Archive | The Economy

Evaluating Continuing Care Retirement Communities

One of the realities of aging is increased medical expenses and Americans consistently underestimate what health care in their golden years will cost. One option is to combine all your needs — and expenses — into a single convenient package — a CCRC. Here are some thoughts on evaluating Continuing Care Retirement Communities (CCRC).

Evaluating continuing care retirement communities will help you decide if they’re right for you.

Evaluating continuing care retirement communities

First of all, it can be a little intimidating. You’re really “hunting for a new home, making high-stakes health care decisions and negotiating a complex business deal—all at the same time.” That’s the down side. On the other hand….

These communities, known as CCRCs, typically offer independent-living units as well as assisted-living and skilled-nursing facilities, allowing them to serve everyone from active newcomers to older residents requiring round-the-clock care. Seniors move in expecting to enjoy amenities such as libraries, golf courses and posh dining rooms while they’re healthy and to receive excellent skilled-nursing care if they fall ill.

So, you have a wide range of options that will accommodate you as your needs change. Still, it’s not an easy decision and certainly requires a lot of investigation.

But finding a CCRC that fits your vision of a financially secure retirement may require some hard-nosed negotiation with the facility’s management and detailed analysis of the development’s finances. You’ll need to assess your ability to pay monthly fees that may rise faster than inflation. And with the typical CCRC charging six-figure entrance fees, you’ll need to understand the size of any refund that you or your heirs may receive if you decide to move or when you die.

Moving to a CCRC may not be for everyone, but if you think it might be right for you do your due diligence and spend some time evaluating continuing care retirement communities.

Click here to read more about evaluating continuing care retirement communities.

 

Posted in Creating a Personalized Retirement Plan, Medicare, Planning for Your Retirement, Retirement Trends, The Economy0 Comments

Boomers Are Rewriting Retirement Rules

For better or worse, Baby Boomers have made an indelible mark on the American landscape in almost every way. Now, as more and more are reaching retirement age, boomers are rewriting retirement rules.

Boomers are rewriting rules of retirement, just as they’ve done for everything else over the last 50 years.

Boomers are rewriting retirement rules

What does retirement have in store for Baby Boomers? It may not be what you expect, but you can be sure that whether you’re part of that generation or another, what boomers do will affect you. Here are some of the developing trends.

More older Americans are packing it in for foreign countries, where they can save on living costs and enjoy warmer climates.

Almost a quarter – 21 percent – of new U.S. businesses started in 2011 were launched by entrepreneurs age 55 to 64, according to the Kauffman Foundation, up from 14 percent in 2007. Entrepreneurs age 45 to 54 accounted for an additional 28 percent of the 2011 startups.

…23 percent of older boomers and 27 percent of their younger siblings use tablet devices, compared with 30 percent of Gen Xers (born 1965 to the early 1980s), according to the Pew Internet Project. The gaps also are small when it comes to smartphones and social networking services.

Older Americans are taking more debt into retirement than previous generations. Mortgage debt is the biggest factor: Forty percent of homeowners over age 65 had mortgage debt in 2010, compared with just 18 percent as recently as 1992, reports the Joint Center for Housing Studies at Harvard University (JCHS).

Life expectancy for men has jumped an average of almost two years in each of the last five decades, to 75.7 years in 2010, according to the Society of Actuaries. For women, life expectancy has risen by 1.5 years, on average, to 80.8 years.

Some 58 percent of boomers are providing financial assistance to aging parents, such as helping them purchase groceries or pay medical and utility bills, according to an Ameriprise Financial survey of just over 1,000 Americans conducted in late 2011.

When it comes to their kids, boomers are even more ready to help out. Almost all boomers surveyed – 93 percent – say they have given their children a hand. A majority have “boomerang kids” who have moved back home to live rent free (55 percent) or afford a car (53 percent).

