Retirement Plan Gone Awry: What Do I Do Now?

By Olivia Sandham 

Type the word “retirement” into any search engine and you’ll be directed toward hundreds of web pages, articles, and videos presenting advice on how to save and invest for your retirement.  But what if you’ve already been retired for several years, you are already collecting Social Security, and after taking a closer look, you begin to realize that you will soon be outliving your retirement fund?  You may have planned ahead by saving and investing for decades pre-retirement, but somehow it simply hasn’t been enough to cover your expenses post-retirement.  Although this can be an overwhelming realization, there are several options available, many of which do not require financial expertise.  With a little motivation and “Thinking Outside the Box”, you can remain financially secure throughout retirement.

Option 1:  Re-enter the workforce.  Although you may not be as energetic as you once were, consider finding simple work for modest pay.  Think Outside the Box:  This job does not have to be a traditional position.  For example, parents are happy to pay for a reliable person to watch their children, and grown children are happy to pay for a reliable person to help tend to aging parents.  If you work in a more traditional position, you might be entitled to free services or discounts which could work in your favor during retirement as well.

Option 2:  Offer your knowledge or skills.  After decades of working you most likely picked up a few tips and tricks along the way, which someone may be seeking.  Advertise with your local newspaper offering your services as an informal mentor or advisor in fields in which you have some expertise.  Think Outside the Box:  If you don’t have money to spend on a newspaper ad, ask your local shopping markets and retailers if you can post a sign or flyer for free.  And of course, spread the word with your family and friends.

Option 3:  Prioritize your spending.  It’s easier to stay financially viable during retirement if you are paying attention to your expenses.  Look for deals on needed items, lessen finances spent on clothing, entertainment, and travel, and watch out for spending too much on loved ones.  Think Outside the Box:  Some not-so obvious changes in spending patterns that can make a difference during retirement.  These include using liquid forms of payment (cash, check, debit card) rather than racking up interest bills on credit cards, buying generic rather than name brands, and doing any necessary shopping at church/charity stores.  Any of these adjustments can certainly add up in your favor over time.

Option 4:  Turn your assets into cash.  You may own a home, car, valuables, or life insurance policies which could be converted into liquid assets.  Think Outside the Box:  Converting to liquid assets doesn’t always mean the asset has to be sold.  A reverse mortgage may allow you to withdraw equity from your home without having to move.  Also, consider the possibility of renting out a room in your house, or even consider renting your entire house and living with friends or relatives, or in a modest apartment.

Option 5:  Re-invest and re-grow your nest egg.  Once you follow the previous suggestions, you might start to find extra finances available.  Rather than spending or only saving these funds, stay on track with what you have been doing and look into ways to reinvest your small amounts of income.  Just because you are retired does not mean you can’t continue to grow your nest egg.  Think Outside the Box:  Traditional thinking says the older we are, the less risky our investments should be.  However, since you do not have as big of a nest egg as you did years ago, investing with a little more risk tolerance might create more growth.

Option 6:  Get by with a little help from your friends.  It can be tough to ask people for help, since most of us like to feel independent, and having to explain that we fear outliving our savings can seem embarrassing.  However, it is very likely that you have a lot of people in your life that would be happy to help, even for a short period of time.  They can be friends or family.  This is not the time to be stubborn with pride; rather this is the time to be smart and reach out to others.  Think Outside the Box:  Look into retirement resources and services available within your community, such as services provided at your local church or within a nearby retirement community.

Option 7:  Get in touch with an expert.  Expert financial advisors might take a peek into your assets, liabilities, income, and expenses and give you a better picture of what changes you need to make.  Experts may also be able to help you make adjustments in your investments or assets which you may not have otherwise been aware were options for you.  Think Outside the Box:  If you don’t have the funds to seek ongoing expert advice, at the very least try to find a non-profit firm or government agency who would be willing to offer a short analysis for free.  It doesn’t hurt to make a phone call and ask.  And as always, make sure to utilize your network of friends and family to see if they know anyone who might be willing to help.  Good luck!

HOW-TO: Keep Spending Under Control During the Holidays

The Southeast Missourian daily newspaper published a time-relevant online article entitled “Holiday Budgeting: Some Ways to Keep Your Holiday Spending Under Control.” We have included the article in this post, or you can click here to read the article in its original form. Comment below to let us know if you found any of these suggestions helpful!

