call it my IHoP idea?) into action.  

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Is It Time to Downsize?

June 12, 2017

Last week I wrote about why my husband and I decided to upsize our home, so this week I’d like to take on its opposite: downsizing.

Downsizing — selling a larger home and moving into a smaller one — seems much more popular than upsizing these days. Mobile homes and RV trailers have been brilliantly rebranded as “tiny houses,” and there are hours of weekly television programming devoted to stories about families selling larger homes and moving into much smaller ones. In fact, my nine year old son, who is an avid fan of tiny house television, has been campaigning for us to move into a smaller home. (He is not likely to convince me.) However, you don’t have to go “tiny” to downsize. Any home that is going to be less expensive to own and maintain can be considered downsizing.

Why downsize?

Downsizing is a natural response to changes in your family needs and financial priorities. Downsizing to a less expensive and/or smaller home may be right for you if:

  • The kids are grown up and you don’t need that much space anymore;
  • You can’t afford the house you are in with its related costs while still funding other goals such as retirement, paying off debt or building emergency savings;
  • You want to move to a better school district but homes are more expensive there.
  • You are prioritizing financial independence over increasing your current lifestyle;
  • You seek a home that makes it easier to live in as you get older (e.g., single story, walkable neighborhood, etc.); or
  • You want to spend less time maintaining your home and more time enjoying life.

Downsize your costs without downsizing your space

I live in the New York City area, where housing is very expensive. A common topic of conversation between my husband and I, especially when paying property taxes, is whether we should sell our home then take the equity and buy the same house in a less expensive state. We wouldn’t have a mortgage, and all our related costs would be lower.

Our friends recently did just that. They sold their home in a neighboring town and bought a larger, yet less expensive home in a southern state – near a beach! It may be hard to move while you are building your career or putting your kids through school, but not so hard to do when you are empty-nesters like our friends.

Alternatives to downsizing

For new retirees, there are other ways to downsize costs without downsizing amenities. Here are a few ideas:

  • Co-housing: An intentional community with private homes that share common spaces and responsibilities, co-housing is a growing practice among seniors from the Flower Power generation.
  • Share your home: Many retirees are looking to share their homes, either by renting out rooms or apartments in their own homes, in order to reduce costs and have companionship.
  • Move overseas: Adventurous retirees are moving overseas in droves, to less expensive ex-pat friendly retirement destinations where the cost of living is lower but the lifestyle is pleasant.

Why stay put?

If your total housing costs (mortgage, taxes, insurance, utilities, maintenance) are 35 percent or less of your net income (income after taxes), there’s no need to rush to downsize. There are plenty of reasons to stay put for the time being:

  • You may like your current home and its size fits your family.
  • You like your neighborhood and schools.
  • Your home can be easily modified to “age in place.”
  • You want to stay near your grown children or aging parents.

Moving is a big decision and our sense of community is often connected to a physical location. If your housing costs are not breaking the bank and you’re not sure if it’s the right time to move on, it may make sense to stay put until you have a clearer idea of where you want to go and what makes sense for your goals going forward. You can always change your mind in the future.

Do you have a question you’d like answered on the blog? Please email me at [email protected]. You can follow me on the blog by signing up here and on Twitter @cynthiameyer_FF.

How Would You Answer This Million Dollar Retirement Question?

June 09, 2017

A recent article in the Wall Street Journal asked a question that has led to one of my favorite conversation starters, both with clients and over beverages at my local watering hole: “Would you rather have $1 million or $5,000 per month in retirement?” To me, the way a person answers that question tells me a lot about how their mind works around money. So far, the answers I get are split about 50/50. Here’s what I’ve learned:

I’ll take it all right now, please.

Those people who choose the lump sum tend to have a strong belief in their ability to be fiscally sound. When asked what they’d do with the money, they typically say that they would pay down every penny of debt, make a luxury purchase or two, then live fairly frugally to preserve the remaining money, while investing it to get some growth. Their hope is to be able to grow that initial lump sum well beyond the starting amount and also do some good in the world.

I’d rather keep a steady paycheck.

