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

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

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

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

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

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

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

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

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


To Your Successful Retirement!

Michael Ginsberg, JD, CFP®



Retirement Timetable for Baby Boomers

Last week I read an article written by Mary Beth Franklin in the magazine, Investment News.  It did such a great job summarizing the key ages related to Retirement Planning, I have republish it in this weeks blog message for your benefit.


Milestones and markers

These days, the road to retirement can be a bumpy ride. And soon it’s going to look like rush hour as Baby Boomers turn 65 at the rate of 10,000 people per day, every day, for the next 17 years. Yet an astonishing 17% of transition Boomers — those 55 to 65 years old — have yet to start saving for retirement, according to a 2012 survey by Allianz Life. Therefore, we’ve created a set of signposts to help these stragglers boost their savings, take advantage of tax breaks and watch out for the curves ahead.



Age 50

Catch-up contributions
In the year you hit the big 5-0, you can start stashing more money into your tax-deferred IRA and 401(k) or Roth accounts. In 2012, those 50 and older can add an extra $5,500 to their employer-based retirement plans on top of the $17,000 allowed for younger workers for a total of $22,500. Next year, the catch-up amount remains the same but the maximum contribution increases to $23,000. Those 50 and older can also contribute an extra $1,000 into the traditional or Roth IRA for a total of $6,000 in 2012 and $6,500 in 2013.


Age 55

Penalty-fee 401(k) distributions for early retirees
If you leave your job at age 55 or older, you can tap your 401(k) or other employer-sponsored retirement account penalty free, avoiding the normal 10% federal tax penalty on early withdrawals. But you’ll still owe income taxes on distributions. The early-out exception does not apply to IRAs which penalize distributions before age 59 ½.

It’s also the age when individuals with a high-deductible health insurance plan can contribute an extra $1,000 to a tax-deferred H S A in both 2012 and 2013 to pay out-of-pocket medical costs tax-free. You can roll over unused H S A funds from year-to-year, making it an ideal way to supplement retirement savings.


Age 59 ½

IRA pay day
Begins the eligibility for penalty-free distributions from IRAs and other qualified retirement plans. But some employers don’t allow distributions from workplace-base plans while you’re still on the job.




Age 60

Early claiming for survivors
Widows and widowers can collect Social Security survivor benefits as early as age 60, but the amount will be reduced by as much as 28.5% compared to claiming benefits at their normal retirement age and benefits. Survivor benefits may be reduced or even eliminated if they continue to work.



Age 62

Early access to Social Security benefits
You can collect retirement and spousal benefits as early as age 62, but benefits will be permanently reduced by up to 25%.




Age 65

Medicare kicks in
If you are already collecting Social Security benefits, you will automatically be enrolled in Medicare. Part A, which covers hospital costs, is free. Part B charges a monthly premium, currently about $100 per month for most beneficiaries, If you’re not yet collecting Social Security benefits, you’ll have to apply for Medicare.

Once you turn 65, you can no longer contribute to a Health Savings Account, but you can spend the money on anything, penalty free. However, you’ll owe income taxes on any non-medical distributions.


Age 66

The magic number
66 is the magic age for Social Security benefits. You qualify for your full benefits, you are no longer subject to the earnings cap restrictions if you continue to collect a paycheck and you can engage in some creative claiming strategies to maximize benefits.




Age 70

Maximum Social Security benefits
If you haven’t started collecting retirement benefits, now is the time to start even if you keep working. Delayed retirement credits, worth 8% per year starting at age 66, end once you turn 70.




Age 70 ½

Mandatory draw-downs
After all those years of tax-deferred retirement savings, Uncle Sam wants his cut. You must start taking annual minimum distributions from your IRA and other retirement accounts (except Roths) based on your life expectancy. If you don’t, you’ll owe a 50% penalty on any amount you fail to withdraw.




Post-Election Update Part 2 – A Few Suggested Investment Strategies

Last week I received the most comments of any of my blog posts to date.  Many of the responses asked for more comments and suggestions related to the type of investments and strategies which should be implemented moving forward.  I will use this week’s blog to provide some suggestions as well as links to articles which go into greater detail about different investment strategies.

