May 2013


Here is May’s review of blog posts. We hope you find something you enjoy!

U.S. News MoneyThe Consequences of Saving Too Much for Retirement – Saving for retirement is important, but it is possible to save too much for retirement, which can lead to problems in other areas of your life.

U.S. News Money7 Ways to Prepare for Retired Life – Retirement can be stressful, so prepare yourself beforehand.

U.S. News MoneyEarning Too Little to Save for Retirement – If you feel like you don’t make enough to save anything for your future retirement, excuses can become very convenient. Don’t let your income get in the way.

Please let us know if you have a favorite financial blog that you think we should be reading.

 

  • Disclaimer: The information on this blog is not meant for specific financial advice. The ideas/opinions stated are not suited for everyone, and readers should use their own judgment in applying them in their financial lives.

This past week over at U.S. News – Money, there was a post by Philip Moeller: “Don’t Get ‘Framed’ When Claiming Social Security.” Essentially the article is about how many people who are eligible to start their Social Security Benefit make their decision based on how the benefits are “framed;” that is, how they are presented to the potential benefit earner.

There are several different ways the situation can be “framed” which Moeller goes into detail about. We won’t discuss them here, except to say that each way of framing could lead to the same person with the same benefits to make a different choice about when to take his benefit. One way of framing may lead him to take his benefit at the earliest age of 62; another way of framing may lead him to take his benefit at 70.

Moeller’s point is that you should be fully informed about the ins and outs of your individual benefit and your potential lifetime benefit before making a decision. If you are presented with a certain way to look at your benefit, don’t assume it is the best option for you.

This is especially important if you are married, which may introduce the spousal benefit. Your decision about when to begin receiving your Social Security Benefit may potentially have a big impact on your spouse’s benefit. Many people don’t consider this when taking their own benefit.

Not considering all the avenues you can take with your Social Security benefits can cost you a lot of money over your lifetime. In some cases, taking benefits too early may cost you into the tens or even hundreds of thousands of dollars over the course of your life (depending of course on your benefit amount and how long you live).

Again, when you are getting close to Social Security eligibility, get to know your benefits. Be prepared before you get “framed.”

 

  • Disclaimer: The information on this blog is not meant for specific financial advice. The ideas/opinions stated are not suited for everyone, and readers should use their own judgment in applying them in their financial lives.

This past week over at U.S. News – Money, there was a post by Philip Moeller: “6 Key Steps in Retirement Planning.” Each one of Moeller’s steps constitutes great advice, but we want to concentrate on one in particular: “Keep solid records.”

Keeping records is not only important for your retirement planning, but for your finances in general. Do you know where all your important financial documents are? Insurance policies, trust documents, house deed, car title, etc? It’s unfortunate that many people do not keep these records in order, and many may not even know if they have copies available to them.

Getting everything in order should be the first step for anyone trying to get their finances on track (as we discussed in our very first blog post!). But keeping solid records must go beyond just keeping everything in order; it also must include who else knows your financial details.

It may not seem important to you now, especially if you are younger, but if something were to happen and you were not capable of handling your finances (disability or death), would your spouse or children be able to step in and take over?

Of course the process would be difficult, often for emotional reasons, for your spouse or children (or whoever your beneficiary is) to step in with your finances. But you have the ability to make the situation much easier on them.

Here are some of our thoughts on how you can do so:

  • Keep your spouse/beneficiary up to date on your records – This is especially important if the person is not actively involved with your finances. Make sure your beneficiary know where you keep all of your important documents, and if you make any changes to that location, update them on the change.
  • Make sure your beneficiaries know who they are – This becomes more of an issue if you don’t have a spouse or child to fill this role. Maybe you select a sibling or niece or nephew. If your relationship with your chosen beneficiary is not as obvious as a spouse or child, you may want to have a talk with them to ensure that know they have been chosen to be your beneficiary.
  • Make sure to include records for online accounts – This has become a real problem today with the popularity of online accounts and paperless statements. If you do all of your financials online, please be sure to let your beneficiary know your login information for those sites, including any email accounts you may keep important information. Otherwise, there is no guarantee that your beneficiary will be able to find that information.
  • Be open about your finances with your spouse and children – We know many people hesitate with this, and that such openness is not an option for some families. But if you are open with the truth about your finances with your family, they will have a much easier time of it if they ever have to deal with taking over for you.

Having to deal with your disability or death will be difficult enough for your family without adding the additional pressure or having to clean up your financials and put everything in order. Please try and make that process easier by ensuring everything is organized now.

 

  • Disclaimer: The information on this blog is not meant for specific financial advice. The ideas/opinions stated are not suited for everyone, and readers should use their own judgment in applying them in their financial lives.

After a number of weeks of fairly heavy content, we wanted to keep it short and simple today.

Earlier this week, over at The Simple Dollar, Trent Hamm wrote a post called “Five Very Simple Truths About Saving For Retirement.” He had some great points, but there was one in particular we want to share here:

“You will survive just fine with a slightly smaller paycheck.
Many people are absolutely afraid of the idea of seeing their check get any smaller. They’re barely making ends meet as it is – how can they possibly live with a smaller check?

Here’s the truth: most of us spend just a little more freely if we have ample cash in our checking account. It’s a lot easier to buy a bottle of soda at the gas station if you have plenty in checking. It’s a lot easier just to roll through Starbucks when it’s not going to grind you down to nothing.

