Over the weekend, we were discussing Social Security, doesn’t everyone? I was telling my Husband that I do not plan on drawing my Social Security benefit until age 70, then he can have a larger Spousal benefit. In the world of Social Security benefits, the Husband is generally the primary wage earner, with the Wife pulling Social Security benefits off his record. Given this statistic, why would you pull benefits early and make things worse for your future widow?
Researchers performed an experiment that revealed that husbands did not change their choice of claiming age even after they were educated about the basics of how their claiming age could impact their spouse’s survivor’s benefits.
For example, the study found husbands tend to claim benefits earlier when they have one of the following:
A defined-benefit pension
Retiree health insurance
A health condition that limits their ability to work
While spousal benefits are limited to half a spouse’s benefit, survivor’s benefits can be up to 100 percent of the deceased’s benefit amount.
Thus, the longer a husband delays claiming his own benefits, at least up until age 70, the larger his future widow’s monthly survivors benefit would be.
My daughter got married last year and we paid for everything. We had a year to plan and if we could not pay cash for something, it was cut from the list. We are in the middle of the “year of weddings.” A number of our daughter’s friends, as well as our friend’s kids, are getting married. We have been to two weddings already this summer, with two more to go. The most recent wedding we went to was paid for by the bride and groom. It was a very nice DIY wedding with all of the important aspects part of the evening. Some engaged couples want it all, but do not have the means to pay for it. I just read about Upstart, a so-called fintech lender.
The average wedding loan Upstart approves is $11,000 for either a three, five or seven-year term. The annual percentage rate, which is the rate charged for borrowing and represents the yearly cost of the loan, can fluctuate between 5 percent all the way up to nearly 36 percent, depending on the applicant.
That is just crazy! If you think it is ok to borrow money and make payments over many years to pay for your wedding, I hate to know what your ideas are for such things as buying a house, having kids, or retirement. In my opinion, this is not a sound money attitude to have toward life. Taking a loan for college, a car, or a home is one thing. If you are willing to accept that it is ok to take a loan for a wedding or vacation, you may never have cash reserves, and may never be able to retire.
I recently met with a couple who are close to 40 with young kids. Both have been working since their teens at one job or another to get to the professions they are working in now. One spouse would like to retire now, but it is actually more practical to look at early retirement in 10 years for their circumstances. The question becomes, what would you give up to be able to retire early? A recent survey was conducted and I am shocked at some of the answers. Here are a few things people are willing to give up:
Over a third said they’d go two years without buying anything new (except essentials like groceries).
Another third were willing to turn up the heat on work, taking a second or even third job if it meant they could retire early.
12% of respondents said wouldn’t have children.
11% said they’d give up their pets. (Hey, pets aren’t that expensive!)
Only 6% said they’d give up their car.
Going without buying something new, or taking on a second job to bank extra retirement dollars I understand – not having kids or pets!?! Those choices I cannot understand just for the sake of early retirement.
The advice I give is to take a hard look at your expenses to see what might be cut or reduced and save money from your first pay check. I also advise my clients to adjust their retirement savings up and their income increases.
We all make sacrifices at times, but think long and hard about what you might be willing to give up.
In 2012 I wrote about the “Latte Factor” and the following is a bit of what I wrote:
If you cut back the premium drinks you buy each week from one a day to 3 a week, you can save $10/week or $520/year. While this small change may not seem like much it does add up.
We are living in a world where not enough money is being saved by all of us. Many people could not even handle a $500 emergency without using a credit card. In the face of coffee shaming, young people usually point to things like student loans and housing prices as the true source of the generation’s instability, not their $100-a-month cold-brew habits.
You have got to put yourself first. Treat your savings account like a monthly bill and make regular deposits. You can even make it a game to pull yourself away from being coffee shamed. Each time you choose not to spend that $3-$5 on a premium coffee, stash that money in an envelope. At the end of the month, you should see a nice stack of bills that you can then deposit for your future.
I have been meeting recently with a number of new client under the age of 35. This makes me so happy. These clients are looking at their life choices as the start off, or have been at a nice job for a few years, and do not want to waste the time they have to secure their retirement. So why are my clients that are in their last 50’s, and mid 60’s, not living by the same ideas? Let me share a few of the things that my older clients need to take a hard look at:
Not having enough money saved – I thought I had beaten this to death.
There’s an old saying: “If you make a lot, save a lot. If you make a little, save a little.” Whether you put your money in a savings account or a money market account account that earns higher rate, it’s important to save.
