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

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Financial Hide and Seek: Finding the Stealth Taxes that Congress Missed

Good afternoon!

The financial sector greeted 2013 with a collective sigh after spending a nail-biting few weeks unsure of how the potential Fiscal Cliff would affect us all in the new year.  I received many emails and phone calls during this tenuous time; most clients wanted reassurance that their investments were safe.  Keep in mind, the Fiscal Cliff sounds confusing because it is.  While the most obvious premises of the deal are more easily researched, there are stealth taxes that could be costing you money at this very moment.

As a Retirement Income Specialist, it’s my job to seek out these hidden taxes that could potentially hurt my clients.  I want to provide you with a brief synopsis of these stealth taxes, but to learn more you can set up an appointment to discuss current financial trends and how they affect your personal finances.  Set up an appointment by visiting us at www.warrenelkin.com.

There are two provisions that were previously dormant from the 1990 tax increase that, as of this week, are re-enacted.  The Pease and PEP will now limit deductions and exemptions for taxpayers in a higher income bracket.  Those who make above $250,000 will potentially suffer the steepest tax increases under this new law.

Of that bracket, married couples with two kids could see a 4.4 percentage point rise in their marginal tax rate.  Americans with incomes topping $1 million could lose up to 80% of itemized deductions, which includes mortgage payments, healthcare, local and state taxes, and charities.

While missing from the main coverage of the Fiscal Cliff deal, Congress has allowed the Social Security Payroll Tax Cut to expire.  Over the past two years, wage earners have enjoyed a 2-percentage-point-cut in the payroll tax.  By allowing this to lapse, that percent now returns to 6.2%, earning the government about $115 billion a year in revenue.  This means the average taxpayer now loses approximately $740 a year.

There are also other stealth taxes that are not covered by the Fiscal Cliff deal.  Things like Phantom Income Taxation, Social Security Taxation, and IRA losses you can’t deduct.  Have you ever heard of Phantom Income Tax before?  Are you paying taxes on your Social Security?  Do you have losses in your IRA?  These are great indicators that you could benefit from a simple review process.

All of these stealth taxes have variances, depending on income bracket, etc.  Don’t start 2013 in the dark about tax policies.  Meet with Warren before going to see your CPA or completing your tax return to learn what questions to ask your CPA to cut your taxes now and avoid tax problems in your future.

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

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Is Your Money Slipping Through the Cracks?

Around the holidays, money is one of the largest topics on anyone’s mind.  Whether you’re lamenting the sum total of your holiday gift expenses or outlining your budget for 2013, end of the year finances are an important subject.  I’m no stranger to these money concerns, as I’ve built a business on helping clients conquer their money fears and learn to get the most out of their investments.

As a Financial Advisor, I’m responsible for a lot of big-ticket financial worries.  People come into my office looking for long term investing solutions, but the long term is only part of retirement planning.  It’s important to look at the places in your life where money could be slipping through the cracks.  Money that could help boost your retirement. Here are a just a few things that might be slowing stealing your hard earned income:

  • Mutual funds can seem like a great investment to aid your retirement, but the fees associated with managing mutual funds can eat away a great deal of your returns. Investment advisory fees, 12b-1 distribution fees, and administrative costs can really add up. So check your expense ratios on Morningstar or use the FINRA Fund Analyzer. If they’re pushing 1.5% or 2%, it may be time to reevaluate your investment.
  • Planning for retirement can take so much thought and effort that people often overlook the biggest place they can save money every year: taxes. I’m not talking about the big income tax fight going on right now, but rather the “stealth taxes” that are sneaking by while the focus is directed elsewhere. Medicare payroll tax and the taxation of Social Security are bad enough, but the biggest hit will come from the new 3.8% Medicare tax on investment income. With all these changes happening, it’s time to take a good hard look at your taxes and investments to make sure you’re not losing out on thousands of dollars because of these silent money killers.
  • If you have cash in your money-market fund then you’re probably only earning a measly 0.01%.  This means for every $10,000 you have in savings, you’re only getting $100 in returns.  Savings accounts aren’t much better with the best rates not even reaching 1%. With inflation increasing at an average of 2.42% a year over the last decade, leaving money in these accounts is a recipe for money loss.

Staying aware of where your money is and how you’re spending it can shield you from these costs.  Don’t be complacent with your savings, and always make sure you’re staying on top of what is the best option instead of what is most convenient.  Let me help advise you in all of your investment decisions. The biggest gift I can give my clients is the financial knowledge necessary to be the most savvy consumer and investor in the marketplace.  Happy Holidays!

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.

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5 Things To Know About Your Parents Financial Future

Parents spend their entire lives planning for their children’s future but, as goes the circle of life, there comes a point when that responsibility starts to shift.  Many children take on the role of caretaker for their parents.  They do all the things that their parents once did for them: drive them to the store, make them their meals, and so on.  Well remember when you were a kid and your parents gave you an allowance, or only let you spend a certain amount of money at the store.  They were, in a small way, helping protect your finances.  Well, one of the most important aspects of becoming involved in your parents’ lives is understanding and managing their finances.  Of course your parents might not take well to you handling their allowances or expenditures, but it’s important that you get involved early and often in your parents financial planning.

