7 money mistakes you shouldn't make in your 50s-Mandi Woodruff

With retirement right around the corner, your 50s are arguably the most crucial years for your finances.

That’s partly because today’s 50-somethings aren’t just dealing with the pressure to save for retirement. The so-called sandwich generation is often saddled with the role of caretaker for not only for their kids but their parents as well.

Nearly half of adults in their 40s and 50s are raising a kid or financially supporting an adult child, while 15% say they’re financially supporting elderly parents as well, according to a Pew study.

The pressure to support not only themselves but their families can leave a lot of room for error. To help you better protect your finances, we tapped financial experts to find out some of the most dangerous money mistakes 50-somethings make today. Here’s what they had to say:

Dipping into your 401(k) to put your kids through college

We all know that college costs are growing wildly out of control, a trend disproportionately affecting middle-class households (too broke to pay for college in cash, yet too rich to qualify for financial aid). Rather than co-signing a student loan on your child’s behalf and taking on more debt, it might make sense to make a penalty-free 401(k) withdrawal to pay for higher education. There’s just one problem with this strategy: Unless you’re expecting a windfall or a cushy promotion at work, how will you ever be able to pay yourself back?

“Often those funds are tough to replenish to appropriate levels,” says Laurie Burkhardt, a certified financial planner in Boston. “There are numerous ways for a child to assume responsibility for an education funding shortfall … However, there are limited ways to fund a retirement shortfall once you reach a certain age and are unable to increase your earnings and savings.”

Rather than bankroll your kids’ college degree, encourage them to work part time, seek out public or community colleges rather than pricier private and out-of-state institutions (unless, of course, they can qualify for financial aid).

Rolling over your 401(k) into an IRA if you retire early

This is such a common mistake for 50-somethings that nearly every financial expert we spoke with pointed it out.

If you decide to retire a bit early, between ages 55 and 59, it may make perfect sense to roll your employer-held 401(k) into an IRA. But the rules for IRA withdrawals are different and you could be shooting yourself in the foot if you’re too hasty to ditch your 401(k).

“If you leave your employer in the calendar year that you turn 55 or older, you can take money out of your 401(k) and not pay a 10% early withdrawal penalty tax,” says Michele Clark, a CFP in Chesterfield, Mo. “This is terrific for people that are younger than 59 1/2.”

But withdrawals made from an IRA before 59 1/2 is subject to a 10% penalty.

“I tell clients that are retiring early (55 to 59 1/2) to keep their 401(k) at their employer until after they turn 59 1/2 to give them flexible access to the money in their 401(k) without penalty,” Clark says.

Letting your kids take advantage of you

In plenty of different cultures, it’s perfectly reasonable for adult children to continue to live under their parents’ roof until they’ve married or can at least sustain a household on their own dime. But if supporting your kids means putting your own retirement in jeopardy, you have to draw a line at some point.

“It starts innocently enough by keeping the... kids on the family plan for the cellphone, but then before most people know it, they are ‘helping’ their adult children with the rent on their new apartments,” Costa says. “If you do this for too long, you can’t easily stop doing it because the kids expect it.”

That doesn’t mean there isn’t a way to support your adult children — or any relative who may need a helping hand, for that matter — and get something in return as well. For example, if they want to move back home while they work at paying down their student loans or finding a job, charge them rent or require them to help out with household responsibilities. Costa gives this advice to all her clients, even if they’re wealthy enough to comfortably support their kids.

“It provides incentive for the [child] to eventually get a place of their own,” she says. “If the parent is exceptionally well prepared for retirement, they can always return the rent money to the kids when they move out and that money can be used to buy or rent a place.”

Hiding your finances from your children

It’s not uncommon for parent-child relationships to shift as parents get closer to retirement age. Those kids who are too broke to afford their own apartment today may be the ones driving you to doctor’s appointments and managing your finances sooner than you think. It’s important to not only prepare for your future —by writing a will, and designating a power of attorney and a health care power of attorney—but to make sure your children know exactly what those plans are.

“Make your decisions ahead of time and let them be known in the form of these legal estate planning documents,” says Kathleen Campbell, a CFP in Fort Meyers, Fla.. “That way, if you are incapacitated or if you die prematurely, you won't have a judge making the decisions for you.”

Your children — or whoever you plan on trusting with your estate plan — should know exactly where to find your documents, whether that means giving them the security code for your office safe or keeping a list of passwords to all of your electronic accounts.

