by Joe Hearn | Nov 25, 2015 | Retirement
Tomorrow is Thanksgiving here in the good old U.S. of A., which means Christmas is right around the corner. With that in mind, I want to do two things. First, I want to wish you all a very Happy Thanksgiving! I hope you have a relaxing holiday with friends and family and have time to reflect on the many blessings in life. I’m thankful for all of you and appreciate you making Intentional Retirement a part of your reading, research and planning as you prepare for retirement.
Second, since many of you will likely begin your Christmas shopping in earnest on the day after Thanksgiving, I want to lend a hand. We don’t normally have sales in our Intentional Retirement store, but this year I’m discounting one of our most popular guides: The Ideal Retirement Design Guide is normally $159, but for the holidays I’m dropping the price to just $99. The guide is a 12 module action plan for retirement. Among other things, it includes a 72 page lifestyle design workbook, tons of worksheets, 6 Q&A case studies with current retirees and 4 hours of audio interviews with experts in areas like income planning, estate planning, long-term care and retiree taxes.
BUT WAIT, THERE’S MORE! 🙂 The guide also includes several bonus items that aren’t available anywhere else, such as my eBook 50 Essentials for Retirement Success. Give yourself or someone you care about the gift of an awesome retirement. Sure, they might get you an ugly sweater or a Snuggie, but you can give them (or yourself) the confidence and peace of mind that comes with having a great plan for what should be one of the most rewarding periods of life.
To learn more about the guide or to order, just head on over to our Store. For your ordering peace of mind, our store is administered by 1ShoppingCart, one of the biggest names in ecommerce. When you click the “Buy Now” button, you’ll be redirected to a secure product page where you can complete your order.
Thanks and Happy Thanksgiving!
Joe
Photo courtesy of Steve Snodgrass. Used under Creative Commons License.
by Joe Hearn | Nov 4, 2015 | Social Security
Who says Congress can’t act quickly when they need to? Just last week they rapidly (after much previous delay) approved budget legislation to narrowly avoid a government shutdown. Unfortunately, buried deep in the pages of that budget—probably somewhere between synchronized swimming studies on Sea Monkeys and a real life iron man suit (actual expenditures in previous budgets)—was a provision that ends two popular and lucrative Social Security claiming strategies. What are the changes to your Social Security claiming options and how will they affect you?
Change #1: Restricted Application for Spousal Benefits
Prior to the change, a person who was eligible for both a benefit based on their own work record as well as a spousal benefit based on their spouse’s work record, could choose to file a restricted application for only the spousal benefit at Full Retirement Age. This would allow their own benefit to continue to grow by earning delayed retirement credits. Then at some future date (as late as age 70), when their own benefit had grown to exceed the spousal benefit, they could switch to the larger benefit. The new law gradually phases out this option.
Those born on or before January 1, 1954 will continue to have the option to file a restricted application for spousal benefits. Those born after that date will not. In other words, if you’re 62 or older by New Year’s Day 2016, you’ll still have the option to file a restricted application once you reach Full Retirement Age (66 for those born between 1943 and 1954). If you’re younger than 62 on New Year’s, it’s Auld Lang Syne for the restricted application option. It should be noted that this change does not affect the ability of widows to file a restricted application for widow benefits and later switch to their own benefit.
Change #2: File and Suspend
Under the old law, there was a strategy called “File and Suspend” whereby a person could file for their benefits, but choose to immediately suspend payment of those benefits. Why would someone do that? The answer lies in the fact that you need to claim your own Social Security benefits before anyone else can claim benefits based on your record. In other words, you need to claim your benefits before your spouse can claim spousal benefits based on your record. But what happens if it makes sense for your spouse to file now, but you want to delay filing so you can continue to earn delayed retirement credits? Enter the “have your cake and eat it too” File and Suspend strategy, which allows your spouse to go ahead and claim benefits on your record while simultaneously allowing you to continue earning delayed retirement credits.
Under the new law, anytime a person suspends their benefit, it will automatically suspend payments to anyone else receiving benefits based on that record. This effectively eliminates the File and Suspend strategy going forward. About the only time it will make sense to voluntarily suspend will be if you change your mind on claiming your benefits and want to suspend payments so you can start earning delayed credits again. The new voluntary suspension rules take effect 180 days after enactment of the new law, which is approximately May 1, 2016.
