Welcome to Best Money Saving Blog. Here we like to write articles about all ways in which normal people like me and you can save or make money. Covering a range of subjects from discounts and voucher codes, how to make money, general saving ideas and the occasional rant from myself. If you're a blogger out there with something to say or a company with a money saving product you'd like to write about - please get in touch with us. We're happy to help out and offer guest posts for anyone who's interested.

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Should you Retire at 65 ?

Published on November 2, 2013, by in Retirement.

Not many years ago the age of 65 was that “special” number that told a person that they were ready to retire. The idea may still be appealing as far as calling it “quits” before we’re too old or too cranky to enjoy our “golden years” but, in reality, 65 is probably too young an age to retire these days. In fact, a recent Gallop Survey showed that over 75% of people working right now are planning on working past 65 and, unfortunately, nearly 40% are going to do it because they have to. With that in mind we put together a blog today with some thoughts, advice and suggestions that will help you to determine if retiring at 65 is the right thing for you to do or not. Enjoy.

  • Do you still actually have a Job? If you do and you’re still able to take care of your job duties effectively (and the job itself isn’t making you want to kill someone) it might make sense to stay there and keep working for a few years longer. The fact is, the longer that you can delay getting your Social Security payments the more money those checks will have in them when you finally do get them. Working longer will also allow you to take advantage of health insurance premiums from your employer rather than having to pick up 100% of the tab on your own. The fact is, if you lose your job or get forced out after 50 (for any reason) there really is no guarantee that you’ll quickly be able to find new employment, so if you already have a job you may just want to stick with it for a while longer.
  • Are you completely prepared, financially? Here’s the thing; statistically speaking, if you retire at 65, you’re going to live at least another 20 years as a retiree. If you’ve worked for the last 30 years and have contributed to Social Security you going to be receiving monthly benefits but these benefits were never intended to completely replace the money you’re making right now. Indeed, as of August 2013, the average monthly benefit from Social Security was $1270 and the average MAXIMUM monthly benefit for someone who retires at their full retirement age is $2533. While it’s true that a lot of bills that you have while working will disappear when you retire, there are other expenses that can take their place including increased health care costs. If you think about it, you don’t just want to “get by” when you retire, you want to enjoy yourself. If you haven’t prepared yourself completely to do that, financially speaking, working for a few more years is probably your best bet.
  • Do you have other interests besides your current job? If you’ve been working at the same or similar job for the last 30 years your daily, weekly, monthly and even yearly activities have probably been defined by that job. Projects, meetings, deadlines and strategy sessions were the norm and, indeed, that’s what you were hired to do for your company. Once you retire you will immediately become responsible for killing this time with something else and, if you don’t have outside interests, interesting things to do or something to fill your time, you may find that you are bored out of your mind and wishing that you would’ve stayed at work. With that in mind it pays to prepare for retirement not just financially but also with plans about how to fill your days with something interesting, entertaining or time-consuming.
  • Do you still enjoy working? While there are certainly many people who dread going into work every day there are also quite a few lucky individuals who look forward to going into work for the camaraderie, the challenge and other reasons. These people literally thrive on social interactions with their colleagues as well as the fellowship that they feel from working towards a communal goal or purpose. A steady paycheck is certainly a great reward for a job well done as well as the kudos from your boss and compatriots. Point being, if your job is interesting, challenging and you still enjoy it, you may consider staying there for a few years longer rather than stopping everything completely when you hit the big 6 5.

Retiring at the age of 65 is no longer looked upon as a “must” but rather as a “possibility”. There are certainly plenty of individual factors that come into play including how much retirement savings you have, how your health is faring and whether or not you still like working. Before making any decisions, sit down with your spouse, a trusted family member or professional financial advisor and take a look at all of your options. If you have any questions about retirement, personal finances or finances in general, please let us know and we’ll get back to you with information, advice and solutions.

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Create a 10 Year Plan for your Credit

Published on October 26, 2013, by in Credit.

