Tag Archive for 'Retirement Planning'

NewRetirement’s Advisor Bud Hebeler in “The New York Times”

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NewRetirement’s Advisor Bud Hebeler of AnalyzeNow.com was just featured in a New York Times Article titled “To Retire in This Weak Market, the Magic Word Is ‘Focus’” that discusses some very interesting and important approaches for retirement preparation. There were quiet a few great takeaways from this article of which I will include two below.

While planning for retirement it is always important to set goals for your future, and the article brings up some clairvoyant questions you must ask yourself.  “The first question assumes you have all the money you need –how would you live your life today? In the second, you are told that you have five years to live: what would you do with that time? And the final question aims right at the heart.  You have 24 hours left on earth –what did you miss? Whom did you not get to be?” These questions allow you to step back for a minute and decide what is vital to your future, which in many cases does not have to do with financial concerns.  Once you can decide what you truly want out of life, then you can set out the course for a retirement plan that will help you meet your goals.

Mr. Hebeler’s advice is also very insightful because retirees rarely budget for wear and tear items.  If you put in the expenses for replacing or repairing cars, air conditioners, and your home, then you will have a much clearer picture of your necessary retirement finances.

Hispanic Americans Lacking Proper Retirement Preparation

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A report released today by the Hispanic Institute think-tank and the Americans for Secure Retirement (ASR) coalition finds that most Hispanic Americans are lacking proper retirement preparation. Because two-thirds of Hispanic Americans are employed in the service-related field, a field that usually does not offer employer-sponsored retirement plans; they are not adequately prepared for retirement.  Furthermore, Hispanic Americans appear to have on average insufficient financial literacy and lower levels of personal savings.  This lack of financial literacy, as I have alluded to in the post entitled The Retirement Planning Divide, could certainly be based on linguistic barriers, as Spanish does not contain some vocabulary imperative to retirement planning.  What is clear from the report is that Hispanic Americans must consider many retirement vehicles to supplement Social Security and make up for the fact that they might not have access to employer plans.  A lifetime annuity is such a product that could build retirement savings as well as offer a secure guaranteed income.

Here are some noteworthy findings from the report:

–  Only 41 percent of Hispanic workers say they have saved money for retirement.
–  Only 25.6 percent of Hispanics are covered by employer-sponsored retirement plans, compared to 42.5 percent of whites and 40 percent of
African-Americans.
–  Of the Hispanics receiving Social Security benefits, almost 80 percent rely on these benefits for at least 50 percent of their retirement
earnings.
–  Among people 65 and older receiving Social Security, on average Hispanics receive about $2,124 less in earnings than non-Hispanics.
– Between 1979 and 1999, middle-class Hispanics households increased nearly 80 percent. In the same period, the group of Hispanic households earnings between $40,000 to $140,000 grew to include about one-third of the total Hispanic households nationwide.

Retirement Savings > College Savings

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On August 27, I made a blog post about a retirement savings and college savings study.  The study stated that 1/3 of people are saving for both equally, a third are saving for one over the other, and a third are not saving enough for either, and it provided no detail as to which option was the most prudents.  Well, according to a recent ABC news article, saving for retirement should be your first priority.  This article states that a 401k trumps a 529 college savings plan anyday, and also shows that people who are saving for their retirement early will be able to either pay for their children’s college down the road or be able to take on a tad of debt themselves.

The Retirement Planning Divide

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A recent milestone analysis of three million employees’ 401k plans in 57 top corporations conducted by Hewitt Associates and the non-profit educational foundation Ariel Investments shows that there are significant discrepancies in retirement planning and saving amongst different ethnic groups.  The study shows that just 65 percent of Hispanic workers participate in their company’s 401(k), while 66 percent of African-American employees, 76 percent of Asians and 77 percent of whites enroll. Among them, Latinos contribute 6.3 percent of their income, whites 7.9 percent, Asians 9.4 percent and blacks only 6 percent.  This study while at its façade displays how different races plan for retirement differently, underlines how there are many ethnic, social, cultural, economic, and linguistic barriers to receiving retirement information, planning, and saving properly for retirement.

“Retirement Revolution” Premieres Tonight on PBS

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Retirement Revolution, a new series that looks at the stories of everyday people who have found ways not only to survive but thrive in this new retirement reality, premieres on PBS tonight.  Our advisor Henry “Bud” Hebeler of Ask Bud fame has an interview on how to have a successful retirement in these tough times with such answers to questions like, Should savings patterns change during inflationary times?.  Check out a part of his interview here.

