Are You a Renter Looking to Become a Homeowner?

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By Paul Mulligan, SVP, Retail Lending

Last year, while many businesses and industries suffered, the real estate market in Connecticut had a phenomenal year, with a 17% increase in home purchases.  The 38,641 single-family homes bought was the highest in the state in 15 years.  One factor certainly was the fact that the number of people moving into Connecticut in 2020 was more than double what the state enjoyed during 2019.

One of the byproducts of the trend was an increase in home prices, which also grew. As a result, many people may feel they are being priced out of the home market.  Renters, in particular, are feeling less confident that they will be able to buy homes.  Just over a third of current renters say they are “not very confident” or “not confident at all” in their ability to buy a home.  The majority say their lack of confidence comes from home prices being too high or an inability to afford a down payment.

But, that shouldn’t mean renters should stop thinking about buying a home.   There are many benefits to owning, including:

  • Freedom to renovate/decorate
  • Building equity
  • Potential tax benefits
  • Value could increase over time
  • Stability of ownership
  • Predictable monthly loan payment (with a fixed-rate mortgage)

There are also many variables to consider when buying a home; including location, size and type of home, features, and of course, cost.  If you’re ready to buy a home – or even if you’re just starting to consider it – one of the first things you may want to consider is your priorities?  That includes what are the must have, nice-to-have, and unnecessary features.  If you’re willing to add flexibility to your process, you should enjoy greater home selection opportunities.

In addition, your local community bank may be able to offer you better mortgage terms that may make it easier for you to get out of paying someone else for your living space and start building equity in your own home.  For instance, The Milford Bank offers highly competitive rates with no-cost lock-in, low down payment options, free prequalification to make your home shopping experience easier, decisions made locally by a bank with a long history of serving the local community, and mortgage professionals that focus on your individual needs as a local customer.

In addition, if you’re a renter looking for your first home, The Milford Bank offers a First-Time Homebuyer program within Milford, Stratford, West haven, and Orange; that includes a rate reduction from the standard rate, application fee refund on closing, and low down payment options. The Milford Bank also offers a special rate for single family dwelling purchases, regardless of location throughout the state of CT.

You may also want to consider current versus future plans.  When looking at homes and talking to your bank, consider how you might be able to expand a potential home in the future to meet additional needs or to add some of the nice-to-have features that might not be feasible initially.  You may even be able to use the equity you build in your home over the years to take out a home equity loan or line of credit to fund home improvement projects.  Alternatively, The Milford Bank offers a construction-to-permanent one closing loan option, which includes the option of a fixed rate and an interest only period of up to 12 months during the construction phase.

The bottom line is, if you are looking to buy a home – whether you’re tired of paying a monthly rent to a landlord or association or you simply want the freedom and convenience of owning your own home – don’t let your lack of confidence keep you from achieving your dream.  Talk to The Milford Bank’s local mortgage specialists, who can provide you with the information and assistance you need to make a truly informed decision to assist you in purchasing a home that fits your needs and budget.

Business Customers – Learn about Clover on October 22nd

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Come meet us on Oct. 22
Get up to $750 back when you open a new merchant services account*
Power your business possibilities. Explore our wide range of solutions designed to meet the needs of your business so you may finish the year strong. We’re bringing Clover merchant services solutions and expertise to you!
Hands-on demos and other fun activities await your arrival. You’ll even learn how Clover technology may be tailored to your business’ needs so you may finish the year strong. Come join us and reserve your spot.
Call or email to book an appointment and qualify for this one-day only offer!

Contact Keith Brooks at 989-395-1511 or keith.brooks@fiserv.com

Clover Main Street Momentum Event
Friday, October 22, 2021

9:00 am – 3:30 pm
The Milford Bank
Post Road East Office
1455 Boston Post Road
Milford, CT 06460
We look forward to connecting with you.
*Promotional offer expires November 15, 2021. New accounts are subject to standard credit approval and underwriting requirements. Rebate will be in the form of an ACH payment to the merchant’s deposit account that will be initiated no sooner than 60 days after the date the merchant’s account is activated. Merchant account must be activated within 30 days of approval. Up to $750 rebate based on annual processing volume: annual processing volume of $100,000 to $249,999 = $100 rebate; annual processing volume of $250,000 to $499,999 = $250 rebate­; annual processing volume of $500,000 to $749,999 = $500 rebate; annual processing volume equal to or greater than $750,000 = $750 rebate. Only one offer per eligible business. Offer subject to change without notice. Terms and Conditions apply.
© 2021 Clover Network Inc. The Clover name, logo and related trademarks are owned by Clover Network, Inc., and are registered or used in the U.S. and many foreign countries. Merchant services are provided by First Data Merchant Services LLC dba Clover Business Solutions. All trademarks, service marks and trade names referenced in this material are the property of their respective owners.
2900 Westside Pkwy, Alpharetta, GA 30004

What the Federal Student Loan Payment Freeze Extension Means For You

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By Jorge Santiago

If you have federal student loans, you probably already know that emergency payment suspension has been extended to January 31, 2022.

