Category Archives: Retirement Strategies

Check out my video for Trusts & Estates Magazine

Last week, I had the opportunity to shoot a quick video to promote the article I co-wrote with John Koehler from Transamerica.  We wrote an article called “A Reliable Income Stream” for the June issue of Trusts & Estates Magazine, and focused on how using annuities could be an effective way to provide reliable income in retirement.

Annuities have always been used as a retirement planning tool, but in the past 10 years or so, annuity companies have created unique products that allow the investor to invest in the market and “lock-in” the upside, with a guarantee that they will never lose their investment.  In other words, they get a guaranteed minimum income for life with a potential to increase their income if the market does well.  This works similar to a traditional pension plan and not only provides peace of mind for the investor, but also acts as a hedge against longevity, inflation risk, market fluctuations and uncertainty.

Check out the video!

This App Is Soooo Money….Moxie

You know how some of these apps available at the App Store can save you money, time, energy and basically make your life a lot easier? Well I found one such app recently–Happy Hour Finder– that works with Apple products and it’s FREE!

Happy Hour Finder App

My BFF Tamar told me about it and, and being a fan of both deals and happy hour, I had to check it out immediately!

The app is pretty good, with an average 3-star rating at the Itunes App Store, and a 5-star rating from Cosmopolitan Magazine.  The app is really easy to navigate.  It uses your location to find happy hours near you and maps them out with the corresponding deal and times that the happy hour applies.  I used the app near my home in Manhattan, as well as in Brooklyn and in Long Island City.  Plus, it’s nationwide so whether you’re in Austin , TX, Raleigh, NC or Boise, ID, you should be able to find the best deals near you.

There’s another feature on the app that lets you add happy hours in case the Great Happy Hour Finder missed one, and you can contact the makers to tell them how awesome they are!

What’s better than a free app that tells you how and where to get the best deals on drinks?  Maybe an at-home bartender, but that’s about it.

Willard Scott Wants To Wish You A Happy Birthday

Like many people in America, I wake up to Matt, Al and the female look alike co-hosts on the “Today Show.”

While the show has (in my opinion) gone a bit downhill over the past few years—although I love watching the expert panel with Donny Deutsch–the one segment that is especially jarring is the one in which Willard Scott, the batty weather guy who’s been on the show since the NBC peacock was just an egg–does the Smuckers birthday segment.  During these painful three minutes, he rambles through a list of centenarians and almost-centenarians.  Usually during this segment, Willard is being filmed mid-swing right on the golf course of what must be his own retirement community.

“Ira Bronstein of Great Neck NY.  He’s turning 100 today!  Ira still has all his teeth, he likes bowling and bird watching!  Go get those birds Ira!”

“Happy birthday Susan Dawson of Birmingham, Alabama.  Look at her, sweet sweet Susan.  Susan is 105 today, loves to go to church on Sunday, enjoys oatmeal and soup, and even drives herself to bingo.  Get out of her way, everybody! Susan’s driving!!”  Chuckle chuckle…

I like how Willard always adds a tidbit about the birthday guys and gals, even if it seems like he makes it up.  Today I was simultaneously shocked and impressed when he announced the birthday of another guy from Long Island who turned 100 and–here’s the tidbit– got married at age 99!!

Crazy right?  I say it’s more scary than crazy.

The truth is as science and technology advance, people are living longer, healthier lives.  The US Census Bureau reported that by 2050, the average US life expectancy will reach the mid-80s, up from almost 78 years old in 2010.  That may seem like it’s far away, but consider that someone who is 32 years old today will be 70 in 2050.  By the time you reach 70 you may have another 15 years left, which means that hopefully you saved enough to live until age 85 and beyond.  Most people these days are not planning for that long of a retirement.

Here’s some more disturbing news: the Social Security Trust Fund, originally created after the Depression to make sure the elderly are cared for in retirement, was never intended to be a primary source of retirement income, and yet these days, Social Security benefits account for 1/3 of the average retiree’s income.  In some cases, an individual (and mostly women) rely on Social Security for 50% or more of their retirement income.

And because of shifting demographics (ie fewer workers and more people in retirement; fewer babies being born, etc.), the prolonged recession and the government’s mismanagement of the Social Security Trust Fund, it’s likely that if nothing is done to change the system, the SSTF will be in the negative (meaning paying out more than it takes in) by 2017.  I have very little confidence that a 32-year-old today will see any Social Security benefits at the rate we’re going.

Retirement may seem like a long way away for some.  Many of us are still paying back school loans, trying to get out of credit card debt, paying for a wedding, saving up for a home or starting a business.  But retirement will be there, whether we’re ready for it or not, and it doesn’t seem like we will have the help and support of the government or employer pension plans like our parents and grandparents did.  The truth is, the longer we wait to start saving for retirement, the worse off we will be.  And let’s face it, it may seem really quirky and retro to live in a trailer and work at Target, but that’s no way to reward yourself after a lifetime of working.  So start saving now.

