Why age 70 isn’t the new 65

Anyone contemplating retirement should seek the advice of an objective adviser. Your CPA, attorney, or fiduciary financial adviser will help you determine the optimum time to take social security and other vital decisions. If you can try to work as long as you can. It does not have to be full time, however this will allow your savings to last longer. Most importantly this should be a lesson to younger employees to begin saving for retirement as eraly as possible.

retirement (Photo credit: 401(K) 2013)

The analysis looked at both income and age. As you might expect, projections for the lowest pre-retirement income quartile are the most sobering. This group would need to defer retirement to age 84 before 90 percent of them would have even a 50 percent probability of achieving comparable pre-retirement living standards. The results improve with income levels, but even among those in the highest income quartile, 90 percent have only a 50 percent chance of having enough to retire by 70. When broken out by age, the news isn’t much better: For one-third of households in which the people were between ages 30 and 59 as of 2007, working until age 70 won’t provide adequate income in retirement. 

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All this aside, buried in the report is a glimmer of hope — working longer does help. While only about half of households age 50-59 in 2007 could retire at 65, the number increases to nearly two-thirds if retirement age is increased to 70. Those extra five years have a dual effect. Not only do workers save more, they also delay dipping into their retirement funds, allowing those funds to continue growing.

In the past, I have extolled some of the non-financial benefits of working longer, namely the continued social interaction and intellectual engagement. A previous EBRI report confirmed that 92 percent of those who worked beyond the traditional retirement age of 65 do so because they want “to stay active and involved,” and 86 percent say they “enjoyed working.” The problem is that there are some real risks associated with relying on the “work longer” retirement plan, the most significant being: What if you lose your job?

If you need more evidence that you need to start saving for retirement now I’m not sure what to say. You are accountable for your financial future.

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Six Money Moves You Should Make in 2013

Every American is responsible for their own retirement future whether they believe it or not. You cannot substitute gambling and speculating for a disciplined savings strategy and a prudent portfolio. The sooner you start saving the easier it is to accomplish your goals. If you cannot save anything you should address your budget and take the necessary steps to include saving each month. Most of us will need the assistance of an investor coach to maintain discipline in our saving and investing strategy.

Roosevelt Signs The : President Roosevelt sign...
Roosevelt Signs The : President Roosevelt signs Social Security Act, at approximately 3:30 pm EST on 14 August 1935. Standing with Roosevelt are Rep. (D-NC); unknown person in shadow; Sen. Robert Wagner (D-NY); Rep. John Dingell (D-MI); unknown man in bowtie; the Secretary of Labor, ; Sen. (D-MS); and Rep. David Lewis (D-MD). (Photo credit: Wikipedia)

1 Work out your biggest savings goal.Many people working today are likely to live for three decades after they become eligible for Social Security, but few of them have a clue what that means financially.Just 42% of working-age Americans have even tried to calculate what they will need in retirement, according to the Employee Benefit Research Institute, a Washington, D.C.-based think tank.

The grim reality: 60% of them have less than $25,000 saved up, excluding the value of their home, and 30% have less than $1,000. Good luck with that.

How much will you need? To replace your current income for 30 years, you would need—assuming an investment return of three percentage points above inflation—about 20 times one year’s income. Social Security aims to replace about 40% of your annual income: By that yardstick you would need to save about 12 times your annual income before you retire.

For a more precise number, use the Social Security Administration’s retirement estimator. Subtract your expected annual benefit from your current yearly pay, and multiply by 20.

2 Ramp up your investments.

Open a Roth individual retirement account, if you don’t have one already. You can invest up to $5,000 for 2012 and $5,500 for 2013 and a nonworking spouse can invest the same. If you are older than 50, add $1,000.

Then invest some money in a fund, such as the WisdomTree Emerging Markets Small Cap Dividend exchange-traded fund (DGS), specializing in smaller-company stocks in emerging markets. It shouldn’t be the whole of your portfolio, but it should be in there. This is likely to be a volatile growth investment.

