Americans Underestimate Long Term Financial Needs

By Javier Simon, September 2017, Plansponsor.com

Despite being confident about their current financial situation, a large portion of Americans significantly underestimate the projected costs of living in retirement, according to a recent survey by independent adviser Financial Engines. The study found that 58% of respondents at least 65 years of age and 76% of those between the ages of 55 and 64 believe the average married couple retiring at age 65 would need between $50,000 and $200,000 for health care. Financial Engines estimates the actual figure is $266,000.

Moreover, 64.9% of respondents to a financial literacy quiz offered by Financial Engines did not know they could defer claiming Social Security benefits until age 70, potentially earning between 6% and 8% in additional lifetime benefits under current conditions for each year they delay between ages 62 and 70.

And even though 47.3% of respondents said they felt “somewhat or much more secure” about their finances compared to five years ago, only 8% of those people passed the financial literacy quiz. Overall, only 6% passed the quiz, which covered topics around financial decisions people are likely to make during their lifetime.

“It’s not surprising that Americans are feeling better about their financial situations given low unemployment and a record-breaking stock market,” says Andy Smith, CFP and senior vice president of financial planning at Financial Engines. “But as our quiz shows, there’s a persistent problem with financial literacy in this country. When it comes to your finances, poor decisions you make today can cost you for the rest of your life.”

Financial Engines found that people struggled most with quiz questions regarding long-term financial decisions such as paying for health care in retirement. And as the health insurance industry undergoes ongoing uncertainty, studies show many Americans are highly concerned about health care costs in retirement. Many workers currently facing increasing costs have stomached the blow by cutting into their retirement savings.

But managing health care costs is not the only long-term financial issue many people are having trouble with. The Financial Engines survey found more than half (51.4%) of people significantly underestimated how much life insurance they should have, which is recommended to be 10 times their annual income. Several survey takers also undermined expected longevity in retirement. Plan sponsors may be able to help employees alleviate the financial downside of living longer by introducing longevity annuities to investment menus.

Financial Engines notes, “While no one knows exactly how long they will live, many people underestimate standard assumptions for life expectancy, which can lead them to save much less than they need. Nearly three out of four people (72%) were unaware that the typical 65-year old man can expect to live about another 20 years, on average, with 61% underestimating longevity by at least five years. The Social Security Administration estimates that a man age 65 today can expect to live, on average, until the age of 84.3 years old. A typical woman age 65 today can expect to live, on average, until age 86.6.”

Smith adds, “Often, people don’t have a realistic idea of their cost of living or how expensive things will be in retirement. While each person has a unique financial situation, it’s important to remember that you are not alone. Take advantage of helpful online planning tools and if you want more personalized help, reach out to a financial professional you trust – someone who can help clarify complex issues and guide you through the financial planning process.”

For its study, Financial Engines surveyed 1,000 individuals between the ages of 18 and 65 who are employed full-time, part-time or self-employed. The survey and panel were both fielded using the Survata Publisher Network. Fielding was executed in July 2017.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


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®


Majority of Today’s Retirees Have a Pension

By Lee Barney, September 26, 2016, editors@assetinternational.com

Eighty-one percent of today’s retirees receive some income from a pension plan. For 42% of these people, their pension provides half or more of their retirement income, according to a study by the Insured Retirement Institute (IRI). However, for those not yet retired, only 24% have a defined benefit (DB) plan.

IRI estimates that as many as 56 million Baby Boomers will not receive retirement income from a pension, and that future retirees will need upwards of $400,000 to make up for this income shortfall. “Replacing pensions and achieving financial security these plans provide to retirees will be a key issue for future generations,” says IRI President and CEO Cathy Weatherford. “As Baby Boomers retire in greater numbers over the next decade, and as Gen Xers begin to leave the workforce, financial professionals have an historic opportunity to help Americans create their own pensions, through Social Security optimization and the use of lifetime income strategies, to help their clients attain the same security, lifestyles, confidence and positive outlooks as the participants in this study.”

The study also discovered that nearly 60% of retirees have worked with a financial adviser, and 93% of these people say the advice they received has been effective. Seventy-two percent of retirees who own an annuity are satisfied with it. Retirees also face unexpected expenses; 40% have suffered a major health event, such as a heart attack or stroke, and 25% have faced a major non-medical event, such as a major home repair.

