In our Jan. 24 column on “The big Social Security mistake,” we pointed out that 729 possible combinations exist for when to draw Social Security benefits.

The difference between the best and the worst possible elections can mean the difference between tens if not hundreds of thousands of dollars of income during a typical retiree’s lifetime. Figuring out the best approach for you comes down to running the numbers for your unique situation using a Social Security calculator. Since that time, tons of our readers have used the calculator we posted on www.RetirementGuysRadio.com. In this column, we want to share with our readers some of our recent findings.

Drawing Social Security benefits as soon as possible or right away at retirement can be a huge mistake for many families. The main reason is the fact that for many retirees who start benefits before full retirement age, often age 66-67, a lifetime reduction for taking benefits early applies. According to www.ssa.gov, the benefits could be reduced by as much as 32.5 percent by drawing them early. The government website also points out that Social Security benefits count for 39 percent of the income for a retiree. Drawing early, especially for a high-income family, can be a double whammy for a spouse’s options because it could reduce the lifetime amount a spouse could receive as well. Remember to know all the options and review the sources of income available before electing benefits.

Consider waiting a while after retirement to start taking Social Security benefits. After an individual has reached maximum retirement age about an 8 percent per year increase is given to those who wait, up till age 70. Although no one knows God’s plan, considering family genetics and an individual’s own health can help us make a smart decision on when to start benefits. Many people we have talked with know that Social Security is broke and assume they should just get what they can now. Tough decisions need to be made by the government on how to make Social Security solvent in the long term. Yet we believe for many retirees close to or in retirement, this benefit will remain for a long time. Don’t just rush into getting money in your hand now.

Many retirees that work for a government agency could be blindsided by a provision called The Windfall Elimination Provision. This could also affect a spouse in what is known as The Government Pension offset. In 2013, benefits can be reduced by as much as $395.50 a month due to these rules. The key is not only knowing the rules, but figuring out a family’s substantial earning years.  For readers who do work for the government or have a spouse who is eligible for a government pension, take extra time to know how the rules apply and determine your best approach on drawing benefits.

The good news is Social Security has been here helping American families since 1935. Generations of Americans have already benefited from this system. Thanks to the hard work of you and others, we have taken care of generations of Americans. It is because of you and me that we have been able to help secure the American dream for so many people and provide a safety net for those who have no other income sources. The contributions of all of us has made a difference.

For those close to or moving into retirement, the good news is you still can decide when and how to draw Social Security benefits. Don’t make the decision lightly; take some time and run the numbers for your family. If you want to find out what’s at stake, stop by our website at www.RetirementGuyRadio.com and run the numbers.

For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysnetwork.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537. (419) 842-0550

Tags: Retirement, Retirement Guys, Social Security

This entry was posted on Friday, May 3rd, 2013 at 12:34 pm and is filed under Retirement Guys, Toledo Business Link.
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Retirement can be an exciting point in life. A retiree can stay up late watching TV and turn the alarm clock off and sleep in. The retiree can look forward to fun vacations and travel when it gets cold here in Northwest Ohio. At the same time, retirement can be scary for some people because it is an area of the unknown. The biggest unknown for most retirees is wondering if they have enough money to last the rest of their lifetime. Trying to figure it out can be confusing — but it doesn’t have to be! We suggest breaking your retirement income planning into three comprehensive parts.

The first part is to review income and expenses by creating a budget.

Setting a budget may not be much fun, but figuring out how much income you will have in retirement and what the monthly expenses are is information every retiree must know. Take the total expenses and subtract your fixed retirement income. Fixed retirement income is typically made of up pensions and social security. If there is a gap between income and expenses it is often covered by investment income or expenses will have to be cut. For investment income, use a 4 percent or 5 percent rate of return for income planning purposes. If you need an outline to create a budget, just do an Internet search for “personal budget worksheet” and several results show up at no cost.