Holiday Budgeting: Some Ways to Keep Your Holiday Spending Under Control

By Robyn Gautschy

A little budgeting before and during the holiday season wouldn’t do you any harm. On the contrary, if you are searching for a way to get out of debt, getting appropriate financial advice before the gift-giving season begins is the best thing that you can do. Most people spend a lot of money on travel, entertaining and presents during the holidays. A significant part of expenditure is done on credit, at huge interest rates. This brings along a lot of debt, which usually destroys people’s cheer after the holiday. If you wish to avoid this, you should check the following 10 tips, which explain how you can have a great holiday without risking some unpleasant financial consequences:

1. Make a List:   Writing down the items that you want to purchase can help you to avoid spending money on unnecessary things. Additionally, the list will remind you to buy everything that you need in order to spend a wonderful holiday with your family.

2. Always Stick to Your Budget:  Another great financial tip that can help you to avoid holiday overspending is to stay within your budget. If you are tempted to spend more money than you should, you can shop together with one of your friends, who can provide a voice of reason whenever you need it.

3. Look Out for Bargains:  Although you cannot find some really good deals during the holiday season, there are major price variations among the same products provided by different stores. To benefit from these variations, you should take the time to compare certain offers. Another great idea would be to look for presents before prices go up for the official shopping season.

4. Check Return Policies:  It is very important to verify the return policies of various stores prior to buying gifts. This is because these policies indicate the terms that all customers who intend to return goods must comply with. These terms mainly relate to time frames and condition of goods.

5. Record Your Purchases:  This is another useful financial tip for the holiday season. Keeping track of your purchases can help you to understand whether you will exceed the limit of your budget or not.

6. Choose the Right Payment Methods:  If you wish to lower your debt, it is very important to leave the credit card at home. The best payment methods include debit cards, checks and cash.

7. Transfer Your Credit Card Balance to a Low-Interest Credit Card:  If you possess a low-interest card, you should transfer the balance of the high-interest cards to it. This can be a very lucrative financial practice because paying off $1,000 at 6% instead of 18% interest will save you a lot of money.

8. Use Stores’ Point Structure:  Numerous stores are involved in cash-back reward programs, which offer rebates on particular purchases. Although most programs only offer small discounts, these can add up to a substantial savings over one year.

9. Get Gift Cards: Using gift cards in order to keep your budget under control is a truly beneficial idea. Occasionally, this type of deal helps people to get two gifts for the price of one.

10. Use Coupons:  A large number of websites offer coupons that can bring you significant discounts, especially during the gift-giving season.

The time to look for financial advice is before the official holiday shopping season starts. Although shopping might not be as much fun as you expect, the tips presented above can help you to get through the holidays without increasing your debt.

Smart Ways to Donate this Holiday Season

With the holiday season fast approaching, many of us feel an increasing urge to give back to our local communities by supporting charities. Money Talks News recently posted a video describing the Smartest Ways to Donate to Charities. Follow these steps to ensure the money you worked so hard for will continue working hard for those in need, and make sure to listen to the Barry Birr Show on KFEQ 680AM at 9:30 a.m., Monday, November 18^th to hear Dan discuss this topic further.

 

1. Choose a charity whose mission aligns with your passion, whether the assistance includes serving hot meals, helping families get back on their feet, counseling for crisis management, or providing shelter or supplies.

2. Research to find the most efficient charity to meet your goals. Recommended websites include Charity Navigator, the Better Business Bureau, Guide Star, and Charity Watch. Find out how much of every dollar raised goes back into the charity program, and donate to the ones with higher percentages.

3. Give directly to the charity. Do not donate through an agency or telephone solicitors, as they usually keep a large portion of the donations they collect.

4. Get yourself involved and donate your time in addition to your money. Lending an actual helping hand not only aids others in need, but it can also be very rewarding.

Retiring Early Starts Today!

If you are in your 20s or 30s, retiring early is within your reach!  Check out this video from Investopedia to learn a few tips and tricks on how you can achieve your early retirement goals.

 

 

 

Quiz: Do You Know the Keys to Financial Security?

