How Women Can Help Fill the Retirement Savings Gap

By: Michelle Buonincontri, CFP®, CDFA

There is certainly a gender gap issue that women face in pay, but there is also a larger one they face in retirement. Having left the workforce to raise families or care for aging parents, possibly having gone through a divorce and the longevity issue that brings with it higher medical costs in retirement all contribute to less lifetime retirement savings and higher expenses.

According to a report, released by the National Institute on Retirement Security on March 1, 2016 “women were 80% more likely than men to be impoverished at age 65 and older, while women age 75 to 79 were three times more likely to fall below the poverty level as compared to their males counterparts.” These findings are contained in Shortchanged in Retirement, The Continuing Challenges to Women’s Financial Future. Consequently, lower retirement savings and increased retirement expenses can create the perfect storm for a retirement crisis for women, if nothing changes.

Develop a spending plan/savings plan. It all starts with cash flow. In order to know how much you can save, you have to know what is coming in and what is going out (your spending). So track your expenses and set an initial savings amount. Remember no amount is too small - just start somewhere, stick with it and have a plan to increase the amount!

Four Ways Women Can Help Fill Retirement Savings Gap

Roth IRAs/Roth 401(k)s

When eligible, maximize your annual Roth IRA contribution and utilize Roth conversion strategies when appropriate. A Roth account allows tax-free compounding and paying tax on retirement savings now, while in a lower-tax bracket, saves money in the long-run. When withdrawals rules are followed the withdrawals, including earnings, will be tax free in retirement and since she can withdraw her original contributions at any time without a penalty, her money is not tied up. Being in a lower tax bracket may be the case for many women due to the gender pay gap, a single lifestyle or supporting single parent households.

Health Savings Accounts

As women we live longer, will most likely be single without a partner to take care for us and will have the added concern of higher medical costs for a longer time period in retirement.  When covered by a high deductible healthcare plan, a Healthcare Savings Account can offer four benefits to women looking to reduce the retirement gap. Contributions are tax-deductible, so taxes are reduced now. It allows savings for future costs, while the earnings grow tax free. HSAs allow tax-free withdrawals for qualified medical expenses - this is particularly important in retirement when healthcare costs will be higher. Lastly, HSAs are portable even if you leave your job or the workforce, so you do not have to “use it or lose it” in a single year.

Employer Plans

Tax-deferred accounts, like a 401(k), also allow money to grow tax free and the employer match is “free money” that helps a nest egg grow quicker. So contribute the minimum needed to take advantage of an available employer match so that you are not “leaving money on the table.”

Saver’s Credit

There is a tax credit specifically for low-income workers who save for retirement. So if a woman contributes to a retirement account such as an IRA, Roth IRA or 401(k) and her modified adjusted gross income is less than $30,750 in 2016, she may be able to claim the Saver's Credit on her tax return. This credit is worth up to $2,000 for individuals and can be used to reduce the federal income tax she pays.

Consult a Certified Financial Planner for comprehensive advice on these and other strategies that address your retirement planning needs.

This article originally appeared on Investopedia.


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Michelle Buonincontri is the Founder of Being Mindful in Divorce. She’s a divorced single mom, passionate about using her professional experience as a CFP® & CDFA™ and personal journey to support women in transition; creating confidence through education so they can make financial choices with peace of mind. Bringing together a background in investment management, tax prep and retirement planning, to provide Divorce planning (with singles or couples) and Financial Coaching services, financial literacy workshops and writings.

Rebuilding Your Financial Future After Divorce

By: Michelle Buonincontri, CFP®, CDFA

If you are like most, your divorce ends with debt, and the last thing we are thinking about is retirement. I know, I've been there; nothing kills a retirement plan like a divorce. There are no student loans or government bailouts to help us.

According to a report released by the National Institute on Retirement Security on March 1, 2016, 80% of women over 64 are already more likely to live an impoverished life than men.

So what’s a gal to do?

Cut Discretionary Spending

This might sound obvious, but life is not the same. The income that once supported one household may now be supporting two, and you may be entering the workforce again or for the first time. Things will need to change, and you are the catalyst for that change!

For example, renting instead of owning a home may make more sense, even if just in the interim to keep expenses down. We need to remove the emotion from our financial decisions and take a longer range view.

Take Advantage of Any Employer Retirement Match

Many employers offer workplace savings plans that match employee contributions—often up to 6% of your salary. Execute the strategy above so you may contribute enough to your tax-deferred employer plan to earn 100% of the employer match in a 401(k), 401(b) or 457 plan. Earning the match is like receiving a 100% return on your investment. Where can you find a 100% return? This will help your nest egg grow and boost your retirement security. Not contributing enough to utilize the employer match is like leaving free money on the table.

View Your Divorce Debt Like An Investment

Like a what? I know that intuitively does not make sense. But there are competing resources for paying off debt and saving. Start by comparing the interest rate on the debt to that of an expected investment return and the power of compounding of retirement savings.

