Top 5 Favorite Online Financial Tools and Their Limits

financial-worldImagine you’re being shipped to a deserted tropical island. What one item would you take? Now ask a thousand people the same question. We’d face similar conditions but would choose different things. Some would go for survival – drinking water, fire starter, Swiss Army knife, or a first aid kit. Others might go for comfort – sleeping bag, comfy recliner, hair conditioner, a solar lamp or a tube of lipstick. And the creative might take a lifetime supply of Tecaté.

There are many choices in online tools for a game of Financial Survivor including retirement, insurance and tax calculators. Perhaps not the utility of a shiny Leatherman tool, but useful gadgets nonetheless. These tools help you see finances in a unique way and explore different “what ifs” so that you stay on track with financial goals, protect your loved ones and have flexibility and freedom to do the things you love to do. There are tons of tools – you can visit websites such as your favorite financial institution,, or where you’ll find over 400 calculators for free.

What are your favorite online financial tools that make planning easier? We surveyed our Sage Financial team and here are the top five calculators:

  • Budget
    You’ve got to be more serious than anyone on the planet about your finances. Spending plans are important for several important reasons – living on less than you make, knowing where your money goes, and funding emergency reserves (rainy day fund). Online tools range from Excel spreadsheets to those with supporting processes and forums (communities) such as, Dave Ramsey and others.
  • Loan Amortization
    Financial priorities often shift in time. Often, the early goals are to accumulate emergency reserves and pay off debt. It’s a joy to watch a person or couple see what it takes to get out of debt (payoff accounts with smallest balances first then move to the next, refinance to lower rates, making extra payments to the mortgage, etc.). And lower rates are the payoff of building and protecting your credit rating.
  • Social Security
    How much do you have to save for a comfortable retirement? What is your projected social security retirement? When do you take social security benefits – age 62, full retirement age or 70? Are your earnings being accurately reported to social security? The maximum monthly social security benefit in 2018 is about $3,698 whether you’re 62 or 70. It’s designed to replace about 40 percent of a retiree’s pre-tax income. The more you make, the lower the percentage of income social security will replace. Your monthly benefit is figured around something called “bend points.” Example – if you were born in 1954 or later, you’d be credited about  90 percent of average monthly income to $895, 32 percent between $895 and $5,397, and 15 percent for the excess; add them all up for the retirement benefit payable at full retirement age. Log on to and sign up.
    Bank Rate is rich with interest rate information for both savers and borrowers. It includes regional and global market data including major indices, CD and loan rates. And it’s a good resource to shop for online money markets to check out competitive yielding alternatives for cash reserves.
  • Tax Tables
    Most people hate getting surprises including unexpected tax bills and underpayment penalties. Ask your CPA or enrolled agent for 2018 tax estimates or go online for tax tables. There are significant tax law changes and your situation may have changed – new job, major asset sale, family change, and others.

What about how much do I need to save so I don’t run out of money in retirement calculators? Absolutely retirement calculators are important for planning. Prudently used, they can help us by showing us the probable future impacts of decisions we make today. There are numerous online tools including some of the websites previously mentioned, your 401k plan provider and others. However, they vary from simple (a couple of variables) to complex (numerous variables), and a very user-friendly (simple) calculator might be a poor simulator of reality.

3 Reasons Retirement Calculators Don’t Work

  1. Generally, retirement calculators attempt to answer a very basic question, “We have savings of $X…will it last our lifetimes if we spend $Y per year?” However, life is seldom a straight line and periodically surprises us. What if we don’t live the same number of years (or live longer than expected) – how do we protect the survivor (or hedge our bets)? Our spending in retirement will vary – higher in the early years, stabilize in the middle, then kick up in our later years – how do we plan for that? We’re a blended family – we’ve got my wealth, his wealth and our wealth – how do we factor that and keep peace in the family? We’re planning to resize our home once, maybe twice as we move to be closer to the grandkids – how does that impact our future?
  2. Can’t maintain our desired lifestyle – This rhymes with haven’t saved enough. What is feasible with a financial reboot? Work longer? Spend less? How do you re-prioritize the goals? How do you negotiate a re-alignment?
  3. We (I) don’t want to do this alone – Sometimes it’s a confidence thing (moving outside the 401k cocoon) and other times it may be complexity or you’d rather be doing other things in life. This is where delegation, partnering or simply having a feedback mechanism to help you think things through is needed.

