Expected Contingency: 4 guidelines for women looking into planning their retirement

Women, on average, live longer than men—this is a plain truth (http://ti.me/8T7Ll),  a fact that must be taken into consideration when planning for retirement.  Running out of retirement funds partway through is not only a risk, it’s an unfortunate reality for many women who’ve outlasted their investments. With this in mind, here are a few general guidelines for women looking into planning their retirement.


1. Start early.

Not only is there still a distinct wage gap between female and male earners, women are also faced with the fact that, in all likelihood, they will end up with a good bit of extra time that they will be needing those retirement funds. This makes it an absolute imperative to start planning for retirement early in order to counteract these two factors working in tandem.


2. Plan for extra time.

As noted in the first point, women are still anticipated to outlast men by a good margin, about 5 to 10 years. Many in the younger generations can expect that to remain, alongside the average age increasing due to advancements in technologies. While planning for a retirement portfolio that will last forever is out of the reach of most, being realistic about longevity is extremely important, and making a conservative estimate may leave you in dire straits down the road. Plan for longevity.


3. Know your caregiver options.

Women with male partners will likely outlast their significant other.  While they will be there to administer care, unfortunately they afterwards find themselves bereft of any similar assistance themselves. Having a caregiver plan will help you sail smoothly throughout the entirety of your retirement and ensure that you have a helping hand as you age.


4. Know your personal risks.

There are a lot of statistics floating around about longevity, but statistics and averages are just that.  As individuals they’re helpful as general guidelines, but are completely ineffective as rules. Knowing not only your family’s medical history and risks associated (or lack of risks which may contribute to a greatly extended retirement) but also knowing your own financial tendencies, will help you get a better grasp on how to manage your money and what factors you should alert your financial advisor of when making a long-term retirement plan.

Extended life shouldn’t have to be something you look at as a downside. Taking steps in the immediate future to ensure that you won’t be too strongly impacted by the unique problems you’ll encounter as a woman facing retirement, will help you make the most of those extra years.
Image courtesy of www.morguefile.com (http://mrg.bz/RyT5zL)


Lessons for College Kids: Three Lessons to give your children before college

One of the most stressful moments of a parent’s life is letting go, allowing your children to walk on their own two feet and hoping they don’t stumble and fall. This is true for all stages, from their first steps to their first bike ride, from their first time driving to their move out of the house into college. Yet the move to college comes with a level of financial freedom that the other stages rarely, if ever, experience, and it’s important to equip your children with the knowledge and tools they need to make the most of their finances once they don’t have their parents to rely on for groceries and other necessities. Here are a few ways to teach them the value of their money, and a few general things kids should know about before leaving the nest for school or work.


1.  Credit Cards aren’t free money.


Racking up credit card debt is easy for a fresh face who’s just starting to experience purchasing freedom. It becomes easy for students recently enrolled to overestimate (and underestimate) all that they’ll need to thrive in their new environment, and even easier to end up spending more money on food and fun than they otherwise should. Teaching your children the goals and benefits of credit (improving your credit score, expanding your line of credit) as well as the pitfalls one can encounter when using a credit card (crippling, unexpected debt) is important for ensuring their financial freedom well into the future.


2.  Work experience is also finance experience.


The moment a new worker gets their first paycheck is always a particularly special one, in that it teaches them both the value of their labor and just how easy it is to burn through the paycheck and have to wait two weeks to a month for the next one. Providing your children with small examples of hourly efforts and what those efforts translate into can help diminish the shock that comes with realizing just how much their work is worth once they actually find a job. Working through college can also help with this, but making sure your children know how to translate the money they spend into the effort it’ll take to recoup it is an important lesson.


3.  Budget!


Nobody likes budgeting right away. It’s daunting to try to figure out how you’ll be spending your money on a weekly to monthly basis. But like all good habits, if started early, teaching your future college student how to effectively budget their finances will provide them with a skill that will help them for the rest of their lives. Give them small budgets at first, let them join you in budgeting groceries, and encourage them to start budgeting when away at school and they’ll be finance-savvy in no time.


