Three Reasons Young People Should Care About Social Security

September 11th, 2013  |  Published in Social Security  |  Comments Off on Three Reasons Young People Should Care About Social Security

There are millions of high school and college students that are searching for jobs.  Whether a new worker is beginning the career of a lifetime or just earning some extra money for the school year to come, there is one question that is likely to be on each new worker’s mind when they see their first pay stub: Where’s the rest of my money?

Generally, employers are required to withhold Social Security and Medicare tax from a worker’s paycheck. The amounts you pay in Social Security and Medicare taxes are matched by your employer. Usually the money that is withheld is referred to as “Social Security taxes” on the employee’s payroll statement. Sometimes the deduction is labeled as “FICA taxes,” which stands for Federal Insurance Contributions Act. This post will tell you how that money is being used, and what’s in it for you.

The taxes paid now translate to a lifetime of protection, when you eventually retire or if you become disabled. In the event that you die young, your dependent children and spouse may be able to receive survivors benefits based on your work. Today you probably have family members — grandparents, for example — who already enjoy Social Security benefits that your Social Security taxes help provide.

You may be a long way from retirement now, so you may find it hard to appreciate the value of benefits that could be 40 or 50 years away. But consider that your Social Security taxes could pay off sooner than you think. Social Security provides valuable disability benefits — and studies show that a 20-year-old has about a three in 10 chance of becoming disabled sometime before reaching retirement age.

Another bit of helpful advice for young workers: be wary if you’re offered a job “under the table” or “off the books.” If you work for any employer who pays you only in cash, understand that you’re likely not getting Social Security credit for the work you’re doing.

If you want to find out more about Social Security then you should go to the source.  The Social Security Administration has lots of helpful information available at

Ruling Affects Retirement Benefits for Married Gay Couples

July 1st, 2013  |  Published in Retirement, Social Security  |  Comments Off on Ruling Affects Retirement Benefits for Married Gay Couples

Married gay couples should take a closer look at their Social Security benefits and their Individual Retirement Accounts. Last Wednesday, the Supreme Court ruled the Defense of Marriage act unconstitutional. Now that the Act denying federal benefits to legally married same-sex couples has been struck down the retirement benefits of married same-sex couples will be affected.

The Social Security benefits of married gay couples will be affected due to the ruling. Surviving spouses should now be able to claim the Social Security benefits of their deceased spouse. In general, married gay couples have the same options to collect their Social Security benefits in the same way heterosexual couples do.

Another change is that if an IRA is rolled over from a deceased same-sex spouse to the surviving gay spouse the individual retirement account would not be taxed. Pensions could also be left to a surviving same-sex spouse. These are just a couple of the changes that will affect same-sex couple financially. Changes affecting retirement plans are just a small part of the changes that will be made overall. Same-sex married couples should now receive the same tax treatment as heterosexual married couples at the federal level. It is not yet clear when the changes will actually be put into effect but couples should be on the lookout for an announcement of when the changes go into effect so they can make changes to their retirement plans.

If you want a more detailed breakdown of the possible changes due to the court ruling check out this summary article at Lambda Legal.

The 7 Deadly Retirement Sins

June 25th, 2013  |  Published in Retirement  |  1 Comment

I was provided with a free copy of the book, The 7 Deadly Retirement Sins to review. Since the book is about retirement and this a blog about retirement the book seemed like a good fit and after reading the book I can say it will be of interest to many of the readers of this blog.

Many financial books, especially ones about retirement, can be dry and difficult to read. The author avoids that by making the book a story about a young journalist who is interviewing retirees about the mistakes they made in retirement. Looking at these mistakes, one can see which of the seven deadly retirement sins caused the retirees problems in their retirement.

I won’t give away all of the retirement sins, but some of them are retiring too early or living above your means, improper investment allocation, and collecting Social Security at the wrong time. The author, Ryan Zacharczyk, is a certified financial planner and that experience is reflected in his investment advice. The story takes up the first two thirds of the book and the last third is financial advice from the author based on the stories shared in the first part of the book. This method makes retirement planning advice more interesting than it normally would be. This book would be a good pick for those who have trouble staying interested in more typical retirement books.

Two Free Retirement Books

June 3rd, 2013  |  Published in General  |  2 Comments

Mike Piper of Oblivious Investor, is offering the Kindle version of his book, Can I Retire? , for free until Wednesday. If you want the paper edition the cost will be $5. This is a new edition of the book. He states that if you already own the book you don’t really need to get the new edition. But if you can get the new one for free it doesn’t hurt anything to update.

The Kindle version, of the book, Retiring Sooner: How to Accelerate Your Financial Independence, is also free until Wednesday. The paper edition is on sale for $5 until Wednesday. The book is by Darrow Kirkpatrick of I haven’t read his blog or book yet so I’m looking forward to reading this.

My “Stretch IRA” post was included in this week’s Carnival of Financial Independence at Reach Financial Independence.

