Archive for the 'Debt and Debt Management' Category

Wealth Gap Between Young and Old Grows

Posted on December 1, 2011 by Erin

Yesterday we told you about a study that showed young investors are no better prepared for retirement than the boomers before them, and that in some cases, are actually less educated about their investments.  Well on Monday, the Pew Research Center released a study that shows the wealth gap between the younger and older generations is indeed getting much wider.

Right now, the gap is the biggest it has ever been in recorded history.  Older Americans are actually increasing their net worth while younger Americans are seeing noticeable declines.  Why is this happening?  Well for starters, kids graduating from college are facing an extremely difficult economy.  Many times people in this age group have no choice but to delay their careers because they simply cannot find work.  Others choose to continue  with their education by going back to school .  Although higher education typically means higher paychecks down the road, the loan amounts that students today are acquiring are much larger than the generations before.  The fear is that if this trend continues, this younger generation will never be able to play catch up and the future for both them and the country’s economy may be dim.

How far along are you with your retirement planning?  Are you further ahead than most?  Try out our Retirement Calculator to see where you stand.

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How to Not Handle Your Money Like the Government

Posted on August 8, 2011 by Erin

There are many lessons to learn from the government’s handling of the debt crisis, but one of the most important can be how to handle your own finances.  Imagine if you made less money than your credit card debt year after year.  That would seem extremely excessive and definitely something you would want to take care of, right?  Well, the U.S. government is in debt by $14.3 trillion but only takes in $2.16 trillion in revenue each year.  So let’s go over some steps to demonstrate how to NOT manage your money this way!

The first step if you feel unsure about how your retirement planning is going is to speak with a financial planner.  A financial planner can analyze your plan (or lack thereof) and get you on the right path to a secure retirement.  Some advice any planner would give you right up front?  Try to meet with one before you want to retire – it will be easier to make a plan when you have time on your side.  Same goes with adding to your retirement fund.  Don’t wait until the last minute to contribute money to the account.  Try adding as much as you can every paycheck over the years so you don’t have to play catch-up.  Simple steps and common sense can help make you retirement much more comfortable.  You can read more tips, here.

Curious about what types of Retirement Advisors are available to you?  Read about them, here.

Let us help match you to a Certified Financial Advisor!

Use our Retirement Calculator to analyze where you are in your retirement plan.

Retirements Swallowed by Debt

Posted on January 27, 2011 by Jason

The New York Times, January 26th, 2011

Bill Freedman, 86, felt financially secure. He had a comfortable
income from Social Security, an I.R.A., investments and an inheritance.
But when he took a fall last October, his daughter, Nancy Freedman, went
to his Manhattan apartment and found several credit cards piled up in a
desk drawer. After making a few phone calls, she discovered he was
$15,000 in debt.

“I read him the riot act,” said Ms. Freedman. Her father maintains
that his finances were manageable. Still, he thought it was a good idea
to hand over the reins to his daughter, who now has power of attorney.
His bills and statements are mailed to her apartment.

“I urge everyone to have that conversation with their parents” about
money, said Ms. Freedman. “I also think it is the parents’
responsibility to tell their children.”

Is it? Study after study shows that more elders are living with heavy credit card debt,
regularly swiping cards to pay for things like gas and groceries. And
as the balances pile up, the elderly cope in a number of ways. Some,
like Mr. Freedman, permit their adult children to step in, while others
seek outside counsel in an effort to preserve their independence. Some
elderly debtors are trapped in limbo, too proud to ask for help but too
strapped to pay off the debt.

No wonder growing numbers of the elderly have or want jobs. A report from the Sloan Center on Aging and Work at Boston College found that 30 percent of unemployed workers over age 55 have more credit card debt than retirement savings; 41 percent have as much. The situation for employed older workers is less grim, but not by much: A study by researchers at Rutgers University
found that 22 percent of older workers, the vast majority of them
employed, reported increased credit card debt, and 12 percent said they
had missed a credit card payment because of the economic downturn.
Experts say many older Americans face the very real possibility of
starting retirement in the red.

“They don’t have anything to fall back on,” said Carl Van Horn, a
public policy professor at Rutgers University and co-author of the
study. “They can’t sell their house, their retirement savings are
nonexistent, they owe all this money in credit card debt — and that’s a
bleak future.”

