Dream Big for Retirement

elkin_dreamretirementLast week I discussed how misinformation keeps many retirees from getting the most out of retirement.  This week, I want you to stop thinking negative thoughts about your future and start designing the retirement of your dreams.  Don’t buy into the myth that you’re sure to outlive your money: start thinking positively and take the necessary measures to place yourself in an ideal position once retirement arrives.  Being proactive about your future is important and can even be downright fun; to start planning, set up a consultation with me by calling 877-476-5051.

Meeting with me, Warren Elkin, is the right place to begin the journey but it shouldn’t end there.  Money may be at the root of retirement, but the monetary aspects are hollow without spending it wisely.  First, think about surrounding yourself with friends and family that will keep you physically and mentally healthy.  Retirement is not a solitary existence, so if you’d like to be closer to loved ones start looking for real estate developments as soon as possible.

When you were younger, your dreams may have been put on hold due to a mortgage or children’s college tuition; take retirement as your time to finally spend the way you’d like!   You’ve worked hard, so feel free to spoil yourself and get on the list for that fancy car, or sign up for a membership at that golf club you never thought you could afford.  If you’ve always wanted to travel, start looking into trip options and narrow down where you’ll go and who you will be taking with you.

Your ideal retirement is out there, so plan wisely and get creative!  Don’t get bogged down in the nitty gritty pessimistic thoughts about the future, let these years be the best of your life!

Our unique review process may help you find the money falling through the cracks in your tax and investment planning to pay for some of those dreams. Make sure you have all the facts necessary to make the right decision with your financial future by calling us today! Speak with us now at 877-476-5051, email Warren at warren@warrenelkin.com, or go to www.warrenelkin.com to learn more about Warren Elkin and his unique process to make sure your financial decisions are made in your best interest.

Have a great day,
Warren Elkin

Retirement Rumors

SecretsI’ve recently been privy to conversations with friends and colleagues over the ramifications of having revealed the heartbreaking truth about Santa Claus to their children or grandchildren over the holidays.  The myth that a jolly old man in a red suit shimmies his way down the chimney bearing gifts for those who have behaved well all year was instantly shattered by parental confessions.  However, those who think only children believe in fictitious legends are very much mistaken.  In fact, I have many clients who believe in rumors about retirement with equal vigor; it’s my job to debunk these financial untruths, as there’s much more at stake here than a couple of reindeer and a bountiful sleigh.

While you can choose what age you’d like to retire, those who believe they can claim their Social Security early and still get all of their benefits later are mistaken.  When you claim early, your benefits will be 25 percent less than if you had waited until retirement age and even up to 80 percent less than if you held off until age 70.  Of course, unforeseen events such as an illness can cause families to take this course of action, but the decision should not be taken lightly.

Don’t rely on being able to work longer or part-time during retirement, you will regret it later.  We all have the optimistic hope that we’ll work as long as we please, but the reality is you cannot predict your own health and work circumstances.  Taking big risks with your investments as you age can hurt your savings, and a backup plan to just keep working is not a sure safety net.

Just because your kids are grown does not mean your expenses will decrease, and thinking that you will need less income during retirement is a common misconception.  You want retirement to be a happy time of life, and failing to accurately budget can result in very stressful decisions for both you and your loved ones.

The key to retirement is planning for your own future and ignoring the popular myths perpetuated by rumors.  It’s important to meet with me, Warren Elkin, in order to sift through the gossip and find out the truth.  Have you bought into the myth that you can withdraw 4-5% of your portfolio because you are going to make 8-9% and, if so, would you like to know how long the amount you are withdrawing is sustainable?  Just like not believing in Santa Claus doesn’t make the holidays any less joyous, knowing the realities about retirement will make that time of life a special and happy one.

Make sure you have all the facts necessary to make the right decision with your financial future by calling us today! Speak with us now at 877-476-5051, email Warren at warren@warrenelkin.com, or go to www.warrenelkin.com to learn more about Warren Elkin and his unique process to make sure your financial decisions are made in your best interest.

Have a great day,
Warren Elkin

Photo courtesy of: http://poetryblogroll.blogspot.com

How to Keep the Housing Crisis from Bursting Your Retirement Bubble

Everyone dreams of that perfect little retirement home in the relaxing tranquility of some quaint town on the shores of something beautiful.  Ahh, yes.  We can picture it now. The feel of a cold drink in our hand and the sun beaming down on our face.  The birds are singing and the waves are lapping at the shore.   Then suddenly, “Pop!” What was that, you say. That was the sound of that dream bubble bursting for the 1.5 million older and retired Americans that have lost their homes to foreclosure along with much of the financial security that came with them.

