There is a similar cycle in financial planning.  Between the charging of the Christmas gifts at 18% and the arrival of the bill, many investors resolve to get their financial life under control.  The number crunchers at statisticbrain.com tell us that 45% of Americans usually make New Year’s resolutions.  Of that group of regular resolvers, 35% of the resolutions are about finances.

Just like getting in shape, the shine of planning for retirement often fades a month or so in, and many investors are back to their same old free-spending ways by spring.  In fact, of the people making New Years Resolutions, only about 8% find success.  Often the reason that body shapers, and retirement savers, fail in their efforts is that they set the wrong goals.

Just as a 300lb person shouldn’t resolve to weigh 120lbs in three months, someone barely scraping the rent together can’t reasonably expect a balance of $100,000 in the bank by the next time the big ball drops.  To assist you in resolving responsibly, let’s adapt 6 guidelines for creating effective weight-loss goals (found on Discovery Fit and Health.com) to preparing for retirement.

Good goals are:

Short Term and Specific – Setting a goal to retire at 55 may make sense when you’re 50, or even 45, but at 25 you just don’t have enough information to know if it will be possible.  Set short term goals that are reachable in a few years, and then scale them up as the wealth building process works for you.

Trackable – Make sure that the goals you set have aspects that are quantifiable, and use your portfolio and the meetings with your financial planner to make sure you are on the right track to reach them.

Positive – Despite what you pessimists may think, the human brain works better in a positive direction.  Resolving not to be broke in 5 years is much less powerful than a resolution to commit 15% of your after tax income to retirement savings.

Personal – Think about why you want what you want and write that into your goals.  A resolution to max out your child’s college savings plan so that they can enjoy the advantage of an education without incurring crushing debt, is personal.  Resolving to have more in your retirement account that your best friend, is not.

Rewarding – Take time out to celebrate the small victories.  Treating yourself to a steak dinner when you max out your IRA, or a weekend away when your child’s college plan is fully funded, can be powerful motivators to keep on saving.

Realistic – Goals are a funny thing, if you use them correctly they can be rungs on the ladder to your dreams, but used incorrectly they can serve as pointing fingers, criticizing you when you fail, and discouraging further efforts.

Just as it’s important to work with a doctor and a personal trainer when customizing fitness goals, it’s important to speak with a financial planner when setting up retirement plans.  They can make sure that the goals you set follow the guidelines above, and can also help you modify them in the case of unforeseen financial situations.

Hopefully, these tips can turn you into one of the people whose resolutions turn into habits, and whose goals turn into stepping stones on the path to a happy retirement.

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Unmarried couples must realize that their retirement planning is a completely different animal compared that of married couples.  As an unmarried couple, don’t let your retirement years discriminate against your wishes for you and your significant other.  It’s absolutely necessary to plan for your retirement together now with a financial advisor/ financial planner to uphold your security in the long run.  Therefore, if you are in an unmarried long-term relationship, please consider the following elements when planning for these golden years with your partner:

Living Arrangements

When an unmarried couple initially moves in together, one of the partners may sell or rent his/her home.   That partner might move into the other partner’s residence, or the couple might decide to buy an entirely new house together.  Whatever the scenario might be, the couple might distribute living expenses depending on which partner qualifies for tax deductions.

Furthermore, if the couple did indeed buy a new home together, an expert might suggest that the couple purchases life insurance policies on each other to help pay off the mortgage in the unfortunate event that the other partner suddenly dies.  Considerations must also be made about whose name will be on the bills and the how expenses will be shared.  Also, additional considerations must be made regarding estate documents.   For example, if a partner dies, will the surviving partner continue to live in that home until his/her own death, or will the deceased partner’s family members immediately inherit the home?

Joint and Individual Accounts

Many unmarried couples prefer to keep both individual accounts and a joint account.  In regards to individual accounts, the couple can separate the assets/debts that each partner individually accumulated and incurred before “couplehood”.  Many couples also open up a joint account primarily funded by both partner’s monthly social security benefits.  This joint account can then be used to pay for expenses together, such as housing expenses, restaurants, vacations, etc.

