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Are You Afraid to Spend Your Money in Retirement?

by with No Comment BlogIncome DistributionIncome PlanningRetirement IncomeRetirement Income PlanningRetirement LifeRetirement Savings

You spent decades saving for retirement. You contributed to your 401(k), invested, paid the bills, raised a family, hopefully paid down some debt, and tried to make smart decisions along the way. The whole idea was that someday you would have enough money to stop working and actually enjoy it.

Then retirement gets closer and something interesting happens. After spending 30 or 40 years saving money, suddenly you’re supposed to start spending it. And for a lot of people, that’s much harder than they expected.

I see this all the time. People don’t usually come right out and say, “I’m afraid I’m going to run out of money.” Instead, it comes out in other ways. They put off the big trip they’ve always wanted to take. They keep driving the car they really don’t like anymore. They hesitate to help their kids or grandkids even though they’d love to. They agonize over purchases they can probably afford. Or they find themselves constantly saying, “Maybe I should wait. I might need that money later.”

Of course, there’s nothing wrong with being careful with money. In fact, being careful is probably one of the reasons you have retirement savings in the first place. But there’s a difference between being financially responsible and being afraid to spend because you don’t know what you can afford.

And I think that’s a really important distinction.

For most of our working lives, we’re taught to accumulate. Save more. Invest more. Don’t touch the retirement accounts. Prepare for the future. Then retirement arrives and we’re expected to flip a switch and start drawing money out of those accounts. Your paycheck may be gone, the stock market is still going to go up and down, healthcare costs become more important, and none of us knows whether we’re planning for another 10 years or another 30.

That’s why I think a good retirement plan needs to answer more than, “Do I have enough money to retire?” It should also help answer, “How much can I comfortably spend and still be okay?”

If you’re approaching retirement or already retired, here are three questions I think are worth asking yourself.

What would make you feel financially secure 10 or 20 years from now?

Before you start thinking about account balances, think about what financial security actually means to you. Maybe it’s knowing you can stay in your home for the rest of your life. Maybe it’s having enough money set aside for healthcare. Maybe you want to know you’ll never have to depend financially on your children. Or perhaps security means being able to travel, help your family and still know there will be plenty of money there when you’re 85 or 90.

We tend to talk about retirement security as if it’s a number, but I don’t think it is. It’s a feeling, too. Two women can have exactly the same amount of money saved and feel completely differently about it. Until you understand what makes you feel secure, it’s difficult to build a retirement plan that actually gives you confidence.

What are you not doing today because you’re afraid you might need the money later?

This might be the most revealing question of the three. Is there something you really want to do but keep putting off because you’re worried about spending the money? Maybe it’s that trip you’ve talked about for years, a new kitchen, a different car, taking the whole family somewhere special or even just spending a little more on yourself without feeling guilty about it.

Then ask yourself another question: Am I saying no because I truly can’t afford it, or because I don’t know whether I can afford it?

Those are two very different things.

Sometimes the issue isn’t that you don’t have enough money. It’s that no one has helped you understand what your money can realistically support. And without that clarity, the safest answer always feels like “don’t spend it.”

What would you need to know to give yourself permission to enjoy your money?

Maybe you need to see what happens if the market drops 20%. Maybe you need to know how much income your investments can reasonably provide each year. Maybe you’re worried about healthcare or long-term care. Maybe you need to understand what happens if you live to 95. Or maybe you simply need to see, in black and white, that you can spend some of this money and still be okay.

That’s one of the things I think retirement planning sometimes gets wrong. We spend so much time talking about accumulation, rates of return and how much someone needs to retire that we forget why they accumulated the money in the first place.

Your money has a job.

I’ve always said that your money is the vehicle. Retirement is the destination. The point of accumulating money isn’t simply to die with the largest possible account balance. It’s to create security, choices, freedom and the ability to live the life you worked all those years to have.

That doesn’t mean spending recklessly. You still need to plan for inflation, healthcare, taxes, market downturns and the possibility of living a very long life. But there’s a big space between spending too much and being afraid to spend anything at all.

A thoughtful retirement plan should help you find that space. It should give you enough confidence in your future that you can actually enjoy some of your money today.

Because the goal isn’t simply to make your money last for the rest of your life.

It’s to make sure you’re living during the rest of your life, too.

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Eliminating the Fear Factor of Retirement

by BlogFinancial LiteracyIncome DistributionIncome PlanningInvestment PortfolioRetirement IncomeRetirement Income PlanningRetirement Savings

“People experience retirement emotionally before they experience it mathematically.”

That may be one of the smartest things I’ve read about retirement planning. It immediately reminded me of the television show Fear Factor. Remember it? Contestants willingly jumped from helicopters, crawled through confined spaces, balanced high above the ground, and ate things most of us wouldn’t go near. The premise was simple: fear changes behavior. Sometimes it causes us to freeze. Sometimes it causes us to overreact. Sometimes it convinces us to avoid something altogether. And sometimes it makes us do things we would never choose if we felt calm, safe, and in control.

Retirement has its own version of Fear Factor. Only instead of spiders, snakes, and impossible stunts, the fears sound like this: Will I have enough? Can I really stop working? What if the market crashes? What if healthcare costs wipe me out? What if I become a burden to my children? What if I make the wrong decision and can’t recover?

Those aren’t simply mathematical questions. They are emotional questions. And until those fears are acknowledged and addressed, it can be very difficult to make confident financial decisions.

Why Retirement Feels So Emotional

Retirement represents one of the biggest transitions most people will ever make.

For decades, you receive a paycheck. You know when it will arrive. You know roughly how much it will be. You build your life around that rhythm. Then retirement asks you to turn accumulated savings into income and trust that the money will last for the rest of your life. This is a major psychological shift.

Even people with substantial savings can struggle with it. A retirement account balance may look reassuring on paper, but spending from it can feel very different. Every withdrawal can feel like a permanent reduction. Every market decline can feel like a threat. Every unexpected expense can raise the question: What if this is the beginning of running out?

This is why many retirees become overly cautious, even when they can afford to spend more. They postpone trips, avoid helping family, and deny themselves experiences they spent decades saving for.

The fear of running out can become so powerful that people never fully enjoy the money they worked so hard to accumulate.

The Science of Fear and Financial Decision-Making

Our brains are designed to protect us from danger.

Thousands of years ago, fear helped humans survive immediate threats. Today, the same biological response can be triggered by a falling account balance, a frightening news headline, or uncertainty about future expenses.

When fear takes over, long-term thinking becomes harder. We tend to focus on avoiding immediate pain rather than making the best decision for the future.

Behavioral finance has shown that people generally feel the pain of a loss more intensely than the pleasure of an equivalent gain. Losing $10,000 often feels much worse than gaining $10,000 feels good. This emotional imbalance can influence retirement decisions in powerful ways.

Fear may cause someone to sell investments after the market has already fallen, locking in losses. It may lead someone to keep too much money in cash for years, reducing growth and purchasing power. It may cause a person to delay retirement even when the numbers show they are financially prepared. It may also lead to endless second-guessing, constant account checking, and an inability to enjoy retirement.

Ironically, one of the greatest risks to a retirement plan may not be market volatility itself. It may be the decisions fear causes us to make.

