Author Archives: Tony Kendzior - Financial Planner

About Tony Kendzior - Financial Planner

I've lived happily, raised a family, and enjoyed a professional life in Gainesville for over 50 years. The next several years are full of promise. My goal is to find new clients, new friends and somehow share the wisdom I've accumulated over these many years. And when I have time, play a little golf and travel with my family. Cheers!

The market will crash this year — and there’s a good reason why

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My Comments: Frankly, I have no idea if it will or not, but I tend to pay attention when people smarter than I start talking about stuff that is clearly an existential threat to my financial well being and that of my clients, family and friends.

If the money you have saved is critical in terms of being able to pay your bills in the future, there are ways to protect yourself against downside risk and still participate in the upside promise of the markets.

Thomas H. Kee Jr. / President and CEO of Stock Traders Daily / April 25, 2018

The market is going to crash this year, and there is a very good reason why. The amount of money chasing stocks is drying up considerably, natural conditions are prevailing, and it is happening on the heels of the most expensive bull market in history.

The stimulus efforts of global central banks created a fabricated demand for stocks, bonds, and real estate, ever since the credit crisis, but as of April 2018 those combined efforts are now a drain on liquidity. As recently as last September the combined effort of the ECB and the FOMC was infusing $60 billion per month into these asset classes, like they had almost every month since the credit crisis — but now they are effectively selling $30 billion of assets per month. That is a $90 billion decline in the monthly demand for assets in seven short months.

Central banks are now a drain on liquidity, and it is happening when natural demand levels are significantly lower than where current demand for stocks, bonds, and real estate appears to be.

According to The Investment Rate — an indicator that measures lifetime investment cycles based on ingrained societal norms to identify longer term stock market and economic cycles in advance — we are currently in the third major down period in US history. The rate of change in the amount of new money available to be invested into the U.S. economy declines every year throughout this down cycle, just like it did during the Great Depression and stagflation. This down cycle also started in December of 2007.

Although the market began to decline directly in line with The Investment Rate’s leading indicator, the declines did not last very long. The Investment Rate tells us that the down period lasts much longer than just the credit crisis, and the declines The Investment Rate suggests are rooted in material changes to natural demand levels based on how we as people invest our money, so it identifies natural demand. The natural demand levels identified by The Investment Rate are much lower, and they decline consistently from 2007.

As much as The Investment Rate serves to identify natural demand levels, when stimulus was introduced by Ben Bernanke a second source of new money was born. The stimulus efforts by the FOMC and the ECB added new money to the demand side of stocks, bonds, and real estate, with the intention of spurring prices higher to induce the wealth affect. The policies were successful, asset prices have increased aggressively, but there are repercussions.

Asset prices increased so much that the valuation of the S&P 500, Dow Jones industrial average, Russell 2000, and NASDAQ 100 at the end of last year made them more expensive than in any other bull market in history. In other words, we just experienced the most expensive bull market in history, and the PE multiple of 25 times earnings on the S&P 500 was driven by the constant capital infusions coming from central bank stimulus programs.

Not only were these programs unprecedented given their size, but they also told us what they were going to buy, when they were going to buy it, and how much they were going to buy, every month, in advance, every year since the credit crisis. At no time in history has Wall Street been able to identify when buyers were going to come in like they have during this stimulus phase.

However, now the stimulus phase is over and not only are these central banks no longer a positive influence on liquidity, but they are now removing liquidity from the financial system as well.

This is happening at a time when natural demand levels as those are defined by The Investment Rate are also significantly lower than where demand currently seems to be, and that creates a double whammy on liquidity. The demand for equities this year is far less than it was last year as a result of these two demand side factors. Because price is based on supply and demand, and because demand is cratering, prices are likely to fall. This applies to stocks, bonds, and real estate.

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Beliefs vs Reality

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My Comments: These are strange times. I’m having a hard time coming to terms with my beliefs and values as a human and the values and beliefs as expressed by others.
Mine have evolved over the past 76 years and encompass everything that defines me as a member of society. I’m comfortable in my own skin and will move on eventually to the next state of being. Meanwhile, others increasingly refute the values that I’ve considered ‘normal’ for my entire life.

