Financial planning for retirement
Retirement always seems too far away until it isn’t. Retirement planning seems too scary, but here are 21 ways to make financial planning for retirement relevant, easier and fun-ner.
What you’ll find here:
- Have a fabulous retirement
- Create a long-term financial plan for retirement
- Create a short-term financial plan to support your financial plan for retirement
- Create a daily financial plan to support your financial plan for retirement
- What investments do financial plans for retirement include?
- What else does a financial plan for retirement include?
- Examples of financial plans for retirement
- Can I retire on $1,000,000?
- Can I retire at 60 with $500,000?
- How to retire earlier or richer or both
- Resources for financial plans for retirement
- Other retirement resources for LGBTQ people
- Why financial planning for retirement for LGBTQ folks is critical
Financial planning for retirement for LGBT retirees and our allies
According to a SAGE study, LGBTQ people are more likely to be single, live alone and not have children to support us in retirement. Likewise, healthcare costs are typically higher for LGBTQ people.
Don’t let that be you. Tackle each one of these steps until you’ve completed them all, then you’ll be on track for a retirement worth living.
Add ‘Have a fabulous retirement’ to your Hopes & Dreams
If you’ve followed us at all, used any of our tools or taken any of our money courses here, you’ll know that one of the first exercises we start nearly everyone with – because this is what we did and it slayed – is identify their biggest, truest, most fabulous hopes and dreams.
Too many of us are living for other people (whether we know it or not), thus the reason so many of us have too much debt and too little money. It takes a lot of self-reflection and personal introspection to learn what really matters to us as individuals, but it’s worth the effort. While everyone’s hopes and dreams are different, one that we all should include is “have a fabulous retirement.”
That’s because, to be real, unless we plan on dying early, we’re going to retire. So, retire fabulously.
But retirement is always so far away until it’s not.
Then, it’s all-hands-on-deck.
Here’s how to plan every day for something that seems soooooo far away.
3 retirement financial plans in 1
There are three different durations of financial plans, daily financial plans achieved day-to-day, short-term financial plans achieved within 3 – 5 years and long-term financial plans that takes 5+ years to reach.
The best plans all work together in tandem. The daily financial plan supports the short-term financial plan that supports the long-term financial plan.
An analogy is a bucket with rocks, pebbles and sand. If you fill your bucket with sand first, you won’t be able to easily add your pebbles or rocks. If you do the opposite and fill your bucket first with rocks, then pebbles and then sand, you’ll easily get all three in your bucket.
The rocks in this analogy represent your big or long-term financial goals – retirement. The pebbles represent smaller financial goals, like qualifying for 100% of your employer match. The sand represents the smallest, daily, goals like sticking with your grocery and dining out budget so you can invest in your employer-sponsored plan to get 100% of your employer match.
So . . . .
1. Create a long-term financial plan for retirement
This is how you plan for all big, bad hopes and dreams, by the way. For the sake of creating a financial plan for retirement, our big, bag goal is your fabulous retirement.
a. Calculate how much money you already have for retirement
The best first step for creating a financial plan for retirement is calculating how much money you already have saved and invested for retirement.
If you have $0 saved for retirement, skip to the next step. If you have any money saved for retirement, great!
Let’s figure out exactly how much money you have by downloading and filling out our Financial Snapshot here.
Once you’ve downloaded the Financial Snapshot, whether on paper or by clicking here for this great online tool, gather all of your statements for all your accounts . . . checking, savings, retirement, investments, credit cards, student and personal loans, etc.. . . E.V.E.R.Y.T.H.I.N.G.
Then, using the Financial Snapshot . . . .
• Calculate your true take-home pay
• Calculate your short- and long-term debts/liabilities
• Calculate all your assets, including your Health Savings Account (HSA) and Value of Retirement Investments
Once you total your net worth (total assets – total liabilities), including your HSA and Value of Retirement Investments, you’ll have your starting point for a fabulous retirement.
If all this math makes your head explode, the Financial Snapshot you can get by clicking this link makes this less painful by doing the math for you.
b. Estimate how much money you need to retire fabulously
Estimating how much money you’ll need to save to live comfortably, let alone fabulously, in retirement is one of the hardest steps with financial planning for retirement. There are many theories on the “right way” to calculate this number. Here are a few:
• Have enough money saved and invested to annually replace 70% to 85% of your pre-retirement income.
• You need $1.7 million to retire comfortably today. (As of 2020)
• Use the 4% Rule – divide your desired annual income in retirement by 4%. To earn $100,000 of income in retirement (assuming a 5% investment return), you’d need $100,000 divided by 4%, which equals $2,500,000.) Use the Magic Money Calculator here to calculate this.
• Use the 15/25/50 Rule – to reach your goal, save 15% of your income beginning at age 25 with 50% invested in stocks.
• Have enough money to equal your annual salary in accumulated savings by age 30, then 2 times your annual salary by age 40, 4 times your annual salary by age 50, 6 times your annual salary by age 60 and 8 times your annual salary by age 67.