The following quiz has been designed based on economic journalist Knight Kiplinger’s “8 Keys to Financial Security”, an enlightening publication with Kiplinger’s own personal financial wisdom.  The article was first introduced in 1997 in the 50th anniversary of Kiplinger Magazine, and again in both 2002 and 2008.  Along with being an economic journalist and active philanthropist, Kiplinger is the Editor in Chief of Kiplinger Washington Editors in Washington D.C.

1. Where should your money be spent or invested first?
a. Giving money to my children
b. Investing in myself
c. Paying off debts
d. Increasing my investment portfolio

ANSWER: (b) Investing in myself.  Developing and increasing your knowledge and skills through continuous education and training should be considered your most valuable asset, since this will ultimately determine your overall earning power.

2. What is one of the most important items to acquire as you move forward in life?
a. Stocks/bonds
b. A house
c. 401K
d. Insurance

ANSWER: (d) Insurance.  Prior to investing in financial assets, make sure you have enough insurance to cover the big risks in life such as serious illness, disability, or early death.  If an emergency arises, insurance will take care of it and you will not have to dip into your financial investments as much.

3. What items should you purchase using borrowing methods (credit)?
a. Everything should be purchased with credit
b. Low price, short-term items that you can pay off quickly, such as clothing, travel, and entertainment
c. High price, long-term items such as education courses or a car or home
d. You should never borrow or use credit

ANSWER: (c) High price, long-term items.  Use your borrowing methods wisely to purchase investments of lasting value, and make sure to pay off as much as possible as quickly as possible to avoid interest fees.

4. In what order should your payments take place?
a. Investments, savings, bills, credit card
b. Credit card, investments, bills, savings
c. Savings, bills, credit card, investments
d. Bills, investments, credit card, savings

ANSWER: (a) Investments, savings, bills, credit card. Trim and prioritize your spending so that you are able to pay into your mutual fund, money market, or brokerage account first so these investments can continue to grow.  Then add money to your savings account/emergency fund and pay all of your regular monthly bills.  Finish up by making a payment toward your credit card or other debts.

5.  What is the best method to investing?
a. Take big risks; the more times you swing, the more homeruns you will hit.
b. Take moderate risks; you hit some and you miss some.
c. Take a risk and swing only when you think the time is right.
d. Don’t take any risks at all; you can’t lose if you don’t play.

ANSWER: (b) Take moderate risks.  Use dollar-cost averaging to invest regularly in markets whether they seem good, bad, or indifferent, and maintain the patience to wait out the occasional bear market.

6. What should be included in your investment portfolio?
a. Strictly liquid assets, such as savings and cash accounts
b. Only safer investments like bonds and CDs
c. Only high return assets such as stocks and high-yield bonds
d. All of the above

ANSWER: (d) All of the above. Successful investors know that each asset category will perform at some point, and on the reverse, each category will also have a time of lull.  Having a diversified portfolio with all of these types of assets will ensure the best performance over the long-haul.

7. Which famous quote should be your personal money mantra?
a. “We are what we repeatedly do; excellence, then, is not an act, but a habit.” –Aristotle
b. “I’d like to live as a poor man with lots of money.” –Pablo Picasso
c. “You only live once, but if you work it right, once is enough.” –Joe E. Lewis
d. “A penny saved is a penny earned.” –Benjamin Franklin

ANSWER: (a) Aristotle said it best.  Saving money is always a good idea (Franklin), but making investments allows for growth you wouldn’t otherwise experience.  Also, you shouldn’t have to feel as if you are living in poverty (Picasso), but living beyond your means (Lewis) is not the right concept either.  Instead, get in the habit of making consistent and informed financial decisions on a daily basis, and you can lead an agreeable lifestyle while keeping your long-term goals achievable.  If you need to, look closely at your current lifestyle and budget, trim back dispensable spending, and invest and save on a regular basis.

8. How generous should you be when giving your time and money to others.
a. I should occasionally give a small amount to others
b. Giving to others should come first
c. I shouldn’t give anything to others
d. I should give what I can afford to give, when I can afford it

ANSWER: (d) I should give what I can afford to give, when I can afford it.  You own financial security is connected to the financial, physical, and spiritual health of others in your community, in our nation, and in our world.  Sharing your good fortune by donating your money, time, and talent helps to create a stronger economy and a healthier, safer world, which benefits us all in the long run.

Are You Making Smart Money Moves?