IRA, Pension, and Retirement Assets

Unfortunately, the spousal advantages of retirement accounts and benefits can be nonexistent for an unmarried couple.  These spousal advantages include advantages, such as the spousal rollover IRA option and the spousal pension continuation benefit election.   An unmarried couple must also annually review beneficiary designations (such as IRAs, annuities, and life insurance) in order to uphold each partner’s exact wishes.  Because of the contractual nature, beneficiary designations will always supersede heirs in other estate documents.

Separate Tax Returns

Complex consideration must be taken when an unmarried couple files separate tax returns.  The couple has to determine which partner gets to deduct which expense.  Because each partner’s individual contributions can vary, deductions vary as well.  Thus, it’s best for an unmarried couple to seek the services of an accountant especially for tax returns.

Estate Planning

As an unmarried couple planning for your enjoyable retirement together, no partner wants to contemplate the possibility of an unexpected sickness, an accident, and even death; however, both partners must be strong and plan for the unexpected as well as the very end.   For this reason, a will, power of attorney, living will, and healthcare directive is essential to have. For instance, an unmarried couple must carefully consider who will make final medical decisions if one partner in the relationship is unexpectedly gravely ill and on life support. Will the other partner or the children of the sick partner ultimately determine when to “pull the plug”?

As for estates, many unmarried couples choose to keep estates separate.  Especially in these cases, financial advisors/ financial planners are needed to set up trust agreements, wills, and other estate documents.

The End Game
Compared to married couples, unmarried couples have a multitude of additional considerations to make when planning for their retirement together.  The complexity of an unmarried couple’s retirement plan increases especially with the presence of ex-spouses, children, grandchildren, separate estates, etc.  You and your significant other must navigate through this retirement planning process with the help of a trusted financial advisor/financial planner.  Especially if you are an unmarried couple over the age of 60, you must request the financial, legal, and tax advice of experts in order to protect  your happy retirement, your estate, and your wishes as a couple.  So, don’t navigate these waters alone; seek the help of an expert today.

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More You Can Do to Retire to the Good Life

We discussed listing the fundamental benefits postponing your retirement will afford you based on the data culled from the Prudential paper and the Boston College’s Center for Retirement Research, and there’s much to be said for sticking it out until age 70, as doing so…  gives you more time in the workforce to accumulate wages while you simultaneously amp up your savings.  This results in a sizable spike in your monthly Social Security benefits and decreases the need to take money out of savings in order to subsist over a prolonged period of time.  Take full advantage of your employer’s defined-contribution plan — which is most likely a 401(k) — and start beefing it up now.

Ask your company if it matches employee contributions, and if so, to what extent. While employers vary in their approach to matching, as some businesses don’t match at all while others are extremely generous, if you do have the opportunity to invest in a workplace-sponsored plan, you should be contributing at least as much as your employer is willing to contribute to your retirement plan.

Find out whether your employer offers alternative, in-plan guaranteed lifetime income products in addition to traditional 401(k)s. These days, it’s well worth investigating the option of diversifying your defined-contribution plan with annuities. In fact, for many middle-class people, a fixed or fixed-indexed annuity is the ideal complement to their workplace savings plan.

Based on your own carefully evaluated (preferably done in concert with your advisor) needs and tolerance to accept risk, ask your advisor to help you choose the best combination of plan investments for you, or reevaluate and research potentially better alternatives to your current elections to see if some of your assets should be reallocated   Don’t forget that a hedge against longevity risk is an important part of your overall retirement income plan

For years now you’ve been in the “accumulation phase” of your financial life, but when contemplating retirement, you’ll need to shift your focus to the “distribution phase.” This fact alone has a hefty impact on they types of products and investments you should now be  buying. Your advisor will be more than happy to explain the ins and outs of this transition, and is in a good position to make informed investment recommendations

Begin exploring and researching guaranteed income products such as annuities. This is a topic you’ll definitely want to bring up with your advisor, as he’ll most likely be able to identify a couple of solid annuity product options that will meet your unique need

While it all depending on your circumstances, nowadays there are products designed to use your savings to generate guaranteed income for the rest of your life — usually products that distribute a monthly payout until (and sometimes even well beyond) your death, such as one of a diverse variety of annuities. Before you purchase an annuity or any product, for that matter, it can really, really pay to review your choice with a qualified advisor before signing the check

The Prudential paper also pointed out ways in which lawmakers, policymakers and bureaucrats could make it easier for hardworking Americans to reach a more secure retirement they can actually enjoy. Indeed, the recommendations delineated in their paper would suggest that your advisor may also be working on the problem, actively lobbying policymakers to lend their support and enthusiasm for retirement-friendly initiatives. Some of the recommendations put forth in the paper include:

• Passing legislation that would make it far more feasible for employers to offer a retirement savings plan to their workers via Multiple Small Employer Plans.

