01/17/17

How to Save for Retirement in Your 40s

By Rodney Brooks, Jan 8, 2017, THE STREET.COM

Many people wait until later in life to start saving for retirement. It gets complicated with kids and aging parents, but Gen X can find a winning strategy.

Beginning your retirement savings in your 20s and 30s is a great strategy, recommended by many financial planners. But many people wait until their 40s – after they have settled into family life with marriage, automobiles, kids and first homes. That’s just the reality. But it’s still not too late to begin savings habits that will pay off handsomely once you reach retirement age.

“As you get into your 40s, chances are you are making a little more money, starting to hit stride in your career, and maybe you have kids,” says Tom Mingone, founder and managing partner of Capital Management Group. “You may have discretionary income.”

The most effective method to save is out of your paycheck, through your 401(k), he says. “The best way to save is a direct deduction out of your check,” Mingone says. “Extra money is like extra closet space. There is no such thing. You use what you have. Pay yourself first. Have money coming out on the 1st or 15th (of the month). You will get used to living on less.”

In their 40s is when people have a job history and higher income, says Laurie Blackburn, first vice president, Investments at the Speck – Caudron Investment Group of Wells Fargo Advisors in Alexandria, Va. ”It is time to start maxing out your IRA and 401(k) contributions, if they haven’t,” she says. “If you start younger, you can increase that amount every year.

A lot of 401(k)s have a built-in escalator – 3% (contribution rate) goes to 4%. Every year, your contribution increases 1 percent, till you are maxed out.” By the time you are in your 40s, you should be maxed out, she recommends. Next up, you should look at your asset allocation and risk tolerance, she says.

Bob Stammers, director of investor engagement for the CFA Institute, says that even though their 40s are top earning years for many, it is also the time when people have many claims on their income, especially things like their kids’ college tuition. For that reason he says he would like to see the retirement system go from annual dollar limits to lifetime limits.

“At different times of people’s lives they have significant income they can contribute to retirement plans,” he says. “For most people, it’s in their 40s. People need to think about maintaining their lifestyles and put away any windfall or increase in salary.” Of course, many people in their 40s start to consume more, because they’re earning more. “Those that don’t get disciplined about savings habits and tracking expenses don’t have money they can put toward retirement,” Stammers adds.

Mingone says no matter which stage you are in life, you also need to think about taxes.”You always want to be aware of your tax bite,” he says. “We think of saving for retirement in three bucket – taxes now, taxes later and taxes never,” he says. “Taxes now are mutual funds. You pay taxes now on gains. Taxes later are things like 401(k) and IRAs. You get a deduction, but you don’t pay taxes now. You pay taxes later. Taxes never are things like Roth 401(k), Roth IRA and life insurance. If you structure it property, all you income will be tax free.” He says it’s also important to be actively manage your investments at the end of the year: Harvest your losses and minimize earnings. “You don’t want to be taxed heavily,” he adds.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®

01/10/17

18 Questions to Ask Yourself Before You Retire

By Dave Hughes, January 5, 2017, US News & World Report

After you retire, your daily life will change in more ways than you probably imagine. Developing a clear picture of how you want to live your life after you retire will help you make better plans and adapt more easily to the changes retirement brings. You need to decide what your retirement will be like and come up with specific things to look forward to. If you’re married or partnered, there are many conversations to have together. You shouldn’t assume that your spouse wants the same things you do. Give careful thought to these questions as you approach retirement:

1. What does being retired mean to you? Obviously, retirement typically means not going to work. Beyond that, you may look at the next chapter of your life as a new adventure, or you may see it as a chance to relax. While it’s fine to decompress for a few weeks or months after you retire, sooner or later you’ll want to get on with your new life.

2. What do you want to add to your life and eliminate from your life? Aside from no longer working, you may want to decrease or eliminate your involvement in professional associations, boards or other obligations. You may wish to cancel housekeeping or landscaping services and take on those tasks yourself or vice versa. You are now free to engage in only those things that truly bring value and enjoyment to your life.

3. What are your travel plans? This is a multi-faceted question that includes how much time you hope to spend traveling, where you want to go and how you want to get there. Your travel plans may range from exploring the world to simply visiting friends and relatives. You may decide to become a snowbird.

4. What will you be passionate about? Once you no longer have to focus on your career or raising children, your interests and priorities may change dramatically. Think about what will excite you and give you things to look forward to. If you haven’t been focused on anything other than your career and your family, you will need to find something new.

