Thursday, October 29, 2015

Aging's Impact on Financial Decisions

Financial capacity — the ability to manage your money to meet your needs and match your values — is one of the first things to go when you have mild cognitive impairment.

Richard Eisenberg writes that this is the condition of people who have mild problems with thinking and memory. Mild cognitive impairment can be an early sign of Alzheimer’s disease and affects about 5.4 million Americans; 22 percent of people 71 and older have it.

America’s ‘Financial Capacity’ Problem

If you have elderly parents or want to prepare yourself for the chance that you may face serious cognitive decline issues someday, you’ll want to know some tips.

The Good and Bad News

Eric Johnson, director of the Center for Decision Sciences at Columbia University’s business school, says he had bad news and good news. His bad news: everyone loses what’s known as fluid intelligence as they age — that’s the ability to learn and process information quickly.

His good news: The other type of intelligence, known as crystallized intelligence — think of it as your knowledge of the world — grows until you’re around 65. “It’s why people are better at doing the New York Times crossword puzzle in their 60s than in their 20s,” said Johnson.

Consequently, he said, cognitive collapse is compensated by an increase in crystallized intelligence.

When Financial Decisions Grow Harder

But this was disturbing: Johnson says bluntly that “after 60, it’s harder to make good financial decisions” because we lose our fluid intelligence over time.

Financial literacy declines in later life and investment skills deteriorate sharply around age 70.

More troubling: 
Annamaria Lusardi, an economics professor at George Washington University’s School of Business, surveyed older people and found that although they scored low on questions about financial literacy, they gave themselves high rankings.

So, not only do older Americans have trouble making wise money decisions, they don’t realize when they’re making bad choices, which can make them easy prey for con artists and unscrupulous financial firms.

That’s one reason why 
older victims of financial fraud lose $2.9 billion annually, according to a 2011 MetLife analysis, and why elderly people pay some of the highest costs for debt. In one study, 75-year-olds shelled out about $265 more annually than 50-year-olds for home equity lines of credit.

The Form That Can Help
Holly Deni, a financial gerontologist who runs ElderLife, an eldercare advisory service based in Little Falls, N.J., advises get a power of attorney drawn up for your parents, elderly single relatives and — perhaps most importantly — yourself. “Anyone who doesn’t have a power of attorney should get one because any of us can fall into incapacity at any time,” said Deni.

Helping Your Parents Gradually

She also suggested that if you notice your parents beginning to have trouble managing their money, assist them incrementally. “Start by setting up a bill-payment schedule and automatic bill paying. Then, become a co-signer for one of their small financial accounts,” she advised. “Then, find out where there important financial papers are.”

Dr. Carolyn McClanahan, a physician and director of financial planning at the Life Planning Partners firm in Jacksonville, Fla., said helping your parents consolidate their accounts can prevent them from becoming victims of financial fraud. “Consolidate as much as possible," she said, "because the more accounts that are floating out there, the easier it is for someone to get their fingers on one.”

The Person You Need to Know

One more tip to protect your parents with financial capacity challenges: Meet with someone who works at your parent’s bank.

“If your loved one frequents one bank, they get to be known there,” said Deni. The bank employee can then let you know if he or she has noticed anything of concern — a pattern of unusually large withdrawals, for instance.

Adapted from Richard Eisenberg article "How Aging Impacts Our Financial Decisions"

© Twin Cities Public Television - 2015. All rights reserved.

Monday, October 19, 2015

5 Pieces of Bad Retirement Advice

One size doesn't always fit all, especially when it comes to retirement advice. In fact, some of the most time-honored rules of thumb for managing your finances after the end of your primary working years may not make sense in your specific situation.

On the other hand, they might make perfect sense. As is usually the case, whether retirement advice can be classified as good or bad for you really depends.

Bankrate presents arguments from the standpoint of the devil's advocate to help you see the old standards in a new light. If nothing else, this exercise may help induce a healthy dose of skepticism when you hear or read advice that passes itself off as the truth.

Reconsider these potentially ill-conceived retirement solutions

1. You can always work
Not so fast, says Gail Cunningham of the National Foundation for Credit Counseling. While Cunningham agrees that working has many pluses -- not only does it boost income, but it's good for your mental and physical health -- too many unknowns make it chancy to count on a job as part of your retirement package.

