Future Pensioners Alert: Act Now or Potentially Lose Thousands

The traditional defined benefit pension may be on its way to extinction. But according to the Congressional Research Service, 24 percent of civilian workers still have one, including one in seven private sector employees. Given that more than 153 million Americans suit up for work each week, tens of millions can look forward to some sort of pension at some point. If you’re one of these lucky people--and you plan to retire soon--tens of thousands of dollars may hinge on your nailing down your plan’s particulars.

Get the Skinny on the Formula

First, call your employer’s human resource department, go online, and do whatever it takes to determine the parameters of your future payday. Will you be forced to take a monthly annuity, an income for life? Or will you also have the option to elect a lump sum as a full or partial exchange of the annuity?

I’m shocked at how few people I encounter understand even the basic features of the pensions they are promised. This is all available in the Summary Plan Description (SPD). Your friendly human resource professionals will happily send it to you or tell you how to access it. The plan will be long, but it’s written so simply that even I, someone blessed with an off and on public education, can understand it. And it comes with a table of contents so you can skip the real boring stuff.

If the plan offers only a monthly benefit, you should figure out the formula and apply it to yourself. As I detailed here, inflation is the enemy of annuity pensions. If the formula is based on the highest five years, and you have some big salary raises on the way, it may pay for you to sit tight a few extra years. Or it may be that the formula increases your benefit substantially once you meet certain milestones. The Rule of 85 is a common one, which means once your age and years of service reach 85, your benefit gets very large. (For example, a person aged 55 with 30 years of service could retire on full pension.) It’s best to get mentally prepared now for the time you’ll serve.

Rick’s Dilemma

This is the path Rick is plodding down. At 55, he’s set financially. A lifetime of diligent savings, smart investing, and an early stint counting beans for a state government means he can quit his current job today. This job is stressful. He’d love to leave, except it’s not a smart move.

Rick is currently vested in a private-sector pension at his current job. At age 56, it’d pay $3,000 a month for the rest of his life. Not too shabby. His financial plan shows he could shove off and be done with the 9 to 5. Yet because of a formula in his pension, he’ll pocket $5,800 a month if he remains employed and a little stressed to age 59. Three years puts $2,800 a month more in his pocket for as long as he remains on the right side of the grass. It takes him only a little over three years to make up all the money he gave up by not leaving at 56. That’s his “what if I die?” breakeven. If he lives 26 years to age 85, the three years of extra toil will produce $765,600 in nominal money. That’s $255,000 for every extra year of work.

Is this worth it? I suspect most people would answer yes. That’s Rick’s position. I remind him of the lifetime value every time we speak.  

Take the Money and Run

Pre-retirees who have a lump sum option may want to follow the opposite strategy: take the money and run before the formula changes. Some hitters should bunt. Others are wise to swing for the fence.

Pension math, like anything that derives from the intersection of government and large corporations, can be a bit baffling. But the core concept is that the lower the interest rates, the larger the lump sum a company must provide to buy you out of taking a stream of monthly payments.

Upon reflection this makes sense. A pension, as I detail in my most recent book, It’s All About the Income (Lioncrest 2022), is essentially liquidating a sum of money, together with the interest it earns on the declining balance, over a person’s life expectancy. The lower the interest rate, the more money is needed to generate the level income. Higher rates, less initial money. The lump sum is the initial money.

No More Dynamite!

The table below illustrates this well. This is not a real life example of a pension. Actuaries would not make the big bucks if it were this simple. But it does illustrate the mechanics.

In this case, the fabled ACME Corporation is on the hook to pay Wile E Coyote, after years of doing his best to destroy Roadrunner, a monthly retirement income benefit of $5,000. The corporation, which (as one episode indicates) is owned by Roadrunner, has promised to finance a fixed portion of Wile E’s monthly income needs.

Wile E has a statistical life expectancy of 15 years. He’s 60 now and coyotes, on average, make it only to 75. If ACME assumes it earns 6 percent on the funds it is paying Wile E, it needs just under $600,000 when he commences his retirement. If interest rates are in the tank and it can safely earn only 4 percent, the initial lump sum increases by 15 percent to roughly $675,000. 

Less Is More and More Is Less

It may be counterintuitive, but low rates are your friend if you have a lump sum pension option. High rates are your enemy.

Why does this matter? You may have noticed that interest rates are spiking off historic lows, and this won’t be good for your lump sum. Each pension plans sets its rates at different times, but many do it once a year, late in the year. If this applies to your plan, the lump sum you’re quoted today is likely based on 2021 low interest rates. Wait until 2022 and you may do a Wendy’s “Where’s the Beef?” when you confront the 2023 offer.

This shrinkage may also make the after-tax value of working an extra year or even a few extra months paltry if not negative. Consider Wile E, who was taking down a considerable $150,000 a year as he approached retirement, much of the comp in hazard pay. If he worked an extra six months, his entire pretax salary of $75,000 (half of $150,000) would have been consumed by his reduced pension.

One Day May Cost You $100,000!

I saw this back in the late 2000s when a company at which I taught financial planning classes allowed employees to model the pensions based on current and future year projections. Although the monthly benefit stayed the same, the lump-sum offer of one soon-to-be retired was reduced by six figures—more than he’d earn if he’d worked the entire year—if he left in January as opposed to December. If he worked one month, he would lose more than a year’s salary in reduced lump sum payout.

Thanks to good planning, that man left with a smile and a seven-figure check.  He got a free year of life.

Not a bad payday for spending a little time analyzing.

It May Matter even if You Plan to Take the Monthly Check

You might be tempted to relax and write off the above as hysterics of an overanalytical financial planning dork. After all, you plan to take the monthly benefit. That’s not changing and, unlike the highly stressed Rick, you’re not working a few years more to boost your payout. You’re leaving soon and your monthly mailbox money will not be affected by any of these analytics.

In the past, I’d have agreed with this logic. A recent planning case, however, rocked my world. I saw something I’d never seen before. I’ll get to that in a minute. First, the background.

My engagement centered on straight fee-only retirement planning for Roy, a 58-year-old man who, like Rick, was sick of his job. Examine the facts, model the options, and advise on the best course of action. Roy had a complex pension. It offered a straight life annuity (SLA), lump sum, partial lump sum, and even an inflation-adjusted option. This is just the sort of thing that prompts academics to quiver with delight.

Getting paid to dive into this is not a bad way to spend the day. It was just the sort of job that provided an excuse to break out the Excel.

I ran the lump sum versus the SLA as a liquidation percent.  It came to 5.4 percent, as the table below illustrates. In other words, the pension offer was just over $2,060 a month for the rest of his life. He could take this or $460,000. The liquidation percent was 5.37 percent. This too was not surprising, given the many pensions I’ve analyzed in recent years.

My Shock and Delight

As a general practice, we always check a lump sum and annuity option against what a lump sum could purchase in the private single premium immediate annuity (SPIA) market. For example, in this case the lump sum offer is $460,000 and the monthly payment option is $2,060. This transparency makes it easy to verify the value of the deal.

We know the age, so we take the lump sum and see how much monthly income this will purchase from a highly rated insurance company. These private annuities pay commissions to agents, so it stands to reason that they pay less, per dollar of lump sum, than the employer’s annuity offer.

The World’s Changed—At Least for Now

I was shocked when I checked and found that the lump sum would purchase $2,399 in monthly income from a highly rated insurer on the open market.

That’s right! If he took the lump sum and purchased a Single Premium Immediate Annuity (SPIA) from a highly rated insurance company instead of letting his former employer send him the funds, he stood to get $2,399 instead of $2,060 a month.

I could not believe it. I don’t recall ever witnessing a commission-loaded SPIA beating a group annuity by more than 15 percent! I double checked with multiple carriers. The results replicated across multiple companies. It’s true, at least for now.

Take the Income and Pocket the Change

This opened a world of favorable options for Roy and may do the same for you. Recall that he had the lump sum option or the annuity option. In this case, a private insurance company would match his pension option for only $395,000. That is, he could take the lump sum, transfer $395,000 of it to an insurance company in exchange for $2,060 for the rest of his life, and invest $65,000 in an IRA to use as he pleases.

Once he is in the world of lump sums, he can select his monthly income amount. No need to be tied to the company’s preset options. The takeaway is that he is getting a much better deal in the private market. As you can see from the table, the increased annuity income will pay out just over $100,000 more than the pension if Roy makes it to 85 and plenty more if he keeps on going. If he uses the lump sum to match the employer pension, it frees up $65,000 immediately.

Consider the Risks

Life is all about tradeoffs and we are rarely comparing apples to apples. Corporate pensions are governed by the Employee Retirement Income Security Act of 1974 or ERISA. This means that they are guaranteed by the federal government through the Pension Benefit Guaranty Corporation (PBGC) up to preset limits by age. The PBGC would fully guarantee my client Roy, at age 58, against default for a monthly pension of up to $3,537. This more than covered his amount.

Once he steps out of the ERISA-protected world, he loses this backing. In the private annuity space, the income is backed by the claims paying ability of the carriers with some additional protection provided at the state level. That is why I compared only highly rated carriers. Is the PBGC protection worth a 15 percent reduction in income? $65,000 today? $109,000 by age 85? Some people may say yes, others no. There is no right or wrong answer here. It is important that you understand the tradeoffs and draw your own conclusion.

Limited Time Offer

This opportunity is not likely to stick around for long. I am no actuary, and I don’t work in any pension department or for any insurance company. That said, my hunch is that this money shot is the result of private insurers responding quickly to rising interest rates and corporations adjusting their assumed interest rates annually.

