Monthly Archives: April 2013

Ingenious Simple, Yet Virtually Unknown Financial Strategy?

Reassessing Retirement Assumptions
What makes financial sense for some baby boomers may not make sense for you.



There is no “typical” retirement. Many baby boomers want one and believe that they will have one, and their futures may indeed unfold as planned. For others, the story will be different. Just as there is no routine retirement, there are no rote financial moves that should be made before or during this phase of life, and no universal truths about the retirement experience.

Here are some commonly held assumptions – suppositions that may or may not prove true for you, depending on your financial and lifestyle circumstances.

#1. You should take Social Security as late as possible. Generally speaking, this is a smart move. If you were born in the years from 1943-1954, your monthly benefit will be 25% smaller if you claim Social Security at 62 instead of your “full” retirement age of 66. If you wait until 70 to take Social Security, your monthly benefit will be 32% larger than if you had taken it at 66.1

So why would anyone apply for Social Security benefits in their early 60s? The fact is, some seniors really need the income now. Some have health issues or the prospect of hereditary diseases influencing their choice. Single retirees don’t have a second, spousal income to count on, and that is another factor in the decision. For most people, waiting longer implies a larger lifetime payout from America’s retirement trust. Not everyone can bank on longevity or relative affluence, however.

#2. You’ll probably live 15-20 years after you retire. You may live much longer, especially if you are a woman. According to the Census Bureau, the population of Americans 100 or older grew 65.8% between 1980 and 2010, and 82.8% of centenarians were women in 2010. The real eye-opener: in 2010, slightly more than a third of America’s centenarians lived alone in their own homes. Had their retirement expenses lessened with time? Doubtful to say the least.2

#3. You should step back from growth investing as you get older. As many investors age, they shift portfolio assets into investment vehicles that offer less risk than stocks and stock funds. This is a well-regarded, long-established tenet of asset allocation. Does it apply for everyone? No. Some retirees may need to invest for growth well into their 60s or 70s because their retirement savings are meager. There are retirement planners who actually favor aggressive growth investing for life, arguing that the rewards outweigh the risks at any age.

#4. The way most people invest is the way you should invest. Again, just as there is no typical retirement, there is no typical asset allocation strategy or investment that works for everyone. Your time horizon, your risk tolerance, and your current retirement nest egg represent just three of the variables to consider when you evaluate whether you should or should not enter into a particular investment.

#5. Going Roth is a no-brainer. Not necessarily. If you are mulling a Roth IRA or Roth 401(k) conversion, the big question is whether the tax savings in the end will be worth the tax you will pay on the conversion today. The younger you are – roughly speaking – the greater the possibility the answer will be “yes”, as your highest-earning years are likely in the future. If you are older and at or near your peak earning potential, the conversion may not be worth it at all.

#6. A lump sum payout represents a good deal. Some corporations are offering current and/or former workers a choice of receiving pension plan assets in a lump sum payout instead of periodic payments. They aren’t doing this out of generosity; they are doing it because actuaries have advised them to lessen their retirement obligations to loyal employees. For many pension plan participants, electing not to take the lump sum and sticking with the lifelong periodic payments may make more sense in the long run. The question is, can the retiree invest the lump sum in such a way that might produce more money over the long run, or not? The lump sum payout does offer liquidity and flexibility that the periodic payments don’t, but there are few things as economically reassuring as predictable, recurring retirement income. Longevity is another factor in this decision.

#7. Living it up in your 60s won’t hurt you in your 80s. Some couples withdraw much more than they should from their savings in the early years of retirement. After a few years, they notice a drawdown happening – their portfolio isn’t returning enough to replenish their retirement nest egg, and so the fear of outliving their money grows. This is a good argument for living beneath your means while still carefully planning and budgeting some “epic adventures” along the way.

Your retirement plan should be created and periodically revised with an understanding of the unique circumstances of your life and your unique financial objectives. There is no such thing as generic retirement planning, and that is because none of us will have generic retirements.

GREG OLIVER 902190e`720342904789289374

Citations. 56e9`625`967253`926753` OLIVER
1 – [2/15/11]
2 – [1/7/13]

What’s Holding You Back From Probate.?

Setting Up Your Estate to Minimize Probate
What can you do to lessen its impact for your heirs?