• Putting in place regulations requiring all defined-contribution plans to include projected future monthly income on the statements issued to plan participants like you.

• Creating “safe harbors” designed to quash rampant employer anxieties regarding adding guaranteed lifetime income products to their defined-contribution plans.

The fact is, odds are good that if you’re healthy at age 65, you’ll have a long retired life to look forward to enjoying. And even though the thought of finally being able to put an end to the working portion of your life at age 65 may be incredibly appealing, it’s ultimately up to you to decide whether getting to retirement is more important than enjoying — let alone funding — your long dreamed-of golden years when a simple five-year delay could pay off in some powerful ways.

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There are, thankfully, a great many steps you can take to put yourself on the path to a secure retirement, many of which were revealed in both a recent Prudential paper, entitled “Planning for Retirement: How Much Longer Do We Need to Work?,” which summarizes the results of a study and report they conducted, and newly released information from Boston College’s Center for Retirement Research. And although the findings indicate that about half of all American households have a bit of work to do in order to better prepare for a comfortable retirement, the report also highlights the tremendous benefits waiting just five years longer can have on your overall retirement preparedness and security.

If you find yourself ill-prepared for retirement, take comfort in the fact that you’re not alone, as the data show that the number of households that won’t be able to retire at the traditional age of 65 continues to increase, going from 30 percent in 1989 to approximately 50 percent today. You can take even further comfort in the knowledge that the same data reveal that if you work just until you reach age 70, the number of households considered prepared to retire soars to an inspiring 86 percent.

“While many Americans despair of ever being able to retire, the reality is that with a few extra years of work and a delay in taking Social Security, they can increase their chances of being able to have a more financially secure retirement,” explained James McInnes, Prudential Retirement’s Chief Operating Officer, Total Retirement Solutions.

Their paper elucidated a number of things you can do to plan for a safe, secure retirement, including some solid steps you can take now. Check out the below listed pointers and start planning!

What You Can Do to Retire to the Good Life

First things first: Even if you’ve had your heart set on walking out the office door on your 65th birthday, if you don’t have the funds, it’s time to acknowledge the fact that your dream may have to be forestalled, if only for a brief time. Then, start talking to your advisor about preparing for this new reality, and don’t discount the value of your own research. If you intend to enjoy your retirement, the more you know the better

Be open with your advisor when it comes to your financial situation. Without all the right information, she can’t really develop the customized plan you need to truly determine how many years past age 65 you should realistically work

As with most things, the earlier you can start putting these strategies to work, the better, so if you have an advisor, the time to make the call is now. If you do not have an advisor, the time to start researching potential candidates was yesterday

Develop a retirement income goal instead of a savings-based target. Thinking about how much income you’ll need each year is a far more effective method for evaluating your true retirement needs than just aiming for a certain number

Think of every one of your efforts to save as an achievement toward reaching your goal for retirement income and earnings. Establish an aggressive savings plan, build a budget and stick to it

Ask friends, family and your advisor for tips on creating a budget you can stick to when saving for retirement. There’s also a virtual plethora of ideas and suggestions for both building and sticking to a budget available all over the Internet

Investigate savings vehicles that typically deliver better interest rates than traditional bank savings accounts, such as money markets or CDs

In Part II of this article, we’ll explore some of the benefits of delaying your retirement, which are nothing if not significant. We’ll also discuss even more steps outlined by Prudential and Boston College’s Center for Retirement Research you can take to make your retirement dreams a reality, even in the face of such a harsh new reality.

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David: Yeah, Jeff. It used to be folks would go to work some place for 30, 40 years, they would retire with their pension. They could count on social security, basically they worked hard during that period of time to pay off their mortgage and get debt free and also stick aside some money in their 401K and their IRA and that pretty much is all they had to do, just go to work every day and just put this thing on automatic pilot and somehow, some way, it just kind of magically worked out. They turned 62 or 65, the company threw them a nice retirement party or maybe they had a little something in their backyard, a barbecue or something, and just hung up the hard hat, took off the suit coat or whatever their line of business was, and wade out into retirement and that would be how it was done.

