Tag Archives: Money

Financial Perspective: Are you comfortable with risk you are taking?

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By Dave Stanley
Integrity Financial Service, LLC

“Risk can be a hard concept to calculate, remember, it is not a calculated risk if you haven’t calculated it.” – Dave Stanley

Photo from Pxhere.com

In the 2009-2010 NFC Championship Game, the Minnesota Vikings and the New Orleans Saints were tied 28-28 late in the fourth quarter, with the Vikings close to field goal range. Vikings quarterback Brett Favre took the snap, rolled to his right, and saw about 30 yards of open field in front of him. Even though he had injured his leg in the third quarter, all Favre had to do was lurch forward for 10 yards, fall down, and have a first-and-10 inside field goal range.

Instead, Favre reverted to what has made him a legendary hero (and sometimes a goat) many times in his Hall of Fame career. He planted his foot and threw cross-field where Tracy Porter intercepted him at the 22-yard line. At that moment, Minnesota’s fine season, Favre’s great comeback, and Vikings fans’ hope for a Super Bowl were thrown away. The Saints ran out the clock and kicked a field goal on the first possession of overtime.

What happened? In a pressure situation, with everything on the line, instead of making the high percentage play, a superstar did what felt familiar and comfortable – not what was safe.

You see the analogy coming. Quarterbacking a football team and managing your retirement portfolio are wildly different activities. It is doubtful that we will ever achieve a “Brett Favre” status within your success. Yet, a failure on our part to “read the field” could be more devastating to a family than the shock and disappointment felt by the players, coaches, and fans after that heart-breaking loss.

It is common for us as individuals to be the “quarterback.” If that’s the picture we are projecting, who is the head coach and team owner? Making all of the decisions in your planning can be very difficult, but help is often needed.

We have moments when we cannot handle any more risk (take the first down!). We know we do not want to lose another dime (just get me into a good field position!). It does not make any difference if you are convinced you can choose the stocks, funds, IPO’s, REITs, or whatever will right their portfolio and make you look like a hero. Most of us may not be ready to take that step with you.

During that game, there were millions of people watching. Some of those people were former NFL players. Some were Hall of Famers. Some were even Hall of Fame quarterbacks. But, when Favre planted his foot, there was no one on the planet more comfortable than he was. A lifetime of training, conditioning, practice, big games – even Super Bowls, had prepared him for that throw. It was the most comfortable thing in the world until Tracy Porter.

We may have the knowledge and experience but being all things in all situations just isn’t possible any longer. We all need a “Coach” to make sure we call the correct play. The disappointment over a lost opportunity while “going for field position” will be nothing compared to the fury if you try to “force a throw” they did not want you to make in the first place.

In plain English, we should never be comfortable with risk unless we know and understand all your options.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspective: Are you planning to retire? Here are a few things to consider

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By Dave Stanley
Integrity Financial Service, LLC

Photo from Pxhere.com

“Planning to retire? Be sure you have your exit plan in place and remember, when you retire, you never have a day off.”  Dave Stanley

Retirement is not likely to look anything like your parents’ retirement. The economic impact of government actions related to the pandemic, inflation caused by loose monetary policy, and stock market volatility have created craters in even the best-laid retirement plans. Many Americans are considering taking the money and running, opting for early retirement.

Joel a long-haul trucker, says he was initially going to wait another five years before retiring. “Dealing with a lack of parts for my trucks because of supply-chain problems, frustrating and time-consuming regulatory changes, and inflation have made my life challenging. I’m retiring now instead of later,” he explained.

Retiring early is a decision many Americans have already made, mainly because their workplaces reduced or eliminated staff. Some workers were offered attractive incentives for taking early retirement by companies feeling the pinch of COVID lockdowns.

Regardless of whether your retirement plans look solid, it’s still a great time to review your portfolio’s balance and think about for how long you want to continue working. Fortunately, the basics of creating a secure retirement remain the same, except for perhaps a few additional COVID-related caveats. Here are a few things to consider:

  1. Don’t count on working forever. Until COVID- working until you dropped seemed like a viable plan. However, results from a 2021 study by the Employee Benefits Research Institute (EBRI) confirm previous findings that indicate nearly 50% of all retirees left the workforce before the original target retirement date. This reality means that people in their 50’s and 60’s should have emergency plans solidly in place.

  2. Reduce or eliminate as much debt as you can. It’s common sense to make debt reduction a priority. You don’t want to take a credit card balance, car payment, or student loan with you when you retire, especially when retiring in an unpredictable economy.

  3. Have a health insurance strategy in place. If you find yourself retired before you are eligible for Medicare, you may have to find an affordable policy for those “gap years.” Even if you do get Medicare, you’ll need to plan for things like co-pays and uncovered expenses. One thing to consider is a health savings account, or HSA, which can help you grow a pot of emergency cash you can use when you retire. Ask your financial advisor to explain the many benefits of HSA plans and help you determine if starting one will work for you.