Prioritizing mortgage debt over all other debts

Retiring without a mortgage is one of the most common goals for older workers, but mortgage debt shouldn’t always take priority over other debts.

The average 50-something has $5,347 in credit debt. More than one in ten Americans over age age 50 still have student loan debt, and 20% of those borrowers is in default on their loans, according to a report by the Federal Reserve Bank.

It’s not like your mortgage and credit card debt is forgiven the minute you leave the workforce. Even Uncle Sam won’t hesitate to garnish your Social Security income (up to 15%) to recoup student loan debt or past taxes owed.

“You’d be amazed how many people punch out for the last time at work and waltz home with credit card debts, boat payments, two car payments, timeshare obligations, and a hefty mortgage,” writes Roger Roemmich, chief investment officer for ROKA Wealth Strategists, in his book, “Don’t Eat Dog Food When You’re Old”.

Unless your mortgage rate is greater than 5%, Roemmich advises against pre-paying on home loans. A tax advantage of having a mortgage is that you can always deduct the interest. The same can’t be said for lingering credit debt, which is almost sure to have a higher interest rate anyway.

“Non-deductible debt (i.e., credit cards) should be viewed as very short-term debt and paid off at the earliest possible time,” Roemmich says. “There are very few investments that return enough to suggest investing in lieu of paying off credit card debt.”

Underestimating your health care costs

The average 401(k) balance in the U.S. today may be at a five-year high (just shy of $90,000 at last count), but when you consider health care for the average retiree will cost upwards of $220,000, it’s pretty sobering to realize that so many Americans may be unprepared.  

Because of its high cost, nearly 80% of the cost of long-term care for the elderly is provided by family members. It can cost up to $6,700 a month for standard nursing home care, and unless you’ve either got deep pockets or family members willing to pick up the tab, it’s unlikely you’d be able to afford it without long-term care insurance. Nursing home care isn’t covered by Medicare either.

In her book, “The Charles Schwab Guide to Finances After 50,” Carrie Schwab-Pomerantz says long-term care insurance (LTCI) should be a part of every retirement plan. LTCI is one smart way to protect yourself against costly health expenses after retirement, and the sooner you sign up for a policy, the better. One in four people over age 60 are denied LTCI coverage, according to Bankrate.

The American Association of Long-Term Care Insurane is a great place to find information: http://www.aaltci.org/.

If you already have life insurance, think about adding a long-term health care rider to your existing policy, or buy a fixed or variable annuity with additional long-term care coverage. 

Expecting too much

Christopher Knight, a CFP in Matthews, N.C., often has to work against his clients’ unrealistic expectations for their own financial futures.

“Sometimes clients in their 50s go through late-career crisis, where all that matters is being able to walk away at a certain specified age, let's say age 60,” Knight says. “Unfortunately, too many times clients become mentally fatigued and emotionally blinded at the late-career stage and end up with the unrealistic expectation of retiring at a certain age, when if they look at things objectively are very unrealistic.”

For a sobering dose of reality, sit down with a financial planner and take a hard look at your finances — you might be saving less for retirement and spending more on your day-to-day expenses than you realized.

“They may think they have x, y or z, but when we look at things, they're off a good bit,” Knight says. “A lack of clarity and reality will lead to the wrong decisions that can derail their retirement.”

Culled from Yahoo Finance

THE IMPACT OF QUALITY CUSTOMER SERVICE IN THE OVERALL MARKETING OF PFAS -Odunze Reginald C

As we celebrate customer service week, it is imperative to note that the customer is king and they are the overall essence of our existence in business.
 

Peter Drucker noted that “an organization has two functions, one is innovation and the other is marketing”. And whatever you are selling whether pensions, insurance, cars, hosing etc. you are selling peace of mind.

Marketing is very essential in any organization and may be regarded as the life wire of the organization, but more strategic to the concept of marketing is that of customer service. This is because customer service leads to repeat purchases, and according to Lebouef (1989:13) in his book “How to win a customer and keep him for life” he noted that “the most important job of any employee including sales people is to create and keep customers”

Many people including sales representatives and their managers believed that sales person’s primary job is to make sales and without doubt, “making sales is important but it creates short term dollar while creating and maintaining customers and offering customer satisfaction make long and medium term dollars”(op cited)