Not surprisingly, most of these trends involve money in some way, spending less by retiring abroad, starting a business to provide work — and income, retiring with more debt and providing financial assistance to both children and aging parents — which may also explain the debt.

Wherever you are in life and whatever your expectations, you can be sure that — just as they’ve done with everything else — boomers are rewriting retirement rules as well.

Click here to learn more about how boomers are rewriting retirement rules.

Posted in Creating a Personalized Retirement Plan, Planning for Your Retirement, Retirement Plan Challenges, Retirement Trends, The Economy0 Comments

Retirement Is A Dream For Most Americans

Pension plans are – for most of us – a thing of the past. 401(k) plans are a disaster. The Federal government is making nasty noises about cuts to Medicare and Social Security. Sometimes is seems like government and big business are conspiring so that retirement is a dream for most Americans.

Retirement is a dream for most Americans.

Retirement is a dream for most Americans

With pension plans a distant memory, most of us — if we have any retirement savings at all — have money in a 401(k). But there’s a big problem with that and it’s virtually ensuring that most Americans will never have enough to retire.

The fact is, that it’s easy to take money out of your 401(k). Sure, there’s a penalty and you have to pay taxes on the money you withdraw, but when you need it, you need it and your 401(k) is a handy stash.

A large and growing share of American workers are tapping their retirement savings accounts for nonretirement needs, raising broad questions about the effectiveness of one of the most important savings vehicles for old age.

More than one in four American workers with 401(k) and other retirement savings accounts use them to pay current expenses, new data show. The withdrawals, cash-outs, and loans drain nearly a quarter of the $293 billion that workers and employers deposit into the accounts each year, undermining already shaky retirement security for millions of Americans.

And now, as the Federal government attempts to get its fiscal house in order, we hear rumors of cuts to Medicare and Social Security.

With policy makers eyeing cuts to Social Security benefits and Medicare to rein in the soaring federal deficit, and traditional pensions in long decline, retirement savings experts say the drain from the accounts has dire implications for future retirees.

‘‘We’re going from bad to worse,’’ said Diane Oakley, executive director of the National Institute on Retirement Security. ‘‘Already, fewer private-sector workers have access to stable pension plans. And the savings in individual retirement savings accounts like 401(k) plans — which already are severely underfunded — continue to leak out at a high rate.’’

The fact is that the interests of working Americans have never been truly served — with very few exceptions — by big business or government and now it looks as though retirement is a dream for most Americans.

Click here to read more about why retirement is a dream for most Americans.

Posted in Creating a Personalized Retirement Plan, Planning for Your Retirement, Saving for Retirement, The Economy0 Comments

Changes To Social Security for 2013

Whether you’re already retired, getting ready or just dreaming, your future financial security will be affected by these changes to Social Security for 2013.

Learn about changes to Social Security for 2013.

Changes to Social Security for 2013

Some good, some bad — depending on how you look at them — here are seven changes being implemented by the Social Security Administration in the coming year.

1. Payroll tax cut ends.

2. Higher payroll tax cap.

3. More online services.

4. Reduced office hours.

5. Paper checks will end.

6. Higher earnings limit.

7. Bigger payments.

To ensure you’re getting all the Social Security benefits to which you’re entitled, take the time to get online and familiarize yourself with the Social Security Administration website — www.ssa.gov — to learn all you need to know about changes to Social Security for 2013.

Click here to read more about changes to Social Security for 2013.

Posted in Planning for Your Retirement, Social Security, The Economy0 Comments

China’s Financial Problems Could Destroy Your Retirement

China is one of the United States’ largest international creditors. And, while it’s nice of them to lead us money, it looks like their economic activities could come back to bite them and China’s financial problems could destroy your retirement.

Addiction to credit may mean China’s financial problems could destroy your retirement.

China’s financial problems could destroy your retirement

While the Chinese government has passed many reforms allowing a more robust competitive economic environment to develop, these changes are coming slowly and — combined with low deposit interest rates — have forced many Chinese to turn to other, more risky investments.