[More from WSJ.com: Sometimes, Enough Money Really Is Enough]

Emerging markets offer the best overall returns of any investment at the moment, according to two groups of experts who successfully predicted the last two financial crises: Research Affiliates, the investment advisory firm founded by Robert Arnott, and GMO, the fund company co-founded by Jeremy Grantham. GMO estimates that emerging markets offer an investment return over seven years of 50% plus inflation, handsomely beating any rival asset class

via finance.yahoo.com

A disciplined saving strategy will result in reaching a successful retirement goal. When developing a globally diversified portfolio, your portfolio will include emerging markets funds as part of the strategy. Remember NO ONE can predict the future.

Please comment or call to discuss how this affects you and your retirement goals.

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42 Social Security ‘Secrets’ All Baby Boomers and Millions of Current Recipients Need to Know

Great information to know prior to making a decision on Social Security. There are many options to consider. Once you make a choice is may not be reversible, so be careful.

English: Scanned image of author's US Social S...
English: Scanned image of author’s US Social Security card. (Photo credit: Wikipedia)

If you aren’t now collecting and wait until 70 to collect your retirement benefit, your retirement benefit starting at 70 can be as much as 76 percent higher than your age-62 retirement benefit, adjusted for inflation.  The reason is that your benefit is not reduced due to Social Security’s Early Retirement Reduction; moreover, it’s increased due to Social Security’s Delayed Retirement Credit.  For many people, the increase in the retirement benefit can be even higher if they continue to earn money after age 62 thanks to Social Security’s Re-computation of Benefits.

3.  But if you are married or divorced, waiting to collect your retirement benefit may be the wrong move.  If you are the low-earning spouse, it may be better to take your retirement benefit starting at age 62 and then switch to the spousal benefit you can collect on your current or ex-spouse’s account starting at your full retirement age. But beware of the Gottcha in item 5. 

4.  If you’re married, you or your spouse, but not both, can receive spousal benefits after reaching full retirement age while deferring taking your retirement benefits and, thereby, letting them grow.  This may require having one spouse file for retirement benefits, but suspend their collection.  This is called the File and Suspend strategy.

5.  Be careful! If you take your own retirement benefit early and are below full retirement age, you will be forced to take your spousal benefit early and at a permanently reduced level if your spouse collects his/her his/her retirement benefit before or in the month in which you apply to collect your retirement benefit.  If your spouse is not collecting a retirement benefit when you apply for an early retirement benefit, you will not  be deemed to be applying for your spousal benefit.  Hence, you can start collecting your spousal benefit later with less or no reduction.

This just a sample of the strategies available to you when considering when to begin collecting social security. The best advice is to seek the guidance of an financial professional, preferably one who agrees to act as a fiduciary.

Please comment or call to discuss.

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A better retirement withdrawal strategy — from the tax man

The withdrawl strategy may be the most important decision you will make regarding your retirement. Yet there really is no answer. Unless of course you can predict the future.

English: In the United States, Social Security...
English: In the United States, Social Security benefits compared for younger vs. older workers. According to author Joseph Fried, this graphic uses information from: C. Eugene Steuerle and Adam Carasso, “The USA Today Lifetime Social Security and Medicare Benefits Calculator,” (Urban Institute, October 1, 2004), from: http://www.urban.org/publications/900746.html. Note: The calculator does not include the value or cost of the Social Security disability program. (Photo credit: Wikipedia)

Researchers analyzed a hypothetical married couple of 65-year-old retirees. The husband receives a Social Security benefit of $12,000 annually, while the wife receives $6,000 through a spousal benefit, making their total household income $18,000 per year. Excluding the value of their home, the couple also holds $250,000 in financial assets invested in a mix of stocks and risk-free bonds, with an allocation that changes with age, realized returns and the assumed coefficient of risk aversion.The bonds have an assumed real interest rate of 3%, while stocks are assumed to have a real return of 6.5%.