If, for example, your student loan or mortgage has a before-tax interest rate of 3–5 % (which may be even less after a tax deduction) and you can reasonably earn 5% with compounding over a longer time horizon in retirement, it may make more sense to put money in your retirement account than pay off that debt early—always considering cash flow and remembering that market returns are not certain. 

But if your credit card is charging 10%, put more money there. Once you stop paying that 10% it’s like earning 10%, because it is no longer being spent and is available in your budget for other items. Look at the interest rates you are paying like market returns that are leaving your pocket, and try to consolidate debt into a lower interest rate whenever possible.

Get in Touch With Where You Are in Your Story

What is going on for you right now, in this moment? Are you living in the past with regret, bringing the past into the present, or maybe even living in the future with fear?  What messages have you taken in and believe about yourself? This can be scary. For me, being grateful for what I have, acknowledging a point of view or a set of expectations I have of a situation, or others that are coloring my perspective, is freeing. Once done, I can choose to see things differently and I can choose to take actions so that I may be the architect of my life.

When we are not blaming and we are choosing, it can be very empowering!

Yes, these are the basics. We need to lay the foundation before we can move onto planning strategies. Consult a certified financial planner for comprehensive advice on strategies that address your retirement planning needs.

This article originally appeared on Investopedia.


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Michelle Buonincontri is the Founder of Being Mindful in Divorce. She’s a divorced single mom, passionate about using her professional experience as a CFP® & CDFA™ and personal journey to support women in transition; creating confidence through education so they can make financial choices with peace of mind. Bringing together a background in investment management, tax prep and retirement planning, to provide Divorce planning (with singles or couples) and Financial Coaching services, financial literacy workshops and writings.

5 Retirement Assumptions You Can't Make Anymore

By: Michelle Buonincontri, CFP®, CDFA

We've all heard the adage "nothing can be certain, except death and taxes." This line of thought also applies to retirement, as society and financial markets change.

Here are a few assumptions many Americans used to be able to make about retirement, and why they can't rely on them anymore.

1. I’ll Be Married When I Retire

Times are changing. We have all heard the statistics that 50% of first marriages end in divorce, and the numbers are even higher for second and third marriages. "Gray" divorces — among couples 50 and up, or "Boomers" – have been on the rise, according to a study by the National Center for Family and Marriage Research at Bowling Green State University, with about one in every four divorces (25%) occurring to people over the age of 50.

Divorce can wreak havoc on the retirement plan of married couples, as assets now need to be divided. Typically, the "less monied" earning spouse has less saved for retirement (401(k), pension, annuities) and a lower Social Security benefit than their higher-earning spouse. With the retirement strategy no longer based on two incomes (even if only Social Security) as originally planned, income is cut in half or less, and expenses as a single person rise. Consequently, divorced couples face unanticipated financial constraints and decisions.

Retirement assets may not be split 50/50 – only the "marital" portion will be divided and they are not automatically split in a divorce — substantially reducing what you will receive after a divorce versus at widowhood. Get financially literate and know what you have ahead of time. Understand all the marital assets, as they all become "potential" retirement assets; even more esoteric employment benefits such as stock options, deferred compensation, bonuses, HSA accounts and the value of pensions (their future income stream). If these assets aren't explicitly accounted for, or you don't understand them, the success of your retirement plan may be been compromised and you could be out of luck – there is no "re-do" in divorce.

Divorce may be out of our control, just like an accident or illness, but it's important to plan for the things we can control – like saving more. Since divorce is forever, perhaps it may be prudent to run retirement projections if you were to divorce — treat it like a "long-term care event," even if you are not considering it — just to test the success rate of the modified scenario and understand the potential financial impact on your retirement plan.

Pensions and Social Security are an important part of your plan after divorce, as they are considered the "safer streams of income," and increase the likelihood of successfully meeting your needs in retirement. After divorce, you may still be eligible to collect larger spousal or survivor Social Security benefits using your spouse's higher earning record under certain circumstances; even if he/she is remarried. You can speak with a Financial Planning (FP) professional to test your plan as a "single" and to understand how to maximize your monthly Social Security benefit before filing for benefits. Most FP's have special software used to determine the best age and withdrawal strategy for you to begin collecting benefits based on your "individual" situation, something that the Social Security department cannot do as effectively.

2. My Assets ‘Conservatively’ Need to Last for 30 Years

As we live longer, a 30-year conservative assumption for retirement assets to last for an average 65-year-old becomes more the "norm," rather than the conservative assumption it was meant to be in 1994 when first introduced as part of the 4% safe withdrawal rule, according to Wade Pfau, economist and professor at The American College of Financial Services. At that time, a 30-year number was outside the "normal" lifespan for an adult.

According to the Social Security website, approximately 25% of 65-year-olds today will live past age 90, and 10% will live past age 95. These numbers are generally lower for an individual versus a married couple, but these statistics negate a "30-year time horizon" for a plan as a "conservative" assumption for how long assets need to last in a retirement plan. If you are retiring earlier, assets need to last longer, but as we live longer and heath costs in retirement increase (more on this in item #5 on this list), the chances of outliving our money increases. Although age 95 is now used as the common age for "last to live for couples," a more "conservative" number may have the last in a couple living until age 100 since 10% of individuals will live past age 95. Then you need to factor in "planned" years in retirement (as some retire earlier than 65), marital status, sex, personal and family health issues. You may get a more accurate number by working with a planner, and to get a better idea of whether your plan will be successful.