So, this article has been helpful in my understanding of the disconnect that I now have with so many people who until recently I considered as being on the same planet as I am. My fervent hope is that life will soon return to at least a semblance of normality and I can live out my days without too much stress. If you too are stressed by how all this is playing out these days, I encourage you to read these words by Daniel DeNicola.

You don’t have the right to believe whatever you want to believe by Daniel DeNicola on June 6, 2018.

Do we have the right to believe whatever we want to believe? This supposed right is often claimed as the last resort of the willfully ignorant, the person who is cornered by evidence and mounting opinion: “I believe climate change is a hoax whatever anyone else says, and I have a right to believe it!”

But is there such a right?

We do recognize the right to know certain things. I have a right to know the conditions of my employment, the physician’s diagnosis of my ailments, the grades I achieved at school, the name of my accuser, and the nature of the charges, and so on. But belief is not knowledge.

Beliefs are factive: to believe is to take to be true. It would be absurd, as the analytic philosopher G E Moore observed in the 1940s, to say: “It is raining, but I don’t believe that it is raining.” Beliefs aspire to truth—but they do not entail it. Beliefs can be false, unwarranted by evidence or reasoned consideration. They can also be morally repugnant. Among likely candidates: beliefs that are sexist, racist, or homophobic; the belief that proper upbringing of a child requires “breaking the will” and severe corporal punishment; the belief that the elderly should routinely be euthanized; the belief that “ethnic cleansing” is a political solution, and so on. If we find these morally wrong, we condemn not only the potential acts that spring from such beliefs, but the content of the belief itself, the act of believing it, and thus the believer.

Such judgments can imply that believing is a voluntary act. But beliefs are often more like states of mind or attitudes than decisive actions. Some beliefs, such as personal values, are not deliberately chosen; they are “inherited” from parents and “acquired” from peers, acquired inadvertently, inculcated by institutions and authorities, or assumed from hearsay. For this reason, I think, it is not always the coming-to-hold-this-belief that is problematic: It is rather the sustaining of such beliefs, the refusal to disbelieve or discard them that can be voluntary and ethically wrong.

If the content of a belief is judged morally wrong, it is also thought to be false. The belief that one race is less than fully human is not only a morally repugnant, racist tenet; it is also thought to be a false claim—though not by the believer. The falsity of a belief is a necessary but not sufficient condition for a belief to be morally wrong; neither is the ugliness of the content sufficient for a belief to be morally wrong. Alas, there are indeed morally repugnant truths, but it is not the believing that makes them so. Their moral ugliness is embedded in the world, not in one’s belief about the world.

“Who are you to tell me what to believe?” replies the zealot. It is a misguided challenge. It implies that certifying one’s beliefs is a matter of someone’s authority. It ignores the role of reality. Believing has what philosophers call a “mind-to-world direction of fit.” Our beliefs are intended to reflect the real world—and it is on this point that beliefs can go haywire. There are irresponsible beliefs. More precisely, there are beliefs that are acquired and retained in an irresponsible way. One might disregard evidence, accept gossip, rumor, or testimony from dubious sources, ignore incoherence with one’s other beliefs, embrace wishful thinking, or display a predilection for conspiracy theories.

I do not mean to revert to the stern evidentialism of the 19th-century mathematical philosopher William K Clifford, who claimed: “It is wrong, always, everywhere, and for anyone, to believe anything upon insufficient evidence.” Clifford was trying to prevent irresponsible “overbelief,” in which wishful thinking, blind faith, or sentiment (rather than evidence) stimulate or justify belief. This is too restrictive. In any complex society, one has to rely on the testimony of reliable sources, expert judgment, and the best available evidence. Moreover, as the psychologist William James responded in 1896, some of our most important beliefs about the world and the human prospect must be formed without the possibility of sufficient evidence. In such circumstances (which are sometimes defined narrowly, sometimes more broadly in James’s writings), one’s “will to believe” entitles us to choose to believe the alternative that projects a better life.

In exploring the varieties of religious experience, James would remind us that the “right to believe” can establish a climate of religious tolerance. Those religions that define themselves by required beliefs (creeds) have engaged in repression, torture, and countless wars against non-believers that can cease only with recognition of a mutual “right to believe.” Yet, even in this context, extremely intolerant beliefs cannot be tolerated. Rights have limits and carry responsibilities.

