Wednesday’s need-to-know money news

Today’s top story: How to read the fine print on credit card offers. Also in the news: Mistakes to avoid if you want your student loans forgiven, how to switch brokers and move your investments, and three retirement savings strategiess to use if you plan to retire early.

How to Read the Fine Print of Credit Card Offers
Paying close attention.

Want Your Student Loans Forgiven? Avoid These 4 Mistakes
Forgiveness is possible.

How to Switch Brokers and Move Your Investments
Big banking moves.

Three retirement savings strategies to use if you plan to retire early
Getting out as soon as you can.

Tuesday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How your house payments can unexpectedly increase. Also in the news: Why grandparents should be careful with 529 plans, why right now could be the right time to refinance your student loans, and six reasons why early retirement could be a mistake.

4 Ways Your House Payment Could Unexpectedly Go Up
Don’t get caught off guard.

Grandparents: Don’t Make a 529 Plan Mistake
529 disbursements come with some risks.

Now Could Be the Right Time to Refinance Your Student Loans
Taking stock of your student loan situation.

6 reasons early retirement might be wrong for you
What sounds like a good idea might not be.

Monday’s need-to-know money news

download (1)Today’s top story: The right card to get when you’re looking to build or rebuild your credit. Also in the news: How to cut your monthly expenses, what you need to know about renter’s insurance, and the habits of successful early retirees.

5 Credit Cards to Help You Build Credit
Cards that can help you establish or rebuild credit.

Ways to slash your monthly expenses
How to make your monthly expenses more manageable.

8 Facts You Didn’t Know About Renter’s Insurance
Protecting your belongings.

The 9 Habits of Highly Successful Early Retirees
Could you follow in their footsteps?

The 20 Worst (and 20 Best) Cities For Saving Money
Did yours make the list?

Friday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: How the habits of early retirees could lead you to retirement. Also in the news: Things to consider when saving for a mortgage, easing financial worries with smartphone apps, and what to do when your friends are big spenders.

5 Essential Habits of Early Retirees
Retire early by picking up these habits.

Saving for a House: It’s More Than a Down Payment
What to consider when you’re saving for a mortgage.

Face Your Retirement Fears With These Free Financial Tools
Reassurance is just a smartphone app away.

How to Keep but Not Go Broke with Expensive Friends
Balancing your friends and your budget.

5 Ways to Pick the Perfect Time to Sell Your House
As they say, timing is everything.

Friday’s need-to-know money news

Today’s top story: Security tips from a former identity thief. Also in the news: What to teach teen about debt, tax mistakes you don’t know you’re making, and tips on retiring early. Ways-of-Identity-Theft

4 Security Tips From a Former Fraudster
Advice on how to protect yourself from guys like him.

4 Things Your Teen Needs to Know About Debt
Teaching your teens to avoid the debt trap.

7 Easy Steps to Pay Off Debt
Budgeting is essential.

7 Tax Mistakes You Don’t Know You’re Making
Don’t forget about tax credits!

5 tips to help you retire early
Treating dollars like employees.

Tuesday’s need-to-know money news

Zemanta Related Posts ThumbnailHow your spouse could impact your mortgage, preparing for holiday travel, and a handy guide on who to tip and how much.

Your Spouse’s Credit Could Hurt Your Chance of Buying a Home
Welcome to life in community property states.

How Many Bank Accounts Do You Need?
The fewer, the better.

Ways to Save: Best times to score travel deals
Holiday travel will be here before you know it!

Top 5 careers for an early retirement
If you’re a physician or an air traffic controller, you’ve got it made.

Who Should You Tip — and How Much?
A handy guide on how not to be a cheapskate.

Your financial independence day

Colorful and vibrant fireworksWorking just to pay the bills isn’t enough. We should be reaching for something more: financial independence.

Financial independence is when your investments and other sources of income provide you with a comfortable-enough living that paid work becomes optional. As we mark the anniversary of our nation’s independence, I like to review our progress toward this goal. The good news: we’re pretty close to financial independence now, if we were willing to live frugally.

Some people who use the principles of voluntary simplicity achieve financial independence remarkably early. I’ve talked to people who “retired” in their 40s or even 30s, trading the 9-to-5 for a more relaxed lifestyle where they worked fewer hours, or worked for pay only when they wanted to. (If you want to know more about voluntary simplicity, the book “Your Money or Your Life” is a great place to start.)

But my husband and I have decided on a different path—a lifestyle that involves more spending now with the understanding we’ll work a little longer. That’s the best fit for us, because we both love what we do and we like the idea of doing it for a long time.

We’re planning a “phased” retirement, cranking back on our work commitments gradually over time. We like T. Rowe Price’s concept of a “practice retirement,” which suggests that those who have saved substantially for retirement can start putting some of that money toward travel and other spending once they hit their 60s, as long as they continue to work and put off tapping Social Security, pensions and their retirement accounts.

We’re also working on a Plan B, in case we aren’t able to work as long as we’d like. About half of retirees leave the workforce earlier than they’d planned, usually for health reasons although also because of layoffs or the need to care for a loved one. Finding ways to have a smaller “nut” in retirement—a lower level of fixed costs—can really help if you have to leave work early. That’s one of the reasons we’re paying down our mortgage, so that we won’t have that bill later. One of my readers installed solar panels for the express purpose of reducing his utility bills in retirement.

