The oldest baby boomers will turn 66 this year. And, with all due apologies to Sir Paul McCartney, it’s a much more significant number than 64 for retirement planning. As you advisors know, when you’re 66, you can claim full Social Security benefits; 65 is a close runner-up, since it’s the year most seniors will file for Medicare.

Social Security and Medicare may be outside the direct purview of most financial advisors. But advisors should understand the ins and outs of filing for both of these critical retirement benefits, and check up to make clients pursue smart strategies and file correctly. Social Security replaces one-third of income for the average retiree, and it’s an especially important source of longevity insurance for seniors who reach very advanced ages – especially women. And Medicare is a critical component in meeting the escalating cost of health care in retirement.

With that in mind, here’s a checklist of key points to remember when your clients are no longer 64. (And don’t forget: You’ll be older too — if only down the long and winding road. Sorry, couldn’t resist the Beatles pun.)

Social Security

Filing age. About half of all Americans file for Social Security at age 62–the first year of eligibility for benefits. But for most, it’s a costly mistake that will mean foregoing thousands of dollars in higher benefits. Although seniors can begin receiving checks at 62, annual benefits will be boosted for every year that they wait, up to age 70.

Many seniors worry about the math of lifetime benefits — that is, they fear they won’t live long enough to make delayed filing “pay off.” But those concerns are off the mark.

Social Security is built around actuarial principles – essentially, the mathematics of risk. And a central actuarial idea behind Social Security is the Normal Retirement Age (NRA), a rule used by the Social Security Administration to ensure the system pays out fairly among all beneficiaries. But the main value of Social Security is replacement of current income, not accumulation of assets. That’s where filing later can help.

Monthly benefits for earlier filers are reduced accordingly to avoid paying then higher lifetime benefits. Under the rules, annual benefits are reduced 8 percent for most of the years you start early, based on an actuarial projection of average longevity. For a 62-year-old filing this year, the net effect will be a permanent reduction of annual benefits of 25 percent.

On the other hand, the SSA will bump up payments by eight percent for every year a senior delays filing beyond the NRA up until age 70, after which credits for waiting no longer are awarded.

Working while receiving benefits. The labor force is getting more gray as Americans work longer. If your client files for Social Security at her NRA, she can earn an unlimited amount of income and receive Social Security benefits. However, earlier filers are hit with a penalty on income over $14,640. (Social Security defines “income” in this context as wages from employment, or net earnings from self-employment). If earnings exceed the limit, $1 will be deducted from benefit payments for every $2 earned over that amount.

However, lifetime benefits wouldn’t be reduced because the withheld benefits are added back into benefits after the senior reaches the NRA.

Spousal benefits: Married couples need to pay attention to the interaction of both spouses’ benefits; certain provisions of the Social Security law can create powerful amplifying effects when the higher-earning spouse waits to file for benefits until the NRA or beyond. The bottom line is that it’s generally beneficial for the higher-earning spouse to delay taking Social Security benefits until the NRA or beyond. More details on the spousal rules can be found here and here.

Medicare

Filing isn’t automatic. Although Medicare eligibility begins at age 65, enrollment is only automatic for seniors who already have begun receiving Social Security benefits. In that case, the government mails a Medicare card three months before the date of eligibility. Clients who aren’t already receiving Social Security can apply for Medicare through the Social Security Administration, either by visiting a local office or online at the agency’s website.

To ensure that your clients’ Medicare Part B coverage start date is not delayed, your clients should apply three months before the month you turn 65, or up to 3 months after.

File on time. It’s best for your clients to start thinking about filing for Medicare before retirement, because failing to file within the enrollment window can lead to substantial Part B premium penalties – the monthly Part B premium jumps 10 percent for each full 12-month period that a senior could have had coverage but didn’t sign up. A mistake can be costly; a senior who fails to enroll for five years ultimately would face a 50 percent Part B penalty – 10 percent for each year.

“If you’re still working and have healthcare coverage, Medicare’s probably not on your radar. But it’s important to think about it a little bit in advance, especially when you hit 65,” says Adrienne Muralidharan, senior Medicare specialist for Allsup, which offers Medicare plan selection services. “If you don’t enroll in Medicare when you are first eligible, you may face stiff penalties when you do go to enroll – and those penalties will be with you for as long as you rely on Medicare.”

Coordinate with employer-based coverage. For seniors who still are employed at age 65, Medicare is the primary payor under certain circumstances, not in others. At companies with fewer than 20 employees, Medicare is the primary payor; at larger companies, the employer is primary. In the latter situation, a senior can postpone filing for Parts A (hospitalization) or B (outpatient services), although many choose to enroll for Part A anyway since it doesn’t require premium payments. Seniors can enroll later without penalty for up to eight months following retirement.