One of the biggest mistakes that people make when it comes to their credit is that they don’t fully consider “the future”. More to the point, most people only consider whether credit score is “now” when they are thinking about getting a mortgage, a student loan or car loan and don’t consider what those loans will do to their credit score in the next time they need it.

For example, a person that’s recently graduated from college might be focusing on their credit score as it looks today because they want to rent an apartment or get a new car.  Thus they fail to consider what that will do to their credit when it comes time to purchase a new home. The same thing goes for a couple that is purchasing a new home and doesn’t consider that it might not be big enough for the family they plan on having in 10 years. What all of this points to is the fact that having a long-term plan for your credit is vital.

With that in mind we put together a blog today about how to create a 10 year plan for your credit that will help you in a myriad of financial ways. Enjoy.

  • Start Today. Here’s the thing; you can actually start your tenure credit plan at any time that you wish. This isn’t something that’s strictly for young adults and, even if you’ve had a major financial problem like a bankruptcy, you can put together a 10 year credit plan at any time you want to establish some long-term goals for your credit. If you have just been through a bankruptcy but you do this today, once you are finally able to get credit again you’ll be in much better shape, financially speaking.
  • Make a list of your biggest financial goals and dreams as well as the type of credit you’ll need to make them happen. Let’s say you’re planning to buy a new home in the next 10 years or a new car in the next 3. More than likely you’re going to need a loan to make those purchases and, if you list them all out ahead of time and have plans for what your credit score will need to be when you make those purchases, you’ll have not only a reminder sheet but something that will motivate you to keep your credit, and your credit score, looking good.
  • Build your goals around specific credit factors. Instead of making goals based on your credit score alone, you can focus your short and long-term actions by putting together short and long-term goals based on factors that can greatly influence your credit score. For example;
    • Credit mix. Getting a new credit account or other loan that you pay off and pay completely every month to build your credit
    • On-time payments. Make sure to pay off all of your loan payments on time, every time.
    • Utilization ratio. Do your best to pay down any loans so that, in 10 years, you can be within 20% of your credit limit
    • Make short-term goals to pay off outstanding debts
    • Set up a calendar with Important Dates. A 10 year plan is a long-term plan and, in many cases, life will tend to make you either forget or ignore those plans unless you give yourself a “reminder” or two (or as many as you need) to keep on track. Checking all of your actions based on your goals is vital as well as checking your credit report at least once a year, if not more. Since you’re entitled to a free credit report once a year from the “Big 3” credit reporting agencies, this really shouldn’t be a problem. Doing this will allow you to make sure that your credit scores are staying high, where they should be, and that there are no mistakes, errors or signs of identity theft in your report.

Once you’ve set up your 10 year plan you definitely should go back, revisit all of the major things on your list and update them as you see fit. You should do this at least once a year and, even better, you should do it every time you get your credit reports so that you can do it all at the same time. While it’s certainly important to make sure that your credit is good “right now”, having a 10 year plan will allow you to make sure that your credit stays high, your credit report is always excellent and you are financial foundations are strong.

 

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How to Figure Out your Credit Score

Published on October 16, 2013, by in Personal Finance.

The average person has a very basic idea about their Credit Score. It’s either “great”, “good” or “bad”. But what exactly does your Credit Score really mean? In actuality, there are several different “scoring models” that are used by the different credit agencies to determine what your “score” actually is. Some of these use a scale and some of them simply use numbers to convey this important information.

For example, your FICO score starts at 300 and tops out at 850 whereas the range for your VantageScore is between 501 and 900. VantageScore 3.0 has arranged between 300 and 850. With all of these scoring systems, the higher the number that you have the better your Credit Score is and, obviously, the lower your score is the harder time that you’re going to have getting that new car loan.

Further confusing people is the fact that these credit reporting agencies don’t actually decide who has a “good” credit score and who has a “bad” credit score and neither do the reporting agencies that give the information to these companies. No, the insurance companies and individual lenders who use these numbers to determine whether you are an acceptable level of risk actually are the ones that put a label on the type of credit score that you have.