Most of the suggestions deal with financial planning surrounding the increases expected in tax rates.  Therefore I suggest you may want to consider the following:

  1. Increase in Capital Gains Tax – Since the long-term capital gains rate is set to increase from 15% to 20% you may want to consider selling highly appreciated assets.  If you have any holdings which are in a loss position you could offset some of the gain by selling them.  If you still like the appreciated investment, you can immediately repurchase the investment and obtain a new higher tax basis for the future.  Usually I recommend the opposite which is called tax harvesting.  Meaning you sell the asset which has a loss, capture that tax loss and then wait 31 days before you repurchase, this is called the “Wash Sale Rule.”  But in a gain scenario you don’t need to wait for the holding period.  Feel free to call me with questions about this strategy.  Please read this article for further suggestions about tax loss harvesting, tax gain harvesting as well as other strategies you may want to consider.
  2. Tax Preferred Retirement Accounts – Fully funding your retirement accounts makes great sense if taxes are going up in the future, especially if you are able to contribute to a Roth IRA or Roth 401k at work.  (As a side note, fully funding your retirement accounts makes sense to do even if tax planning was not involved, BECAUSE IF YOU DON’T PLAN FOR YOUR RETIREMENT, WHO WILL?)  By fully funding your tax deferred retirement accounts you are able to defer current taxes and enjoy the benefit of compounded growth.  Now may also be a good year to consider doing a full or partial Roth Conversion.  Here are some articles on the subject:
  3. Favorable Tax Planning Investments REITS – Generally I recommend placing anywhere from 10% to 20% of a client’s holdings in non-publically traded Real Estate Investment Trusts or REITs.  The reason I use them is to generate bond like returns which smooth out the volatility of a client’s portfolio.  The REITs I recommend are currently paying a dividend rate of approximately 7% before any potential appreciation caused by the exit strategy.  The types of non-publicly traded REITs I recommend offer low management costs, they purchase Class A shopping centers or medical related properties at below market and new construction costs, have income which more than covers the monthly dividend paid to investors and offers a timely exit strategy of 3 to 5 years.  In addition when some of these non-publicly traded REITs are held in taxable accounts they offer great tax benefits as well.  They may offer up to 100% tax sheltering of all monthly income paid out and when the investment is actually sold, the gain is taxed at lower long-term rates instead of ordinary income rates.  For more information to see if these types of investments are suitable for you, please call or email me.

If you would like to meet and discuss your situation further, please feel free to call or email me.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


Post Election Update

Even after the candidates, unions, business groups and other special interest groups spent billions of dollars on the campaign, the end result is that we still have the same divided government that we had last week.  President Obama was reelected the Republicans will control the house with a 41 vote majority and the Democrats will control the senate with a 10 vote majority.  The bottom line is that any piece of major legislation will require bi-partisan support, something the Democrats did not have to do with the stimulus, healthcare or financial industry reform measures.  They had super majorities during the first half of President Obama’s presidency and never worked in a bi-partisan manner.

Generally, re-elected Presidents start to think about their legacy, and President Obama privately conceded during an off the record interview that if he was re-elected he will need to tackle the deficit and entitlement spending issues.  Unfortunately, his actions so far appear that he will continue to outsource major legislation to Congress just like he did with the stimulus and health care laws and not take a hands-on approach.  After his re-election Instead of calling congressional leaders back to Washington in order to deal with the “fiscal cliff,” he gave a campaign style speech and went off to play golf.

Most Washington Economists believe that there will be movement towards dealing with the deficit issues.  The major drivers of the deficit are Social Security and Medicare.  These experts believe that it will be possible to push changes through which include means testing of benefits, higher income levels on which social security and Medicare taxes are paid on and pushing the retirement age out.  It is also generally agreed that these changes will only affect those under age 55.

The “fiscal cliff” has been called the “mother of all lame duck session issues.”  If congress can’t agree to soften the tax increases and spending cuts tied to the “fiscal cliff” package of issues, most economists believe that there will be a 3.5% decrease in GDP.  Since the GDP is currently only growing by 1.25%, this means that there will be a drop in GDP, resulting in a recession starting in the 1st half of 2013.

So what are some strategies to prepare for higher taxes and slower economic growth?

  • If you were thinking about selling or diversifying assets with significant gains, you should sell them this year.
  • Be prepared for greater market volatility.  This is due to the high degree of uncertainty along with greater number of assets being sold to avoid the increase in capital gains rates.
  • Consider municipal bonds and tax deferred investments.
  • Consider Roth IRA Conversions.  Even if you convert this year, you can always revert back by October 2013 if positive changes or decreases in market value don’t benefit the conversion.
  • Take advantage of higher gifting this year.