More than one-quarter, 27%, have relocated their primary residence in retirement, and of these people, 60% did so for lifestyle reasons, and 30% in order to lower their cost of living. While 67% of retirees think their chance of requiring long-term care is less than a 25% chance, the Department of Health and Human Services (HHS) believes that 70% of those turning 65 today will need such services. Sixty-percent think that Medicare will pay for their long-term care expenses.

Greenwald & Associates conducted the survey among 806 retirees between the ages of 65 and 80 who retired with at least $50,000 in investable assets and have been retired for at least five years.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®


YOUR MONEY-How to care for two parents at once without going broke

By Chris Taylor, Nov 23 2015 Reuters Markets

For years, Madeleine Smithberg has been at the forefront of American comedy as co-creator of “The Daily Show” and a talent coordinator for “Late Show with David Letterman.” That sense of humor was especially handy during the last few years. That is because Smithberg had to cope with not one, but two elderly parents in rapid decline.

“It’s heartbreaking,” says Smithberg, 56, who heads a production company in Los Angeles. “And yet it’s invisible, because nobody talks about it.” Dealing with one aging parent is challenging enough, whether you are helping navigate the complex healthcare system, paying for an assisted living facility or struggling with cognitive decline as the parent slips away. But the emotional and financial stress can be more than double if you are caring for both parents at the same time.

“It’s like having toddlers,” says Smithberg, whose father passed away in 2014 after she moved her parents to Los Angeles. “They’re hot, they’re cold, they’re hungry, they ask repetitive questions, and their needs become the most important thing in the world at that second… The biggest challenge of all is holding onto your patience.” According to a new study by Northwestern Mutual, the childrearing comparison is apt: 59 percent of Americans feel that taking care of two parents between ages 85 and 90 would be even harder than handling two kids between ages 3 and 5.

Caregivers may also have kids of their own. In that case, it’s not just the “Sandwich Generation” – it’s a Triple-Decker. The Northwestern Mutual report found that 38 percent of those surveyed have not planned at all for handling the financial burdens of caring for elderly parents. The costs can be gigantic: National median costs for an assisted-living facility are now $43,200 annually, according to insurer Genworth Financial in its annual Cost of Care study. A private room in a nursing home? $91,250. That is more than enough to blow up any financial plan. The following is advice on how to care for your parents without going bankrupt yourself.


“Long-term care, long-term care, long-term care.” That’s the simple advice from Smithberg. Her father had taken out coverage for himself and his wife, which she calls “the best thing he ever did.” Long-term care insurance covers expenses for nursing home or home care if you become incapacitated – most of which is not covered by Medicare. The coverage, like the care, can be extremely expensive, and to be sure, it did not cover all of Smithberg’s parents’ assisted-living costs. But, combined with their own life savings, the policy has meant that she has not yet had to dip into her own savings to pay for their care.


Being that it’s the New Year and everyone is talking about their goals and desires, it’s the perfect time to have the talk. Don’t let the opportunity slip by to discuss your parents’ expectations, should illness arrive. Find out if they have advance directives – documents that spell out what treatment they would and would not want during a life-threatening health crisis. Make sure you establish who has power of attorney, should they need someone to make important decisions.


Reverse mortgages allow homeowners aged 62 and above to borrow against their home equity and to receive either a lump sum, a series of monthly checks or a line of credit that can be tapped as needed. The upside of a reverse mortgage? With the bank paying you every month, instead of the other way around, that check can help cover costs for in-home caregivers. Tom Davison, a financial planner in Columbus, Ohio, is working with a 90-year-old woman whose daughter moved in with her as a caregiver. “A reverse mortgage could help (the daughter) pay her the wages she has given up,” Davison said. The downside, of course: The family home will eventually become property of the bank.


Your first instinct as a child may be to drop everything and handle all your parents’ needs yourself. But if it comes at the cost of your own career, think about the ripple effects – on your retirement savings, on the needs of your own kids, even on your own sanity. With Americans extending their lifespan – 76.4 years for men, 81.2 years for women, according to the National Center for Health Statistics – this is a family challenge that won’t be going away anytime soon.

Denver financial planner Kristi Sullivan recommends hiring a case manager to do the heavy lifting. ”For an hourly fee, these people can handle tasks quickly that it might take you hours to do – scheduling doctor’s appointments, handling medical payments and dealing with insurance, helping find a good nursing home or in-home care,” Sullivan says. “Spending this money may seem expensive, but it’s less than putting someone’s career on hold to become a full-time caregiver.”

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®


The Do’s and Don’ts of 401(k) Rollovers

When you switch to a new employer, make sure to transfer your retirement account the right way.