Unfortunately, many people today seem to take great license with the right to believe, flouting their responsibility. The wilful ignorance and false knowledge that are commonly defended by the assertion “I have a right to my belief” do not meet James’s requirements. Consider those who believe that the lunar landings or the Sandy Hook school shooting were unreal, government-created dramas; that Barack Obama is Muslim; that the Earth is flat; or that climate change is a hoax. In such cases, the right to believe is proclaimed as a negative right. That is, its intent is to foreclose dialogue, to deflect all challenges, to enjoin others from interfering with one’s belief-commitment. The mind is closed, not open for learning. They might be “true believers,” but they are not believers in the truth.

Believing, like willing, seems fundamental to autonomy, the ultimate ground of one’s freedom. But, as Clifford also remarked: “No one man’s belief is in any case a private matter which concerns himself alone.” Beliefs shape attitudes and motives, guide choices and actions. Believing and knowing are formed within an epistemic community, which also bears their effects. There is an ethic of believing, of acquiring, sustaining, and relinquishing beliefs—and that ethic both generates and limits our right to believe. If some beliefs are false, or morally repugnant, or irresponsible, some beliefs are also dangerous. And to those, we have no right.

The 1 Retirement Expense We’re Still Not Preparing For

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My Comments: Those of us who live long enough to enter the final stages of our lives get to confront something that rarely happens to those not retired.

I often refer to this as ‘becoming goofy’, though it’s not always a mental affliction. (My mother had Alzheimer’s and needed constant attention for over nine years.)

As you have long since discovered, being alive can expose you to a double edged sword. Yes, we’re still on this side of the grass but with that comes new challenges.

As a financial planner now focused on retirement planning, not dying quickly comes with a cost. And costs often come with price tags, many of which we’re unprepared to pay.

These words from Maurie Backman are a necessary read. It’s unrealistic to expect bad things won’t happen to us, and to the extent we can be ready if they happen, it will be good for us and our children to take some necessary steps in advance to reduce or eliminate the inevitable financial pain.

Maurie Backman | May 24, 2018

No matter what sort of lifestyle you lead, retirement is an expensive prospect. And while you can cut back on certain expenses like housing and leisure when circumstances require you to do so, there’s one expense you may not have a choice about: long-term care. And unfortunately, new data from the Society of Actuaries shows that Americans still aren’t preparing for it as they should be.

In a recent study of retirees 85 and older, most respondents who have not yet needed long-term care expect that if they do, they’ll get by with the help of paid home aides and family support. Most of those who are currently getting long-term care, however, have had no choice but to pack up and move to nursing homes or assisted living facilities, thus significantly adding to their costs.

The study also underscores the importance of having a financial backup plan for those who don’t have family to rely on to provide elder care. Currently, 32% of seniors 85 and over receive logistical support from family members with regard to physical activities such as transportation, meals, and household chores. To hire a home aide to provide those services, however, is an expense many seniors are in no position to bear.

If your goal is to maintain a level of financial security throughout retirement, then you’ll need to not only assume you’ll require long-term care at some point in time, but also save and plan for it. Otherwise, the latter end of your senior years might end up being more stressful than you ever could’ve bargained for.

There’s a good chance you’ll need long-term care…
It’s easy to think of long-term care as somebody else’s problem, but in reality, 70% of seniors 65 and over end up needing some type of long-term care in their lifetime. Among those, 69% end up requiring that care for a three-year period or longer.

And if you’re counting on Medicare to pick up the tab, you’re out of luck. The average Medicare-covered stay in a nursing home is a mere 22 days. That’s a meaningless tally in the grand scheme of a three-year period or more.

…and it’ll cost you
So how much might an extended stay at an assisted living facility or nursing home cost you? Probably more than you’d think. The average assisted living facility in the country costs $3,750 per month, or $45,000 per year, according to Genworth Financial’s 2017 Cost of Care Survey. The average nursing home, meanwhile, costs $235 per day, or $85,775 per year, for a semi-private room. Want your own room? It’ll set you back $267 per day, or $97,455 per year.

