Wednesday, May 17, 2017

Your Pre-Retirement Checkup

If you are getting close to retirement, it is time to do a pre-retirement checkup.  You want to feel confident you will have enough retirement income to support yourself and your dependents; you also want to have a plan to make sure your money lasts the rest of your life.  While no one can guarantee your assets will last a lifetime, you do not want to retire until you feel fairly certain you will not outlive your money.

What is involved in a pre-retirement checkup?  How do you make sure you are ready to retire?

Organizing a Pre-Retirement Checkup

Of course, you should have been looking over your retirement plans throughout your working years, not just when you are about to retire.  The earlier you started planning, the more likely you are to have a satisfying retirement.  However, about five or six years before you think you will retire, you need to evaluate your plans more carefully.

Start with your annual Social Security benefit estimate.  How much income do you expect to receive at different potential ages?  Would you be better off if you postponed your retirement by a year or two, or even until age 70, in order to increase your income?  Remember, if you are married and have been the primary breadwinner, your spouse will also be affected by your decision.  The longer you wait to retire, the higher your income will be, as well as the income of your spouse.

Next, look at the size of your retirement savings account.  Many financial planners recommend retirees start by only withdrawing 3 percent a year, gradually increasing that amount by 0.03 percent a year, so they are sure their money will last the rest of their lives.  If you add that amount to your Social Security benefits, will you have enough income to maintain your current standard of living?

Do you have any other income which will supplement your Social Security and savings withdrawals?  For example, are you eligible to receive a pension in addition to Social Security or will you have a small income from a hobby, part-time job, rental property or other source?

Evaluate Your Living Expenses

Once you have a fairly good idea of how much income you will have, it is time to evaluate your current cost-of-living.  Are there expenses which you expect will be lower after you retire, including commuting costs, eating out, and buying work clothes?  Are there some expenses which you expect to be higher, such as taking trips or eating more meals at home?

If your estimated retirement cost-of-living far exceeds your future potential income, you may consider relocating to a less expensive area, getting a smaller home or taking other steps to reduce your expenses.  You may be able to make some of these adjustments before you retire and use the money you save while you are working to build up your retirement savings.

Talk to a Financial Planner

Even if you believe your retirement plans are in good shape, this is a good time to meet with a financial planner or investment advisor.  You want someone who will charge you an hourly fee to review your investments or a flat fee to manage your assets, and not someone who relies solely on commissions from the investments he sells you.  Ask the advisor to look over how your retirement assets are invested and recommend changes which could increase the growth of your assets over the remaining years before you retire.  Once you retire, you may want the financial planner to reallocate your assets in order to increase your income and reduce your risk.

In addition, a financial planner can help you determine how much more money you might need to put aside in savings during your remaining working years, what age you should begin to collect your Social Security, what changes you need to make to your lifestyle, and the tax ramifications of making withdrawals from your IRA or 401(k).  The financial planner can also help you decide if some of your current assets should be placed in a Roth IRA, to reduce your future taxes.

After going through all the numbers, first by yourself and then with a financial planner, you will feel much more confident about your retirement plans. Your goal is to be comfortable and confident when you stop working.

For an overview of retirement planning, watch for my book Retirement Awareness: 10 Steps to a Comfortable Retirement which will be published by Griffin Publishing and Watering Seeds in the fall of 2017.

If you are interested in learning more about financial planning, where to retire, common medical issues and changing family relationships, use the tabs or pull-down menu at the top of the page to find links to hundreds of additional articles.

You are reading from the blog:  http://www.baby-boomer-retirement.com

Photo credit:  morguefile.com

Tuesday, May 9, 2017

Protect Yourself from Fraud and Scams

Retirees are extremely likely to become the targets of scams or fraud.  As a result, we must be extraordinarily careful about our interactions with businesses and people who contact us by phone or on our computer. We are continually bombarded with phone calls and emails from dishonest people who try to trick us into turning over our personal information or money.  Many of these scammers are very persistent and deceptive.  Sometimes it can be difficult to tell the difference between legitimate and fraudulent websites.  The only way to stop these scammers is to learn how to protect ourselves and then report the crooks who try to cheat us.

What are the Most Common Scams Against Seniors?

