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Another Reason Not to Count on Social Security 01/20/2017 social security during retirement

Nearly every year since 1975, social security has undergone a cost of living adjustment (COLA). Benefits go up slightly, to reflect price increases, inflation, and other factors that make everyday living more expensive. The first year, it went up by 8%. Lately, rises have been smaller, but most years still see the amount go up at least a little. This year is no exception. Seniors collecting benefits will see them increase by a whopping five dollars, for a 0.3% increase—the lowest rise since these adjustments started.

We’ve talked before about why you won’t be able to depend on social security to support you when you retire. This latest incident demonstrates yet another reason.

The Actual Cost of Living

If you’re optimistic, you might argue that a small increase is better than none. Last year, benefits didn’t go up at all, nor did they in 2009 or 2010, in the wake of the economic crisis. However, even though they’ll technically be receiving more money next year, most seniors will still see their disposable incomes decrease

Social security uses certain metrics to determine how much to adjust benefits by. They compare the third quarter of the current year to that of the previous one, and look at their inflation rates, according to the Consumer Price Index for Urban Wage Earners. If prices have gone up, benefits do as well. If not, they don’t.

This metric works in theory, but it in practice, it’s not reflective of real price increases or actual costs of daily living for seniors. This COLA, like many of the ones in recent years, doesn’t reflect increases in the actual cost of living. A single quarter isn’t really an accurate measurement of the economy as a whole.

Price Increases Eat Additional Benefits

There are a number of specific examples of ways in which costs are rising for retirees more quickly than their benefits. One of the most important is Medicare. Premiums are going up for Part B of the senior health insurance plan, which covers doctors, outpatient hospital visits, and similar medical care. That extra $5 won’t be nearly enough to cover the difference.

Other costs are going up as well, from gas to food to clothing and more. Retirees live on a fixed income, and if the money they receive isn’t enough to cover basic expenses, then they’re in trouble.

Add to this the fact that social security benefits in general are due for a significant decrease in the near future. Experts estimate that by 2034, the fund will be completely depleted. At that point, the only money that will be able to be paid out will be what’s coming in that month from those still in the workforce. Full benefits will be decreased to 79% of their previous value, or less for those who opted to start collecting before age 66.

What to Do

It’s clear that you can’t rely on social security benefits for your retirement. It may be able to provide you with a small supplement, but without a separate, larger source of income, you won’t be able to support yourself once you leave work.

This is why it’s so essential to contribute regularly to your IRA/401(k). Always make the maximum annual contribution, to increase the amount you’ll have to live on. The sooner you start building up your nest egg, and the more diligent you are about putting money into it, the more comfortably you’ll be able to live in your golden years. With a little pre-planning hopefully you won’t need to rely on social security at all.

Women Face Bigger Healthcare Bills in Retirement 01/16/2017 Women Healthcare Costs During Retirement

Saving for retirement is difficult for everyone, but it seems women in retirement have it especially hard. According to a recent report released by Massachusetts company HealthView Services, they need to save 20% more than men do in order to cover medical expenses they’ll encounter after they leave work. This isn’t the only problem females face in their golden years, either. A number of obstacles make their saving for retirement problematic.

The Reason for Increased Medical Expenses

Why do women have to pay more for medical expenses in their retirement? The simple fact is, women live longer than men on average. A woman of 65 has a life expectancy of about 89 years, compared with 87 for a man of the same age.

This may seem like a small difference, but it works out to an extra $35,000 in health care premiums. Women’s out of pocket costs will be higher as well, in addition to other expenses that aren’t factored in, such as dental care, vision and hearing. This brings the total medical costs post-retirement up to $306,000 for women on average, as opposed to $260,000 for men.

To deal with this disparity, it’s recommended that women funnel about 20% more into their retirement accounts than men do. It’s particularly critical during their final years at their job to make sure they have enough to cover expenses. It seems unfair, but it’s the only way for them to ensure their future.

Female Retirement Statistics

Unfortunately, it seems females are lagging behind when it comes to retirement saving. According to the Transamerica Center for Retirement Studies, the average man currently has about $115,000 in retirement savings, compared with only $34,000 for women.

There are many issues that can come into play in this disparity.  Women, on average, earn less than men.  They are more likely than men to be the head of a household that includes children, with the rocketing costs that involves.  Women also have to take more time away from work, whether to have children or, often later in life, to look after an ailing family member.

What to Do

It’s clear even though women will need more money for retirement in the long run, they have less saved up on average. This means that their financial troubles will ultimately be greater than for men. Their funds will be depleted sooner and their hardships will last longer. If you’re a woman saving for retirement, what can you do to remedy this? There are a few steps you can take.