Most of the time, your 401(k) chugs along quietly, accumulating money and future benefits.

But when it’s time to think about transferring your account to a new employer plan, you face a dizzying array of questions and considerations. These do’s and don’ts will help you roll over your 401(k) without getting seasick.

Don’t get hung up on mastering the technicalities of this process, says Tom Rankin, business administration instructor for Wake Tech Community College in Raleigh, North Carolina. “Worry less about the exact rules, and focus more on knowing how to access and look up the rules,” he says. “Understand the laws, but don’t memorize them, because they’re always changing. It’s more important to know the key questions to ask when you take a new job and when you are changing your account.”

Do ask these basic but important questions of the new fund administrator, Rankin says:

  • What are the fee structures? Low fees typically translate to higher returns.
  • What is the employer match?

How can you consistently escalate your 401(k) contributions to achieve your goals? Consider diverting a portion of each raise to your 401(k) account, Rankin says. “Keep it simple, and keep it automatic,” he says.

Don’t forget to review your account to make sure you don’t have any outstanding loans or withdrawals you will have to pay back in full before you can accomplish the rollover. It’s easy to forget you are paying back a 401(k) loan if the repayment is automatically funneled from your paycheck, financial advisors say. Get in touch with the plan administrator and find out exactly what you need to do to restore the funds so the account qualifies for a rollover.

To avoid loans against your account in the future, do insulate your 401(k) from emergencies by first seeding, then regularly feeding, a rainy day fund, Rankin says. This ensures you won’t be tempted to borrow against your 401(k) for routine situations, such as paying for a new refrigerator. Even a couple of thousand dollars can provide the buffer you need to shield your 401(k) from temptation, he says.

Do integrate your 401(k) into your estate and disability plan, Rankin recommends. Your loved ones and heirs need to know how to access the account in case you are not able to manage it. Designate someone as the executor when you set up the new account. Don’t forget about prior spouses. As annoying as it may be, you may have to get a signature and releases from a former spouse to roll over your 401(k).

Don’t overlook the special circumstances of owning company stock, says Mike Piershale, president of Piershale Financial Group in Crystal Lake, Illinois. In some circumstances, you might be able to claim special tax breaks if you own company stock, and Internal Revenue Service rules will probably require you to sell the company stock in a certain way. Make sure to scope out the long-term capital gains implications before making a move, Piershale says. “This typically applies to people who’ve been at the same company for at least five years and typically much longer,” he says.

In fact, if you are rolling over the account because you are leaving a job you have had for a long time, take the time to review your portfolio diversification and your next stage of investing goals, Piershale adds.

Don’t assume you must take the money with you when you move to a new employer, says Lenny Sanicola, senior practice leader with WorldatWork, a benefits association based in Scottsdale, Arizona. “You don’t have to take it out,” he says. You may want to leave the account with your current employer’s fund in the following scenarios:

  • There is no 401(k) or equivalent plan at your new employer.
  • You are going to start a company or become self-employed.
  • You need to figure out how your retirement accounts mesh with those of your partner and where you may find efficiency.
  • You need to take time to review your retirement and investing plans, options and goals before redirecting the 401(k).

Take your time, Sanicola says, and don’t give in to your former employer’s promptings for closure. It’s much better to leave your 401(k) parked in a former employer’s plan than withdraw the money in a lump-sum distribution. That is the single biggest no-no, financial advisors agree. If you get a check for the funds, you will probably pay an early withdrawal penalty of as much as 10 percent, wiping out years of gains. The money will also probably be subject to regular income taxes, erasing even more gains. And the IRS will force your former employer to withhold 20 percent of the funds, which you can reclaim by filing special forms when you do your income tax return.

“Keep your hands off the money,” Sanicola says.


To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


Add My New Phone App to Your Smartphone!

I am very excited to announce the availability of my firm’s new phone app.  You can access this phone app by clicking this link through your smartphone.  In order to accomplish this, you need to open this weekly email message through your phone, not just your computer.

This phone app will allow you to:

  • Access your accounts at SEI and your REITs
  • Watch and share educational videos I have produced for clients and their friends
  • Contact me either by phone or email
  • Access my website
  • Read my current weekly blog message
  • Directions to my office

Click this link after opening this email message on your smartphone.  The link is:  http://michaelginsberg.gowebmo.com

Once you click the link it is very simple to add the app to your phone.  Here are the instructions for an iPhone:

App Setup Instructions_Page_1


You can share this app with your friends by forwarding this message or by:

  • Clicking the share button on the phone app
  • Click the email button
  • Enter your friend’s email address
  • Send the message

I look forward to hearing your comments about the app and the videos.  If you have suggestions about other tools and features I should include in the app, please let me know.