Between recent student loan servicer shakeups, the Covid-19 surge, and 90 percent of affected borrowers saying they’re not prepared to resume payments, the decision to extend the payment freeze beyond September (as previously scheduled) comes as a relief for many borrowers.

But do you know how to use this additional extension to your advantage? Don’t just think of the extension as extra time without federal student loan payments — think of it as extra time to plan, to save, and to get ahead.

Here are some things you can do help put your best financial foot forward until federal student loan payments resume:

Get in touch with your student loan servicer

Contact your student loan servicer to confirm your payment due date, reconnect a payment method to auto-pay your bill, and learn about any new policy changes. If you’ve moved since March 2020, be sure to update your mailing address, too.

If your loans are serviced by FedLoan, Granite State, or Navient, be advised that these servicers have announced that they will transfer their student loans to other servicers before the end of the year. With that in mind, you may want to keep an extra watchful eye out for updates about the transfer in the event that you need to take any action with the new servicer.

Make sure you’re on the best path forward

Now is a great time to explore your eligibility for new federal repayment plans and forgiveness programs.

Switching to an income-driven repayment plan, for example, could lower your monthly payment and get you on track to have outstanding debt forgiven after a certain number of years. If you work for a non-profit, government, or public service organization, you may also qualify for Public Service Loan Forgiveness, which forgives remaining loans after ten years of qualifying payments.

Consider making payments

It may sound counterintuitive, but for some borrowers, the suspension period is the perfect time to make student loan payments.

That’s because the interest rate for federal student loans is still 0%, so any payments you make during the freeze will apply directly to your principal — which can ultimately lead to paying off your student debt sooner.

Get ahead on other financial goals

The average monthly student loan payment is $393 — a major expense that often forces borrowers to delay other financial goals until their student debt is paid off. For example, did you know that more than half of non-homeowner borrowers say their student debt has delayed their ability to buy a home?

Without the expense of monthly student loan bills, now could be the perfect time to get ahead on other priorities like saving up for a down payment, making extra retirement fund contributions, opening an emergency savings account, or setting aside cash for a major purchase.

Learn how The Milford Bank can help

When it comes to student debt, you don’t have to go it alone. The Milford Bank has partnered with Candid.ly, the leading student debt repayment platform, to give customers the tools they need to help make managing their student loans easier than ever before. Visit milfordbank.com/other-services/candidly/ to learn more and activate your free account today.

Student Loans 101

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by Jorge Santiago

College is expensive. In the 2020-2021 academic year, the average private college’s tuition and fees was $35,087; public colleges averaged $21,184 for out-of-state students and $9,687 for in-state students. Multiply that by at least four years, and the total cost of a degree is one very few students — or their families — can afford out-of-pocket.

That’s where student loans come in. Student loans create opportunities for students who might not otherwise be able to afford their education, which can in turn lead to more stable, gainful, and fulfilling employment.

But student loans are just that — loans that must eventually be paid back. If you’re one of the 47.9 million Americans carrying a combined $1.71 trillion in student debt, you probably already know that repayment can be a strain. And if you’re considering applying for college loans, you should understand your options before taking on student debt.

So let’s get back to the basics. Here are four questions everyone with student debt — or considering taking out student loans in the future — should know how to answer:

What types of student loans are available?

Types of federal student loans

As their name suggests, federal student loans are offered through the federal government via the Department of Education’s Office of Federal Student Aid (FSA). Three different types of federal student loans are available: Direct Subsidized, Direct Unsubsidized, and Direct PLUS.

  • Direct Subsidized Loans are available for undergraduate students with financial need (the difference between your school’s cost of attendance and your household’s expected contribution). Interest rates are fixed for life when the loan is first disbursed and are generally lower.
  • Direct Unsubsidized Loans are available for both undergraduate and graduate students, regardless of financial need. Interest rates are fixed for life when the loan is first disbursed and are generally higher.
  • Direct PLUS Loans are available to parents financing their child’s education, and to graduate or professional students funding their own education. The application process requires a credit check, but borrowers with low credit scores can still qualify if they have an endorser or can document extenuating circumstances. Interest rates are fixed for life when the loan is first disbursed and are generally the highest rate compared to other federal student loans.

Types of private student loans

Private student loans are offered through financial institutions like banks and credit unions. The terms of private student loans are controlled by the lender, so there are lots of different options available. Private loans often entail higher interest rates and stricter eligibility criteria, but they can be a helpful tool for borrowers who have already maxed out their federal aid.

 

How does student loan repayment work?

Federal student loan repayment

If you have federal Direct Unsubsidized or Direct Subsidized Loans, your loans will be in deferment while you’re still in school and for six months after you graduate or withdraw. After this grace period ends, you’ll be responsible for making monthly payments through your loan servicer (FSA will assign your servicer — a third-party company that manages student loan billing — after your first loan is disbursed).

Direct PLUS Loan borrowers can expect a very similar process, with the exception that you must request deferment through FSA or your student loan servicer. Otherwise, you’ll have to start making payments while you are or your child is still in school.