3. I Won’t Outlive My Money If I Have a Safe Annual 4% Withdrawal Rate

How cliché can I get? Well when science proves something out, it should be shouted from the rooftops beyond facial blueness. The 4% safe withdrawal rate rule was introduced in 1994 by financial adviser Bill Bengen. It has been used by planners to help retirees spend their retirement funds and suggests that if retirees withdraw 4% of their portfolio in their first year of retirement, and adjust that amount for inflation each year, they'll have a low risk of running out of money in 30 years. This rule is affected by several parameters such as; interest rates/income generation, how long folks live (longevity), asset allocation & income source types (stocks, bonds, guaranteed annuity stream, pension etc.).

However, several articles have been written challenging this 4% withdrawal assumption. Pfau wrote a research paper showing that this rule would not work when retiring in a market downturn or in a period with historically low interest rates.

In 1994, when this rule was introduced, portfolios were generally earning 8% annually, and these days we are looking at earnings more like 3-4%, with safe investment such as bonds not earning nearly what they did historically, and if interest rates did rise, folks would face a loss in bond values since prices fall when yields rise.

When interest rates are low, retirement savings are not earning the same income and people are spending principle, retirement savings becomes more dependent on market upside (if they are invested in stocks and bonds) to provide the earnings needed rather than stable rates of return. This makes retirement savings more susceptible to swings in the market when money is being withdrawn and that can have a dramatic impact of savings, which increases the risk that funds won't last through retirement.

Add the fact that we are living longer, and the money needs to last even longer — creating further risk in the original 4% withdrawal rule.

The bottom line is there is no easy answer.

4. A Home Is a Good Retirement Asset

A home is probably the largest and most valuable asset that consumers own, though it may not be as appreciable as you think it is. Owning a home is no guarantee of profit. In fact, even if you sell your home for more than you bought it, that doesn't mean you necessarily made a profit. You need to determine the inflation-adjusted dollar amount of what it would cost to buy that home in the future when you want to sell it.

Going backwards: For example, if you spent $800,000 in 2005 to buy your home, and wanted to sell it 10 years later in 2015, that same $800,000 in 2005 would cost you $974,111 in today's dollars due to inflation. So then you may think you need to sell that house for more than $974,111 to break even – but owning a home has related expenses that are much higher than renting. You need to also subtract any money you spent on upgrades and maintenance over the past 10 years, and 3-6% in sales commission, closing costs and moving costs to get a more accurate picture of your profit. Chances are you really didn't make very much on that asset you held for 10 years.

Additionally, the housing market is volatile, and if you don't sell at the height of market, you could be facing a flat market or prices declining for many years. The financial crisis taught us that the real estate market can be affected by things outside our control. This, and the fact that you can't sell unless there's a buyer with your price at the time you want to sell, makes real estate illiquid and creates undue risk in your retirement plan at a chosen time that you need cash flow.

Making a profit also depends on where you buy and when you sell and where you wind up living after the sale. You will need to spend money on a place to live, and unless you are planning to live in an area with a substantially lower cost of living, that "windfall" may not seem so big or last so long. (This free calculator can show you how much house you can afford.)

We cannot predict the market climate when you retire, so remember your home is a home, buy it with that intent, and plan on not needing it in retirement you will have a higher degree of certainty that you plan will work.

5. Spending Always Decreases in Retirement

Maybe, maybe not. Just as we were individuals while working, the same goes for retirement. Sure, certain expenses like clothing, transportation and other business expenses tend to go down, and maybe your house is paid off, but with 8-10 hours extra a day, socializing, entertainment and eating out can take up a bigger part of your retirement budget. Many retirees want to travel more in the early retirement years and believe these costs drop later, but those travel costs are most likely offset by rising medical costs. Medical expenses can even consume a larger portion of a post-retirement budget right away because health insurance costs may no longer be subsidized by employers. So you may need to pay out of pocket; if you are 65, Medicare part B premiums can be pretty high, depending on your income level.

As we live longer, the likelihood of increased medical expenses also increases with diseases such as Dementia & Alzheimer's. Seventy percent of individuals over 65 have a long-term care event at some point in their life, which is not covered by Medicare. According to the Employee Benefits Research Institute (EBRI), Medicare covered roughly 62% of an individual's medical expenses, and it may decrease in the future – increasing a retiree's share of health care costs. EBRI estimates that a 65-year-old couple should save between $241,000 and $326,000 to cover medical and drug costs (excluding long-term care) in addition to the amount required by a retirement plan to cover basic annual needs. Also, another EBRI study stated that 20% of retirees reported that, in addition to supporting the immediate household, they also provided financial support to relatives and friends.

Between high retirement lifestyle goals, rising health care costs, increased longevity and costs related to supporting family members in retirement, don't assume that expenses in retirement are always less. Instead, you need to take this all into consideration to help improve the success of your retirement plan.