Finally, no matter what you decide about retiring, meet with a qualified retirement income planner. Ultimately, deciding when to retire may or may not be up to you. However, if you are thinking about leaving the workforce, you should sit down with your advisor and discuss every potential pitfall and how to avoid them.

Your advisor will suggest more strategies and recommend the right products to help you avoid running out of money when you stop working.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspective: Do you want green sauce or red sauce with that?

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By Dave Stanley
Integrity Financial Service, LLC

“If you are within a couple of years of retirement, you will want to know the answer to this critical question.”- Dave Stanley

Photo from pxhere.com

Here in New Mexico, it isn’t unusual for someone ordering Mexican food to be asked, “Red or green?” In fact, “Red or green?” was adopted as the official state question in 1999. (Did you even know such a state question existed?) Chile is the fiery soul of New Mexican food, and everyone here has their opinion about which chile sauce goes best with which dish.

I like to ask my clients and prospects the same question regarding their retirement savings. “Do you prefer green money or red money?” Red money, I define as that portion of savings a person is willing to expose to market risk. With red money, you accept the possibility of losses, even significant ones. The desire to chase after market gains is perfectly understandable given our current low-interest environment that punishes savers. Nevertheless, risking your life savings in hopes of getting (often mythical) higher returns may not be the ideal decision for those who are within a few years of retiring. That’s because when you choose red money, your wealth is exposed to both upside and downside risk.

On the other hand, green money is the portion of your savings you want to safeguard. Green money is cash used to create income streams that provide you with more safety and peace of mind. Green money is for those who are unwilling to accept even small losses. Instead, green money people add products offering lower rates of return in exchange for low to no market risk. Real green money has no downside risk and only upside potential.

Choosing red or green is not black and white. Despite what you may have heard from your advisor or some TV money guru, neither red money nor green money is inherently bad or good. After all, you are an individual with your own level of risk tolerance and unique money goals. What you need your savings to do when you retire may be very different than what your friend, neighbor, or co-worker needs.

Knowing this, you shouldn’t be asking, “What’s better, red or green money?” but rather, “What percentages of each type should I have in my portfolio to achieve my goals?” “What portion of my cash am I comfortable with exposing to risk?” “What do I ultimately want this money to do for me?” If you’re wanting to move forward slowly and consistently, instead of getting caught in a cycle of two steps forward, three steps back, you’ll need to examine products that can help you accomplish that.

For example, certain types of life insurance and annuities offer you the possibility of creating predictable retirement income with little to no risk exposure. Exploring your safe money options is not only prudent but necessary as we continue to experience market upheavals and a precarious and unpredictable economy.

Summing it up: A successful retirement requires that you know with what percentage of risk you are most comfortable with, how much you can afford to lose during a market downturn, and what you want your wealth to accomplish. How much red or green money you put into your portfolio is a critical decision that every retiree needs to make. A seasoned retirement income planner can assist you in making that decision and ensuring that every one of your dollars does the work of three or four.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspective: Time value of money

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By Dave Stanley
Integrity Financial Services, LLC

Photo from Pxhere.com

One of the fundamental financial concepts, the time value of money (TVM), says that the current value of a sum of money is worth more than the future value of that same amount. The principle of TVM comes from implicit costs, known as “opportunity costs.” It would be best if you evaluated when deciding whether it’s better to receive money now or take payments in the future. One way to think about opportunity costs is that they represent the value of what you stand to lose or possibly miss out on when you choose one possibility over another.

For example, a favorite uncle left you $100,000 in his will with the option to either take the whole sum now or get the money in equal payments over three years and receive an additional $500.00 for doing so.

For most of us, the instinctive choice is to take all the money right now and not wait three years to put it to use. By taking that money immediately, you can put it into an account that offers you continuous compounding interest that is likely to equal or exceed the $500.00 bonus you get for waiting. You could invest in an appreciating asset such as real estate or a cash-flowing business when you get the money right away. You might purchase stock with the potential to gain value or lock-in value with an annuity or life insurance policy. Because it provides immediate purchasing power, most people consider a present-day sum of money more valuable than a future sum.

Understanding the theory of the time value of money can help you avoid making costly mistakes with your money. You may one day face the decision to take a lump sum of money immediately or wait until later. Fortunately, there is an easy formula for the time value of money that takes the guesswork out of the decision. In this formula, the following variables are accounted for:

  • FV= Future value of money
  • PV= Present value of money
  • i=interest rate
  • n= number of compounding periods per year
  • t= number of years

Using the TVM formula, we can determine whether it would be wiser to accept the $100,000 from your uncle as a lump sum or in equal annual payments over three years along with the additional $500.

We have established that by not taking the lump sum, you stand to gain an additional $500. The question is, how much money could you earn over the three years if you were to receive the $100,000 and invest it today? Let’s say you take your $100,000 and invest it in a fund with an average annual rate of return of 6%. You want to know how much your investment will grow by the 3rd year. To figure this out, input the variables, and you will be left with the future value of your investment for a particular year.