All federal student loan borrowers will have the opportunity to select a repayment plan when they first start making payments and adjust their repayment plan later on. There are eight different federal student loan repayment plans available, including income-driven repayment plans, which cap monthly payments to a manageable percentage of your discretionary income.

Private student loan repayment

Private student loan repayment varies based on your lender’s terms. Some require payments while you’re still in school or immediately after graduating, some manage repayment through a servicer or in-house, and repayment plans vary. If you’re considering private student loans, be sure you understand the lender’s repayment policies.

Can I get my student debt cancelled, paused, or forgiven?

If you have private student loans, your options for getting your loans cancelled, paused, or forgiven are limited.

But if you have federal student loans, it’s possible — provided you meet certain eligibility requirements.

You may be eligible to have your federal student loans partially or totally cancelled if:

  • Your school closed while you were a student or shortly after you withdrew or graduated
  • You develop a total and permanent disability
  • You were defrauded by your school
  • You declare bankruptcy

You may be eligible to have your student loans paused if you apply for and are granted temporary deferment. You might qualify for deferment if:

  • You’re enrolled in a graduate fellowship
  • You’re undergoing cancer treatment
  • You’re serving in the Peace Corps
  • You’re on active military duty
  • You’re receiving welfare assistance
  • You work full-time but earn 150% below the poverty line

You may be eligible to have your student loans forgiven through special forgiveness programs if:

  • You’re a teacher
  • You work at a nonprofit organization
  • You work for a federal, state, local, or tribal government agency
  • You’ve been on an income-driven repayment plan for at least 20-25 years

How can The Milford Bank help me manage my student loans?

When it comes to student debt, you don’t have to go it alone. The Milford Bank is excited to launch a new partnership to give our customers tools that make managing their student loans easier than ever before. Stay tuned for an announcement soon!

Estimating Your Retirement Income Needs

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You know how important it is to plan for your retirement, but where do you begin? One of your first steps should be to estimate how much income you’ll need to fund your retirement. That’s not as easy as it sounds, because retirement planning is not an exact science. Your specific needs depend on your goals and many other factors.

Use your current income as a starting point

It’s common to discuss desired annual retirement income as a percentage of your current income. Depending on whom you’re talking to, that percentage could be anywhere from 60% to 90%, or even more. The appeal of this approach lies in its simplicity, and the fact that there’s a fairly common-sense analysis underlying it: Your current income sustains your present lifestyle, so taking that income and reducing it by a specific percentage to reflect the fact that there will be certain expenses you’ll no longer be liable for (e.g., payroll taxes) will, theoretically, allow you to sustain your current lifestyle.

The problem with this approach is that it doesn’t account for your specific situation. If you intend to travel extensively in retirement, for example, you might easily need 100% (or more) of your current income to get by. It’s fine to use a percentage of your current income as a benchmark, but it’s worth going through all of your current expenses in detail, and really thinking about how those expenses will change over time as you transition into retirement.

Project your retirement expenses

Your annual income during retirement should be enough (or more than enough) to meet your retirement expenses. That’s why estimating those expenses is a big piece of the retirement planning puzzle. But you may have a hard time identifying all of your expenses and projecting how much you’ll be spending in each area, especially if retirement is still far off. To help you get started, here are some common retirement expenses:

  • Food and clothing
  • Housing: Rent or mortgage payments, property taxes, homeowners insurance, property upkeep and repairs
  • Utilities: Gas, electric, water, telephone, cable TV
  • Transportation: Car payments, auto insurance, gas, maintenance and repairs, public transportation
  • Insurance: Medical, dental, life, disability, long-term care
  • Health-care costs not covered by insurance: Deductibles, co-payments, prescription drugs
  • Taxes: Federal and state income tax, capital gains tax
  • Debts: Personal loans, business loans, credit card payments
  • Education: Children’s or grandchildren’s college expenses
  • Gifts: Charitable and personal
  • Savings and investments: Contributions to IRAs, annuities, and other investment accounts
  • Recreation: Travel, dining out, hobbies, leisure activities
  • Care for yourself, your parents, or others: Costs for a nursing home, home health aide, or other type of assisted living
  • Miscellaneous: Personal grooming, pets, club memberships

Don’t forget that the cost of living will go up over time. The average annual rate of inflation over the past 20 years has been approximately 2%.1 And keep in mind that your retirement expenses may change from year to year. For example, you may pay off your home mortgage or your children’s education early in retirement. Other expenses, such as health care and insurance, may increase as you age. To protect against these variables, build a comfortable cushion into your estimates (it’s always best to be conservative). Finally, have a financial professional help you with your estimates to make sure they’re as accurate and realistic as possible.

Decide when you’ll retire

To determine your total retirement needs, you can’t just estimate how much annual income you need. You also have to estimate how long you’ll be retired. Why? The longer your retirement, the more years of income you’ll need to fund it. The length of your retirement will depend partly on when you plan to retire. This important decision typically revolves around your personal goals and financial situation. For example, you may see yourself retiring at 50 to get the most out of your retirement. Maybe a booming stock market or a generous early retirement package will make that possible. Although it’s great to have the flexibility to choose when you’ll retire, it’s important to remember that retiring at 50 will end up costing you a lot more than retiring at 65.