5. Is it important to be close to your family? If you live away from your family, think about how often you will want to visit them and how often you hope they will visit you. Keep in mind that although you will have a lot more time on your hands, other family members may still be busy with their careers. If you have grandchildren, consider how much you’re willing to serve as a babysitter.

6. Do you want to remain in the community where you live now or move somewhere else? Many people dream of moving to a warmer climate or a favorite vacation spot near a lake or in the mountains. But it’s important to consider whether your new location has the businesses, services and recreational and cultural amenities you will want for your day-to-day life. You’ll also be moving away from many of the people who are most important to you.

7. How do you feel about downsizing? In addition to considering the pros and cons of moving to a smaller house, think about how many possessions you are willing to get rid of and what you definitely want to keep. You and your spouse may have very different opinions on this issue.

8. How structured or spontaneous do you want your life to be? While you might eagerly anticipate freedom from your tightly-structured work day and look forward to waking up each morning without an alarm clock, you will probably find that living a totally unstructured life isn’t as enjoyable as it sounds. Some structure helps ensure that you will do the things you want to do and keep your life on track.

9. Do you plan to start a business after you retire? This doesn’t have to be a business in the traditional sense. There are many activities you could pursue that produce income, such as selling crafts or artwork, consulting services or becoming a paid writer, musician or public speaker.

10. What activities do you plan to engage in? Hopefully, you are looking forward to retirement as a time when you can do many of the things you didn’t have time for while you were working. You’ll want to coordinate with your spouse to find the right combination of solo activities, things you will do with your spouse and group activities.

11. What do you want your social life to look like? After you leave work, socialization doesn’t happen as easily as it did before. You will have to take a more proactive role in keeping in touch with your friends. It’s a good idea to choose some activities that will expose you to new people. Staying socially engaged is extremely important after you retire in order to avoid loneliness.

12. Which people in your life are most important to you? Think about how you will stay engaged with friends after you retire, especially those who continue to work. If your circle of friends consists mostly of work colleagues, you may be surprised by how quickly those relationships fade. Similarly, if you move after you retire, you will have less contact with your current friends.

13. What new things do you want to learn? Many seniors stay mentally engaged by continuing to learn throughout retirement. The best part is that you can focus on whatever you are interested in and not worry about exams and grades.

14. What’s on your bucket list? Having a list of things you want to do and places you want to visit is great, but in order to actually accomplish them you will need to set some dates and make some concrete plans.

15. What will provide a sense of purpose for you after you retire? If you relied heavily on your career accomplishments for purpose and fulfillment, you may experience a feeling of emptiness after you retire until you find a new source of satisfaction.

16. Do you want to be of service to others in some way, such as volunteering or mentoring? If you envision retirement as being entirely about relaxation, leisure and fun, you may discover that you still value the reward and the sense of purpose that comes from helping others. Mentoring or teaching is an excellent way to share your knowledge with others.

17. Do you want to spend all or most of your money on yourself or leave an inheritance to your beneficiaries? There’s no wrong answer to this question, but it’s important to be on the same page as your spouse. You may be surprised to learn that your heirs hope that you’ll spend your money on yourself.

18. How do you want to be remembered? After you leave your working career, you will probably realize that your professional accomplishments such as awards, promotions and an impressive job title don’t matter as much. You may find that the impact you have on other people and what you contribute to the world matters a lot more.

Thoughtfully answering these questions will help you to envision a future filled with exciting possibilities and give you a clearer picture of what you want for the rest of your life.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®

12/19/16

No Savings, No Backup Plan, No Fairy Godmother: How to Handle a Financial Disaster

By Susannah Snider, Oct. 18, 2016, US News & World Report

A financial disaster is hard enough to navigate. But it gets even harsher when you have no emergency fund or backup plan to help you work your way out of it. So, what’s an unlucky person to do after, say, a broken-down car or job loss leaves you short on cash and high on stress?

Fortunately, the financially unfortunate have access to a range of resources for patching up a financial disaster, experts say.

But keep in mind that all of these choices have their downsides. “Ideally you wouldn’t choose any of these options,” says Stephanie C. McElheny, a certified financial planner and assistant director of financial planning at Hefren-Tillotson in Pittsburgh. “None of them are good options – it’s just lesser evils.”

Here’s how to handle a money mishap when you have no backup plan – and no fairy godmother to boot.

Sell your stuff. A quick way to find extra cash without tapping credit is to hawk your belongings. “There are lots of options to get rid of your stuff,” writes Niv Persaud, a certified financial planner and managing director of Transition Planning & Guidance, a boutique financial advising firm in Atlanta, in an email.

