Tag Archives: affordable retirement

In Denial About Money?

Could you be in denial about money? An article by the APA(1) has identified the warning signs if you are. They begin with the concept that, “money is stressful.” This was the result of an annual survey asking people their top source of stress. Of course, it’s natural to try to avoid stress especially if it’s painful in some way. That’s where we get into trouble because avoiding financial issues only tends to worsen them.

Here are the warning signs they mention:

a. You try to put money and finances out of your mind

b. You avoid talking about money

c. You avoid opening bank or credit card statements

d. You don’t know what your credit score is

e. You don’t know your net worth.

We all have these behaviors to some extent and some of them keep changing like d and e. But, as anything in psychology, it’s the degree or severity of these behaviors that make it significant. I’m a psychotherapist and prior stockbroker, so I understand that your relationship with money is often a result of past experiences and future expectations.

When I say relationship with money, I mean your individual perception of its importance and what emotions come with that perception. For example, many people who lost money in the crash of 1929, never invested in the stock market the rest of their lives. This past experience created anxiety and distrust of the markets and clouded their future expectations. This generation had a distrustful relationship with money as a result of being traumatized with sudden and unpredictable losses. The emotional memory of this trauma was never forgotten.

Women also have a different relationship with money. Women don’t view money as an end result, but as a means to get somewhere. Women also do not discuss finance and business in their personal relationships as much as men. Thats because their priorities are different. However, that is different than consciously avoiding talking about money which is a form of denial.

If you feel the warning signs pertain to you, they recommend a few steps like keeping track of your income and spending or make a budget. Establish a spending plan of your priorities. Set up automatic saving like a 401k or IRA. Use software programs to assist you with the above.

Of course, everyone should have a budget with priorities and it’s easy to find a template on the internet if you are just getting started. Automatic savings are set up at your work. They do not suggest any specific software. In addition, I would certainly add, 1. Get more financial education-read and take classes. 2. Consult a financial pro before investing 3. Consider using cash vis-a-vis credit cards to reduce spending. 4. Understand your personal relationship with money especially your past traumas and risk tolerance 5. Join an investment club or start one of your own 6. Consider downsizing your lifestyle 7. Consider occupational re-training to increase your income. 8. Assess you social security to determined future income 9. Be willing to work into retirement if necessary. In other words, make learning about money and investing an essential and fun priority. L. Johnson

AmericanPsychological Assoc., Feb 2015. ‘Face the numbers: Moving beyond financial denial.’ Retrieved on 4-22-2015 from: http://www.apa.org/helpcenter/financial-avoidance.aspx

When to Start Social Security

WHEN TO START SOCIAL SECURITY

When to start social security for women is based on different factors than men. It’s also a very individual decision based on your circumstances. Your starting age actually depends on a number of different financial and personal factors.  Women need a smarter plan to stretch their incomes and benefits through a longer and more expensive retirement. ( http://blog.creativeretirementforwomen.com/11-ways-female-retirment-different/.)

We are all aware of the three major starting points to begin Social Security, 62, 66 or 70 years old. We are aware that taking benefits at 62 reduces it about 25% compared to 66. Taking benefits at 70 increases our amount by about 25% compared to 66 years old. Here is an example.

62 years = $1125 / month             $13,500 / year
66 years = $1500                            $18,000
70 years = $1875                            $22,500

When examining these numbers, it’s clear that the best situation is to collect the most on a permanent basis. But, you would receive it for less years.

Reasons to start at 62: The primary reason is that you need the money to live on.

1. You’re unemployed and it’s difficult getting hired.
2. You’re working part-time or your income is below $20,000
3. Your health is poor and you are unable to generate much income.
4. You don’t have longevity in you family history.
5. You are trying to minimize your long term taxation.
6. You’re starting an early spousal benefit before switching at 70

The first three examples are based on your current financial need. If your family longevity is short, taking benefits early makes sense. Since Social Security is subject to taxation, taking a lower benefit results in less taxation when combined with your other income. This makes sense if your other incomes are over $20,000. Your combined income for taxation when receiving Social Security is= 1) your AGI or adjusted gross income + 2)non-taxable interest(now taxable) + 3) half of your benefits. Let’s take a look at this example:

Adjusted Gross Income            $12,000
Tax-exempt interest                  $ 8,000
Half of Soc. Sec. benefits         $ 6,750

This total is $26,750 while your taxes begin at $25,000 if single. So, if you are making $20,000 a year or more, getting more social security will mean more taxation. The days of receiving tax free municipal bond dividends are over.

As a spouse, you are entitled to social security at 62 years old even if you never worked. You just have to be married for 10 years at some point and you can be divorced now. You can collect half of his benefits without any loss to him. You simply have your partner apply for social security and suspend his payments until 70. This allows you to receive you spousal benefits at 62 and start your own benefits at 70 when it’s higher.

