10/17/17

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® 

10/10/17

Why It’s Easier to Reinvent Yourself Living Abroad

What Expats Say About Why and How They Forged New Lives

By Chuck Bolotin, Nextavenue.com, September 6, 2017

As the founder of Best Places in the World to Retire, I’ve heard many of our expat contributors say that one reason they moved abroad was to “reinvent” themselves. And based on what they’ve told me, I’d say it’s easier to reinvent yourself living abroad than while you’re living in the United States.

To reinvent yourself requires a belief in free will; that you are the inventor who created you. Very few expats I’ve met, and none who told me their reinvention stories, could be described as fatalists. Many, like Anne Dyer, defied stereotypes and faced what most people would consider to be long odds, though.

Reinventions Out of Facing Long Odds

Dyer came to Mexico from Oklahoma more than 30 years ago, relocating to what was then a male-dominated village, at a time when doing so was nowhere as common or easy as it is today. Not only that, she opened a business from scratch and succeeded — all as a middle-aged, single woman. (Dyer still operates several successful businesses today.)

In more extreme and unexpected cases, American women like Anne Gordon (now Anne Gordon de Barrigón) didn’t know they were searching for something or that they would be so open to reinvention. She arrived in Panama as an animal trainer in 2004, to work on a film that hired the Emberá tribe as actors. Gordon de Barrigón was so touched by the warmth of the Emberá people, she wound up staying in Panama and marrying an Emberá man. Now she shares her love of the Emberá on tours she runs in the rainforest.

The concept of reinventing oneself is fundamentally optimistic and outward-facing, traits shared by those two women along with the other reinventing expats described below. They believe that they are in charge of their own future and could alter what otherwise would be called their destiny.

Many of the expats had reached middle age or close to it and were re-thinking their lives, especially in light of a heightened awareness of their mortality. Going forward in the same way as before was not satisfactory to them. Instead, they were searching for a way to change their lives to create themselves anew along the lines of their own, newly more self-aware design.

Very few of the expats wanted to completely discard their past and change everything. For most, reinvention involved only a part of their lives, while they retained the rest “as is.”

Phil McGuigan used to be a partner in high-powered law firm in Chicago. Now, he puts some of these skills to use directing an umbrella organization of charities in Boquete, Panama that regularly brings in large containers of supplies for locals in need. McGuigan raises the money from his previous partners and well-heeled clients. He has gone from top-floor boardrooms to rural outposts with no running water, and clearly loves it.

4 Reasons Reinventing Abroad Is Easier

Here are four reasons expats said it was easier for them to reinvent themselves while living abroad:

1. The shock of being in unfamiliar circumstances.  By definition, expats intentionally put themselves in unfamiliar circumstances, where they cannot act exactly as they did in their home country and get the same outcomes. I have been told that this can foster a re-evaluation and a new perspective, along with new opportunities for growth.

Chris Frochaux is a “serial re-inventor,” at first, out of necessity, because his father was a diplomat and the family moved from country to country. As an adult, Frochaux chose a life of constant reinvention. He has lived in France, Italy, Ivory Coast, Senegal, Switzerland, the U.S., Argentina, and now Panama. About his life in Panama, Frochaux says: “I love this country. And you will too, if you choose to embrace it on its own terms instead of expecting it to conform to your country’s standards.”

2. The shock (and joy) of being around new people.  Just as expats are in a new cultural and physical environment, they are also in a new social environment, within which they’re not bound by the grooved-in interpersonal kabuki dance they performed in the past.

Expats have told me how liberating it was to start fresh relationships. Describing their past, they told me about the growth-inhibiting triad of behaviors being heavily influenced by: what others expected of them, others expecting them not to change and then their tending to conform to others’ expectations of not changing.

But as expats meet new people, they are free to create relationships intentionally to help become their best, reinvented selves.

When Greg Gunter came to San Miguel de Allende, Mexico, he created new social connections, including a serious ongoing relationship with a Mexican woman and her family. Two parties held back to back made a big impression on him. The first was with mainly Mexicans, and lasted about eight hours. The next night, Gunter went to a party of mainly expats, which lasted just a few hours. When he was asked by his Mexican friends why the expat party was so short, it hit him. “In Mexico, work is always secondary to spending time with friends and family, unlike in the U.S. If I had stayed in the U.S., I probably never would have experienced a different way to interact with people, and changed my perspective because of it,” Gunter said.

3. The lower cost of living, allowing for more free time and generates less stress.  Expats have told me that because of lower costs, they could take the time to paint or form that rock and roll band they always wanted to; many have had the time to volunteer, which further changed their view of themselves and fostered positive change and growth.