Consider peddling your hand-me-downs on eBay, Craigslist and at secondhand stores. Heck, if you can survive without your car – and you’re in dire financial straits – consider letting it go.

Land a part-time job. If you’ve got time to spare, look into applying for a side gig. ”With the holidays around the corner, many retailers are looking for additional help,” Persaud writes. “Another option is [to] use your skills on sites, such as Fiverr, Elance, etc. You can also bite the bullet and babysit for friends [and] family or take care of their pets when they’re out of town.”

By cutting costs and using the debt snowball method, this duo slashed thousands in 25 months.

Slash spending. Carve out room in your budget by trimming expenses wherever possible. If housing is a major budget-buster, for example, consider getting a roommate, says Jamie Ebersole, a certified financial planner in Wellesley Hills, Massachusetts.

Do what you can to cut down on eating out and shopping. Re-negotiate or cancel unnecessary monthly bills, like your cable bill, to make your last dollar go further.

After you’re done digging your way out of this financial hole, consider continuing these good behaviors until you’ve built up at least six months of living expenses in an emergency fund.

“It’s best to just be proactive and have that emergency reserve, so this can be avoided, or at least mitigated [in the future],” McElheny says.

Work with your creditors. If your financial disaster revolves around debt, you may be able to negotiate a gentler repayment plan or reduced monthly bill – and carve out some extra room in your budget.

“Actually talk to your creditors,” Ebersole says. “Most creditors are willing to work with you if you’re upfront with them and aren’t trying to hide it.”

Tap your home equity. If you’re house-rich but cash-poor, borrowing against your home’s value can help you fund major, unexpected expenses, like medical bills, with a relatively affordable loan.

Consider a home equity line of credit, a type of revolving credit in which your home serves as collateral. A lender will set your credit amount based on the home’s appraised value, the balance owed on the mortgage and your ability to repay, including your credit history, according to the Consumer Financial Protection Bureau. Or consider a home equity loan, which provides a fixed amount of money, which you repay over a set time period.

Credit card expert Beverly Harzog offers some unusual tips in her new book ’The Debt Escape Plan.’

Borrow against your insurance policy. You can access relatively affordable debt by tapping the cash value of your life insurance policy, experts say. In this case, the insurance company will essentially lend you money while holding your policy as collateral.

Keep in mind, however, that if you fail to repay your loan – and it balloons to exceed the policy’s cash value – your policy could lapse and trigger a major tax bill.

Tap your retirement savings. If you have a 401(k) plan, you can borrow up to 50 percent of its vested account balance, or up to $50,000, whichever is less. So, to borrow the full $50,000, you’ll need to have at least $100,000 in your plan. Loans borrowed against your 401(k) must typically be repaid within five years. And failure to repay on time can leave you saddled with penalties and fees.

Savers who have been squirreling away money in a Roth IRA for at least five years can withdraw their contributions penalty-free. “You can always take out the principal without paying any taxes on it,” Ebersole says.

Bottom line: Even if you can repay loans taken from your retirement accounts on time, you’ll miss out on the gains you would have realized had you left those funds to grow on the investment market.

Borrow from your 529. Contributors can withdraw any funds placed in a 529 plan, which is for educational expenses, Ebersole says. But withdrawing money for noneducational expenses isn’t ideal since it can trigger taxes and a 10 percent penalty on the account’s earnings.

As with borrowing from a retirement account, dipping into your college savings account will cost you the returns you would have seen had you let the funds grow on the market.

Ask family and friends. ”Family and friends are always a good place to go if you don’t have any other options,” Ebersole says.

Don’t forget that mixing loved ones and loans can make for a potentially toxic combination. “Borrowing money in any capacity from family has the potential to backfire and can really strain relationships,” McElheny says.

Declare bankruptcy. Another last resort is to declare bankruptcy. But keep in mind that going through bankruptcy will make it hard to access credit for years in the future, including loans for a child’s college education and other useful debt.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®

12/12/16

3 Ways to Boost Retirement Income

By Linda Backus, Oct 19, 2016, MotleyFool.com

A whopping 52% of working American households are “at risk” for not being able to live as comfortably as they did before retirement, according to the findings derived from the 2014 National Retirement Risk Index published by the Center for Retirement Research at Boston College. That’s a sobering statistic considering retirement is classically considered a time when people get to enjoy the perks of a lifetime of hard work.