Giving your child the right skills for managing their money is both important and overlooked in a lot of families sending their children off to college. Being financially responsible is a full-time job, and the more work experience they get in earlier, the better they’ll be at it later in life. Make sure to make your children aware of when it is and when it isn’t appropriate to use credit, give them a bit of work experience to teach them the value of their money, and most importantly of all teach them how to budget themselves and they’ll be on a solid path to financial freedom.



Deep Cuts: How the budget changes could directly affect you and your family

As incredible as it seems, the automatic budget cuts did indeed go through on March 1st, leaving the government with a lot of work to do as far as reining in its spending goes. While there are many of us without government jobs going about our daily lives, assuming that we won’t be hit too hard by the changes that will be continually rolling out over the next several months, the effects of the budget cuts promise to be surprisingly far-reaching. Not only will there be government layoffs to help cover the new budgets, as well as a potential exodus of skilled government employees searching for more profitable work due to furloughs, there will also be a reduction of consumer spending as those furloughs and layoffs take full effect. This promises to affect your portfolio, particularly if you’re invested in commodities and equities. It will also affect both your taxes and, for families, the educational future of your children through college.


The IRS has stated that individuals filing won’t see any extra time tacked onto their expected date of receiving a refund, but for anyone with additional gripes or issues with taxes after tax season is over may find themselves having to wait a good deal longer than normal, as the IRS’ furloughs will begin to take effect once the big crunch is done with (http://hrld.us/14Aqrf2). If you’re anticipating any taxation troubles in your future, now is the best time to get in touch with a financial professional to have your appeals or adjustments moving through the IRS as quickly as possible. While the slowdown shouldn’t be too dramatic, it will still be significant, and if time is of the essence for your returns then don’t wait until those furloughs take effect.


For families with children, the cuts to education promise to be remarkable. Students will be finding themselves in more crowded classrooms as teachers will be cut from the government payroll en-masse, and education stipends for college students will be cut across the board, generally leading to a more expensive college education and less personalized K-12 for students at all levels. If you were banking on your child to take on a work-study program or something similar, you may have to reassess the likelihood of it, as they’ll be needing more money and have fewer opportunities to get it during their college years.


Most importantly in all of this, it’s necessary to keep an eye on what sort of trends may be shifting as a result of the government spending cuts. Alongside the slowdown of post-tax season assistance and student aid, there will be a lot of people leaving the workforce, having their wages cut, and even those on unemployment will find themselves with less financial agency than before. Get in touch with an advisor to help navigate the undoubtedly tricky waters ahead to help make sure that you and your family manage to stay afloat—even if you don’t expect yourself to be affected by the cuts, looking for ways that you may be is the most important thing you can do to ensure the viability of your finances and portfolios well into the future.


Fast Forward: How Retirement is Changing

Predicting the future is a rough sort of business to find yourself in, particularly with a world that’s begun changing more and more rapidly with every passing day. Unfortunately a lot of people on all sides of retirement find themselves having to do this very thing, having to try and figure out what directions the world will be taking them in once they’re ready to stop working. Luckily you’re not alone, and most of us are trying to maximize our options for our post-career years. Here are just a few of the ways in which retirement is changing in the next decades, to help you stay ahead of the curve:


A: Retirees are living longer than ever before.
Advancements in medical technology have increased the average life expectancy of individuals in developing nations; retirement planning is becoming more and more troublesome for both actuaries and future retirees (Smart Money, 2012). This increased longevity comes with a need to set up a matching retirement plan, particularly when some retirements are expected to last longer than the amount of time the retirees spent working. Rather than trying to predict how long your retirement is slated to last, be prepared for the longer estimate in response to these treatments and technologies.


B: Children are staying with their families longer, even after college.
According to a new study released by Oregon State University, young adults in the 18-30 age bracket are having a harder time than ever becoming financially independent from their parents (Journal of Aging Studies, 2012). This greatly affects those looking to retire while their children are still young adults, and can cause a domino effect that starts to influence generations to come. There’s no guarantee of the job market recovering or this trend changing in the next few years, so when looking at your retirement make sure to factor in all of your current familial expenses.


C: Social Security may not be around in the future.
Social Security has always been a problem politically since it has a foreseeable end; between longer life expectancies and the large baby boomer population, social security is anticipated to “face funding shortfalls in about two decades if nothing changes” (CNBC 2012). While it’s quite possible that the government will come to a viable solution to salvage social security benefits, it’s a good idea to plan for the ‘what ifs’ regardless. Plan for social security as less of a guarantee and more as a pleasant possibility so there are no unpleasant surprises down the road. Don’t have your retirement plan hinge on social security as it may crumble within the next few decades.