These companies and lenders use your credit score in a variety of ways that will affect you financially. These include;

  • Figuring out the interest rate that they’re going to charge you for your loan.
  • Determining the discount that they might be able to offer you on your new insurance policy
  • Deciding whether or not to give you credit
  • Figuring out how much credit that they actually can give you
  • Determining whether or not they should lower your credit limit
  • Determining whether they should close your account (if they deem it too “risky”)

Since the actual number doesn’t really mean anything until a specific lender decides how to use it, there’s really no such thing as a “bad” credit score. The fact is, it’s only when your credit score keeps you from accomplishing whatever financial task you have on hand that it becomes bad. If you’re trying to refinance a loan, borrow money at a lower interest rate or get the lowest rate on your car insurance, having a “bad” credit score can certainly affect you financially.

Back in the real world however you can use the numbers on your credit score to make certain assumptions depending on where among those numbers you fall. Generally speaking, assume that;

  • You have “excellent” credit when you’re between 760 and 850
  • You have “good” credit when you fall between 680 and 760
  • You have “fair” credit when your credit score is between 620 and 680
  • You have “bad” credit when your credit score is below 620

Determining Exactly Where You Stand

One of the best ways to figure out exactly what your credit score is, is simply to get your free credit report from the “Big 3” credit reporting agencies. You can do this once a year at no cost to you whatsoever but you can also pay to get your score on any sort of schedule that you like. If you do this on a regular basis you’ll be able to quickly identify your payment history, your debt and any other factors that might affect your credit score. You’ll also be able to see if there are any errors or mistakes in your credit report and take care of them before they become big problems as well as determine if you have been the victim of identity theft.

When you’re doing us remember that every lender is different and they will decide for themselves how to use your credit scores when making decisions about whether or not to lend you money or give you an excellent entry. It’s also important to remember that what some lenders consider a “bad” credit score others may consider to be perfectly acceptable.

If you have any questions about your credit report, your credit score or financial issues in general, please send us an email, leave a comment or ask questions and will get back to as soon as possible with answers, advice and suggestions.

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10 Excellent Money Tips that are often Overlooked

Published on October 9, 2013, by in Saving Money.

There is definitely an abundance of financial advice available on the Internet today and it can sometimes become overwhelming, to say least. There are however a number of fundamental financial principles that shouldn’t be overlooked but oftentimes are. This blog is about those money tips and, if you adopt them, you’ll create excellent financial habits and be more prepared for any type of financial emergency as well as being better prepared for retirement. Enjoy.

Excellent Money Tip #1: There truly are no shortcuts. Let’s face it, the only way to truly double your money fast is to take it, fold it in half, and put it back in your wallet. The fact is that risk and reward are inherently correlated and doubling your money in a very short period of time means that you’re going to have to put that money at high risk. The higher the return, the higher the risk that you actually lose your money, which is not good in any way, shape or form. While all investments pose a certain risk, some are so high that you definitely want to avoid them.

Excellent Money Tip #2: Gadgets won’t make you happy, but they will drain your bank account. On any given day the average consumer is absolutely bombarded with advertisements for new and better gadgets, fun opportunities and expensive toys. The fact is, Madison Avenue knows how susceptible we humans are to “wanting the newest thing” and they know exactly how to get us to take action on these emotions. Simply put, if you’re constantly out spending money on the newest, the latest or the “best” new gadgets, toys, clothing, shoes, cars or what have you, you’re going to have an incredible collection of (mostly worthless) stuff when you’re done, and an incredibly empty bank account.

Excellent Money Tip #3: Save money intentionally. Seemingly in your 401(k), in and even in savings all good habits. Even better is stashing money that you would otherwise have spent on gadgets (see above) into those same accounts. For example, let’s say that you were going to buy a new smart phone but decided that the one you already had was good enough. In this case, give yourself a little pat on the back and take the money that you would have used and put it into one of those accounts instead. This serves to keep your money from evaporating into thin air (which it has a tendency to do) and also gives you the psychological boost of knowing that you “did good”.