There are a number of ways in which scammers are able to cheat us.  They may call, pretending to be a grandchild in trouble, and beg for money.  They might win our confidence on an online dating site and ask us to "loan" them money to help them out.  They could impersonate an IRS agent and threaten us with jail if we do not immediately pay our back taxes, which they demand in the form of gift cards or other untraceable types of instant money.  Sometimes they ask for donations to official sounding charities.

Scammers can also trick us by sending fraudulent emails from sites which look similar to the official sites of our bank or credit card company.  They might download malware on our computer and lock us out, until we pay a ransom.

It seems as if the different ways scammers can attack us are endless and they are continually coming up with new approaches.  We have to continually be vigilant.

How to Protect Ourselves from Scammers

While there seems to be no limit to the variety and creativity of the scams which threaten your financial security and peace-of-mind, there are steps you can take to make yourself less vulnerable.

1.  Ask plenty of questions if a family member calls and asks for money.  No matter how much of an emergency it appears to be, make sure you are actually talking to your relative and not a complete stranger.  We have told our adult children and grandchildren not to get their feelings hurt if they ever call asking for money and we pepper them with questions.  We explained to them there are very aggressive scammers who pretend to be members of a family and beg for financial assistance ... often while "crying" so it is difficult to identify their voices.  As a result, we would need to ask numerous questions before sending anyone money.  These questions might include where they went to school, their best friend's name, or their address as a child.  We have also told our family members we would call them back on their cell phone and discuss the request with other family members, to make sure the request is legitimate.

2.  Be suspicious if an "authority figure" calls and demands money.  Whenever a stranger calls pretending to be an IRS agent, the manager of your bank, or an representative from your credit card company, do not provide them with information they should already have such as your credit card number, date of birth or full Social Security number.  If you are in doubt, hang up and call the company or business directly, using the official customer service phone number for your bank or credit card company. The IRS will never unexpectedly call you demanding an immediate payment.

3.  Do not send money to strangers you "meet" online.  No matter how compelling or sad their story is, there is no way for you to verify they are telling you the truth.  Be suspicious, even if they show you "evidence."  Many of these scammers work in groups and they are very good at vouching for each other or producing realistic looking documents.

4.  Be very slow to send money to anyone.  Just because someone else seems to be having an emergency, you do not have to rush to send them money.  Take your time.  Whenever you consider sending money to someone, even a relative, discuss the decision with other family members. If necessary, call the police or the U.S. State Department and ask for their help in confirming that the situation is legitimate, particularly if the "crisis" is occurring in another country.  

5.  Never click on links in emails which are sent by strangers.  You should only click on links in emails sent by friends if you are expecting the link.  Your friend's email service could have been hacked.  Email links can allow scammers to take over your computer remotely.  Once they do, they can find anything you may have on your computer ... banking information, contacts, photos, passwords, etc.  For example, I have told my friends that if they send me a joke or interesting story and I have to open a link to read it, I will not open the link unless I am expecting them to send me this information.  We can't be too careful.

6.  Be careful about what you say on social media.  Make sure your Facebook posts have a privacy setting of "Friends only."  Do not reveal too much about yourself; especially do not give details about where you live and then announce when you are out-of-town.  Some people make it far too easy to be robbed.  In addition, be careful of the social media questionnaires which ask personal information about you such as your birth date, place of birth, maiden name, etc.  Combined with other information about you which is publicly available online, dishonest people can easily steal your identity.

7.  Make sure your computer is as safe from intruders as possible.  Although any computer can be hacked, some people make it far too easy.  Use both antivirus and anti-spyware software.  Keep your computer software updated.

8.  If you receive harassing phone calls, block the number.  No matter how lonely you may be, talking to strangers on the phone is not safe, no matter how old you are.  They may have done their research on you before making the call, including looking up your first name and the names of family members.  They may pretend to have met you and try to gain your confidence, before tricking you into making a "donation" to a worthwhile cause or asking for money for some other purpose.  Keep phone calls from solicitors, charities and other strangers short.  Hang up on them, if necessary.  We always tell phone solicitors that we do not conduct business over the phone, and then quickly end the call.  After the call, we block the number so they cannot keep calling back.

Finally, if you believe you have been cheated or tricked by a scammer, take the time to report the incident to the police.  If the scammer was pretending to be from the IRS, your bank or another business, notify the government agency or business involved so they can help you prevent this from happening to someone else.

