Archive for June, 2010 Page 2 of 4



Peddling Relief, Firms Put Debtors in Deeper Hole

The New York Times, June 17th, 2010

Editor’s Note:  Caveat Emptor, as always…

For the companies that promise relief to Americans confronting swelling
credit card balances, these are days of lucrative opportunity.

So lucrative, that an industry trade association, the United States
Organizations for Bankruptcy Alternatives, recently convened here, in
the oceanfront confines of the Four Seasons Resort, to forge deals and
plot strategy.

At a well-lubricated evening reception, a steel drum band played Bob Marley
songs as hostesses in skimpy dresses draped leis around the necks of
arriving entrepreneurs, some with deep tans.

The debt settlement industry can afford some extravagance. The long recession
has delivered an abundance of customers — debt-saturated Americans,
suffering lost jobs and income, sliding toward bankruptcy. The
settlement companies typically harvest fees reaching 15 to 20 percent of
the credit card balances carried by their customers, and they tend to
collect upfront, regardless of whether a customer’s debt is actually
reduced.

State attorneys general from New York to California and consumer
watchdogs like the Better Business Bureau say the industry’s proceeds
come at the direct expense of financially troubled Americans who are
being fleeced of their last dollars with dubious promises.

Consumers rarely emerge from debt settlement programs with their credit
card balances eliminated, these critics say, and many wind up worse off,
with severely damaged credit, ceaseless threats from collection agents
and lawsuits from creditors.

In the Kansas City area, Linda Robertson, 58, rues the day she bought
the pitch from a debt settlement company advertising on the radio,
promising to spare her from bankruptcy and eliminate her debts. She
wound up sending nearly $4,000 into a special account established under
the company’s guidance before a credit card company sued her, prompting
her to drop out of the program.

By then, her account had only $1,470 remaining: The debt settlement
company had collected the rest in fees. She is now filing for
bankruptcy.

“They take advantage of vulnerable people,” she said. “When you’re
desperate and you’re trying to get out of debt, they take advantage of
you.” Debt settlement has swollen to some 2,000 firms, from a niche of
perhaps a dozen companies a decade ago, according to trade associations
and the Federal Trade Commission, which is completing Read more of this article.

In Budget Crisis, States Take Aim at Pension Costs

The New York Times, June 19th, 2010

Many states are acknowledging this year that they have promised pensions
they cannot afford and are cutting once-sacrosanct benefits, to appease
taxpayers and attack budget deficits.

Illinois raised its retirement age to 67, the highest of any state, and
capped public pensions at $106,800 a year. Arizona, New York, Missouri and
Mississippi will make people work more years to earn pensions. Virginia
is requiring employees to pay into the state pension fund for the first
time. New Jersey will not give anyone pension credit unless they work at
least 32 hours a week.

“We can’t afford to deny reality or delay action any longer,” said Gov.
Pat Quinn of Illinois, adding that his state’s pension cuts, enacted in
March, will save some $300 million in the first year alone.

But there is a catch: Nearly all of the cuts so far apply only to
workers not yet hired. Though heralded as breakthrough reforms by state
officials, the cuts phase in so slowly they are unlikely to save the
weakest funds and keep them from running out of money. Some new rules
may even hasten the demise of the funds they were meant to protect.

Lawmakers wanted to avoid legal battles or fights with unions, whose
members can be influential voters. So they are allowing most public
workers across the country to keep building up their pensions at the
same rate as ever. The tens of thousands of workers now on Illinois’s
payrolls, for instance, will still get to retire at 60 — and some will
as young as 55.

Read more of this article.

Retirement Calculator:  If your pension finds itself modified (as those of Colorado have been), where will that put you overall?  Our Retirement Calculator can be used to determine those very things.

What Broke My Father’s Heart

The New York Times, June 14th, 2010

Editor’s Note:  No links this time, for this is really not a story about specific programs or products to help people, this is a personal story about what one family went through.  It profoundly shook this editor’s perceptions, and it is our hope that it may provoke a thought or two in you. 

One October afternoon three years ago while I was visiting my parents,
my mother made a request I dreaded and longed to fulfill. She had just
poured me a cup of Earl Grey from her Japanese iron teapot, shaped like a
little pumpkin; outside, two cardinals splashed in the birdbath in the
weak Connecticut sunlight. Her white hair was gathered at the nape of
her neck, and her voice was low. “Please help me get Jeff’s pacemaker
turned off,” she said, using my father’s first name. I nodded, and my
heart knocked.

