Estate Planning – It’s Not Just Taxes

Ray’s Take: Many people think estate planning is only for the super wealthy, but that’s not the case. Do you have a home? Children or grandchildren? Elderly parents? Bank accounts or other assets? If you have any of these, you need an estate plan. And it’s about more than just taxes.

An estate plan helps protect your family when – not if – you pass away. There are a number of things to include in estate planning.

A big item is a last will and testament. According to a Gallup poll, only 44 percent of Americans had a last will and testament in 2016. This is the document that tells everyone your final wishes and yet over half of Americans have not made a will. That leaves a lot up to chance, court fees and possible legal battles.

You can name beneficiaries on tax-deferred accounts, and those will pass directly to the specified individual outside of the will. Things like life insurance and retirement accounts fall into this category as well. But you can’t name minors. Further, a pile of cash with no strings attached falling into the hands of a college student may not be in their best interest. Without a named beneficiary on these accounts, they will pass into probate, and if you don’t have a will, your state will write one for you, and you might not like it.

It’s important to review your estate planning documents regularly to make sure you’ve designated people where needed and want to keep the same beneficiaries. For example, if your executor, trustee or guardian has moved across the country, you’re likely better off naming someone local. You’ll also want to review your estate plan every time there’s a major life event, such as the birth of a child or grandchild, the death of a parent or a divorce.

These are only a few of the items in a good estate plan. An attorney or financial expert can help you set up your estate plan so that your assets go where you want rather than where a judge designates.

Dana’s Take: Estate planning is planning what to leave behind and to whom. But what about the impressions and memories you will leave with family and friends?

I read about a retired CEO who made a mission to thank all of the people in his life who helped him along the way. First, he wrote to each person and asked to meet face-to-face. Then he flew or drove to meet each one. Imagine the joy he spread by expressing his gratitude.

Ray’s father, Denby Brandon Jr., also made a lifelong habit of expressing appreciation to clients, friends and loved ones.

It’s never too late to create a legacy of gratitude.

Continue reading
1 Hits

Match Game: Employer Matching Funds

Ray’s Take: I am amazed at how many times when I ask people how much they are contributing to their 401(k) the answer comes back, “Whatever the match my company gives is – I love free money!” There’s a much better way to make that decision, but that is a topic for another column. There are a number of reasons companies offer some form of match and they may not all be charitable.

While it’s good advice to never leave money on the table, you should always do a financial plan that includes all investment options first to get a truer picture of where you are in relation to where you want to be.

401(k) matching funds are touted as “free money,” but there usually are strings attached. As a general rule, employer-matching funds are not fully vested for a specified period of years. On average, five. So, what happens to those funds if you leave your job before you’re fully vested? They don’t all go with you.

With the trend away from spending your career in one company, you shouldn’t count your chickens before they are hatched. But don’t worry about your own money that you have deferred. It’s yours from day one and goes with you when you go. According to the Bureau of Labor and Statistics, workers between ages 25 and 34 have been in their jobs, on average, less than three years.

Take a close look and be sure you understand the particular 401(k) plan you are thinking about investing in so that you understand the vesting schedule along with when the company matches. It could be with each paycheck – or it could be once a year. That can also make a big difference in gains.

Contributions to a 401(k) lower your taxable income. A point for a 401(k) investment, but calculate the actual value of that over time to be sure you make the correct decision for you. It’s harder to be tempted to spend money that never hits your checking account.

Depending on your personal circumstances, the company matching funds might be a good fit up to the amount that the company matches, but it’s best to look at all your options and have a clear picture of your long-term plans before signing up.

Dana’s Take: Saving with a 401(k) account can pave the path to financial security. I’ve been reading the book “Everything That Remains,” by two young men who call themselves “The Minimalists.”

In their popular social media sites, they advocate giving away possessions and even leaving non-fulfilling jobs in order to experience life more fully. They point to the vicious cycle of consuming and then working to pay for our excessive consumption.

Our time is actually more valuable than money, they say, because we can always make more money but we can never make more time. Ouch.

Become conscious of the balance between spending money and spending life.

Continue reading
4 Hits

Retirement Paychecks – Reversing the Flow

Ray’s Take Retirement planning doesn’t end when you stop working, and one of the biggest concerns for any retiree is running out of money. As you move into retirement, you move from the accumulation phase to the distribution phase of planning, and it has a lot of moving parts. Retirement is like a car trip, but there are no gas stations along the way. What you have in the tank is it.

A good starting point for creating this new paycheck is to determine your “fixed” expenses each month. Budgets don’t stop when you retire, they get even more important. Sit down and create a list. Next, you need to list other fixed expenses that occur more sporadically, like clothing, gifts, annual insurance premiums and taxes. Then you need to “amortize” costs that are random but inevitable, such as replacement cars or major home repairs. Finally you want to put in a budget for discretionary costs and luxuries like trips. Discretionary expenses can be put on hold in more difficult years to recover from surprises and extend the life of your assets.

This works a lot like the budget you have when you’re in the planning phase of your life, but in retirement, your employer becomes your retirement assets. Your current budget is a good place to start your projected retirement budget, and you can factor in changes you anticipate, like cars or a mortgage that will be paid before you retire.

Keep in mind that it’s not only how much you withdraw, but also the order in which you tap your assets that will give you the best chances at future financial security. Sit down with a professional planner who can help you make the best decisions on which accounts to withdraw funds from to maximize your income and minimize your taxes. Take time each year to review your withdrawal strategy and make any necessary changes. Don’t leave it to chance.

Developing a plan well before retirement can help relieve some of the fear of running out of money. It can be emotionally difficult to “reverse the flow,” but having arrangements to get a regular paycheck can ease the conversion.

Dana’s Take As a couple, deciding how to spend our retirement years is a tricky thing. It’s completely based on imagination. What if we guess wrong? Sometimes I think I’d like to live near a beach someday. What if I’m wrong and we end up in a hurricane in a two-bedroom condo wishing we still had the comforts of our Memphis home?

Should Ray work longer and save more or work less and make time for those exotic trips of our dreams? If we spend more of our savings on travel, then where will we spend less? Can we agree on where to cut?

Start the conversation about the retirement of your dreams and start saving to make it happen.

Continue reading
13 Hits

529 Plans – What You Should Know

Ray’s Take This August, I will be the proud parent of college freshman. With that pride comes the bills for tuition, room and board, books, etc. 

Dana and I have long believed that an education is the best gift to a child, but not at the expense of our own retirement. We started saving for college the moment we had social security numbers for our kids. With college tuition costs rising every year, saving early for education is one of the most important decisions parents can make. One vehicle for saving is the 529 plan. 

These plans offer a way to save for college by putting money into a specific account that is exempt from federal taxes. For states that have a state income tax, these accounts may also be exempt from state taxes for in-state residents. 

Adults typically open these accounts on behalf of a minor, but adults can utilize them for their own education. There are no age limits on these accounts.

For college savings plans, most colleges and graduate schools, along with professional and trade schools, are eligible. Funds from these plans can also be used to cover fees other than tuition, such as books and room and board.

When setting up these accounts, it’s important to take care with how they are named. Only one person can own the account, and there can only be one beneficiary. But individuals other than the owner can make contributions to the account.

When it comes to making withdrawals from these accounts, pay special attention to what is considered a qualifying expense. Also be careful not to withdraw over the limit to avoid tax consequences. 

Additionally, something to watch out for: These two scenarios can create a tax liability at the owner’s tax rate rather than the beneficiary’s tax rate, along with federal, and possibly state, penalties. To avoid potential tax headaches, withdrawal checks should be made out to the beneficiary of the account, or directly to the college on behalf of the beneficiary.

These plans vary from state to state. Consulting a planning professional can help you navigate the requirements and benefits of these accounts such as tax deductions, fees and expenses to build the account that is most suitable for the beneficiary.

Dana’s Take Saving for college can put a financial burden on families. Especially those with more than one child who will be attending college at the same time. A 529 plan could be a good option for your family. Another great option is to look into grants and/or scholarship requirements and use those as a way to pay for college along with work-study programs and student loans. 

Saving for your kid’s college education is a wonderful gift, just make sure it’s not at the expense of your retirement. They have a lifetime to pay back student loans, but your time to save for retirement is limited. 

Continue reading
18 Hits

New Rules for Emergency Funds

Ray’s Take The old rule of thumb for an emergency savings account was three to six months of living expenses. It was created at a time when the workforce experience was more monolithic and predictable. This was when there more likely was a single breadwinner who worked at the same company their entire life and retired with a gold watch and a big send-off party. 

Those days are behind us now. Changes in the workforce and economy have led to a much more fluid society. Years ago, changing jobs multiple times was considered “job hopping,” and it was a big red flag on an employment application. Nowadays, it’s the norm. So when creating an emergency fund, the new rules should include time and resources for career changes. 

Bear markets come and go. Real financial distress tends to occur when people didn’t properly prepare for reasonably predictable financial challenges. The time to fix the roof is when the sun is shining! Build those reserves while you have cash flow coming in. Give yourself the freedom of finding the career that’s best for you by creating a fund large enough to support yourself and your family for a longer period of time – whether that timeframe is by choice or thrust upon you. 

You need to have a money plan in place before making a career change, not just a career plan. You need a financial plan to protect you from the downside risks you take on in making such a dramatic life transition. And a bigger emergency fund is a vital part of that plan.

The era of lifetime employment is over for more and more, and we need to plan for multiple careers throughout our working lives. An expanded emergency fund will allow us to make better long-term decisions without worrying about losing the house or eating, but it’s hard not to tap into those resources when tempted!

Dana’s Take Employment gaps and transitions do require a greater savings cushion. To minimize those gaps and get ahead of the competition, Gov. Bill Haslam is offering free tuition and fees at Tennessee Colleges of Applied Technology (TCATs). His Drive to 55 and Reconnect programs (tnreconnect.gov) aim to retrain adults for higher-tech – and higher-paying – jobs.

Before turning up your nose at technical or vocational training, look into the salaries for some of these skilled tracks. A surgical technician, the person who hands the surgeon sterilized tools, requires three semesters of training at community college and salaries start at $40,000 to $45,000 plus full benefits. Try matching that with a history degree. 

Peruse the fields of study offered at TCATs to find specialties tailored to current job openings. I know it’s hard to teach an old dog new tricks, but gaining cutting-edge skills may make you feel like a much younger dog. 

Continue reading
26 Hits

Uncertain Times

Ray’s Take We live in uncertain times. There are no guarantees; there is only planning and adapting. A sound financial plan is a great hedge against uncertain times, and the inability to predict future tax rates or the direction of the stock market should not be a deterrent to having a good financial plan.

A generation ago, not many people really cared what “the market” was doing. We worked, retired, and lived on a pension. Trained investment professionals worried about asset allocations, interest rates and longevity risk. Now it’s up to us.

With the demise of pensions, uncertainty in home prices, generation low interest rates and a volatile stock market, in addition to ongoing changes to Social Security, Medicare and employer-sponsored retirement plans, setting financial goals and sticking to them is more important than ever before.

The fact is, we are living in a new normal and 21st-century retirees have a slew of things to plan for, so it’s important to devote some time to thinking about the areas of your financial plan that you can control. And the sooner the better.

Start with the amount you put into retirement accounts and how those accounts are managed. Next up, review the tools in place to manage unexpected future expenses like a long-term health care plan, a power of attorney and a will. Additionally, have an emergency cash fund to cover short-term expenses.

Short-term volatility is no reason to change your long-term financial plan. But media stories of an alarming nature can give rise to doubts and concerns. An annual review is an important part of making sure you’re still on track. Financial planning in uncertain times requires thoughtful decision-making and a decision to do nothing is as important a decision as is to do something.

A qualified financial planner who is on top of the changing face of the world of planning and investments can help you navigate the murky waters.

Dana’s Take The baby boomer generation is creating a new retirement lifestyle. But what will our kids’ retirement look like? Will there be a new new normal by the time they reach retirement age? And what will retirement look like for them?

With all the changes taking place in the financial world in everything from how we handle paying bills to how we save for the future, it’s very hard to imagine what tools we need to give our kids in order for them to achieve the type of retirement we’ve dreamed of for ourselves.

But will they even want the same type of retirement that we envision for ourselves? It’s important to teach our children money skills based on the world as it is today, but make sure they adapt those skills to match changing trends as they mature into their own retirement dreams.

Continue reading
23 Hits

Financial Spring Cleaning

Ray’s Take: This time of year our thoughts turn to spring – and cleaning. Sprucing up our yard. Clearing out closets and other clutter. But how about our finances? Spring is a great time to take a look at debt, savings, budgets and retirement plans with an eye to getting them all in shape.

Take a look at any holiday debt you incurred and make plans to pay it off. According to Consumer Reports, approximately 7 percent of shoppers go into the new holiday season still paying off debt from the previous one. If there’s any interest being incurred, that’s the place to start. Taking steps to pay it now will leave money to save before the next holiday season rolls around.

Take a look at your credit reports to make sure there’s nothing on them that’s incorrect, and if there is, take steps to get it corrected. You can get a free report every 12 months to help ensure there is no false information reported about you. Line up all debt in order of interest rate and start knocking them down.

