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March eMagazine

March 23rd, 2016 | No Comments | Posted in eMagazine

March 2016

Reducing the Risk of Outliving Your Money

March 22nd, 2016 | No Comments | Posted in Financial News

What steps might help you sustain and grow your retirement savings?

shutterstock_230366815“What is your greatest retirement fear?” If you ask retirees that question, “outliving my money” may likely be one of the top answers.  Retirees and pre-retirees alike share this anxiety. In a 2014 Wells Fargo/Gallup survey of more than 1,000 investors, 46% of respondents cited that very fear; 42% of the respondents to that poll were making $90,000 a year or more.1

Retirees face greater “longevity risk” today. According to an analysis of Census Bureau data by the Center for Retirement Research at Boston College, the average retirement age in this country is 65 for men and 63 for women. Many of us will probably live into our eighties and nineties; indeed, many of our parents have already lived that long. In 2014 (the most recent year for which Census Bureau data is available), over 72,000 Americans were centenarians, representing a 44% increase since 2000.2,3

If your retirement lasts 20, 30, or even 40 years, how well do you think your retirement savings will hold up? What financial steps could you take in your retirement to prevent those savings from eroding? As you think ahead, consider the following possibilities and realities.

Realize that Social Security benefits might shrink in the future. Today, there are three workers funding Social Security for every retiree. By federal estimates, there will be only two workers funding Social Security for every retiree in 2030. That does not bode well for the health of the program, especially since nearly one-fifth of Americans will be 65 or older in 2030.4

Social Security’s trust fund is projected to run dry by 2034, and it is quite possible Congress may intervene to rescue it before then. Still, the strain on Social Security will mount over the next 20 years as more and more baby boomers retire. With this in mind, there’s no reason not to investigate other potential retirement income sources now.3

Understand that you may need to work part-time in your sixties and seventies. The income from part-time work can be an economic lifesaver for retirees. Suppose you walk away from your career with $500,000 in retirement savings. In your first year of retirement, you decide to withdraw 4% of that for income, or $20,000. At that withdrawal rate, not even adjusting for inflation, that money will be gone in 21 years. What if you worked part-time and earned $20,000-30,000 a year? If you can do that for five or ten years, you effectively give your retirement savings five or ten more years to last and grow.3

Retire with health insurance and prepare adequately for out-of-pocket costs. Financially speaking, this may be the most frustrating part of retirement. We can enroll in Medicare at age 65, but how do we handle the premiums for private health insurance if we retire before then? Striving to work until you are eligible for Medicare makes economic sense. So does building some kind of health care emergency fund for out-of-pocket costs. According to data from Health Affairs, those costs approached $16,000 a year in 2014 for Americans aged 65-84, and $35,000 a year for Americans aged 85 or older.4

Many people may retire unaware of these financial factors. With luck and a favorable investing climate, their retirement savings may last a long time. Luck is not a plan, however, and hope is not a strategy. Those who are retiring unaware of these factors may risk outliving their money.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – usatoday.com/story/money/personalfinance/2014/09/24/investors-fear-outliving-retirement-savings/16095591/ [9/24/14]
2 – thestreet.com/story/13468811/1/here-rsquo-s-how-to-make-your-money-last-in-retirement.html [2/23/16]
3 – marketwatch.com/story/so-whos-going-to-pay-for-you-to-live-to-be-100-2016-02-17/ [2/17/16]
4 – thinkadvisor.com/2016/02/22/6-ways-to-prevent-going-broke-in-retirement [2/22/16]

Should You Plan to Retire on 80% of Your Income?

March 22nd, 2016 | No Comments | Posted in Financial News

Examining a long-held retirement planning assumption.

shutterstock_252912289A classic retirement planning rule states that you should retire on 80% of the income you earned in your last year of work. Is this old axiom still true, or does it need reconsidering?

Some new research suggests that retirees may not need that much annual income to keep up their standard of living.

The 80% rule is really just a guideline. It refers to 80% of a retiree’s final yearly gross income, rather than his or her net pay. The difference between gross income and wages after withholdings and taxes is significant to say the least.1

The major financial challenge for the new retiree is how to replace his or her paycheck, not his or her gross income.