Reasons to start at 70:
1. You are able to work full time with a decent income until 70
2. You need to lock in the highest benefit to maintain your lifestyle
3. You don’t have a big savings or multiple income streams
4. You are healthy and have longevity in your family
5. You want to collect the 8% a year by waiting
6. You will receive a greater cost of living increase

Due to the greater longevity and other expenses of women, most should wait until 70 years old to collect benefits. The key reason for most of us to wait is that we haven’t saved enough. Working longer not only increases your income, but also pays more into social security that increases your benefits. Your benefits increase about 8%(past full retirement age) a year by waiting. Many people consider that a good return on your money. The cost of living increase is a percentage, so the larger your benefit, the larger the increase in dollar terms.

In conclusion, I believe most people would receive the greatest benefits by waiting until 70 years old to collect. To get maximum benefit, take half of the spousal benefit at 62 and your full benefit at 70. If you fit into one of the reason to start early, then don’t be bashful about taking advantage. But, try to wait as long as possible. L.J.

More at: www.creativeretirementforwomen.com

Do Women Need a Female Financial Advisor?

Do Women Need a Female Financial Advisor?

Would it surprise you if I told you that women are better money managers than men? It starts with a different relationship with money. Women do not view money as the ultimate goal, tend not to flaunt it with objects that are symbolic of success, and don’t involve it in their identity to the extent as men. Becoming a millionaire is usually not the final accomplishment and stopping point for women. Instead, money is a tool that enables women to enjoy the benefits and freedoms of life.

As a stockbroker, it became clear to me that women are more careful and thoughtful about risking their money. They are not trying to hit a home run in the market, but look for stability and safety in an investment. “How safe is this,” was the most common question and should be asked at every turn. So, most women tend to have a similar relationship with money.

Since men just view money differently, their risker mind-set interferes with the core money relationship women have. But, what bothered me the most about being a stockbroker, is that women were treated differently and even inferior by other men. It was not uncommon to see a male broker talk to only the man when a couple came in for advice. I understand that it is a male dominated field, but there is no excuse for this behavior.

In retirement, low risk investing is not only practical, its essential because you don’t have time to start over. A study(1) found that female hedge fund managers out-preformed men by 6% over a nine-month period in 2012. A hedge fund, originally named to hedge against market losses, has evolved. Now it is a managed fund(not indexed) that is less regulated in terms of using leverage. Using leverage dramatically increases investor risk.

This study points out four primary differences. 1. Women are less competitive and less preoccupied with beating an index. 2. Women take fewer risks in the market as with other areas of life. 3. Women do more homework and stay in investments longer. 4. Women realize they are not in control. Realizing you are not in control of all factors gives women the perspective to not panic. Level heads will prevail.

So, women need a female financial advisor because:

1. Your relationship or how you view money is similar on an emotional level.
2. Safety and sustainability of your money is the priority, especially in retirement.
3. Female advisors tend to establish a more personal relationship with clients.
4. Women, with the same experience as men, are better investors on average.
5. There is a deeper sense of trust with another woman.

More at:       www.creativeretirementforwomen.com

(1) Sightings, T. (1-7-14) “4 ways women make better investors” money.msn.com. Retrieved on 2-28-14 from: money.msn.com/how-to-invest/4-ways-women-make-better-investor

You are the GOLDEN GIRLS of our time

You are the “GOLDEN GIRLS” of our time.

Due to the surprisingly high singles rate and the expense of residing alone, sharing a place with others can completely transform your life while offering many benefits. You remember the TV show called the “Golden Girls?” This is what I call Platonic Cohabitation and it has the potential to be a life saver on a number of different levels.

Since we are the first generation to live a long time in retirement, social accommodations that meet our needs tend to lag behind. That means we need to anticipate and plan for ourself accordingly. The many benefits of cohabitation are:

ECONOMIC: This most obvious of benefits cuts your expenses of rent and utilities in half. It can reduce your mortgage payment or become an income stream if your home is paid off.

HEALTH: Others help alert us to remembering our medications or being aware of problems that are not apparent to us at first. Your roommate would be the first responder if you get hurt or need help.

SOCIAL: Having people around stops some primary problems in old age like loneliness and isolation. We know this can led to depression and early death. So, being social is part of the key to better mental health and longevity.

PERSONAL: Having someone to discuss personal matters with is a very important part of being involved and connected to life. The degree of bonding that occurs with roommates can be very profound and long lasting. It’s quite likely that needed friendships will flourish in this setting.

When I worked my way through college, I needed to have roommates for many years. Besides a form of economizing, it was an experience at meeting new and diverse people. I actually met the group of college buddies that became lifelong friends for over 41 years as roommates. When I purchased my first house, I offset the expense by having a roommate. This person also turned out to be a lifelong friend. Consequently, the best friendship bonding in my life has occurred as a result of having roommates.

Many of us may have not had a roommate since college and may have mixed feelings about it. But, we should not let past memories cloud our judgement about what we need in the future. I always recommend that you start with someone on your social network, so you already have a level of comfort. If no one on your network needs to share right now, there are a number of websites that are roommate finders. All my roommates were unknown at first until they became lifelong supportive friends.       L.J.

More at:    www.creativeretirementforwomen.com