When reviewing a budget, retirees should also look for ways to lower expenses. Look at the big expenses first. For example, if a retiree is paying $1,000 a month for a mortgage that has only $25,000 left on principal, it may make sense to just take part of the investment savings and pay off the mortgage to free up the monthly $1,000 payment. The same can be true if the person has several high-interest credit cards. Sometimes it’s best to just eliminate this debt to free up cash flow. A common theme we have seen with many retirees that are comfortable in retirement is the fact that they are debt-free. Once the big expenses are reviewed, try and reduce the little ones as well. That old gym membership that never gets used, the cell phone, TV and Internet plan, they all add up.

The next part is to build future pay raises into your retirement income plan.

The cost of living is going to go up and the increases in social security and pension benefits may not keep pace with inflation. One way to do this is to create a specific purpose for each of the investment accounts and set aside money in different buckets that mature at different time frames. Often this is referred to as laddering out the portfolio. Consider creating buckets of money that are to be used in three- to five-year time frames: One bucket of money for current income, one bucket of money that will be used in three to five years, another bucket of money that will be used in six to 10 years, etc. Using this approach can help the retiree with picking different investments for each bucket. It also allows the retiree to set aside more money for peak spending years when income needs could be higher than later in life when people tend to slow down.

The final part in retirement income planning is to look at how much income the surviving spouse will have if the other spouse passes away.

The planning starts by picking the correct pension option and having a plan in place to cover any shortfalls, such as a loss of one Social Security income. One solution to cover any additional income needs is to purchase the correct amount of life insurance. Life insurance can be a great option because the owner can change beneficiaries in the future, say to children, or cancel the insurance in the future if there is no longer a need. Another option to consider is annuity income guarantees. Options vary from company to company and from different products, such as fixed, indexed or variable.

Don’t let retirement income planning overwhelm you. Follow the above three steps and you’ll be on your way to building a solid retirement plan.

For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysnetwork.com. Securities and Investment Advisory Services are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group, Inc. does not provide tax or legal advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Tags: Mark Clair, Nolan Baker, Retirement, Retirement Guys

This entry was posted on Friday, November 2nd, 2012 at 5:06 pm and is filed under Opinion, Retirement Guys, Toledo Business Link.
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Personal finance is more of an art than a science, in spite of all the books, classes, and lectures on the topic — not to mention the money charged by “experts” for “financial planning.” Nothing in this industry, be it planning or investing is ever black-and-white. [Note: That’s not to say there aren’t good or bad investments for given economic conditions.]

Instead, there are options. No one, no planner, lecturer, author, or self-help guru can tell a client what is right for him or her. We each have to make personal decisions about our finances based on what is right for us. The best an adviser can do is to help clients understand their options and make recommendations based on their own beliefs (e.g. “If it were my money…”).

Oftentimes we as individuals don’t go all the way in one direction or another, but try to straddle some invisible line, to find some gray area.

There is no better example of this than the varying philosophies on saving. Generally among investors there are two schools of thought, each with their own merits.

The first way of thinking is to save and create a nest egg to pass along to kids. The goal here is to make priority No. 1 of saving and investing to improve the stations in life for descendants — an attempt to make a family truly “wealthy.”

As a brief side note, it’s important to understand financial milestones. For example, a person is considered “financially independent” if they have accumulated in liquid assets enough money to pay their expenses for the next two or three years. They are termed “financial independent” because they can maintain their standards of living, even if they lose their jobs.

The definition of “wealthy” is even less clear, but to date the best definition we have found is this: “A person is truly wealthy when their money earns more than they do,” meaning that interest and dividends from investments are greater than a person’s salary. Very few people ever reach this level of wealth.

In any case, people who stress saving generally at least want to be able to maintain their lifestyles in retirement, at a minimum to support themselves in later life without burdening their families.

One thing we commonly tell clients is that no one owes it to their kids to leave them a large inheritance. However, people DO at least owe it to their children to be able to support themselves financially late in life without being a burden.