Even if you don’t require a nursing home or assisted living facility in your lifetime, there’s a good chance you’ll reach a point when you just plain need help functioning independently. And if you don’t have family around to assist, you’re going to have to pay for that help. Currently, the average cost of a non-medical home aide is $21 per hour. This means that if you wind up needing assistance for 10 hours a week, you’re looking at close to $11,000 per year.

All of this means one thing: You should be saving for these eventual costs during your working years rather than assuming you’ll cut corners to pay for them later on. And the sooner you do, the more secure you’ll be going into retirement.

The good news? If you still have a number of working years ahead of you, boosting your savings rate modestly could increase your nest egg substantially. For example, socking away an additional $250 a month on top of what you’re already saving for the next 20 years will give you an extra $123,000 in retirement, assuming your investments generate an average annual 7% return during that time. (That’s more than doable with a stock-heavy portfolio, by the way.) That’s enough to cover an assisted living facility for almost three years.

Another option? Look into long-term care insurance. The younger you are, the more likely you are to not only get approved for a policy, but also snag a health-based discount on your premiums. Having that insurance to defray the cost of long-term care could lift a major burden when you’re older and at your most vulnerable.

Finally, if you’re counting on family to provide any type of care or support when you’re older, have that conversation in advance rather than assume that help will be a given. You never know when your adult children might choose to pick up and relocate abroad or when a stay-at-home adult child of yours might opt to go back to work. Knowing what to expect assistance-wise will help you avoid a potential financial shock (not to mention an emotional one) down the line.

Guggenheim investment chief sees a recession and a 40% plunge in stocks ahead

My Comments: We can argue ‘till we’re blue in the face about when this is going to happen and none of us will be right. Just know it will happen.

There’s a reference in Scott Minerd’s comments below about the Fed raising interest rates. Here is a chart I found some time ago that shows interest rate trends since 1790. 225 years and there have been only FOUR points that define the end of a downward interest rate trend. The last one is where we are today.

The last uptrend ran from 1946 through 1981. What this tells me is that for the rest of my life, interest rates are going to trend upward, and with that trend we’ll see all kinds of consequences. Like before, some will be good and some will be bad. Good luck.

Scott Minerd, Guggenheim Partners, April 6, 2018

Guggenheim’s head of investing sees a tough road ahead for the market and economy, with a sharp recession and a 40 percent decline in stocks looming.
Scott Minerd, who warned clients in a recent note that the market is on a “collision course with disaster,” expects the worst of the damage to start in late 2019 and into 2020.

Along with the decline in equities, a rise in corporate bond defaults is likely as the Federal Reserve raises interest rates and companies struggle to pay off record debt levels.

“For the next year … equities will probably continue to go up as we have all these stock buybacks and free cash flow,” Minerd told CNBC’s Brian Sullivan in a “Worldwide Exchange” interview. “Ultimately, when the chickens come home to roost and we have a recession, we’re going to see a lot of pressure on equities especially as defaults rise, and I think once we reach a peak that we’ll probably see a 40 percent retracement in equities.”

One of the main problems is that Congress and President Donald Trump have pushed through aggressive fiscal policies at a time when the Fed is looking to control growth with higher interest rates and less accommodative monetary policy.

Corporate debt currently stands at a record $8.83 trillion, according to Securities Industry and Financial Markets Association data. Higher rates will make it harder for companies to refinance and will put pressure on them once the stimulative effects of tax cuts wear off, Minerd said.

Once short-term rates hit 3 percent, that will be enough to drive up defaults and cause a recession, he added.

“As interest rates keep ratcheting higher, with record levels of corporate debt it’s going to be harder and harder to service,” Minerd said. “At some point, as the economy starts to mature and as cash flows start to stabilize and decline, it’s going to be difficult for everybody to pay this interest.”

“Defaults are going to be concentrated in corporate America, where in the past downturn they were basically focused in areas of consumer activity,” he added.

From there, Minerd figures the Fed will get involved, going back to the quantitative easing policies that helped pull the economy out of the last recession and pushed a surge in stock market prices but also coincided with lackluster economic growth.

“All that will do is defer the problem into the future and allow excesses to continue to build and the collision course that we’re on will just come later and probably be worse,” he said.