What actions should you take as a result of these changes? For many people, losing these strategies will mean lower lifetime Social Security benefits, which could mean drawing more from savings or delaying retirement altogether. If you’ve done a Social Security claiming analysis on your own or with your adviser, you should review that analysis to see if the new law warrants a change in strategy. And if you haven’t yet done an analysis, but retirement is right around the corner, now is the time to review your options. The clock is ticking.
As always let me know if there’s ever anything I can do to help. And if you have any questions about the new rules, feel free to post them in the comments section of this article and I’ll do my best to answer them.
~ Joe
by Joe Hearn | Oct 8, 2015 | Investing, Retirement
To a large degree, happiness is being able to do what you want when you want. To get to that point, however (and here’s the paradox), you often have to do what you don’t want when you don’t want. Case in point: Retirement.
You’ve heard me say many times that:
All of that is still true, but I want to give you a quick reminder.
You still need money.
I didn’t say that retirement was not a math problem or that money had no role to play. (see this, this and this for articles on preparing financially). Instead, I said “more than.” In other words, it’s money plus something else. Money plus meaning.
Why the reminder? I got an email from a reader named Patricia recently that discussed this very topic. Here’s a brief excerpt:
“I am one of those people who deferred. I worked really hard for 30+ years, saved like hell, deferred life in many ways so we would be able to retire early. And according to you, I totally screwed up.”
First off, there are many things that fall under the category of “screwing up” in my opinion, but working hard and saving so you can retire early is not one of them. Hat tip to Patricia (she and I had a nice conversation via email) and anyone else out there who is doing what it takes to build a nest egg and achieve financial independence.
Second, I took Patricia’s email seriously, because if she felt that I was somehow disparaging the savers and deferrers (is that a word?), then others of you may have had that feeling too. Nothing could be further from the truth. Hard work and disciplined saving is absolutely critical if you’re going to meet your retirement goals. That said, the money without the meaning is pointless just like the meaning without the money is often unrealistically out of reach. It’s up to each of you to balance those competing interests in a way that works for your life and goals.
In 8 Habits of Successful Retirees, I told you to live with a sense of urgency (#1), retire to something, not from something (#4) and choose yes over no (#6). Just don’t forget Habit #5: Retire based on your bank account, not your birthday. Run after the meaning, just don’t forget about the money.
~ Joe
by Joe Hearn | Sep 17, 2015 | Pursuits, Travel
Sleeping bag? Check. Tent? Check. Pocketknife? Check. Horse? Wait, what? For years my father-in-law has invited me on a cowboy camping trip that involves a four-hour horseback ride into the Wind River Range in Wyoming. It’s never quite worked out in the past, but this year I was determined to make it happen, which is how I found myself on the back of my trusty steed (a.k.a. El Diablo) riding into the mountains on the Friday before Labor Day.
It wasn’t just me. My father-in-law was there, of course, but also his brother-in-law Rusty (the organizer of the annual trip) and Rusty’s three sons. We were each riding a horse and then we had three packhorses that were carrying all of our gear. We made it to our remote campsite, unloaded the horses and began setting everything up. What followed was four days of hiking, riding, fishing and telling stories around the campfire, all while miles away from the nearest cell phone signal. Needless to say, it was a great time.
When the trip was over and we got back to civilization, I took a much-needed shower and started the long drive home. I had plenty of windshield time so I thought back on the trip and a few takeaways came to mind.
There will always be reasons to say no. As I mentioned earlier, my father-in-law has been inviting me on this trip for years. As much as I wanted to go, I had just as many reasons to say “no” this time as I had previously. Life is always busy. There will always be schedules, commitments and to-do lists. If you wait for the stars to align perfectly, you’ll never do anything.
“Yes” is more complicated than no, but much more rewarding too. It can often be complicated and costly to say “yes”, but that is usually the price of admission for doing interesting/fulfilling things. I had to take several days off work. The drive was 11 hours each way. And did I mention the horse? “Yes” gets you out of your comfort zone. It costs time and money. It takes effort. But to summarize Mark Twain, someday we’ll all regret the times we said “no” much more than the times we said “yes.”
Opportunities are finite. You and I will only have so many chances to say “yes.” To take the trip. To mend the relationship. To embrace the new opportunity. Even if the world were perfect, our opportunities are finite and—newsflash—the world is far from perfect. Case in point. Both my father-in-law and uncle-in-law are battling cancer. They’re doing well, but illness is always a good reminder that you won’t always have the opportunity to say “yes.”