Mike Cobb is involved in several offshore businesses and was recently instrumental in building a health clinic to bring primary health care to rural Nicaraguans. “I wouldn’t have the time to reflect or get involved as much if it weren’t for the ‘silly inexpensive’ cost of living here,” says Cobb. “Living here, we can easily afford housekeepers, gardeners and handymen. Not only do we have more time, but our stress is less, all our relationships better and we’re able to get involved in things that matter to us on a deeper level.”

4. Seeing and being around people who see and do things differently than you do.  Many expats told me that being around locals in places like Mexico, Panama, Belize and Nicaragua who had materially much less than they did helped them reinvent themselves for many reasons.

One is that this gave the expats more of an understanding for others who were not as fortunate. Another: When they saw these people seemed to be much happier than those they knew back home, it challenged their previous assumptions that more material goods make people happier. This caused them to reevaluate what made them happy (almost always to become less materialistic) and to gain new focus and dedication to that.

Dave Drummond, now based in Belize, has been working in international real estate development and international financial services for 14 years. If he had those careers in the U.S., he says, they would keep him cloistered among higher-echelon business investors and allow precious little interaction with anyone else. Not so for him in Belize.

Drummond related a story of watching a group of local children in Belize playing. “There were no parents, no babysitters, no one supervising; just young kids enjoying life with nary a care in the world. They were laughing, giggling, and shouting as children should while playing with nothing other than a simple ball and a stick. They didn’t have a gaming device, they didn’t have a tablet or any electronics at all. They only had what they could find and yet, they had more than they needed. They had the safety of the village, the simplicity of their game, and the freedom to enjoy having fun,” he said.

His conclusion: “It is not what you have that makes your life enjoyable; it is being able to do what you enjoy in life that does; a simple life concept I’m fortunate to be reminded of in Belize almost every time I walk out my office door.”

The Worst Reason for Moving Abroad

A common answer our expats give on our site to the question “What is the worst reason for moving abroad?” is: “To run away from something.” Moving abroad alone won’t reinvent you. You are the one who has to reinvent you.

If you really wanted to, you could do it from your home country, in the same house you’ve lived in for decades. Moving abroad just makes it a whole lot easier.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 

09/26/17

If You’re Dreaming of Retiring, it’s Important to Make a Plan — and Commit to it

By Michelle Singletary, September 9 2017, Washington Post

The go-to strategy to encourage people to save for their retirement years has been to frighten them with the numbers.

The average cost of retirement is more than $700,000, according to a study released this year by Merrill Lynch. If you want a swanky retirement, you’ll obviously need more. Fidelity Investments estimates that health care and medical expenses alone will total $275,000 for the average 65-year-old couple retiring in 2017.

And then there’s the scariest number of all. If you retire at 65, you could live an additional 25 years. The horror: You could outlive your savings.

This scared-straight approach is supposed to make us save more. But as television host Phil McGraw likes to say, “How’s that working for you?”  It’s not.

Despite dire reports of a looming retirement crisis, many households have little if anything saved. A GoBankingRates survey found that 55 percent of Americans have put away less than $10,000 for retirement.

“Ninety-two percent of working families have retirement account balances that do not meet recommended savings targets,” researcher Nari Rhee wrote in a report for the National Institute on Retirement Security. “The ‘American Dream’ of retiring after a lifetime of work will be long delayed, if not impossible, for many.” Scared?

Don’t be, says Chris Hogan, a former debt collector and banker who is now a financial coach for Ramsey Solutions.

Hogan’s tactic is to motivate, not intimidate. His book “Retire Inspired: It’s Not an Age, It’s a Financial Number” (Ramsey Press, $24.99) is the Color of Money Book Club selection for this month.

“If you’re like a lot of the people I’ve coached over the years, the very word retirement might give you the same shivers you’d get from watching a Stephen King movie,” Hogan writes. “That fear might get your attention for a moment. And while fear can be a wake-up call, it is also a negative emotion. Fear doesn’t create energy, and it doesn’t really cause lasting change.”

So what causes enduring change? A retirement dream with a plan, Hogan says.

He says to ask yourself: “What is that one dream you have for your future? That one thing that would make you wake up every day and think, ‘I get to do this?’ ”

I’d like to travel for months at a time. And when I’m not on the road, I want to continue working in the financial literacy field and volunteering at my church and in prisons. But to make my dream come true, I can’t be worried about money. My house has to be paid off. I need financial security to free me up to serve.

Here’s the thing: A secure retirement isn’t accidental.

“People generally don’t enter retirement with no savings because their plan didn’t work; they retire broke because they didn’t have a plan in the first place,” Hogan writes.

