Twila Van Leer

Wealth Gap Lasts Into Retirement

August 15, 2014 by Twila Van Leer

It just seems to make sense that if you keep plugging along at a your job, by the time you retire you should have come closer to the level of wealth some others enjoy.

Not so, experts in the field say. Thousands of Americans struggle to set aside enough money to enjoy retirement, particularly those who are self-employed. They are having little success at building an adequate post-employment reserve.

The challenge is so overwhelming that many refuse even to look it square in the eye, which becomes a serious part of the problem. Pensions that used to provide the safety net for many workers are becoming rarer in the private sector and workers at the low end of the totem pole often have no access to such programs.

All of this contributes to the widening gap between the average worker and the wealthy. With more than 70 million Baby Boomers preparing to leave active employment and settle into retirement, that is not good news. The net result may be government services stretched more thinly and more elderly people staying in the working ranks for longer, increasing the challenges for younger workers looking for jobs.

Who Fares The Best In Retirement?

Predictably, next to the really wealthy, those who fare best in the retirement picture are highly educated couples. They are likely to have more resources such as 401k plans, savings and home equity that are a boon when their jobs end. Those with less education, health issues and/or lower income and fewer resources can only watch in frustration as their prospects for a financially secure retirement fade into the distance.

The old saying that the rich get richer while the poor get poorer is literally true in today’s economy. Incomes for the top 1 percent of earners rose 31 percent from 2009 to 2012, according to an economist at the University of California/Berkeley. For the remaining 99 percent, the rise averaged 0.4 percent.

In households with annual income under $25,000, nine of 10 had savings under $10,000, according to the Employment Benefit Research Institute. For households in which earnings topped six figures, 42 percent had savings of at least $250,000, the institute reported. Five years ago, that percentage was 34 percent, another indication that the retirement prospects for those in the low-earnings categories are making no headway toward any kind of parity.

One-Minute Guide To Debt-Reduction

July 24, 2014 by Twila Van Leer

Learn the differences between good debt and bad debt.

Sounds like a dream. No more debt. No sleepless nights trying to figure out how to scale the mountain of credit card debt. No painful personal contacts with collectors. Financial freedom!

The advice takes just a minute. Here we go!

Resolve to spend less than you make. No other financial wisdom has ever been better than that. Make it a habit. Embed in your mind the truism that you can never get out of debt by going into more debt.

Good Debt vs Bad Debt

Learn to distinguish between bad debt and OK debt. Don’t settle for any debt that requires more than 10 percent interest, and watch for tax advantages. Home mortgages and college debt that increase your overall worth over time are among OK debts. Auto loans are marginal, since they don’t appreciate in value. Most everything else is bad debt, such as credit cards or high interest “quick cash” loans. Avoid them like the plague.

When choosing credit cards, look for the lowest annual interest rate. Use cards for emergencies only. Get rid of cards that are not essential and simply pose a temptation to buy what you don’t really need.

Line up your bad debt accounts in a row. Add up the minimum payments and pledge to pay the minimum on each, plus whatever you can must. Choose the account with the highest interest and work on it first, and so on down the line. Resist the temptation to add to any of these accounts.

Request that the issuing institution lower the interest on your cards. Tell them you are aware that there are cards available at lower rates, but that you want to stay a loyal customer. The response may make you uncomfortable, but stick to your guns. The institutions depend on their customers to make their profit, remember? If you have any bill on which interest tops 14 percent, try to get it down to at least 11 percent.

Be aggressive in paying down debt, but don’t put yourself in a bind with other obligations.

Look for ideas (and sympathy) through discussion boards such as consumer credit/credit cards, provided by The Motley Fool. The company, through its credit center, also offers workable ways to get out of debt.

Past Idocy

When your bad debt can be filed under “past idiocy,” make good use of the money you have saved by saving it.

Commenting on Motley Fools good advice, a woman said that she and her husband had almost maxed our their 401k and planned to use tax income and savings over the next year to pay off debt. Then life happened, with two hospital admissions, operations, hail storm damage and co-pays. Then the husband was laid off. “We spent every penny paying on debt on one credit card and a car. Then the credit card issuer, pursuant to the state laws where they lived, raised their maximum interest to 31 percent. Help! “We did not hesitate. We took our money out of our IRA and paid off every penny we owed. You wouldn’t believe how much free money we now have. We still have insurances, utilities, groceries and gas, but we have enough money that we don’t have to use the credit card. We kept one card, which we pay off monthly. (Our experience shows you should) pay off the credit card first, if you can.”