Unfortunately, there’s no “right answer.” Choose whichever math makes sense for you. We like to keep things simple, though.
By the time you retire, some expenses, such as mortgage payments, childcare and work expenses (auto and gas, business clothes, etc.), will hopefully be eliminated or reduced. Healthcare, medicines and other expenses will increase. To keep this simple, let’s assume these expenses are a wash.
Then, take the total cost of your expenses from the Spending Analysis from our Budget Buster Bundle that you can get by clicking here and multiply it by 25. That total is your target for how much money you’ll need to save for retirement.
Then, in retirement, withdraw 4% annually to cover your annual living expenses.
If one of the previous formulas makes more sense for you, great. Use it. Or, use our formula focused on your spending as a start.
c. Open and fund all your retirement accounts
Specifically, for retirement goals, as we’re talking about retirement, open a company-sponsored retirement account such as a 401(k) or 403(b) and an Individual Retirement Account (IRA) or Roth IRA are ideal.
If you didn’t set up and start funding your 401(k), 403(b) or another company-sponsored retirement plan, when you started working for your current employer, talk with your Human Resource department or your manager to start now.
If you’re able to invest for your retirement beyond the minimum to qualify for your full employer match, you have two options. Your first option is to contribute up to the maximum into your company-sponsored plan. For 2020, you can contribute up to a maximum of $19,500 if you’re under the age of 50 and up to $25,500 if you’re 50-years-old or older.
But company-sponsored retirement plans are often expensive and limit your investment options. If investing correctly is something that makes your brain hurt, we love this cheap advisor you can access by clicking this link that does it all for you (more on Blooom below).
Your second option is to open a Traditional Individual Retirement Account (IRA) or a Roth IRA. There are several considerations when determining whether to open a Traditional or Roth IRA. We suggest using M1 Finance by clicking here (more on M1 Finance below, too) to do this.
Generally speaking, open a Traditional IRA if you expect to be in a lower tax bracket when you retire, because you earn a lot of money today, or open a Roth IRA if you expect to be in a higher tax bracket when you retire because you’ll have a lot of money to withdraw from your 401(k) and Uncle Sam will want his paycheck.
If you don’t have access to a company-sponsored retirement plan (because some employers don’t offer them), that’s another reason to consider opening a Traditional or Roth IRA through M1 Finance by clicking here.
Talk with an accountant to decide which retirement account is right for you. But note that you can have both and contribution into each as appropriate based on your income.
d. Love your loved-ones long time
Knock out all the important things at once. When you’re setting up these retirement accounts, assign a designated beneficiary to each account. The designated beneficiary can be the same on all accounts or different on each.
It’s important to note that wills don’t usurp designated beneficiaries. So, make your wishes ironclad and designate your partner, spouse – someone – as the beneficiary of these accounts, then confirm them annually and update them as necessary.
Don’t forget to buy life insurance. Life insurance can help your partner or spouse and children when you pass away. It can help you leave a legacy by leaving an inheritance to nieces, nephews, siblings or other loved-ones or donations to a non-profit or charity.
With a death accelerated benefit rider, you could borrow against your life insurance if you’re diagnosed with a terminal or life-threatening illness.
I have life insurance and this is the company I’ve signed up with and recommend.
Haven Life offers term life insurance through MassMutual, an occasional Queer Money® podcast sponsor.
Haven Life also allows you to fully apply online and find out immediately if you’re covered. So, you don’t have to wait for a physical. Although, a physical is required, but a technician can meet you at your home or place of employment.
And, their process is simple and fast.
Hear Mark Sayre, head of Risk Solutions, at Haven Life talk on this episode of Queer Money® about why he and all queer people need life insurance (even if we’re not partnered or with children):
2. Create a short-term financial plan to support your financial plan for retirement
The mistake too many of us make is thinking that retirement – even financial planning for retirement – is decades away. Successful retirement planning is a month-to-month, year-to-year responsibility.
Here’s how we break this big goal down into bite-size chunks.
a. Calculate your retirement balance targets in 5-year increments
In Step 1, you estimated approximately how much money you need to retire fabulously – current total expenses X 25. It probably seems like a far-fetched, lofty goal. It does for everyone.
The trick to achieving this far-fetched, lofty goal is to take one simple step toward it at a time.
Take your target retirement number (current total expenses X 25) and divide it into 5-year increments. So, if you want to retire in 20 years, you’ll calculate how much you need to reach in five years, 10 years, 15 years and 20 years.
If you want to retire in 30 years, you’ll have 6 numbers, five years, 10 years, 15 years, 20 years, 25 years and 30 years.
The best part of investing is that your earned interest compounds on itself, meaning that your rate of growth expedites the longer and more consistently you invest. Therefore, what’s challenging to reach in five years is easier to double in 10 and even easier to double again in 15 and 20 years.
To calculate this, use The Rule of 72. The Rule of 72 calculates how long an investment will take to double your investment at a fixed annual rate of return.