The reality is that, for many older Americans, their dream scenario has turned into a living nightmare.  Instead of visions of beach houses or lakeside homes, many retirees find themselves clinging for dear life to the homes they have inhabited for years.  The housing crisis knows no boundaries, and it has certainly proved that by inhabiting the lives of many retired and soon-to-be retired individuals.  Unfortunately, the tidal wave of foreclosures continues to splash through the 50+ age group.

The AARP released a report outlining the foreclosure climate in the lives of older Americans and the results were a little frightening.  Over 1.5 million of them have already lost their homes.  Currently, about 600,000 people in the 50+ age group are in foreclosure, while another 625,000 are over 3 months behind on their mortgage payments.  16% of all 50+ Americans currently owe more than their homes are worth.

These numbers are not what many Americans are accustomed to.  The proportion of seriously delinquent loans held by older Americans has risen over 450 percent over the last five years.  Many of these people have gone their whole lives with nearly perfect credit, but have now hit a solid wall of debt that doesn’t seem to be budging.  Things aren’t getting any easier with age.  Among Americans 75 and older, one in every 30 homeowners are in foreclosure.  Five years ago, that proportion was just one out of every 300.  The numbers are hurtling downward at an alarmingly fast rate, and they don’t seem to be slowing.

These statistics are more than just ink on paper.  They are seriously altering the lives of many retirees, forcing some to re-enter the workforce or drastically change the budgets they had planned out years earlier.   Their retirement dreams have disappeared and they are simply trying to stay afloat.

The report showed that younger Americans are struggling as well, but the number of older Americans entering the dreaded foreclosure zone is increasing at a much faster rate.  One of the main questions is simply, “Why?”  Why are so many older Americans falling into trouble?   What’s the problem?

The problem is that many of these people set their budgets and their retirement plans before the economy, well, you know.   Most of them are living on a fixed income and quickly find themselves plowing through their retirement savings.  The income from their investments has been drastically cut, but their house payments have not.  Picture this: the faucet of their main source of income has slowed to a drizzle, but the drain of payments remains wide open.  It doesn’t take a financial expert to realize that it’s only a matter of time before the pool of funds will be completely dried up.

That can be a pretty disheartening image, but the bursting of the housing bubble doesn’t have to burst your bubble of retirement dreams, you simply might have to alter your path to get there.  Planning for these difficulties ahead of time can drastically reduce the struggles you could face.  Many people approaching retirement can analyze their investments based on earnings and interest rates of the current market and forecast their plans more accurately.  It might not be as pretty, but it’s a more realistic picture of what things will look like.

The most important thing is to not be blinded by your dreams, but use them as your vision to create a plan that works for you and your future.  With some planning and a little creativity, you could find yourself livin’ the dream in no time!

http://www.aarp.org/content/dam/aarp/research/public_policy_institute/cons_prot/2012/nightmare-on-main-street-AARP-ppi-cons-prot.pdf

Photo courtesy of: 123RF

The Why, When and How of Consolidating Your Retirement Accounts

Consolidate: To combine separate items or scattered material into a single whole or mass.  The definition makes consolidation seem tidy, productive and even a bit powerful.  With all those good vibes, it’s a wonder why more people hesitate to use consolidation tactics in their lives, especially in terms of their retirement.  Many people have multiple retirement accounts through multiple different custodians with multiple different terms.  That is a lot of “separate items or scattered material” that can be combined into the “single whole or mass” that consolidation affords its users.  So if you are one of those people, it’s time you look into simplifying your retirement plans and consolidating those accounts. But you might ask yourself, why consolidate?  Or when is the best time to consolidate?  Or how do you actually go about consolidating?  Well, since you asked…

Why
The essential of why you should consolidate is best described by a demonstration.  Take a piece of paper at your desk, and now rip it in half (make sure it’s not your paycheck before you start the ripping stage).   Now grab a stack of 15-20 papers and try to tear that in half.  More difficult, right?  Materials are stronger when grouped together, we know that.  What most people don’t know is that when it comes to retirement accounts, grouping them works in essentially the same way.  Your financial position is much stronger when each investment isn’t standing individually.  Having multiple accounts leaves you at the risk of portfolio duplications in which similar investments have similar objectives and they overlap, wasting your assets with unnecessary risk.  Fees can be avoided and paperwork is simplified.  Also, by combining into one account, you are better able to adjust your investments in reaction to market changes by simply accessing one account.

