Traditional Retirement Communities Not on Boomers’ Wish Lists

Downsizing on May 8th, 2012 No Comments

From MultiHousing News*:

A recent study called “The Next Generation: Understanding What the Boomer Consumer Wants from Retirement Living” from Varsity, a marketing company based in Harrisburg, Pa., reveals that “traditional” retirement communities might become a thing of the past for boomers, unless some important changes are made.

Interestingly, I am noticing trends as I meet with dozens of people looking to downsize. People generally want more space, which is understandable as each subsequent generation Read more »

Longevity – Planning to Live Too Long vs Cutting Yourself “Short”

Financial Planning, Retirement Income Planning on April 18th, 2012 No Comments

In a recent  MarketWatch article, author R. Powell advocates planning to live to age 100.

Of course this article was interesting to me as I have these conversations all the time. The challenge with deciding how to plan longevity is this:

If you plan to live a long time, say age 100, then for many of you, often means less money to spend at 68. And if we conveniently assume that you’ll die younger, say at age 82, then  we can splurge a bit more at 68.

Moreover, many people are often familiar with the general tables on life expectancy put out by actuary groups. These often list life expectancy around 80 give or take a few years depending on the table, and sex of the person. However, what many people do not pay attention to is the fact that, the longer you live, the longer you WILL live. For example, as the article states, if you’re age 55, you have a 66% chance of making it to 80 whereas those chances are lower for a newborn.  One of the more succinctly poignant quotes from the article was this:

“For an individual or couple planning their own retirement, I’d suggest using a conservative life span,” he said. “Part of the reason is that the consequences of running out of money typically weigh much more heavily than being able to leave a bequest.”

So the challenge is a bit psychological, as it tests greed vs generosity, enjoyment of life vs continued prudence for some, and it also tests how we view the future. when I discuss this topic with clients, I don’t get resistance to the idea of planning well past 90 for income. I think these days, people have enough experience with older relatives that they can see a reasonable chance of getting there themselves.

Sometimes though, I will meet someone who wants to spend too quickly and doesn’t care about longevity. This is a tough case because unlike many politicians (who often pass legislation at an older age and don’t live to see the fruit (poison) of their decisions), I will likely (percentages) be alive to see the fruit of my recommendations. And I don’t want to have to explain to a 92 year old why he ran out of money. I prefer to be conservative.

However, one way to balance this decision is to plan to travel and live more actively before age 80 and then leave the option open of selling one’s house or other large measures to fund a down-scaled life after age 80. This approach could work for many but when people tell me they want to keep their house and spend down their money, and I look at historic cost increases in property taxes, utility costs, food, gasoline and insurance, I do get worried.

use realistic thinking when planning your longevity and feel free to call us or drop a note on our contact form if you have questions.

Poor Liability Insurance Coverage – A Gaping Hole in Your Financial Plan

Asset Protection, Financial Planning on April 16th, 2012 No Comments

Three for three…

Those are the numbers on my most recent clients and whether or not they needed their liability coverage completely revamped. Let’s review the action shall we?

Typically, I see coverages of about 300,000 for liability on auto insurance and 500,000 or 300,000 on homeowners’ insurance. Which means per incident, the coverage could be lower and it also means, that in a serious accident, someone (you) might be writing a check.

for example, if you:

  • had $50,000 of damage to other people’s property coverage on your auto insurance, and
  • you crashed into a Mercedes then
  • ricocheted into a storefront, and
  • it was your fault, and
  • the total accident damage came out to $125,000

Where do you think the other $75,000 is coming from? If you guessed your checkbook or a new home equity loan on your property, you might be correct.

I must say, I don’t know and can’t predict what would happen in each situation. But I can say that the other insurance company is not going to want to pay for your boo boo. And they have lawyers.

Therefore, when putting together your comprehensive financial plan, consider asset protecti0n aspects such as solid liability coverage. And if you’re considering working with a professional to craft your comprehensive financial plan, give us a call (781-393-0021) or drop us a note on our contact form.

72T Questions Increasing

IRA Planning, Retirement Income Planning on March 26th, 2012 No Comments

I think there are many people getting sick of working at their jobs. I also think there are many people who, instead of continuing to look for a job similar to their last one, are considering using a combination of early pensions, early retirement withdrawals, part time jobs and consulting gigs, and low cost living to check out of the corporate rat race early.

Why do I think this? Because of the increased number of questions and inquiries regarding 72T distributions that I get from people all over the country. Read more »

Tags: 72T, ira

Long Term Care Insurance Won’t Get Cheaper – What You Need to Know

Financial Planning, Health Care & Insurance on March 12th, 2012 No Comments

Many retirees and near retirees consider long term care insurance as part of their overall planning package. And as you’d guess, I believe they are wise to do that. Oftentimes, they consider purchasing this insurance in their 50s when it is super cheap (long term care pricing is flat up to age 40 typically, then moves higher if you apply after that).