Tweaking the RMD formula so that withdrawals for the couple begin at 65, the retirees pull a growing percentage of assets each year for their income, starting at a rate of 3.13% and then going as high as 15.87% at 100.

To compare this strategy with others, the paper used a measure called Strategy Equivalent Wealth, which represents the factor by which the dollar value of the couple’s wealth at 65 must be multiplied so they are as well off as a household that follows the optimal strategy. Researchers gave the optimal strategy an SEW of 1, while those that are suboptimal are greater than 1.

This is a very interesting research study. Although every individual is different this might be an excellent withdrawal to maintain an income throughout your lifetime.

Please comment or call to discuss how this affects you and your retirement portfolio.

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More Investing…..Less Gambling!

English: The corner of Wall Street and Broadwa...
English: The corner of Wall Street and Broadway, showing the limestone facade of One Wall Street in the background. (Photo credit: Wikipedia)

The Wall Street bullies have a vested interest in keeping the investing public trading. They make money on every trade whether you make money or not. You cannot make up for a lack of saving by speculating. It is far too dangerous for you and your families’ financial future.

Needed: More Investing, Less Gambling

John Bogle said, “the wisdom of long-term investing has been crowded out by short-term speculation.” It’s more than just market timing and flash trading. Americans are speculating that Social Security will be fixed, and corporations are speculating that they will earn 8% on their pension funds.

Some additional risk may be necessary to help baby boomer clients generate the retirement income they need, but it’s important not to go to extremes. “The market doesn’t care whether [your client needs] extra income or not,” he noted. Taking excessive risk is “not a Bogle move. I’m a middle-of-the-road, boring–I’ll admit it, boring–kind of guy.”

Many investors are far too impatient to be successful investors. Remember to succeed in reaching your long term financial goals you need a disciplined savings strategy and a prudent investment strategy. Mr. Bogle’s advice brings something the Wall Street bullies lack and that is “Wisdom”.

Many of us are relying on Social Security as a safety cushion, a cushion which may or may not be there when we need it. Prepare for the worst.

Follow the three simple rules of investing:

Own Equities….Globally Diversify….Rebalance

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70 is the New 65 –

Saving for retirement must become a priority for most Americans. You will be disappointed if you plan on relying on the federal government. Sadly, most baby boomers have this plan in mind. This might explain why many lost huge amounts in the 2008-9 crisis. They substituted a disciplined savings plan with excessive and inappropriate risk in their portfolios.

retirement (Photo credit: 401(K) 2012)

Late baby boomers and the generations that follow are slowly beginning to realize and accept that 70 is the new 65. Retirement on The Golden Pond at age 65 is fast becoming a luxury that few will be able to afford. Most workers haven’t saved enough, and government programs cannot be counted on for a bailout. The solution is to work to age 70, at least part time, and delay taking Social Security benefits.

The past few years saw a sharp decline in Americans’ confidence about their ability to secure a financially comfortable retirement, according to 2012 Retirement Confidence Survey (RCS) published annually by the Employee Benefit Research Institute (EBRI). The age at which workers expect to retire is slowly rising. In 1991, 89 percent of workers expected to retire at or before age 65. Twenty-one years later, in 2012, only 63 percent of believe they will have the same opportunity.

Other interesting facts from the survey show that in 1991, about 50 percent of workers thought they could retire earlier than 65. The number today has dwindled down below 24 percent. In fact, more people today believe they will be working at age 70 than retiring before age 65.  In 1991, only 9 percent of workers believed they would still be working at age 70. The number today is 26 percent.

One reason people expect to work longer is because saving for retirement has become more difficult. Only 66 percent of workers reported that they or their spouses have saved money for retirement. That’s down from 75 percent in 2009, according to the RCS.

More than half of workers (60 percent) report they and or their spouses have less than $25,000 in total savings and investments (excluding home equity and the present value of a defined benefit plan). About 30 percent of workers reported savings of less than $1,000.

Saving at work has helped. Workers who contribute to a retirement savings plan at work are considerably more likely (76 percent) to have saved at least $10,000 than those who are offered a plan but choose not to contribute (42 percent) or are not offered a plan (37 percent).

