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You Are Never Too Old
Healthy Living

You Are Never Too Old

by Kendall VanBlarcom
written by Kendall VanBlarcom

People are living longer than they have in previous generations. As you age, it is important to remember that you are never too old to create the life you want. You Are Never Too Old
Creating happiness is something that can be done at any age, yet it is common for people to equate aging with the idea of being too old to learn new things. You are able to bring new activities and connection into your life at any point, provided you are motivated to do so and are willing to seek out the right tools and guidance.

Is It Too Late For Me?

Sometimes, as life changes, people find themselves living a life they never planned on, and yet they are unsure what to do next. Why is this? Well, often it is because children grow up, move away, and have children of their own. Or jobs change and people retire. Sometimes retirement happens before you want it to, either through staffing changes or economic shifts. When any of these life changes happen, it’s time to take stock in your life and figure out what you’d like to do next.

What Do I Want?

For some people, this is a scary question. But it’s important to keep yourself open to new friendships, opportunities, and experiences. You are never too old to improve your life. Believing you are too old will only stifle your growth, making it difficult for you to move forward. Make yourself and your own happiness a priority.

You Are Never Too Old To Make Change

  • Purse a hobby. Either revisit a hobby you enjoyed in the past or find a new interest. Shared hobbies can also be a great way to bond with your spouse or others in your life.
  • Start journaling. Writing down your ideas can help you to discover your dreams. Plus, writing your thoughts and emotions down can be a path to healing. Some find it helpful in dealing with past traumas, because writing can be a way to break through emotional blocks.
  • Listen to books. Think of the books you have wanted to read and look into audio books. You can relax, take in the tale, and allow your imagination to soar.
  • Spend time with friends and family. Make dinner plans with people you miss or invite someone over to your house if you want company at home. If some relationships have weakened, make an effort to reach out. Sometimes it is easy to complain about people moving out of our lives, yet we have stopped making the effort as well.

Life is full of possibilities. Yes, your abilities and interests might change, but you are never too old to pursue the life you dream of. Change your thoughts about aging. Getting older can be an experience to enjoy if you allow yourself to learn new things and make new connections. You may find yourself having fun. Inspiration to live life fully could follow.
Want to make a change? You can. Talk through your problems and discover your path to health and happiness.

You Are Never Too Old

You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old You Are Never Too Old

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How To Withdraw Needed Cash From Your IRA
Money Tips

How To Withdraw Needed Cash From Your IRA

by Jeff Dailey
written by Jeff Dailey

7 Ways You Can Withdraw from your IRA Without Penalty

An IRA is one of the most important retirement investments available. It allows you to take deductions on your contributions while accumulating tax-deferred earnings. How To Withdraw Needed Cash From Your IRA
You are generally not allowed to withdraw money from a traditional IRA until age 59-1/2 without paying a 10% penalty on top of ordinary income taxes on your withdrawal — and generally, you do not want to withdraw funds early because of the loss of tax benefits and the reduction in earnings.
However, there are cases where you may legitimately need to access your IRA funds, and the IRS has made exceptions to the early withdrawal rule to account for these cases. These exceptions are sometimes known as Rule 72(t) provisions after the applicable section of the Internal Revenue Code. Here are some of the primary allowable exceptions:
1. Initial Home Purchase – For purposes of buying or building/rebuilding your first home, you can take a penalty-free early IRA withdrawal up to $10,000 or $20,000 for couples. To qualify as a “first home,” you and your spouse must not have owned a home for two years prior to the home sale.
2. Medical Expenses – You can withdraw funds penalty-free to pay for any unreimbursed medical expenses that go beyond 10% of your adjusted gross income (AGI) for the tax year. The withdrawal must take place during the same year as the medical expense.
3. Disability – Should you become disabled, you can qualify for the early withdrawal exemption if your disability meets severity requirements.
4. Health Insurance – If you have been unemployed for at least twelve weeks because of the loss of a job, you can take penalty-free early withdrawals to pay for health insurance for you and your family. Make sure that the distribution is in either the same year or the following year after receipt of unemployment benefits.
5. Revise to an Annuity – It is possible to avoid a penalty by setting up your withdrawals as a series of annuity payments that are calculated according to your life expectancy. You must take the distributions for five years or until you reach age 59-1/2. The withdrawal method must follow IRS-approved guidelines, so it is wise to seek professional help when choosing this path.
6. Educational Expenses – Certain payments on higher education expenses may be covered by penalty-free IRA withdrawals if the educational institution qualifies and other requirements are met. Contact a tax professional and your school to verify if your educational expenses apply.
7. Inheritance – When you inherit an IRA, you can take withdrawals without the 10% penalty, but you must leave it as the inherited IRA instead of rolling it over into your own. Once rolled over, an IRA is treated as your own and subject to the same rules as your existing IRA.
For a full list of exceptions and further information, check the IRS website.
Roth IRAs (established using after-tax funds) work a bit differently with respect to penalties. The contributions that you have made may be withdrawn at any time tax-free and penalty-free. Penalties only apply on earnings if the withdrawal takes place less than five years after the initial IRA deposit and you are below age 59-1/2.
The same exceptions that apply to traditional IRAs apply to Roth IRAs in this case, but if the withdrawal takes place after the five-year mark, penalties do not apply even if you are below age 59-1/2. Taxes apply on the earnings withdrawn before the five-year mark regardless of your age.
We suggest that you keep all of your IRA funds in place whenever possible. However, if you truly need to access your IRA funds, see if your reasoning falls under one of the Rule 72(t) provisions — and if it doesn’t, then you will have to decide if the need is strong enough to be worth absorbing a tax hit and the corresponding 10% penalty.
Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle.
-MoneyTips.com

