It’s tax preparation time and there is no better time to take stock of your finances. Tax reporting forms are piling up and you’re beginning to sort through receipts from last year for deductions (telling yourself next year will be the year you get organized!)

As you look over how much money you made and how you spent your money, it’s a good time to look at some of your insurance expenses and make sure you have the right coverage and take advantage of your tax benefits. Here are  tips:

Life Insurance — Take a look at your life insurance policy in light of last year’s income. Do you have enough coverage to take care of your loved ones in case something happened to you? Often we’ll buy life insurance and then forget to update the coverage to reflect current lifestyle. If you have a term life insurance policy you purchased several years ago, you also may find that you can buy a new policy with more coverage for the same or less premium. A recent survey from MetLife Mature Market Institute found that over 40% of people admit they don’t have enough life insurance coverage or aren’t sure.

Long Term Care Insurance – Long term care insurance policies comes with tax benefits. A Federal tax credit is available to you each year. The amount depends upon your age. If you are using a tax preparer make sure they know you have a long term care policy. Some states also provide a tax credit or deduction. Check your state tax laws to find out what is available to you.

Health Insurance – If you are still working and have a flexible saving account don’t leave money in your account. You have until mid-March to use those benefits so make that doctor, dentist, and optometrist appointment now and use up your funds…or you lose them.

Health Insurance Deductions — For many people reaching the threshold of 7.5% of your adjusted gross income can be difficult. But if you are self employed and paying your own health insurance premiums you’ll want to find out what is deductible. Many seniors with Medicare health insurance plans don’t realize that they may now be eligible for this deduction. Their health care expenses could include their Part B premiums, their Medicare health insurance premiums, co pays and deductibles, their prescription drug costs and most out-of-pocket health care expenses.

For those on Medicare, reviewing expenditures during the previous year may also provide an important picture of whether their Medicare plan is the right plan and if it is appropriate to consider switching to a different type of Medicare plan in the coming year.

Tax day in 2012 is April 17. Once you’ve gathered up your information and sent it off to the IRS, take a look at your insurance coverage and see if some changes need to be made to your insurance plans in 2012.

Guest contributor Laura Rossman heads up communications for iQuote by Longevity Alliance. The independent national insurance broker works with more than 20 companies to help seniors compare and find the best term life insurance, medicare supplement plans, and long term care insurance. Laura has worked in the health and senior care services industries for over 20 years.

      Mrs. C. was 85 years old when our agency was hired by her son to provide home care for her.  Up until that point, Mrs. C. lived on her own while her son lived in another state and traveled a great deal for his work.

      He was relieved to have us step in and initially provide his mother with eight hours of care, seven days per week.  She was very demanding and difficult to please, which took some time for the aides working with her to get used to.  She called the agency day and night, and we seemed to provide direct or indirect care 24 hours a day.

      Mrs. C. was suspicious and did not trust anyone, either in person or over the phone, which is why it was so unusual for her to be a victim of fraud.  Nonetheless she became one.

      A routine was established for Mrs. C. and she seemed to begin to trust the two aides who were caring for her.  The number of hours that we provided home care increased, first to 12 hours per day, then to 24 hours. Basically, Mrs. C. was never left alone anymore. Our aides were well trained to ferret out fraudulent phone calls and attempt to swindle money from patients.

      At some point, Mrs. C. was hospitalized with an irregular heartbeat.   The hospital allowed us to provide her regular aide only during the day.  Therefore, she was on her own in the hospital room at night.

      Within five days we brought the patient back home.  A month later her son called me and asked if any of the aides working with his mother live inFlorida.  I did not understand what he meant, but told him that both aides lived inNew York City.

      He explained that he was billed by a credit company, from which he never had a credit card, for $18,000, for furniture and other household goods that were purchased inFlorida.  The credit card had been created in his mother’s name.

