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Busting financial myths about retirement savings

MYTHS BUSTEDWe all know we should be saving for retirement, but from that baseline, myriad variables exist. How much in savings is enough? What role does Social Security play in your overall financial picture? At what age should you retire?

What you don’t know about building wealth and saving for retirement might surprise you. There are a lot of misconceptions floating around out there. Here are some common myths about retirement strategies and the reality behind them.

Myth: I’ll need 80 percent of my current income in retirement.

Reality: This figure varies from person to person based on spending habits, debt and other factors. Do you own your home outright or do you still have a mortgage? What do you want your lifestyle to be like? Hint: Estimate high. The more you can save for retirement the better your golden years will be.

Myth: Social Security will cover my expenses when I retire.

Reality: The amount of Social Security you’ll receive is based on your income, but it's nowhere near as much as your income. Earning $60,000 per year now? Expect $2,096 per month from Uncle Sam when you retire. Unless you're prepared to live on that, you need individual savings, too.

Myth: I’ll start getting Social Security at age 62.

Reality: You can, but you should delay. The amount you’ll receive each month if you retire at age 70 is 76 percent more than the amount you’ll receive if you start at age 62.

Myth: When I retire, I should take my money out of the stock market.

Reality: Stocks allow for potential growth while you are in retirement. Just make sure you have a diversified portfolio consisting of cash, fixed income and equities. Asset allocation and diversification won't ensure a profit or prevent a loss in a declining market, but the strategies can help mitigate risk and volatility.

Myth: I just entered the workforce. I don’t need to start saving now.

Reality: It pays off big to start early. People who start saving at 25 can accumulate twice the savings of someone starting at 35.

Myth: Beyond contributing to my 401(k), there's not much else I can do to save for retirement.

Reality: A savvy financial adviser can help you explore tax options like the saver's credit, which is worth between 10 and 50 percent of the amount you contribute to your 401(k).

Myth: My spouse has a solid 401(k) or IRA. We’re all set.

Reality: The two Ds can mess with this plan: death and divorce. Make sure your spouse names you, not your kids, as the primary beneficiary in case of his or her death. And divorce? If you don’t have your own savings, you could be out in the cold.

Myth: I’ll keep working during retirement.

Reality: Studies show 74 percent of people plan to work after retirement, and that's great, but there's no guarantee that income will keep coming in. Why? Health, family and employer concerns. That's why having a solid amount of savings in your 401(k) or IRA is crucial.

Myth: I should only contribute what the company will match in my 401(k).

Reality: Experts say you should be contributing up to 15 percent of your salary to your 401(k). Companies won’t usually match that much. Be smart and contribute the max. Your future self will thank you.

Myth: I’m 55 and haven’t saved much. Why bother? It’s too late for me.

Reality: Almost half of U.S. workers ages 45-55 have less than $10,000 saved. But it’s not too late! You can still enjoy retirement. You can add more to your Roth IRA or 401(k) the older you are. Pay off existing debt (except your home), and start investing 15 percent of your income now!

Working with a financial planner will ensure you have a solid foundation as you head into retirement. At Harbor West Wealth Management, we're here to help with integrated financial planning that helps you reach your financial goals.

This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.

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Five Financial Facts to be Aware of Before Your Divorce

DIVORCE GRAPHICThe costs of divorce are many. There's the emotional cost of the breakdown of a family, the pain of a failed marriage and the anger that can come with the reasons for the split. Divorce can take a physical toll, too, as the stress of it all wreaks havoc with your sleep, your blood pressure and your immune system.

There's also a financial cost, sometimes a great cost. Divorce can be disastrous for your finances. Surviving divorce means going into it forewarned and informed.

At Harbor West, we have helped many clients through this heartbreaking transition, sorting out the financial issues to help ease their minds. The divorce might be breaking their hearts, but with some sound financial advice, it doesn't have to break their bank accounts.

Here are five financial factors to think about when you're facing a divorce, and ways to prevent common pitfalls.

Credit cards and bank accounts

When you know for sure you're headed to a divorce, cancel all of your joint credit cards immediately so no further charges can be made. Depending on the card company, you may have to pay off the balance before you can close the account, but there will be no chance of your spouse running up further debt and leaving you with it.

Closing your joint bank accounts is easier. Either one of you has the right to withdraw the entire amount without notifying the other, so do it as soon as possible or you could find yourself cleaned out. 

Division of property

Not having a clear picture of marital assets is a sure way to lose what's rightfully coming to you.

Before setting the divorce process in motion, make a list of all your marital assets, including your home, cars and other big-ticket items like boats. Remember to include retirement plans, insurance policies, any stocks or stock options. Then dive deeper. What about accumulated vacation pay? Bonuses from work? Frequent flier miles? Antiques? Artwork?

Also, get your spouse's salary, bonuses, stock options and other information from his or her employer in writing.

Armed with that information, we can assess the value of your assets, even taking tax implications into account, giving you a clear financial picture of what you'll be facing.

Child support and alimony

Child support payments are generally set by the state where you live, but factors include both parents' incomes, the number of children involved and custody agreements. While the non-custodial parent is legally mandated to pay child support, it doesn't always happen. Alimony is paid to the spouse who earns less — the stay-at-home mom whose husband has walked away, for example — but laws vary from state to state.

Your credit report

Divorce itself will not hurt your credit score, but indirectly it could cause that all-important number to drop. The chaos of divorce proceedings can lead to missed payments. Also, a judge can declare your spouse responsible for some joint credit accounts, but there's no guarantee he or she will pay them. Also, keep a close eye on your credit report to ensure your spouse hasn't opened any new accounts in your name.

Loose ends, post-divorce

When your divorce is final, it's not over and done. You still need to tie up some critical loose ends. Cross the Ts and dot the Is. Change the names on the deed to the house, stocks, car titles and any other documents. Change your beneficiaries on life insurance, employer-sponsored retirement savings accounts and your will.

Protect yourself from these potentially devastating financial ambiguities by having a strong financial plan in place. We can help you with that.

This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.

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Regulatory Disclosure: The information on this website has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. This website is neither an offer to sell nor a solicitation to buy any securities. Gerard Gruber offers Securities and Investment Advisory and Financial Planning service through Geneos Wealth Management, Inc, Member FINRA/SIPC.  Investments are not FDIC insured. Investments are not deposits of the financial institution and are not guaranteed by a financial institution. Investments are subject to investment risks including loss of principal amount invested.