Money in the Middle

Sandwich Generation Talking About Money Up, Down and Across Generations

Archive for the ‘retirement planning’ Category

Social Security: No COLA Again?

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Within the next few weeks the Social Security Administration will announce the fate of the cost-of-living-allowance for 2010.  The news doesn’t look good — for the second year in a row.

The decision for 2011 is based on the change in inflation between the third quarter of 2008 and the third quarter of 2010

 “[There has been] an increase [in prices] relative to 2009, but it’s still below the 2008 level, so no COLA again,” said Donald Marron, a former director of the Congressional Budget Office told USA Today .

The decision will also impact many pensions that are tied to the Social security COLA decision.

While we surely haven’t seen the price increases to support a COLA increase, it sure doesn’t feel good.  Especially for those who are already retired and counted on those modest bumps for their living expenses.

For those still working, there’s some good news.  The same law also keeps the same cap on wages subject to Social Security for 2011.

Expect to hear more from Social Security by mid-October.


Written by Laura Rossman

October 5, 2010 at 11:47 pm

Baby boomer tips to their children on retirement

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 There was generally good news about the state of Medicare and Social Security last week when the trustees released their 2010 Annual Report.  Good news for  baby boomers.  Not so good for the generations following us.

 Medicare is looking much healthier, thanks to the changes in the health care reform bill that reduces costs for prescription drugs and physician services..  The Hospital Insurance trust fund is expected to remain solvent an additional 12 years – until 2029.  While Medicare finances have improved, further reforms will be needed. 

Social security isn’t sitting quite so pretty, but there’s no reason for alarm.  The recession’s combination of fewer workers and more early retirees means that Social Security expenditures are expected to exceed tax receipts in 2010 for the first time since 1983.

 “The fact that the costs for the program will likely exceed tax revenue this year is not a cause for panic but it does send a strong message that it’s time for us to make the tough choices that we know we need to make,”  said Michael J. Astrue, Commissioner of Social Security. 

The report said that the deficit is expected to shrink substantially for 2011 and to return to small surpluses for years 2012-2014 due to the improving economy.   But as the baby boomers begin retiring in larger numbers in 2014 the number of beneficiaries grows substantially more rapidly than the number of covered workers.

So we’re beginning to hear a lot more –from both political parties – about the need to tackle the issue of retirement age. It’s unlikely that it will impact the benefits of baby boomers – most of whom will reach full retirement at age 66.

But for those younger, the role of Social Security is likely to change as is the nature of retirement planning and work.

It’s a very difficult environment for people who are good planners when it comes to their finances. 

The best advice baby boomers can give their children: count on long and varied careers.  Keep funding that 401(k) plan as much as you can.

 Learn from our mistakes : plan better; rely on your own savings; live within your means (that one’s from your grandparents) and find work you enjoy

You’re going to be counting on your own resources more than your parents or grandparents!

Written by Laura Rossman

August 9, 2010 at 7:33 pm

Money or Meaning More Important in Retirement?

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Young and old agree that meaning trumps money when it comes to leading the “good life.”

I get a lot of research across my desk that spells gloom and doom for future retirement prospects based primarily on the lack of adequate financial resources. True, retirement savings is pretty dismal for much of the population, though savings have picked up in the past two years.

 But this new research from MetLife Mature Market Institute paints a very different and hopeful picture of the future. 

The conclusion:  the recession has had a noticeable impact on people’s live, particularly in the financial areas.  But when it comes to meaning and purpose, the negative impact has been relatively modest. 

And as we move into retirement years, it is meaning and purpose that are prominent in defining “living the good life.” 

Meaning, closely associated with the importance of family and friends, remains the primary component of the Good Life for all age groups, despite instability in financial and other aspects of their life.  People plan to spend time with family and friends above all else, regardless of age. 

The study, done with Richard Leider, emphasizes that the people who achieve “living the good life” are those who focus and plan.  That gives them the resiliency to cope with negative “trigger” events –think recession, job loss –whatever their life stage or circumstances. 

The 45-74 year-olds in the studies who maintained a steady perspective on their “vision for the future and the “focus” on the ways to get there were able to weather the storm. 

The younger generations, maybe because things have been so financially challenging for them early on in their professional lives, hold very similar views about the importance of meaning and purpose in life.  Maybe the baby boomers have raised a thoughtful, less consumption focused generation than their own.