For example, for $5 to grow to $10 at a conservative 7% return, it would take 10.3 years (72/7 = 10.3).
Note that this is more of a guide than a rule despite its ruley name.
b. Calculate your retirement balance target for 1-year
Now that you know how much money you’ll need in five years to reach your long-term retirement goal; calculate how much money you’ll need in one year to reach your five-year goal.
Simply divide your 5-year target by 5 to calculate your one-year annual targets for the next five years. In this simple calculation, we don’t account for growth. To us in this short time frame, growth is the rainbow on top of your pot of gold.
c. Review and update your investments
At least annually and no more than bi-annually, review and update your investments. If you’re holding any investments that aren’t performing as expected, it’s time to sell them.
Some people review and update their portfolios annually when they file their taxes. Others do so twice a year when they check the batteries in their fire alarms (check the batteries in your fire alarms twice a year).
d. Get investment help with your retirement investing
What scares people off with investing for retirement is, well, investing. But it doesn’t have to be scary, especially today.
There are several tools that we love, use and have used to help our investing. They’ll help you, too.
Get investment help from Blooom. Your investment options in company-sponsored retirement plans are often limited but even then, it can be hard to pick and manage the investments that are right for you because there are so many things to consider.
Don’t worry about it! Let Blooom worry about it for you – you just supervise.
Let Blooom do a 401(k), 403(b) or other company-sponsored retirement plan analysis for you, then do the research and provide you truly unbiased advice to build a portfolio that best suits your short- and long-term retirement goals based on the investments that are available to you in your employer plan.
If you have a Traditional or Roth IRA at either Vanguard, Fidelity or Charles Schwab, it can help you manage those accounts, too.
If you’re concerned about the current market volatility and its effects on your 401(k), 403(b), Blooom as three special O’s to help you with your investing during these turbulent times that you can see here.
If you’re a go-it-alone, independent investor, open an account with M1 Finance – it’s free for retirement accounts with a minimum of $500 that you can access by clicking here.
M1 Finance is an incredibly flexible investing automation platform and great for individuals who are comfortable managing pre-built and customized Exchange Trade Funds (ETF)-based portfolios (click here for an explanation), though they can model pre-built portfolios by Wall Street experts and robo-advised models.
• Trading is free
• There are no asset under management (AUM) fees
• There are no account fees (for brokerage accounts with a minimum of $100 and retirement accounts with a minimum of $500)
M1 Finance also allows for socially responsible investing, which is huge for the queer community.
Think you’re too broke to invest for retirement? You’re not; there’s always a way, and that way is investing through Acorns here!
With its spare change savings tool and cash-back rewards, Acorns lets account owners invest in taxable and, for your purposes here, retirement accounts using spare or loose change. It’s a great way to get started with investing, especially when you think you have no money to invest.
3. Create a daily financial plan to support your financial plan for retirement
Ever hear the saying “beach bodies are made in the winter?” Well, a fabulous retirement is made every day for 50 years.
Now that we’ve looked one, five and 30 years out to plan for your retirement, let’s look day-to-day.
a. Set up recurring contributions to your retirement accounts to meet your 1-year and 5-year retirement balance targets
1. Company-sponsored retirement account
Once you complete the simple 401(k) or 403(b) paperwork and your account’s open, it’s time to start funding and investing in it – this is good stuff.
Your employer may offer to match a portion of your contributions up to a certain percentage or dollar amount. This is free money, so don’t turn it down. Contribute at least enough to your employer-sponsored retirement account to receive the full match.
Your employer can automatically deposit your contributions before the IRS touches them, so a qualified plan will also save you a bundle on taxes. Additionally, your investments in the account will grow tax-deferred; you can sell investments and collect dividends without incurring capital gains taxes or dividend taxes. In other words, no taxes for you to pay right away.
You’ll pay taxes on the money you withdraw from this account after you’ve retired, but if you’re in a lower income tax bracket when you retire you’ll come out ahead.
2. Traditional and/or Roth IRA
Once you open your Traditional and/or Roth IRA, set up automatic, recurring payments into these accounts for a specific dollar amount for a maximum contribution of $6,000 for 2020 if you’re under 50-years-old and $7,000 if you’re 50-years-old or older.
Set up these payments through direct deposit from your employer or recurring Electronic Funds Transfer (EFT) from your bank. By automating these contributions, you’ll reduce your day-to-day involvement and the risk of missing a contribution – consistency is key.
The more consistently and regularly you contribute to your retirement accounts throughout your working life, the better off you’ll be in retirement, plus, you might be able to retire sooner than you predict.
This is another reason we love Acorns and M1 Finance. Both companies let you set up recurring contributions just as we outlined.
Open an account with Acorns by clicking here.
Open an account with M1 Finance by clicking this link.
b. Make a budget aligned with your long- and short-term financial plan for retirement
Budget isn’t a 4-letter word and isn’t like a diet.