Here are Hogan’s five fundamentals of an inspired retirement.

●You’ve got to dream. “Dreaming is an action.”

●You’ve got to have a plan. “Let the plan be your GPS to get you to your retirement dreams.”

●You’ve got to execute your plan. “It involves investing, budgeting, avoiding debt.”

●You have to commit to the plan. “Commitment means embracing the sacrifices necessary to get you to your dream.”

●You’ve got to be vigilant. “Vigilance means knowing that ‘stupid’ is always lurking around the corner. It is the admission that someone is always trying to sell you something you really don’t need. It is watching out for people trying to get you to invest in a risky, once-in-a-lifetime opportunity that will most likely leave you broke and embarrassed.”

You also have to watch out for the happy dance in retirement. Hogan tells the story of one couple who decided to upgrade to a bigger home. With the move came more expenses they hadn’t planned for.

The couple had to go back to work. They had to “un-retire,” Hogan said. “So at a time when they should’ve been simplifying life, they actually complicated everything with one bad financial decision.”

Here are three of my favorite quotes from the book:

●“Debt is a thief.”

●“The word deserve puts you on the fast track to stupid.”

●“Taking personal responsibility for your own retirement is the first step toward success.”

Fear can be a powerful motivator. But frighten people too bad and they give up. They see their retirement number as unattainable.

Hogan doesn’t ignore the scary statistics. He just turns them around to inspire people to work toward the best retirement they can afford.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 

09/5/17

3 Stupid Retirement Moves

By Maurie Backman, Aug 19, 2017, The Motley Fool

Retirement is a milestone that countless workers look forward to. But if you’re not careful, the wrong decisions could spell trouble for your golden years. Here are a few glaring retirement mistakes you’ll want to avoid at all costs.

1.    Waiting too long to start saving

It’s easy to make excuses for why you’re not setting money aside for retirement early on in your career. Maybe you’re not earning all that much money, or you’re struggling to keep up with your student loan payments. What many people don’t realize, however, is that by holding off on retirement plan contributions for even a few years, you’re giving up a world of growth. Thanks to a concept known as compounding, those who save for retirement steadily through the years can grow their nest eggs into sizable sums, even if those individual contributions are relatively small year after year. The following table, in fact, shows how much you stand to gain if you start saving just $200 a month at various stages of life:

If You Start Saving $200 a Month at Age… Here’s What You’ll Have by Age 65 (Assumes an 8% Average Annual Return)…
25 $622,000
30 $413,000
35 $272,000
40 $175,000
45 $110,000
50 $65,000

You can’t help but notice the difference between giving yourself a 40-year savings window versus a 15-year window. And, yes, if you start saving money that much earlier, you’ll end up spending more out of pocket to build your nest egg, but in our example, that $622,000 you’d get by starting at age 25 comes at a cost of just $96,000 in contributions. That’s a $526,000 gain! The point here is that holding off on retirement savings can really limit your ability to take advantage of compounding, so even if your monthly contributions aren’t much to write home about, they’ll help your savings efforts over time.

2.    Banking on Social Security alone

There’s a reason more than 40% of near-retirees don’t have any savings to show for — they’re convinced they’ll be able to get by on the income they collect from Social Security. The reality, however, is that most seniors can’t live on Social Security alone. That’s because those benefits are only designed to replace roughly 40% of the average worker’s pre-retirement income.

Most people, however, need at least 80% of their previous earnings to cover their expenses in retirement, and without independent savings, you’re likely to fall short. And if you think you’ll manage to get by on just 40% of what you used to earn, consider this: The average healthy 65-year-old couple today will spend $400,000 or more on healthcare costs in retirement. Over a 20-year period, that’s $20,000 a year on medical bills alone. Given that the average Social Security recipient today collects just $16,320 annually, it kind of makes you rethink how far those benefits can be stretched.

 3.    Not having a plan

While not having to report to a job might seem like something to celebrate, losing that structure and schedule could end up throwing you for a serious mental loop. According to the Institute of Economic Affairs, retirement increases the likelihood of clinical depression by 40%, and a big reason is that many seniors struggle to find their purpose once they no longer have a job to go to. Not only that, but for many people, work serves as a key social outlet, and losing those connections later in life could impact your well-being.

That’s why it’s critical to go into retirement with not just a financial plan, but a road map for what you’re going to do with your newfound free time. Of course, your available income will play a huge role in dictating the latter. You can’t, after all, say you’ll travel three months out of the year if your savings can’t support that lifestyle. But if you come in prepared with a realistic means of occupying your days, you’ll be less likely to regret the decision to retire in the first place.