On the other hand, the people who say they’d rather have the monthly income tend to be wary of becoming one of those tragic stories about people who “had it all” and then blew it. They feel like they can live on the monthly income with ease and save a portion of it for future generations or charitable work. The WSJ goes into the psychology of this choice, which is something called “the illusion of wealth” versus “the illusion of poverty,” but you’re better off just reading the article to understand that one better.

Are you focusing on the right number?

Why do I mention this debate? So many people that I have talked to regarding retirement are completely fixated on getting to some “magic number” in their 401(k) before they’ll feel safe to retire. When I meet people who are locked in on needing X number of dollars in order to retire, they are almost always already in excellent shape for retirement. Why? I find that they’ve been so laser focused on the dollar value of their accounts that they haven’t really thought about the monthly income that the portfolio could generate.

In many cases they’ve saved enough that they can afford to have a higher monthly income than their current income! I can’t count the number of times I’ve told someone that they can walk back to their desk because they are choosing to, not because they need the paycheck.

The number that counts.

When we prepare retirement projections, the most important number – in my opinion – is the monthly income that a person will have from all sources (Social Security, pension, investment accounts, retirement accounts, etc.) during retirement.  After all, most people have a lifestyle that requires a rather consistent monthly income.  If that income, plus some, can be replaced today – work truly becomes an option, not a requirement. 

Find your number.

What can you do? Run retirement projections at least annually. This is probably the most important thing anyone can do to track their progress toward financial security. After a few years, your projections should show a trend. If you’re doing things right, you’ll see that trend improve with each year. When it doesn’t, you can decide what actions to take in order to get the trend line back to being a positive. Regardless of your stance on the question of a big lump sum vs. a steady monthly income, running a projection to see how much income you can expect to have in retirement will help you determine a lot of financial decisions between now & then. To steal a line from Nike: when it comes to running retirement projections, JUST DO IT.

Use This Hack to Figure Out How to Invest

June 07, 2017

If I could wave a magic wand and impart knowledge to anyone who thinks they have to be an investing expert in order to make money in the stock market, I would make sure that everyone knows that you don’t have to even be interested in investing in order to do it well. People who want to talk stock tips are often disappointed when they bring that subject up with me – I have relatively zero interest in the market. Yes, I’m a CFP® and no, I don’t like to choose investments.

I understand how to do it quite well, and really enjoy helping others learn what they need to know, but I don’t waste my time worrying about whether the next bear market will happen this year or next. I am quite certain there will be quite a few bear markets between now and retirement, but as a long-term investor, I don’t particularly care when they’ll happen or how long they’ll last, and neither should you. To me, a bear market is like the semi-annual sale at Athleta – a great time to stock up!

An easy investing hack

If you’re like me, and really just want to make sure you’re taking advantage of the overall long-term growth potential that investing in the stock market offers without having to analyze mutual fund ratings, asset allocation models or stock charts (nothing against those who do – more power to you and I wish you much investing success!), then this hack is for you.

Stocks and bonds and asset allocation, oh my

One of the most confusing parts about investing is figuring out what percentage to invest in stocks versus bonds, not to mention dividing the stock portion up among different market segments like large cap, mid cap, international, etc. (JARGON ALERT!)  When I first got into financial planning, I was totally stumped about how to do this. Was there some magic formula that only really smart market gurus could come up with? I knew that there were financial advisors who very confidently presented custom mixes to clients, but where did they get this information? Did I have to work for one of the big investment banks in order to have access to this information for my clients?

Then one day, I discovered the answer. It’s not some secret formula and it isn’t rocket science. You don’t have to know the first thing about what the market is going to do tomorrow or even worry if it’s up or down or going sideways. All you have to do is copy the mix of a Target Date Fund (also sometimes called Target Retirement Funds or Freedom Funds, depending on the investment company that runs them) with the date closest to your retirement year.

How it works

The easiest way to find the mix of a Target Date Fund is to look at the information for the fund, which is often found on the Fund Fact Sheet or you can just look one up on the website of companies like Fidelity, Charles Schwab, Vanguard, etc. You can typically find a pie chart that tells you the percentage of the fund that’s invested in different parts of the market, and then literally copy that percentage using index funds into your own account.