Estimate your life expectancy

The age at which you retire isn’t the only factor that determines how long you’ll be retired. The other important factor is your lifespan. We all hope to live to an old age, but a longer life means that you’ll have even more years of retirement to fund. You may even run the risk of outliving your savings and other income sources. To guard against that risk, you’ll need to estimate your life expectancy. You can use government statistics, life insurance tables, or a life expectancy calculator to get a reasonable estimate of how long you’ll live. Experts base these estimates on your age, gender, race, health, lifestyle, occupation, and family history. But remember, these are just estimates. There’s no way to predict how long you’ll actually live, but with life expectancies on the rise, it’s probably best to assume you’ll live longer than you expect.

Identify your sources of retirement income

Once you have an idea of your retirement income needs, your next step is to assess how prepared you are to meet those needs. In other words, what sources of retirement income will be available to you? Your employer may offer a traditional pension that will pay you monthly benefits. In addition, you can likely count on Social Security to provide a portion of your retirement income. To get an estimate of your Social Security benefits, visit the Social Security Administration website (www.ssa.gov). Additional sources of retirement income may include a 401(k) or other retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest, the rate of investment return, and other factors. Finally, if you plan to work during retirement, your job earnings will be another source of income.

Make up any income shortfall

If you’re lucky, your expected income sources will be more than enough to fund even a lengthy retirement. But what if it looks like you’ll come up short? Don’t panic — there are probably steps that you can take to bridge the gap. A financial professional can help you figure out the best ways to do that, but here are a few suggestions:

  • Try to cut current expenses so you’ll have more money to save for retirement
  • Shift your assets to investments that have the potential to substantially outpace inflation (but keep in mind that investments that offer higher potential returns may involve greater risk of loss)
  • Lower your expectations for retirement so you won’t need as much money (no beach house on the Riviera, for example)
  • Work part-time during retirement for extra income
  • Consider delaying your retirement for a few years (or longer)
1Calculated form Consumer Price Index (CPI-U) data published by the Bureau of Labor Statistics, January 2021
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. TMB Financial Solutions is a trade name of The Milford Bank. Infinex and The Milford Bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including possible loss of value.

This communication is strictly intended for individuals residing in the state(s) of CA, CT, FL, MA, NH, NJ, NY and NC. No offers may be made or accepted from any resident outside the specific states referenced.
Prepared by Broadridge Advisor Solutions Copyright 2021.

10 Years and Counting: Points to Consider as You Approach Retirement

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1 2020 Retirement Confidence Survey, EBRI

2Note that if you work while receiving Social Security benefits and are under full retirement age, your benefits may be reduced until you reach full retirement age.

3Working with a tax or financial professional cannot guarantee financial success.

4EBRI Issue Brief, May 28, 2020

5A complete statement of coverage, including exclusions, exceptions, and limitations, is found only in the LTC policy. It should be noted that carriers have the discretion to raise their rates and remove their products from the marketplace.

10 Years and Counting: Points to Consider as You Approach Retirement

If you’re a decade or so away from retirement, you’ve probably spent at least some time thinking about this major life change. How will you manage the transition? Will you travel, take up a new sport or hobby, or spend more time with friends and family? Should you consider relocating? Will you continue to work in some capacity? Will changes in your income sources affect your standard of living?

When you begin to ponder all the issues surrounding the transition, the process can seem downright daunting. However, thinking about a few key points now, while you still have years ahead, can help you focus your efforts and minimize the anxiety that often accompanies the shift.

Reassess your living expenses

A step you will probably take several times between now and retirement — and maybe several more times thereafter — is thinking about how your living expenses could or should change. For example, while commuting and other work-related costs may decrease, other budget items may rise. Health-care costs, in particular, may increase as you progress through retirement.

Try to estimate what your monthly expense budget will look like in the first few years after you stop working. And then continue to reassess this budget as your vision of retirement becomes reality.

According to a recent survey, 38% of retirees said they were “very confident” that they would be able to meet their basic expenses in retirement, while only 28% showed similar levels of confidence in meeting health-care costs.1 Keeping a close eye on your spending in the years leading up to retirement can help you more accurately anticipate your budget during retirement.

Consider all your income sources

First, figure out how much you stand to receive from Social Security. The amount you receive will depend on your earnings history and other unique factors. You can elect to receive retirement benefits as early as age 62, however, doing so will result in a reduced benefit for life. If you wait until your full retirement age (66 or 67, depending on your birth date) or later (up to age 70), your benefit will be higher. The longer you wait, the larger it will be.2

You can get an estimate of your retirement benefit at the Social Security Administration website, ssa.gov. You can also sign up for a my Social Security account to view your online Social Security statement, which contains a detailed record of your earnings and estimates for retirement, survivor, and disability benefits. Your retirement benefit estimates include amounts at age 62, full retirement age, and age 70. Check your statement carefully and address any errors as soon as possible.