Retirement Planning Should Address Both Math AND Emotion

Traditional retirement planning often focuses on projections, rates of return, withdrawal strategies, and probability-of-success calculations. Those tools are important. But they do not automatically create peace of mind. A plan can work beautifully on paper and still leave someone terrified to spend. That is why retirement planning should answer two questions:

  1. Will the money work?
  2. Will the plan help you feel secure enough to live?

A strong retirement plan should do both.

Introducing the Confidence Foundation™

At Her Retirement, I believe every retirement plan should begin by building what I call a Confidence Foundation™. Think of it as the financial base that helps you sleep well at night. The purpose of the Confidence Foundation™ is to provide dependable income for the expenses you simply cannot avoid.

Ask yourself this question: If the stock market dropped 30% tomorrow, would I still be able to pay my essential monthly expenses? If the answer is yes, you have reduced one of retirement’s biggest emotional risks.

Your essential expenses may include housing, food, healthcare, insurance, utilities, taxes, and basic transportation. These are the costs that continue regardless of what the market does. The goal is to match as much of those expenses as reasonably possible with income sources that are reliable, predictable, or guaranteed.

What Can Make Up a Confidence Foundation™?

There is no single product or strategy that works for everyone. The right combination depends on your income needs, assets, health, risk tolerance, tax situation, and goals.

For many people, Social Security forms the first layer. Because it provides inflation-adjusted lifetime income, it can be one of the most valuable components of a retirement income plan. The decision about when to claim can have a lasting impact, which is why it deserves careful consideration.

A pension may provide another dependable monthly income stream. Some retirees may also choose an annuity to create guaranteed lifetime income that helps fill the gap between Social Security, pension income, and essential expenses.

For others, a bond ladder, Treasury ladder, or CD ladder may provide predictable cash flow over a defined period. Cash reserves can also play an important role by covering near-term spending needs and reducing the chance that investments must be sold during a market downturn. Some people may use several of these strategies together.

The important point is this: the Confidence Foundation™ is not one product. It is a planning outcome. Its job is to make sure the money needed for basic living expenses is not completely dependent on short-term market performance.

Where Annuities May Fit

Annuities can be useful for some retirees because they can convert a portion of savings into a predictable income stream that lasts for life. This can be especially valuable for someone who does not have a pension, is concerned about outliving her money, or wants more certainty around essential expenses.

But annuities are not all the same, and they are not appropriate for everyone. Fees, liquidity, guarantees, riders, surrender periods, and the strength of the issuing insurance company all matter.

The question should never be: Do I need an annuity? A better question is: Do I have an income gap in my Confidence Foundation™, and what is the most appropriate way to fill it?

An annuity may be one possible answer. It should not be the automatic answer, or the answer that an insurance salesperson pushes on you.

Building Your Freedom Fund™

Once your Confidence Foundation™ is in place, the rest of your assets have a different job. I call this your Freedom Fund™.

The Freedom Fund™ is designed to help you enjoy retirement, maintain flexibility, keep pace with inflation, and support the life you want to create. It may include stock mutual funds, ETFs, individual stocks, Roth IRAs, traditional IRAs, 401(k)s, brokerage accounts, real estate, or other long-term growth assets.

Because essential expenses are already being addressed through the Confidence Foundation™, the Freedom Fund™ does not have to carry the full emotional burden of paying next month’s bills. This can make market volatility feel less threatening.

Instead of viewing a market decline as a threat to your ability to buy groceries, you may be able to view it as a temporary fluctuation in assets intended for long-term growth and discretionary goals.

The Freedom Fund™ can support travel, hobbies, family experiences, charitable giving, home improvements, education, starting a business, or simply enjoying more of the life you worked so hard to build.

Why the Two-Part Strategy Can Work Emotionally

The power of the Confidence Foundation™ and Freedom Fund™ is not only financial. It’s emotional.

When the basics are protected, retirees may feel more comfortable leaving growth assets invested. They may be less likely to panic during market declines. They may also feel more confident spending on the things that bring joy and meaning to retirement.

This structure creates clarity. One part of the plan is designed for security. The other is designed for growth, flexibility, and possibility. This separation can reduce the feeling that every dollar must perform perfectly at all times.

Confidence Changes Behavior

When every dollar in your portfolio has to perform perfectly just to pay the electric bill, every market headline feels personal. But when your Confidence Foundation™ covers your essential lifestyle, something shifts. Fear begins to loosen its grip. You make calmer decisions. You stay invested more consistently. You become more comfortable spending. You stop treating every market decline as an emergency.

Most importantly, you may begin to experience retirement as a life to be lived rather than a financial problem to be managed. The goal is not simply to maximize returns. The goal is to maximize confidence.

At Her Retirement, we believe retirement planning is about far more than spreadsheets, rates of return, and investment performance.

We help women make informed financial decisions so they can retire with confidence and create a life of meaning. Because the best retirement plan is not necessarily the one with the highest projected return. It’s the one that helps you feel secure enough to live the life you planned for.

If you’d like some guidance on creating a life (and a retirement) with confidence and freedom, reach oout. We can help you Get Her Done.

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What Women Can Do About Rising Medicare Costs & a Small 2026 COLA

by BlogFinancial LiteracyHealth InsuranceIncome PlanningInsuranceMedicareRetirement EducationRetirement IncomeSocial SecurityTax PlanningWealth

If you’ve seen the newly released 2026 Medicare numbers, you might be feeling a little frustrated. Part B premiums are jumping. Part D is climbing. And Social Security’s cost-of-living adjustment (COLA) is only 2.8%.

Most people think they’re powerless when Medicare costs rise faster than their benefits. But here’s the truth:

You are not powerless.
In fact, there are very real financial levers women (and couples) can pull right now, before 2026 shows up on the doorstep.

Let’s break them down clearly, simply, and in plain English.

1️⃣ Manage Income—Not Just Expenses (IRMAA Planning)

IRMAA (Income-Related Monthly Adjustment Amount) is the extra surcharge high-income retirees pay on Medicare Parts B and D. It’s based on your MAGI from two years prior, which means:

Your 2024 income determines your 2026 IRMAA charges.

There is still time to influence this.

Ways to keep Medicare-related income lower:

  • Shift income into tax-free buckets (Roth conversions—but sized correctly)

  • Reduce capital gains during key years

  • Delay big IRA withdrawals

  • Be strategic with RMD timing once required

  • Use Qualified Charitable Distributions (QCDs) at 70½ for charitable giving

  • Avoid unplanned income spikes (like selling property without a strategy)

This one step alone can save hundreds to thousands of dollars per year.

2️⃣ Build a Buffer Into Your Retirement Budget

Most retirees underestimate how fast medical costs rise. If premiums keep climbing while COLA lags behind, your budget must reflect that.

Practical steps:

  • Add a medical inflation line item of 5–6% annually

  • Revisit your retirement spending plan every year

  • Treat healthcare as a core non-negotiable expense, not a variable one

A 2.8% COLA simply won’t cover the reality of 2026. Planning for the gap is essential.

3️⃣ Keep Taxable Income Smooth—Not Spiky

Medicare doesn’t care about your average income.
It penalizes sudden spikes.