More and more children are finding themselves either completely or partially financially responsible for their parents in their retirement.  In some cases, that situation is unavoidable, but there is a way to make sure your parents have financial stability as they age and make that transition from supported to supporter easier on you and them.  The main thing is to discuss the issue early.  It’s easier to plan for your parent’s financial future if you’re not planning out your own retirement at the same time.  Talk about it early, and talk about it often.

Some parents try to avoid discussing their personal finances with their kids, so it could be helpful to start the discussion by asking your parents for advice on your finances.  That gives you a window into the decisions they have made, and allows you to give them bits of advice you think they would find useful, without hurting any egos.  Once that window is open, there are a five different pieces of information you need to discuss about your parent’s financial situation and plans.

1.       Important documents-  All parents have their super clever secret hiding spots where they keep all their important files and documents.  If you are lucky enough that your parents remember where these super clever secret hiding spots are, than you are a step ahead of most of us. It’s important that you ask them where many of their important documents are located.  These are things like their will and living-will, life insurance policies, information on their financial accounts, financial power of attorney and more.   Knowing where these are kept is critical because a) you know your parents actually have the documents and b) you know where they are in the case of an emergency.

2.       Long-term care insurance-  It can seem like an uncomfortable subject, but the earlier you talk to your parents about their long term care, the less expensive it will be for both them and you.  Like any insurance, long-term care insurance is cheaper if you buy it when you’re younger and healthier.  Even with parents as young as 50-years-old, planning for the financial strain that long-term care can present is a conversation worth having.

3.       Social Security Planning-  Social Security is blanket that covers a lot of people in their retirement plans, but it’s important for your parents to determine when they should be tucked in.  The point at which a person should begin to collect Social Security benefits depends on a few details, details which you should ask your parents about.  It’s important that you ask how much they have saved in various contribution plans such as a 401(k) or IRA.  Also, find out how much they can expect to receive from a possible pension.  The funds available to them in these accounts can drastically affect the point at which they should apply for Social Security benefits.

4.       Investment Legitimacy-  We have all have that sweet old aunt who proudly told everyone how she received that letter in the mail informing her that she won the jackpot in some sweepstakes and will receive the prize money just as soon as she sends in her bank account information.  This is obviously a drastic example, but it’s important that you ask your parents about their investments that they have made and ensure that they aren’t involved in anything risky.  Older individuals are often targeted by scammers, so it’s an important conversation to have.  Even investments that are legitimate may involve too much risk to be worthwhile for them.

5.       Plan for their plans-  Trends have shifted to the point where the majority of young people expect to care for their elderly parents in the future.  In order to plan for this care it’s important to know their plans.  Ask them when they expect to retire, where they plan to live, and how much money they have saved.  These answers will allow you to better prepare your finances in way to give them the support they may need.

When it comes to your parents future there is a lot to discuss, and in order to get to all if it, you need to start the conversation early and revisit it often.  It may not be easy or fun, but your parents probably had a struggle or two with you back in the day trying to get you to comply with their conversations.  It’s the circle of life, and embracing your new role to clear up the essentials now can save your parents, and you, a lot of money later.

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The Road to Retirement: “Are We There Yet?”

Many people preparing for retirement feel like a kid on a road trip. “Are we there yet?” It’s the common feeling of anyone aiming for a destination. Unfortunately, for many future retirees it can feel like they are that cartoon character chasing after the sandwich hanging from the stick at their back. They keep running after it but they never get any closer. Well a new study by The Center for Retirement Research at Boston College brings both good and bad news for those perpetual chasers. The good news: you don’t have to work forever. The bad news: the benchmark age at which the majority of Americans will be prepared to retire at has been bumped back to 70.

