According to a Bankrate survey from 2023, 56% of Americans feel behind on retirement savings, while over 20% have not put a dime towards savings for retirement in over a year. As inflation remains and wages remain relatively stagnant, Americans are struggling to keep up with saving. Mitlin Financial Founder Lawrence Sprung and Advisors Capital Management Senior VP Cary Carbonaro join Wealth! to give insight into the best ways to maximize retirement savings and learn new financial planning strategies.
Carbonaro states that workers need to maximize current retirement accounts offered by employers: "I always say step one is to max out your current retirement account at work. If you don't have one, you can always set one up or you can do an IRA, but no matter what, you have to set it up. It has to be on autopilot because that's the way most people save. If you're given a choice, you won't save it. It's called behavioral finance. So you have to get it in and get it often. And that's the way to get you to your goal. "
Sprung explains the use of Tax loss Harvesting as a way to save: "Tax loss harvesting is taking a look at investments that you may have losses in and taking those losses and using them to offset gains. Because at the end of the day, it's all about how much money you're able to keep, not after selling the investment, but after you pay the tax man. And by selling some losses to offset those gains, you end up keeping more of your hard-earned money and the growth you have accumulated within those accounts that are outside of retirement accounts. "
BRAD SMITH: Getting retirement ready, a 2023 bank rate survey finds that 56% of Americans feel behind on saving for retirement, even more over, around a quarter of workers have not made retirement contributions in at least a year. So how can we help? We've gathered a panel sharper than a number 2 pencil to provide some context around financial planning for retirement and some tips to help you along. Joining me now on set, we've got Mitlin Financial founder Lawrence Sprung. He's known on the interwebs and by his friends as Larry. He's also the author of "Financial Planning Made Personal."
Also, with us virtually we've got Cary Carbonaro who is the Advisors Capital Management Senior Vice President and Director of Women and Wealth. Thank you both so much here for taking the time. We have to know first and foremost right off the bat because it sounds like there are a lot of people, and Larry, I'm turning to you first, a lot of people that have not taken some of those steps. Some of them very easy, but for different reasons, one way or another, what is the first step first way that they can get back into the proper type of retirement savings cadence?
LAWRENCE SPRUNG: You have to get started. If you're one of those people that has not started yet, get started. Do research on the internet if it's something that you feel comfortable doing on your own, and if not contact an advisor, even a fee only hourly just to get some advice and guidance so you can figure out what you need to do to get on track for yourself and your family.
BRAD SMITH: Cary, I want to bring you into this as well. I mean, when clients come to you, what's the first question that they're asking about where they can set up that retirement planning?
CARY CARBONARO: So most clients that come to me usually have something via work because if you have a 401(k) or a 457 or a 403(b), you usually get matching contributions, and that is free money. So I tell everybody please take advantage of that, and I always say, step one, is to max out your current retirement account at work, and if you don't have one, you can always set one up or you could do an IRA. But no matter what, you have to set it up. It has to be on autopilot because that's the way most people save. If you're given a choice, you won't save it. It's called behavioral finance. So you have to get it in and get it often, and that's the way to get you to your goal.
BRAD SMITH: Certainly, now Larry, it was interesting. I was reading one of the recent blog posts that you had at Mitlin Financial talking about the benefit of the power and benefiting from the power of tax-loss harvesting. First and foremost, just explain that to us.
LAWRENCE SPRUNG: Yeah, so tax-loss harvesting is taking a look at investments that you may have losses in and taking those losses and using them to offset gains because at the end of the day, it's all about how much money you're able to keep, not after selling the investment, but after you pay the tax man. And by selling some losses to offset those gains, you end up keeping more of your hard-earned money and the growth that you've accumulated within those accounts that are outside of retirement accounts.
BRAD SMITH: And Kerry, I mean, this is a really interesting time specifically as so many people filing their taxes, and retirees, they're trying to figure out the best way and the tips and tricks that they can employ for themselves. Is there one top trick that's different this year than years past?
CARY CARBONARO: Well I love my favorite tip and trick for my retirees, is what's called a QCD, which is a qualified charitable distribution. So if you are forced to take your required minimum distribution, and you don't need it, and you are already gifting to charity, and especially if you're not itemizing because a lot of seniors are not itemizing anymore, you can have that required minimum distribution go directly to the charity, then the charity wins, you win because you don't have to pay taxes on it, and really everybody wins, but the tax man.
BRAD SMITH: Yeah, everybody's looking to score a W against Uncle Sam. So at the end of the day here, Kerry, as well. You look out into the future, and you think about the number of people that are also going to be bringing in whether it's millennials and how they're planning for retirement and starting to figure out, OK, where we need to set up for our kids? And where we need to make sure that even in this entire equation we have enough for ourselves as well as making those around us? What is the biggest shift that you're sensing over this past perhaps year or few where millennials are coming into some of those peak-earnings years but also thinking forward to what retirement looks like as well.
CARY CARBONARO: Yes, it's interesting. Millennials are starting to really save, and I have a lot of millennials that are maxing out their 401(k)s, which I'm super happy about. But another thing that I do with my clients is my clients actually set up and fund Roths for their children, for their adult children, and that's been super helpful because every year sometimes they don't even tell the children. But they set up the Roths, and it's great way to build tax-free income for your children over time. And I mean, I'm talking adult children as well.
BRAD SMITH: Certainly, I mean, Larry when we think about early retirement, I mean, is there a common misconception that pops into your mind about early retirement and how can people avoid those pitfalls?
LAWRENCE SPRUNG: Yeah, I think one of the misperceptions is that it can't be done. People have this conceptual idea that they have to work till 62 or 65, some retirement age that's kind of been created for us, and it's just not true. If you start early enough, invest wisely, and make right and smart financial moves, you can retire much earlier than those preconceived retirement ages that we all think about.