The purpose of this article is to ring the bell alerting you to the opportunity to potentially make some lemonade from the lemons this year’s financial markets have offered up. To paraphrase the counsel of the Zac Brown Band in its song “Let it Go,” when a pony comes a-walking by, you might want to put your rear end on it.

Michael Lynch CFP is a financial planner with the Barnum Financial Group in Shelton, CT, where he focuses on his clients’ finances so they can focus on their lives. He teaches consumer-oriented financial planning courses for leading organizations, including Madison Square Garden and Yale New Haven Health Systems. He is a member of Ed Slott’s Elite IRA Advisor Group and the author of Keep It Simple, Make It Big: Money Management for a Meaningful Life, October 2020, and It’s All About the Income: A Simple System For a Big Retirement, May 2022. You can find more articles and videos at www.simpleandbig.com. He can be reached at mlynch@barnumfg.com or 203-513-6032.

Securities, investment advisory services, and financial planning services are offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000. Any discussion of taxes is for general informational purposes only, does not purport to be complete or to cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate.

CRN202507-2830038

Take Your Job and Shove It

“A Harvard-trained economist says ‘early retirement is one of the worst money mistakes—here’s why you’ll regret it,’” blared a masterfully crafted clickbait headline.

I couldn’t resist. I clicked. 

The author is prominent economist and personal finance author and entrepreneur Lawrence J. Kotlikoff.

He wasted no time delivering his thesis: “For most Americans, early retirement isn’t just a decision to take the longest vacation of their lives — it’s one of the biggest money mistakes that they will regret,” he writes. “The reason is simple: We are, as a group, lousy savers, making early retirement unaffordable. Financially speaking, it’s generally far safer and far smarter to retire later.”

Kotlikoff makes a familiar case in this piece. He cites the meager saving of the average American and notes the substantial increase in annual income from delaying Social Security.

His tight and entertaining presentation makes sense. It represents the conventional wisdom on retirement in America. Yet I can’t buy in. In my experience as a retirement practitioner—a facilitator of financial independence—I find that the decision to leave full-time paid work behind is nearly universally positive.

I set the article aside and pondered our disconnect. Why my unease? A month and a few re-reads later, it hit me. The key words were right there at the top of Kotlikoff’s piece: “regret,” “as a group,” and “safer.”

Pick your poison

Let’s start with regret. Kotlikoff worries that people will regret retiring early and then coming up a few dollars short. That may be a mistake. But so would working an extra decade to pad the portfolio, only to find yourself among the half of people who stop needing any money prior to average life expectancy.

Reframe regret

What if the article headline had blared, “Working too long is something you’ll likely regret: Experts say the safest way to ensure you enjoy years of financial freedom is to call it quits as soon as you can”?

Minimizing one regret may maximize another

I often ask groups of people to take a moment and recall the thing they did that they regretted the most. After a minute invariably smiles will appear on many faces.  Why? Since they aren’t serving time for their act, I suspect it’s now water under the bridge and often a funny story. I’m sure you have one. I have a few.

I then ask people to ponder a thing that they regret not doing, a shot they didn’t take. The room’s mood sours and smiles turn upside down. The regret for missed opportunities grows over time. This is the asymmetry of regret.

Getting retirement right or wrong

Faced with a retirement decision, there are two ways to be right and two ways to be wrong. You can retire and enjoy it, and therefore be right. You can also continue to work, live a long life, and have the extra years of earnings play a critical role in your advanced years. Here too you’d be right.

Alternatively, you can retire early or at least from a job that you could have kept and either not like the new freedom or eventually run short of money. You were of course wrong.

So too if you kept your nose to the grindstone enriching yourself and the company only to expire with significant unspent funds. That’s akin to trading in a car with new brakes, fresh tires, and a full tank of gas with no compensation. Now there’s some regret.

The endlessly fretting retirement experts focus only on one type of error and one type of regret. For the risk-averse, the very sorts of people who flock to tenured academia, government bureaucracies, policy think tanks, and the media, this may be correct. For many others it misses the point entirely.

Groups don’t retire, individuals do

The next disconnect derives from the academic’s focus on aggregate data rather than individual reality. Much is made of the meager average savings of Americans, with no reference to the variability. Many households are statistical zeros. They’ve never had money and never will. They’ve been living tight for years and will continue to do so in retirement. For some, it’s due to low-paying jobs. Others just refuse to delay gratification and invest.

In a free society, this may or may not be a pressing public policy issue. It shouldn’t be a personal concern for people who have high retirement funds of six or seven figures, ready to provide income. These people will also have Social Security on deck and perhaps even a pension or two.

The perpetually broke are certainly not the audience reading this article or CNBC websites where Kotlikoff rang his warning bell. There’s never any evidence presented that it’s these folks who are retiring and therefore in peril. In fact, a long-running Gallup survey of actual retirees consistently shows that they have no trouble generating enough income to live comfortably.[1] And if you enter retirement with a few dollars, your chances of spending your last dollar are thankfully low. An in-depth study found that people who entered retirement with at least $500,000 typically spent down only 12 percent of their principal in 20 years.[2]

Digging into data

The best look at American household finances comes from the Federal Reserve Survey of Consumer Finances (SCF). This triannual deep dive examines our income, assets, liabilities, and even insurance. It paints a far more complex and happier picture of personal finance and retirement readiness than the straight average of retirement plan balances.

For example, the oldest Americans have the most money, which makes sense when we consider how it compounds. The median net worth of Americans aged 65 to 74 is $266,000. The mean is $1.27 million.[3] 

Combine this with the typical spending needs of Americans. The Federal Reserve Survey shows a median income for Americans aged 65 to 74 of $50,000 a year.  The 2021 U.S. Bureau of Labor Statistics Consumer Expenditure Survey provides deep empirical insight into the actual financial lives of Americans. Its most recent report pegs the average (mean) income for American households headed by boomers born between 1946 and 1964 at $78,000.[4]

This data set dives deep into consumption data. Two-person households over age 55 spend roughly $55,000 at the mean.   

This level of spending may seem low to the coastal and urban professionals who write about retirement. But it puts the shockingly low aggregate savings numbers in perspective. Suddenly a couple’s $3,200 a month in tax-free Social Security, along with a paid-off house and $250,000 in retirement investments, cover the spending needs of a substantial portion of retirees. It even explains why few Americans spend down their assets in retirement.

The problem is framing. Six- and seven-figure-income professionals know very few people who support households on $50,000 to $75,000. But these are most Americans. Social Security is progressive and income taxes are extremely so. It just doesn’t take multi-millions of investments to fund the average retirement. It may, however, take millions to fund yours.

Safety matters

It’s easy to conceive of retirement as a binary choice. Many people will work and retire completely. It’s a light switch. Retirement in this view is risky, as it entails walking away from a steady paycheck that can never be replaced.

Many of my clients get their last paycheck, settle on an income strategy for retirement funds, and book the winter in Florida or South Carolina. Others, however, will push off from the 5-day, 40-hour week and 50-week year to work part-time, often in the field they ostensibly left.

In both cases an early retiree’s risk of poverty is mitigated by a substantial reserve of human capital. We’re all knowledge workers now. We get more valuable and have more leverage as we age. A person’s human capital doesn’t evaporate the day he or she retires. Their networks don’t disappear. In cases where early retirement may in fact be a mistake, the destination is not destitution. The mistake, if it is one, is not irreparable.

Earn a little, live a lot

This ability to earn provides a serious safety net. In retirement a little earning goes a long way. Social Security provides a floor below which retirees can’t fall. Then there are the accumulated funds that in most years will earn more than a person’s withdrawals.

Retirement Daily readers will be familiar with the 4% withdrawal guideline. Adherents to this approach to retirement accumulation and income generation need $1 million to generate $40,000 of annual income that they can expect to inflate to match increases in the cost of living.

These number can be depressing. Researchers hark on them constantly, with some particularly nervous types making predictions that even the 4% percent withdrawal rate is too aggressive. Examined from another angle, this guideline highlights the massive value of even part-time work kept in reserve. A part-time job bringing in $30,000 a year is the equivalent of $750,000 of capital. Most retirees are highly skilled, so generating this sum annually is not difficult.

Speaking of a cash infusion

In my experience, few people explicitly base their retirement plans on catching an inheritance. Reasons for this are myriad, from not knowing how much mom and dad have, to loving one’s parents and not wanting to face the inevitable, to the reality that it’s their money, they worked hard for it, and they have every right to spend it all.

All well and good. But the reality is that trillions of dollars are headed down as I write. The adoption of 401(k)s and IRAs as a dominant retirement system means that retirement income comes from mounds of money saved by individuals, not corporate coffers, government budgets, or insurance companies. A 60-year-old likely has at least one parent in his or her 80s. Again, the Federal Reserve pegs average net worth for Americans over 75 at $254,000 (median) or $977,000 (mean).[5] When the older generation no longer needs the income, the capital passes down. Houses come with cash these days.

They call it work for a reason

Work provides many non-monetary benefits: human interaction; fulfilling, meaningful tasks; and structure to the day, week, and even year. For some of us, our vocation is our avocation and we’d rather work than do most other things. I suspect this is true for most intellectual earners. We get paid for having fun.