7 Social Security “did you know” moments to consider

My Comments: For millions of us, Social Security is a critical component and source of income as we attempt to flourish and enjoy our retirement. For those of you who decry the idea of ‘socialism’, I encourage you to attempt to finish your life without every cashing one of your monthly checks.

Yes, you might prefer to have never paid into the system, but pay in your must. Years ago, people we elected to serve in public office at the national level determined that it was in society’s best interest that the elderly not be reduced to living in the streets or under bridges.

Over time, it’s appropriate for us to re-evaluate those decisions. That’s what we’re doing now. I have confidence the aforementioned choices made by our elected leaders will be confirmed and re-affirmed. Democratic Socialism is a viable economic model for us to follow.

Sean Williams, The Motley Fool Published 7:00 a.m. ET May 5, 2018

Social Security arguably is the most important social program in this country, but you wouldn’t know that by quizzing the American public on their knowledge of the program.

Back in 2015, MassMutual Financial Group did just this and found that only 28% of the more than 1,500 respondents could pass its straightforward, 10-question, online true-false quiz with at least seven correct answers. Such poor results suggest that most seniors are likely to leave money on the table or make a non-optimal claiming decision during their golden years.

The fact of the matter is that the American public doesn’t know much about Social Security. And while there’s a laundry list of things they don’t know, the following seven facts stand out most of all.

1. Did you know that Social Security is only designed to replace 40% of your working wages?

To begin with, you may or may not be aware that Social Security is not meant to be a primary source of income for retired workers. When it was signed into law in 1935, its purpose was to provide a financial foundation for lower-income workers during retirement.

Today, the Social Security Administration (SSA) suggests that benefits be relied on to replace about 40% of working wages, with this percentage perhaps a bit higher for low-income workers and lower for well-to-do workers. By comparison, 62% of current retirees lean on Social Security to account for half of their monthly income. That’s a bit worrisome, as the average check for retired workers is only $1,410 per month.

2. Did you know that the Social Security Administration can withhold some or all of your benefits, depending on when you claim?

Claiming benefits before your full retirement age — the age where you become eligible to receive 100% of your monthly benefit, as determined by your birth year — may entitle the SSA to withhold some or all of your benefits. If you won’t reach your full retirement age in 2018, the SSA is allowed to withhold $1 in benefits for every $2 in earned income above $17,040. Meanwhile, if you’ll reach your full retirement age in 2018 but have yet to do so, the SSA can withhold $1 in benefits for every $3 in earned income above $45,360.

The good news is you’ll get every cent withheld back in the form of a higher monthly payment once you hit your full retirement age — likely between 66 and 67 years old. The bad news is it’ll prevent most folks from double dipping with working wages and Social Security income prior to hitting their full retirement age — i.e., between the ages of 62 and 66 to 67.

3. Did you know that Social Security benefits may be taxable?

Believe it or not, your Social Security benefits may be taxable at the federal and/or state level. If your adjusted gross income plus half of your Social Security income totals more than $25,000 as a single filer, half of your Social Security benefits are taxable at federal ordinary income tax rates. For couples filing jointly, this figure is $32,000. A second tier allows 85% of Social Security benefits to be taxed above $34,000 for single filers and north of $44,000 for couples filing jointly.

What’s more, 13 states tax Social Security benefits to some extent. A few, like Missouri and Rhode Island, have exceptionally high income exemptions, allowing most retired workers to escape state-level taxation. Others, like Vermont and West Virginia, mirror the federal tax schedule and can act as a double whammy for seniors.

4. Did you know that Social Security offers a mulligan?

You probably aren’t aware that there’s a do-over clause built into Social Security if you regret claiming benefits early. Beneficiaries are allowed to undo their claim within 12 months of receiving benefits if they file Form SSA-521 or a “Request for Withdrawal of Application.” The catch? First, you only have 12 months to make this choice, and second, you’ll have to repay every cent you’ve received from Social Security in order to undo your original filing.

The benefit of this mulligan is that it’ll allow your benefits to grow once again at 8% per year, until age 70. It’s as if your claim was never made. Seniors who wind up going back into the workforce shortly after they start receiving Social Security income usually benefit the most from SSA-521.

