15 Mistakes Smart People Make in Retirement

Neglecting to plan for long-term care can be a big threat to your nest egg.

Americans make plenty of mistakes when it comes to planning for retirement, the biggest of which is not saving enough. In fact, a recent recent GOBankingRates survey found that 1 in 3 Americans has saved nothing for retirement.

However, even if you have made saving a priority, you still can make missteps once you leave the 9-to-5 that will put a comfortable retirement at risk. Here are 15 common mistakes people make in retirement — and how to avoid them.

1. Claiming Social Security Too Early

More than one-third of baby boomers take advantage of the option to claim Social Security benefits early at age 62, according to the Center for Retirement Research. But taking benefits before full retirement age results in a permanent reduction of as much as 25% of your benefit, said Patricia Cathey, an investment advisor with financial services firm Smart Retirement in Denver.

Full retirement age is 66 for those born between 1943 and 1954 and gradually increases until it reaches 67 for people born after 1959. “Waiting to claim Social Security is one of the best things you can do to boost your income in retirement,” Cathey said. “And there’s a big bonus for delaying your claim beyond your full retirement age: Your benefit will grow by as much as 8% a year from your full retirement age up until age 70.”

2. Continuing to Work After Claiming Social Security

If you start receiving benefits at 62 and continue to work, you will lose $1 in benefits for every $2 earned above the annual limit of $15,720. The year in which you reach full retirement age, you will lose $1 in benefits for every $3 earned above the annual limit of $41,880. That continues until the month you actually reach full retirement age — at which point the limit disappears. [Those withheld Social Security benefits are not permanently lost, however. Once you reach normal retirement age, your benefits will be permanently increased to account for the missing amounts.–MONEY editors]

3. Carrying Debt Into Retirement

Having debt in retirement when you are on a fixed income makes you vulnerable to financial hardships because it leaves you with less money to cover unexpected expenses, Cathey said.

Cathey recommends you pay off all debt before you retire. But if that’s not possible, have a plan to have it paid off by a certain date in retirement.

In particular, you should focus on paying off your mortgage, because it is the biggest monthly expense for most people, said Robert Steen, enterprise advice generation director for retirement and complex financial planning for USAA, which offers financial services for members of the military.

4. Being Too Conservative With Investments

Many retirees shy away from holding stocks in their retirement account portfolios because they fear losing money in a market downturn. By avoiding stocks, though, they are trading off one risk for another — not having enough growth potential in their portfolio to outpace inflation, Steen said.

Although stocks are often volatile over short periods, they tend to outperform bonds and other conservative investments over long periods, said David Walters, a certified financial planner and portfolio manager with Palisades Hudson Financial Group‘s Portland, Ore., office.

“Retirees need to understand that the period of their retirement can be upwards of 30 years, and they need their portfolio to support them throughout this entire period,” he said. “So while it is important to keep the risk of the portfolio in check, some allocation to stocks is warranted.”

5. Being Too Aggressive With Investments

Some retirees become too aggressive with their portfolios to achieve better returns, said Corey Sunstrom, a Charlotte, N.C.-based certified financial planner with Hobart Financial Group. “The truth is, aggressive investors aren’t being rewarded either, and their portfolios have a greater propensity for loss,” he said.

Rather than reach for returns, Sunstrom recommends working with an advisor to ensure you are properly diversified with investments that will help you reach goals.

6. Overexposure to One Stock or Asset Class

Some people have a significant portion of their portfolio invested in their former employer’s stock, Walters said. This creates risk, though, because a large amount of your retirement income could be riding on the fate of a single stock. If it tanks, so will your portfolio.

“Where possible, allocations to any single company should be minimized in favor of a well-diversified portfolio with exposure to many companies and asset classes,” Walters said.

7. Not Knowing How Much to Withdraw

More than three-quarters of Americans over the age of 40 don’t know how much of their retirement savings they can safely spend each year without outliving their assets, according to a new survey conducted by Ipsos Public Affairs for New York Life.

About one-third of those surveyed believe they can spend 10% a year. But if past investment returns are any guide, they would likely run out of money in 11 years or less at that rate.

The rule of thumb is that you can withdraw 4% a year from savings to minimize the chance you will outlive your money, said Steen. Consider that a guideline only, though. Steen said your withdrawal rate should be based on expenses and the performance of your investments each year.

8. Failing to Take Required Minimum Distributions

Some retirees make the opposite mistake when it comes to withdrawing money from their retirement accounts. Instead of withdrawing too much, they do not take out enough.