119,101.60=100,000 x (1+.06)3

As you can see, after the 3rd year, your initial investment will have earned you an additional $19,101.60. Now that you know, taking the lump sum seems like a no-brainer.

If you are taking an active approach towards investing for retirement or other financial goals, do not be fooled by the allure of “free” money in return for splitting the sum into smaller payments. Carefully evaluate the pros and cons of each option while keeping in mind your own financial goals. Use the TVM formula, compare the potential gains and remember this; a dollar today is worth more than a dollar in the future.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspective: US Treasuries are the safest possible place to invest your money

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By Dave Stanley
Integrity Financial Service, LLC

“Everyone at some time in their life will run to safety.”  Dave Stanley

Treasury bonds are issued and backed by the federal government, the full faith and credit of the United States Government. The advantage is safety; the disadvantage is the yield you may earn can be lower than other investment options. The question to ask is simple, is the lesser yield still sufficient for your needs?

US Treasuries are issued in four different categories: Bills, Notes, TIPS, and Bonds.

Treasury Bills (T-Bills) have a maturity date of 1 year or less, and they are short-term by nature. Four options exist for a time duration of investment, 4 weeks, 13 weeks, 26 weeks, and 52 weeks maturity. Treasury Bills do not pay interest. Instead, they are sold at a discount and in denominations of $100. For example, a $1000 T-Bill with a maturity of 52 weeks might sell for $975. At the end of maturity (52 weeks), the owner of the T-Bill would receive $1,000.

Treasury Notes (T-Notes) A T-Note has a more extended maturity time period than T-Bills, 1 year to 10 years. Notes are issued in denominations of $1,000 with interest paid every 6 months. T-Notes are issued with the full face value of the note and not as a discounted face value.

Treasury Bonds (T-Bonds) T-Bonds are issued for a more extended period than T-Notes, 10 years to 30 years to maturity. Bonds are issued at face value, and interest is paid every 6 months. The most popular time period is 30 years.

Treasury Inflation-Protected Securities (TIPS) are US Treasuries issued with an added benefit; they are designed to help offset inflation. Treasury Inflation-Protected Securities are issued with 5, 10, and 30-year maturity dates. Interest is paid every 6 months and is a set rate, but additional interest can be paid at maturity based on inflation history.

Regardless of which US Treasury you choose, the safety of the principal is always the underlying benefit.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: Here is a guaranteed way to become a millionaire

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By Dave Stanley
Integrity Financial Services, LLC

“Using inflation as a tool, governments can confiscate, secretly and unobserved, an important part of the wealth of their retirees.”  Dave Stanley

You can almost imagine the unrestrained joy politicians felt upon reading John Maynard Keynes‘ words back in the early 1920s. Finally, they had discovered an easy way to finance the government’s wild spending sprees and pork-barrel projects without raising taxes (and losing votes!) Inflation gave governments a powerful yet discrete method of taxation, requiring no approval from the voters. The icing on the cake was that inflation’s consequences were much less detrimental to political careers than making unpopular budget cuts or increasing tax rates. Thus began the era of addiction to the printing press, unrestrained deficit spending, and an increasingly intrusive government.

Where are we today?

The “easy money” inflation genie rocketed out of the bottle with the force of a cork exiting a champagne bottle. No amount of pressure or commonsense economics could push it back inside. Even the Great Depression, funded partly by easy money economics, could not reverse a course of uncontrolled government spending and money printing.

Inflation is a misunderstood concept that threatens your wealth.

Inflation is one of the most misunderstood economic ideas and the source for much of the evaporation of middle-class wealth in the United States. In simple terms, inflation is a measure that determines the rate of rising prices in an economy.

Catalysts of inflation can include

  • Increases in the costs of raw materials
  • Wage increases
  • Poor fiscal management by the government.

Specific government actions are undertaken to jumpstart a lackluster economy, such as the so-called “quantitative easing” pursued by the Federal Reserve a few years ago, which also contributes significantly to rising inflation.

Inflation is the “silent” tax.

Sometimes referred to as the “stealth tax,” inflation is a more significant threat to your financial future than state or local income taxes. Inflation has proven to be particularly problematic for seniors who are retired. That’s because retirees live mainly off the income generated by their retirement accounts, along with Social Security. So, when money loses its purchasing power, the price of necessities increases. Such increases mean that seniors will use up their savings faster, perhaps putting themselves in the position of running out of money early in retirement.

Could we see “billion-dollar” currency denominations?

Disastrous monetary policies such as shameless deficit printing and currency devaluation have existed for the greater part of human history. Unfortunately, though, the United States has taken fiscal irresponsibility to new heights, becoming the most indebted country in world history. Currency turmoil is almost always the outcome of reckless fiscal policy. For example, inflation in the country of Zimbabwe was so high for so long that their entire economic system crashed. This hyper-inflation arose when Zimbabwe’s government responded to the out-of-control national debt, political corruption, and a weak economy by increasing the money supply.