Retirement is changing, but that doesn’t mean you can’t still build a healthy, strong retirement plan even with a moderately uncertain future. Your retirement is something that needs to be made to last a long time and you’re allowed to take your time putting the right amount of money into it. As long as you avoid the unnecessary risks in relying on social security, plan for a slightly longer nesting period for your children and plan for your own longevity, you can avoid a few of the major pitfalls that your retirement plans may otherwise succumb to.





If You are Worried About Your Retirement, You Are Not Alone

Retirement might be years away for you, but you have this persistent nagging feeling inside. You might even be comparing your financial situation to specific friends, coworkers, or peers around you. You observe that you are the less financially prepared for your retirement than the others.  You are not as relaxed about retirement; in fact, you are downright worried and ill prepared for this stage in your life.

The self-deprecating thoughts in your head might be chanting, “Just like the highly educated Mr. Jones over there with a very successful career and a fantastic financial plan, I could have, I would have, I should have…”  I could have strived for a better job with a higher pay.  If I had known foreseen tough times later on, I would have started saving for my retirement earlier.  I should have contributed more money to my 401’k through the years.  Stop with this negative self-talk. Don’t feel like you are alone on your own island of retirement worry.  Although individuals around you might not voice any concern about their financial security in these “Golden Years”, new studies indicate that many Americans also feel insecure about their own retirement.

Despite a slow economic recovery, worries about retirement still exist today among Americans.  A strong correlation exists between retirement concern and education/income levels.  These retirement worries appear to be greater among those individuals with less education and a low income.  On the other hand, the more educated higher paid individuals experience less worry about these retirement years.  A strong correlation also holds true for retirement concerns among certain age groups.  Contrary to previous years, new research indicates that the baby boomers and those individuals closer to retirement are not the most concerned about their retirement security.  Instead, the younger and middle aged adults win the award for the age group most concerned about these retirement years.

So, why is retirement stress so prevalent in the younger generation now? According the Pew Research Center, a recent analysis of Federal Reserve data reveals that the reason “retirement concerns have surged among adults in their late 30s and early 40s is that the average wealth of this group has fallen at a far greater rate than for any other age group over the past 10 years.”  Furthermore, this analysis suggests that the dwindling wealth among individuals in their 30s and 40s is due to this age group’s inability to benefit from recovering stock prices since the recession.  Much of this age group abandoned the stock market entirely during the recession, and remained out of the market as prices began to increase.

With this awareness that many other Americans also worry about retirement, what can you do with it?  Well, first of all, share your concerns with a financial advisor/planner if you don’t already have one.  It is never too late to modify a spending/saving behavior, make a difference in your retirement future, and what better way to be guided through the retirement planning process than by an expert. Second of all, find solace in the fact that you are not the only person with retirement worries.  Despite a slowly improving economy, many other Americans also share your concerns about your retirement especially now. Lastly, focus on yourself, and not on other people’s retirement situations around you.  Stop negatively comparing yourself to others, and beating yourself up for not being as prepared as you want to be for this stage of life.  You can drain so much of your energy out on negative thoughts about comparing yourself to others that you have no energy left to better yourself and proactively plan for a better retirement future.  So, it’s time to focus on you now.

Brooks, Chad. “Retirement Concerns Plague Americans.” BusinessNewsDaily. 22 October 2012. <http://www.businessnewsdaily.com/3306-retirement-concerns-plague-americans.html>


Fixed Rate vs. Adjustable Rate Mortgages: Which one is right for you?