This article originally appeared on Yahoo Finance.


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Michelle Buonincontri is the Founder of Being Mindful in Divorce. She’s a divorced single mom, passionate about using her professional experience as a CFP® & CDFA™ and personal journey to support women in transition; creating confidence through education so they can make financial choices with peace of mind. Bringing together a background in investment management, tax prep and retirement planning, to provide Divorce planning (with singles or couples) and Financial Coaching services, financial literacy workshops and writings.

The ‘stretch’ option for maximizing IRAs

By: Elliot Raphaelson

Because most employers have eliminated defined-benefit retirement plans, future retirees will depend more than ever on 401(k) plans, traditional IRAs and Roth IRAs.

To plan for a successful retirement, you must understand the fundamentals and nuances of these plans. The regulations are complex, and you cannot afford to make any mistakes. Not every financial planner is well-educated in this field. If you depend on a financial planner, make sure he/she has the required expertise. Don’t be afraid to ask a prospective planner to demonstrate it.

Before you do that, you need to educate yourself. I recommend Ed Slott’s “Retirement Decisions Guide” for 2018, available for $13 through IRAHELP.COM (or by calling 1-800-663-1340).

Regular readers of this column will recognize Slott’s name. He’s a leading expert on IRA planning, and I cite him frequently. Recently, I attended a two-day seminar for financial advisers sponsored by his company. One of the insights I came away with is the importance of designating the IRA’s beneficiaries.

One of the most important features of an IRA is the ability to extend its life as long as possible to take advantage of the associated tax advantages. Many choose to include children as beneficiaries as a way to create a “stretch” IRA.

A beneficiary who inherits and IRA will be required to make age-related withdrawals. The older an individual is, the greater the required mandatory withdrawal. Accordingly, children who are beneficiaries can stretch out the required withdrawals for a longer time frame than a spouse. If your children are in a lower tax bracket than your spouse, that would be another advantage.

A major reason why attempts to create a stretch IRA fail is that the individuals who set them up fail to name a living beneficiary. It’s that simple.

Too many people believe that IRA succession is taken care of or covered in the will or estate plan. It isn’t. Wills do not cover IRAs! The IRA passes outside the will by beneficiary designation. That designation is retained by the financial institution that maintains your IRA account.

If the financial institution you established your IRA with merged with another financial institution, your initial form establishing beneficiary designation may not have been retained by the new firm. It is your responsibility to ensure that the new financial institution has an up-to-date beneficiary designation form. If your financial institution does not have a written designation, then your estate will be the beneficiary, and your beneficiaries would lose the stretch option.

If a life event occurs that alters your choice of beneficiary, you must update your beneficiary designation forms. Changing your will is not sufficient! If you go through a divorce, and you don’t want your ex-spouse to be a beneficiary, you must update the designations. If one of your beneficiaries dies, it is likely you will want to update the designations. Again, these changes have to be made via the beneficiary form, not your will.

After you die, how can your beneficiaries maximize the use of the stretch option? Only spouse beneficiaries have the option of rolling over the inherited IRA into their own IRA. Your spouse also has the option of initially establishing an inherited IRA and subsequently rolling it over into his/her own IRA. This makes sense for beneficiaries who inherit before age 59 1/2.

Suppose a widow inherits her deceased husband’s IRA before age 59 1/2 and rolls it immediately into her own IRA. If she withdraws funds, she will be subject to a 10 percent penalty. However, if she maintains it as an inherited IRA and withdraws funds from it, the 10 percent penalty is avoided. At 59 1/2, she can roll the account over to her own IRA. Withdrawals from traditional IRAs will be subject to income taxes on both inherited IRAs and individually owned IRAs.

Inform your beneficiaries, preferably in writing, of the steps they should take to transfer the assets to their accounts, or specify a financial planner they should be communicating with. If your beneficiaries don’t transfer the accounts in a timely manner, thousands of dollars will be lost.


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A retired executive of Chase Manhattan bank, Elliot Raphaelson joined The Savings Game after decades of experience as an advisor, teacher and author in the field of personal finance. His writing has appeared in The New York Times, Town & Country, Vogue, Self, Savvy and Working Woman magazines. For ten years he has worked as a certified mediator and trainer in a Florida county court.

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Elliot Raphaelson

A retired executive of Chase Manhattan Bank, Elliot Raphaelson joined The Savings Game after decades of experience as an advisor, teacher and author in the field of personal finance. He has taught courses in personal financial planning at The New School for Social Research and at the Military Academy at West Point, as well conducting seminars for Chase, Dow Jones & Co. and other corporations.

Past publications include Planning Your Financial Future (Wiley, 1982), and his writing has appeared in The New York Times, Town & Country, Vogue, Self, Savvy and Working Woman magazines. For ten years he has worked as a certified mediator and trainer in a Florida county court, where he helps resolve personal financial problems of every description.

Downsizing in Retirement

By: Allison Pearson

Do you and your partner share the same goals & expectations for the future throughout your changing life phases?