How To Withdraw Needed Cash From Your IRA

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5 Tips for Aging in Place
Age-In-Place

5 Tips for Aging in Place

by Jeff Dailey
written by Jeff Dailey

When Joanne Harrison’s spouse passed away, the 78-year-old had no interest in moving. She’s healthy, has many friends, and her two sons live nearby. Plus, she’s a confident driver and gets herself to doctor’s appointments and the grocery store. 5 Tips for Aging in Place
Those are all important prerequisites for people who want to stay in their homes as they grow older, or “age in place.”

According to an AARP survey, nearly 90% of those over age 65 want to stay in their homes for as long as possible. But Sullivan and others, who want to stay put as they grow older, “need to have a plan—and a support system—in place that allows them to stay in their community, ideally in their home, as long as possible, and to ensure that they’re living safely and independently,” explains Suzanne Schmitt, vice president for family engagement at Fidelity. 5 Tips for Aging in Place
Here are five things that aging singles or couples—and their children, other family members, or caregivers—should keep in mind when assessing the living situation.

1. Explore the Benefits of Staying Put

There are many reasons why aging in place can be a win. For starters, “it may be financially advantageous,” Schmitt says. For instance, depending on the situation, staying in a home can be less expensive than moving to an assisted-living community. There are the upfront costs of moving, an often steep entrance fee, and monthly payments for room and board, which can easily top $3,000 a month.
Even more important are the psychological payoffs of not moving away from one’s established community of friends, medical professionals, and faith community. Though these factors are hard to place a financial value on, they are a vital component of healthy aging.
“The single most predictive factor of whether you’re going to age well—meaning be able to be independent and live a long and healthy life—isn’t money,” says Schmitt. “And it isn’t even necessarily your health. It’s your social connections, which may get lost [if you move], because many people focus more on their finances.”

2. Do a Home Safety Check

The first step in an “aging in place” plan is to run a complete safety check of your home. “Many people don’t know what to look for,” says Schmitt. “There are some hazards that you might take for granted—for example, furniture obstructing pathways or stairs.”
Sullivan’s children did just that. They walked around her house with an eye for any potential hazards that might cause trouble should her vision or mobility begin to deteriorate. Then they hired a home modification professional to help make needed changes.
The good news is that many of the improvements that may make it easier to stay in your house—such as raising electrical outlets to make them more accessible and installing brighter outdoor lighting—aren’t expensive.
Sullivan’s home was retrofitted by installing secure handrails alongside the stairs to the front door, switching doorknobs to levers, adding automatic lights to hallways, removing rugs that might become tripping hazards, and placing grab bars in the shower.
“There are plenty of easy options to modify a home,” says Schmitt. “The sooner you start preparing, the better.”

3. Assess Transportation

“Driving may be your lifeline and independence,” Schmitt points out. “Coming to the ‘I don’t think I can drive’ moment is tough, but it can’t be avoided.”
And, although driving might not be a concern now, it may ultimately become one.
If you are at the point that you can no longer drive or walk to the grocery store or reach other important services, consider other transportation options. “If you have public transit, great, but it doesn’t exist in a lot of places,” explains Schmitt. In that case, you may need to make other arrangements, such as ride sharing with friends and neighbors, or transportation assistance that many companion-care services may offer. When it comes to groceries and getting things like prescriptions filled, automatic delivery or online delivery can be a great option. A family or friend can help manage orders and accounts and can track order history to help make sure you are getting what you need.