In closing, some projects are completely do it yourself, and others are where you use tools to validate what’s being recommended to you or confirm your thinking. Remember, they’re tools, and sometimes you need a special touch. Imagine three people standing in line at Home Depot. We’ve each got an orange bucket containing the same tools – the same brushes and paint. It’s you, me and a guy named Michelangelo. One of us will have a very special outcome.

Good luck!

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The Third Phase of Retirement: Reflection

Traditional discussions about retirement planning often involve two objectives – accumulating enough money to last a lifetime, then having a way to pass it on to your loved ones. However, there’s a big chunk between retiring and dying where you’re navigating life’s transitions. This three-decade period has been the focus of this series. There are three phases of retirement. Each is defined more by distinct situations, needs and financial needs, than by time. And each has unique planning opportunities and challenges.

The third phase known as Reflection isn’t as fun or active as the first two – Honeymoon and New Directions – because you’re making the more difficult medical and lifestyle decisions. There are two sub-components – the longevity phase (accepting the inevitability of aging) and the solo phase (where a couple becomes single).

  • Primary retiree concerns – It’s often a time of reflection – a life well lived, and uncertainty – how our exit will go. Life has slowed and you’re spending more time at home preserving memories and talking with family and old friends. Health and finances may limit your choices in life. Doctor visits rise as physical and cognitive conditions decline. Caregiving increases as a receiver or giver – one in four American families provide nearly 21 hours per week for care to a loved one. You don’t want to be a burden and focus is getting loose ends wrapped up for less mess left for the kids; and there’s a renewed concern – will my spouse be ok without me? Simultaneously, the kids are worried if mom and dad are going to be ok and what changes they may need to make.
  • Cash flow planning – Three challenging situations require management – Declining revenue and assets, and rising costs. A couple’s income might decrease after a death from reduced pensions and Social Security. Costs rise for healthcare and professional caregivers. Fidelity Investments estimates healthcare costs for a couple age 65 to be $280,000 (excludes long-term care) and inflation. And living alone at home might be cost prohibitive if professional aids are needed – 24/7 care at $20 per hour is $14,400 a month and excludes the cost of Boost drinks and personal care goods. The most expensive period for a couple may be when the first spouse moves to assisted living – you’re maintaining two households. Finances are easier when the second spouse needs advanced care – you sell the house.
  • Legal and estate planning – Your professional advisory team and estate plan should be in place due to the higher risks of diminished capacity and health. And estate plans should be updated at a minimum for any of the “5 D’s” – decade, divorce, death, diagnosis and decline (American Bar Association).

How’d you do in Mind Reading class? Getting your wishes in writing will greatly help your loved ones. Conversation Project was a survey that included end of life planning. Over 80 percent said it was important to have their wishes written down, but only a quarter had done so.

Many tools are available including advanced medical directives, POLST, Power of Attorney for Healthcare, etc. through your attorney, healthcare professionals and online. However, I will highlight a couple to stimulate deeper thought.

  • “Five Wishes” helps remove the guesswork. You express how you want to be cared for at end of life. The five areas include who you want to make decisions for you when you cannot, types of medical treatment you want (or not), your desired level of comfort, how you want people to treat you, and what you want your loved ones to know.
  • Check out Susan Turnbull’s website on ethical wills and letters to trustees. The legacy you leave goes beyond material wealth – your personal stories, wisdom, feelings and advice are worthy of being passed on. The practice of communicating what one thinks is important to younger generations dates back to the first parents. Jewish men began to formalize this practice in the 12th century by writing personal treatises to their sons on how to live an ethical life. And Susan’s modernized it into “love letters” to family members, letters of wishes to trustees and expressions of donor intent.

I end with a story about a beloved comedy team, Burns and Allen. The duo’s career started in vaudeville theater and spanned four decades including theater, radio, TV and film. Burns signature sign-off to their popular TV show was “Say goodnight, Gracie.” Gracie said her final “Goodnight” in 1964 when she died from a heart attack at age 69. But with his trademark cigar, George continued his career as a comedian, actor and singer for a total of seven decades. He’d visit his beloved Gracie’s grave once a month to share what was going on in his life. His onstage characters and jokes reflected his attitudes about life and often poked fun at aging. One of them was “How can I die? I’m booked.” George Burns died at age 100 in 1996.

