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Retirement Planning Blog

on 04 April, 2018

financial literacy us 2018

Editor's Note: This is the first part of a four-part series on financial literacy in the United States. Stay tuned for more helpful articles on how you can reach the retirement you have worked hard to attain.

Now that April is here, it’s National Financial Literacy Month. This is a good time to gauge our knowledge and comfort with money matters. Why? Well, because financial literacy is something that affects all of us.

In its research, the FINRA Foundation has found that financial literacy is “strongly correlated with behavior that is indicative of financial capability.” People with high literacy are more likely to plan for retirement, have an emergency fund, and avoid expensive credit card debt. In turn, those behaviors can lead to quality-of-life outcomes, including more financial wellness, more confidence, and more peace of mind.

But in the same breath, studies show a gap between what Americans say they know and how they actually rank in their financial knowledge base. A recent study brief by the FINRA Foundation drives it home.

In the study, nearly two-thirds of Americans failed a quiz on basic financial concepts.

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on 21 March, 2018

 planning for healthcare expenses in retirement

How should you include the price tag of healthcare costs in your retirement plan? Many people underestimate what their healthcare expenses may be. At times, it’s even to a great extent.

In a March 2017 survey by Voya Financial, 69% of baby boomers said they expected to pay “$100,000 or less” for healthcare expenses in retirement. Among retirees, 66% also expected their healthcare costs to be $100,000 or below.

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on 02 April, 2018

 steps to create a retirement income plan

Remember those television commercials from a decade ago showing people walking around town carrying a giant orange “retirement number” under their arms?

That is what everyone thought a retirement plan should look like. A big number that you divvy up and draw down during your golden years. With that strategy you are taking 100 percent of the risks many retirees may face, from market volatility to longevity risk to healthcare risk.

Modern thinking has taught us that, as the average life expectancy continues to climb (Could age 90 be the new 70?), our real concern should be more than a magic number for retirement savings. It should be creating a retirement income plan that ensures we will have income in retirement that lasts as long as we will.

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on 19 March, 2018

asset based long term care

An income-rich retirement takes diligent effort to reach. Living well in the golden years means you have to start saving early. Over the years you save and invest some of your income in tax-advantaged retirement accounts, like a 401(k) or a Roth IRA. When retirement starts to draw near, it's time to create an air-tight financial plan that generates the income that would make your ideal retirement possible.

But, if you’re like the majority of Americans, you may not have planned for a big-ticket item that can derail even the best-laid retirement plan: the nest-egg-depleting cost of long-term care.

We know from recent studies that we are living longer than previous generations. However, most of us have our blinders on when it comes to planning for long-term care (LTC). A study by Northwestern Mutual revealed that 56 percent of Americans say that saving for LTC is one of their top financial priorities. But a whopping 73 percent haven't planned for this need.

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on 28 March, 2018

 gen xers money concerns

Generation Xers, you have probably heard yourselves referred to you as the "Sandwich Generation." For those of you on the upper end of Gen X’s age range (35 to 55) this means that, not only are you likely to be responsible for caring for your long-living parents. You will also likely provide some financial support to your children. For many Gen X parents, that may be helping with college tuition. 

And there you are in the middle, needing to build a retirement nest egg and prepare for your own future needs, like the possibility of long-term care. What's more, you have to account for all the other routine expenses facing retirees.

You may not be feeling like the middle of a sandwich as much as you are feeling like the middle of a famous chocolate sandwich cookie. The two rigid outside edges (financial support for both parents and kids) may seem like they are squishing you—and your financial future—in the middle.

In a recent survey, the Insured Retirement Institute found three key money risks that worry Gen Xers. Below are those money concerns, as well as some ideas to help you preserve your financial strength and maybe even “Double Stuf” your retirement resources in the face of them. But first you need to start the conversation.

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in Annuity
on 15 March, 2018

market value adjustment

Have you heard of a “market value adjustment” when researching annuities? A market value adjustment is a contract feature that comes with annuities of the fixed variety. Generally you will find it attached to traditional fixed annuities and indexed annuities.

A contract with this feature is called a “market value adjusted annuity,” or an MVA annuity for short. MVA annuities tend to offer higher interest rates than regular fixed annuities do.