To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


Unfortunately, financial planning not a high priority New Year’s resolution for most Americans

As my practice grows, both in number of clients and the ages of new clients at both ends of the spectrum, I am consistently amazed at how many say that they never thought about using the services of a Certified Financial Planner™.  In a survey by Allianz Life Insurance Company, 84% of Americans will not include financial Planning in their New Year’s resolutions.

The #1 reason why people did not include financial planning in their resolutions was their belief that they don’t make enough money to worry about it.

“It’s alarming that Americans’ willingness to ignore financial planning in their New Year’s Resolutions continues to go up year after year,” said Katie Libbe, vice president of Consumer Insights for Allianz Life. “With the responsibility for retirement security shifting from employers to individuals, people need to become more, not less, active with financial planning to ensure they have enough money to fund a retirement that could last up to 30 years.”

Unfortunately, when respondents were asked how likely they are to seek advice from a financial professional in 2013, more than a third (36 percent) responded “less likely,” up 5 percent from 2011. Only 20 percent said they were “more likely,” matching 2011, while 44 percent noted they were “unsure,” down 5 percent from the 2011 survey.

In typical American fashion, we have big desires for health and wealth, but do little to do the work necessary to achieve these goals.  It’s easier to dream about the great abs but don’t do the sit-ups required.

For the second straight year, “health/wellness” topped Allianz Life’s survey as the most important focus area for the upcoming year. Forty-four percent of respondents made it their top selection followed by “financial stability” (31 percent), “employment” (15 percent) and “education” (6 percent).

If you know of someone who truly needs to establish good financial habits, which include working with a Certified Financial Planner™, please pass on this week’s email which includes links to articles about working with financial advisors.

I want to wish you a wonderful holiday season and a prosperous New Year.


To Your Successful Retirement!

Michael Ginsberg, JD, CFP®



Life Insurance is Not Just for the Young

Congress has declared September – Life Insurance Awareness Month.  So why would I be writing about life insurance in a blog about retirement – isn’t life insurance just for those with young kids?  In the not so distant past, the answer may have generally been yes – but today the answer is no!

Life insurance does play a very important role in planning for the financial risks associated with younger couples.  Meaning young couples have many financial risks which can be address very easily and inexpensively through the use of life insurance.  These risks include loss of one spouses income, lump sum to help fund college expenses for young children or even a lump sum to pay off or down a mortgage.

BUT since we are all living longer, there are new longevity risks which can be mitigated through proper life insurance planning.    

These risks include not only the typical such as loss of a spouse’s income, but also the ability to provide a lump sum to help offset the costs of long-term care for the surviving spouse, lump sum funding for a grandchild with special needs or even a lump sum to assist with education costs of grandchildren.

Here is how the scenario plays out for the risks associated with long-term care expenses…

  • A husband and wife are in their mid 60′s and 70′s and they are starting to draw down on their retirement assets.
  • One spouse, needs some long-term care assistance.  So now the couple is not only drawing down on their retirement assets to fund retirement needs, but they are also drawing down an additional $2500+ per month to pay for part-time or full-time home health care assistance.
  • As that spouse needs more care, the costs increase dramatically which causes further drawing down on retirement savings.  The accelerated draw down rate may even result in the need to obtain a reverse mortgage in order to fund the long-term care expenses of one spouse.
  • Eventually the ill spouse passes.  The surviving spouse may still need to draw down on the retirement savings for another five to ten plus years and may even have their own long-term care expenses which need to be paid.  THIS IS WHERE LIFE INSURANCE COMES INTO PLAY!  IF THE SPOUSE WHO PASSED FIRST HAD LIFE INSURANCE THEN THE LUMP SUM COULD REPLENISH THE SURVIVING SPOUSE’S RETIREMENT ASSETS!

You can take a look at my website  www.michaelginsberg.com for interesting calculators and articles about life insurance.  To save some search time, here are some further links to articles about life insurance which you may find valuable:

If you can see how this risk may apply to you – I would be happy to review your needs.  Let’s “celebrate” Life Insurance Awareness Month together – call me for a life insurance review today.  If you would like to watch the video sponsored by the LIFE Foundation highlighting this year’s life insurance story, click here.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®