Your body is in a constant state of entropy. The horseback ride up the mountain was difficult, but the horseback ride down the mountain was one of the craziest things I’ve ever done (think “The Man From Snowy River”). I managed it in my 40s, but I don’t think I’d want to attempt it in my 60s. As we get older, things change. Our bodies start to break down (entropy) and doors begin to close on certain opportunities. I wrote about this concept in The Funny Thing About Time. Take a minute to read it because it’s a good reminder.
Routine is the enemy of time. A guy by the name of Jed Jenkins said that and he is so right. When you’re stuck in a routine, time flies by. Getting out of your routine slows things down. It helps you look at things differently. It refreshes and makes you better when you get back. Four days in the mountains seemed like a really long time. Not because it wasn’t fun, but because I was doing something different and new. I had fresh eyes. I was having new experiences. Rather than my brain being on autopilot, I was aware and focused and present. If you regularly fill your life with new experiences, it won’t seem so short and hurried.
How about you? What travel plans are on your to do list? What have you wanted to get around to “someday”? What can you do today, this week or this month, to make those plans a reality? Don’t keep putting it off. Just go already.
~ Joe
by Joe Hearn | Aug 27, 2015 | Asset Allocation, Investing, Retirement, Risk
On Monday morning my friend texted me: “Holy cow! Don’t jump!” He was referring, of course, to the 1000+ point drop in the Dow. Thankfully, after more than 20 years in this business, I’ve gotten used to wild swings, so I wasn’t on the ledge (although in 2008 I was glad I work in a one story building). That said, volatility in the market can produce much fear and anxiety, especially if you’re at or near retirement. There is a 100% chance that market volatility will continue, so here are 5 things I’ve learned after two decades of bulls and bears that can help you keep your retirement plans on track.
Markets have recovered from every single downturn in history. Every. Single. One. The Panics of 1893, 1896, 1901 and 1907 (Seriously, calm down already!). The Crash of 1929. The recession of 1937-1938. The Flash Crash of 1962. Black Monday in 1987. The crash after Iraq invaded Kuwait. The 1997 crash caused by the Asian currency crisis. The Dot-com bubble in 2000. The crash after the September 11 attacks. The selloff in 2002. The financial crisis of 2007-2009. The Flash Crash in 2010. The markets are higher now than after every panic, bubble, crash and crisis in history, but be careful because…
You are not the market. Your personal experience with market volatility will largely be impacted by the actions you take before and during a crisis. Were you poorly diversified? Was your asset allocation totally inappropriate? Were you taking too much risk? Did you sell in a panic? Did you wait to get back in until the markets had already recovered? Did you stop making 401(k) contributions when things went south? Investment returns are not investor returns. Each year Dalbar does a study to see how well the average investor does compared to the markets. In short, the average investor only captures a fraction of the market return, largely because of poor behavior, so…
Sometimes it’s good to have help (especially if you’re near retirement). There are some people with the time, temperament, knowledge and discipline to handle their investments on their own. Others could benefit from a little help. This is especially true the closer you get to retirement because the issues you’ll be confronted with are different. Before retirement the major issue is saving. Most of us are at least familiar with the concept of saving (regardless of whether or not we’re doing it). We’re less familiar with the many moving parts that make up the typical retirement plan: calculating how much is enough, settling on an appropriate asset allocation, risk management, cash flow management, pension payouts, periodic rebalancing, retirement plan distributions, estate planning, Medicare, Social Security and the tax consequences of certain distribution strategies. You don’t want to mess those things up because…
Your runway is shorter now than it was during the last crisis. On average, stocks experience a 10% selloff about once every year and 20% pullback every 3.5 years. The average time of recovery for the former is about 4 months. For the latter it takes about 22 months. So while my earlier point is absolutely true—markets have always recovered—you may not have enough time to wait it out. The closer you are to retirement, the closer you are to withdrawing money from your accounts. And if you’re taking distributions while the markets are down, your money won’t last as long. So use the current crisis as a not-so-friendly reminder to…
Focus on what you can control. John Wooden once said: “The more concerned we become over the things we can’t control, the less we will do with the things we can control.” It’s easy to focus on headlines, markets and political uncertainty, but we can’t really do anything about them so it’s an exercise in frustration. We can control things like saving, debt reduction, asset allocation, and risk management, however. Focusing on those actually produces results. Unfortunately, the bull market of the last six years has lulled many into a false sense of security. Use the current volatility to make sure that your portfolio is appropriate and your plans are on track.
~ Joe
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