Employed seniors who opt to postpone enrollment should approach this decision with great caution – it should be discussed in person with the Social Security Administration and a workplace plan administrator. And, it’s best to notify Medicare at age 65 of a decision not to file in order to ensure that there won’t be problems with premium penalties later on. This can be done by checking off a box on the back of a Medicare card that has been sent, by calling the Social Security Administration or through the SSA website.

Traditional Medicare or managed care? Seniors can choose between traditional fee-for-service Medicare or Medicare Advantage, a managed care option that offers all-in-one medical and drug coverage. When a senior joins an Advantage plan, Medicare provides a fixed payment to the plan to cover Part A and Part B; there usually are additional co-payments and deductibles, depending on the plan. Here’s a detailed guide to the ins and outs of Advantage plans.

Watch out for premium surcharges. High-income seniors pay surcharges on premiums for Part B and Part D. The surcharges are paid by individuals with $85,000 or more in annual income, and joint filers with income over $170,000, and they scale upwards through four income brackets. The surcharges affect just 5 percent of seniors, since most are retired and don’t have that much income. But if you do have clients in these brackets, the payments are substantial.

Consider strategies that might keep the client under the income trigger. One possibility is taking portfolio withdrawals from a Roth IRA, which are not counted in Social Security’s definition of taxable income. Or, alternate withdrawals from taxable accounts so that the client doesn’t have to pay the surcharge every year.

Mind the gap. Many Medicare beneficiaries opt to purchase an optional Medigap policy, which charges an extra premium but caps out-of-pocket costs. If your clients plan to buy a Medigap policy, it’s best to do so during the six-month open-enrollment period, which is open for six months at the time they turn 65 or enroll in Medicare Part B. While no late enrollment penalties are levied, after the open enrollment, seniors may be required to take medical screening tests and can be rejected because of preexisting conditions.

Resources
The non-profit Medicare Rights Center offers an excellent, free online toolkit to assist professionals with Social Security and Medicare enrollment issues.

Allsup offers a free guide to Medicare filing.

The federal government publishes an annual – and very comprehensive – guide to Medicare annually. Click here to download the 2012 edition of Medicare & You.

Medicare produces a guide that explains how Medicare works with other kinds of insurance or coverage and who should pay seniors’ bills first.

My online guides to Medicare and Social Security basics are available at RetirementRevised.com

Visit the Medicare website to download a guide to Medigap plans.

About the Author
Mark Miller is a journalist and author who writes about trends in retirement and aging.

By Bedros Keuilian

Each and every day your head is being filled with trash. It’s happening to all of us. To some more than others. Let me explain…

I was recently talking to a program director for a major news network and the conversation turned to how news networks make their money. It’s probably no surprise to you that they make their money by selling advertising. But their big problem is that they need lots of eyeballs to make the most money. So they figured out that “trash”, as he called it, sells the most. By trash he means “news” that’s scary, filled with gossip and fear. You know, gloom and doom news.

In fact he went on to say that years ago when they tested running feel good segments on the news, less people stuck around to watch. Crazy? Yes.

But, this does prove two things…

1. Society is twice as likely to act on pain (fear) then pleasure.

2. They are intentionality putting trash into your head because that makes them more money.

So while you can use the first fact above to make more money by changing your marketing, the second fact is pretty scary because that “trash” has an effection you.

It’s actually been scientifically proven that your thoughts can be influenced by what you watch. Therefore, anything that enters into your conscious and subconscious mind can impact your beliefs. Since your thoughts affect your decisions and actions, that clearly shows you must be careful about how much ‘trash’ you allow into your mind.

This upcoming holiday season will give us a chance to spend time with loved ones (and our global readership will surely have similar experiences over the next six weeks). However, often our loved ones don’t quite necessarily understand what we seek to accomplish in our lives and may even discourage our ambitions.

In most cases, our relatives mean well, and aren’t trying to be negative, because they believe they are protecting us. But there are also some relatives who are just plain toxic to our goals in life.

Frankly, you can’t change those you are related to, but when you get back into the office next week, take some time to analyze your professional relationships. Are your surrounding yourself with the right types of people?

Fortunately, I have something that helps me keep my thoughts clean and clear all the time. And you can use it too to protect your mindset.

If you feel that sometimes you’re stuck in a bad place and want to change your thought patterns to those of the super successful then consider these changes in how you think:

• Eradicate the words “try” and “can’t” from your vocabulary
• Cut out negative people and energy vampires from your life
• Eliminate fear, greed, hate, and scarcity from your mindset
• Surround yourself with positive people who you want to be like

Use the list above to shift your thought patterns to a success mindset.

But never forget this. The harsh truth is that YOU need to take responsibility for your failures, successes, and lack of action. That is the number one reason people never get what they want – No personal responsibility. And with that they don’t take action and 12 months go by and at best they’re in the same place in life that they were last year… only older.

Don’t let that happen to you. Change your mindset today and take out the trash.

Nearly eight out of ten Americans acknowledge the increasing need for long term care (LTC) planning, yet nearly half (45%) aren’t sure how they will address future LTC needs, according to a study released today by Northwestern Mutual Life Insurance Company.