But each positive arrives with an offsetting negative. At low levels, work is a grind and the pay sucks. Physical jobs such as the heavy construction field in which I grew up wears people out physically. Not everyone can work until age 70 or even 65. Even cushy jobs get repetitive and require us to leave home in snowstorms, request time off for family functions, and push household chores to the weekends. Would you rather spend time with Martha at the office listening to tales of her grandkids or with your grandkids manufacturing tales of your own?

A recent study published by the Center for Retirement Research at Boston College indicates that, on average, Americans work to live rather than live to work.[6] These researchers focused on how empty nesters use any freed-up funds to invest or pay down debt. It appears from this data set that on average, recently liberated parents neither pay down debt nor increase retirement savings. Instead, they reduce their hours and take more of their lives back when they no longer need to support the kids.

When financial independence appears possible, the benefits of leaving paid work outweigh the risks. Many people still have pensions that make leaving possible. Others have large investment balances from years of diligent investing. For others, lower levels of income mean a less expensive lifestyle that can be supported with Social Security and a cash side hustle.

You’re the only expert that matters

At the end of the day, it’s likely the clickbait nature of the news business that drives these retirement crisis articles. If it bleeds, it leads. People worry about a mistake and these stories feed fear.

This doesn’t explain why we don’t see equivalent stories about the half of people who die before their life expectancy and therefore worked far longer than necessary. Perhaps it’s because these folks are harder to pin down for interviews and don’t do so well on camera.

The data point that matters to you is one: your family’s. It doesn’t matter how much the average American your age has saved for retirement. It’s not a decision point how many people don’t have pensions any longer. The only thing that matters is how much you have stashed and what other resources—pensions, social security, part-time earnings, and spousal earnings—you can count on.

Once you have enough, you’re financially independent, even if you’re 60. Quit that job and do what you want. That’s the safest way for you to maximize the time you spend retired. If you stay a day longer than you must, there’s no doubt that you’ll regret it.

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Michael Lynch CFP is a financial planner with the Barnum Financial Group in Shelton, CT, where he focuses on his clients’ finances so they can focus on their lives. He teaches consumer-oriented financial planning courses for leading organizations, including Madison Square Garden and Yale New Haven Health Systems. He is a member of Ed Slott’s Elite IRA Advisor Group and the author of Keep It Simple, Make It Big: Money Management for a Meaningful Life, October 2020, and It’s All About the Income: A Simple System For a Big Retirement, May 2022. You can find more articles and videos at www.simpleandbig.com. He can be reached at mlynch@barnumfg.com or 203-513-6032.

Securities, investment advisory services, and financial planning services are offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000. Any discussion of taxes is for general informational purposes only, does not purport to be complete or to cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate.

 CRN202509-2338118

[1] Megan Brenan “U.S. Retirees’ Experience Differs from Nonretirees’ Outlook,” Gallup, May 18, 2021.

[2] Sudiptp Bamerjee, “Asset Decumulation or Preservation? What Guides Retirement Spending?” EBRI Issue Brief, no. 447 (Employee Benefit Research Institute, April 3, 2018).

[3] “Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances,” Federal Reserve Bulletin, Board of Governors of the Federal Reserve System, September 2020, Vol. 106, No. 5

[4] U.S. Bureau of Labor Statistics, “Consumer Expenditures-2000,” www.bls.gov/cex/

[5] “Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances,” Federal Reserve Bulletin, Board of Governors of the Federal Reserve System, September 2020, Vol. 106, No. 5

[6] Andrew G. Biggs, Anqi Chen, and Alicia H. Munnell, “How Do Households Adjust Their Earnings, Savings, and Consumption after Children Leave?” November 2021

The Unicorn

The second chapter of my forthcoming book It’s All About the Income (May 2022) kicks off with a picture of a unicorn to make the point that there’s no such thing as pure safety, a government-backed investment that “produces high levels of reliable income.” My point is not subtle and in general I’m sticking to it. True financial safety requires a diversified approach, a mix of investments of which some will always be underperforming at any given time.

Yet I’m being proven wrong as I write. I was alerted to this a few months ago on a call with Tom, a smart man who was spending hours educating himself on the ins and outs of personal finance. He’d been spending time on Tik Tok and asked me about a U.S. government-backed bond that pays just over 7 percent. I smelled a scam, explaining that risk always comes with reward, that the 10-year treasury just broached 2 percent, and that this must be a junk bond. “You’re getting ripped off,” I condescended.

I was wrong. Very wrong. And I owe Tom an apology for my arrogance. He was referring to Series I Savings Bonds (I Bonds) that as of November 2021 were paying a six-month interest rate of 7.12 percent annualized on newly purchased paper.

I’ve been pulling penance for my ignorance and arrogance by discussing this opportunity in one-on-one meetings. But it’s long overdue to blast the news. This is not a recommendation to purchase these securities from the U.S. government. They may or may not be appropriate for you. They may work for your financial plan or just be an annoyance. That’s for you to decide. If you want advice, you know where to get me.

That said, here’s the skinny.

I Bonds date back to 1998. They are the direct version of Treasury Inflation Protected Securities and have some important differences. They can only be purchased directly from the government on treasurydirect.com or through a tax return. Each person is limited to $10,000 worth a year, plus a potential for $5,000 more paper bonds purchased with tax refunds.

This provides a strange incentive to overpay taxes to generate a refund of this magnitude. Here’s a hack. Make a fourth quarter estimated tax payment of $5,000 on January 15th. You won’t be providing Uncle Sam much float.

The bonds mature in 30 years and taxation on the interest is deferred until you cash them in. (You can elect to pay the taxes each year if you prefer.) The principal value will never go negative. You must hold them for at least one year.  If you cash them in prior to five years, you will give back three months interest. After five years they are fully liquid without any penalty.

These are the cousins to Series EE Savings Bonds, the traditional U.S. Savings bonds. The returns comprise two features. First, the underlying interest rate, which is currently zero. This rate is set at issue for each bond and will never change.

The second component is a principal adjustment for inflation that is based on the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CFI-U). This index includes energy and food, two of the leading expenditures for many consumers. This rate resets twice a year, in November and again in May. Your bond will reset every six months in the month in which it was purchased.

Given the recent price spikes, the rate jumped to 7.15 annualized in November 2021. As the table below illustrates, some purchasers of I Bonds in previous years are already enjoying 10 percent or higher returns due to base interest rates of more than 3 percent in earlier times. Hence my Unicorn, almost. In my defense, there have been plenty of years in which these bonds did not produce high income. Therefore, the current rate of return can’t be considered reliable. 

I like to say that there’s always something good going down somewhere in personal finance opportunities. Right now, I Bonds present an interesting opportunity for risk-averse investors who seek inflation linked interest rates. The only drawbacks are the small quantity of these bonds which you can purchase and the inconvenient fact that, given today’s high prices, the real returns are set at zero. That’s still better than what banks are offering.

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Any discussion of taxes is for general informational purposes only, does not purport to be complete or to cover every situation, and should not be construed as legal, tax, or accounting advice. Clients should confer with their qualified legal, tax, and accounting advisors as appropriate. Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 6 Corporate Drive, Shelton, CT 06484, Tel: 203-513-6000.

CRN202504-2238704

3 Business Growth Tips from "Keep it Simple and Make It Big"

What happened that made you decide to write the book? What was the exact moment when you realized these ideas needed to get out there?

I’ve spent much of my life and certainly now most of my day telling stories to illustrate important concepts and things I feel are deep truths.  The urge to get it all in one place consumed me two years back, as the summer gave way to the New England fall colors.  I lit a fire and started writing.  Keep It Simple, Make it Big is the result.  I designed this book as a comprehensive, yet extremely accessible overview of the fundamentals and strategies of personal financial success.  I’ve had years of experience working every day with middle-class American families and I wanted to share the strategies that create financial success.  The United States retirement system is often criticized for not really being a “system.” That is, journalists and academics are inherently biased to favor a top down, one size fits all system that is regulated and controlled by government and other large I institutions that can be manipulated, prodded and controlled by pressure groups.  I, on the other hand, think of system is not only not broke but it offers fantastic opportunities for almost everyone to create their own financial success.  It is self-serve, however, so people must act. 

1. What's your favorite specific, actionable idea in the book?
   
   

Hands down, it’s big goals motivate.  Don’t ask “why” ask “why not?”  A great life doesn’t just happen, it’s created.  I view finance as a fuel to power the life of one’s dreams.  For most people, wealth is not an end in and of itself, it’s a means to an end.  We all need to understand this, take a step back and, as Dr. Stephen Covey wrote, begin with the end in mind, and decide what we want out of our short time on this earth and then go get it.  As it relates to finance, this goal will determine how much one needs to accumulate and that will determine the best places to do so, Roth IRAs, employer plans, non-qualified investment accounts. Getting into financial details, the actionable items include people really understanding the basic structure of our tax code and how it relates to their family’s income and what they get to keep.  Also the proper use of insurance to protect that which they can least afford to lose. And a proper understanding of investment risk and time horizon, specifically that assets such as CDs that appear safe are actually high risk over the long run and assets that are risky in the short term, such as ownership of publicly traded corporations, are the safest over the long run.  Finally, returning to a core concept, our financial lives tend to be based the primacy of income while we are working and the primacy of expenses when we are retired. 