Zimbabwe’s government caused some of the highest inflation in human history. At one point, it took 1.2 QUADRILLION Zimbabwean dollars to equal $4,000 U.S. dollars! Some scholars suggest that if the U.S. continues on its present course, we could experience similar issues.

The bottom line: Inflation is just one of the erosive factors that can undo your best-laid retirement plans and cause you to experience stress and worry when you no longer work. Inflation may be the greatest threat of all because it is little understood and anticipated. If you have a retirement plan in place, now is an excellent time to review that plan with your advisor to ensure you have included provisions to see you through in the event of hyperinflation.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: There is a secret about longevity, living a long time

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By Dave Stanley
Integrity Financial Service, LLC

“The secret is simple: The longer you live, the longer you live!”

What happens if you live longer than you expect? How do you make sure your funds last as long as you do?

Do you invest in stocks? Bonds? Keep your money in the bank? Increased life expectancy is extending the time needed for our retirement funding, making sure our money lasts as long as we do has become the new “mantra” of the Baby Boomers.

Many financial planners are turning towards products that remove the risk of the longevity problem, allowing an insurance company to bear the longevity risk, annuity companies issue and manage annuity products.

Many types of annuity products are available, even those who pay interest (yield), which are similar in structure to bank CDs. However, the real benefit of annuities is the income provision, income that can pay for any period, even a lifetime.

The question often asked is “What happens to the money in an annuity if a person dies early? Does the annuity company keep the money?”

The answer is no; it is an old wives’ tale that insurance companies profit from an early death. The unused portion of the annuity is merely refunded to the named beneficiary. Funds are always accounted for, and it is the law.

Consider letting an insurance company be responsible for your important long-term safe and secure retirement income. Safety and security is their first and foremost goal.

One last tip: shop around for the best rates; rates can often be based on age, and numerous options exist.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: From the NBA to annuities, from free throws to guaranteed income

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By Dave Stanley
Integrity Financial Service, LLC

I recently read an article about Shaquille O’Neal and his after basketball life that was truly amazing. Did you know in his 19 -year NBA career, he earned a total of $292 million in compensation? He was the highest-paid player over that time period, making enough money for a couple of hundred families to live in complete comfort. With the athlete’s age, we have watched salaries skyrocket to levels we cannot comprehend as just regular folks.

Shaq was one of the all-time greats, and he proved it on and off the basketball floor. Did you know he also starred in movies and had three very successful records with more than 1.3 million copies sales? Shaq became a brand, and he used his celebrity to put in place a money-making machine for his retirement from basketball.

The article mentions his endorsement life: products we know nationally, such as Buick, Icy Hot, Reebok, Zales, Foot Locker, Arizona Tea, and many more. The list includes more than 20 products and companies. His endorsement income is now greater than his salary as a top NBA center, and more to come.

Shaq is booked all day, every day, in a nonstop worldwide promotional endorsement and entertainment tour. In addition to product endorsements, he is also a TV analyst, an international motivational speaker, and a private party DJ. Yes, you can have Shaq come to your house for 2 hours, have him DJ your party for only $50,000.

It was estimated he could earn more than a BILLION dollars in just his endorsement career. Certainly a lot of money and reason to be concerned about how the money is invested and protected to ensure his and his family’s financial security.

In the article, he was asked about the income he is now earning. He said, “I don’t pay any attention to the money. If I lose it all, it is no big deal, myself and my family are already financially secure because when I started in the NBA, every year I invested in annuities.”

Annuities now provide more income than myself and my family need. The money I earn now is just for fun.”

Annuities? Yes, a man who in his lifetime will earn in excess of a BILLION dollars is depending on annuities to guarantee his financial future.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Perspectives: Have bonds earned a place in your portfolio?

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By Dave Stanley
Integrity Financial Service, LLC

Beginning in 2020, the Federal Reserve cut interest rates to multi-decade lows, dropping the rate on 10-year Treasuries from a robust 2% to 0.5%. This steep decline was a blow to savers, especially those who traditionally look to bonds as safety anchors for their retirement portfolios. Since Treasury 10-year rates determine approximately half the yield of corporate bonds, convertibles also feel the sting of near-negative interest rates.

Discouraged by a cooled-off bond market, many who count on bonds for retirement income are looking into convertible bonds as an alternative. Corporate bonds that can be swapped for common stock in the issuing company, convertible bonds can lower the coupon rate on debt, thus saving a company interest.

Convertibles allow a holder to exchange them for a predetermined number of regular shares in the issuing company. For the most part, convertibles function just like traditional corporate bonds but with somewhat lower interest rates.

Since convertibles may be changed into stock and benefit if the underlying stock price rises, companies offer lower yields. If the underlying stock does not perform well, there is no conversion, and the investor is stuck with the bond’s sub-par returns.

How do convertible bonds work?