So concluded Texas Tech University professor Michael Finke, who analyzed the 80% rule last year and published his conclusions in Research, a magazine for financial services industry professionals. Finke noted four factors that the 80% rule does not recognize. One, retirees no longer need to direct part of their incomes into retirement accounts. Two, they no longer involuntarily contribute to Social Security and Medicare, as they did while working. Three, most retirees do not have a daily commute, nor the daily expenses that accompany it. Four, people often retire into a lower income tax bracket.1

Given all these factors, Finke concluded that the typical retiree could probably sustain their lifestyle with no more than 77% of an end salary, or 60% of his or her average annual lifetime income.1

Retirees need to determine the expenses that will diminish in retirement. That determination, rather than a simple rule of thumb, will help them realize the level of income they need.

Imagine two 60-year-old workers, both earning identical salaries at the same firm. One currently directs 25% of her pay into a workplace retirement plan. The other directs just 5% of her pay into that plan. The worker deferring 25% of her salary into retirement savings needs to replace a lower percentage of their pay in retirement than the worker deferring only 5% of hers. Relatively speaking, the more avid retirement saver is already used to living on less.

New retirees may not necessarily find themselves living on less. The retirement experience differs for everyone, and so does retiree personal spending.

As a recent Employee Benefit Research Institute study noted, household spending typically declines 6% in the first two years of retirement, with additional declines thereafter. This is not the story for all retirees; EBRI also found that almost 46% of retiree households increased their spending in the initial two years of retirement. On the other side of the scale, nearly 40% of the retiree households EBRI studied saw their expenses fall by at least 20% within two years of retiring.2

A timeline of typical retiree spending resembles a “smile.” A 2013 study from investment research firm Morningstar noted that a retiree household’s inflation-adjusted spending usually dips at the start of retirement, bottoms out in the middle of the retirement experience, and then increases toward the very end.2

A retirement budget is a very good idea. There will be some out-of-budget costs, of course, ranging from the pleasant to the unpleasant. Those financial exceptions aside, abiding by a monthly budget (with or without the use of free online tools) may help you to rein in any questionable spending.

Any retirement income strategy should be personalized. Your own strategy should be based on an accurate, detailed assessment of your income needs and your available income resources. That information will help you discern just how much income you will need when retired.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – marketwatch.com/story/you-may-need-less-retirement-income-than-you-think-2015-11-30 [12/24/15]
2 – money.cnn.com/2015/12/02/retirement/retirement-income/ [12/2/15]

Financial Planning with Health Insurance in Mind

March 22nd, 2016 | No Comments | Posted in Financial News

How much might health care cost you someday?

shutterstock_143828731“Financially speaking, what would be the worst thing that could happen to you?” If you ask a hundred people in their forties that question, you may get a dozen different answers. Some may say “my business going under” or “losing my house.” Some might say “a divorce,” “a lawsuit,” or “being laid off.” But how many would say “a severe illness?”

A catastrophic illness seems like a remote possibility to many; distant, decades away. As a result, that possibility may be overlooked in our financial planning.

The healthiest of us may need to save the most for health care. This may seem paradoxical, but think about what many people in their eighties or nineties experience: years of declining health and mobility, and accompanying high health care expenses.

Two projections of average retirement health care costs are very illuminating in this regard. Empower Institute (an offshoot of retirement plan administration firm Great-West Financial) has calculated the amount of money that 65-year-old males with particular medical conditions will need in order to absorb 90% or more of future health care expenses. A 65-year-old man with Type 2 diabetes, for example, will need $88,300 (in today’s dollars) to cope with those costs, according to Empower’s projection. It also estimates that a 65-year-old tobacco user will require $114,900 and a healthy, non-smoking 65-year-old male, $143,800.1

Why the difference? According to the Empower forecast, the 65-year-old diabetic has a life expectancy of 78, versus 81 for the tobacco user, and 87 for his healthier counterpart.1

How about a healthy 65-year-old woman? Empower projects she will need a retirement health care fund of $156,000, as women currently outlive men on average.1

Another take on all this comes from the respected Employee Benefit Research Institute. EBRI estimates that the average healthy 65-year-old today will need $124,000 to handle future medical expenses. EBRI’s director of health research, Paul Fronstin, told the Wall Street Journal that a pre-retiree should adjust that number for inflation as follows: increase it by 5% for each year remaining until your planned retirement date. So if you are 50 right now, you will need about $250,000 to cover medical costs if you retire in 2031.1