1. What's a story of how you've applied this lesson in your own life? What has this lesson done for you?

I’ve pretty much spent my entire life applying these principals.  Asking why not, allowed me to change careers twice, each time with a reduced income stream.  The second transition, from a writer to financial advisor, occurred when I had a brand-new baby and a brand-new mortgage.  I left a near six figure writing career for a position that paid $800 a week for 13 weeks and zero after that.  I was able to do it because I followed the principals I document in the book.  I always saved and invested and understood my expenses, necessary and otherwise.  I dug in and paid the price of success.  With family help, I was able to take care of a disable daughter and build a good life.  These days, I track all my time.  I work a 50-hour week, I’ve been fishing 40 days this summer with friends, family and clients, and pre-and post-covid I will visit every major league baseball park with my parents.  My son is getting a fantastic education at a boarding school, which I can afford due to years off business building. Again ask why not? I am currently in the process of getting my Commercial Driver’s License back so I can drive Semi-Trucks.  I love trucks and I had a license when I was 18 but I went to college, drove buses then, and eventually let it lapse.  I’m nor sure how I’ll use it, but you may just see me in your rear-view mirror heading south.  I’m pretty sure I’ll in a rare club: a financial advisor who published a book and secured a Class A license in the same year.   

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Eggs in a Basket

Who among us has not been warned against putting all of our eggs in one basket? This wisdom, handed down through the ages, reminds us that success often depends as much on our ability to manage life’s risks as it does to seek life’s rewards.

The fact is that through much of our lives, in most of life’s aspects, we are in fact highly concentrated. After a few years of general study, for example, we settle down and concentrate our knowledge in a specific area, be it engineering, medicine, business or some other field. If we don’t do so in school, the workplace pushes us in this direction. We may progress from laborer, to heavy equipment operator to specializing in a particular piece of equipment. 

We concentrate our affections, when we say “I do,” after hearing the better and worse line. Our real estate holding are usually limited to one zip code. 

I do know for sure that in the area of our financial lives, it’s imperative that we manage concentrated risk. While it’s not limited to investments, we often find people are taking far too much risk in their retirement and investment accounts. 

The most common way people find their investments concentrated is in a company 401k plan. Many companies matched contributions in employer stock and many people put their contributions into employer stock as well. It’s not uncommon to find a person with more than half of their invested wealth in a single company. 

People may also find themselves with a large amount of stock due to an inheritance, the purchase of company stock through an employee stock purchase plan or systematic investing in a dividend reinvestment plan. It’s never a bad thing to own the stock of great companies. But it is possible to have too much of a good thing. Especially if that good thing turns not so good.

Stock prices move quickly and significantly, sometimes when the market is closed and retail investors have no way to get out. I don’t need to name companies, but there have been some high profile disasters for rank-and-file employees in the last few months and years. 

Investors have many good options to diversify their investments and spread risk. Inside employer-sponsored 401k plans, there are no tax consequences for selling and the trading costs may be paid by the employer. Many 401k plans offer diversified investments in most asset classes where a single selection will offer ownership in hundreds of companies. The company stock you sell may very well be one of the companies, but it will be joined by many, many more.

Stock positions in taxable accounts can offer more challenges. Sometimes the challenge is emotional, when the stock was acquired through inheritance. Often it’s a tax issue. People know they should diversify a position, but selling often triggers a tax on the gain.

There is no best way to deal with emotions. One strategy, however, is to determine the amount of shares the individual originally purchased and sell down to that number. One can also keep a token amount of stock in honor of the grantor.

As for taxes, we must always remember that we pay taxes only on the gain, not the entire amount. Under current tax laws, the maximum capital gains tax rate is 15 percent federal plus applicable state tax, which in Connecticut is an additional 5 percent. Market fluctuations, in contrast, affect the entire value of the stock. They can be severe, wiping out in a day far more than taxes would have claimed had the position been trimmed.  Investors must also remember that they will have the cash to pay the taxes by reserving a portion of the sale proceeds. 

Concentrated stock can be addressed by hedging, selling or gifting. A hedging strategy entails setting floors on the price at which one will keep the stock. The best way is through options, and it requires attention as well as expense.

Selling the stock is generally straightforward. One exception might be for a person who is an executive and considered a control person of the company.  In that case they may have to establish a systematic plan.

Investors can pool large positions into exchange funds, which are vehicles that allow many people with concentrated positions to come together and pool their shares. There are risks and costs associated with such pooled funds that need to be fully evaluated before entering such an arrangement.

People should also consider the charitable option, especially if they are currently giving cash to a church or charity. If they gift stock, the charity can sell it and pay no tax due to their tax-exempt status.

There is no single-best way to manage the risk of a concentrated stock position. Thankfully, there are many good ways to do so. The one that’s best for you will depend on your individual circumstances.

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Facts of Life Part II

Normal people don’t spend excessive time contemplating their demise. That said, the last column started a conversation on just this topic, covering the issue of who might need life insurance and how to figure out how much is needed.  This column will address what kind of life insurance might meet your needs, should you need it.

First a review. The first step is to ask the question: I’m dead, now what? If the answer is someone you love needs money, then you have a need for life insurance. Step two is to determine how much is enough (there’s never too much), which can be accomplished by either putting a value to foregone future earnings or a more detailed determination of what it would take to support those who depend on you. 

It is only then that we get to the third step, determining which type of insurance best suits your needs. Although the type of insurance comes third in the process of evaluating a life insurance need, it is the focus of many debates over life insurance and it often causes paralysis, or creates an excuse to do nothing. Not acquiring life insurance because of an inability to determine the kind is the equivalent of not eating because one can’t determine the perfect meal. At some point, it makes sense to simply pick a dish and meet your basic obligation to yourself. 

The kind of insurance should always be a tertiary consideration to determining the need and amount. If one needs life insurance, taking action to purchase it is a moral decision, similar to securing a safe residence for one’s family. The particular type one acquires is a business decision, akin to deciding whether it’s best to rent or buy an apartment, condominium house or country estate.  

So what are the choices?

There are two type of policies, let’s call them “If” policies and “When” policies, temporary and permanent, often known as term and permanent.  One is not better than the others, just as a sedan is not better than a pickup truck. They are simply designed for different jobs. 

Let’s start with term insurance—the “If” policies. Term is pure life insurance, a contract that is in force for a period of time or term, generally referenced to the period of time over which the premium payments are fixed.  These contracts pay an income-tax free death benefit if the insured dies while the contract is in force. Most policies through work are term policies. 

These policies offer no cash values or investment features. Since the probability of death is low for healthy people who are young, term insurance is inexpensive on a cash flow basis for young people. Term is generally appropriate to cover large temporary needs, such as replacing money for a child’s education, a spouse’s income should death occur before retirement assets have been amassed. 

Permanent policies are designed to be, well, permanent. These are the “when” policies, as in they will pay an income-tax free benefit when the insured passes on.  The varieties include whole life, universal life, and variable universal life. 

These variations, while significant, are dwarfed by the similarities. Permanent policies combine an insurance feature with a cash accumulation account. The premiums may be level or variable, but in the early years they will generally be more expensive than term. They are, however, designed to remain in force and therefore pay a benefit at advanced ages. This makes it an appropriate choice to cover long term and permanent needs, such as replacing lost pension and social security income, providing for children with special needs, or providing money to pay estate taxes. Since they are designed to pay when one dies, they may end up significantly less expensive than term over their lifetime. 

In the long run, the best investment is the investment that provides the right amount of money when it is needed the most. The best insurance is that which provides the appropriate benefit when it is needed. Sometimes the need is temporary, and therefore a term insurance solution is appropriate. Sometimes, it is permanent and requires a permanent solution. 

The first step, in either case, is taking the time and making the effort, either by oneself or with a professional, to identify your needs and put dollar figures to them. After that, one makes the business decision as to what combination of insurance to use to meet those needs.

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Home In Trust

Keeping our homes is a prominent financial priority. This is the third and final installment in a series of articles on strategies that may  protect the family home in the face of expensive long-term care services. The first, looked at creative uses of life estates. The second, long-term care insurance and family members. This column will examine the use of trusts. 

First a bit of background. The average net worth of Americans ages 65 to 74 is $190,000. Nearly seven in ten own a house, the average value of which is $150,000. (Source: Federal Reserve Board, Survey of Consumer Finances, 2004) 

The American dream starts at home. The threat is nursing home care. We are living longer. A married couple that celebrates each other’s 65 birthday has a 60 percent chance that one will be blowing out 90 candles on a cake. (U.S. Census Bureau) When we live this long, we often need help. And help is expensive. In Connecticut, average home care costs $25 an hour.  Assisted Living is at least $3,500 a month. Nursing home care tops $300 a day. (Source: MetLife Mature Market Institute 2007)

The nursing home bill is often first paid from income, then bank accounts, then other countable assets may have to be liquidated, and finally the state, if needed. In Connecticut, the average nursing home resident is a single woman at least 85 years-old on state support. (Source: State of Connecticut Annual Nursing Facility Census, September 30, 2007) This means she has $1,600 or less to her name. 

Of all the strategies discussed, transferring a home to a trust is probably the most complex to execute and cumbersome to maintain. Trusts can only be used with the assistance of a qualified attorney. 

Trusts can either be revocable or irrevocable. A revocable trust will do nothing to protect the value of a home, as the trust’s contents are easily accessible. Therefore, an irrevocable trust is required. In this case, the irrevocable trust would provide the grantor with the right to remain in the house and receive any income benefits there from.  This would allow the property to be included in the grantor’s gross estate and achieve the step-up in basis discussed in the life estate article while at the same time removing the property from the grantor’s probate estate and thereby avoiding estate recovery.   (Caution – While under current state law many states, including Connecticut, would exclude a house held in such an income only trust from estate recovery, federal law does authorize these states to expand their definition of available assets to include any asset in which the decedent has any interest 

Here’s how it works. 

