July 19, 2016

Understanding Annuities



Barbara Friedberg explains how annuities work:
  1. You purchase an annuity from an insurance company with either a single payment or ongoing contributions.
  2. The money in your annuity account grows at an interest rate or predetermined rate associated with a specific market rate.
  3. Upon retirement, the money in the annuity account is annuitized — converted into an income stream — or withdrawn in a lump sum.
There are two broad types of annuities: immediate and deferred. Within each of these categories are fixed- or variable-payment options. Read the details at:

July 15, 2016

Fixed- Income Investments

The Motley Fool provides a clear explanation of a variety of fixed-income investments and strategies to make the most of this part of one's portfolio. Especially with today's ultra-low interest rates, it is important to manage your investments strategically. With the Dow hitting record levels this week, now is a good time to sell high and rebalance your portfolio. Sell some of your stocks at today's high prices and buy some fixed-income bonds to regain your original portfolio allocation between stocks and bonds. Read the full article at: http://www.fool.com/investing/2016/07/14/what-are-fixed-income-investments.aspx

May 12, 2016

Wills, Trusts, Estate Planning & other Legal Topics

A great resource for estate planning is the NOLO website: http://www.nolo.com/
Nolo was started by a group of lawyers who felt you shouldn't have to pay hundreds of dollars to get competent legal information and advice. In addition to selling books (the real thing and e-books) on a wide range of legal topics, the Nolo website provides an amazing amount of free information. For most people with simple lives (and not a string of ex-spouses with kids) you can write your own will for a fraction of the cost of what an attorney would charge. A great thing about the Nolo resources is they are very careful to alert you to situations where you really do need to consult an attorney. Their materials are well written in a lively manner and with a sense of humor. Check them out. Even if you are convinced you need a lawyer, you can save hundreds of dollars by educating yourself and preparing before you meet with an attorney.

May 6, 2016

Cutting your child's college costs starts early with tough talks

Paying for college is one of a family's biggest expenses.  "With college expenses and student debt on the rise, wise parents engage in candid conversations on this hot topic earlier, rather than later, with their college-bound kids." Sue Grossardt, offers the following tips in a Special for USA TODAY: 
1. Focus on cost, and don't be shy.
2.  Get some skin in the game.
3. Figure debt (not guilt) into college choice.
4.  What’s your major?
5. Define goals early.
"How many of us, at 18 years of age, knew exactly what we wanted to be when we grow up? The reality is that the process of uncovering that is part of growing up. Having some tough talks ahead of time could help limit the cost of that lesson.
Paying for college is the topic for the July 13 Financial Planning for Women program. Details at: www.usu.edu/fpw

The Huge Retirement Penalty for Being a Mom

To reinforce my earlier post about giving mom an Individual Retirement Account rather than flowers or brunch for Mother's Day read on...
"As Mother’s Day approaches, families are busy buying flowers or booking a brunch at a favorite restaurant. Sounds great, but you may want to check on Mom’s retirement plan."
1. Moms generally earn less… 
2. …so they save less for retirement…
3. …and receive lower Social Security benefits.
4. Yet they have longer retirements to finance…
5. …which adds up to higher odds of poverty in retirement.    
Read the details by Penelope Wang at: http://time.com/money/4318170/retirement-penalty-mother/
Then search for "IRAs" on this blog for how to arrange an individual retirement account for mom. Adult children might want to contemplate the impact on their lives when mom is old and living on only Social Security.

Housing, Health Are 1/2 of Elderly’s Costs

As I transition from employer-subsidized health insurance to Medicare I'm reminded that not all expenses decrease in retirement. My (and husband's) health care premiums are going from $43/month to about $300/month.
Medicare Part A (hospital insurance): most people don't pay a premium because they've paid taxes while employed.
Medicare Part B (outpatient insurance): $121.80/mo. (for most people; some pay more)
Medicare Part C (Medigap to cover the gaps):
Medicare Part D (prescription drug coverage): cost varies by plan with higher income enrollees paying additional premiums AND you still pay deductibles, copayments, and/or coinsurance. See: https://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html#collapse-4811
or Part A & B plus Medicare Advantage (supplemental insurance): https://www.medicare.gov/your-medicare-costs/medicare-health-plan-costs/costs-for-medicare-advantage-plans.html
And... once you've figured out the best plans, you need to go through this process every year as insurers change coverage and premiums!

