Still Clickin

Personal Financial Planners offer one answer to the nagging question, “What do I do with my money?” Like any group of service providers, they come in a variety of flavors. They segment themselves by –

• The amount of money per account they accept under their management,
• The range of services they provide to those accounts,
• Whether they are independent or company/franchise operators,
• How they charge for their services, and
• The professional organizations in which they participate (are certified).

As in any services sector, planners also segment themselves into poor, average, good, better, and best. As you might expect, that classification can be quite difficult to discern.

By and large, Personal Financial Planning was a spin off of the insurance industry. Good insurance brokers have always needed to understand their client’s financial picture, and adding financial products to their product portfolio was a natural. Then some stock brokers saw the opportunity and jumped aboard. Today, it has become an established, self-regulated sector.

1.  To begin your search for a planner, start with the organizations, i.e.

• Financial Planning Association (FPA),
• The National Association of Personal Financial Advisors (NAPFA),
• Certified Financial Planner (CFP), and
• National Association of Insurance and Financial Advisors (NAIFA).

2.  Visit the web sites of a few planners listed in your area. You will find –

• Nearly all listings will specify the financial tiers, e.g. from $100,000 to $5million, for which they will accept clients.
• Many planners will specify certain financial sectors in which they specialize as well as the range of services they provide.
• Whether the planner is part of an independent firm or a larger company/franchise is often not highlighted, but the information can be researched or requested.
• The NAPFA members have fee-based services while the FPA members typically offer free initial consultations with a combination of fee and commission-based services thereafter.
• CFA members have passed certain tests to become certified. They will appear throughout the listings of the other organization.
• NAIFA members are closely wedded to the insurance industry and often stress annuities as their primary financial offering.

3.  Ask your friends and neighbors. Although people often don’t discuss it, most will readily give you the name of their planner if they have one. Whether they will give you an accurate evaluation of their performance is another question entirely. If you target your inquiries toward people whose judgment you trust, however, you might find a name that keeps popping up.

4.  In any case, interview a few planners to discover how comfortable you are with them. Ideally, this relationship should last for a few years. You have no need to pay for a personality clash no matter what rate of return they profess to achieve.

Once you have taken all of these steps, you should have discovered someone with a few more tools, interest, and motivation to achieve better financial results than you could effect on your own. In this crazy market, that can’t hurt.

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Human beings, as social creatures, are bound to live in community. But living in community brings with it two intrinsic elements - regulations and taxes.

In the history of mankind, you have to assume that regulations came before taxes. The first regulations likely involved the proper sharing of the food from the hunt. Time and work contributions to the community didn’t get replaced by taxes until some sort of currency was established. However, the lapse of time between the two couldn’t have been more than a few moments. No one with any power would skip an opportunity like that.

Eons later, we are still involved with community and still arguing about regulations and taxes. Conservatives want less sharing and stress the rights of the individual. Liberals stress the good of the community, and are more willing to accept regulations and taxes to enhance it. Obviously, both viewpoints have some validity. It is a question of balance.

Right now, the issue of Social Security is moving into the crosshairs of our Federal Government. Where is the proper balance?

When Social Security started out, it was an insurance plan. Our payroll deductions that were made for Social Security were insurance premiums. Like any insurance program, the money was to be invested and the benefits paid out of from the fruits of those investments. Those funds grew, performed, and began to look to tempting to ignore. Before long, Congress decided to “utilize” these funds and ignore the insurance concept. As a consequence, the program is under-funded today.

Now, what do we do? How about we allow senior citizens to work? Give them the choice.

• Possibly it is wrong to ask this question at this time when so many younger people are out of work, but many senior citizens would love the opportunity. But we live in a youth-oriented society, and in the workplace, senior citizens are more often tolerated than valued.
• Provide sliding scale tax incentives to companies that hire senior citizens. For example, one credit/hire for jobs that pay in the 20’s, two for jobs that pay in the 30’s, three for jobs that pay in the 40’s, etc. This would counter the earnings barrier that seniors face. As a professional who works to find jobs for seniors recently said, “The best opportunities that I can find for seniors in major cities pay $12/hour. I have people with PhD’s working for that.”
• Our current tax code already returns Social Security payments for anyone with some earnings. Working seniors not only recognize, but willingly accept that. Effectively, because of the opportunity to work, they are paying their own way.
• Promote job sharing so that those that didn’t want or need to work fulltime could share their responsibilities flexibly with another person. This arrangement could be very beneficial to organizations that have variable business demands.

