Social Security COLA for 2018 is a “Good News, Bad News” Mix

First, let’s consider the good news about a Social Security cost of living adjustment (COLA) for 2018: it looks like there’s going to be one, and it could be the most generous in years. But the bad news is it may not amount to much in actual purchasing power for the typical senior.

That’s the conclusion we drew from this article we read a few weeks ago on the website of Investment News. Actually, there have been a slew of similar articles since the Social Security Board of Trustees announced their projection (still not set in stone) that benefits would go up 2.1 percent next year, the largest cost of living hike in 6 years.   That’s a significant boost from the paltry 0.3 percent last year, and a big jump from the “zero COLA” offered in 2016. If the projection holds true, and Medicare Part B premiums remain unchanged as projected, the average Social Security recipient could see an extra $28 in his or her pocket – not a lot but better than nothing. Remember, though, that at this point these are strictly projections. We’ll have to wait until October to learn the actual COLA for 2018.

But things aren’t exactly rosy for most retirees for whom Social Security represents all or most of their income. The article in Investment News quotes a study by The Senior Citizen League (TSCL) estimating that Social Security recipients “have lost nearly a third of their buying power since 2000 as the costs of items typically purchased by the elderly have significantly outstripped the annual inflation increased in their retirement benefits.” Since 2012 the annual COLA for Social Security has only averaged 1 percent, largely because benefit adjustments are based on what’s called the CPI-W – the Consumer Price Index for Urban workers. “Senior advocacy groups, including The Senior Citizens League, argue that when it comes to measuring inflation experienced by retired and disabled individuals, the government is using the wrong index,” says Investment News. “The CPI-W gives less weight to medical care and housing costs — two categories that have experienced rapid inflation and represent a larger portion of the budgets of older households than younger workers.”

The Senior Citizens League did some calculations to measure the erosion in buying power for the average beneficiary. Since 2000, benefits have increased a total of 43 percent, but the actual expenses incurred by most seniors have gone up by twice that rate – 86 percent. In real numbers, the average beneficiary back in 2000 was receiving $816 per month, an amount which by 2016 had grown to about $1,170. By using a more accurate estimate of rising costs affecting seniors, TSCL calculated that it would take almost $1,520 today to match the buying power of the average benefit in 2000, leaving the typical Social Security beneficiary about $350 short in buying power every month. No wonder things are getting tougher for many low and moderate income seniors.

According to the Social Security Administration, more than 62 million Americans are receiving Social Security benefits in 2017. About one-sixth of those are disabled workers and their dependents, so the great majority of beneficiaries are retirees whose average benefit is $1,360 per month.  For more than 40 percent of single retirees, Social Security accounts for 90 percent or more of their monthly income. Benefits in 2017 are estimated to total $955 billion.

In researching the story about Social Security COLA for 2018, we also found this timely article on the popular financial website Motley Fool. It quotes much of the same information as the Investment News article but adds this warning. “COLAs aside, Social Security is still facing a pretty dire shortfall within two decades’ time. The latest projections confirm what we were already told last year – that without intervention from Congress, the program’s trust funds are set to run dry come 2034.” Financial analysts estimate that if that happens, Social Security will manage to pay out only about 77 percent of scheduled benefits. “For today’s younger retirees who don’t have independent savings,” says the Motley Fool article, “that could spell major trouble down the line.”

So what’s the answer? At AgingOptions our answer is a familiar one: you must have a comprehensive retirement plan in place. And we don’t simply mean a financial plan, as important as that is: financial planning by itself cannot protect you against the unexpected twists and turns of your retirement journey. Time and time again we have seen situations where a nicely done financial plan unravels when someone faces a medical crisis, an unanticipated housing change or a legal challenge. Is there a way to plan for all these elements and also to make certain your family will support your wishes as you age? Fortunately the answer is yes. The answer is an AgingOptions LifePlan.

Our approach to planning for retirement is different from everyone else’s. A LifePlan weaves together the financial, legal, housing, medical and family elements so that each piece supports the other. With a LifePlan in place you’ll be able to protect your assets as you age, avoid become a burden to your loved ones, and escape the trap of being forced into an institution against your will. You’ll also be protected against the uncertainties of Social Security and other government programs whose future health seems very much in jeopardy. Why not invest just a few hours and attend a free LifePlanning Seminar? Bring your questions and become better informed about what a solid retirement plan can look like. You’ll be very glad you did!

For details and online registration, click here, or contact us during the week. It will be our privilege to serve you!

(originally reported at www.investmentnews.com and www.fool.com)

NY Times: Future of Medicaid and of LTC Insurance Closely Linked

Watching the battle over health care legislation in Washington, D.C. is like watching a high-stakes ping pong match. First one side and then the other has the edge in votes, with the future of every American’s health care hanging in the balance. As of this writing it seems that the most recent Republican plan to repeal and replace the Affordable Care Act (a.k.a. Obamacare) has ended up in a legislative dead end, and now our political leaders have to go back to the drawing board. The future of American health care policy is as murky as ever.

But no matter which of many arguments eventually prevails, there’s a growing consensus among many that some major changes to the Medicaid program are probably inevitable – and those changes may have a significant impact on your decision about whether to purchase long-term care (LTC) insurance. That’s the conclusion from this article which appeared in the New York Times just a few days ago. We highly recommend you read this timely piece because it will help shed some light on one of the more important retirement-related decisions you’ll face: how will I cover the costs to care for myself when I can no longer live independently?

New York Times money columnist Ron Lieber writes that the outcome of the proposal to drastically cut Medicaid benefits is “important to nearly everyone, even people who are reasonably affluent.” He calls Medicaid the “backstop for retirees who run out of money but still need home-based care or must move into a nursing home.” As we’ve warned repeatedly on the AgingOptions radio program and in our LifePlanning Seminars, these long-term care costs (which are almost never covered by Medicare) can quickly add up to several hundreds of thousands of dollars, draining away the retirement savings of many middle class seniors who thought they had enough set aside.  The important thing to realize, Lieber suggests, is that even if the Republican health care plan with its built-in Medicaid cuts fails to move forward, something is going to have to give. In the words of the Bipartisan Policy Center in Washington, “States will not be able to sustain spending for long-term services and supports” as the baby boomers start needing care. Boomers with their meager retirement savings could bust the Medicaid budget.