Retirement isn’t the sort of thing you want to mess around with, so it pays to start thinking about it as early on in your career as possible. If you begin saving at a young age, understand what you’ll get out of Social Security, and map out a plan for your senior years, you’ll avoid the mistakes that cause so many people to wind up cash-strapped and unhappy down the line.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®

08/29/17

The 3 Phases of Retirement and How to Plan for Them

By Wendy Connick, Aug 16, 2017, Motleyfool.com

When workers think about what retirement will be like, they often imagine it as a single monolithic event — as if they can pursue their favorite activities every day until their last. But in reality, retirement is a three-stage event, and for most retirees, each stage is considerably different. Knowing how your expenses will likely change over time will help ensure that your money lasts as long as you do.

The first decade: retired life begins

During the first decade or so, new retirees are stretching their wings and learning just what this retirement thing is really like. Because new retirees are relatively young, they’re often in good health and have a relatively high energy level, so they’re ready and eager to embark on adventures like world travel. However, our natural desire to live it up after decades of work means that this first decade is typically an expensive one for retirees. That’s why it’s important for retirees to build significant flexibility into their initial budget, perhaps planning to spend 10% to 20% more per year during the first 10 or so years of retirement. For example, if you think you’ll need $50,000 in annual income in retirement, aim instead for $55,000 or $60,000 per year. With this approach, if it turns out you were optimistic about your income needs, you’ll still have enough to get by.

Part of the challenge of this early retirement period is that while you need a relatively large income, you also want to keep your retirement account withdrawals fairly low. After all, the money in those accounts needs to last you for the next 20 to 30 years; if you deplete them too much early on, you’ll be sure to run out of money down the road. Assuming your investments earn average returns (say, 7% per year if you’re invested mostly in stocks), it’s best to limit your withdrawals to 3% to 3-1/2% of the entire balance per year for the first five to 10 years of retirement. If your returns are particularly good during the year, you can take a little more. On the other hand, if your returns are bad or even negative, keep your withdrawals as small as you can possibly manage.

The second decade: settling in

Once the first decade of retirement has passed, you’ve had time to get used to this whole retirement thing and have likely sated your taste for adventure. You may also begin to experience some chronic health issues that reduce your energy or even your mobility. Thus retirees in their second decade tend to live more quietly. This is a time when many retirees choose to focus on family activities. Some feel like their current home is “more house than they need,” inspiring them to downsize and perhaps to move closer to family or friends.

Spending typically drops during this phase of retirement. Americans aged 75 and older spend 23% less on average than those aged 65 to 74, according to a Bureau of Labor Statistics study. That’s partly because elderly Americans travel less — the BLS says the 75-and-up crowd spends 35% less on transportation than the 65-to-74 group — and downsizing your living situation also helps to cut expenses. At this point, you can also bump your retirement account withdrawals, raising the percentage to 4% to 5% per year depending on your returns. On the other hand, medical expenses are likely to be somewhat higher than they were during the first decade. If your healthcare expenses are much higher than they were in the previous decade, consider switching to a different Medicare plan – a plan with higher premiums but better coverage might end up saving you money at this point.

The third decade: winding down

By this time you’re in your 80s or 90s and probably have much less energy than you did at the beginning of retirement. Many retirees at this stage move to assisted-living facilities or require other types of long-term care. It’s best to explore different long-term care options before you actually need them so that you can find the best caretaker or facility for you. It’s also a good idea to arrange for a power of attorney with a trusted advisor or family member so that if you become unable to make decisions for yourself, someone with your best interests at heart will make them for you.

Most of your living expenses will drop still further at this point, but your medical expenses will likely rise, especially if you’re getting substantial long-term care. Unless everyone in your family lives past 100, you’re probably reaching the end of your life and can thus increase your retirement plan withdrawals to 8%, 10%, or even more depending on your returns. That said, if you want to preserve capital for your heirs, then you may choose to cut back on your withdrawals.

Planning for the three stages

Since your health and energy levels will be highest at the beginning, it’s wise to pursue your highest-activity desires during your first decade of retirement. Just keep an eye on your budget so you don’t overspend and cause problems for yourself later. During the middle and later stages of retirement, many retirees experience feelings of isolation — so this is a good time to be close to family and friends. And remember: You worked hard for decades to be able to enjoy a pleasant and comfortable retirement. This part of your life should be all about you, so put your time and energy into enjoying yourself!