If you have a qualified retirement plan such as a 401k or traditional IRA, you typically have to start taking withdrawals by age 70½, said Jeff Jones, a Huntsville, Ala.-based certified financial planner with Longview Financial Advisors.

However, it can be confusing because you can delay your first required minimum distribution (RMD) until April 1 of the following year after turning 70½. If you fail to take an RMD, you will be hit with a 50% excise tax on the amount you were supposed to withdraw, Jones said.

9. Dismissing Annuities

Annuities get a bad rap because of the fees associated with them and the unscrupulous sales tactics used by some people who sell them. But a basic immediate annuity can be a good addition to a retirement portfolio because it can provide a guaranteed stream of income, Steen said.

To figure out how much to invest in an annuity — which you can do by taking a lump-sum from your retirement account — determine how much money you will need each year in retirement for fixed expenses, said Cathy McCabe, senior managing director at financial services provider TIAA. Then, calculate how much income you will get from Social Security and pensions.

If that income doesn’t cover your expenses, consider an annuity to bridge the gap, she said.

10. Not Updating Your Investment Strategy

Volatility in the stock market can affect your savings — as can your current expenses and future needs, said Jim Poolman, executive director of the Indexed Annuity Leadership Council. So the investing strategy you created before retirement might need adjusting once you enter retirement.

“Once you start your retirement, it’s beneficial to review your strategy,” Poolman said. “Revisit your retirement plan every few years to make sure your savings reflect your needs, and adjust for market conditions.”

11. Overspending in Early Years of Retirement

One of the biggest errors is overspending in the early years on large expenses that should have been addressed during working years, said Pedro Silva, a wealth manager with Provo Financial Services in Shrewsbury, Mass.

“Large home repairs such as driveways, additions, or new roofs and new vehicle purchases should be done before retirement,” he said. Making withdrawals from retirement savings to cover such expenses can make a permanent dent in your portfolio.

12. Not Considering Home Equity as a Source of Income

You do not have to think of your home’s equity as a last resort when looking for a source of income in retirement. Either a reverse mortgage — which lets you tap your home’s equity — or a home equity line of credit can be a useful tool in your retirement toolbox, Steen said.

Tapping home equity can be a good way to cover expenses in a year when the value of your retirement portfolio drops because of a market downturn. You can draw on your home’s equity rather than cashing in losing stocks. That will give your portfolio time to recover, Steen said.

13. Neglecting to Plan for Long-Term Care

The cost of long-term care can be one of the single largest threats to your nest egg, said Rodger Friedman, a Washington, D.C.-based chartered retirement planning counselor and founding partner of Steward Partners Global Advisory. The average annual cost of care in an assisted living facility is $43,200, and a nursing home is almost twice as expensive, according to the Genworth 2015 Cost of Care Survey.

At least 70% of adults over 65 will need some form of long-term care, according to Genworth. But Medicare and most health insurance plans don’t cover long-term care. Unless you have long-term-care insurance, you will have to cover these costs on your own — or rely on Medicaid if you have extremely limited resources.

14. Not Having Estate Planning Documents

More than 60% of Americans do not have a will, according to a survey by low-cost legal service provider Rocket Lawyer. And a similarly large percentage do not have a living will or advance directive that spells out their health care wishes if they cannot make them on their own, according to a FindLaw.com survey.

“These are essential documents and need to be in place before something happens,” said George Urist, a certified financial planner with Urist Financial and Retirement Planning in East Syracuse, N.Y. “Without them, most states have their own ideas on where your funds will go.”

Creating an estate plan can help your loved ones overcome common legal issues that can emerge if you die, or are unable to make decisions for yourself.

15. Underestimating How Long You Will Live

The average life expectancy for a man is 76 years, and for a woman it is 81 years, Cathey said. But many people live well into their 90s or even past 100. “It would be much easier to plan if we all knew how long we were going to live, but it just doesn’t work that way,” she said.

To ensure your retirement savings will last, plan on living longer than you expect and withdraw from your savings at a rate that improves the odds you will have enough money for several decades. “You do not want to have to go back to work to support yourself in your 90s,” she said.

I hope this information was useful to you.

Best Regards,

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With presidential campaigns already underway and the stock market firmly in bear territory, a lot of conversations these days revolve around politics and the economy. Many people’s 401K’s, and other non-qualified investment vehicles, have dropped dramatically in recent months, creating a real concern about financial safety and the preservation of principal.