The more you earn, the more you may pay for essential health benefits. Take the case of Medicare premiums. Most Medicare beneficiaries who are single filers with modified adjusted gross incomes of $85,000 or less are paying monthly Part B premiums of $104.90-$121.80 this year. In contrast, single filers with MAGIs between $85,001-107,000 are paying Part B premiums of $170.50 a month. That premium jumps to $243.60 for a single filer with MAGI greater than $107,000, and extremely high-earning individuals pay more than that. Pre-retirees should be mindful of this, and the fact that Medicare does not pay for long term care or dental care.2,3

Your income level may also affect how much you pay for health coverage before you retire. As an example, a Texas household of four that expects its 2016 income to be between $24,300 and $60,625 can go to the Health Insurance Marketplace and qualify for health plans with relatively low premiums, plus savings on deductibles and copayments. A similarly sized Texas household with income higher than $97,000 cannot qualify for any such savings and must pay full price for their health coverage at the Marketplace.4

So looking ahead, is a Health Savings Account a good idea? For the future, it may be. HSAs must be used in conjunction with high-deductible health plans, but even with that requirement, these accounts can give pre-retirees a nice, dedicated savings vehicle to plan for future health care expenses. An HSA may become an important part of a long-run financial strategy.5

The annual contribution limit on an HSA is currently $3,350 for individuals, $6,750 for families. Contributions are 100% tax-deductible. (You can even make $1,000 catch-up contributions beginning in the year you turn 55, as long as you are not a Medicare recipient.) You can also optionally invest the money within the account. An HSA is tax-advantaged: assets get tax-free growth, and withdrawals are tax-free if you use the money to pay for qualified health expenses. HSAs also have another nice feature: once you turn 65, you may use withdrawals from them for non-medical purposes, though such withdrawals will be taxable. If you enroll in Medicare, you can no longer contribute to an HSA – so it is vital to fund these accounts for some years before retiring.5,6

It is only prudent to factor potential health care costs into your financial plan. Some healthy pre-retirees may assume that they will need only a five-figure rather than six-figure sum to address them. That assumption may be flawed.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 – tinyurl.com/hbcoezd [2/10/16]
2 – medicare.gov/what-medicare-covers/not-covered/item-and-services-not-covered-by-part-a-and-b.html [3/10/16]
3 – kiplinger.com/article/retirement/T039-C001-S003-medicare-part-b-premiums-in-2016.html# [11/13/15]
4 – healthcare.gov/lower-costs/qualifying-for-lower-costs/ [3/10/16]
5 – nytimes.com/2015/11/07/your-money/health-savings-accounts-and-medicare.html [11/7/15]
6 – bankrate.com/finance/insurance/health-savings-account-rules-and-regulations.aspx [10/7/15]

Vehicle Recalls Reach a Record High

March 22nd, 2016 | No Comments | Posted in Financial News

shutterstock_309810638Fifty million vehicles operating in the United States have been recalled due to safety issues, but the National Highway Traffic Safety Administration (NHTSA) estimates that 25 percent of recalled vehicles are never repaired. That’s why it’s important to be proactive about vehicle recalls.

There are two ways to determine if your vehicle has been recalled:

  • Go to https://vinrcl.safecar.gov/vin and search for your vehicle identification number (VIN). Your VIN can be found in the corner of your vehicle’s windshield where it meets the dashboard or on the driver’s-side door post.
 
  • Call your vehicle’s manufacturer and ask about your vehicle.
 

If you discover that your vehicle has been recalled, you can take it to one of the manufacturer’s dealerships for a free repair. Remember to be proactive about recalls—a vehicle that has been recalled has the potential to endanger its driver, passengers and surrounding traffic.

© 2016 Zywave, Inc. All rights reserved.

You Can Control Your Spending

March 22nd, 2016 | No Comments | Posted in Financial News

shutterstock_283372868You might be a person who does very well with your money.  Your money management skills are serving you well.  On the other hand, you might have some concern about your spending habits.  Maybe you are an over spender.

Regardless of whether you are a controlled spender or an over spender, there are ways to improve your particular situation.