The issue of quality customer service prompted Napoleon Hills to embark on a study. Napoleon Hill devoted over twenty years of his life trying to study why so few men succeed and so many failed. He went on to say that he interviewed numerous great men from all walks of life such as Andrew Carnegie, Thomas Edison, and Woodrow Wilson etc. He presented the essence of his findings in his classic bestselling “Think and Grow Rich” One of Hill’s best recommendation is to cultivate the idea and habit of rendering more and better service more than that for which you are paid, and before you realize it, the world is willingly paying you for more than you do”. Today we call that “building perceived value”, seventy years ago we called it the”Law of Increasing Returns” (op cited)

But a more interesting story was that of the life of vice president Andrew Johnson. Andrew Johnson was the only United States chief of staff who never went to school not even a primary school. He was a tailor by profession and was taught how to write and do arithmetic by his wife. He carved a niche for himself first as a tailor but the success of his tailoring profession was hinged upon an excellent use of customer relations with his politician customers who are in serious desire of his well tailored suits. The relationship between him and his clients became so cordial that they encouraged him to go into politics. They provided him with both moral and financial support. He became Mayor of Glennville, member of the Tennessee house of assembly and later United States house of Representative between 1843-1853, Governor of Tennessee from 1853 to 1857 and United States Senate (1857 -1862) and following the assassination of Abraham Lincoln, he served as president from 1865 to 1869.

I am not interested in telling history of vice president Andrew Johnson but I am fascinated to bring this story to highlight on the gains of an effective customer service. It was an exciting customer relationship between clients that shot this man to limelight, customer service is essential to business concern. And according Jeff Hitchman a former managing Director of Xerox Nigeria. “People are no longer selling but building and maintaining relationships”, when a relationship is built and maintained it is like a bond. I could still remember a relationship manger in one of the new generation banks who followed a managing director of a major electronics company in 2003 to the burial ceremony of his mother and stayed for almost 5 days with him in the village, though an extreme situation but it buttressed one thing, he has built a relationship with this man.

An excellent customer service will at the long run impact positively on sales and marketing department. As Pension Fund Administrators’ positioned itself for effective customer patronage in the possibility of National Pension Commission Lifting the window of transfer, customer relationship will be the determining factor in keeping these customers and one of the effective ways of maintaining relationships is in resolving customer complaints, and according to Housley (2005:45) in his book on Marketing, “resolving customer complaints build customer loyalty” He went on to say that “it is possible to turn customer complaints into assets.

Most of the complaints among the Pension Fund Administrators’ customers are Zero balance, double registration, partial funding, change of name especially among married women failure to generate pin at the appropriate time, wrong statements, no statements etc. And according to Lebouef (1987) “a typical dissatisfied customer will tell eight to ten people about the problem. One in five will tell twenty. It takes about twelve positive service incident to make up for one negative incident”.

As the pension fund administrators embark on this onerous task of satisfying the customer, they should always bear in mind that customers are unique and different, what is applied to customer A may not apply to customer B. 

Let us all remember to satisfy our customer as we celebrate customer service. Happy customer service week

Odunze Reginald C

How to Balance Unfulfilled Dreams With the Financial Realities of Life-Sienna Beard

Most of us have a bucket list of things we want to accomplish or do. For some people, that list includes fun and daring activities, like skydiving or visiting another country. Other dreams might include starting a business, going back to school, or taking a big vacation. If you are in financial trouble, you might have to wait for a while to fulfill your dreams. However, if you have mostly been responsible with money, now might be the time to take a risk and go for your dream.
It’s difficult to determine when the financial realities of life will prevent you from fulfilling your dreams, but sometimes you just have to take a risk in order to do what you have always wanted to do. While saving your money is usually the best option, sometimes spending money in order to fulfill a dream is truly worth it. Here are some issues to consider as you make your decision.

MOHD RASFAN/AFP/Getty Images

1. The scope of your dream

If your dream is to go skydiving, it might be that your physical fear of completing this task is a greater influence than the cost itself. If you can get past your fear, then doing so might only take a day out of your regular schedule. If you simply want to cross your dream of skydiving off your list, and you have time available to take a day or weekend away, then you should do it.
However, if your dream is a little bigger, such as starting your own business, than you will have a lot more issues to consider, and starting your own business will take serious planning. You will need an idea and a business plan, a way to market your business, and of course the necessary financial backing. If you have a dream that is a fairly small dream as far as planning goes, then it might be easier to set in motion.