      His mother never had a credit card in her life, and throughout her life she never handled the family’s finances – her husband had taken care of all the bills and check writing.  After he passed away, her son took over the handling of all his mother’s financial affairs.                                                                           

      I knew that my aides had nothing to do with the fraud, and they informed us that there were no suspicious calls in which Mrs. C. gave out any information on the phone to anybody that could have been used for opening a credit card account.                                                                                                                                                                                                                 

      With the investigation that the credit card company pursued, it seemed that the personal information had been gotten from the hospital, while Mrs. C. was hospitalized.  Who had penetrated the hospital records, and whether it was done by computer or through paper records, is not quite clear.  She may also have been approached by somebody at the hospital and, thinking that the person was part of the hospital staff, may have given out some information. Either way, it seems that her Social Security number, name, address, and date of birth were accurately lifted.

      In Mrs. C.’s case, all her incoming mail was forwarded to her son and he immediately acted upon this fraud.  But often the target of fraud is a senior who has no one to verify the bills for correct charges, and many times will pay for purchases he or she never made. Some of the seniors may also not know that they are not liable for purchases they have not made and, if contested, the credit card company will remove the charges from their account. It takes some calling and following up, but there is no need to rush and pay for it.

      In many cases, no matter how careful we are, we still can be victims of fraud, but we can reduce the chance of it happening by being suspicious and cautious. For more information, please log onto: www.goldenyearsgolden.com

• Overall Drug Pricing and Patient Safety Rating
• Overall Complaint Rating
• Overall Member Experience Rating
• Overall Customer Service Rating

At this relatively late stage in a person’s life, cost and expenses are endlessly important. I recommend you consider all costs associated with a change in Medicare coverage and that you apply the points raised below to your personal situation:

(1)  MedicareBlu RX – S5743

This top rated Medicare plan has contracts available to consumers in Minnesota, Iowa, Montana, Nebraska, Wyoming, and North Dakota. Total premiums for these contracts range from $39.70 – $104.60. Paying a higher premium has its benefits, as the drug deductible associated with that higher premium is much smaller. The drug deductibles for these higher premiums are $0.00 compared to $160 associated with the lower premiums.

(2)  Advocare – H5211

Brought to you by Security Health plan of Wisconsin Incorporated, this plan has contracts available to residents throughout the state of Wisconsin. With total premiums ranging from $26.60 – $62.30, all drug deductibles are at $0.00. On top of that, customer service associated with this plan was 40.1% higher than the average customer service rating for all Medicare Part D plans.

(3)  Kaiser Permanante Senior Advantage –  H0630

This plan from Kaiser is offered to residents of Colorado. Contracts for this Senior Advantage plan vary widely with total premiums from $0.00 – $48.70 and drug deductibles from $0.00 to $320. Quality of customer service associated with this plan was about 12% higher than the average rating for all Medicare part-d plans reviewed.

(4)  Excellus Health Plan, inc – H3335

Contracts offered under this plan vary widely with total premiums from $0.00 – 55.40. Drug deductibles also vary widely for this plan ranging from $0.00 – $160. When choosing new plan, it is important to research the quality of customer service. This company’s quality of customer service associated with this plan was rated about 40% higher than that of all Medicare plans reviewed.

Overall, there are many aspects of Medicare part-d coverage that should be considered before choosing a plan. It is most important to find a plan that works best for you. When choosing a new plan, make sure your health care providers accept the coverage that you’re interested in choosing. Also, be sure check into the extension of your plan geographically to avoid unexpected expenses. And don’t forget, make sure the quality of customer service provided for your Medicare plan is what you expect. There are many useful Medicare ratingson the market that review quality of customer service. I highly suggest using one before finalizing such an important decision.

Peter Griggs is a business development associate at FindTheBest Health, which
helps users compare everything from dialysis centers to community health centers.

It’s a known fact that from 1946 to 1964, approximately 76 million American kids were born and they were referred to as the historic generation of Baby Boomers. Experts forecasted that when this historic generation of Baby Boomers would retire, it will pose a magnanimous threat to US economy. However, this is not the bad news; the worst is yet to come.  This historic Boomer generation has finally started reaching their retirement age last year in 2011 and it seemed most of them couldn’t save up sufficient money for their retirement days. In an age when state and government pension plans lack adequate funding, private sector pension plans are insufficient in resource and the social security benefits have been adversely affected by inflation, it seems millions of baby boomers will find retirement quite harsh and painful. Moreover, thousands of financial issues like the dwindling home values, the delayed returns on stock market investments, the lack of interest rate returns and the employment scarcity after 50 have worsened the situation for these baby boomers. If you want to know more about the dark future that baby boomers are encountering now, read on these astonishing details below.