The Times article suggests that all this talk of Medicaid cuts has revived interest in various forms of long-term care insurance. Originally LTC policies only covered nursing home residents, but in recent years home-care and assisted living have also come under the coverage umbrella for most policies. According to a 2015 study cited by Ron Lieber, just over half of those turning 65 will need some form of long-term care before they die. (This is lower than other studies which have pegged the total of those who will one day need long-term care at closer to 70 percent.) One-fourth or more, says the Times, will need less than two years’ worth of coverage while about 14 percent will require five years of coverage or more. The majority are somewhere in between.

But the irony is that even with a growing population of seniors needing coverage, the number of insurance companies offering that coverage is dropping rapidly, mostly because companies guessed wrong in the early years of writing LTC policies. They charged premiums that were too low and paid out benefits that cost more and lasted longer than they had anticipated. The result was a severe market shake-out, such that today only a handful of surviving firms remain, having learned a painful actuarial lesson the hard way. These days LTC premiums are significantly higher than they used to be, and underwriting standards are stricter. The New York Times says that many who apply won’t qualify: industry data reveals that 25 percent of applicants in their 60s were turned down for long-term care coverage, as were 44 percent of people in their 70s.

So with those daunting odds combined with high costs plus the uncertain odds you’ll ever need coverage someday, what’s the best decision? You could opt for a traditional long-term care policy. You could also investigate the growing number of life insurance policies being offered today that include a long-term care benefit: in return for a much higher initial premium, you have the peace of mind of knowing that your heirs will inherit the policy’s proceeds if you never need long-term care. Or you could trust your investment savvy, Lieber suggests, and hope you can save enough to cover the costs of your care should the need arise – costs which for a significant number of seniors will exceed $250,000.

It’s definitely a challenging decision. “There is no calculator that can size things up precisely,” writes Lieber. He recommends something we’ve often suggested here at AgingOptions: before investing in any form of LTC insurance, “hire an independent adviser on an hourly basis…to examine the policy side by side with traditional long-term care insurance and the possibility of paying for care out of pocket.”  Don’t rely on the advice from someone with a product to sell! If you’ll contact us at AgingOptions we can recommend some objective professional planners in your area whom you can approach with confidence.

One of the critical things to remember in all this, warns Rajiv Nagaich of AgingOptions, is that planning around Medicaid must start years before you ever need it. “Even if present laws remain unchanged,” says Rajiv, “we believe that Medicaid benefits are going to be harder to access in the future, not easier.” What’s more, Medicaid by itself is completely inadequate to ensure any real quality of life as you age. “It promises only life – not quality,” in Rajiv’s words.   The best strategy – one that the professionals at AgingOptions can help you implement – is to learn how to safely set aside funds today so you can augment the care you receive from Medicaid in the future. A LifePlanning Seminar is a great next step for you.

Lieber’s article ends with the suggestion that maybe, considering the extent of the looming long-term care crisis in the U.S., our political leaders will come to see that a comprehensive solution involving expanded Medicare benefits for the care needs of aging seniors is necessary. Sadly, while this may be a worthy dream, the present dismal state of bi-partisan political discourse in America leaves us pessimistic. Instead of waiting around for the government to come up with a solution, we recommend you find a terrific solution for yourself in the form of a LifePlan from AgingOptions. Your LifePlan contains all the planning elements you’ll require for a secure retirement future: a financial plan, a legal strategy, a comprehensive medical safety net, and a well-planned strategy for your housing needs – all combined with a plan to involve your family at every stage of retirement. We invite you to come find out more about all aspects of retirement planning by attending a free LifePlanning Seminar near you.

Simply click here for details and online registration, or call us during the week. Let AgingOptions help guide you into the retirement you’ve always hoped for!

(originally reported at www.nytimes.com)

Reverse Mortgages Could Help Reduce Rate of Senior Bankruptcy

Financial experts who track such things report that there’s good news on the bankruptcy front: the rate of bankruptcy filings in the U.S. is on the decline. However, there are a still close to one million people filing each year, and a significant number of them are over age 65. Could it be that a reverse mortgage, or Home Equity Conversion Mortgage (HECM), might be the antidote to bankruptcy for many seniors?

We recently ran across this interesting article on the industry website Reverse Mortgage Daily. It quoted retirement expert Dirk Cotton whose analysis suggests that there are five major causes of elder bankruptcy: health expenses, credit card debt, loss of income (often from job loss or forced retirement), housing costs (property taxes, rising mortgage costs and foreclosure threats), and what Cotton calls “interconnected loss risk.”  That refers to the idea which we discuss frequently here at AgingOptions that one retirement issue can compound another. “It is less likely that a household’s ruin will result from a single risk on this list than to multiple risks,” Cotton writes. “These losses might occur simultaneously and be unrelated, but it is more likely that one will cause another, which may cause even more.”

So what does that have to do with a reverse mortgage? Properly utilized, experts suggest an HECM can be the answer to each one of these problems faced by financially strapped seniors. And yet a huge majority still does not fully understand or appreciate how a reverse mortgage works.

First let’s consider the scope of the bankruptcy problem among seniors. According to the American Bankruptcy Institute, the total number of personal bankruptcies in the U.S. (including people of all ages) reached its peak in 2010 at 1.5 million. Since then, changes in bankruptcy laws have made it more difficult to have debts forgiven, which in turn contributes to a decline in total filings to about 935,000 by 2014.  The Institute for Financial Literacy says that seniors (those over 65) represented almost 100,000 filings, or about 1 bankruptcy in 12 in 2009. That percentage has apparently continued to rise since then.

As we said above, there are five chief reasons for financial crisis among seniors, says Dirk Cotton who writes the financial blog The Retirement Café. In our experience every one – medical expenses, credit  card debt, income loss, housing expenses and the blend of factors Cotton called interconnected loss – can potentially be alleviated through a combination of careful planning and the infusion of financial aid that can flow from a reverse mortgage.