Source: Thinkstock

2. The cost of your dream

If your dream is to sky dive, you can participate in the static-line and instructor-assisted deployment (IAD) method for $100-$200, according to the United States Parachute Association. Unless you are in serious financial trouble, you can probably set aside the money to pay for that dream. On the other hand, if you are considering starting a business, you will be facing a more serious financial risk. Ask yourself if you can truly afford to start a business, and what will happen if the business fails. If you have a great idea and you have always wanted to start your own business, then with financial support, you might be in a great place to launch that business. However, you have to weigh the risks. While fulfilling a small dream might give you some happiness, going after a more expensive dream is really only possible if you have the money to do so without potentially ruining your financial future.

Source: Thinkstock

3. The potential long-term benefits of your dream

Another important issue to consider is what the potential long-term benefits of your dream are. If you want to go back to school in order to further your career, you may find that the potential benefits are worth the financial cost. According to CNBC, many adults return to school hoping to keep their job or move up into a better job. This can be the right decision, but you need to determine what your professional goals are, and also consider what you need to do to get there and what your education will cost. It’s helpful to look for scholarships and to avoid borrowing too much money. You can also see if your employer has a tuition remission program.
If you need a degree to stay in your current position or to advance, then going back to school might be worth it. However, if your dream is to learn a new career, or you simply want to further your education for yourself, then you should weigh the costs (and these include the financial costs as well as the cost of time).

Source: Thinkstock

4. The short-term benefits of your dream

Being financially savvy is really important, and it’s a good idea to avoid spending money frivolously. However, there comes a point when sometimes you just need to spend some money in order to decrease your stress, or really feel like you are doing more than just working. This is one of the most difficult choices to make, because you don’t want to spend money if doing so will endanger your future or put you in debt. According to Inc., taking time off might be necessary in order for you to return and do your best work. Sometimes you need a break, and taking a break might actually help you grow.
When you report to someone else, it can be difficult to feel safe taking the time away. In that case, you should talk to your boss. If you are extremely stressed and you have been dreaming about a particular vacation, trip, or other dream for a long time, now may be the time to go after that dream. If doing so will bring you back to work with a renewed work ethic and less stress, then the short-term benefits might be worth the lost time or money.
All of us have dreams, and the regular requirements of life can make it difficult to follow those dreams. If you are hoping to go on a vacation, go back to school, start a business, or you have some other dream in mind, take some time to evaluate whether or not you can balance your dream and the financial realities of your life. Going into great debt or sacrificing retirement or future savings in order to go for a dream probably won’t be worth it. But if you can truly afford to go after your dream, and the benefits will outweigh the risks, then you should go for it.

Source wallstreetcheatsheet

Will You Be Able to Retire Mortgage Free?

How often do you think about paying off the mortgage? Retirement may be harder if you still have debt. Ideally, you should enter retirement as free from a mortgage as possible. Here’s why and how.
Not having a mortgage reduces your overhead. That is to say, you need less money to live. You lower your personal break-even point. With limited income in retirement, this is always a good thing. Say your mortgage is $1,500 per month. If you pay it off before you retire, you have $18,000 more per year in your pocket.
You have more options. For me, a good financial plan is about having options. For example, you might not want to stay where you are. You might decide to sell your house and move to a less expensive part of the country. If you owe money on your house, you have fewer options. You might need to work part-time or draw additional amount from your savings. If you owe nothing, you can move and decide to work or not in retirement much more freely.
You are able to tap into your home’s value. Too many people do not save enough for retirement. I hope you’re not one of them. If you don’t have enough, the equity in your house can be a source of additional funding. In retirement, you probably don’t need as big of a home as you did. You can sell your house and move to one that’s less expensive. By trading down, you can take some money and add it to your retirement savings. It probably doesn’t suffice, but it surely helps. This can only happen if you have equity, and paying off your mortgage translates into more equity.
Think about doubling up payments. Paying off your mortgage isn’t hard, you just have to consistently save and have discipline. The easiest way is to make two payments a month instead of one. You can drastically reduce the term and the overall cost of your mortgage. While you’re at it, think about adding another $100 per month to that payment. If you do both, you can cut years off the time it takes you to clear your mortgage.
Becoming mortgage free is an important part of any retirement plan. When your mortgage is gone, you make your financial life safer. That’s something I think worth the extra efforts. Be smart and spend some time thinking about the future

Culled from Advice IQ

Challenges in the administration of pension reform Act, 2014 (1)-Olagunju B. Bashir

The Pension Reform Act 2014 which replaces the Pension Act 2004 was signed into law by President Goodluck Jonathan of the Federal Republic of Nigeria on 1st July 2014. The Act has significantly altered the scope of the employer’s and employees’ responsibility as well as regulatory powers of the Pension Commission.