Upstairs, my 85-year-old father, Jeffrey, a retired Wesleyan University
professor who suffered from dementia, lay napping in what was once their
shared bedroom. Sewn into a hump of skin and muscle below his right
clavicle was the pacemaker that helped his heart outlive his brain. The
size of a pocket watch, it had kept his heart beating rhythmically for
nearly five years. Its battery was expected to last five more.

After tea, I knew, my mother would help him from his narrow bed with its
mattress encased in waterproof plastic. She would take him to the
toilet, change his diaper and lead him tottering to the couch, where he
would sit mutely for hours, pretending to read Joyce Carol Oates, the
book falling in his lap as he stared out the window.

I don’t like describing what dementia did to my father — and indirectly
to my mother — without telling you first that my parents loved each
other, and I loved them. That my mother, Valerie, could stain a deck and
sew an evening dress from a photo in Vogue and thought of my father as
her best friend. That my father had never given up easily on anything.

Born in South Africa, he lost his left arm in World War II, but built
floor-to-ceiling bookcases for our living room; earned a Ph.D. from
Oxford; coached rugby; and with my two brothers as crew, sailed his
beloved Rhodes 19 on Long Island Sound. When I was a child, he woke me,
chortling, with his gloss on a verse from “The Rubaiyat of Omar
Khayyam”: “Awake, my little one! Before life’s liquor in its cup be
dry!” At bedtime he tucked me in, quoting
“Hamlet”
: “May flights of angels sing thee to thy rest!”

Now I would look at him and think of Anton Chekhov, who died of
tuberculosis in 1904. “Whenever there is someone in a family who has
long been ill, and hopelessly ill,” he wrote, “there come painful
moments when all timidly, secretly, at the bottom of their hearts long
for his death.” A century later, my mother and I had come to long for
the machine in my father’s chest to fail.

Read more of this article.

Health care reform lets people plan for long-term care

WFAA, June 18th, 2010

Hidden in the health care reform is the Community Living Assistance
Services and Supports (CLASS) Act.

It’s a program helping people as young as 18 start to plan for
long-term health care.

You pay into to it for five years, but you reap the benefits for a
lifetime.

Barbara Horner is shopping around for assisted living. For her, it’s
about thinking ahead.

Bent Schoellhorn with Senior Helpers, says unlike Horner, most
families wait too long to make a plan.

“If you live long enough, you will go broke. People don’t start
preparing until there is a crisis,” Schoellhorn said.

But the CLASS Act could help.

Anyone over 18 can pay monthly premiums for five years to be
eligible.

That could cost roughly anywhere between $61 to $123 a month,
depending on age. After you pay for five yeas, you’re done — fully
vested.

Read more of this article.

What does an extended lifespan mean in terms of retirement savings?

Christian Science Monitor, June 14th, 2010

Here’s a number for you. Half of all babies born in the United States
this year will live to age 104 or older. In other words, when a
person from that generation hits the typical “retirement age” of 65,
they’ll still have 40 years of life left.

Obviously, this represents a major change from where we’re at now.

At
age 65, people will have 40% of their life yet to lead.
In other
words, 65 will become the new 40.

Social Security cannot
support everyone having forty years of retirement.
It will have
to drastically change or go bankrupt. There is no other option. The
only way to prepare for this is to assume that Social Security simply
won’t be there when you reach retirement age.

Few people will
want to “retire” at age sixty five.
If 65 is the new 40, people
aren’t going to want to retire then. They’re going to want to keep
having active, productive lives for many, many years to come after 65.

Thus,
the age range for retirement savings will become much longer.
People will start targeting their retirement savings to age 80 or 85.
Money put into such savings at age 25 will have 55 to 60 years to grow.

When
I look at my children, I recognize that these are the facts that their
lives are going to hold. How exactly will they plan for the future? What
will their lifelong financial trajectory look like? Here are a few
elements I see coming down the pike – and they’re certainly going be a
part of the advice I give to my children.

Read more of this article.

Retirement Calculator:  Can your retirement plan handle the risk of longevity?  Can anybody’s when the longevity in question is that long?  Consider looking at your plan again using the NewRetirement Retirement Calculator

Navigating Life’s Transitions: Budgeting for long-term care can be tricky

Naples News, June 14th, 2010

One of the more stressful parts of long-term caregiving is the worry
about how to pay for it. Planning ahead can help, as can creating a
caregiving budget. Of course, once you create your budget, you need to
stick to it.