Imitation = flattery = easy investing

The advantage over using the Target Date Fund itself

Why not just buy the Target Date Fund itself, you may be wondering? One of the common criticisms of Target Date Funds is cost – because they require a little more attention than a standard index fund, they typically cost a little more. So, it’s mostly just to save money on fees, although this strategy would also work for someone who has a 401(k) that doesn’t offer Target Date Funds (admittedly, this is becoming less and less common, but check those fees!). It’s kind of like going to a craft show to scope out the cute DIY goods then going home and copying everything you saw that you liked, rather than buying the finished product at the marked-up price.

This hack is also perfect for someone who wants to be a little bit more hands-on, but is still learning the ins and outs of investing. Finding that perfect asset allocation is a bit of the holy grail in the investing world, so save yourself the search and take advantage of the work already done by the experts.

Things to watch out for

  • Rebalancing. If you decide to use this hack, then you also have to be sure you’re rebalancing periodically — at least once a year, you need to check in to make sure your percentages haven’t gotten too far out of whack. If you’re lucky, your account will allow you to automatically rebalance instead of having to do the math, but either way, this is how you take advantage of buying low and selling high.
  • Taxes. If you’re using this hack in a non-retirement account, then any time you do rebalance, you’ll likely be incurring capital gains and/or losses. Not to discourage rebalancing, but just be aware of the potential tax consequences if you’re making big shifts.
  • Adjusting for risk. One of the benefits of just choosing a Target Date Fund is that it automatically shifts the investments toward a more conservative mix as your retirement date draws nearer, so you’ll be on the hook for that with this strategy. Every five years or so, check back with the mix of your original fund to see what changes you need to make when you rebalance.

The Thing That Millennials Are Getting Right About Money

June 02, 2017

If you know me, you know that it’s no secret I have a strong dislike for breaking down financial statistics by demographics. Yes, I realize that there are some benefits to looking at trends this way, but there’s a little part of me that bristles whenever we start pointing out the differences in people, especially in today’s less than harmonious political climate.

One of my guiding life principles is that people are people, and we are largely the same regardless of our age, gender, race and other demographics. We all want to see our friends, family and loved ones succeed and we all want to enjoy our lives. And while it may seem naïve and idealistic, I’d like to see those who hold opposing points of view start from a point of commonality in their discussions rather than defending their differences.

So while it’s clear that I am not a fan of discussing differences, I’m about to…

The stereotype

One of the things I often hear is that this current generation of millennials doesn’t seem to view working and saving for retirement the same way that older generations do. A common gripe of gen Xers and baby boomers is that millennials (I really despise that label, as do most of the members of that generation whom I know) are lazy slackers who want to be paid well with fancy titles before they ever accomplish anything.

“Those darn millennials…”

It’s easy to view the next generation as not being as hard working and ambitious as your own generation; I’ve seen that with the way my grandfather talked about my father’s generation and how my generation talks about millennials. Their music is too loud, they don’t work as hard and their standards aren’t as high. It seems like each generation has the same complaints about the succeeding generation as the prior generation had about them. There’s some beautiful irony there.

Surprise! They’re getting this one right

However, I recently came across a very interesting article about the financial behaviors of the millennial generation, which got me to thinking that maybe their bad rap is not justified. The article points out that it may be true that millennials aren’t saving as much for retirement as other generations may be, BUT – and this is a huge point – they do have a higher overall savings rate than other generations. On average, they are saving 19% of their income with over 1/3 of them saving in excess of 20% of their incomes. That’s absolutely incredible! Well done, millennials.

Saving for something else

The thing that irritates older generations though might be that the savings aren’t earmarked for retirement. The savings figures are high, and the money saved is often used for current lifestyle considerations such as travel, fitness & health, and dining out. They are spending money on experiences today rather than building up a gigantic nest egg for the future. Retirement isn’t at the top of their list of reasons to save.