Unfortunately, things are so much different today. We have got such a volatile stock market out there, we have seen it go in 5 years from a high of almost 15,000 on the Dow, back down to a low in 2008 of about, under 7,000. Then here we are back again above 13,000 in 2012. So talk about some peaks and valleys there, and that affects so much on how much income an individual can take from things like 401Ks, IRAs, or other monies that were set aside for retirement.

So what can a person do? Again, we’re looking at an election year. We have two diverse opinions between the two parties, how is that going to shape tax law going forward? Our country’s almost $17 trillion in debt. They’ve been discussing a variety of ways to make up that shortfall and basically it comes down to, if you’ve got some money, they’re going to want part of it.

So there’s just a lot of things that we need to be concerned about. So where does it all start? How does someone protect themselves?

Well, I think the number one thing an individual needs to do is find a trusted advisor. We don’t know where the stock market’s going to go. All we know is
that things are going to change and when this will happen is still looming in our future, we just know they’re going to change.

So, folks, find yourself a good, trusted advisor and have that very important conversation.

Jeff: Now, DJ, obviously finding an advisor is one thing, but how does one rebuild their finances after a bear market that has been as crazy as the last four years have been?

DJ: Yeah, well, when we look back at that, of course, we’re dealing mostly with retirees, and so one of the things that I tell retirees on a daily basis is that there’s a necessity to avoid the bear markets to begin with. You’re at a time in your life when really we can’t afford to take a 30 or 40% loss, folks have already retired, they’re in their late 50s, early 60s, a 30 or 40% loss at this point in their life is going to be devastating.

But aside from that, what people really need to do to rebuild their finances is really change their philosophy about investing. Instead of thinking like they were when they were working, we have time to let this grow, we have time to take some losses and make that money back when the market comes back, you really need to change that philosophy to something that’s more like a preservation-type mindset, or preservation-type philosophy.

I kind of equate that with dieting, in a way. When somebody gains a lot of weight, the thought process that they need to change is that it’s really discouraging to gain the weight and to lose it, to gain the weight and lose it, which is similar to the market in a way. You have to change that philosophy, it has to be a lifestyle change.

And when you think about your finances, you can’t avoid market losses if you’re keeping all of your money in an aggressive investment, it just doesn’t work that way. You are going to ride the roller coaster of the market, if you keep the money invested aggressively.

One of the best ways to rebuild those finances, number one, is to change the mindset so you don’t lose the money to begin with. Start moving more money into
more conservative preservation-minded type of positions so that you can live the kind of retirement that you want.

Jeff: DJ, let me throw this question at you. Is the economic climate constantly changing these days? Perhaps a better question would be how much is the economic climate changing these days?

DJ: Well, it seems to be changing and perhaps more than ever, at least more than any point that I can remember in my lifetime. We see all these factors affecting our economy and one of the things that is probably the most prevalent is the fact we are a part of a global economy than maybe we even did 15, 20 years ago, where everything that everybody else does changes our market and changes our investments on a day-to-day basis.

I don’t now how many times we have look online and the headline said something to the affect of, “Greece received news on their debt and the market goes up,” or “Greece got bad news on their debt and the market goes down.” And it seems like that story is repeated almost every single day and our markets are being based off of that, whether it be with Greece or whether it’s our own debt, $16 trillion dollars and that number just keeps growing on a day-by-day basis.

It’s almost to the point where the number is so large, it’s inconceivable of what that number actually means, and to fathom how big that number is.

Lately some of the things that we’ve seen affecting our economy is our relationship with what’s going on in the Middle East and our relationship with some of the Middle Eastern countries. And we’ve seen that relationship grow very tenuous and it’s affected our oil prices. Maybe it’s the inflation that we presume is coming, people are callous now to paying three-and-a-half to four dollars a gallon.

These are all things that are affecting our retirement dollar. A person who retired in 1990, I don’t know that they ever imagined that they would be seeing what
they are seeing take place here in 2012. And I think there’s a lot of uncertainty. It’s hard to find those companies that we think are going to be the anchors in our retirement portfolio, like they used to be.