How about your budget? If you don’t have one, do it now. If you do, how have you been doing with it? Over it? Under it? Now is a good time to review your budget and make any adjustments to get back on track if you’ve swerved off it, or to tweak it to make it work even better for you.

Multiple 401(k) accounts should be consolidated if possible. Look at your options and choose the plan with the lowest fees. Make sure your asset allocation is consistent with your plan. If you have changed jobs a few times, you may have left your 401(k) to continue being handled by your previous employer. Combining multiple 401(k)’s makes it easier to manage these accounts and to avoid paying fees to multiple managers.

Taking steps to keep your financial house in order will pay dividends all year long. Once you’ve done that, you can relax in the knowledge that you’ve checked that off your to-do list.

Dana’s Take: While you have your mind on spring-cleaning, take a look in your purse or wallet. Did you find any partially used or unused gift cards languishing in there? If you don’t plan to use them, investigate websites that will pay you cash to take them off your hands.

How about your closet? Do you constantly feel like you have nothing to wear, but the closet is bursting at the seams? Winnow that wardrobe down and sell the rest. Your closet will thank you.

Go through your loyalty cards and frequent flyer points. Tally everything up and use points that are on the verge of expiration.

Doing simple spring-cleaning chores like these can result in more cash in your life. What’s not to love?

Continue reading
42 Hits

Financial Freedom

Ray’s Take We have been trying to move away from using the word “retirement” and instead focus on achieving “financial freedom.” But have you ever asked yourself what financial freedom is? 

It may have a different meaning to you than to your friends or your spouse. There are bound to be many opinions and some disagreement, even with a spouse or other family member.

In other words, there are many routes to financial freedom and many pictures of what financial freedom looks like.

The first step to financial freedom for a couple is to have a discussion with your spouse and family about what financial freedom means to each of you. It’s difficult to create a plan to get to your destination if you aren’t working toward the same point.

Does financial freedom mean no required work with no debt at all? Or is some debt OK? And if so, what debt? Mortgage? This knowledge can free you. It may include supporting your favorite causes with time, money or both. With a plan, you won’t be wondering if what you’re doing is “right” or “wrong.” In most cases, there is no right or wrong answer – it will depend on your situation.

People often view financial freedom as an enormous task that requires years of saving and investing while concentrating on that distant goal of retirement. It’s important to plan for that day, but it’s also important to enjoy life as you work toward that goal. Financial freedom doesn’t need to wait until retirement; it’s much more beneficial to focus on each victory along the way. That balance can be financial freedom right now.

Have that discussion and put your feet on the road to your destination. It’s up to you to define financial freedom for yourself – and then to create a plan that will help you methodically reach that goal. A financial planner can help you set up the plan to take you there. 

Dana’s Take I might define post-retirement financial freedom as having no worries about money, living in pleasant surroundings with reliable transportation and being able to pay my health care expenses. Plus having the liquidity to travel often and eat out a few times a week. But, is that doable?

In my mind, the key to achieving that freedom is keeping overhead manageable, post-retirement. Hitting that mark does not necessarily require a huge nest egg. Finding a super-affordable rental or sharing a home could drop expenses a lot. I’m surprised that more senior adults don’t share a home. Even if installing a second kitchen were required, the savings might justify the remodel. 

Think about your definition of financial freedom and brainstorm creative ways to get there.

Continue reading
36 Hits

The Optimal Retirement Age

Ray’s Take Most of us say we want to do it – retire, that is. Given that, how do we find that perfect time to do it? Retirement at the optimal age isn’t something to be left to chance; it is something that needs to be a rational decision that takes into consideration a variety of variables. Financial variables include how much income you’ll be receiving from all sources and factoring in life expectancy and health issues. Emotional variables include considering that your spouse may have taken you for better or worse, but not for lunch.

Choosing the right retirement age is a trade-off between time and money. The traditional retirement age of 65 was chosen when most people didn’t live much past 70, so clearly the math has changed.

Many people would like to retire early but are unsure if they can afford to. Numerous retirement-planning events are triggered at specific ages, such as when you can begin drawing on Social Security or when you are required to take IRA distributions. These need to be factored into your decision along with health insurance options. Consider if retiring early leaves a gap in health insurance coverage.

A harsh reality of the globally competitive world in which we live is that the notion of lifetime employment is increasingly unlikely. Employment, like retirement, will be considered in phases. An “all or none” approach to either one won’t be an option for more and more people. Most people will need to consider working longer to accumulate additional funds for the extended life expectancies we are enjoying.

Finding the right balance is hard. Careers and skill sets will need to evolve. Retirement plans will be like the flight plan for Apollo 13 – scrapped and rewritten as conditions change. Meeting with a financial planner to discuss your options is a good step in the right direction, then buckle up!

Dana’s Take Assuming steady employment with your current employer until the age you choose may be wishful thinking. Ray and I have a college-educated friend who was laid off from his job at age 50. Was that his financial plan? Not even close. 

Saving more into an emergency fund and maxing out retirement savings while fully employed might pay off big if blindsided by an employment gap. 

One area where most of us could cut costs is in extravagant spending on our kids and teens. If your teen’s not working, particularly in the summer, your emergency fund needs that money more than your teen needs to work on his tan. (When did travel “experiences” replace cutting yards in the summer?) 

Include contingencies for employment gaps in your retirement plan. Then, if all goes well, retire early and splurge a little. 

Continue reading
63 Hits

Target-Date Funds and Taxes

Ray’s Take Target-date funds are mutual funds that contain a collection of other mutual funds that are designed to invest aggressively at the beginning and, over a long time horizon, move money into progressively more conservative holdings as the target date approaches.

These type of funds have become very popular in recent years in company-sponsored retirement plans. They’re a kind of ‘set it and forget it’ retirement savings vehicle. The fund should adjust itself to meet your time horizon. These plans may be a good choice inside a tax-deferred plan, but outside of that the consequences are different.

A tax-deferred plan, like a company-sponsored 401(k), does exactly what it says – defers any taxes on the funds until withdrawal. But if these type of accounts are held outside of a tax-deferred plan, the tax hit at the end of the year may come as an unpleasant surprise.

Because of the integrated strategy in a target-date fund, current holdings must be periodically sold and new ones that are less aggressive in nature must be purchased. This means that investors in these funds in taxable accounts will be hit with capital gains/losses when the fund exercises its reallocation procedure, as well as when positions within a given fund are sold and gains are realized.

Additionally, investors will have to pay taxes on any gains/losses, dividends or interest income generated from the fund that year. These are over and above any gains/losses generated by the reallocation procedure. 

Target-date funds can provide automated investment management for those who don’t want to actively manage their portfolios, but their taxability might make them a less-effective choice to hold outside an employer-sponsored retirement plan.

Having said all of that, it is still better to invest than not. Further, no one ever went broke making a profit.

Dana’s Take Target dates can be a good thing when it comes to what you want to do with your life, such as purchasing your first home by the age of 30, or getting that dream job by 25. Targets like these give you a time frame that can help motivate you to reach those goals since you know there are steps you have to take to meet that target date. 

Along with target dates, add photos to your visions. Whether you call it the laws of attraction, vision boards, or simply prayer, committing your dreams to positive thoughts and images can help move those dreams toward reality. 

Before I met Ray, I wrote a list on an index card of the traits I would like to find in a partner. Within a month, I met had Ray and checked off every item. A coincidence? Perhaps. 

Target the life you want and achieve it. 

Continue reading
43 Hits

Retirement Planning Illusions

Ray’s Take By its nature, retirement planning requires making plans without being able to know the future. When it comes to retirement planning, there’s no shortage of conventional wisdom.

According to an Employee Benefits Research Institute 2013 Retirement Confidence Survey, despite roughly half of retirees finding they actually spend as much or more in the early stages of retirement than they did before they retired, only 11 percent of current workers expect to spend more in retirement, with nearly 60 percent expecting to spend less. 

There’s that conventional wisdom at work here – assumptions that may not hold true for everyone.

First there’s the conventional wisdom that you’ll only need 70 to 80 percent of your pre-retirement income. It is true that work-related costs go away when you retire, but other expenses can move into that slot, particularly health care costs. Even if you wait until age 65, Medicare doesn’t cover everything. Freed from the limits of work schedules, most people find time to spend more money, not less, especially with travel.

Another assumption is that you’ll be in a lower tax bracket when you retire. You may find that taxable portfolio income, retirement account distributions, pensions (if you have one) and Social Security income could combine to keep you in the same, or perhaps a higher, tax bracket. 

Unless you have a crystal ball, it’s better to really run the numbers on where your retirement income will come from and estimate the tax liability. Taxable distributions in nonqualified portfolios are still taxable even if you’re reinvesting them. The IRS doesn’t care whether or not you are spending them.

No other factor comes close to helping you achieve retirement success as the amount that you’re able to save. Financial planning advice is generally focused on helping you understand the likely outcomes of your financial choices, and a financial planner can assist you with looking at the variables of your individual needs and goals to create a plan that will serve you well.

Dana’s Take Conventional wisdom comes from a generally accepted principle and is often passed down in families from generation to generation. 

Ray’s father, E. Denby Brandon Jr., and his grandfather, E. Denby Brandon Sr., had a number of favorite aphorisms. Senior liked to say, “Just take one stoplight at a time,” meaning don’t tackle every problem at once. Junior’s favorite was probably, “It’s bad to be old and broke,” and he dedicated his career to preventing that outcome. 

Other maxims regarding finances included, “Anyone who says money doesn’t matter, usually has lots of it,” and, “Money can’t buy happiness but it allows you to look for it in some interesting places.” Ray likes to remind us “not to mistake luck for smarts.” Lastly, Denby Jr. advised, “It’s easier to not spend money than it is to earn it.” 

What conventional wisdom did your parents and grandparents share? If it still rings true, pass it on. 

Continue reading
54 Hits

Growth Funds for Tax Efficiency

Ray’s Take When it comes to real return, it’s not what you make, but what you keep after taxes and inflation that counts. 

Being mindful of taxes is more important than ever. Tax-efficiency in taxable portfolios is imperative, whether they’re pre-retirement accumulation accounts or retirement distribution portfolios. It’s incumbent upon investors to understand the tax implications for the various funds in their portfolios to plan the best strategy for their retirement.

Tax-efficient funds generate fewer dividends or capital gains. So you will want to find mutual fund types that do this if you want to minimize taxes. One way to accomplish this is using growth funds. 

These companies typically reinvest their profits back into the company to grow it rather than paying dividends. Hence, the name “growth fund.” Managers of these funds prefer longer holding periods allowing for fewer capital gain distributions. So a mutual fund with a growth objective tends to be more tax-efficient. 

Growth funds are typically long-term investment vehicles and vary widely in their risk forecast. Over the long term, returns tend to be higher but much more volatile. Gains from growth funds come from an increase in stock prices over time.

Diversifying by tax treatment can be especially important if you’re uncertain about the tax bracket you’ll be in down the road. Utilizing a tax-efficient strategy is a component of building that diversity.

Having said all of that, you don’t want to let the tax tail wag the dog. Remember that your objective is to increase your wealth after taxes and inflation. Tax codes come and go just like congressmen. Predicting future tax rates is speculative at best. Unless you have a crystal ball, it’s best to cover a variety of tax treatments in addition to investments. 

Dana’s Take Long-term goals for parents tend to focus a lot on their kids – such as getting them the best education possible, as well as helping them get a good start in life as adults and leaving them a little something after we’re gone. So efficiency is something that works in a lot of different aspects when planning for those events.

What does efficiency look like when planning for your kids? Like any good strategy, plan early for best results. That way, when life takes an unexpected turn, you’ll be able to reassess better.

Take the time to look around you, to gauge your kids’ interests, and where they may lead, to give you a direction to start. Success is built over the long term and starting with an efficiently built foundation makes for a strong platform to build out.

Do you want your days to have a plain brick wall or a cathedral? Make the future happen, don’t let it happen by accident.

Continue reading
55 Hits

After Losing a Loved One

Ray’s Take The loss of a loved one can shatter your life. As you adjust to not having that person as a part of your world any longer, the painful grieving process can feel never-ending. 

Coping with death is never easy, and facing the mountain of things that need to be handled while dealing with that grief can feel overwhelming. Many people are unprepared to deal with navigating all the laws and requirements surrounding someone’s passing. 

As a first step, you should locate all documents needed to sort things out, including insurance policies, deeds, stock and bond certificates, retirement plans, and bank and brokerage statements. After a death occurs, many legal issues arise which need addressing. Some of them include, but are not limited to: dealing with creditors; locating and probating a last will and testament; handling estate taxes; property transfers and last wishes.

After a loved one passes away, there is a lot more to do than just prepare a final income tax return. It can take a year or longer after your loved one dies before you start feeling emotionally ready to take on major lifestyle decisions. That’s why it’s OK, actually preferable, to wait until you’re closer to ready before you make any financial decisions that aren’t imperative. However, address anything imperative right away, such as changes in tax status and beneficiary designations and re-titling jointly owned assets. 