What’s out there that can provide all of the following:

1. Guarantee of principal
2. Tax deferred growth
3. Guaranteed minimum rate of return
4. Annual participation with the upside gains of the S&P but none of the downside
5. Allows for flexibility of income at retirement

You might think the answer is “Nothing,” especially in one financial product. Right? Wrong!

There are actually two investment vehicles that meet all of these criteria:

1. A tax deferred indexed annuity
2. An immediate income annuity

Here at Boyer Insurance Services, we believe that people should consider the advantages of using these products in their overall financial planning.  Let us know if you would like to learn more about these amazing products.

Best Regards,

The post A Wise Alternative to the Market appeared first on Boyer Insurance Services.

What To Do With Your Deleted Scenes | BookDaily #AuthorTips

R Scott Boyer                                                                                                                                    July 1, 2015

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1. Only Having Coverage Through Work

Most group policies only cover you while you are employed with that company.  What if you get sick and go on disability or unemployment?  Will you lose your life insurance when you need it most? 

2. Buying For You, Not Them

A small life insurance policy may be enough to bury you, but how long will it take care of the people who rely on you?  If you make $75,000 a year and plan to work for another 20 years, your earning power is $1.5 million!  How long would a $100,000 actually take care of your family? 

3. Forgetting About Mom

Do you realize how expensive it would be to try and pay someone to do all of the things a stay at home spouse does?  Wow!  Don’t forget to get a life insurance policy on them too! 

4. Not Paying Attention

Are your rates going to go up soon and you don’t know it?  If you haven’t looked lately, you could be in for a really bad surprise! 

5. Keeping Up

Have you upgraded your coverage since you upgraded your life?  New income, new children, new business, new spouse, new house?  It’s time to look again!

We hope this information was useful to you.  If you have a specific case or a question, don’t hesitate to call our office.

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Five Myths about the Affordable Care Act and Midsize Businesses

Many businesses are struggling to understand and comply with the rules of the Affordable Care Act (ACA or health care reform law).  Here are five common myths some of your midsize group clients (51 to 100 employees) may need your help with to understand:

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Help Clients Assist Senior Parents with Money Matters

As life expectancies increase, helping senior parents manage their finances becomes more and more important to our clients. Having things arranged in advance can relieve stress for all parties involved.

A recent article in Investor’s Business Daily gives four tips for helping elders with money matters (http://tinyurl.com/n22x3tr) in order to give them peace of mind.

1.    Obtain authority and inventory assets

The first step for your clients is being named as their parent’s power of attorney for financial matters, giving them authorization to manage accounts and pay bills if mom or dad becomes incapacitated. Do this now, not later. Trying to obtain control after a parent becomes mentally or physically incapacitated can take weeks to months – and that’s precious time wasted.

Clients should help elderly parents create a detailed list of bank accounts, titled property, investments, and retirement accounts. The list should include the name of the institution holding the assets, the name of a contact person or service manager, account numbers, and any online login information that might be required.

It’s important that your clients collect this important information while their elder parents are able to assist with the process. Trying to get access to the data later is much more difficult.

2.    Add up the bills

It’s important for clients to know their senior parent’s recurrent expenses (i.e. monthly bills), including account numbers, due dates, estimated payment amounts, and to whom checks should be made.

We would add that in planning for these normal expenses, clients should also think about non-recurrent expenses as well. Recently, the Wall Street Journal discussed a study that helps clients estimate these sorts of less predictable expenses, (http://tinyurl.com/mqsvknx) most of which are centered on medical expenses.

These expenses can be tricky to calculate exactly, but estimates are possible. The article explains that for individuals ages 85 and older, the average and the 90th percentile of nursing-home expenses were $24,185 and $66,600, respectively, during a two-year period.

In addition, over half of people over age 65 needed in-home health care prior to death, and for those ages 85 and older, over half needed either short or long term care in a nursing home during their lifespan.

We recommend that clients consider and plan for worst-case scenarios to ensure financial peace of mind.

3.    Set up automatic payments and deposits

Once clients know what mom or dad’s expenses are, making arrangements for direct-deposits and automatic payments can simplify financial management. Taking care of elderly loved ones is difficult enough. Streamlining the process will relieve the financial strain and stress for all parties concerned.

4.    Make plans for end of life issues

Clients should help ensure that end of life plans are in place. Is mom or dad’s will up to date? Who has been named as power of attorney for health care decisions? Have they filled out an advanced directive specifying medical wishes? Have they completed a living will? Have they completed necessary forms to make their wishes known?

Some of these forms must be notarized, and clients should keep both digital and print versions so they can be produced when necessary. Our office is here to answer questions and create these documents.