If you are interested in learning more about handling finances in retirement, where to retire, common medical issues, Social Security, Medicare and more, use the tabs or pull down menu at the top of the page to find links to hundreds of additional articles.

Watch for my book, Retirement Awareness, which is being published by Griffin Publishing and Watering Seeds and will be available in the fall of 2017.

You are reading from the blog:  http://www.baby-boomer-retirement.com

Photo credit:  Photo property of author.

Wednesday, May 3, 2017

Short on Retirement Savings

How much money do you think you will need in order to retire comfortably?  The honest truth is you probably need more, much more, than you actually have.  According to SeniorLiving.org, half of Baby Boomers, the generation which is currently retiring at a rate of 10,000 people a DAY, have saved less than $100,000.  Over one-third have saved less than $50,000.  This means a substantial number of Baby Boomers have not saved enough money to produce a modest retirement income, even when combined with their Social Security benefits, and they are at a serious risk of outliving their retirement savings.

Breakdown of Baby Boomer Savings

The report at SeniorLiving.com showed the following statistics for Baby Boomers as of December, 2016:

37% - Saved less than $50,000
13% - Saved between $50,000 and $100,000
14% - Saved between $100,000 and $200,000
12% - Saved between $200,000 and $300,000
09% - Saved between $300,000 and $500,000
15% - Saved $500,000 or more

How Much Does the Average Retiree Spend?

According to the Bureau of Labor Statistics, the typical household whose head of house is age 65 or older spent $44,664 in 2015.  That cost-of-living has probably increased since that time.

How Much Income Can the Average Retiree Expect?

Social Security is designed to replace approximately 40% of an employee's pre-retirement income, although many Baby Boomers mistakenly believe it will replace 90% of their income, instead.  In 2017, the average single retired person collects $1,360 in Social Security benefits.  The average couple receives $2,260 in benefits.   This translates to an income of $27,120 a year for a retired couple, far below the $44,664 the average household spends.  At a 6 percent return, only the people who have saved $350,000 or more (less than one-fourth of retirees) will have enough savings to make up the difference between their income and the average cost-of-living for the typical retired couple.

To make matters worse, many certified financial planners recommend retirees withdraw no more than 4% of their retirement savings per year at the beginning of retirement, and increase that amount very gradually, in order to be confident they will not run out of money during the remainder of their lifetime. This means they would actually need to have $450,000 or more in savings in order to maintain an average lifestyle.  Unfortunately, the vast majority of retirees do not come close to having that amount of savings.

What to do if You Have Not Retired Yet

If you are getting close to retirement, but you have not stopped working yet, here are a few steps you can still take to deal with a shortage in your retirement savings.

1.  Start cutting your expenses now, while you are still working, so you can adjust to your future cost-of-living and, at the same time, free up more income for savings.  It is better to make small sacrifices now, if it means you will be more comfortable later in life.

2.  Increase the amount of money you have going into an IRA, 401(k) or 403(b).

3.  Postpone retirement until age 70, which could increase your Social Security benefits by approximately 24% over what you would receive if you begin to collect at age 67.  This action alone could substantially reduce the amount of savings you will need during retirement.

4.  Pay off all your bills, including your auto loans and mortgages, if possible, to minimize your expenses during retirement.

5.  Discuss your retirement plans with a certified financial planner to make sure your savings are invested appropriately to maximize your earnings and growth.

What to do if You Have Already Retired

If you have already retired and realize you are going through your savings much more quickly than you expected, you may want to see if you can find a part-time job and reduce the size of your savings withdrawals ... or even postpone making additional withdrawals until you are older and unable to work.  This is the best way to maintain your independence and salvage your savings after retirement.

Retirees who are falling short may also want to see if they can find a less expensive place to live, cheaper car to drive, or make other adjustments to cut their cost-of-living.

Finally, if you are concerned about outliving your money, you may want to talk to a financial planner to see if you can increase your income without using up the principal you have saved.

If you are interested in more ideas about preparing financially for retirement, where to retire, common medical problems, changing family relationships and more, use the tabs or pull-down menu at the top of the page to find links to hundreds of additional helpful articles.

For an overview of retirement planning, watch for my book, Retirement Awareness, which is being published by Griffin Publishing and Watering Seeds and will be available in the fall of 2017.

You are reading from the blog:  http://www.baby-boomer-retirement.com

Photo credit:  morguefile.com