5. Did you know that your claiming decision may be about more than just you?

Deciding when to take benefits might be one of the most important decisions a senior citizen will make. However, it may be an equally important decision for their spouse.

In addition to providing retired worker benefits, Social Security provides benefits to the disabled and the survivors of deceased workers. If a high-earning spouse passes away, a lower-earning spouse may be able to claim survivor benefits based on their deceased spouse’s earnings history, assuming the survivor benefit pays more per month that the low-income worker’s own retirement benefit. If a high-earning spouse enrolls for benefits early — i.e., before his or her full retirement age — it can adversely impact the survivor benefit that the lower-income spouse receives.

6. Did you know Social Security isn’t going bankrupt?

Surprise! Despite a pervasive myth that Social Security is spiraling into bankruptcy, I can assure you that it’s not.

Social Security is funded three ways:

  • A 12.4% payroll tax on earned income up to $128,400, as of 2018.
  • The taxation of Social Security benefits.
  • Interest earned on almost $2.9 trillion in asset reserves.

The secret sauce here is the 12.4% payroll tax, which accounted for 87.3% of the $957.5 billion collected by the program in 2016. As long as Americans keep working and Congress leaves the funding mechanism for the program as is, there will always be money collected that can be disbursed to eligible beneficiaries.

Mind you, this doesn’t mean the current payout schedule is sustainable. Social Security’s Board of Trustees projected last year that sweeping benefit cuts of up to 23% may be needed by 2034 to sustain payouts through 2091.

7. Did you know it’s been 35 years since the program’s last overhaul?

Finally, were you aware that it’s been 35 years since Congress last enacted a sweeping overhaul to the Social Security program? Sure, it’s tweaked a few things over the years, but it hasn’t made any major adjustments in over three decades.

That’s disturbing for one big reason: Social Security is facing a $12.5 trillion cash shortfall between 2034 and 2091, and lawmakers are simply kicking the problem under the rug. Make no mistake about it, Democrats and Republicans each have a core fix for Social Security that works. Unfortunately, with politics in Washington highly partisan, no middle-ground solution has been reached.

While there’s much more to learn about Social Security, these seven facts offer a solid foundation on which to build your wealth of knowledge.

 

12 Retirement Investment Factors That Are Frequently Overlooked

My Comments: They say money is the root of all evil. While that may be a fundamental truth, it’s also true that in our 21st Century society, having more money is better than having less money.

As I develop my online course focused on helping people achieve a successful retirement, the idea behind having more money when you retire depends to a large degree on making good investment decisions along the way.

Here are 12 ideas that might help you make better decisions about your money than you are making right now.

Mar 6, 2018 Forbes Finance Council

Preparing for retirement is a lifetime process. Your clients are constantly wondering if there will be enough money to survive, and it is up to you to ensure their investments earn in a way that they are happy with. You need to stay abreast of the trends, tips and long-term investment options that can help them achieve their financial goals.

With many people worried they will not have enough money saved for retirement, it is your job as a financial professional to calm their fears and help them put their money where it makes the most sense. But, are you really aware of all the aspects that affect their ability to save enough for retirement?

To answer this question, 12 members of Forbes Finance Council share the one facet of retirement investing that is most often overlooked. Here is what they had to say:

1. Risk Mitigation
Target retirement funds are a great option, as they automatically adjust risk based on age and relative distance to retirement age. Employees often use the risk assessment tool when establishing their employer-sponsored 401(k) plan but fail to maintain these settings. This poses a risk to both account rebalancing and age-risk correlation. – Collin Greene, ShipHawk

2. Purpose
Research shows that those who don’t have a purpose in life tend to have poorer health. This means that, despite a good investment portfolio, if there isn’t a life plan to go along with it, you will be rich but depressed. Make sure life planning is done in conjunction with investment planning. – Darryl Lyons, PAX Financial Group LLC

3. Life Expectancy
People underestimate how long retirement can last, and with advances in medicine and science, the “problems” from living longer are only getting worse. If you retire at age 65, you may have about a 25% chance of living past age 90, for instance. That’s why I often advise clients to invest as if they’ll live to be 100. Your plan should be conservative and make similar assumptions. – Elle Kaplan, LexION Capital