Underfunding your retirement savings
Not saving enough for retirement is the most common financial regret, especially among older Americans. Many unprepared retirees stress about their finances, run out of money or even depend on their children and loved ones for financial support.
Living on credit
Credit card debt is something you can’t afford at any age. If you fall behind in your payments because of an unexpected emergency or job loss, you can end up with a bad credit score. Poor credit can cost you in the future: you could end up paying a higher loan rate the next time you need to buy a car or home.
Come on – act your age and stop doing these things. You will have choice in your retirement and be much happier you made these changes.
Have you tried this map? I use Google Maps a lot and I know that there are many mapping systems that people like to use. I am going to suggest a “map” that most of you have not thought of – mapping your cash flow. This is an important component to budgeting and it is a very important component to your retirement. If you map your cash flow to your projected expenses, you can give yourself peace of mind when planning your retirement. At the very least, you should try to map out the first three to five years of cash flow. The funds that you will use every day before you actually retire. Look at all of your known sources of retirement income, then look at your current spending to see where you might have to make changes. By mapping your cash flow, you will travel your road to retirement with fewer bumps or surprises.
To start with, SECURE stands for “Setting Every Community Up for Retirement Enhancement”.
This is the first major change to standard retirement plans that we have seen in years. Here are a few of the highlights:
Increase Required Minimum Distribution Ages
Today, the law requires that most individuals take out required minimum distributions (RMDs) from their retirement accounts once you reach age 70.5. The SECURE Act would delay this requirement to age 72. The RESA Act currently in front of the Senate seeks to push RMD requirements even further back to age 75. If the age for RMD’s is pushed out, that means your retirement dollars will have more years to grow.
Removal of Age Limitation on IRA Contributions
For years, there has been a rule that essentially discouraged retirement savings in IRAs for people who continued to work later in life. After age 70.5, you could no longer contribute to an IRA, but amazingly, you could still contribute to a Roth IRA. Sec. 114 of the SECURE Act would remove this savings limitation by repealing the age limitation for traditional IRA contributions.
Removal of “Stretch” Inherited IRA Provisions
The SECURE Act would make significant changes to inherited retirement plans like 401(k)s, traditional IRAs, and Roth IRAs. In the past, beneficiaries of these accounts could typically spread the distributions over their own life expectancy.
However, the new bill includes what is viewed as a tax-generating provision that would require most beneficiaries to distribute the account over a 10-year period. This change would accelerate the depletion of inherited accounts for many large IRAs and retirement plans.
There are more provisions to the act, these are just some highlights. I feel the passage of this act would be good for everyone.
“It’s not how much you make, it’s how much you save.”
“Can’t afford college now? Get a job, learn common sense.”
“Go get ‘em tiger.”
“I’ve been where you are, but you haven’t been where I am.”
“If you loan money to a friend, you’ll lose the money and the friend.”
“Integrity is the only thing that people can’t take away from you so don’t give yours away. “
“Do you want me to give you something to cry about?”
“Pull my finger!”
“If you’re unhappy with a situation you can either change the situation, or change how you feel about it. Remember you’re not stuck.”
“…that the most precious things a father can provide are time, attention, and love.” Tim Russert
Happy Father’s Day to our Dads wherever they are.
Everyone should have either homeowner’s or renter’s insurance, but what do these insurance policies cover in case of a hurricane? Some of us have dealt with hurricane damage, others have not, and I want to make sure you are prepared as the 2019 hurricane season has just started.
If you live in a hurricane-prone coastal area, your basic homeowner’s insurance policy will cover the structure and contents of your house against fire, lightning, theft and tropical storms that aren’t specifically hurricanes. But once the weather guy speaks the hurricanes name, all bets are off with your basic policy, and that’s where flood insurance and windstorm coverage – or in some states and policies, a hurricane rider, comes into play.
Federal Flood Insurance is in-expensive, you should look into purchasing a policy. As we have seen over the past two years, 100 yr. flood plain maps don’t mean much anymore.
Windstorm insurance covers wind and hail damage from hurricanes, and works in tandem with flood insurance and additional provisions like sewer backup coverage and debris removal coverage to form your homeowner’s insurance policy.
Dwelling coverage covers the structure of your home, your roof and other structures on the property like a fence, deck or pool. Coverage should equal the total rebuild costs of your home or the amount that it would cost to build a brand new home.
Remember that hurricane deductibles are generally higher than with any other type of claim. Your hurricane insurance deductible can be easily located on your policy’s declaration page, which is the monthly or annual invoice for your policy.
Now is the time to review your coverages and make your hurricane plan – don’t wait until one is coming our way.