A grantor places the house in a trust. This is a transfer for Medicaid purposes. It may or may not be a gift for estate tax purposes, depending on how the trust is drafted. The grantor has given up control of the house, but the trust is drafted in such a way that the grantor is responsible for paying the income tax on any income generated by the trust. 

The ultimate beneficiaries of the trust will be of the grantor’s choosing. In some cases, it will be rigidly established at the time the trust is established. In others, the grantors may retain a special power of appointment that allows them to change beneficiaries. The grantors can live in the house. They are responsible for its upkeep, but they no longer own it. 

This strategy provides for some flexibility. The transfer will always count as a Medicaid transfer, but the estate tax outcomes are entirely up to the grantors and their qualified attorneys. 

First the Medicaid transfer. Under federal law, when one applies for Medicaid assistance, the state will “look back” five years to determine if the applicant or the applicant’s spouse transferred assets to another person. If there was a transfer in this five year period, and a transfer to this trust would count, the value of that transfer would make the person ineligible for state assistance for the period of time that the monetary value of the transfer would have paid. This is marked from the date of application for Medicaid, not from the date of the transfer.  It is therefore important to transfer the house to the trust at least five years before any assistance is required.  In Connecticut, the average monthly cost of care penalty for 2008 is $9,464. So if a $500,000 house was transferred in the five year period preceding a need for Medicaid, it would make the person ineligible for state aid for 52 months. 

Now for estate tax. If the grantors are worried about estate size and ultimate taxation, they can make the transfer a completed gift, deal with the gift tax consequences and remove the asset from the taxable estate. If estate tax is not a concern, they can keep the house in the estate and enjoy a step up in the house’s cost basis to fair market value at the time the house transfers from the trust to the beneficiary. 

It’s entirely possible for a person to protect the entire value of their home even in the face of catastrophic medical or long-term care expenses. There are basically two sets of rules. One set is established by default. These are the rules that most people end up with. They require all assets to either be spent down or in some case be subject to recovery at death, including the value of the house for a single person. The other set of rules potentially allows for the protection of our houses and significant financial assets. It’s available to everyone in theory, but in practice only those who take the time to financially plan their lives actually enjoy them. They require a bit of effort, some time and working with professionals . In recent years the Medicaid laws have undergone a number of changes. Certain planning vehicles have been eliminated and most rules have been tightened. It is reasonable to expect that further changes will occur. It is vital that you speak with a local attorney with much experience in Medicaid planning.

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Identity Struggle

A colleague of mine often jokes that he recently had his identity stolen and his credit score increased. If you wouldn’t expect this to be the result for you, you may want to take steps to protect yourself. 

Identity theft is a serious problem. In 2007, more than 8 million Americans were affected at a total estimated cost of $49 billion, according to the Privacy Rights Clearinghouse. The effects are most often financial—the average incident sets a person back $5,720. It is hugely disruptive of one’s life, taking, on average 25 hours to resolve. But the effects can be even more dire. Criminals have been known to assume someone else’s identity when arrested. They then skip bail and the bench warrant is issued on the unsuspecting innocent. Spending the night in jail, I’m told, is no fun. 

Fortunately, taking a few prudent steps can reduce most of the risk of ever being a victim of identity theft.

One key way to avoid the financial effects of identity theft is to never pay with your money—at least not initially. This tip was shared with our firm by no less than Frank Abagnale, the once con-man now FBI consultant on whose life the movie “Catch Me If You Can” was based. Mr. Abagnale, who in his criminal days forged more than $2.5 million worth of checks, told us to pay for everything on a credit card. This puts the bank’s money at risk, not yours, should someone get a hold of your account. When the bill arrives, you can dispute the charges and the bank takes it from there. 

I know from experience that this works, as I once went on a shopping spree in Brazil with a Citibank Visa Card, even though I’ve never been to the country. The bank held me harmless. In another instance, my house was burglarized when I lived in San Francisco. The thieves got my wife’s jewelry, were able to spend my $50 but I never paid for the gas they put on my stolen credit card.

An added benefit: The card issuer may reward you in cash back or gift-card like credits  for using their card. 

Other prudent steps to take to guard one’s identity include an annual check of your credit report. This will allow you to see if anyone is doing business in your name. You can log on to annualcreditreport.com for a free copy of your report.

It is important to guard your Social Security number. It’s a good idea  not to have it on your checks. Provide it only to trusted institutions and individuals for legitimate purposes, such as opening an investment or bank account. 

Don’t discard your junk mail and old bank and investment statements—shred them. And don’t just shred them with any shredder, make sure to use a cross-cut shredder. Anyone dumpster diving for your information will only come up with confetti, not useful information. 

Moving from the physical world to cyberspace, it’s critical to protect yourself from predators. Install firewalls and keep them updated. Don’t respond to solicitations that can’t be confirmed to be from reputable sources. When you discard your old computer, make sure you wipe the hard drive clean with dedicated software. The delete function does not get the job done.

Finally, or perhaps even initially, consider purchasing home and auto insurance that provides for identity theft protection. An insurance company can’t prevent the theft any more than it can prevent the car accident or tree falling on the house. What it can do, however, is to assume the financial risk of the event for a set premium and provide skilled help in fixing the mess should it occur.

It is a bit sobering to think that in my relatively short lifetime I have gone from living in a community in which we not only didn’t lock the house but also left keys in car ignitions to a world in which we have to guard our Social Security numbers. But that is simply how it is. We just have to deal with it.

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Your Financial Plan

It’s a new year, a new beginning, and I’m pleased to introduce a new regular column focused on the importance of personal finance and the latest tools and techniques to make your money work as hard as you do.

I’ll use this space to address finance issues impact your daily lives. Don’t expect to find stock tips here—the only tip I ever provide is to align investment vehicles to your life’s great goals and your ability to weather volatility, and then get invested, keep investing, and stay invested. 

What you will find is practical guidance for your journey towards life’s great destinations: enjoying a worry-free retirement, educating the next generation, and even enjoying a luxury or two in the process. 

I’ll address the best way to hedge your bets—that is, manage life’s risks so that when bad things happen, you and your loved ones aren’t wiped out financially.

This column will not worship money, acclaim accumulation for accumulation’s sake, or celebrate conspicuous consumption. I will use this space to assist you in addressing the unavoidable reality of today’s world: If we want to prosper, it is up to us to make smart choices and put programs in place to ensure success.  

The government will not do it. 

Our employers will not do it. 

We must do it for ourselves. 

A great trend of recent decades is the shift of financial responsibility from governments and employers back to individuals. We’ve seen it in education—the day of the free public University is long gone. We’ve seen it in retirement—the traditional monthly pension check is being replaced by 401(k)-style accumulation accounts. We’re seeing it in health care—first dollar coverage for all things medical is giving way to increased cost sharing and IRA-style accumulation accounts. 

This shift is scary at times—but it’s not all bad. The shift in responsibility has come with new tools, tools that were not available to our parents and grandparents. 

The pension has given way to 401(k)s and now Roth 401(k)s. 

The IRA menu is long and growing: Traditional, Roth, Non-deductible, Simple and SEP. 

We can finance junior’s education with bonds, Education Savings Accounts, and Section 529 plans, to name just three choices. 

The passbook savings account has been joined by money market bank accounts, money market mutual funds, and short term CDs. 

Tools must be used properly for the proper job. This column will help turn you from an apprentice to a journeyman. 

Our ability to finance our dreams and consumption has grown as well. Many can remember the day when getting a credit card was an achievement. Today, our credit options not only include the plastic in our wallet, but the equity in our homes, a portion of the balance in our retirement plans, and, of course, the finance department at the store or dealership where we are making our latest purchase.

Which finance tool to use for what job?  We’ll address that too.

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The Long-Term Care Advantage

When people consider long-term care, they often think about nursing homes. In fact, long-term care is not just about nursing homes, and understanding that can help you protect your family and finances.

Long-term care is a continuum of care services you will likely need when you live a long life. The question is not necessarily who will take care of you, because your family will most often, but rather what providing that care will do to your family and finances.

Long-term care is defined as needing assistance with activities of daily living (toileting, bathing, dressing, eating, transferring from one point to another, and continence). It also includes care due to cognitive impairment so severe that the individual needs constant supervision.

The New England Journal of Medicine has estimated that 43 percent of people over age 65 will need nursing home care for some period of time in their lives.  Many  will also need care in their own homes, before or after nursing home stays. Those who never enter a nursing home may still need long-term care. The question is, who will pay for the at-home care?

Medicare typically pays only for skilled or rehabilitative care, not long-term custodial care. Medicaid will pay for custodial care, but most often that which is provided in nursing homes. So many people end up using retirement savings to pay for custodial care, and that can put them at risk of outliving their assets.

Long-term care insurance can pay for the expense of having experienced home health professionals to assist the family members with the toughest tasks, allowing the family to provide care better and longer at home.

Connecticut residents can benefit from the Connecticut Partnership for Long Term Care, a collaboration between the state and insurance industry that allows residents to preserve assets and still, if necessary, rely on Medicaid. If you buy a Connecticut Partnership-qualified long-term care insurance policy, you may retain a dollar of assets for every dollar the policy pays for care without that dollar being counted toward the Connecticut asset maximum permitted to become Medicaid eligible. 