Yet, when we look at our account and see it’s about empty, we’ll skip those treats with no hard feelings. They’ll come around again.

For an awful lot of people, all retirement savings does is spread out those treats a little bit. If you put, say, 10% of your income into your 401(k), you’re usually only dropping your paycheck by 7% or so. Even if you just save 5%, you’re only actually cutting your paycheck by 3%. That’s $3 out of every $100. For most paychecks, that’s a stop at the coffee shop – and that’s about it.

You won’t even miss it. It seems like a big deal, but when it comes down to the reality of your paycheck, it really fades into the woodwork quite seamlessly.”

Not only does this idea apply to retirement savings, but any kind of savings, and also includes paying down debt. The excuse of “not being able to afford” to save for your future is dangerous thinking. If you compound not saving with not controlling your cash flow (which you are likely not doing if you truly can’t afford to save), your future is not going to be a very positive experience for you financially.

There is almost always a way to be able to put a little bit aside today. You just need is the dedication to do it.

 

  • Disclaimer: The information on this blog is not meant for specific financial advice. The ideas/opinions stated are not suited for everyone, and readers should use their own judgment in applying them in their financial lives.

Today will be the last post in our series about the book What Color Is Your Parachute? For Retirement by John E. Nelson and Richard N. Bolles. We’ll be discussing chapter nine: A New Chapter in Psychology and chapter ten: Happiness Is Only Real When Shared. These chapters deal with how to find happiness in your retirement.

Moving beyond simple enjoyment

Everyone has things they enjoy doing. Maybe it’s a hobby or maybe it’s finding some time to relax and read a book. Whatever you enjoy doing, can you really see yourself spending 20-30 years doing those enjoyable things every day, all day? Depending on your situation, that may actually sound great to you. But that’s a long time to fill.

We’re not saying you shouldn’t enjoy your retirement! Obviously you should, but as Nelson and Bolles recommend, you need to find something that will engage you. Even your favorite hobby may become boring if you have little engagement in the activity.

According to Nelson and Bolles, “Engagement is the missing ingredient in lasting retirement happiness. And the key to engagement is identifying our strengths—those talents and abilities that we receive great satisfaction in using” (190).

To explain the idea of engagement, Nelson and Bolles discuss the three approaches to happiness:

  • Pleasure – This is the enjoyment approach. It usually involves an activity or situation that will bring you positive feelings. However, this pleasure is usually short lived. While finding enjoyment should be an important part of everyone’s life, you have to keep going back to the activity that brings the enjoyment to find happiness, it’s not lasting.
  • Engagement – Also called involvement, engagement goes beyond pleasure. We’re sure you’ve been involved in an activity that you lose yourself in. Something that you start working on with the intention of spending the morning on, only to find out when you’ve stopped that hours have gone by and you’ve missed lunch without noticing. That’s what it is to be engaged. Nelson and Bolles recognize that you may not have even realized that you were happy until thinking back on it later. “Engagement involves a challenge, and it demands something from you, so it’s not as simple as pleasure. […] Over time, it can build up into a lasting satisfaction with life” (192).
  • Meaning – Also called purpose, Nelson and Bolles recommend that find something beyond yourself to find meaning in retirement. Most people find this by believing in something and then helping service that belief. It could be through your church, a charity, a political party, your community, etc. Meaning doesn’t have to derive from something grand either; it could be as simple as picking up litter in your community as you are on a walk.

Hopefully you will be able to find happiness using all three approaches in your retirement. However, keep in mind, engagement is the key!

Building Relationships

Prior to retirement, you more than likely were exposed to the “Automatic Relationship Generator.” In your younger life, you were in school. There were plenty of others around for you to be friends with. In your working life, you had your co-workers. Maybe you would consider some of them friends, but you had to have some sort of relationship with them to work with them every day. School and work “automatically” built your relationships for you.

You won’t have that in retirement. There is no “Automatic Relationship Generator” in retirement. You probably won’t be seeing the same people almost every day of the week. If you aren’t careful, your retirement may become lonely.

Nelson and Bolles make some great recommendations about how to ensure you don’t lack meaningful relationships in retirement:

  • Concentrate on your marriage – If you are married, retirement may put pressure on that marriage. If both spouses are at home together when previously time spent together was much more limited, this sudden overabundance of time may cause friction between the spouses. Don’t ignore the problem and hope it goes away. Try to be open with your spouse and work through whatever issues retirement may cause in your marriage. Also, try to find activities that you can both engaged in and share.
  • Reconnect with family and old friends – You may have let relationships with family and old friends suffer some while you were working and had less time to devote to them. Once you retire, work on building these relationships back up, especially if you have siblings.
  • Work on building relationships while still working – You can do this two ways. One would be to extend your work related relationships beyond the work day. If you have work friends that you could see being friends outside of work, invite them to spend some time together after work or on the weekends. The other option is, as you approach retirement, concentrate on building relationships outside of work. Maybe through your church, or other cl

Putting it all together

The last chapter in the book, chapter eleven: The New Retirement—an Undivided Life, helps you put everything together. We’re not going to talk about it here, but we hope that you’ve found something useful to your life during this series, and we hope we’ve encouraged you to pick up the book for yourself. (Just a note—we like the first edition better than the second!)

 

  • Disclaimer: The information on this blog is not meant for specific financial advice. The ideas/opinions stated are not suited for everyone, and readers should use their own judgment in applying them in their financial lives.