On Being Conservative

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I grew up in the Great Depression and witnessed my parents’ penchant for avoiding risk. I learned my own lessons as well after I started earning my own money and tried to save it. Someone advised me of a “good” stock broker. He wasn’t good to me. I lost money on every stock he sold to me. I think that his firm directed him to sell the stocks in their own inventory that they considered bad investments.Midway through my working career at Boeing, I became head of corporate planning—a job that required parceling out research and new business budgets to the operating divisions and justifying the investments on the the sales prospects to the company’s board of directors. The total of the budget requests were always higher than we could afford to support while the sales projections from the operating divisions were, when totaled, higher than the customers could afford to spend. They reminded me of the always optimistic projections of my first stock broker.Years later, in retirement, I learned a lot about the various retirement planning methods. Almost all of them used optimistic portfolio returns from history and left out many things that influenced retirement spending and income, and no two gave similar answers. Inserting my standard test values for investment returns, pension, Social Security, tax rates, etc., I found they all gave different results. In fact, some said that no additional savings were required while others would impose staggeringly high monthly savings. These results were published in two, full page, articles in The Wall Street Journal.These programs came from well-known financial firms which seemed reluctant to improve their programs. I still find significant shortcomings after all of these years. The majority do not account for the appreciable costs that bring actual returns to values lower than the indexes for returns, nor do the simpler programs account for reverse dollar-cost-averaging shown by my research and described in J. K. Lasser’s Your Winning Retirement Plan.There are more complex statistical programs that purport to predict the future. They don’t. They should really say they are poor representations of what might have happened in the past. Most are based on fake return statistics and don’t correlate with actual historical inflation at the time of the returns.Together with my wife, we offer modest assistance to some people relying only on Social Security. They consumed their savings too early for various reasons, and now are sorry that they weren’t more conservative in their planning, budgeting, investing and spending. Over the years inflation destroyed the value of the pensions some have. Even then, they didn’t realize that they can’t spend all of their fixed pensions in retirement. It’s necessary to save part of each pension payment so they’ll be able to supplement their income later as inflation destroys fixed pensions income.Then there are Unk-Unks, a term for unknown-unknowns, that is, things you are unlikely to think about in advance, such as household emergencies and events in the lives of your adult children or elderly parents. Retirees have told me their biggest Unk-Unks were the divorce of a daughter with children followed by the need to support elderly parents after the parents exhausted their own savings.There are the things that you could have planned using some very detailed planning. Such planning is used by estimators in the construction industry. When an item was forgotten, we called these OSIFs, short for “Oh, shoot, I forgot,” except we had a stronger word than “shoot.” Forgotten items result in a dollar-for-dollar loss. On www.analyzenow.com I include a special event worksheet in the comprehensive programs that encourages people to include the cost of high value items such as to replace a roof, automobiles, etc. Retirees (and older working people) can gain much by first saving for a future purchase rather than paying for it over time.During my working years, I was very successful managing projects and organizations ultimately becoming president of The Boeing Aerospace Company (1980-1985). I attribute much of my success to being conservative both in work and retirement. Being conservative in retirement planning means using inputs that are low for returns, high for taxes, long life spans, etc. It also means having a significant portion of your assets in conservative securities. You can’t afford to retire on lottery tickets in a retirement portfolio.Bud Hebeler, www.analyzenow.com

Addendum to A Generational Battle

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And now to add to yesterday’s blog, as a recent businesswire article, “Americans Dramatically Underestimate Health Care Costs in Retirement, First Command Reports” states that retirees need to show some foresight and put extra money for the rising costs of healthcare and clear deficit in Medicare and Social Security spending.  So ensure you and your financial advisor discuss and plan on having enough money for rising healthcare expenses and the rising taxes required to fund the government stimulus packages.  

Who Should Fund The Boomer’s Retirement?

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So, my Mom met with her accountant last week. She is getting a life insurance policy to cover her business partner’s expenses if something were to happen. Her accountant suggested putting a Long Term Care Insurance rider on the life insurance policy.

Great idea, right?

Yes, the Long Term Care rider might be a great idea. The costs of Long Term Care are an expense that most retirees have not planned for and not having long term care insurance can completely devastate your finances. Please review information on the need for long term care insurance here

http://www.newretirement.com/Planning101/Serious_Medical_Crisis.aspx .

But, here comes the shocking part of the recommendation: The accountant suggested that that my mother ask my brother and I (her children) to fund the monthly premium on the rider since we would end up paying for Long Term Care expenses if she hadn’t taken care of them herself.

Indeed, Long Term Care insurance payments are likely less expensive than the ultimate cost of Long Term Care, but why should we, her children, pay for either. We would of course fund her needs — or make arrangements for her to move in with us — if necessary, but why is the general population and a financial expert recommending that it is indeed our responsibility to fund these things?

Social Security, Medicare, Long Term Care Insurance and More — Who Should Pay for It All? Boomers? Children of Boomers? Grandchildren of Boomers?

We children of boomers are already going to have to fund Social Security and Medicare. The baby boomers are retiring with these programs being unfunded. We will be paying our taxes to fund our parents (and grandparents) retirement.

What’s worse, the under- or un-funding of these programs is not even factored into the known and mounting deficit that we are inheriting.

We children of Boomers have an incredible financial burden to bear.

Retiring Boomers Should Consider Who Should Fund These Costs

Please boomers and those advising boomers, please think about the sanity of putting these costs on your children and grandchildren. Is this what you want your legacy to be?

Retirement should be earned. Barring severe health issues, there is no logical reason to retire before you have saved enough money to cover your costs.

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