Convertibles operate according to what is known as the “conversion ratio.” This formula determines how many shares will convert from each bond. The conversion ratio expresses as either a ratio or as the conversion price.

For example, if the conversion ratio is 40:1, with a par value of $1,000, shareholders may exchange the bond for 40 shares of the issuing company’s stock.

The price of convertible bonds starts to rise as the company stock price nears the conversion price. When this happens, your convertible bond performs somewhat like a stock option. If the corporate stock experiences volatility, so will your bond.

Why would anyone consider adding convertible bonds to their portfolio? 

Investors add convertible bonds to their investment mix because convertibles offer guaranteed income with built-in downside protection. Provided an investor does not convert before maturity, they get their initial investment back, plus earned interest. There is also the potential for higher returns than traditional bonds.

What are some convertible bond pitfalls? 

The “forced conversion” element of a convertible bond is one of these instruments’ most significant downsides. The bond issuing company retains the right to force investors to convert the bonds into stock. Such conversion typically occurs when the stock price becomes higher than the amount would be if the bond were redeemed.

A specific type of convertible bond, known as a reverse convertible bond (RCB), lets the issuing company decide to convert the bonds to shares or keep them as fixed-income investments until maturity. RCB’s, unlike common stocks, can cap the bond’s capital appreciation. Such caps mean that these bonds’ principle protection element may not be as worthwhile as it first appears.

Summing it up: Convertible bonds are somewhat complicated instruments designed to create guaranteed income while protecting against market losses. Companies usually issue convertible bonds with less-than-exceptional credit ratings but expectations of high growth. Convertibles allow these companies to get money to expand at much lower costs than those of conventional bonds.

If you are considering purchasing a convertible bond, you need to understand the basics of how they work and all the associated risks.

Always consult an authorized and licensed financial professional to map out convertibles’ pros and cons relative to your situation and risk tolerance. Your advisor may suggest other products, such as Fixed Indexed Annuities, that also guarantee principle with growth potential.

Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

Financial Perspectives: Should you have debt when you retire?

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By Dave Stanley
Integrity Financial Service, LLC

“Obligating yourself with debt is borrowing against your future income, be careful, that obligation can cause big problems when you retire.”  Dave Stanley

Unless your parents made some weird deal with the hospital, you were probably born kicking and crying but debt-free. In a perfect universe, you would have remained that way, spending most of your life as solvent as possible. Then you would skip blissfully into retirement without being shackled to a boatload of debt. You’d have a million in your 401k, maxed out life insurance policies, and guaranteed income from annuities.

The reality, however, is a lot different for most pre-retirees and retirees. Life has its’ own plans, and sometimes it goes off the rails a bit. Even the best-planned people can end up underwater, sideways, and paying lots of unexpected bills. According to financial researchers, more than 41 % of Boomer retirees have credit card debt, and another 35% have car loans with balances over $14,000. Many older retirees also carry debt into retirement, although the number is substantially less.

 

How can debt impact retirement?

You may be thinking, “So, why is having debt so terrible? I have cash flow from my retirement accounts that I can use to pay it. Is it that much of a problem?

The answer to those questions, unfortunately, is “Yes.” Many retirees discover that having a lot of debt when you no longer work means having a more stressful, hand-to-mouth existence that could last 30 or more years after leaving the workplace.

Even worse, debt might be the tipping point that causes some retirees to run out of money long before they die. Having a lot of debt significantly constricts cash flow, making it difficult, if not impossible, to maintain emergency funds, pay for vacations and leisure activities, and pay for out-of-pocket health care costs and preventative medicine.

While many who are planning their retirements believe that having some money in the market will offset some of the problems created by debt, they forget that even historic market gains cannot offset high credit card rates. Often, we forget about the toll that anxiety over finances takes on our health and emotional well-being. Having debt hanging over one’s head can also cause various mental and physical ailments that could reduce life expectancy or require nursing home care. 


How much debt is acceptable?

Those close to retirement are probably wondering how much debt they can bring with them and not feel too impacted. There are rules of thumb in the financial services industry that say you should have no more than 28% of your pre-tax household income servicing principle, insurance, interest, and taxes on a mortgage and no more than 36% of that income to consumer debt payments.

 

That’s while you are still drawing a paycheck.

In my opinion, when you retire, the numbers should be much, much more conservative. If you find yourself rapidly nearing retirement and saddled with debt, you may want to consider other options. To pay off debt and still keep saving for retirement, you might try working a few years past your ideal retirement age, getting a second job or part-time “gig,” selling off things you don’t want or need, or perhaps negotiating lower interest rates on loans.

In most cases, you want to pay the high-interest debts first and not worry as much about the mortgage, especially if you have a reasonable fixed rate and continue to get the mortgage interest tax deduction. If you don’t have an ideal rate, consider refinancing to shorter terms or lower interest rates.


The final word:

Because individual financial situations differ, the amounts of debt that can potentially impact retirements will be different for everyone. In general, though, it’s a good idea to pay off as many debts as possible before you decide to retire. If you are already retired or are about to, consult a competent retirement specialist to find debt reduction strategies that are best for you.