A recent post under Personal Finance on the U.S. News & World Report website listed 50 Smart Money Moves. We have taken our top 30 from this list and created a "Financial Check-Up" for our blog readers. Check each smart money move you believe you follow on a regular basis, and see where your money-moves rank with our results below.

 

( ) Decide on financial goals.
( ) Create a spending plan.
( ) Resist retailers' enticements.
( ) Track your own spending.
( ) Don't accept posted prices (i.e. price-matching).
( ) Research products online before visiting stores.
( ) Earn money from more than one source.
( ) Negotiate your salary.
( ) Don't shy away from all debt and make sure to choose the best credit card or loan for you.
( ) Pay off high-interest-rate debt quickly.
( ) Check your credit report and build a solid credit history.
( ) Track and review account statements.
( ) Take advantage of rewards cards.
( ) Adopt a hands-off approach to investing (consider a professional).
( ) Remember the risk-versus-reward rule.
( ) Start early, invest often.
( ) Don't try to time the market, and don't follow the market every day.
( ) Check your Social Security statement online and calculate your own retirement number.
( ) Take baby steps.
( ) Save even when you're not earning.
( ) Live with family members.
( ) Look for non-financial ways to help family members.
( ) Prepare to help aging parents.
( ) Avoid sharing credit accounts.
( ) Live more simply, use fewer products, and find cheaper hobbies.
( ) Plan weekly meals.
( ) Insure yourself.
( ) Make sure you're ready for X (house, baby, retirement, etc.).
( ) Cancel/avoid catalog subscriptions.
( ) Find ways to lower your utility bills.
 
If you checked 0 to 10 Smart Money Moves, you are:
Moving at the Speed of Slow.  Though you may not be where you should be now, there’s still hope!  Which of the above are you doing regularly and which areas do you need to work on?  Consider the ways you can start to implement these things into your life, put them into practice, and monitor as you go.  You’ll be glad you did.  If you need help getting started, don’t be afraid to ask for it!
 
If you checked 11 to 20 Smart Money Moves, you are:
Moving in the Right Direction.  So you’re not quite there, but don’t give up.  Be sure to track your progress and make adjustments when necessary.  If you need advice to reach your goals, contact a professional.
 
If you checked 21 to 30 Smart Money Moves, you are:
Moving toward Financial Freedom...and freedom is fun!  Way to go!  You’ve worked very hard and it’s paying off.  Slip-ups and setbacks can (and likely WILL) happen, so be careful not to regress backward.  Keep up the good work and you can enjoy the fruits of financial freedom!

PIMCO: Stay The Course

PIMCO (PacificInvestment Management Company, LLC) produced a market-relevant article earlier this month entitled “Stay The Course”.  This article discusses four (4) reasons why long-term investors should remain focused on their goals and not fear rising rates.  Click here to view the full article (with visuals!) in PDF form.

1)  Rising Rates Build Income:  With interest being the primary driver of bond returns, reinvesting into a gradually rising rate environment can actually help build long-term growth.  When rates rise, new bonds may pay higher, which can increase what you (as a lender) receive in the long run.
 
2)  Lower Volatility Helps Preserve Capital:  During uneasy times in the market, investors are often reminded why fixed income investments can be solid anchors for their portfolios.  Bonds have historically been less volatile than stocks, while also providing capital preservation, income and growth, and low-to-negative correlations to equities.
 
3)  Cash ‘Safety’ Comes at a Price:  Investors concerned about market fluctuations and short-term bond volatility may be tempted to withdraw their investments until prices stabilize.  However, with cash and money market investments typically yielding rate of returns close to zero, and especially after accounting for inflation, these types of investments can actually provide a negative return.  Compounding over the long-term, maintaining investments in bonds will almost always generate a higher rate of return.
 
4)  Experts Have Access to a Diverse Toolset:  Although mainstream media tends to focus on U.S. Treasuries (which are the most sensitive to changing rates), the “market of bonds” is exceedingly diverse and global, including corporate and high yield bonds, mortgage-backed securities, floating rate issuers, emerging market bonds, and many others.  Since each sector or asset class responds differently to economic and market trends, a skilled bond fund manager should be capable of diversifying a portfolio which can defend against capital losses while also capturing a range of growth opportunities.
 
PIMCO is the world’s largest bond investor and one of the world’s largest active global fixed income investment managers.  As of the end of 2012, PIMCO had $2 trillion in assets under management.