First of all, it’s important to delay collecting Social Security. You’re eligible to start receiving benefits at 62, but your checks will be significantly reduced. If you can, wait until 66 when you can receive the full amount. (For those born after 1960, that age will be 67.)

For married women whose spouses have an annuity or a pension, it’s also possible to arrange a survivor benefit, which can supplement your income. By taking a slightly lower monthly payment, they can ensure “joint life” benefits, wherein you continue to receive checks, even after your spouse passes away.

It’s also important to make sure both you and your spouse have life insurance. In addition to helping cover their final expenses, which could otherwise take a large chunk out of your savings, it can provide extra money to cover debts, medical costs and more.

The extra money that women need in their retirement years can be a significant challenge. However, knowing about it in advance gives you the tools to do something about it. With a little pre-planning, you can make sure your nest egg is sufficient to cover all expenses in your golden years and help you live a comfortable life for a long time to come.

6 Ways You’re Blowing Your Retirement Security 01/11/2017 6 Ways You’re Blowing Your Retirement Security

Everyone needs to prepare for their retirement. You may think you can’t afford it, but the truth is, you can’t afford not to. However, important as it is to build up a nest egg, it’s just as essential to do it the correct way. There are a number of retirement planning mistakes people make that can end up completely blowing their savings, leaving them without enough to live on once they leave work. Here are six of those mistakes, and how you can avoid them.

  1. Not Planning Things Out There’s a lot more to retirement planning than just “Save as much as you can.” You need to know exactly how much you can afford to put away each month, where and how you want that money invested, and most importantly, the total you’ll need to save up in order to support yourself in your golden years. Without a specific plan in place, you’re likely to end up without as much money as you need. Talk to a financial adviser and figure out what the best way is for you to save for retirement.
  1. Thinking Any Amount of Saving Is Fine Almost as bad as going in with no plan at all is thinking that as long as you’re saving something, you’re doing well. It’s true that something is better than nothing, but it’s likely still not going to be enough. There are a variety of factors that contribute to how much you’ll need, including the rate of inflation, how long you’ll live after retirement and more. Because it’s such a complex equation, most people tend to underestimate how much they’ll need to carry them through—sometimes drastically. It’s crucial to sit down and figure out exactly how much you need to put away, so that you have a goal to work towards.
  1. Risking Too Much on Your Investments—or Not Enough Some people look at their investment portfolio as an opportunity to strike it rich. They imagine a few lucky stocks, bought low and sold high, can make them a millionaire and allow them to retire in style. This is extremely inadvisable. The more risk you take on, the more likely you are to lose everything. On the other hand, not enough risk can be a problem as well. By playing it too safe, your returns will be significantly lower than you need, which can lead you to make mistakes while trying to get the numbers up.
  1. Paying Too Much in Taxes Unless it’s a Roth IRA or 401(k), your retirement account, much like your regular income, is subject to taxes. However, there are a variety of tax breaks and loopholes you can take advantage of. Are you getting everything you can back from the IRS? The more you pay, the less you’ll have for yourself, once you leave work. Also, if you trade too much—or if your mutual funds do—your taxes will be higher. Minimize the amount of trading you do to improve your returns.
  1. Taking Generic Advice as Gospel To whom do you listen when deciding where and how to invest your retirement fund? A lot of the advice you see in the media from financial experts, no matter how loud and emphatic it is, is not as reliable as it seems. Remember much of it is just their opinion, and the next expert may think something completely different. Also consider that everyone’s situation is different. Many of the experts you see on television get paid a great deal to be on television, thus they can afford to take higher risks than you can.  Take what they say as a guide, but not as incontrovertible. Talk to your own financial planner about your personal circumstances, now and in the future, and see what they think will work best for you.
  1. Not Having a Gold IRA The markets can be pretty volatile at times. When the 2008 crash occurred, millions of workers who had saved for years suddenly lost a large chunk of their retirement funds. It’s vital to protect your investment by spreading it around. That’s where a Gold IRA comes in. Gold typically goes up when the markets are going down. Also, as a physical commodity, it can act as a safe haven, which retains its value over time. That way, if something happens to the money you have invested in the markets, you still have something to fall back on.

What’s more, unlike cash, gold resists inflation’s erosion of buying power over time.  With the Fed’s plan to continue interest rate hikes over the course of 2017, inflation is back on the table.

These are just a few of the retirement planning mistakes people make every day. Do your research and find out what the best investment plan is to meet your needs, and how you can structure it to avoid the pitfalls that might otherwise wipe you out. If you’re smart and careful, you can build up a nice nest egg that will support you, rain or shine, throughout your golden years.

Is the Dining-Out Decline a Wider Recession Warning? 01/10/2017 Is the Dining-Out Decline a Wider Recession Warning?