Settling the estate means safeguarding your loved one’s property during the administration process, paying debts and taxes, and distributing the assets of the estate to those who are entitled to receive it. An experienced financial planner and/or an estate attorney can help you navigate the complex tasks.

 

Dana’s Take Having recently lost a patriarch in our family, I have been floored to see the quantity of estate-, insurance- and tax-related work required. Add a family business with a transfer of ownership, and the volume becomes staggering. This work can go on for up to a year or more. The surviving spouse is left responsible for complex financial and tax matters. Further, his or her will must be updated after the loss to reflect new powers of attorney and more.

In a family of certified financial planners, you just call one of your sons to handle the mail, trips to the safe deposit box, scheduling with attorneys and so on. Otherwise, be sure that the surviving spouse or beneficiary retains a financial planner, estate attorney or tax attorney. The loss is overwhelming and detailed business matters may get overlooked in the grieving process. 

Continue reading
63 Hits

Keeping Your Information Private (and Safe)

Ray’s Take We live in an increasingly online world. You can trade stocks, buy groceries, pay bills or order a ride, all on your computer or smartphone. Almost any financial transaction you need to make can be done in the comfort of your own home. With identity theft posing a real threat, keeping financial data private requires that consumers be proactive in the way they approach online security.

Your credit report is your window into your ID security. The Fair and Accurate Credit Transaction Act, passed by the federal government in 2003, mandates that each of the major credit bureaus supply consumers with a free copy of their credit report each year. This report is an excellent tool to see what’s going on with your personal information. But a lot can happen in a year.

Keeping your network secure is another great tool to protect yourself. If you have a wireless network, make sure you keep it secure. A hacker can gain access to anything you do over an unsecured network in a matter of seconds. Purchasing a protection program for your computer is a great investment.

Lock your smartphone. A smartphone is a mini computer that carries access to all your personal information if you use it to make purchases or do online banking with it. Just like securing your home computer, you should secure your phone. Checking to see what has been charged to your credit or debit card should be a daily ritual. The sooner you catch it, the less damage done.

You can also protect yourself offline by limiting what you carry. When you go out, take only the identification, credit and debit cards you need, and make sure you have a physical copy of all debit, credit and loyalty cards in case they get stolen.

Identity theft is a significant risk that affects the lives (and credit scores) of millions of people each year. Taking just a few extra precautions can help protect you from being another statistic.

Dana’s Take I recently recorded my fingerprint online for “security” purposes. Later, I reflected that I had just sent my fingerprint over the internet. Could someone copy it and claim to be me? Possibly. Did I feel like a fool? Absolutely.

Being safe with your personal information is a big issue today, especially with the ease of shopping online. Make sure that any online store you use either has “https” at the beginning of the web address or displays a closed padlock symbol.

Be wary of any public Wi-Fi connection, like those offered at coffee shops or libraries. They carry extra risks since they aren’t private.

Many online merchants ask you to store information, like mailing address and credit card information, for the sake of convenience. Given the number of data breaches that have occurred at major retailers, this may not be the best choice. The benefit of this convenience is far outweighed by the inconvenience of having your identity stolen.

Continue reading
65 Hits

What’s Wrong With the 4 Percent Strategy?

Ray’s Take: When you finally reach your retirement date, one of your first questions will be: How much of my savings can I spend?

The seat-of-the-pants guideline for retirement withdrawals has been 4 percent for many years. That’s all well and good when 10-year treasuries were yielding 6 percent. Now they are under 2.5 percent so that approach and the rule are less clear. Retirement readiness is too complex to be bound by a simple rule of thumb. Further, that rule doesn’t necessarily take into account investment expenses.

Americans are living longer after retirement, which means savings have to last longer. Pensions are increasingly rare. Like the sequence of investment returns, retirement spending follows an irregular pattern. Retirees are commonly spending more money during the earlier years of retirement. This is intuitive as you suddenly have the time to do more things and feel like doing them. As the years pass these types of expenses tail off as you age and tend to lose interest in traveling or just become less energetic. Later in your retirement years the cost of medical care might increase.

You should strive to strike a balance between spending too much money early on and being broke later. Staying flexible and reviewing your plan annually can go a long way toward maintaining the retirement lifestyle you worked for. Better portfolio performance years should be followed by nicer trips while bear markets call for more austerity.

You need to take into account your health, your family’s history of longevity, variable rates of return, your risk tolerance and your goals, including the financial legacy you may want to leave.

The truth is that using the right withdrawal rate year after year is a lot more complicated than applying a simple rule of thumb. Everyone’s situation is different. Sustainable withdrawal rates are very closely related to the risk and returns provided by the underlying investment portfolio. 

Work with a financial adviser who is familiar with using all the tools available for building a retirement-income plan. You’ll thank yourself when you’re older, and you’ll be able to enjoy retirement with more peace of mind.

Dana’s Take: Sometimes the best advice is the simplest. After all, if it wasn’t short and sweet, “stop, drop and roll” probably wouldn’t do much for someone on fire. In the same way, financial rules of thumb are useful to many of us when making big decisions.

Simplicity is good. It helps us to keep things in order in our lives because we use these axioms to make decisions that take us along the road towards our goals, both financial and personal. Rules like don’t spend more than one-third of your income on your mortgage or more than two months’ salary on an engagement ring. These rules give us a starting point from which we can make decisions based on our own circumstances.  

Continue reading
58 Hits

Keep Your Finances on Track

Ray’s Take Not being careful about precisely where your money is going can leave you struggling to pay for necessities like groceries now and retirement later. Taking just a small amount of time to do some tasks now can lead to big financial wins all year long – and into the future.

Two of the best moves are to meet with a financial planner and set up a budget. These go hand in hand and get you on the right road to financial security. Financial choices become much easier once you have a clear vision of where you’re going and when you want to get there.

The budget seems to have a negative connotation for many people as most focus on the limits it seems to place on them. I think just the opposite. Budgets can be built with plenty of flexibility. More importantly, sticking with them is freeing in more ways than most imagine. They can free you to quit work some day and do whatever you want to do. They can allow you to provide the gift of education to your children. Money is a very good servant but a terrible master. Budgets allow you to take charge.

An airplane flying from New York to Los Angeles is off course multiple times on the trip. They use regular course corrects along the way to get back on track. That’s where your planner comes in. Regular annual reviews help your plan deal with the curves that life and the capital markets have on things. 

Don’t kid yourself that your planner has a crystal ball on the markets and interest rates. All of those projections and graphs can be changed in the blink of an eye. If you don’t roll up your sleeves and get back on track, days can turn into years, making it many times harder to get where you want to go.

Seeking out and using a good financial planner can help you make small adjustments that will have a big impact.

Dana’s Take John D. Rockefeller famously carried a pocket notebook where he recorded his expenses. My grandmother, likewise, kept a notebook of daily expenses. This Depression-era practice may be due for a revival.

Staying on top of your personal finances can be challenging, tedious and even discouraging, but for most people, this process is a necessary evil. 

Make it easier for yourself by having a system for recording everything you spend. It doesn’t matter if we use something as simple as a pocket notebook, an Excel spreadsheet, or something more complex like a computer program that categorizes and keeps a running tab. 

Having something in place that gives you a picture at a glance is a great way to alert you to how and where you are spending your money so you can make adjustments. It’s your money – there’s no sense in lying to yourself about how much you’re spending.

Create a system, even if it’s a pocket notebook. The most important part of keeping track of your finances is consistency.  

Continue reading
61 Hits

Midlife Insurance Audit

Ray’s Take Owning the right type of insurance policies at the right price at the right time of your life is a crucial element to your financial planning. Preparing for retirement is a particularly important time to do a full risk management evaluation, as you may no longer need some types of coverage you’ve had for years. You might be overpaying for others or might be inadvertently underinsured against some potential risks.

Some things to think about might include determining whether your current insurance policies can be used to help supplement retirement income. Can they be used for legacy and estate planning purposes? Can they be used to cover final expenses like outstanding medical bills, funeral and estate-settling costs, outstanding debts, mortgage balance and college costs? 

The estate and gift-tax exemption for 2017 is $5.49 million (that’s $10.98 million for a married couple), so the universe of people who need life insurance for estate taxes has gotten a bit smaller. If you haven’t self-insured your need for life insurance, you should reconsider your ability to retire.

Health insurance needs go up at this point however. That “early” retirement looks good on paper until you check on health insurance eligibility and cost until you are eligible for Medicare. Even after Medicare, many should consider supplements. The cost of long-term care must be evaluated. While many can afford to self-insure this risk, others cannot, or they have in their financial plan a desire to pass along their hard-earned wealth to their heirs.

Liability protection needs have gone up as well, since protecting your wealth has become pretty important at this point. Once you retire, you will probably not want to have to go back to work.

Dana’s Take A close friend just filed for divorce, buried her father and watched her only child move to another city. She’s feeling pretty lost, but I have faith that her midlife reboot will lead in exciting new directions. 

A midlife financial review is a great thing, but it’s not the only review we should be doing. It’s a perfect time to review all aspects of our lives. Midlife can be a stressful time, and many people feel discontented and restless as they struggle with aging and their sense of purpose in life. 

Are you where we want to be? Are you where you envisioned yourself at this point? And if not, how can you make it happen? The key to a happy fulfilled life is to have a range of goals in different areas of life, from health and fitness to money, to friends and family, to personal development. Maybe it’s time to start that hobby you’ve always dreamed of doing. Or, if you’ve already begun, take it to the next step. How about a small business that you’ll enjoy all the way into retirement, with the bonus of an additional income stream?

Continue reading
62 Hits

Overestimate Health Care Costs for a Healthier Retirement Budget

Ray’s Take It’s not news that health care costs are increasing. Whether you’re just in the planning stages or you’ve already left the workforce, estimating your health care needs is a major cost to consider during retirement. According to Fidelity, a 65-year-old couple that retired in 2015 will need $245,000 to cover future medical costs – not including the cost of long-term care. And yes, that’s with Medicare. Many workers and retirees are totally unprepared for this cost, which can completely wipe out their savings and retirement plans.

Most people, especially healthy ones, will underestimate the potential cost of health care, which can be financially devastating. Don’t assume just because you’re healthy now that you will continue to be throughout retirement.

Most people don’t realize Medicare covers much less than traditional employer plans. People who are near retirement routinely and wildly overestimate the percentage of health care costs covered by Medicare. It covers only 51 percent of health care services, according to the Employee Benefit Research Institute.

Then there’s the issue of long-term care insurance. Various studies estimate that the percentage of people who reach 65 that will need long-term care is 30 to 50 percent. Are you going to pay for that out of your current assets or are you going to get a long-term care policy? While cost is certainly a factor in not buying long-term care insurance, another reason is that many people simply don’t want to think about something as unpleasant as ending their days not being in control of their own lives. Some think they can throw the risk on Medicaid. Go visit one of those facilities before you decide. 

Regardless of the approach you take in planning for health care after retirement, doing some research and consulting a professional planner can help you create a plan that works for you. The harsh, cold truth is that money buys options. And the more options the better.

Dana’s Take According to a 2014 study published in Psychological Science magazine, having a sense of purpose can add years to our lives. Why? Having purpose after retirement brings all those other good things into our lives, like mental stimulation, movement, socialization and even sunshine. Those healthy bonuses can prolong independence and save retirement dollars spent on ill health.

If you can’t find your purpose, think of your elders when you were growing up. What kept them going? Was it work, grandchildren, a garden, a hobby or sport, travel, or a faith-based project or cause? What keeps your peers going? Ask to sit in on a friend’s activities. Try on a few projects to find one that fits. 

Health is wealth. Especially in retirement.

Continue reading
74 Hits

Retirement Spending Budget

Ray’s Take How much you spend from your retirement savings from year to year is arguably the most important piece in the retirement finance puzzle.

Before developing your spending strategy, you should understand an important overarching philosophy: You can’t control financial market fluctuations. You can only control how much risk you take, how much you spend and how to adapt. When you stay invested during retirement, there will be times when market volatility makes it feel like you’ve lost control. Maintaining a plan can help rein in this feeling.

Budgeting is a lifestyle. Like any other habit that is good for you, the more you practice it, the better you get at it. The most difficult part is getting started. But rest assured, it will become easier over time.

In retirement, things keep getting more and more expensive. Some of the items you buy each day will cost more based on the regular inflation rate. But other things, like health care, long-term care and major household repairs can increase significantly each year. Planning and saving are the best ways to prepare for these expenses.

Few people plan their monthly expenses. Worse, many people guess and are off by thousands of dollars. Additionally, people tend to think they will spend less in retirement, when they will probably spend even more, especially during the early phase. One of the best approaches to the process is to plan three different budgets. One for average years. One for “bonus” years when everything goes right. One for the “lean” years when nothing does. 

Don’t wait until after you’ve retired to deal with changes to your financial circumstances. One helpful way to estimate expenses in advance is to review bank account statements for two years. This way you will catch one-off expenses and gift expenses – two things many retirees don’t think to include when planning their budget. With respect to retirement planning, you need to know what is going out the door each year. 