The study also found that almost two-thirds of people believe the cost of providing LTC services will rise faster than the return on their savings, and that slightly over half believe that long-term care costs will double in the next 14 years. Yet, less than one third are currently saving for future LTC needs.

“There is a clear disconnect between what Americans understand about long-term care needs and the steps they’ve taken to prepare,” said Steve Sperka, Northwestern Mutual vice president of long-term care. “In order to create flexibility and options in retirement, people need to address long term care risk as part of financial security planning.”

Northwestern Mutual’s survey was conducted online by Harris Interactive from October 11-13, and comprised 2,194 American adults ages 18 and older.

According to the survey, an estimated 27% of women report that they have been a caregiver compared to 22% of men. Additionally, two-thirds of women polled said that they’re more likely to report that the physical demand of caregiving is their biggest challenge versus less than 50% of men.

Compounding the issue is the fact that women, on average, live five years longer than men, according to data from the Centers for Disease Control. Despite this fact, the study showed that fewer women are saving for their future needs (24% for women vs. 32% for men).

“There’s no doubt that long-term care is a pronounced issue for women, who tend to live longer and are more likely to provide care during their lives,” Sperka added. “This just amplifies the importance of planning for women, in order to maintain control over their finances and lifestyle through retirement.”

The study found that respondents with caregiving experience are:

• Almost twice as likely as those who haven’t had caregiving experience to have discussed long term care options with family and friends (43% vs. 23%)

• Almost twice as likely to have addressed the need for long term care within their retirement plans (30% vs. 17%)

• More likely to understand their options and the resources available when it comes to LTC planning (56% vs. 34%)

Required Minimum Distribution (RMD) for retirement account owners:

Generally, your RMD must be taken by December 31 of the year for which it is due. However, an exception applies to your first RMD, which is due for the year in which you reach age 70 ½. Under this exception, your RMD for the year that you reach age 70 ½ can be deferred until April 1 of the following year. Caution: If you defer taking your RMD for the year you reach age 70 1/2 until the following year (taking it by April 1), you will need to take two RMD amounts for that year. That is because the second and all subsequent RMDs must be taken by December 31 of the year for which it is due. Taking two RMD amounts in one year could impact your income taxes, as it could put you in a higher tax bracket. Consult with your tax professional, who should be able to advise you on the tax impact of taking your first RMD in your 70 ½ year vs. deferring it until the next year.

By Mark Ford

I consider myself to be an expert of sorts on retirement. Not because I’ve studied the subject, but because I’ve retired three times.

Yes, I’m a three-time failure at retiring. But I’ve learned from my mistakes. Today, I’d like to tell you about the worst mistake retirees make.

It’s a common mistake… Yet, I’ve never heard it mentioned by retirement experts. Nor have I read a word about it in retirement books…

The biggest mistake retired people make is giving up all their active income.

When I say active income, I mean the money you make through your labor or through a business you own. Passive income refers to the income you get from Social Security, a pension, or from a retirement account. You can increase your active income by working more. But the only way you can increase your passive income is by getting higher rates of return on your investment.

When you give up your active income, two bad things happen:

First, your connection to your active income is cut off. With every month that passes, it becomes more difficult to get it back.

Second, your ability to make smart investment decisions drops because of your dependence on passive income.

Retirement is a wonderful idea: put a portion of your income into an investment account for 40 years and then withdraw from it for the rest of your life. Once you retire, you won’t have to work anymore. Instead, you will fill your days with fun activities: traveling, golfing, going to the movies, and visiting the kids and grandkids.

But consider this: A retirement lifestyle for two, like the one I described above, would cost about $75,000 a year, or $100,000 before taxes.

How big of a retirement account do you need to fund that?

Let’s assume that you and your spouse could count on $25,000 a year from Social Security and another $25,000 from a pension plan (two big “ifs”). To earn the $50,000 balance in the safest way possible (from a savings account), you’d need about $5 million, because savings accounts only pay 1% right now.

If you were willing to take a bit more risk and invest in tax-free municipal bonds (this is the safety level I like), you’d need about $1.25 million, assuming you could get 4% interest.

But middle-class American couples my age are trying to retire with an account in the $250,000 to $300,000 range. And that’s where the trouble begins. To achieve an annual return of $50,000 on $300,000, you’d need to make 17% a year.

Getting 17% consistently over, say, 20 years may not be impossible, but it’s very risky – too risky for my tastes.

I retired for the first time when I was 39. I put my money into ultra-safe municipal bonds. I soon realized, however, that to maintain the lifestyle I wanted, I would have to get a greater return on my investments – I would have to take greater risks with my money by investing in stocks. But when I studied the history of yearly stock market performance, I came to the conclusion that I couldn’t confidently expect to get the return I needed, year after year.

So what did I do? I went back to work.

