Treat your retirement savings as you would any other bill

According to a recent study by Wells Fargo Retirement Services, more than one-third of middle class Americans could end up at or near poverty in retirement.

In a recent survey of 1,000 middle class Americans, conducted by Harris Interactive from July 9-Sept. 4, found that 52 percent of middle class Americans believe their most important day-to-day financial concern is paying the monthly bills, up from 37 percent a year ago. Savings for retirement comes in second with 16 percent of respondents saying it was a key concern.

More than half (53 percent) of those surveyed said they are not confident they will have saved enough for the life they want in retirement, up from 42 percent in 2011.

For this reason it is critical to treat saving for retirement like you would do with any other bill.  What I mean by this is that you need to treat saving for retirement just like any other expense you pay proportionately with each pay period.  If you are paid twice a month, and your goal is to fully fund your IRA or Roth IRA account each year, you should invest $208.33 per pay period.

This type of simple budgeting is essential if you are to avoid the fears and risks identified by this survey.  KEEP IN MIND – IF YOU DON’T PLAN FOR YOUR OWN RETIREMENT, WHO WILL?  THE GOVERNMENT?

I have some clients who reply to this advice with the comment – I will just work until I am in my late 70’s.  WELL… Thirty percent of those surveyed in this survey said they will need to work until they are 80 to live comfortably in retirement, up from 25 percent a year ago. Yet, 73 percent of Americans say their employer would not want them to work in their 80s. Seventy percent said they will try to work in retirement, with 39 percent saying they’ll work out of financial necessity.

So if you are part of the group who thinks that they will work into their 70’s, just look at your current company, how many of your fellow employees are in their 70’s?

With proper focused planning, you can avoid the fears of the people in this survey.  Be part of the group who retires with confidence.  Work and a Retirement Planning Advisor who can keep you on track and can provide you with the tools and guidance you need to succeed.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


The Benefits of Turning 66

One of the key age points in regards to Social Security planning is age 66.  Yes you are eligible for all kinds of senior specials, but from a Retirement Income Planning perspective, turning 66 is an important age for Social Security eligibility. At 66, you can claim the full amount of your Social Security benefit without any penalty for working and claiming Social Security benefits at the same time.

If you decide to hold off on receiving Social Security at full retirement age, you can actually further increase your monthly Social Security payments.  This opportunity lasts up until age 70.  If you are healthy and longevity runs in your family it may make sense to wait until later in order to receive a larger Social Security check.  But you still need to do the math and determine the number of years it will take to break even by waiting.

What may make more sense is for married couples to maximize their potential benefit.  Married individuals (or those who were married for at least 10 years) are eligible for Social Security payments based on their own work record or payments equal to up to 50 percent of the higher earner’s benefit, whichever is higher. If you have reached your full retirement age, you and your spouse can claim both of these types of payments at different times.   For example:

  • A 66-year-old retiree may sign up to receive spousal payments and continue to delay receiving his or her own retirement benefit.   A retired worker who uses this strategy between ages 66 and 70 will get higher monthly payments after age 70 due to delayed claiming plus four years of spousal payments.

BUT – if you do decide to hold off on collecting Social Security at age 65, you MUST NOT FORGET ABOUT MEDICARE!!!  Retirees can sign up for Medicare beginning three months before the month they turn 65.

WHY IS THIS IMPORTANT – It’s important to sign up for Medicare as soon as you are eligible because premiums may increase by 10 percent for each 12-month period that you delay enrollment.   People who are still working and are covered by a group health insurance plan through their job must sign up within eight months of leaving the job to avoid the penalty.

If you do elect to receive Medicare Part D prescription drug coverage, it’s important that you shop around for a new policy annually during the open enrollment period because covered medications and cost-sharing requirements often change each year.

Click this link to read an article entitled:  Two Social Security Strategies for Married Couples 

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


“The Fiscal Cliff” – What it means to you and your family

The “Fiscal Cliff” – Coming January 1, 2013!