Dana’s Take My mother is a great example of living well post-retirement on a fraction of her working-life income. What’s her secret? Besides great health, an adventurous spirit (and a younger boyfriend), she keeps her monthly overhead low so she has more cash flow left for travel and discretionary spending. 

Years ago, my mom gave up a suburban house for a two-bedroom, two-bathroom apartment in town. Does one person need much more than that? Also, she’s kept the same car for 10 years or more. As a result of keeping her monthly expenses down, she has taken her grandchildren on trips in the U.S. and abroad, taken European cruises, driven across France and has more trips in the works. 

Living within your means post-retirement is crucial, but living well within your means is even better. 

Continue reading
68 Hits

Exercise Care When Taking Distributions

Ray’s Take With few exceptions, the IRS requires that investors in traditional tax-deferred accounts begin to draw them down when they reach age 70 1/2. Most people are inclined to think about required minimum distributions (RMDs) once they start having to take them. It’s a good idea to start some projections well in advance of that deadline. If you miss the deadline, the IRS will access a penalty of 50 percent of the amount you should have taken. 

Bracket management is the key here as you put together the pieces of your retirement income puzzle. Juggled in the mix is when to take Social Security benefits and any other pension income along with the size and allocation of your nonqualified investments. If all of those pieces are more than sufficient for your lifestyle, you can consider distribution to your future heirs and charitable beneficiaries.

RMDs have been a planning challenge since the law that created the requirement was passed. Objections revolve around two aspects of the law. First, people don’t like being told when they have to take – and pay taxes on – their money. Second, the rules are so complicated they almost invite noncompliance.

If you don’t currently need the income from your RMD to help cover your retirement expenses, you can reinvest the distribution in one of your taxable accounts to cover future unanticipated expenses, but you still have to pay the taxes. And the tax rate for distributions from qualified plans is your ordinary rate even if it came as a qualified dividend or long-term capital gain.

When choosing how to invest the funds, remember to choose an investment mix that reflects your financial situation, time horizon, and risk tolerance. The chances of one spouse living well into their 90s is north of 40 percent. Invest accordingly. There’s no reason to upset all your careful pre-retirement planning decisions – unless there has been a significant change in your circumstances that needs to be addressed.

Whichever strategy applies to you, RMDs are likely to play an important role in your finances in retirement.

Dana’s Take It’s important to be careful with how we handle our money to make it last comfortably throughout our retirement. Paying attention to returns on funds is smart. 

Another way of being careful and making retirement funds last is to pay close attention to other aspects of our lives that affect expenditures. This means making smart choices for your body, mind and spirit. 

Loneliness is now considered a health risk for seniors. I recently read that lacking social connections is as harmful to our health as smoking 15 cigarettes a day. Who knew? 

“Use it or lose it” applies to more than money. To a large extent, aging well is in your own hands. The decisions you make, your habits and your lifestyle all affect your senior years – and how far your retirement funds will stretch.

Continue reading
60 Hits

Create a Cash Flow Plan With Taxes in Mind

Ray’s Take When you head out the door on the last day of your job, you want to know that you've made a solid plan to take care of finances during your retirement years. And, even though that regular paycheck from your employer is out of the picture, Uncle Sam will still want his share of your money. Understanding the tax repercussions of distributions from various retirement vehicles and planning accordingly ahead of time can help you be more tax efficient in your planning.

The time to create a cash flow plan that will meet your needs in retirement is well in advance of that last day. Understanding the resources that you have available to meet your retirement goals is the first step in determining your retirement cash flow. 

The second step is to assess and manage the tax efficiency of the income you are collecting. This will help minimize the amount of income taxes you pay both now and down the road. All income is not created equally, and ultimately it’s not what you make but what you keep that matters. Capital gains and qualified dividends are taxed at lower rates in your non-qualified portfolio, but that doesn’t matter when they come from your qualified plan – all distributions are treated as ordinary income.

It is tempting to keep deferring qualified plan distributions as long as possible, but doing so can really bump up required minimum distributions later on. So a little “bracket management” can be useful. Finally, it’s important to remember that tax rates come and go, just like the politicians who write the laws. Don’t bet the farm that a given tax code will be in place forever. No one has a crystal ball. 

It’s important to spend some time understanding all your accounts, their tax status, distribution requirements and your options for handling them. Find a tax professional to ensure you are meeting the IRS requirements – and to help avoid a costly tax mistake.

Dana’s Take I like to think that between YouTube and a Google search I can figure out how to do-it-myself for just about anything. Retirement planning, unfortunately, with its tax and survival consequences, is not one those topics. 

The most important thing to keep in mind when planning for retirement, and preparing to spend your savings during retirement, is that your plan is a roadmap that should be put in place and updated on a regular basis. When you retire, you will have more time. So why not take the time to do things that will save you the thing you likely have less of – money. Nothing is set in stone, but with a solid plan you are putting yourself in a position of success.

Continue reading
69 Hits

Incorporate Life Planning in Your Financial Plan

Ray’s Take You may already devote considerable attention to the financial side of retirement planning: how much to save, how to invest, different ways of turning your nest egg into a reliable retirement income, etc. But have you given thought to retirement lifestyle planning?

If your goal is to quit work, still be able to pay the bills, take a few trips each year and indulge in your favorite hobby, that’s one type of planning. But, if your goal is to trade in your current career for something you’ve dreamed of doing, like turning your hobby into a small business, that’s another type of planning entirely. Instead of asking, “How much do I need to save,” you need to ask, “How am I willing to change my lifestyle in order to achieve my goal?”

Will a smaller house, less-expensive car or fewer high-priced vacations help you create the life you want for yourself? It’s all about deciding what life you want to live now and in the future and merging those two images to find the point at which you can make both a reality. It is nothing short of creating a new identity.

Once you have that image, it’s more about the mechanics of orchestrating a transition than it is about just saving a certain amount of money or earning a certain rate of return on your investments. Just as each person has his or her own definition of happiness, the decision to pursue a lifestyle change is highly personal. It should be expected that the process will cause some friction between spouses. It can involve enormous upheaval, but it can also result in enormous satisfaction.

Prior to taking the leap, you should carefully examine your motivation and your financial resources. Then all you have to do is come up with the plan that will get you there. A financial planner can help you put the pieces together.

Dana’s Take Baby boomers are changing the face of retirement, so the concept of lifestyle planning isn’t surprising. And it’s vitally important that they have a plan in place for their second act. With all the improvement on the medical front, boomers are reaching the traditional retirement age in better health and with a lot more energy than previous generations. 

For boomers, the concept of a life of full-time leisure or full-time work is being rejected. A happy retirement consists of integrating work, play and volunteer activities. Today’s retirees are the new guinea pigs. As they shift away from the notion of working like crazy for 40 years and goofing around for 20, they are creating the new “normal” of a blend between learning, working and leisure.

Continue reading
67 Hits

Retirement Budget Busters

Ray’s Take When you’re working, emergencies seem to happen fairly regularly. Whether it’s a new roof or a special vacation, they come up. If there’s not enough money in the emergency fund, you can always adjust the plan – earn a little extra, delay retirement, etc. But after you retire, there’s not as much margin for error. 

Even retirees who have checked off all the boxes on the financial “to do” list before leaving the workforce can be surprised at how challenging it can be to balance a monthly budget. One thing after another conspires to undermine carefully created plans, leading to a level of unwelcomed anxiety.

Your first line of defense is margin for surprises in your budget. If everything has to go perfectly for the budget to work, you’re sunk before you even start. 

Next you should review the larger budget items. If you’re still servicing much debt, you should consider delaying retirement. Those fixed items are merciless. What are your hobbies? Some are much less expensive than others. How expensive your favorite pastime is will have a big impact on your monthly budget. Once you retire, you may start spending more time on your hobby than you originally projected, leading to higher expenditures. 

What about those travel plans you made? Traveling in retirement has become a cliché. Every retirement commercial seems to feature happy couples lying on a beach or dancing on a cruise ship. All that travel can cost you – and the farther you go, the pricier it gets. It doesn’t mean you can’t travel. But you do need to consider the cost of travel in your retirement budget. 

Look at how you are spending money on children and grandchildren. Help them out as long as you aren’t hurting your own finances. Think ice cream cones, not the latest tech gadget. It’s one thing if you have unlimited resources, but if you’re on a strict monthly budget, you need to be cautious. 

Finally, learn to say “no.” That one skill can go a long way to keep a retirement happy. 

Dana’s Take If you have warm feelings toward a grandparent, I doubt it’s because they spent a lot of money entertaining you. It’s more likely that your special grandparent made you feel special by spending time with you.

It’s a shame that grandparents sometimes believe their families look to them to splurge on trips, tuition and gifts. A grandparent’s very existence in a child’s life is a tremendous gift. 

Paying attention to a grandchild may be even more valuable than paying for a trip to Disney World. Plan a special time with each grandchild. If you’re not close enough for a walk or playtime, plan a weekly call, a letter or even a FaceTime chat.  

Measure your legacy by how much time, rather than dollars, you give your grands. 

Continue reading
65 Hits

Saving More – Can It Be Done?

Ray’s Take When you’re busy focusing on living your life, it’s easy to fall into spending habits that aren’t exactly consistent with your long-term goals. Marketing departments hire some very smart people who can get you to buy things that you didn’t even know you wanted!

A full review of your financial plan is something that you should schedule every year. And part of your annual financial planning should always be figuring out if you are on track for your priorities. If you’re not, it’s time to see whether there are places in your life where you could save more money than you were able to save over the past 12 months.

Apply those savings to your retirement or college fund, use them to pay down existing debt, or put them into an emergency fund. Your plan should also include identifying ways you may be able to save even more in coming years.

Check out the current mortgage rate to see if it’s in your best interest to refinance. And, if it is, redirect the savings into your new plan. The same applies to other debts. Review your car and homeowners insurance. Simply getting alternate bids may be enough. Are you over-insured? Cable/satellite bills are usually an easy target. If you’re well on your way to being self-insured through retirement investments, life insurance should be reviewed for both need and cost.

Reviewing your utility usage can lead to simple changes that add up over time. If you love technology, check out Google and Apple Home apps, but you don’t have to be an expert to adjust your thermostat a few degrees and change a few light bulbs. Avoid the “it just doesn’t make that big a difference” mentality.

An honest accounting of where your money goes can lead to positive results, and a few small changes could mean substantial savings down the road. You can save money without turning yourself into a miser.

Dana’s Take The world we live in has become one of credit cards, internet banking and online shopping. And because of this, kids rarely see people buying anything with physical money like notes and coins.

Not seeing money used for buying and bill paying makes it harder for kids to get their heads around what things cost. They might see this invisible money as an unlimited resource rather than actual money coming into and out of their parent’s bank accounts.

Talk to your kids about expenses to help make this invisible money real. When you use a debit or credit card to buy something, make sure they understand that there has to be real funds out there somewhere, in your name, in order for the purchase to take place. That way they’ll have a more realistic view of money and how it works.

Continue reading
63 Hits

2016 – What Can We Learn From the Big Events?

Ray’s Take One of the most important disciplines in financial planning is the annual review. A time to look at what worked, what didn’t, what needs adjusting and what we learned. As we look back on 2016, we can learn some financial lessons from the big events of the year.

Gatlinburg. We all, locally and nationally, watched in horror as the fires took lives and devastated homes and businesses. Our lesson here is to be prepared financially for emergencies. Hopefully, none of us will experience this level of loss, but no one can predict the future. Having insurance and reserves in place to take care of some of the material losses is one less thing to worry about when the unexpected does happen.

Stock market. It started the year off low, leading many experts to make dark predictions. And yet, by the end of 2016, the Dow was substantially higher and near its highest levels in history. What lesson can we take from this? Don’t panic. Play the long game. No one can consistently time the market. Allowing emotion to take over can negatively impact your investments.

Another big headline making event was the Zika virus. A virus with devastating effects that seemed poised to spread across the U.S. at one point. What does a health scare have to do with financial lessons? It’s a good example of how important health is to us. When we take care of our health, we can avoid, delay, or at least mitigate, many medical issues that come with age and lead to big costs. Health insurance is a must, even if you’re in perfect shape. If a problem were to arise, you can rest assured that you’re covered and your financial goals won’t be derailed.

A financial adviser can help you look beyond conventional wisdom and manage your money in a way that works for you. The world changes quickly. It takes discipline and patience to achieve your goals.

Dana’s Take With the end of Christmas shopping and the beginning of a new year, I have to ask myself, “Where did all that money go?” The good news is that it’s a new year and January is a good time to reflect on financial successes of the past year. Did your 401(k) grow? Congratulations. Did you set up automated savings from your paycheck? Pat yourself on the back. Are credit card balances shrinking? Way to go. Did you set aside money all year for a future purchase or vacation before committing? Yay, you.

January is also a great time to correct course on any financial wrong turns of the year. Change is always possible and with financial stability comes peace of mind. Every tiny change can help. When the habits improve, the finances follow.

Make 2017 your financial best.