With the American economy making a slow but steady recovery, it may be a good time to look at getting back into the housing market, be it finding a new home for your family or solid ground to retire on. For many, whether it be a first home or a new home, the decision between choosing a fixed-rate and adjustable-rate mortgage is an uncertain one at best. Here are a couple examples of prospective homeowners to get you started thinking about what kind of mortgage would be right for you.
The Traveler:
Never to be bound in one place, you find a new town to settle in once every few years. If variety is the spice of life then nobody can ever fault yours for being bland. If you don’t see yourself staying where you are for more than 5-10 years, and adjustable rate may be the best idea for you, as you’ll be paying at a lower interest rate at the beginning of the mortgage and can then sell it off to move elsewhere without getting too high up. A fixed rate mortgage may not be the best for you, because you may end up paying more at the start of the mortgage than you would with an adjustable, but won’t take advantage of the fixed interest for the life of the mortgage plan.
The Tree:
You want a place your children and grandchildren can grow up in and look forward to having around, always. While the lower initial interest rate of the adjustable may seem like a good idea at first, you run the risk of that interest rate going through the roof fifteen or twenty years down the road, when a fixed rate would provide a stable, predictable mortgage.
Ultimately, regardless of which path you take, it’s always a good idea to sit down and discuss the decision with a financial advisor. Whether you want to try and take advantage of an adjustable-rate because you can see yourself moving around a lot, or want the stability of a fixed-rate since you’re comfortable with where you’re at in life, the first and most important step in choosing the right mortgage plan is figuring out how the numbers will pan out in the long run. Know yourself, and know how your plan works for you; after you have solid figures on the table, the decision becomes a lot easier than you’d think.
Image Courtesy of mr_write/MorgueFile.com (http://www.morguefile.com/archive/display/86067)


Maximize Your Social Security Benefits

You have worked hard all of your life. You have raised a beautiful family that you are proud of, and you and your spouse are finally ready to enjoy your golden years together. And yes, you have also planned and saved for these future retirement years. Maybe you planned many years ago or maybe you planned just recently; but either way, you probably factored in the boost offered from your future Social Security benefits. Whatever the boost might be, wouldn’t you rather maximize those benefits if possible? If the answer is a resounding “YES”, then you want to learn about the various claiming strategies, and fully discuss them with your financial adviser/financial planner. The proper strategy can amplify your lifetime Social Security benefits significantly.

An example of one strategy is waiting as long as possible to start claiming your Social Security benefits. The earliest age that a retiree can start claiming these benefits is 62 years old. However, did you know that once you reach your full retirement age (between 65 -67), your social security benefits increase by 8% each year plus inflation adjustments? Wow, the money claimed increase considerably just by waiting a little longer.

Are there claiming strategies that can optimize your Social Security benefits even if you need to start collecting at an earlier age? The answer is “Yes”. Advantageous strategies can be applied to this situation as well when you know how to maneuver through the claiming process… you just need the proper expertise to guide you through the rules. Once you know these rules and know how to navigate confidently through the claiming process, you can apply a strategy that works in your favor, and maximizes this money.

Some of these claiming strategies involve the idea of spousal benefits. Here, spousal benefits can be applied to a “Restricted Spousal” strategy as well as a “File and Suspend” strategy. According to Jim Blankenship, CFP, EA of Forbes Advisor Network, “File and Suspend allows for the lower wage earner to increase his or her benefits by adding the Spousal Benefit, while the higher wage earner continues to delay his or her benefit, adding the delay credits.” On the other hand, the Restricted Application for Spousal Benefits “provides one spouse or the other with the option of collecting a Spousal Benefit, while at the same time delaying his or her own retirement benefit.” All and all, any couple must carefully consider the particular rules pertaining to these strategies in order to determine the appropriate strategy that applies to their specific situation.

Overall, these claiming strategies can cushion your retirement years with thousands of dollars. If you are thinking about navigating through your Social Security claiming process alone, it might be very unrealistic because the rules behind these strategies can be complex and meticulous. Even the employees at the national and local Social Security offices cannot give any advice; therefore, it’s best to seek the help of a financial advisor who has an in-depth knowledge of the best Social Security strategies for retirees. The world today is very different… life expectancy has increased, pensions have dwindled, medical costs have increased, and the economy remains uncertain. Especially now, maximizing your Social Security benefits is necessary because these are unfavorable conditions. So, make certain that you fully learn and understand the rules of each strategy before you chose. You can add thousands of dollars to your retirement funds just by applying the right Social Security claiming strategy for you.