Dave Stanley is the host of Safe Money Radio WOOD1300 AM, 106.9 FM and a Financial Advisor and Writer at Integrity Financial Service, LLC, Grandville, MI 49418, Telephone 616-719-1979 or  Register for Dave’s FREE Newsletter at 888-998-3463  or click this link:  Dave Stanley Newsletter – Annuity.com  Dave is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management

Money available to help homeowners, business owners pay winter bills

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Photo from Pxhere.com

By WKTV Staff

Michigan Attorney General Dana Nessel and Consumers Energy are launching a public campaign today to ensure Michigan residents take advantage of tens of millions in federal, state and local dollars that will help households and small businesses pay winter heating bills.

“No one should go without warmth or comfort in their own home when they can have access to so many dollars here in Michigan, starting with a single phone call,” Nessel said. “We know February’s brutal cold is leaving our friends and neighbors with high energy bills, but they should know they can take action now that can make a huge difference.”

“Consumers Energy is working right now to help many Michiganders who could use support due to the twin challenges of the pandemic and the cold snap,” said Lauren Youngdahl Snyder, Consumers Energy’s vice president of customer experience. “The new federal stimulus and other sources are making tens of millions of dollars available to help with energy bills.”

Nessel and Michigan’s largest energy provider are teaming up after two weeks of especially cold temperatures in February caused furnaces to run more often than usual. The cost of that heat will be reflected in customer bills that are arriving this month.

Consumers Energy and the attorney general are both reaching out to the public and are promoting resources to help Michiganders. People who are struggling with energy bills should call 2-1-1, a free service that connects people with nonprofit agencies in communities across the state. They can also go to mi211.org. 

Other ways to get help

Consumers Energy alone has provided $15 million since last fall to help customers pay bills. In all, the company and its charitable foundation have provided over $21 million to support customers and communities with needs related to the COVID-19 pandemic.

“Consumers Energy knows asking for assistance isn’t always easy,” Snyder said. “But we want you to know money is available right here in Michigan to go toward your energy bills. Even if you didn’t qualify in the past, it’s possible you can get help today.”

Practical ways seniors can save money

3-bottom, Citizen Journalism, Community Health, Health, How-To's, Senior Living,
Courtesy Vista Springs Assisted Living

By Vista Springs Assisted Living


Saving money is important no matter your age or income level, but seniors often find themselves needing a few extra dollars here and there to make retirement work. Fortunately, there are practical ways to stretch a dollar, without breaking the bank.


Downsizing to a smaller home, getting rid of cable television, sharing expenses with friends and taking advantage of senior discounts are all effective ways to save money in retirement.

Downsizing

Larger homes cost more to heat, cool, furnish and repair, which is why downsizing the square footage makes a lot of sense for seniors. Moving to an assisted living community can amplify the cost savings, depending on the circumstances. Specifically, downsizing can reduce gas, electric, insurance, property taxes, and water bills, while minimizing upkeep costs like new carpet and landscaping.

Cut back on cable

Cable television isn’t cheap, especially when you factor in premium channels such as HBO, Showtime, and Cinemax. While it’s fun to have all of the sports and specialty channels, they aren’t always necessary, and they can cost more than $100 a month. Netflix and Hulu are much more cost-effective, allowing seniors to stream content via the Internet on their televisions. Both services combined allow retirees to watch movies and television shows at a fraction of the cost of cable.

Share expenses

Whether it’s carpooling to bingo, the movies or to the store to get groceries, ride sharing among seniors is an effective way to cut down on fuel costs. Transportation isn’t cheap, especially in areas of the country where cities are decentralized, or in the countryside where it takes some time to get back to more populated areas. Thus, lower fuel costs can help seniors. Ride sharing also cuts down on the wear and tear to older adults’ vehicles, extending a car or truck’s useful life and reducing maintenance costs.


Moving into an assisted living facility like Vista Springs can also help seniors spread the cost of entertainment, activities, and medical care among fellow residents, enhancing the quality of life for everyone involved. The costs of independent medical attention, food preparation, and daily entertainment is often-times cost-prohibitive for seniors living alone. Finding ways to share expenses among a group provides new and exciting possibilities for aging adults.

Senior discounts

Movie theaters, fast-food restaurants, fine-dining restaurants and similar establishments typically offer senior discounts at particular times, or on specific days of the week. Taking advantage of these opportunities can yield cost-savings and an active retirement, which is beneficial on multiple levels. The goal of retirement is not to stop spending money, but to enjoy the fruits of one’s labor of many years of working. Senior discounts allow seniors to get out and do more for less, which is positive for everyone in the community.


Seniors living off of a fixed income usually need to be cost-conscious to ensure a comfortable and rewarding retirement. But when you find ways to save money in an efficient, practical and common sense way, older adults can live a fun and enjoyable retirement.