4. Ensure a Supportive Community or Network

This is a linchpin: Communications—social connectivity. Think about how supportive the community is where you live.
Isolation can be a stumbling block to aging well. And it can creep up slowly. No matter how safe the inside of a home is, if there isn’t enough interaction with a community, a plan can fall apart.
“Are you lonely? Part of aging in place successfully is being able to stay connected, and not fall into the depression that many people experience because they are isolated,” says Schmitt.
Are you comfortable on a computer? Can you connect online with your children, grandkids, and others?
You might also investigate some of the companionship services available in the community, through websites such as Caregiving.org.
Start to pull together a list of people and professionals who can step in and help if you need someone to go along to a doctor’s appointment or someone to help with errands, or for lunch or dinner dates. If your family doesn’t live nearby, you may want to have a pipeline to neighbors you can call for periodic checkups.
A growing number of communities use the “village” concept for services and support to seniors. The idea, originating in the Beacon Hill neighborhood of Boston, is to create a nonprofit organization that arranges for services—including transportation, home repair, and social activities—for a fee. 5 Tips for Aging in Place

5. Make it an Ongoing Process 5 Tips for Aging in Place

“One of the myths is that people think they can make a plan once, and they’re done,” says Schmitt. “This is something that needs to be reviewed regularly by you and your family member or caregiver.”
Once the home is retrofitted, keep an eye open to see if you are having trouble. Friends and family members may want to look out for any unexplained bruising on the aging person’s arms or legs. “It can be an indicator that they may be having trouble moving around,” Schmitt notes. Also, look around the home when you visit. Is there a pile of mail? Are things in disarray? Check the refrigerator. Is it bare? Is food spoiling?
What if you experience a health event, such as a bout of pneumonia that requires a lengthy hospital stay, or a fall that affects your cognitive ability or mobility. These are going to be very important points when you have to take a look at whether the plan you put in place is still going to work going forward.
“In an ideal world, we will age gracefully in place, but that doesn’t happen very often without careful preparation,” says Schmitt. “Take the time to sit down and get the aging-in-place conversation going.” 5 Tips for Aging in Place
Article from Fidelity.com

5 Tips for Aging in Place

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How Denial About Decline Compromises Senior Care
Housing Tips

Data helps seniors determine where to live

by Carol Marak
written by Carol Marak

Seniors want data when searching for the best place to retire. While the younger people have their own lifestyle criteria, older adults have stricter requirements because as they grow older, their needs expand. Data helps seniors determine where to live
AARP claims Social Security is the foundation of retirement and 84 percent of people age 65 and older receive benefits. Social Security provides more than a third of income for retirees which is hardly enough to survive since the average benefit in the U.S. is $17,189/year according to the Census survey. Data helps seniors determine where to live
So what do seniors look for when evaluating areas to retire? The majority want to keep working and live in a state where housing is affordable. Data helps seniors determine where to live
Using the U.S. Census data and other government surveys, let’s compare three states in the country based on work and housing to see which would be the best state to retire. I’ve selected Arizona, Minnesota, and Texas for my own analysis.

Arizona

  • There are 215,982 seniors living alone in Arizona. Of these, 68% are female.
  • Average social security income is $18,179/year
  • The median household income for an Arizona senior is $39,445
  • The number of seniors working in the state is 13 percent
  • 83 percent own a home and 21 percent of the owners spend over 35% of their monthly budget on a mortgage
  • The number of people aged 65 and over in Arizona is projected to rise 101% over the next 15 years, from 1,181,358 to 2,371,354.

Minnesota

  • There are 201,459 seniors living alone in Minnesota. Of these, 72% are female.
  • Average social security income for all seniors is $17,798/year
  • The median household income for a Minnesota senior is $37,329
  • The number of seniors working in the state is 16 percent
  • 78 percent own a home and 32 percent have a mortgage. Those with a house payment, 20 percent spends over 35% of their monthly budget on it.
  • The number of people aged 65 and over in Minnesota is projected to rise 54% over the next 15 years, from 774,390 to 1,193,124.

