Staying connected while retirement to the cpa community

CPAs: Want to Stay Connected to the Profession in Retirement?

There’s a fork in the road when it comes to retirement. You leave behind your career to begin a new fulfilling chapter in life, but how do you fill your time? Some travel, others spend those years making hobbies a lifestyle or help raise their grandchildren. However, what if you aren’t quite ready to step away from the financial field but want the flexibility retirement offers?

You could consider remote work or meeting new people and learning new things! Or maybe the goal is just to supplement your retirement income streams. Now, consider when you are working in retirement there may be additional tax or Social Security risks involved.

The following are great ways to stay connected to the CPA community:

Consulting

Nearing retirement means that you are typically looking for a part-time gig with likely not as much demand as a full-time job. Fortunately, a lot of businesses, even CPA firms, are always looking for financial professionals with experience. Having the skills from your working years means that you are fit for the job. Plus, consulting gigs are not demanding, offer great flexibility, and create a stable stream of income.

Contract jobs

Want something like a consulting gig, but only seasonally? Contract assignments are an option! These could include only working during the tax season or doing seasonal bookkeeping. Contract jobs are much more common for experienced workers than entry-level positions.

Teaching

If you wish to do something related to the field, but not quite the same, consider teaching. Many four-year universities and community colleges are looking to hire professors. You may even be able to offer training services through businesses. Another great teaching opportunity is tutoring, and this can be done at a college or even high school level. Luckily, moreover, this can be done in-person or even online. Some virtual services offer great passive income opportunities!

Research

Since you spent most of your life practicing patience and have a sharp eye for detail, those skills would make you a great researcher. Be it with finance or another field, gathering and organizing data is something you could still do, even part-time. Research into your local universities, get in contact with your network, and see if anyone is looking for research help. You might like it!

Grant writing and administration

Putting together grant applications utilizes the skills you have mastered as a CPA. You help write the grant and then if the money is funded you can help manage and track the funds or project. Stepping into grant writing and administrative work uses your knowledge of bookkeeping, tax legislation, and project management. You easily become and asset to their team (and sometimes these are offered as contract gigs)!

Your retirement years do not have to be spent completely giving up what you love, what you have done for so long. There are new ways to keep yourself in the field especially as the digital and virtual world expands! You may even find a new passion.

READ MORE

Past, Present, & Future of Market Volatility

Every up has a down, every down has an up. Lulls and downturns in trade are cyclic norms—something our stock market is no stranger to. Historically speaking, the global market sees a downturn approximately every 10 years. Since retirement has been left to individuals to figure out, a lot of options to build a retirement savings are invested.

How can you protect your retirement assets from a market crash? The best way to begin doing so is understanding major market corrections within the last century.

Market Crash of 1929

As a catalyst to the Great Depression, this crash ending the market up known as the Roaring Twenties. The market was booming in the 1920s. Over almost a 2-month period, the market slowly descended into a 13% decline on Black Monday and followed on Black Tuesday with a 12% decline.

The bear market immerged by mid-November with the Dow having lost more than 20% of its pre-crash value. Losing value until it bottomed in the summer of 1932, the Dow took until 1954 to reach the 1929 pre-crash value.

The cause? Investors and investment trusts bulk-purchased stocks on margin—paying a tenth of a stock’s value under a loan. At this time, too, consumers began to acquire credit, purchasing items left and right. The debt bubble burst causing the catalyst of the Great Depression.

Crash of 1987

The Black Monday of 1987, this crash began when the Dow dropped over 20% in a single day. That November is when all the market indexes had lost 20% of their value. The rebound took almost two years, much faster compared to the Black Monday and Black Tuesday set off in 1929. By September of 1989 the market indexes reflected a complete bounce back of the 1987 losses.

The cause? A series of events: a growing U.S. trade deficit and worldly tensions, especially those in the Middle East, contributed to the market. The biggest factor was the computerized trading programs that had been launched. Computers would automate large buys when prices raised and sell orders when prices tumbled. When the trading-verse was floored by these automation, other investors would panic-sell and panic-buy.

1999-2000 Dot-Com Bubble Crash

In the late 1990s, internet-based stocks drastically skyrocketed. Resulting in the tech-dominated Nasdaq index to surge. The surge met its maker with a 77% drop over 2000-2001, reaching its lowest point in October 2002. Nasdaq did not see a pre-crash value for almost 15 years.