Good luck to you!

You can also view this article on Reno Gazette Journal.

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The Second Phase of Retirement: New Directions

The average American spends four decades dreaming and saving for retirement. Some transition well. Others struggle. Advertisers portray retirement as a life of leisure – endless walks on the beach and rounds of golf. But as Mitch Anthony wrote in “New Retirementality,” playing golf every day risks two things – first you get bored, and second, you become boring. Retirement is supposed to be fun and a time of rejuvenation. But according to a survey by USA Today, about two-thirds of retirees said they had challenges adjusting to retirement.

Rather thinking about planning for retirement, think the phases you are likely to navigate and negotiate. The three phases of retirement are Honeymoon, New Directions and Reflections. Each phase is defined more by distinct situations, needs and spending rates, than by time. And each has unique financial planning issues. This article is intended to give you some ideas as we focus on the middle phase.

New Directions phase (age 75 – 84) is a pause from the go-go of the prior Honeymoon phase. That period may have been fun and busy. But now, many shift and re-think what they want from their lives while they’re still able. They include simpler things in life, finding new identities (being productive), or new relationships (circles and groups). Think about these two insights by MIT AgeLab. First, we will see a depletion of resources during retirement – financial, cognitive, physical and social – and hopefully gradual and not abrupt. We press on the gas but want to make sure there’s enough in the tank to finish the trip. And second, a 60-year old routine is broken – get dressed, eat breakfast, go to school or work, come home, eat, and go to bed. A new routine is needed.

  • Primary retiree concerns: “Shall I stay or shall I go?” Conversations arise about downsizing or moving closer to the children, someplace warmer, or nearby healthcare. Concerns emerge about longevity and mortality. These include finding yourself suddenly alone (loss of a spouse), caregiving (giving or receiving end), and giving up the car keys (mobility and independence). Do you remarry? Some make new relationships but keep things separate (finances, homes, etc.). According to Pew Research, about half of those 65 or older remarry. Yet another interesting finding from the Office of National Statistics is that women 65 or older are four times less likely to remarry than their male counterparts perhaps supporting the notion that women mourn and men replace.
  • Cash flow planning: The rate of spending tends to decrease as retirees settle and get into a groove. Some planners refer to this as a “retirement smile” effect where retirees spend more in early retirement, flatten in the middle, then rise with healthcare costs. However, spending priorities shift (you travel less but buy airline tickets for the kids to visit you, or rising home or rental maintenance costs as you hire more help).
  • Investment strategies: Is cash flow keeping pace with living costs? The drive for simplicity continues – fewer cats to herd – consolidating, hiring property managers, etc. And interestingly, I see less concern with market events or crisis du jour. I remember a quote by Warren Buffett’s business partner Charlie Monger a couple years ago, “The older I get, the less concerned I am with the state of US economy.” He’s now 94 years young.
  • Estate plan: Review and update wills, trust, POAs and beneficiary designations. How about a professional trustee in lieu of one of your kids to help maintain harmony in the family, or you need special talent? Have you identified new causes or organizations that are ideal for legacy gifting?

Da Vinci, Edison and Ford are known for their innovations that changed the world.  However, there’s also the Museum of Failures in Helsingborg Sweden with examples like the hydrogen blimp, Concorde jet and Segway. Prior miscues serve the wise as lessons learned. Hopefully, these insights give you some ideas ponder and nudge you to action. Forget the rearview mirror. The future is closer than you think.

Good luck!

You can also view this article on Reno Gazette Journal.

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The First Phase of Retirement: Honeymoon

Orson Welles once said, “If you want a happy ending, that depends of course, on where you stop your story.” Some people when planning for retirement focus only on “The Number” – how much I need in monthly income or cash in the bank to retire and stay retired.  Suppose you retire at 65 expecting to live another three decades, but you die unexpectedly at age 74. You didn’t live long enough to run out of money. Was that a successful retirement or in Mr. Welle’s terms a “happy ending?”

More successful retirees value the role of life planning – living life on their terms, how they want to be remembered, and maintaining harmony in the family. This article is the first of a series that will explore each of retirement’s distinct three phases – Honeymoon, New Directions and Reflections. Each phase is defined more by distinct situations, needs and spending rates, than by time. And each has unique financial planning issues.

