RETIREE FAQS

1) PREPARE A BALANCE SHEET: Certified Financial Planner Bob FitzSimmons, who runs a firm in Lincoln, Neb., recommends preparing a balance sheet showing your assets and liabilities to determine your net worth. Assets include personal possessions of value, such as cash, real estate and investments. Liabilities are your debts and legal obligations. You can prepare your balance sheet on an Excel spreadsheet, a notepad with columns or Bankrate's net worth work sheet.

2)GET RID OF DEBT: Head into retirement with no debt on the balance sheet. "That's the ideal world. It's psychologically the most comforting," says FitzSimmons. If you have debt, and retirement is on the horizon, go after the debts with the highest interest rates first. "You shouldn't go into retirement with excessive credit card debt," says FitzSimmons. Credit cards usually have the highest interest rates, with car loans generally coming in second. Rates on home equity loans are a little higher than for a mortgage. Pay off the mortgage last because it presumably has the lowest interest rate.

Planners generally advise that you look at the effective rate on your mortgage (which takes the mortgage interest deduction and real estate taxes into account) versus the after-tax yield on what you could earn with the money you would otherwise use to pay off your mortgage. In retirement, however, you don't have employment income but savings to use to pay the mortgage. Tapping into retirement accounts could have serious tax consequences. Bankrate's story, " Keep the mortgage or pay off the house," sheds light on this subject.

3)CONDUCT A HOUSE CHECK:If remodeling takes place pre-retirement, think about future needs. Barbara Krueger, a senior housing marketing specialist in Del Mar, Calif., and founder of www.seniorresource.com, recommends doorknobs and faucets with lever handles that are easier to maneuver. Consider installing a shower with a low threshold and a shower seat.

Thinking of moving? Stairs are often a concern. Many people look for a house with only one floor, but this doesn't mean that you can't be comfortable in a two-story house during your senior years. "If there are no landings and no changes of direction on the stairway, you can install a chair elevator, which is a lot less expensive than a standard elevator," says Krueger. Big houses are another issue because of the maintenance that comes with them. "Just as many people will downsize so that the kids can't come back to live," she adds.

4)ASSESS LIFE INSURANCE NEEDS: Term and permanent life insurance are expensive at retirement age. "The theory is that by that time, you'll have some liquid capital for your executor and have most of your expenses paid off," says Certified Financial Planner H. Mark Saunders, president of Saunders Retirement Advisors in Richmond, Va. "You don't have to replace a salary, and if the right decisions are made when electing your pension options, your spouse will be able to continue the pension and, of course, part of the Social Security." Term insurance is generally recommended for young people who have debt, dependents and few assets. Nevertheless, a life insurance policy may be necessary for estate planning or other purposes.

5)THINK ABOUT LONG-TERM CARE INSURANCE NEEDS: "If you have a horrendous long-term care event and need nursing home care for 10 years, can you afford it without making anybody destitute because you have plenty of money?" asks Certified Financial Planner Michael E. Kitces, director of Financial Planning at Pinnacle Advisory Group in Columbia, Md. Even if you can, long-term care insurance might still be something to consider. Kitces says purchasing a plan is a prudent way for people to manage the risk of losing their assets. It's not inexpensive, though, and it's best to make the purchase when you are in your 50s to avoid even higher rates. Kitces says that for some people, the decision to purchase this insurance has less to do with protecting assets than to ensure a certain level of quality and flexibility of care.

6)CONSIDER VARIABLE ANNUITIES:While the consensus of detractors is that these insurance products are designed to enrich insurance firms more than investors, they do have a place in some portfolios. "We are seeing more variable annuities that are designed to create sustainable income in retirement without requiring immediate annuitization at the time of retirement," says Kitces. To convert to an immediate annuity, or to annuitize, means you are turning over your cash balance to the insurance company in exchange for a guaranteed series of payments over a specific time period. Kitces says only a small percentage of deferred annuity contracts actually get annuitized. "The rest of them are either held until death or people take withdrawals from the assets," he says. "People can now take advantage of regular withdrawals and living benefit riders on the newer contracts as a different option to generate income during their retirement years."

