Go for the Goal: Insights and Strategies

Goals are a statement of what an individual, family, or organization wants to achieve in the future. Four months into 2023, it is still appropriate to consider setting goals. They are not just for New Year’s Eve. Actions to achieve personal and financial objectives can start at any time.

Below are some thoughts about goal setting:

 

Benefits of Goals- Goals provide focus, direction, and motivation (e.g., to cut spending to free up money to invest), provide a “reality test” for dreams, serve as a reference point to measure progress over time, and provide immense satisfaction when achieved.

 

Goal-Setting Obstacles- Common barriers include a lack of motivation, successful role models, and/or time and uncertainty about process steps (e.g., how to set and/or achieve goals).

 

The Need for a “Why?”- Without goals, it is hard to make and/or sustain behavioral changes. Goals provide a “why” for changed behavior (e.g., reduced spending or more physical activity). A goal should be personally meaningful and big goals should be divided into smaller chunks.

 

Holistic Goal Setting- Experts recommend looking at your life holistically when setting goals. It is perfectly fine for personal and professional goals to intertwine. For example, making time to exercise early on days that you expect to work long hours or attend multiple meetings.

 

SMART Goals- SMART is an acronym for Specific, Measurable, Attainable, Realistic, and Time-related. SMART goals have an anticipated cost and time deadline. From there, you can “do the math” to determine attainability and measure progress. Examples: save $10,000 toward the cost of a new car in 10 years and save 10% of salary in a 401(k) plan for 25 years.

 

The Need for Flexibility- SMART goals cannot be too confining. Some flexibility is needed so if someone “falls off the wagon,” they will not quit. If you get behind on goal attainment, develop a “recovery plan” by answering the question “how can I make this work?”

 

Envisioning the Future- It can be empowering to visualize how you will feel when a goal is achieved. You will likely be happy, proud, and inspired to achieve follow-up goals. Tools like vision boards and online calculators can provide inspiration and a reminder of what is possible.

 

Small Wins Matter- Experts recommend dividing big goals into chunks and rewarding yourself each time a “small win” is achieved. This helps people get through the “messy middle” between where they start out and where they want to be.

 

Stuff Happens- Experts in goal setting and behavior change advise people working on goals to be graceful with themselves. Events will happen in life to throw you off-course. Give yourself forgiveness as you would with others.

 

To set short-, medium-, and long-term goals, use this worksheet.

Can Farmers Ever Afford to Retire?

One of my Money Talk clients is my long-time employer, Rutgers Cooperative Extension. In addition to writing monthly Small Steps to Health and Wealth™ financial messages, I also present online webinars and class segments.

 

I recently presented content for Annie’s Project-NJ; a program designed to build the skills of women farmers in New Jersey. My segment of their six-week class series was called Can Farmers Ever Afford to Retire?

The answer to this question is yes, with planning and regular savings, as is the case for workers in any occupation. Farmers may also have some unique income generation methods.

Below are eight common sources of retirement income for farm families:

 

Social Security- To obtain Social Security, workers need 40 quarters (10 years) of covered work and must be age 62 or older. Benefits are based on a worker’s 35 highest earning years and delayed retirement credits between full retirement age and age 70 increase benefit amounts.

 

Off-Farm Job Employer Benefits- These include a defined benefit pension, an employer retirement savings plan (e.g., 401(k), 403(b), 457 plan, and thrift savings plan), and other employer benefits (e.g., health insurance).

 

Rental Income- Some farmers supplement their income by collecting rent for the use of their land, buildings (e.g., barn, silo, riding arena), farm equipment (e.g., tractor, combine, plow, seeder, baler), animals, or other items.

 

Individual Retirement Account (IRA)- There are two types: traditional (funded with before-tax dollars) and Roth (funded with after-tax dollars). IRA owners can select a variety of investments (e.g., stocks, bonds, mutual funds, exchange-traded funds, and bank CDs).

 

Simplified Employee Pension (SEP)- This is a retirement savings plan for self-employed workers and small business owners. The contribution limit for sole proprietors is 20% of net self-employment earnings and the deadline for deposits is the filing deadline for each tax year.

 

Investment Income- This includes income derived from various investments, including land, and includes interest, dividends, capital gains, and payments for mineral rights.

 

Continued Income- This includes payments for crops, animals, and animal products (e.g., eggs and meat), agritourism income, a salary earned through continued work for an adult child or other new farm owner, and income from non-farm related work.

Farm Asset Sale Income- When farm assets are sold, the proceeds provide a nest egg that can be invested to provide retirement income. Another option, to keep farmland involved in agriculture, is to apply for Farmland Preservation payments.

For additional information about retirement planning for farmers, visit the Rutgers Cooperative Extension Later Life Farming website.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

Useful Information from Recent Webinars- Part 1

 

Every so often, I review my personal “learning journal” and summarize notes taken from various webinars.

