Worried you’ll run out of money in retirement? Then don’t make these rookie mistakes.

By Katie Young & Sharon Epperson, April 13, 2017, CNBC.com

Being newly retired is definitely a reason to celebrate — and spend — some of the hard-earned money you’ve saved over the years.

Yet with Americans living longer, experts say you need to plan for a retirement that could last 30 years or more. Add in ever-rising medical costs, mostly stagnant Social Security checks and all of a sudden that pile of cash doesn’t look so big.

The issue of outliving your money is a real threat. To avoid having that happen don’t make these classic new-retiree mistakes.

Spending too much too soon

Making the transition from earning money to spending money when you first stop working is tricky. Especially if you’re healthy and eager to enjoy all that new free time.

“We get this all the time, where recently retired clients will do a trip to Europe or Asia, then spend four weeks in the Caribbean, saying, ‘When we get older we’ll slow down,’” said Chris Schaefer, who leads MV Financial’s Retirement Plan Practice Group, Bethesda, Maryland. “They’re eating so much of principal in early retirement that they don’t have enough to last.”

Schaefer suggests that working with a financial planner to create a withdrawal strategy for your retirement accounts is key. He says a good starting point is taking out no more than 4 percent of your total nest egg a year.

Overspending on the house

Wanting to be debt free is an admirable goal and one that works for many retirees. However, if you haven’t paid off the mortgage yet, rushing to do so may not be your best move.

As long as you have the cash flow to comfortably make the payments, Schaefer says don’t sacrifice your retirement savings by using a big chunk to pay it down. Instead keep it invested where it should continue to grow.

Plus having a mortgage offers tax benefits you can still claim as a retiree.

Overspending on the kids

Once you retire it’s time to let the 35-year-olds take care of themselves.

“Over the last 10 years we’ve seen this more and more with millennials not able to get out on their own,” Schaefer said.

So, if you’re paying rent for your adult children, or their cellphone bill, car payments or other recurring costs, it’s time to sit down with them and tell them it’s over.

Making smart decisions early on will help stretch your money further so you can retire well.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


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® 


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® 


Helping Without Hurting Your Retirement

By Holly Gallagher, September 10, 2017, Traverse City Record Eagle

A large portion of the millennial generation has come of age during complex and challenging economic conditions. While the economy and job market have begun to improve, the headwinds that millennials have faced in starting their careers and making long-term financial plans have led to a few trends that are affecting their parents’ generation as well.

Many parents of adult millennial children find themselves wondering how much they should help their kids. Providing financial support to a family member can affect their own retirement plans.

Staying in the nest longer

One way young adults are staying afloat is by staying in their parents’ homes. By providing free or cheap housing, parents arguably are preventing their young adult children from falling into greater debt. The expectation, of course, is that these young adults will progress in their careers and eventually have enough earning power to achieve financial independence. But can you count on this happening? More important, what’s the exit strategy?

Footing the bill

If you’re still on the hook for financial support for your young (or not-so-young) adult child, you’re not alone. According to a 2014 American Consumer Credit Counseling survey, more than one-third of U.S. households provide regular financial assistance to adult children including paying rent, repaying student loan debt and covering car payments and cell phone bills.

Even if you haven’t dipped into your IRA to pay for your daughter’s wedding (and, please, don’t do that), these smaller amounts — a couple of thousand or even a few hundred dollars at a time — can have a detrimental effect on your retirement savings if they continue over the long term.

Is it a loan or a gift?

Another element to consider when providing substantial financial support to your child is the annual IRS gifting limit. For 2016, couples can gift up to $28,000 before having to report the amount to the IRS. In some instances, the same limit can be applied if you loan the money to your child (e.g., as a down payment on a house), but either consider it interest-free or charge below-market interest. For any amounts over these limits, you’ll be on the hook for taxes.

It’s important to note that gift and estate tax rules differ from state to state, and each situation is different. Consult with a qualified tax professional about the impact to your tax bill.

Setting a precedent

As parents, your goals are noble and well-intentioned — but do your actions foster the habits that will lead to financial success and independence? Or are they possibly setting the expectation that you’ll continue to fund a lifestyle that your children may never be able to afford on their own?

Learning to live within our means can be a challenge at any income bracket, and cutting your kids off financially or enabling bad habits is a tough line to tread. Here are some compromises you might consider:

  • Charge rent. Don’t necessarily expect market value for your accommodations, but you have the right to set boundaries that keep both parties feeling comfortable with the arrangement.
  • If not rent, pick an expense and be consistent. Among utilities, groceries and other expenses, there are many different ways your millennial can be accountable for at least some household needs.
  • Set boundaries. Separate wants from needs — you don’t need to finance your kids’ vacation or spa visits.
  • Live within your own means. Unless you want to end up on their doorstep someday when your retirement funds run out, be disciplined about sticking to your budget and savings plan.

Above all, make sure to discuss your actual spending needs both as a family and with your financial and tax professionals. You’ve put time and effort into building a sustainable retirement plan. Don’t derail your hard work by giving away more than you can afford.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®