The first phase, Honeymoon (roughly age 65 to 74) is a period of discovery and very active physically, emotionally and financially. These are the “doing years” when you’re checking off the to-do list of “someday” items. These include travel, spending time with family, reviving an old or starting a new hobby, completing a home improvement project, and changing careers including part-time, board or committee member, and volunteering.  It’s emotionally charged – you’ve retired – and you may have retirement regrets because once you get off the horse, it’s hard to get back on. This and the third phase (Reflections) are generally the most expensive.

  • Primary retiree concerns: Are we spending too much (or too little)? Now, what am I going to do (or “Please find him something to do. I didn’t marry him to have lunch with every day.”). How do we invest our retirement funds, and draw a monthly paycheck from them? And watching CNBC daily is likely to give you grief.
  • Cash flow planning: You will be more serious about your finances than anyone else on the planet. Budgets are crucial – some are very detailed and others know they spend X dollars a month. They’ll have “spikes” for travel, remodel, RV, etc. You’ll file retirement benefit elections for Social Security, elect IRA/401k withdrawals and organize your other investment cash flow including rental properties.
  • Investment strategies: Are your portfolios positioned for the long-term and your “happy ending?” Sufficient liquidity to maintain your retirement checks should a bear market descend?
  • Business exit transition: What exit best accomplishes your goals regarding your financial security, tax minimization, employees and clients?
  • Risk management: What employer-provided coverage needs to be replaced? File for Medicare at 65 and what supplemental insurance should you consider? Put your auto, fire and casualty coverage out for bid? If lots of overseas travel, do you buy travel and medical insurance?
  • Estate plan: Consult your attorney and review and update your wills, trust and POAs and beneficiary designations. Should you consider renaming successor Trustees or Executor because they’re as old as you or moved? How about a professional trustee in lieu of your eldest kid as successor trustee to help keep the peace and get things done? What about modifying “ownership” of accounts (are they supposed to be protected under the trust, add a joint owner, etc.)?

This is a pretty large list! I didn’t bring my briefcase on my honeymoon with my bride and I don’t expect all of this get done in the first year of retirement honeymoon. However, that’s a reason you have a team of trusted advisors to delegate some of this work. Life has a way of surprising us and we can blow through the three retirement phases faster than expected.

Good luck!

You can also view this article on Reno Gazette Journal.

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What worries the world? Here’s what one survey says

What are your top three worries? Do they serve as anchors and impede your progress? Or do you acknowledge that the world’s an uncertain place, you plan accordingly and live your life? Football coach George Allen, Sr. once said “Forget the past – the future will give you plenty to worry about.” This article takes a look at a recent global survey of the world’s worry list and shares some insights that you can discuss with your family and team of advisors to help you stay on track and manage whatever crisis du jour next develops.

What worries the world is the name of a monthly survey conducted by a leading global market research and advisory French firm called Ipsos.  One question asked is “Which 3 of the following topics do you find most worrying in your country?”  Here are the results from the survey (250,309 adults in 29 countries interviewed January – December 2017).

Worry          % Mentioning      in 2017 Top Worries by Country
Unemployment/jobs 36% Italy & Spain 65%, France 46%, Saudi 45%, S. Korea 32%
Corruption & financial/political scandals 34% S Africa 67%, Brazil 57%, India 47%
Poverty/social inequality 33% Russia 54%, Germany 45%, Japan 38%
Crime and violence 29% Peru 65%, Mexico 59%, Argentina 51%, Sweden 46%
Healthcare 23% Hungary 65%, Poland 49%, UK 41%, US & Canada 37%
Terrorism 20% Turkey 62%, Israel 45%, Belgium 34%
Education 19%
Taxes 17%
Moral Decline 15%
Immigration Control 13%
Inflation 10%
Rise of extremism 10%
Maintaining Social Programs 9%
Climate Change 9%
Childhood Obesity 3%
Access to Credit 2%

It illustrates what people worry about, and country-specific issues. Some of these worries are big pictures issues for which we have little control. Other worries, however, are very relevant and actionable so you can better put things in your favor. These “worries” have personal financial planning implications.