China’s economy has become a credit junkie, requiring increasing amounts of debt to generate the same unit of growth. Between 2007 and 2012, the ratio of credit to GDP climbed to more than 190%, an increase of 60 percentage points.” In 2012, new credit to the non-financial sector totaled 15.5 trillion, that’s equivalent to 33 percent of 2011 GDP.

What does that mean and why should we care?

A lot of China’s debt is supported by real estate which is put up as collateral for the loans. Banks’ official exposure to property is listed as 22 percent of the loan book. But that doesn’t account for exposure to real estate through their loans to local government financing vehicles (LGFVs) and off-balance sheet credit instruments.

Sudden drops in real estate prices caused a jump in debt problems and non-performing loans.

Oh yeah. A real estate bubble. You remember what that’s like, don’t you.

As we struggle to rebuild our own economy, the US is very susceptible to economic trends around the world. If it’s economy crashes — or even just dips substantially — China’s financial problems could destroy your retirement.

Click here to read more about how China’s financial problems could destroy your retirement.

Posted in Planning for Your Retirement, Retirement Plan Challenges, The Economy0 Comments

2013 Guesses About Retirement Investments

As we ease into 2013, it seems just about everyone has ideas — predictions, if you will — about what the new year will bring. Bearing mind that your speculation is as good as mine and that “past performance is no guarantee of future returns,” here are some of the headline-making 2103 guesses about retirement investments.

2013 guesses about retirement investments. What will happen to your money this year?

2013 guesses about retirement investments

One thing is pretty certain: since the Great Recession, the stock market has managed to claw it’s way back to record levels. It also looks like things will continue to get better.

Optimism about the economy and the political scene brought strong gains for the stock market in 2012, despite occasional jitters over the so-called fiscal cliff. There are reasons to think the rally will continue through 2013. Europe is getting better. China is stronger. Maybe our own economy will pick up as unemployment goes down, consumers build confidence, and politicians agree to compromise.

That said, we can safely bet that diversity in your investment portfolio is a good thing, because — let’s face it — no one really knows what the future holds for China, Europe or anywhere else in the world and you want to be prepared. Then there’s the infamous “presidential cycle.”

Research tells us that the stock market tends to follow a presidential cycle. Stock prices go up during a presidential election year like 2012 by an average of about 8 percent. This past election year brought us almost twice that, some 15 percent.

Marshall Nickles of Pepperdine University suggests

…while the presidential cycle theory is historically accurate, it does not necessarily predict stock prices. The market is subject to various forces, many of them unforeseeable, and a recognized pattern may not anticipate the next turn in the market.

A report from John Hancock Mutual Funds confirms

…the observation that the stock market ekes out small gains during a president’s first two years, then goes gangbusters during the president’s second two years. John Hancock puts the chances of a stock-market gain during a presidential election year at 74 percent. But the chances of a gain during the first year of a presidential term fall to 57 percent. And this study calculates an average return of just 4 percent.

Then there’s the Santa Clause rally.

Yale Hirsch of The Stock Trader’s Almanac looked at the last five trading days of the year plus the first two of the new year. Since 1950, those seven days have averaged a 1.5 percent gain in stock prices (an annualized rate of over 50 percent). He also found that this Santa Claus rally often predicts the next year’s market. If the Santa Claus rally arrives on schedule, it’s a good sign. If it doesn’t, then the following year often turns bearish.

Ho! Ho! Ho! You may find it entertaining to look at the numbers, trends and predictions — I do — but don’t bet the farm on them. Instead, remember that they’re 2013 guesses about retirement investments.

Click here to read more about 2013 guesses about retirement investments.

Posted in Planning for Your Retirement, Retirement Plan Challenges, Saving for Retirement, The Economy0 Comments

Working Longer May Not Save Your Retirement

Working longer is a frequently-sited strategy for ensuring a financially secure retirement and it offers many benefits such as more years of employment to save and maximizing your Social Security benefits. But just working longer may not save your retirement.