Texas

  • There are 638,725 seniors living alone in Texas. Of these, 70% are female.
  • Average social security income is $16,334/year
  • The median household income for a Texas senior is $36,915
  • The number of seniors working in Texas is 17 percent
  • 81 percent own a home and 32 percent have a mortgage. Those with a house payment, 20 percent spends over 35% of their monthly budget on one.
  • The number of people aged 65 and over in Texas is projected to rise 67% over the next 15 years, from 3,112,883 to 5,186,185.

At initial glance, from the perspective of a single female, aging alone, Texas is a better fit for me since there are more people in my predicament (solo agers.) My first assessment is crude, but the housing and mortgage numbers tell me that homes are more affordable in Texas and Arizona. Plus, both project to have a higher rate of people my age down the road.
Even so, having a job helps people thrive, and having one is vital to me. The Harris poll found 54 percent of workers (age 60+) say they will work part or full-time after retirement. Texas has a slightly higher number of working seniors than Arizona or Minnesota.
The city guides can give you much more insight than the little I give today. You can do your individual assessments by using the data provided for over 8,000 cities across the country. Data helps seniors determine where to live Data helps seniors determine where to live Data helps seniors determine where to live

Data helps seniors determine where to live

Data helps seniors determine where to live

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How to Make Backdoor Roth IRA contributions
Retirement Planning

How to Make Backdoor Roth IRA Contributions

by Jeff Dailey
written by Jeff Dailey

Many investors are enticed by the long term benefits of a Roth IRA. Unfortunately for those who do participate in an employer sponsored retirement account, such as a 401k, and earn a high annual income (over $116,000 for single filers and $183,000 if you are married, filing jointly), you are unable to make a Roth contribution. How to Make Backdoor Roth IRA contributions
Fortunately, there are ways around this. There are steps outlined below that can be taken, which would allow a high income earner to move after tax funds into their Roth IRA. This is only possible because there are currently no income limitations for those who are looking to convert to a Roth IRA.
Step 1 – Determine whether or not there are other pre-tax IRA’s
Step 2 – If there is an existing pre-tax IRA, roll this account into a 401k (if available) to avoid the IRA aggregation rule. It is important to check whether or not the 401k allows for a rollover. You are also only able to roll over pre-tax funds.
Step 3– Contribute to a non-deductible IRA (You must have earned income for the year)
Step 4 – Invest funds in the non-deductible IRA
Step 5 – Keep invested (this is the step where you/CPA must be aware of the step transaction doctrine)
Step 6 – Convert to a Roth IRA
A CPA should be consulted prior and along the way as there are important obstacles to be prepared for. Obstacles such as the IRA aggregation rule and the “Step transaction doctrine.”
It is worth noting that this opportunity might not exist forever and the new administration may change the rules.
William N. Pugh, CFP®
Wealth Manager
www.Apriem.com
 

How to Make Backdoor Roth IRA Contributions

 