More food for thought from Leider: 

“The longevity revolution demands a new mindset and skills, not to mention courage.  As life expectancy continues to increase, Money, Medicine, Meaning and Place will become even more significant and challenging.  Yet those challenges can also be positive because they can lead to new points of view and knowledge essential to succeed in the future.” 

Or said another way – aging isn’t for sissies.

Lump sum or annuity: Is that the right retirement planning choice?

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Retirement Income Planning

Retirement income planning is tricky business.  You need to be able to see into the future, account for emergencies, gauge the future state of the economy and know what your investments/savings will be earning to generate income. In other words, you need a calculator and a crystal ball.

 With the baby boomer generation approaching retirement age, and more concern about how to make those dollars stretch a lifetime, there is increased interest in the choices people make with those retirement dollars.

 What role does your employer 401(k) plan have to provide you with  more options in making that money last a lifetime?

 That was the focus last week of a summit on retirement income last week sponsored by AARP, WISER and ASPPA.  A request for information from the government on the role of income annuities in retirement plans (Dept. of Labor and Treasury) has sparked a lot of comments (800+). 

There were a couple interesting ideas that cropped up during the day.  Maybe they’ll help you think through your retirement plan.   

Thinking differently about your number…that big bucket of money you need in retirement.  The one depicted in the TV commercials with the guy carrying his number over his shoulder.  Big numbers, however, can be deceiving.  It may not last as long as you think if you have to take out too much each year to supplement your expenses (planners suggest no more than 3% -4% per year) or it may not grow as fast as you planned if there’s a downturn in the market or a recession.  We all know now how fast that bucket of money can disappear with economic dips. 

So rather than focusing on the big number, figure out how much that generates for you every month and plan backwards.  Figure out what you’ll receive in Social Security (your yearly benefit statement will tell you or use the benefit estimator at, add in your pension and any other guaranteed income.  Then figure out how much you need to fill the gap, for how long and you’ll be able to determine how big that bucket needs to be.  Or how much you need to scale back your retirement plans or work longer.   

It’s a different view– and for some a more manageable way to look at how much you need in savings to live the lifestyle you want in retirement.  You’ll probably be seeing more tools from your 401(k) plan to help you figure this out. But this does require getting comfortable with what’s in your budget – a task many of us prefer to put off. 

Trial annuities. While annuities have their rightful place in retirement planning since they can guarantee income for as long as you live, their not a consumer favorite.  For many of us it’s hard to trade guarantees for the hope and possibility that our money can grow really big, making us rich in retirement. Because once you turn on an annuity (annuitize) there’s no turning back, and when it comes to money most of us like options.

Of course, the other side of that is what happens if you invest incorrectly. 

So there is some talk about figuring out how to create a “trial annuity” from your 401(k) plan.  A test drive of sorts – try it for say, two years, see how it works, how you feel about receiving a monthly check . Like it: then turn your savings into an annuity.  Don’t like it: go on with Plan B.  The devil is probably in the details, but a creative way of helping us better understand the value of guaranteed income for what could be a long life. 

Here’s one thing we know won’t happen – a return to defined benefit plans (fixed pensions).  Those days are gone.  It’s now up to us to figure out how to create our own pensions.

Written by Laura Rossman

May 26, 2010 at 8:18 pm

Watch Out for Roth IRA Predators

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The new rules on Roth IRA conversions can be a real benefit to some baby boomers and seniors.  But it also an opportunity for less scrupulous sellers of financial products to engage in a bit of bait and switch.  Not good for your retirement planning….probably pretty good for the seller’s wallet 

This article Crooks Are After Your Retirement Account from CBS MoneyWatch gives  a great  inside view of how at least one sales agent is planning on using Roth IRA conversions as a hook to get information to sell you something else that you probably don’t need.

Watch out!

I have no doubt you’ll start seeing seminars on Roth IRA conversions, flyers in your local newspaper and senior center.  Be wary.  Some will be legitimate experts with good information and reputable businesses.  Others will be using it as a hook to get information to sell you something you don’t need or isn’t right for you.


1. Get your information from reliable, trusted sources.  Get the information promised and don’t give up your personal financial information to get it. Here’s a NY Times article that can help you figure out if a Roth IRA even makes sense for you. Check with your tax adviser.