Another reason people are expecting to retire at a later age is a growing skepticism about Social Security. About two-thirds (64 percent) of workers are not confident that Social Security will continue to provide benefits of at least equal value to the benefits retirees receive today. Workers today are half as likely to expect that Social Security will provide a major share of their income in retirement (31 percent) as retirees are today (69 percent).

One benefit to working to age 70 is that a person can significantly increase their Social Security benefits. This is called delayed retirement credits. A person who delays taking Social Security will increase their monthly benefit increase by 8 percent annually after age 65 until age 70. For example, if a 65 year old waits until age 70 to collect, their monthly benefit will be approximately 40 percent more. Delayed retirement credits end at age 70, so there’s no reason to wait after that.

The 2012 RCS finds that workers also feel more uncertain about Medicare’s future. About two-thirds (64 percent) of workers are not confident that Medicare will continue to provide benefits of at least equal value to the benefits retirees receive today. In addition, 75 percent of workers believe they are very (42 percent) or somewhat (33 percent) concerned that the eligibility age for Medicare will increase before they retire.

Unfortunately, workers don’t see employers funding the health care gap between age 65 and whatever the Medicare retirement age may become, although attitudes appear to be changing. In the 2011 RCS, one-third of workers reported that they expected to receive health insurance from an employer (36 percent) after retirement. That’s better than the 27 percent of current retirees who reported they actually received health benefits from previous employment.

Today’s workers are beginning to see their retirement future, and one fact stands out clearly − age 70 is the new 65. People realize they’ll be working longer, delaying Social Security benefits to take advantage of delayed retirement credits, and relying more on employers for the health care gap if and when the age for Medicare extends past 65. Life on the Golden Pond is still possible in America, but it take a little more time.

Americans are beginning to believe that if they do not save for their own retirement, they will not be able to retire. Saving for retirement should become a part of your budget. The fixed part, that is, it does not change.

Please comment or call to discuss.

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Social Security not deal it once was for workers

Social Security should not solely be relied on to support you during your retirement. You are responsibile for your own financial future. This part of your savings strategy must have a prudent plan and discipline to succeed.

Social Security Poster: old man
Social Security Poster: old man (Photo credit: Wikipedia)

People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press.Previous generations got a much better bargain, mainly because payroll taxes were very low when Social Security was enacted in the 1930s and remained so for decades.

via washingtonpost.com

The battle begins, the younger generation believes they will never receive the benefits they deserve and the older generation believes they deserve more.

Please comment or call to discuss.

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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.

Photo courtesy of: http://ioanalazarov.com

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Retirement 2012 – Dos and Don’ts of Working After Retirement

Retirement (Photo credit: Wikipedia)

Many people are considering retirement due to layoff or a desire to make an early exit from the workforce. This is a serious issue and should be carefully analyzed. In a majority of cases working during retirement will be a necessity. I have heard some people returning to school to upgrade their skills. Remember idle time has its drawbacks particularly when you lack the funds. Saving for retirement must become a permanaent part of everyone’s budget.

Another consideration is making sure your assets are working for you in the most efficient manner. This requires working with someone who has your best interest at their top concern.

“Retirement today is not that of a generation ago. Gone is the day of a company pension, company-paid health care and secure Social Security,” says Ted Sarenski, president and chief executive of Blue Ocean Strategic Capital LLC in Syracuse, N.Y.

“Today’s retiree is faced with self-sufficiency and, as such, needs to work at least part time ‘in retirement’ to have enough money to pay the costs of living that were once paid by someone else,” he says.

Unfortunately, many people decide to retire without really thinking through the decision, then wind up returning to work, says David A. Littell, a professor at The American College who focuses on the financial issues of affording retirement.

Many Americans refuse to save for their own retirement choosing instead to live for the moment. This decision will result in the need to work during retirement to supplement their income.

Please comment or call to discuss how this affects you.

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