When buying this insurance, look for a long-term care specialist. One consideration is whether they talk first about a plan or a product. If they are interested in developing a plan to solve your long-term care needs, you are probably on the right track. If they focus only on product and price, you’ll probably want to get another opinion.

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Credit Check

An annual physical is a valuable tool to keep your body in shape, and it’s also a vital part of maintaining your financial health.

Reviewing your credit history is part of a thorough financial checkup, and under the Fair Credit Reporting Act, Valley residents may now take a close look at their credit records for free. That’s a real boon to consumers in these days of computer errors, identity theft, and an increasing reliance on credit scores for major purchases.

Your credit history determines whether you qualify for a zero percent car loan, a cut-rate credit card offer, or a rock-bottom mortgage rate. It can affect your ability to rent an apartment or house or even land a job. And it may determine whether you must pay a deposit on utility services.

Under federal regulations passed in 2005, you are entitled to an annual look at the records the three major credit bureaus keep on your finances, at no charge. This allows you to discover and correct any mistakes, to see how well you are managing credit, and to improve your record if necessary.

To request your free reports, go to www.annualcreditreport.com or call (877) 322-8228.

Study the reports, making sure the information is accurate and that all of your accounts are included. Credit can be adversely affected if your major accounts don’t show up, as a solid payment history works to boost one’s eligibility in the eyes of future suitors. Obviously, erroneous information on the ugly side – such as late or no payments to accounts that are not yours – need to be cleared up.

You may challenge any information on the credit reports and you have a right to receive a response within 30 days. Do it in writing and keep copies of correspondence. If the credit bureaus can’t verify the information with the reporting credit issuer, by law they must remove the item from your permanent record.

The free reports won’t provide your actual credit score. The most well-known of these is the FICO score, developed by Fair Isaac & Co. You may obtain this number, which ranges from 300 for the highest risks to 850 for the lowest, with a $7 payment at the time you order your credit history report. So if you want to know your score along with your history, have your credit card handy.

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There’s Hope for the CD Blues

Are you retired or near retirement? Do you have more money than you need, want, or know what to do with at this point in time? Are you tired of paying unnecessary taxes? 

I ask these questions because more and more I am running into people who fit this profile. It’s not that they are Bill-Gates rich, but they’ve lived right, saved a few dollars, and are able to meet current bills with current income. Still, they have some money that not only is providing low returns but, to add insult to injury, even these low returns are being eroded by federal and state income taxes. 

If you recognize yourself or someone you know and care about in the above description, there is help. It may be beneficial for you to consider a deferred fixed annuity with a highly rated insurance company.  If structured properly, such a solution can provide competitive rates when compared to fixed bank products. 

I know I’ve used the A word, annuity.  Fixed annuities are complex flexible tools. Like any tool, they can be used correctly or incorrectly. 

The type of annuity I am discussing is a deferred fixed annuity. As a CD, it offers a fixed interest rate for a given period of time. Unlike a CD, there is no FDIC insurance.  It is guaranteed by the claims-paying ability of an insurance company, not a bank. There is, however, a state guarantee fund for insurance companies. 

Interest on bank CDs is taxable at your highest rate. This means that a person in the very common combined state and federal tax bracket of 30 percent, ends up with only a 2.1 percent return on a 3 percent CD. 

Interest in a deferred fixed annuity accumulates tax-deferred. It will be taxed when it is withdrawn, but that may be years in the future. In the meantime, you are able to compound the entire interest rate. In the above example, 3 percent would be 3 percent. 

Fixed annuities are designed for retirement. One reason the IRS allows for tax deferral is that the government wants to encourage us to save for our future. As a result, the IRS imposes a 10 percent penalty on any earnings withdrawn before a contract owner reaches the age of 59 and a half. This is not an issue for anyone over this age.

Deferred fixed annuities contain a few other flexible features that make them attractive to many people. If held until death, like a IRA or life insurance, they transfer outside of probate. . 

I do not know if a deferred fixed annuity would meet your needs. I do know that it’s a good fit for many. You just might be among them. 

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Flow Control

The leading cause of bankruptcy in America, you may be surprised to learn, I believe is a smaller than expected raise.  This may not be entirely correct, but it employs humor to make an important point. Americans are optimistic. I feel our future has always been better than our past. And expecting this to apply to us, we often spend money, or commit to spending money today that we expect to have in the future.

Don’t worry. This isn’t another column on the subprime mortgage crisis and housing hangover. It will introduce two important concepts that, if heeded, I believe will keep you out of financial trouble.

The key to financial success is not complicated to understand, it’s just difficult to execute. One has to break the law, Parkinson’s law. In 1955, British civil servant Cyril Northcote Parkinson postulated that work expands to fill the time available for it. The monetary corollary is that expenses expand to consume all available income, and then some. The key is to break the law, drive a wedge between income and expenses and save that wedge, preferably at least 10 percent, over a long working lifetime. 

It’s easier said than done. Here are two enemies.

The first is a phenomenon known as buying up. One buys up when, upon receiving news of an increase in salary, they immediately devote it to new consumption, rather than spending. A $1,200 a year salary increase, for example may immediately turn into a lawn furniture set, the payments for which are $100 a month. Since or desires are as expansive as the possibilities for consumption, and since there is always something a little nicer that we could enjoy, a propensity to buy up keeps us from saving for the future. We’ll increase the 401k with next years increase, we tell ourselves, but then next year comes and we find another enhancement our life would not be complete without.

The cost is not just the $100 a month in new consumption, but what the $100 a month could have compounded to if invested for a reasonable rate of return. At a hypothetical 6 percent rate of return, $100 a month grows to $16,388 over ten years and continues on to a hypothetical $46,204 over 20. 

The second is the phenomenon is known as the invisible commitment. If buying up is out in the open, invisible commitment is its deadly cousin. Invisible commitment refers to the hidden expenses that come with a purchase. Move from a Camry to a Lexus, for example, and it’s not just the monthly payment that’s larger. Insurance may increase, maintenance may be more expensive and the premium gas certainly will be.  Purchase a larger house and you certainly make some visible commitments: larger mortgage and increased taxes. There will be some less visible ones as well: higher utilities, more landscaping costs, and perhaps other expenses like the need to upgrade the Camry to the Lexus is keeping up with the Jones become important. 

Neither of these concepts should is shocking, nor can or should we strive to completely avoid them. We work hard to earn well to provide an enjoyable lifestyle for ourselves and our loved ones. There is nothing wrong with enjoying a raise or, to quote George Jefferson, moving on up. Providing for our future and the financial security of ourselves and those who depend on us is also important. And if we understand the natural urges to buy up and make visible as many invisible commitments as possible, we can buy up to a secure financial future and a worry-free retirement. 

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Double Dip

Seniors looking for an out-of-the-box financial idea to increase income may want to consider paying back their Social Security. That’s right. I’m not talking about a take-it-for the team somebody else needs the money more than I do move. Quite the contrary; this strategy may produce an increased return for the client. 

It’s sort of like taking a do-over, a mulligan on the government’s pension program. The strategy has been covered in Forbes magazine and was popularized in a newspaper column by financial writer Scott Burns. It’s based on a case study from Economic professor and financial planning software entrepreneur Lawrence J. Kotlikoff. 

Here’s the deal. Americans vested in the Social Security system have a primary insurance amount. This is the amount that we get at our full retirement age, which varies depending on our year of birth. We can take benefits as early as 62, but in exchange for the steady check, we get a reduced benefit. On the other end, if we wait until 70, we get extra. Like good red wine, the inflation-adjusted annuity provided by Social Security gets better with age. 

Here’s how it works, according to a case study from Kotlikoff available on his website http://www.esplanner.com/Case%20Studies/double_dip.pdf and the article by Burns. A person born between 1943 and 1954 would face this landscape. At 62, they would be eligible for 75 percent of their full benefit. At 70, they would be eligible for 132 percent. 

As an example, assume a person’s benefit would be $1,000 a month at age 62. If they’d waited until age 70, it would have been $1,760 a month. The trick is that at 70, this person can indeed claim the higher benefit. The catch: they have to pay back all the money they received. A person files a request for Withdrawal of Application, SSA form 521, and it’s as if one never took the benefit. 

The math is compelling. In the example above, the person would have to pay back $96,000. In return, they would receive $9,120 a year more in income. And that income is inflation-adjusted. This is an initial pay-out rate of 9.5 percent, far higher than one could get if they handed this $96,000 to anyone except Uncle Sam. They don’t have to pay back any interest on the Social Security they receive and they can reclaim the taxes they paid on the previous Social Security benefits. (See IRS Publication 915, pg. 15) 

This strategy is not for everyone. In fact, it’s not appropriate for most people. One must actually have the money. Most people don’t simply save their Social Security and many don’t have this kind of excess savings. There is always the mortality risk. As with any annuity stream, if one dies before recouping the $96,000, their heirs may have been better off if they stuck with the original program. A spouse, however, may be better off in this case, and he or she might enjoy a higher survivor benefit for the rest of their lives. A final note of caution for those who may elect to take Social Security at 62 with the intent to exercise this option is in order. Although this is available today, the government could change the rules. It might not be available in the future. 

Still, if at 70 one finds themselves with some assets and in need of increased income after having elected Social Security, this is one option to consider. It may be the best deal in town. 

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Facts of Life

It’s time to discuss the facts of life, a sometimes controversial and often uncomfortable discussion. This column will always cut to the core of issues—explaining the facts and, hopefully, providing readers a framework to make intelligent decisions. This week’s column is the first of two that will address life insurance. 