With a market value adjustment feature in the contract, the insurance company shares some of its investment risk with an annuity policyholder. In exchange, the policyholder may enjoy more chances for growth potential than a regular fixed contract may provide. That being said, the market value adjustment factor applies typically to excess contract withdrawals and surrender charges. And depending on the interest rate environment, an MVA may be positive or negative, which can increase or decrease a surrender charge amount. 

The insurance company uses the market value adjustment factor as a safeguard against annuity contract surrenders and, in turn, to maintain its financial strength. That way it can maintain its contractual guarantees and promises made to its annuity policyholders.

Let's look more at what a market value adjustment involves -- and how it may be beneficial or negative.

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on 26 March, 2018

 social security earnings test question

Choosing when to take your Social Security benefits — whether that moment is before, at, or beyond your Full Retirement Age (or Normal Retirement Age) — could be one of the most important decisions you will make for your retirement income plan.

Why is knowing your Full Retirement Age (FRA) so critical? Claiming your Social Security benefits prior to reaching your FRA results in a reduction of your benefit, a reduction that lasts for your entire life. Since Social Security is likely to be the largest “income asset” for many people, understanding what could reduce that payout, and potentially how to avoid that reduction, is paramount.

It's not just that. If you are working and take Social Security benefits before attaining your Full Retirement Age, the Social Security Administration will also reduce your benefits payments should your earnings exceed certain limits. This is called the "Earnings Test" by the SSA and financial professionals. According to Transamerica Center for Retirement Studies, 53% of workers plan to work past 65, and 56% plan to work after they retire.

Given that lots of Americans have working plans for their retirement future, how could the Earnings Test affect their benefits payments? For one, it isn't clear to many people exactly what earnings apply toward the Earnings Test -- and therefore what could affect their benefits payouts. 

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on 12 March, 2018

living to 100 article

What are the chances of living to 100? You may be surprised. Although people reaching 100 and beyond is rare, more Americans are joining the ranks.

In 2010, the U.S. Census Bureau found 53,364 centenarians – or those fabled few who have attained age 100 and up – were living in the United States. A later study by the CDC estimated that the “100 and up” crowd had grown over 40 percent, or to 72,197 centenarians, in 2014.

Over the past few years, numerous studies have revealed that, in general, we are likely to live longer than previous generations did. In turn, that is changing people's expectations of the golden years. 

Apparently, we have gotten the message that we are likely to have many more years to enjoy than we may have previously expected. A newly released study from the Transamerica Center for Retirement Studies reveals that today’s workers are already thinking in terms of longer lives.

Their 2017 survey of more than 6,000 workers across the United States asked: “What age are you planning to live to?” Those who provided an answer to the question are planning to live to age 90 (median). Another 14 percent plan to live to age 100 or older, a finding which is even higher among millennials (18 percent).

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on 22 March, 2018

market meltup over morgan stanley

The stock market certainly delivered an exciting start to 2018.

The S&P 500 climbed 7.5% between late December and January 26, when it recorded the last in a string of record closes at 2,872.87. That fateful Friday in January was also the day the Dow Jones Industrial Average reached its record high of 26,616.71.

That may have been the end of a much-anticipated "meltup," which CNBC reporter Sue Chang writes is defined as an unexpected rise in asset prices as a fear of missing out (FOMO) drives investors to surge into the market. Think of it as the opposite of a meltdown. But like a party that gets out of control, what often follows a meltup may be quite a slow clean-up.

One prominent analyst says 2018 peaked early and we shouldn’t expect much growth for the rest of the year.

"We think January was the top for sentiment, if not prices, for the year. With volatility moving higher we think it will be difficult for institutional clients to gross up to or beyond the January peaks," said Michael Wilson, chief U.S. equity strategist at Morgan Stanley Institutional Securities, in his weekly note on March 19, 2018.

"Retail sentiment indicators also look to have peaked in January and we do not see anything on the horizon to get retail investors more bullish than they were following a tax cut."

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on 08 March, 2018

a look at single premium iul

People depend on life insurance for many reasons. Some households use it for income protection, as they have children or other dependents for whom they provide. Retired and middle-aged working individuals may use it for legacy or estate planning goals. It could be part of a broader legacy or estate plan, as the tax treatment of life insurance allows for an efficient transfer of wealth to loved ones.

Depending on your goals, life insurance comes in many forms, and one is Single-Premium Indexed Universal Life Insurance. It's also known as "Single-Premium IUL," or even just "SPIUL." Let's take a closer look at this universal life insurance option and what it might have to offer.

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