The growing reliance on plastic has driven the average credit card debt for people over 65 to $10,235, according to a July 2009 study by Demos, a public policy research organization in New York.

José Garcia, associate director of research and policy at Demos, said
the increase in the number of older Americans getting new credit cards
outpaces that of any other age group.

Read more of this article.

Debt Consolidation:  Retiring with debt is almost a guarantee that your retirement plans are going to miscarry.  Credit Card debt is widely considered the worst form of debt to have, due to the exorbitant interest rates associated with it.  If you have debt in retirement, or believe you will when you retire, it’s time to consider a comprehensive plan to eliminate that debt.

SMART MONEY: No need to file, they already are bankrupt

Posted on January 27, 2011 by Jason

The Oakland Press, January 27th, 2011

DEAR BRUCE: My parents, both 80, have lived for years on their
credit card, running up the balance and paying it off every month. This
works great when you have ample income to cover it. For whatever
reasons, they have no investment income left and are living on
retirement and Social Security now. While they live in their own home,
they have two reverse mortgages on it and I think they exceed the
current value of the home, so selling it is not an option. They have
reached the point where not only are they running up the credit card
every month, they have maxed out two substantial lines of credit on
other cards as well. The interest alone runs them $700 per month. While
they have no mortgage or car payments, they have substantial medical
expenses (prescriptions). They cannot meet the interest obligation every
month. I estimate their credit to be about $20,000. Dad is talking
bankruptcy. I am not in a position to assist them in any meaningful way.
Is this a good alternative for them? Or should they seek credit
counseling/debt consolidation? They are in the position of NOT being
able to stop using the credit card because it takes up literally all of
their income each month. I hope I’ve given you enough information to
put forth an opinion. — Jennifer, via e-mail

DEAR
JENNIFER: Technically, your mom and dad are bankrupt. Having financial
obligations and no resources to cover them. The house isn’t an asset
given the fact that it has reverse mortgages and very likely the house
is upside-down. This has no adverse effect on them as long as they
continue to pay the taxes and insurance, this will allow them to live
there until they pass away. Their Social Security income is not
attackable so they can depend upon that. As far as the credit cards,
sooner or later they will not be able to make a minimum payment and
then the whole house of cards will collapse. I don’t see credit
counseling or debt consolidation having any value. The only positive
thing they can do is write to the credit card companies and explain
that their assets have been completely exhausted, their only income is
Social Security and they would like to close out the accounts, but they
are not in any position to reduce the outstanding balances. After
investigation, chances are the credit card companies will write the
debts off.

DEAR BRUCE: My mother carried the note on my
house, which was forgiven upon her death. I paid monthly interest,
which stopped when she passed away in 2009. Because I no longer owe
anything on my house and it is fully paid for, how do I get the deed? —
Meredith

Read more of this article.

View of Retirement at 107

Posted on January 21, 2011 by Jason

Yahoo Finance, January 17th, 2010

Editor’s Note:  No links in this case, as this concerns more than simple retirement financial products, but the article below is a fascinating view of Retirement from someone who, by every possible measure, has gone through the entire process.  We could all stand to learn a great deal from Leonard McCracken.

Eight years ago, at age 99, Leonard McCracken failed the eye test for
renewing his driver’s license. He put his Lincoln Continental up for
sale and got $1,600. “I sold it in three days — I got a good price. I
love to haggle,” he says.

McCracken, who lives in Florida, has been living in retirement since
about 1969, when he left a position as a salesman with a now-defunct
steel company in Ohio. Since then, he’s been living on savings, Social
Security and a lifetime annuity that he purchased before he retired. He
has never had a pension. At 107, after living in retirement for 41
years, he’s still paying the bills and getting by on his own resources.

“Dad never made more than $10,000 a year in his life,” says his son Bob, a 73-year-old retired GE aircraft engineer.

How
does a guy with modest income manage such a retirement planning feat?
McCracken points to a half-dozen basic principles that have gotten him
through life and continue to serve him well.

