Wednesday, March 29, 2017

How to Prepare Financially for Retirement

Whether you are 30, 40, 50 or 60, everyone needs to take steps to plan to retire someday.  Of course, the younger we are when we start, the better prepared we will be to retire when the time comes.  No matter what your age, what are some of the things we need to do in the years before we stop working?  How can we make sure we are financially prepared when the time comes?

Steps in Retirement Planning

Save Money in an IRA and/or a 401(k) - If you work for an employer with a 401(k) or 403(b) plan, take advantage of it.  Have your employer withhold some of your pretax income and put it towards your retirement.  Some corporations will even match the donations of their employees, which means you will be able to accumulate wealth twice as fast! 

The younger you are when you start saving, the better off you will be when you finally stop working.  However, even if you are in your 50s when you start, you may still be able to put aside 10 to 15 years worth of savings, which could make a huge difference in the quality of your retirement.

If you are self-employed or do not have a 401(k) or 403(b) plan where you work, save money in an IRA instead.  You can even have both, if you have enough excess income.  However, if you save too much money, not all of it may be tax free.  It is still beneficial to save as much as you can towards retirement.

Talk to a Financial Planner about How to Invest Your Savings - If you are in a 401(k) or 403(b), your employer may give you a menu of mutual funds, tell you to pick one or two, and that is where they will invest your contributions.  The same thing could happen with an IRA, if you decide to set up an automatic withdrawal and investment program.  Most of us could use a little help in choosing the best investment plan, however.  It will probably be worth your time and money to talk to a certified financial planner or investment advisor representative.  Get their recommendations on how to invest your savings for growth when you are young, and for income when you get ready to retire.  Be sure to diversify your investments so you do not have too much money in one type of fund or investment.

Pay off Your Debts As You Approach Retirement - Nearly everyone will have a more comfortable retirement if they keep their debts to a minimum after they retire.  The closer you are to retirement, the more important it is to have a plan to eliminate all your student loans and credit card debts.  If you can also pay off your home and car, you are going to have a lower cost-of-living once you are living on Social Security and your savings.

Get an Estimate of Your Future Social Security and Pension Income - Everyone should periodically get estimates of how much they can expect to receive in the future from Social Security benefits and any employer funded pensions.  Everyone needs to know how much income they can expect to have after retirement. You also need to understand how much you could increase your income by postponing your retirement by a few years.

Come Up With a Retirement Budget - Estimate how much it will cost you to live after you retire.  If you have a large gap between your current expenses and anticipated income, investigate the steps you can take to reduce your expenses by downsizing, for example, and how you can increase your income by taking steps such as postponing your retirement age.  If necessary, you may also consider getting a retirement job which will help increase your income.  It can be a fun job, as long as it produces enough income to make your feel more financially secure.

Talk to Your Financial Planner or Advisor about Turning Your 401(k) or IRA into Income - Once you are ready to retire, find out how much money you can withdraw from your IRA and still be assured you will have enough money to last the rest of your life.  Discuss the 3 percent withdrawal rate, dividend funds, annuities, bonds and other investment vehicles which will produce an income.  You may want to invest in a variety of income producing products to give you the most financial security.

If you plan carefully and realistically, you can feel confident you are financially well-prepared for retirement when the time comes.

Watch for my book, Retirement Awareness, due to be released by Griffin Publishing and Watering Seeds in the Fall of 2017. It will go into more detail about how to prepare financially for retirement.

If you are interested in more information about financial planning, where to retire, Medicare, Social Security, medical problems and more, use the tabs or pull-down menu at the top of the page to find links to hundreds of additional articles.

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Tuesday, March 21, 2017

Hidden Costs in Assisted Living Facilities

The cost of living in a skilled nursing home, assisted living facility or memory care unit varies greatly across the United States.  Charges can vary from around $3,000 to $7,000 a month for basic expenses, but hidden fees can drive the cost much higher.  It is these unexpected charges that sometimes cause the greatest stress for families trying to keep a relative in a comfortable facility.

Basic Costs for Senior Living

While the exact prices will vary at different facilities and in various parts of the country, below is a list of sample basic charges from a facility which offers different levels of care in Orange County, California. Their basic charges are for independent living.  The costs increase as the resident begins to need more types of care.

The least expensive level is independent living.  This includes meals, weekly housekeeping, and access to activities, exercise classes, a fitness center and swimming pool.

Below were the basic monthly charges for one person living in the sample facility in 2016:

Junior Studio          $3177
Small Studio           $3167
Large Studio           $3539 - $3609
One Bedroom         $4162 - $4343
Two Bedroom         $5324 - $5429

If two people are living in the same apartment, there is an additional monthly fee of $1000.  Upon moving into this particular facility, there is also a non-refundable processing fee of $1500.

Residents can also expect these monthly rents to increase periodically.

Additional Hidden Costs of Assisted Living

What many retirees and their families do not expect is that there could be a number of necessary extras which can dramatically increase the cost of living in the typical assisted living facility.  Below are examples of some of the possible fees.  While these are just a sample of possible charges, based on one facility, everyone should ask about the cost of these services before they select a residence, because these charges can potentially amount to thousands of dollars above the cost of basic housing.

Medication Management:        $410 - $525 a month
Dressing / morning hygiene:     $400 a month
Undressing / evening hygiene:  $400 a month
Escorting residents to meals/activities:  $300 a month
Checking on resident every two hours:  $500 a month
Incontinence Care:                  $600 a month
Cueing (reminders):                 $120 a month
Stand-by during showers:         $480 a month for 7 showers a week
Full Assistance in showers:       $700 a month
Treatments for wounds, etc:     $10 per treatment
Blood pressure or sugar monitoring:    $40 per check
Laundry:                                 $100 a month
Other types of assistance:         $4 to $15 per service 

As you can see, someone could easily be charged as much as $3,500 to $4000 over the basic apartment rental, if the resident needed a great deal of personal assistance and attention.  Of course, few people will need all of those types of assistance.