She says a lot can go wrong with plans to work into perpetuity:
  Your health can decline.
  Your spouse's health needs may cast you into the role of caregiver.
  Your company may have other ideas.
  Circumstances could make a move away from your job's location attractive.

Plan to work if you want, but don't make it a necessary part of your financial equation.

"Continuing to work is a plus, but only if it's on your terms," Cunningham says

2. Pay off the mortgage
While getting rid of debt doesn't seem like it could have a downside, there are circumstances where paying off a mortgage might not be such a great move.

Michael PeQueen, managing director and partner with HighTower Las Vegas, a financial planning firm, says the decision to rid yourself of a mortgage is often an emotional decision rather than a financial one.

Sure, a paid-for home can bring peace of mind, but it's not always the right strategy. Depending on the interest rates involved, it might make better financial sense to invest the cash that would go into freeing yourself from your low-interest home loan and instead put your money into higher-yielding investments.

PeQueen explains how it works: "Let's say a female becomes a widow in her early 60s. That could leave her 30 or 35 years worrying about inflation taking a significant portion of her portfolio. Locking it into a guaranteed low rate of return by paying off a fixed-rate mortgage really could cost her tens of thousands, if not more, over her lifetime," he says

3. You will need “X” amount per year…..

You do the math and decide you need $80,000 a year to retire, so you want to put everything in relatively safe vehicles to generate that amount. Fine, but that's based on the value of today's dollar. What will it take to maintain your lifestyle in 10, 20 or even 30 years? It's not that easy to quantify what you'll need in the face of unpredictable inflation rates.

David Twibell, president of Denver-based Custom Portfolio Group, says when investors grab numbers out of the air, they often forget that their money -- while theoretically growing over the years -- will be worth a lot less based on inflation.

Consider that in January 1975, the inflation rate was 11.8 percent. March 1980 brought inflation up to a whopping 14.8 percent. The past few years have seen a relatively low rate of inflation, but some say that won't last.

Even if it stays at a benign 3 percent a year, over time your purchasing power erodes significantly. A thousand dollars today would be worth $412 in 30 years.

That unpredictability is why Twibell advises against overloading your portfolio with fixed-return vehicles like bonds and annuities with a low rate of return.

"The typical response I get when initially talking about retirement planning is, 'I just need $80,000 a year.' Obviously, $80,000 today is far different from $80,000 two decades from now," Twibell says.

4. Its smart to downsize
Getting rid of the big house once the kids are gone may seem like a good idea. But like any other type of financial decision, it's good to crunch the numbers first and not simply assume that downsizing is right for everyone.

HighTower Las Vegas' PeQueen says the fees to buy and sell a home, plus the costs of moving and preparing both homes for these transactions, can negate any financial gain for at least the first few years. And, PeQueen says, a smaller home doesn't necessarily translate to a lower cost of living.

"In downsizing to a better location, for example, you have to factor in the increased costs, such as homeowners association fees and a higher tax rate," he says, adding that surviving spouses often opt for downsizing because memories of happier times prove difficult and they want a new start emotionally.

"And that's fine, but you also need to look at all options because holding onto their current home could actually be the cheaper option," PeQueen says.

5. Skimp of 401K savings
Sometimes life pelts you with not-so-great surprises; you're short on cash due to medical bills, home repairs or college expenses. Your budget is already tight, so how do you come up with the money you need? That 401(k) nest egg looks mighty tempting to tap, but you've heard enough times that it's not a good idea. So how about lowering your retirement contributions to increase your income temporarily?

Experts say the solution to your cash flow problem may take some creative thinking (an additional part-time job, working overtime, selling something). But you should not sacrifice your 401(k) contribution.

"Stopping 401(k) contributions is convenient when times are tough," says Ted Lakkides, CFP professional and founder of Cygnet Financial Planning, "but there are (plenty of other) items that can be trimmed off a budget if a person has the guts to look."

Lakkides says it's best to comb through current expenses to find that cash, but if lowering your retirement contribution can't be helped, then avoid going below the employer's match point. If you feel you must do so, maintain at least a 1 percent contribution, he says, and hike it to former levels or higher as soon as possible.

He provides this warning to those who do give in and lower their 401(k) contribution: Be prepared for major tax-time sticker shock.

"They will owe income taxes on the extra money they didn't put in their 401(k)s," he says.