•  As per the Employee Benefit Research Institute, the amount of retirement saving that 46 percent American employees have is below $10,000.
•  An examination conducted by Boston College’s Center for Retirement Research shows that American workers requires at least $6.6 trillion to cover their minimum retirement fund.
•  Within 2030, the number of Americans, who are reaching their retirement age would be a staggering 18 percent and by 2050 that number will reach to 89 million.
•  Statistics reveals at least 74 percent of American workers have to keep on working even after 65, which is their official age of retirement. In fact AARP survey claims, 40 percent of them have already planned to work “until they drop”.
•  Right now, one out of every six senior Americans lives below the federal poverty line.
•  CESI Debt Solutions poll claims 56 percent of the Americans would continue carrying an outstanding balance even when they are retired.
•  The number of senior Americans declaring insolvency rose by a staggering 178 percent within 1991 to 2007. In fact a professor at the University of Michigan claimed that the elderly Americans above the age of 55 are now responsible for 20 percent of all bankruptcies across the United States.

However, every dark cloud has a silver lining. If the rest of the bay boomer generation who are yet to hit their  retirements age show a bit of prudence and take their financial decisions responsibly from early 30’s, they can weather the storm and can ensure a better financial future for themselves. For this, all they have to do is they have to practice money management tactics. For example, they have to start living within their means, have to work harder to increase their flow of income, have to set some realistic financial goals and strive hard to achieve them. Most importantly they should all address their debt problems quite seriously and take baby steps towards paying down their outstanding debts. If the members of baby boomer generation, who are solely dependent on Social security and Medicare in their retirement days would like to secure their financial future, they should immediately start following the aforementioned points.

Post courtesy of Sidney Terrell, an associate writer with Oak View Law Group. Her expertise includes finance and investment. She has written several articles on debt settlement, bankruptcy, bill consolidation and mortgage since 2005.

Are you a caregiver? 

 The first approach to helping is self referential.  In this scenario proposed solutions are driven by the helper’s context (feelings, attitudes, culture, experiences, norms, etc.).  Advice often falls into this category; one reaches into one’s own value system and imposes judgment onto the other.  In relation to the person needing help, the mindset is this:  I think you should…  Because the helper’s context drives the solution, however, the response by the other is often this:  You just don’t understand or This way of doing things doesn’t feel right to me.  In the hierarchy of helping this approach is at the bottom of the totem pole.    The second approach is empathic.  This mindset is a step up on the totem, because proposed solutions give some thought to the other’s context.  This approach is often associated with the helping professions, such as social work, and is generally rated highly.  To be told that one is empathic is to receive praise for “stepping out” of one’s context in order to consider things from another’s perspective, as in this example:  With your eyesight, I would wish soft lighting.  Therefore, I will provide this for you.  However, this approach is still somewhat self referential in that proposed solutions are still driven primarily by what one believes that one would wish in similar circumstances, often referred to as walking in another person’s shoes.  Finally, there is the altruistic approach.  In this scenario proposed solutions are driven solely by the personal context of the person needing help (his or her situation, feelings, attitudes, goals, preferences, background, and usual way of doing things either as known or inferred from some kind of evidence).  This approach requires a great deal of information about the person, because it requires the helper to act as the person would act if he or she were able to do so independently.  Here is how the mindset of the three approaches might play out in a given problem.

Problem: The lamppost in John’s driveway just broke.

Self-Referential Caregiver: I think we should just leave it: He doesn’t really need it.

Empathic Caregiver: I wouldn’t want to spend money on repairing it. Let’s leave it.

Altruistic Caregiver: His daughter told me how happy he was when he had it installed.