Taking action now, rather than later, to help a client with their senior parents can make all the difference. If they do nothing: Utilities might go unpaid. Checks can be lost. Surviving spouses might not know how or where their deceased spouse managed their finances. Any of these issues can easily destroy their retirement planning.

We hope this information was useful to you and helps you and other families.

If you have a specific case or a question, don’t hesitate to call our office.

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Credit Shelter Trusts – To “B” Or Not To “B”

Let’s talk about federal estate taxes. Back in the old days the first spouse to die had to use the lifetime estate tax exemption at death or lose it. In the discussion that follows assume a $1,000,000 exemption (in fact, it is $5,430,000 for 2015) where the husband dies first.

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There are a lot of mistakes your clients can make in estate planning. A lot.

Bad planning can result in your client failing to protect her children, surviving spouse, assets, and her business. It can ignite unnecessary conflicts between and pour on additional stress among a client’s surviving loved ones that are still grieving.

A Wall Street Journal article recently outlined their picks for the three most common estate planning mistakes. (http://tinyurl.com/oppg6tp)
We’ve chosen to add a fourth most common mistake to the list.

1. Absolutely Nothing

Let’s start with the biggest no-no: There is no estate plan to begin with. Regardless of whether your client has an estate value that surpasses the estate tax exemption rate when she dies, having basic estate plan documents is crucial.

The four cornerstones of any good estate plan include a will, a living will, medical power of attorney and financial power of attorney. To ensure your client’s wishes are upheld, these documents should be drafted by an attorney.

A trust can be a strong foundation for building on those cornerstones. Clients often mistakenly assume they don’t have enough money or property to require the creation of a trust. However, depending on its language and state laws, a trust can add layers of protection against creditors, divorce settlements of a client’s children, and unintentionally disinheriting children when a client’s surviving spouse remarries. Special needs trusts, credit shelter trusts, pet trusts, dynasty trusts – there are a myriad of protections that a trust can provide.

2. Dusty Documents

Maybe your client already has an estate plan in place – but she completed it years ago and hasn’t updated it. Since then, she accumulated additional assets, bought and sold property, and has even seen the arrival of grandchildren.

A client’s documents should be reviewed by an experienced estate planning attorney every few years and whenever there are any “life changes” in a client’s circumstances. Those can include a move, a marriage or a divorce, property transfers, the starting or sale of a business, a decline in a client’s health, the death of a spouse, and the addition of new children or other potential heirs.

We can’t emphasize this enough: When there is a significant life change, a client’s documents should be reviewed and likely updated.

3. Outdated Beneficiary Designations

A retirement plan beneficiary designation is one of the most often overlooked parts of anyone’s estate planning. Unlike other assets, retirement plans are not disbursed by a will or a trust. Instead, they are released based on the beneficiary forms on file with your client’s financial institution.

Too often, people neglect to update their retirement plan beneficiary designations when their originally identified beneficiary (usually a spouse) dies or they divorce. Sometimes, the financial institution is bought out by another, in which case your client should probably refile the beneficiary forms using the new company in case the original designation won’t carry over properly, the WSJ said.

And now, our choice for the fourth most common estate planning mistake:

4. No Plan to Pay for Long Term Care

Many clients willfully ignore that they are growing older and one day they may be unable to care for themselves physically. They especially don’t like to think about paying for medical care. Sticking their heads in the sand about this issue is a HUGE mistake.

A single room in a private nursing facility can cost thousands of dollars. That can quickly wipe out a single person’s or a couple’s life savings. If your clients haven’t put into place a strategy to protect their assets and their families from the costs of long term care, they are risking their quality of life in their most vulnerable years.

Now is the time meet with an experienced estate planning attorney with knowledge of elder law issues such as Medicaid planning, long term care insurance, and veterans aid and attendance benefits. Putting this sort of planning off for “someday” can have devastating results.

We hope this information was useful to you and helps you and other families.  If you have a specific case or a question, don’t hesitate to call our office.

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Meet the 10 Worst Life Insurance Clients in the World

Yikes!  Don’t try this at home.

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Rates and products are constantly changing, which is why we recommend that you meet with your insurance agent once a year to eliminate any gaps in coverage and be sure you are not overpaying for your insurance.

In the last year have you:

* Purchased a home

* Welcomed a new family member

* Married, divorced, or lost a spouse

* Started you own business

* Begun caring for an elderly relative

* Taken out a loan

* Started a retirement or college fund

 It’s Time to Take Another Look!

 You can get a Life Insurance quote in 30 seconds!

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