Monday, August 17, 2015

Making a Global Impact

I recently found an article from the 1950’s discussing the many worldwide ministries of our Church.
Methodist Episcopal Church Nurse,
Severance  Union Medical College & Hospital, 
Seoul, South Korea
It was striking to see that many areas of our world have made great progress, yet still need help. The United Methodist Church has made an impact here and around the world in areas such as aid during natural disasters, programs for young and older adults, support for missionaries, starting new churches, and training lay leaders.

The Permanent Fund for The United Methodist Church provides an opportunity to invest in the future of our Church through the most critical ministries that we support as a denomination. It will provide support for vital ministries of The United Methodist Church far into the future. As United Methodists, we support our local church, however, there is an entire network provided throughout The United Methodist Church that supports ministries in your local church, in your area, in the United States, and around the world.

The United Methodist Church is promoting The Permanent Fund through the name UMC global
impact to express that your gifts to The Permanent Fund truly do make an impact in the United States and around the world.

Please consider the many areas of our Church ministry that hold interest for your family.  As you support your local Church through your Will and estate plan, consider making a contribution to The United Methodist Church’s ministries in your area and around the world through The Permanent Fund.

Wednesday, August 12, 2015

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Twitter: @umcdevcenter

Wednesday, August 5, 2015

Can moving be a good retirement strategy?

Eric Kingson, retirement expert from Syracuse University Aging Studies Institute, was recently asked about moving as a strategy for retirement.

He stated that increasingly, older people are living on tighter incomes. The golden age of aging -- when retirees could count on pensions and other sources of income like interest income on savings -- that's changed. And many older people are either in economic difficulties or just one shock away, meaning the loss of a spouse or an illness, from major financial difficulties. That really describes more than half of seniors today. So it's not surprising that people are looking for environments that might save them in the long run.

When asked if there were financial advantages to moving, Kingson mentioned that it depends on where you are in your age and your health, and your reason for moving to be near family. A lot of us who are in our early 60s or early 70s want to be near our grandchildren and near our children, and so that's a very normal human instinct and a good one.

Some of us want to move to places like Florida or Arizona to more comfortable climates and less expensive settings. But then, after 15 or 20 years, there's a lot of movement from those areas back to where family members live for health reasons. That's a strong financial argument to be made for having family as caregivers.

One way to consider a retirement move is to find a central location that might have the climate advantage that you are seeking, while also being close enough to family for those times when they might be needed. The “half-backs” have become a popular trend. This refers to folks that move to Florida with family in Ohio, and then move to Tennessee or North Carolina to be “half-way-back” to their family.

A move is never easy, but it might meet your needs at a stage in your life when you are ready for a change of pace, or just a change of scenery. The important thing to remember is that any move should be financially advantageous, and should not come at the expense of your savings. We all fall in love with those nice communities on HGTV, but affordability should be the deciding factor. You worked hard during your career to attain a comfortable life, just make sure that that comfortable status extends to your later years and is practical for you and those that will be assisting you in the future.

Thursday, July 23, 2015

Book Review "Enough" by Adam Hamilton

Adam Hamilton’s treatise on “prudent financial practices,” Enough: Discovering Joy Through Simplicity and Generosity, is inspiring.  In a world where computers and cellphones are “disposable” items, his message of restraint and charity stands out.

Beginning with an autobiographical story, many of us can identify with, Reverend Hamilton looks prophetically upon the culture of “affluenza” and “credit-it is” the US finds its citizens living in.  For Hamilton, a deeper problem lies beneath:

“Inside us there is a brokenness; the Bible calls it sin.  Our souls were created in the image of God, but they have been distorted.  We were meant to desire God, but we have turned that desire toward possessions.”  (pg. 21)

Believers need to think about and plan out the financial sphere of their lives.  Its foundation is the answer to the question, “What is your life purpose?”

US society calls us to consume.  Hamilton asks, “What does God call you to do?”

Along with helpful practical advice on financial planning, the author also seeks to remind us of the theological value that undergirds the life of a “contented” Christian.  Can, we Christians, be defined by our generosity?  Our giving?

“When God created humankind, God designed us to be generous.  God created us with the willingness to give to God and to others.”  (pg. 76)

Unfortunately we are strongly “tempted to keep” for ourselves.  Fear and selfishness drive our actions.  Hamilton reminds us that we have been given a gift – our lives.  The One who gave it to us, owns all of it.