Take Advantage of a Stretch IRA

May 22nd, 2013  |  Published in IRA  |  8 Comments

When you go to open an IRA account you will probably find that there are several variations. One variation of an individual retirement account (IRA) is a stretch IRA.  This concept is used to pass the proceeds from an IRA to younger generations rather than to your spouse or peers.   IRA owners must begin receiving distributions by the age of 70 and ½.  The distributions are based on the life expectancy of the owner.  Older owners will have a greater required minimum distribution (RMD) while younger owners will have a much smaller RMD.

Comparing the RMD of a retiree who is 73 years old, versus the grandchild of an individual with a stretch IRA, you will see how the money saved in the original IRA could potentially last two or more lifetimes.  A good example is looking at how a $500,000 IRA would be distributed.  The original owner would be required to take a minimum distribution of a little over $20,000.  If this same IRA was inherited by a child, and that child was 55 years old, their minimum distribution would be around $17,000.  If instead of a child, it was a 28 year old grandchild that inherited the IRA, they would have to take a minimum distribution of approximately $9000.  If the grandchild was only 6 years old, that distribution would be around $7000 per year.

The amount of the distributions is based on the IRS Single Life Expectancy Table.  Potentially, depending on the amount accumulated in the IRA and the lifespan of the beneficiaries, the stretch IRA could span several generations.  If the stretch IRA is a traditional IRA or a Roth IRA both will benefit from tax deferred growth even if the distributions are being directed to a beneficiary.  Traditional IRA distributions will be taxed as ordinary income and Roth distributions are usually tax free.

This product has the capacity of passing on supplemental income that grows tax deferred to future generations, stretching the IRA’s proceeds significantly.  This is especially true if the rate of growth for the IRA is consistent year after year and decade after decade.  It also opens up a new means of passing on one’s wealth without the dealing with the burdensome process of probate and the estate taxes associated with probate.

U.S Retirement System a Success

May 16th, 2013  |  Published in Retirement  |  5 Comments

You have probably read a lot of posts and articles lately detailing how the U.S. retirement system is failing retirees.  The Frontline documentary, “The Retirement Gamble“, detailed how high 401k fees are making it difficult for many Americans to save enough for retirement.  In the wake of the article there were many other posts and articles stating how difficult it was for workers to save enough for retirement in the U.S.  I do believe that 401ks have mostly been a failure but a recent report from the Investment Company Institute (ICI) states that the U.S retirement system is a success.

ICI states that their research indicates that the U.S retirement system has successfully provided adequate retirement sources to generations of Americans.  They also state that more recent generations of retirees have been better off than retirees in previous generations.  As an example they state that “the poverty rate among people aged 65 or older has declined from nearly 30 percent in 1966 to 9 percent in 2011.”  Maybe things are not as bad as they seem.

The research does also show that Social Security provides a substantial portion of most retirees’ retirement resources and provides the primary retirement resources for workers with low lifetime earnings.  Although the system may be successful so far it seems that any reductions to Social Security could undermine the success of the retirement system.  Also the ICI indicates that the shift from defined benefit plans to defined contribution plans is unlikely to reduce retirement preparedness.  I am not entirely sure of that.

Even if the U.S. retirement system is  currently a success there are improvements that can be made.  And the uncertainty of future Social Security benefits and the shift from pensions to 401ks could certainly have an impact on whether the retirement system continues to be successful.  What do you think?  Is the U.S. retirement successful?  Will it be successful in the future?  What changes, if any, should be made?

No Win No Fee Claims: What Are They Really?

May 10th, 2013  |  Published in Guest Post  |  Comments Off on No Win No Fee Claims: What Are They Really?

In recent years you may have heard the term ‘no win, no fee’ mentioned a lot in the newspapers and on television but are you 100% you know what it means? There is a lot of confusion surrounding the term, a lot of which has led to misunderstandings and people losing out on money they were entitled to.

Doesn’t mean no cost

The first thing you need to understand is that it does not mean no win, no cost. This is something that many people have had trouble understanding and the source of much confusion. You need to go into any case with your eyes open and in full possession of all the facts.

At its most basic, no win no fee is an easy way of referring to a Conditional Fee Agreement (CFA). These were introduced in 1995 when the legal aid system stopped applying to personal injury cases. Without CFAs, personal injury cases would only have been available to those who could afford to make them. That essentially meant that better off people could receive compensation when they had been affected but the rest of us had little choice.

Thanks to no win no fee, justice has been done for thousands who otherwise would have been unfairly punished by the system. It has levelled the playing field and given the little guy a voice.

A no win no fee or CFA is an agreement made between client and solicitor that means if the client does not win, they are not charged. If you win, the solicitor earns his fee as usual but it comes from the opposing party. You keep the compensation awarded, the solicitor receives payment from the insurance company or other party involved.

If you lose you may be liable to pay these costs but your solicitor should have arranged an insurance policy to cover these costs. You need to be aware of this before you start any case. This ‘After Event’ insurance covers you against a loss.