That’s good advice. And if it took more than a minute, you can count it time well spent.

Investment Advice? It’s As Old As The Hills

July 17, 2014 by Twila Van Leer

It probably began right after the Garden of Eden deal fell through. Swapping success stories has been part of the human condition since there were two entrepreneurs to swap tales. And some very good advice has survived for generations.

Forbes Magazine winnowed down the list to share with readers. Their pool of gurus includes five billionaires, a miser, a Nobel laureate, a founding father and assorted and sundry people whose names rise to the top whenever success is the topic.

Examples include:

Warren Buffet, whose $65 billion empire was built on buying businesses that he was certain were worth more than the sellers envisioned: “Whether socks or stocks, I like buying quality merchandise when it is marked down.”

Sir John Templeton, founder of Templeton Funds, who made a killing by defying the conventional wisdom about the stock market, buying when others were selling: “If you buy the same securities everyone else is buying, you will have the same results as everyone else. . . Buy at the point of maximum pessimism, sell at the point of maximum optimism.”

Nathan Mayer Rothschild, 1776-1836, founder of N. M. Rothschild & Sons. “Information is money.” Thanks to his extensive network of carrier pigeons, and the careful placing of his sons in strategic European cities, Rothschild knew that England had defeated France in the Battle of Waterloo before anyone else in London. As other traders on the stock exchange braced for a British loss, he capitalized on his early information to build a fortune.

Peter Lynch, manager, Fidelity Magellan Fund. “Buy what you know.” He applied his knowledge of wise money management to generate an annual return of 29 percent. His secret to profitable investing: Don’t buy Twitter or Amazon, but do buy those suggested by A.All .com and Validea.com, NetApp, Barrett Business Services, Honda, Publis and Alliance Fiber Optic.

Alexander Hamilton, first U.S. Secretary of the Treasury, who earned the nickname Little Lion. His bestseller: the $10 bill. During the country’s formative years, he tirelessly advocated for responsible federal finances. His lesson: Don’t buy securities in developing countries with dodgy rulers. “A nation which can prefer disgrace to danger is prepared for a master and deserves one.”

David Tepper, founder Appaloosa Management. During the panic of early 2009, he bet heavily on Bank of America, Citigroup and AIG. Quit Goldman Sachs in 1992 to build his own hedge fund. Reputation for clearheaded moves in environments of fear and misinformation. His quote: “I am the animal at the head of the pack. I either get eaten or I get the good grass.” He advises paying careful heed to central bankers and fiscal policymakers.

Hetty Green, 1834-1916: Description, miser; nicknamed “The Witch of Wall Street.” She inherited $5 million at age 30 and had multiplied it into $100 million by the time she died in 1916 by ferreting out investments that would earn her 6 percent annually, doubling her fortune every 12 years. The richest woman in the United States, she saved pennies by refusing to use hot water, wash her clothes or provide her son with decent medical care. “All you have to do is buy cheap and sell dear, act with thrift and shrewdness and be persistent.”

Make A Million At Age 70

July 11, 2014 by Twila Van Leer

The 70s Could Be Your Golden Years In More Ways Than One

So you’ve retired. The end of the earning road, right? No way, say financial experts who have studied the issue. More than one fortune was built by people who had passed the 70-year milestone. Later-life entrepreneurship actually has some benefits that might not have worked earlier, they say.

A Bankrate.com article by Chris Kissell suggests that, with a little effort and sacrifice, there is money to be made by people who have some experience behind them. No need to give up that dream of spending the time you have left in comfort.

The suggestions advanced by the experts include:

Invest Aggressively

Making small investments while you are in your prime working years may give you a nice little nest egg. But if that opportunity passed you by, it isn’t too late. Invest as much as you possibly can every month and hope for good results. According to James Twining of Financial Plan in Bellingham, Wash., a 70-year-old retiree who could invest $2,393 per month, at an annually compounded rate of 10 percent a year could end up with a million dollars by age 85. The equity markets have been returning an average of 10 percent per year since 1926, he notes. He warns against the temptation to gamble on high-stakes stocks, a strategy that actually can defeat your success ratio.