7)OVERSEE ESTATE PLANNING: Everyone needs an updated will, power of attorney and advanced medical directive. Saunders says the biggest mistakes he sees are with accounts that circumvent the will, such as joint accounts that transfer on death, IRAs, pension plans, life insurance proceeds and annuities. The executor of the estate may be left with no funds to carry out the decedent's wishes. Yet many accounts are best distributed directly to people as beneficiaries rather than through the estate. For instance, if IRAs and certain retirement accounts list the estate as the beneficiary rather than a person, the ultimate beneficiary loses the advantage of being able to stretch the payouts over long periods of time.

"I recommend that people review their wills and accounts at least every five years," says Saunders. "They should know who the beneficiaries are on the will and other accounts. A letter of instruction to the executor detailing who should receive which personal heirloom is not binding, but a great assistance to a family in mourning, which usually includes the executor." Providing an inventory of personal data such as Social Security number, date of birth, bank account numbers, lawyers, insurance policy numbers, the location of a copy of the will and prepaid burial arrangements will allow loved ones to grieve without additional stress.

8)DITCH COLLEGE EXPENSES: The time to fund your children's college educations is when they're small -- not when they're matriculating and you're counting down to retirement. "Nobody should ever divert retirement contributions toward college funding for their children," says Certified Financial Planner Joe Baker, president of ALCUS Financial Group, based in Mount Pleasant, S.C. "There are so many more options available to fund college for your kids than there are to fund your retirement," he says. Your children can take advantage of student loans, grants, scholarships, student work programs and they can pay their own way by working while going to college as students did in the good old days. "If your child went to a school that cost $450,000 a year, that $200,000 college funding goal would pale in comparison to the amount that you would need to save to fund a 20 or 30-year retirement goal," says Baker. Max out a Roth IRA each year instead.

9)LOOK AT THE BIG PICTURE WITH A PLANNER:Before planning a date to retire, see a financial expert and get a broad comprehensive perspective on your whole financial situation and determine if everything is in order and you are really ready. "This can range from re-evaluating your portfolio -- are your investments structured in a way that's appropriate for someone transitioning into retirement -- to insurance issues," says Kitces. There are a lot of questions to ask that require answers: Are you still paying for disability insurance you won't need any longer? How will your health insurance be handled during the bridge years between when you retire and when you are eligible for Medicare?

10)PREPARE A BUGET: Prepare a paper budget or spending plan to give yourself an idea of what your actual living expenses will be once you are not working. "There are some expenses that go away once you are not working," says FitzSimmons. Food costs may go down if you used to eat lunch in a café or restaurant daily, commuting expenses will decrease, and if you were required to wear business attire, these expenses will be eliminated as well.

"What a lot of people overlook is the possibility for extensive travel, and this can be very important in the equation for some people," says FitzSimmons. Think about where, and how often, you will want to travel. If you live in a cold climate, you may want to spend a few winter months in Arizona or Florida. Your current financial situation may not provide for travel or winters in warm climates. "There may be a need for additional 'fun money' that comes from working part-time," says FitzSimmons.

WHEN PLANNING FOR RETIREMENT,TAKE THE HOLISTIC APPORACH:

It’s not unusual for investors to consider retirement planning a numbers game that focuses on the size of a nest egg, a desired rate of return and how much to withdraw annually to cover living expenses. As with many areas of life, though, there are a host of other factors to consider. Many individuals and couples approach retirement with personal goals such as spending more time with family or supporting causes that matter to them.

Adopting a holistic consulting approach that focuses first on life goals and future aspirations before selecting investments may increase the chances of living the retirement lifestyle that you desire. Values play a significant role in how individuals manage their money, especially during their later years. While we often postpone certain aspirations or activities when we’re busy starting careers or raising families, accommodating your personal needs may make the transition to retirement a more rewarding one.