Whether it’s finding the cash to take the trip of a lifetime or simply finding the money to make ends meet, there are a myriad of ways to quickly fatten your wallet, and in the process, enrich your quality of life.

How much can I make?

The first step for any retiree seeking more income should always be to know the rules when it comes to Social Security benefits. For those who are 62 or older and receiving benefits but haven’t reached full retirement age, the limit for new employment income is $15,270 per year without facing penalties, according to the Social Security Administration. Any amount above that will be deducted from your monthly checks based on a calculation that factors in your age and how much you are making. But when you reach “full retirement age” you can earn as much as you want and still receive your full benefit check each month.

Once you’ve determined how much you can safely make without impacting your benefits, the sky is the limit in terms of what you can do to boost income. Here are three simple ideas that can improve your financial status quickly without too much hassle.

Seasonal work is plentiful for seniors

Working a couple of months a year can increase income in the short term leading to long term financial benefits. Industry analysts were quick to point out as the holiday season approached that jobs are plentiful, and could translate into year-round employment.

Job posting giant Monster staffer Lily Martis made it a point to highlight the findings of global outplacement consultancy Challenger, Gray & Christmas, Inc. which predicted companies across the country are poised to take on 700,000 seasonal employees to deal with the rush of holiday shoppers this year. But the jobs aren’t all in retail, said John A. Challenger, chief executive officer of Challenger, Gray & Christmas in a press release.

“The big change we are seeing, however, is that while seasonal retail jobs remain flat or shrink, there has been a marked increase in seasonal job gains in other sectors,” he said. “The sector with the biggest increase in holiday hiring in recent years has been transportation and warehousing, as more and more holiday shopping is done online.”

When checking out possibilities for seasonal work, don’t forget to consider the perks. Some positions at higher-end department stores include discounts on items you purchase or commissions for sales. As many as 20% of seasonal hires are retained for work throughout the year, according to Martis — which you may or may not want — and many seasonal workers come back during the next year’s holiday rush.

Retirees can teach

Retirees have a wealth of knowledge that can easily translate into more income. Teaching is a great way to share skills and stay engaged in learning while saving for a big vacation or finding new revenue to invest. Depending on your specialty and preferences, teaching can be an incredibly flexible job choice as well.

Consider tutoring or consulting in your old field. Most colleges and universities will allow tutors to post flyers on campus or information on online bulletin boards.

Another flexible way to make extra money on a part-time work basis is to work as a substitute teacher. School systems across the country are continuously looking for a stable of people who are willing to be on-call when a teacher is sick or takes a personal day.

The range pay varies by state and district. In the Northeast, substitute teachers can make anywhere from $75 to $150 per day depending on the district and the level of experience. Do your homework, however before considering this option. Some districts require that subs have a Bachelor’s degree to be considered, and you will likely be asked to undergo a background check including fingerprints. Subs can agree to work every day, a few days a week or even half-days. (Let’s face it, having the summers off isn’t a bad deal either.) The National Education Association has an excellent state-by-state summary that can help you get started.

And, it’s worth noting that teaching does not have to be in traditional subjects. There may be money to be made teaching bridge, chess, sewing, or countless other skills you may have developed during your life that you can share with others in retirement.

Sell things you don’t need

There’s no point in hanging on to items that have out-lived their usefulness, especially when you’re looking for a fast way to improve your financial outlook. One of the easiest ways to make some quick cash while cleaning out your basement or attic in the process, is to call on a reputable auction house to come cart the stuff away. While this option will only work once to boost your income, it’s basically like getting paid to have someone else clean your space. Owners will get a percentage of the purchase price. It’s often well worth the money to take a lower percentage if the auction house is willing to do all the work. The National Auctioneers Association provides a list of reputable auction houses in your area.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 

12/5/16

8 Ways to Safeguard Your Financial Life as You Age

By Teresa Mears, Oct. 20, 2016, US News and World Report

Taking steps when you’re younger can be essential to keeping your money safe in your later years. We’ve all heard the horror stories about elderly people being fleeced of their life savings, falling prey to con artists or losing their homes because they never got a bill for their real estate taxes.

We all think it could never happen to us. But you may want to think again. Research shows that even people who never succumb to dementia lose some of their financial prowess as they age. Unfortunately, they don’t always lose confidence in their ability to manage their own finances. That can lead to financial losses.

People of any age, but especially older people, should take steps when they are young to protect themselves from financial errors later in life. They can include steps such as automating bill pay or discussing financial decisions with a trusted friend or relative before taking any action.