Women can help themselves by:

  • Spreading out IRA withdrawals

  • Avoiding one-time bursts of income

  • Using multi-year Roth conversion ladders

  • Coordinating Social Security and pension timing

Smoother income = fewer IRMAA surcharges.

4️⃣ Get Smart With Part D (Most People Don’t)

Part D premiums and IRMAA are both rising, but the good news is:
Part D is one of the easiest places to save money.

Each year:

  • Re-shop your Part D plan

  • Use Medicare’s official plan finder tool

  • Choose a plan based on current medications—not the one you picked five years ago

  • Look into Extra Help if you qualify

  • Use preferred pharmacies or mail-order options

Many people save hundreds per year simply by reviewing their plan annually.

5️⃣ Do Tax Planning Before Retirement, Not After

One of the biggest Medicare cost drivers?
Large pre-tax retirement balances.

Here’s what proactive planning looks like:

  • Roth conversions in your 50s and early 60s

  • Maxing out HSAs (if eligible)

  • Building brokerage accounts for flexible withdrawals

  • Using Roth 401(k) options when it makes sense

You can pay a little tax now—or pay a lot more later through higher Medicare premiums.
Planning early gives you options.

6️⃣ Appeal IRMAA if You Qualify

Most retirees don’t know this:

IRMAA is not permanent.

You can appeal using Form SSA-44 if you’ve had a qualifying “life-changing event,” such as:

  • Retirement

  • Marriage or divorce

  • Loss of income

  • Loss of pension

  • Work reduction

If your income drops significantly, you may be able to reduce—or completely eliminate—your IRMAA for that year.

To learn more about IRMAA and get step-by-step IRMAA appeal directions, check out our IRMAA webinar at: www.IRMAAWebinar.com and our resources at: www.NoIRMAAforMe.com.

7️⃣ Work With Someone Who Understands Medicare + Taxes

This goes beyond investments. This is strategic retirement planning that mixes Medicare rules, tax timing, Social Security, and income management.

Most people save money simply by working with someone who knows how these pieces interact. This isn’t investment advice, it’s retirement math and smart tax planning.

If you’d like to connect with a Medicare, tax, IRMAA, or Social Security expert, email Lynn at: lynnt@herretirement.com. We have a great company that helps you chooose the BEST Medicare options for you.

Final Thought: You’re Not At the Mercy of Rising Costs

Every year, I see women feel blindsided by Medicare increases. But many women can prepare. Many can smooth out income. Many can avoid unnecessary surcharges.

The sooner you understand the levers you can pull, the more control you regain.

Your Medicare costs don’t have to control your retirement, you can control your strategy.

To learn more about Medicare, check out my Medicare e-classe and resources at: www.MedicareforHer.com

To learn more about Social Security, check out my Social Security e-classe and resources at: www.HerSocialSecurity.com

And, we highly encourage you to learn more about the More for Her Collective offered by Her Retirement at: Her Retirement Collective – Her Retirement

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Should You Take Social Security at 62 and Invest It, or Wait Until 70? (if you can)

by BlogIncome PlanningInvestment PortfolioRetirement IncomeRetirement Income PlanningSocial SecurityWealth

When it comes to Social Security, there’s no question that timing is one of the biggest financial decisions of your retirement. The difference between claiming early (at 62) versus waiting until 70 can add up to hundreds of thousands of dollars over your lifetime.

But what if you don’t need the money to live on, but just invest it? Could you take it anyway, invest it, and come out ahead (vs. waiting til 70 to claim and then start investing? Let’s explore both strategies. Let’s look at some lifetime portfolio values from you Social Security benefit.

The Break-Even Age

If you claim at 62, you start collecting smaller checks earlier. If you wait until 70, you collect bigger checks later.

  • The break-even point — where waiting finally catches up with claiming early — usually happens around age 80–82.

  • Live past that? Waiting typically wins.

  • Pass away sooner? Taking early often leaves you ahead.

The difference between claiming at 62 and waiting until 70 can indeed add up to hundreds of thousands of dollars — but it depends on the path you take.

If you claim early and spend it, you lock in smaller checks for life. Waiting until 70 gives you a much larger guaranteed monthly income stream (about 75–80% higher). In our example, that’s the difference between a $2,000/month benefit at 62 and about $3,500/month at 70 — roughly a 77% increase — plus COLA increases even while you’re waiting.

If you claim early and invest the checks, the story changes. By putting that income into the stock market, you’re betting on growth that could exceed Social Security’s built-in 8% yearly increase. If markets deliver, your invested balance could be far greater — but it’s not guaranteed. Investing in the market carries risk…sometimes lots of risk.

In essence, delaying Social Security is like buying a government-backed deferred annuity with inflation protection. Taking it early and investing trades that security for potential upside in a riskier portfolio.

This makes the contrast really clear: “guaranteed annuity-like income vs. risky but potentially higher-return investment.”

What if you claimed at 62 and invested the money, or waited until age 70 and then started investing?

Let’s assume:

  • Benefit at 62 = $2,000/month

  • Benefit at 70 = $3,500/month

  • Investment = 60/40 stock-bond portfolio earning 8% annually

  • Timeline = Age 62 to 95

  • Includes a 2.5% COLA (cost of living increase)

The Numbers at Key Ages

(Rounded estimates based on assumptions above)

At 8%, the 62+invest strategy leads until age ~94–95. At 6%, the 70 strategy catches up in your mid-80s. At 5%, waiting at 70 pulls ahead by ~85 and never looks back.

Claim at 62 & Invest

Longevity risk: if you live into your 90s, waiting until 70 produces more lifetime income unless your investments deliver consistently high returns.

Pros:

  • Immediate cash flow — assuming you don’t need it, you can put it to work right away (think time in the market).

  • Compounding advantage: those 8 extra years of contributions and growth give you a strong lead through your 70s and 80s.

  • Flexibility and control over how the money is invested or spent.

Cons:

  • Market risk: if long-term returns are closer to 5% than 8%, the “early & invest” edge disappears by your mid-80s.

  • Behavioral risk: discipline is required not to spend the money instead of investing.

  • Lower guaranteed base income — your check will always be smaller than if you had waited, which could hurt if you live into your 90s and markets underperform.

Claim at 70 & Invest

This is the risk-free path — Social Security’s ‘delayed retirement credits’ are guaranteed, while market returns are not.

Pros:

  • Significantly bigger monthly check for life (about 75% higher than at 62).

  • Guaranteed, inflation-adjusted income — protects you from longevity and inflation risk.

  • Survivor benefit for a spouse is higher, which matters for couples.

  • If invested, the larger checks grow meaningfully and can eventually catch up — by age 95 in the 8% return scenario, or as early as 85 in a 5% return world.

Cons:

  • You need to live long enough for the bigger checks to catch up.

  • You give up 8 years of potential compounding (the opportunity cost is clear in the charts).

  • Requires other reliable income or assets to bridge the gap until 70.

Framing:

    • At 62, you’re leveraging time in the market.

    • At 70, you’re leveraging guaranteed higher income for life.

    • Both can “work” — which is better depends on longevity, market performance, spending discipline, and spousal situation.

 

The below chart shows what happens if the returns are more like 5% on the age 62 benefit. Ate age 85, the 70 claiming age begins to look better financially.