Blankenship, Jim. “Are You Leaving Social Security Money on the Table.” Forbes. 26 November 2012. <http://www.forbes.com/sites/advisor/2012/11/26/are-you-leaving-social-security-money-on-the-table-you-might-be-if-you-dont-understand-and-use-this-one-rule/>

Roberts, Damon. “The Retirement Planning Edge: Maximizing Social Security.” Fox Business. 27 November 2012 <http://www.foxbusiness.com/industries/2012/11/27/retirement-planning-edge-maximizing-social-security/>


The Tax Season Cometh: Putting your refund to work for you.

With tax season just around the corner and the IRS having just released information that it plans to issue refunds about as quickly as it did last year (9 out of 10 refunds released in under 21 days (www.irs.gov)), now is the time to start considering what you’re going to do with your refund. While the promise of a big check from the government always comes with some temptations (a new grill for the summer, a gift you missed out on over the holiday season) you should always make sure you’re investing that money wisely. While it may seem like a gift, and an easily spent one at that, remember that it’s mostly money from your other sources of income that you were never able to collect on. Your tax return should be treated like any other money put away, safe from withdrawals for a long period of time; take your excitement at getting such a big break in the mail as incentive to be smart and save. Here are a few tips to get you thinking about putting some of your tax refund to work.

Save it! Invest it!: The importance of either putting some of your return into a savings account or investing it cannot be stressed enough. A good rule of thumb, at the bare minimum, is take ~10% of every check you get and put it into a savings account or towards your investments. Before you know it, you’ll have a tax return a few times over waiting for you whenever you need it that can be used anytime throughout the year.

It’s too much and you don’t know what to do with it!: If it seems like you’re getting too much back on your tax return, get in touch with either a tax preparation specialist or financial advisor.  In this case, you can see if there are any changes you can make to your tax documentation in order to get more of that money throughout the year instead of the one big chunk annually. Chances are if you haven’t already done so, you could be seeing a slight rise everywhere else and a reduction in your tax return check.

IRA?: Alongside the 10% rule for saving/investing, it’s also a good idea to look at doing something long-term with some of the money, namely, putting some of it towards an IRA or other form of guaranteed retirement income (annuities, etc). Nothing is more valuable to someone right now than an investment in future stability. Consider asking your advisor, while you’re trying to shrink your tax refund, about recommended retirement investment opportunities.

While it may seem like something of a killjoy at first, making sure that the first thing you do with your tax return is putting some of it in a place that will give you access to it in the future is of utmost importance in tax season. Whether you’re saving, investing, putting it into a retirement fund or contributing to a child or grandchild’s education, just remember that it’s better if your short-term desires wait until your long-term stability is taken care of.  Before you know it, they will have caught up to each-other, and you’ll have made some hefty gains in the meantime.


Make Sure That You’re Covered Long-Term

We’ve all heard the horror stories about the investor who did everything right, who had the right job, maxed out their 401k, diversified their portfolio until comfort in retirement was assured, only to have the rug swept out by a debilitating illness.  For this exact reason, insurance companies have created a product called long-term-care insurance.


Since Medicare doesn’t pay for most nursing home costs, and Medicaid doesn’t ante up until your assets are almost depleted, investors who have wealth that they want to pass on to loved ones need to protect it.  Long-term-care policies do just that, In fact, many insurance agents will tell you that as you near retirement age, long-term-care insurance becomes a real priority.  That priority was much easier to satisfy before the policies became losers for the insurance companies, leading insurers like Manulife Financial to ask state regulators for average rate increases of 40%, and other insurers like MetLife, to stop selling new policies entirely.


As baby boomers who already have long-term-care insurance get older and file more claims the premiums are bound to continue to rise, and if you get into a difficult financial spot and let your policy lapse you’ve lost your entire investment. So, what are the options for someone who wants to protect themselves, but doesn’t want to get skinned doing it?


What are your options

First, it’s important to deal with an insurance agent who is knowledgeable in the products that he is selling, and is able to explain the options of different policies and the merits of each.  There is a huge price range across different providers, and agents who only sell one product aren’t going to be able to give you the benefits of that variety.


As the premiums for long-term-care climb, many providers are addressing the rise in cost by offering custom options.  For instance, instead of unlimited coverage, you can shave some money off your premiums by limiting care to three or four years. According to the Centers for Disease Control and Prevention (www.cdc.gov/nchs/data/databriefs/db91.pdf) the median stay in a nursing home is 671 days.