The cause? The Dot-Com Crash is a serial offender. The foremost cause was overvalued internet stock. Investors predicted that online companies would become profitable, so they poured their money into the ‘dot com’ sector. Secondly, the Federal Reserve restricted their monetary policy, straining capital flow.

Crisis of 2008

About ten years prior, the Federal National Mortgage Association made home loans more accessible to higher-risk individuals—those with less money for down payments and low credit scores. Payments for these people came with the reflection of their high-risk profiles: above average interest rates and variable, pricy payment schedules.

With mortgage debt availability increased, investors and previously ineligible borrowers ate up the opportunity. However, consumers during this were racking up additional debt. Companies saw an increase in debt, too, because they wanted to take advantage of the economic boom.

The collapse happened by September that year. Stock indexes had lost over 20% of their value because investing banks could not cover their loss from taking on the high-risk mortgages. It took four years for the market to reach its pre-crash value.

The cause? The American economy was debt-fueled. Banks and real estate were drowning.

Coronavirus Induced Crash

As the most recent, this crash occurred worldwide. During the last week of February several of the market indexes dropped 11.5%, marking the biggest loss since the crisis of 2008. The Dow set a record on March 12 when it fell by 10%. Sadly, four days later, it dropped another 13%. These were the largest day-drops the Dow saw since Black Monday of 1987.

This crash bounced back by May because of stimulus money, the Federal Reserve cut interest rates and pumped trillions into markets. Congress passed a massive aid package to stimulate the economy, too.

The cause? Covid-19 infections shutting down economies worldwide that domino-effected supply chains and workflow.

How can I use this information to help my retirement?

It shows that market crashes and corrections can happen whenever. The best course of action now is to lower retirement risk and diversify your retirement assets, so you are protected when a market crash does happen.

Retirement planning is the most important step in reducing the market volatility risk.  Have six months of living expenses saved in a rainy-day fund. This way you are prepared if your retirement assets take a hit. Consider long-term: a life insurance policy or an annuity that can protect against market loss, offer that lifetime income needed, and overall decrease your retirement risk.

For more information on the market and how to think long-term to reduce your risk of market volatility, please listen to episode 5 of The Retirement Risk Show, “In This Current Market Flux, Think Long-Term” at https://www.buzzsprout.com/1844811/9998926.

READ MORE

How to Face Your Retirement Risks: Think in Buckets

Since the old paradigm of retirement will do more harm than good in this current world, tackling the Top Ten Risks can be tricky.

Why won’t the old paradigm work? The first reason is folks nowadays live into their 80s when decades back that was not as common. Because retirement age back in the late 20th century was 55, many retirees waited until years past their retirement age to fully leave the workforce. Another major contributor to retirement plans back then were pensions. Social Security (SS) was on the table then, too. Folks could easily retire and enjoy their golden years off their employment pension and SS. Now, a lot of retirement is unfortunately up to the employees.

Beyond understanding SS and Medicare, balancing your assets over taxable, tax-deferred, and tax-free accounts is key to the success of your risk-free retirement. This is known as the Three Bucket System.

First and foremost, the taxable bucket is designed for emergency funds. Having 6 months of your living expenses in this bucket permits less risk. You are protected in case of emergency, and you are not exposing your savings to extra taxation.

The second bucket is tax-deferred and is a bucket folks overfill. While this bucket varies individually, there are some ‘rules’ to be mindful of. Your required minimum distributions (RMDs) should be low enough to not create provisional income (too much would cause your SS to be taxed). Secondly, you do not want them to exceed your standard deduction.

Filling the other two buckets means you can successfully begin filling the third bucket up: tax-free. The sooner you do this, the better off your risk-free retirement will do. Things that can be done for this bucket are Roth conversions or buying a life insurance retirement plan.

**We strongly encourage you to listen to our podcast Retirement Risk Show episode “Break Down the Top 10 Risks Facing Your Retirement” for a deeper dive into the information provided in this blog. For even more on the 10 Risks Top Ten Risks and strategies to reduce them during retirement, register for our webinar “Getting Safely Through Retirement.”

READ MORE