Congress seems afraid to reduce Social Security, and the way things stand now, they should. However, if given an incentive, some of the younger members of our society might be courageous enough to stop calling us “Honey” or “Dear” and start treating us more as equals. They might be surprised that we have contributions to make and that experience really does have some value.

Today, Social Security is nothing more than guilt money. It allows Congress to assume the posture that the “senior issue” has not only been dealt with, but generously. However, if you ask anyone that has to live on it, they will laugh in your face. For many of these people, the opportunity for a job would be a gift.

Some sites for further thoughts are -

• There are a few opportunities, e.g. Experience Works
• A Canadian perspective, Senior Years
• Volunteering is the current option, e.g. Senior Corps

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It is almost “Medicare review time” (November 15th – December 31st), that time of year when it is possible to adjust your enrollments in either Part C or Part D plans. You may be asking, “Is this the year I should choose Medicare Advantage (Part C), or should I enroll (or continue) in traditional Medicare (Parts A and B)?”

Medicare Advantage is the name given to the private insurance programs that were started with the idea of privatizing all of Medicare. There are some similarities and some bold differences between traditional Medicare and the Advantage plans. Do these differences make an Advantage plan the right choice for you?

Only you can decide, but here are some things for you to consider.

*Location – As private insurance plans, Advantage plans are controlled at the state level. What holds true in Connecticut doesn’t necessarily apply in Colorado. You have to look at the details for your individual state. In addition, you have to consider your distance to the physical locations where the services are provided. Go to the Medicare site to learn about the plans where you live.

*Structure – Traditional Medicare is a fee-for-service plan run by the government and accepted nearly everywhere. There is no “gatekeeper” aspect to traditional Medicare. You can go to any doctor that is accepting new Medicare patients.

Medicare Advantage private plans can take many forms, e.g. – HMO’s where you choose from a specific list of doctors and hospitals, PPO’s which allow use of some out-of-network providers at a higher cost, PFFS’s which will allow any doctor or hospital that will accept their terms, and SNP’s which limit membership to people with special needs. Typically, all care requires pre-approval by a physician in the plan who acts as its gatekeeper.

*Coverage – Traditional Medicare covers most specific “medically necessary” treatments. In addition, the 2010 health legislation finally added a number of preventative health measures as well.

The Medicare Advantage plans must provide coverage for the same treatments provided by traditional Medicare. However, they do not have to cover every treatment in the same way. For example, they may pay less for skilled nursing care but offer more coverage for preventative care, prescription drug coverage, and vision and dental as well.

*Costs – Here is where it gets interesting. That same tag line form the Watergate era applies here, “Follow the Money.”

For traditional Medicare, most people have already earned the Part A coverage (hospitals) and there is no additional charge. There is an additional monthly charge for Part B (doctors). Although this official charge for 2011 will be $115.40, most enrolled seniors will only pay the 2008 rate of $96.40 since the rate is locked whenever there is no cost-of-living increase for Social Security. You should also look at the costs of Medigap policies and the Medicare Drug plan (Part D) when comparing traditional Medicare to an Advantage plan that includes these benefits.

For Medicare Advantage, the rates (and their coverages) vary by plan. Because they are private programs, these plans can charge what they want. They can set their own rates, deductibles, and co-pays. They can also change these fees each year. If the plan becomes unprofitable, these plans can simply go out of business.

In addition to the premiums you will pay for an Advantage plan, traditional Medicare also pays these private firms a set amount each month per person enrolled to compensate for the coverage they provide. To help launch these programs, this amount paid has exceeded the amount paid for a person enrolled in the traditional Medicare. It was about $1,100 last year. That discrepancy is scheduled to be phased out over the next few years, so there is some concern that these plans will either raise their rates or drop extra coverages. Reading this article will provide you with some interesting insights on these developments.

*Performance – As you would expect, the performance level of these various plans can vary by location. Ask people you trust around your neighborhood to discover if there are any organizations that it may be wise to avoid. The Wikipedia article on Medicare gives a good description of the big picture and some links that may help your search for performance information. Its section on Medicare Advantage plans is especially helpful.

*Conclusions – Generally, the few rules of thumb you can follow are -

• If you live in a rural area, stick with Traditional Medicare Parts A & B. It is likely that Part C will cost you too much time and gas money.
• If you are in reasonably good health and live in an urban area, you may be able to save some money with a Medicare Advantage plan, especially one with an HMO structure that is well managed.
• If you health is deteriorating and you are facing major costs, you are probably safer with Traditional Medicare.

If you want to learn more details on what happens during this annual change period, visit this site for more details.

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What Will You Do?