  1. Safety and security are top concerns whether it is my job (income interruptus), personal safety, or integrity of the system. How can I increase my marketability (earnings potential)? What risk management tools should I use to protect me and my family?
  2. What is important to you about some of these single word “worries?” Healthcare can mean the process and issues of aging, the access to or cost of care, or maintaining good health. Is education about investing in one’s future, how to fund for it, or paying off the debt from getting your diploma? And what steps can you take to get a bigger income tax refund, minimize the tax from selling your business or a property you’ve had for a long time, or reducing the cost of gifting your wealth or transferring it upon death?
  3. We live in a changing and uncertain world. There’s a trade-off between risk and return. How much return do you need and can it be earned with a comfortable level of risk? Should you take advantage of opportunities overseas by investing globally? What areas or regions represent danger or greater volatility? Diversification is the blessing of never getting killed in exchange for never making a killing.

A wise person once told me if you wait for all uncertainty to disappear, then so does the opportunity. And often, the initial question or “worry” isn’t the real issue – you’ve got to dig, ask and explore. Then you get a clearer picture, the solution might be a bit more involved, however, it’s best for you. Good luck.

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Planning Under the Clouds of Dementia and Reducing Financial Elder Abuse

“It’s not the men in your life that matters, it’s the life in your men.” Mae West had a way with words and exuded a playfulness in life. The legendary actress and playwright delighted audiences and horrified guardians of morals with her hourglass figure wrapped with feathers and furs and husky voice that purred double entendres. She said, “If I had known I was going to live this long, I would have taken better care of myself.”  Paradoxically, she lived a more disciplined life, she didn’t smoke or drink, and died at 87 in her LA home.

Living longer challenges our basic wants of freedom, dignity, health and not being a burden. We need more wealth, experience and negotiate the process of aging, strive to reduce the high cost of elder financial abuse. This article outlines some actionable steps to help you prepare and protect your future and that of your loved ones.

The costs of living longer are financial and emotional. When are you ready to retire, enjoy a life of leisure and hang up your tool bag, briefcase or lab coat? The decision for some is easy. Others struggle because it can be a big transition mentally and emotionally. Do you have enough wealth, or on track, to last a lifetime? If your lifestyle requires $100,000 a year over and above your pension and Social Security benefit, and you retire at 65, you’d need about $1.6 million in wealth if you expect to live for 20 more years, assuming 5% return and 3% inflation. If you live 30 years, you need $2.2 million, and $2.7 million for 40 years. Serious saving and prudent investing is required. And as we grow older, emotional challenges shift to making life simple (less lawn), using alternative transportation (lunch with friends), and the assistance of caregivers (changing light bulbs).

As we get older and capacity diminishes, the risks rise for elder financial abuse.  And the costs go beyond money lost. According to figures reported by, elder abuse costs US seniors about $36.5 billion annually, one in five seniors report being a victim of financial fraud or abuse, and nine of ten abusers are family members or other trusted individuals. This abuse can lead to distress and depression. And despite being widespread, the crimes often go unreported or undetected.

Dementia is a general term for a decline in mental ability severe enough to interfere with daily life. Alzheimer’s accounts for about 80% of the cases, and afflicts one in nine Americans age 65 and older and one in three age 85 and older per the Alzheimer’s Association. Another type of dementia is Parkinson’s. And here are three stages of decline and planning steps to consider.

Mild decline – Time for difficult conversations with he or she, the family and professional advisors. Discussions include financial, legal and caregiving plans, and for the afflicted about his or her wishes with loved ones for future care. Planning steps include reviewing estate plans and beneficiary designations, and executing durable powers for finances, power of attorney for health care and living will.

Moderate decline – Time to deepen the working relationships between family and professionals. Financial planning should be wrapped up because legal capacity may be in question.

Severe decline – This is when the family is working primarily with professionals. Legal capacity might be lost, and proper planning helps continuity amongst the family – otherwise guardianship may be necessary.

May West also said, “You only live once, but if you do it right, once is enough.” Amen to that.  Life has its ups and downs. It’s the rough spots that give us the most grief, and why we plan. Paraphrasing the words of Denis Waitley, we expect the best, plan for the worst and are prepared to be surprised. Good luck to you.

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6 Things a Graduate Should Do

Congratulations graduates. It’s exciting as you’re about to embark on new journeys and blaze individual paths into the world.  Yet maybe it’s a time of uncertainty. What are you going to do with your life, where are doing it, and who will you be doing life with? Three big questions, but you’ll figure things out. You’ve learned how to learn, and life now shifts to choosing what you’re going to learn. Meanwhile, here are six smart financial moves for graduates.