As we approached the end of 2016, the majority of America’s restaurant owners were not so happy. In the second quarter diner traffic slowed down significantly, according to data from market research firm The NPD Group. Analysts noticed the slump during the summer, an indication that a restaurant recession was on the cards.

Statistics pulled from the same study also highlighted reduced demand during breakfast and lunch as well. Since this is the very first decline in traffic for five long years, restaurant owners are on the edge of their seats, anticipating (or perhaps dreading) what’s in store for them in 2017.

Some say they should have seen it coming however, following the forecast of a restaurant recession by the brokerage firm Stifel Nicolaus in July 2016. When a survey was conducted by the Restaurant Industry Snapshot earlier in the year, the findings outlined a 2.8 percent reduction in restaurant traffic from January through September.

Stifel said they were now “bearish” on restaurants, noting, “our most recent Stifel Sales Survey reflects the start of a US Restaurant Recession – which, may also represent a harbinger to a US recession in early 2017; and, if so, Restaurants have historically led the market lower during the 3-to-6-month periods prior to the start of the prior three US recessions.”

With the slowdown not expected to end in the near future, the effects are hitting restaurants across the price spectrum, including Del Frisco’s Steakhouse chain, El Pollo Loco, Chipotle and seeming perennial favorite the Cheesecake Factory. Overall, more Americans dined out in 2015 than last year, and sales haven’t bounced back since the election, a worrying signal. Paul Westra, of Stifel Nicolaus announced the firm had downgraded its stock ratings for popular chains BJ’s and Panera Bread.

Restaurants Out at Home Plate

The other obstacle facing restaurants is the fact that cooking and dining at home is much cheaper than the cost of dining out nowadays. While there’s been a 2.4 percent decrease in the amount of money spent on groceries in the past year, the biggest 12-month reduction since the Great Recession, restaurant tabs increased by 21% over the last decade.

Most likely as a result, grocers are seeing a rise in sales.  We’ve also seen a sharp uptick in services such as Amazon Fresh and other grocery delivery providers that make eating at home easier for working families.

Is the Larger Economy Next?

While certain market innovations and pressures are unique to the restaurant sector, the amount Americans spend on entertainment, including dining out, has classically been seen as a leading indicator of the health of our economy.  Put plainly; when we’re feeling financially confident we go out.  Thus, the multi-quarter decline in restaurant spending is a genuine cause for concern, since more than one quarter of slumping spending is the definition of recession.  That, added to the fact that no resurgence was seen after the election, and even into the holiday season, may be an omen that all is not sunshine ahead.

The 3 Most Effective Money Steps You Can Take in 2017 01/03/2017 The 3 Most Effective Money Steps You Can Take in 2017

If your 2016 was a year filled with procrastination, you now have a great opportunity to turn over a new money management leaf in 2017 and take control of your finances. (You can do it!)

There is no better motivation to start managing your money better than embarking on the new year laser-focused on your own bottom line. Since the holiday season tends to involve a great deal of spending, whether on food and drink, gifts or a break away with the family, chances are you may want to tighten the purse strings come January. Keeping a new leaf turned for a whole twelve months might seem like a tricky task, but if you have the right mindset and put a solid plan into action, seeing the results of your new money management plan in just a few months will be entirely feasible!

Did you know that one-third of Americans plan to work until they die? According to BusinessInsider, the majority of Americans have a higher amount of debts than savings, and just 36 percent of us have $1,000 in a retirement savings account.

Instead of letting money woes hang over you into 2017, take a stand to pave the way for financial success.

  1. Organize Your Debts Sit down and ask yourself, “Which debts do I need to prioritize over others?” While it’s important that you clear up as much debt as possible, organizing arrears by interest rate will save you money in the long run. Stay on top of your minimum payments and keep in mind that not all debts will have the same impact on credit rating. A strict repayment strategy will prove your creditworthiness, therefore the more consistent you are in making payments, the easier it will be to manage your personal finances, and perhaps even refinance some of your debt at a lower interest rate.
  1. Utilize Software for Personal Money Management It’s easy to forget how much you’re spending on everyday things—until you realize how little you have left and long it is till payday. Something as simple as logging your expenditures will aid you in controlling expenditure, month after month. There are heaps of web apps and computer programs out there nowadays, each of which is designed to make finances centralized and visual, which translates to better overall spending habits.
  1. Invest in Your Retirement—Today America is facing a pension crisis, and a Social Security crisis, so it’s up to you to secure your own financial future. If, like many workers, your company doesn’t offer a 401(k), or if you just want an additional option, there are numerous tax advantages are associated with starting an IRA. This retirement funding strategy comprises various financial products, including market-based assets, bonds and even liquid, tangible assets like gold and silver.

In addition to taking (and sticking to) the above money management steps, you might also consider closing unnecessary accounts, as well as enrolling in an automatic savings plan. Clear goal definition, patience, and progress tracking are three essential secrets to achieving those life-altering changes.

