7 Resolutions to Get Your Nest Egg in Shape

Last week, the Wall Street Journal had a special report on Retirement Income Planning.  The main article outlines the key steps that I encourage all my clients to engage in to help ensure that they have a successful retirement.  These 7 steps are:

  1. Track spending – As I tell clients, tracking your spending is extremely important.  Since this is the only way to gain total control over your money and where you decide to spend it. When you track your spending for 3 or 6 months, it provides significant insight into where you currently allocate your money, as well as helps you determine if you are spending wisely.  This is not a judgmental issue, it is a control and value issue.
  2. Automate savings as early in life as possible – One of the simplest ways to accumulate significant savings is to baby step your way to success.  Start by savings either a fixed dollar amount or a percentage of income each month.  Then allocate a portion of any salary increase to your savings.  By doing this, you can grow both retirement and non-retirement liquid savings.  This method is also very valuable when saving for big-ticket items in order to avoid adding to credit card debt.
  3. Open and honest communication with your spouse – The #1 reason for fights between spouses is money.  The simple way to avoid this problem is to just TALK!!!  Communication about money and financial goals is critical.  That is one of the reasons that I have created a workshop with a family psychologist entitled – “Stop Fighting – It’s Only Money!”  If you are interested in attending the three-week program just let me know.  We have received excellent evaluations about the benefits of the program.
  4. Maximize Social Security Payout – with a little planning you can maximize the potential payout you and your spouse will receive from Social Security.  Speak with a Certified Financial Planner™ who can help you with this very important retirement income planning step.
  5. Take advantage of the Tax Code – We are under no obligation to pay any more in taxes than the law requires.  With planning and advice from a CPA, you can structure your investments and eventual retirement income to minimize taxes as much as possible.  As the saying goes, it’s not what you earn, but what you keep!
  6. Buy a Pension – Today very few employers offer traditional pensions, therefore we need to establish our own pension-like solutions.  These are also called income annuities.  Due to the low-interest rate environment, high quality income annuities are hard to find.  But using a pension like solution can allow you to maximize your retirement income, and help ensure that you don’t outlive your money.
  7. Don’t ignore Long Term Care Issues – About 70% of all people over the age of 65 will eventually need some type of long-term care services.  Since health insurance and Medicare don’t cover long-term care services, you need to either have your own policy or self-insure by using your own retirement savings.  Fortunately, today there are several options from traditional long-term care policies to annuities and life insurance with special long-term care riders.  It is important to work with an experienced financial planner in this area, not just an insurance salesperson.

I hope in reviewing these 7 simple, yet powerful steps you can take today will allow you to have the type of retirement you and your spouse deserve.  Feel free to either call or email me for more details.


To Your Successful Retirement!

Michael Ginsberg, JD, CFP®



Who contributes the most and the least to Retirement Accounts

These days, planning for retirement is a concern for most Americans. In the past, many Americans relied on Social Security and company pensions to fund their retirement. Today, Social Security does not pay enough for some people to be comfortable in their retirement, and most companies have eliminated pensions (if they had them to begin with). Therefore, making 401(k) and IRA contributions are critical to people’s retirement to ensure that they have enough money once they stop working.

I advocate that everyone should contribute at a minimum 10% to their retirement savings, but should actually aim for at least 15%.  According to a recent analysis by Esri, world’s leader in geographic information systems (GIS), the average American contributes only $1,325 to retirement accounts per year.

401(k) contribution:  401(k) retirement accounts allow Americans to contribute to their retirement directly from their regular paychecks. The contributions are pre-tax and are often matched by employers to encourage savings. Not everyone contributes though. Some either do not feel they have the funds to do so or they do not see the value.

According to Esri, the areas with the highest likelihood of residents that contribute to a 401(k) are in states on the Eastern Seaboard, in the Midwest and along the California coast.

ZIP codes of residents with the highest likelihood of having a 401(k) account include 19373 (Thornton, Pa.), 08535 (Millstone, N.J.), 48374 (Novi, Mich.) and 99516 (Anchorage, Alaska).

What type of person is most likely to have a 401(k) account? Esri has developed the Tapestry Segmentation system that classifies U.S. residential neighborhoods into 65 unique market segments based on socioeconomic and demographic characteristics.

The Tapestry segments with the highest likelihood of having a 401(k) account are Boomburbs, Exurbanites, Sophisticated Squires and Suburban Splendor. Residents in neighborhoods dominated by these tapestry segments are at least 1.5 times more likely than the average American to have a 401(k) account.

Residents of these tapestry neighborhoods are all very wealthy. Boomburbs communities are home to busy, affluent families with young children who live an upscale lifestyle. Open areas define the Exurbanites affluent neighborhoods of empty nesters and married couples with children. Sophisticated Squires are educated, married couple families hold good-paying jobs and are willing to commute longer distances to maintain a semi-rural lifestyle. Suburban Splendor neighborhoods mostly include two‐income, married‐couple families with or without children. They are well-educated and have good jobs.

The tapestry segments with the least likelihood of having a 401(k) account are City Dimensions, The Elders, Home Town, Industrious Urban Fringe, Las Casas, Metro City Edge, Modest Income Homes, NeWest Residents and Rural Bypasses. Residents in these neighborhoods have an index of 50 or less meaning they are half as likely as the average American to have a 401(k) account.

Low income is the commonality among these segments. Differences occur in age, race/ethnicity and location.

IRA contribution:  Contributing to an Individual Retirement Account (IRA) is another way that Americans can save for retirement. The U.S. government encourages people to contribute to an IRA by allowing them to deduct (depending on their income level) the contribution amount from their taxes. Not all Americans take advantage of this. Who does? Who doesn’t? Where do they live?