My son recently headed off to college. It was an important life transition, not just for my son, but for me and my husband as well. Seeing our child move out of the house and start a new phase of his life inspired us to evaluate our outlook for retirement – or, more accurately, how we would approach our next stage of life and how we envisioned living it.

The notion that the traditional definition of retirement is changing is no longer a revelation. It’s not even a remotely provocative concept these days.

We've all seen the headlines about how people are working longer because they're living longer, or simply because they want to remain active, engaged and productive. I'm personally very much on board with this – I plan to continue working into my "retirement" years, although not necessarily in the same capacity as what I'm doing now, or on the same full-time schedule.

In other words, I plan to downsize my career to some extent when I reach that point when I feel ready to shift some of my focus to other life goals, activities and interests. I think that's what I look forward to most in retirement, and how I define this next stage of life for me: It's a time to focus on whatever you choose to focus on, so long as you're able to maintain the lifestyle you're comfortable with financially.

"Our careers have always been the center point of our conversations about retirement, but now we are starting to consider other aspects of our plans for how we'll live in the future."

My husband and I are both in agreement that, barring any physical limitations as we get older, we intend to continue working, contributing and generally remaining active for as long as possible. Our careers have always been the center point of our conversations about retirement, but now we are starting to consider other aspects of our plans for how we'll live in the future. In other words, we're trying to develop a common vision of retirement that is both fulfilling and financially viable.

Where to Live in Retirement – The Housing Dilemma

The concept of downsizing is typically used in context with housing, of course. And as I look toward the future I (somewhat hazily) envision for myself and my husband, figuring out what will work best for us in terms of the size, cost and location of the place we call home has become a rather pressing topic. In fact, our initial conversations on the topic were my first indication that my vision of retirement was not entirely aligned with my husband's – at least when it came to housing.

Before I go into how the housing situation exposed this gap in our retirement vision, I'll give some background on the practical aspects of our downsizing dilemma.

Our situation is probably familiar to a lot of people in our stage of life. We realize it would make sense to downsize for a number of reasons – cost chief among them, but also the desire to have a smaller property to maintain. But we're also at the mercy of the ups and downs of the real estate market.

We purchased our current home 15 years ago in the midst of a classic "buyer's market" and were pleased to see it appreciate considerably since the 2008 recession as the location is very favorable and home prices in general have enjoyed a steady climb.

Now that we've reached this point and the housing market is strong, we feel we should consider selling, as it appears we're solidly in a seller's market – but are we? After all, a healthy real estate market means we have a good chance of making a profit on the sale of our current house, but as we peruse listings in the area, I was disheartened to realize that there's no way we'll find another house with a comparable value. Even the smallest houses we'd consider are now going for around what we originally bought our current house for. As it stands, we don't have the opportunity to make a profit on the sale of or current house that we could add to our retirement savings, or even make enough money so that we could have a very small mortgage or eliminate it altogether. That was eye opening!

Of course, I'm not implying that one should consider their house to be a retirement nest egg. The unpredictability of the real estate market makes that idea a very risky bet! But the Catch-22 nature of trying to buy in a seller's market is simply a complicating factor as my husband and I attempt to downsize as one of many aspects of our lives in preparation for retirement.
 

Getting back to the vision side of things, our discussions about downsizing bring to mind a time several years ago when we purchased a property in Utah. It was in a fairly remote, secluded location – more or less rural compared to where we live now.

I had always considered the Utah land to be an investment property, so it took me by surprise when I learned that my husband had always assumed that's where we would live when we retired. I told him that wasn't what I had in mind at all – I envisioned having a smaller, more manageable house but still wanted to be located in a suburban area with easy access to grocery stores and other conveniences.

"You can believe you share the same vision as your partner, when in fact you have very different ideas about what your future needs will be."

We have since sold the Utah property, but it's a good example of how you can believe you share the same vision as your partner, when in fact you have very different ideas about what your future needs will be.

How to Live in Retirement – A Shared Vision

The housing detail – while it's certainly an important one – is nonetheless a relatively tactical decision and I'm confident we'll be able to come up with a compromise that works for both of us. In fact, finding a house that's slightly more off the beaten path than I'd prefer could allow us to find something that's more affordable and gives us the financial lift we’re looking for with the sale of our current house. But we've agreed that we will not rush out and do anything unless it makes good sense. We love our home and views of the mountains and don't want to have to give that up.

Still, the fairly stark contrast between our preferences on this point opened my eyes to the larger, more philosophical question of whether we shared the same vision of retirement. In other words, not just where to live, but how to live.

Perhaps the reason it's so difficult for me and my husband – and for most couples, I assume – to find common ground when it comes to our long-term outlook is because of the uncertainty involved. Strictly from a health perspective, it's very difficult to know what we can expect to be capable of 20 or 30 years from now. It's also a rather scary and unsettling thing to think about, so the natural tendency is to block it out of your mind entirely – you can worry about it later.
 