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Retirement Planning

10 Tips for Picking a Place to Retire

by Jeff Dailey
written by Jeff Dailey

Once you retire, you’re free to head to the beach or golf course. In some cases, you can even dramatically reduce your cost of living or improve your quality of life with a single move. But you want to make sure that a retirement spot will continue to meet your needs as you age. Here are 10 tips for finding your ideal retirement spot. 10 Tips for Picking a Place to Retire
Seek lower costs. If you can sell your house in an expensive city and move to a place where housing costs significantly less, you can use that influx of cash to help fund your retirement years. “If the cost of living is lower, it can certainly let your retirement nest egg last a little longer,” says Scott Cole, a certified financial planner for Cole Financial Planning in Birmingham, Ala. “We do see people who had a lot of their investments tied up in their house, and they were able to liquidate that house, net a significant gain and then come and buy a pretty similar house, if not much nicer house, here [in Alabama], and then use the rest of that money for retirement income.” However, there are significant transaction costs when you buy and sell a home and the move itself may also come with a variety of expenses, so make sure you factor that into your relocation calculations.
Look for great amenities. Think about how you want to spend your retirement years, and make sure your retirement spot has the resources to allow you to do that. Look for golf courses, pools, fitness centers, parks or other amenities you would like to use. “If you want to be pursuing your education, you might be looking for a college or other learning venues,” says Mary Languirand, author of “How to Age in Place: Planning for a Happy, Independent, and Financially Secure Retirement.” “If there are travel options you want to pursue, you are going to need to be near an airport or a train station.”
Health care options are essential. Make sure any community you are considering has adequate medical facilities and doctors that are taking on new patients. If you have any ongoing medical condition, or propensity for a specific illness runs in your family, it can be useful to retire near medical professionals who specialize in treating it.
Calculate the tax impact. Taxes vary considerably by state, and you can often reduce your costs considerably by moving to a low-tax place. Take a look at how the state taxes pensions, Social Security and earned income, and also consider the sales tax, property tax and any special tax perks available for senior citizens. It’s also important to realize that taxes pay for services, and there may be less help available to senior citizens in low-tax areas. “There are some services for senior citizens that might actually be better met in a higher-cost community,” Languirand says. “In rural areas, it is not unusual to have no public transportation or the special transportation services that people with lower mobility require.”
Aim for proximity to family and friends. Many people want to retire near their children and grandchildren. Family and friends can enrich your life in retirement and provide significant (and often free) help when you need it most. “If somebody has lived in the same place their whole life and that’s where their social network is and where the people they depend on are, then it’s much harder to pick up and build a new network of support where you don’t know anybody and you have to start from scratch,” says Cynthia Conger, president of Conger Wealth Management in Little Rock, Ark. “Rather than being able to depend upon a support network of people you know, you might now have to pay for services that might have been done by people who were friends. You might end up paying more.” If you do move to a new community away from your support system, you will need to create a new circle of friends. “An activity like golf or bridge will get [you] into another social network,” Conger says.
Consider the political, religious and social climate. Some people want to retire in a community of like-minded individuals. There are retirement communities that cater to artists, RV owners and people of various ethnic heritages. “You need to understand the politics of the state and whether you can cope with that,” Cole says. “You want to think about the politics and whether it is in line with who you are. You don’t want to spend your last years constantly irritated and agitated.” Of course, if you like to engage in lively debate about politics and religion, you might want to seek out a more diverse community.
Job opportunities. Americans are increasingly planning to work during the traditional retirement years. If a retirement career is part of your plan, you may want to line up a job opportunity before you make a move. “A place that will enable you to do what you want to do with your post-retirement work career is very important,” Languirand says. “Some people have very portable skills where they could practice anywhere, while some people are more place-dependent.”

Transportation options. Many seniors reach a point when they can’t or no longer want to drive. Some cities have public transportation systems that give discounts or are even free for senior citizens, or low-cost van or cab services that will help seniors get to doctor’s appointments. “If you move away from family and you are in a place where there is not much of a public transportation infrastructure, you are going to have to find a way to meet basic needs, your grocery shopping,” says John Eaton, a certified financial planner for Cypress Wealth Advisors in San Antonio.

Better weather. Some people seek retirement spots with warm weather so they can avoid winter, but you might find that you miss the change of seasons or that warm weather comes with its own challenges. “Professionals come down here and they just can’t take this heat,” Eaton says about San Antonio. “It’s hot, and if you are somebody who is used to seasons, it might not suit you.”

Test it out first. One way to be more certain that a retirement spot will be a good fit is to test it out by renting for a few months or even a year before buying. “When you first move to a place, it might seem wonderful, but once you have tried living in it, you might find that it doesn’t really suit your needs,” Languirand says. “There’s nothing like actually living in a place to know all its little eccentricities and ins and outs.”
By Emily Brandon, Senior editor for Retirement at U.S. News.

10 Tips for Picking a Place to Retire

10 Tips for Picking a Place to Retire 10 Tips for Picking a Place to Retire 10 Tips for Picking a Place to Retire 10 Tips for Picking a Place to Retire 10 Tips for Picking a Place to Retire
 

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Menopause and Perimenopause Tips
Retirement Planning