 

The Bottom Line

  • If you’re confident in your health and expect to live well into your 90s, waiting until 70 gives you a much larger guaranteed monthly income stream (about 75–80% higher). In our example, that’s the difference between a $2,000/month benefit at 62 and about $3,500/month at 70 — roughly a 77% increase — plus COLA increases even while you’re waiting.

  • If you don’t need the income and have the discipline to invest it, claiming at 62 and investing can keep you ahead for decades — but the strategy depends heavily on market returns.

  • If you need the income right away, claiming at 62 is the practical choice, regardless of the math.

  • Ultimately, Social Security is personal. The “right” claiming age depends on your health, wealth, goals, risk tolerance, and whether you have a spouse depending on your benefit.

Want to see your break-even age — and whether claiming early or waiting makes sense for you? Inside the Her Retirement Collective, we’ll run your Social Security strategy side by side so you can make the best decision for your life. Reach out to us at: retire@herretirement.com and we can help you Know More, Have More & Live More.

 

ChatGPT Image Jul 13, 2025, 03_25_36 PM

The Big Beautiful Bill (2025): Unbiased Overview

by BlogFinancial LiteracyRetirement EducationRetirement IncomeSocial SecurityTax Planning

On July 4, 2025, former President Trump signed the One Big Beautiful Bill (OBBBA) into law—an 870+ page tax and spending package with major implications for American households, businesses, retirees, and investors.

This bill:

  • Extends and expands many of the 2017 tax cuts that were set to expire

  • Adds new tax breaks for seniors, families, and workers

  • Introduces new savings vehicles like Trump Accounts

  • Cuts funding for several social programs to offset cost

  • Adds $2.4–$3.4 trillion to the national debt over 10 years

If that sounds like a lot to digest—it is. But you don’t need to read all 900 pages. Here’s your plain-English breakdown of the key provisions, who benefits, what critics are saying, and when everything goes into effect.

1. Tax Cuts Extended & Expanded

  • Permanent Extension of 2017 TCJA
    Individual income tax rate reductions and the 20% deduction for pass-through businesses (Section 199A) are made permanent. 
    Sources: time.com, en.wikipedia.org, rsmus.com

  • Note: The original Trump-era tax cuts passed in 2017 were set to expire after 2025 for individuals and small businesses. Without congressional action, this would have likely resulted in significantly higher taxes for many households starting in 2026. The 2025 bill prevents that expiration and locks in those provisions going forward.

  • Child Tax Credit Increased
    Raised from $2,000 to $2,200 per child, with additional temporary enhancements for lower-income families phased in through 2028.
    Sources: apnews.com, sfchronicle.com, bipartisanpolicy.org

  • New Targeted Deductions Introduced

    • Tax-free status for overtime and tipped income, up to annual limits.

    • Full expensing of certain domestic business investments.
      Sources: time.com, en.wikipedia.org, apnews.com

  • Standard Deduction Adjustments

    • Additional $1,000 for individuals and $2,000 for married couples (2025–2028).

    • Ongoing inflation indexing made permanent.
      Sources: kiplinger.com, bipartisanpolicy.org

  • Senior-Specific Deductions

    •  Seniors aged 65+ now receive a dedicated $6,000 standard deduction increase
      (not $4,000 as some earlier proposals suggested).

      • This is in addition to the regular standard deduction for all taxpayers.

      • The $6,000 benefit:

        • Applies whether or not you’re collecting Social Security

        • Applies whether or not you itemize

      • It is designed to help fixed-income seniors keep more of their retirement income, Social Security, and savings.

    • Phases out above $75,000 in income for individuals and $150,000 for married couples filing jointly.
      Sources: bipartisanpolicy.org

2. Cuts to Health, Benefits & Safety Net Programs

To offset the tax cuts, the bill includes major reductions in federal spending:

  • Medicaid & SNAP Cuts

    • Slower growth caps on Medicaid.

    • Tighter eligibility and reduced SNAP (food stamps) allocations.
      Sources: theguardian.com, apnews.com, thetimes.co.uk

  • Work Requirements & Co-pays

    • Federal assistance programs like Medicaid and housing aid now include work or volunteer requirements (20 hours/week in many cases).

    • Some Medicaid recipients face new co-pays for services.
      Source: apnews.com

3. Border & Defense Funding Increases

  • Over $350 billion allocated to defense, border security, and immigration enforcement over 10 years.

  • Expands ICE funding and builds on existing infrastructure.
    Sources: reuters.com, vanityfair.com, apnews.com

4. Deficit & Debt Impact

  • The Congressional Budget Office (CBO) and independent analysts estimate the bill will add between $2.4 and $3.4 trillion to the national debt over 10 years.
    Sources: reuters.com, en.wikipedia.org

  • Supporters argue that the bill will boost GDP by ~1.1% over a decade, citing increased consumer spending and investment.
    Critics counter that long-term debt pressures could lead to higher interest rates or future spending cuts.

When the Provisions Begin

According to USA TODAY’s July 2025 breakdown, provisions phase in over several years:

ProvisionStartEnd
Tax-free overtime & tipsJan 1, 2025Dec 31, 2029
$6,000 Senior DeductionJan 1, 2025Permanent
Trump AccountsJan 1, 2026Dec 31, 2029
Auto Loan Interest DeductionJan 1, 2026Dec 31, 2029
Boosted Standard DeductionJan 1, 2025Dec 31, 2028
Expanded Child Tax CreditJan 1, 2025Dec 31, 2028
529 ExpansionJan 1, 2025No expiration
SALT Deduction Cap ($10,000)ImmediateStill in place

What This Means for Women & Retirees

If you’re:

  • Working hourly or part-time → You’ll pay no federal tax on tips or overtime.

  • A senior on a fixed income → You’ll benefit immediately from the new $6,000 deduction (if you meet the income requirements)

  • Caring for children or grandchildren → You get more back via the child tax credit and expanded 529 flexibility.

  • Saving for your future → Trump Accounts and deductible auto loan interest could give you new savings advantages—if you act in time.

Critics vs. Supporters

Supporters SayCritics Say
Increases take-home payFavors the wealthy
Rewards working AmericansCuts essential services
Makes tax cuts permanentExplodes the deficit
Simplifies savings & investingTemporary benefits for most households

Final Thoughts: What Should You Do?

Even if you’re not political, this bill affects your:

  • Taxes

  • Health coverage

  • Retirement planning

  • Day-to-day cash flow

Here’s what we recommend:
✅ Review your 2025 tax withholding
✅ Talk to a tax advisor about timing deductions
✅ Update your retirement strategy to factor in these changes
✅ Explore new savings vehicles like Trump Accounts and 529s
✅ Be aware of benefit eligibility changes if you or a family member relies on Medicaid or SNAP

If you’re feeling overwhelmed, you’re not alone. Her Retirement is here to help you navigate this new landscape—with smart strategies, planning tools, and a supportive community. Learn more inside the Her Retirement Collective.