  1. Use your time wisely – Job prospects are strong. Take your time and pursue the right opportunities. Most employees want honesty and marketability. The better long-term career investments are often jobs that develop your skills and expand your network.
  2. Start saving early – Here’s a test question. You’re offered a choice (a) $1 million in cash now, or (b) magical penny that doubles in value daily for 31 days. Take the magic penny! It’s boring for a while (1 penny turns to 2, 4, 8, and so on), but things get exciting. End of week 1 you have $1, week 2 is $100, and week 3 is $10,000. You hit $10.7 million on the 31st day! Compound interest is a powerful principal. Consistency and time matter. Save and invest X dollars monthly (401k and personal investments) towards your goal – newer vehicle, fund college or trade school, or retire on your terms.
  3. Build cash reserves – Most Americans have less than $1,000 in bank savings. It’s wise to have three to six months’ living expenses socked away in an interest-bearing money market for emergencies, reserves and flexibility. You’ll have more flexibility and less stress – move apartments, switch jobs, or pay a surprise bill.
  4. Stick to your spending plan – A ton of money will pass through your fingers in lifetime earnings over the next forty-some years work. Ignoring inflation, Average Joe earns $35,000 annually, or $1.4 million over forty years, and $100,000 a year is $4 million lifetime. How much of that will you save? Most don’t save enough. Schwab’s 2018 Modern Wealth Study reports that three in five Americans live paycheck to paycheck and only one in four have written financial plans. Affluent people spend less than they make, know what they spend, and budget money to save to maintain their future lifestyle and minimize “surprises.”
  5. Manage debt – Goals are to eliminate debt (pay off student loan or credit cards), or use wisely for major purchases (cars and house). Rising rates or poor credit rating mean more expensive debt. If you’re buying a vehicle, consider the savings of new versus used, and refrain from buying the “extras.” Say you’re comparing a $20,000 used vehicle at 6% interest for 36 months versus $30,000 new vehicle at 4% for 72 months. Used vehicle may sound expensive ($608 monthly payment versus $469). However, the new vehicle means monthly payments twice as long, spending $10,000 more in price and twice as much interest expense.
  6. Protect yourself – Boarders and cyclists wear helmets. Protecting your financial health is also important. Review and enroll in health and disability insurance (and life if needed) as appropriate possibly via your employer. Review your estate plan and beneficiary designations (life insurance and retirement plans) as needed. And periodically shop your car and homeowner’s insurance to save money and make sure you’re adequately covered.

Celebrate graduation with your family and friends. There may be some lingering worries “What am I going to be when I grow up?”  Take a deep breath. You may be feeling a little intense right now. The world changes. There are careers today that didn’t exist ten years ago – AI Engineer, Digital Marketing Specialist, Telemedicine Physician, or Uber Driver. And there will be new advancements in the future. If that didn’t help, remember back to your childhood when you first pedaled your bicycle on your own – without your mother or father running alongside holding your seat. Overwhelming feelings of freedom… and fear? Do the same today as you did back then – keep pedaling. Congratulations and good luck!

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Widows and Widowers and Getting the Right Social Security Benefits

Are the majority of widows and widowers making the wrong decisions regarding Social Security survivor and retirement benefits? Or are they getting limited information regarding the benefit options available?  The Office of Inspector General suggests that thousands of widows and widowers may be shortchanging themselves by millions of dollars in a recent report titled “Higher Benefits for Dually Entitled Widow(er)s Had They Delayed Applying for Retirement Benefits.” This article explores that study and several planning issues regarding Social Security benefit elections.

What is Dually Entitled? Social Security provides benefits to retired and disabled workers and eligible dependents and survivors. You may be entitled to retirement benefits based on your earnings starting as early as age 62, full retirement age (65-66 for most), or deferred to age 70. The later you wait, the higher the benefit – deferring benefits from age 62 to 70 is about a 76% larger monthly check. Additionally, a widow(er) may be entitled to a survivor’s benefit as early as age 60. Thus, a dually entitled person could be a widow(er) age 62 or higher – she (he) may be entitled to survivor and retirement benefits. In 2010, about 28% of SS beneficiaries had dual-entitlement status.