Yet, even when you are building a budget it is important to think
through the “what ifs” and create a few scenarios for how your
caregiving journey might unfold.

It’s helpful to construct a best case, worst case, and most likely
case because this view of the future might help you make decisions about
what to do now. I advise caregivers to assume that the resources
available at any moment will be lower than what you expect and the needs
of your care recipient will be higher. If you think about things this
way, you are more likely to be “surprised” that you have more than
enough rather than the opposite.

A budget is made up of inflows, outflows and the assets and other
resources available. Inflows include your care recipient’s income,
social security payments, pension benefits, IRA, 401k, or annuity
distributions, veteran’s benefits, long term care insurance proceeds,
support from family, etc. Outflows include all of your care recipient’s
expenses, not just those associated with the care itself.

For example, if Mom lives in her own apartment, you have to include
her rent and utilities, not just the cost of the home health aide.
Always include a contingency or cushion line when you are fashioning a
caregiving expense budget. Be sure to consider all of the assets or
other resources that are available or could become available. These
include savings, value of the home or car, gifts from others, loans,
credit card limits, and life insurance policies to name a few. It is
important to know about the availability of these resources along with
how to access or monetize them.

Once you have crafted the budget, you will immediately see whether
the inflows are sufficient to cover the outflows. If they are, you have a
surplus, and that’s a good thing! When you have a caregiving surplus,
put it away for immediate access later. If the outflow exceeds the
inflow, a budget deficit occurs and must be funded. That’s where assets
and other resources come in. If the deficit is short term, as when extra
help is required for respite, it might be feasible to fund it from
savings or using a credit card. Alternatively, if the deficit is
ongoing, it’s time to determine if the available resources are
sufficient to cover it and for how long. It may be time to consider
making changes to the caregiving budget so things are more in balance.

Read more of this article.

Trading Down: Can It Still Bankroll Your Retirement?

The Wall Street Journal, June 12th, 2010

Trading down to a smaller home is a retirement-planning staple.
According to an April study by the Society of Actuaries, 20% of not-yet
retirees say they plan to downsize after the last child leaves the nest.

But it is getting a lot harder to do, even for wealthier people.

A study by the Joint Center for Housing Studies at Harvard
University, scheduled to be released on Monday, shows that while
mobility has slowed across all age groups during the real estate bust,
“mobility rates among seniors have posted the sharpest drop.”
Trade-downs in March comprised about 8% of total home sales, down from
12% in October 2008, the first year for which there are historical
comparisons, according to the National Association of Realtors.

Why
are pre-retirees staying put? The housing crash has pounded the higher
end of the market, to which many 50- and 60-somethings have graduated.
That has narrowed the price gaps between the upper and middle markets,
meaning smaller homes aren’t always much cheaper.

Making matters worse, people took an enormous amount of money out of
their homes during the bubble—$358 billion in the peak year of 2005
alone, according to Goldman Sachs. So-called
cash-out refinancings raised mortgage burdens sharply. That, combined
with the price plunge, has wiped out trillions in home equity during the
bust, making empty-nesters unable to trade down easily.

Other
factors, such as job complications and dealing with adult children, are
getting in the way, too.

“Unless they live in a megamansion, I
haven’t seen enough in savings” to justify trading down, says Steven
Levey, a financial planner in Denver.

The logic of downsizing is
simple. Middle-class Americans devote 20% to 50% of their budgets to
housing costs, says John Henry Low, a fee-only financial planner in Pine
Plains, N.Y. So people who reduce that figure significantly can improve
their spending power accordingly.

Read more of this article.

A New Health Care Survey and the Affordable Care Act

The White House, June 14th, 2010

Today, a new survey from PricewaterhouseCoopers (PWC) looks at the
cost of health care and to no one’s surprise, finds that costs are
rising. But the survey also notes that the Affordable Care Act
has the potential to help bring down health care costs. Here are a few
things to keep in mind as you are reviewing the study:

  • Timing is everything. The survey was done in the
    first quarter of 2010 – before the Affordable Care Act was enacted and
    highlights some of the problems the Act was designed to address
  • Praise for the new law. PWC officials note that the
    Affordable Care Act “could bring significant new cost savings
    opportunities for employers and payers as well as new choices and
    transparency for workers buying insurance” and that it is “designed to
    reduce costs and improve efficiency.”  PWC officials also note that
    increasing the number of Americans with insurance will help reduce
    shifting costs from employers to employees. And the new health insurance
    exchanges can help create new opportunities to bring down costs. 
  • The Affordable Care Act helps solve important problems and
    strengthen the health care system for all of us.
    Several
    provisions of the Affordable Care Act are designed to address the very
    issues raised by this report. For example:

    • Market reforms that limit cost-sharing in new job-based plans and
      discourage unreasonable premium increases will help keep prices down for
      businesses and their employees.
    • Premium review grants that provide incentives to states to review
      health insurance premium increases before they take effect.