I shall attempt in this review to highlight some of the challenges in the administration of the new Pension Act 2014. My approach shall be to reproduce relevant sections of the Act in this review and then comment as appropriate.

Application of Provision of the Act

The provisions of the Act shall apply to any employment in the Public Service of the Federation, the Public Service of the Federal Capital Territory, the Public Service of the States, the Public Service of the Local Governments and the Private Sector-Section 2 (1)

In the case of Private Sector, the Pension Scheme shall apply to employees who are in the employment of an organization in which there are 15 or more employees-Section 2(2)

Notwithstanding the provisions of subsection (2) of this section, employees of organizations with less than 3 employees as well as self-employed persons shall be entitled to participate under the scheme in accordance with guidelines issued by Pension Commission (PENCOM)-Section 2 (3)

Comment

The Pension Reform Act 2014 is mute on organizations with a workforce of 3 to 14. It appears the omission is due to typographical inadvertence and/or omission. Pending clarification and/or rectification by the Pension Commission, my recommendation is that organizations apparently missed out should continue to maintain their Pensions and Group Life Policies in accordance with basis of contributions stipulated in the new Act. It is pertinent to mention that under the old Pension Act 2004, the minimum eligibility number of employees was 5 and above.

Those organizations which do not presently have a Pension scheme are urged to incept one. For those falling within the eligibility bracket, an offence is being committed if one has not been incepted. Infraction of the Act has its attendant sanction and these sanctions are severe.

The recommendation is based on the reality that the accumulated Pension Liability together with the Group Life liability remains the employer’s responsibility under the Act. Should an employee suffer death during his/her tenure of employment while the default persists, the employer remains potentially liable for the employee’s entitlements. The employer would have to source for fund from elsewhere to fund the liability. Nigerians are increasingly becoming conscious of their legal rights.

Contributions To Pensions

Contributions for any employee shall be made in the following rates relating to monthly emoluments-Section 4 (1)

• Minimum of 10% by the Employer

• Minimum of 8% by the Employee

Any employee under the scheme may, in addition to the total contribution being made by him and his employer, make voluntary contributions to his retirement savings account-Section 4 (3)

An employer may agree

• On the payment of additional benefit to the employee upon retirement or

• Elect to bear the full responsibility of the Scheme provided the employers contribution is not less than 20% (instead of 18%) of the monthly emolument of the employee-Section 4 (4)

Definition of Monthly Emolument

It means Total Emolument as may be defined in the employee’s contract of service but shall not  be less than the total sum of basic salary, housing allowance and transport allowance-S120.

Comment

Under the Pension Reform Act 2004, the contributions used to be 7.5% by the employer and 7.5% by the employee, giving an aggregate of 15%. The Pension Act 2014 has increased the employer’s contribution to 10% and that of the employee to 8%, giving a revised aggregate of 18%. It is however curious that the employer’s contribution is revised to 20% by the Act if the employer chooses to fund the whole contribution. We can only guess the rationale that must have informed the additional 2%. The new Act also preserves the employer prerogative to pay gratuity in addition to pension. Thus a Pension Scheme and a Gratuity Scheme are not mutually exclusive. Staff motivation is tremendously enhanced if both schemes exist in an organization.

Group Life

Every employer shall maintain a Group Life Insurance Policy in favour of each employee for a minimum of 3 times the annual total emolument of the employee and premium shall be paid not later than the date of commencement of the cover-Section 4 (5)

Annual Total Emolument in relation to the Group Life Insurance Policy means the Gross Emoluments of an employee or deceased person.-Section 120

Death of Employee

Where an employee dies, his entitlement under the life insurance policy maintained under Section 4 (5) of the Act shall be paid by an underwriter to the named beneficiary in line with Section 57 of Insurance Act 2003.-Section 8

The relevant section under the Insurance is hereby reproduced for ease of reference: A policy of insurance shall not be made on the life of a person or other event without writing in the policy the name of the person interested in it or for those whose benefit or on whose account the policy is made- Insurance Act 2003- S 57

Employees Declared Missing

Where an employee is missing and is not found within 12months from the date he was declared missing and the Board of Enquiry by the Pension Commission (PENCOM) makes a declaration…….that it is reasonable to presume that the employee is dead, the provisions of Section 8 of the Pension Act 2014 will apply. – Section 9.