What’s the problem? We’re each responsible for contacting SSA to understand our benefits and options, then decide and file for benefits. If you’re eligible for benefits as a widow(er) or surviving divorced spouse, you might be able to switch to your own retirement benefit as early as age 62 (or defer them to as late as age 70), assuming your retirement benefit is greater.  SSA is supposed to explain the options so that we can make an informed decision. OIG feels that SSA employee guidance and advice to beneficiaries needs improvement. Based on their random sampling they estimate thousands of widow(er)s have lost more than $130 million in benefits because SSA employees failed to adequately advise widows/retirees of their benefit options.

Furthermore, they estimated that 82% should have delayed filing for retirement benefits, 10% had family members (e.g. children) eligible for benefits, 6% were not eligible for higher retirement benefits and 2% did delay filing for retirement benefits.

Here’s an example they provided. A woman applied for widow’s and retirement benefits in 2011 and was eligible for $1,403 and $1,140 per month, respectively. She’ll get the higher of the two, not both. SSA paid her a combined monthly benefit of $1,403 consisting of $263 (widow) and $1,140 (retiree). However, she could have limited the scope of her application… file initially for the survivor benefit, and later submit her retirement application at age 70. Apparently there was no discussion of such option in her SSA files.  She turned 70 in 2015. SSA has paid her about $39,700 from the time she turned 70. Had she deferred taking retirement benefits to age 70, she would have received 25% more. She was underpaid $13,000 by not deferring her retirement.

The key conclusion by the OIG is apparently to talk up deferred retirement elections (age 70) because beneficiaries get more money. Is that the best recommendation for you? I’m not here to critique their study. Perhaps a solution to Social Security’s underfunding problem is telling us all to defer filing for SS benefits until age 70 and hoping we have short life expectancies. However, I do have two closing thoughts specifically as they relate to widows and widowers and generally as they relate to personal financial planning.

  1. Don’t rush into making big decisions. We share a checklist for executors to help them through a difficult time. It’s intended to help keep things from falling through the cracks. There are many items on the list – the deceased, family, financial, legal, etc. However, “Don’t Rush” tops the list. It’s an emotional time. Hopefully, you have good shoulders to lean or stand on and help you prioritize and handle the pressing issues, and maintain flexibility until things become less cloudy.
  2. Think things through. Many planning issues are complicated. They’re not limited to choose A or B, and often they’re multi-dimensional. How can analysts of this study conclude that 82% made the wrong decision? Deferring retirement checks until age 70 may have meant higher benefits down the road. How about the survivor who has a short life expectancy, needs the cash flow now (e.g. reduced pension benefits), or is “comfortable” financially now?

Like most things, the best choice for you is “it depends” and your plan’s unique. Good luck.

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Reasons People Get Off Track Financially

Staying on track is challenging. Investors face too many choices – including the lure of “almost too good to be true” solutions – that make mapping their financial plan confusing. And distractions pop up – crisis du jour – that threaten to blow us off course. Generally, it’s not a single issue such as market uncertainty – is now the right time to invest or how to adjust my 401k – but bigger issues that come into play. Let’s review some of the major reasons people get off track so that you can better negotiate decisions you may face in life.

Planning is a combination of art and science. First it must be easy to implement. Your financial life may be complicated, however, if the plan is too complicated, it won’t be executed – picture dusty blueprints for the house that will never be built that sit idly in the corner. And second, it must be based on evidence – both relevant to your situation and pass the tests of time.

More US workers are dissatisfied with their financial situation than they reported two years ago per the 2017 Global Benefits Attitudes Survey by Willis Towers Watson. This biennial survey measured 30,000 private sector workers in 22 countries – roughly 5,000 were American workers – and was conducted in August and September 2017. It represented a slight reversal of financial well-being following several years of steady growth. About a third (35%) said they were “satisfied” with their current financial situation today, down from roughly half (48%) two years ago. 34% believe that their “financial woes are negatively impacting their lives” – up from 21% two years ago. About half reported a major life event in their lives – divorce, health event, or borrowing from their 401k or payday loan. These coupled with stagnant wage growth cause worker angst.

How many of the two-thirds “dissatisfied” would improve their situation with financial planning and guidance?

Investors may be concerned about market uncertainty, volatility or whatever the current crisis du jour. They’re important. However, bigger issues deserve attention such as not having saved enough, and your overall financial health is determined by more than your cash flow. Prudent planning considers up to six or seven areas (investments, tax, insurance, business, etc.) to build and protect from a major setback from jeopardizing your and your family’s future. Thinking about the survey above, here are four ways (non-investment related) people get off track.