Retirement Lessons to Teach Your Children

by Jeff Dailey
written by Jeff Dailey
Retirement Lessons to Teach Your Children
Many individuals are finding that they must postpone their retirement target dates or cancel retirement because they are not financially ready for it. If you find yourself in such a predicament, you may find solutions to this dilemma if you look carefully. If not, you’ve at least learned a valuable lesson – one that you can and should pass on to your children. Let’s look at some of the sometimes-harsh lessons the current generation of retirees and pre-retirees has to teach. Retirement Lessons to Teach Your Children
Lesson No.1: Don’t Finance Your Children’s Higher Education at the Expense of Funding Your Retirement Nest Egg
Parents often have the best of intentions when they choose to pay for their children’s higher education, but the cost can erode retirement savings and/or negatively impact the parents’ ability to add to their retirement nest egg. For instance, a parent who chooses to take PLUS loans or private loans of $120,000 ($30,000 per year over a four year period) to pay for her child’s college expenses may end up repaying an average of $186,000.
As a parent, it may make you feel good to know that your children will not be saddled with repaying student loans when they starts their journey to financial independence. But, before you get too comfortable with that feeling, consider that your children have several options for financing their education, while you are solely responsible for financing your retirement through retirement savings account, regular savings and social security contributions. (For more on college loans, see College Loans: Private Vs. Federal.)
Lesson No.2: Don’t Overextend Your Debts and/or Ruin Your Credit
Having unmanageable debts can negatively impact your ability to add to your retirement nest egg, as you may find yourself unable to even meet those debt obligations. Debt repayments reduce your disposable income, resulting in a reduction of the amount available for adding to your retirement nest egg. Having too much debt can also result in a poor credit rating.
A poor credit score can negatively impact your ability to get lower interest rates on loans, and higher interest rates mean higher loan repayment amounts. For instance, consider an individual obtaining a $250,000 30-year mortgage. At an interest rate of 7% you would pay total interest of $348,680 and have a monthly repayment amount of $1,663. If that individual was able to obtain the mortgage at 5.5 % due to good credit history, the amount of interest repaid would be $260,840 and the monthly repayment about would be $1,419. The difference of $87,840 in interest repayments could have been added to the individual’s retirement nest egg.
In fact, if the $244 difference in repayment amounts were added to a savings account instead, it could result in an accumulated savings of approximately of $169,000 at a conservative interest rate of 4%. Even at 2%, it would result in a savings of $120,000, which can go a long way in covering expenses during retirement.
Lesson No.3: Prioritize Saving For Retirement
Retirement savings should be added to your budget as a fixed expense and increased as your disposable income increases. However, retirement is often viewed as a distant event that can be put on the financial back burner; by the time these individuals are ready to implement their retirement savings regimen, it becomes burdensome. Consider that an individual who needs to have $1 million in his retirement nest egg at retirement will be required to save more per year for each year that savings are delayed. Let’s look at some numbers to demonstrate this point.

Years to Fund Planned Payment (Per Year) Total Payments Total Earnings @ 5.5% Accumulated Value
1 $947,867.30 $947,867.30 $52,132.70 $1 million
5 $169,835.48 $849,177.42 $150,822.58 $1 million
10 $73,618.74 $736,187.38 $263,812.62 $1 million
15 $42,299.14 $634,487.17 $365,512.83 $1 million
20 $27,184.20 $543,683.98 $456,316.02 $1 million
25 $18,530.19 $463,254.81 $536,745.19 $1 million
30 $13,085.68 $392,570.32 $607,429.68 $1 million
35 $9,454.91 $330,921.74 $669,078.26 $1 million
40 $6,938.71 $277,548.56 $722,451.44 $1 million
Source: www.72.net/CostOfWaiting

If you want to save $1 million, assuming a rate of return of 5.5%, you would need to save $6,938 per year if you start saving 40 years before you aim to retire. If you wait until 10 years later, you would need to save $13,085 per year. The amount grows each year you neglect to save. The higher savings amount for the shorter savings periods may make it much more difficult to meet the savings goal.
Lesson No.4: Don’t Fail to Design a Customized Investment Portfolio
A significant portion of losses on retirement savings can be attributed to improper and unsuitable asset allocation models. For instance, a portfolio with too much allocated to one type of stock (or just stocks in general) can experience a significant loss if the stock market falls. Diversifying investments can help to mitigate risks and use gains in some areas to offset losses in other areas.
There is no one-size-fits-all solution when it comes to investing your retirement savings. Instead, your asset allocation model is affected by factors such as your risk tolerance, retirement horizon and your age. Your portfolio can be designed to include different classes of assets, and different categories within each class. For instance, you may choose to allocate 20% of your portfolio to stocks, and may further break down that percentage into healthcare, energy and other types of stocks so as to further diversify your investments and balance your risks.
Don’t fail to rebalance. As your portfolio experiences losses and gains in different areas, you will need to rebalance your allocations so as ensure that your portfolio continues to be suitable for your financial profile.
Lesson No.5: Look at Alternative Retirement Options
Being behind the retirement eight-ball does not mean that you cannot retire. Instead, it may mean considering alternate options, such as taking nontraditional retirement routes. For instance, you could:

  • Work longer: If you planned to retire at age 65, working for an additional five years could make a big difference. You Social Security payments would increase and the income from working could be used to pay down debts and add to your retirement nest egg.
  • Spend less and save more: Limiting your expenditures to necessities and increasing your savings can make a big difference to the balance in your retirement accounts. For instance, if you reduce your expenses by $250 per month for five years, at a rate of return of 4% you would save about $16,000 extra.
  • Phase-in retirement: Retirement does not have to be a one-shot process. Instead, it can happen gradually. For instance, instead of retiring at age 60, you could continue to work on a part-time basis and gradually reduce your hours over the years until you can afford to fully retire.