Financial scams often target older people, partly because they have more money but also because they are often seen as more trusting. Even people savvy enough to avoid scams can make financial mistakes because they’re disorganized or forgetful. But they may be too proud to ask for help.

“If you’re in that position, you may be in a state of denial. And you don’t want to [ask for help], and you’re embarrassed,” says Joseph Lucey, president of Secured Retirement Advisors in St. Louis Park, Minnesota. “You want to plan for the worst but hope for the best.” Awareness is the first line of defense to keep older adults safe from fraud.

Among the most vulnerable are widows and widowers whose partners previously handled all the finances. Not only are they dealing with unfamiliar transactions, they’ve lost a trusted partner with whom they could discuss decisions. “Spouses keep an eye on each other. They have somebody else to keep tabs on them,” says Scott Tucker, a fiduciary investment advisor in Chicago.

A 2009 study by the Center for Retirement Research at Boston College found that people made the fewest financial missteps between ages 43 and 63, with 53 being the peak financial age. There are things people of all ages can do to avoid becoming the victim of bad financial decisions, but getting systems in place can be particularly important as you age.

Here are eight steps to take to safeguard your financial life:

Automate transactions. Anyone of any age can forget to pay the mortgage or real estate taxes. Automate as much as you can, from utility payments to mortgage payments to required distributions from retirement accounts. And have anything you can deposited directly into your bank account. Then make a list of what you have automated and let your heirs know where it is. Don’t automate and ignore, however. “You still need to look at your statements, just like you look at your bills,” says Gerri Walsh, senior vice president for investor education at the Financial Industry Regulatory Authority, which maintains a securities helpline for seniors as well as a BrokerCheck service, which allows consumers to check the employment history, certifications and license of brokers as well as any serious complaints. “It’s still important to know what you’re being charged.”

Set up banking alerts. Most banks will alert you if your balance drops below a certain level. You can also set up alerts for large credit card purchases, due dates for bills and reminders to check your statements. Alerts can come via text or email, whichever you’re more likely to see. You can also create calendar alerts on your phone or computer or write reminders on a paper calendar.

Keep your estate planning documents updated. Depending on your situation, you might need a will, a living trust, health care directives, a power of attorney or other documents to let someone else manage your affairs while you’re still alive and to handle your business once you’ve passed on.

Organize your important papers and let someone know where they are. Make a list of assets, gather important documents and passwords and put them in a secure place, perhaps a home safe or waterproof box. Then make sure one of your children or trusted confidante knows where they are in case you’re incapacitated.

Simplify your accounts. Consolidate brokerage and bank accounts. Close accounts that have only small amounts of money. That gives you less to manage. If you have multiple credit cards, use just one so you’ll have only one bill to pay.

Sure, boomers have time and experience on their side, but they could still learn a thing or two about money from millennials.

Don’t make quick decisions. Sales people, both good and nefarious, push for a quick response because they know people are more likely to buy in the heat of emotion. Make a pact with yourself that you won’t make any significant financial move, such as moving your investments to another brokerage firm or buying a new car, without first discussing it with a trusted friend or relative. “Emotion ties into fraud susceptibility,” Walsh says. “When older individuals were invited into a heightened emotion state … they were more likely to be receptive to a fraudulent pitch.”

Consider sharing information. If you want someone else to help monitor your finances, have copies of your statements sent to a trusted friend or relative. Authorize your financial advisor to discuss your finances and concerns with a third party, and request an annual meeting to which you’ll bring other family members or friends. You can also give account passwords to those you trust so they can keep tabs on your financial affairs. But be careful with whom you share your information. “There’s pros and cons,” Walsh says. “Sometimes the issue is stranger danger, and sometimes the danger is family fraud.”

Sign up for the Do Not Call registry. That won’t end all nuisance, fraud and solicitor phone calls, but it will reduce the number of them. Refuse to answer other calls from people you don’t know or immediately hang up, and decline offers from strangers who call trying to sell you something, “fix” your computer or otherwise try to separate you from your money.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 

11/21/16

Before Retiring, Take This Simple Test

By Shlomo Benartzi & Martin Weber, Oct. 26, 2016, Wall Street Journal

For some people, the prospect of getting an immediate reward is simply too difficult to resist. One of the most important financial decisions people make is when to retire. It’s also one of the worst decisions many people make. Specifically, they retire too early, resulting in serious financial shortfalls in old age.