Excellent Money Tip #4: Start saving even before your Debt is paid off. When you’re paying off credit card debt or student loans it may seem like a good idea to use all of your money to do that and not save any but, in actuality, it’s still important to get into the habit of saving. The fact is, as with any habit it takes a while to train yourself and form that habit deeply. Also, while paying down your debt is great, if your car breaks down or you have a sudden emergency, you’re going to need cash to pay for it.  If you’ve been using all your cash to pay down your debt might have yourself what the experts call a “sticky financial situation”.

Excellent Money Tip #5: Live a little. Being frugal is an excellent idea, especially the case with the economy (among other things) in such a wretched state. The problem with being frugal all the time however is that it can lead some people to feel that they’re being “deprived” which can, in turn, lead to spending binges that can wipe out months of diligent saving work. Much like a “starvation diet”, if you’re on a starvation budget and you “cheat”, you usually cheat in a big way.

Excellent Money Tip #6: Put your finances on “autopilot”. Today it’s extremely easy to use your computer and the Internet to schedule paying your bills and, in most cases, if you do it correctly you won’t even have to think about most of your bills. The reason this is a great idea is that most of us are so busy these days that it’s relatively easy to forget a bill and, when we do, the extra fees and the “ding” that it makes on our credit report can be a high price to pay. Automating your savings in the same way by having heart of your paycheck deposited right into a 401(k) or another savings account is also an excellent idea.

Those are six of the best Money tips that the average consumer overlooks or even ignores. If you use them however you’ll find that, unlike many of your friends, neighbors and family members, you’re not only happier but you have quite a bit more money in your savings accounts, retirement accounts and emergency fund than they do. If you have questions relating to personal finance of any kind, please let us know and will get back to you with answers ASAP.

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Investments that aren’t really a very good Investment

Published on October 1, 2013, by in Personal Finance.

Let’s be honest, everyone wants to make as much money as possible with as little effort. That’s not always possible of course and, when it comes to financial planning, you need to be aware that all investments are definitely not created equal.

In fact, some can be quite dangerous, at least financially.

You need to always do as much research as possible to make sure that the investments you are considering making are the best possible. Also, with every investment you need to ask yourself simply this; is this calculated risk a good risk or a financially dangerous risk? With that in mind, we put together a list of investments that, in most cases, are financially dangerous and should be avoided.

  1. Investments that seem too good to be true, usually are. If you’ve been promised a constant and ridiculously large return or any type of business proposition that just doesn’t add up, you need to be extremely wary. In these cases using your common sense is your best defense and realize that the market fluctuates naturally over time. There’s no secret formula to maintain large returns on any sort of consistent basis. Also, when it comes to advice, even if a family member or trusted friend is giving it, never go on anyone’s  advice alone but always perform your own due diligence, get references, research and get through documentation.
  2. Purchasing a new car, boat, motorcycle or RV. Practically everyone knows that once you drive your new car off of the dealer’s lot it’s going to lose quite a bit of its value instantly. Of course, depending on the type of car that you purchase and the amount of use you put into it, it will depreciate faster or slower than other makes and models. Interestingly, exotic color cars and luxury cars are known to actually depreciate faster than “regular” cars. Keep in mind that the cost to own a luxury or exotic car is also higher due to the cost of maintenance and premium gas. The same thing goes for boats, motorcycles and RVs and, in most cases, buying  one that’s use but has been well maintained is a better idea.
  3. Buying or opening your own Restaurant. If you like to cook and you are a “people person”, owning a restaurant they seem like a really fun idea. In fact, it’s this preconceived notion about restaurants that actually dooms most of them to failure. Not only is the restaurant industry notoriously difficult but most people who open restaurants lack the experience and business background to actually run one well and instead believe that, just because cooking or entertaining is fun, owning a restaurant would be “great”. Just like any type of business it is vital that you have experience in the industry, have a well-designed business plan, avoid going into business with partners who have less experienced than you do and, as always, do your due diligence.
  4. Purchasing or ”flipping” Real Estate. In 2008 real estate investors across the United States were reminded that the real estate market can sometimes be incredibly volatile and that, in real estate as of life, there are no guarantees. Even if you’re just buying a house for yourself you not only need to be financially secure, have excellent credit and have enough money to put down a decent down payment, you need to also have an emergency fund to cover anything that might go wrong.