Continue reading
76 Hits

Fixed Costs: Overhead That May Be Costing You Too Much

Ray’s Take There’s an old cash flow joke about having too much month at the end of the money. It’s usually more a function of spending than earning. For most people there’s a lot more control over the expenditures side of the equation than there is over the income – at least in the short run. So cutting how much you spend on extras sounds great. But how much of your spending can really be reduced or eliminated? Too much “overhead” can result in disaster.

To get a realistic picture of your fixed expenses, write them down – all of them. A visual is always a good way to look for overages. The list should include mortgage payments, car payments, insurance, cellphone, etc. Consider anything that is a regular use of funds. Most people will have a very similar list, but remember that some expenses that qualify as fixed for some people may be non-fixed, or variable, for you. For example, the cellphone bill is often considered a fixed expense. It’s true that everyone needs a phone, but the level of add-ons can be reviewed to reduce or even eliminate some costs.

Autopay is an increasingly popular option for monthly bills. It’s a great convenience, but it doesn’t give you the visual big picture the way sitting down, writing a check and balancing the checkbook does. It’s a good idea to review your banking online regularly if you handle bills this way. That health club that you may not use can stay on autopay for a long time. This is a great way to see where you can cut or reduce some of your current fixed expenses. Do you really need that extra movie channel on your satellite package? How about planning a way to pay off a fixed expense like a car loan to eliminate it from your monthly expenses?

On the other hand, if you are on track to meet your financial goals for retirement, education, etc., and want to splurge on those extras, by all means do so. Life is about balance.

Dana’s Take A new type of overhead is digital overhead. By that I mean monthly billing for digital access to music or entertainment (Spotify or Netflix), and even academic resources like Gradesaver. Millennials are particularly vulnerable to the appeal of these services.

Although each item seems small, usually around $10 a month, a few services each month add up fast. The good news is that these services are usually easy to cancel.

The convenience of digital services is nice, but if they don’t match up to actual cash flow, consider unplugging from digital overhead.

Continue reading
64 Hits

Taxable or Tax-Deferred?

Ray’s Take Tax planning is an essential part of any budgeting or investment management decision. Generally there are two types of accounts to consider: taxable and tax-deferred. But which one will work best for you? The answer is usually both, but there are definite strategies to consider when choosing.

Tax-deferred accounts allow for immediate tax deductions to be realized on the full amount of the contribution. Future withdrawals from these accounts will be taxed. Because of their nature, tax-deferred accounts will provide the greatest benefit when they shelter investments that generate frequent cash flow or distributions that would otherwise be taxable. This allows these payments to remain whole and be reinvested most efficiently. 

The immediate advantage of paying less tax in the current year provides a strong incentive to put funds into a tax-deferred account. You will pay less tax on investments that have been in a tax-deferred account.

However, there are times when the tax from tax-deferred investments can be higher than the tax that would be realized from unsheltered taxable investments. There are several types of investments that can grow with reasonable efficiency even though they are taxable. In general, any investment or security that qualifies for capital gains treatment is a good candidate for a nonqualified investment account. 

Another possible reason for utilizing a taxable account could be that you’ve maximized the annual deferral amount allowed to your retirement plan but still need to save more for retirement. 

The “both/and” approach also gives flexibility when making distributions. Most people will retire through a number of different Congresses and tax codes. Since we can’t predict what the tax bracket will be before or after retirement, a combined strategy involving both pre-tax and post-tax accounts can provide a useful hedge. 

Dana’s Take “Payday someday.” That saying applies to taxes and also to grief. Most people expect to grieve soon after a loss, but are often caught off-guard when grief wells up long after the loss. 

People who express their grief through writing, talking and even crying usually have a better outcome than those who try to ignore those feelings.  

Grief recovery groups are particularly useful for healing. In the presence of a number of people experiencing a similar loss, your feelings and reactions become normalized. Someone in the group may bring up the anniversary of a loss or a trigger memory and how it has affected them. Other group members join in the conversation and leave feeling accepted and relieved. 

Seek out a grief support group or schedule with a certified marriage and family therapist or other counselor to vent your feelings and get support in moving forward after a loss. 

Continue reading
61 Hits

Setting Financial Priorities in Your 50s and Beyond

Ray’s Take Every phase of life has its challenges – financial and otherwise. Your education gives way to career, which is often followed by marriage and children. Next comes educating those children. It would be great if all of these phases were managed and balanced as we pass through them, but most of us have a few detours along the way. 

If you’re in your 50s or beyond, you really need to be focused on your retirement plan. By this time, it’s getting pretty big in the windshield. If you haven’t started already, here are a few important things that need to be taken care of. 

Start by knowing your retirement number. In order to meet your goal, you have to know what it is. When you hit your 50s, you need to crunch the numbers for when you hope to be able to quit work and how you’ll live afterwards. That leads to the steps needed to make it happen.

Once you know your numbers, start by maxing out your retirement contributions. By contributing the maximum allowable amounts to your IRAs and 401(k), you create a bigger pool for retirement. If more savings are needed, review non-qualified savings and investment options.

Rebalance your portfolio. It’s important to do this step all along your planning line, but when you get into the home stretch toward retiring you should more regularly review your risk, as you have less and less time to recover from the inevitable bear markets.

Accelerate debt payoff, particularly mortgage debt. It may or may not be a deal breaker for you. If it’s important to you to have your home mortgage-free when you retire, now is the time to make that happen. Review any other debt you may have like credit cards and cars. 

Review spending. The truth is, the fastest way to save is to spend less. Building a lower-cost lifestyle now means less money will be needed to maintain your standard of living at retirement.

This is not the time to make quick, off-the-cuff decisions. A financial planning professional can help you to review your current situation and make a plan to meet your goals.

Dana’s Take People are living longer and conceptions of age and aging are changing. In fact, the old truism about 50 being middle age no longer holds true. The baby boomers are now over 50 and making major changes in how we perceive everything.

A grandparent is no longer the person who is at home relaxing. In fact, the grandkids may have a hard time keeping up with the new grandparent. Retirement is no longer playing golf or coffee klatches. It may include these things, but it’s now so much more. 

It’s important to take the more active lifestyle into consideration when we’re making decisions about retirement. We don’t want to find ourselves short of funds at a crucial time and unable to do the things we dreamed of or discover later in life.

Continue reading
67 Hits

Financial Recovery Regrets

Ray’s Take When the market went into meltdown in 2008 a lot of investments and property values went south. People are recovering from losses to the value of their homes and losses in portfolios, but some still need to dig their way out. Getting out of a hole always takes a lot longer than falling in.

If you’re nearing retirement, you’re probably looking for ways to reduce your risk but still participate in some gain. Making good decisions now is imperative to making sure you preserve your future.

Many still owe a variety of debt, including possible 401(k) loans. Retirement and debt are not a good combination. Debt can force you into dangerous corners from which many will never recover financially. If you are not out of debt, delay retirement.

Many saw the value of their homes tumble as much as 50 percent by 2009, but that only mattered if they sold. The same was true with their retirement investments. The key is to be patient and not try to time the markets.

Many people turned to credit cards to make up for a variety of reversals and now are still trying to handle that debt. Credit card debt is financial cancer and must be eliminated.

The first step in undoing the damage is to put together a well-thought-out plan. A plan can help you figure out how to prioritize goals and how you’re going to achieve them. You can avoid having regrets about the impact of decisions not thought out over the long term.

An objective financial planner can help you create order out of the chaos while creating a sound plan to get back on track with your goals.

Dana’s Take The recent fire tragedies in Gatlinburg brought the possibility of unexpected loss right in our faces. It seems so unfair when terrible things happen to good people.

The sad truth is that it happens. If it happens to you, you’ve got to make a plan. You have to make choices. And those choices will probably mean you have to make sacrifices. Try to see the choices as a fork in the road, an opportunity to choose who you really want to be.

Hard choices are all about values. No data or advice can tell you what’s most important to you. Once you determine what’s most important, there are people who can help you along the path. Remember, no matter how hard it seems now, time brings change and hope.

Continue reading
91 Hits

Retirement Drawdown – Which First?

Ray’s Take It’s not what you earn, but what you keep. That old saying is true when saving for retirement, and it’s just as important – if not more so – when it comes to withdrawing money from your various retirement accounts.

Most people own more than one type of account when they retire. With each type being taxed a different way, deciding when to take from each account can be a challenge. Because distributions from pretax retirement plans are taxable as ordinary income, long-term capital gains are taxed at lower rates or not at all. Distributions from Roth IRAs aren’t taxed at all when certain criteria are met.

You can control current taxation by picking and choosing to take from certain types of accounts. It’s also important to keep in mind that current IRS guidelines call for the commencement of mandatory taxable withdrawals at age 70 1/2 from all tax-deferred accounts – even if you’re still working.

By carefully deciding which accounts and how much you want to use, you can stretch your money and be tax-efficient. There is a common rule of thumb for withdrawing retirement savings – taxable savings before tax-deferred savings. However, pushing all tax-deferred accounts into the future can actually cause more tax liability when it pushes you into higher brackets. At the same time, a tax paid today is paid and it’s never coming back. Further, tax codes come and go, just like presidents and members of Congress.

Taking a long-range view can also help you determine which account to draw on first. This approach can help you withdraw money in ways that maximize the final total account balance over the long term. Either of these may work for individuals depending on their personal circumstances and plans.

The rules can be strict and confusing – not only in the law itself, but also among the various types of accounts. Solid professional advice can provide you with a plan to meet all your goals.

Dana’s Take The financial burden of student loan debt is leading some young adults to ask family members to repay their debts. The reasons are many. Some want to clear the debt so that they may borrow for a home. Others simply aren’t earning enough to repay the loans and live well.

Some parents are emptying their retirement savings to repay a child’s loans. Before giving so generously, try to remember how hard and long you worked and saved for those retirement savings. Your child has decades of potential earning power and your earning power may be on the wane.

Help where you can, but try to model Polonius’ sage advice in Hamlet: “Neither a borrower nor a lender be; for loan oft loses both itself and friend.” Relatives could be added to that counsel.

Continue reading
75 Hits

Estate Planning for Women

Ray’s Take Women have special estate-planning needs that may sometimes be overlooked. Statistically, women live longer than most men and also tend to choose husbands who are older. 

In fact, women live an average of 4.8 years longer than men, according to the U.S. Census Bureau, which means they are likely to become widowed and live on their own for a number of years. Among Americans 65 and older, 42 percent of women are widowed and only 14 percent of men are widowed.

Without proper financial planning, many married women will see their standard of living reduced during their retirement years. Women should be an active participant in financial planning. An unknowledgeable widow will likely be confused and uncertain, while one who has participated in the planning process will more easily understand it. 

In today’s competitive economy, both a husband and wife frequently have serious careers with associated benefits. More women are entering marriages with assets equal to their husbands. That’s a lot of assets that need to be combined and planned for strategically.

Women also need to plan for the possibility of incapacity in their later years, as they are more likely to be without a spouse to assist them. A long-term care plan can be an asset in the estate plan of anyone, but especially women. And, as possible caregivers, they need to plan for the continued care of those who may be dependent upon them. Children and parents, the bookends of the sandwich generation, will need to be factored into the estate plan to cover all possibilities. 

Women’s unique situations need thoughtful estate planning for retirement, long-term health care, children’s care and education, and parental dependence, as well as asset protection.

Dana’s Take As women, our lives and relationships are ever-changing and so are our financial needs. It’s important to get an annual financial checkup to make sure your finances match your upcoming needs. 

My friend is about to get married for the second time. Her children are grown, as are his. She recently inherited money and her fiancé owns a business. Is it time for a financial checkup? You bet. 

Wisely, she made an appointment with her estate-planning attorney to update her will. Should she leave everything to her new husband, her children, a favorite charity or a little to each? That’s a very tough question that she was brave enough to answer. No matter who my friend names, her loved ones will be glad she formalized her wishes in a will.

Looking after our finances helps women be prepared for life’s changes. 

Continue reading
72 Hits

Protecting Your Parents From Financial Exploitation

Ray’s Take Financial abuse against elderly victims is nothing new. With an aging population and more access to personal information online, it’s a crime that’s reaching epidemic proportions. Over 5 million older Americans are financially exploited each year by sophisticated scammers, caregivers or even members of their own family. As the statistics of elder abuse have risen, state and federal agencies have taken notice. Legislatures in all 50 states have passed some form of elder abuse prevention laws.

Unfortunately, financial exploitation often goes unreported. Experts say the victims are often too ashamed or may be unaware of the abuse due to cognitive impairment. Only one in 44 cases of elder financial abuse is ever reported.

It could happen to you or your loved ones if you don’t safeguard finances.

Be engaged in what’s going on in the lives of your loved ones. Simply being involved in their lives on a regular basis makes it far easier to detect signs of financial abuse. You may not prevent it, but you can limit its damage. There may be signs that they are losing track of their finances. Keep an eye out for piled-up bills and notices from creditors. Review their bank account for suspicious activity, including significant withdrawals or unusual purchases. Set up thresholds for credit cards that alert your smartphone. Be in the loop with their attorney and financial adviser and attend all meetings, either in person or on conference call.