It is not in any solicitor’s interest to take you case if they don’t think you can win. If they do not think there is a case to answer they won’t give you a CFA in the first instance. However, this does not mean you shouldn’t make yourself aware of the facts first.

If you feel you do have a personal injury case, then why not contact a specialist in the field like for more information?

Make Your Own Retirement Target Date Fund

May 7th, 2013  |  Published in Investing  |  Comments Off on Make Your Own Retirement Target Date Fund

You can create your own version of a target date retirement fund with Target Date motifs from Motif Investing.

Target Date motifs are designed to provide you with a disciplined and diversified retirement portfolio that can fit your individual needs. Choose from eight motifs intended to keep your retirement investments allocated properly.

Value. Using ETFs with low expense ratios, Target Date motifs seek to provide steady returns at minimal cost.
Discipline. Target date strategies can provide investors with potential for gains from equities and other high-risk securities, while mitigating potential losses from over-exposure to a single asset class.
Rebalancing. You can choose to follow an annual rebalancing of Target Date motifs to help keep your portfolio moving toward retirement.
Flexibility. As with other motifs, you can easily customize your motif to best suit your own needs.

Detailed Asset Allocation
A key feature of Target Date motifs is the transparency into the security-level asset allocation instead of merely at the asset-class level. This detailed level of allocation allows increased control of the portfolio’s risk profile at every age. Target Date motifs allocate assets across the following securities:

1. Growth-oriented assets

  • US equities
  • International equities

2. Fixed income assets

  • US bonds
  • International bonds
  • Inflation-linked bonds (TIPS)

3. Precious metals

4. T-bills

Beyond Equities
Another key feature of Target Date motifs is the allocation to precious metals such as gold. This exposure to precious metals seeks to provide diversification and a hedge against inflation risk in the face of unprecedented levels of quantitative easing.

From Early Years to Retirement
In the early years, growth-oriented and risky assets make up as much as 75% of the portfolio with the balance allocated to conservative, fixed-income assets.

As you move toward retirement, the allocation to growth assets is gradually reduced in favor of low-risk and conservative assets such as bond ETFs and short-term T-bills. At the target date, growth-oriented assets make up around 25% of the portfolio while fixed-income assets and short-term treasury bills represent 60% and 15%, respectively.

Customers will be informed of the changing allocations and it is up to the customer’s discretion to follow motif rebalances. Just click on the affiliate link below to sign up.


What Legal Protection do you Have if you can’t Care for Yourself?

May 2nd, 2013  |  Published in Retirement  |  3 Comments

Making a decision regarding what’s right for your own well being can be a difficult task at the best of times, but the thought of being unable to make that decision owing to mental or physical incapacity is an altogether more worrying state of affairs.

If you are unable to care for yourself, there are a number of legally protective steps that you can take as a means of ensuring the correct decisions are made on your behalf, should you not be capable.

 Advanced directives

The British government specifies that every adult who is deemed mentally capable has the right to refuse or accept whatever medical treatment is prescribed by a healthcare professional. So there exists an advanced directive or living will: a set of instructions that you are able to dictate which describes your future wishes with regards to medical care.

If it is deemed that you ‘lack capacity’,  as defined by the 2005 Mental Capacity Act, your advanced directive – made when you are deemed mentally capable – takes precedence over any decisions that you make in your mentally deteriorated state. Advanced directives are invoked by a designated healthcare proxy, which you will appoint, who plays a role similar to that of the executor of a will.

Advanced directives allow you to make decisions regarding a wide range of treatment possibilities, and are increasingly being used by those suffering from terminal illnesses where one’s mental faculties are known to deteriorate.

The decisions covered by an advanced directive relate to: the use of intravenous fluids, cardiopulmonary resuscitation, life-saving treatments where brain functionality is inherently impaired (such as in the case of a stroke) and other specific procedures, such as blood transfusions.

 Untimely death

 If you are suffering from a long-term illness, or potentially fatal condition, making a will is an essential undertaking.

A will is the only legally binding means you have of ensuring that the beneficiaries of your estate are those who you intended them to be. A well-written will, made up by a reputable solicitor, such as those found at Co-operative Legal Services, enables you to give one final gift to your loved ones, at an extremely difficult time.

Failure to make a will, however, means that your estate will become subject to the rules of intestacy.

The rules of intestacy

 The rules of intestacy are very clear and well documented, strictly laying out the order of priority in which your family will inherit your estate. While this may be acceptable to some, the inherent, traditionalist nature of the rules means that cohabitants and friends have no legal claim to your estate.

If you wish the beneficiaries of your estate to be a friend, girlfriend, boyfriend, or even a charity, making a will is the only way of legally ensuring that your wishes are adhered to.

 Don’t leave it to chance

 If you’re currently in a state of ill-health, or your health is slowly deteriorating, the only means of ensuring that your desires are carried out is to contact a professional body, such as Co-operative Legal Services, to help you draft an advanced directive and/or will.

With these articles prepared, you can rest assured that you are legally protected if you reach a stage where you can’t care for yourself.