There are many tools and techniques to help over spenders transform negative habits into positive behavior.  Here are a few:

  1. Stay clear – of the spots where you know that you spend lots of money
     
  2. Take a timeout – Create a policy for yourself that says, “I will use layaway, the store’s ‘hold policy’ or I will wait two weeks before I buy this item.”  This will give you time to think before you buy.
     
  3. Shop with a list – Most purchases that sabotage a spending plan are impulse buys.  Using a list and sticking to it, will make splurging a thing of the past.
     
  4. You can still splurge – but do it economically and consciously.  If you have an urge to spend, spend, spend, consider doing it at Goodwill instead of Saks Fifth Avenue.  You might find that your urge is satisfied.
     
  5. Track your money – and use cash when you purchase items.  You’ve worked hard for that money and sometimes it is more difficult to exchange cash when making a purchase.
     
  6. Call a friend – Just talking with a trusted person can reduce the urge to splurge.
     

Marketers would prefer that you shopped from a subconscious level.  Fight back before you buy.

March, 2016 – Monthly Economic Update

March 22nd, 2016 | No Comments | Posted in Monthly Economic Update

March2016-Monthly_Economic_Update

Nike Just Created A Sneaker That Laces On Its Own

March 22nd, 2016 | No Comments | Posted in Lifestyle

Tying your own laces is so 20th century.

After Nike’s latest sneaker launch, it’s not hard to imagine a future where our children will grow up abstaining from a key rite of passage: Learning how to tie your own shoes.

Nike unveiled the HyperAdapt 1.0 at Moynihan Station in New York City on Wednesday. The sneaker features state-of-the-art adaptive lacing, which automatically secures the wearer’s foot as soon as they slip it on. That means no need to tie your shoes as you have been your whole life.

“What’s manual today will be automatic,” Tiffany Beers, a Nike senior innovator who worked as the technical lead on the sneaker, told The Huffington Post.

“We’ll put shoes on and it will all happen for us. A lot of times I think, ‘Iron Man.’ That suit. I keep that in mind a lot. When Tony Stark first put that suit on — that was a powerful moment.”

Beers said that her team began working on the shoe’s technology about 10 years ago. Fellow designer Tinker Hatfield, she said, had the “vision” for the sneaker when he worked on “Back to the Future II” in 1989, but the team had to wait for technology to evolve far enough — and for motors to become small enough — before it could become a reality.

Beers and her team sourced servo motors, similar to ones that are in small train engines and helicopter wings, and leaned on the transportation industry’s engineering feats to help with their own motor development. (She’s aware that once competitors get their hands on the HyperAdapt, copycats may follow.)

So how does this futurist product actually work? As Beers explained, when a wearer steps into the HyperAdapt, a sensor in the heel (the blue light seen below) will tell the sneaker’s “brain” to auto-lace using a small motor, which needs to be recharged every two weeks.

As the laces start to lock in the foot, the brain actively measures the “attention” between the foot and the system until it reaches a snug fit, and automatically stops. To adjust the fit or release the foot, small plus-minus buttons are located on the side for manual control. While the sneakers have been water-tested, Beers doesn’t recommend wearing them out in a rainstorm.

via GIPHY

Beers noted that the HyperAdapt’s heavily patented technology is similar to that of the 2015 Nike Air Mag — a literal incarnation of Marty McFly’s famous kicks — which was Nike’s first power-lacing sneaker. But while the Air Mag will only be available for charity auction in spring 2016 to benefit the Michael J. Fox Foundation for Parkinson’s Research, the HyperAdapt will be available to Nike+ app members in three colorways starting in the 2016 holiday season. No retail price has been determined yet, according to a Nike rep.

But what Beers and Nike as a whole see as the greatest benefit of the technology is that it “reduces distraction.” It enables runners, for example, to shrug off nagging worries of laces loosening when climbing a hill, and protects marathon runners with swollen feet from the pain of overly tight laces.

The HyperAdapt is the first step into adaptive fit, but Beers says there’s potential for the technology become embedded into all types of athletic footwear, from basketball to soccer, and could serve as an injury deterrent.

“Sometimes you’re jumping, sometimes you’re sprinting, sometimes you might be sitting on the bench,” she said. “That instant ability to adjust your lace on the fly will change how people think about performance.”

Source: huffingtonpost.com

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