We’ve seen a growing chorus of articles (such as this very recent report on Fox Business News) praising the HECM as an important financial tool to help seniors live more secure lives and avoid the catastrophe of bankruptcy. The Fox report is called “What seniors should know about reverse mortgages,” and while the information is fairly basic it still represents another affirmation of the power of an HECM. “Forget downsizing or migrating to warmer weather,” Fox Business News reports.” An overwhelming number (83 percent) of pre retirees and retirees today say they want to remain in their homes for as long as possible. That’s according to a new survey from The American College of Financial Services, and it confirms what other articles have said. “For seniors on a fixed income, a reverse mortgage can be a new source of retirement income and allow you to remain in your home for as long as you live,” says Fox. But here’s the real kicker: the number of seniors who still do not understand reverse mortgages is right up there at around 70 percent.

In the Fox Business News report, reverse mortgage consultant Meghan Keller answers the basic questions about the HECM. She explains, for example, that a reverse mortgage is a financial product through which a homeowner converts their home equity into an asset. The amount a homeowner can borrow depends on the age of the borrower, with a provision that allows older borrowers to tap into more of their home’s equity (HECM clients must be 62 or older).  Keller adds that, “while there’s no perfect formula for determining how much you can get with a reverse mortgage, the rule of thumb is you’re eligible to convert 50 percent of your available equity as a reverse mortgage.” (You’ll definitely need to consult with a reverse mortgage expert to get more precise figures that reflect your specific situation.)

Thanks to federal rule changes in recent years, homeowners (or their heirs) will never owe more on a reverse mortgage than the value of the mortgaged property.  If a home is worth less than the amount owed when the homeowner moves or dies, says Keller on Fox News, “the remaining obligation is paid by the Federal Housing Authority (FHA)” since all reverse mortgages are FHA-backed. Closing costs vary, Keller says: “Borrowers should expect to pay between $2,500 and $3,000, all of which can be rolled into the loan.”

Putting these two ideas together – the growing threat of senior bankruptcy and the general level of ignorance about reverse mortgage details and benefits – tells us that many seniors may be unaware of the financial relief that could be at their fingertips. We’re not suggesting that an HECM should take the place of proper planning and budgeting, and we recognize that reverse mortgages are not for everyone, but we strongly suggest that any senior eligible for one of these powerful financial tools should sit down with an objective expert such as Laura Kiel and get all your questions answered. You may be amazed at the financial freedom waiting for you.

Speaking of planning, at AgingOptions we hear all the time from seniors who have failed to make prudent decisions early on about their retirement. As a result they’re now finding it extremely difficult if not impossible to protect their assets and to avoid becoming a burden to those they love. Don’t let that happen to you! The common pitfalls of aging can be avoided with the right kind of preparation , and that means an AgingOptions LifePlan – a unique strategy that combines financial, medical, housing, legal and family elements into one seamless blueprint. If this kind of comprehensive approach piques your interest, we encourage you to invest a few hours of your time and attend one of our free LifePlanning Seminars, offered at locations throughout the area. Come get your retirement questions answered – we assure you you’ll enjoy the experience! For dates, times and locations, simply click here – then register online or call us during the week. Remember, AgingOptions is on your side!

(originally reported at www.reversemortgagedaily and www.foxbusiness.com)

The Fraud Never Ends – Here’s 2017’s Top 10 List of Worst Scams

There are some “Top Ten” lists nobody wants to make, and here’s a good example, from the website of the Mic Network (www.mic.com). It’s the Top Ten list of the worst scams of 2017, and it reflects the creative skill of thieves out there who are always looking for new and better ways to separate you from your money. We at AgingOptions share this information with you because scammers don’t care if you’re old, young or in-between – they’re after your bank account numbers, credit card numbers, and social security numbers. But sadly it’s seniors who seem to be disproportionately affected by fraud, sometimes with catastrophic results.

The article from the Mic Network (click here to read it) is called “Worst Scams of 2017: 10 tricks fraudsters are using to dupe you out of your money.” Some of these sounded familiar to us while others were newer, but there’s a common thread: crooks will do whatever it takes to trick the unsuspecting into revealing the information thieves are looking for. If necessary they’ll resort to everything from flattery to intimidation. Most of these come-ons will strike via your telephone, especially your cell phone. In just about every instance the advice is the same: hang up immediately.

“Financial fraud is alive and well,” writes the article, “and mobile phone scams in particular are a major way fraudsters are tricking people in 2017.” A new report from a telecommunications privacy firm called First Orion reveals that scam calls on mobile phones have quadrupled since 2015.  More than half of the survey participants in the First Orion study said they received a scam call within the past month and the number of respondents who have received one of these annoying calls since the first of the year is now close to 80 percent. “Not sure what to do — beyond ignoring your phone when it rings?” asks the mic.com article. “A little bit of warning can go a long way.”

There’s not space to cover all ten scams here – for that we encourage you to read the article. But here’s an overview of a few that we’d never heard of before.

  • You get a phone call from someone claiming to be from Apple Tech Support. They claim they’ve had an iCloud breach and that some of your data has been compromised. All you have to do is provide them with important personal data (passwords, sometimes even credit card numbers) and they can fix the breach. But the truth is that Apple will never contact customers with this type of request, so the best advice is to hang up and then report the call to Apple immediately.
  • You’ve lost something in a taxi, and in an effort to retrieve it you find a company online that promises to recover your lost item for a flat fee of $47. The firm has a legitimate-sounding name like “yellowcabnyc.com.” But it’s a fraud: you’ll never see your lost item or your fee again, and now the scammers have your credit card number. Instead of falling for this scam, if you forget something in a cab, start with a phone call to the taxi company and they’ll advise you how to proceed.
  • Some scams simply don’t pass the common sense test. For example, a scammer might call and promise that you’ve won some form of government grant because you paid your taxes on time. All they need is your checking account information so the bogus grant can be electronically deposited. Or you might find a “too good to be true” deal on Craig’s List for an airline ticket: you pay by credit card and receive what seems like an authentic confirmation number, only to discover (sometimes at the airport!) that the ticket doesn’t exist. The only safe solution is to use a site that’s trusted, like Expedia.
  • Other growing sources of scam complaints involve bogus vacation rentals. Thieves will pose as agents and rip off your pre-payment for properties that don’t even exist, or they’ll “hijack” an actual ad for a real property and defraud potential renters. The Federal Trade Commission advises that you should be extremely cautious if someone asks you to wire money in advance for a vacation rental.