The good news is that, according to a new study by Philipp Schreiber and Martin Weber at the University of Mannheim in Germany, there’s a simple two-question quiz that can help predict whether you’ll regret the timing of your own retirement. Here are the questions:

Question 1: You just learned that you are due a tax refund. If you’d like, you can get the $1,000 refund right away. Alternatively, you can get a $1,100 refund in 10 months. Which do you prefer?

Question 2: You just learned that you are due a tax refund. If you’d like, you can get a $1,000 refund in 18 months. Alternatively, you can get a $1,100 refund in 28 months? Which do you prefer?

The two questions are nearly identical. Each poses the same kind of choice. But the second question postpones the two options for delivery by 18 months, while the first offers an option for immediate delivery.

Time will tell

The point of the exercise is to measure the consistency of a person’s time preferences. Someone with consistent time preferences should answer both questions the same way—choosing the early option both times, or the delayed option both times. Such consistency is a requirement for making financial plans that you stick with.

Some people, however, choose inconsistently. They will take the larger tax refund if both refunds require a delay, as in the second question. But they choose to accept the smaller amount when it is available immediately, as it is in the first question. For these people, the prospect of getting an immediate reward is simply too difficult to resist.

The respondents with inconsistent answers exhibit a tendency known as present bias, or hyperbolic discounting. They strongly prefer rewards that arrive right away. While previous research has linked present bias to a lack of retirement savings, this new study, which tallied results from more than 3,000 Germans, shows that present bias can also lead people to retire before they are financially ready.

The researchers found that people who give the most inconsistent answers tend to retire significantly earlier (about 2.2 years on average) than those with consistent preferences. This leads to a roughly 13% reduction in their monthly benefits. Over time, these people are also far more likely to say they regretted the timing of their retirement.

Help steering

This research helps us better understand why people choose to retire early. It can also help us find ways to stop people from retiring too early. For instance, many workers now benefit from automatic savings programs that rely on default payroll deductions to help them save for retirement. These programs generally use a one-size-fits-all approach, recommending the same savings rate for all workers.

While these defaults have boosted savings for many Americans, they could be even more effective if they were personalized according to the results of the two-question quiz. Consider a person who exhibits a strong bias for receiving rewards in the present. Given the likelihood that she’ll be tempted by an early retirement, she might want to be defaulted to a higher savings rate during her working years. This will help her avoid future regret over the timing of her retirement decision, since she will have sufficient savings.

We can also redesign the Social Security enrollment process to minimize the possibility of regret. The program is structured so that you can start receiving payments at any time after the age of 62. However, the monthly payments will be larger for every month you delay signing up to receive benefits, at least until you turn 70. For instance, a person who can expect to receive $1,000 per month if they retire at 62 will see his benefits increase to approximately $1,750 per month if he can wait until he’s 70 before collecting.

A number of economists have argued that waiting for the larger payment is usually a much better deal. Nevertheless, most people aren’t willing to wait. According to an analysis by Alicia Munnell and Anqi Chen at Boston College, the most popular age, by far, to start Social Security is 62.

Fewer regrets

With the new research from Germany, we can come up with strategies to encourage better decisions. One approach is to ask people to estimate their preferred retirement age when they are still working. Because retirement benefits are far off, they probably won’t be tempted by the smaller/sooner amount and will likely predict an age well past 62. While this estimated age isn’t binding, it will allow Social Security to personalize communication with that person in a way that might reduce their future regret. (The monetary amount itself won’t change, just the way the options are presented.)

Let’s say, for instance, that a person stated a preferred retirement age of 70 during his working years. When presenting his retirement options, Social Security could describe the benefits he’d collect at 62 as a relative loss of approximately $750 per month, at least compared with the benefits he’d receive if he waited until his preferred retirement age. Such framing could make the possibility of starting benefits right away far less appealing.

Nobody wants to regret his or her retirement choices; many of these decisions cannot be undone. By identifying those workers who are planning for a late retirement but are likely to succumb to the temptation of an early one, we can take steps to prevent mistakes before they occur.

 To Your Successful Retirement!

 Michael Ginsberg, JD, CFP®

11/15/16

Your Fellow Passenger: Meet the Senior Traveler

By Airlines.org, October 20, 2016

Today’s air travel is more accessible than ever and our skies have never been more diverse. From first-time fliers to seasoned veterans, your next flight is sure to bring together different people from all over the world headed toward their next destination. We’d like to help you get to know a few of your fellow passengers. Throughout the year, we introduced you to the Road Warrior, the Family Travelers and the Millennial Travelers. Finally, we’d like to introduce you to the Senior Traveler.