With so much of our future unknown – and unknowable – how can we ever be sure that we're both moving toward a shared vision of retirement, or of our future together in general? For me and my husband, I think the best solution is to make retirement an ongoing conversation. It's a key piece of our future that should come into play whenever we're discussing finances, career paths, housing decisions, major purchases, and our college-aged son's financial situation and future as well.

I've written about talking with your parents about their retirement and educating your kids about money in my previous columns. And I firmly believe that communication is absolutely critical to financial success and maintaining a healthy relationship with money. It can be a difficult thing to discuss, but having honest, open conversations with your family members can help ensure everyone is better prepared for those important transitions – both expected and unexpected – in our lives.

"I firmly believe that communication is absolutely critical to financial success and maintaining a healthy relationship with money."

Your vision for retirement is a very personal thing. But when you're expecting to share the rest of your life with your partner, you want to make sure your visions are at least somewhat aligned. Keep those lines of communication open, and remember: the future is what you make it, so it pays to remain focused on your goals and prepared for the unexpected.

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Investing involves risk, including possible loss of principal.

Diversification does not assure a profit or protect against loss in a declining market.

This article originally appeared on https://www.jackson.com/financialfreedomstudio/articles/2017/downsizing-in-retirement.html


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Allison Pearson currently serves as Vice President of the National Sales Desk for Jackson National Life Distributors LLC (JNLD). She is responsible for the Career Development Program, coordinating recruiting efforts and training and supporting the Sales Desk management team in strategic initiatives. Allison joined Jackson in 2002 as Director of Recruiting with Human Resources.

Your indispensable guide to Social Security

By: Elliot Raphaelson

There is no question that Social Security issues are important to the American public. It is not unusual for me to receive more than 100 responses from readers when I write a Social Security-related column.

Regular readers know that I frequently reference Andy Landis as a source. He has just updated his book, "Social Security: The Inside Story" (www.andylandis.biz), which I consider an indispensable resource on the topic. His book is up-to-date, comprehensive, well-organized and easy to understand. He provides numerous helpful examples. In each chapter, he includes Social Security references so readers can read the associated regulations that were discussed.

The book provides a useful overview of Social Security and chapters on retirement benefits, family benefits, survivor benefits, disability benefits and Medicare. There are references to available calculators for estimating your benefits, hints on effective filing, and a very important chapter on maximizing your benefits.

The chapter on maximizing Social Security benefits is particularly useful. Landis discusses the advantages of postponing filing for benefits up to age 70, which increases your benefits by 8 percent for every year you wait past full retirement age (FRA). Another advantage in doing so is that widow/widowers might be entitled to a larger benefit if you choose this option. Filing for widow/widower benefits only does not preclude filing for benefits based on your work record at a later time.

The chapter also discusses restricted application for "spousal only" payments. This option allows you to file for your spousal benefit after you reach your FRA, and then to file for your benefits based on your work record up to age 70. Unfortunately, many Social Security representatives do not understand this option. When I have written about this option, I have been amazed at the number of readers who write complaining about the ignorance of many Social Security Administration representatives.

Note that this option is available only to individuals who were born before January 2, 1954. And to qualify, your spouse would have to have already filed for his/her benefits. You must not have received a reduced retirement benefit or spousal payment before.

It would make sense to use this option only if your payment at age 70 is higher than your spousal payment at FRA. If you meet these qualifications, it can be a valuable tool.

Many of the options and tools discussed in this book will help you make the right decisions. You cannot depend on advice from SSA representatives. Many financial planners are far from experts in Social Security as well. I recommend that it is in your best interests to become an expert in Social Security before it is time to apply for benefits. Making the right decision can provide you with hundreds of thousands of additional benefits.

Many divorced individuals do not understand their Social Security options. If your previous marriage lasted at least 10 years, and you either have not remarried or remarried after age 60, you may have benefits you are not aware of. You can't depend on the SSA to inform you. For example, many individuals believe that because their ex-spouse remarried, it affects their benefits. This is false; it has no impact.

If your ex predeceases you, it is possible that you are entitled to larger benefits than you previously were receiving. For example, assume your ex worked until age 70 and was receiving $2,000 per month in Social Security benefits, and he/she died. If you are single, or remarried after age 60, you are entitled to whichever is greater, your ex-spouse's benefit or the benefit you are now receiving.

Landis' book covers this and other topics in great detail.

If you have any relatives approaching retirement age, one of the best gifts you can provide is a copy of this book. It can make their retirement much more prosperous. Making the right Social Security choices is critical. Making the wrong choices is expensive and difficult to undo.


Raphaelson-Elliot-savvy-ladies-blog-author.png

A retired executive of Chase Manhattan bank, Elliot Raphaelson joined The Savings Game after decades of experience as an advisor, teacher and author in the field of personal finance. His writing has appeared in The New York Times, Town & Country, Vogue, Self, Savvy and Working Woman magazines. For ten years he has worked as a certified mediator and trainer in a Florida county court.

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Elliot Raphaelson

A retired executive of Chase Manhattan Bank, Elliot Raphaelson joined The Savings Game after decades of experience as an advisor, teacher and author in the field of personal finance. He has taught courses in personal financial planning at The New School for Social Research and at the Military Academy at West Point, as well conducting seminars for Chase, Dow Jones & Co. and other corporations.