There are many more inventive rip-offs out there waiting to victimize the unsuspecting. Has the IRS called threatening you with a fine and arrest? Have you received calls accusing you of failing to show up for jury duty and offering to settle your “fine” via credit card over the phone?  Have you received alarming phone calls that a loved one has been kidnapped or is in jail?  Do you occasionally get calls from businesses seeking to “verify” personal information over the phone?  Odds are practically 100 percent that these are all scam phone calls. (And by now we suspect most people know this, but here’s very important rule of thumb: don’t trust caller i.d.)

At AgingOptions, we seek to help people protect their assets in retirement and not become a burden to those they love. When it comes to holding onto your money, the first rule of thumb is not to allow someone to steal it from you! We urge you to share this information and other similar articles with those you love, and especially with your aging parents and friends. Because seniors tend to be more trusting and less technically savvy, they are known to be more susceptible to telephone-based scams and frauds. You owe it to them to make certain they know how to cope with the scoundrels out there who may be lurking on the other end of that innocent-sounding phone call.

When it comes to protecting yourself in retirement, we can definitely help. At AgingOptions we’ve developed a unique and comprehensive retirement planning strategy called LifePlanning, blending together the five most important parts of any retirement plan: financial, legal, housing, medical and family. In your personalized LifePlan all five of these facets act interdependently, giving you greater peace of mind than you may have thought possible. Why not find out more? It’s easy – and completely without cost or obligation. Simply invest a few hours and attend a LifePlanning Seminar at a location that’s convenient for you. You’ll be very glad you did – and you’ll never look at retirement in quite the same way again.

For dates, times and locations, and to register online, simply click on this link, or call us for assistance during the week. It will be our pleasure to meet you and to answer your retirement questions at an upcoming LifePlanning Seminar.

(originally reported at www.mic.com)

Survey Shows Most Americans “Clueless” About Retirement Finances

If you were to ask most Americans how important it is to have a solid understanding of financial issues affecting retirement, the majority would agree that it’s extremely important, even essential. Saving money and spending it wisely is one of the keys to enjoying retirement with enough money to live the way we want to live. But if that’s so, then why are so many Americans so ignorant concerning the basic elements of retirement finance?

That’s the sobering conclusion from this very recent article that appeared on the popular (and somewhat irreverent) financial website Motley Fool. The title of the piece says it all: “Most Americans Don’t Know Jack About Retirement. Do You?”

Earlier this year the financial firm Fidelity conducted their first-ever Retirement IQ Survey (here’s a link if you want to check it out) designed to gauge how well-informed the public is about saving for, investing for and spending in retirement. Fidelity says their survey uncovered “significant knowledge gaps” and that at least three-quarters of respondents seriously underestimated how much they will need to save. And as Motley Fool put it, “If you don’t understand these fundamental aspects of pre- and post-retirement finance, how can you possibly come up with a retirement plan that works?”

Before we describe a bit more about Fidelity’s survey, this seems like a good time to remind you that, as vital as a good financial plan is in retirement, it’s not enough. A truly comprehensive plan that will preserve your assets and allow you to live the way you want as you age, without burdening those you love, demands much more. Merely planning on how to save and spend your money will not get you where you want to go, any more than a stool with one leg can ever be called “stable”! Here at AgingOptions, we have the solution, called a LifePlan, which we’ll talk about in a moment.

The Fidelity Retirement IQ Survey included more than 2,000 respondents. Half were in the age group between 55 and 65 and not yet retired. The others were broadly representative of the 18-plus population. Fidelity asked respondents eight different questions, which the Motley Fool article summarized in four general categories of financial savvy. Understanding these, the article suggests, should allow you to enjoy “a financially stress-free retirement.” While that seems like an overstatement to us, here are the “critical topics” about which so many American adults seem to be in the dark:

  • The historical returns of the stock market: After the recession of 2007-2009 and the resulting investment losses suffered by many, a large number of people withdrew all their assets from stocks in favor of safer investments. Many still shy away from stocks for fear of repeating those losses. But in fact the stock market has enjoyed positive returns in 30 of the past 35 years, and the average return has hovered around 7 percent. Only one survey respondent in twelve correctly and accurately assessed the power of the stock market to build an asset base for retirement.
  • The average length of retirement: Respondents in the Fidelity study were asked how long they would need to have their retirement savings last if retirement began at 65. A large number of those surveyed said retirement would last 12-17 years. But the fact is, those turning 65 today will live an average of 22 more years and some will go on far longer. Says Motley Fool, “If you underestimate how long your retirement is likely to last, as many survey respondents did, you’re setting yourself up for financial disaster.”
  • The amount you can safely withdraw from retirement accounts: While there’s no hard and fast rule, many financial advisers suggest that a retiree in his or her 60’s can safely withdraw about 3 ½ percent annually from their 401(k) accounts and IRAs, with that percentage rising as the retiree gets older.  But many in the Fidelity survey guessed far higher, estimating that they could safely withdraw 10 percent of the money or even more starting early in retirement. Taking out more than a cautionary minimum early on, warns the Motley Fool article, could deplete your savings too rapidly and leave you without assets later.
  • The cost of healthcare: According to Fidelity, the average couple retiring last year at age 65 would need to plan on spending about $260,000 for the remainder of their lives on healthcare. But the majority, almost three-quarters, underestimated that figure by a large margin – some by a whopping $200,000! That shows a dismaying ignorance of the facts and is an ominous sign that millions are careening toward retirement with a dangerous lack of fundamental knowledge about what lies ahead.