People dream about it their entire lives—when the average workweek is no longer a factor, the world can be your oyster. And whether it’s the vacation to Italy they’ve always dreamed of or a trip to see their granddaughter’s first soccer goal, retirees depend on air travel to get them there. Sixty-six percent of Senior Travelers are enrolled in a frequent flyer program, so they can earn miles on every trip.

With a lifetime of adventure waiting around every corner, retired travelers are always looking forward to their next adventure. Almost a third of Senior Travelers were likely to fly for personal international travel in 2016 while 76 percent planned to fly for domestic personal travel.

With airfares down 6 percent in 2016 alone, on top of dropping 5 percent in 2015, there has never been a better time for retired travelers to take to the skies. That’s one of the reasons why almost 80 percent of travelers over the age of 55 are satisfied with their overall air travel experience.

Today’s Senior Travelers are a technologically savvy bunch, with more than 60 percent checking in for their flight on a desktop or mobile device.

With fewer time commitments, retirees are discovering their love for travel all over again. U.S. airlines give Senior Travelers the freedom to explore the world and experience the new adventures they’ll find there—especially if that new adventure includes being there to help your grandson take his very first steps.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®

11/8/16

Looking For A Fun Job After Retiring

By Marie G. McIntyre, October 23, 2016, Tribune News Service

Q. Like many baby boomers, I plan to continue working after I retire. However, I would like to do something completely different. For example, I recently met a retired executive who found a job working for a boat dealership. He delivers new boats to their owners and demonstrates all the features.

Although starting over will undoubtedly be difficult, I am very energetic and have a lot of useful experience. I’m also prepared to take a significant pay cut. My problem is that I don’t know how to convey all this in a job application. How can I convince potential employers that I would be an asset to their business?

A. With compensation being less important, you are now in the enviable position of doing work for fun. Therefore, the first step is to determine what type of work you find appealing. Start by making a list of all your interests and hobbies and then brainstorm related employment possibilities.

Next, develop a plan for learning about jobs in your desired field. For example, your boat delivery buddy might have done research by attending boat shows, visiting dealerships or chatting with employees at a marina. Eventually, the people you meet along the way will become part of your job search network.

With a radical career change, networking will be your most valuable tool. Randomly submitting applications won’t be helpful because your background has no apparent connection to the jobs you want. On the other hand, a personal conversation will allow you to convey your character, motivation and sincere desire to learn.

Since your ultimate goal is to get hired, be prepared to provide a concise career summary, highlighting any relevant skills and experience. If it’s been awhile since you looked for work, take time to refresh your interviewing skills. And since this is part of your retirement, please remember to relax and enjoy the process.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®

10/31/16

Older Workers and the Search for “Good” Jobs

By Steve Vernon, September 22, 2016, CBS Money Watch

Working longer is becoming the go-to retirement plan for millions of older Americans who report they expect to keep working well into their retirement years. Many say they need the money and benefits, and most likely they’re right.

How many older workers are working at “good” jobs, compared with those who are desperately holding on for purely financial reasons? It turns out that defining “good” and “bad” jobs can have many subtleties, and it’s highly individualized to people’s goals and circumstances.

The Schwartz Center for Economic Policy Analysis (SCEPA) publishes a monthly report on unemployment for workers age 55 and over. Its August “older worker at a glance” brief noted that the unemployment rate for these older workers, as reported by the U.S. Bureau of Labor Statistics (BLS), is 3.5 percent, a historical low. This low rate is often cited as evidence that older people can continue working if their retirement income falls short. But simply focusing on this rate can be misleading. Note that this particular measure counts those who are unemployed as people without jobs who’ve been actively looking for work in the past four weeks.

The SCEPA brief also reports a total unemployment rate of 8.7 percent for workers age 55 and older. This rate is the sum of the BLS unemployment rate, workers who are working part-time but would rather work full-time and unemployed people who’ve recently given up looking for work. When you add jobless older workers who gave up looking after more than four weeks, the resulting unemployment rate is actually 12 percent. For these 12 percenters, just about any job might be considered a good one.

The SCEPA brief goes on to report that an increasing share of older workers are in “bad” jobs – 29.1 percent in July 2016 compared to 27 percent in July 2006. SCEPA defines a “bad” job strictly in financial terms. It’s a job for people working 30 hours per week or more that pays less than two-thirds of the median wage for such workers. In July, this median wage was $880 per month.