I went back to earning an active income because I didn’t want to spend my days studying the market and my evenings worrying about my investments. And do you know what happened? The moment I started earning money again, I started to feel better.

Retirement isn’t supposed to be filled with money worries. And yet, that is exactly what you will get if you try to get above-par returns on your investments.

As I write this, millions of Americans my age are quitting their jobs and selling their businesses. They are reading financial magazines and subscribing to newsletters. They are hoping to find a stock selection system that will give them the 30% and 40% returns they need. But they will soon find out that such systems don’t exist. They will have good months and bad years, and they will compensate for those bad years by taking on more risk. The situation will go from bad to worse.

It doesn’t have to be this way. Let’s go back to the example of the couple with the $300,000 retirement fund and the $100,000-a-year retirement dream. To generate the $50,000 they need, they would have to earn about 17% a year in stocks. As I said, that is highly improbable. But if they each earned only $15,000 in active income, they would need a return of only about 7% on their retirement account, which is doable.

There are many ways for a retired person to earn a part-time, active income. You could do some consulting, start your own Web business, or earn money doing any sort of purposeful work.

I am not saying that you should give up on the idea of retirement. On the contrary, I’m saying that retirement might be more possible than you think.

But you must replace the old, defective idea that retirement means living off passive income only. Paint a new mental picture of what retirement can be: a life free from financial worry that includes lots of travel, fun, and leisure, funded in part by active income from doing some sort of meaningful work.

The first benefit of including an active income in your retirement planning is that you will be able to generate more money when you need to. But the other benefit – the one that no one talks about – is that it will allow you to make wiser investment decisions because you won’t be a slave to your investments.

As the number of family members providing care for aging parents increases, the solutions to find help with loss of income because of time off from employment for caregiving has become a major concern for many.

The demands on both the time and energy needed to provide the needed care can make it impossible to maintain both a full time job with full time caregiving.

Seeing a need to give support to family caregivers the federal government Administration on Aging created the National Family Caregiver Support Program.

State Area on Aging division manages this program on the state and community level to offer support services that include:

• Information to caregivers about available services;
• Assistance to caregivers in gaining access to supportive services;
• Individual counseling, organization of support groups, and caregiver training to assist caregivers in making decisions and solving problems relating to their roles;
• Respite care to enable caregivers to be temporarily relieved from their care giving responsibilities; and
• Supplemental services, on a limited basis, to complement the care provided by caregivers.

Medicaid Cash & Counseling Program

A Medicaid approved assistance program called Cash & Counseling may be used to provide funds to hire personal care aides as well as purchase items or services, including home modifications that help them live independently.

The PayingForSeniorCare.com website gives the following information about the program:

“For Medicaid eligible seniors, the process begins with an assessment in the home to determine the senior’s home care needs; this includes interviews with caregivers and possibly the senior’s physicians. A determination of how many monthly care hours are required is made. The benefit amount is calculated using that determination and cost of care for that geographic area. This amount can be increased or decreased as the senior’s needs change. A family care giver may need to qualify as a home health aid by the state to receive these funds.”

This program is executed by each individual state Area on Aging Services division. It is a relatively new program and is not yet available in all States. Check with your state Area on Aging Services department for availability.

Using the Veterans Aid and Attendance Pension Benefit

A totally overlooked source of money to pay family caregivers to provide care at home is the Aid and Attendance Pension Benefit. This money is available to veterans who served during a period of war. Pension money is also available to the widows of these veterans. This benefit, under the right circumstances, can provide up to $1,949 a month in additional income to pay family members to provide care at home.

Getting the aid and attendance benefit to pay for family caregivers is not an easy task. This is because there must be a caregiver contract in place, a physician medical evaluation done, income and asset qualifications met and proof of medical expenses provided. Submitting the correct forms and documentation can easily be completed with the help of a VA Accredited Consultant who understands the process.

Long Term Care Insurance Benefit

If the senior being cared for has a long term care insurance policy that covers home care, payment to the care giver from this source could be arranged. Some policies require the care provider to be through a licensed home car agency, but others will pay for individual aides certified as such. This would require some training by the family member to become certified. There are policies that pay a daily benefit amount to the insured to use as they want to pay for their care. Check with a long term care insurance professional about types of policies.

Caregiver Contract

In some cases the senior parent has the funds to pay for care. If a family member is giving care it is very important that a caregiver contract be in place. A signed and dated agreement will outline the services provided as well as the amount of pay for these services. The contract will eliminate questions about what is expected from both parent and caregiver as well as providing a legitimate contract and payment record of services to qualify for Medicaid.

Attorney John L Roberts, in his article titled “Caregiver Contracts that Protect Elders and Their Family Members” states:

“A written Caregiver Contract is a good idea for every family that wants to protect family harmony, and make sure everyone in the family understands how care is being provided to an elder.