Working longer may not save your retirement, but it may help make your  golden years more fun, interesting — and rewarding.

Working longer may not save your retirement

There are many other factors that come into play when you consider postponing your retirement. How much you’re earning now is critical.

As you might expect, projections for the lowest pre-retirement income quartile are the most sobering. This group would need to defer retirement to age 84 before 90 percent of them would have even a 50 percent probability of achieving comparable pre-retirement living standards.

You’ll have to really love what you do to make working until you’re 84 seem attractive. The future looks brighter for those earning more, but not much.

The results improve with income levels, but even among those in the highest income quartile, 90 percent have only a 50 percent chance of having enough to retire by 70.

Even if you’re relatively young and plan to work longer, the projections are still grim.

When broken out by age, the news isn’t much better: For one-third of households in which the people were between ages 30 and 59 as of 2007, working until age 70 won’t provide adequate income in retirement.

One way to look at this and make the picture seem a little brighter is to broaden your definition of “work.” Even if you hate your current job and want to get out of it as soon as possible, your skills and experience may have many applications that will allow you to work less, generate income to offset your retirement expenses, and actually enjoy what you’re doing.

Working longer may not save your retirement, but it may help make your  golden years more fun, interesting — and rewarding.

Click here to learn why working longer may not save your retirement.

Posted in Planning for Your Retirement, Retirement Plan Challenges, Saving for Retirement, The Economy0 Comments

Save Your Retirement From Financial Advisors

Almost all of us — to some degree — have bought into the myth that financial planners know what they’re doing and that we should follow their advice because they’re — well — experts. They’re not. It’s not really their fault, either. You see, they’ve bought into the myth as well. Maybe now is the time for you to save your retirement from financial advisors.

Take the time now to learn about investing and save your retirement from financial planners.

Save your retirement from financial advisors

When it comes to saving for your retirement here’s all the specific advice I’d ever share:

  1. Start saving young and save as much as you can.
  2. Live within your means.
  3. Don’t touch the principal.
  4. Diversify to mitigate the effects of inevitable market swings — the more diverse, the better.

Everything else is just smoke and mirrors because — as all financial planners will tell you — past performance is no guarantee of future results. We cannot — and they cannot — predict the future. Yet we persist in believing the myth. The problem, according to Ms. Helaine Olen, a freelance journalist and author of “Pound Foolish: Exposing the Dark Side of the Personal Finance Industry” is this:

…“most of the financial advice published and dished out by the truckload is useless” — that it is simply “oblivious to the messiness of the human condition.”

And that “human condition” makes us our own worst enemies.

Ms. Olen writes that the “financial therapy movement,” for all of its flaws, “has hit on one universal truth: When it comes to money, the vast majority of us are nuts. Bonkers.” She counts some of the ways: “We don’t open our 401(k) statements. We ‘forget’ to pay our bills or file our taxes until the last minute.” Financial literacy is alarmingly low. Many of us don’t budget at all.

Our own lack of experience and understanding about investing and finance make us easy targets for those unscrupulous individuals who know they’re blowing smoke, but do it anyway.

A 2009 AARP survey found that nearly one in 10 people over 55, or about 5.9 million Americans, had attended a free financial seminar in the last three years.

At the World MoneyShow, an annual event in Orlando, 80 percent of attendees were over 55. The author [Ms. Olen] writes that “a panicked baby boomer is their best customer.”

Knowledge is power — even just a little bit of knowledge. Learn about investing. Like anything else, it’s scary and incomprehensible at first, but before long, you’ll know at least as much as most professionals and you may be able to save your retirement from financial planners.

Click here to read more about how you can save your retirement from financial planners.