4. Behavioral Finance
The 2017 Nobel Prize in Economic Sciences was awarded to Richard Thaler, the father of behavioral finance. Having clients understand the emotions and psychology of money can be the determining factor in success or failure when it comes to investing. Many investors act under the influence of behavioral biases, often leading to less than optimal decisions. Teach clients how to correct these actions. – Lance Scott, Bay Harbor Wealth Management

5. Annual Portfolio Rebalancing
During the year, some assets will outperform others, and an annual rebalance of the portfolio should occur. This allows the investor to take profits from the investments that did very well and invest the proceeds in investments that did not perform. This process reaffirms the mantra “buy low, sell high,” and will help you grow your retirement portfolio over the long term. – Alexander Koury, Values Quest

6. Safe Money Options
Fixed annuities have caps that limit growth, but the trade-off is safety. Diversifying with fixed annuities provides a way to accumulate savings with peace of mind that your hard-earned money is safe from a market correction. Yes, it takes longer, and yes, the market could outperform it, but at the end of the day, you need to know there are safe retirement options with guarantees. – Drew Gurley, Redbird Advisors

7. Inflation
A 1% rise in inflation barely shutters an eye in one year. If this continues for the next 20 years, when you may have planned for $60,000 per year for your retirement, your purchasing power will have declined to the equivalent of $49,000. And, that is assuming inflation doesn’t rise to more than 1%. Taking this into consideration, saving more than you need to live off becomes a necessity. – Stacy Francis, Francis Financial, Inc.

8. Aging In Place
Studies have shown that 83% of retirees wish to stay in their own homes. A much smaller number consider using their home equity as a source of income. There are many ways to tap into wealth accrued through home ownership. Some of these include home equity loans, reverse mortgages and sale-leasebacks (typically to a family member or heir). Consider leveraging home equity to age in place. – Ismael Wrixen, FE International

9. Medical Expenses
Inevitably, no matter their economic background or their age, very few of the people I speak with think about the medical circumstances they are going to face. That’s why I am such a proponent of a Health Savings Account (HSA). It is like a quasi-retirement account that we can put money in and use going forward until we start to retire. – Justin Goodbread, Heritage Investors

10. The IRA Account
I’m a big fan of the individual retirement account, or IRA, but it’s an obvious way of saving that often gets overlooked. Many working adults make contributions to their IRA, but they don’t think about how it will see them through retirement. IRAs give you more flexibility than the 401(k) you can get at work. You’ll have the opportunity to diversify with CDs, annuities, stocks and bonds. – Shane Hurley, RedFynn Technologies

11. Diversification
People often overlook diversification; as a result, their investments are subject to unnecessary risk. Many believe they are diversified because they invest in mutual funds, but the truth is they are investing in a single asset class: equities. True diversification can be achieved only with truly self-directed IRA, which allows investments in alternative assets, such as real estate or private lending. – Dmitriy Fomichenko, Sense Financial Services LLC

12. Market Crash
Everyone plans on positive returns in their retirement portfolios, but what will you do when the market crashes and a large chunk of your money disappears? You need to plan for this inevitability and have a strategy on how to bounce back. Without a strategy, you might be inclined to make decisions based on fear rather than sound investment advice. – Vlad Rusz, Vlad Corp. USA

Filing for Social Security Benefits

My Comments: For millions of us, a predictable monthly income from Social Security has become critical for sustaining our standard of living. For many reasons, we should be increasingly worried about it. But that story is for another day.

Right now, I’m sharing with you what I hope is a simple overview if you have not yet applied for benefits. You can choose from any one of 97 months. The first one is when you turn 62 and the last one is when you turn 70. (you can wait beyond that but it’s pointless…)

Know this too: regardless of when you sign up, we’re talking about essentially the same amount of money spread over your lifetime. Starting early means you’re getting a smaller check for a longer period of time. Starting late means you’re getting a larger check for a shorter period of time.

The optimal month for most of us, is, in my opinion, the month when you reach what is known in Social Security jargon as your FULL RETIREMENT AGE or FRA. Unless you plan or expect to die before your full life expectancy, that date is your first target for signing up.

