Summer is a time for American workers to relax and take vacations, but for a select population, a permanent vacation may be on the horizon! Specifically, a massive wave of Baby Boomers, those who grew up between 1946 and 1964, will be retiring. In fact, according to the U.S. Census Bureau, by 2030, all Baby Boomers will be 65 or older. Chartered Financial Analyst Tim Baker, Founder and CEO of Metric Financial is helping Baby Boomers and the next generations of investors.
“Many people do not understand all of the investments available in their plans-and also sadly, don’t get enough guidance from a professional- and so they just let their contributions default to a target date fund,” said Tim Baker, CFA, Founder & CEO of Metric Financial. “When it comes to 403(b) plans, many default to an annuity or a guaranteed account. In the case of these and target date funds, investors may be leaving a lot of money on the table unnecessarily.”
Employees also find it confusing to decide between a Roth and a traditional retirement plan – assuming that their employer offers both. Baker notes that the siren song of tax-free withdrawals from a Roth 401(k) or Roth 403(b) can be alluring, but there are many other factors to consider. This is a situation where consulting with a financial advisor can be very helpful.
One of the great debates, particularly for Baby Boomers, is whether to roll one’s retirement plan over to an IRA when the person leaves a company. There is a lot at play here. The Department of Labor has put tighter restrictions on advisors when it comes to rollovers in terms of disclosures. When considering a rollover, it’s important to consider fees, investment options, and who is acting as a fiduciary for you, among other things.
“We get asked all the time if clients should only put in as much as their company matches,” adds Baker. “While everyone’s situation is different, our general answer is it’s still a tax-deductible contribution, whether your employer matches or not. The more important consideration is what is comfortable to take out of your paycheck to put into funds that will be inaccessible until age 59 ½ while leaving yourself a comfortable emergency fund in the bank.”
Finally, a person’s retirement plan should be part of a broader financial plan, which should be a one-stop place where the investor can see everything in their financial life. A good plan will spell out the liquidity picture, total investment portfolio, income versus expenses and therefore annual free cash flow, optimal social security strategy, regardless of age, chances of success in reaching financial goals like retirement and education spending, and much more.
“Start early and finish late,” concludes Baker. “You’re never too young to have a plan and you’re never too old to keep revisiting it.”
Baker conducts frequent one-on-one and educational sessions with investors who are just entering the workforce and those approaching retirement. For more information, visit www.metricfin.com.
ABOUT METRIC FINANCIAL
Founded in 2018, Metric Financial, LLC is registered as an Investment Adviser with the State of Connecticut. Led by Chartered Financial Analyst Timothy Baker, the firm provides investment management services, comprehensive financial planning, debt management, estate planning, retirement planning, risk management and tax planning, among others. Baker conducts frequent educational sessions and public seminars on a variety of financial topics of interest to schools, business groups, and associations. For more information, please visit www.metricfin.com or call 860.256.5895.