Conversely, the other philosophy on personal finance is extremely simple. It’s characterized by a simple phrase we’ve all heard before: “You can’t take it with you.” In other words, people should enjoy their money and worry less about the future, much less future generations. Let them worry about themselves.

Obviously this second philosophy isn’t simply unsound financially, it’s unhealthy!

It is of utmost importance for each of us to find some sort of balance between responsibility and enjoyment, because obviously there is validity to both ways of thinking. And while I’d like to be able to provide some sort of answer — some kind of golden ratio between fun and safe — each of us must answer this question for him- or herself.

Hopefully most readers have already found some kind of balance in their lives and are enjoying their earnings while also preparing for the future — maybe even stockpiling something to leave behind. For those who haven’t, the first step is to recognize the need; the second is to understand the options.

Dock David Treece is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and is licensed with FINRA through Treece Financial Services Corp. He provides expert content to numerous media outlets. The above information is the express opinion of Dock David Treece and should not be construed as investment advice or used without outside verification.

Tags: Dock David Treece, inheritance, personal finance, Retirement, saving philosophies

This entry was posted on Friday, March 9th, 2012 at 8:50 am and is filed under Toledo Business Link, Treece Blog.
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The first wave of baby boomers will soon start turning 65.  For many baby boomers, the thought of retirement is here.  Imagine all of the fun in store — turning off the alarm clock and sleeping in, getting up and being on your own schedule; getting to spend time with grandchildren and other family members can now be something there is time for.  Although many people look forward to these days, still the thought of retirement can be scary. Reduce your worries by avoiding these scary retirement mistakes.

Unexpected health care costs

We do a lot of public speaking locally and nationally, talking on the topics of how to manage money, protect assets and plan an estate.   Oftentimes when we are speaking to a group of boomers or retirees, we ask people to raise their hands if thet have long-term care insurance.  Usually it is less than 10 percent of the room.  Yet an unexpected health care crisis can easily wipe a family out. Also, when we talk with many retirees we hear them say their health insurance is covered by their company for their lifetime.  In reality, in most of these cases, health insurance in retirement time is a luxury, not an obligation. So be prepared to have plenty of money set aside to cover unestimated and unexpected health care costs.

Too much debt

Try to eliminate as much debt as possible before retiring. Just this week, we met with a couple in their late 50s. They came in to talk about being in a position to retire if the union contract deal didn’t go the way they wanted. It is not normal to see people in their late 50s retiring. The common theme among those who do is they are almost always debt-free. If all of those outgoing debt expenses are eliminated, there should be more cash flow for enjoying retirement. For many, the number can be huge. Don’t rely on investments to cover debts in retirement; instead, have as many paid off as possible before retiring.

Loaning money to family

At retirement, people are often in control of the biggest amount of money in their lifetime. This is because a retiree now has access to their 401(k), possibly a lump sum pension and many other investments. Children may sometimes ask their parents for a loan. That loan could be to start or support a business, it could be to cover a job loss or a variety of other reasons.

Loaning money can not only be dangerous to a retiree’s own financial future, it can create unhealthy relationships. If the loan doesn’t work out, it can quickly ruin a family.  We believe in helping family when they need a hand to get back on their feet, but only if you can afford it. Instead of loaning money, if you have the financial resources give the money as a gift. If you can afford to give the money away, that’s great. If not, a loan can be dangerous.

Forgetting Plan B

Shift the mindset and have a Plan B. For years and years the plan has been saving and growing the nest egg.  Retirees should consider shifting their mindset to a distribution mode.   No longer will retirees be putting money each and every paycheck into their retirement savings.

Instead, they now will be relying on those retirement savings to fund their income needs. Plan B involves looking at retirement money differently and having a backup plan in place.

For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC.  NEXT Financial Group Inc. nor its representatives provide tax advice.  The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.

Tags: Business, Finance, Retirement, Retirement Guys

This entry was posted on Friday, October 29th, 2010 at 11:55 pm and is filed under Retirement Guys, Toledo Business Link.
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