Should you have any questions about how the bill impacts your money and your retirement, reach out to us and we’ll connect you with a vetted expert in our network: retire@herretirement.com

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The Myth of the “Magic Number” in Retirement Planning

by BlogRetirement IncomeRetirement Income PlanningWealth

For years, Americans have been told they need to save a “magic number” to enjoy a comfortable retirement. Recent surveys by firms like Northwestern Mutual and Charles Schwab have pegged this figure between $1.5 million and $1.8 million, but experts argue that such benchmarks are oversimplified and misleading.

Lynn Toomey, founder of Retirement Solved and Her Retirement, emphasizes the importance of personalizing retirement planning instead of chasing arbitrary figures. “Retirement isn’t one-size-fits-all. The number you need depends entirely on your unique lifestyle, goals, and income sources,” Toomey explains.

Survey Findings vs. Reality

A Northwestern Mutual survey earlier this year found that Americans believe they need $1.46 million for retirement, a 15% increase from 2023. Similarly, Schwab survey respondents cited $1.8 million as their target. While these numbers grab headlines, they fail to account for individual circumstances, and in fact can work against those struggling to catch up to these numbers.

A 2023 study by Transamerica Center for Retirement Studies adds further context to the discussion on retirement “magic numbers.” According to their findings, the median amount that U.S. workers believe they need to save for a comfortable retirement is $500,000. However, their actual median savings often fall far short, highlighting a gap between aspiration and reality.

This data underscores the disparity in savings goals and the challenges many face in reaching them. For example:

  • Workers in their 20s estimate they’ll need $250,000, while those in their 60s target $1 million or more.
  • 40% of respondents admitted they based their retirement goal on a “guess” rather than a calculated plan.

Real Life Numbers

A sampling of real-life examples highlights the wide range of what people believe their “magic number” for retirement is:

  • Sarah, a 60-year-old teacher, says, “I’ve always thought $1 million was the golden number. But with inflation, I’m worried that might not be enough.”
  • Mark, a 55-year-old engineer, believes, “With $2 million, I’ll feel secure enough to travel and maintain my current lifestyle.”
  • Lisa, a 62-year-old nurse, notes, “My goal is $750,000, combined with Social Security. I’ve paid off my mortgage, so my expenses are lower.”
  • Tom, a 65-year-old small business owner, says, “I’ve saved $500,000 and rely on my pension and Social Security. That’s enough for my modest lifestyle.”
  • Karen, a 58-year-old graphic designer, admits, “I don’t have a number in mind. I just save as much as I can and hope for the best.”

These examples illustrate that people’s perceptions of their “magic number” vary widely based on their financial literacy, lifestyle expectations, and planning. As Lynn Toomey points out, “A single number doesn’t work for everyone. In addition, most people don’t understand cash flow in retirement and have a really poor sense of how much income they’ll have access to and how much they can generate. And as far as expenses, many people have no idea how much their “real” expenses will be in retirement. Effective retirement planning means understanding your unique needs and crafting a strategy tailored to your goals and resources.”

It’s Not About the Number

David Blanchett, head of retirement research at PGIM, argues that the fixation on a magic number is more about generating buzz than providing actionable advice. “Retirement success depends on factors like age, lifestyle, and guaranteed income sources—not on hitting $1 million or $2 million,” he says.

Toomey concurs, adding, “For some, $500,000 may suffice when combined with Social Security or a pension, while others with $5 million may still struggle due to high spending habits. The key is understanding your personal needs.”

A Practical Approach

Experts stress that retirement planning should begin with assessing guaranteed income sources like Social Security and pensions. The next step is determining how much savings will be needed to supplement this income.

Toomey recommends working with retirement specialists: “Don’t settle for a generalist advisor. Seek out someone who focuses exclusively on retirement planning. They’ll help you create a strategy tailored to your needs, not based on arbitrary benchmarks. Note: I can hook you up with a retirement specialist.”

Flexibility Is Key

Ultimately, retirement isn’t about achieving a single savings goal but about creating a plan that aligns with your life. Toomey advises, “Think of retirement as a journey, not a destination. Whether you plan to live modestly or lavishly, start by understanding your life goals, your numbers and then making informed decisions. The ‘magic’ lies in preparation, awareness and adaptability, not in the number itself.”

By moving beyond the hype of the magic number, retirees can focus on what truly matters: financial security and a fulfilling lifestyle. Reach out when you’re ready to get clarity on your real cash flow needs in retirement.

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The Boston Celtics, A Super Fan Named Carol and Retirement: The Surprising Parallels

by BlogRetirement AdvisorRetirement EducationRetirement IncomeRetirement Income PlanningRetirement Savings

The Boston Celtics are the NBA Champions for the 18th time!!  WooHoo. A world record. Wowza.

As a life-long Celtics Fan-atic I’ve been dreaming about this day for a while. My late mom, Carol, dreamed about it too. I will never again be able to think about the Celtics without thinking about my mom. A basketball player herself back in the 50’s and a HUGE Celtics fan. Perhaps their number one fan. She referred to Jayson Tatum as “Her” Jayson.

Last season, the Celtics (and Dana Farber Cancer Institute in Boston), kept my mom cheering and going strong until she gave in to her battle with Ovarian cancer last April. During the 22/23 season, Jayson’s number one fan endured a blockage in her kidney, a blockage in her stomach, two surgeries and stays in four different medical facilities. Throughout all of this my hero mamma NEVER missed a game! The Celtics were her medicine. Her dream was to see them win the championship last year. Neither the Celtics nor my mom, however, could pull it off.

But alas, the Celtics came back with vengeance for the 23/24 season and are now the NBA champs (with a little help from an angel in heaven named Carol). I think she was on the rim at the Garden Monday night. I also think she’ll be watching from above as banner number 18 is raised to the rafters.

My mom was fortunate to have witnessed years of Celtics games and championships. She was also fortunate and grateful to have had a long happy and mostly healthy life. She retired early at 58 and enjoyed a 30-year retirement! A life and retirement like this doesn’t just happen. Just like an NBA championship doesn’t just happen. It’s all a battle from the start.

The battle requires strategy, perseverance, commitment, consistency and teamwork. A little luck from an angel helps too.

So, let me break it down and see what lessons we can learn from the Celtics’ championship (and my mom) that you can apply to your own life and retirement.

  1. A Strong Game Plan

Boston Celtics: The Celtics didn’t just stumble onto the court and hope for the best. They had a well-thought-out strategy, focusing on both offense and defense. Every play was designed to maximize their strengths and exploit their opponents’ weaknesses.

My Mom: Divorced at 38 with four kids, my mom figured out a new strategy for her life. She had good offense and a good defense. She was one tough lady.

Your Retirement: Similarly, your retirement plan should be strategic. According to the Employee Benefit Research Institute, only 48% of Americans have calculated how much money they need for retirement and the average retirement is over 20 years in duration. Creating a detailed financial plan, which includes budgeting, saving, and investing, is crucial. Just like the Celtics, you need a solid game plan to ensure you’re financially prepared for the long run.

  1. Consistent Training and Adaptation

Boston Celtics: The Celtics’ success didn’t happen overnight. It took years of training, adapting to new players, and learning from losses. They kept refining their skills and strategies to stay at the top of their game.

My Mom: Lucky for my siblings and I, my mom had a career as a school teacher, which meant a reliable income (albeit small for a family of 5) and a retirement pension. Leaving our family home with kids in tow, she was the queen of adaptability. She was both a dad and a mom for many years, honing her skills on the job. Her plan: to get through each day, one day at a time and focus on being a good mother.