The family member who provides care can save an elder from needing nursing home services, and may also protect assets if nursing home care is needed in the future. Elders who want to cover all of these bases must have a written Caregiver Contract. Whenever adult children and other family members are providing valuable care, only a written agreement will protect assets from nursing home care costs and qualify the elder for Medicaid.”

In having the parent pay a family member for care giving, it will be an employer/employee situation and payroll records must be kept with payroll taxes paid.

This can also be set up by an elder law attorney at the time the contract is done.

Final Note

Taking the time to create the caregiver contract, research the government and state services that are available to caregivers and using community resources will make the family care giving experience less stressful.

“The 4 Steps of Long Term Care Planning” from the National Care Planning Council

Martin V. Higgins, CFP, CLU, AEP is a financial practitioner who specializes in helping people prepare financially for long term care.

Family Wealth Management is a professional firm providing customized financial planning and wealth management solutions to our clientele of pre-retirees, retirees, widows and small business owners.

We invite you to visit our website @ http://www. savethespouse.com to learn how Family Wealth Management may be the right choice for you, your family or business.

Martin Higgins is a registered representative and investment adviser representative of Mutual of Omaha Investor Services, a securities broker/dealer and registered investment adviser. Home Office: Mutual of Omaha Plaza, Omaha, NE 68175-1020 Member FINRA/SIPC. There is no contractual relationship between Family Wealth Management and Mutual of Omaha Investor Services, Inc. Martin Higgins can only do business in states in which he is registered. The information presented in this newsletter is intended for educational purposes only, and is not intended to replace the advice of an attorney or qualified tax professional.

By Bill Losey, Retirement Solutions

A recent survey found that over 60% of women feel they are better at handling money than men are. However, married women sometimes find themselves in perplexing financial situations – conditions that might be avoided with a little planning and/or foresight. With vigilance, you can plan to steer clear of these mistakes.

Not saving enough for retirement after marriage. If your spouse earns a huge salary and has invested avidly, you may have less impetus to save for retirement yourself. Your IRA, 401(k) or 403(b) may start to seem more supplemental than primary. Yet what happens if the relationship ends someday and you personally end up with a retirement savings shortfall? Keep contributing to your own retirement accounts.

Dipping into retirement savings once married.If your spouse is really wealthy or has much greater net worth than you do, your retirement nest egg may seem minor in comparison. Your spouse may tell you that with all the investments and savings that you collectively possess, you taking a loan out of your 401(k) won’t be that bad. Well, drawing down your own retirement savings could look like a very bad move 20 or 30 years from now. Who knows what changes life could have in store? Resist the temptation to siphon off your retirement savings.

Trusting a reckless spouse with your finances. When you love someone who is cavalier with money, look out. Beware of ceding financial control or your financial say in such a situation. If you marry someone with severe debt problems, don’t think that you will be financially immune from the effects of those problems. If your spouse is a wastrel or has a terrible credit rating, do not “hand over the keys” to the household finances. Watch what goes on with the bank accounts, investment accounts and credit cards among you– keep communication open and encourage transparency.

Forfeiting some or all of your financial identity.You may have taken your spouse’s name, but that does not mean you need to give up your own credit card for a shared one, merge your personal checking account into a joint one, and so forth. If you don’t use a credit card for several months or years, you won’t have to pay a fee but it could show up as “inactive” on your credit report. The credit card issuer may move to close the account, and losing the credit history of that card could hurt your credit score. Retain individual savings and investment accounts and individual credit cards.

Divorcing with an “equal” rather than equitable financial settlement.If a divorce happens, the impulse may be to amicably split things “50/50” … or, the focus may be on keeping custody of your kids or keeping your home with your financial potential a distant second. However, you must keep your financial future in mind.

Quite often, a woman will be instrumental in building a business or professional practice with her spouse – but she may not be a part of that successful company or professional entity after a divorce. If you divorce and have helped your spouse build a business to greater or lesser degree, you may not only find yourself out of work but taking a job that pays less or having to learn new skills to compete in the job market. Your earnings potential and retirement savings potential may be affected. If you should divorce, seek an equitable settlement that considers your future financial potential; this is even more important than retaining material wealth or real property from the marriage.

Losing touch with your career path. If you have happily put a career aside to raise kids, keep in mind that you might find yourself returning to work sooner rather than later. Life events, economic necessity, personal desire and growing children may all be factors. Yet a long, total absence from the workplace can make it difficult to step back in – the technology or outlook of any given field can change radically across a few short years. Try to keep a foot (or at least a toe) in your career via consulting or networking efforts.

The takeaway: look out for your financial well-being.It is okay to emphasize (and plan for) your own financial destiny when you are married. In fact, it is both wise and appropriate to do so.  Let me know how I can help you.

Federal law requires that participants in employer-sponsored retirement plans designate their spouse as their beneficiary unless the spouse waives this right in writing. Assuming that you and your spouse adhered to this practice, a document known as a Qualified Domestic Relations Order (QDRO), which is part of a divorce settlement, specifies how retirement assets are divided.