The “Out of Left Field” Factors that Impact Our Financial Lives 12/21/2016 The “Out of Left Field” Factors that Impact Our Financial Lives

The economy is a fickle thing. There are a number of factors that can affect you financially even if you don’t realize it. Some are easy to pinpoint. For instance, even if you aren’t personally borrowing money or paying off a credit card, a Fed decision on raising interest rates still impacts you. It can lead to troubled times for businesses, higher prices and less disposable income for everyone. However, there are other, not-so-obvious, hidden factors that can impact your financial life in ways you never imagined. Here’s what they mean for you.

The Financial Contagion of the Flu 

Depending on what area you live in, flu season in the U.S. is generally considered to be approximately October through May. Some years are worse than others, in terms of both the number of people afflicted and the intensity of their illness. However, even in the lightest of years, the flu virus affects thousands of Americans.

The financial impact this has on you directly can vary. Assuming you have adequate health insurance and enough sick days saved up, it shouldn’t cost you too much. However, there’s another issue at play, which is loss of productivity.

Even if you personally never get the flu or miss any days at your job, plenty of others will. Their absences will slow things down for everyone, limiting what you’re able to get done. Worse yet, many sick employees won’t stay home, but will force themselves to come in. For lower-income workers this may be because they don’t get paid sick days.

Among higher-income workers “toughing it out” may be considered a badge of honor, but it actually makes things worse for everyone. When someone goes to work sick, they end up getting the rest of the office sick as well, leading to more absences and a greater decline in productivity. At minimum, this can mean fewer sales for your company, or fewer goods produced.

Believe it or not, an average flu season can result in a GDP loss of up to $45 billion. Companies make up for this by raising prices, reducing employee work schedules and more. Thus, even if you don’t get sick yourself, the economic results are still likely to affect you.

Holiday Shoplifting

Theft is a problem most retailers have to deal with all year. However, it gets far worse during the holidays. Crowded stores make thieves more difficult to catch, with all the confusion, and temptingly small, expensive items arrayed on the shelves.

Electronics and their accessories are among the most popular items stolen during the holidays, as they tend to be very costly, but small enough to slip into a pocket or purse. Other popular items include alcohol, perfume and cologne, and certain types of clothing.

But even if you would never dream of taking the “five-finger discount,” other people’s shoplifting habits affect all of us. The losses that retailers suffer from theft are passed on to the average consumer in the form of higher prices. This can cost consumers around $50 per person or more during the holiday season.

Every action has consequences, and most of them involve money in some way. There are a variety of reasons why prices go up or incomes go down, and while some are fairly evident, others are caused by events you probably never imagined.

Venezuelans Are Now Weighing Their Cash 12/15/2016 Venezuelans Are Now Weighing Their Cash

Inflation and currency devaluation pose a threat to a number of countries, but there are few places where it’s more prevalent than in Venezuela. Their currency, the bolivar, has lost so much value that the bills it takes to pay for basic purchases are hardly worth counting anymore. Instead an increasing number of retail establishments are choosing to weigh the money.

Venezuela: What Cash Problem?

This is hardly the first time in history that a nation’s currency has become so devalued. Weighing money was a practice in Germany in between the two world wars, as well as Yugoslavia in the 1990s. Basic purchases require giant bags stuffed with cash. Affording basic necessities is a problem for many, and even for those who have enough wealth, simply finding enough bills to make the transaction is a problem.

The immediate issue could be fixed by simply printing money in higher denominations. Inflation and currency devaluation would still be rampant, but at least purchases could be made with reasonable amounts of cash. However, the Venezuelan government refuses to do so—because that would mean admitting that there’s a problem.

They don’t even publish consumer price data on a regular basis. Rather, they largely ignore the issue. Printing larger denominations of currency would be a sign of weakness and a clear indicator that their country is in trouble financially. Eventually, they’ll have no other option, but they’d like to delay that moment as much as possible.

A Cash-Based Society

Another simple solution for many consumers is simply to pay for things with credit or debit cards. Unfortunately, this doesn’t work all the time. Around a third of Venezuela’s workforce is paid entirely in cash, including cab drivers, street vendors, a number of civil service jobs, and more. In addition, Venezuela’s state pensions to retirees are paid in cash.

The enormous number of bills can be taken to the bank and deposited, after which the consumer can use a debit card, but that still means having to haul it from one place to another on a regular basis. This is not only inconvenient, but dangerous. Carrying that much cash around attracts the attention of robbers, and the farther you have to travel with the money, the more vulnerable you are.