If you got a late start saving for retirement or have suffered some big financial setbacks, your financial independence day may seem impossibly distant. But you may be able to move that date into sight if you’re willing to plan, make some sacrifices and stick to your guns. Start with “Your Money or Your Life” and build from there.

How are you doing on your path to financial independence?

About to retire? Get some help

Dear Liz: I am approaching being able to retire in three years at 56, but I’m really concerned with the current market conditions. I have around $320,000 in 401(k) and 457 accounts now, all of it invested in stocks. Should I scale this back to more moderate allocations? My pension will pay me around $5,200 a month, so I do not anticipate needing to withdraw from my investments before age 59.

Answer: Even if you’ve been a die-hard do-it-yourself investor until now, it’s time to get help. Retirement decisions can be incredibly complicated, and you may not have time to recover from mistakes.

A fee-only financial planner would ask, among other things, what your current living costs are and what additional expenses you expect, such as buying another car, taking trips and so on. Those details can help determine whether your savings are adequate. The planner also would ask you how you plan to pay for healthcare in retirement, since Medicare doesn’t kick in until age 65, and an individual policy at your age could eat into that pension check. Even with Medicare, Fidelity Investments estimates, a 65-year-old couple retiring this year would need $240,000 to cover medical expenses throughout retirement — not counting any money they might need to pay for nursing home or other custodial care.

What a planner probably wouldn’t do is approve having 100% of your investments in stock at any age, even with a nice pension. You may have time to ride out another market downturn, but watching half of your life savings disappear might increase the chances you’d sell out in a panic. Having a more moderate allocation that includes bonds and cash could help cushion those market swings and keep you invested.

You can get referrals to fee-only planners who charge by the hour at the Garrett Planning Network, http://www.garrettplanningnetwork.com. If you’re looking for fee-only planners who charge a retainer or a percentage of assets, you’ll find those at the National Assn. of Personal Financial Advisors, http://www.napfa.org. NAPFA has tools for consumers at http://www.napfa.org/consumer/Resources.asp and the Financial Planning Assn. has tips on choosing a financial planner at http://www.fpanet.org/FindaPlanner/ChoosingaPlanner/.

“File and suspend” can boost Social Security benefits

Dear Liz: I am 63 and not nearly ready to collect Social Security. In fact I probably won’t be ready for quite a few years. My husband, who is 64, wants to collect on my Social Security as it is higher than his. Is there a way for him to do this that would not hurt me? I have called the Social Security office five times and have received five different answers. My husband went into the local office and they told him to have me apply for benefits and then after a short time send them a letter rescinding my application. That would allow him to collect on my work record and wouldn’t hurt my eventual benefit. I am not comfortable doing this. What do you suggest?

Answer: At your current age, you must start your own benefits for your husband to get a check based on your work record. The so-called spousal benefit is basically half your retirement benefit, and it will be somewhat reduced because your husband hasn’t achieved “full retirement age” (which is 66 for both of you). When he applies for spousal benefits, the Social Security Administration will compare that benefit with the one based on his own record and give him the larger of the two.

Starting benefits now, however, would lock you into a lower payment for the rest of your life. Your checks could be further reduced based on your earnings, if you continue to work.

If you can wait three years, you have another option called “file and suspend” that would allow your husband to collect a spousal benefit without reducing your eventual checks. Once you reach your full retirement age of 66, you can go to your local office to file for your benefit and then immediately suspend your application. That would allow your husband to collect a spousal benefit while your own uncollected benefit could continue to grow.

Another advantage for your hubby if you wait: He will have achieved his full retirement age when he starts receiving spousal benefits, so he would be allowed to switch to his own benefit later, if it’s larger. If he starts receiving spousal benefits before his full retirement age, he loses the option to switch.

You can learn more about the file-and-suspend strategy on the Social Security site at www.ssa.gov/retire2/yourspouse.htm. You may want to bring a printout of that page with you to the Social Security office. File and suspend is not an obscure strategy, but it doesn’t appear that your local office is quite aware of all the details.

Live it up now, or insure against longevity

Dear Liz: I was born in 1960 and plan to retire with reduced Social Security benefits at 62. I’ve read in many places that taking reduced benefits isn’t a good idea because you are locked into a lower amount for life. While this is true on a monthly basis, what about on a cumulative basis? I have figured out that on a cumulative basis I can collect to about the age of 78 and be even with collecting full benefits at 67, and this doesn’t include cost-of-living increases that would add a few more years before full benefits exceed reduced benefits on a cumulative basis.

This means I would be collecting my benefits while I am younger and healthier so I can enjoy it as opposed to delaying it on the presumption I will live well into my 80s when who knows what the future holds. Social Security will not be my main source of income as I will have a sizable amount saved by then. Would taking reduced benefits make sense for me, or am I missing something?

 Answer: You’re right that the break-even period — the point where waiting for full benefits gets you more than taking benefits early — is typically in your late 70s. A male at age 62 is expected to live 19 more years on average, while a woman the same age is expected to live 22 more years. If you’re in poor health and don’t expect to live long after you retire, however, that can tip the scales toward taking benefits early.

Wanting to claim your benefit early, while you’re “young enough to enjoy it,” is certainly understandable. But you might also want to look at Social Security as a kind of longevity insurance. If you live into your 80s and beyond, you may well exhaust your savings and wind up relying more than you think on your Social Security check. In that case, you might appreciate the larger benefit you’d get from waiting until your full retirement age.

AARP has a free Social Security benefits calculator that can help you determine the best time to claim benefits.