Why You Should Have an Online Social Security Account

Posted by on Feb 25, 2018 in 401k, 403b, Boomers. Millenials, college planning, Consumer Tools, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Retire Happy Now, Retirement, retirement planning, social security, tax returns, taxes, TSA | 0 comments

In monitoring your Social Security profile, you may help to thwart fraud.   Provided by Frederick Saide, Ph.D.   Could your personal information soon be stolen? The possibility cannot be dismissed. Sensitive financial and medical data pertaining to your life may not be as safe as you think, and thieves may turn to a vast resource to try and mine it – the Social Security Administration. Consider three facts, which in combination seem especially troubling. One, Social Security’s databases contain sensitive personal information on hundreds of millions of Americans, both living and dead. Two, more than 34 million Americans interact with the SSA online. Three, nearly 100% of Social Security benefits are disbursed electronically.1 The more you reflect on all this, the more you realize that cybercrooks could take advantage of you by creating a bogus online Social Security account in your name, in order to steal your benefits and/or your personal data. Creating and maintaining a My SSA account may lessen the threat. Last year, Social Security advised all current and future benefit recipients to set up and actively use an online profile. The agency’s blog noted that this simple move could “take away the risk of someone else trying to create [an account] in your name, even if they obtain your Social Security number.” This is a case where you want to be first rather than second.1 Setting up a My SSA account is easy; the first step is to visit ssa.gov. Whether you have an existing account or not, you will want to review your mailing address, date of birth, and other essential pieces of information. If they are not correct, they demand attention.  Are you working full time in your late sixties? Then be vigilant. If you have reached Full Retirement Age (66 or 67) without filing for retirement benefits, your Social Security profile may be especially tantalizing to a cyber thief. In this circumstance, you are eligible to receive up to six months of benefits retroactively, as a lump sum. That could mean a payday of more than $10,000 for a criminal who assumes your identity.2 Make no mistake, cyber crooks have exploited Social Security accounts. While the SSA told Reuters this year that the incidence of fraud is “very rare,” a 2016 audit by the Office of the Inspector General found that during 2013, around $20 million in Social Security payments were directed to the wrong parties. That swindling involved about 12,200 My SSA accounts – less than 2% of the total in 2013, but certainly enough to raise eyebrows.1,2 The SSA tightened authentication standards in 2017. It added security codes to help certify the legitimacy of My SSA account users. It regularly...

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Good Reasons to Retire Later

Posted by on Feb 18, 2018 in 401k, 403b, Boomers. Millenials, Deflation, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Medicare Planning, Retire Happy Now, Retirement, retirement planning, social security, tax returns, taxes, TSA | 0 comments

Working longer might work out well for you.   Provided by Frederick Saide, Ph.D.   Are you in your fifties and unsure if you have enough retirement savings? Then you have two basic financial choices. You could start saving and investing more of your pay than you currently do, or you could work longer so you have fewer years of retirement to fund. That second choice might be more manageable, and it may also work out better financially. Research suggests that working longer might be a good way to address this shortfall. Last month, the National Bureau of Economic Research (NBER) published a paper on this very topic, and its conclusions are significant. The four economists writing the report maintain that when you reach your mid-sixties, staying on the job just one more year could help you greatly. Waiting a little longer to file for Social Security also becomes a plus.1 What was the most noteworthy finding? By the time you are 66, staying on the job just an additional three to six months will do as much for your standard of living in retirement as if you had contributed 1% more to your retirement plan for 30 years.1 Here is an example from the report, with an asterisk attached. A 66-year-old who has directed 9% of their earnings into an employee retirement plan during the length of their career retires. Had they simply put 10% of their pay per year into that retirement plan rather than 9%, they would have retired with 11.11% more money in that account.1 If they work for another year, retire at 67 and file for Social Security benefits at 67, they may put themselves in a better financial position. In this simple example, Social Security benefits would constitute the other 81% of their retirement income. They are just slightly past their Full Retirement Age as defined by Social Security, so by retiring at 67, they receive 108% of the monthly Social Security benefit they would have received at 66.1,2 The asterisk in this scenario is the outlook for Social Security. In the future, will Social Security benefits be reduced? That possibility exists. Working full time until age 67 may be a tall order for some of us. Right now, only about a third of American workers retire after age 65; about a fifth retire at age 60 or younger. Perhaps the ambitious, energetic baby boom generation will alter those percentages.3 Working one or two more years may be worthwhile for several reasons. Your invested assets have one or two more years to compound before potentially being drawn down – and when assets have grown for decades, even a year of compounding is highly...

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Keeping This Correction in Perspective

Posted by on Feb 16, 2018 in 401k, 403b, bank statements, Boomers. Millenials, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Retire Happy Now, Retirement, retirement planning, social security, tax returns, taxes, TSA | 0 comments