But thanks to the professionals at AgingOptions, you don’t have to be one of those lost in a fog of retirement ignorance. With your AgingOptions LifePlan as your guide, you’ll be able to chart a course for the retirement you’ve dreamed of, confident that you’re prepared for just about everything aging can throw your way. A LifePlan from AgingOptions is like a building built with five interconnected pillars: your financial plan, your legal plan, a plan for your housing choices, a plan for your medical coverage, and even a plan to involve your family so they’ll fully support your plans and wishes. There’s nothing like an AgingOptions LifePlan.

It’s easy to find out more: plan now to invest a few hours and attend a free LifePlanning Seminar. We offer these highly popular events all throughout the region. For currently scheduled seminars, this link will give you all the details – then you can register online or contact us for assistance.

When it comes to retirement, ignorance is definitely not bliss – it’s disastrous. But with AgingOptions you can approach retirement informed and prepared. Age on!

(originally reported at www.fool.com)

CNBC: When Siblings Fight over Money, it Usually Involves the Parents

The headline on the recent CNBC story sounds optimistic: “Sibling money fights are rare,” it says. But then there’s this kicker: “but there’s a common cause: parents.” In other words, when siblings quarrel over finances, Mom and Dad are usually at the center of the battle.

You’ll find the CNBC article by clicking on this link.  What we noticed as we reflected on this subject is that despite the optimistic tone, which emphasizes how “rare” it is for brothers and sisters to fight over money, if you read between the lines you’ll find that a surprisingly large number of these siblings do in fact find themselves battling over family finances, and that those battles are usually triggered by the parents, for reasons we’ll explore in a minute. The article is based on a report from Ameriprise Financial that was done in late 2016. This report, called the Family Wealth Checkup, surveyed some 2,700 adults between the ages of 25 and 70.

What Ameriprise researchers found, says CNBC, is that only about 15 percent of siblings responding to the survey admitted that they do have arguments with their fellow siblings over money. (Other respondents said they “talk” with their brothers or sisters about finances but the issues don’t turn into fights.)  But what we noticed is that, of those 15 percent of siblings who say they are “financial fighters,” two-thirds report that those fights usually put parents at the center of the conflict. In other words, when fights over money erupt between siblings, Mom and Dad are at the center of the battle in two cases out of three. Based on our quick math, that means fully 10 percent of adults will probably find themselves arguing, fighting, sometimes even suing other siblings over financial issues having to do with Mom and Dad. That’s a lot of people. And remember, that number represents only those who willingly admit to having these battles. How many more won’t confess family fights over finances, or are young enough that they have yet to experience just how ugly a family money fight can be?

So what are the “parental” issues that trigger family wars over money? The CNBC article lists at least three broad common categories of friction that can set off a financial fight.

The first sore point, says Ameriprise, is the amount of financial support given to each child by the parent during their lifetime. Obviously each adult child’s circumstances can be different, but it’s easy to see how parents can be accused of favoritism by giving more support to one sibling over his or her family members. Sometimes the age of the adult kids is a factor in this perception of inequity. This survey last fall from Fidelity reported that almost half of millennials (those in their early 20s to mid-30s) say Mom and Dad have helped them with their living expenses, and more than 20 percent are still living at home (or have moved back in). If that millennial has older and more established siblings, resentment over “favoritism” might be brewing that could come out later, in some very unhealthy ways.

The second trigger point for family fights involves how the parents plan to divide their inheritance when they die. Nothing says that estates have to be divided equally among siblings, but in our experience the time to talk about your gifting plan is now, not when the parent has died and one or more siblings resents being (in their view) unfairly treated. This is also true if the parent plans to do something unexpected, such as leaving a large bequest to a non-profit or university. The sooner your kids know your plans, the less potential for conflict after your passing, even if having the conversation now can be touchy.

The third source of family friction, says the survey, is how much each sibling is expected to contribute to a parent’s financial support in old age. This is a huge arena for major conflicts in our experience here at AgingOptions. CNBC recommends coming up with a well-crafted caregiving plan in which each sibling’s capacity for financial assistance is blended with their ability to help in more hands-on, tangible ways. The sibling with more resources who lives farther away, for example, might be able to contribute more money while the one who is visiting and spending time every day is paying less money but contributing more daily effort.

So what’s our solution here at AgingOptions? Are we satisfied with a situation in which at least 10 percent of adult siblings (and probably many more) face the prospect of going to war with their own brothers and sisters over issues involving how they were treated by Mom and Dad, and how they in turn will treat their parents as they age? No, we find such a situation appalling, especially when the solution seems to us so very obvious: hold a family conference under the direction of one of our professional estate experts at AgingOptions. Bring parents and siblings together around the table, and go carefully down through a list of potentially contentious issues. Based on our many years of experience, we confidently predict you’ll declare that having a family conference under the guidance of AgingOptions is the best decision you ever made, and we believe your children will concur.

But Mom and Dad, here’s what you need to do first: attend a free LifePlanning Seminar are learn about the power of an AgingOptions LifePlan . The fact is, you need a blueprint so that you can build the retirement you’ve always hoped and dreamed about, where you can protect your assets, avoid becoming a burden to your loved ones, and escape the trap of being institutionalized against your will.  With a LifePlan, every facet of retirement comes together: financial, legal, housing and medical – not to mention, of course, your family. To find out dates and times and to register online, simply click here, or contact us during the week.

Step one: attend a LifePlanning Seminar and begin to create the plan for your future. Step two: bring your family together for a conference designed to minimize conflict and preserve family harmony. It can be done – with the help of the professionals at AgingOptions!

(originally reported at www.cnbc.com)

Think Twice Before Co-Signing a Loan for your Child or Grandchild

With summertime in full swing, we’ll bet your college-bound children or grandchildren are starting to get really serious about how they plan to pay for the costs of their education. They may be thinking about turning to you for help.  For that reason, and as a general rule of thumb, we wanted to update a story we first brought you this time last year – a loud and clear warning against co-signing a loan for a loved one. In our experience, co-signing is a bad idea in just about every case.

