How Retirement is Changing

Fast Forward: How Retirement is Changing

Predicting the future is a rough sort of business to find yourself in, particularly with a
world that’s begun changing more and more rapidly with every passing day.
Unfortunately a lot of people on all sides of retirement find themselves having to do this
very thing, having to try and figure out what directions the world will be taking them in
once they’re ready to stop working. Luckily you’re not alone, and most of us are trying
to maximize our options for our post-career years. Here are just a few of the ways in
which retirement is changing in the next decades, to help you stay ahead of the curve:

A: Retirees are living longer than ever before.
Advancements in medical technology have increased the average life expectancy of
individuals in developing nations; retirement planning is becoming more and more
troublesome for both actuaries and future retirees (Smart Money, 2012). This increased
longevity comes with a need to set up a matching retirement plan, particularly when some
retirements are expected to last longer than the amount of time the retirees spent working.
Rather than trying to predict how long your retirement is slated to last, be prepared for
the longer estimate in response to these treatments and technologies.

B: Children are staying with their families longer, even after college.
According to a new study released by Oregon State University, young adults in the 18-30 age bracket are having a harder time than ever becoming financially independent from
their parents (Journal of Aging Studies, 2012). This greatly affects those looking to retire
while their children are still young
adults, and can cause a domino effect that starts to
influence generations to come. There’s no guarantee of the job market recovering or this
trend changing in the next few years, so when looking at your retirement make sure to
factor in all of your current familial expenses.

C: Social Security may not be around in the future.
Social Security has always been a problem politically since it has a foreseeable end;
between longer life expectancies and the large baby boomer population, social security is
anticipated to “face funding shortfalls in about two decades if nothing changes” (CNBC
2012). While it’s quite possible that the government will come to a viable solution to
salvage social security benefits, it’s a good idea to plan for the ‘what ifs’ regard
less. Plan for social security as less of a guarantee and more as a pleasant possibility so there are no
unpleasant surprises down the road. Don’t have your retirement plan hinge on social
security as it may crumble within the next few decades.

Retirement is changing, but that doesn’t mean you can’t still build a healthy, strong
retirement plan even with a moderately uncertain future. Your retirement is something
that needs to be made to last a long time and you’re allowed to take your time putting the
right amount of money into it. As long as you avoid the unnecessary risks in relying on
social security, plan for a slightly longer nesting period for your children and plan for
your own longevity, you can avoid a few of the major pitfalls that your retirement plans
may otherwise succumb to.

http://www.smartmoney.com/retirement/planning/the-cost-of-living-longer–much-longer-1328897162395/
http://oregonstate.edu/ua/ncs/archives/2013/jan/no-more-%E2%80%9Cempty-nest%E2%80%9D-middle-aged-adults-face-family-pressure-both-sides
http://www.cnbc.com/id/100338122/Yes_We_Can_Fix_Social_Security_but_It_Won039t_Be_Pretty

The Tax Season Is Here: Putting your refund to work for you.

With tax season just around the corner and the IRS having just released information that it plans to issue refunds about as quickly as it did last year (9 out of 10 refunds released in under 21 days (www.irs.gov)), now is the time to start considering what you’re going to do with your refund. While the promise of a big check from the government always comes with some temptations (a new grill for the summer, a gift you missed out on over the holiday season) you should always make sure you’re investing that money wisely. While it may seem like a gift, and an easily spent one at that, remember that it’s mostly money from your other sources of income that you were never able to collect on. Your tax return should be treated like any other money put away, safe from withdrawals for a long period of time; take your excitement at getting such a big break in the mail as incentive to be smart and save. Here are a few tips to get you thinking about putting some of your tax refund to work.

Save it! Invest it!: The importance of either putting some of your return into a savings account or investing it cannot be stressed enough. A good rule of thumb, at the bare minimum, is take ~10% of every check you get and put it into a savings account or towards your investments. Before you know it, you’ll have a tax return a few times over waiting for you whenever you need it that can be used anytime throughout the year.