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 

08/22/17

9 Ways to Maximize Your Retirement

By Dave Hughes, August 17, 2017, US News and World Report

When you retire, a wide array of new possibilities become available to you. You have the opportunity to create a life that’s determined by your interests, desires and priorities, unencumbered by the constraint of having to earn a living. Yet many people don’t take advantage of the possibilities that retirement offers. They just continue with their daily routine, minus the job. Here are nine suggestions for how to get the most out of your retirement years. Most of them cost little or no money, but they may require some effort, new habits and a positive attitude adjustment.

Be open to adventure. Most of us are creatures of habit and routine. If you don’t add some new things to your life when you stop working, then everything that’s part of your current routine will just expand to fill the time vacated by work, probably supplemented by more time spent watching TV. After you leave work, try some new things. Be open to new adventures. Don’t say yes to things you don’t want to do, but don’t say no due to fear of leaving your comfort zone.

Create a new identity. When you are working you have a job identity, such as doctor, engineer, teacher, accountant or manager. When you meet someone new and they ask what you do, you have a ready answer. After you retire, what will you say? Saying you are a retired doctor or a former teacher lets the other person know what you did, but not what you’re doing now. Simply saying you are retired doesn’t tell your new acquaintance much about you either. Being retired shouldn’t mean there’s nothing interesting about you.

So create a new identity for yourself. If you are working on your memoir or writing the great American novel, you’re an author. If you plan to travel a lot, you’re an explorer. If you have dusted off your trumpet and you’re playing in a community band, you’re a musician. Create a role for yourself that is descriptive, inspiring and opens the door for further conversation. You may have several roles.

Set some goals, and then create a schedule and a plan. You probably have some ideas about what you want to do after you retire, such as places you want to travel, hobbies or interests you want to spend time on or new things you want to learn. You may have compiled some of these goals into a bucket list. If you haven’t written them down yet, you may find doing that to be very helpful. But simply creating a list is only part of the process. Unless you create specific plans for accomplishing things on your list, then all of these goals are likely to remain things you’ll do someday – and that illusive someday may never arrive.

So look at your list and select the first few things you want to accomplish. Set a date for each of them. Write down what you’ll need to do to make each of them a reality and get started. For example, if one of your goals is to visit France, decide that you’re going to go in May of next year. Create a list of steps such as making airplane reservations, making hotel reservations, renewing your passport and gathering information on what you want to see once you get there. Do this for each of the first few items on your list, and then update your list and your plans periodically.

Make plans for upcoming birthdays, holidays and special events. While major trips and events come along only occasionally, smaller special occasions occur far more frequently. Taking advantage of them just requires a little advance planning, but that effort will result in memorable, quality time spent with those you love and a life filled with purposeful enjoyment. As an added benefit, you’ll always have something coming up to look forward to.

All you need is a wall calendar or scheduling software for your computer or phone, such as Outlook or Google Calendar. Enter each significant birthday, anniversary, holiday or other event in the tool, and then set them to recur annually and set the advance notification feature to remind you at least two weeks in advance. If you use a wall calendar, make sure you allow yourself time at the end of each year to transfer all of your important dates to next year’s calendar. You may want to use sticky notes on the prior month’s page to remind you of events coming up.

Create and nurture a network of people you enjoy. Friends come and go throughout your life. When you leave your job or move, you’ll leave many of those friends behind. It’s up to you to keep the flow of new friends coming into your life to replenish those who naturally drift away for one reason or another. Just as the curator of an art museum seeks out the best artwork to display at his or her museum, you can think of yourself as a curator of quality friends for your life. Choose people who are positive and supportive and have qualities you value. Steer clear of people who constantly complain and gossip about others. Of course, you should be civil and polite with everyone, but you are not obligated to be friends with people just because you are related to them, you work with them, they go to your church or you’ve known them for years.

Continue to learn and grow. After you leave work, you may be grateful to be relieved of the stress of making difficult decisions and the pressure to keep up with industry trends and new information. That doesn’t mean you should shut off your brain and coast for your remaining years. One of the best ways to keep your days enjoyable and purposeful is to indulge your curiosity. Learning can be fun during retirement because you can choose to learn about the topics that are most interesting to you. You don’t have to worry about studying for exams or being graded. You can read books, visit museums, take classes, seek information on the internet, engage people in discussions – the possibilities are limitless. Staying mentally stimulated is one of the best ways to keep your retirement interesting.

Spend your money – wisely, of course. You would be surprised how many people live through their whole retirement and leave most of their money unspent. Throughout your working years, you have been conditioned to save money for retirement. Often, it’s difficult to adjust your mindset so that you can allow yourself to spend some of that money you have saved. While everyone’s situation is unique, a widely accepted guideline is that you can spend 4 percent of your portfolio each year and not run out of money. Check with a financial advisor to determine how much money you can safely spend each year. You may find that you can take that vacation or buy that convertible you have wanted. Live a little.