Frequently in our AgingOptions office, in our LifePlanning Seminars or on our call-in radio programs we get questions about co-signing for someone else’s loan. Typically the borrower is a grandchild or adult child, and the person considering co-signing is full of loving intentions. After all, they’ll say, if I don’t co-sign, my child or grandchild won’t get the loan. The truth is, that may turn out to be the best possible outcome, because co-signing a loan can become a form of financial quicksand, trapping too many well-intentioned parents and grandparents in unplanned and often burdensome debt. If you don’t believe us, we suggest you read this article we found last year on the website of the New York Times. It’s called, “Thinking about Co-Signing a Loan? Proceed with Caution.” We couldn’t agree more.

Co-signing a loan is basically guaranteeing that the loan will be paid. If the borrower fails to make the payments, you as the co-signer are contractually obligated to pay off the loan. Co-signing is a fairly common practice, according to a survey cited in the New York Times article which said that about one adult in six has co-signed for someone else (typically a child, stepchild or grandchild). No doubt the borrowers usually intend to act responsibly. However, this same survey reports that nearly 40 percent of co-signers ended up having to pay all or part of the bill because the main borrower failed to make the payments.

The Times piece quotes Mr. Rod Griffin, an official with the credit bureau Experian, who reminds us that the reason the lender is demanding a co-signer is simple: the lender thinks the borrower doesn’t qualify for the loan.  “You’re vouching for the loan,” Griffin said, and “that’s a very high-risk thing to do.” If the lender is cautious, you should be, too.

While we mentioned education loans at the start of this article, it turns out, according to the survey, that about half of co-signed loans were actually car loans, while about one-fifth were student loans. In the case of student loans, the Times explains, some private lenders require a co-signer since they’re making the loan based on a student’s projected future earnings. Sadly, some parents or grandparents, according to the article, may think all they’re doing by co-signing is providing some sort of “character reference,” when in reality their co-signature obligates them to pay if the student defaults. This can come as a particular shock as student loan amounts can add up rapidly, creating a burdensome, even crippling debt.

The New York Times article goes on to explain that co-signing a loan can definitely affect your credit rating, even if the loan stays current, because it shows up as a debt obligation on your credit report. When you have more debt, it can cause you to have to pay higher interest rates when you borrow. What’s more, once you co-sign, getting yourself removed from the debt can be extremely difficult if not impossible. The article lists a few circumstances in which you may be able to get out from under the co-signer’s obligation, plus a few pointers that could help safeguard your interests before you co-sign. But our advice is to be very, very cautious, and avoid becoming a co-signer if at all possible. It may mean having a hard conversation with a loved one – but that’s better than facing your retirement years burdened by someone else’s indebtedness.

Being cautious about finances is important as you plan for retirement. But a good financial plan by itself will not ensure that you’ll experience the type of freedom in retirement that we all dream of. Your financial plan is only one facet of a comprehensive retirement strategy that we at AgingOptions call a LifePlan. Besides helping to keep you financially sound, your LifePlan also allows you to look ahead to ensure that your medical needs are met, your legal affairs are in order, your housing options have been considered and your family communications are healthy and open. With a LifePlan in place, you can look forward with confidence to a well-planned retirement that is both fruitful and secure.

The quickest and best way to learn more about the AgingOptions LifePlanning process is by attending one of our free LifePlanning Seminars. Bring your loved ones, and your questions, and come prepared for an enjoyable, information-packed event. Click here for dates, times and locations,  then register online or call us for assistance during the week. We urge you not to delay, because these popular events fill up fast and space is limited.

We’ll look forward to meeting you at a LifePlanning Seminar soon.

(originally reported at www.nytimes.com)

AARP Alert: Trying to Sell a Time-Share? Beware of these Scam Artists

Not that many decades ago – back in the early 1970’s, to be more precise – there was essentially no such thing as a time-share. In the 40 or so years since time-shares appeared on the scene, the time-share industry has grown dramatically, to the point where today there are more than 9 million time-share owners in the U.S. and more than 1,500 time-share developers.  One industry website claims that the number of time-share owners is growing at an average of 16 percent per year (although we wonder how accurate that figure can be in light of the recession of 2007-2010 that appeared to have put a crimp in timeshare sales). Another financial website pegged the average cost of a time-share at $14,500 plus annual fees and other often-hidden costs that can really add up. So you can see that we’re talking about significant amounts of money.

Many time-share owners are happy with their purchases and they use their vacation investment faithfully, racking up points and strategically scouring websites for the weeks and locations they want. But thousands of time-share owners feel differently: they want out. It may be a case of buyer’s remorse, or changing health, or tight finances that trigger this desire to sell a time-share. But in almost every case, once these buyers start investigating their resale options, they discover the painful truth that the time-share resale market is saturated, with far too much time-share inventory chasing far too few buyers.

Desperate time-share sellers can be ripe for scammers – sophisticated thieves who will concoct elaborate and believable deceptions to defraud people out of thousands of dollars in bogus fees. Because the problem is so widespread, and because many victims of time-share fraud are seniors, we strongly encourage you read this article that was just published on the website of the AARP (www.aarp.org). The article reveals how these scam artists prey on the hopes of people who are eager to unload their time-shares at any price.

Here’s how one scam worked against two sisters in their 70s, according to the AARP. These women wanted to sell a Charleston, South Carolina time share they had had since 2012: even though they had used the unit, they regretted the decision to buy, and wanted out of the contract. So one of the sisters placed an ad on a website called “BuyaTimeShare.com.”  They soon received a phone call from a man claiming to represent a buyer for the time-share. He said the buyer was a couple from Montreal, and he provided one of the sisters with the couple’s contact information. When the sister contacted the “buyers,” the woman on the phone corroborated the story and emphasized how eager she and her husband were to complete the deal. So far, so good. The seller received official-looking faxed documents, already signed by the alleged buyers, and was asked to send a check for $2,250 to set up escrow and title services, a fee that would later be refunded, the buying agent promised.

You know the rest of the story. The sister never heard from the imaginary buyers or the bogus agent again. She was out more than $2,000, the victim of a scam.