Reprinted with permission from Vista Springs Assisted Living.


Money talks that you should be having with your aging parents

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Courtesy Michigan State University Extension

By Scott Matteson, Michigan State University Extension


“Silence is golden” or so the saying goes, but is it always a good idea? Silence is not golden when it comes to the subject of your parents’ living expenses, healthcare and elder care costs. According to the Fidelity Intra-family Generational Finance Study (FIGS), 4 out of 10 families have not had a conversation with their elderly parents about living expenses, healthcare, and elder care costs. One reason, as stated in the study, is that parents worry that their adult children are counting too much on a future inheritance, while children don’t want to upset their parents.


Because of this reasoning, the subject of money becomes taboo and needed conversations are not happening.


According to the FIGS study, children and parents didn’t believe having a conversation about living expenses, healthcare, and retirement was difficult to start. The difficulty comes with the depth and the detail of the conversation and when to start having the conversations. The important thing to remember is don’t wait until an emergency to have the conversation.


Below is a list of topics and ages when discussing retirement issues that can help avoid future emergency conversations:

Age 50AARP Eligible, Senior Discount Programs, Catch up contributions of $1,000 for IRA and $5,500 for 401k, 403b and TSP
Age 55401k or retirement withdrawals without 10 percent early penalty
Age 59 ½Take from any retirement account without 10 percent early penalty including Roth IRA, as long as it’s been held for 5 years.
Age 62Earliest age to collect Social Security. Eligible for reverse mortgages.
Age 65Eligible for Medicare (Apply 3 months before 65th birthday) – otherwise Medicare part B and prescription drug coverage part D may cost more money
Age 66Full retirement if born between 1943-1954 Can collect Social Security without reduction and no offset on amounts earned.
Age 70Maximum Social Security accrual – time to start.
Age 70 ½IRA and 401k contributions must stop. Must begin taking required minimum distributions


Before beginning a conversation on a sensitive subject such as money, you have to realize that the conversation is not a democracy; your parents have made decisions about their money all of their life and they are not about to stop now. Remember, it is your parents’ money and their decision. Below are 10 suggestions to aid in having a conversation concerning retirement, living expenses, healthcare, and elder care.

  1. Start Discussions Early. Do not think that it will only take one talk. The earlier you begin discussions, the more time will be on your side and the easier the discussions will become.
  2. Include all family members. Make sure all siblings are included in the discussions. This way, everyone in the immediate family is fully aware of all decisions made and are not getting information passed on to them that may or may not be accurate.
  3. Explain the purpose of your conversation. Communication is integral. Explain your concerns about how your parents will be cared for and how they feel about their financial future.
  4. Understand your parents’ need to control their own lives. The conversation is not about preserving your inheritance. It is about your parent’s right to be able to live their life how they want to live it.
  5. Agree to disagree. It is okay to disagree; the conversation is not about who is right or who is wrong.
  6. Use good communication skills. Listen to understand not to reply. If you don’t understand, then ask for clarification.
  7. Ask about records and documentation. Do not be afraid to ask where pertinent records are located and who would need to be contacted concerning them are.
  8. Provide information. If you come across information you deem to be useful in helping to make appropriate decisions, provide it to everyone involved in your ongoing discussions.
  9. Re-evaluate if things aren’t working well. Do not be afraid to take some steps backwards if conversations are not being productive.
  10. Treat your parents with respect. Always respect your parent’s wishes regarding decisions concerning their living expenses, healthcare and elder care.

For more in depth information about talking with aging parents about retirement please click on the following links: Aging and Money and When to Start Receiving Retirement Benefits. Additional information can also be found here.


This article was published by Michigan State University Extension. For more information, visit https://extension.msu.edu. To have a digest of information delivered straight to your email inbox, visit https://extension.msu.edu/newsletters. To contact an expert in your area, visit https://extension.msu.edu/experts, or call 888-MSUE4MI (888-678-3464).



Preparing youth to be money smart after graduation

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By Frank Cox, Michigan State University Extension

 

What comes to mind when you hear preparing for post-secondary education? Other than filling out applications for colleges, trade schools, financial aid or scholarships, you may think of working hard to get good grades, studying to make high scores for the SAT or the ACT, or, for student athletes, improving skills to get a scholarship. What about preparing students to manage their money while they are in post-secondary education

 

According to a study on college students and personal finance by LendEDU, statistics show this can be an important topic to teach to students entering into post-secondary education. For example:

  • 58% of students reported they were not saving money each month.
  • 43% of students stated they don’t track monthly spending.
  • 29% of students stated they saved 0 percent of their monthly income each month.
  • 81% of students stated they do not have an emergency fund.

What can parents, schools or community organizations teach or emphasize to students as they enter post-secondary education? First, for the statistics above: budgeting and saving. Other than paying for the costs of college like tuition, room and board, and other academic expenses, other expenses such as the costs of hanging out with friends, going to restaurants or sporting events can affect the budgets of students (please see “1. Don’t deposit and dash” in “4 Steps to Financially Prepare Your Student for College” by U.S. News).