Get rid of possessions you no longer need. Just as it’s important to adjust your mindset from saving money to spending it, it’s also helpful to adjust your mindset from accumulating possessions to getting rid of them. Maybe you have amassed a large collection of books, movies or music that is just sitting on your shelves collecting dust. Your closets may be overflowing with clothes that you haven’t worn in years. Perhaps your guest bedroom has turned into a walk-in storage facility and your garage is so full you can’t park your car in it. Regardless of whether you sell, donate, recycle or throw away all those things you’ll probably never use again, you’ll feel better once they are gone. You will have fewer things to clean and keep organized. If you move, you will have fewer things to pack. Most people who declutter and tidy their home are glad they did it. People rarely miss those old possessions after they get rid of them.

Enjoy each day. Despite your best intentions and plans, you may not get to do everything you hope to do during your retirement. You may experience a physical setback that eliminates some things from your bucket list. You may realize that there are a few things you won’t be able to afford. Or, sadly, you may pass away before you get to everything. While it’s wonderful to have goals and plans for the future, the most important determinant of whether you will have a happy retirement is whether you enjoy each day as it comes along. As you are getting ready for bed each night, think back on your day. Did you enjoy it? If not, why not? Figure out what you can add or eliminate from your life so that you will enjoy each day a little more. Sometimes an average day can turn into a great day with a little spontaneity. If it’s a nice afternoon, find something to do outside. On a whim, call a friend and ask if they would like to have lunch or dinner with you. If the day seems too routine, do something out of the ordinary. When you’re retired, you have more freedom to do what you want with each day. Avail yourself of that freedom. Time spent doing something you enjoy is time very well spent.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®

07/31/17

Here’s How Much a Job Loss Now Will Cost You by Retirement

By Dan Kadlec, June 19, 2017, Money.com

When Americans struggle financially—if they face a job loss or a bout with illness, for example—one of the first places they turn for relief is their retirement savings accounts. This makes some sense, at least in the short term: Such accounts typically provide ready cash. But the long-term costs are significant, and they plague more people than you might imagine.

Incredibly, 96% of Americans experience four or more “income shocks”—defined as a 10% or greater decline in pay, as the result of something like a job change, job loss, or ill health—in their working years, according to a study led by Teresa Ghilarducci at The New School for Social Research. Taken alone, minor income shocks don’t necessarily have devastating consequences for retirement savings, according to the study, which was also supported by the National Endowment for Financial Education. One 10% setback typically results in as little as $1,166 less savings at retirement. By comparison, having less-than-excellent health ultimately reduces retirement savings by up to $34,500, the study finds—and poor health reduces a nest egg by up to $86,300, on average.

But repeated shocks, as widely experienced in the modern economy, add up: Four 10% income dips in a career may result in more than $10,000 in reduced savings, the study finds. Researchers also looked at more severe shocks, in which an individual lost all income for at least a year. This also is more common than you might believe, especially over a long time frame: Some 61% of workers went at least one year by age 70 with no income. A quarter suffered through at least four such episodes, according to the research.

In these cases, retirement savings would be reduced by an average $6,218 per episode—or nearly $25,000 after four no-income years. These are just averages, and if they seem low that’s because many people are able to leave their savings untouched—and even continue saving—through any work-related hiccups. Affluent people experience little impact on retirement savings, typically because they have other assets to draw from. Income shocks are also less of a nest-egg problem for people with an emergency fund.

Two-earner households weather income shocks better as well. In some cases, a couple may even choose the drop in income–with one partner leaving a job to, say, care for kids or an aging parent. But low-income households, and those with few additional liquid assets, feel the bite. These are the families most likely to raid a 401(k) plan or other retirement savings for day-to-day expenses. Economic shocks explain at least 32% of early withdrawals by workers in low-income households, according to the study.

The researchers take issue with the argument that the retirement savings crisis is a result of Americans lacking saving discipline. The bigger problem, they conclude, is regular and largely unavoidable income disruptions, coupled with a retirement system that allows many to raid their long-term savings. “Under a retirement savings system that requires a lifetime of consistent and voluntary contributions, life gets in the way,” says Ghilarducci. “People suffer economic shocks such as job loss and protect their standard of living by decreasing or halting their retirement contributions. Only those with the most resources weather these storms with their retirement nest eggs intact.”