How widespread is this problem? Even though the Federal Trade Commission and local law enforcement keep cracking down, new variations on the scam keep cropping up. AARP reported that one Orlando-based “boiler room” operation conned more than 80,000 people and took in about $24 million – all in the space of about 30 months. Sadly, this particular scheme shows no sign of abating because there always seems to be a fresh supply of willing victims. “One reason the frauds continue is that it is relatively easy for scammers to get the names of time-share owners,” says the AARP article. One attorney in Tennessee who works to stop time-share sales fraud points out that time-share deeds are usually public records. It’s easy for resale scammers to scour public records to find consumers with low-value time-shares.  What’s even worse is that some desperate sellers have been victimized multiple times. “Buying a time-share seems to put you on a list,” says one Orlando Police detective. “The list is sold repeatedly back and forth between people, because there are only so many time-shares that are out there. We have people who have been victims of probably seven or eight different companies.”

If you’re trying to get out from under an unwanted time-share contract, the AARP article lists a few helpful pointers and some links to reputable websites where you can arm yourself with legitimate information. Your first call, the experts say, should be to the resort where you bought the time-share, since they may have a formal resale program.  Once you list your time-share for sale, prepare for an onslaught of shady “offers” from telemarketers asking you to pay upfront fees – if this becomes part of the pitch, hang up. Make sure you’ve read over your ownership papers so you know your options, and acquaint yourself with the latest scams, because when it comes to fraud there’s always something new.

On a much more positive note, when it comes to preparing for retirement, there’s nothing more powerful than good, solid, actionable information, and that’s what you’ll get when you attend a free AgingOptions LifePlanning Seminar. A LifePlan is a retirement plan – unique to AgingOptions – that prepares you for a safe and fruitful retirement better than any plan we know of. That’s because only an AgingOptions LifePlan encompasses all the critical facets of retirement planning into one blueprint: your financial plan, your legal plan, your medical plan and your housing plan. We also help you bring your loved ones into your plan so they will fully understand and support your wishes as you age. The result: your assets are protected, you can avoid becoming a burden to those you love, and you can escape the trap of being forced into an institution against your will. That’s the power of a LifePlan!

Why not take the next step and learn more? Make plans now to attend a free AgingOptions LifePlanning Seminar. You’ll find a complete list of currently-scheduled seminars here, including locations, times and online registration. (Or if you prefer, call us for assistance during the week.) It will be our pleasure to meet you at a seminar in your area.

(originally reported at www.aarp.org)

 

5 Warning Signs Your Financial Advisor Might Not Be On Your Side

Here at AgingOptions we frequently get asked the question, “Who is the best financial advisor for me?” What people really seem to be asking is, “Where can I get advice I can trust, without falling prey to someone’s hidden agenda?” In these days of market turbulence and increasing fiscal confusion, people are desperate for good, honest, objective recommendations – but where can they find it?

We’ll give you our perspective on that question in just a moment, but first we want to call your attention to this eye-opening article just published on the Money website of US News. The title really caught our eye: it’s called 5 Signs Your Financial Advisor is Working Against You.  “Sometimes,” warns US News, “the person you hired to help you get ahead is the one putting hurdles in your way.”

More and more people seem to be relying on financial advisors of one variety or another to help them chart their financial future. According to a survey done by the Certified Financial Planner Board of Standards, in 2010 about 28 percent of Americans used the services of a financial advisor – but by 2015 that number had risen to 40 percent. What accounts for this dramatic rise?  “Many people do not feel they have enough hours in the day,” says the article, “or the technical expertise to manage keeping up with the rapidly changing financial landscape.” People these days also seem more worried about the financial security of their family – it’s “a weight (that) becomes even heavier when you begin to wonder what happens to those you love when you are no longer around to steer the financial ship.”

But the truth is that “not all financial professionals can be trusted to help with the decision-making process, and some actually work against the best interests of those seeking guidance,” warns US News. Just because someone has a long list of credentials after his or her name doesn’t mean they’re going to act in your best interests, which means you need to be a smart consumer – after all, your financial future could be at stake. The US News article lists these five “suspicious circumstances” that may suggest it’s time for you to seek out a second, more objective opinion.

The first yellow flag, says the US News article (which was co-written by two fee-only financial planners) is if your planner recommends an annuity inside an individual retirement account. We don’t want to go into too much detail because the topic of annuities can be complex (we encourage you to contact us at AgingOptions so we can help you get thorough advice about annuities or any other financial topic).  But in the view of the article’s authors, planners who suggest an annuity inside an IRA are forcing you to pay for an unnecessary layer of annuity fees without gaining you any additional tax benefits. Annuities in an IRA, say the authors, are less cost-effective and more expensive, and if your planner suggests this strategy he or she may be lining their pockets with extra fees at your expense.

A second warning area is recommending high-risk strategies – higher than your situation suggests. For example, says US News, “If your advisor recommends mortgaging a paid-off home so you can invest in more insurance and financial products, get a second opinion. There is a conflict of interest when advisors encourage clients to increase their debt, often resulting in a large commission check for the advisor and higher ongoing fees for the client.”

The third caution is if your advisor starts pushing insurance products you don’t need. “It should be concerning if every solution or proposal that your advisor puts forward involves insurance or annuity products,” the article says. These products aren’t necessarily bad in themselves, but they are expensive and often force you to lock up your money for years, even decades. And remember, your planner is earning commissions every time you purchase one of these costly and potentially restrictive products.

The fourth practice that should set off alarm bells is when your planner engages in a practice called churning. “Churning,” says US News,” is when a broker engages in excessive buying and selling of securities in a customer’s account chiefly to generate commissions that benefit the broker.” It’s not unusual for advisors to recommend a financial product and then turn around a year or so later and suggest another, forcing the client to pay commissions and sometimes costly surrender fees. “Sometimes the only person making money on these transactions is the person who is selling the product,” says the article.

