Tag Archives: Planning for Retirement

Big Changes to Social Security

By Larry Luxenberg  

This fall two Social Security “aggressive claiming strategies” were eliminated. This is the biggest change in Social Security in more than a decade.

These changes will affect when many couples should claim their retirement benefits. For people who turned 62 by Dec. 31, the major strategy is still available. For those older than 66 by the end of April, another strategy remains available until April 29.

While both strategies had been on the books for at least 15 years, they have gained attention recently.

Social Security is bigger and more complicated than most people realize. The benefits amount to five percent of gross national product and are the bedrock of most people’s retirement.

Coordinating Social Security benefits with the rest of your assets and plans is an important part of preparing for a comfortable retirement. Maximizing your benefits means taking into account your work plans, your partner, your tax strategy and the deployment of your other assets.

Many people make spur of the moment decisions on Social Security and pensions and may never realize why their hopes and dreams go awry. Failure to make the correct decisions can cost tens of thousands of dollars.

We talk to people frequently about these issues and are happy to help.

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Contingency Plans

By Larry Luxenberg  

The Sun Doesn’t Always Shine
We now have a solar roof and it takes care of our electrical needs on sunny days but the sun doesn’t always shine. At night, our panels rest. During storms and very cloudy days, the panels aren’t at peak efficiency.

Yet when it comes to personal finances, I generally come across people whose planning assumes that the sun will always shine.

Many of these people are do it your selfers where one partner in a couple handles the finances and does it well. But what happens when that person gets too busy or injured or sick or passes away.

What about when old age and diminished mental capacity don’t permit them to perform in the way they’d like. What happens to a couple who are living together for many years when the storms finally roll in?

Not long ago, someone asked me what happens if the bull market ends? Will the stock market go down?

I told him the question is wrong. We know the market always goes up and down. The long-term trend for a century has been up but we know the market will go down and we need to plan for that.

We enjoy the sunshine and warm weather, the lazy days of summer. But we don’t throw out our umbrellas and raincoats and keep our flashlights handy. We know that the sun doesn’t always shine and we always need to keep in mind the possibility of stormy days ahead and prepare accordingly.

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False Precision in Financial Planning

By Larry Luxenberg  

Craving Certainty

Recently The New York Times published an article about financial planning and how much people crave certainty. The result is that many financial plans have page after page of numbers and graphs and charts. The more numbers, the more confident people feel about the future.

But these plans can be so overwhelming that many go unused. In the Times article, author  and planner Carl Richards deplores this kind of false precision. He argues that for most people, the future is impossible to predict and plans must be flexible to account for the vagaries of life.

The planning process itself forces people to think hard about their goals and priorities. Often, latching onto a firm goal, even if it’s one that’s difficult to attain, might make success more likely than having a vague but less lofty goal.

Being disciplined and thorough in planning can yield significant results even if the ultimate destination is far removed. Identifying the key variables and options during the planning process can provide a clarity of purpose and a route to get there.

Planning and adapting the plans from time to time are a valuable exercise. Just don’t get too caught up in the details and miss the big picture.

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Social Security Information

By Larry Luxenberg  

Social Security Website

Social Security retirement benefits is a more complex and important subject than most people realize.

In retirement, Social Security typically accounts for one-quarter to one-half of retirement income. The size of those benefits is dependent on your 35-year work and earnings record as well as at what age you begin taking your benefit check,  whether you have a spouse (and their age and record), other dependents, your work plans, and other factors.

A good place to start looking for information is the Social Security Administration website, www.socialsecurity.gov. For those who like to get their information online, a useful page is, http://www.socialsecurity.gov/onlineservices/. This page tells you some of the many things you can use the Social Security website for.

The Social Security Administration also can be reached by telephone or in person at their local offices. Social Security also publishes pamphlets that give quick summaries of various features. “Update 2015” provides some of the current numbers.

Social Security serves tens of millions of people and needs many rules to get this done effectively. Learning as much as you can yourself and consulting a financial professional, accountant or lawyer if needed can help you get the best results for your individual situation.

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How Much Money Do You Need to Retire?

By Larry Luxenberg  

 

Planning for Retirement
Often I am asked how much money is enough for retirement?

On the surface, it’s a simple and logical question but in reality it’s quite complex. Almost always, the answer is “it depends.”

When are you planning to retire? Age 50? 60? 75? Never? Where are you going to retire? Manhattan? Orlando? Rural Oklahoma? It makes a big difference. Most people would agree that it takes more money to retire in Manhattan than Oklahoma. But what if you have a cheap rent controlled apartment and no car.

In general, most people have an exaggerated idea of how much money it takes to retire and don’t fully appreciate the size of their resources. Sometimes I come across people who face a hopeless situation.

But more often, I talk to people who are unnecessarily worried and don’t realize how large their Social Security and pension or 401-K are.

Their concerns are not harmless; they can lead to bad decisions.

The first step to a good retirement is a realistic assessment of your spending needs and a full tally of your resources. Neither task is simple.

If you are confused and concerned about retirement, we can help.

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Pension Mistakes of Investors

By Larry Luxenberg  

Pension Woes
Recently the New York Times highlighted the troubles of the New York City pension system. The pool of money held to pay future benefits is at least $100 billion short of where it needs to be.

Experts debate the exact amount but it’s clear that there’s not enough money to cover obligations. The pension troubles consuming the budget, rising from 2 percent of total spending to 11 percent in a decade.

What’s also clear is that this huge institutional investor is making the same mistakes as ordinary, small investors: paying too little attention to something that cries out for focus, failing to properly allocate assets and falling prey to the siren song of unrealistically high projected returns in alluring investments.

It’s a shame that boring old stocks and bonds don’t have the pizzazz of alternative investments — hedge funds, private equity, venture capital.

The Times mentions that the pension system’s investment return goal was unrealistically high at 8 percent annually. Actual returns were two percent a year.

Individuals make the same mistakes and this doesn’t have to be; a little realism and some good planning go a long way toward achieving a successful and comfortable retirement. We can help.

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