IRA?: Alongside the 10% rule for saving/investing, it’s also a good idea to look at doing something long-term with some of the money, namely, putting some of it towards an IRA or other form of guaranteed retirement income (annuities, etc). Nothing is more valuable to someone right now than an investment in future stability. Consider asking your advisor, while you’re trying to shrink your tax refund, about recommended retirement investment opportunities.

While it may seem like something of a killjoy at first, making sure that the first thing you do with your tax return is putting some of it in a place that will give you access to it in the future is of utmost importance in tax season. Whether you’re saving, investing, putting it into a retirement fund or contributing to a child or grandchild’s education, just remember that it’s better if your short-term desires wait until your long-term stability is taken care of. Before you know it, they will have caught up to each-other, and you’ll have made some hefty gains in the meantime.

Stockpicking?

There are so many unknown variables when picking individual stocks (literally trillions), that is why it is impossible to consistently guess which ones are going to go up or when they are going to go down.

The lure for stock speculators is similar to the gambler… the excitement that is felt and experienced when they hit the big winner. When we watch the markets we see big winners every day. Similar to walking through a busy casino, we see winners all of the time. This preys on wish fulfillment…why not me?

Just one big winner keeps them coming back until they can break their addiction. Just like the gambler, this usually does not happen until they hit bottom, after the inevitable several big losers in a row.

When picking individual stocks, it becomes an obsession. They check the news and the price almost every day. They think about the stock almost every day, if not every day. I have seen it happen over and over again.

Apple is the latest hot stock to cool off. Will the next big move be up or down? It’s anyone’s guess.

Tips to Maximize your Social Security Benefits

Maximize Your Social Security Benefits
You have worked hard all of your life. You have raised a beautiful family that you are proud of, and you and your spouse are finally ready to enjoy your golden years together. And yes, you have also planned and saved for these future retirement years. Maybe you planned many years ago or maybe you planned just recently; but either way, you probably factored in the boost offered from your future Social Security benefits. Whatever the boost might be, wouldn’t you rather maximize those benefits if possible? If the answer is a resounding “YES”, then you want to learn about the various claiming strategies, and fully discuss them with your financial adviser/financial planner. The proper strategy can amplify your lifetime Social Security benefits significantly.

An example of one strategy is waiting as long as possible to start claiming your Social Security benefits. The earliest age that a retiree can start claiming these benefits is 62 years old. However, did you know that once you reach your full retirement age (between 65 -67), your social security benefits increase by 8% each year plus inflation adjustments? Wow, the money claimed increase considerably just by waiting a little longer.

Are there claiming strategies that can optimize your Social Security benefits even if you need to start collecting at an earlier age? The answer is “Yes”. Advantageous strategies can be applied to this situation as well when you know how to maneuver through the claiming process… you just need the proper expertise to guide you through the rules. Once you know these rules and know how to navigate confidently through the claiming process, you can apply a strategy that works in your favor, and maximizes this money.

Some of these claiming strategies involve the idea of spousal benefits. Here, spousal benefits can be applied to a “Restricted Spousal” strategy as well as a “File and Suspend” strategy. According to Jim Blankenship, CFP, EA of Forbes Advisor Network, “File and Suspend allows for the lower wage earner to increase his or her benefits by adding the Spousal Benefit, while the higher wage earner continues to delay his or her benefit, adding the delay credits.” On the other hand, the Restricted Application for Spousal Benefits “provides one spouse or the other with the option of collecting a Spousal Benefit, while at the same time delaying his or her own retirement benefit.” All and all, any couple must carefully consider the particular rules pertaining to these strategies in order to determine the appropriate strategy that applies to their specific situation.