Ensuring that your parents’ financial wishes are documented well before dementia or other cognitive issues arise is perhaps the most crucial step toward preventing financial abuse. Having money conversations with them on a regular basis is also crucial to helping to prevent scammers from getting into your parents’ finances.

Don’t feel like you are being too intrusive when discussing money with your parents. There have been numerous elder abuse cases that could have been averted if the victims’ children had discussed their parents’ future wishes and helped them get their documents in order.

Dana’s Take In some ways financial abuse is very similar to other forms of elder abuse. It can be devastating to the victim and is frequently traced back to family members, trusted friends and caregivers. Unlike physical abuse and neglect, financial abuse is more likely to occur with the tacit acknowledgment and consent of the elder person. That makes it more difficult to detect.

Financial abuse may result in elder persons becoming dependent on social welfare agencies with a significant decline in their quality of life. Victims may become very fearful, both of crime and of their vulnerability to crime. These fears may lead to dramatic changes in their emotional well-being.

Family members whose inheritance was reduced or depleted as a result of the financial abuse will suffer loss and may also feel abused. Seek legal advice if you suspect a loved one is the victim of financial abuse.

Continue reading
72 Hits

Splitting Your Savings – Retirement or College?

Ray’s Take After purchasing a home, the two biggest expenses most couples encounter are saving for retirement and saving for kids’ college expenses. In a perfect world, parents would estimate how much each goal would require, make a conservative estimate about returns, and then invest enough money each month to reach those goals on target.

But that’s tough to do. So which goal should come first? As a general rule, retirement savings need to outweigh college savings.

It may sound harsh putting yourself before your kids, but think of it this way: Kids have plenty of time to pay off student loans, while you have much less time to restore retirement savings raided or avoided for college expenses. Generally, a withdrawal before turning the age of 59 1/2 will trigger a 10 percent penalty on top of income tax, wounding the account so badly it might never recover, and undermining retirement plans. While the IRS does allow hardship withdrawals for college expenses, qualifying can be difficult and that only offers relief from the penalty.

It’s also possible to take out a home-equity loan to pay for college, but banks are funny – they expect to be repaid. Borrowing against the home, like raiding retirement savings, undermines retirement security by leaving you with less equity when you need to sell. Retirement plans generally don’t send monthly statements or foreclosure threats.

Although you may be willing to postpone retirement to pay for college, that’s not always an option. Kids can delay going to college and work in order to save money. They can also go to a less expensive school or get student loans. 

The reality is, your kids can borrow for college, but you can’t borrow for retirement. And the best gift you will ever give your children is your own independence.

A financial planner can help you make a plan that will work for you and your goals.

 

Dana’s Take It’s really tough to build up your 401(k) account when you’re getting gigantic college bills.

It’s a real problem for the middle-income, middle-aged. Just about the time you hit your stride in your career and begin to make up lost ground in funding your retirement, your kids are graduating from high school and looking at colleges with everything that entails.

College financial aid calculation starts with a look at the discretionary income of the parents. Notably, anything for your retirement savings is absent from the allowable deductions. In other words, colleges think the money you would like to put into your retirement savings is discretionary.

“Pay yourself first” is the mantra here. If you have money left after assuring your retirement is secure, then it’s great to use it to help your kids pay for college. Remember, no one offers grants, scholarships or federally guaranteed loans to support you when you leave the workforce. 

Continue reading
71 Hits

Prepping for the Next Market Correction

Ray’s Take Stock market corrections are an inevitable part of investing. Since 1932, declines of 10 to 20 percent have occurred every two years on average. It might happen next week, three months from now, or next year. 

Don’t kid yourself, or let your adviser deceive you, that you can time yourself out of it. Asset allocation will determine most of your ultimate terminal wealth, and if well-designed, it will help you make good choices and avoid emotional bad choices. But it will not give you a crystal-ball insight into the randomness of market corrections. 

There are some choices you can make that will help.

Keep a cash cushion. Cash is king in a volatile market. Savvy investors with cash can take advantage of opportunities that arise when other investors are nervous. Cash is especially important to retirees because it means you don’t have to sell stocks at the bottom just to pay bills.

It’s also important to diversify your investments through disciplined asset allocation. No one can know for sure which sectors of the equity markets or the fixed income markets will be up or down on a given day, week, month or year. But if you are diversified, you will be in a better position to weather any changes. Over time, you will learn your risk tolerance. You may think you know your tolerance, or believe you will respond rationally, but until you’ve lived through it, you don’t know for certain. Your real enemies are fear and greed, and they are formidable foes.

Keep debt low or non-existent. It is much more stressful having to “feed the beast” when those monthly statements come in worse and worse. Your mind will play cruel tricks on you and you start to question things you might not question in less stressful times. You can count on hearing scary market predictions on the news. Non-emotional and educated details are what should drive your planning. Ask your financial planner to help you understand the risks associated with your investments, so you know what to expect in every market condition.

Dana’s Take The stock market, much like life, is a roller coaster. You know there are going to be some scary moments. The truth is, no matter how long you’ve been investing in the stock market, a sharp downturn can still turn your stomach around. That’s usually followed by a slow climb back up to where you feel comfortable. 

Being prepared as much as possible can make some of the changes a little easier to take. Once you’ve done that, try not to focus on the detail. Zoom out and look at the big picture. Those changes that seemed so scary at the time will seem much smaller in that mode.

Try to keep the perspective that in general the market goes up over time and it has periods of corrections when it goes down, sometimes dramatically. A sound plan requires time, commitment and focus. The stock market is not a “get-rich-quick” strategy. Patience can pay big dividends.

Continue reading
70 Hits

Digital Assets – You Need a Plan

Ray’s Take With all the technological changes that have happened in recent years, digital assets need to be a part of your estate plan. 

From bank accounts to Facebook, PayPal and more, a good chunk of our personal and financial lives are online. What about eBooks, iTunes and frequent flyer accounts? According to a 2013 McAfee survey, the average person has roughly $35,000 worth of assets stored on digital devices. That’s a lot of digital property to be left floating around. 

Unfortunately, those assets are increasingly at risk of being lost when the account owners pass away. Many digital accounts are subject to service agreements with complicated terms. These agreements can often make it difficult or impossible for surviving loved ones to access these assets. State and federal laws could put friends and relatives who try to log on to your accounts at risk of violating anti-hacking and privacy statutes. This leaves accounts floating, which can put your estate at risk for hacking or fraud. Ultimately your estate could be paying for the losses.

The Revised Uniform Fiduciary Access to Digital Assets Act will provide some relief for executors, but it hasn’t been enacted in all states at this point. And even with the law, it’s important to incorporate detailed directions and information surrounding your digital assets into your estate plan. Write your digital-asset plan into your estate documents. Be very clear about it. Do not just rely on the generic powers of an executor or a general definition of assets to assume that includes digital assets. Consult with an experienced estate-planning attorney to make sure you’ve covered all your bases when it comes to digital asset planning. 

Dana’s Take You wouldn’t walk around with your wallet stuffed with all of your cash, plus all the account numbers of your investment accounts, would you? If you have a smartphone in your pocket or purse, you probably are, because passwords, account numbers and other key information are likely saved in your phone. 

Consumer Reports’ November issue lists “66 Ways to Take Control” of personal information on phones and other devices. Many of the tips take only seconds to complete and some were surprising. They included safeguarding web-connected devices in your home, such as baby monitors and children’s toys. How creepy is that? 

In this age of Google Wallet and Apple Pay, our phones are becoming our wallets. I think it’s time CPAs and other investment advisers offered audits of personal information security on phones and laptops. 

Identity theft can be a nightmare. Take steps to protect your digital financial privacy. 

Continue reading
72 Hits

Financial Accounts and College Fees

Ray’s Take We are now seeing total undergraduate degree costs well in excess of the cost of a new home. We could talk about whether it’s worth it, but that’s another column. Today we want to discuss ways to save for it. First thing–start immediately. You should get going the moment you have a social security number for your child. Second–run the numbers honestly. It’s not realistic to assume scholarships before potty training. A multi-faceted plan will probably work best.

One way of putting away funds for college is a custodial account. These are known as a UGMA or UTMA account after the Uniform Gifts to Minors Act and Uniform Transfer to Minors Act that created them. They’re set up for your child and managed by you. 

Advantages to using a custodial account include taking advantage of the gift-tax exclusion and some income tax preferences. You can also control how the money is invested and spent while your child is a minor. Be aware, once your child reaches the age of majority, that money is legally theirs to do with as they please. While the income tax advantages are not significant, these plans do offer more flexibility for helping your child. You can use it before college if necessary, and for things other than education costs. 

An alternative approach to saving for college is a 529 plan. If you use the money for college tuition, the lifetime cumulative earnings are tax free. That is huge. But so are the strings attached. It needs to be used for college or you may be looking at back taxes and penalties. This approach includes a limited ability to change beneficiaries if the need arises.

When it comes to financial aid, compare the impact of the two types of accounts when you are planning your strategy. Custodial accounts are your child’s asset, not yours. As such, most financial-aid formulas take that into account. With a 529 plan, the assets are yours as the owner and are calculated differently in most financial-aid formulas.

Dana’s Take When it comes to college, a lot of kids want to do the full experience. This includes sorority/fraternity activities and summer travel experiences. These things can become expensive, so it’s a good idea to have money put aside so your child can participate without feeling like money is short. 

If you have a custodial account, this money can be used to meet these “non-educational” expenses. But be aware, if you are funding with a 529 plan, these expenses are not payable from this type account. You can create a savings account at your bank that is specifically for expenses like these. Both you and your child can make contributions to it over the years. 

What a great way of giving your child even more input into their money for college.

Continue reading
75 Hits

Invest In Yourself With Vacation Days

Ray’s Take Vacation time is an investment in your future. Studies show that many Americans leave vacation days on the table every year. We’re too stressed to take a vacation because we’re stressed by the thought of all the work that will accumulate while we’re gone and make the whole vacation worthless. 

If we do pull the trigger and take some time off, we often bring work along with us. This keeps us essentially still in the work mindset we’re supposed to be escaping.

And this mindset can lead to other issues.

There is a known relationship between stress and health. Stress also impacts your finances. When you’re stressed out and tired, you’re more likely to become ill. Your sleep will suffer and you will become more irritable, depressed and anxious. All these things can lead to health and relationship problems that affect you financially. Health problems can also lead to bad decision making, which also affects you financially.

Vacations do have the potential to break into the stress cycle. We emerge from a successful vacation feeling ready to take on the world. We gain perspective on our problems, get to relax with family and friends and generally feel much more in control of our lives. All these factors lead to better health and better decision making.

Taking a long weekend can be just as refreshing as an extended time away if you totally disconnect from everything work-related and immerse yourself in the time off. I used to think that more frequent, shorter vacations were better for me than more extended breaks. As the years have passed, I have found that the longer breaks were more helpful. It is very important to have alternation in your life.

Instead of thinking it’s important to be at your company every day, you need to realize it’s just as important to take some time away. It’s an investment that will benefit everyone in the end.

Dana’s Take Getting away can be a great stress reliever. Over Labor Day weekend, however, Ray and I needed to stay close to home. So instead, our family booked a Downtown hotel with lovely river views.

Exploring Downtown on foot was a great adventure. We found great restaurants within walking distance of our hotel, plus a nice spa for a mani-pedi. We even visited Slave Haven, a historical site none of us had been to before. 

When the weather felt too warm to walk, we hopped on a trolley shuttle bus. One dollar took us from Bass Pro at the Pyramid to South Main. 

The weekend was refreshing and we didn’t have to book flights or connect through the Atlanta airport. Try a Downtown Memphis staycation for a low-stress getaway.

Continue reading
81 Hits

Spending Smart to Save

Ray’s Take When we bring up the “B” word (budget), most people’s knee-jerk response is to think in terms of depravation – not spending. While that’s true to an extent, it’s more likely to be successful and sustainable if we slightly change our mindset from “less” spending to “different” spending.

Some choices are obvious. Be sure to do regular maintenance and make repairs to homes and cars in a timely manner, even if it means spending a little bit of money now. It’s not worth pressing your luck to save a few dollars today on things that may lead to making a major payout later on.

These preventative, smart-spending strategies apply to your health too. You may save money today by skipping a check-up at the physician or dentist, but if doing so leads to more serious problems down the line that could have been caught early, the savings actually turns into a longer-term, more expensive cost.

Another way to incorporate smart spending into your life is to buy value, not low cost. Purchasing the cheap mattress today to save money may lead to back pain or interrupted sleep cycles, which lead to health issues and cost more money in the long run. You spend a third of your life on that mattress – that’s not the place to cut. Replace pillows once a year. You’ll be amazed at how a few strategic expenditures can have significant benefits. A well-placed gratuity at the beginning of a vacation can give you an outsized benefit.

Whether you’re looking for a car, house or furniture, it’s far better to buy something good in quality and take care of your purchases to make them last a long time. Sometimes, trying to save money can actually whisk more cash from your pocket. 