As far as “flipping” real estate is concerned, just because there’s a new genre of reality television shows that make it look easy doesn’t mean it actually is easy. If you’re considering purchasing real estate and then “flipping” it for a quick profit you’ll need to not only have a bit of luck but also be prepared for construction delays, the market taking another dive, your construction costs going over budget and many other factors that could turn your promising real estate adventure into a giant mess.

Hopefully we didn’t rain on your parade too much with this blog today but, in our opinion, it’s better to be forewarned about these types of risks then learn about them from hindsight after having lost your shirt.

 

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Financial Advice that you shouldn’t follow, as recommended by Suze Orman

There certainly are no shortages of financial blogs going around these days, including ours. The fact is that financial advice is easy to find on the Internet but the question is, is that advice pertinent, valuable and helpful? It’s a good question, isn’t it? With so many blogs and “professionals”purporting to have “excellent advice” it’s hard to sometimes determine if that advice is actually good or if it’s more self-serving ( or just plain wrong) than helpful.

To put aside any thoughts that the occasional reader might have that we don’t take care of our readers, we’ve put together a blog today with some financial advice that you actually should not follow based on the words and opinions of one of the most respected financial advisors today, Suze Orman.

A two-time Emmy award winning host, Suze Orman has been hosting her show, the aptly named The Suze Orman Show, on CNBC for quite some time. Her 9 (yes, 9!) back-to-back bestsellers on the New York Times Bestseller list are a testament to the fact that she actually knows what she’s talking about. For us, when Suze Orman gives advice about how to take care of our finances we certainly listen and, for that matter, when he warns us about what not to do we listen even more closely.

Ms. Orman was recently interviewed on Talking Numbers and gave her opinions on 3 of what she calls the “worst pieces of advice” other personal finance “experts” routinely gave to their readers and listeners. In our opinion the warning is worth remembering closely as, from what she advises, all 3 of them could be highly detrimental to the health of your portfolio.

Suze Orman’s Worst Piece of Advice #1. Investing in Whole Life insurance.

Ms. Orman: “What’s sad is that [people] see a financial advisor or an insurance agent [who says], ‘I know, you do two things: you can protect your family by buying whole life, universal [life], or variable life insurance and, at the same time, you can invest. So you can have your cake and eat it, too.’”

“Are you kidding me, people? That is one of the worst investments you will ever make in your life!

“Insurance should be insurance and investments should be investments. If you need insurance, the only type of insurance you should buy is term insurance, in most cases. And if you want to invest, stay away from insurance. Do stocks, mutual funds, ETFs (exchange-traded funds)… whatever’s out there but don’t use an insurance policy as an investment.”

Suze Orman’s Worst Piece of Advice #2. Putting your money in Immediate annuities.

Ms. Orman: “Right now, interests are still relatively low even though they’re headed up probably. We still have one of the lowest interest rate environments ever.

So now what’s happening is you have all of these financial advisors preying on the fear – especially of the retired – of low interest rates and saying, ‘If you just invest your money in an immediate annuity or a life income stream annuity which will pay you a monthly income for the rest of your life…’ – and they give you this big figure it will pay you – ‘that is how you should take care of your retirement.’

“Again: The worst investment you will ever make. You are locking in the lowest interest rates that we’ve had in a really long time. You don’t want to do that.

“They reason that they’re able to give you more than you can get somewhere else is they are giving back your principal to you. You want to make it so you invest your money to take advantage of higher interest rates in the future and doing an immediate annuity is not the way to go.”