Posted in Planning for Your Retirement, Saving for Retirement, The Economy0 Comments

Bond Investments Will Blow Your Retirement

Bonds have long been a safe — relatively — investment for those who want a financially secure retirement, but that may be changing. Investors seeking safer investment options are creating a “bond bubble.” Given what’s happened to all past bubbles, is it possible that bond investments will blow your retirement?

The “bubble” of bond investments will blow your retirement.

Bond investments will blow your retirement

As we seek more secure investments and safer returns…

…the panicky flight to safety is creating a new kind of bubble, this time in the U.S. bond markets. The supply of safe assets, which historically meant AAA-rated government bonds, mortgage-backed securities and gold, has been declining precipitously over the past few years.

It’s not looking good for bonds — of any kind.

…U.S. Treasuries are the last last resort; as investors have flooded into them, yields dropped to 220-year lows. The practical result is that if you own T-bills, you are basically paying the government for the privilege of babysitting your money while you go nowhere.

There are other options, however.

…remember real estate? Ouch, you do. Sorry. But it’s looking to be a safer bet. The asset that caused our financial freak-out has, by many indicators, bottomed out. Building permits, the leading indicator of future construction, jumped nearly 8% in May; that sets the stage for some major construction this summer. “Interest rates are low, prices are low enough to encourage buying, and yet rents are rising–a kind of dividend which may well beat inflation,” notes Paul Ashworth, chief North American economist at Capital Economics.

What were once safe investments may not be any longer. Consider other options because it’s possible that bond investments will blow your retirement.

Click here to read more about how bond investments will blow your retirement.

Posted in Planning for Your Retirement, Retirement Investment Options, Retirement Plan Challenges, The Economy0 Comments

Credit Card Debt Can Ruin Your Retirement

Credit card debt is a fact of life for most Americans, but many of us don’t think about the disastrous effect it can have on our future. The truth is, not only can it cause havoc with your current finances, credit card debt can ruin your retirement.

Credit card debt can ruin your retirement.

Credit card debt can ruin your retirement

You’re probably familiar with the concept of compound interest — it’s what makes building a healthy retirement nest egg possible. But that same principle is at work with debt.

Let’s say you’re the average American with $6,500 in credit card debt at a 14.5 percent interest rate. That means your estimated initial minimum payment will be $130 a month. And if you just pay the minimum, you’ll have to make payments for 26 years to pay off the balance, paying a whopping grand total of $8,938 in interest charges.

Wouldn’t it be nice to add that much to your retirement fund instead of paying it on purchases that have long since been cast aside?

So credit card debt, when you carry a balance for years, takes away from the income that you can save for retirement. But if you’re like most people, you may still want to split the difference – putting part of your disposable income into retirement savings and part of it into paying extra on your credit card.

Even “splitting the difference” isn’t always a good idea, especially if you’re paying a high interest rate on a large balance.

If your credit card has a 15 percent interest rate, but your IRA is only earning 8 percent, it almost always makes more sense to pay off your credit card debt ASAP, and then to put more money into your IRA. You’ll get more bang for your buck this way – by paying off the credit card as quickly as possible, you’ll save more interest than you would make by putting that extra money into retirement savings.

Of course, there’s always an exception to the rule. In this case, it’s the employer matching contribution to your 401(k). (By the way, a hefty employer match is about the only reason for putting money into a 401(k) instead of other investments.)

The only exception here is if your company matches part of your retirement savings. If you get a company match, you’re getting free money. Don’t pass it up. Contribute enough annually to your retirement account to get all of the possible company match.

Carrying credit card debt into retirement creates an even worse financial scenario, primarily because most of us will be on a fixed, limited income. High interest rates on credit card debt can ruin your retirement, so pay it down and only use the card for purchases you know you can pay off quickly.

Click here to read more about how credit card debt can ruin your retirement.

Posted in Creating a Personalized Retirement Plan, Planning for Your Retirement, Retirement Plan Challenges, Saving for Retirement, The Economy0 Comments

Recent Comments