2. How is the person offering you advice on Roth IRA conversions getting paid?  Do they have expertise in retirement planning and investing for retirement.  Check out our blog on recommendations from the AARP Retirement Survival Guide.

3. Keep your antenna up.  Watch for bait and switch. Watch out for crooks. Maybe the information is good, but if you suddenly find yourself talking about a different product, it’s probably time to move on.

Making Smart Financial Decisions

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As the stock market climbs back from the deep dark depths of recession, many are feeling optimistic that the worst is over.  Maybe.  But continuing unemployment and foreclosures indicate that we have a way to go yet.   

Lots of articles too on people yielding to pent up demand and heading back out with credit card in hand.  Good for the economy; not so good for their savings plans. 

So since it’s National Retirement Savings week what is it that we can do to get started or get back on track to retirement savings.  There’s lots of advice out there.  Here’s the Retirement Savings Week site.

But I think that for many of us who are beyond the “why should I save” and are struggling with “how do I save for retirement now”, there are two “musts” that often get overlooked:

 1. Understand the financial products you are buying and how they fit in with your goals.

2. Understand who makes money when you purchase the product and what how their goals align with your goals.

 aarp retirement guideI recently received a copy of The AARP Retirement Survival Guide:  How to Make Smart Financial Decisions in Good times and Bad by Julie Jason. 

 While calling it a survival guide may be a bit over ambitious, it is a good guide to answering the two key questions above – how does the product really work and who makes money when you buy it.

 It’s a practical book.  Subject headlines like: Hint, WARNING and Julie’s recommendations help you shine a bright light on the pros and cons of the product.  That ultimately makes it easier to see if the product is a right match for you.  She also provides lots of good questions to ask and easy to navigate language free of financial jargon.

Lately, I’ve come across more people who are confused about the relationship they have with their “financial advisor.”  That person could be a broker, an insurance agent, a financial planner or a register investment advisor but many people think they are just different names for the same thing.  Not at all!  Jason has a great information and a chart (p.87) on who gets compensated in what manner.  It’s also easy to see who has what responsibility to you. Most often it is a standard of suitability.  Fiduciary responsibility is reserved for registered investment advisors who must put your interests ahead of his/her own.  It’s important to know the difference so you know what you should expect from someone advising you on financial products.

So if you’re a baby boomer or senior thinking of getting some help on what to do next with your retirement savings, The AARP Retirement Survival Guide is worth a read.  It can help you ask smart questions and make you more knowledgeable about what really can help you reach your retirement goals.

Get Your Retirement Plan Priorities Straight

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Are your retirement funds slipping away?  It might be because retirement funds are being funneled off to help others. Good intentions.  Bad consequences.

 A new survey from Schwab says that almost half of retirees report supporting family members that they hadn’t planned for.  Children (53%) and grandchildren (37%) top the list of dependents.  An additional 12% are contributing to their parents’ finances.  The retirement reality of the sandwich generation.

 So are we doing what we should be doing? If you are putting your own retirement planning behind your adult children or parents – then the answer is “no”.  Why?  Because you are at great risk of continuing the cycle and putting yourself at financial risk.  

 Schwab says your retirement should take priority.  We agree.  Knowing what you need financially to retire, understanding the steps you have taken to control some of the risk (long-term care insurance, life insurance etc.) and how long you need to work are key.  If this economy has taught us nothing else, the unexpected can happen.  So the more you can shore up your own retirement, the better off you and your family will be.  

Helping aging parents.  After you have your retirement plan pinned down, you can turn to helping aging parents.  It can be simple things like helping make sure they have the right Medicare coverage, that their investments are appropriate for their stage of life or providing help with bill paying.  Or it may be helping them sort through local resources.  If they are in need of care assistance, check with your local Office on Aging to see if they are eligible for any community services.  Though cutbacks in state budgets are having their impact on senior services.  If you are still working, your company may offer elder care services which can help you identify resources.

The kids are last.  They have time you don’t to rebuild.  and this can be one of those teachable moments about the importance of an emergency fund and budgeting.  Help as you can with housing or small expenses, but to take on additional debt to help them just doesn’t make financial sense.  Let them carry the school loans or figure out how to pay off their own credit card debt. “Encouraging their financial independence now will actually be to their benefit in the long run,” Schwab advises.

 Hard advice to follow?  Smart retirement planning.

Written by Laura Rossman

September 9, 2009 at 3:20 pm