Another benefit of holistic consulting is that it may provide a comprehensive view of all areas of your financial life. Within many households, assets may exist in compartments earmarked for retirement, savings and investments, real estate, insurance, trusts, etc. This approach may lead to redundant strategies or exposure to unnecessary levels of risk. Holistic financial consulting may help you take a broader look at all of your assets and improve your financial situation in a number of ways. Some financial advisors report that the process has helped clients eliminate debt, better understand the financial decisions that support their situation and improve family communication regarding money issues.

Discovery and Goal Setting As a prelude to holistic financial consulting, ask yourself – and your significant other, if appropriate – these questions that seek to probe deeper into lifestyle and personal values issues: • How do you envision the rest of your life? • How do you want to spend your time? • Are there goals or desires that have been important to you but you have not acted on because of work or family commitments? • Do you have fears or concerns about retirement? • Are there aspects of retirement that make you excited or happy?

Planning to Pursue Your Goals Once you have greater clarity about your personal goals you are ready to craft a financial roadmap that supports them. Don’t be surprised if you end up with multiple goals. A recent survey sponsored by PlanSponsor.com found that investors aged 50+ hope to take on multiple challenges in retirement; domestic travel, hobbies, international travel and a new career were mentioned by more than 80% of respondents.1

Achieving your goals is directly linked with your ability to finance them along with meeting other obligations. Luxury travel, for example, costs significantly more than maintaining a garden at home. Living in a large, expensive home may require significant financial resources, but being close to loved ones may be high priority. In fact some retirees continue to provide financial support to children or grandchildren. It’s also essential to consider necessities such as the cost of health care. Medicare is the primary insurance provider for older Americans, but benefits don’t begin until age 65. Many retirees purchase supplementary coverage to pay for routine medical services and long-term care that Medicare does not cover.

Sources of Retirement Income Many Americans rely on a combination of income sources in retirement, including Social Security, assets from an employer-sponsored retirement plan, an IRA2, savings, real estate, even income from a job. Maintaining tax-deferred accounts, such as qualified retirement plans, for as long as possible enables you to defer taxes on withdrawals. Once you reach age 70½, the IRS mandates required minimum distributions (RMDs) from the plans based on your life expectancy. If you need more money than your RMDs will supply, you may want to consider tapping taxable investment accounts, investing in dividend-paying stocks,3 or owning bonds that pay regular interest. Your financial advisor can help you analyze all of your potential sources of retirement income and determine whether you have enough to pursue your goals during retirement. If there are gaps, you may want to consider saving more if you are still working, reducing expenses, or working part-time to make up the difference.

An Ongoing Process Holistic financial consulting typically doesn’t end when you retire. It’s important to regularly monitor how well your plan is supporting your immediate and longer-term goals. As you age, there may be changes in your personal situation that require a modified approach. But putting your personal needs first may bring you closer to the retirement lifestyle that you desire.

1 Source: PlanSponsor.com, March, 2006. 2 Early withdrawals before age 591/2 may be subject to a penalty tax. 3 Stock investing involves risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise and are subject to availability and change in price.

This article is not intended to provide specific investment or tax advice for any individual. Consult me,or your tax advisor with questions. Or visit my website at http://www.charlestonwealthmanagement.com

SOCIAL SECURITY INCOME,THINGS YOU NEED TO KNOW:

Social security income is something that a lot of people are unsure about. They want to be able to have an idea of what they will get every month when they retire so they can plan for their future. Let's take a look at some of the things that we know about this.

Social security income is based on the amount of contributions that a person puts into the fund. The social security benefits of this is based on the amount of earnings that they have over the years that they have worked.

Now and then you will get a statement that will tell you what amount you have put into the social security fund. It will also tell you what amount you would get based on the amount that is on the statement. This amount will change if you are continuing to work.