Next, review the accounts you’ve earmarked for retirement income, including any employer benefits. Start with your employer-sponsored plan, and then consider any IRAs and traditional investment accounts you may own. Try to estimate how much they could provide on a monthly basis. If you are married, be sure to include your spouse’s retirement accounts as well. If your employer provides a traditional pension plan, contact the plan administrator for an estimate of that monthly benefit amount.

Do you have rental income? Be sure to include that in your calculations. Might you continue to work? Some retirees find that they are able to consult, turn a hobby into an income source, or work part-time. Such income can provide a valuable cushion that helps retirees postpone tapping their investment accounts, giving the assets more time to potentially grow.

Some other ways to generate extra cash during retirement include selling gently used goods (such as furniture or designer accessories), pet sitting, and participating in the sharing economy — e.g., using your car as a taxi service.

Pay off debt, power up your savings

Once you have an idea of what your possible expenses and income look like, it’s time to bring your attention back to the here and now. Draw up a plan to pay off debt and power up your retirement savings before you retire.

Why pay off debt? Entering retirement debt-free — including paying off your mortgage — will put you in a position to modify your monthly expenses in retirement if the need arises. On the other hand, entering retirement with a mortgage, loan, and credit-card balances will put you at the mercy of those monthly payments. You’ll have less of an opportunity to scale back your spending if necessary.

Why power up your savings? In these final few years before retirement, you’re likely to be earning the highest salary of your career. Why not save and invest as much as you can in your employer-sponsored retirement savings plan and/or IRAs? Aim for maximum allowable contributions. And remember, if you’re 50 or older, you can take advantage of catch-up contributions, which enable you to contribute an additional $6,500 to your 401(k) plan and an extra $1,000 to your IRA in 2021.

Manage taxes

As you think about when to tap your various resources for retirement income, remember to consider the tax impact of your strategy. For example, you may want to withdraw money from your taxable accounts first to allow your employer-sponsored plans and IRAs more time to potentially benefit from tax-deferred growth. Keep in mind, however, that generally you are required to begin taking minimum distributions from tax-deferred accounts once you reach age 72, whether or not you actually need the money. (Roth IRAs are an exception to this rule.)

If you decide to work in retirement while receiving Social Security, understand that income you earn may result in taxable benefits. IRS Publication 915 offers a worksheet to help you determine whether any portion of your Social Security benefit is taxable.

If leaving a financial legacy is a goal, you’ll also want to consider how estate taxes and income taxes for your heirs figure into your overall decisions.

Managing retirement income to result in the best possible tax scenario can be extremely complicated. Qualified tax and financial professionals can provide valuable insight and guidance.3

Account for health care

The Employee Benefit Research Institute (EBRI) reported that the average 65-year-old married couple retiring in 2020, with average prescription drug expenses, would need about $270,000 in savings to have a 90% chance of meeting their insurance premiums and out-of-pocket health-care costs in retirement.4 This figure illustrates why health care should get special attention as you plan the transition to retirement.

As you age, the portion of your budget consumed by health-related costs (including both medical and dental) will likely increase. Although Original Medicare (Parts A and B) will cover a portion of your costs, you’ll still have deductibles, copayments, and coinsurance. Unless you’re prepared to pay for these costs out of pocket, you may want to purchase a supplemental Medigap insurance policy. Medigap policies are sold by private health insurers and are standardized and regulated by both state and federal law. These plans offer different levels of coverage and may pay many of your out-of-pocket costs.

Another option is Medicare Advantage (also known as Medicare Part C), which is a bundled plan that includes Parts A and B, and usually Part D prescription coverage, and may offer additional benefits Original Medicare doesn’t cover. If you enroll in Medicare Advantage, you cannot also purchase a Medigap policy. For more information, visit medicare.gov.

Also think about what would happen if you or your spouse needed home care, nursing home care, or other forms of long-term assistance, which Medicare and Medigap will not cover. Long-term care costs vary substantially depending on where you live and can be extremely expensive. For this reason, people often consider buying long-term care insurance. Policy premiums may be tax deductible, based on a number of different factors. If you have a family history of debilitating illness such as Alzheimer’s, have substantial assets you’d like to protect, or want to leave assets to heirs, a long-term care policy may be worth considering.5

Ease the transition

These are just some of the factors to consider as you prepare to transition into retirement. Breaking the bigger picture into smaller categories and using the years ahead to plan accordingly may help make the process a little easier.
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. TMB Financial Solutions is a trade name of The Milford Bank. Infinex and The Milford Bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including possible loss of value.

This communication is strictly intended for individuals residing in the state(s) of CA, CT, FL, MA, NH, NJ, NY and NC. No offers may be made or accepted from any resident outside the specific states referenced.
Prepared by Broadridge Advisor Solutions Copyright 2021.

Retirement Planning: The Basics

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You may have a very idealistic vision of retirement — doing all of the things that you never seem to have time to do now. But how do you pursue that vision? Social Security may be around when you retire, but the benefit that you get from Uncle Sam may not provide enough income for your retirement years. To make matters worse, few employers today offer a traditional company pension plan that guarantees you a specific income at retirement. On top of that, people are living longer and must find ways to fund those additional years of retirement. Such eye-opening facts mean that today, sound retirement planning is critical.
But there’s good news: Retirement planning is easier than it used to be, thanks to the many tools and resources available. Here are some basic steps to get you started.