It’s always good to begin at the beginning, to quote Lewis Carroll.  Life insurance, most importantly, provides an income-tax free benefit, predetermined at time of purchase, should an insured die while the contract is in force.  In short, it creates a pile of tax-free money to pay mortgages, fund educations, and provide income. 

So before we even get into which flavor might be appropriate for an individual or family, we must first answer the question: Would it be important to have a pile of tax-free money for someone or some institution when we die? More to the point ask: I’m dead, what does my family do now?

Keeping in mind that the no one gets out alive, it’s a matter of when we die, not if we die. Therefore we have to answer this question if we were gone tomorrow, five years, ten years, or at ten years past our life expectancy. 

If the answer is yes for any one of the time frames, then a person has a need for life insurance.  

Some situations are obvious: A young family dependent on one or two incomes to pay a mortgage, educate children, and amass money for retirement. A couple in the ten-year dash to retirement, with one or two people in peak earning years that are necessary to catch up on retirement contributions. A family with a special needs child who will need expensive support long-after mom and dad are gone. 

Others might be less so, but careful consideration reveals a need.  A soon-to-be retired couple whose income is tied to a pension and social security benefit that will be significantly reduced should one person die will need life insurance. A family with significant assets that, if no planning is completed, will see a distressingly large portion sent to Uncle Sam in estate taxes.

Others still might decide that none is needed. Income sources are secure and able to cover expenses regardless of life or death, no taxes will be owed to the government, and no one will be left holding a bag of bills should one pass. 

Once a need is determined, the question arises: how much?  The number one reason people purchase life insurance is to replace income. There are many legitimate ways to determine how much insurance is needed to provide sufficient income for loved ones. 

The human life value places a dollar amount on the value of one’s life. It asks the question, how much is a person worth, in dollar terms, to their family should they survive to life expectancy. In technical terms, it is the net present value of one’s future earnings. Believe it or not, we can put a dollar figure on each of our lives. This is what courts do for legal purposes. It provided the basis for the 9/11 compensation fund, which paid an average death benefit in excess of $2 million, according to the ABA Law Journal (Jill Schachner Chanen and Margaret Graham Tebo, “Accounting for Lives: The 9/11 victim compensation fund worked. But what about next time?” ABA Law Journal, August 2007).

The virtue of this method is that it requires relatively simple calculations and no need to understand an expense or debt structure. It merely asks, how long is one planning to be dead, answers forever, and replaces the necessary amount of money.

Another method is a basic needs analysis. It asks, what would I want for my family should I not come home or wake up? This method demands that we pull out a piece of paper and put dollar figures to goals: How much will we need to fund college, retirement, and income for survivors. This analysis requires combining desired income streams and lump sums into a single number. It’s the dollar amount that is needed to keep a family in its own world, should nothing else change.

For young families, the human life value and basic needs approach will produce very similar results, since most of their great life goals—paying off a mortgage, educating their children, and amassing money for retirement—are dependent on future earnings. In later years, human life value may produce a larger number. In both cases, the numbers are usually larger than people expect—we undervalue ourselves—and much larger than most group policies cover at work, creating a need for privately owned insurance. 

One method is not right and the other is not wrong, they are simply different paths to the same goal—protecting our loved ones. The important point is to take action, ask the sometimes uncomfortable questions posed in this column, and then do something to protect the people you love.  

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Fundamental Finance

We Americans, as a collective, under perform in our financial lives. Don’t get me wrong, I’m not saying we’re bums. Quite the contrary. We’ve created the world’s most dynamic economy; we produce life-enhancing innovations at a pace that has never been matched. We work hard, we work smart, we work creatively, and we are, in general, well rewarded for it.  From 1967 to 2006, average incomes have jumped from $36,502 to $48,223 in constant 2006 dollars, according to the U.S. Census Bureau. (U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements, 2006).

Yet I can’t help wondering, for all of the wealth that is produced, for all the income that flows through our checking accounts, why isn’t more retained by the average American household? In 2004, the average net worth was $93,100, according to the Federal Reserve Board’s 2004 Survey of Consumer Finances. The average 401K balance, net of loans, was $58,328 in 2005, according to a the Investment Company Institute and the Employee Benefits Research Institute, large enough to produce $243 a month in income at a 5 percent rate of withdrawal. ( Sarah Holden and Jack VanDerhei, “401K Plan Asset Allocation, Account Balances, and Loan Activity in 2004,” Investment Company Institute Perspective, Vol. 11/No.4, September 2005). 

I am convinced that our under accumulation of wealth stems from a fundamental confusion about what constitutes sound financial management, a confusion of good business finance with good personal finance. 

We’ve all heard the phrase; it takes money to make money. In business and investment this is certainly the case.  We must spend money before any will come back to us. The basic paradigm is the agricultural model, which provided humans with our first movement into stable, self-sustaining societies. In order to earn money farming, a person must acquire money, either through savings or loans, purchase land and seed, then work the land, rely on a bit of luck that no aberrant or other catastrophe wipes out the crop, then work to harvest, sell the produce, pay off the loans. It is only then that the farmer earns a profit and starts the cycle again. 
The bottom line: In business, we must spend money before we have it so that we can have it to spend it. Failure to spend will doom any business to stagnation and ultimate failure. Being too cheap will end an enterprise. 
The fundamentals of personal finance, however, are the opposite. In personal finance we should wait until we have the money to spend it. We must earn, set aside 10 to 20 percent, and let the pile grow. It is only after the pile has grown that the prudent person indulges in spending to upgrade one’s lifestyle. 
This pay yourself first rule is not new and certainly not revolutionary. It was first put to print in 1926 by George S. Clason in his classic parable, “The Richest Man in Babylon.”  Yet far too few Americans accept Clason’s advice. 
Instead, we tend to justify today’s consumption with expectations of future earning increases. Many of us actually use the business paradigm to rationalize spending on the personal side.  We categorize personal consumption as an investment in business. 

I may, for example, have a Toyota Camry that, while a decade old, is paid off, running fine and inexpensive to maintain. Not having a car payment of $500 enables me to invest an equivalent amount in a taxable account or far more in a retirement account, as I don’t have to pay taxes. 

I want a Lexus. I don’t have the money saved. I will have to take a loan. No problem. I tell myself it is important for me to have a nice car for business appearances. Just as a dentist must have teeth, a financial advisor must drive an upper-end automobile. 

I’ve rationalized personal consumption as a business expense, and diminished my future net worth--my ability to achieve real financial freedom--in the process.  I could do the same with any number of nice -to-have lifestyle items including, a larger house, a vacation home, a country club membership, a boat, season tickets for the Yankees and Red Sox’s (I have clients who are fans of both teams,) private schools for the children, expensive suits, just to name a few.  

Now some of these may in fact improve my bottom line. Dentists do need teeth and I can’t live in a tent and ride a bicycle to appointments with clients in second hand blue jeans. Some purchases, such as vacation homes, may be a great investment in family time. But each dollar must come from somewhere and I can justify almost any purchase as an investment, when, in fact, many will simply be lifestyle enhancing consumption.

Ultimately, there is no objective measure that can neatly pinpoint the optimal spot between the bicycle and the Rolls Royce or the second-hand jeans and the five figure suit where I should place my marker. The principles, however, are useful. They provide a gut check, the ability for us understand our spending habits, choices, and their consequences. Most important, they allow us to be honest with ourselves and make smart money choices. 

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Homeland Security: Part II

For most Americans, our home is are largest asset. My last column focused on how people can use “life estates,” to protect either their home or its value. This column will focus on the use of family and insurance.

First a bit of background. The average net worth of Americans ages 65 to 74 is $190,000. Nearly seven in ten own a house, the average value of which is $150,000. (Source: Federal Reserve Board, Survey of Consumer Finances, 2004) 

The American dream starts at home. The threat is nursing home care. We are living longer. A married couple that celebrates each other’s 65 birthday has a 60 percent chance that one will be blowing out 90 candles on a cake. (U.S. Census Bureau) When we live this long, we often need help. And help is expensive. In Connecticut, average home care costs $25 an hour.  Assisted Living is at least $3,500 a month. Nursing home care tops $300 a day. (Source: MetLife Mature Market Institute 2007)

The bill is often first paid from bank accounts, then the home, if not protected, and then the state, if needed. In Connecticut, the average nursing home resident is a single woman at least 85 years-old on state support. (Source: State of Connecticut Annual Nursing Facility Census, September 30, 2007) This means she has $1,600 or less to her name.

One way to protect a home is through the use of long-term care insurance. In Connecticut, the state and the insurance industry have combined to offer Partnership policies. These policies provided dollar for dollar asset protection. This means that for every dollar a policy pays on a person’s behalf, that person can keep a dollar of assets over and above any limits set by Medicaid. For example, a person with a five year policy that paid $250 a day for at home, assisted living, or nursing home care would be able to protect $456,250 in assets. This is in addition to the $1,600. In many cases, this would protect the value of the home. So if the house was valued at $450,000, the entire value would be at risk of Medicaid recovery in absence of a partnership policy. With the above referenced partnership policy, the house could be protected under the $456,250 pay out from the insurance company. 

Not all policies are Partnership policies. If asset protection is an important goal, one should ensure that they at least consider this option. 

In addition to insurance, family members can play a critical role in protecting the house, provided that there is advanced planning. A house can either be considered countable asset or an excluded asset for Medicaid purposes. They key it to make it an excluded asset. This can be done with the help of family members. 