Areas with where people are most likely to contribute to an IRA are in the Midwest and along the Eastern Seaboard. The ZIP codes with some of the highest likelihood of people contributing an IRA are 02030 (Dover, Mass.), 94028 (Portola Valley, Calif.) and 38139 (Germantown, Tenn.). Each of these ZIP codes have an index of 199 meaning residents are 1.99 times more likely or more than the average American to contribute to an IRA.

Residents of neighborhoods with dominant tapestry segments most likely to contribute to an IRA are Suburban Splendor and Top Rung. These neighborhoods have an index of at least 200 meaning residents are at least two times more likely than the average American to contribute to an IRA. Residents in neighborhoods dominated by the Boomburbs, Connoisseurs, Exurbanites, Metropolitans, Military Proximity, Prairie Living, Prosperous Empty Nesters, Silver and Gold, Urban Chic and Wealthy Seaboard Suburbs segments have an index of 150 or higher. Except for Military Proximity and Prairie Living, all of these segments are affluent. Residents of Military Proximity neighborhoods are either on active duty or civilian employees of the military. Prairie Living neighborhoods are located primarily across America’s breadbasket; residents are employed in agriculture.

Top Rung is tapestry’s wealthiest consumer segment. It represents less than 1% of all U.S. households. In their peak earning years, these highly-educated residents are married couples with and without children. Suburban Splendor neighborhoods mostly include two‐income, married‐couple families with or without children. They are well-educated and have good jobs.

Tapestry segments with the least likelihood of contributing to an IRA are City Dimensions, City Strivers, High Rise Renters, Home Town, Inner City Tenants, Industrious Urban Fringe, International Marketplace, Las Casas, NeWest Residents, Southwestern Families, Urban Melting Pot and Urban Villages. Residents in these neighborhoods have an index of 50 or less meaning they are half as likely as the average American to contribute to an IRA. Residents of these neighborhoods are low income; differences among them are age, race/ethnicity and location.

Retirement contribution amount:  The amount people contribute to their retirement accounts vary tremendously. Obviously it is important for people to contribute as much as they can but that varies with income level and personal situation. Who contributes the most? Who contributes the least? Where do they live?

People living along the Eastern Seaboard and the coast of California contribute the most to the retirement accounts. Residents in ZIP codes 22066 (Great Falls, Va.), 10514 (Chappaqua, N.Y.) and 60043 (Kenilworth, Ill.) have some of the highest contributors to retirement accounts. Residents of these ZIP codes contribute an average of $5,000 or more per year to retirement accounts. Areas of Arizona, New Mexico and Kentucky have some of the lowest contribution rates.

Residents of neighborhoods dominated by tapestry segment Top Rung contribute the most. These residents contribute $2,500 or more annually to their retirement accounts. Residents of Boomburbs, Connoissuers, Exurbanites, Suburban Splendor, Wealthy Seabord Suburbs and Urban Chic also contribute a significant amount. Residents in most of these neighborhoods, on average, contribute $2,000 or more annually to retirement accounts.

Residents of City Commons and Social Security Set neighborhoods are among the lowest contributors to retirement accounts. Most residents, on average, contribute $500 or less annually. Many residents of Social Security Set are already retired, so they probably would not contribute. Residents of this segment live alone in rented apartments in low‐rent, high‐rise buildings. City Commons neighborhoods are primarily in large Southern and Midwestern metropolitan areas. Primarily in cities of large Southern and Midwestern metropolitan areas, residents of these neighborhoods are young, single or single parents, and most likely, unemployed, or work part‐time.

Why does this matter?

Americans all dream of comfortable retirement; however, not all can do it. Many want to ensure that once residents get to retirement age, they can enjoy it — travel, see family, pay for medical care and participate in hobbies. Not everyone is planning (or even able to plan) for their retirement. It is important for the government, nonprofit organizations, and companies to understand how much people are saving for retirement, what types of retirement savings programs are being utilized and who uses them. This information can help target education and other efforts to inform people about the best way to plan. Knowing where they live is a big part of this as that information can be used to develop marketing and set up programs for people who are not as prepared for retirement.

More information about Esri’s data can be found at www.esri.com/data

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


Financial Best Practices for 2013

Every year we make resolutions for the new year, financial resolutions are just as important, here is a list of some “best Financial Practices” you may want to consider adopting for 2013:

  • Max out your 401(k) and 403(b) contributions.  As I always tell clients, there are loans for education for our children, but there are NO retirement loans for us.  That is why it is critical to put your retirement savings, especially tax deferred retirement accounts, as your #1 savings priority.  This is especially true if your employer offers a match.  THAT IS FREE MONEY, DON’T THROUGH AWAY THAT GIFT!!!  The annual limit in 2013 for 401(k) accounts is $17,500 plus a catch up contribution of an additional $5,500 if you are over 50 years of age.
  • Max out your IRA and Roth accounts.  For 2013 contributions limits have increased to $5,500, but the catch up is still $1,000 for those over 50 years of age.  Even if the IRA contribution is not deductible, (meaning you are covered by a 401(k) program at work or you earn over $112,000) still setting aside money for retirement is a good thing.
  • Spend your FSA (flexible spending account) balances.  Most employers give you until March to spend the money.  Remember, the rules have changed as to what you can spend the money on.  Not all over the counter medications are covered any longer.
  • Resolve to keep your tax papers better organized.  Doing your taxes is always easier if you are organized.  Promise yourself to keep your tax papers better organized during the year so the process next year will be easier.

I want to wish you a wonderful and a prosperous 2013.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®