Your Retirement: Retirement planning is a long-term commitment. Saving significantly for retirement takes consistency and starting as soon as possible. Learning about money, finances and retirement early on is critical. Regularly reviewing and adjusting your financial plan is essential. Keeping up with changes in the market, adjusting your investments, and ensuring you’re on track to meet your goals is essential.

  1. Teamwork Makes the Dream Work

Boston Celtics: Basketball is a team sport. The Celtics’ victory was a result of excellent teamwork. Each player knew their role and worked together seamlessly, from the starting five to their incredibly talented bench. The team is steeped in talent.

My Mom: She kept us all close and we learned what it meant to function as a family team. We all chipped in to make daily tasks easier, we appreciated what we had, and every day ended with love and a smile.

Your Retirement: Your retirement plan should also involve teamwork. Financial advisors, accountants, and even family members can play vital roles in your retirement planning. According to a study by Vanguard, working with a financial advisor can add up to 3% in net returns on your investments. Surround yourself with a supportive team to help guide you through complex decisions and keep you motivated.

  1. Staying Healthy and Prepared

Boston Celtics: Physical fitness and injury prevention are crucial for NBA players. The Celtics maintained peak physical condition to ensure they could perform at their best throughout the season and playoffs.

My Mom: Physical and mental health was a priority for my mom, throughout her life. While not an exercise fanatic, my mom always took good care of herself and her kids. She had a good balance and instilled an active lifestyle in all of us.

Your Retirement: Health is equally important in retirement as it is in all the years before retirement. Medical expenses are a significant concern as we age, with Fidelity estimating that a 65-year-old couple retiring in 2023 may need about $315,000 for out-of-pocket healthcare costs in retirement. Maintaining a healthy lifestyle now can reduce future medical expenses and improve your quality of life.

  1. Handling Pressure Like a Pro

Boston Celtics: Performing well in high-pressure moments defines championship teams. The Celtics excelled under pressure, making clutch plays and rising to the occasion when it mattered most.

My Mom: The term cool as a cucumber was coined in my mom’s honor. JK. Seriously, my mom faced some pretty high-pressure moments in her life, but she handled these moments mostly with calm, courage and practicality. She always told us, “Where there’s a will, there’s a way.”

Your Retirement: Retirement planning can be stressful, especially when facing financial uncertainties or unexpected expenses. However, staying calm and making informed decisions under pressure is key. Diversifying your investments, having an emergency fund, and planning for contingencies can help you handle financial and retirement pressures like a pro.

  1. Celebrating Wins Along the Way

Boston Celtics: Every win during the season was a cause for celebration and motivation to keep going. The Celtics didn’t wait until the championship to acknowledge their successes.

My Mom: Celebrations in our family were a regular occurrence. Birthday parties, Christmas, and even everyday life, my mom was celebrating life and being grateful. My mom celebrated and appreciated the smallest things in life. A sunset was one of her favorites.

Your Retirement: Celebrate your retirement planning milestones too! Whether it’s hitting a savings goal, paying off debt, opening a Health Savings Account or making a smart investment decision, recognizing your achievements can keep you motivated and on track.

Conclusion

Winning an NBA Championship, being a single mom, fighting cancer, or planning a successful retirement all require determination, strategic planning, courage, teamwork, and the ability to adapt and perform under pressure. By applying these lessons from the Boston Celtics’ championship run, and from my mom Carol, you can set yourself up for a victorious and enjoyable retirement. So, lace up those sneakers—and let’s get her done.

Remember, whether you’re aiming for a championship ring or a comfortable retirement, the journey is just as important as the destination. Here’s to enjoying every season of life. Happy planning!

If you’d like some help with your financial plan for retirement, reach out to us. We can hook you up with a team of experts: retire@herretirement.com.

 

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When it Comes to Having an Investment Advisor…is Nice, Enough?

by BlogRetirement AdvisorRetirement EducationRetirement IncomeRetirement Income PlanningRetirement Savings

Recently I had a Get Her Done Chat with a lovely lady named Susan who’s turning 60 soon. She’s starting to think seriously about retirement (because she’s been watching me and all my tips on YouTube and TikTok).

She has $500,000 managed by one of the big investment firms and she’s paying a 1.5% management fee. That’s $7,500 per annum or $625/month. Not an insignificant amount. However, fees are an issue in the absence of value.

I asked her what services the advisor is providing (i.e. value)? Other than meeting once a year to review her portfolio and making some adjustments, she really couldn’t come up with any other value.

She also admitted she doesn’t really understand what the firm/advisor is doing with her money, or why. She did say the advisor, who she’s had for several years, is likable and nice.

But….when it comes to your money and retirement, is nice enough?

We talked a bit more, and it became clear the nice advisor has never had the proper money and retirement conversation (nor provided any education). A conversation and education that my new friend Susan really needs (and deserves), by the way.

Me: “So has your advisor brought up (and educated you about)…

  • Retirement risks and how to mitigate them? Longevity, volatility, sequence of return, inflation, interest rates, etc.?
  • Optimized retirement portfolios?
  • Retirement income planning (generating protected income for life)?
  • Social Security timing & maximization?
  • Healthcare planning?
  • Long-term care planning?
  • Life insurance planning?
  • Tax planning for retirement?
  • Using home equity as an income buffer?
  • Estate planning?
  • Non-financial topics such as: lifestyle planning (where you’ll live, what you’ll do, purpose, mental and physical health, social connections, etc.)?

Susan: “Nope. Nada. Just my investments. I did ask him about Social Security and he said I can take it whenever I feel like it (me: ugh). I also asked him about annuities and he said, “Run. If anyone ever brings up annuities to you, run away from that advisor.”  (me: ugh again)

Before I could respond, Susan added, “I don’t even know when I can retire or how much money I can take from my 401k or when? Or if, god forbid, I run out of money and become a bag lady. I’m just feeling a little panicked and the thought of not having a regular paycheck from working is frightening.”

Wow…so much to unpack from her response. It was crystal clear that Susan’s nice advisor was clueless about retirement planning. As I explained to Susan, “There’s many, many investment-only advisors. This doesn’t make him bad at his job. I’m not here to judge that. It just makes him inappropriate for the “retirement planning” job you need done now. And, for an equal to or potentially lower fee than what you’re currently paying, you could be benefiting from FULL retirement planning vs. just investment advice.”

Susan decided to schedule another chat with me to dig into her details (yay). I encouraged her to take my free Her Retirement Masterclass and to check out a preview of my retirement readiness software platform before our next chat.

I explained that getting foundational retirement literacy is a key part of the Her Retirement process. This will allow her to have more informed conversations with retirement experts and make more informed decisions. She’ll also be taking a complete financial inventory within my software and will benefit from a personalized G.R.O.W. guide the software produces for her. The guide will identify her Gaps, Risks and Opportunities, which is a foundational element to her ultimate retirement plan.

I’m looking forward to being an active listener and collaborator with Susan on her journey to “more.”