                                           We should get it fixed. Maybe we can barter…

Every single person born into this world has a personal context from birth to death that guides lifestyle and is composed of genetics, personality, culture, experiences, material and spiritual values, priorities, preferences, etc.  Knowing the details of that context can elevate the help inherent in caregiving from generic or “good enough” to good by enabling the helper to  customize actions so that actions reflect what the other would do for himself or herself if able.  “Good enough” care may be based on sound training and years of experience, but good (aka altruistic or custom) care is based on sound training plus experience plus knowledge about what is unique to the context.  It is this attention to the unique that elevates care to best practice, which refers to the ability to carry out the just-right thing in any given context.  Neither information nor skill are enough without the other.  Information provides context for application of skill, and skill isn’t really skill at all if it isn’t relevant to the immediate need.   For example, knowing how one recipient of care wishes to begin the day doesn’t inform how another recipient chooses to do so.  This requirement to blend information and skill to do a good job is true regardless of work type, work setting, or work goal.  Information is not, by the way, code for micromanagement.  It is just that:  information through which we can develop parameters inside of which our actions can and should take place – boundaries that set up the context for choosing our actions and through those actions, be effective.

Imagine being asked to cook for a neighbor just home from the hospital for one week.  He cannot tell you what to cook.  What do you do?  Perhaps you cook what you like (self referential).  Or one step up, perhaps you consider what you might like in his situation (empathic), so you rummage through his pantry and find chicken soup.  You love chicken soup, so this is what you prepare.  You later learn from his daughter that he doesn’t like chicken soup (although he was too weak and grateful for your help to tell you).  She tells you that it’s in his pantry for her lunch when she visits.  Imagine how, with a little information, you could have done so much better!  You could have made familiar and comforting meals during your neighbor’s recuperation, and you would have known what to stay away from. 

This is the kind of predicament in which we place caregiving aides all the time.  Yes, they are generally well meaning.  Yes, they are generally trained in CPR.  Yes, they are often educated in age-related diseases.  But no, they are almost never purposefully and thoughtfully informed about the personal context of their recipients except haphazardly and hurriedly through notes tacked onto the fridge or scribbled by the telephone.  Can’t the person in care just speak up, you ask?  Maybe yes; maybe no.  But even if yes, many people in care worry about being seen as demanding or “fussy” or causing too much work, so they let things slide. 

The moral of the story is this:  Not all approaches to helping are equal!  To be a good caregiver – whether family or professional  – is to act in accordance with the personal context of the person who needs help.  Without direction to the contrary even well meaning people commonly operate at the self-referential level, pay little attention to the details of other people’s lives, and prefer the familiarity of their own ways to the unfamiliar ways of others.   The empathic caregiver has a good start, but it can be difficult to walk in other people’s shoes – especially in this multi-cultural world.  If they are too wide, too tight, too long, too high, or otherwise uncomfortable, scapegoating, distance, or benign neglect sets in.  And that’s when care gets bad.  So ask yourself, Am I a good caregiver?  Do I know my loved one’s personal context intimately enough to base my actions on his or her values, needs, and preferences?  If so, kudos to you.  Then consider others with whom you share the care.   Have you taken the time to help them follow suit?  If not, now’s the time to do so.  A little time to do that today can save lots of time, tears, and regrets tomorrow.    

Dr. Dominique Moyse Steinberg

Founder/CEO, CustomElderCare^®

www.customeldercare.com

“Where are the cheapest places to retire in the U.S.?”

The underlying motivation for asking this question was the loss in retirement assets that resulted from The Great Recession and a fear that many of my retirement clients shared…can they retire with the assets or income they have or expect to have in retirement?

In 2009 I set out to answer that very question. I analyzed over 3,020 select cities, towns and communities across the United States for ten key retirement factors and applied a proprietary scoring formula to each factor to determine which communities ranked highest as the best of the cheapest places to retire in the U.S. For each city, town or location we focused on the following ten key retirement factors:

1)         Lowest Housing Costs

2)        Lowest Property Tax

3)        Lowest Sales Tax

4)        Best Climate

5)         Lowest Crime Rate

6)        Lowest Income Tax

7)         Closest to Major or Regional Metropolitan Areas

8)        Closest to Hospitals

9)        Closest to Airports

10)      Closest to Beaches or Coastlines

Deciding where to retire may very well be one of the most important decisions you make as you approach retirement. Use this book as a tool in helping you find your ideal, affordable  retirement community.