Determine your retirement income needs

It’s common to discuss desired annual retirement income as a percentage of your current income. Depending on whom you’re talking to, that percentage could be anywhere from 60% to 90%, or even more. The appeal of this approach lies in its simplicity. The problem, however, is that it doesn’t account for your specific situation. To determine your specific needs, you may want to estimate your annual retirement expenses.

Use your current expenses as a starting point, but note that your expenses may change dramatically by the time you retire. If you’re nearing retirement, the gap between your current expenses and your retirement expenses may be small. If retirement is many years away, the gap may be significant, and projecting your future expenses may be more difficult.

Remember to take inflation into account. The average annual rate of inflation over the past 20 years has been approximately 2%.1 And keep in mind that your annual expenses may fluctuate throughout retirement. For instance, if you own a home and are paying a mortgage, your expenses will drop if the mortgage is paid off by the time you retire. Other expenses, such as health-related expenses, may increase in your later retirement years. A realistic estimate of your expenses will tell you about how much yearly income you’ll need to live comfortably.

Calculate the gap

Once you have estimated your retirement income needs, take stock of your estimated future assets and income. These may come from Social Security, a retirement plan at work, a part-time job, and other sources. If estimates show that your future assets and income will fall short of what you need, the rest will have to come from additional personal retirement savings.

Figure out how much you’ll need to save

By the time you retire, you’ll need a nest egg that will provide you with enough income to fill the gap left by your other income sources. But exactly how much is enough? The following questions may help you find the answer:

  • At what age do you plan to retire? The younger you retire, the longer your retirement will be, and the more money you’ll need to carry you through it.
  • What is your life expectancy? The longer you live, the more years of retirement you’ll have to fund.
  • What rate of growth can you expect from your savings now and during retirement? Be conservative when projecting rates of return.
  • Do you expect to dip into your principal? If so, you may deplete your savings faster than if you just live off investment earnings. Build in a cushion to guard against these risks.

Build your retirement fund: Save, save, save

When you know roughly how much money you’ll need, your next goal is to save that amount. First, you’ll have to map out a savings plan that works for you. Assume a conservative rate of return (e.g., 5% to 6%), and then determine approximately how much you’ll need to save every year between now and your retirement to reach your goal.

The next step is to put your savings plan into action. It’s never too early to get started (ideally, begin saving in your 20s). To the extent possible, you may want to arrange to have certain amounts taken directly from your paycheck and automatically invested in accounts of your choice [e.g., 401(k) plans, payroll deduction savings]. This arrangement reduces the risk of impulsive or unwise spending that will threaten your savings plan — out of sight, out of mind. If possible, save more than you think you’ll need to provide a cushion.

Understand your investment options

You need to understand the types of investments that are available, and decide which ones are right for you. If you don’t have the time, energy, or inclination to do this yourself, hire a financial professional. He or she will explain the options that are available to you, and will assist you in selecting investments that are appropriate for your goals, risk tolerance, and time horizon. Note that many investments may involve the risk of loss of principal.

Use the right savings tools

The following are among the most common retirement savings tools, but others are also available.

Employer-sponsored retirement plans that allow employee deferrals [like 401(k), 403(b), SIMPLE, and 457(b) plans] are powerful savings tools. Your contributions come out of your salary as pre-tax contributions (reducing your current taxable income) and any investment earnings are tax deferred until withdrawn. These plans often include employer-matching contributions and should be your first choice when it comes to saving for retirement. 401(k), 403(b) and 457(b) plans can also allow after-tax Roth contributions. While Roth contributions don’t offer an immediate tax benefit, qualified distributions from your Roth account are free of federal, and possibly state, income tax.

IRAs, like employer-sponsored retirement plans, feature tax deferral of earnings. If you are eligible, traditional IRAs may enable you to lower your current taxable income through deductible contributions. Withdrawals, however, are taxable as ordinary income (unless you’ve made nondeductible contributions, in which case a portion of the withdrawals will not be taxable).

Roth IRAs don’t permit tax-deductible contributions but allow you to make completely tax-free withdrawals under certain conditions. With both types, you can typically choose from a wide range of investments to fund your IRA.

Annuities are contracts issued by insurance companies. Annuities are generally funded with after-tax dollars, but their earnings are tax deferred (you pay tax on the portion of distributions that represents earnings). There is generally no annual limit on contributions to an annuity. A typical annuity provides income payments beginning at some future time, usually retirement. The payments may last for your life, for the joint life of you and a beneficiary, or for a specified number of years (guarantees are subject to the claims-paying ability of the issuing insurance company). Annuities may be subject to certain charges and expenses, including mortality charges, surrender charges, administrative fees, and other charges.

Note: In addition to any income taxes owed, a 10% premature distribution penalty tax may apply to taxable distributions made from employer-sponsored retirement plans, IRAs, and annuities prior to age 59½, unless an exception applies.