Thrift

In
his whole life, McCracken says, he has only owned two new cars. The
rest of the time he bought used. He still shops at the thrift store. And
he remembers vividly the time that his wife was holding a garage sale
and left him in charge. When she returned, he had sold the living room
sofa for $100. “I had a very understanding, frugal wife (Dorothy, who
died in 2002 at 95 after 75 years of marriage). We gave up a lot of
things that other people were buying in order to break even.”

Read more of this article.

Credit Card Debt: Not a Concern for Retirees in Bad Economy

Posted on December 2, 2010 by Jason

Third Age, November 29th, 2010

Editor’s Note:  We urge you to read this one with a large grain of salt.  Though we are including it because it’s a new concept that is certainly outside the box thinking, we at NewRetirement wish to stress the extreme danger that credit card debt can pose to your retirement.  As always, we cannot issue advice as to whether or not this advice below will work, but it does run contrary to most of the established thinking on retirement, and we caution anyone to think long and hard before acting on this sort of thing.

Credit card debt
is a daunting issue for many Americans, worrying most into concerns
about paying their bills and avoiding late charges, fees, etc. Many
retired Americans have huge debts they have no intention of paying off
before they die, a survey found. Nearly 40 percent responding to a poll
by CESI Debt Solutions said they are piling up credit-card debts and
don’t plan to repay them, CNBC reported.

“At the end of the day, some people of a certain age say, ‘It’s too late in the game for me to do anything about it. I can’t win. So I’m just going to stop playing the game,’” said Neil Ellington of CESI.

Many seniors have seen their retirement accounts cut in half by the recession and are running out of time to do anything about it, he said.

More than half of those surveyed said they had saved less than
$50,000 — some nothing at all — but had retired anyway. Just 4 percent
said they had delayed retirement because of debt.

More than 75 percent of people surveyed said they went into debt for medical or funeral expenses.

Read more of this article.

Money Woes Can Be Early Clue to Alzheimer’s

Posted on November 3, 2010 by Jason

The New York Times, October 30th, 2010

Renee Packel used to have a typical suburban life. Her husband, Arthur, was a lawyer and also sold insurance. They lived in a town house just outside Philadelphia, and Mrs. Packel took care of their home and family.

One day, it all came crashing down. The homeowners’ association called
asking for their fees. To Mrs. Packel’s surprise, her husband had simply
stopped paying them. Then she learned he had stopped writing checks to
his creditors, too.

It turned out that Mr. Packel was developing Alzheimer’s disease
and had forgotten how to handle money. When she tried to pay their
bills, Mrs. Packel, who enlisted the help of a forensic accountant,
could not find most of the couple’s money.

“It just disappeared,” she said.

What happened to the Packels is all too common, Alzheimer’s experts say.
New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements.

It is not just families who are affected — financial advisers and lawyers say they are finding themselves in a bind when their clients’ minds seem to be slipping.

The Financial Industry Regulatory Authority, the largest nongovernmental
regulator for securities firms doing business in the United States,
recently met with individual financial services companies and the Alzheimer’s Association
to formulate guidelines on how to deal with clients who have trouble
remembering and reasoning, a problem that is not new but is increasing
as the population ages.

Read more of this article.

For many over 55, debt defers dreams

Posted on October 25, 2010 by Jason

USA Today, October 24th, 2010

A growing number of Americans age 55 and older
have put their retirement dreams on hold as they face a dismal financial
reality: The recession has forced many into unemployment, stripped away
years of their savings or dramatically reduced incomes during what they
had hoped would be their final high-earning years.

“My generation thought that we were on easy street,” says Irene Froehlich, 61, who lives in the Chicago area. “All of a sudden, we have been hit hard.”

Froehlich, who works at home as an advertising
sales contractor for two magazines, saw her income drop 75% at the
beginning of 2009 because of declining ad sales. With less money, she
relied more on her credit cards, and the amount she owed jumped by 25%.
She filed for bankruptcy in May.

“I was backed into a corner, and I couldn’t pay
the bills any more,” Froehlich says. “It was not the way that I was
raised. I felt that I was a terrible person. But the economy has caused
this, and we’re paying the price.”

Even before the recession, older Americans were
piling on debt. From 2000 to 2008, the average debt for households
headed by people 55 or older nearly doubled to $66,000, according to
Strategic Business Insights, a consumer behavior research firm.