A QDRO specifies the amount or portion of a plan participant’s benefits that are paid to a spouse, former spouse, child, or other party. A QDRO typically governs assets within a retirement plan such as a pension, profit-sharing plan, or a tax-sheltered annuity. Benefits paid to a former spouse typically are considered income for tax purposes. If you contributed to your retirement plan, a prorated share of your investment is used to determine the taxable amount.

Former spouses on the receiving end of a lump-sum distribution mandated by a QDRO may be able to roll over the money tax free to a traditional individual retirement account or to another qualified retirement plan. Following such a transfer, assets within the plan are subject to rules that would normally apply to the retirement plan. If you transfer assets within a traditional IRA to your spouse as part of a divorce decree, the transfer is not considered taxable and the assets are treated as your former spouse’s IRA.

Procedural Issues

QDROs are governed by rules established by the U.S. Department of Labor. In most instances, a judge must formally issue a judgment or approve a settlement agreement before it is considered a QDRO. The fact that you and your soon-to-be-former spouse have signed an agreement is not adequate for a QDRO to take effect. Also, following an order issued by a judge, the administrator of the retirement plan affected by the QDRO must determine whether the court order qualifies as a QDRO according to the rules of the labor department.

Note that retirement assets are part of a broader financial picture that may include your home, taxable investments, personal property, and other assets. It is not mandated that your spouse receive a portion of your retirement assets in the event of a divorce. You and your spouse may negotiate another type of arrangement that permits you to retain your retirement assets while granting other assets to your spouse. In addition, a prenuptial agreement, depending on its provisions, could potentially limit your spouse’s rights to your assets.

You may want to consult a divorce lawyer and your financial advisor to determine whether federal laws relating to retirement accounts apply to your situation.

© 2011 McGraw-Hill Financial Communications. All rights reserved.

September, 2011 — This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by Martin V. Higgins, CFP, CLU, AEP, a local member of FPA.

On Average, Women Lose $324,000 While Men Lose $284,000

Westport, CT – June 14, 2011 – Americans who provide care for their aging parents lose an estimated three trillion dollars in wages, pension and Social Security benefits when they take time off to do so, according to “The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents”. Produced by the MetLife Mature Market Institute in conjunction with the National Alliance for Caregiving and the Center for Long Term Care Research and Policy at New York Medical College, the study reports that individually, average losses equal $324,044 for women and $283,716 for men. The percentage of adults providing care to a parent has tripled since 1994.

The researchers analyzed data from the National Health and Retirement Study (HRS) to determine the extent to which older adult children provide care to their parents. They also studied gender roles, the impact of caregiving on careers and the potential cost to the caregiver in lost wages and future retirement income.

“Nearly 10 million adult children over the age of 50 care for their aging parents,” said Sandra Timmermann, Ed.D., director of the MetLife Mature Market Institute. “Assessing the long-term financial impact of caregiving for aging parents on caregivers themselves, especially those who must curtail their working careers to do so, is especially important, since it can jeopardize their future financial security.”

In addition, the study found that:

• Adult children age 50+ who work and provide care to a parent are more likely than those who do not provide care, to report that their health is fair or poor.
• The percentage of adult children providing personal care and/or financial assistance to a parent has more than tripled over the past 15 years and currently represents a quarter of adult children, mainly Baby Boomers. Working and non-working adult children are almost equally likely to provide care to parents in need.
• Overall, caregiving sons and daughters provide comparable care in many respects, but daughters are more likely to provide basic care (i.e., help with dressing, feeding and bathing) and sons are more likely to provide financial assistance defined as providing $500 or more within the past two years. Twenty-eight percent of women provide basic care, compared with 17% of men.
• For women, the total individual amount of lost wages due to leaving the labor force early because of caregiving responsibilities equals $142,693. The estimated impact of caregiving on lost Social Security benefits is $131,351. A very conservative estimated impact on pensions is approximately $50,000. Thus, in total, the cost impact of caregiving on the individual female caregiver in terms of lost wages and Social Security benefits equals $324,044.
• For men, the total individual amount of lost wages due to leaving the labor force early because of caregiving responsibilities equals $89,107. The estimated impact of caregiving on lost Social Security benefits is $144,609. Adding in a conservative estimate of the impact on pensions at $50,000, the total impact equals $283,716 for men, or an average of $303,880 for male or female caregivers age 50+ who care for a parent.

“These family caregivers, the celebrated members of the sandwich generation, are juggling their responsibilities to their own families and to their parents,” said Gail Hunt, president and CEO of the National Alliance for Caregiving. “There is also evidence that caregivers experience considerable health issues as a result of their focus on caring for others. The need for flexibility in the workplace and in policies that would benefit working caregivers is likely to increase in importance as more working caregivers approach their own retirement, while still caring for their loved ones.”