I still can remember folks coming in, telling me how the bonds at GM were going to be one of their anchors in their retirement portfolio. Maybe it was Lehman Brothers, maybe it was Circuit City, maybe it was Blockbuster. Maybe it was all these other large companies that people kind of hung their hat on and said, “These were going to make my retirement.”

Jeff: Now, David, without giving us legal advice, can you share an easy-to- understand explanation between a will and a trust?

David: Sure, Jeff. As you mentioned, we’re not attorneys, but we work very closely with a variety of attorneys as we help people piece together their entire financial plan.

Everyone needs at least a will, some folks do need a trust. A will is a document that allows the state that you reside in to understand how you would like your
assets to pass. And if you don’t have a written will, then the state has one for you. Every state has some basic guidelines of what goes to the wife, the kids, and that kind of stuff, if someone dies in that state, without a will, the state has one for you.

But a basic will is what I like to describe as a ticket to court, it’s not a mechanism to bypass probate court, it’s a method of just simply saying, “This is what I
would prefer having done with my assets should I die.” The most common is the simple “I love you” will that if I die, everything passes to my wife, if we both die, we split it between our two, three, four kids. You’ll pay off the debts and split the balance to the kids. And for some folks, that works just fine.

But the more money that an individual has, the more assets they’ve acquired over a lifetime, they may need to consider having a trust done. What a trust does is it provides some protection and also a means to pass assets more privately and outside of probate court. So again, with a trust, it’s a titling mechanism. It allows things to pass kind of like a beneficiary, Jeff, like a life insurance policy or an IRA, or a tax sheltered annuity, you can literally name primary beneficiaries, that’s who the money would pass to should you die, and a contingent beneficiary or beneficiaries, should both you and the primary beneficiary die. So you can do the same thing with a trust, and for instance, like a pass on your house, your cabin, various accounts that don’t have beneficiary designations, you can literally create one by having a trust and titling the assets properly to that.

It’s very important that you’re working with a financial advisor that understands how these wills and trusts work, if your assets are not properly titled and you go out and you pay to have a trust done, you may simply just have an expensive box sitting there on your shelf with no way, no mechanism for those assets to pass into that box, then be properly disposed to who you want them to go to.

So it’s very, very important for an individual to have a trusted financial advisor that works very closely with estate planning attorneys in getting these type of
documents and their assets lined up properly.

Your visit can be a lot more effective, and a lot more comfortable, if you know these basics ahead of time.  In order to be prepared for your visit with a financial planner, make sure you think about these five points before you walk through the door.

1.       Future Goals:  It’s impossible to create a successful plan of action for your future if it’s not clear what that future looks like.  Be prepared to give specifics of where you want to be, and what you would like to accomplish with your finances in the years ahead.  Is there a target figure you want for retirement?  Do you want to be able to finance your kids’ college education?  These goals can be just a few years down the road or decades into the future, but be prepared to give a clear picture of what you are looking for.

2.       Present Income: Once the future is laid out, it’s critical to nail down what your current situation is.  Before an advisor can work out a plan moving forward, they need to know what you have to work with now.  Be prepared to give a realistic account of your total current assets.  Be honest about what you are bringing in now in terms of cash flow as well as how you expect that cash flow to change in future.  If you know a raise is coming, or if you are at risk of possibly losing your job, these are thing that your financial planner needs to know.  The appropriateness of any investment vehicle they suggest is based greatly on what you have now, and what you expect to have moving forward.

3.       Budget Practices:  The first part of this is: Do you have a formal budget in terms of your household’s cash flow?  If the answer is no, creating one is probably the first step.  If you do have one, it’s important that you lay out your budget for your advisor so they know what cash you have available to invest each month.  They can’t put together a plan for you to put $500 a month in a specific investment if you don’t have the $500 available to invest.  Be straightforward and honest with your planner so that they can be straightforward and honest about what plans and steps are right for you.

4.       Division of Roles:   In other words: how involved do you want to be in the process?  Most financial planners send out a quarterly report for their clients, but if four updates a year isn’t enough, discuss this.  Especially if you are going into the appointment as a married couple, lay out who will be staying in contact and getting updates on the progress and growth of the investments. Do you prefer email or phone for the form of contact?  What times of the day are you available to chat? Be clear about what type of involvement you want in the planning process and how you want that involvement to be carried out.

