Saturday, February 21, 2015

I don’t Know Anyone Waiting Until 70 to Retire

I keep reading and hearing advice about waiting until age 70 to retire.  And there was even an article on MainStreet.com entitled, “Retirement Delayed: Why age 70 is the new 65”.  It notes, “More Americans are holding off on retirement until they reach their seventies. A recent research paper published by the Center for Retirement Research (CRR) at Boston College reveals that Social Security’s real retirement age is now 70.”

But for those with whom I associate, this isn’t the case.  Far from it in fact.  Most people I know who are retiring or nearing retirement are either doing so at or before age 65.  So why are they not heeding the advice to delay their retirement?

Social Security payments will go up…if you live that long
The Mainstreet.com article I previously mentioned states, “Delaying your Social Security benefits has the potential to increase the total amount of income you'll receive throughout your lifetime by $100,000 or more.”

To me, and many other future retirees, the key word in that quote is “potential”.  Sure, you might recoup all or even more than the amount in benefits you’d receive by retiring on time, but how long will that take?  While longevity and family health history can certainly play a part in this equation, figuring out just how much longer you’d have to live to make higher payment amounts worth the missed five years of monthly payments worthwhile may be a worthy endeavor before assuming delaying payments is the right move. 

Part-time work
Some of the retirees that I know find part-time work is a strong possibility in their retirement years.  And while this work may not be through a regular employer, it garners them income through activities that they enjoy doing and that make them feel useful and/or productive.

This not only makes for a more meaningful and satisfying retirement in which there is a maintained sense of purpose, but it provides further financial stability (even if the income made from such activities isn’t substantial compared to previous income levels) that can allow for an on-time retirement.

Family is a powerful force
Family can be powerful force when it comes to determining a retirement age.  Many of the people I know are retiring to be closer to family – especially grandchildren.  However, there is more to the retirement question than just proximity when it comes to family.

A family can also be a critical support system that can add security to a retirement and bolster confidence in an early retirement decision.  Knowing that family is there to provide support services (transportation, home repairs, yard work, monetary security, etc.) as well as a potential living situation, should it come to that, can add to the conviction that an earlier retirement may be a better move than delaying those golden years.


Disclaimer:

The author is not a licensed financial professional.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Tuesday, February 17, 2015

There’s No Excuse for not Understanding Your Finances these Days

If you’re reading this article then I assume you have access to the internet.  And if you have access to the internet, then – whether you realize it or not – you may have the opportunity to utilize all sorts of incredibly easy-to-use financial tools.

You don’t necessarily have to be any financial wizard or have a business background to utilize a litany of available financial tools these days.  So there is little excuse for not harnessing these tools to better understand your personal finances.

Debt payoff calculators
According to CNN Money, “The average American household with at least one credit card has nearly $15,950 in credit-card debt (in 2012), according to CreditCards.com, and the average interest rate runs in the mid- to high teens at any given time.”

Figuring out how to tackle consumer debt can be difficult.  Which debts to payoff first, how much to apply to those debt, and how long it will take to pay down the debt are all questions that might be lingering in a person’s mind when looking at their overall debt situation.  Using a debt payoff calculator could help getting a better grasp on just what loans are outstanding, how the overall interest obligation may be reduced if such loans are consolidated, what the payoff timeframe would be if making extra payments in certain amounts, as well as assist in sorting the loans by type, amount, associated interest rate, and remaining number of payments.

Mortgage and amortization calculators
It’s amazing to me how many people have mortgages but understand so little about how these debt obligations can affect their finances over time.  How mortgages are amortized (broken down between interest and principal), how interest rates affect how much such a loan costs over time, whether it’s a good idea to refinance at a particular interest rate, how much interest is paid on top of the loan amount itself over the course of a mortgage, and the total cost of a mortgage are all things that various mortgage calculators can help determine.  Not only this, but a mortgage payoff calculator might help with seeing just how much of a difference extra payments can make when applied to a mortgage and how small contributions can add up to big savings in this area.

Investment calculators
But financial calculators can be helpful in more than just determining how best to pay back money.  They can also help determine how best to make it.  However, it can be hard these days to find safe investments that earn much in interest.  In many cases, certificates of deposit, savings bonds, savings and checking accounts, money market funds, and the likes just aren’t paying out much in returns.  This doesn’t necessarily mean that it’s not worth trying though.

Understanding what certain investment returns can earn you over time can still be critical to the financial planning process.  Investment calculators allow you to see investment amounts grow over time, set short and long-term goals, review your net worth, and determine where to put money to maximize its growth and return potential.



Disclaimer:

The author is not a licensed financial professional.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

Monday, February 9, 2015

Why Does the Country Keep Falling for ‘Wimpy’nomics?

As a kid, I used to watch old Popeye cartoon reruns.  I still remember the character Wimpy and his catchphrase, “I’d gladly pay you Tuesday for a hamburger today.”

As a child, this statement was funny and I really didn’t pay much attention to the meaning behind it.  However, as this now seems to be the common catchphrase for a growing segment of the American consumer, I don’t find it funny at all.  In fact, I find it rather scary.  And after the financial crisis and ensuing recession, I wonder why the American public keeps falling for what I like to call, “Wimpynomics” or the constant borrowing of money for things today that might be paid for later. 

Debt, debt, debt
From homes, vehicles, and educations to phones, appliances, computers, televisions, and more, it seems like so many of the major – and even not so major – purchases people make these days are done so with credit.

As CNBC.com notes in a May 2014 article, “Outstanding household debt rose by $129 billion from the previous quarter, boosted by a $116 billion jump in mortgage debt and smaller rises in student and auto loans, the report said. Total household indebtedness was $11.65 trillion, which is still 8.1 percent below the peak in the third quarter of 2008.”

A little delayed gratification might be the answer we’re looking for
Sometimes a little delayed gratification is all it might take to keep debt at bay and even appreciate the things we have, want, and eventually buy, a little bit more.  This could also have kept poor Wimpy’s rotund waistline a bit trimmer.

Remember those days proceeding Christmas or your birthday as a child?  Do you remember how excited you got and the anticipation of what was or might be coming?  Sometimes the days leading up to the actual event were almost more exciting and the day itself somewhat anticlimactic.  Well, the reason you likely remember those days was because of all that anticipation.  And the appreciation of finally getting those toys or trinkets hopefully had you caring for them like they were your own children.

Well, the same can go for us as adults except that we no longer have parents to restrain us from creating our own little Christmas mornings all the time for ourselves with our credit cards.  Exercising a little self-restraint might not only keep us from greater buyer’s remorse but help us appreciate and care for our purchases a little more.

The reward for saving is saving itself
Some people use the excuse that due to low interest rates on savings, there’s really no reward for setting a little cash aside.  But sometimes, the reward for savings is the savings itself.

Even if your savings aren’t growing much, or even at all, they’re there.  They can act as reserve funds, ready for an emergency, to be put to use in a new business venture, be saved for retirement, or should the opportunity present itself, put to work in an investment with greater returns.  So while poor returns on savings can be an excuse, the savings themselves could be the reward for your self-restraint and saving efforts.
 

Disclaimer:

The author is not a licensed financial professional.  This article is for informational purposes only and does not constitute advice of any kind.  Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.