The wisdom of those gone before

While older generations may view that as less than ideal, perhaps it’s just where they are considering their stage of life. And, perhaps it’s wise and it’s something learned from listening to and learning from prior generations. I have heard many older relatives say that they wish they had traveled more extensively when they were younger so that they had more energy and stamina, and their bodies didn’t rebel against long hikes through foreign cities.

A different perspective

Maybe, instead of seeing this generation as snowflake slackers, we should maybe try to see them as incorporating the wisdom of prior generations and putting it into action. Is it possible that millennials are more financially savvy and more mindful of the important things in life than they are being credited for? It’s something to consider.

If you’re a millennial reading this – great job saving so much of your income. It’s a fantastic habit that should translate to a nice bucket of money if/when you actually do retire. If you’re not a millennial and you’re reading this – I’d like to suggest that you maybe try to be more like a millennial and drive your savings rate up above 20%. As they’re learning to listen and implement wisdom from older generations, let’s learn from them as well.

 

Follow This One Simple Rule for a Secure Retirement

May 26, 2017

While I was taking pictures of my middle guy and a whole bunch of his friends right before their senior prom, I was having a conversation with one of the other kids’ fathers. The inevitable conversation about what kind of work we do came up and he was, at one point in his career, working for a large accounting firm that has a wealth management arm. When he found out I was a financial planner, he shared a story about his colleague who ran that part of the business and had built himself a very nice retirement portfolio. My prom-dad-buddy asked him what the secret was that he used to grow his wealth & that of his clients.

The answer was simple: “Always live on your income from 5 years ago.”

When I heard that, I thought it was an interesting concept. If someone is accustomed to pay increases on an annual basis, this allows for a considerable amount of savings each year. This is a concept/theory that I had not heard before playing amateur photographer at prom time. But, it’s consistent with my very incredibly simple rules for personal financial management:

  • Spend less than you make
  • Don’t take on high interest debt
  • Save 10% or more of your salary
  • Always live on your income from 5 years ago

How it works

At a 3% pay increase, someone who earns $50,000 this year would earn $57,963 a mere 5 years later. Living on the original $50k would allow that individual to save almost $8,000 (probably closer to $5,000 after taxes & benefits) that year. If that same person contributed 10% of their income ($5,793) to their 401k – that’s one heckuva combined savings rate (>18%) before we even consider an employer matching contribution or account growth. If that pattern is repeated for a couple decades….retirement starts to look awfully secure. (I tried to do the math, but it got complicated. Suffice it to say, we’re talking about doubling your savings or more with this method)

There are a whole lot of very simple methods for becoming financially secure and these are just two of them. Managing your financial life isn’t as complicated as a lot of people make it sound. I’m a financial planner who hates the term “budgeting” because it sounds so restrictive and so much less than fun.  I prefer to have a couple of quick & easy spending guidelines instead, like these grumpy old man rules.

 

Retirement Planning Step 4: Monitor and Adjust

May 24, 2017

This is the fourth and final step in my retirement planning step series. Now that you’ve set your goal, opened your account and selected your investment plan, you should be checking your progress about once a year, unless you have a significant change that affects your plans like a job loss, divorce or inheritance, in which case you’ll want to update your retirement estimator then as well. Any time you’re considering making a change to your savings, the first step should be to calculate how that will affect your retirement plans.

If you need to pull back on saving to pay for college, you need to know how many more years you’ll have to work to compensate. Thinking about using your retirement savings to purchase your first home? Double check to make sure that won’t set you back too far with your savings goal.

And what if you run that calculator and find that you’re overshooting your goal? Awesome! This just means you’re on track to reach financial independence sooner, which will give you more choices with your retirement lifestyle. Unless you’re five years or less from retiring, don’t use that as an excuse to save less – better to be over-prepared in case life happens than to be playing catch-up when it does happen.

Finally, make sure you’re rebalancing your investments at least once a year. If you’re using a Target Date Fund, then you’re all set, but if you created a custom mix then you’ll want to double check that it doesn’t get too far off base as the market changes. Your 401(k) plan may offer an auto-rebalancer that will do that for you as well, so just check the box and keep saving.

How Should You Invest in an HSA?