“You didn’t bring any of it with you when you came into the world and you won’t take any of it with you when you leave.”  (pg. 79)

Tell them to do good, to be rich in the good things they do, to be generous, and to share with others. When they do these things, they will save a treasure for themselves that is a good foundation for the future. That way they can take hold of what is truly life.         I Timothy 6:18-19

In Enough, with the simple and clear understanding which Adam Hamilton writes on the how’s and why’s of a Christian’s fiscal life, we too can grab ahold of “what is truly life” and not the mere shadow of living.  We come to realize that for most of our lives, we are not needy, but we are “wanty.”  Knowing the difference is the beginning of purpose – God’s purpose for your life.

If you would like your own free copy of Enough by Adam Hamilton, send us an email to with your request, name and mailing address.  Supplies are limited.

Wednesday, July 22, 2015

Thursday, July 9, 2015

No Longer Saved for Generations

"As their parents die, baby boomers are on the receiving end of the largest transfer of wealth in U.S. history: estimated at $8.4 trillion, according to a 2010 study by the Center for Retirement Research at Boston College."

Along with that inheritance comes a lifetime of belongings.  However all generations seem to be reluctant to take on the inheritance of belongings.  Baby boomers see their own need to pare down so therefore do not want anymore stuff.  Gen X's, Y's and Millennials live in a fast-paced world where stuff will just slow them down, preferring money rather than items for their inheritance.

A good practice would be to sit down with the family and discuss the nature of large inheritance items.  Old love letters might be something everyone in the family would like to see stay in the family, while old furniture may not be something anyone wants.  Someone may want to take the jewelry and photo albums but may not have any use for a fireplace mantle.

Much like investments, land and other financial instruments should be discussed regarding their distribution, household items and other ephemera must be taken into consideration.

Source:, No longer saved for generations, family heirlooms are being shed, April 22, 2013

Thursday, June 11, 2015

Do you have enough to retire?

By Jennie L. Phipps ·
Thursday, January 10, 2013
Posted: 2 pm ET
People frequently ask how much they'll need to retire. There is no one-size-fits-all answer. You'll need what it takes for you to live on. Getting to that number is the first retirement planning step.
It's a little like making a budget. List all the things you currently spend money on -- mortgage or rent, utilities, car payment, gas, health and auto insurance, health care that's not covered by insurance, clothing, groceries. After you've identified all the big-ticket items, add in the smaller items -- auto maintenance,  pet food and vet fees, club dues and related expenses, Friday night dinner out, gifts for the grandkids, a week at the shore. Whatever you spend, put it in there. You can always take it out later if you decide you can't afford it.
Add up the annual total, and you have a rough estimate of what you'll need in retirement. It may not be much lower than it is now. Most people's expenses don't go down a whole lot when they stop working, but you will lose some costs of commuting and other expenses related to working. And if you have been saving for retirement, you don't have to include that.
Next, go to the Social Security website at, and figure out how much you and your spouse are entitled to at various ages. then multiply those numbers by 12. Note that the totals go up significantly the longer you wait to take your benefit. If you or your spouse are entitled to a defined benefit pension from a current or previous employer, call the company benefits office and find out how much it is. In most cases, there is no advantage to delaying past age 65 because the pension won't increase.
If you have 401(k)s, add them together and multiply the total by 4 percent. That will give you a rough idea of how much you can draw once a year. Divide that by 12 to see how much you can afford to spend every month.
Add all these income totals up, and compare them to your costs. If you aren't bringing in enough to cover your nut, you'll need to work and save more. But if you have enough, congratulations.
Your next step is to find a retirement planner who will help you make this analysis more sophisticated. In particular, you'll want to see the effects of inflation on your retirement. It can be a killer. You also may want help considering ways to use something such as an annuity to make your income more stable, especially if you don't have a defined benefit pension.
None of this is rocket science, but it isn't simple either. The reward for a little hard work is a better sense of your ability to live securely during your oldest and frailest years.

Monday, June 1, 2015

Your Passion

If you are passionate about the ministries of The United Methodist Church (UMC), check us out!  The UMC Development Center serves a wide range of national and worldwide ministries of our denomination. Please visit our website at
We would also like to talk to you in person, please call us at 615-369-2382 or email us at

The mission of the UMC Development Center is to be a fundraising partner with agencies, caucuses, and affiliated organizations of the United Methodist Church, through planned gifts, estate planning, and major gifts.