Unfortunately, there’s many conversations going on across the country that are similar to Susan’s with her investment advisor. Approximately 5,200 women are turning 60 every day in the United States.  It scares me to think of the lost opportunity many women will have to improve their retirement outcome, simply because they aren’t getting the quality advice and education around retirement they deserve. Sometimes, it’s simply because they don’t know what they don’t know. They don’t know who to turn to and who to trust.

In addition, as the Great Wealth Transfer unfolds over the next decade, women will become increasingly vulnerable as they inherit significant wealth. This demographic shift, which will see trillions of dollars transferred from the older generation to their heirs, places women at a unique risk. Many women, especially those who may not have been the primary financial decision-makers in their households, could find themselves navigating unfamiliar financial terrain. This vulnerability is exacerbated by the potential influx of unscrupulous advisors looking to exploit their lack of financial literacy or experience. These predatory advisors may offer seemingly attractive financial products or services with hidden fees, poor returns, or outright fraud. It is crucial for women to seek out trustworthy, transparent, and knowledgeable financial/retirement advisors to safeguard their newfound wealth and ensure their financial security for the future.

My mission with Her Retirement is to encourage more women to become students and stewards of their life and retirement. With my “More for Her Movement,” I want all women to Know More. Have More & Live More (now and in retirement).

I also connect women with professionals who are nice AND knowledgeable about all this retirement planning stuff…while also providing A LOT more value than the average Joe investment advisor. If you’re a single or suddenly single professional woman who wants more, I can help you Get Her Done.  Reach out because no, nice is not enough.

 

 

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How Will Working Affect Social Security Benefits?

by BlogRetirement Income

In a recent survey, 70% of current workers stated they plan to work for pay after retiring.1

And that possibility raises an interesting question: how will working affect Social Security benefits?

The answer to that question requires an understanding of three key concepts: full retirement age, the earnings test, and taxable benefits.

Full Retirement Age

Most workers don’t face an “official” retirement date, according to the Social Security Administration. The Social Security program allows workers to start receiving benefits as soon as they reach age 62 – or to put off receiving benefits up until age 70.2

“Full retirement age” is the age at which individuals become eligible to receive 100% of their Social Security benefits. Individuals born in 1960 or later can receive 100% of their benefits at age 67.

Earnings Test

Starting Social Security benefits before reaching full retirement age brings into play the earnings test.

If a working individual starts receiving Social Security payments before full retirement age, the Social Security Administration will deduct $1 in benefits for each $2 that person earns above an annual limit. In 2022, the income limit is $19,560.2

During the year in which a worker reaches full retirement age, Social Security benefit reduction falls to $1 in benefits for every $3 in earnings. For 2022, the limit is $51,960 before the month the worker reaches full retirement age.2

For example, let’s assume a worker begins receiving Social Security benefits during the year he or she reaches full retirement age. In that year, before the month the worker reaches full retirement age, the worker earns $65,000. The Social Security benefit would be reduced as follows:

Earnings above annual limit                $65,000 – $51,960 = 13,040

One-third excess    $13,040 ÷ 3 = $4,347

In this case, the worker’s annual Social Security benefit would have been reduced by $4,347 because they are continuing to work.

Taxable Benefits

Once you reach full retirement age, Social Security benefits will not be reduced no matter how much you earn. However, Social Security benefits are taxable.

For example, say you file a joint return, and you and your spouse are past the full retirement age. In the joint return, you report a combined income of between $32,000 and $44,000. You may have to pay income tax on as much as 50% of your benefits. If your combined income is more than $44,000, as much as 85% of your benefits may be subject to income taxes.2

There are many factors to consider when evaluating Social Security benefits. Understanding how working may affect total benefits can help you put together a strategy that allows you to make the most of all your retirement income sources – including Social Security.

  1. EBRI.org, 2022
  2. SSA.gov, 2022

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright 2022 FMG Suite.

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Investment Basics

by BlogRetirement IncomeRetirement Income PlanningWealth

Why invest? 

To keep ahead of inflation. 

Inflation has reduced the purchasing power of your dollars over time. According to the U.S. Department of Labor, the average annual inflation rate since 1914 has been around 3%. If $100 is $100 today, it would cost $181 in 20 years. Inflation has skyrocketed, but most experts agree it will settle back down. Investing in stocks is your best hedge against inflation.

To take advantage of compound interest. 

Anyone with a savings account understands the basics of compounding: the funds in your savings account earn interest, and that interest is added to your account balance; the next time interest is calculated, it’s based on the increased value of your account. In effect, you earn interest on your interest. 

Many people, however, don’t fully appreciate the impact compounded earnings can have, especially over a long period. To benefit from the longest possible investment period, the sooner you start investing, the more time your investments have for potential growth. Waiting too long can make it very difficult to catch up. 

Consider the examples. Let’s say you invest $5,000 a year for 30 years. After 30 years, you will have invested a total of $150,000. Yet, assuming your funds grow at precisely 6% each year because of compounding, you will have over $395,000 after 30 years. This is a hypothetical example and is not intended to reflect the actual performance of any specific investment. Taxes and investment fees, and expenses are not reflected. If they were, the results would have been lower. 

Investing is Risky Business

Investing is different for every individual. The investment plan that’s right for you depends mainly on the level of comfort you have when it comes to risk. You can’t completely avoid risk when it comes to investing, but it’s possible for you to manage it. 

Investors are typically grouped into three categories for purposes of discussing risk tolerance: 

  • Aggressive: those who have a high degree of risk tolerance 
  • Moderate: those willing to accept a modest amount of risk 
  • Conservative: those who have low risk tolerance 

When it comes to investing, there’s a direct relationship between risk and potential return. This is true for investment portfolios as well as for individual investments. More risk means a greater potential return but also a greater chance of loss. Conversely, less risk means lower potential returns and less likelihood of loss. This is known as the risk/return tradeoff. You can’t have it all. There’s a relationship between growth, income, and the stability of our investments, and when we move closer to one, we generally move away from another. This is a dilemma all investors face. 

Managing Risk 

Only you can know your risk tolerance level when it comes to investing. Let’s now look at the types of investments and their level of risk and return.

Cash alternatives 

Cash alternatives are low-risk, short-term, and relatively liquid instruments that you may use. 

Advantages:

  • To provide you with relative stability 
  • To maintain a ready source of cash for emergencies or other purposes 
  • To serve as a temporary parking place for assets until you decide where to put your money longer term 

Examples of cash alternatives include: 

  • Certificates of deposit (CDs) 
  • Money market deposit accounts 
  • Money market mutual funds 
  • U.S. Treasury bills (T-bills) 

 

Now let’s talk about the next instrument: bonds. 

Bonds are essentially loans to a government or corporation, which is why they’re called “debt instruments.” Bonds are issued in denominations as low as $1,000. The interest rate (or coupon rate), which can be fixed or floating, is set in advance, and interest payments are generally paid semiannually. Bond maturity dates range from 1 to 30 years. However, bonds don’t need to be held until they mature. Once issued, they can be traded like any other type of security. Currently, bonds are at historic lows, so many experts are suggesting people replace the bonds in their portfolios with alternatives. You can listen to episode 56 of the Her Retirement Podcast, What’s Better Than Bonds, to further understand what’s happening with bonds and what are some alternatives.

Bonds include: 

  • U.S. government securities 
  • Agency bonds 
  • Municipal bonds 
  • Corporate bonds

Now I’m going to go over Stocks. 