Overall, these claiming strategies can cushion your retirement years with thousands of dollars. If you are thinking about navigating through your Social Security claiming process alone, it might be very unrealistic because the rules behind these strategies can be complex and meticulous. Even the employees at the national and local Social Security offices cannot give any advice; therefore, it’s best to seek the help of a financial advisor who has an in-depth knowledge of the best Social Security strategies for retirees. The world today is very different… life expectancy has increased, pensions have dwindled, medical costs have increased, and the economy remains
uncertain. Especially now, maximizing your Social Security benefits is necessary because these are unfavorable conditions. So, make certain that you fully learn and understand the rules of each strategy before you chose. You can add thousands of dollars to your retirement funds just by applying the right Social Security claiming strategy for you.

Blankenship, Jim. “Are You Leaving Social Security Money on the Table.” Forbes. 26 November 2012.
Roberts, Damon. “The Retirement Planning Edge: Maximizing Social Security.” Fox Business. 27 November 2012.

Wednesday Wisdom from Mark Matson

Should investors try to predict the future?
“I always have to remind investors to stop playing God. Specifically that means stop trying to predict the market, and stop trying to forecast the market. Above all, it means stop trying to find anyone else who says they can do these things, because anyone who tells you that he can do it is either seriously delusional, uneducated, misinformed, or lying. So don’t ask anyone else to play God when building your portfolio and advising you, because no one can.” Mark Matson

Mark Matson on Prudent Investing

The complexity of investing and the overwhelming tendency to perpetuate self-destructive investing behavior make it seem only natural to seek professional help. Many Americans turn to financial planners, brokers, or fee-based money managers. But are these professionals as a whole any better than Main Street investors when it comes to following the simple rules of investing and applying academically sound investment principles, or are they part of the problem? Are they true defenders and protectors of disciplined investing, or is it a classic case of the fox guarding the chicken coop? The average financial professional is not any more seasoned and prudent than the average investor.

That is why I have dedicated my life to only one part of the planning process —prudent investing.

Matson on Investor Courage

Trying to play God with the financial markets is highly destructive. So don’t try it. In the end, you will guess wrong. Instead, have the long-term courage to take the long view and stick to your plan. Know that courage doesn’t meant the absence of fear. Courage means feeling the fear and doing the right thing anyway.

Matson on Investor Emotions

You will often hear so-called investment experts say things like, “You have to eliminate feelings from the investment process.” There is only one problem with that: It is impossible. No one can completely eliminate feelings and emotions from the investing process, because everyone is human. Pretending otherwise and believing your emotions won’t come into play is a recipe for disaster.

Matson On Dysfunction Loves Secrecy

Most of us have been taught that investing is a solitary experience; that what we do is we go and meet with our financial planner or our financial advisor, and don’t talk about money with others, don’t share what is going on, and certainly don’t share your fear, or your apprehension, or your goals, or your feelings. We are led to believe that we should do this in isolation.

Instincts plus emotions plus perceptions are twisted and take over in isolation. But human beings are meant to live in community, in support of each other. It’s the fear of sharing our own emotions and failed behavior that keep us stuck. However, we gain strength by sharing our experiences, fears, and hopes. And we do that best in groups. To be successful as an investor is to take strength and hope from others, to share our experience, to know we are not alone when the market goes down 30 percent or when we see an advertisement for gold up 80 percent. It helps us to know that there are other people struggling with the same things that we’re struggling with and the same fears that we struggle with, where it’s the economy, struggles at home, the loss of a job, or health issues. All of these things can exacerbate the situation. When the market crashes or there are bad periods, and you combine that with health problems, or problems with children or problems with jobs, it magnifies the fear. It makes things worse. To be a successful investor, requires the support of a group. When we’re in a group, we understand ourselves when we share. You learn from other people’s experience, and then learn that you’re really not so different after all.

Wednesday Wisdom from Main Street Money

Matson On The Financial Media

They need readers and viewers to sell advertising. It is all about profits and the way to keep you watching and reading is to tap in your emotions, instincts, and perception biases. They magnify the urge to speculate and gamble. Many of them believe it is their job to help you forecast the future, a futile exercise. They believe the lies and perpetuate the myths. If it bleeds it leads, and if it is up 100 percent in the last year, everybody will be talking about it, no matter how imprudent it is. Think of this as financial pornography. Its job is to seduce and titillate.