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.
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Methodist Episcopal Church Nurse,
Severance Union Medical College & Hospital,
Seoul, South Korea
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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
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
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
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 info@umcdevelopmentcenter.org with your request, name and mailing address. Supplies are limited.
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: StarTribune.com, No longer saved for generations, family heirlooms are being shed, April 22, 2013
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: StarTribune.com, No longer saved for generations, family heirlooms are being shed, April 22, 2013
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