A budget is your roadmap to your long-term financial goal – retirement – and it tells you what you can do and when so that you always stay on track for your goal.
That means, less stress, better sleep, more happiness and more (better) sex!
Creating a budget, for many, is scary because it means numbers and formulas and spreadsheets.
Don’t worry! We’ve done the work for you.
This is the same exact budget we and our signature course members use.
c. Create and schedule your Milestone Rewards
Most of us need more frequent positive reinforcement than 20 and 30 years out – hell, more than one year out.
While having a goal of saving and investing $2,000,000 by retirement sounds exciting, it’s not enough encouragement in the day-to-day.
That’s why we have Milestone Rewards!
Milestone Rewards are affordable treats we give ourselves when we reach milestones in achieving financial goals. They also don’t wreck our financial goals because they’re too much of a reward.
An example might be, going out for a 2-for-1 ice cream cone with your hubby after you open all your retirement accounts and set up the automatic and recurring contributions.
Maybe it’s reserving $50 in cash to spend on a decent dinner when you’ve gone a full quarter or three months with making your recurring retirement contributions.
Or, setting $100 aside for a new piece of clothing if and when you achieve an annual goal earlier than forecasted.
The idea is to plan rewards that make sense for you and don’t thwart your real goal of saving and investing for retirement. This way, you’ll get motivation and positive reinforcement all year long.
What else does a financial plan for retirement include?
Family needs in retirement – retirement planning for families
Because of the increasing costs of college, housing and healthcare in the United States, family finances and retirement planning are more and more becoming “all for one and one for all” strategies. As we learned from a 2010 Met Life study, for example, LGBTQ children are more likely than their straight siblings to take care of mom and dad during their retirement.
How do we care for mom and dad during their retirement without sacrificing our financial security in retirement? Then, how do we cover our needs in retirement without being a burden on our children nieces and nephews?
These are the reasons why LGBT folks especially must save and invest for retirement as early and as eagerly as possible – but that’s easier said than done. So, to the extent possible, execute on our advice above now and eagerly.
If you’re starting your financial planning for retirement late, follow these three steps as shared by our friend and colleague Todd Tressider when he was a guest on Queer Money®.
1. Maximize stock investments
We discussed stock market investing above. Reread the above as necessary and implement as soon as possible.
Download the Super Simple Investing Guide here for more help.
2. Invest in real estate
There are many ways to invest in real estate, from holding real-estate investment trusts (REITs) in a taxable retirement account to being a landlord to flipping houses to being an Airbnb or Misterb&b host.
If you’re drawn to being a landlord or flipping houses, you want to listen to this Queer Money® episode with Chad Carson. Chad’s a super-successful landlord and house-flipper who works for the biggest real estate investing website in the world, Bigger Pockets.
Chad Carson on Queer Money®:
If you’re inclined to be an Airbnb or Misterb&b host, which isn’t too dissimilar to hotel and restaurant management, listen to this Queer Money® with Zeona McIntyre. Zeona successfully manages over 20 properties in multiple countries and teaches others how to do the same.
Zeona McIntyre on Queer Money®:
If the above all sounds too scary, then your best bet is to diversify your stock investments by incorporating real-estate investment trusts (REITs) with crowdfunded real estate investments into your retirement portfolio.
Fortunately, there are several companies built specifically to do that.
AcreTrader was created with a simple mission: provide investors direct access to the highly attractive asset class of farmland. This is a niche that many miss out on and that can help to diversify your portfolio.
M1 Finance REIT
Yes, the M1 Finance from above that we talked about. M1 Finance is another trading firm that lets you invest in real estate through it’s M1 Finance REIT. This may be another reason to go with M1 Finance by clicking this link.
3. Start a business
As with the other two recommendations above, this is easier said than done. What you have going in your favor today is that the barrier to entry to start a business has never been lower. That’s because you don’t have to rely on creating a brick and mortar store.
- Create a blog, like we did, for less than $4 a month. Sign up here for BlueHost to get our negotiated discount.
- Learn from the pro about Instagram marketing to either grow your blog or become an influencer. Sign up for The Mother of Marketing’s Instagram Masterclass by clicking this link.
- Sell affiliate products or your own products, like some of our Credit Card Pay Off Plan students do, on Amazon and Etsy.
- Become a Facebook Ads pro to teach others how to use FB Ads or to grow your own business (one of the ideas listed here maybe?). Learn all there is to know by signing up at this link here.
- You can learn to become a freelance writer from our mentor here and make $60,000 a year in less than 2 years, as we did. Sign up here.
- Make up to $22 an hour by clicking here teaching English to Chinese people.
- Finally write and publish the book that’s been wrestling inside you for years with Publish Your Purpose Press, a queer-owned and operated publisher created to help queer authors and readers live bigger. Start your authorship by clicking here.
- Become a virtual assistant, which is like being an executive assistant for anyone anywhere in the world, and earn $10,000 a month. Sign up for $10K VA by clicking this link.