Furthermore, some time ago, a few financial experts came up with age 57 or 58 being the prime age to purchase if weighing the cost/benefit comparison. This I’m sure motivated some to buy it early.

But there are forces at work in the long term care insurance industry that are making this insurance increasingly expensive and increasingly important for the consumer to consider sooner rather than later: rising life expectancies, lower than expected lapse rates and increasing usage are forcing some companies to either leave the business or raise their rates.

The latest casualty: Prudential Financial.

from FA News Online: Read more »

Tags: long term care insurance costs rising, planning

Are Changing Attitudes Toward Renting vs Owning Endangering Your Home Value?

Downsizing on March 5th, 2012 No Comments

“Examining 250 properties around the U.S., and going through close to 40 client files to project the financial impact of owning real estate versus liquidating it, Arzaga, an adjunct professor in personal finance at the University of California at Berkeley, found that, “100 percent of the time it was better to rent, rather than own.”

Prof Richard Arzaga from Reuters Article

In a recent Reuters article, the author mused that the “New American Dream is Renting to get Rich.” Comments like that should scare the dickens out of anyone counting on their home equity as their primary retirement asset. And the comment has further merit when the writer interviews a Berkeley (CA) professor and he says stuff like the quote above.

But should future and current retirees really be worried? Read more »

“Actual” Economics vs Macro, Micro Etc – It’s All in the Mind

Financial Planning, Observations & Analysis on February 22nd, 2012 No Comments

Many financial advisors likely feel that if their clients only understood the “fundamentals” of the financial field, they wouldn’t get upset over market ups and downs (what we call “volatility” in the industry. However, the truth is much more complicated in that and a whole field called “behavioral economics” has grown up around the idea that how people respond emotionally to events is much more important that logical facts.

A recent Financial Advisor Magazine  Online Article focused on this difference between fundamentals and emotions:

Research supports the need for advisors to look beyond just the fundamentals. A 2011 Prudential survey on investor concerns and attitudes finds that 56% Read more »

Low Yields Forcing You to Invest in Risky Assets?

Retirement Income Planning on February 13th, 2012 No Comments
Photo courtesy of Head Start Body Start

Historically, when planning for retirement income, investors could rely on a balanced portfolio with bonds, stocks and the bonds CD’s would lower the risk while adding some interest income.

Today this is just not possible. With the Federal Reserve Board setting short-term rates at 0%, the entire yield curve has sunk to amazing lows (yield curve – yields from short term to long term plotted on a graph).

An interesting recent Wall Street Journal Article highlighted this issue also. What can you do?

As it states in the article, we can’t keep waiting for rates to go up so that we can save in CD’s and make 6-8% again. Who knows how long rates will be low. So we are “forced” to seek higher yields in something not so safe – the markets. I can’t tell you how to invest for income, but I can help you decide what approach works best for your personality type. Here are some questions to ask: Read more »

Small Changes = Big Savings in Your Retirement Budget

Cheap Ba***rd, Retirement Income Planning on February 6th, 2012 No Comments

In my evening reading, I came across a nice article tip on saving money by getting oil changes when your auto manual recommends them, not every 3,000.

In summary, many newer cars today require oil changes every 5,000 miles or more, so changing oil every 3,000 miles is excessive. Why is 3,000 recommended? It was in the past the regular cycle and I’m sure it helps the business of your local quickie oil change center if their thousands of customers come twice as often as they need to.

Interestingly though, there are numerous other ways you can stretch how far your income goes (and for retirees, how far your retirement income goes!) just be changing the frequency of routine service. Things like: Read more »

Hiring an Advisor?

The Honest Broker – Reflections on Seth Godin’s Comments

Financial Planning, Observations & Analysis on January 30th, 2012 No Comments

From the blog of the famous Seth Godin:

The honest broker

It really is a choice, one or the other.

Either you happily recommend the best option for your customer, or you give preference to your own items first.

Either you believe in what you sell, or you don’t.

Either you treat your best partners better, or you treat everyone the same.

Either you shade the truth when it’s painful to do otherwise, or you consistently share what’s important.

Either you always keep your promises or you don’t.

Either you give me the best price the first time, or you make me jump through hoops to get there.

Earning the position of the honest broker is time-consuming and expensive. Losing it takes just a moment.

_______________________________

I want to comment on the idea of hiring a financial advisor, and working with me specifically, while incorporating Seth’s thoughts. This is intended to be a direct and honest assessment of how I stack up to Seth Godins’ principles laid out above. Here we go… Read more »