Probate subtly reduces the value of many estates. It can take more than a year in some cases, and attorney’s fees, appraiser’s fees and court costs may eat up as much as 5% of a decedent’s accumulated assets. Think tens of thousands of dollars, perhaps more.1

What do those fees pay for? In many cases, routine clerical work. Few estates require more than that. Heirs of small, five-figure estates may be allowed to claim property through affidavit, but this convenience isn’t extended for larger estates.

So how you can exempt more of your assets from probate and its costs? Here are some ideas.

Joint accounts. Jointly titled property with the right of survivorship is not subject to probate. It simply goes to the surviving spouse when one spouse passes. There are a couple of variations on this. Some states allow tenancy by the entirety, in which married spouses each own an undivided interest in property with the right of survivorship. A few states allow community property with right of survivorship; assets titled in this way also skip the probate process.2,3,4

Joint accounts may be exempt from probate, but they can still face legal challenges – especially bank accounts when the title is modified by a bank employee rather than a lawyer. The signature card may not contain survivorship language, for example. Or, a joint account with rights of survivorship may be found inconsistent with language in a will.5

POD & TOD accounts. Payable-on-death and transfer-on-death forms are used to permit easy transfer of bank accounts and securities (and even motor vehicles in a few states). As long as you live, the named beneficiary has no rights to claim the account funds or the security. When you pass away, all that the named beneficiary has to do is bring his or her I.D. and valid proof of the original owner’s death to claim the assets or securities.3

Gifts. For 2013, the IRS allows you to give up to $14,000 each to as many different people as you like, tax-free. By doing so, you reduce the size of your taxable estate. Please note that gifts over the $14,000 limit may be subject to federal gift tax of up to 40% and count against the lifetime gift tax exclusion, now at $5.25 million.6

Revocable living trusts. In a sense, these estate planning vehicles allow people to do much of their own probate while living. The grantor – the person who establishes the trust – funds it while alive with up to 100% of his or her assets, designating the beneficiaries of those assets at his or her death. (A pour-over will can be used to add subsequently accumulated assets; it will be probated, however.)2,7,8

The trust owns assets that the grantor once did, yet the grantor can use these assets while alive. When the grantor dies, the trust becomes irrevocable and its assets are distributed by a successor trustee without having to be probated. The distribution is private (as opposed to the completely public process of probate) and it can save heirs court costs and time.7

Are there assets probate doesn’t touch? Yes. In addition to property held in joint tenancy, retirement savings accounts (such as IRAs), life insurance death benefits and Treasury bonds are exempt. Speaking of retirement savings accounts…2

Make sure to list/update retirement account beneficiaries. When you open a retirement savings account (such as an IRA), you are asked to designate eventual beneficiaries of that account on a form. This beneficiary form stipulates where these assets will go when you pass away. A beneficiary form commonly takes precedence over a will, because retirement accounts are not considered part of an estate.8

Your beneficiary designations need to be reviewed, and they may need to be updated. You don’t want your IRA assets, for example, going to someone you no longer trust or love.

If for some reason you leave the beneficiary form for your life insurance policy blank, it could be subject to probate when you die. If you leave the beneficiary form for your IRA blank, then the IRA assets may be distributed according to the default provision set by the IRA custodian (the brokerage firm hosting the IRA account). These instances are rare, but they do happen.9,10

To learn more about strategies to avoid probate, consult an attorney or a financial professional with solid knowledge of estate planning.

GREG OLIVER 9073-95473-597193405719340571-9

1 – [4/17/13]
2 – [4/4/13]
3 – [11/99]
4 – [8/19/10]
5 – [1/28/13]
6 – [2/22/13]
7 – [8/24/11]
8 – [2/10/11]
9 – [11/8/09]
10 – [6/10/11]

Powerful New Retirement Tool


Social Security has closed a popular loophole, but all is not lost.

Mature Couple

The “reset button” has been removed. A few years back, the distinguished economist Laurence Kotlikoff alerted people to a loophole in the Social Security framework: retirees could dramatically increase their Social Security benefits by reapplying for them years after they first applied.

It worked like this: upon paying back the equivalent of the Social Security benefits they had received to the federal government, retirees could fill out some simple paperwork to reapply for federal retirement benefits at a later age, thereby increasing the size of their Social Security checks. Figuratively speaking, they could boost their SSI after repaying an interest-free loan from Uncle Sam.

You can’t do this any longer.