May 18, 2017

I’ve written about how to invest in a Roth IRA, your employer’s retirement plan, and a taxable account, but a new type of tax-sheltered account that’s growing in popularity is a health savings account or HSA. (If the new health care bill passes, HSAs could become even more important as the contribution limits would be doubled.) Like a health care FSA, HSA contributions are tax-free and can be used tax-free for qualified health care expenses, but unlike FSAs, you can leave the money in the account to be used for future health care expenses (and for any purpose without penalty after age 65). For this reason, many plans allow you to invest money in the account. Before investing your HSA, here are some things to consider:

When might you use the money?

Anything you might spend in the next few years shouldn’t be invested at all. That’s because a downturn in the market could force you to sell investments at a loss and even leave you without enough money in the account to cover your health care costs. If you use the account for current expenses, you might want to leave at least enough in cash to cover your deductible for the next year or two. On the other hand, if you plan to cover any current health care costs with other savings and not touch the HSA, you can invest as much as the plan will allow you (many require you to keep a minimum amount in cash) to grow as much as possible tax-free for future medical expenses.

How should you invest it?

You can either look at your HSA as a standalone account or as part of your overall retirement portfolio. In the former case, you can invest it in a fully diversified asset allocation fund or a balanced portfolio based on your risk tolerance and time frame. In the latter case, you can use it for investments that may not be available in your employer’s retirement plan.

Where should you have your HSA?

Unlike with your employer’s retirement plan, you don’t have to wait until you leave or turn age 59 ½ to transfer your HSA to a different provider. If you want to invest in something not available from your current provider, you may want to consider other options. Just be aware that your contributions from your payroll and your employer will likely continue being deposited in your current HSA so you’ll have to keep transferring the balance periodically.

Not sure what to do? Consider consulting with an unbiased financial planner to discuss your options in more detail. In the meantime, don’t let analysis paralysis stop you from contributing to an HSA at all. You can always leave it in cash until you make your decision.

Retirement Planning Step 3: Choose Your Investments

May 17, 2017

When it comes to choosing how to invest the money you deposit into your 401k and/or your IRA, it’s easy to get overwhelmed, but don’t let information overload stop you. It’s true that investing can get complicated and involved, but there are also things out there that make it pretty easy.

First thing though, is knowing whether you are a conservative, moderate or aggressive investor. The younger you are, the more aggressive you MAY be, but just to be sure, take this quiz to find out. Once you know what your investing personality is, the best way to narrow your options is by declaring yourself either a hands-off or hands-on investor.

What’s the difference?

Typical things a hands-off investor might say:

“I wish someone would just do this for me.”

“Words like ‘allocation’ and ‘portfolio’ are foreign to me.”

“I want to set it and forget it.”

“I rarely review my account and prefer a pre-mixed solution.”

The good news is that the investing industry recognizes that there are plenty of people out there who want the benefits of investing but who don’t have the knowledge, interest or even just the time to do it well, so they have created solutions that can be really great. If that sounds like you, then you don’t need to worry about how to pick a stock or watch channels like CNBC or Bloomberg TV – that’s more for the hands-on folks.

If you’re a hands-off investor, look for Target Date Funds in your 401k or IRA – the easiest way to spot them is that they have a year, like 2050, in their name. Target Date Funds are great because they choose the mix of stocks and bonds for you, in a mix according to the year you choose, and they typically charge lower fees than more actively managed options. Moderate investors typically choose the fund with the year closest to when they turn 65, while conservative investors may look for a year that’s closer to today and aggressive people often choose the one closer to the year they’ll turn 70 or 75.

When Target Date Funds aren’t available, then hands-off investors may opt to hire an investment manager to help them pick or they use the suggested investment mixes that can be found on the last page of the Risk Tolerance Profile and Asset Allocation Worksheet to help them put together a mix of the funds available in their 401k.

Typical things a hands-on investor might say:

“I enjoy researching mutual funds and their objectives.”

“I love my Jim Cramer bobblehead.”

“I log into my account regularly to check in on things.”

“Investing is interesting and I enjoy learning about it.”