To purchase a copy of the book go to: www.richhabits.net

Below is a sampling of a few of the very affordable communities highlighted in my book.

#24 GULFPORT, MISSISSIPPI

When you think of Mississippi you don’t always think beaches. But there is a small slice of Mississippi heaven on the Gulf Coast that makes you re-think everything about the state. Situated just over 10 miles to the west of Biloxi is the town of Gulfport, just 3 miles from Gulfport-Biloxi International Airport and a short walk to many Gulf Coast beaches.  In an hour’s drive east you can find yourself in the heart of Mobile, Alabama and Mobile Bay.

Here you’ll find 6.7 miles of picturesque, white-sandy beaches lining the Gulf of Mexico. There are exciting, fun-filled indoor and outdoor activities, championship golf courses, taste-tantalizing cuisine, plentiful shopping, gambling casinos and must-see cultural attractions.

From its simple, humble beginnings as a lumber and port city, Gulfport has evolved into a diversified, expanding community.

Approximately 55% of its citizens are white, 35% are black and the balance is a blend of Hispanic and other races. Religious diversity is evident in Gulfport with a good mix of Southern Baptists (36%), Catholics (33%), Methodists (14%), and other religious affiliations balancing out the mix.

The Good

• Waterfront location
• Affordable housing for a coastal community
• Low property tax
• Close proximity to air transportation

The Bad

• Crime rate is 5.45%, slightly higher than our average of 3-4%
• Still rebuilding after Hurricane Katrina

#46 PENSACOLA, FLORIDA

Having visited Pensacola on one of my “research missions”… stop laughing, it was a real research mission… I can’t help but express my unbridled bias toward this most unique coastal community.

Let me paint you a picture. You are sitting on your porch or deck. A few hundred feet to the west is the bay, with its own flat sandy beach; at the same distance to the east is the ocean, with its fluffy white sand and warm tropical ocean temperatures. You’re hungry so you decide to bar-b-que on one of the many free grills that pepper the public beaches. You’re thirsty and decide to take short stroll alongside the beach to Peg Leg Pete’s Oyster Bar.

Mm mm, sounds too good to be true doesn’t it? Well that’s Pensacola. Pensacola is, hands down, this author’s top pick of affordable retirement communities.

What you get in Pensacola at a very affordable price is simply hard to believe. Affordable housing, exceptional location on the panhandle of Florida, no income tax, scenic coastal views, warm waters, beaches on the bay and ocean, boating, fishing galore, great night life, excellent restaurants, free beach access, a quaint trolley and much more makes Pensacola a fabulous retirement retreat.

Take your boat and anchor it off Conch Island and explore the variety of shell life there. Or simply anchor your boat in the bay near the shore and sit down in the water with an aperitif before the dinner bell rings. Comb the bay sea floor for Sandollars of every size. It’s all here and at a very affordable price.

A diversified community is what you’ll find here with 65% white, 25% black with the balance a blend of many other races. Catholics, Southern Baptists, United Methodists, Assemblies of God and many other religious affiliations are well represented in Pensacola.

The Good

• Magnificent sandy beaches on both the ocean and the bay
• Unlimited water recreational activities
• Comfortable year-round climate
• No income tax
• Nearby Pensacola Airport
• Great nearby restaurants, bars and night life

The Bad

• Slightly higher than average crime rate at 5.45%
• Somewhat remote

#66 FLORENCE, OREGON

For the first time Oregon makes the list. Florence is situated along the beautiful Siuslaw River on the west coast just 4 miles from Heceta Beach.