Early retirement is something many people look forward to. This is something that people need to look at carefully as they will not get the full social security benefits if they do this. The benefits will be reduced depending on how early you are retiring.

Similar to this is the fact that people that want to work past the age of full retirement can do so. This will reflect in the social security income they receive when they eventually retire, but the amount will go up. This is due to the fact that they have kept adding contributions to the fund when they were working after the age of retirement.

Use the internet to help resolve your questions and concerns in regards to social security income. There are a lot of resources that are on the internet that can help you with them. This is something that is very important and people need to take seriously.

THE BEST YEARS OF YOUR LIFE:

Jake and Dawn are a couple in their early 50’s. They run their own business and own their home. They have 2 children, ages 15 & 17. Last year, Jake’s father was diagnosed with Alzheimer’s Disease. Jake’s mother is having a difficult time figuring out how to handle this new crisis in their lives and relies heavily on Jake and Dawn for emotional support and to help her with general household upkeep. Jake and Dawn’s time is stretched thin. Between caring for their children, caring for their parents' home, helping Jake’s mother with medical decisions and working - there is no time to even have a quiet dinner together.

According to Statistics Canada, one-fifth of the population over age 45 is providing unpaid care for a senior. Sandwiched between caring for their own children and caring for aging parents, Jake and Dawn are among this group that has come to be called the Sandwich Generation.

As difficult as things are for Jake and Dawn, let’s shift focus and look at things from Amy’s point of view. Amy is a 75 year old woman. Recently, her husband’s Alzheimer’s has progressed and he cannot even be left alone. She is unsure of how long they will be able to live in their home, and she must now rely on her son and daughter-in-law to help her on an almost daily basis. Things she never gave a second thought to, like going for a walk or a trip to the grocery store, must now be planned or postponed altogether.

Children are finding it challenging to add “caring for their parents” into their already busy life schedules; and senior parents are struggling to maintain some level of independence as they age. This scenario is becoming more commonplace. There are a growing number of businesses providing services for people who find themselves somewhere in the sandwich.

Caring 4 U Support Services is one such business in the Okanagan that provides services to help seniors stay independent in as many ways as possible as they enter the phase of life where they are in need of additional care, thus taking pressure off of younger family members. Jo-Ann Keith, owner, says that for seniors, “Staying active has tremendous health benefits. It helps with mental alertness, maintains physical conditioning and builds self esteem. Sadly, family members often do not have the time in their own schedules to help the senior maintain his or her own routines and lifestyle. The senior ends up at the mercy of the caregiver’s schedule.”

Caring 4 U Support Services will work with seniors or with family members who are responsible for their care to develop a program that is centered on the individual person. In some instances, this means taking the client on weekly visits to shopping centers, recreation facilities, medical appointments or social gatherings.

Where Caring 4 U can really assist a client, however, is in helping him or her to develop life skills to maintain independence in their own environment. Jo-Ann's training as a Human Service Worker equips her to assist seniors in transforming their home and daily routines wherever necessary in order to promote a safe, liveable place where they are comfortable.

Jo-Ann said, “As a person’s needs and abilities change, basic living space is one component of daily life that is often overlooked. I am trained and have experience in seeing things that family members and seniors wouldn’t necessarily see. Small changes can go a long way in maintaining safety. Helping seniors keep up their own personal daily routines increases their quality of life tremendously.”

The later part of life is often depicted as a lonely time. It doesn’t need to be. Family members don’t have to shoulder all of the physical, emotional and social needs of a senior for whom they are responsible. It also doesn’t have to cost a fortune. Caring 4 U can ease what is perceived as a burden for a cost that is extremely un-burdensome.

If you haven’t found yourself in the sandwich yet, the chances are that you will. It may happen quite suddenly, due to injury or illness. Providing some forethought will ease the transition so the latter years really can be the best years of life. You can contact Caring 4 U Support Services through their website www.caring4u.ca or by telephoning 250-765-8949

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