The ranks of older bankruptcy filers also have
been swelling rapidly. From 1991 to 2007, bankruptcy filings by those 65
and older increased by 150%, while filings in the 75-to-84 age group
soared 433%, according to the Consumer Bankruptcy Project.

Older Americans are staggering under debt because
of a variety of problems — from unexpected job losses late in life and
underemployment to overwhelming medical bills and providing financial
help to their children and grandchildren, analysts say. Making the issue
even more serious: They have little time to climb out of debt, says
Matthew Beatman, bankruptcy lawyer at Zeisler & Zeisler in Bridgeport, Conn.

Read more of this article

Dealing with Debt:  Debt can sink retirement, but there are ways to manage it, even if you are already of retirement age.  Consider the various options available to you at NewRetirement.com

New rule cracks down on debt settlement industry

Posted on July 29, 2010 by Jason

Yahoo News, July 27th, 2010

Companies that promise to reduce or eliminate credit card balances
and other debt for customers will no longer be allowed to charge an
upfront fee.

The Federal Trade Commission said Thursday that the
new restrictions are a crack down on the debt settlement industry, which
flourished during the economic downturn as borrowers struggled to pay
bills.

Debt settlement companies will now only be able to charge a
fee once a customer’s debt has been reduced, settled or renegotiated.
The rule goes into effect Oct. 27.

Since the start of the
recession, the Better Business Bureau has received more than 3,500
complaints about debt settlement companies. Customers complained that
they ended up deeper in debt or were sued by creditors after failing to
make payments. The bureau did not separately track complaints against
the industry prior to the recession.

Debt settlement companies
often charge an upfront fee, typically a percentage of the customer’s
outstanding balance. In exchange, the company promises to negotiate with
creditors to reduce or eliminate the debt, sometimes by as much as
half.

The new FTC regulations also require debt settlement
companies to disclose to customers how long it will take to get results,
how much it will cost, and any negative consequences that could arise
from the process.

For example, customers can go deeper into debt when they hire a debt settlement company.

This is because customers stop making payments on their loans, and late fees and interest charges continue piling up.

Customers
are also often required to start setting aside money in a separate
account maintained by the debt settlement company. This money is
intended to eventually pay off any remaining debt.

Under the new
rule, however, companies will only be able to require such an account if
it’s maintained at an independent financial institution under a
customer’s name.

Read more of this article.

79 million baby boomers enter retirement: What it could mean for the market

Posted on July 7, 2010 by Jason

Christian Science Monitor, July 6th, 2010

My friends and colleagues in the investment management business should
realize that the most important determinant of their success over the
next decade is the type of mousetrap they have to offer the retiring
Baby Boomer generation.

According to USA Today, there are approximately 79 million
boomers in the American populace and the first wave of them turn 65 in
the next year.

Wealth managers, brokers, investment advisors,
financial planners, and family office guys will all feel the effects of
this retirement onslaught, but nowhere on The Street will it be felt
more than in the mutual fund complex. John Waggoner writes:

The
Baby Boom began in 1946 and stretched through 1964. The mutual fund
industry has grown up with Boomers. In 1971, when the first Boomers
turned 25 and began to enter the workforce, the fund industry had $55
billion in assets. It’s now a $10.7 trillion behemoth, $4.1 trillion of
which is in retirement accounts, according to the Investment Company
Institute, the funds’ trade group. About 42% of mutual fund IRA money is
invested in U.S. stock funds, as are 46% of assets in mutual fund
defined-contribution plans such as 401(k)s.

Will the boomers be
content to “stay the course” and just count on actively managed mutual
funds or low-cost indexing options as they have for decades? Something
tells me that another decade for stocks like the one we’ve just had will
make these traditional options much less “default” than they’ve been in
the past.

The ten year treasury is now yielding less than most
blue chip stocks and many of these stocks are trading at historically
low price-to-earnings ratios…will the boomers opt for the (perceived)
additional risk of the 3.5%-yielding blue chip equity mutual fund? Or
will bonds remain the focal point for those staring their last years of
working in the face?

Read more of this article.

Retirement Calculator:  What’s your specific plan for retirement?  Will you be investing in a bond-heavy portfolio, or taking more risk to maximize return.  Our Retirement Calculator can help you figure out where to begin if you haven’t made those decisions.

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