First, the value of a house is protected if a spouse lives there. There is a general rule that $750,000 of equity can be protected. But with a spouse living in the house, the sky is the limit. In addition, if a sibling with an equity ownership position has lived in the house for at least one year, the house can be protected. If an minor child or adult child with disabilities resides in the house, it can be protected. 

Finally, there is the adult child caregiver rule. If an adult child has lived in the house for at least two years and in so doing has kept a person from entering a nursing home, the house can be transferred to the child without fear of Medicaid recovery. It is important that the care be documented by a medical professional. As always, it is important to work with professionals including an attorney who understand the nuances of how the laws are applied in this area.

Some strong themes should be emerging from my last two columns. First, that there are many ways for seniors to protect the value of their homes, should they require long-term care. Second, each of these strategies requires advanced planning. Third, family is a tremendous resource. Finally, that it’s important to consult with qualified professionals who can help you and your loved ones sort through the options and pick a combination of strategies customized to your hopes, dreams, and desires. There is very little that can’t be accomplished, provided one sets the goal, takes the time to plan, and takes action.

CRN202709-7715132

Money Bliss

Money may not be able to buy happiness, as some maintain, but it can assist in structuring some pretty good illusions, allowing one rent it for spell. Certainly, the link between money and happiness is complex.

One definition of being wealthy in the United States is earning $1 more than one’s brother-in-law. This may appear flippant, but academic research actually supports the spirit of this quip. 

People who live in households that earn $90,000 or more are significantly happier than those in households earning less than $20,000, according to a study by two academics. Yet the higher income households were only slightly less happy than those living in households with total earnings ranging from $50,000 to $89,000.( “Would You be Happier if you were richer? A Focusing Illusion,” by D. Kahneman, A. Krueger, D. Schkade, N. Schwarz and A. Stone, Science June 2006.)

Once we establish an absolute level of wealth that ensures our basic needs are met, our happiness has more to do with the context of our money, than how much we have in some absolute level. 

“If you compare two people with the same income, with one living in a richer area than the other,” Harvard Economist Erzo Luttmer told Money Magazine, “the person in the richer area reports being less happy.”(Quoted in, David Futrelle, “Can Money Buy Happiness?” Money, July 18, 2006.)

This makes sense—as it’s stressful keeping up with the Jones and the Jones aren’t the superrich in the magazines and television shows, but our neighbors whose children our children play with and with whom we socialize. If all the other kids are going to summer camp without a problem but a couple is tapping credit to provide the same experience for their child, they’d be happier in an area were kids stayed local in the summer. 

A house, after all, is a house, and there’s nothing in the bonus room, granite countertop, or formal dining room that causes humans to emit endorphins. Consider that the average house in the United States jumped from 983 square feet in 1950 to 2349 square feet in 2006, according to National Association of Home Builders, “Housing Facts, Figures, and Trends 2006,” and it becomes clear that we are consuming more that just square footage when we build our literal castles.

Americans are not twice as happy with our houses in 2008 as they were in 1950. I recall many conversations from my youth with elders in which they linked two phrases without missing a step: “We didn’t have much, but we were happy.” 

So if money alone can’t make us happy, can being happy make us money? It turns out the answer is yes, as long as we are not too happy. On a happiness scale of one to ten, people who scored themselves as a 7-8 enjoyed the most career and monetary success, according to researchers at the University of Virginia, University of Illinois in Urbana-Champaign, and Michigan State University. (Shigehiro Oishi, Ed Diener, and , and Richard E. Lucas “The Optimum Level of Well-Being: Can People Be Too Happy? Perspectives on Psychological Science, December 2007.) 

Fall into the blues, and it carries over in negative ways. But more strikingly, blissed out individuals underperformed the merely content. The reason, researchers think, is that they are out of touch with life’s often harsh realities.  

So if being above average makes us happy, and being above average happy makes us successful, it might come as a surprise that being down, blue, depressed can put us in the poorhouse. It’s called retail therapy and in a study to be published in the June 2008 issue of Psychological Science, researchers from Carnegie Mellon, Stanford and the University of Pittsburgh found that people who viewed a video clip designed to produce melancholy spent up to four time as much on an item as individuals who were showed emotionally neutral clips. The rationale is that being sad produces self-centered focus that causes people to treat themselves.  

So what’s the lesson? One obvious one is that we are a wealthy society and offer plenty of money to pay people to study happiness.  But beyond that, the lessons seem the sort that we all need to be reminded of periodically. Money is a tool that helps us achieve things we want for ourselves and our families. It can provide security, options, and, to some extent, freedom.  But in and of itself, it does not produce happiness and can, in fact, produce strife, discord and tension.  In the worst cases, money merely buys a cage with golden bars. I often liken it to the plumbing in one’s house: Well adjusted people don’t want to spend a lot of time thinking about it but if it malfunctions or worse, didn’t exist, they’d be in a world of hurt.  

So, in terms of happiness, the best money advice is often that if you want to feel rich, count your blessings. Better yet, do so in the company of friends and loved ones. And if you want to feel like a baron, just make sure you earn $1 more than your brother-in-law.

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Retiring Possibilities

This year’s financial markets have been brutal, with nearly every asset class posting double-digit declines. For the young investor, they provide a reality check that what goes up indeed can, and must, at some point go down. For the optimistic, they might consider this a giant sale with deep discounts. It’s a different story for those close to, at, or already in retirement. Their buying days are mostly in the past. The movie is certainly not a comedy. It’s not even a drama, but pure horror.  Yet if one has a proper plan, they comfortably watch the film to the end, knowing that they will be okay. 

The first thing to understand that the recent decline, although steep, quick, and volatile, is not without precedent. In the 63 years since World War II, there have been 13 market declines of 20 percent or more, the official definition of a bear market.   (“The Four Essential Characteristics of All Bear Markets, Nick Murray Interactive, Vol 8, Issue 10, October 2008.) Many can recall the malaise of the early 1970s. We can all recall the horror of 9/11, the technology bubble bursting and the last round of corporate scandals that nearly cut the broad U.S. stock market marked by the S&P 500 by half.  In every case in the past, the decline proved temporary, the increase proved sustainable and those that stayed broadly invested in diversified portfolios were rewarded. 

We must also recall why people are invested in publicly traded securities, and equities. The challenge of retirement is generating an income that maintains one’s standard of living. The good news is that Americans are living longer. A married couple retiring at 65 has a better than even chance that one person will be alive at 88. (Society of Actuaries, 2000 Male and Female Mortality Tables) That 88 year-old person will need income. That income will need to have doubled since the day they retired just to keep up with a modest inflation rate of 3 percent. 

That’s the bad news. Living is indeed expensive. Most corporate pensions do not adjust for inflation. Social Security does, but then the inflation is often the Medicare payment that is removed from the check. One of the best bulwarks against the relentless increase in prices is owning common stock of the companies that sell the stuff that is increasing in price. 

If one puts equity investing in the proper perspective of an overall plan for retirement, they will be okay if this or some other decline coincides with their desired retirement date. The reason is that such a plan would have contingencies built in, such as two to five years of expenses that are required from investments to be in cash or near cash investments. That is, if  $500 a month is needed from investments, a person may have as much as $30,000 in a safe cash account. Other components include products, often from insurance companies, that can provide for guarantees on income streams and sometimes principal. Guarantees always come with restrictions, fees, and charges. Yet just as a car payment gets one a car, a fee for a guarantee is a great value in the right situation. 

 A properly diversified income plan is flexible enough to not have to sell too much, too quickly in a down market. It can help provide for an umbrella in the rain, a storm cellar when the weather gets particularly mean but also the gear to enjoy the sunshine when the environment improves.  Most important, having a plan allows one to actually read the days financial news and say to themselves and their loved ones, we’ll be okay. We planned for this. 

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Making Your Money Last in Retirement

We are living longer lives, and that’s a good thing. But there is a downside – your retirement savings must stretch to cover you and your spouse for a protracted period of time.

According to the latest figures from the Centers for Disease Control and Prevention, if you were 65 years of age in 2001, at that time you could expect to live an average 18.1 more years. That compared with an average 16.4 years of life expectancy at age 65 in 1980, and 13.9 years to go at age 65 in 1950.1

To keep up with inflation, you must not only preserve your nest egg’s principal but keep the income growing as well. For example, an income of $2,000 a month when you retire will be worth just $1,107 a month 20 years later, assuming a 3 percent rate of inflation.

But how do you invest your money to satisfy both of these conflicting imperatives? Preserving principal requires shorter-term fixed investments such as certificates of deposit, savings accounts, fixed annuities, and short-term bonds. In return for stability, however, investors accept returns that may not keep up with rising expenses. They lose principal slowly, overtime, to inflation.

Alternatively, if you invest for higher return potential, you are likely putting your principal at greater risk, generally subjecting yourself to the vagaries of the marketplace, short-term volatility and uncertainty. That uncertainty could translate into continued growth and robust retirement income or it could mean that you need to cut expenses as your income decreases or even face finding employment or assistance in the most dire of circumstances. 

Fortunately for Valley residents, you can take advantage of the expertise of a Financial Planner or Financial Services Representative from the Barnum Financial Group to evaluate your current circumstances and take realistic steps to help manage risks to your future retirement income. Working with a financial professional is key because not one solution is appropriate for all circumstances.  Whatever you do, be sure that you are fully informed about the pros and cons of any financial product or investment strategy. 

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