Suze Orman’s Worst Piece of Advice #3. Putting your money in Bond Mutual Funds.

Ms. Orman: “Again, staying with the same theme of interest rates increasing: Everybody knows that when interest rates go up, the value of bonds go down.

“If you are going to buy a bond mutual fund, you have to be very careful because if interest rates go up, the value of that bond mutual fund will go down. And, in a mutual fund, there is absolutely not maturity date.

“So, what are you thinking? The worst thing you could do with your money right now is put it into a bond mutual fund. If you need income and you want to invest in municipal bonds, for instance, buy individual bonds. But, stay away from bond mutual funds.”

There you have it, advice from one of the foremost financial professionals in the business today. We give advice here as well and, if there’s something that’s not covered in our blog today that you’d like to ask questions about or need advice about, please let us know and we’ll get back to you as soon as possible.

 

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How to Lower Your Taxes in Retirement

Published on September 16, 2013, by in Retirement.

Reaching retirement means that many of your once normal expenses will be gone. Things like the cost to commute to work, dry cleaning for your dress shirts or dresses as well as many other work-related expenses will no longer be on your monthly list of bills to pay. One thing that won’t go away however is your tax bill.

For example, while it may seem that a person who has $1 million in retirement savings has plenty  of money to get them through retirement, the fact is that federal and state taxes will eat up a large amount of this money. In some cases the amount of taxes that you’ll pay on your retirement savings can be as high as almost 40%!

The fact is, when it comes to the different types of retirement accounts available, including taxable accounts, tax-deferred and tax-free accounts, it’s good to know exactly which ones are the best for your particular situation as well as knowing when to withdraw from these accounts in order to pay the least amount of taxes.

Knowing which accounts to withdraw from first is vital and experts will tell you that you should withdraw from your taxable accounts first during retirement so that you’ll be able to benefit from a lower capital gains tax rate and let your tax-deferred and tax-free retirement accounts continue to grow.

When it comes to other types of assets, any of them that you have owned in a taxable account for more than a year will be taxed up to 23.8%, depending on your tax bracket. Using your taxable accounts to  purchase investments that qualify for long-term capital gains or ones that are tax free will minimize your taxes in this case. Growth stocks, tax efficient mutual funds as well as exchange traded funds are the best for these and, if you happen to own individual municipal bonds they should also be in your taxable accounts. It’s also recommended to keep at least two years’ worth of living expenses in these accounts, using a low risk account like a money market account to do so.

Tax-deferred accounts like traditional IRAs, 401(k)s and any other type of retirement savings plans are next. These are usually taxed at your ordinary income tax rate when you withdraw from them, unless any after-tax contributions that you might have made. Be careful not to withdraw from these accounts before you hit the age of 59 ½ because the chance is high that you’ll also pay a 10% penalty if you do. It’s a good idea as a retiree to have a certain amount of stocks as well as stock funds in your IRA as well. These accounts are best for investments that are already being taxed at your ordinary tax rate like bond funds, preferred stocks, real estate investment trusts and individual bonds.

Roth IRAs are the last accounts that you should withdraw from as withdrawing from them at any time is penalty free as well as tax-free. Earnings are tax-free as well as long as you have had the account for at least 5 years and you’ve passed the age of 59 ½. The difference between a Roth IRA and a traditional IRA is that, when you  reach 70 ½, with a Roth IRA you don’t have to make minimum withdrawals. You can either leave the money there and also leave it to your heirs to allow them to make tax-free withdrawals as well.

Since withdrawals aren’t taxed from a Roth IRA, you can use them for a wide range and investments including aggressive stock funds since, because of the fact that you don’t have to make withdrawals, they will be more time for your investments to grow. Even better, there won’t be any taxes to pay on any profit you make.

If it seems like a silly game to play to have to keep as much of your hard earned money from getting taxed as possible, it is. It’s vital that you know how to play the game well however as, game or not, Uncle Sam will get his money unless you play it correctly.