This currency devaluation is not only bad for Venezuela, but for the U.S. as well. A number of major corporations in America do business with the South American nation, and with their economy doing so poorly, and cash so difficult to deal with, many of those companies are suffering. Some, such as Clorox, have opted to stop all dealings with the country, while the Ford Motor Company is no longer including them among its core operating results.

What to Do

It’s clear Venezuela has a problem, and a permanent solution doesn’t seem imminent. Could the U.S. experience anything like this? It’s doubtful the government would let it get quite to that point, but when the dollar bubble finally bursts, a significant devaluation of our currency seems likely.

It’s important to be prepared for such an eventuality, so even if the value of the dollar plummets, your own savings remain intact.

Three Obstacles Facing Women at Retirement 12/09/2016 Three Obstacles Facing Women at Retirement

Retirement planning is difficult for anyone. It takes a lot of saving to put away enough to support yourself continually once you’ve left work. Many people end up depleting their savings early and are forced to return to work to make ends meet. However, according to a recent report by Financial Finesse, the struggle to build up an adequate nest egg is much harder for women than for men. Why? Here are three reasons.

  1. The Wage Gap

There’s a lot of dispute as to exactly how big the wage gap is between men’s and women’s salaries, and how it should be calculated. Moreover, it does appear that the difference is gradually shrinking over time. Still, the evidence does tell us that, no matter how you figure it, women, on average, make less money than men do for the same job and hours.

This makes it more difficult for women to save for their retirement. If you’re not making as much money, there’s less to put away and smaller returns on investments. Over the years, this can lead to a serious deficiency in your IRA or 401(k).

  1. A Broken Career Trajectory

In addition to making less money, women are also more likely than men to stop working entirely for periods of time in their careers. Often this break is taken to have and raise children, though it could also be for a number of other reasons, such as to take full time care of an older relative who is no longer able to live on their own.

Whatever the reason, if there’s a task that needs to be taken care of at home, it frequently falls to the woman to attend to it. Often she ends up giving up her own career in the process whether temporarily or permanently.

Either way, during this extended work hiatus she’s also not building up her nest egg, which can result in a serious shortfall once she reaches retirement. If she takes the break between the ages of 45 and 55, it can cost her around $1.1 million in savings. If she leaves her career earlier than that, for the same amount of time, it can mean losing closer to $1.3 million due to the loss of investment growth.

  1. Missed Opportunities

The breaks in a woman’s career can lead to another shortfall for her IRA or 401(k). When you leave your job for an extended period of time, you miss out on opportunities to be promoted, or even simply to get a pay raise.

This means essentially your career is frozen during the time that you’re away. When you finally return to work, you can find yourself at a significant disadvantage compared to the men your age, who have been climbing the ladder this entire time. That’s assuming that you’re even able to come back at the same salary you had when you left, (and that inflation and cost of living increases haven’t caused the same paycheck to have less buying power). One in five women returning after a career break reportedly experience a pay cut of 20% or more from what they were making when they left.

Each of these reasons is a reflection of the society we live in and its distorted expectations of both women’s and men’s roles. It’s hardly fair. But even so, it’s the reality we live in. You can work to change it, but in the meantime, you need to accept the implications for your retirement and your savings, and plan accordingly to make up for this shortfall. Otherwise, you’ll never be able to build up enough money to support yourself once you retire.

6 Myths That Can Ruin Your IRA or 401(k), and Your Retirement 12/08/2016 6 Myths That Can Ruin Your IRA or 401(k), and Your Retirement

When it comes to retirement planning, everyone has advice. How much do you need to save? What expenses do you need to cover? How long will it need to last? Unfortunately, a lot of the information going around is misinformed, misguided or just plain wrong, and listening to it can be detrimental to your future. Here are six of the most popular myths that can ruin your IRA or 401(k), along with the security of your retirement years.

Myth #1: All You Need Is Social Security

A lot of people assume that, when they retire, their monthly Social Security checks will be enough to cover all of their expenses. Therefore, they don’t even bother building up an IRA or 401(k) on their own. There are several problems with this. First of all, if something should happen that forces you to leave work before you turn 66 (for instance, if company cutbacks cause you to be laid off at 62, and you’re unable to find another job), your monthly government check will be reduced.

But even if you do retire at the proper age, the money you receive likely won’t be enough to live on. These days, Social Security’s real role is as a supplement to your regular retirement savings, rather than as a sole source of income. If you don’t have an IRA or 401(k) to shoulder the burden of your regular living expenses, you’ll find yourself struggling just to get by.

Myth #2: Taxes Are Lower for Retirees

One good thing about retirement; since you’re no longer working, you don’t have to worry about taxes, right? Wrong. Even though your income is lower, the money coming in from your IRA is still taxable, just like your regular salary was. Many people don’t take this into account when building their 401(k), and their IRS tab ends up taking a large chunk out of their savings.