In late 2010, the Social Security Administration closed the loophole. Too many retirees were using the repayment tactic, and the SSA’s tolerance had worn thin. (The Center for Retirement Research at Boston College figured that the strategy had cost the Social Security system between $5.5-8.7 billion.)1,2

Today, accumulated Social Security benefits can no longer be repaid with the goal of having the SSA recalculate benefits based on the retiree’s current age. You can only withdraw your request for Social Security benefits once, and you are only allowed to reapply for benefits within 12 months of the first month of entitlement.1,3

Couples can still potentially increase their SSI. This involves using the “file and suspend” strategy once one spouse has reached full retirement age (FRA).

An example: Eric applies for Social Security at age 66 (his FRA). Immediately after filing for Social Security benefits, he elects to have his benefit checks stopped or postponed. As he has technically filed for benefits at full retirement age, his wife Fiona can begin receiving spousal benefits – a combination of her own benefits plus the extra benefits coming to her as a spouse, both reduced by a small percentage for each month that she is short of her FRA. (If she is younger than her FRA, she cannot apply to only receive a spousal benefit.)4

Meanwhile, Eric’s Social Security benefits are poised to increase as long as his checks are halted or deferred. As Eric has hit FRA, he now has the chance to accrue delayed retirement credits (DRCs) and have his benefits enhanced by COLAs between today and the month in which he turns 70.4

Before you claim Social Security benefits, run the numbers. Knowing when to apply for Social Security is crucial. As it may be one of the most important financial decisions you make for retirement, it cannot be made casually. Be sure to consult the financial professional you know and trust before you apply.

GREG OLIVER 907890[790[7-897-9878-97

Citations. OLIVER / ohio / USA
1 – [12/8/10]
2 – [12/9/10]
3 – [3/1/11]
4 – [1/30/12]

What is a College Degree Really Worth?

What is a College Degree Really Worth?
Is higher education really the prerequisite for success?


Do you need a college degree to succeed? That assumption is long-entrenched, and it isn’t hard to see a relationship between education and earning power. Yet the cost and debt linked to getting a degree are so significant now that some contrarians are saying “skip it” – go learn in the world rather than on campus, if you’re smart you’ll do just as well in life.

When and how did such a controversial idea emerge? It has gained momentum in the past decade, especially in the wake of Robert Kiyosaki’s Rich Dad, Poor Dad. The best-seller contends that while financial literacy is crucial for success, a college education is not. Kiyosaki compares what he learned from his “poor dad” (his father, a Ph.D. who became Hawaii’s superintendent of education yet struggled financially) with what he learned from his hazily identified “rich dad” (a high school dropout who became the richest man in Hawaii). You may be a fan of the book, or you may not be; its popularity can’t be dismissed.1

Peter Thiel, the co-founder of PayPal, raised eyebrows in 2011 when he paid 24 collegians $100,000 each to drop out and start up tech firms. In a New York Times op-ed piece that summer, Thiel said that “learning should be done throughout life, and technology creates more ways to learn every year”. He wrote that in the near future, a conventional four-year college education “will be revealed as an antiquated debt-fueled luxury good”. A year after letting the world know that a traditional college education was all but obsolete, Thiel signed up to teach at Stanford University. (He has both a B.A. and a J.D. from Stanford himself.)2

Financially, it may be risky to enter adult life without a degree. Kiyosaki and Thiel aside, you don’t find many successful people dismissing the value of a university education. Less-educated people generally earn less than well-educated people.

All you have to do is look at Census Bureau data to see the relationship between education and salary. On page 152 of the 2012 Statistical Abstract of the United States, we find Table 232, Mean Earnings by Highest Degree Earned. It says that in 2009 (the most recent survey year), the average high school graduate earned just $30,627. The average bachelor’s degree holder pulled down $56,665. The average Ph.D. earned $103,054, and those with professional degrees (i.e., law or medicine) earned an average of $127,803.3

You get more than earning potential out of the college experience. The traditional, liberal arts-grounded university education gives you a skill set for life – social skills, cultural literacy, and a refinement of critical thinking that is invaluable, in addition to what you learn in your major. The friendships made in college may last a lifetime as well, with a positive effect on your career path. You also have the chance to discover who you are, and to possibly live on your own for the first time.

Does a college degree make that much of a financial difference in life? Just look at the Census Bureau data. Look at the anecdotal evidence everywhere around you. You may not need a college degree to succeed, but it does help your chances.

GREG OLIVER //// Citations.
1 –,9171,1908418,00.html [7/13/09]
2 – [3/13/12]
3 – [2012]