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 

07/24/17

The Big Mistake Most People Make When Planning For Retirement

By Shelley Seale, June 22, 2017, TheWeek.com

Preparing for your “golden years” is a big focus of any financial plan. Will you invest in real estate and the stock market to save? Do you have an IRA or company retirement plan? These are all great questions. But making sure you’re covered financially is only one part of the bigger picture. The question that is often overlooked when planning for retirement is how, exactly, you want your life to look after you retire. As in: What do you want to do with your time?

Retirement planning isn’t just about the money, but is equally about the significant life changes you will face. “People come into our office wanting to retire and they are clear what they want to retire from: a job, a career, a bad commute, the rat race,” explains Cass Grange, a senior adviser associate at Lucien, Stirling & Gray Advisory Group in Austin, Texas. “What they often lack is a vision of what they want to retire to: a meaningful life filled with connections and purpose. This takes time to build and plan. And planning your life after working is just as crucial as the financial piece of retirement planning.”

The important thing, when looking down the road to retirement, is to get specific. What’s important to you? What do you want an average day to look like? Where do you want to be? Those are some big questions to be asking now, especially if you’re decades away from leaving the workforce. But Grange has found that people tend to view their own ages differently through time. Before 50, they tend to think of themselves as being 12-15 years younger than they actually are, which can lead to unrealistic timelines for planning and saving.

“They often tell me, ‘I’ll just work until I am 80. That is my retirement plan!’” she says. Then in their 50s they get tired or downsized, or have health issues, and they come in and say, “I’m done working, I want to retire.” In other words, retirement — or the urge to retire — can sneak up on you. The sooner you start planning as if you’re retiring tomorrow, the sooner you can retire tomorrow, and the better that retirement will be. Start by making a list of the things you’d like to do.

Here’s a good example: Jessica and Bill (whose names have been changed for this article) were in their 50s and both working full-time. They had saved a significant amount of money already, and owned four rental properties. Their sole focus, for many years, had been on saving and surviving. But they hadn’t really thought about what retirement would actually look like for them. After some long, soul-searching conversations with Grange, Jessica and Bill finally put their retirement dream into words: They had always wanted to have a little cabin on a lake.

After hearing this, Grange urged the couple to hone in on how exactly this would work. The clients protested. “But we were going to wait until we retire to do this,” they said. But Grange was adamant. Why should they wait another 20 years to iron out the details of their dream, when they could do it now?

“I asked if they had any idea where they’d like to do this,” says Grange. The family had rented a cabin on the same lake in northern Minnesota for decades. They knew exactly which lake they wanted to be on, and how much it would cost. In fact, the couple had enough money to buy the cabin now. They bought a cabin that summer and have enjoyed it most summer weekends since then.

As Jessica and Bill did, decide where you want to be. If your dream is to live in the mountains, pick a city and start looking at property prices, so you know what you’re getting yourself into. The worst thing that could happen is to realize at 65 that you can’t afford to chase your retirement dream.

The other reason to get specific is because sometimes people spend years dreaming of retirement, but once they get there, they’re confused or unsure of how to spend their time. After decades of doing the same job, this much free time can lead to loneliness or a loss of a sense of purpose — especially because so many people take not just money from their jobs, but meaning as well.

If you enjoy what you do, try looking for a charity or nonprofit you can volunteer for in retirement. Don’t just say you want to volunteer, actually find the right program for you. A person’s network of friends and family makes a huge difference in the success of retirement, Grange says. Even if you’ve started planning late in the game, it’s never too late to take purposeful steps.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®

07/17/17

Pre-retirees Unsure About Executing Retirement Income Strategies

By Javier Simon, June 22, 2017, Plan Sponsor

According to a survey by the American College of Financial Services, 74% of respondents failed a 12-question retirement income quiz. Unlike their younger counterparts, individuals nearing or in retirement don’t have the luxury of long time horizons in which to grow their nest eggs. They are at a point where developing a strategy to sustain their assets and draw retirement income is critical. However, many lack the knowledge to do so effectively. Of those who passed, only 5% scored a “B” (80%) or higher.

In particular, several respondents failed to correctly answer questions around preserving assets and sustaining income in retirement. The survey found only 38% know that $4,000 is the most they can afford to “safely” withdraw per year from a $100,000 retirement account, and only 34% know that a substantial negative investment return at retirement age is more damaging to portfolio sustainability than the same negative return a number of years before or after retirement.

The study also indicates most respondents lack knowledge of best practices to execute near retirement. Only 33% understand the benefits of working two years longer or deferring Social Security for two years as opposed to increasing contributions by 3% for five years just prior to retirement. Moreover, fewer than half know that using a portion of their portfolios to purchase a life annuity can protect against longevity risk. In fact, the lack of knowledge behind annuities was of particular concern to researchers. Rating scores on sections from best to worst, “annuity products in retirement” took the top followed by “company retirement plans” and “paying for long-term care expenses.”