What is the “fiscal cliff”? It’s the term being used by many to describe the unique combination of tax increases and spending cuts scheduled to go into effect on January 1, 2013. The ominous term reflects the belief by many economists that, taken together, higher taxes and decreased spending at the levels prescribed have the potential to derail the economy. Whether we do indeed step off the cliff at the end of the year, and what exactly that will mean for the economy depends on several factors.

Will expiring tax breaks be extended again?

With the “Bush tax cuts” (extended for an additional two years by legislation passed in 2010) set to sunset at the end of 2012, federal income tax rates will jump up in 2013. We’ll go from six federal tax brackets (10%, 15%, 25%, 28%, 33%, and 35%) to five (15%, 28%, 31%, 36%, and 39.6%). The maximum rate that applies to long-term capital gains will generally increase from 15% to 20%. And while the current lower long-term capital gain tax rates now apply to qualifying dividends, starting in 2013, dividends will once again be taxed as ordinary income.


Current and New Federal Tax Rates
2012 As of January 1, 2013
Ordinary income 10%, 15%, 25%, 28%, 33%, 35% 15%, 28%, 31%, 36%, 39.6%
Capital gains (generally) 


15% maximum; 0% for those in 10% and 15% income tax brackets 20% maximum; 10% for those in 15% income tax bracket (slightly lower rates will generally apply to a sale or exchange of assets acquired after December 31, 2000 and held for more than five years)
Qualified dividends Taxed at long-term capital gains rate (15% top rate) Taxed as ordinary income (39.6% top rate)
Medicare contribution tax on unearned income 


N/A 3.8% on net investment income for individuals with MAGI over $200,000 ($250,000 for married couples filing jointly; $125,000 for married individuals filing separately)

In addition, the following changes will also occur:

  • The temporary 2% reduction in the Social Security portion of the Federal Insurance Contributions Act (FICA) payroll tax, in place for the last two years, also expires at the end of 2012.
  • Lower alternative minimum tax (AMT) exemption amounts (the AMT-related provisions actually expired at the end of 2011) mean that there will be a dramatic increase in the number of individuals subject to AMT when they file their 2012 federal income tax returns in 2013.
  • Estate and gift tax provisions will change significantly (reverting to 2001 rules). For example, the amount that can generally be excluded from estate and gift tax drops from $5.12 million in 2012 to $1 million in 2013, and the top tax rate increases from 35% to 55%.
  • Itemized deductions and dependency exemptions will once again be phased out for individuals with high adjusted gross incomes (AGIs).
  • The earned income tax credit, the child tax credit, and the American Opportunity (Hope) tax credit all revert to old, lower limits and less generous rules.
  • Individuals will no longer be able to deduct student loan interest after the first 60 months of repayment.

The House of Representatives have extended all these provisions, but the Senate will not act.  The impasse centers on whether tax breaks get extended for all, or only for individuals earning $200,000 or less (households earning $250,000 or less). Many expect there to be little chance of resolution until after the November election.

New taxes take effect in 2013?

Beginning in 2013, the hospital insurance (HI) portion of the payroll tax–commonly referred to as the Medicare portion–increases by 0.9% for individuals with wages exceeding $200,000 ($250,000 for married couples filing a joint federal income tax return, and $125,000 for married individuals filing separately).

Also beginning in 2013, a new 3.8% Medicare contribution tax is imposed on the unearned income of high-income individuals. This tax applies to some or all of the net investment income of individuals with modified adjusted gross income that exceeds $200,000 ($250,000 for married couples filing a joint federal income tax return, and $125,000 for married individuals filing separately).

Both of these new taxes were created by the health-care reform legislation passed in 2010–recently upheld as constitutional by the U.S. Supreme Court–and it would seem unlikely that anything will prevent them from taking effect.

Will mandatory spending cuts be implemented?