Here you can enjoy a stroll along the boardwalk, experience Historic Old Town Florence’s truly unique shopping or dine in one of the many restaurants in the district. From chowder to gourmet pizza, crab encrusted halibut to the famous green donkey burrito; retirees can find a variety of foods to fit any budget. At the south end of Florence you will find 42 miles of magnificent, wind-shaped sand dunes, some rising 500 feet above sea level. These dunes represent the largest expanse of coastal sand dunes in North America. If you’re looking for adventure you’ll find it at the dunes through their guided sand rail tours, self-guided ATV tours, sand boarding, hiking, camping, horseback riding and photography.

Florence is often billed as a river town, and why not with 17 lakes and rivers in and around the area. But the hidden gem is the Pacific Ocean which is located just over the dune.  When it comes to enjoying the Ocean, the possibilities for adventure are truly endless. Walk along the surf in search of glass floats, shells, agates and driftwood. Hit the Oregon Coast Trail for hiking, biking or horseback riding. If you like fishing or boating, Florence has that too. There are over a dozen fresh water lakes, which serve anglers and boaters.

Florence is a predominantly white community with a robust diversity of religious affiliations making Florence truly a religious melting pot..

The Good

• Desirable location
• Low property tax
• No sales tax
• Unique outdoor activities

The Bad

• Higher than average precipitation (rainfall)
• Very high income tax
• Somewhat remote

Marquette, Michigan

As surprising as it might seem, the beautiful town of Marquette, Michigan, has some of the best retirement options to be found in the entire nation. One of the best things about this quiet, picturesque location is the huge amount of options it has for year-round fun.

Although tanning on the beach to the gentle crash of waves may sound ideal at first, doing it every day for the next 30 years could become quite a chore. Marquette, Michigan, is situated on a broad peninsula that extends out into Lake Superior. With a huge body of water never more than a short drive away, you will be able to enjoy as many water sports and activities as you like all summer long. There is plenty of snow during the winter months, and skiing, ice-fishing, and other winter activities will make sure you are never bored when the cold hits.

The average home price in this town is a mere $145,000 and the state income tax hovers at around 4.35%. Marquette, Michigan, sits in close proximity to Northern Michigan University, which offers plenty of exciting indoor activities. Additionally, the city has one of the best cardiovascular hospitals in the nation.

Cape Coral, Florida

Of course, when it comes to retirement, the beach is hard to beat. Cape Coral, Florida, is not only near some of the most beautiful beaches in the United States, but it also has a mild climate, an economic housing market, and low taxes. Real estate prices have dropped an average of 60 percent over the last five years, and they are showing no signs of slowing down. The average home price in Cape Coral, Florida, currently sits at only $95,000. On top of this, there is a cost-of-living index that ranks at an ideal 96, and no state income tax.

If you like water, there is plenty of it in this quiet town. About 400 miles of canals cut through Cape Coral, many of which empty directly into the Gulf of Mexico. Although there is very little nightlife here, there is a great outlet mall, a lively farmer’s market, and a beautiful golf course.

Austin, Texas

Although the summers in this bustling cultural city do err slightly on the sticky side, Austin, Texas, has just about everything else going for it. Knee-deep in performing arts and music culture, Austin has a never-ending line-up of cultural events such as orchestral performances, ballet presentations, and live indie bands. There are no less than three senior centers run by the city of Austin, where you will be able to sign up for a huge variety of fitness classes and other activities. Austin’s University of Texas also features learning programs for all ages.

Austin, Texas, has an average home price of only $124,000 and no state income tax. There are plenty of great nature preserves and beautiful parks to explore, and if you like spending Cinco de Mayo in Mexico, it’s only a short drive away.

Megan writes for Assisted Living Today, a leading source of information on a range of topics related to elderly living and retirement care and facilities including a Maryland Assisted Living guide.

History of Social Security

Social Security was developed in 1935 as a U.S. Federal program of social insurance and benefits.  At that time, there were already 34 other nations operating some form of social insurance program.  The philosophy driving its creation was one in which the government would assist in providing economic security to its citizens during phases of their lives when it was needed, including disability, death, and old age.  On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller.  The accumulated taxes on her salary totaled $24.75.   As she lived to be 100 years old, she eventually collected a total of $22,889 in benefits!  Since then, Social Security has grown into the nation’s largest Federal program, while also deemed the most effective antipoverty program in US history.  Recent data from the Social Security Administration shows that over the years, more than $8.7 trillion has been paid into the Trust Fund and more than $7.4 trillion has been paid out in benefits.  Factoring in the interest earned, the Social Security Trust Fund had a balance of about $2.6 trillion as of the end of 2010.