The Bottom Line: Teach your children to learn from your mistakes
One of the best ways to impart knowledge to your children is by sharing true life experiences. You can share book strategies and other theoretical mediums with your children, but the lessons they will likely remember and learn from the most are those that are centered on the mistakes you’ve made. If you find yourself behind in saving for your retirement, help your children to understand how you got there and help them to understand the things you could have done differently that would have resulted in more positive outcomes.

By Investopedia
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Retirement Can Hurt Boomer Living Standards
Retirement Planning

Retirement Can Hurt Boomer Living Standards

by Jeff Dailey
written by Jeff Dailey

How retirement hurts living standards for baby boomers

The baby boom generation — aged 52 to 70 — is going into its “Golden Years,” and some boomers would like to keep working or even take a second job to supplement Social Security. Retirement can Hurt Boomer Living Standards
But a study from the National Bureau of Economic Research (NBER) categorically refutes this scenario. The “tax disincentives” of working nine-to-five — or earning an extra $20,000 at the local McDonalds — make employment a lost cause. What they’ll see instead is most of that paycheck vanish into the black hole of the IRS, not to mention state and local taxes.
“You’re better off staying home and eating macaroni and cheese,” said one of the study’s four authors, Boston University economics professor Laurence Kotlikoff.

What seniors need to know about working in retirement

It’s hard to argue with some of the study’s premises. Boomers who take Social Security early at age 62, rather than the full retirement age of 66 – or 67 for those born in 1960 or later — face a huge tax disincentive. For every $2 earned, one is likely to be taken away by a 50 percent marginal (or extra) tax rate on earnings above the recipient’s monthly Social Security check.
And that’s only one of the many ways the tax code can work against boomers who want to earn additional money. They’ll also encounter higher Medicare taxes and other disincentives, said Kotlikoff. “Older people can also lose disability benefits if they make too much money.”
When the NBER study added up all the different federal programs that apply to boomers, the result was a negative number. “Many, if not most baby boomers appear at risk of suffering a major decline in their living standard in retirement,” said the NBER.
“With federal and state government finances far too encumbered to significantly raise Social Security, Medicare and Medicaid benefits, boomers must look to their own devices to rescue their retirements, namely working harder and longer,” the study claimed.
Despite advice to the contrary, about 98 percent of seniors take Social Security prior to age 70 — when they have to and would receive the most money.
“Almost everyone does the wrong thing,” Kotlikoff said. “They take the Social Security money as soon as possible.”

Four in 10 baby boomers have no retirement saving

Not only do they get less, but they face “a plethora of explicit federal and state taxes and implicit taxes arising from the loss of federal and state benefits as one earns more” said the study. That includes Social Security’s complex earnings test and the clawback of disability benefits.
But this doesn’t mean older Americans are stupid. “Most older workers aren’t privileged and need to retire early, either because they’re fired or laid off, or the work is killing them,” said Teresa Ghilarducci, an economics professor at the New School in New York City and an adviser to Democratic presidential nominee Hillary Clinton.
Once “retired,” more than half of retirees find that their savings are inadequate for the 20- to 30-year road ahead and feel as if they’re behind right from the start, according to a study by the Employee Benefit Research Institute. They take Social Security because they need it. Then they look for a part-time job to supplement their income. That’s when they get caught in a squeeze. They find that if they’ve already taken the minimal payout from SS, they won’t earn much from a job.
“Working longer, say an extra five years, can raise older workers’ sustainable living standards,” the NBER study states. “But the impact is far smaller than suggested in the literature, in large part because of high net taxation.”
So in many ways, retirement for boomers is a drag. Pensions, which used to support people after they retired, are vanishing, and 401(k) plans and IRAs work only if people invested in them, and wisely. Most didn’t, according to Federal Reserve data, and those who did may have become victims of recession, the need to draw on their plans to survive or simply made the wrong choice of investments.
Ghilarducci said the answer is increasing Social Security benefits, reforming the pension system and making 401(k) plans “universal and efficient.”
Good luck with that, or with a reform of the tax code, said a New Jersey financial planner whose name was not used for compliance reasons. “The tax code is like a pinball machine,” he said. “One thing bounces into another. And it would be nice if they raised Social Security, but it’s going broke.”
But most disheartening is the way many people see their lives ending — sooner rather than later. “They’re sure they’re going to die young, which is why they take Social Security early,” Kotlikoff said. “Then they don’t have to pay any bills. Death is financial salvation.”
Article Source: CBS, Ed Leefeldt
Ed Leefeldt is an award-winning investigative and business journalist who has worked for Reuters, Bloomberg and Dow Jones, and contributed to the Wall Street Journal and the New York Times. He is also the author of The Woman Who Rode the Wind, a novel about early flight.