If you would like to meet and discuss your situation further, please feel free to call or email me.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


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® 


Long-Term Care Issues

Odds of Needing Long-Term Care Assistance

Recently I have been discussing the realities of paying for long-term care needs with several clients, and thought it might be a good idea to share with you some of these discussions.  Long-term care expenses are the costs you must personally pay for when you need assistance to independently care for yourself.  These activities of daily living or ADLs consist of: Dressing, Bathing, Transferring, Toileting, Eating or Continence.  If you have long-term care insurance, generally a person must need help with two of these six ADLs in order to make a policy claim.  Care needs may also arise when a person has cognitive problems related to diseases such as Alzheimer’s or Parkinson’s.

So what are the risks of needing this type of assistance?

Well if we put the answer into the context of home or auto ownership the answer is shocking.  The odds of our home being seriously damaged by fire are 1 in 96, with the average insurance claim being $170,600.  Having your car damaged in an auto accident is 1 in 5 with the average insurance claim being $27,600.  BUT the odds of needing help with two of the six activities of daily living are 1 in 2, or a 50% chance!  With the average cost of a private nursing home room in the Bay Area being $259 per day or $94,535 per year.  The average stay in a nursing home is 2.5 years.

So with the high odds of needing this type of care, and with the expense totaling hundreds of thousands of dollars if necessary, how can a person plan for these expenses in their retirement income plan?  As you know, I use a 4-step Retirement Income Planning Process, here is the chart:

Michael Ginsberg’s 4-Step Retirement Income Planning Process

Paying for Long-Term Care Expenses:  There are 3 ways to pay for care.  The first is to self-insure or set aside the funds to pay for the care if necessary.  The second is to shift some of the risk to an insurance company through the purchase of insurance.  Or the third is to shift the cost of care to society through either the government or a charitable organization.

If you don’t have the thousands of dollars to set-aside to personally pay for care, then there are several insurance options now available.  One option is the traditional long-term care insurance policy which will pay if the need arises, but the problem is that if you don’t need the care you don’t get any of your premium payments back.  Another option is a long-term care rider tied to life insurance.  The attractive feature to this type of policy is that if you don’t need LTC benefits then your heirs will receive the death-benefit from the life insurance.  The third type of new policy is an annuity with LTC benefits.  This may be a very viable and the least expensive option if you have additional savings to self-insure since this has significant tax saving benefits available.  I would be happy to discuss your best options with you if interested.

Here are some additional research articles I have put together if you are interested:

 Concept Pieces

Life Insurance Riders that Pay for Long-Term Care
Long-Term Care Annuities


Long-Term Care Needs Calculator

 Video Seminars

Planning for Long-Term Care

 Consumer Materials

Long-Term Care Insurance: How Does It Work?
Using Life Insurance Riders to Pay for Long-Term Care

To Your Successful Retirement!

Michael Ginsberg, JD, CFP® 


Welcome to My New Blog

I decided to start this blog to help my clients and friends to better understand the challenges associated with Retirement Income Planning.   As a Certified Financial Planner™ specializing in Retirement Income Planning, I address these challenges with clients on a daily basis.  My practice can be divided into three groups:

  • Pre-Retirement clients who are 5 to 10+ years away from retirement:  For my pre-retirement clients, they are still concerned about the accumulation of assets in order to support themselves during their retirement years.  They are of course challenged in this savings process since they still have obligations such as putting children through college or supporting their own parents.
  • On the cusp of retirement, meaning clients who are within one year of making the leap from full-time employment to either retirement or part-time employment:  As clients face the day that one or both spouses leave their full-time position, they immediately start to experience the fears associated with major life changes.   One common thought/fear I hear is that one spouse is not sure how they will spend their day, or how they now need to find new friends outside of work.  I also hear comments, if one spouse has already retired; they are concerned about the newly retired spouse interfering with their home and personal life processes.
  • Already in retirement:  For my clients already in retirement they see firsthand the choices which they need to make in order to make sure that they don’t outlive their financial resources.  I see these clients wanting to support their grandchildren’s educations at the possible detriment of their own financial well-being.

I firmly believe that almost anyone can plan for and ultimately enter retirement successfully if they follow a specific process.  In the case of my client’s, I use a 4-step process to help them plan for this exciting new phase of life.  Here is what the process looks like:


Each week, I will post a new blog message which discusses one of the 4-steps of my retirement process.  Occasionally, I will post more often if there is some significant change which occurs because of the economy or because of something which happened in Washington, DC.  At other times I may post a video message.  This may be a recorded version of a presentation I give.

I hope this blog can turn into a two-way communication process.  I encourage you to either comment on articles I write, or make suggestions as to topics you would like me to comment on.

To Your Successful Retirement!

Michael Ginsberg, JD, CFP®