If you’re a hands-on investor, chances are you probably have a pretty good handle on what you want to do with your money, but here are a few resources to check out to keep your knowledge and skills top notch:

How to Invest in Your Employer’s Retirement Plan

Should You Care About a Mutual Fund’s Past Performance?

How Investing is Like Eating Pizza

 

Step 1 in Retirement Planning: Set a Goal

May 03, 2017

It might sound cliché but as with any planning exercise, the first step is to just set a goal. After all, how will you know when you’ve gotten there if you don’t know where you’re going? How you’ll go about defining your goal depends a lot on how close you are to actually thinking about retiring as well as how you personally define the concept of “retirement.”

One of the challenges of setting a retirement goal is that it’s less of a set number and more of a moving target. How much you’ll need to have in order to stop worrying about how much is coming in from working depends heavily on how closely you want to mirror your working standard of living. Someone who will have their mortgage and other debt paid off and no dependents to care for can retire on much less than someone who will still have housing expenses or kids in college. If you’re looking at the more traditional definition of retirement by simply stopping work one day and living off of social security and savings, setting that goal can be as simple as running a retirement calculator and seeing if the age you’re hoping to retire is feasible considering your current savings amount and rate of saving. If you’re not on track to retire by the age you are hoping, then you’ll either need to push back your date, increase your savings, or decrease the expenses you’ll have to cover in retirement.

The closer you are to actually retiring, the more specific you can be with your planning. The Financial Finesse calculator gauges your goal based on whether you’re on track to replace a percentage of your income, but often people who are planning a significant reduction in living expenses and/or folks who are plowing tons of money away into savings during their later working years can get away with savings that only replace a fraction of current income. If you’re the type who thinks of retirement as more of a “financial freedom” day where you can pursue activities without concern for earning, then there are a few more variables. For example, if you’re thinking that you want to spend your second chapter starting a business, then your goal may be more of a dollar amount that will sustain you for a year while you build your business up to provide ongoing income.

If you’re a couple decades or more away from retiring, then the best way to set your goal is to aim for being on track to replace 80% of your current income. The closer you can remain to that target, the more choices you’ll have as the years go by. And if you’re getting a late start or the thought of quitting working feels more like an imminent reality and less like some hazy future that may or may not happen, then you’re better off using the “Equivalent Pay (Today’s Dollars)” amount in the Goal Calculation tab of the calculator to measure whether you’re close to your goal or not. If the equivalent pay amount doesn’t meet or exceed your anticipated annual budget in retirement, then you need to plan to work longer, save more or cut some expenses.

Retirement factor Need less savings Need more savings
My mortgage will be paid off X
I want to start a lucrative business X
I want to pursue a lower-paying passion project X
I want to travel in style X
I want to move to a lower cost region X
I have a long life expectancy X
I have health issues X
I have family to help support me X
I plan to work part-time X
I plan to be a missionary in a third-world country X
I expect to have a lot of expenses X
I expect life to be pretty simple and cheap X

 

 

How to Invest in Your Employer’s Retirement Plan

April 27, 2017

Last week, I wrote about how to invest in a Roth IRA but how about your employer’s retirement plan like a 401(k) or 403(b)? After all, that’s where most people have the bulk of their retirement savings. Here are some options:

Keep it simple…real simple. If you have a target date retirement fund in your plan, this is the simplest option. In fact, it’s probably the default so you may not need to do anything at all.

The idea is to pick the fund with the target date closes to when you think you’ll retire. Each fund is fully-diversified to be a one-stop shop that automatically becomes more conservative as you get closer to retirement so you can set it and forget it. It doesn’t get much easier than that.

There are a couple of downsides though. First, you may not even have this option in your plan. Second, your plan’s target date funds may have high fees. Finally, you don’t have the ability to customize the mix of investments to match your particular risk tolerance (although you can pick an earlier date if you want to be more conservative or a later date if you want to be more aggressive) or to complement any outside investments you may have.

Target a particular risk level. If you don’t have a target date fund or want something more tailored to your particular risk tolerance, see if your plan has a target risk fund or an advice program. A target risk fund is fully diversified to be a one-stop shop, but it stays at a particular risk level so you may want to switch to something more conservative as you get closer to retirement.