The smartest question I ever heard about planning for retirement was not, “How do you plan your finances?” Instead it was “What are you going to do?” Most of us don’t appreciate how much structure and purpose the daily grind of a job adds to our lives. It is easy to focus more upon the frustrations rather than the rewards. But work adds challenges, rewards, and interest to our everyday experience.

What happens when that is gone?

There are some people who truly delight at chasing a little white spheroid around a golf course, and plan to do it everyday of their retirement. Others can be just as passionate about the game of Bridge. Still others plan to exhaust the cruise circuit.

But some people are still fixated upon the idea of making a difference. This group of people are unsatisfied, or feel just plain guilty, unless they are spending a good portion of their time engaged in some activity that ‘Makes a Difference’ on this planet. Some examples available in most locales include –

• tutoring at local schools,
• providing support services at hospitals,
• fund-raising for charities,
• driving the local ‘Senior Van’, or
• volunteering at a community organization.

Unfortunately, none of these pursuits produce a shred of revenue, which has become a more urgent requirement for those with 401k’s and savings devastated by our current economy. Is it possible to ‘Make a Difference’ and ‘Make a Buck’ at one and the same time?

The answer is ‘Yes’. It is called the non-profit sector of the economy. Jobs are available, but all at lower pay scales than they would be in the for-profit business sector. As noted in this article, Volunteer Your Way to a Job, the best way to approach the sector is to first volunteer. Once you are inside the organization and make yourself known, you will be in a much better position to land a paying job doing work that ‘Makes a Difference’.

Some helpful sites for volunteering are -

• Learning and Volunteering
• Volunteer Opportunities
• Volunteering Approaches
• Volunteer Match

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When you reach age 65, you find that traditional Medicare offers very extensive medical coverage . . . up to a point.  Medigap plans provide coverage for those times when you go beyond those points.

Medigap plans are supplements to the traditional Medicare Parts A & B.  These plans offer coverage of the medical charges that are not covered by Parts A & B.  Although the companies involved vary state by state, the coverage provided by plans themselves, listed A through N, are fixed by the federal government.  (Note: Plans E, H, I and J are no longer being sold, but they can be retained by those that already have them.)  Although different companies may charge different amounts for different plans, the coverage provided by the plans themselves is uniform throughout.  With the new changes coming in 2011, the specifics of these plans will undoubtedly by modified, but their overall thrust will likely remain unchanged.

During the past decade, Congress introduced Medicare Part C, aka Medicare Advantage, in an attempt to reduce costs.  These plans offered broader coverage but limited the choice of doctors and hospitals.  Ironically, Congress legislated higher payments for these plans in an effort to entice people to change to them.  On the flip side, the amounts paid to doctors with traditional Medicare patients were reduced.  When physicians stopped accepted new Medicare patients as a consequence, Congress relented and reversed the cuts to traditional Medicare.  Your doctor should welcome your new Medicare status.

Now, with the new health care legislation, Congress is eliminating the price advantage of Part C while adding coverage for many preventative care measures to the traditional plans.  As a consequence, you will be able to keep your own doctors, and Medigap will likely live on.

Of all the Medigap plans, Plan F has been the most popular.  But that does not mean that is the one

you

should choose.  The different plans are for different situations, and you have to spend the time to determine what is best for your lifestyle, health, and wallet.  For example, some plans offer coverage for medical expenses while traveling abroad.  If you are not a traveler, it makes no sense to pay for that feature.

Some sites to visit for further information are -

Guide by Medicare

AARP Medigap description of plans

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Everyone who has entered the realms of retirement has to answer a question, “What do I do about money?” An annuity is often a simple answer, but not necessarily the best.

If you happened to buy a fixed annuity in 2006, you are feeling pretty good right now. With 2010 interest rates almost non-existent, a 6% fixed annuity can make you feel both relieved and smug at the moment. You should feel good, because you have a great deal . . . at least for the moment.

In principle, annuities should be a simple investment. Their basic purpose is to give you a monthly flow of income after you hand over to the company (typically an insurance company) a large chunk of your money. Insurance companies are professional investors. They are sufficiently confident in their management of money to offer either -

• fixed annuities, which pay a set amount per month, or
• variable annuities, whose payments can vary within a set of parameters.

The downside for annuities is twofold.

1. Your money is committed and no longer accessible to you, and
2. The rates of return for annuities are invariably lower, over time, than other investments available at the time of purchase.

As a result, you should be very careful when investing in annuities.