- Becoming a published author with Make Money with eBooks. There’s a ton of money to be made in romance novels, especially dinosaur erotica and gay romance novels – believe it or not. Learn more by clicking here.
Do something – anything – that’ll help you make money on the side. Doing so often opens doors for other money-generating opportunities.
To learn more about creating primary hustles and side-hustle businesses, listen to this Queer Money® episode with the kind of side hustles, Nick Loper of Side Hustle Nation.
Nick Loper on Queer Money®:
To be fair, none of these is easy, but every single recommendation is doable, and they’re your best bet for success with late-stage retirement planning. If you’re only starting retirement planning in your 50s and 60s, you need a “can-do” attitude and to execute this three-steps strategy above ASAP.
Click here to listen to that Queer Money® episode with Todd to make sure you don’t miss a thing.
Todd Tressider on Queer Money®:
Caring for the family while planning your retirement
Do you have children, grandchildren or other family you are taking care of today or will need to in the future? Then there are ways to include them in your planning so that you can have a comfortable retirement without having to be worrying about their needs as well. Remember to put your retirement needs first though so they don’t end up having to support you in retirement.
Below are four ways to take care of them:
1. Open a specialized trust for family members – Include in your trust contingencies for the relatives (nieces, nephews, children, grandchildren) you decide to receive money from this trust, such as long-term unemployment or other financial emergencies.
2. Open a 529 Plan – 529 Plans are state-sponsored education savings plans with maximum annual contributions up to $310,000 in some states.
3. Open a UTMA/UGMA account – UTMA and UGMA accounts are savings plans for a child – the beneficiary – with an adult (possibly you) – the custodian. Once a child reaches the age of majority in their state, usually 18 years old, the money in these accounts become 100% theirs to do as they wish – yikes!
4. Open a gift account – This is simply a savings or investment account in which you store money you may want to give to family members. Remember to stay under annual gifting limits to avoid taxes.
Ultimately, what these plans let you do is plan for the inevitable if you’re the gay parent, child or guncle who’s likely to sacrifice for your family.
Medical tourism in retirement
Because healthcare costs in the U.S. are ridiculous and can quickly erode retirement savings, include medical travel – medical tourism – in your retirement planning.
Why would you do this?
Traveling outside the U.S. for minor and major medical care is becoming increasingly popular with the ever-increasing cost of U.S. healthcare.
Despite what the media and your family might say, international healthcare is often just as good or better without the constraints of the U.S. Food & Drug Administration and U.S. health insurance companies.
Best of all, the costs of medical procedures abroad are often cheaper in countries without the high number of attorneys frothing at the mouth to sue medical professionals and without overly bureaucratic and profit myopic insurance companies.
For example, the average cost for a hip replacement in the U.S. is about $32,000. A hip replacement in Belgium costs 9,496 euro or $10,473 U.S. dollars and roundtrip tickets less than $700 U.S. dollars. A patient could spend half as much on their hip replacement and have a vacation in beautiful Belgium.
As of November 2013, traveling abroad for surgery was a $40 billion industry expected to grow 15 to 20 percent annually. In a recent study, 29% of seniors and 51% of millennials said they would travel abroad for medical needs.
Do your own research and math because prices are always changing. Include other financial categories, such as travel, hotels and food.
The point is that factoring medical tourism into your retirement planning could save you money, but you want to plan for what it will cost you.
Gay retirement housing in retirement
We’d all love spend our last years living it up with our besties on our lanai, but life doesn’t always imitate art.
But where we spend our retirement and final years is an important consideration for many LGBTQ folks. According to SAGE, LGBTQ people are more likely to be single, not have children and live alone in retirement.
Finding the right place to call home could mean the difference between a Golden Girls’ versus a Grumpy Old Men’s retirement.
Because this is such an important topic, we dedicated a whole article here to the 22 gayest retirement villages and homes you can find through this link in the United States.
We, also, made this simple contact sheet with all 22 locations you can get by clicking here.
Assisted living facilities provide 24/7 concierge-level service and may use outside vendors to deliver medical care and other needs. Whereas nursing homes provide 24/7 medical care.
Assisted living facilities can cost upwards of $80,000 a year or $8,000 to $12,000 a month for institutional services and those that provide specialized care. Unfortunately, some of these facilities aren’t equipped to help LGBTQ people.
So, planning and buying long-term care insurance, as we discuss below, is crucial.
If you plan to stay in your existing home until they take you out in a body bag, include in your retirement plan the possibility of modifying your home if you become immobile.
With the increased number of seniors in the U.S., housing accommodations have become as unique and numerous as car features. Discussing long-term care and housing needs and incorporating them into your retirement plan also helps loved ones from having to make sensitive decisions on your behalf.
Speaking of long-term care . . . .
Long-term care insurance
Long-term care insurance or LTCI is insurance coverage that helps pay for varying levels of personal care, such as nursing home care, in-home care or personal care. This is the type of insurance you’ll most likely only need toward the end of your life, but you should plan for and purchase it much sooner.