Myth #3: Your Savings Only Have to Last a Decade or Two

How long will your retirement savings need to last? Of course, no one knows when they’re going to die, but by looking at health history, family history, and other factors, experts can give you a rough estimate. That way, you have at least some idea of how long to plan for once you leave work.

However, many of these figures fall far short of the actual numbers. The Society of Actuaries has found that people are living an average of 11-13 years longer than their estimated life expectancy. If you don’t take this possibility into account when planning for your retirement, your savings will depleted when you still have a decade or more to live. When building your IRA or 401(k), err on the side of caution and make sure you save enough to support yourself—and then some.

Myth #4: You’ll Work Until You Die

Many hearty souls believe they’d be too bored in retirement, and would happily stay working, and earning, in some capacity right up to the end.  Unfortunately, that decision isn’t always up to us.  Unless you own the company, as an older worker you face the same layoff risk as any other employee, perhaps even greater if your employer can get someone younger to do your job for less.

You also run the risk of being sidelined by an injury or illness that makes it impossible for you to keep working.  According to a MetLife Mature Market Institute study, more than half the baby boomers who’ve hit retirement age found themselves exiting the workforce before they’d planned to.  Realizing you’ve just seen your last paycheck is not something you want to face unprepared.

Myth #5: Your Savings Only Need to Support You

When most people think of saving for retirement, they figure how much money they’ll need to live on as an individual. But what about your family? Do you have a spouse or children living with you? Even if they have their own incomes, the sudden reduction of yours could still put a serious strain on all of you.  Make sure you have enough in your 401(k) so that your entire household can live comfortably.

Myth #6: Bonds Are the Best Investment for an IRA or 401(k)

The stock market is too risky to trust with your future. Even in sound economic times, a couple of bad decisions can send your portfolio plummeting. And with things as financially volatile as they are now, it’s unlikely you’ll even end up breaking even, much less turning a profit on your investments.

Some people therefore assume that the best place to put their retirement money is in bonds. The risk is much lower than for stocks. Unfortunately, the yield is much lower too—and has become even more so in recent years. Bond values are depreciating, and as inflation rises, you’re likely to end up losing money as they mature, rather than making it.

These are just a few of the retirement myths there are out there. Believing them can be devastating to your savings. However, if you make a plan to avoid these pitfalls, and put your money into a safe haven that will maintain its value over time, you can secure your future and ensure your prosperity once you leave the workforce, to live the rest of your life in the comfort and peace you’ve earned.

Prescription Drug Price Gouging—How It Could Impact Retirees 12/07/2016 Prescription Drug Price Gouging—How It Could Impact Retirees

You’ve seen the stories in the news. Prescription drugs that used to be affordable to the average person are suddenly becoming an ultra-expensive luxury only affordable for the rich. It happened with the anti-parasitic drug Daraprim. Then the much more widely used EpiPen skyrocketed as well. What’s behind this sudden price gouging? And how will it affect retirees and Americans fast approaching retirement?

What’s Behind Prescription Drug Price Gouging?

About a year ago, the infamous pharmaceutical entrepreneur Martin Shkreli bought the rights to Daraprim and raised the price from $13.50 per pill to $750. Over the last few years, the makers of the EpiPen, which many allergy sufferers are forced to buy regularly as a lifesaving precaution, have increased its price tag from $57 to over $600. There are many more examples, not all so headline-grabbing, but the fact remains the prescription drugs people need to live are becoming a luxury they can’t afford.

The average person in the United States pays more than twice as much for prescription drugs than patients in other industrialized nations—$858 annually, or 17% of their overall healthcare expenses. Between 2013 and 2015, those costs went up 20%. Even people whose medications are covered by insurance are still faced with rising copays—or simply finding that their particular level of coverage doesn’t include what they need anymore.

There are several reasons for this, but one of the main ones appears to be new government regulations on drug manufacturers. These companies are allowed market exclusivity on the medications they develop, in order to recoup the money they’ve spent on research and development. This means that many of these drugs are the only ones of their kind allowed on the market. Without competition, pharmaceutical companies essentially have a monopoly. They can set whatever price they want for their medications, and people who want them have to pay it.

Additionally, healthcare providers like Medicare and Medicaid aren’t allowed to negotiate for lower prices. So to keep from losing money, they have to raise their copays. Thus, even with adequate insurance, many people aren’t able to afford the prescription drugs they need.

How This Affects Retirees

Typically, the older you get, the more medications you require to remain in good health. Pills for arthritis, high cholesterol, and more become a necessary part of your daily routine. Interestingly, according to a Reuters analysis, these are exactly the medications that are experiencing significant price hikes.

Add to that the fact that most retirees are on a fixed income. They get a small check from Social Security each month, as well as whatever’s in their IRA or 401(k). Both combined usually equal only a fraction of what that retiree made when they were working. At a time when they need more medications, prices are skyrocketing while their income is slashed.

