“What do you mean Social Security is going broke”! “Will I get mine?”

I have always looked at Social Security as one leg of the retirement stool, with personal savings, and a pension if you have one, as the other legs. Many retirees no longer have a pension and have placed their Social Security benefit in higher regard. Social Security was always meant to be a supplement to retirement, not the base of retirement income that is has become, and now we hear that the trust fund is in trouble. We have been saying the trust fund would be depleted sometime around 2036, and the Medicare fund around 2028. The Social Security Trustees are now projecting that the Social Security trust fund will be depleted in 2034, with the Medicare trust fund hitting the wall in 2026. What does this do to your benefit?
We have already seen some changes as to how we claim our Social Security benefit and the full retirement age for many taxpayers has been pushed back. There is talk of “means testing” Social Security benefits in the future. Means testing could take the form of more income taxes, a reduction in benefits, a surtax or some other method. Anyone who has done a good job saving for their retirement on their own should consider the chance that Social Security benefits will be means tested in the future. What we know right now is that current tax withholding will provide Social Security benefits for many years in the future. We have not heard of any changes either currently or projected that would reduce anyone’s benefit. While nothing is written in stone, I imagine any changes to the Social Security system will be discussed at great length and not made without much discussion.

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Merging love and money.

June is known as the marriage month. Having just gone through my daughter’s wedding, I know how much planning goes into the big event. We spent close to a year planning everything, as is typical for most couples. The question is, how much time does the new couple spend planning their financial future? Because my daughter is my daughter, merging their income and outflows started when they moved in together a good year before they were engaged but this is not the norm. Here are a few topics to discuss as you are merging your new lives:

  • Be clear on what each of you bring to the table.
  • What debts do you have?
  • Do you pay more than the minimums on those debts?
  • How much have you saved and how much do your save from each paycheck?
  • Be open and honest without judgement when learning how each of you have managed saving and spending prior to your merge.
  • What are your financial goals?
  • Discuss when you might like to buy a house and how much to save for a down payment as well as how you will pay your monthly household bills.
  • Discuss how much you need for an emergency fund – this is an amount of money that will stay in a liquid account for emergencies.

Individual goals are ok too. It is important to be on the same page for the big items, but individual goals are important also. Each person should write a list of “yours,” “mine,” and “our” goals, then compare the lists so you can focus on the differences.

As I approach my 32nd anniversary, I can say that we came together practicing some of these tips, but were not aware of all of them. We practice all of these tips now and have successfully merged love and marriage.

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Should you compare?

When I lived up North, I had auto insurance through AAA as most everyone did. When I moved to Florida, I had to find another company to insure my car. Everyone I knew had State Farm because they bundled their renters or homeowners insurance together for a “lower” cost. I took everyone’s advice and stayed with State Farm through our home purchase all the way through the hurricanes of 2004.
After the 2004 hurricane season, State Farm decided not carry home owners insurance, so I decided to shop everything. What I found out and what should have been obvious is that it pays to compare. Not only does it pay to compare, it may not be cost effective to have all of your insurances with the same company.
There are a lot more choices today for auto and homeowners insurance. I suggest that when your policy comes up for renewal, you shop and compare.

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The saga has finally ended.

I have written a number of times about my father-in-law’s struggles with Parkinson’s, and our struggles with settling his estate after he passed on. Here we are, 4.5 years later and finally, the estate has been settled. My father-in-law was an artist who did not care about anything that would be considered business. His free spirit was a joy, but his refusal to sign even a basic will had become our burden. We had to open up probate, hire attorneys and accountants in New Jersey, and my husband made countless trips there to settle his estate. We begged him to sign a will, appoint durable power of attorney to someone, and state his final wishes to no avail.
Basic estate planning can be a simple task without a large outlay of cash or time. Please do not leave this type of legacy for your family. If you need a referral to an estate planning attorney, please contact me at nancy@financialgroup.com.

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Do I pay it or do I save it?

I have had two clients ask me in the past week if they should use funds that they received unexpectedly to pay down debts or save the funds.
My answer was different for both clients. Let’s look at the circumstances.
Client # 1 has a daughter with student loans that is also looking to buy a house. Their question was regarding where to gift the dollars for student loan or down payment? I felt that since the loan payments have not been a burden, putting the funds toward a down payment and avoiding PMI would be better in the long run.
Client #2 also has student loans and will be graduating soon. My recommendation was to pay extra toward the highest interest loan, but to keep the bulk of the funds available for an emergency fund.

Everyone is different; therefor, the use of funds will be different too. There is no correct answer for everyone.

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Why do you want to save money?

We have a big problem in this country – not enough people have cash on hand. We are a mere two weeks away from the start of hurricane season and when the power goes out, cash is king. An emergency fund is, in my opinion, so important, but so few people have one. My question to you is, “Why do you want to save money”?
Retirement is a big reason to save as social security is not going to cut it in retirement if that is your only source of income. We need to start saving for retirement from the very first pay check. My recommendation is to start with 10% of your pay and increase that amount as you get raises and bonuses.
Many people save for a home purchase. Housing prices are very high right now. Once you figure out how much you can afford, the goal should be to save 20% for a down payment so you do not need to pay PMI. Private Mortgage Insurance (PMI) is a special type of insurance policy, provided by private insurers, to protect a lender against loss if a borrower defaults.
Vacations seem to be another big reason people save money. When planning a family vacation, add an additional 10% to what you think you might need as you never know what could happen on a trip, good or bad, that could require extra funds.
Identify why you want to save money and be diligent about stashing away cash for that reason, even if you have to sacrifice a bit to achieve your goal.

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A man is Not a Plan – 3 things to do before you re-tie the knot.

We have all had clients that have gotten remarried but have not looked at their full financial picture before doing so. Here are 3 things to pay attention to before you re-tie the knot:

Put all of your cards on the table:
When combining families, there is a lot to consider. Does one spouse have child support to pay? Are there alimony agreements with your former spouse that may change? What liabilities are you bringing into the new marriage? It is important to have full disclosure of all assets and liabilities, pensions, retirement plans, bank accounts, and estate plans.
Update your beneficiary designations:
Sadly, I have seen more than one case where a second spouse has passed on, but they never changed their beneficiary designations after a remarriage. There is nothing worse than having to tell the second spouse that they will inherit nothing because they are not the beneficiary on the life insurance or retirement plans.
Take care of your legal documents:
Make sure to update your living will, Florida medical surrogate statements, and powers of attorney, both standard and durable powers to your new spouse.

Take time to address all of these important issues and you plan your new life.

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A retirement product ≠ a retirement plan.

Even though I am in the business, each week I receive a number of dinner invitations to hear about the retirement product to end all retirement products. Annuities, trading platforms, structured investment platforms, and real estate have all been touted as the perfect product for a successful retirement. Please don’t take me wrong, these products I have mentioned may have a place in your retirement, but they will not be the mana from heaven that some tout them to be. When we ran retirement seminars, we offered the opportunity to plan your retirement, we did not offer THE retirement product.
Without a personalized, comprehensive retirement plan, you have no idea what your retirement may look like throughout your retirement years. A comprehensive retirement plan can be your roadmap to a successful retirement.
Contact me at nancy@financialgroup.com to schedule a complementary consultation to determine if you might want to develop a true retirement plan.

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