5.       Questions or Concerns: This discovery process to clear up the basics in your meeting is a two way street.  Make sure that you have a list of questions or concerns you may have with the planning process and your financial future, and feel free to ask them in your appointment.  The success of your relationship with your financial advisor is largely based on understanding, comfort and transparency.  Make sure to be honest and voice your concerns or ask them to explain something that you don’t particularly understand.  Any question that you don’t ask them then is a question you will be asking yourself later as you lay awake at night wishing you knew the answer.

Making an appointment with an advisor is a critical step in your financial planning process.  Often times, it’s a wakeup call for future investors as they see where they stand now, and where they could stand down the road.  By being prepared and knowing the important questions going in, you can make the appointment go smoothly for both you and your advisor. The meeting could seem like a small step for you now, but it could be a giant leap for your finances in the future.

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Are you seaworthy yourself?:  It’s important to know yourself and your comfort level in the rough waters that mutual funds can bring.  Can you handle the stress that comes with the shifting performance of many funds?  Mutual funds can at times require a lot of patience and confidence for investors to wait out small dips for the long term positive performance.  You also need to take your morals and values into account when choosing a company or industry to invest with.  Make sure your ethics match those of the mutual fund you invest with.

Understand the variety of vessels:  Portfolio performance is often determined by how the assets are allocated.  You need to understand the different fund styles.  Take a look at the characteristics of the different fund classes, such as small-cap, large-cap, blend funds and so on.  Once you know the specifics of each of these, determine which ones match the investments that you are looking to make.

Be Aware of the Ebbs and Flows:  Performance of the fund is something to consider when you are choosing where to invest, but many investment professionals warn of the cyclical nature that most funds follow.  It’s important that all performance statistics be examined with a critical eye.  Jumping into a fund when it’s at its height leaves you with a long way to fall.

What’s the cost of a ticket?:  Fees are one of the most dividing issues when it comes to funds.  If the fee on one fund is higher than another, that fund must make up the difference in performance, which is oftentimes hard for managers to do.  Index funds often offer lower fees than funds that are actively managed, which aim at making up for the fees with stock choices.  Overall, fees are something to evaluate near the end of the process.  They shouldn’t make or break your decision, but they are something that can drastically affect your performance and should be taken into consideration.

Watch for people jumping overboard:  The turnover rate of a mutual fund is one of the best indicators as to how successful the investment will be.  This rate signifies how many of the holdings in a portfolio have changed over that year, in a percentage.  Those rates can be anywhere from less than 10% to over 300%, depending on how aggressive the fund is.  The higher the turnover, the higher the cost from the frequent buying and selling and other movement efforts.  Its best to target funds with a lower turnover, aiming at 40% or lower in order to avoid the issues that constant trading has on longer term performance.

Become familiar with the captain of the ship:  Another aspect of the fund that you don’t want to see turning over is the fund’s manager.  The stability of a fund can be read by the stability in its manger.  In order to keep their role they must show that they are capable of maintaining a consistent style and discipline in the decisions involved with the fund.  It’s nearly impossible to predict the future success of a fund if the manager role has endured frequent changes.  A good rule of thumb is to find a fund whose manager has been in their position for at least five years to ensure that any patterns will continue to be consistent.

Is the ship on course?:  A strong fund will follow its strategy through thick or thin.  The overall course of a fund shouldn’t change based on market changes.  Of course, the ability to adapt to changes is a positive tool in mutual funds, but the overall strategy and plan of a secure, strong fund should always keep its general course.  Be wary of funds that seem to jump on the bandwagons of investment fads that make them stray from their original direction.

The waters of mutual funds can seem endless and dark at the beginning, but by sorting out a few basic issues involved you can find yourself smooth sailing in no time.  Of course, even the best planning can’t guarantee that you won’t run into a storm or two along your journey.  But the stronger and more secure is mutual fund that you choose to ride along will leave you in a better position to weather the storms and sail off into the sunset.

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Prior to the new Department of Labor regulations requiring employers to provide fee information, the only deductions most employees saw were attributed to market loses.  The statements this November will contain a much different landscape.  Unfortunately, as people transition from ignorance to knowledge, it can take even more time before that knowledge turns to understanding and comprehension.  In order to help you with that comprehension, I have set out to answer the most common questions surrounding this fee disclosure and what changes this November will bring for you.