The failure of the deficit reduction supercommittee to reach agreement back in November 2011 automatically triggered $1.2 trillion in broad-based spending cuts over a multiyear period beginning in 2013 (the formal term for this is “automatic sequestration”). The cuts are to be split evenly between defense spending and nondefense spending. Although Social Security, Medicaid, and Medicare benefits are exempt, and cuts to Medicare provider payments cannot be more than 2%, most discretionary programs including education, transportation, and energy programs will be subject to the automatic cuts.  The problem is that the defense cuts are real dollars vs. the domestic spending cuts are merely reductions in future increases in spending.  This means that there will be an estimated 1 million jobs lost fairly quickly in the defense and defense related industries.

New legislation is required to avoid the automatic cuts. But while it’s difficult to find anyone who believes the across-the-board cuts are a good idea, there’s no consensus on how to prevent them. Like the expiring tax breaks, the direction the dialogue takes will likely depend on the results of the November election.

What’s the worst-case scenario?

Many fear that the combination of tax increases and spending cuts will have severe negative economic consequences. According to a report issued by the nonpartisan Congressional Budget Office (Economic Effects of Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013, May 2012), taken as a whole, the tax increases and spending reductions will reduce the federal budget deficit by 5.1% of gross domestic product (GDP) between calendar years 2012 and 2013. The Congressional Budget Office projects that under these fiscal conditions, the economy would contract during the first half of 2013 (i.e., we would likely experience a recession).

It’s impossible to predict exactly how all of this will play out. One thing is for sure, though: the “fiscal cliff” figures to feature prominently in the national dialogue between now and November.  That is why it is critical to plan for the effect of possible increased taxes by possibly shifting income into 2012 and delaying deductions to 2013.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®


Last year, the average equity investor lost -5.73% What should the average investor do?

One of the most important reasons to use a financial adviser  especially a fee-based Certified Financial Planner ™ is to help you reduce the financial noise which is ever-present.  It is impossible to turn on the TV, radio, internet, open a magazine or newspaper and avoid distracting financial news about the market going up, or the market going down, or the Federal Reserve doing something, or upsetting news about your ability to save for retirement, or either true or false news over the internet, or any of the infinite other tidbits which seem to attack us on a daily basis.

This financial noise is one of the reasons that the average do-it-yourself investor has consistently under-performed the stock market indexes.  Thanks to the DALBAR organization, this under-performance has been statistically proven for over 30 years.  Financial noise has a VERY NEGATIVE IMPACT on average investors.

DALBAR is the financial community’s leading independent expert for evaluating, auditing and rating business practices, customer performance, product quality and service.  Launched in 1976, DALBAR has earned the recognition for consistent and unbiased evaluations of investment companies, registered investment advisers, insurance companies, broker/dealers, retirement plan providers and financial professionals. DALBAR awards are recognized as marks of excellence in the financial community.

One of the most watched reports which DALBAR releases is their annual survey of how average investors perform in relation to market indexes.  In the 2012 report, which uses 2011 investment results, market volatility reigned supreme.  Equity investors were driven by volatility to cash out, and bond investors were driven by fear of the downgrade to do the something, which both groups did at the wrong times.

As this chart shows, emotional reaction is one of the most important reasons why average investors consistently under-perform market index returns. The rule to successful investing is to buy low and sell high.  But as you can see, what average investors do is buy high and sell low.  A guaranteed recipe for failure!

Why the average investor under-performs market returns

As the 2012 DALBAR report shows, average equity investors lost 5.73% compared to the index gain of 2.12% and the average fixed income investor gained only 1.34% compared to the index gain of 7.84%.



Average Equity Investor

S&P 500



Average Fixed Income Investor

Barclays Aggregate Bond Index


20 Year







10 Year







5 Year







3 Year







1 Year








The benefit of using an advisor has also been shown to be valuable in 401k accounts.  In a survey recently released by Schwab Retirement Plan Services, they reported that employees who use independent professional advice services inside their 401(k) plan have tended to save twice as much, were better diversified and stuck to their long-term plan, even in the most volatile market environments.

So what is the lesson to be learned from this research?  It is simply that there is too much financial noise, and clients have been shown to financially benefit from using the services of a fee based Certified Financial Planner ™ .  If you also want to get an upper hand in winning the battle of investment returns you should look into using a fee-based Certified Financial Planner.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®