Memory Care Facilities are All-Inclusive

If you or your loved one needs to move into a Memory Care Residence, the expectation is that they will need 24 hour a day personalized care, so many types of assistance are already included in the $6844 a month fee for the sample residence.  However, there could be additional charges for any special medical or personal services they need.

Ask About Hidden Expenses Before Choosing a Facility

While this article used examples of charges from only one facility, it is intended to educate aging seniors and their families on the types of hidden expenses they might expect. It is important for people to have a firm understanding of the potential cost of living in a facility before they commit to it. It is also important to ask lots of questions before you move yourself or a loved one into a facility. While the basic charges may seem reasonable, the true expense could be thousands of dollars more each month, depending on what services the resident eventually needs.

Long-term Care Insurance

One way to reduce or eliminate the high cost of a skilled nursing facility is to purchase a long-term care insurance policy while you are still healthy ... which usually means buying it in your 50s or 60s.  If you wait too long, you could easily become uninsurable.  In addition you should know that, over time, the cost of your premiums will rise.  However, if you need care in your later years, you will be glad you purchased the policy.

Continuing Care Retirement Communities

Another option to help you contain your expenses is to move into a Continuing Care Retirement Community or CCRC.  With most of them, you have to be ambulatory and in reasonably good condition in order to become a resident.  They can also be very expensive.  However, once you buy-in to the facility, you are guaranteed skilled nursing care or memory care, as needed, for the remainder of your life.  With most CCRC's, you will have to pay a high buy-in fee, as well as a monthly charge which can be as much as the typical assisted living facility mentioned above.  However, if your costs become too high for you to afford because of the services you need, the extra charges will be taken out of your original buy-in.  According to many of the CCRC agreements, a percentage of whatever remains from your original buy-in can be returned to your heirs after your death or to you, in the event you move to a different facility.

As with any legal contracts, it is extremely important that you do careful research before moving yourself or a loved one into an assisted living facility or a CCRC.  You want to know exactly how high your costs will be before you sign a contract.

If you are interested in additional information about where to retire, financial planning, Social Security, Medicare, health issues and more, use the tabs or pull-down menu at the top of the page to find links to hundreds of additional articles.

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Tuesday, March 14, 2017

How to Choose a Financial Advisor

Do you rely on your friends, neighbors or brother-in-law when it comes to investing your money?  How much do they know about different investment products such as insurance, annuities, mutual funds, tax-free bonds and stocks?  Even if they know a little about those products, do they know which ones are the best for you?  You need to find a fiduciary such as a Registered Investment Advisor or Certified Financial Planner who is knowledgeable and will put your needs first.

What Should an Investment Advisor Do For You?

A fiduciary should work for you.  They should put your needs first ... above their own.  They should offer a variety of products and combinations of products which are designed to meet your goals ... whether that is to increase the value of your assets, protect your portfolio for the benefit of your family, or provide a lifetime income for you and your spouse.

The fiduciary should do this and, at the same time, help you avoid high commission products, funds which are heavily front-loaded, or investments which give large incentives to the salesmen.

In fact, a fiduciary should be creating a comprehensive investment plan designed to meet your needs, without causing you to pay unnecessary or excessive commissions.

What Are Examples of Fiduciaries?

The type of investment advisor you are seeking could be a LPL - Financial Advisor, a CFP - Certified Financial Planner, an IAR - Investment Advisor Representative, or someone with a similar background, education and designation.

The person you choose should have knowledge about tax planning, asset allocation, risk management, retirement planning and estate planning.  They should also know about a wide variety of investment products, including life insurance, annuities, growth stocks, dividend stocks, tax-free bonds and funds.  They should be capable of putting together a balanced portfolio which is diversified.  They should not rely on just one type of product or products from only one company.

How Can You Find a Reliable Financial Advisor?

Your first step in choosing a financial advisor is to see if they are a Certified Financial Advisor, an Investment Advisor Representative, or one of the similar designations mentioned above. Next, ask them what agency oversees their business.  It should either be FINRA (Financial Industry Regulatory Authority) or the SEC (the Securities and Exchange Commission).  Some advisors may be registered with both.  Your advisor or other employees of their company may also hold insurance licenses, be a CPA and or have other professional designations and certifications.  

Go to the appropriate regulatory agencies and check out both the advisor and their company.  Confirm they are licensed and see if any complaints have been filed against them.  You are also looking to see if the information the agencies have is the same as what the advisor has told you.  You need to be confident they are not touting a phony degree or designation which does not exist.

You can also used the website Brightscope to see what licenses they hold and if there are any disclosures about them.

Finally, you may simply want to Google their name and see what comments there are on the internet about them.  A few vague complaints may not be a problem.  However, too many negative comments and indications of disciplinary actions against them could be a red flag.

When Should You be Concerned About Your Financial Advisor?

Financial advisors are required by law to avoid conflicts of interest and to put the needs of the client above their own.  They should give you a wide range of advice, but not make you feel you are getting a "hard sell" on any particular products.

A Financial Advisor should also keep you informed and disclose any news which might arise affecting your investments and financial planning.

Despite the research you have done prior to hiring a financial advisor, if their actions make you feel uncomfortable, share your concerns with other business advisors in your life ... the person who does your taxes, your lawyer, etc.  You may decide to shop around for another advisor if you feel your current one does not have your best interests at heart.

Remember:  This is your money and you have the right to feel confident it is being handled correctly and safely. 

If you are interested in learning more about financial retirement planning, Social Security, Medicare, aging, family relationships and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional articles.

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