According to AARP, the lifetime probability of becoming disabled and needing long-term care is 68% for people over the age of 65. That includes a lot of us. When you consider SAGE’s findings of our prospective solitude, there’s an even greater chance that LGBTQ people will need LTCI.
But when’s the right time to buy LTCI and how much do you need? Ryan Taylor of LGBTQ Financial shares his expertise on this episode of Queer Money®.
Examples of financial plans for retirement
We’re talking about financial planning for retirement, but what’s a retirement plan include? How do you know you have all the right parts in the right place? Let’s discuss this.
Financial plans for retirement typically include:
- a retirement strategy
- a risk management plan
- a long-term investment plan
- a tax reduction strategy
- an estate plan
A retirement strategy is the combination of your objectives and resources to retire comfortably, such as the daily-, short- and long-term financial plans we outlined above.
A risk management plan is your objective to protect your investments, such as cash and bonds, and yourself, such as with Long-term care insurance, health insurance, life insurance with the appropriate riders for end of life care and a medical tourism budget.
A long-term investment plan is a plan that looks five years or more into the future, pretty much the sole value of this article for most readers.
A tax reduction strategy includes your objectives to reduce your taxable consequences, such as using company-sponsored and individual retirement plans and investing in municipal and treasury bonds, and selling losing stocks in taxable accounts when necessary. They’re legal loopholes to reduce your tax burden.
An estate plan is your strategy to bequeath your assets and investments that remain after your death, such as with your will and life insurance policy.
These are a summary of the main tools you’ll use to create your retirement plan.
Can I retire early?
F.I.R.E. standing for Financial Independence/Retire Early. FIRE is a mission of many people to retire in their 30s, 40s or 50s and start living life on their terms.
The definition of “retire” is loosely defined, as many of those who’ve “achieved” FIRE still work. They just run their own business, usually, virtual businesses, rely on income from real estate properties they manage or own and dividend investments that pay out regular income.
In preparation for FIREing, people often strive to have their net worth be 25 times their annual expenses – we’ll discuss more of this below.
To reach this lofty goal, they hustle hard to pay off all debt, create multiple streams of income, and aggressively save and invest as much of their money as possible. Considering either side of their personal balance sheets, many assume a very minimalist lifestyle with some living in tiny houses or RVs.
As we’ve shared, it’s pretty common for FIRE advocates to claim the #1 step in choosing to FIRE is figuring WHY you want to fire – why this may be a hope and a dream.
Why do you want to retire early?
Do you want to travel the world? Want to give your boss the middle finger? Want to spend more time with your partner or children? Both? Want to start your own business? All of these? None of these – but something else?
What’s left after you decide on your why is simple math; increase your inflow of money and decrease your outflow of money.
Increase your influx of cash by:
- Getting a raise or a promotion with this money-making tip here
- Starting a full- or part-time business, also known as a side hustle, as we shared above
- Invest in low-cost, index Exchange Traded Funds (ETFs) and/or high-yielding dividend investments
- Generate recurring real estate income
Seeing a theme?
Decrease your outflow by:
• Cutting and reducing your housing costs (maybe moving one of these affordable gay cities)
• Cutting auto expenses
• Lowering insurance expenses
• Cutting non-essential spending, such as magazine subscriptions, app services and cable
• Paying off credit card and student loan debt fast
• Becoming meticulous about grocery expenses and reduce or eliminate dining out
If FIRE sounds right for you, listen to our interview with Gwen & J of the popular FIRE Drill podcast here on Queer Money®.
Can I retire on $1,000,000?
People like round numbers and for the longest time, $1,000,000 was the ultimate goal for retirement savings, but is $1,000,000 enough to retire?
That depends on a few variables. For instance, the average life expectancy in the US is 79 years. We should also consider your investment returns and inflation, which we’ll assume are 7% and 3% respectively (estimating moderately conservatively on both).
Throughout this discussion, it’s important to note that according to the Bureau of Labor Statistics that the average cost per year in retirement is $49,000 and that your healthcare expenses per couple who retires at 65 years old, per Fidelity Investments, is $285,000.
We’ll also assume that you won’t leave money to heirs or charities.
If you work until 66-years-old and enroll in Medicare, you could have a nice 13-year retirement living off of $1,000,000 even without a pension. Considering our assumptions above, you’d have $96,000 a year of your own money in today’s dollars to spend and about $48,600 of Social Security benefits to receive.
That’s a monthly $12,050 payout before taxes – with investment income yielding $96,000 a year, you’ll pay taxes on both your investment and Social Security income but no more than 85% of your Social Security income will be taxable.
However, if you double your years in retirement because you retire earlier than age 66 and/or live longer than 79 years, and you’d still have a decent retirement if you’re diligent about managing your expenses, which isn’t always easy.
That’s why we highly recommend the Budget Buster Bundle. It’ll give you the perfect tools to both monitor and manage your expenses by clicking here.
Can I retire at 60 with $500,000?