Below are six information nuggets that caught my eye:

 

Impact Investing- This is a big growth area in the investment world and is expected to grow. The stated intention is to have investments create change and generate a positive impact on the world- as well as a high return. Acronyms associated with impact investing include SRI (socially responsible investments) and ESG (environmental, social, and governance). Investors need to be careful about “greenwashing” (unsubstantiated claims about a company’s positive impact).

 

Widowhood Challenges- Part of many older adults’ later life will be spent living as a single person, but few couples proactively plan for this. “One size does not fit all” when it comes to a surviving spouse’s financial needs. Common challenges that affect many widows/widowers are aloneness, a lower income, increased taxes/higher tax rate filing as an individual vs. a couple, loss of services that a deceased spouse used to perform, and no longer spending time with couples.

 

Financial Infidelity- This is the term used to describe financial cheating on a partner. It includes lying about finances and debt and hiding purchases. “Red flags” to spot it include a change of status (a spouse is no longer on a joint credit card), changed passwords to online accounts, new credit card statements, a spouse no longer willing to discuss financial issues, and unexplained documents to sign. Effects include a loss of trust and broken relationships.

 

The Rise of Neobanks- Sometimes called “challenger banks,” these are fintech companies that offer banking services (checking and savings accounts) in a non-traditional (i.e., digital) way. They typically provide checking and savings accounts via a website or app. The #1 neobank is Chime, with over 13 million customers. Other neobank names are Aspiration, Current, and Varo. Most neobanks partner with chartered banks, which provides access to FDIC insurance.

 

Taxes in Retirement- Tools for tax control in later life (read: to avoid being clobbered by taxes on RMDs- required minimum distributions) include charitable giving, Roth conversions, and tax diversification (i.e., placing savings in taxable, tax-free, and tax-deferred accounts). Placing every dollar of retirement savings in tax-deferred plans can be expensive in later life as RMDs get added to other ordinary income sources such as W-2 income from a job, a pension, Social Security, interest and dividends, mutual fund capital gains distributions, and more.

 

Roth Conversions- Between now and the end of 2025 is a good time to do Roth conversions (e.g., convert a traditional IRA to a Roth IRA) because the Tax Cuts and Jobs Act was “time-boxed.” As a result, tax rates (applied to converted IRA dollar amounts) are scheduled to increase in 2026. Market downturns are also a good time to make Roth conversions. When market values bounce back later, subsequent growth in value will take place in a tax-free investment.

 

Financial knowledge is power. I hope that you found this information useful.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

 

Highlights From a Conference on Retirement Savings

At the 2022 Retirement Summit sponsored by the Employee Benefit Research Institute (EBRI), there were four main topics: improving individuals’ access to retirement savings plans, reducing plan leakage (i.e., when workers take a pre-retirement distribution), helping people spend down their assets in retirement, and improving investment outcomes for American workers within the retirement system. Below are my key take-aways:

Reluctance to Spend- Many people who saved regularly for decades in retirement savings plans such as IRAs and 401(k)s- as financial experts told them to do- are now hesitant to spend down their assets. Withdrawing money, instead of saving, feels “foreign” and uncomfortable.

 

Savings Fosters Success- Studies have shown that just being in the retirement system in some capacity (e.g., participating in an employer savings plan and/or IRA) increases the odds of having a successful retirement (i.e., not running out of money to live a comfortable lifestyle).

 

Workplace Savings Matters- The general consensus was that, if people are not covered by a workplace savings plan (e.g., 401(k) plans), they generally don’t save for retirement. Some states have started to require employers to offer a workplace savings plan. An example: CalSavers in California.

 

Auto-Enrollment is Effective- Research indicates that most workers who are auto-enrolled in retirement plans stay in them, even in the absence of an employer match. Speakers suggested three types of “nudges” (i.e., automatic features): auto-enrollment, auto-escalation (where workers’ savings deposits increase over time), and auto-re-enrollment (where workers who opt out of a retirement savings plan are auto-enrolled again at designated time intervals).

 

Streamlined Portability- There needs to be a more streamlined process for workers who are leaving jobs to rollover their retirement account balances to another tax-deferred plan, thereby preventing leakage. Currently, many workers “cash out” their accounts and say “just give me a check” because it is much easier than the “paperwork hassles” required to transfer funds.

 

Decumulation Assistance- Workers get help from their employers setting up and contributing to retirement savings accounts (accumulation) but very little “on the back end.” Without personal assistance or planning tools, it is hard for older adults to budget their money and decide how much they can withdraw from savings. Older adults need help with decumulation.

 

Technology Tools Exist- Many speakers stated that retirees don’t know how to draw down their savings, but technology already exists to help them. An example given was a default to move 3% of workers’ target date fund (TDF) balance to an annuity at age 55 and 3% more each year so about 25% of the account would be in an annuity and 75% in the TDF at age 65.

 

In summary, addressing retirement savings gaps with innovative solutions is a necessity, not an option. The alternative (i.e., doing nothing) is a cadre of destitute older people falling back on limited government resources. The most vulnerable people are minorities and low-wage and small business workers.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.