An online advice program can recommend a particular mix of investments based on your risk tolerance. Many programs will even use the lowest cost options in your plan and/or factor in any outside assets you may have. For example, if you have a lot of stocks in a Roth IRA, the program may reduce your stock holdings in your plan accordingly. However, it will need to be periodically updated as your situation changes and some programs charge additional fees.

Create your own mix. If the above options aren’t available to you or if you prefer to have more control, you may have to create your own mix of investments. You can take a risk tolerance quiz like this one and use the suggested allocations as guidelines.

Just be sure to look for low cost fund options to implement your portfolio. You may want to use your plan for those assets in which you have low cost fund options and use outside accounts for the rest. (That’s why I invest mine all in a low cost S&P 500 index fund.) Don’t forget that taxes are another cost. If you have investments in taxable accounts, you may want to prioritize the most tax-inefficient investments like taxable bonds, commodities, real estate investment trusts, and funds with high dividends and turnover for your tax-sheltered retirement account since more of their earnings will otherwise be lost to Uncle Sam.

Consider a small amount in company stock. If company stock is an option, you might want to keep a small amount there to benefit from potentially lower taxes on the gains when you eventually withdraw it from the plan. Just don’t have more than 10-15% there because having too much in any one stock is too risky, no matter how great the company is. This is especially true with employer stock because if something happens to your company, you could be out of a job at the same time as your portfolio is decimated.

Not sure what to do? Don’t let analysis paralysis prevent you from investing at all. You can start with a simple option like a target date or target risk fund for now and adjust later. You don’t want to make the perfect investment plan the enemy of the good.

 

How Should You Invest In Your Roth IRA?

April 20, 2017

If you’re like many people I’ve talked to recently, you may have decided to contribute to a Roth IRA before the deadline on Tue. However, it’s not enough to open an account and fund it. After all, a Roth IRA is simply a tax-sheltered account, not an investment. You still have to decide how to invest the money. Here are some options to consider:

Use it as an emergency fund. If you don’t have enough emergency savings somewhere else, you can use a Roth IRA as part or all of your emergency fund since you can withdraw your contributions tax and penalty-free at any time and for any purpose. (Earnings are subject to taxes and a 10% early withdrawal penalty before 5 years and age 59 ½ but the contributions all come out first.) In this case, you’ll want to keep it someplace safe and accessible like a savings account or money market fund. Once you accumulate enough emergency savings elsewhere, you can invest it more aggressively for retirement.

Save for a short term goal. A Roth IRA can also be used penalty-free for a first-time home purchase (up to $10k) or education expenses. If you intend to use your Roth IRA for either goal in the next few years, you’ll probably want to keep it in savings.

Choose investments that complement your other retirement accounts. For example, you may want to use your Roth IRA for investments that may not be available in your employer’s plan like real estate, gold, commodities, emerging markets, international bonds, and microcap stocks. They can help diversify a more traditional mix of bonds and large and small cap US and international stocks.

Choose a more conservative mix for early retirement. If you’re planning to retire before becoming eligible for Medicare at age 65 and are planning to purchase health insurance through the Affordable Care Act (assuming it hasn’t been repealed and replaced), a tax-free Roth IRA can help reduce your insurance costs because the insurance subsidies are based on your taxable income. Since a large percentage of the account may be coming out over a relatively short period of time, you may want to invest it more conservatively than your other retirement investments.

Choose more aggressive investments for long term tax-free growth. If you’re not planning to withdraw your Roth IRA early, you may want to take the opposite approach and use it for the most aggressive parts of your portfolio. That’s because the account is growing tax-free and may be the last to be touched. (It helps that Roth IRAs aren’t subject to required minimum distributions.) Some examples of more aggressive investments would be emerging market and small and micro cap stocks.

Keep it simple. If this all sounds confusing and you want to just keep your investing as simple as possible, you can look at each account separately. For example, you might choose a target date retirement fund for your Roth IRA since it’s a fully diversified one stop shop that automatically becomes more conservative as you get closer to the retirement date. All you need to do is pick the one with the date closest to when you think you’ll retire and set it and forget it. If you want something more customized, you can also use a robo-advisor or design your own portfolio based on your particular risk tolerance.