Medicare costs: https://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html
The Squared Away blog shows how Americans' spending changes as they transition from work to retirement. Of course, individual spending varies but the pie charts help by showing the averages. See: http://squaredawayblog.bc.edu/squared-away/housing-health-are-12-of-elderlys-costs/
Read the Medicare Advantage Primer (but note it was published in 2015 and Pat B premiums have gone up to $121.80 in 2016); http://squaredawayblog.bc.edu/squared-away/medicare-primer-advantage-or-medigap/

April 29, 2016

Future stock market returns will be low than past history

Be careful of projecting future stock (and bond) returns based on historical averages. According to Bloomberg Businessweek reporting on a study by McKinsey & Co, market returns will be much lower over the next 20 years compared with the past 30. The report predicts average annual returns of 4% to 6.5% over the next 20 years, compared with an annual average of 7.9% in the past 30 years. Check out the graphic "Lowering your sights" at: http://www.bloomberg.com/news/articles/2016-04-27/be-afraid-be-very-afraid-if-you-re-investing-for-the-long-run#media-1
For a more detailed discussion see: http://www.bloomberg.com/news/articles/2016-04-27/be-afraid-be-very-afraid-if-you-re-investing-for-the-long-run
The report's conclusions confirm academic research that projects lower domestic and international stock and bond returns in the coming decades. So, bottom line, we need to save and invest more to ensure a secure retirement. 

Ignore hidden investment fees at your peril

Too often investors ignore the hidden fees in their retirement accounts, assuming that their employer or financial salesperson has their best interests at heart. Don't be so naive!  "Most people understand the basics of retirement planning. You set aside money to invest and save every month, and you keep daily expenses in check. Sounds pretty simple, right?
Not exactly. Even with a plan in place and the best intentions, you could be one of millions of Americans giving up hundreds of thousands of dollars in hidden fees. But how do you know? If you're saving for retirement with one of the leading brokerage firms, the answer is that you're probably losing retirement income to fees." Read the details by Bill Harris at: http://www.cnbc.com/2016/04/26/how-hidden-fees-can-crack-that-nest-egg.html
Cracked eggs

Presidential candidates: Where is the discussion on aging and retirement security?

In this sad, pathetic election season where so much of the rhetoric is juvenile and meaningless, where is the discussion on aging and retirement security? "There probably has been more discussion about the size of Donald Trump’s hands than about how to secure guaranteed lifetime income, the kind of topic that is top of mind with just about all boomers" according to Dan Kadlec in "The Money Megatrend That the Presidential Candidates Are Missing."  Read the analysis of the critical topics the candidates are ignoring at: http://time.com/money/4307241/presidential-candidates-ignoring-aging-retirement/

Mom deserves an IRA for Mother's Day

Forget the usual gifts of flowers, a restaurant meal, or another kitchen appliance. What stay-at home moms really need for Mother's Day is an Individual Retirement Account (IRA). Non-paid spouses can have their own IRA as long as their spouse earns an income. Homemakers do not earn Social Security retirement credit for their hard work and contributions to families. While that policy oversight may not be remedied in the near future, families should contribute to the retirement security of full-time homemakers, mostly women who are likely to outlive their spouses, by regular contributions to an IRA. For details simply search for retirement and IRA on this blog. For more thoughts on this topic read:Retirement Planning for Stay-at-Home Moms.  Here’s how parents who aren’t earning an income can prepare for retirement. http://money.usnews.com/money/blogs/on-retirement/articles/2016-04-27/retirement-planning-for-stay-at-home-moms
Come to the June 8 Financial Planning for Women program on selecting mutual funds for IRAs and other goals; details at http://www.usu.edu/fpw/
 
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