Tuesday, October 11, 2016

It's Not Your Grandfather's Retirement

I remember when I first realized people retire.  First of all, they were REALLY OLD.  Some of them did a lot of travelling, and many just stayed home and did hobbies or socialized with their friends and family.  My father retired when he was 55 years old, and I thought that was the norm, and it became my goal to retire at 55.  My employer for much of my career promised a full retirement at age 55 if you had enough service years and had started young enough, which I had done.
My dad growing up in Santa Cruz, CA

When I was 45 years old, I realized there was no way I could work there for another 10 years.  The old ways of staying with one company had gone, and there were so many opportunities that seemed more appealing to satisfy my need to help, along with my leadership and financial skills.  I left, and never looked back. Fortunately, I had hired a financial planner as soon as I earned my MBA, and relied on her expertise to make the best investment decisions to meet our risk tolerance and future goals.  My parents taught me how to work hard, spend less than you save, enjoy life (especially family and travel), and invest in Real Estate and traditional investments. 

I had to realize that when I left behind that corporate job with a “real” pension, I accepted responsibility for my financial future.  I observed that most people don’t retire until they are 63 years old.  I didn’t know I was going to have to work that long!  I started noticing commercials about your “number.”  Why were those numbers so big?  They said I’d probably spend only 80% of my income in retirement; stop commuting, dry cleaning, business lunches. 

As I have been studying retirement planning for over 10 years now, I see a much different scenario and I don’t think I was the only one who had bought into our father’s retirement.  Employers started reducing retirement benefits, and of course they would not tell anyone that they handed over the responsibility to employees.  A lot of people really thought Social Security would provide enough on top of the retirement pension. The government approved 401K and Roth IRAs, and we liked the potential tax savings, but still didn’t see the whole picture. 

According to a study by Chris Hogan, “Stress and Anxiety Surrounding Retirement”, half of Baby Boomers, who were born between 1946 and 1964, have less than $10,000 saved for retirement.  We are in a bad place with retirement near or already here.  Only 9% of middle income employees save at least 15% towards their retirement.  We don’t have any plans, we’re not saving.  When someone mentions Retirement, we experience anxiety.  We lose sleep. We don’t know what to do.

While some families and cultures have several generations in one home, do you want that to be the only option?  Probably not.  As embarrassing as it is, we need our Baby Boomers to feel comfortable enough to get some help to plan their retirement.  Whether it be their employer, Money Coach, investment professional, banker, or some trusted professional to provide guidance.  It’s time to get in gear, learn your options, and start setting some money aside.  There are lots of us out there to help – the time is NOW to do something.  Make an appointment today.  Write down some goals and questions.  Listen to the suggestions, and pick at least one to start with right now.  Move retirement to a high priority and make it your second job to make solid plans. 

Please remember, there are a lot of us out there to help you understand more about retirement, and there’s no need to be mortified when others see your situation.  You’re not alone.  When you get your retirement plan rolling, help someone else you know do the same.  Let’s share a prosperous future with all of our fellow Baby Boomers.

This is the beginning of my series of blogs on retirement.  Today’s Baby Boomers are my first priority because time is of the essence to do something quickly.  You can find out more about me on my website http://www.moneywiseadvisors.com  

Thursday, October 6, 2016

A little research can keep hidden costs from hitting where it hurts most — your wallet!

The unexpected costs of buying a home

Buying a home is expensive, but it’s not just the price of the house itself that you need to plan for. If you’re considering a new home, BetterMoneyHabits.com can help you look beyond the sale price to understand and plan for the extra expenses that come with making this big purchase.

  1. Low Credit Score
Your credit score has a big impact on what your mortgage interest rate will be and how much you will need for a down payment. If your score isn’t great, you might not even be approved for a home loan.
You can check your credit report at annualcreditreport.com, or by contacting one of the three credit bureaus: Equifax, Experian, or TransUnion. But if you find you fall into the lower range of credit scores, it is not the end of the world. Check out these BetterMoneyHabits.com videos to get back on track:
  1. Down Payment and Private Mortgage Insurance
The more you put down on your new home, the better. Ideally, you will need to put down 20 percent. At that point, you will receive a better interest rate, have lower monthly payments, and you will not have to pay for private mortgage insurance, or PMI.
PMI is a type of insurance that lenders require you to pay if you are unable to make a full 20 percent down payment. This protects them if you default on your loan. And it’s not cheap. PMI can cost up to about 2 percent of the total loan amount. PMI is either required up front, or rolled into your monthly mortgage payment.
With some loans, you won’t have to pay PMI forever, but check with your lender for more details.
If you cannot come up with a 20 percent down payment, there are some alternative options, such as government programs that require just 3.5 percent. For more information, watch Understanding Alternative Mortgage Options
  1. Closing Costs
Closing costs include things like title insurance, appraisals, and attorney fees. Plan on these closings costs being 3 to 7 percent of the total loan amount. And remember, this is on top of the down payment.
  1. Unanticipated Expenses
Homeownership may come with some unexpected expenses. These could be increased energy costs, the price of new appliances, homeowner’s association fees, or even just the expense of maintaining a nice yard. So make sure you’ve accounted for all these in your budget. And for good measure, start an emergency fund for those things you cannot prepare for. Learn more by watching Create a Safety Net for Life’s Unexpected Events.