Consequence of Default in Arranging Group Life Cover

Where there is default in making payment for Group Life as at when due, and the policy becomes legally inoperative, the employer shall make arrangement to effect the payment of claims arising from death of any staff in its employment during such period.-Section 4 (6)

Definition of Annual Total Emolument

It is the Gross Emoluments of an employee or of a deceased person.-S 120

The payment of benefits to the estate of deceased employees under both Pension Contribution and Group Life has always remained a nightmare to most claimants. The process of obtaining a

Letter of Administration from Probate Division of the courts is an open ended journey. It may take months or a year plus with attendant legal fees and probate fees.

A case where the employee died on 25th November 2013. The Burial expenses benefit and the death benefits were settled by insurers on 4th and 27th December 2013 respectively. Whilst the burial expense benefit was released almost immediately to the bereaved family, the Death benefit remains till date marooned in the PFA’s safe awaiting the issuance and release of the letter of Administration was cited

Source  Businessday Newspapers

Social Security: 3 Ways to Make the Most-AdviceIQ

Your Social Security can be worth more in golden years’ income than your 401(k) or individual retirement account. The trick: Know at what age to best file for benefits.
Consider a married couple who both begin Social Security with a first-year combined benefit of just $23,304, based on the Social Security program fact sheet. As of Dec. 31, 2013, the average retired benefits recipient gets $1,294 a month and a spouse $648 a month. A retirement plan needs a value today of $543,147 to provide the same income as Social Security for the next 20 years.
This assumes that each retiree in our couple lives an additional 20 years, during which each receives a cost of living increase of 2.5 percent per year and pays no federal income tax on Social Security income but does pay 10 percent federal income tax on all other ordinary income. Also assume that each spouse’s 401(k) or IRA earns 4 percent, with distributions taxed at 10 percent.
Many preparing for retirement do not understand the value of benefits and how those benefits work, nor do the eventual retirees’ financial advisors. Here are four ideas to help maximize your Social Security retirement income.
1. Use the proper start-date for benefits. Assume that you have sufficient income without starting your benefits at age 62 – your earliest date of eligibility, when you get reduced benefits – and that your life expectancy is average or better. Then, delaying your start date can be a good investment.
If you were born between 1943 and 1954, you can increase your monthly payments as much as 76 percent based on when you start your benefits, at 62 or 70, and does not include any cost-of-living-adjustment.
2. Integrate your retirement and lifestyle, and consider taxes. Today, many post-career years include new or different work in early retirement.
For example, a married couple, both 60 and with a current employer for more than a decade, feel unfulfilled and can’t wait for a chance to change their lifestyle. They can work part-time or learn a new skill or both, while beginning to temporarily draw on their 401(k) or IRA. Both can integrate their retirement and work until they reach full retirement age (or FRA, 67 for anyone born after 1960) or continue this strategy until age 70, when they qualify for the maximum the Social Security benefit.
During this period, both in our couple take distributions from retirement accounts (distributions are taxable) and replace that income at full retirement age or up with higher Social Security income (not fully taxable).
3. Consider longevity planning and survivor protection. Longevity planning estimates how long you can collect benefits; survivor protection looks at how long your spouse can collect.
According to mortality tables, if you are a 65-year-old man you have a 50 percent chance of living to 85 and a 25 percent chance of making 92. If you are a woman the same age, you have the same relative odds of living to 88 and 94. A surviving spouse has a 50 percent chance of living to 92 and a 25 percent chance of making 97. A survivor at FRA or older can receive 100 percent of a deceased worker’s benefit if that benefit exceeds his or her own.
Couples need to jointly decide start dates and take into account age differences and the benefit of the primary wage earner.
4. Enlist a qualified advisor prior to deciding. Social Security representatives are willing to help but not normally prepared to take time to give you a detailed analysis of your best start date. Find an advisor and ask:

• Do you know when I need to stop and restart benefits between age 62 and my FRA or between FRA and 70?
• Do you know how the following may affect my start date: the Social Security tax-favored advantage; use of separate start dates for spouses; the higher step-up survivor benefit?
• Do you understand how to integrate my lifestyle with Social Security?
• Does your retirement-income planning integrate Social Security with 401(k) and IRA income?
• Do you know why I, the primary wage earner, may want to start benefits based on my spouse’s lower earnings record instead of on my own record?