Dana’s Take Spending more for a top-quality product can sometimes be worth every penny. Case in point, Ray purchased an alligator belt from Oak Hall and wore it until it was falling apart. I took the belt to the store seeking a new one. Instead, Ray’s salesman gave me the card of the belt maker, Torino Leather in New Orleans. 

Torino instructed me to mail them the belt with a check for $30. One week later, we received our beautifully refurbished belt with a new buckle. Wouldn’t it be great if every purchase were as satisfying as that one? 

It turns out, that “expensive” alligator belt cost a fraction of a penny per wearing. How many items in your closet can make that claim? Investment dressing can pay off in dollars and in satisfaction.

Continue reading
92 Hits

Risk Management and Planning

Ray’s Take Among the many balancing acts involved in professional financial planning is the trade-off between “certainty” and “risk.” While risk may not feel very good sometimes, given the current level of interest rates and inflation, a retirement plan without some level of risk will almost certainly leave you old and broke.

It’s best to evaluate risk more by magnitude than probability. For example, a large adverse judgment against you for an auto accident (less likely) could be financially devastating (and therefore more important to insure), whereas a minor fender bender (more likely) should be managed out of your emergency fund. If a family has debt (mortgage), children to raise and educate and only one breadwinner, that person should almost certainly be well-insured. If there is no debt, two earners and fewer future obligations, there is not as much need.

It’s normal to prefer stability and avoid risk, especially as we get older. It’s also normal to be fearful of the unknown, particularly when large sums of money are involved. Yet, aversion to risk may be a disadvantage when investing. Risk certainly feels bad during a bear market (likely) but that must be weighed against running out of money during retirement.

By taking a close look at your own individual circumstances – insurance needs, emergency fund and overall goals – you can get a better perspective on what level of risk works best for your situation. The earlier you start planning, the more time you’ll have for your investments to meet your goals. As you get older and more financially stable, you should be able to put away more to invest.

Not every investment is for everyone. Even if you’re less risk-averse, you shouldn’t concentrate all of your money into too few investments. At the same time, some risks can’t be diversified away. Risk tolerance is your personal desire to assume risk and your comfort level with doing so. Risk management is how you handle that. 

Choose investments that fit within your investment philosophy and tolerance for risk, and are most likely to succeed. Then don’t overthink things. 

Dana’s Take As Ray and I have gotten older, we have tended to keep our life’s circle small, continuing in comfortable routines. Loss, however, has made us rethink everything regarding risk versus safety. 

Recently, Ray and I lost someone very dear to our family, Ray’s father and the founder of his financial planning firm, Denby Brandon Jr. Mr. Brandon lived large, making friends wherever he went. At his memorial gatherings, we heard over and over how fully Mr. Brandon lived every moment. 

Those memories were a reminder to us to step outside of our comfortable routines. Now, Ray and I are talking about finally taking some of those far-flung trips we’ve talked about for decades. 

Safety is cozy but a little risk can shake things up and make life livelier. 

Continue reading
91 Hits

Estate Planning – It’s a Need

Ray’s Take When talking about money and how it works in our lives, we often refer to the difference between wants and needs. The challenge being that when someone really wants something it can start to feel like a need.

Estate planning should always be a need. But often it gets relegated to the “do it tomorrow” list. There are lots of reasons people put it off, starting with having to deal directly with thoughts about dying. Also high on the list are the “what ifs.”

One person might be a good choice for guardian, trustee, power of attorney or executor, but what if when the time comes they have moved or don’t want the responsibility, then who? What if someone who needs to be named in the will needs to be removed later? What if the laws change or the circumstances change and another option would be better?

Things do change, that’s a fact of life. Children grow up and don’ t need a guardian, parents get older and do need a guardian. We change jobs, get promoted or lose jobs. Investments go up and go down. Sometimes laws change. All of these things factor into the list of what needs to be handled in estate planning.

Many people spend more time planning a vacation or researching the options of their next car than planning their estate. Of course, those are more fun – and more immediate.

Estate planning is much more important, but requires more time and effort. Without a comprehensive estate plan, a significant part of what you’ve done throughout your life, both at your job and with your investments, can be lost or given to unintended beneficiaries.

You should write a will as if you were going to die THAT DAY. Then set up a review system to make sure it stays relevant and appropriate. An estate-planning attorney is a great asset in figuring out the puzzle.

Dana’s Take Estate planning is a wise financial move and can also be a kind and caring gift. Anyone who has recently lost a loved one can appreciate the peace and security bestowed by a well-written estate plan or knows the chaos created by its absence.

Effective estate planning usually saves on taxes, plus time and expense settling an estate. A relationship with a trusted estate planner and financial planner also provides a hand to hold during a confusing time. Rather than the surviving spouse or children digging through papers, searching for clues on what to do next, the planner’s ready paperwork helps to move the process along smoothly, with minimal involvement from the grieving family.

An estate and financial plan lightens the burden of fear during life’s darkest moments. Can you think of a better gift?

Continue reading
90 Hits

Retirement Readiness – Positive Planning

Ray’s Take At varying levels, most of us acknowledge that retirement planning is something that deserves some consideration. The challenge comes in the midst of day-to-day problems and distractions. We can lose focus or may not have a good grasp of what our focus is. It makes an often-difficult task even harder.

Here’s where the Law of Attraction can play a vital role. The law is simply this: We attract whatever we think about, good or bad. This works for retirement planning because setting goals through the planning process will guide you through a series of small incremental decisions “attracting” you to those goals. 

So, you should ask yourself some important questions about what you want your retirement to look like. Once you have that picture more in focus, you will find it more automatic to make the day-to-day decisions that will lead you to your long-term goals.

Knowing and prioritizing what is important to you, and why, will guide you on every financial planning decision moving forward even without consciously thinking about it. It will be easier to say “no” to the smaller things along the way because the bigger “yes” down the road is more attractive.

When we are looking to live out our dreams, the fact is, financial independence must usually be obtained first.

Nobody knows exactly where to start. You’ll have to do a bit of educated guessing at the beginning. You’re plans or dreams may change as the years go by. But, if you need to course-correct down the line, it’ll be easier if you’ve been working toward your goals all along rather than waiting 40 years and hoping for the best. 

Make a plan that is based on something realistic and achievable, take positive action and st

Dana’s Take Attracting the good things in life is a goal we all aspire to. Creating a positive atmosphere is integral to making that happen. 

Think about your plans for your life like a garden. Things don’t grow in soil that isn’t full of nutrients. The same is true for creating and achieving goals in our lives. First, get a mental picture of what you want to have or what you want to happen. Then, tend to those goals and aspirations the same way you tend to flowers in our garden – with loving care.

While visualization and positive thinking are powerful tools, they don’t work alone. Your actions are a big piece of the puzzle. At the Olympics, Michael Phelps said he used the power of visualization to achieve his dream. But, he also put in a lot of laps in the pool.

Continue reading
100 Hits

Mortgages: 15 or 30?

Ray’s Take When thinking about mortgages, most people look at either the rate or the payment. Typically a 30-year mortgage offers lower payments but has a higher rate and more total interest cost. A 15-year mortgage offers a lower interest rate but has higher payments. Neither one is inherently right or better. When deciding on the mortgage that is best for you, take a deeper look at everything involved.

Rates have been at historic lows for quite some time. This makes for good homebuying opportunities and generally a larger universe of homes available for those in the market to buy.

If you choose the 15-year mortgage, you should pay less interest over the life of the loan. This may not be the case if you don’t keep the mortgage for the full term, or if you refinance to lower payments down the road. How likely are you to stay put for that long?

If you have a 30-year mortgage, you can still pay as if it were a 15- or a 10-year mortgage, without being locked in to the higher payment amount of the shorter-term loan. In other words, you have more flexibility on how you pay the mortgage should your circumstances change. You could significantly reduce the amount of interest you pay by paying off the loan early.

It’s possible you may reach traditional retirement age and still owe money on your home. And that’s OK. You still get a tax write-off on the interest you pay, and you still own your home. At this time in your life it’s all about enjoying life, not stressing about making mortgage payments. Leaving a paid-for home to your heirs may or may not be one of your goals.

Deciding among mortgages is a major decision that will have long-lasting effects on your personal finances. Before settling on a term, consider your current financial situation and your long-term financial goals. Consider the mortgage holder as your “partner” in the risk of holding real estate.

Dana’s Take Millennial couples are putting off getting married longer and longer. The median age of marriage has risen steadily over the last 10 years. Many millennials are struggling to find jobs, and owning a home is not something they see as necessary. They saw their parents struggle with loss of home value and foreclosure.

But in an interesting turn of events, even though post-millennials – those born after the 1990s internet bubble – were very young when the housing/stock market crashed, they feel the opposite of their older siblings.

According to an article in Money magazine, post-millennials, on average, aim to own a home by age 28 – three years earlier than the median age of first-time homebuyers reported by the National Association of Realtors.

So, with this change of direction in the youngest generation, perhaps the American Dream of homeownership will come back around.

Continue reading
104 Hits

Retirement Planning When You’re Self-Employed

Ray’s Take Most people who work dream of being their own boss at some point. While there are certainly some benefits, there are a good number of extra headwinds you don’t want to ignore.

You have to cover both halves of your Social Security taxes, pay all your own employment taxes and cover your own health insurance bills. But you can catch some breaks in your retirement planning.

The joke about “when you’re up to your knees in alligators it’s hard to remember that your objective is to drain the swamp” rings true to many a business owner. You probably have so much on your plate that it’s easy to neglect your retirement planning until “later.” Bad idea.

Self-employed IRAs allow up to 25 percent of your gross annual salary to be saved on a tax-deferred basis, up to the current maximum limit of $53,000. And, if you have a workplace retirement plan that you are contributing to, you can still contribute self-employment income to a SEP IRA if you have income from a side business.

Another option is an individual 401(k). If you are an individual business owner, an individual 401(k) is just that: your own personal 401(k) plan. Contribution limits are the same as the limits for a traditional 401(k), but because you administer the plan as well, you can match contributions as an employer – up to 25 percent of salary. That means you can contribute almost double the traditional 401(k) limits in an individual 401(k).

Keogh plans were the original planning tool for the self-employed. You can set up a Keogh like a pension or defined benefit plan where you set an annual goal and fund it. The contribution limit was $215,000 in 2015 or 100 percent of compensation. This can be an attractive option for self-employed individuals with a large income wanting to save a larger portion. But the annual paperwork required to maintain a Keogh plan is more extensive by comparison.

The most important takeaway from the alphabet soup of retirement planning choices is to start today.

Dana’s Take Working for ourselves has been an American dream for a long time. But, like Spiderman, with great power comes great responsibility.

Owning a small business is no easy ride. You’ve got to build up your business, and that takes time and dedication. There’s a lot of paperwork to handle for taxes, expenses and retirement contributions. At times, it will probably seem overwhelming.

On the plus side, the seed of any small business is passion. If you love what you do, you’ll be more motivated and productive in your work and those long hours might not seem quite so arduous.

So next time you’re up to your elbows in paperwork and perhaps feeling a little frustrated, take a moment to sit back and reflect on how far you’ve come and why you’re doing it.

Continue reading
102 Hits

The Money Mindset

Ray’s Take We all have rules about how we live our lives, and we have rules about how we use our money. Whether you realize it or not, you have created certain rules around your spending, saving and giving of money.

This is called your money mindset. What is your money mindset? Do any of these common mindsets sound like you?

Never Enough Money – This mindset is actually a comparison of opposites. You can have an actual cash crunch with the mindset there will never be enough money to get out of it, or an abundance of money with an irrational fear of it not being enough.

You Only Live Once – This mindset is the opposite of Never Enough. You may find there are all kinds of internal justifications for spending everything now. 

Why Bother – This one can be the feeling of resignation that nothing you do will make a difference, so why make the effort.

More Money Will Fix Everything – This mindset is the feeling that regardless of money or net worth, more money will solve all of life’s problems, financial or not.

Mindsets drive the host of everyday decisions that have gotten you where you are today. But, where did they come from? Your parents and family created many of your rules as you were growing up. You absorbed their thoughts and ways of doing things and you’ve adopted them without even realizing it. Significant events in your life – positive and negative – have created some. Some of these rules work for you and create positive change in your life. Other rules are holding you back and causing unnecessary stress. Once you are aware of these subconscious patterns, you can decide which rules work for your financial situation and leave the others behind.

A money mindset is not set in stone. You are the owner of your money mindset. You are the one who gets to decide whether you want to change, modify or fortify it.

Dana’s Take I have to step back and look at the money mindsets my actions are teaching our kids. 

I’m in a hurry, so forget about the cost. The summer camp packing lists come out and we buy every item on the list at the premium outdoor outfitter. Had I started a month earlier, we could have turned the house upside down and found that we already owned half of the items on the list.

Shopping on the internet is easy, so click, click, click. This thought turns into a purchase in under one minute, and if it doesn’t work out – well, it’s too much trouble to ship it back. 

Ready to model a calmer money mindset? Practice money mindfulness. Before opening your wallet or clicking the order key, take a deep breath and offer up thanks. Now that’s a money mindset worth sharing. 