So, cutting down on the stay that you’re allowed could be a smart option for limiting costs.  Some policies also allow you to reduce the annual inflation adjustment from 5 to 3 percent to cut those costs even more.


Options in insurance

Another option for investors who are unable to get long-term-care insurance, or find the costs too prohibitive, are the new, combo products being offered by insurers like Hartford Financial Services group, Prudential Financial, and MetLife.  These permanent life policies and annuities feature accelerated death benefits, or living benefit riders.


What this means to you is that the death benefit of these life insurance policies can be tapped in the event of a diagnosis of chronic illness, and used to pay for care. Many investors like these policies because, unlike traditional long-term-care coverage, if you never need the care, the policy will pay your heirs just like a traditional life insurance policy.  The living benefits of the combo products are usually limited to the death benefit for the policy, though, whereas long-term-care policies will pay all qualified expenses for whatever duration of stay the policy covers.
The decision between these two flavors of insurance is a personal one, but for investors who want to feel safe in their retirement, and who want to make sure that the fruits of their hard work can be passed down to their loved ones, some type of coverage is important.  Talk to your financial advisor to see which one gets you closer to your retirement goals.


How To Dig Yourself Out From Debt

Debt: the deep hole that seems so effortless to dig but impossible to climb out from.  With every new credit plan comes a barrage of danger for consumers already drowning in bills.  It’s a problem that millions of Americans struggle through every day and for many it seems that there is no end in sight.  The pile of debt can get so high that it’s hard to find a place to start, which is often times the most difficult step.  It’s similar to the people on those “Hoarders” shows, when every room is piled high with junk the task can seem too daunting to even begin.  Hours and hours of work hardly make a dent and progress is difficult to achieve.  But for those looking at an uphill climb out of debt, there are ways to make those first few steps easier, and more productive.


The first main process on the road to recovery is to recognize and break your bad habits.  There is no point in doing the work to get out of debt if you will simply bury yourself back into it in a year.  You need to take the time to recognize the spending behaviors that have caused the problem in the first place and work to break them. Take a look at your budget for each month, and make more of an effort to live within it. One way to do this: stop using credit cards.  Consumers find it increasingly easy to mindlessly swipe their plastic through every register they see. By limiting yourself to cash or debit accounts you will be more aware of your spending and unable to add to your debt problem in the process.  Once you have curbed the problem you are ready to begin your journey.


Step 1:  Map it out.  It’s important to lay out your debt in front of you so you know what you are working with.  The options for these are your choice.  Use a spreadsheet or a chart or a series of pictograms or whatever works best for you to understand your debt.  Separate each account by balance, rate, minimum payment and the number of payments you have left.  This organization allows you to plan out the rest of your steps in order to meet your goals.


Step 2: Budget a payment plan.  Once you have all of your debt in front of you, determine how much you can put toward paying off your debt each month.  The goal for this amount should be more than all of the minimum payments on your accounts combined.  This may require some stricter budgeting throughout the month.  Limit your spending wherever you can.  Pack a lunch for work instead of eating out, avoid frivolous or impulse purchases, or turn down your heat at home by a few degrees.  Small changes can give you the boost you need to start to dig yourself free.


Step 3: Focus on a few accounts at a time. The first two steps have given you a plan on how to become debt free, but step three is where the work begins. Pick two or three debts and pay off as much as you can above the minimum on those each month.  This will allow you to begin your ascent.  The selection of these few targeted debt accounts shouldn’t be random.  There is an easy order to follow when attacking these balances.  Pay the one with the lowest balance first.  This decision is wise both financially and emotionally as crossing accounts off of your list can simplify your journey and feel super satisfying at the same time.  Second, go after the debts with the highest interest rates.  Paying these down early will help you nip the problem in the bud and keep your debt balance from rising.  Your last goal is to aim for your secured debt that has just a few payments remaining.  If you pay above the minimum you can cut out the final payment or last few payments altogether, giving you a lot more freedom in your monthly budget.


The final step is simple: once you have dug yourself out, don’t fall back in.  Often times, the freedom associated with people becoming debt free leads to the same habits and behaviors that caused the debt in the first place.  If you feel the need to reward yourself, do it with a deposit into a savings account or a contribution into your retirement plan.  Keeping yourself debt free and financially stable will be the greatest gift you can grant yourself.