Why the change?

Many people will say that ignorance is bliss, that knowing what they pay won’t make it any less expensive, so why tell them? Especially considering the economic stress that most people are dealing with right now.  Well one of the main answers to that is accountability on the part of the company.  Most of the companies, who are charged with the task of choosing the 401(k) plan provider, are ignorant as well, and often times don’t take the care to ensure they are choosing the best option.  The bottom line is this: most of the fees associated with these plans are paid by the employees, not the company.  Picture yourself on a shopping spree, with someone else’s checkbook in hand.  If you know that it’s not your money and no one will ever see how much you spent, you wouldn’t take a whole lot of time shopping around for the best deals.  This is essentially the situation that employers have found themselves in, and the fee disclosure forces those companies to be more accountable in terms of the decisions they make and the costs associated.

What are the fees for?

The perks of the 401(k) come with a cost that most people never thought to factor in, until now.  That cost is created from a combination of sources associated with the handling of the accounts themselves such as the processing and holding of the plans at each layer of distribution such as administration, investment management, and so on.   Those costs vary based on the individual’s investments and the plan providers.

What to do about it?

This question goes back to the “knowing what they pay won’t make it any less expensive” argument.  Many financial experts think that the required disclosures could very well make the fees less expensive.  It’s predicted that many high level executives, who often have the largest investments (and, in turn, some of the largest fees), won’t take their costs quietly.  They expect the sticker shock of the costs to cause quite a bit of push back from the investors against their company and the provider of the plan.  It’s important that investors take advantage of their access to this information and do their research.  There are a variety of resources online that offer free comparisons between the fees of different providers.  Employees can also compare their fees with their co-workers and make sure they let their employers know that they are unhappy.

Overall, the implications of the disclosure requirements are expected to make to an impact. Many financial experts expect to see some backlash from most investors and even believe the fees will cause many people to withdraw from their 401(k) programs altogether and pursue other investment options.  There is no question that the November statements will give investors something to talk about, and that conversation is sure to give employers something to think about.

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Studies upon studies upon studies have proven that women lag behind men in their retirement planning.  It’s easy to point fingers at various causes of this.  Some say that it’s because the male dominance in the financial industry causes women to shy away.  Others say that women lose their financial momentum when they take time away from their careers to raise a family.  Still others blame the mother’s instinct to put their family before themselves as the cause, pushing their own financial future toward the back burner.  The truth probably lies somewhere in a combination of them all.

While the causes for the lack of financial planning in women are still in the air, the effects are pretty obvious.  Women are living longer than men, but are saving less.  A recent report from the ING Retirement Research Institute found that women who are 50 to 69 have about 20% less in retirement savings than men in that age group.  This increase in life expectancy and lack of savings has left 9% of all women over the age of 65 living in poverty.  It’s a growing problem that needs to be addressed early and often if women are to shift the trend.  There are a few things that women can do now, in their working years, to prepare for their upcoming retirement.

Take advantage of your benefits-  All women, whether they are married, single, or divorced, need to take advantage of the benefits available to them through their employers.  Despite the fact that more and more women are becoming either the sole or leading breadwinner in the family, many of them are not focusing on the financial benefits that come with their careers.  It’s important that women are getting the full benefit of employer retirement programs, such as 401(k) matches, and invest all that they can.  In many households where both the man and women are working, the women’s income is often used for more discretionary purposes while the income from the men is used for their investments.  In the long run, women need to make sure that they are making the most of their money and their future.

Increase Survivor Benefits-  With the life expectancy of women continuing to rise past that of men, it’s important that women make note of the survivor benefits they will receive if their spouse is to pass away.  The most obvious of these situations is in defined-benefit pensions and Social Security payments.  In defined-benefit pensions, it can be tempting to take the single life offer that brings higher payments, but to help protect the future of the surviving spouse, the joint survivor benefit allows for partial payments to continue after the death of the retiree.  Also, applying for Social Security early will leave the surviving spouse with much lower payments later, so it’s important to delay application for Social Security benefits for as long as possible to ensure the largest payments later.