According to the survey, only 29% know that buying an annuity product will be less expensive for an older person than a younger one; only 17% know the lifetime income payout rate for a 65-year-old male is roughly in the 6% to 7% range; and only 14% know a deferred annuity with a guaranteed lifetime withdrawal benefit can pay income even if the investment drops to zero.

However, 74% say having a source of guaranteed lifetime income in retirement is important. Furthermore, the research highlighted several areas for which older Americans scored very well. Subjects marked by high proficiency include housing finances, Medicare issues, the principle of inflation, the role taxes play in retirement, and life insurance concepts.

Next: Demographics Play Key Roles in Literacy

The survey found major gaps in score levels along the lines of gender, asset amounts, and education levels. More men (35%) passed the quiz than women (18%). More than half (82%) of women failed the quiz, suggesting the need for targeted communication and education based on particular concerns that may be more common among females.

Not surprisingly, higher passing levels seemed to correlate more closely with those who had substantial assets. For example, 49% of those with at least $1 million in assets passed the quiz, as opposed to 20% who passed with less than $1 million in assets. Of those who passed, 40% had at most a graduate degree, 32% had at most a college degree, and only 9% never graduated college.

Surprisingly, the study found that more people who weren’t working with financial advisers passed than those who were working with advisers. Thirty-four percent of people without advisers passed, and only 22% of those working with advisers did as well.However, the study also shed light on what people value in advisers. Of respondents with an adviser, 52% stated it was extremely important for their adviser to act as a fiduciary. Moreover, 76% of respondents with advisers found it extremely important that their adviser educate them on retirement risks.

Moving forward, it’s imperative that advisers educate clients about these risks, focus on areas of low proficiency, and re-enhance dimensions of high proficiency. A thorough evaluation of a client’s financial literacy can also help, as 61% of respondents reported they were very or extremely knowledgeable about retirement income planning; however, only 33% of them passed the literacy quiz—with a mean score of 51.87%.

The 2017 RICP Retirement Income Literacy Survey Report can be found at Retirement.TheAmericanCollege.edu.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 

07/10/17

Retirement is a Journey, Not a Destination

By David Adams, June 23, 2017, Financial IQ.com

As advisors, we’re trained to help clients set some magic number for how much they need to save by age 65. Then they can retire, start taking Social Security and live off their investments. Only then can they start to travel and live life. But after 15 years of working as an advisor, I had an experience with my father that led me to change my entire perspective on retirement.

My father was an example of the typical retirement pattern. He worked in retail for 40 years. In his 60s he was still working 80 hours a week. One day while moving boxes around at work he fell and hurt himself. The injury wasn’t serious but I became concerned about his health. I told him he needed to slow down or retire but he kept telling me he needed to keep working to a certain age to be sure he had the money he needed to retire.

Six months later he was rushed to the emergency room because it appeared he was having a stroke. Thankfully it turned out to be high blood pressure instead. Once again, he insisted he needed to go back to work. I went to see him and begged him to quit, saying, “Dad, I’m not losing you to retail.” But he kept insisting he couldn’t leave his job because he didn’t have enough money to retire. I told him, “You can always have more money, but if you wait another two years to retire you may not be healthy enough to enjoy it.” We went back and forth like this for several days until finally he agreed to quit.

Like my father, many of my clients approach retirement from a place of fear. I tell these clients that financial planning is important, but it’s equally important to find a balance where you enjoy life along the way. They need to make retirement a journey and not just a destination.

For example, I have a client with about $1.8 million in his retirement account who was wearing himself out working awful hours. He had been telling me he wanted to quit for years but kept insisting that he couldn’t. We talked about potential solutions, such as taking a pay cut or getting a lower-pressure job that would cover the bills and still allow him to spend more time with his wife. But he was always too afraid to pull the trigger — until his wife got really sick. That was a wake-up call for him.

He finally did make the transition away from his high-stress job and today he’s very excited. He’s going to take on some consulting work and make about a third as much as he was before he quit. But he’s let go of the idea that he needed to save $2.5 million before he retired.

When clients insist they need to keep working to save a little bit more money before they retire, I tell them there’s never going to be enough to make them feel fully secure. They’re never going to feel totally comfortable, no matter how much is in their accounts, if they approach saving for retirement from a place of fear.

I encourage them to change their thinking about retirement and stop thinking about it as a static dollar amount or age deadline, but rather as a dynamic process. Going through this very same experience with my own father taught me how important it is to support clients in finding ways to live life now so they can think of retirement in a more balanced way.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®