When you buy company stock, you’re actually purchasing a share of ownership in that business. Investors who purchase stock are known as the company’s stockholders or shareholders. Your percentage of ownership in a company also represents your share of the risks taken and profits generated by the company. If the company does well, your share of the total earnings will be proportionate to how much of the company’s stock you own. 

The flip side, of course, is that your share of any loss will be similarly proportionate to your percentage of ownership. If you purchase stock, you can make money in two ways. First, corporate earnings may be distributed as dividends, usually paid quarterly. Second, you can sell your shares. If the value of the company’s stock has increased since you purchased it, you will make a profit. Of course, if the value of the stock has declined, you’ll lose money. 

Types of stock 

  • Stock is commonly categorized by the market value of the company that issues the stock. For example, large-cap stocks describe shares issued by the largest corporations. Other general categories include midcap, small-cap, and microcap. 
  • Growth stocks are usually characterized by corporate earnings that are increasing faster than their industry average or the overall market. 
  • Value stocks are typically characterized by selling at a low multiple of a company’s sales, earnings, or book value. 
  • Income stocks generally offer higher dividend yields than market averages and typically fall into the utility and financial sectors and other well-established industries. 

Common vs. preferred stock 

Common stockholders hold many rights, including the right to vote. However, common stockholders are last in line to claim the earnings and assets of the company. They receive dividends at the board of directors’ discretion and only after all other claims on profits have been satisfied. 

Preferred stockholders are given priority over holders of common stock when it comes to dividends and assets. Preferred stockholders do not receive all of the privileges of ownership given to common stockholders, including the right to vote. Preferred stockholders typically receive a fixed dividend payment, usually quarterly. For preferred stockholders, there is less return potential than for common stockholders; there is less risk. 

Let’s talk about Mutual Funds. 

The principle behind a mutual fund is quite simple. Your money is pooled, along with the money of other investors, into a fund, which then invests in certain securities according to a stated investment strategy. The fund is managed by a fund manager who reports to a board of directors. By investing in the fund, you own a piece of the total portfolio of its securities, which could be anywhere from a few dozen to hundreds of stocks. This provides you with both a convenient way to obtain professional money management and instant diversification that would be more difficult and expensive to achieve on your own. 

Another concept I want to explain is active vs. passive management 

An actively managed fund is one in which the fund manager uses their knowledge and research to actively buy and sell securities in an attempt to beat a benchmark. A passively managed account called an index fund typically buys and holds most or all securities represented in a specific index (for example, the S&P 500 index). 

The objective of an index fund is to try to obtain roughly the same rate of return as the index it mimics. Funds are commonly named and classified according to their investment style or objective: 

  • Money market mutual funds invest solely in cash or cash alternatives. 
  • Bond funds invest solely in bonds.
  • Stock funds invest exclusively in stocks. Stock mutual funds can also be classified based on the size of the companies in which the fund invests–for example, large-cap, mid-cap, and small-cap. 
  • Balanced funds invest in both bonds and stocks. 
  • International funds seek investment opportunities outside the U.S. Before investing in a mutual fund, carefully consider its investment objectives, risks, fees, and expenses, which can be found in the prospectus available from the fund. Get a copy and review it carefully before investing. 

Now let’s cover Dollar Cost Averaging. 

Many mutual fund investors use an investment strategy called dollar-cost averaging. With dollar-cost averaging, rather than investing a single lump sum, you invest small amounts of money at regular intervals, no matter how the market is performing. Your goal is to purchase more shares when the price is low and fewer shares when the price is high. Although dollar-cost averaging can’t guarantee you a profit or avoid a loss, a regular fixed dollar investment may result in a lower average cost per share than if you had bought a fixed number of shares each time, assuming you continue to invest through all types of markets. 

For example, let’s say you decide to invest $300 each month toward your child’s college education. Because you invest the same amount each month, you automatically buy more shares when prices are low and fewer shares when prices are high. You find that your average cost per share is less than the average market price per share over the time you invested. 

On to another concept called Asset Allocation.

It’s almost universally accepted that any portfolio should include a mix of investments. That is, a portfolio should contain investments with varying levels of risk to help minimize exposure. Asset allocation is one of the first steps in creating a diversified investment portfolio. 

Asset allocation is the concept of deciding how your investment dollars should be allocated among broad investment classes, such as stocks, bonds, and cash alternatives. The underlying principle is that different classes of investments have shown different rates of return and levels of price volatility over time. Also, since other asset classes often respond differently to the same news, your stocks may go down while your bonds go up, or vice versa. Diversifying your investments over non-correlated or low-correlated asset classes can help you lower the overall volatility of your portfolio. However, diversification does not ensure a profit or guarantee against the possibility of loss. 

How do you choose the mix that’s right for you? Many resources are available to assist in asset allocation, including interactive tools and sample allocation models. Most of these take into account several variables: 

  • Objective variables (e.g., your age, the financial resources available to you, your time frames, your need for liquidity) 
  • Subjective variables (e.g., your tolerance for risk, your outlook on the economy) 

Ultimately, though, you’ll want to choose a mix of investments that has the potential to provide the return you want at the level of risk you feel comfortable with. For that reason, it makes sense to work with a financial professional to gauge your risk tolerance, then tailor a portfolio to your risk profile and financial situation. 

Factors that should be considered: 

  • Diversification 
  • Risk tolerance 
  • Investment time frames 
  • Personal financial situation 
  • Liquidity needs

Asset Allocation–Sample Models 

Conservative 

Everyone’s situation is unique. Nevertheless, in general, conservative asset allocation models will invest heavily in bonds and cash alternatives, with the primary goal of preserving principal.

This asset allocation suggestion should be used as a guide only and is not intended as financial advice. It should not be relied upon. Past performance is not a guarantee of future results. 

Moderate 

In comparison, a moderate asset allocation model will attempt to balance income and growth by allocating significant investment dollars to both stocks and bonds. This asset allocation suggestion should be used as a guide only and is not intended as financial advice; it should not be relied upon. Past performance is not a guarantee of future results. 

Aggressive 

An aggressive asset allocation model will concentrate heavily on stocks and potential growth. This asset allocation suggestion should be used as a guide only and is not intended as financial advice. Past performance is not a guarantee of future results. 

How a Financial Professional Can Help 

As you’ve seen, there’s a lot to consider when investing. A financial professional or  retirement advisor can help you: 

  • Determine your investment goals, timelines, and risk tolerance 
  • Evaluate markets and investments 
  • Create an asset allocation model 
  • Select specific investments 
  • Manage and monitor your portfolio 
  • Modify your portfolio when necessary 

 

I hope you’ve found some value in this Investment Basics overview. There’s so much more to investing, but this will give you the basics you should know. I encourage you to listen to Episode 56: “What’s Better Than Bonds?” for an overview of the issue with bonds in a pre-retirees and retirees portfolio. Also, listen to Episode 10: “Retirement Portfolio Design for a Changing Economy.” While Her Retirement does not provide investment advice, we seek to help women understand investing topics so that more information conversation can happen and more informed decisions can be made. It’s all about knowing more and having more. Let’s Get Her Done. Thanks for listening.