Start a Business

Creating your own business is one of the historically successful ways to increase your worth. Older first-timers actually have some advantages over younger entrepreneurs, says William Carrington, founder of Arrington Financial Planning in Arlington, Va. He is convinced it is the best route to financial security. Those in the retiree camp have a lifetime of experience on which to draw and have generally developed expertise in at least one line of endeavor. His advice is to explore that expertise and see how it could translate into a viable company. In the process, it may be possible to spread the wealth by hiring other older (often that translates to more reliable) retirees, many of whom are willing to work for less than young folk.

Delay Social Security

The longer you wait to collect Social Security, the larger the monthly payment. It is one of the most stable sources of income for the elderly. According to Barry Korb, president of Lighthouse Financial Planning in Potomac, Md., a couple who hold off on collecting their SS until age 70 could end up with a comfortable amount — up to a million dollars— that would be a great investment fund if carefully handled. He posits that a couple, both age 66 and entitled to maximum SS payments, could realize a 32 percent increase in their payments, about $845 per month each or $1,690 for the two. Invested, say, in a Standard & Poor’s 500 index fund, which averages a 7.84 percent return after taxes over the years, they would be millionaires by the time they were 92. That doesn’t take into account SS increases, which would add to the total.

Buy Real Estate

This avenue to wealth requires significant risk, but is a proved method for getting rich quickly. The best return — and the greatest risk — comes from using leverage. For instance, if you purchased a $500,000 property with a 20 percent down payment, and if there is a 5 percent appreciation in the first year, the increase for you is $25,000. That’s good, but again, the experts point to the risk and advise caution.

Forget About Making a Million

Aside from the bragging rights in having accomplished what for many is a lifelong goal, what’s the point? Given the inevitability of decline and death, is it worth the effort? For some, it would be, especially if their objective is focused on the well-being of dependents. However, people like Twining who deal with financial issues for a living, think a drive to accumulate huge amounts of money in the twilight years is wasted effort. “Get-rich schemes very rarely work,” he says. “Somebody who is 70 or older would be foolish to give it a try.”

In other words, it’s possible, but . . .

Women Working More Years

June 16, 2014 by Twila Van Leer

"Surprising news that Baby Boomers will be happier after 60 if they continue to work." - Zestnow.com — “Surprising news that Baby Boomers will be happier after 60 if they continue to work.” – Zestnow.com

Women are working more years than they used to before retiring, and that fact will change the overall retirement picture in the United States, according to Age Wave, a company that focuses on issues involving the elderly.

Over the past 20 years, the number of older women in the workforce has increased significantly. In 1992, 23 percent of the over-55 working group were women; by 2012, the figure had risen to 35 percent. By 2022, the number will have reached 82 percent, Age Wave predicts.

Finances push the trend to a degree. Women have traditionally worked for less than their male counterparts and have less in their retirement savings. But enjoyment of their work also is a factor. A survey conducted by the company in partnership with Merrill Lynch Global Wealth Management found that social opportunity, mental stimulation and the physical benefits of working topped the list of reasons for prolonging employment. Only 31percent of the respondents put financial need in the top spot. With life expectancy at 80 to 90 for many Americans, the thought may be that spending 20 to 30 years in full retirement is not an attractive alternative. There is more to life than 50 hours a week in front of the tube, as reported in a recent survey of the 65-plus population.

Baby boomer women are four times more likely to be working into their sixties than their own mothers were 30 years ago, as financial stress puts retirement out of reach. ~ www.news.com/au

Women who are part of the “boomer generation” are different, experts say. They are more adaptable and more politically savvy. Some of them have taken an employment break for rearing families and they’re ready to work outside the home again. They have tended, too, to marry men closer to themselves in age, and that affects retirement, since most couples retire within a year of each other.

The longer work term for women has implications for employers, said April Wu, a research economist in Boston College’s Center for Retirement Research. The studies show that many older women will be found in the health care arena, as nurses, physical therapists, occupational therapy and patient advocacy. They also find niches in the nonprofit world.

The feminine involvement in how retirement money is spent is likely to grow, says Kerry Hannon, author of “Great Jobs for Everyone 50+”Finding Work That Keeps You Happy and Healthy.” They will likely have a larger role in the distribution of $59 trillion in wealth that will be distributed to heirs, charities and taxes. Although men currently are 58 percent more likely to be the primary contact with a financial advisor, women are gaining.

Hirers often see advantages of hiring mature women over the hoodie-wearing younger job applicants they see, Hannon said. Many of the older women also have gained the know-how and the confidence to strike out on their own.

Changes will be gradual, but unless something short-circuits the current trends, you can expect to see more older women in the workforce.