While $1,000,000 is a nice round and popular number to target for retirement, it’s also a hard number to reach for many. What’s easier – though not necessarily easy – is a $500,000 target for retirement.
Can you retire on $500,000 at 60? Based on the above information, you can probably answer this yourself – but the answer is “yes.”
Using the same conservative assumptions above – living in retirement for 19 years (dying at 79), an annual investment return of 7% and an inflation rate of 3% – you could withdrawal $36,284 each year from your individual and company-sponsored retirement accounts for 19 years.
As for supplementing retirement income with Social Security income, you can’t start receiving Social Security benefits until at least age 62 and, even then, you’ll only receive 70% of the monthly benefit because you’ll receive benefits for an additional 60 months.
Living off of $36,284 per year for two years would be tight but doable. Starting to receive Social Security benefits at 62, though, means you’re agreeing to smaller Social Security checks for the rest of your life.
This, again, is achievable if you’re diligent about managing your expenses. To repeat and add to what we said above, here’s how to manage your expenses.
1. Manage your day-to-day spending
Most of us only have two to four expenses that blow our budget. Reining in this spending has an exponential improvement on our budget without seriously ruining our quality of life. Simply keeping an eye on the rest of our expenses does the same.
The best way to do this is with a Spending Analysis. We and the students in both the Credit Card Pay Off Plan and Budget Buster Bundle use our Spending Analysis once or twice a year because our Spending Analysis is more granular for a clearer picture when you click this link.
Then, use a budgeting app to manage day-to-day expenses. Speaking of budgets . . . .
2. Create and use a budget
It’s simply impossible to manage your household finances without a budget, and you don’t have to fly blind with creating your own budget. We and the students in both the Credit Card Pay Off Plan and Budget Buster Bundle all use the Debt Free Guys Dynamic Budget on a month-to-month basis then use a budgeting app to manage day-to-day expenses.
Then, sign up for one of our favorite budgeting apps, Honeyfi when you click on this link.
Honeyfi will help you itemize your week-to-week and month-to-month expenses to make doing the Spending Analysis within the Budget Buster Bundle twice a year so much easier. Then, you’ll be crystal clear on where your money’s going, and you can adjust your spending to more easily align with your fabulous retirement and other goals.
3. Consider moving
For community and safety, LGBTQ people often gravitate to expensive cities to live, and that costs us. If you’re planning on living on less than $50,000 a year, trying to live in San Francisco, Chicago or New York City will erode your savings.
Therefore, consider moving. Consider moving to a cheaper house, a cheaper apartment and a cheaper city. Fortunately, we’ve created this list of affordable cities that are also gay-friendly (though smaller than the above cities).
4. Become debt free
Finally, pay off all your debt. The truth is that debt anchors your future earnings and income to your past.
Do you really want those fancy jeans from 15 years ago or that trip – as memorable as it is – from your 20s to ruin your chance to retire on your terms? No, you don’t, but most gay men say that their credit card debt is their biggest inhibitor to a successful retirement.
Don’t let that be you.
Until we start taking new memberships for the Credit Card Pay Off Plan, we’ve outlined the steps our exclusive Debt Lasso Method to help you pay off credit card debt faster than any other strategy – yes, faster than the Snowball or Avalanche methods.
Plus, it’ll help you save more money and improve your credit score more than any other plan you’ll find anywhere.
Get the Debt Lasso Method step-by-step by clicking this link here. For help following the Debt Lasso Method, paying off your credit card debt fast, saving money and improving your credit score, sign up for the Credit Card Pay Off Plan here today.
Resuming the Social Security benefits discussion, you’ll have to wait until age 66 or 67, depending on the year you retire, to receive 100% of your monthly Social Security benefits.
Each year you delay receiving Social Security benefits, your payout increases by 8% until age 70 when benefits max out at 132%. If you expect to not live long, take your Social Security benefits early. If you think you’ll live long, postpone applying for Social Security benefits at least until age 66 or 67.
This brings up a unique but important topic for same-sex couples – marriage. Surviving spouses could avail themselves of hundreds of thousands if not millions in Social Security Survivor and Spousal benefits, but there’s a caveat –
you must get married!
Fortunately, we interviewed for Queer Money® the pro on Social Security Benefits, David Freitag, of MassMutual. Get the 411 on all things Social Security and Spousal Benefits.
David Freitag on Queer Money®:
A caveat to the caveat occurs if either of you ever works for the government, including being a teacher in a public school. Some states do not pay into the system, so those employees are subject to Social Security Offsets. Learn all about Social Security Offsets, WEP and GPOs, which could wipe out your potential $1,000,000 windfall, on this interview with Freitag.
How to retire earlier or richer or both
Aside from the above four recommendations to manage every incoming and outgoing penny, how can you retire earlier and/or richer? For most of us, the answer is optimizing the return on our current investments.
