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Pay Yourself First Because No One Else Will

 
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Orlando, FL -- (SBWIRE) -- 12/20/2013 -- The Richest Man in Babylon by George S. Clason published in 1926 remains a classic slice of literature and read by millions. His message may be interpreted differently by readers, but the theme of his writing sends a powerful message of self perseverance. Clason illustrated the value of saving and money management using characters set in ancient Babylon whereby financial and life’s lessons were learned.

When a professional first begins practice, the primary goal is to meet expenses. After which the goals are to continually improve the practice by serving patients well and increase profitability by keeping a positive cash flow and growing net income. The importance of retirement planning should not be underestimated.

The Need to Start Saving Towards Retirement

Financial experts and related articles continually urge the beginning of any retirement plan be done sooner vs. later, as time is not forgiving for those who often wait. The earlier you start saving the likelihood is you will have the opportunity to build a portfolio of growing assets and peace of mind.1 Action steps require some level of planning by obtaining information on how the process of implementation is best used to attain desired goals, i.e., retirement funding, purchase home or car, education for children, travel, etc.

For those who think Social Security will be sufficient to meet required retirement expenses, think again. In reality, 48% of U.S. households do not save and more glaring is the fact that over 65% of American adults do not have any emergency funds (3-6 months cash on hand to cover monthly expenses) set aside.2 To compound these findings, the retirement age for receiving full Social Security (FRA) benefits is creeping up and life expectancies are increasing. In other words, you will likely wait longer to receive your full retirement benefit and will statistically live longer. These factors alone should motivate everyone to the importance of not waiting to start a savings program and begin the process of building an asset base. As you will need them most during your retirement years! “According to a recent EBRI survey3, nearly one in three workers--an all-time high in the survey’s history--are not confident they’ll have enough money to retire comfortably… While previous generations relied on traditional pensions, social security benefits, or even inheritances, these sources of income are considered supplemental by today’s retirees.”

Retirement Plan Savings and Choices

The options available for retirement savings and investing are innumerable. However, the requirements and availability of options are often times limited due to a whole host of equally daunting factors. The intent of funding a plan is only a small part in the retirement funding puzzle. Many questions pose themselves and only individuals well versed in the constantly changing maze are equipped to help guide you to realizing your goals. For example, are you a solo practitioner or practice in a group? Do you plan on including your staff in a plan? Can staff be excluded legally and if so how? What are the advantages to an owner by having staff participate? Do you want a qualified or non qualified plan and do you know the difference? What are the tax benefits and potential pitfalls of participating in a plan? Once a plan is selected and funded, are you required to maintain annual contributions? May you increase or decrease the amount contributed? What are the vesting requirements for ownership of plan assets? Does the plan require annual actuarial review or not? There are additional questions to be answered before selecting a plan. Selecting a plan which adequately and appropriately suits the owner and employees must be fully vetted to ensure appropriate participation.

The process and implementation may be simple to complex depending on the determined needs and requirements of the owner and staff; in essence all the probable participants.

Once questions are answered and decisions made the following plans5 may adequately suit the needs of the owner and participants: defined contribution or benefit, profit sharing, SIMPLE, SEP, Keogh, 401k, money purchase, age weighted, target benefit, cash balance, safe harbor plans and more. The contribution to an IRA or Roth IRA may be done individually and unrelated to an employer’s plan. However, in certain circumstances this option may be curtailed or eliminated. It is best to speak with your tax professional prior to making any contribution.

Choose Wisely

It becomes abundantly clear the choices for retirement planning and subsequent investing may become overwhelming if not cumbersome. Retirement planning is not the end all but a part, albeit large portion, of asset accumulation. The need for assets is continual as you go through life and its challenges. The goal is to meet each need and have the fortitude to stay the course to reach your ultimate goal. It is never too late to begin your financial journey, although earlier is better vs. later. The importance of selecting a professional with knowledge and experience to assist you with your journey towards your goals is similar to a patient selecting you for their health care needs. Patients entrust their needs and goals in you and your expertise. Your choice in selecting a Certified Financial Planner™ (CFP®) is akin to a patient selecting a doctor; ensure you select a fiduciary having the same professionalism, expertise and knowledge you would expect to offer a patient. One more thing, do not forget to pay yourself first!?

References:

1Top 10 Ways to Prepare for Retirement. US Department of Labor:
http://www.dol.gov/ebsa/publications/10_ways_to_prepare.html

2U.S. Federal Reserve Board, Survey of Consumer Finances, 2010.
3EBRI’s 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many. http://www.ebri.org/pdf/surveys/rcs/2013/PR1013.19Mar13.RCS.pdf

4Gibbons, Vera. How Much Do You Need for Retirement?
http://finance.yahoo.com/blogs/cost-of-living/much-retirement-140830786.html>

5Types of Retirement Plans
http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Types-of-Retirement-Plans-1>

About the Author
H. William Wolfson, DC, FICC, MS, is Director of Professional Services at American Financial Advisors (AFA), Inc., based in Orlando, Florida with offices in Orlando and New York. Dr. Wolfson is a registered representative with Foothill Securities, Inc., member FINRA/SIPC and a registered investment advisor representative (IAR) with AFA. Foothill Securities, Inc. and American Financial Advisors, Inc. are not affiliated companies. Dr. Wolfson obtained his Masters of Science (MS) Personal Financial Planning from the College of Financial Planning and is a candidate for CFP® certification. Dr. Wolfson remains active and engaged in chiropractic by volunteering his time as NY Alternate Delegate to the American Chiropractic Association and serving on assorted committees. He is also a board member of the New York State Chiropractic Association. Dr. Wolfson retired after twenty seven years of active practice and may be reached at Hwwolfson@AFAdvisors.com.