June is for brides, but maybe not. Many retired couples are choosing to shack up but not marry. I don’t have a problem with this – as a matter of fact, two years ago, I advised a couple to do just that – live together but not marry. Here are some reasons why:
You can share the wealth, sort of. You don’t have to completely mingle your finances, just share costs. Many couples set up a joint account to pay common expenses.
You will not have changes to your Social Security. Often, if there is a second marriage, Social Security benefits can change, generally not for the better.
Your adult children won’t have to worry about losing their inheritance. A spouse is generally the primary beneficiary (especially if there is not a will); we all know the blended families can sometimes create inheritance problems and bad feelings.
So move in together, but make sure that everyone important to you knows the ground rules you have put in place.

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Lately, I have met with a number of people taking advantage of our second opinion appointment. I have never seen so many accounts that have statements of 65 pages or more.
The account consists of many individual stocks and a few mutual funds. Most of these holdings have $3000 or less per stock or fund. There is no difference between the holdings in retirement accounts vs. non-retirement accounts. I find this crazy. This shows, in my opinion, that there has been very little weight given to the client’s risk tolerance or investment needs.
Diversification can be a good thing; however, you can be too diversified.

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Q: I have been watching Apple for a number of years. Now that the stock is down so much, should I put all of my investments in AAPL?
A: While I feel that apple will be a solid company for many years to come, my answer is NO.
It does not matter how you feel about a company, you should never put all of your assets into one holding. Diversification is very important for successful, long term investing. I feel that no more than 10% of your investment dollars should be in any one holding.

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About a year ago, I received a call from a client – her voice was shaking – she told me that their family had decided they were going to liquidate all of their accounts and move everything into annuities. I asked if they planned to move their IRA and Roth IRA account also and she said yes. She said there was no point in me trying to talk to them about this as their minds were made up. I asked who was there with them and she hemmed and hawed. I asked if the insurance agent was there telling her what to say. She replied yes and promptly ended the call. I was heartsick for this 80 something couple, but what could I do?
I alerted the CPA and he went to visit them. After his visit, he told me he could no longer keep them as clients and he felt as I did that they were making a huge mistake.
Fast forward to this April, the CPA sees the wife at his door, crying for help. She had a box of unopened envelopes and so much other paper she did not know which end was up. They bottom line is: they ended up owing $80,000 in income tax, have a number of annuities with 10yr. surrender charges, and no longer have any liquid funds.
I and the CPA had tried to be advocates for this couple – their adult children did not.
Please pay attention to what is going on with your parents. An attorney has been brought in to try and help this couple. I hope it is not too late.

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I have a number of clients turning 70.5 yrs. old this year. That means they have to start taking their RMD’s (required minimum distribution) form their qualified retirement accounts. I am often asked if all of the funds need to come from one account, how do they take the distribution and how does the IRS know that it is the RMD?
First, there is a formula for how much has to be withdrawn. In the first year you must withdraw 3.65% of your 12/31/15 balances.
Second, it does not matter which accounts you withdraw from as long as the amount is correct.
Third, it does not matter if you take your RMD monthly, quarterly, or in a lump sum, just make sure you take enough out.
Another note: in the year that you turn 70.5, you don’t have to take your first RMD until April 1st of the following year. If you defer your first RMD, you will have to take two withdrawals that year.
If you do not need your RMD to supplement your lifestyle, you may just want to move funds from your qualified account directly to your general investment account and let the funds continue to work for you.

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Many of these tips I have shared with my daughter; feel free to pass them along to your family.
Graduate:
An education is important. You learn a lot about life going to school as well as preparing yourself for your chosen occupation.
Save for a rainy day:
Having an emergency fund, (I call it the “toe of the sock fund”) helps you avoid panic and having to use credit cards to cover emergencies.
Spend below your earnings:
Never spend everything you make – nothing more needs to be added to this tip.
If you can, never pay full price.
I always told my daughter to start at the back of a store, where all of the sale items are first. Shop online to compare prices; don’t be afraid to ask for a discount.
Open a retirement account:
No one will save for your retirement for you. Take advantage of payroll deductions, as it is a painless way to save. Start retirement saving with your first job and do not stop until you retire. Rule of thumb is to save 10% of what you earn; more if possible, but any amount is better than zero.
Live a life of gratitude.
Truly be grateful for what you have – help others when you can and do it anonymously. The grass is not always greener. Be happy! Happiness is an underrated virtue.

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My grandfather lived with us for many years before he passed. He emigrated from Russia by way of Canada. He worked hard running his own little grocery store his whole life. No one ever talked to him about saving for retirement; he had no other choice but to move in with us. It was wonderful having him there, but we don’t want to have to move in with our daughter when we retire. Here is what we will do to make sure we can remain independent:
Have a retirement plan. We know when we want to retire, how much it costs us to live, what things we would like to do in retirement, and what our family medical history has told us to prepare for later in life. From these points, we know how much we need to save and for how long.
I mentioned family medical history; it is important when planning for medical expenses in retirement. Anything can happen at any time, but facing your heredity can help make medical expenses easier to deal with later in life. Review your copays, deductibles, and long term care coverage.
Spending is everything. Many people plan for how big their nest egg needs to be, but have you thought about how to withdraw the income you will need? Have a plan for where you will pull funds from first, how much to withhold in tax, and how to handle emergencies.

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My daughter is getting ready to move into her own apartment. In preparing to move, we are going through closets and the attic to find all of her stuff. While looking through one box, we found tax documentation dated 2003. I knew that could go to the shred pile, but how long do you need to keep your stuff, and what stuff is important?
We have complied a “keep or shred” document to answer that question.

KEEP OR SHRED-CFG (2)

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A few blogs ago I wrote about treating my family to lunch with my savings at the pump. While this is something to cheer about, if you are already retired, you may not be cheering.
For just the 3rd time in 40 years there will be no increase in your Social Security check. Blame this on the savings at the pump. COLA calculations for the past year indicate that inflation has not increased, therefore, no increase in your Social Security. To make matters worse, your health care costs may increase. Medicare part B premiums are deducted directly from your Social Security and while there is no COLA increase, heath care is not part of the COLA calculation.
Here’s hoping that gas prices go up?

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