• They are usually a good deal for the salespeople who befriend the senior to whom that are selling, but often may not be a good deal for the senior.
• Annuities can be sold with some very complicated features. If it is too complicated, back off. Especially be wary of any fees that can be added.
• Do not put all your savings into annuities. At most, they should only be one component of your savings.
• If you are considering any annuity from any company, have at least one objective, knowledgeable person look it over carefully.
• Consider other alternatives. Typically, you can set this up yourself by investing the money in a safe fund and pulling a set amount out every month. Usually, this approach will allow you to control your own money and typically cost you less.

For further information, try -

• New Retirement.com
• CSMonitor.com
• Money Magazine

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Most of the things we buy repeatedly are bought locally. Groceries, clothes, fuel, and flowers are purchased from stores in our neighborhood. The store could be an outlet of a national retailer or a small independent, but it is local. However, many people now make their special purchases, i.e. items that are purchased infrequently or only once, from an online store.

Not too long ago, making a purchase at an online store almost qualified as an adventure. Today, anyone who is reading these words has, in all likelihood, made a number of online purchases. The intent of these comments is to provide an update, for myself as well as you, of the best shopping practices you should use.

• Check on spyware - It is tragic, but necessary to start with that comment. Spyware exists, and if you, or one of your visitors, opened an email that said, “Congratulations, you’ve just (fill in the blanks)”, spyware that can capture your credit card information may be lurking on your system. Do a scan, e.g. PCTools, and check to make sure you are safe.
• Read the reviews - It used to be that you could go to the library, find the category in Consumer Reports, and feel confident that you could discover the basic things you needed to know before making a reasonably informed buying decision. Although you can still use that approach, you can also find a fair amount of information on the Internet. Just enter ‘review (name of specific product)’ into your search engine, and any number of information sites will vie for your attention. Typically, one or two of them are quite through. For example,

1. Consumers Search can be helpful, and
2. cNet provides detailed advise on technology products.

• Find the Best Deal - Once you have identified the specific product you are after, i.e. manufacturer and model number, you can start looking for the online merchant that will best serve your purchasing requirements. Since the price comparison sites all vary slightly in their approach, it is in your best interest to try a few. Even these reviewers are reviewed, and one good comparison can be found at Smart Money. Since some online merchants will offer special deals through one pricing site and not another, it is best to search a few before you make your final decision. For example, try -

1. Price Grabber,
2. Yahoo Shopping,
3. Dealtime,
4. NexTag,
5. Shopzilla, or
6. Street Prices.

For travel deals, try -

1. Kayak, or
2. Travel Zoo

For special deals, try -

1. Fat Wallet, or
2. Finders Cheapers

• Carefully Select Your Merchant - Product price is definitely NOT the only factor. The cost of shipping can change the monetary profile of a deal. Obviously, the best shipping charge is ‘free’. Beyond that, your have to shop online just the way you shop locally, i.e. find a merchant you can trust. The price comparison sites recognize this need and most of them rate their vendors. Choosing a vendor with a high performance rating can seem like wisdom if something happens to the shipment or later to the product.

Once you click, enjoy the anticipation. Your purchase will appear at your door in just a few days.

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Ever since the passage of the Health Care Reform Act on April 23rd, I’ve been looking for a good summary of its components. Of course, any legislation with that many pages will be difficult to summarize, but someone had to take a swing at it. I guess no one will be surprised that it was the AARP that took up the challenge.

At the link, AARP User’s Guide to Health Care Reform, you will find a summary that doesn’t take that long to read. It does, however, have a sufficient sweep and level of detail, that you can develop a sense of the legislation.

Three things to note -

1. Medicare will finally start to cover its most foolish lack, i.e. some preventative services. Catching conditions sooner rather than later should always reduce the cost of their care.
2. The Part-D Donut Hole will be phased out over the next decade.
3. The overpayments for Medicare Advantage Plans will be phased out.

Every senior should read this summary. Thanks AARP, you did a good job!

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Since last observed, Reverse Mortgages have experienced some changes.

The fundamental idea hasn’t changed at all. Financially, you are making a bet that you are not going to leave your house for a nursing or funeral home before you have received enough payments to equal the value of your home. The government-approved bank is betting that you will.

Since our last look, the rules have changed a bit.

• The qualifying age, 62, is still the same. At 62, however, you’ll only receive about 30% of the qualifying amount of the home while a 95 year-old could receive 80%.
• The maximum amount that you can receive, which can vary based upon your geographic location, was increased from $417,000 in 2008 to $625,000 for 2009. Next year, it’s predicted to decrease because of the loss of home values.
• The origination fees that you can be charged have been capped at $6,000.

Despite these changes, the principles haven’t changed.