When
The question of when is less about timing, and more about in what situations it should be used.  Consolidation is an advantage to almost anyone who is looking for a simple and productive retirement plan, but there are certain instances in which it is a good strategy to apply.  For example, when many people leave a company, they leave their retirement funds that that company’s 401(k) or pension plan.  This is a great opportunity for consolidation as you can roll those funds into your IRA to increase your existing investment selection while also minimizing the number of accounts you have to manage.  It’s also important to understand the investment options available for different types of investments.  For example, Rollover IRAs have nearly unlimited investment choices, while 401(k) plans are limited to usually a maximum of 25 choices.  The more options you have, the more flexible your plans are, and the better off you are.  You also must understand which accounts are available for consolidation.  All traditional IRA’s can be combined, both deductible and non-deductible, but a Roth IRA cannot be combined with a traditional IRA.  Make sure you understand these stipulations before you make your decisions.

How

Here is the meat of the issue, how to go about this consolidation process.  With this there is good news, and better news.  The good news is that most of work involves information you already have.  The better news is that all you have to do is take that information and follow these simple, step by step directions and you will be well on your way.

The first step is to make a list of each of your individual accounts that you hold currently.  In this list, include details on each account such as the type of account it is, the current balance, its recent and long term performance, as well as any fees associated with it.  Next you need to think about and plan your retirement goals and investment philosophy.  The third step is to determine the plan or institution that best fits those goals.  After that, you start to combine your accounts into the institution and plan that you chose.  This should begin with you smaller accounts, followed by the non-performing accounts and accounts with high fees.  Continue this until all your accounts have been rolled into one.  Then take all of your funds and determine the specific investments needed to reach the goals that you set earlier in the process, all in one tidy account.  Then bake at 375 degrees until golden brown.  Just kidding, but in all seriousness if you follow these steps, consolidating your retirement accounts can be as easy as baking a cake, probably easier for most of you.

When it comes to your retirement, it’s important to find ways to work smarter, not harder.  Consolidating your accounts is one of the simplest ways to do that.  Combine your accounts, limit your paperwork and strengthen your investments.  Aristotle once said, “The whole is greater than the sum of its parts.”  It’s pretty unlikely he was speaking specifically about your retirement accounts, but you get where he was going.

Photo Courtesy of: mybanktracker.com

State Pension Debate: Black, White & A Whole Lot of Grey

It comes as almost no surprise that states governments are getting hit in their pocketbooks throughout the recession just as everyone else is.  The difference is, state governments often have a lot more people that they need to write checks to.  One of these checks that has been given a lot of attention lately is the retirement plans for government workers, and it’s no secret that state and local governments are looking for ways to reduce the number the write in the dollar amount section.

According to statistics from The National Conference of State Legislatures, 43 states have changed their retirement plans since 2009 in hopes of finding that ever elusive balance for their budget.  Many states have taken different approaches to that task, implementing plans that increase the amount of money that workers contribute to their retirement, increasing the age in which benefits can be reaped and more.  These changes have put a bad taste in the mouths of most public employees who have stood behind the shield of laws that protect their pensions as these battles continue to fill our courtrooms with various appeals and challenges.

It’s a messy issue that is causing upheaval in nearly every state, flooding local news outlets with protests, sit ins and even a Governor’s recall election or two.  Like any heavily involved controversy, it isn’t black and white.  The shades of grey hovering over this issue are more numerous than many people realize, or want to try wrap their heads around.

First of all, many of the changes (or proposed changes) do not have any effect on current workers who have spent their lives in a job planning for the benefits to come after retirement.  Most people accepted government jobs, many times with lower pay than the private sector, because of the shining light of their pensions at the end of the long tunnel of employment.  Of course, there are a few states, such as Louisiana and Florida, which are asking (or in other words, are attempting to make a state law requiring) current employees to contribute more to their retirement funds but these laws are facing the most stiff defense from labor groups and unions.  With the exception of a few cases, the changes in pension policies will affect only those who are hired after the legislation passes.

Something else that most private sector employees don’t take into account in these battles is the soft little pillow we like to call Social Security.  Many employees who are covered by a public retirement pension program, a program that they are now at risk of losing, are not covered by Social Security.  When the Social Security system was created it didn’t include any public sector employees.  This changed after many states made what are called “Section 218 agreements” with the Social Security Administration to give their employees some coverage under the federal program.  Later, a 1991 federal law gave Social Security coverage to any public employee that weren’t involved in the Section 218 agreements or didn’t have pension programs through their agency.  So although times have changed, many employees rely on their pension programs to fill in for their lack of Social Security benefits.  They don’t have the safety net waiting to catch them in the end, because they have spent their lives in a system that was supposed to replace that.