Learn About Your Finances Now, Not Later-  61% of men say they are most responsible for retirement and financial planning decisions in the household, while only 34% of women claim that responsibility.  It’s important for women to understand these decisions and learn the lessons of their financial planning now, so they can make more informed decisions later.  Because of increases in divorce, women remaining single, and life expectancy, the majority of females will, at some point, find themselves on their own, which means they need to be able to make critical decisions about their financial future for themselves.  Whether this means seeking out a financial professional for advice, or making smart decisions on their own, it’s critical that women learn the ins and outs of their financial portfolio now, or they will suffer the consequences later.

Women are continuing to make strides in terms of their professional and financial independence, and it’s important that as they reach those goals, they understand what to do when they get there.  By planning for their future, taking advantage of the opportunities around them, and taking the time to educate themselves, women can continue to make strides in their retirement as well.

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Jeff: All right, guys, let’s get down to business here.  DJ, I’ll start off with you.  I mentioned that we’re going to go over a lot of terms that people may have heard of and may hear us talk about on this program, but we’re going to go back to the basics here.  We’re going to hopefully teach people what they mean so we can get a better understanding of these financial terms.

Jeff: So let’s get started, what is compounding interest?

DJ:  Compound interest is one of those terms that I think people either, many times don’t completely understand or have never really been told about the importance of what it actually is and how valuable it can be to your retirement dollars.

If you go back and look at the very beginning when people start investing, compound interest, of course, is the money that you’re earning on the interest that you’re earning.  So it keeps compounding year after year after year.  So let’s say you earn 5% this year, then next year you earn another 5%.  It’s not just that you’re earning 5%, you’re earning 5% on really what was 105% of that money.  So it’s compounding or growing over and over again on that rate.  Earning interest on the interest that you’ve already earned is really the idea of compound interest.  If you go over an entire accumulation period of somebody’s life, if you have 30 years of earning interest on your interest every single year, how important that is.

Something else that can be key when you think about compound interest is the ability to defer over that period of time, so you’re actually able to earn interest on money that has not been taxed.  Things like IRAs, and deferred annuities fall into that category where you haven’t payed tax on the gains at this point, and so now you’re actually able to earn money or earn interest on money that you haven’t had to pay tax on yet.  This allows you to compound and earn at a much higher rate.

And again, this concept is really, really important for people to understand, because, the more money you’re able to save, the more money that you’re able to earn compound interest on, the quicker and faster a retirement account will grow.

Jeff:  Well, know we know that compounding interest is basically interest on top of interest.  David, let’s turn to something else here that you’re familiar with.

Jeff:  What is the consumer price index?

David:  Well, the consumer price index that you hear on TV all the time, folks are always asking us: what is the government trying to tell us here?  Consumer price index is just the cost of certain goods and services that have been identified, food, housing, gas, and a variety of different things, and how much it’s fluctating.  It’s a way to see what inflation is doing, think of it in terms of what used to cost us $1, if the consumer price index went up 3%, so it’s now $1.03, it’s costing you a $1.03 for what used to cost you $1.  Or another way to look at it, your dollar’s only able to buy 97 cents worth of what it used to be able to buy for that same dollar.

So over the course of time, as the consumer price index is going up and prices are inflating on different things, if your income isn’t going up, not only do you not have enough money, but what money you do have is buying less of those consumer goods that we need.  So having a program design where your income is keeping pace with inflation and the rising costs of goods and services, especially in retirement, is extremely important.

Jeff:  Absolutely.  So that’s important and along those same lines, let’s talk about a financial needs analysis, what is it?

David:  A financial needs analysis is really a starting point for anyone that is looking to do some serious financial or retirement planning.  It’s where you sit down with a financial advisor and disclose your financial goals and objectives, whatever financial concerns or problems that you may have, looking at what assets they have available, what income you have available, factoring in things like pension benefits or social security, what other assets that you have that you could draw income from to try to determine: What are my financial needs?  How much income do I need?  What cash needs are coming up?  It could be money for a grandchild’s college education, a second home, or factoring in end of life and funeral expenses.  Whether it be how much income we need each and every year and how much that needs to increase.  So a good financial needs analysis will take into consideration all those objectives.

Jeff Hamlin:  Some very valuable information from David and DJ, I know that your time is valuable and I appreciate you taking the time to talk with me, thank you.