Like all financial decisions, your choice begins with your goal. Are you trying to save for emergencies? Do you plan to use the account early or late in your retirement? Or do you just want to keep things as simple as possible?

 

 

 

Which Retirement Plan Benefits Are You Missing Out On?

April 06, 2017

This week, we’re recognizing Employee Benefits Day on April 3rd by writing about ways to appreciate and “benefit from your benefits.” One of the most common benefits that is often underappreciated and underutilized is your employer’s retirement plan. In particular, here are some features that you may not be taking full advantage of if you’re fortunate enough to have them in your plan:

Employer’s match. According to our research, 92% of employees are contributing to their plan but almost a quarter aren’t contributing enough to get the full match from their employer. At the very least, make sure you’re contributing enough to not leaving any of this free money on the table.

Contribution rate escalator. If you can’t afford to save enough to hit your goal, try slowly increasing your contributions by one percentage point each year. This tends to be less than cost of living adjustments so people generally don’t even notice the difference in their paychecks, but after just a few years, they may be saving more than they ever thought they could. A contribution rate escalator can do this for you automatically.

Roth contributions. Unlike pre-tax contributions, you get no tax benefit now, but Roth contributions can grow to be tax-free after 5 years and age 59 ½. This is especially useful if you’re worried about paying higher tax rates in retirement or if you’re planning to retire early since tax-free Roth distributions won’t count against you in calculating the subsidies you would be eligible for if you purchase health insurance through the Affordable Care Act (assuming the subsides are still in place) before becoming eligible for Medicare at age 65. Roth contributions are also more valuable if you max out your contributions since $18k tax-free is more valuable than $18k that’s taxable. (Yes, you could technically invest the tax savings from making pre-tax contributions, but then you’d still have to pay a tax on those earnings too.)

After-tax contributions. If you max out your normal pre-tax and/or Roth contributions, you may be able to make additional after-tax contributions. These aren’t as advantageous since the money goes in after-tax and the earnings are taxed at distribution, but you can convert them into a Roth account to grow tax-free, either while you’re still at your job if the plan allows it or by rolling it into a Roth IRA after you leave. You can also generally withdraw after-tax money while still working at your job (subject to taxes and a 10% penalty on earnings before age 59 1/2).

Asset allocation funds. To simplify your investing, retirement plans will often provide you with fully-diversified asset allocation funds that can be a one-stop shop. Some, called target date funds, even automatically become more conservative as you get closer to the target date so you can simply “set it and forget it.”

Online retirement and investing advice. Some plans provide access to a free online retirement planning and investment tool that can tell you whether you’re on track for retirement and make specific investment recommendations based on your particular risk tolerance and time frame, typically using the lowest cost funds in your plan.

Brokerage window. If you’re looking for an investment not otherwise available in your plan, see if you have a brokerage option that will give you access to thousands of other funds and in some cases, even individual stocks.

Employer stock. While you don’t want to put too much in any one stock (no more than 10-15% of your overall), especially your employer’s, there can be a tax benefit for doing so when you eventually cash out the account. If you transfer the employer stock directly to a brokerage firm in-kind, you can pay a lower capital gains tax on the growth instead of the higher ordinary income tax rate that you would normally owe on distributions.

Retirement plan loans. If you need a loan, borrowing from your retirement plan doesn’t require a credit check and the interest goes back into your own account. However, you miss out on any earnings that money would have received and if you leave your employer, you may owe taxes plus possibly a 10% penalty (if you’re under age 59 ½) on any outstanding balance after 60 days. (Some plans do allow you to continue making loan payments though.) Also, be aware that retirement plan loans are paid back from your paycheck so there’s no possibility of default and you can’t discharge them through bankruptcy.

Financial wellness. Some plans offer free, unbiased financial wellness coaching to help you plan, save and invest for your retirement. This is an important benefit since it can help you take advantage of all the others.

Which of those benefits are you not taking advantage of? See which ones are offered by your plan and start utilizing them. Your future self will thank you.