Continue reading
110 Hits

Money Lessons They Don’t Teach in School

Ray’s Take Less than half of states in the U.S. require the students at public high schools to take a personal finance class before they graduate. So, many young people learn through the “school of hard knocks” once they get out in the real world.

When I have taught a short financial-literacy course in the Shelby County Schools system, I am stunned to learn the majority of 11th-graders already have credit cards (co-signed by their parents). When I ask if they pay them off every month, they assure me that they make the minimum payment each month. There is much to learn.

Things like – your salary is not your take-home pay. There is a whole alphabet of entities that get a piece of your money before you do.

Things like – start investing for retirement as soon as you get a job. The earlier you start the more options you will have down the road.

Or even things as basic as saving money for an emergency. Having money on hand when things go wrong, as they inevitably do, makes for a less stressful situation.

In a world where pension plans have gone by the wayside and retirement planning is a bigger and bigger individual responsibility, it’s more important than ever for young people to have a realistic grasp of finance before they get out on their own, where mistakes are much harder to correct. Progress is more likely when you don’t have to start by digging out of a hole.

EverFi and Higher One, organizations that help implement financial literacy programs, conducted a survey of 65,000 mostly freshman college students in 2014. They found that students required to take a financial literacy course in high school were significantly more likely than their peers to be financially responsible.

However we do it, we’re all invested – like it or not – in making sure everyone does a better job managing their dollars and cents because the global economy is more and more connected every day.

Dana’s Take Parents of teens don’t get many gratifying moments, but watching your teen open his first real paycheck is one of those moments. Having calculated hours worked times hourly pay, the teen eagerly tears open the envelope for the big payoff. His face falls, reflecting that painful rite of passage for every working American: net pay after taxes. Just knowing that your soon-to-be adult knows the wince of the shrunken paycheck is a real bonding moment.

Those of us at a certain age may remember this line from “Friends” when Rachel says, “Who is FICA? Why is he getting all my money?” It was pretty funny to us back then and still relatable today.

What is the value of the financial literacy lesson of that first paycheck? Priceless.

Continue reading
108 Hits

Rules Change Once You Retire

Ray’s Take: Retirement is a time when a lot of the old financial rules get flipped on their head. Most people who retire don’t want to go back to work, and even if they did, they may not be afforded the opportunity. Wal-Mart needs only so many greeters. At this point there’s no turning back, and what money you’ve saved will be the lion’s share of what you will need to live off of.

Reaching your target retirement age with a sufficient retirement account is a sign of financial success that is increasingly difficult. Increased longevity has redefined “sufficient.” And, when you retire, your finances and responsibilities dramatically change as you shift from investing in those retirement accounts to depending on them. The sequence of returns affects distributions very differently than contributions.

Whatever the size of your nest egg, retirement will likely mean big changes in your financial life. Sources of income can shift and expenses can change. Sometimes your financial priorities change as you move from saving for retirement to generating income from your hard-earned retirement savings. A market downturn that would have been meaningless during your working years can be devastating in retirement.

Retirement is like driving to your vacation destination knowing that there are no gas stations along the way to “refuel.” When you retire, often nothing is being withheld for state and federal income taxes, so you may be responsible for any quarterly estimated taxes. And most retirees generally have to pay health care and other insurance premiums directly to the insurance companies. Contrary to popular belief, Medicare doesn’t cover everything.

You are the architect of your financial future. Taking the time to think through the “what ifs” of future cash management also means that you get to make the decisions about how you'll be using your financial resources during a retirement that may stretch 30 years or more. Meeting with a financial planner can help you create a plan that will serve you well.

Dana’s Take: “The question isn't at what age I want to retire, it's at what income.” – a class="learn" href="http://www.memphisdailynews.com/Search/Search.aspx?redir=1&fn=George&ln=Foreman" rel="

Learn more about George Foreman

Tap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.

Try one of these to get you started:

Name SearchWatch Service" style="color: #7d0200; text-decoration: underline;">George Foreman

It always comes down to money. Having enough for what we want to do and how we want to live. While we're still working, we always have ways of increasing our income. We can find a second job, get a raise or move to a new company for a larger salary.

But once we pull the trigger on retirement, our options slim down to a big degree. The baby boomer generation will be doing retirement differently than previous generations, but there's still a need for smart retirement planning and a clear understanding of how the money works at the other end of the spectrum.

Don’t let a lack of financial knowledge put a shadow on your golden years.

Continue reading
106 Hits

Credit Card for Travel – Use Wisely

Ray’s Take As a general rule, credit card debt is considered a bad thing. But, as with any rule of thumb, there are exceptions.

How about a travel credit card? These can be an asset as long as you take care to research them – and use them wisely. They can be a money saver, stretching your travel dollars and enhancing your travel experience, with the right research and planning.

Traveling with cash or traveler’s checks can be a risky hassle. If you think a travel credit card might be the route for you, planning in advance can really help.

Many of the cards offer thousands of travel miles, but the catch is you have to have the cards for a specified period of time and spend a specified amount of money in order to cash in on the travel miles. But by working your advance planning just right, you might get some or all of your airfare free.

Some of these cards allow you to use travel miles for specific hotels or rental car insurance. Others give air miles, free checked baggage or priority seating on airlines. Look at your preferences first and prioritize. If there’s a much better air schedule on a specific airline, it may trump a good deal on the hotel.

If you’re thinking about international travel, research cards that can help with money exchanges. This one is a really smart move since some vendors in other countries charge a fee to convert. Make sure the card you choose has a “no foreign transaction fee” option on it.

Check the interest rates on these types of credit cards. Some tend to run higher when they are rewards-specific cards. If you are paying it off every month, it really doesn’t matter, but that annual fee, or lack of one, does.

In the end, be sure you are making the trip you want to take and not just earning the “points.” Determine your needs and work to get the best option for you so you can have a more relaxed vacation.

Dana’s Take Travel. Who doesn’t love it? Seeing new places and having new experiences are the top items on many happiness lists. It’s a great way to have some family time without the usual distractions of our everyday lives. Travel can also be a time for empty nesters to reconnect.

It’s a great opportunity to learn about our country by traveling to other cities, or to learn about other cultures by traveling to foreign countries. Many psychological studies have revealed that planning a vacation adds to the overall happiness quotient.

Whether you’re planning a grown-up vacation with umbrella drinks and sand or traveling on a cross-country adventure with family, getting away from it all without getting into big debt is a plus for everyone involved.

Continue reading
126 Hits

Long-Term Care – Not for Everyone

Ray’s Take With people living longer due to advances in medicine and lifestyle changes, chances are that most of us will become disabled for some time before we die and will need some long-term care. The projected numbers are at least seven in 10 Americans over age 65, and the vast majority underestimates the cost. 

Many people operate under the assumption that Medicare will cover costs when, in fact, the program does not pay for ongoing long-term care. Medicare kicks in very little for these costs and only on a short-term basis. Medicaid does not kick in until the assets of an estate are spent down (i.e., you are broke). Most people must pay for these costs out of pocket.

There are really only two ways to deal with these expenses – your investment/retirement portfolio and long-term care insurance. Most people take a look at what long-term care insurance costs and opt for taking their chances without it. Then if that first round of expenses hits, they may wish they had bought the insurance. But it’s usually too late to buy it then. Keeping adequate liquid and conservatively invested assets available is a drag on portfolio returns and difficult to sustain at times. But if you can afford to self-insure then you may have saved you and your estate a lot of money.

Making long-term care insurance part of your overall retirement plan is an option you should consider early if you don’t see another way to cover costs. If passing on an estate to your heirs is a priority then shifting some of the risk to an insurance company also makes sense. The ideal time to start evaluating coverage is around age 55. Those who wait longer face higher premiums and an increased possibility of being denied coverage.

Consulting an estate-planning professional can go a long way toward finding the solution that works best for your individual circumstances. 

Dana’s Take Active aging is the best-case scenario. I’m happy to report that my 83-year-old mother and a friend just returned from touring France in a rental car. If, however, age dovetails with injury or illness, it’s time to examine options. 

Relying on family for long-term care is the one option most experts don’t recommend these days. It looks like a good option, but it can take a huge toll on caregivers. In these days where most families are two-income and kids are participating in multiple activities, the additional burden of caring for elderly family members can be real.

If this is something you are considering, make sure to discuss it with all family members. Look into additional sources of help like adult daycare to potentially ease feelings of being overwhelmed. If the discussion is likely to be difficult, an outside facilitator such as a social worker, religious leader or geriatric care manager might be helpful. 

Care giving can be physically and financially draining, and it may lead to resentment and broken relationships within a family. Make sure you’ve taken into consideration the emotional cost as well as the financial cost before making your decision.

Continue reading
106 Hits

Emotions of Retirement – Are You Ready?

Ray’s Take: How prepared are you for the emotional side of retirement?

Most of us see retirement planning as a quantitative exercise to be as certain as we can that the financial aspects are in good order. Everything else we tend to see through rose-colored glasses, envisioning it as a time when we are free to do the things we’ve been putting on hold for years. But there’s another side to retirement that few fully think through in advance. 

Let’s assume you have your finances set, you’ve been saving, investing and making sure you have sufficient resources to support you and your family with plenty of margins. So what could possibly be missing?

How about a plan for how you will spend your time? According to a 2015 Ameriprise study, almost seven in 10 retirees experienced some challenges adjusting to their new lifestyle.

Missing day-to-day socialization with colleagues, many of whom have been acquaintances for years, is a big factor. Often our mental picture of who we are may be based on our career. Once we’ve retired, who are we? We spent decades creating our “working” identity. How quickly can we create a new identity? How will you fill those hours previously filled by a work schedule? Having only a vague idea of what we want to do may create a feeling of disorganization.

To combat these and other negative side effects of retirement, start early to visualize who you will be. Begin making gradual lifestyle changes that implement parts of that future self into your life now. Create new social relationships that are unrelated to your career life. Begin learning new skills related to the things you want to do with your time when you have left the corporate world. Take time to explore new interests and find the things that fill you with excitement. 

Transitioning to retirement is a journey. Your vision for retirement should be as detailed as your financial plan.

Dana’s Take: If you haven’t read Richard Leider’s book “The Power of Purpose,” you may not be ready to retire. To find that reason to get up in the morning, Leider suggests taping just two words to the mirror for inspiration: “grow” and “give.” Make sure those two bases are covered before leaving the workforce. 

Have you always wanted to learn to garden, paint, play golf or bake bread? Each day brings a new challenge when we challenge ourselves to grow. If you can build that skill into giving to others, all the better. How? Garden in a community garden, cook dishes for a halfway house, paint a mural for a blighted neighborhood, mentor a golf team for inner-city kids or bake bread for women or men serving time in prison. Get the idea? It’s a win-win all around.

While you may have put a lot of thought and effort into preparing your financial portfolio, how much thought have you given to preparing your psychological portfolio?

Continue reading
114 Hits

Agreeing on Retirement Issues – Start Early

Ray’s Take Communication is the key to avoiding conflict in any aspect of life. And retirement issues are no exception.

As more baby boomers prepare to retire, they’re increasingly facing complicated negotiations with spouses. Many live in dual-income households. And while each partner may have very specific ideas about when and how to retire, they often avoid discussions about retirement altogether. 

Many money disagreements happen because couples aren’t speaking the same language. You really need to understand what type of financial life will bring you both happiness and fulfillment. I once had a couple tell me that they took each other for better or worse – but not for lunch.

According to a 2013 study from Hearts & Wallets, only 38 percent of couples actively work on their retirement strategy together. It’s important for couples to be on the same page about financial and lifestyle expectations of what life will be like after work. Even if your plans change along the way, it’s good to make plans together early on – especially when it comes to finances. Couples who have very different expectations and avoid talking through them are headed for trouble.

Start by talking about each of your dreams for this next chapter in your lives. Next discuss the age at which you want to not have to work any longer. That doesn’t necessarily mean you have to retire, just when work becomes an option. Will one of you retire first? Work as a team. Even if you don’t agree on all the details, start saving. Building up a nest egg takes time. Money buys more options down the line.

It goes without saying that financial well-being is important in retirement. But so is emotional happiness and personal satisfaction. It’s important that both partners actively participate in the decision-making process. Once you’ve figured out how much you need to be socking away towards retirement and what your goals are, you need to look at what each of you can do to make sure you reach the finish line. Consulting a financial professional can help with getting on track to fulfill your retirement dreams.

Dana’s Take Retirement, like getting married or having children, can reveal, or make worse, any cracks in a relationship. When one or both partners are at work, there is a sense of personal space. When retirement kicks in, after decades of primarily spending nights and weekends together, it can be disconcerting to be with your spouse all day, every day.

Work through different questions and scenarios to gain an understanding of what your spouse wants for life after full-time employment. Coordinate your retirement goals. Discuss new divisions of labor around the house, where you would like to live, places you would like to travel, volunteer opportunities, or perhaps spending time with grandchildren versus providing daycare for grandchildren. Creating a plan together ahead of time will mitigate the inevitable rough spots in the changeover and make retirement the adventure you’ve always dreamed of.

Continue reading
143 Hits