Finally, it may be time for a second opinion (or a new advisor) if you sense your portfolio is being neglected – in other words, if your advisor is guilty of errors of omission. This is the opposite of churn: instead of too many fee-generating transactions, some planners are guilty of too few.  “Portfolio monitoring, rebalancing and investment review are all parts of a sound investment management process,” says US News. “If your portfolio is comprised of the top-rated investment funds or best performers from 1999, there might be no reason to continue to hold those specific investments today.” Time for a fresh look!

All this is good advice. Our suggestion remains the same as it has always been: you are generally better off, and more likely to get good, objective financial advice if you deal with a fee-based planner, not someone with a product to sell. Contact us at AgingOptions and we can steer you toward reputable planners in your area. But don’t forget this: a financial plan alone is hardly enough to get you safely into and through your retirement years. In fact, relying on a financial plan all by itself is a recipe for disaster. As soon as an unplanned medical emergency arises, you’ll need a medical plan – which will likely force you to make a new housing choice, which necessitates a housing plan. In the midst of all this emergency planning, legal issues are bound to arise, so you’re going to need a legal plan. And finally, will your family understand and support your wishes? A family communication plan will become essential if you want to avoid being forced into a nursing home against your wishes, and keep from being a burden to your loved ones.

Only one form of retirement planning encompasses all these elements: financial, medical, housing, legal and family. It’s an AgingOptions LifePlan, and if this sounds like a true retirement breakthrough, it is. Why not take the time to find out more? Plan now to attend a free LifePlanning Seminar in a location near you. We have several choices of dates and locations so click here for details and online registration, or call us during the week for assistance. Bring your retirement questions, and we’ll answer them at a LifePlanning Seminar!

(originally reported at http://money.usnews.com)

Is This Lump-Sum Offer from Social Security a Scam? You Decide.

Here’s a new wrinkle many may not have heard about until now. Apparently officials from the Social Security Administration are calling people who are delaying benefits until age 70, offering them a cash incentive if they’ll file for benefits early.

Does that sound like a scam to you? It does to a lot of people, and it did to syndicated columnist and Social Security expert Laurence Kotlikoff. But writing in this article that just appeared in the Seattle Times, Kotlikoff says the call and the offer are real – however, that doesn’t mean people should be sucked in by this lure of a lump sum payment. Apparently Social Security is offering cash now in an effort to save more money in the long run.

Kotlikoff writes about a man who was planning on commencing Social Security benefits when he turns 70 this coming August. Last fall this gentleman received a call from the Social Security Administration (SSA) telling him that if he filed for benefits as of November 2016 instead of August 2017 the government would pay him a lump sum incentive check of almost $19,800, in essence paying him for six months’ worth of benefits. The caller from the SSA explained that if the man declined the offer and stuck with his plan to delay benefits until 70 it would take him until age 80 to make up the difference. Based on this assertion the man agreed to start his benefits earlier than planned and claim his one-time cash incentive.

So far this sounds like one of those too-good-to-be-true hoaxes, but apparently it’s not. This man received his $19,800 check in the mail and his benefits commenced as promised. So it was a good deal, correct? No, it wasn’t a good deal for this particular gentleman, and if you get a call from Social Security under similar circumstances it might not be the best for you, either. What was going on here?

“This is, indeed, a scam being run by the Social Security Administration,” writes Kotlikoff. “Social Security appears to be calling everyone who is trying to maximize their retirement benefit by filing at 70 and bribing them to file early.” There are several reasons why he uses the word “scam” to describe this incentive plan. But before we get into the details, let us strongly advise you that deciding when to begin Social Security benefits can be a complex matter with many individual factors to consider. We at AgingOptions will be happy to provide you with expert counsel, based on our many years of experience with this complicated decision.

So why does Kotlikoff call this a scam, and why should someone be hesitant about accepting the offer of a cash bonus for filing early? First, the SSA is failing to fully disclose that filing early permanently lowers monthly benefits. For a person this man’s age, born between 1943 and 1954, benefits grow by 8 percent for every year the beneficiary waits to start payments, topping out at age 70. If this man in the article starts his benefits 9 months before age 70, his payments will be reduced by 6 percent, permanently.

Second, not only are monthly benefits reduced, but the family’s lifetime benefit would drop fairly dramatically. Using a computer model, columnist Kotlikoff estimated that taking the early payment would actually end up costing this man and his family more than $22,000.

Finally, not only does this man lose out on monthly cash in his Social Security check, but so will his wife if she outlives him. Under the regulations, the surviving lower-earning spouse will receive the benefit of the higher-earning spouse. In this case, the difference for the surviving wife could amount to several hundred dollars monthly, a significant amount that could dramatically affect her quality of life for years to come.

So why, asks Kotlikoff, is this happening? “Is Social Security intentionally scamming the public?” he asks.  “Possibly. Getting people to file early saves the system money” – even with a lump sum bonus as an incentive. He speculates that government officials may be gambling that it will be cheaper for the SSA to make these lump sum payments and getting beneficiaries to lock in lower payments, playing the odds that many beneficiaries won’t do the math. There are exceptions, but for most people in good health, delaying until age 70 pays good dividends. If you live past your early 80s, you’ll earn significantly more than those who started benefits at age 66 or 62.

What about the man who was subject of this column – the one who accepted the offer of a lump sum check and a lower benefit? His advisers reminded him of the wisdom of sticking with the original plan, so he decided to file a form withdrawing his application for retirement benefits. He mailed back the check and chose to hold out until age 70.

Planning for your retirement future is not only complicated, it’s also multi-faceted. Here at AgingOptions we frequently encounter people who have made careful financial plans involving Social Security, savings and pensions, only to find that when a crisis hits those plans often prove inadequate. Finances alone simply cannot ensure a safe and secure retirement! If your desire is to protect your assets as you age, avoid becoming a burden to your loved ones, and escape the trap of being forced into a nursing home against your wishes, you need an AgingOptions LifePlan – a blueprint for your future that connects your financial, legal, housing, medical and family plans into one seamless whole.

We invite you learn more at one of our free LifePlanning Seminars. There are several of these fast-paced information-packed sessions planned for this month at locations throughout the area.  Click here for details and online registration, or call us during the week and we’ll gladly assist you.

(link to www.seattletimes.com)