Other considerations can be used to define good and bad jobs. “Finding work that fulfills a sense of purpose is a major theme for older workers,” said journalist and author Mark Miller, who is also the editor of retirementrevised.com​. “Many people who have found themselves stuck in unfulfilling careers are looking for that second chance to get it right, and the research tells us they are happier, healthier and more likely to ultimately enjoy a successful retirement.”

Among the many other aspects for defining a good job are a harmonious work environment, friendly colleagues, flexible schedules or a short commute. A recent report by Merrill Lynch and Age Wave​ looked at the reasons retirees cited as motivation for working:

  • Staying mentally active (62 percent)
  • Staying physically active (46 percent)
  • Maintaining social connections (42 percent)
  • Keeping a sense of self-worth (36 percent)
  • Needing the money (32 percent)

Note that financial need ranked well below other considerations. As a result, it’s possible that many older workers may intentionally accept lower-paying jobs in exchange for increasing their fulfillment and freedom. In fact, many retirees report that they’re happy even though they have less income​ compared to when they were working previously.

What does all this mean if you’re approaching your retirement years? Spend the time doing the math and determine how much money you really need to support the life you want. Figure in how much income you’ll receive from Social Security, prudent withdrawals from savings and a pension if you have one. This exercise can help you find work that’s best for your unique goals and circumstances.

You’re much more likely to enjoy life in your retirement years if you’re working because you want to and not because you need the money. And if you really need the money, you might enjoy life more if your work keeps you mentally, physically and socially active. Work that’s flexible or part-time might also give you the freedom to pursue your hobbies, interests and travel.

If you’re in your mid-50s or early 60s, now’s the time to start planning for your retirement years​, including estimating your sources of income and determining how much you’ll be relying on work. If you need to continue working in your retirement years, it will take some planning and effort​, including taking care of your health, updating your skills and nurturing your contacts. But doing so will increase the odds that you’ll find good work and have a good life in retirement.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 

10/24/16

You Got a Pay Raise, Here’s How Not to Blow It

By Jeff Reeves, September 26, 2016, USA Today

Congratulations, you’re (probably) getting a raise!

According to Aon Hewitt’s 2016 U.S. Salary Increase Survey of more than 1,000 companies, base pay will rise 2.8% on average in 2016 and is expected to rise 3.0% in 2017. And that’s on top of the 5.2% boost in median household income — up to $56,516 in 2015 — that the U.S. Census Bureau recently reported.

Of course, that’s the average. Unsurprisingly, the report from talent firm Aon Hewitt indicated that “low performers” will typically get nothing in the way of raises.

And bigger picture, certain industries are looking better for employees than others. Aon Hewitt found the 2016 budget for salary increases at property and casualty insurers was the brightest, with a 3.3% bump on average, while the outlook for workers in the oil and gas industry was the bleakest, with just a 1.5% increase in overall salary budgeted.

Getting a bigger paycheck is always good news. But finance experts say running right out and spending that extra cash may not be the best idea.

“If you have more money coming your way, I recommend you siphon it off,” said Charles Sizemore, chief investment officer of Sizemore Capital Management in Dallas. “Continue to spend at your current levels, and use the excess to save and invest.”

So where, exactly, should you put that cash instead of buying a new flat screen or a tropical vacation?

Here are some ideas:

Build emergency savings: A staggering 66 million Americans have zero saved up for an emergency like car repairs or a broken fridge. “An ideal savings cushion is enough to cover six months of expenses,” said Greg McBride, chief financial analyst at Bankrate.com. “Getting to this goal will certainly take time, but it is important to have a direct deposit from your paycheck into a dedicated savings account and increase the amount of that deposit with each pay increase.” This fund won’t just help you replace a broken appliance, but also help you avoid troublesome financing options, such as payday lenders or credit cards that can charge high fees or interest.

Increase your retirement fund. After a rainy day fund, the next must-have to finance is your retirement fund. That means taking advantage of a tax-deferred account like a 401(k) — particularly if your employer matches the funds you contribute. “In addition to building a nest egg for the future, you’re getting a tax break today,” said Sizemore, since contributions to a 401(k) lower your total taxable income and IRA deductions are tax deductible.

Pay down debt: If you have a high-interest-rate loan that’s outstanding, either for credit card debt or a car or tuition, then zeroing out that balance can be one of the most effective investments you can make. “Paying down a 16% credit card balance is a risk-free return of 16%,” said McBride.

To Your Successful Retirement

Michael Ginsberg, JD, CFP®