Past publications include Planning Your Financial Future (Wiley, 1982), and his writing has appeared in The New York Times, Town & Country, Vogue, Self, Savvy and Working Woman magazines. For ten years he has worked as a certified mediator and trainer in a Florida county court, where he helps resolve personal financial problems of every description.

Are Your Bonds Safe?

by Manisha Thakor

"Last year I invested in a bond fund and now I've lost money. What happened? I thought bonds were supposed to be safe investments!" 

Recently several people have asked me this same question. Given the turbulent economic times we're (hopefully!) coming out of, it's understandable that folks want to find a "safe investment" to hunker down in.

Alas, the phrase "safe investment" is an oxymoron. The whole point of investing is taking on some risk with the hope, but not the guarantee, of earning a higher return than you'd get from doing something risk free.

So how did bonds get the reputation of being "safe?" Well, at their core, bonds are loans. You lend money for a pre-determined period of time. In return you receive interest at specified intervals. When your loan (a.k.a. bond) matures you get back the money you originally loaned - if the entity hasn't gone bankrupt.

It is the return of that original investment that has caused people to view bonds as "safe" investments. Alas, there are always risks with any investments. The two classic ones for individual bonds are:

  1. Credit Risk: This is the risk that the entity you lend to goes belly up and can't pay you back.

  2. Interest Rate Risk: Bonds are like seesaws. When interest rates go up, the price of bonds go down. If you hold your bond until it matures, the impact is all on paper. But if you are forced to sell your bond before its maturity date and interest rates are higher than when you bought that bond, the price you'll receive will be less than you originally invested.

Another problem with individual bonds is you often need a pretty hefty chunk of change to buy them. This is where bond mutual funds come in. For example, if you had $10,000 to invest you might be able to buy one bond. But by pooling your money with other people's money, bond mutual funds enable you to take that $10,000 and spread it out over many different bonds. That helps you spread out your risk.

However, when individual investors decide to take their money out of a bond fund, the portfolio manager may be forced to sell bonds at less than desirable prices to give them back their money. You could call this liquidity risk. Over the past year, as interest rates have inched up and there have been concerns about credit quality, the price of some bond funds has declined as these risks all reared their heads.

What does this mean for you? It means that like stock funds, bond funds also have some risk associated with them. They should not be thought of as "100% safe" substitutes for FDIC insured savings accounts. Rather, they are intended to be part of a well-balanced portfolio. Another way to keep your risk low is to invest in bond funds that have average maturities of 5 years or less because they seesaw around less violently as interest rates move.

What additional questions do you have about bonds or bond funds?


Want more financial love? You can follow Women's Financial Literacy Initiative founder, Manisha Thakor, on Twitter at @ManishaThakor or on Facebook at /MThakor.

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Manisha Thakor

From Manisha's linkedin profile page:

Manisha Thakor is the Director of Wealth Strategies for Women at Buckingham Strategic Wealth and The BAM Alliance. 

Manisha and her colleagues provide both evidence-based wealth advisory services for high-net-worth households and core asset management solutions for women and families nationwide with $80,000 or more in investible assets. 

An ardent financial literacy advocate for women, Manisha is the co-author of two critically acclaimed personal finance books: ON MY OWN TWO FEET: a modern girl’s guide to personal finance and GET FINANCIALLY NAKED: how to talk money with your honey. She is on Faculty at The Omega Institute and serves as a Financial Fellow at Wellesley College. Manisha is also a member of The Wall Street Journal’s Wealth Experts Panel, a member of the 2015 CNBC Financial Advisor’s Council, and wearing her financial educator’s hat serves as a part of TIAA-CREF’s Women’s Initiative. 

Manisha's financial advice has been featured in a wide range of national media outlets including CNN, PBS, NPR, The Today Show, Rachel Ray, The New York Times, The Boston Globe, The LA Times, Real Simple, Women’s Day, Glamour, Essence, and MORE magazine.

Prior to joining the Buckingham team, Manisha spent over twenty years working in financial services. On the institutional side she worked as an analyst, portfolio manager and client relations executive at SG Warburg, Atalanta/Sosnoff Capital, Fayez Sarofim & Co., and Sands Capital Management. After this she moved to the retail side and ran her own independent registered investment advisory firm, MoneyZen Wealth Management. 

Manisha earned her MBA from Harvard Business School in 1997, her BA from Wellesley College in 1992 and is a CFA charterholder. She lives in Portland, OR where she delights in the amazing Third Wave coffee scene and stunning natural beauty of the Pacific NorthWest. Manisha’s website is MoneyZen.com.

Shocking Statistics on Women & Retirement

by Manisha Thakor

"Do you ever worry about ending up old and poor?"

For many women, becoming the proverbial "bag lady under the bridge" is one of their worst nightmares. Myself included. I literally sit down with my husband and our financial planner twice a year to re-confirm that we are doing everything we can to make sure we do not outlive our retirement savings!