It’s no secret that the longer that you work, the more financially secure you will find yourself in retirement. The age of reaching that financial security varies with the individual based on their circumstances, but the new study shows that 85% of Americans will be financially prepared to retire by age 70. Overall, the study found that American households fall into a variety of groups in terms of their age when they will be ready to retire.
· 23% will be ready between the ages of 66 and 68
· 17% will be ready between 69-71
· 9% will have to work until at least age 72
These numbers are determined by what are known as the National Retirement Risk Index measures. These portray the percentage of households that find themselves at risk of being unable to keep up their current standard of living throughout their retirement.
Age 70 provides an attainable goal for many Americans who have envisioned working well into their golden years in order to reach their financial goals. But if you have set your sights on lounging on the beaches of Boca well before that landmark age, there is hope for you yet. The study revealed that about half of Americans will be financially secure enough to enter retirement by 65. Many of you are sitting thinking, “How do I get to be part of that group?” Well, there are a few things that you can do to finagle your way into the “Sixty-Five Club.”
Cost Efficiency- It’s important to remember that the National Retirement Risk Index measures are based on maintaining your current lifestyle. A good way to drop your target retirement age is to drop some of your expenses as you enter retirement. Downsize to a smaller house, save on gas by driving less, buy fewer clothes… you know the drill. This can be hard for many people who find that their retirement brings more free time, which brings more activities and adventures, which costs more money. If you commit to being more cost efficient in your retirement, you can be more age efficient in your retirement plans.
Increase Your Savings-This doesn’t have to be a huge, life altering increase, but small increments can make a huge difference over time. Try to increase your savings by just one or two percent each year. You won’t notice the change now, but you certainly will notice it later. Ramping up your retirement contributions a little each year could have you living the good life sooner than you think!
Become a Part-Timer-This can be a good plan both financially and socially. Many retirees find it a shock to their system to go from working full time for their entire adult life, to suddenly having nothing but time. Picking up a stress-free part time job can help you work your way into retirement while keeping you busy and engaged. Your new job can simply be reduced hours at your current employer, or a completely new and fresh engagement somewhere else. This part time work can also be a huge boost to your finances, as you continue to bring in a bit of income for the first few years of your retirement.
The bottom line is that changing times have brought about changing circumstances for retirees. With longer life expectancies and healthier adult years, it can be expected that longer careers will follow suit. Just remember that the end is in sight, and your hard work and diligence will pay off. Soon when you ask “Are we there yet?” the answer will be a resounding and confident, “Yes!”

http://crr.bc.edu/briefs/national-retirement-risk-index-how-much-longer-do-we-need-to-work/

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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.

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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.

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Unsustainable Assumptions

Sustainability—it’s the new “it” word used to discuss everything from the environment to family budgets. But when we look at the federal government and money spent on retirees, sustainability has a whole new meaning—or perhaps it’s a warning. Because what’s going on at the federal level regarding money spent on retirees is, in fact, not sustainable.

Our society seems to assume that we will perpetually be able to provide for our elderly. But the fact is that when you look at the numbers, what we’ve done historically simply will not be feasible in the future.

Here are a few things to think about.

In 2009, a study on government expenditures found that our government spends 2.4 percent more per capita on the elderly than they do on children, although children are twice as likely to face hardship and poverty than baby boomers. The current analysis found that in 2033 Social Security will no longer have sufficient funds to pay full benefits. Milllennials will pay more for baby boomers’ health care, social security, and other benefits than boomers did for their parents’ generation. This is not a criticism. But it is a warning that future generations will need to be prepared for a retirement without the type of government assistance that’s been possible in years past.

It is critical for workers out there take a serious look at their finances. Keeping your head in the sand and having an “ignorance is bliss” attitude about your retirement is not only unwise, it can be devastating to your future. Sit down and look hard and critically at your spending. Money may seem tight, but what are the “wants” that can be cut out? How can you divert money into funds for your retirement?

Because after all, you’d probably like a retirement lifestyle that is comfortable, enjoyable and sustainable!

If you are nearing retirement, look for sustainable income sources that will keep your life savings secure.

For more information, visit my website, www.warenelkin.com, or call me at 1.877.476.5051.

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Why You Should Care About Interest Rates

The Federal Reserve recently announced that it has decided to keep interest rates low—in fact, they’re at an all-time low of 1.46 percent. And it doesn’t look like it will change any time soon, with Chairman Ben Bernanke mentioning that rates may stay low through 2014. This is great news for borrowers, but it means that savers will not only NOT gain interest, but they’ll lose purchasing power because of inflation.

Let me explain. Today, money funds yield on average about 0.03 percent. The best-case scenario for a one-year bank CD is a mere 1.1 percent. If inflation stays at 3 percent, well—it doesn’t take long to realize that money in a CD or in a savings account is losing its value faster than it can grow at these low rates.

In an article in USA Today, Ronald Fatoullah, a New York elder law attorney, said that he sees some seniors who have been pushed into riskier investments, such as stocks. He added, “”I’m personally fearful for older clients to invest in this market,” he says. “It could tank.”

So what do you do with your savings? How can you enable it to grow safely so that it is outgrowing inflation but isn’t in a risky place, such as stocks?

The proper type of annuity can be a vital tool, because it’s guaranteed and stable but still provides the growth necessary to surpass the rate of inflation. Annuities are similar to a company’s pension plan, but it’s an individual, not a company, that provides the initial funds to make future, lifelong payments possible.

There are many different annuities out there so it’s imperative that you select the one that’s right for you and your family. If you’d like more information, I’d be happy to guide you. I have more than 30 years in the industry and an A+ rating with the Better Business Bureau. Contact me at 877-476-5051 to see how your savings can safely and securely beat inflation and keep its purchasing power for your future well being.

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