There are a few ways to offset these costs. Some drugs have cheaper, generic equivalents that work just as well as the name brand. For certain medications, buying in bulk can help lower the price, up to a point. And those with Medicare coverage can apply for a “Part D Supplement Insurance” plan, which covers a portion of their prescription drug expenses. Though of course, with prices rising the way they are, even this may not be enough to help them afford what their doctor prescribes.

Many people and organizations are protesting this prescription drug price gouging. But even if they do make a dent, inflation ensures the cost of medication and other healthcare expenses will likely keep going up in the long run. This is one of many reasons it’s vital that, when you do finally exit the workforce, you have enough saved to cover medications you’ll need for a retirement that may last decades.

Protect Yourself Against the Coming Recession Using Gold 12/06/2016 Protect Yourself Against the Coming Recession Using Gold

Economists and financial experts agree: another recession is on the horizon. The markets are unstable, housing and real estate are experiencing problems, and the oil industry is still suffering the effects of the debt bomb from a few years ago.

Much like in 2008, the elements are once again coming together to create a perfect storm of economic chaos. Raoul Pal, founder of Global Macro Investor, believes a recession will occur within the next twelve months. Fortunately, he also sees a solution: Investing in gold can help you protect yourself against the crisis to come. Due to a variety of factors, right now may be the perfect moment to get in on this safe haven.

The Evidence for a Recession

Raoul Pal’s prediction of a recession is based on more than just the current economic climate. It comes from his observation of a precedent going back over 100 years. Since 1910, every President who has served a second term has seen it followed by a period of recession within a year of their leaving office.

The prosperous Reagan years were followed by economic hardship under the first President Bush. The economy began to revive under Bill Clinton, but quickly fell again once he finished his second term. Then at the end of George W. Bush’s eight years, we were plunged into the worst financial crisis since the Great Depression. For the moment things are finally starting to turn around. But what will happen when President Obama leaves office? The writing is already on the wall: we’re headed for another downturn.

The Mispricing of Gold

How does buying gold help guard against this impending crisis? At first glance, it would seem to be a rather risky choice at the moment. The price has been on its way down in recent months. How does that make it a good investment?

The important thing to remember is that gold is an asset for the long term. It may be down 6% in the last few months, but it’s up 18% for the year overall. What’s more, experts agree that the price of the metal is currently much lower than it should be.

Given our current economic state, and based on past trends it should be trading at a considerably higher price. What’s more, when the recession hits, this disparity is expected to reverse itself, and gold will go up again. Essentially, we’re in a very narrow window wherein gold can be purchased more cheaply than normal, right before its demand, and then price, skyrockets.

Gold in a Recession

As a nation enters into recession, central banks try to slow the economic downturn through quantitative easing—essentially artificially injecting money into the financial system. It sounds like a good thing, until you realize it’s effectively devalued the dollars you were already holding, and the dollars in which most of your investments are denominated.

As paper- and market-based investments destabilize, more people turn to precious metals, due to their generally stable pricing and ability to preserve wealth. In addition, as investors rush to gold, logically enough, its price goes up. Pal believes once the recession hits the price of gold could double.

Another factor in play is the decline of other world currencies, including the pound and the euro, in comparison to the dollar.  Pal believes this will continue over the next year or so. Additionally, the negative interest rates that have plagued Europe and other parts of the globe could serve to boost the value of both gold and the U.S. dollar.

Many experts, however, warn that the dollar’s increase in value is merely a bubble, which will burst before long and send it plummeting. So that leaves gold as the smartest and safest investment to guard against the coming recession.

With its price still artificially low at the moment, now is the optimum time to stock up on gold in preparation for what’s on the horizon. When its price goes up as everything else begins coming down, you’ll have a safe haven to keep you from losing your savings, your IRA, 401(k) and more. You can even set up your own gold IRA.  But if you wait too long to make the investment, you might see that “sale” price on gold evaporate in the rush.

What Is a Safe Haven Asset? 11/21/2016 What Is a Safe Haven Asset?

Financial experts agree troubled economic times are upon us. When the economy crashed in 2008, many investors lost everything in the blink of an eye. IRAs and 401(k)s lost up to half their value, and people who had been saving for retirement for decades suddenly found themselves with no options. In order to guard against those kinds of losses, many investors are looking to put their money into safe haven assets. But what is a safe haven asset, and how does it work?

Finding a Safe Haven

A safe haven is a type of investment that can be relied on to retain and even increase its monetary value, even while other types of investments are failing. In particular, a safe haven asset is something that you can still get money out of, even if the markets plummet.