Some tips to assist students in money management for college from “6 Must-Follow Money Tips For College Students” in the U.S. News and World Report are:

  • Create a budget.
  • Separate wants and needs.
  • Set up a checking account.
  • Use, don’t abuse credit cards.
  • Do your homework on loans and financial aid.
  • Shop smart for textbooks.

The National Endowment for Financial Education also provides a helpful resource with “40 Money Management Tips Every College Student Should Know” to help provide strategies and resources for young people before and during their post-secondary education.

 

Also, Michigan 4-H Youth Development through Michigan State University Extension has resources for youth money management. Parents and caring adults can use resources such as National Endowment for Financial Education High School Financial Planning Program and Michigan 4-H Youth Money Management to build personal finance skills that will help youth not only in college but also through adulthood.

 

Michigan State University Extension and Michigan 4-H Youth Development help to prepare young people for successful futures. As a result of career exploration and workforce preparation activities, thousands of Michigan youth are better equipped to make important decisions about their professional future, ready to contribute to the workforce and able to take fiscal responsibility in their personal lives. To learn about the positive impact of Michigan 4-H youth career preparation, money management and entrepreneurship programs, read the 2016 Impact Report: “Preparing Michigan Youth for Future Careers and Employment.”

 

This article was published by Michigan State University Extension. Reprinted with permission. For more information, visit http://www.msue.msu.edu. To have a digest of information delivered straight to your email inbox, visit http://www.msue.msu.edu/newsletters. To contact an expert in your area, visit http://expert.msue.msu.edu, or call 888-MSUE4MI (888.678.3464).

Misperceptions about market corrections: Are you prepared?

3-bottom, Citizen Journalism, How-To's, , , , , , , , ,

By Jeffrey S. Williams, Grand Wealth Management

 

In his most recent Berkshire Hathaway shareholder letter, Warren Buffett shared this powerful insight about market downturns:

 

“During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy.”

 

This is a good time to talk about scary markets, since we haven’t experienced a severe one in a while. 

 

Scanning financial news in our calm market, you’ll find the usual range of attempted interpretation about our current market: “We are worried about …” “Economic indicators suggest that …” “Geopolitical events are likely to …” and so on.

 

While it’s highly unlikely the market will remain this calm forever, nobody can predict when it might turn, or why or how dramatically it may spike back up when it does. We counsel against shifting your portfolio in reaction to near-term forecasts. Instead, let’s use the relative calm as a perfect time to do a reality check on what scary markets really represent, and how to manage them when they occur.

 

Contrary to common perception, scary markets can be your friend. Instead of fussing over when the next market downturn may or may not occur, here are some great questions to consider:

  1. Are you taking on enough stock market risk in your portfolio to capture a measure of expected returns when they occur?
  2. Are you fortifying your exposure to market risks and expected returns with enough lower-risk holdings, so you won’t fall prey to your fears the next time markets tumble?
  3. Have you assessed whether your current portfolio mix is optimized to achieve your personal goals and have those goals changed?
  4. Does your current portfolio mix of safer/riskier holdings accurately reflect what you’ve learned from past markets?
  5. Have you carefully considered what a 30% or so market downturn would mean to you in real dollars and cents?

You can prepare for the next down market by having a well-planned portfolio in place today — one you can stick with through thick and thin. Neither too “hot” nor too “cold”, your portfolio should be just right for you. It should reflect your financial goals. It should be structured to capture an appropriate measure of expected returns during good times, and allow you to effectively manage your personal fears throughout.

 

Your Community in Action: Financial health in the new year

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By ASCET Community Action Agency

 

Data from 2012 indicates that 60% of Michigan residents don’t have an emergency fund. What happens when their car breaks down or a family member gets sick? How do they find the money for these unplanned expenses?

 

Living pay check to pay check is stressful; it can feel like you will never catch up. Many people find money management training helps. With the right tools and dedication, it is possible to save up for that rainy day!

 

January is a great time to set goals for the upcoming year. If financial health is one of your New Year’s resolutions, there are many programs in Kent County that can help. For example, MSU Extension offers the Money Management Series. Money Management is a Personal Financial Education Program that gives participants information and tools to manage their finances, achieve goals and increase their financial stability. In this series, you will learn the following skills:

  • Making Money Decisions
  • Creating & Managing Spending Plans
  • The Importance of Saving & Investing
  • Credit Card Use & Paying Off Debt

After taking financial classes through MSU Extension, 84% of participants reported keeping track of spending and income as well as saving money regularly.  Are you ready to meet that New Year’s resolution of better financial health? The next series begins on February 8 in Grand Rapids!

 

Pre-registration is required. Learn more about the program and how to register online here. .  

 

Your Community in Action! is provided by ASCET Community Action Agency. To learn more about how they help meet emergency needs and assist with areas of self-sufficiency, visit www.communityactionkent.org