Here are some tips to getting your retirement sitch situated:

1. Make sure you have first paid off high-interest debt and are sticking to a budget before saving.

2. Make sure you have an emergency fund: about 6-8 months worth of savings for fixed expenses.

3. If your company offers a 401(k) plan, make sure to contribute as much as you can.  A 401(k) plan is a defined contribution plan; it allows you to put your pre-tax money away for retirement.  The account may be invested in subaccounts, which may be a mixture of stocks and bonds that fluctuate with the market.  Throughout the accumulation phase (ie. while you’re still working and not taking money out), the account will grow tax-deferred, and during retirement, you start taking taxable withdrawals.  Check to see whether your employer also matches your contribution up to a certain percentage or dollar amount–this is like free money (subject to vesting limits) that will also accrue tax-deferred until withdrawals are taken.

The max contribution amount for 2012 is $17,000 with an additional $5500 allowed as a “catch-up” or workers age 50 and up.  If you can contribute the max, knock yourself out, but if you are still paying off school loans, or saving up for something, try to put away as much as possible, and at least enough that your employer will match.

4. If you work for a hospital, school or nonprofit your company may offer a 403(b) plan which works similarly to a 401K.  Check with your employer for plan specifics.

5. If a 401(k) or 403(b) are not available, consider a Traditional of Roth IRA.  These are individual retirement accounts that you can open at a bank or brokerage.  With a Traditional Deductible IRA, you may be eligible for a deduction based on the amount you contributed and your salary.  Even if you are not eligible for a deduction, an IRA is still a great way to put away money for retirement.

As with a 401(k), an IRA allows you to contribute money (although it will be after-tax money) and let it grow tax-deferred during the accumulation phase, then taxable when you withdraw money in retirement.

A Roth IRA works similarly to a Traditional IRA–allows you to contribute after-tax money, have the money grow tax-deferred–but owners can take tax-free qualified distributions from an IRA in retirement.  Income restrictions will limit some people from being eligible to contribute to a Roth, so check with your bank or broker about the details.  But if you can open and contribute to a Roth IRA, DO IT!  This may be one of the last ways to get tax-free income in retirement.

With a Roth and a Traditional IRA, the max contribution is $5000 for 2012 indexed to inflation, with an additional $1000 catch-up allowed for people 50 and over.

6. If you’re a small business owner, opening a 401(k) or offering it to your small group of employees can be very costly, so consider opening a SEP or SIMPLE IRA.  These are retirement accounts that allow individual or small business owners to contribute more than $5000 each year into the retirement plan.  A SEP lets you save up to $50,000 of income and employer contributions in 2012.

7. As retirement looms closer, many people consider investing in a variable annuity, which is like a mutual fund in an insurance wrapper, to complement their existing retirement plans. Variable annuities are for investors who want to capture the upside of the market but also have their principal protected, and receive a stream of income during retirement.  Annuities are popular for many reasons: they offer tax-deferred growth, death benefit protection for families and income during retirement for the owner.  These investments are not offered by employers so people invest in annuities as an alternative or in addition to their 401(k) or IRA plans.

8. Long Term Care Insurance (LTCI) is used to cover costs in retirement that regular insurance does not.  Usually LTCI is used when an individual can no longer perform the basic activities of life, like bathing, eating, toileting, getting in and out of bed and walking.  LTCI covers the costs of home care, assisted living, hospice and home health care.  With the average annual cost of a nursing home for one individual at $70,000 and the majority of American adults over 65 likely to need assisted living at some point during retirement, LTCI is becoming more and more necessary for the average retiree.

The best time to buy LTCI is in your 30’s and 40’s when you’re healthy because premiums will be a lot cheaper than they will be in your 50’s and 60’s.  Check with your financial advisor for more information and if this is a good fit for you.

9. Recently, with concerns over longevity and the hits that many retirement accounts took during the recession, the Treasury Department released proposals making it easier for people to get longevity insurance from their retirement plans.  Longevity insurance is an additional type of insurance you can buy from an insurance company that would pay you a stream of income beginning at a later date in retirement.  For example, you can invest a certain amount of money  (ie. $100,000) at age 65 that would begin paying out about $60,000 a year for life beginning at age 85.  Check with certain insurers to see if they offer these types of polices.

Sure, you could look at this list and instantly get a headache.  Or you could consider this list as a wake-up call and take action by visiting your bank or talking to your employer or financial advisor about retirement options.  After all, one day your face may be on that Smuckers jar.

The above information is for informational purposes only and readers should not rely on this for tax or legal advice. Check with your financial advisor or tax professional to see if any of these options are right for you.