Read more of this article.

7 Retirement Savings Mistakes You Might Be Making

US News & World Report, June 11th, 2010

With all the retirement advice available today, you would think that
we investors wouldn’t make mistakes. But investment errors happen a lot
more than they should. Here are some common mistakes made in retirement planning
and how to avoid them.

1. Paying too many taxes. There are several
tax-advantaged ways to save for retirement. You should be taking
advantage of retirement accounts such as a 401(k) and a Roth IRA to help
you minimize taxes, both now and in the future. If you’re not investing
for retirement within a tax
advantaged account
, why not? There are few reasons you shouldn’t
shield a significant amount of your funds from taxes in these types of
accounts.

[See 5
Reasons to Start Investing for Retirement Today
.]

2. Not having an end game. Do you know what total
savings amount or withdrawal amount you are trying to achieve for
retirement? You need to figure out when you’ll begin accessing those
funds and the tax implications of those withdrawals. Visit a flat
fee-only certified financial planner (someone who won’t try and push a
product on you for a commission) and have your portfolio reviewed to see
where you’ll end up based on your current and expected contribution
levels. Ask about the most efficient ways to withdraw your funds.

3. Relying too much on others. Don’t count on the
government, an employer, or someone else to help you out in retirement.
You have the power to do your own research, invest without the need for
an expensive broker, and create a comfortable retirement. You can pick
your own investment options
and reduce the expenses involved. Take control and make sure you are
taking care of yourself for retirement.

[See How
to Ladder Your Retirement Savings
.]

4. Not properly allocating your assets. How you have
your money invested should be a product of your risk tolerance and your
age. Properly allocating your assets means putting your money in a
variety of different types of investments. There are plenty of asset allocation
models
available today for you to review and design your portfolio
around.

5. Paying too many fees. Investing for retirement
can get expensive. Investment firms are constantly thinking of new
products to offer potential investors which often come with a hefty
price tag. In general, the more managed a particular investment is, the
more expensive it’s going to be. Be sure you know what fees you’re
paying with your investments and always be on the lookout for less
expensive investments that will give you the same result. If you’re
actively trading your retirement investments, consider a low-cost online
stock broker
for cheap stock trading.

Read more of this article.

Retirement Calculator:  If you’ve made any of the above mistakes, it’s time to sit down and look at where you stand in terms of Retirement.  Our calculators can help you do just that.

5 Places to Retire On Social Security Alone

US News & World Report, June 13th, 2010

One of the most compelling reasons to consider retiring to another
country is the opportunity to reduce your cost of living, maybe
dramatically.

As one American I know who retired to Boquete, Panama put it
recently, “Back in Tucson, Arizona, where I’m from, my monthly Social
Security check might cover the cost of my utilities. Here in Boquete, my
income from Social Security is enough to buy me a very comfortable new
life.”

[See 6
Reasons to Retire Overseas
.]

The average Social Security check is about $1,200. You can receive
that payment while living anywhere in the world. In some countries, you
can even have your Social Security check direct-deposited into your
local bank account. Here
are five places where you could retire on your Social Security income
alone.

Boquete, Panama. Panama offers super user-friendly
options for foreign residency. Resident retirees receive
a long list of benefits including discounts on everything from
prescription medicines and in-country air travel to closing costs on the
purchase of real estate.

[See 7
Affordable Places to Retire Abroad
.]

Granada, Nicaragua. Granada is a charming
Spanish-colonial city built around a beautiful and lively central
square. It’s also home to a welcoming community of expat retirees
enjoying new lives in this land of lakes and volcanoes. You could live
well in Granada on about $900 per month.

Hangzou, China. About $1,000 a month could buy you a
comfortable and super-exotic new life in Hangzou.

Morelia, Mexico. You could retire on a budget of
about $1,100 per month in this colonial city full of charm and history. A
friend calls Morelia the “coolest Mexican city you’ve never heard of.”

Read more of this article.

Relocation Assistance:  Thinking of taking one of these options?  You might need assistance to relocate to your new home.  Consider the options at NewRetirement.com



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