1Calculated form Consumer Price Index (CPI-U) data published by the Bureau of Labor Statistics, January 2021
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021
Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC.
Member FINRA/SIPC. TMB Financial Solutions is a trade name of The Milford Bank. Infinex and
The Milford Bank are not affiliated. Products and services made available through Infinex are not
insured by the FDIC or any other agency of the United States and are not deposits or obligations of
nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment
risk, including possible loss of value.

How to Recognize Scam Calls and Keep Your Money Safe

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By Tina Mason

On any given day, you probably get phone calls from numbers you don’t know.  Those dreaded spam calls continue to become more frequent and the total number grew by 18% globally last year.  In the U.S. that growth was even more significant, with Americans receiving an average of 28 spam calls a month (up from 18 a year earlier).

What’s worse is the situation is expanding.  What was once limited mostly to landlines has expanded to mobile phones.  In fact, 46% of Americans said they get spam calls on their cell phones every day in February of this year.

The problem is these calls aren’t just a nuisance; many are from scammers trying to con people into giving up their money.  Unfortunately, it’s working – Americans lost nearly $20 billion due to phone scams in 2020.

The good news is you can avoid falling victim by staying informed about the latest scams (the FTC regularly updates its site with common scams), by knowing how to identify them, and by simply following some best practices.

Auto warranty scams – This one has been going on for years.  It usually starts with a pleasant recorded voice introducing him- or herself and claiming to be from the “Vehicle Service Department” or something similar.  The recording continues to explain that your vehicle warranty is about to expire unless you extend it with them immediately.  They might even have specific information about your vehicle they have obtained through any number of ways.  The warranty these scammers are offering is usually a service contract of some kind that could actually cost you more than you would pay for vehicle maintenance and repairs.

Pyramid sales schemes – These may seem like legitimate business opportunities selling products from your home.  But when you look at them carefully, you’ll see your compensation is based on how many new sales people you recruit, not how much product you sell.  In addition, you will typically be required to buy a certain amount of product, even if you already have enough inventory on hand.  Ultimately, you’re more likely to lose time and money than make a living.

COVID-19 scams – There are several kinds of scams trying to leverage the coronavirus pandemic.  Some try to sell you a vaccine.  If you haven’t yet been fully vaccinated, remember that the COVID-19 vaccine is being administered for free.  You can find a local vaccination site here.  Another scam involves scammers posing as FEMA workers reaching out to cover costs associated with family members that may have died due to COVID-19.  Unless you have already registered with FEMA for their funeral assistance program, they will not reach out to you.  If you get a call or email from someone claiming to be with a government agency, it’s most likely to be a scam you don’t want to get involved with.  And no, your social security number will not be suspended – yet another government-related scam that has been around for a long time.

Utility scams – Have you gotten a call from someone claiming to be with your electric, water, or gas company, claiming your service is going to be cut off unless you make payment immediately?  Again, almost certainly a scam.  Your actual utility companies may threaten to cut you off if you are delinquent on your bills, but they will send notifications – you can also verify your account through their website if you’re not sure.  Or, simply call them if you think you may have missed a payment – in which case you may have to pay a late fee, but they probably won’t threaten to cut off your service yet.

Payment options – One of the things to note is most scammers don’t use the normal payment methods when they try to get you to pay them.  Having you send a check or pay online on your oil company’s site doesn’t get them any money.  They will often ask you to use Western Union of other money transfer services, or some ask you to add money to a reloadable gift card.  More tech-savvy scammers may also want you to pay with cryptocurrency.  They use these methods because they are mostly untraceable making it almost impossible to recover the money.

The bottom line is this: Legitimate businesses will identify themselves clearly and won’t threaten you on the phone.  Most will also work with you to arrange payment plans if you’re experiencing difficulty.

If an offer seems too good to be true – like winning a large cash award from a drawing you didn’t enter, or a get-rich-quick job offer – it probably is.  Never agree to anything before you have done your research.  In fact, many people today don’t even answer phone calls from numbers they don’t know.  That way, they can just delete the phony voice mail messages and, if they think it could possibly be real, can look up the correct phone number (never call back a number given on a voice message you think could be fraudulent) and call the bank, store, service provider, government agency, or whoever the caller claimed to be with.

The same goes for emails.  Don’t click on links, don’t call numbers on emails because they could be fake, and assume offers are fraudulent unless they come from one of your trusted relationships.  Even then, take care to look carefully at email addresses, names, other personal details, as well as grammar and spelling.  Most fraudulent of phishing emails have mistakes in them that should raise a red flag.

Again, if you have any uncertainty, look up phone numbers yourself and make a few phone calls to verify the legitimacy of any call or email you get.  It may take a few extra minutes, but that small effort could keep you, your family, and your money safe.

But, if you make a mistake and think you have fallen victim to a scam, the first thing you should do is contact your bank so they can help you with your bank accounts and make sure your funds aren’t accessible to scammers.

Celebrating Home Owners: Are You Ready to Buy?

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June is National Homeownership Month, celebrating a key part of what many people see as part of their life dreams.  And why not?  Home ownership can be a great investment with many benefits.