So if a safe haven asset is so much more reliable, then why do people bother with stocks and bonds at all? Why not just put everything into a safe haven from the beginning? Well, the problem is finding one. Safe haven assets used to be plentiful. But over the past few decades, with every crisis our economy endures, they become more difficult to locate. Government bonds, for instance, used to be considered one of the safest investments around. Now however, bond payouts are continually shrinking, and people are losing money on them.

Even if you do find a safe haven asset, it still might be the wrong kind. The assets that are reliable in one type of market downturn can be a terrible idea in a different situation. If you play your cards wrong, your safe haven could end up as vulnerable as any other investment.

Reliable Types of Safe Havens

There are two types of assets that are generally considered to be a safe bet in any circumstances. The first is T-bills. T-bills, or Treasury bills, are like short-term government bonds. You can invest anywhere from $1,000 to $5 million in T-bills, and when they mature (usually a year or less later), you collect the dividends. Since the maturity time is so much less than for bonds, they’re less likely to lose value, making them a relatively safe investment.

However, just because they’re a safe investment doesn’t mean they’re a good one. They’re low risk, but they also have very little payout. So even though you won’t lose your money, they also won’t help you grow your savings much over time. If you’re within a couple of years of your retirement, they can be a good option, but otherwise, they need to be continually reinvested, and aren’t generally worth the trouble.

A much better safe haven asset is gold. Unlike stocks, bonds, and T-bills, gold is a physical asset with intrinsic value. Its value isn’t going to plummet just because the markets do. In fact, during times of market turbulence, gold historically increases in value, making it a great way not just to keep your money safe, but to grow your portfolio and make sure you have enough stored away for your retirement.

As the world economy continues to decline, the last thing you want is to find the investment portfolio you’ve been building over decades to be suddenly worthless. Putting at least a portion of your retirement funds into a reliable safe haven asset like gold is the best way to safeguard your future.

 

 

Should Social Security be Part of Your Retirement Planning? 11/17/2016 Should Social Security be Part of Your Retirement Planning?

You’ve been faithfully putting money into your IRA/401(k) for a number of years now. Over time, you’ve built up a fairly substantial nest egg, but you’re not sure if it will be enough to carry you through your retirement. But that’s no big deal. At age 66, you can collect your full Social Security benefits as well, providing you with a nice monthly supplement to your savings, right? Well, no. If Social Security is part of your retirement planning, you need to rethink your strategy immediately.

The End of Social Security

Economists and financial advisors have been talking for decades about the depletion of the Social Security fund. Now that Baby Boomers are entering retirement, the people collecting benefits greatly outnumber the people paying into Social Security. Eventually the fund will be tapped out. We tend to think of it as someday in the far future, when our children are getting ready to retire. But according to the latest Social Security and Medicare trustees’ annual report, that date is a lot sooner.

According to the Administration’s own report we have less than twenty years; by 2034 Social Security will be tapped out. Now, this doesn’t mean the checks will stop entirely. The workforce of 2034 will still be paying into the fund, allowing you to collect benefits, but they’ll be significantly reduced. There will only be enough money coming in to pay an estimated 79% of promised benefits.

The term Social Security actually refers to two separate funds: one for retirement benefits and one for disability benefits. If you combine the two, they’ll be depleted by 2034. If you take them separately, then the retirement fund will likely last an extra year. However, at that time, benefits will be reduced even further, to just 77% of what was promised. Meanwhile the disability fund, taken on its own, would be depleted in just 7 years, running out in 2023 and thereafter paying only 89% of promised benefits.

Protecting Yourself for the Future

The good news, if you can call it that, is that at the moment this is just the path Social Security is headed down. Since we know what’s coming, some major policy changes could change the way we handle the funds and potentially make the benefits more stable for the future. Of course, that’s assuming we enact those changes in time, and they have the desired effects. But particularly in an election year, it’s impossible to know what those policy changes will end up being, much less the effect they’ll have over the next eighteen years.

In the meantime, the smart thing is to reformulate your retirement plan so that it doesn’t rely on the supplement of a monthly government check. Start putting money into something more stable that will increase over time, rather than depleting. While stock investments have the potential to build up your portfolio, they’re increasingly risky in today’s economic climate. Another market crash like the one in 2008 could cut your IRA/401(k) in half, leaving you in dire straits, and a decade closer to retirement. Even bonds, which have always been considered less risky than stocks, have been losing money lately.

So how can you pad your retirement fund and protect yourself against the impending end of social security? You need a stable, physical asset with intrinsic value, like gold. Unlike the fluctuating markets, the precious metal maintains its value over time. By investing in physical gold, you can not only keep from losing your nest egg, but also expand it over time. Having the extra monthly check from the government would still be nice, of course. But when Social Security does peter out, you want to make sure it’s not a crushing blow to your financial security.