Here are three ways to optimize your current investments
1. Open a high yield account with CIT
CIT Bank’s current base savings rate is 0.40%. You can earn more by participating in their Monthly Savers program. Essentially, if you make at least one $100 deposit a month into your CIT Bank Savings Account, you’ll earn a higher interest rate. Click this link for more details.
The best part of opening an online savings account with CIT Bank is that there are no opening, monthly servicing or online transfer fees.
2. Blooom to optimize your 401(k)
Get investment help from Blooom. As we shared, your investment options in company-sponsored retirement plans are often limited, and it can be hard to pick and manage the investments that are right for you because there’s so much to consider and you’re probably not an investing pro. Don’t fret, most of us aren’t.
Let Blooom do a 401(k), 403(b) or other company-sponsored retirement plan analysis for you, then do the research and provide you unbiased advice to build a portfolio that best suits your short- and long-term retirement goals. Blooom can also help manage your Traditional or Roth IRA through either Vanguard, Fidelity or Charles Schwab.
Again, if the current market volatility has you concerned, you don’t want to miss this special message from Blooom.
3. Get a retirement plan with a financial planner from GuideVine
Studies show that LGBTQ people don’t trust traditional financial services because we assume the person, usually, a straight, white man, sitting across the desk from us either doesn’t know how to work with queer people and our unique needs or doesn’t want to work with us.
What if those weren’t concerns?
John Hancock found that 70% of people, in general, who use a financial planner are on track or ahead for retirement, compared to just 33% of those who don’t use a financial planner.
Abating those two concerns will help you more easily join that 70% and be on track or ahead for retirement.
So, we worked with our friends at GuideVine to create a way to easily identify financial planners who are either members of the queer community or allies of the queer community.
GuideVine makes it easier than ever to get to know a financial planner before ever stepping foot in their office. You can learn all about their experience and specialties, and even “virtually meet” them on video to make sure you’ll jive with your financial guy or gal.
Meet our friend and financial planner, Cathy Pareto. A queer trailblazer in her own right, Cathy shares how and why she works with GuideVine.
Resources for financial plans for retirement
LGBTQ people have more considerations for retirement than our straight peers. For example, our healthcare costs are often higher, and we have fewer resources. Below we address getting life insurance if you have HIV+ and all the ins and outs of obtaining health insurance when you’re LGBTQ.
Learn how to get life insurance when you’re HIV+:
Learn more about LGBTQ healthcare:
Other retirement resources for LGBTQ people
National support groups
- Lambda Legal “is a national organization committed to achieving full recognition of the civil rights of lesbians, gay men, bisexuals, transgender people and everyone living with HIV through impact litigation, education and public policy work.”
- GLBTQ Legal Advocates & Defenders or GLAD leverages “strategic litigation, public policy advocacy, and education, GLBTQ Legal Advocates & Defenders works nationally to create a just society free of discrimination based on gender identity and expression, HIV status, and sexual orientation.”
- Services and Advocacy for GLBT Elders or SAGE is another advocacy group for the LGBTQ community, however, SAGE focuses its efforts on the elderly, as elderly LGBTQ people often don’t have a voice.
- SAGE helps older LGBTQ people with other needs, such as finding a community or a person with whom to talk. Both resources help older LGBTQ people feel less isolated and keep their physical and mental health sharper.
- The National LGBTQ Task Force fights to advance full freedom, justice and equality for LGBTQ people.
- The National Center for Lesbian Rights fights to “achieve LGBTQ equality through litigation, legislation, policy and public education.”
- Most financial advisors are familiar with the American Association (AARP), but most don’t know that AARP has an LGBTQ vertical, AARP LGBTQ Pride. AARP LGBTQ Pride offers information from a planning guide for LGBTQ caregivers to LGBTQ estate planning to marital status and Medicare eligibility guide.
Local support groups
Many cities and towns across the country have local LGBTQ-friendly support groups, community centers and advocacy organizations. From Destination Tomorrow in the Bronx to One-Colorado to the Center for Sexuality & Gender Diversity in Bakersfield, such organizations are great resources when planning for and when in retirement.
Why financial planning for retirement for LGBTQ folks is critical
In its 2012 LGBT Financial Experience Study, Prudential reported that LGBTQ respondents said their most pressing financial concern was retirement. Respondents to its 2016-2017 said they were less likely to have started saving or investing for retirement than in 2012.
That’s not good.
The percentage of LGBTQ people raising children is estimated to be between 17% and 20% and expected to rise. While having children doesn’t guarantee familial support later in life, it increases the chance. Eighty percent of the LGBTQ community must plan on having little to no familial support in retirement.
That’s why financial planning for retirement is so important.
And, news to no one who’s read this far, LGBTQ people can be denied assisted living and nursing home care in most states. Even when LGBTQ have legal protections, there’s evidence of abuse or inappropriate care triggered because of people’s LGBTQ status.
For this reason, it’s common for LGBTQ people to go back into the closet when they’re older. Don’t let that be you.
The best way to overcome these concerns is with a solid retirement plan, as we’ve outlined above.