There are dozens of good reasons to sign up early. And there are dozens of good reasons to wait until your FRA. There are far fewer good reasons to extend your wait beyond your FRA. Here’s a summary of what you can expect.

by Maurie Backman / Apr 10, 2018

Age 62
Age 62 is the earliest point at which you can file for Social Security, and it’s also the most popular age for seniors to claim benefits. The advantage of filing at 62 is that you get your money sooner. The downside, however, is that you’ll face the greatest reduction in benefits by going this route.
If you’re entitled to a full monthly benefit of $1,500 at age 67, for example, then filing at 62 will knock each payment you collect down to $1,050. That said, if you’re unemployed come 62 or need the money for another reason, you’re better off taking benefits than resorting to credit card debt.

Age 63
Filing for Social Security at 63 still means taking benefits early and having them significantly reduced. Still, if you’re desperate for cash, it often pays to take that hit, which won’t be quite as bad as it would if you were to file at 62. Using our example above, a $1,500 benefit at age 67 would be whittled down to $1,125 at 63 — not ideal, but better than collecting just $1,050.

Age 64
Claiming Social Security at age 64 will also result in a sizable reduction in your full monthly benefit. But it won’t be as drastic as filing at an earlier age. In the case of a $1,500 benefit at 67, you’d only lose about 20% by filing at 64, thereby resulting in a $1,200 monthly payment.

Age 65
Once you turn 65, you’re eligible for coverage under Medicare. As such, some people get confused and assume that 65 is the age at which they’re able to collect their Social Security benefits in full. Not so. Still, if you retire at 65 once Medicare kicks in and decide to file for benefits simultaneously, you won’t face such an extreme reduction. Following the above example, a $1,500 monthly benefit at 67 would only be reduced to $1,300 at 65.

Age 66
Age 66 is a significant one from a Social Security standpoint because it’s when workers born between 1943 and 1954 reach full retirement age and are thereby eligible to collect their monthly benefits without a reduction. Your full retirement age is a function of your year of birth, as follows:

Year of Birth       Full Retirement Age
1943-1954                  66
1955                            66 and 2 months
1956                            66 and 4 months
1957                            66 and 6 months
1958                            66 and 8 months
1959                            66 and 10 months
1960                            67
Data source: Social Security Administration.

Therefore, if you were born after 1954 but before 1960, your full retirement age is 66 and a certain number of months. If you were born in 1960 or later and have a full retirement age of 67, filing for Social Security at 66 will reduce your benefits by about 6.67%. That means a full monthly benefit of $1,500 would go down to just $1,400 if you were to take them a year earlier.

Age 67
If you were born in 1960 or later, this is perhaps the age you’ve been waiting for, since it’s when you get to take your monthly benefits in full. In our example, age 67 is when you’d get that $1,500 we keep talking about. That said, you don’t have to file for Social Security at full retirement age. You can hold off and grow your benefits for a higher monthly payout.

Age 68
Though 68 is hardly a common age for taking Social Security, it’s a strategic one nonetheless. That’s because for each year you delay your benefits past full retirement age up until age 70, you get an 8% boost in payments, which, in our ongoing example, would take a full monthly benefit of $1,500 at 67 up to $1,620 at 68. That increase then remains in effect for the rest of your life. Of course, not everyone wants or can afford to hold off on benefits all the way until 70, but waiting until 68 is a decent compromise — you get a modest boost without having to wait too long.

Age 69
Age 69 is a good time to take your benefits if you don’t need them sooner. Doing so will boost our aforementioned $1,500 benefit to $1,740, thus guaranteeing a higher payout for as long as you collect Social Security.

Age 70
The credits you accrue for delaying benefits past full retirement age stop accumulating once you reach 70. Therefore, it’s considered the latest age to file for Social Security. Granted, you don’t have to sign up for benefits at that time, but there’s really no financial incentive not to. If you’re dealing with a full retirement age of 67, filing at 70 means boosting your benefits by 24%, which would turn a $1,500 monthly payment into $1,860 — for life.
Which of the above ages is the right one for you to take benefits? It depends on a host of circumstances, from your savings level to your employment status to the state of your health. The key is to understand the pros and cons of filing at various ages so you land on the one that works best for you.