Current Concerns

The White House’s 2012 budget proposal reported that Social Security faces a “long-term financing shortfall”.   Social Security paid out more than it received in payroll taxes in 2010, marking the first time the program was in the red since it was overhauled in 1983.  This annual deficit is set to worsen.   As the baby boomer generation begins to retire, Social Security enrollees will increase while the pool of workers contributing to the program will decline.  According to estimates compiled by the president’s non-partisan fiscal commission, there were 16 workers per beneficiary in 1950.  That ratio decreased to five workers per beneficiary in 1960, three in 2010 and an estimated 2.3 in 2025. As Figure 1 shows, the years of building reserves are basically over.  Unless reforms are made now, outlays will consistently and significantly outweigh inflows.  The Social Security Trustees project that in 2037, the trust fund will be completely expended.   Prompt action must be taken in order to sustain Social Security.

Figure 1: Long Term Projections for Social Security Cash Flow (Source: Congressional Budget Office)

Proposals to Fix the Shortfall

Lawmakers continue to debate a variety of proposals to improve the long term health of the Social Security System.  When faced with similar long-term funding issues back in 1983, congress approved a major overhaul that included raising the normal retirement age from 65 to 67.  Here are some of the more popular strategies being floated around Washington:

• Similar to the 1983 reform, raising the age at which Americans can receive retirement benefits is one recommendation of the president’s high-level deficit commission.  As the nation’s life expectancy increases, it makes logical sense to push back this level concurrently.  This modification would eliminate a third of the projected deficit.
• Currently, surplus money from taxpayers was put into trust funds that have been used to pay for other projects.  Instead of investing these assets into higher yielding securities, they were instead placed into federal IOUs earning low interest rates.  Investing 40% of the trust fund in the stock market would also reduce the projected deficit by a third.  However, it would expose the fund to increased risk and liability in the event of market downturns.
• It was also suggested that Social Security payouts be reduced by 3% for new beneficiaries, eliminating about 18% of the funding shortfall.  A 30% deficit reduction would result if a 5% cut was initiated. 
• A third idea to tackling the shortfall is to increase worker and employer contributions.  At present, workers and employers pay 6.2% of earnings up to $106,800 into Social Security.  Increasing this percentage to 7.3% would completely eliminate the projected deficit.  Additionally, if all income above $106,800 were still taxed but did not count toward benefits, the projected deficit would also be completely eliminated.

Conclusion

The complexity of the Social Security reform debate is inarguable.  However, the problems and potential solutions are not significantly different from those that every household faces with their family finances.  How do we increase income and reduce expenses?  How do we prepare for a future with less income?  How do we invest prudently to achieve a high level of return without unmanageable risk?  Implementing some of the proposed changes above may be a bitter pill to swallow for many Americans, but the pain pales in comparison to what is in store for the Social Security System if we allow it to continue on its current destructive course.   Thoughtful action is imperative for both the nation’s short-term economic recovery and the long-term economic security of America’s families and communities.

Jeff founded Cypress Financial Planning because he has a strong desire to help individuals and families achieve their financial goals. As a Certified Financial Planner, Jeff adheres to the highest ethical and financial proficiency standards in the industry. Our clients have chosen to partner with us because they recognize the value of having a long-term advisor to simplify the decision making process in today’s complex financial world. Visit www.cypressplanning.com or contact Jeff directly at 856-534-6431 to learn more about how he is helping fellow seniors enjoy their retirement years with confidence.

The Berkley Law Firm, Fullerton, California

Benjamin H. Berkley, Esquire,  www.berkleylaw.net, www.benberkley.com

As children we believe we are invincible.  We can ski the steepest mountain and challenge the highest wave.  Sleep, diet and exercise often take a back seat to having fun. 