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Retirement Planning Crucial for Small Business Owners
Retirement Planning

Retirement Planning Crucial for Small Business Owners

by Jeff Dailey
written by Jeff Dailey

Planning for retirement is crucial for everyone, and it is especially critical for small business owners, the business leaders many cite as the life-blood of the American economy. Retirement Planning Crucial for Small Business Owners
Indeed, according to the U.S. Small Business Administration, small business owners employ half of all private sector employees, pay 44 percent of total U.S. private payroll, and have generated 65 percent of net new jobs over the past 17 years.
The challenge before American small business owners is keeping their companies financially healthy long-term. This is so that small business owners do not over-rely on the sale of their business alone to take care of them in retirement, and so the business will continue to remain a viable employer in the communities it serves. Retirement Planning Crucial for Small Business Owners
Because small business owners and entrepreneurs are busy every day working to keep their businesses running strong, their schedule can often interfere with planning for the future. But in this economy, planning is a must in any business strategy. Without it, business owners may be surprised to find that the ultimate sale of their business may not leave enough for them to live on. This is because the sale timing might be off, or their finances are not strong enough to cover a full retirement.
“Setting a target number – or dollar figure of what is needed to live on for the rest of your life – is important, and it should be determined at least 10 years before you’re ready to retire,” says Tara Reynolds, corporate vice president with Massachusetts Mutual Life Insurance Company (MassMutual). “And as you approach retirement, it’s also a good idea to re-calculate what the business is worth with a proper business valuation to determine how you will need to fund your non-working years, if the value has changed. Having this plan and expectation in place can help you determine the best way and time to retire from your business.”
The average business owner expects to retire at age 68, according to a survey conducted by GfK Custom Research North American for MassMutual in 2011. Yet only one-third of the respondents had a sound retirement strategy to ensure income for life, having access to income when needed, managing potential health care expenses and leaving a legacy to the next generation.
MassMutual financial professional Katheigh Degen of Kansas City offers the following tips to help small business owners stay financially secure during the run up to retirement.
* Anticipate needs – Traditionally, most people need about 70 percent of their current annual income to live comfortably in retirement. Know what your business is worth – both as one entity, and also broken down into smaller parts. Only about 10 percent of business sales involve the entire business as one lump sum.
* Save on the side – You’ve probably heard about diversifying your portfolio, and the same is true with diversifying your retirement plan. Put aside 20 to 25 percent of your gross income in savings outside of the business. This provides you with flexibility as you plan your exit from the business. For example, if you have an heir or employee interested in purchasing the company, they might not be able to afford it all at once, but could take over the helm with smaller payments over a period of time. Having additional savings can help you tide over in retirement while you also receive payments for the business.
* Explore options – As you near retirement, selling off your business in one setting would make everything easy. But as mentioned earlier, it doesn’t always work that way. Knowing your business’ value can help you evaluate offers that come your way, so you can make an educated decision on whether to sell and live comfortably in retirement, or keep working and pursue a better offer.
* Don’t wait too long to find a buyer – Within three to five years of retirement, business owners should start to find a buyer for the business. Of course, this plan demands that the owner set an expected retirement date and stick to it. By waiting too long, owners may begin to experience poor health and low energy, which could affect productivity and potentially the profitability of the company.
Planning for retirement is so crucial, and owning a business can often add complications in timing the retirement perfectly.
“Business owners put so much hard work into building the business and making it strong and viable in the market,” says Degen. “With additional planning in retirement strategy, a good business owner can retire and see the business continue to succeed even after it has been transitioned over to new owners.”

Provided by: Article Resources

Retirement Planning Crucial for Small Business Owners

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