If you have any questions about retirement plans, taxes or financial questions in general, please let us know and we’ll get back to you ASAP with advice, answers and solutions.

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Shout Out to My Peeps: September 8th

Published on September 8, 2013, by in Uncategorized.

Ok well this weeks carnival inclusions were slim…but thank you, thank you, thank you…to the carnival that saw fit to accept our entry :)

Carnival of MoneyPros hosted by Rather Be Shopping
 

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The Cost, and Risk, of Long Term Care

Published on August 24, 2013, by in Retirement.

When you’re working on your retirement savings, ask yourself this question; do you think that your nest-egg could take a half-million dollar hit? The fact is, even the most financially astute person could face a huge setback in their retirement plans if they suddenly were faced with a $500,000 bill and, unfortunately, that’s happening to more and more people every day as they get hit with the cost of Long Term Care (LTC).

The sad fact is that long-term care can quickly and easily decimate a lifetime’s worth of careful retirement planning. Even worse, it’s such a random happening that it’s extremely difficult to simulate the effects using any type of financial plan. The fact is, no matter how carefully you might have saved or how good your investment strategy or asset allocation plan, if you, your spouse or someone else in your family suddenly needs long-term care those plans could end up in the garbage.

Even worse is that, unless you’re already destitute and qualify for Medicaid, the federal government has no program (and isn’t planning one) that will take care of you. Nursing homes aren’t covered by your health insurance or Medicare and, once you’re released to any kind of long-term care facility by a hospital, your medical coverage stops paying. Even worse, after only a single day of hospitalization you may already need long-term care.

When you consider that the average cost for a semiprivate nursing home room is over $90,000 a year it’s easy to see how quickly a half million dollars can get used up and, even worse, many people who need long-term care need it for a longer period than five years. Now, truth be told, there’s also the home healthcare option as well as assisted living facilities that are going to be a bit less than this but, in most cases, the savings aren’t all that substantial.

Want some more bad news? The chance that you’re going to need long-term care during your lifetime are very high. Not only is there a 70% chance that you’ll need it once you hit 65, the startling fact is that 40% of people who need long-term care are actually between the ages of 18 and 64. For couples the odds are even worse and, even if neither of you needs long-term care, there are many people all over the country that are in serious debt because of the costs of paying for the long-term care of another family member.

What this basically leaves is two choices for the average consumer, either paying for long-term care insurance which is quite expensive or rolling the dice and not purchasing long-term care insurance at all.

The reason that long-term care is so ridiculously expensive is that, for insurance companies, the risk is incredibly high. People are living much longer today and so there’s a much greater chance that, at some point in their life, they’re going to need long-term care and need it for a long period of time. One telling sign here is that dozens of insurance carriers have gotten out of the long-term care market, a sure sign that providing the coverage is costing them more money than it’s worth.

Making matters more complicated is the fact that ‘triggering events’ for long-term care vary greatly, there are different waiting periods before coverage will start, coverage amounts vary widely and the length of time that a coverage will continue is also a big variable. There are multiple types of payment plans also, including those that require you to pay into the insurance for practically your entire adult life, pay until you reach the age of 65 or only pay for a period of 20 years, and each type of course costs a different amount.

Because of the exorbitant cost of LTC many people try to outfox the system and wait until just before they need it but, since insurance companies generally are run by people that are rather intelligent, in many cases this technique is unsuccessful. Most experts will tell you that purchasing and paying for LTC is best between the age of 40 and 60 years old and not try to beat the system.

The fact is, even though LTC is complex, expensive and relatively hard to get, unless you are incredibly wealthy or staggeringly poor, you’d best take a long, hard look at your options, make an informed decision and get long-term care insurance as soon as possible.

The good news is that if you limit your years of coverage, start paying for LTC insurance early and also accept a longer elimination period before your coverage starts, you’ll be able to keep your premiums at a tolerable level. Your best advice is to find an insurance agent with expertise in long-term care insurance and a company with extensive experience in the same. There are at least six excellent carriers that still remain in the market and, if you’re between 40 and 60, in good health and financially able, the chance of finding a LTC plan that fits your budget is a good one.