  • Helping too much – It’s natural to lend a helping hand and see our kids and grandkids more successful than us. Find the right balance between your financial future and theirs.
  • Too much debt or the wrong kind – There are smart ways to use leverage such as large asset (home, business acquisition, etc.) or super cheap car loans. However, the most financially successful have no or little debt. And payoff or fix variable rate debt including ARM mortgages and student loans – rates are rising.
  • No spending plan – Know how much you can spend (and save) and budget a rainy-day fund for ‘surprises.’
  • Alone at the wheel – There may come a point when a couple becomes solo. It’s hard enough to read minds, especially when one’s gone. The burden of financial decisions can be heavy resting on one. Written plans and shared passwords are helpful, as is having another to bounce ideas or think things through.

Who amongst us doesn’t prefer short cuts over long hauls, or the magical power to turn lead into gold? I think about our fascination with magic and the realities of science. Take alchemy. It tends to get a bad rap with wizards and bubbling potions. It blended mysticism and science to help men understand forces in the world, including some brilliant minds such as Isaac Newton and Robert Boyle. Over time, alchemy faded but something else emerged. Experimentation and exploration paved the way for modern chemistry. Let’s remember that fulfilling goals and negotiating life’s “surprises” takes a balance of part art and part science. Good luck.

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Crossing the Rubicon

The triumphant Julius Caesar stood on the northern banks of the Gaul River with his army. He agonized over his next move. Caesar had expanded the borders of the Republic into modern France, Spain and Britain in a decade long campaign. Should he stay in Gaul and forfeit his power to enemies in Rome, or take Rome by force with his sword and army? He had little choice, but if he crossed, there would be no turning back.

Roman law required generals returning from military conquests to disband their armies.  Senators said it was “for the safety of Rome” and avoiding an internal military coup – and it protected their positions, power and wealth. However, this time opposition against Caesar had escalated. His unprecedented victories earned him unrivalled power and influence Caesar was ordered to relinquish his command and there were rumors to take him out by any means necessary.

Caesar had no intention of obeying the Senate. Inspired by a vision from the gods, he took charge of his men and said, “The die is cast.” He crossed the small stream and started a great war. And his successes continued until he was assassinated five years later. He established a new constitution, brought order to the Roman Empire, reformed the calendar with the Julian calendar, and was snuggle buddies with Cleopatra.

“Crossing the Rubicon” for Caesar meant leading the greatest empire of the times. It also brought him death. The phrase is used today when you face a difficult decision. You commit to a specific course and it becomes a point of no return. Examples include having a family, expanding into a new business area, retirement, divorce, or a tattoo. Not all are irrevocable and some have more significant consequences. And some can be reshaped or enhanced with adjustment and planning.


10 Ideas for Your Tax Refund (or Reasons Why We Save)

  • Build cash reserves – Amount equal to three or six months’ living expenses if working, one or two years if retired. Check online FDIC insured money markets for competitive yields (vs local banks).
  • Pay off debt.
  • Add to 401k or your after-tax savings – Retirement plans generally provide tax benefits. Reasons to invest outside of retirement accounts include liquidity, real estate, or you don’t want all your future retirement checks to be fully taxable.
  • Fill gaps in insurance and reduce risks – $1M umbrella liability policy might cost $300-$400 or buy a home generator.
  • Fund vocational or college expenses – Also 529 plans have been expanded for elementary and secondary private schools (but not all states have agreed to piggyback on the new Federal rules so check).
  • Build your HSA account – If you’re eligible, Health Savings Account are excellent with triple tax breaks (deductible contributions, tax-deferred growth, and withdrawals tax-free for qualified expenses).
  • Honey do’s – Maybe not enough for a car wash in the shower, but maybe programable thermostat, closet organizer, or yard project.
  • Kickstart the kid’s savings – Consider funding $5,500 to his or her Roth IRA, or their W-2 earnings, whichever is less.
  • Update your estate plan – We’re not getting out of this world alive. And aging can be a double-edged sword. Consult your attorney regarding your will, power of attorney, medical directive and maybe a trust.
  • Give to others – Most people give because it’s the right thing to do. A tax deduction may be a bonus. Some might “lump” contributions to every couple of years to clear the higher standard deduction.


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