One aspect of this controversy that seems to be the most transparent, but most obvious shade of grey is the simple fact that state governments are, at their roots, a business.  When private sector businesses can’t cover the expense of their employees, they cut costs, lay people off, or in the worst cases, go out of business.  Well state governments can’t shut down, for obvious reasons.  They can’t fire all their workers, again, for obvious reasons.  Their only choice is to cut costs.  Like any business, state and local governments have a balance sheet, with liabilities and assets, and there are new accounting rules which will change how those will be calculated.  With many states lacking the assets needed to cover their employee retirement programs, some missing over 70% of the necessary funds, they are not looking very valuable to Mr. Moody and his ratings for investors.  If states can’t find a way to cut their deficit, many investors will begin to expect a higher yield to make up for the higher risk and lower ratings, which will add further costs to the government.  With all of the emotions involved in the fiery battles around the nation, the bottom line for many states is simply, “It’s not personal, it’s business.”

Overall, the battle over state pensions involves both the worker’s money and their future and there are few things life that people fight harder to protect than that.  The problem is that the states are fighting for the same two things.  This dispute over worker pensions is a sea of grey in a dizzying world of passionate black and white.  Round and round with the issues we go, where we will stop, nobody knows.

http://www.ncsl.org/issues-research/labor/state-defined-contribution-hybrid-retirement-plans.aspx

Photo Courtesy of: annuities4u.com

Are Annuities a Key To Your Future?

With the future of pensions up in the air, Social Security on thin ice and 401(k) fees causing concern, more and more people are turning to other types of funds to lead them into retirement.  One of their attractive options? Annuities.  Unlike other investments, annuities are held through the insurance industry and are known for their flexibility which is lacking in many other funds.  For some people these annuities are their main investment, others use them simply as a surplus income.  Retirement plans are different amongst everyone, but there are a few reasons why you should be giving annuities a second look.

  • Flexibility-  As mentioned, Annuities offer more flexibility than most other retirement funds.  In your career, you went to work every day and earned money.  In your retirement, it may seem like you wake up every day and simply spend money.  Vacations, family get togethers, shopping trips, etc.  It’s important to ensure that you have money coming in that can cover those expenses.  One of the most popular annuities is a Single Premium Immediate Annuity (SPIA) in which one lump sum payment guarantees you a monthly paycheck for as long as you wish it to last.  It simply acts as a pension plan organized and determined by your wishes.
  • Lifetime Payments-  With the life expectancy rates seeming to climb every day, one of the biggest risks of retirement planning is longevity.  Many types of funds can leave holders worried whether the income will last them for their entire lives.  Of course pensions and Social Security are a lifetime option, but the future of both of those funds is beginning to be questioned by many.   The SPIA is one of the only options that ensures lifetime payments.  The payouts of a SPIA are determined by your age, interest rates, and time of purchase amongst other factors.  Additionally, holders can determine whether they want the payments to cover a single life of married couple.  They offer the longevity needed paired with the flexibility preferred.
  • Avoiding Risk-  Everyone saw the devastating effect a market turn can have on the investment portfolios of recent and soon-to-be retirees.  It can be a scary thought for anyone approaching that age.  Annuities, with all their options and flexibility, offer a security from these market effects without enduring the poor interest rates in options such as money markets.  Certain annuities protect your principle while investing in stock mutual funds, while others put your money in the market but guarantee your investment won’t dip below your original input.  It’s quality peace of mind with the opportunity for growth.

With all the advantages of annuities, some people might run out the door and get themselves one ASAP, but there are certainly other things to consider before making any moves.  Because of the options and flexibilities involved with annuities, they can be confusing and technical in terms of their contracts.  Before you put your name on the dotted line, make sure A) you have an advisor you can trust and B) you get all of your questions answered.  Ask about commission fees, fees for early withdrawal and surrender charges.
Another danger lies in interest rates, which can often have a great effect on the size of the payments you receive each month.  The current interest rate is one of three factors determining the payment size, but it does have a significant effect on monthly changes.  Try to find annuity options with a guaranteed interest rate that you know you can count on.
With all the changes shifting through the retirement funds and what seems to be the beginning of the end of pensions, annuities are becoming an attractive and viable option for most retirees.  Even if people aren’t ready to abandon the more traditional offers, annuities can provide a comforting supplemental income.  Take the time to look at the options of annuities and see if they could benefit you.  It could pay off later.

Photo Courtesy of: montague.net