• Because this type of transaction entails a risk for the bank, you will never get the full value for your home. The best way to achieve that value is to eliminate the risk, i.e. to actually sell your house on the open market. Then, you can move into a smaller home or a rental property and pocket the difference.
• These transactions entice seniors because it means that they do not have to move out of the familiar, old homestead. To combat that obstacle, however, start looking at travel brochures. You would be able to pay for a VERY nice vacation with the money you would otherwise abandon through this transaction.
• Those people for whom this is a suitable transaction, should NEVER mix it with other investment transactions, e.g. annuities, funds, etc. These different transactions should be evaluated independently and on their own merits.

If you are still tempted, you MUST do your research. For starters, review -

• A Description of Reverse Mortgages
• AARP’s Guide to Reverse Mortgages
• Government Reverse Mortgage Guide from HUD
• Consumer Law’s Tips for Seniors

Once you’ve learned a bit more about reverse mortgages, read the recent Report by Consumer Law entitled, “Subprime Revisited”. If that is too detailed, at least read the Consumer Reports Article. Both review the current marketing practices being used by lenders today. The conclusion is BEWARE.

After all the research, ask yourself the same question that Clint Eastwood would ask. “Do you feel lucky?”

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With retirement comes the gift of time. And one way to use that time, recharge your batteries, and perhaps scratch a long-postponed yen, is to travel. Even though the finances of most people have been downsized over the past year, the economy has also created many bargains for those that have anything left. It may be time to scratch that itch.

Whether its around the block or around the world, travel brings an exposure to new vistas and experiences that shakes us out of our same-old-same-old routines. That bit of shaking gives us all a new sense of time, an event to mark our lives. In that way, it can be very healthful and rewarding, especially if it is shared.

But travel also brings its own set of challenges - planning, expenses, preparation and inconveniences - that can prove to be a hassle for many. For a successful trip, its imperative that we meet those challenges with a sense of fun.

Planning -
Both a weekend bus tour and an extended trip overseas take careful planning, and it’s fun to do. Part of the fun is discovering what is possible, learning more about the history and culture of an area, and targeting or avoiding local events that can draw extra crowds. To start,

• Set a Budget - No sense planning for a trip that breaks the bank. Pick a number, assume you’ll exceed it by 10%, and then explore what that number makes possible. Since sleeping is often the largest travel expense, how long you travel can have a greater impact on expenses than how far.
• Picking your Style - It’s silly to force yourself into a style you abhor, but the style that you find to be fun can have a major impact on your choice of destinations and budget. Guided tours are efficient, but less spontaneous. Cruises can feel exquisite to some and confining to others. For the physically fit, Elder Hostel & trekking may be the only way to go.
• Finding Destinations - One of the most interesting aspects of planning a trip is choosing your destination(s). exchange rates may influence the countries you choose, but this isn’t even an issue if you stay within your own borders.
• Selecting Travel Times - You can stretch your budget a lot if you avoid peak seasons and big events. If your desire is to do a museum crawl in Europe, February can be an excellent time.
• Using Travel agents - If you feel intimidated by the mass of information that the Internet delivers, you can always use a travel agent. Quite often, the fees that they charge may be offset by the deals they can discover.

Preparation -

• Read a Book - Once you’ve decided and locked in your itinerary, you can begin your preparation. The first thing I like to do is find an historical novel about the area to become steeped in its history.
• Travel guides - Find a good travel guide that is oriented toward your style. Make sure that it is light enough to carry, because you’ll want to take it along, as well as sufficiently detailed so that you can become informed as you go.
• Chart your Route - Learn enough about the locations that you can chart your overall course as well as the specific path you want to take through the cities or countryside.
• What to pack? - The short answer is ‘Less’. Everyone always takes too much. Plan to do some laundry, especially at anyplace you are staying for a couple of nights. We lessen drying time by rolling wet garments in a towel and stepping on it.

Have Fun -
Once you arrive, make certain you have some fun. Daily burdens can sometimes make people forget how to have fun, and travel is one way to force yourself out of that rut. Travel always brings some inconveniences, but is also brings adventure. So what if no one speaks your language or the bed sags. Use gestures, move the mattress to the floor, and laugh. Adventures are fun!

Helpful Links -
There are many. Here are some favorites -

• For airfare and other quotes from multiple sites try Kayak.
• Another source of both travels opinions as well as multiple quotes for fares, hotels, etc. try TripAdvisor.
• For alerts on travel specials, try TravelZoo.
• Elder Hostel offers diverse adventures for seniors.
• For packing and all sorts of other advice, go to the Rick Steves site.
• Of course, AARP Travel offers lots of info and specific tours.
• Lastly, if you’re headed beyond US borders, go to the government site for the latest information.

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