The take away from this is that, with a very high risk of needing long-term care and consequences that can be devastating to your retirement plans, most people should very carefully consider their LTC options so that they don’t find themselves facing retirement with their finances already in ruin.

If you need help or advice about long-term care insurance or have retirement planning questions, please let us know and we’ll do our best to provide you answers and options.

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Don’t Make this Costly Social Security Mistake

Published on August 17, 2013, by in Retirement.

It’s a story that’s played out hundreds of thousands of times every year. Retirees, eager to begin collecting their monthly Social Security check, start collecting it as soon as they possibly can after retiring. The problem; doing that can be a big mistake that’s extremely costly.

The simple fact is that, even though it’s possible to begin claiming Social Security at the age of 62, not claiming your checks for a few years longer can actually add up to thousands of dollars of extra income, money that will be lost if a person begins collecting right away at 62.

The reason is that a person won’t qualify for all of their earned benefits until they actually reach what’s called their ‘full retirement age’. That’s 66 years old for the average baby boomer and 67 years old for people who were born in 1960 or afterwards.

Checks claimed when a person is just 62 years old are actually 25% less than what they would get if they waited until they reached their full retirement age. Even more, if a person waits longer their annual benefits will increase by 8% for each and every year that they wait up until the time they reach the age of 70.

As an example let’s take Tom. Tom is currently earning $55,000 a year and, if he retires and start collecting Social Security at 62, he’ll receive approximately $15,400 per year. If Tom waits until he reaches 66 however, he would receive approximately $20,500 per year and, if he’s able to hold off until the age of 70, his yearly benefits would jump to $27,000 a year!

That’s a very large difference that can really add up over a person’s lifetime. For example, if Tom reaches the ripe old age of 95 his cumulative Social Security benefits (assuming that he started collecting at age 70) would be roughly $677,000. If, on the other hand, he opted to begin taking his benefits at age 62 he would only receive about $500,000, a difference of $277,000!

Of course waiting until you are 70 years old, or even 66, is not possible for everyone. Realistically, some people may just not live long enough to reap the benefits of waiting and others, due to either health issues, unemployment or other factors, may not be able to actually work and may also not have enough savings to get them through until the benefits increase. Simply put, some people may just not be able to maximize their Social Security benefits by waiting.

For married couples as well as divorced couples who were married for at least a period of 10 years, there are a number of other strategies that should be considered. The fact is, each partner is normally eligible, depending on their circumstances, 43 different kinds of benefits.

  1. Retired worker benefits. These are benefits that a person accrues during their own working years.
  2. Spousal benefits. This benefit entitles you to receive half of your spouse’s benefits while they are still alive.
  3. Survivor benefits. Once you reach your full retirement age these benefits entitle you to your deceased spouses full Social Security benefits.

A great way to increase their annual benefits would be for a couple to coordinate when and how they actually start collecting Social Security. In the majority of cases it makes sense for the spouse who earns less to file first, letting the spouse who earns more money weight as long as possible and accrue more benefits.

Using this strategy results in larger annual benefit checks as well as locking in a higher survivor benefit for the spouse who earns less. Some experts believe that the survivor benefit is important enough that even a spouse who is suffering from health problems should hold off on claiming their benefits until they are the higher earner.

Another strategy is called “file and suspend” and what this does is allow one spouse to receive their spousal benefits while the other spouse delays their Social Security benefits longer in order to get a bigger amount.

A number of online tools are available from the Social Security Administrations Retirement Planner as well as the AARP’s Social Security calculator and a Social Security Benefits Evaluator tool from T Rowe Price. It is highly suggested that you use one of these retirement planners so that you have a very clear idea of where you are and what you need to do to reach your retirement goals.

Retirement planning is something vitally important for all people and, if you have any questions or need help with solutions, please let us know and we’ll get back to you with answers and options ASAP.

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