Long term cost savings – By paying your monthly mortgage, you are creating your own nest egg, instead of paying off someone else’s mortgage or generating revenue for them.  In many cases, mortgage payments, especially for first-time buyers, can be very close to or even lower than monthly rent.

Equity – As you pay down your mortgage, you build equity in your home, increasing your net worth and your future ability to obtain home equity loans for other expenses, including home improvements (which can further increase the value of your investment).

Improving credit – As long as you make your monthly payments on time, you can improve your credit rating, making it easier to secure other loans for future expenses.

It’s yours – When you own property, the decision on how to use it is yours, not your landlord’s.  You can decide how to decorate, renovate, add on to create more living and entertaining space, and generally use your property however you want.  The financial benefits are great, but this may be the greatest benefit of all.

Of course, if you’re a first-time home buyer, you’ve got a lot to think about, including securing a mortgage, which can be an uncertain prospect.  But, working with the right bank can make it a much easier and satisfying process – especially those with special first-time buyer programs.  The Milford Bank offers a program that includes a reduced interest rate, application fee refund, pre-qualification certificates, and low down-payment options, which take the hassle out of buying your first home.

In addition to financing, you have many other things to think about when buying a home – especially for the first time.  This includes location, school system, style, property size, and of course home features.

To help you consider what is most important to you, here’s a list of the most commonly desired features by home buyers today.  Each of these features was listed by at least 80% of people as being either a must-have or desirable feature.

  • Laundry room
  • Exterior lighting
  • Ceiling fan(s)
  • Energy efficient windows
  • Patio
  • Double kitchen sink
  • Walk-in pantry
  • Front porch
  • Energy efficient appliances
  • Hardwood floors
  • Full bath on main level
  • Energy efficient lighting

As you get start with the home buying process, make sure you’re buying a home that you’ll be happy with.  It’s not a bad idea to think about the future and your ability to renovate or add on.  You’ll have question, naturally, especially when it comes to the mortgage.  Don’t hesitate to call on our mortgage specialists to answer them so you have an enjoyable experience.

Why Small Businesses and Community Banks are a Perfect Match

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By John Darin

May is Small Business Month, celebrating the importance of small businesses to our national and local economies.  Small business owners and their entrepreneurial spirit are a cornerstone of our economy and our local communities.  In Connecticut, they comprise 97% of business and employ half of the state’s workforce.

Small Business Month also recognizes that small businesses have unique needs.  Every business needs a bank and there are certainly several national brands to choose from.  But, just as there are many options for your personal banking, there are local alternatives that may be beneficial for small businesses.

Community banks were instrumental in helping small businesses make it through the COVID-19 pandemic.  Early during the pandemic, when the first round of Paycheck Protection Funding was exhausted, the U.S. Small Business Administration approved more than 1.6 million loans to support small businesses, totaling more than $300 billion.  About 60% of those loans were handled by community banks.

Like small business, community banks are important to the success of local communities and can offer benefits that large national brands can’t.

Personalized service –  When you go into or call a local bank, you’re getting attention from the same people every time – not a call center agent located across the country.  You’ll save time because your bankers know you and your business, creating deeper bonds because they see your business as a personal relationship, not an account number.  As a result, they will go the extra mile to give you personalized attention.

Faster action – Time is money.  As a business owner, getting answers from your bank quickly is important.  Because community banks aren’t spread across the country, their decision-making process is often simpler and faster because it happens locally.

Lower fees – Many community banks offer lower fees or better terms and interest rates than their national counterparts.  For small businesses, every dollar saved or earned makes a difference.

Local for local – Local banks are proud of their local communities and tend to be very active in local activities.  They know the local business and support various organizations and events that support the local economy and benefit both businesses and residents.  This helps build their communities and create a better place to live and work, which help attract new residents and businesses.  As a small business, the local community is important to your success, and community banks play a big role.

Know your customer – Every business is unique.  Personal attention combined with local intimacy also gives community banks a chance to really know their customers and their business banking needs.  As a result, they are able to provide a higher level of care and service that caters to each individual business.  That knowledge can also play into your bank’s decision-making because they are able to factor in what they know about your business, you as the business owner, and the local community.  It becomes about more than just entering data into a formula.

Small Business knowledge – Community banks understand small businesses.  Remember that they are, in fact, small businesses just like you, so they have an inherent first-hand knowledge of what it takes to succeed as a small business.  That knowledge translates into a service mentality designed to help small businesses succeed, rather than trying to force them into cookie-cutter approach designed for large enterprises.

Business services – Community banks have built service portfolios to meet your business needs. They aren’t a one-trick pony and offer a variety of business banking services.  From commercial loans and business lines of credit to retirement and employee benefits management to online banking and much more, don’t think that just because they are smaller, your community bank isn’t well-equipped to serve your business needs.

As a small business, you know you have specific banking needs.  You also know the large national brands aren’t as agile or flexible when it comes to meeting your needs – they can’t be.  So, when you think about your financial needs, remember there are local alternatives to those big brands that can be a much better fit for you.  Find out exactly how The Milford Bank can help your business by getting to know one of our local professionals today to learn how they can help make running your business a lot easier.