Carefully consider your Social Security start date. These are just a few of the numerous factors to take into account.

Written by Wayne Fourman. Wayne Fourman works with the May Financial Group in Greenville, Ohio, and has served individuals and businesses with personal financial counseling since 1983. He was among the first in the nation to provide Social Security start-date planning.

Culled from Wallstreetcheatsheet

Three reasons why no one needs to buy an annuity -Alan Higham

Comment: annuities are shockingly poor value for money and there are better ways to use your pension savings, says Alan Higham

Investing your money will give you a better return than an annuity, says Alan Higham Photo: HOWARD McWILLIAM

"Let me be clear. No one ever needs to buy an annuity again." So said the Chancellor, George Osborne, in his Budget speech in March.

So, with annuity purchase optional, is there ever a reason to buy one? In my opinion the answer is no. Here are my reasons.

1. Value for money

As they stand, annuities are simply shocking value for money.

For people in good health, the best annuity offers the prospect of an annual return of less than 1pc over the 20 years of expected retirement for a 65-year-old. Locking into a 20-year fixed savings rate of 1pc is financial folly.

Anyone who can afford to take some measure of investment risk could do an awful lot better on a do-it-yourself basis.
Aviva will pay you a fixed yield of 5.5pc on its 22-year corporate bond, with your capital back at the end of the period or on earlier death. A 63-year-old man might live for another 22 years and he could buy an annuity paying 5.5pc a year for life with no capital on death. Even if you live to 100 or more, having £100,000 capital preserved is a decent return for the risk.
Aviva might default, of course, and I don’t for one minute suggest that people put all their eggs into one bond investment. But a mixture of bonds, shares and property ought to do a much better job than an annuity, especially if inflation takes off.
2. Even enhanced annuities are no better
"Enhanced" annuities pay a bigger annual income to people in poor health because insurers acknowledge that they won’t live as long. Enhancements vary between a few per cent and more than doubling the rate for the more severe conditions.
One man I helped has motor neurone disease and a very uncertain life expectancy; his specialist said three to five years when he was diagnosed two years ago.
He could have bought an enhanced annuity that pays more than double the rate for healthy people – 12.5pc rather than just under 6pc. But if he died within a few years, as was highly likely, he’d have lost more than half of his fund. We could have protected the fund by buying a guarantee that payments would continue for at least 10 years, but that reduced the rate to 8.7pc – in other words, getting back only 87pc of the capital and zero investment returns.
Adding his wife to the policy just turned the annuity into her annuity.
Unless he was an exception, like Stephen Hawking, he would be better off drawing chunks of his pension as and when needed, leaving the rest untouched.
Anyone who has less than 12 months to live – as certified by a doctor based on the balance of probabilities – can access their whole pension fund tax free.
3. There's another – better – way to get a guaranteed income
What about an annuity's "insurance value" – making sure you don’t run out of money no matter how long you live? I’m a big advocate of covering your essential expenses with secure sources of income such as the state pension, a final salary pension or an annuity.
Consider Dave, 65, who receives £6,000 from the state pension and £4,130 from a final salary scheme and has a £100,000 pension pot. Dave needs a minimum of £1,000 a month (£12,000 a year) to cover his essential outgoings, so he has a £1,870 annual shortfall in secure income.
He could spend £55,000 buying an inflation-linked annuity to cover the shortfall. He could also spend £33,000 buying a "level" annuity, which means taking some risk with inflation.
But better still he could defer his state pension for three years, spending £25,000 of his pension fund to cover that missing income and the shortfall. That way, when his state pension starts, it has been increased to the point that the missing £1,870 a year has been covered. (This method is explained in more detail here.) Why buy an annuity for £55,000 when the state will provide the same benefit for £25,000?
The small minority who should still consider an annuity
There are limits to state pension deferral: the longer you defer for, the less valuable it is, and your state pension can only be boosted so far. For people with very high essential outgoings relative to their state pension who can afford to buy an annuity despite its poor returns, I would advise doing so.
Also, if you are in very poor health and have no dependants or beneficiaries to whom you wish to leave your funds should you die at young age, again an annuity would be suitable for you.
Before the Budget, more than 90pc of people bought an annuity with their pension savings. In the future, state pension deferral terms will become less generous and people’s retirement pots will be far bigger, so I expect the annuity to return. But I think very few people making a positive choice about their retirement today would conclude that an annuity is the best option.


Culled from the Telegraph