“As the percentage of employees who are caregivers continues to grow, there will be greater demand on employers for help and support. There are many workplace resources and programs that can be made available that benefit all stakeholders since financial stress can negatively impact physical health and workplace productivity,” adds Timmermann.

The study contains implications for individuals, employers and policymakers. It points out that employers can provide retirement planning and stress management information and can assist employees with accommodations like flex-time and family leave. Individuals, it says, should consider their own health when caregiving and should prepare financially for their own retirement. Policymakers are made aware of the fact that more states are considering paid family leave, especially as it is accrued through workers’ compensation funds. On the federal level, a voluntary long-term care insurance program is part of the Affordable Care Act and will likely increase public awareness of the issue.

The MetLife Study of Caregiving Costs to Working Caregivers provides updated information first reported in two MetLife studies: Sons at Work: Balancing Employment and Eldercare (2003) and The MetLife Juggling Act Study: Balancing Caregiving with Work and the Costs Involved (1999).

Methodology

The study uses data from the Health and Retirement Study (HRS) conducted biannually by the University of Michigan with funding from the National Institute on Aging. First fielded in 1992, the HRS, a nationally representative sample, surveys adults over the age of 50 and provides extensive information on this population, including data on income, work and health status, and whether respondents provide basic, personal care and/or financial assistance to their parents. After cases with missing data were eliminated from the 2008 panel, the sample was restricted to 1,112 men and women who had a parent living.

The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents can be downloaded from www.MatureMarketInstitute.com. It can also be ordered through Contact Us on the MetLife Mature Market Institute Web site, or by writing to: MetLife Mature Market Institute, 57 Greens Farms Road, Westport, CT 06880 or MatureMarketInstitute@metlife.com

The MetLife Mature Market Institute^®

The MetLife Mature Market Institute is MetLife’s center of expertise in aging, longevity and the generations and is a recognized thought leader by business, the media, opinion leaders and the public. The Institute’s groundbreaking research, insights, strategic partnerships and consumer education expand the knowledge and choices for those in, approaching or working with the mature market.

The Institute supports MetLife’s long-standing commitment to identifying emerging issues and innovative solutions for the challenges of life. MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers in over 60 countries. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. For more information, please visit: www.MatureMarketInstitute.com.

National Alliance for Caregiving

Established in 1996, The National Alliance for Caregiving is a non-profit coalition of national organizations focusing on issues of family caregiving. The Alliance was created to conduct research, do policy analysis, develop national programs, and increase public awareness of family caregiving issues. Recognizing that family caregivers make important societal and financial contributions toward maintaining the well-being of those for whom they care, the Alliance’s mission is to be the objective national resource on family caregiving with the goal of improving the quality of life for families and care recipients. www.caregiving.org

Center for Long Term Care Research and Policy, New York Medical College

The Center for Long Term Care Research and Policy at the School of Health Sciences and Practice, New York Medical College, was established to engage in research, education and public policy development to improve long term care for all Americans. The Center’s work focuses on health care disparities, health care needs and caregiving across the lifespan and to promote fair and equitable financing of long-term care in the United States. Research and analysis in this report is provided by Peter S. Arno, PhD, and Deborah Viola, PhD with statistical support from Qiuhu Shi, PhD. www.nymc.edu/shsp/CLTC/index.html

If you – or one of your kids – are about to graduate from college or high school, congratulations on successfully navigating the twists and turns of the education system. You don’t need me to tell you what a challenging, rewarding and expensive road it has been.

But, as someone who’s learned a few financial lessons the hard way, I would like to share a few steps you can take now to ensure you’ll start the next chapter of life on sound economic footing.

First, live within your means. Unless you sailed through college on a full scholarship, you’re probably already saddled with thousands of dollars in student loan debt. (If you’re about to enter college, avoiding future loan debt is something to keep in mind.)

Add in rent, car payments, credit card and personal loan balances and other monthly bills – not to mention payroll taxes – and your new salary may not go as far as you’d hoped.

If you don’t already have a budget, start one now. Many free budgeting tools are available online at sites such as MyMoney.gov (www.mymoney.gov), the National Foundation for Credit Counseling (www.nfcc.org), and Practical Money Skills for Life (www.practicalmoneyskills.com/budgeting), a free personal financial management program run by Visa Inc.

Speaking of student loans, here are a few repayment tips:

• Most federal loans offer grace periods before repayment must begin, but many private loans do not. Carefully review your loan documents to see where you stand.
• Ask if your lender will reduce the interest rate if you agree to automatic monthly payments or after you’ve made a certain number of on-time payments.
• If you anticipate repayment difficulties, contact your lender immediately to try and work out an agreement to defer payments, extend the loan’s term or refinance at a lower rate.
• Many people with federal loans who are low-income, unemployed or working at low-paying, “public service” jobs in education, government or non-profits qualify for income-based repayment, where monthly payments are capped relative to adjusted gross income, family size and state of residence. To learn more, visit www.studentaid.ed.gov/ibr.