But, upon the passing of a loved one, suddenly for the first time we are forced to face our own mortality. There is never “a right age” for being able to accept that someone has passed away.  Even if we had thought that someday we might no longer be here, most of us do little to plan for that unfortunate and often sudden event.  Often, however, when tragedy strikes your survivors find themselves scrambling to find the pieces of the puzzle that were held by you. 

It is ironic that we plan our vacations, and take precautions for an approaching hurricane.  And with access to the Internet, we research the cheapest airfares, get the latest sports scores, and download our favorite recipes.  The Internet has helped to organize our fast paced lives. 

But though we are racing through life, the timing of our demise is never known.  This was so evident on September 11, 2001.  Of the more than 2,000 people that perished that day, the great majority had no arrangements in place for the unthinkable.  They kissed their wives, husbands, and children goodbye that morning never thinking that today was their last day on Earth.  And   the news was filled with stories for weeks to come of surviving families   facing financial disaster as a result of the terrible disruption that resulted.  Insurance companies could not issue death benefits without an insurance policy that could not be located.  Families who needed to sell their homes often had to seek court permission when   the names on   title included someone who died on 9-11 as that person was no longer here to sign a deed transferring title. 

By planning for the inevitable, you are taking the first steps in protecting the future lives of your loved ones when you are no longer here.  As tragedy can strike at any time, it is prudent to be prepared so as to avoid disruption that is often faced by your survivors upon your passing.

                                                                                                                    By Rachelle Matherne

According to a study released this week by Wells Fargo, 20% of affluent Americans and 25% of middle-class Americans said they will need to keep working at least until they are 80 years old. “Even among those considered ‘well off’, many seem to fear a sharp drop in their post-retirement standard of living due to insufficient retirement savings,” says Karen Wimbish, director of Retail Retirement at Wells Fargo. Roughly one-fifth of working Americans currently between the ages of 60 and 75 don’t know when they’ll retire.

Throughout this past year, the first wave of baby boomers hit that magical age of 65, when retirement is traditionally expected to begin. In fact, an estimated 10,000 boomers per day turned 65 throughout 2011. That daily increase is expected to remain constant for the next 19 years. That traditional retirement age is no longer applicable for a number of reasons, however.

A major cause of delayed retirement is the current, so-called Great Recession. People simply can’t afford to stop working and rely solely on Social Security benefits. The average American would need roughly 70% – 80% of his or her pre-retirement income to maintain a comfortable retirement lifestyle, and Social Security just covers barely half of that amount. There are other retirement arrangements that could provide income, but many people either were not able to pay into one or simply did not plan ahead. There are also those whose savings were affected by the economic downturn.

The most obvious solution, of course, is to delay retirement for a few years. If you’re working, not only are you still earning a paycheck, but you’re also not dipping into your savings. You could also consider a “phased retirement,” which can mean decreasing your work hours from full-time to part-time, or even changing careers. While you work the reduced hours, use that time to trim your expenses and adjust to living on a tighter budget before you start dipping into your savings or Social Security benefits.

On a similar note, don’t start claiming Social Security benefits at age 62 when you are first eligible. Doing so will lock you into a lower monthly payout for the rest of your life. The longer you wait to start receiving your checks, the higher those checks will be — to a certain extent, of course. Each year that you postpone your benefits, your annual total will increase by 8%. The percentage increases stop at age 70, however.

Consider consulting a professional financial planner, who can provide tips on getting the most out of your retirement savings. Resources for finding a financial planner include the National Association of Personal Financial Advisors, the American Institute of Certified Public Accountants, and the Garrett Planning Network.

Finally, be wary of scams disguised as easy fixes. Boomers have become a mark for con artists, with 1,241 reported cases last year, compared to 506 cases in 2009. Unregistered securities such as promissory notes, private placements, and investment contracts are typically the method of perpetrating financial fraud against those over the age of 50.

Rachelle Matherne is a professional blogger for firstSTREET, a leading provider of unique gift ideas for boomers and beyond. She covers technology, health, and financial topics for seniors on the firstSTREET blog