Unfortunately, this fear of ending up old and poor is actually a very rational one for a high percentage of women. 

Recently, I had the chance to hear Karen Wimbish, Head of Wells Fargo Retail Retirement Group, and personal finance guru Jean Chatzky present powerful data collected in a Harris Interactive poll in conjunction with the launch of a new website to help women prepare for retirement, Beyond Today. I'm always looking for useful resources to direct women to, and I think this site can help a lot of folks.

First up, the data: (Put your seatbelts on. The numbers are stark.)                

  • Nearly 1/3 of women between the ages of 40 and 69 are “can’t estimate” how much money they can withdraw annually from their retirement accounts and about 32% of women in their 40s and 50s estimate they will withdraw between 11% – 30% of their savings annually. These are unrealistically high annual withdrawal rates - leaving them vulnerable to outliving their savings.

  • While both men and women are under saved for their retirements, the women polled had saved less than men - with a median retirement savings accumulated to date of $20,000 for women surveyed versus $25,000 for men.

  • Worse still, despite longer expected life spans, when asked how much they were aiming for in retirement savings women aimed lower with a median goal of $200,000 versus $400,000 for men.

    A savvy, 30-year industry veteran, Karen was kind enough to speak with me about some of the factors driving this dreary data - and what women can do to improve the odds that their golden years really will be golden. 

    A couple of key themes kept coming up during out chart. First, while many women are absolutely at the table on a day-to-day basis for bill payment and major household expenditures, when it comes to financial planning or investing – women are more likely to report ourselves as a “joint decision maker” than are married men who are asked this question.  Men are more likely to see themselves as “the primary“ decision maker in financial matters – so there is a disconnect between men and women in terms of the role they see themselves playing.  The survey data also showed women to have less confidence in the stock market as a long-term tool for retirement planning.

What does all this potentially mind-numbing data mean for your life? 

  • If you are in your 20s and 30s: The best action step is to max out your tax advantaged retirement plans (401k type plans and IRAs). Karen points out a great way to do this is to commit to saving a set percentage of your income, rather than a fixed dollar amount, so as your income rises, so too do your contributions.

  • If you are in your 40s: That data shows that this group, which I'm a part of, are the most stressed-out set, sandwiched between entering our peak earnings years while trying to juggle family and elder care responsibilities. In this life stage, the key action step is not to put our heads in the financial sands.

  • If you are in your 50s, and 60s: You are heading into the "red zone" the critical years leading up to retirement where small shifts in how much you save and what you invest in can make the difference. Understanding the gravity of this period is key.

The key takeaway:  At all three stages making sure you are actively engaged with your finances and seeking to self-educate yourself is key. Reading blogs, visiting websites like Beyond Today, and engaging the services of a trusted financial advisor to meet with you on an annual or semi-annual basis can go a VERY long way towards increasing your financial confidence, sense of optimism for the future, and even household harmony.  Just as with your health, no one will ever care about your financial fitness as much as you do. 

What steps are you taking right now to plan for your retirement?   


Want more financial love? You can follow Women's Financial Literacy Initiative founder, Manisha Thakor, on Twitter at @ManishaThakor or on Facebook at /MThakor, and enroll in her innovative new online personal finance course called “Money Rules.”

Comment /Source

Manisha Thakor

From Manisha's linkedin profile page:

Manisha Thakor is the Director of Wealth Strategies for Women at Buckingham Strategic Wealth and The BAM Alliance. 

Manisha and her colleagues provide both evidence-based wealth advisory services for high-net-worth households and core asset management solutions for women and families nationwide with $80,000 or more in investible assets. 

An ardent financial literacy advocate for women, Manisha is the co-author of two critically acclaimed personal finance books: ON MY OWN TWO FEET: a modern girl’s guide to personal finance and GET FINANCIALLY NAKED: how to talk money with your honey. She is on Faculty at The Omega Institute and serves as a Financial Fellow at Wellesley College. Manisha is also a member of The Wall Street Journal’s Wealth Experts Panel, a member of the 2015 CNBC Financial Advisor’s Council, and wearing her financial educator’s hat serves as a part of TIAA-CREF’s Women’s Initiative. 

Manisha's financial advice has been featured in a wide range of national media outlets including CNN, PBS, NPR, The Today Show, Rachel Ray, The New York Times, The Boston Globe, The LA Times, Real Simple, Women’s Day, Glamour, Essence, and MORE magazine.

Prior to joining the Buckingham team, Manisha spent over twenty years working in financial services. On the institutional side she worked as an analyst, portfolio manager and client relations executive at SG Warburg, Atalanta/Sosnoff Capital, Fayez Sarofim & Co., and Sands Capital Management. After this she moved to the retail side and ran her own independent registered investment advisory firm, MoneyZen Wealth Management. 

Manisha earned her MBA from Harvard Business School in 1997, her BA from Wellesley College in 1992 and is a CFA charterholder. She lives in Portland, OR where she delights in the amazing Third Wave coffee scene and stunning natural beauty of the Pacific NorthWest. Manisha’s website is MoneyZen.com.