Many people don’t realize the impact their credit score has on their financial future until after it’s been seriously damaged from making late payments, bouncing checks, opening too many accounts or exceeding credit limits. This can haunt you later when you try to borrow money for a house or car, rent an apartment or apply for a job.

Find out where you stand by ordering credit reports from each major credit bureau – Equifax, Experian and TransUnion. You can order one free credit report per year from each bureau from www.annualcreditreport.com; otherwise you’ll pay a small fee.

To learn more about the importance of understanding and improving your credit score, visit What’s My Score (www.whatsmyscore.org), a financial literacy program for young adults run by Visa Inc. It features a free, downloadable workbook called Money 101: A Crash Course in Better Money Management, a free tool to estimate your FICO credit score and “Welcome to the Real World” money guides on topics such as student loan repayment, finding a job and budgeting.

You’ve worked hard to earn your degree; now put it to work for you. Just make sure you don’t sabotage your efforts by starting out on the wrong financial footing.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

Jason Alderman

Corporate Relations, Visa Inc.

Jason Alderman is a senior director at Visa Inc. and runs the company’s global financial literacy initiative, which includes the award-winning Practical Money Skills for Life andWhat’s My Score? programs. As part of his work at Visa, Mr. Alderman writes a weekly personal finance column that is carried in 400 community newspapers throughout the U.S.

Prior to joining Visa at the start of 2006, Mr. Alderman handled communications for Pacific Gas and Electric Company, one of America’s largest utilities. Mr. Alderman’s career also included service as a Congressional staffer in Washington, D.C. on the House Appropriations Committee and as the legislative director for the late Rep. Sidney Yates of Illinois. In that post, he helped oversee the multi-billion dollar budgets for the U.S. Department of the Interior and the Smithsonian Institution.

Mr. Alderman sits on the board of the JumpStart Coalition for Personal Financial Literacy and is the founder of the Bay Area Center for Voting Research.

Barry Moltz

On Presidents’ Day, we honor our nation’s presidents, but we typically don’t look to them for business help and advice (unless it’s extending more government loans or incentives). But, there is actually a lot we can learn from two of our most well-known leaders.

As small business owners, we are especially familiar with George Washington and Abraham Lincoln since they appear on our money. And here are four lessons business owners can learn from these two presidents:

1. Solve customers’ problems. Washington was a marijuana farmer. In the late 1700s, pot was actually grown for hemp and soil stabilization (at least, this is what Washington told everyone). Hemp was used for textiles, paper, and medicine. In fact, the Declaration of Independence was written on hemp paper. Washington also ran many other businesses including a large fishery and one of the biggest whiskey distilleries in the country. Lincoln owned a general store. In the 1830s, these stores were the only places that offered a wide variety of goods for farms and homes. Stores would also offer the farmers credit based on how good the next year’s crop was projected to be. (Note: Do not follow this last piece of advice since Lincoln went out of business.)

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2. Be an innovator. Washington introduced the mule to America for farming. Utilizing mules gave farmers many advantages over horses including the ability to work the animals harder, longer, and with less feed. They were particularly popular in the south since their hooves were better suited for crops like cotton, tobacco and sugar. Lincoln was also an innovator. He received patent No. 6469 for a device called “Buoying Vessels Over Shoals” on May 22, 1849. It was supposed to lift riverboats off of sandbars. He whittled the original device out of wood. Unfortunately, the product was never marketed because the extra weight on the boat actually increased the chances of it running aground. Lincoln was more innovative as a lawyer and politician. He created the first transcontinental railroad and established a national currency.

3. Failure is part of the journey. In Washington’s first battle, he was ambushed and forced to surrender at Fort Necessity in Pennsylvania. In 1755, Washington had to assume command from a dying General Edward Braddock. He led the surviving Colonial soldiers on a “successful retreat.” Washington always talked about how “99 percent of failures come from people who make excuses.” Lincoln lost the first time he ran for state legislature and U.S. Congress; he won the second time around for each. He lost both times when he ran for U.S. Senate, but was later elected president.

4. Learn from the bottom up. Washington’s father died when he was 11 and left no money or formal education. So Washington became an apprentice in order to learn business. Lincoln also had no formal legal education. He learned from books until the Supreme Court of Illinois licensed him. When he became a lawyer, he traveled around Illinois to learn his craft until he became one of the most successful lawyers in the state.

What other presidents can we learn from?

Barry Moltz gets business owners growing again by unlocking their long forgotten potential.  With decades of entrepreneurial experience in his own businesses ventures as well as consulting countless other entrepreneurs, Barry has discovered the formula to get stuck business owners out of their funk and marching forward.  Barry applies simple, strategic steps to facilitate change for entrepreneurs, and get’s them growing their business once again. Barry Moltz has founded and run small businesses with a great deal of success and failure for more than 15 years. http://barrymoltz.com/contact-barry/