After 20 months of relative calm, this volatility needs to be taken in stride.   Provided by Frederick Saide, Ph.D.   Are you upset by what is happening on Wall Street? It may help to see this pullback within a big-picture context. Corrections have become so rare as of late that when one occurs, emotion threatens to influence investment decisions. So far, February has been a rough month for equities. At the close on February 8, the Dow Jones Industrial Average was officially in correction territory after a slide occurred, which included two 1,000-point descents within four days. Additionally, nearly every U.S. equity index had lost 7% or more in the past five trading sessions.1,2 This drop is troubling, yes – but not as unsettling as it may first seem. The market has been up for so long that it is easy to dismiss the reality of its occasional downs. Last year’s quiet trading climate could legitimately be characterized as “abnormal.” Prior to this current retreat, the S&P 500 had not fallen 5% from a peak since June 2016. It went more than 400 trading days without such a slump, setting a record. In this same calm stretch, the index also went through its longest period without a dip of 3% or more.3 During a typical year, there are five trading days when equities descend at least 2%, plus one correction of about 14%. On average, equities take roughly a 30% fall every five years.4 This year, the kind of volatility normally seen in the market has returned. It may feel like a shock after so much smooth sailing, but it is the norm – and while the Dow’s recent daily losses are numerically unprecedented, they are also proportionate with the level of the index.  A few things are worth remembering at this juncture. One, Wall Street has had more good years than bad ones, as any casual glance at its history will reveal. This year may turn out well. Two, something similar happened in the mid-1990s – a long, easygoing bull run was suddenly disrupted by major volatility. That bull market kept going, though – it lasted four more years, and the S&P 500 doubled along the way. Three, this market needed to cool off; in the minds of many analysts, valuations had become too expensive. Four, the economy is in excellent shape. Five, earnings are living up to expectations. Last week, Thomson Reuters noted that 78% of the S&P firms that had reported this earnings season had topped profit forecasts.1,3  Wall Street may be turbulent, but you can stay calm. You could even look at this as a buying opportunity. Assuming this is a correction and nothing...

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The Retirement Mind Game

Posted by on Feb 11, 2018 in 401k, 403b, bank statements, Boomers. Millenials, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Medicare Planning, Retire Happy Now, Retirement, retirement planning, social security, taxes, TSA | 0 comments

Your outlook may influence your financial outcome.   Provided by Frederick Saide, Ph.D.   What kind of retirement do you think you’ll have? Qualitatively speaking, what if the success or failure of your retirement begins with your perception of retirement?   A whole field of study has emerged on the psychology of saving, spending, and investing: behavioral finance.  Since retirement saving is a behavior (and since other behaviors influence it), it is worth considering ways to adjust behavior and presumptions to encourage a better retirement.   Delayed gratification or instant gratification? Financially speaking, retiring earlier has its drawbacks and may lead you into the next phase of your life with less income and savings.   If you don’t love what you do for a living, you may see only the downside of working longer rather than the potential boost it could provide to your retirement planning (i.e., claiming Social Security later or tapping retirement account balances later and letting them compound more). If you see work as a daily set of unfulfilling tasks and retirement as an endless Saturday, Saturday will win out, and your mindset will lead you to retire earlier with less money.   On the other hand, if you change your outlook to associate working longer with retiring more comfortably, you may leave work later with a bigger retirement nest egg – and who wouldn’t want that?   If you don’t earmark 66 or 70 as your retirement year, you can become that much more susceptible to retiring as soon as possible. You’re 62, you can get Social Security; who cares if you get less money than you get at 66 or 70 if it’s available now?   Resist that temptation if you can. While some retirees claim Social Security at age 62 out of necessity, others do out of inclination, perhaps not realizing that inflation pressures and long-term care costs may render that a poor decision in the long run.   Social Security wants you to wait until you reach what it calls Full Retirement Age (FRA) to claim your benefits. For those born after 1942, FRA is 66, 67, or somewhere in between. When you take benefits earlier than that, your monthly benefit payments are reduced by as much as 25%. That reduction is permanent.1   Some people are misinformed about this. In a 2017 Fidelity Investments poll, 38% of respondents thought the reduction was temporary and that their monthly benefits would suddenly increase when they reached their FRA.2   Setting a target age for retirement – say, 65, 66, or even 70 – before you turn 60 can help mentally encourage you to keep working to that age. Providing your health and employment...

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Try the Bucket Approach

Posted by on Feb 5, 2018 in 401k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, Consumer Tools, credit card statements, Deflation, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retire Happy Now, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

Constructing a portfolio this way may help you ride through a bear market in retirement.   Provided by Frederick Saide, Ph.D.   Stocks sometimes retreat. That reality can be overlooked in a long bull market. Bear markets do appear, and a deep downturn could force you to sell securities in retirement, so you can pay for necessary expenses.   Right now, you might have too much money in stocks. Years of steady gains may have unbalanced your portfolio and heightened your risk exposure. If you are 60 or older, that constitutes a warning sign, especially given this bull market’s age. What would a downturn do to your retirement fund and your retirement income?   If you are wondering how to respond to this risk, consider the bucket approach to retirement income planning.      The bucket approach may help you through different market cycles in retirement. This investing strategy, credited to a Florida financial planner named Harold Evensky, has simple and complex variations. It assigns fixed-income and equity investments to different “buckets” with the goal of providing sufficient cash flow to retirees during different stages of their “second acts.”1,2   The simplest version involves just two buckets. One holds the equivalent of 1-5 years of cash reserves (in deposit accounts and/or fixed-income investments), and the other holds everything else in the investment portfolio. When you need to fund your expenses, you turn to the cash and the fixed-income vehicles and leave equities untouched. Rebalancing your portfolio (that is, selling investments in an overweighed asset class) lets you increase the size of your cash bucket.1,2   Other versions of the bucket approach have longer time horizons. In one variation designed to be used for at least 25 years, a cash reserve bucket is created to fund the first two years of retirement, its size approximating 10% of the portfolio; the cash comes from FDIC-insured sources or Treasuries. A second bucket, intended to generate somewhat greater income, is planned for the rest of the first decade of retirement; this bucket is filled with longer-duration, fixed-income investments and comprises about 35% of the portfolio. The third bucket (the other 55%) is designed for the years afterward and contains a sizable equities position; the goal here is to realize some growth and compounding for a decade, then tap into that bucket for income.1,2     In glimpsing the details of the bucket approach, you can also see the big picture. Suppose a bear market occurs just as you retire. Since your retirement income strategy pulls cash from deposit accounts and fixed-income investments first, your equity positions have time to rebound. You have a chance to avoid selling low (and selling off part of...

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