Here is the first reason too many of you are choosing to ride a financial tsunami:

You don’t know of another option

Most of you have only heard one message all your adult life: Stuff your 401(k) with as much money as you can and make sure it’s in the market. Buy stocks. Buy mutual funds. It’s no wonder the majority of the retirement-saving public is doing just that — it’s the only message you’ve really ever heard. Too many are relying on their HR department to provide them a compass. Don’t rely on it.

Benefit directors nationwide believe their organizations are not doing enough to help employees make critical decisions at the point of retirement, according to a recent survey. 81% of them said they are concerned their employees don’t have the resources to adequately provide for their retirement.

Yet the same advice is given over and over year after year. Remember that old definition of insanity? Doing the same thing over and over and expecting different results. Here is a perfect example.

You probably have no idea that there is another ship going in the same direction; a ship that is sailing in calm waters with no fear of overturning, crashing, or springing holes. It is a ship your stockbroker and benefits administrator probably knows nothing about.

Can I ask you a question? What if you were going to sail the whole Atlantic Ocean in a small boat and could request a guarantee of the type of seas that you would meet, what would you ask for? Would you want sunny skies and calm water, or violent storms and huge, crashing waves? Of course, unless we have a death wish we’d all choose sunny and smooth sailing.

So then why is it that most people — your father, your brother, your neighbor, your co-worker, (maybe even you) continue to choose the roller coaster waves of stock market losses and the tsunami of volatility that wipes out your financial future? It’s a rough ride with an uncertain destination. One minute you’re sitting on a decent wave of gains, able to see your retirement on the horizon, and the next minute you’re plunging into a dark hole of fear and dread as your account racks up a series of devastating losses like we have experienced in the last twelve years. This storm threatens to rob you of a thriving, secure, and peaceful retirement.

Over my next several blog posts I will share some of the reason too many people continue to choose the unpredictable, stormy seas and give you some information to make choices that you feel good about now and in the future.

For the individual female caregiver, the cost impact of care giving on in terms of lost wages, pension and Social Security benefits averages $324,044. For male caregivers, the figure is $283,716. Ouch!

This same study found that adult children age 50 and over who work and provide care to a parent are more likely to have fair or poor health than those who do not provide care to their parents.

Don’t let yourself suffer financially, physically, and emotionally from this sandwich of caring for the generations surrounding you. Avoid touching your retirement or you may put the same stress on your children down the line.

So have “the talk” with your aging parents.

1.     Start the conversation…

Have this conversation while your parents are still healthy and able to handle their own affairs. Before you have this talk, let your brothers and sisters know what you are doing and why so there is no misunderstanding. If the whole group can’t get together at least everyone will be on the same page.

You know your parents well and you don’t want them to feel like you are ganging up on them so think through the best way to broach the subject. For some parents it will be a welcomed relief to have this all on the table now. For those who are more resistant to this conversation, try asking questions.  You want to plan with them, not for them so try something like, “Have you thought about what you’d want to happen if you couldn’t be completely independent anymore?” Let them know that by planning ahead they get a greater say in the decisions that will eventually have to be made.

2.       Make a Locations list

Know where all important documents are. Are they in a file draw at home or in a safe deposit box at the bank? If your own children are adults, be sure to let them know this information for you. If and when the time comes to need this information, one less emotional turmoil will be greatly appreciated.

3.       Talk about nursing home care

Americans who reach age 65 have a 40% chance of entering a nursing home so this is certainly an issue to cover before it is a matter of urgency.  Discuss a plan now to make sure they are where it is best and that they have what is best when the need arises.

The sooner you start the conversation, the easier it will be to get your parents’ financial house in order without jeopardizing your own retirement!

For a list of specific questions to cover that are critical email me at bonnie@rocksolidwealthdesigns.com

Will you have the resources to lead the lifestyle you want as long as you want?

When I ask people how much of your lifestyle do you want to give up at retirement most people answer “none!” Many of them underestimate the funds they’ll need at retirement. I have a question for you. Which days of the week do you spend the most money? Did you say Saturday and Sunday like me? When you retire EVERYDAY will be the weekend!

Here are 2 things you can start doing now to enjoy a comfortable retirement lifestyle later.

1. SAVE

Saving is putting money away that will be there for you when you need it. It is money you cannot afford to lose. In contrast, most Americans think they are “saving” through “investments” such as a 401k or IRA with money fully at risk to market fluctuation. Ask yourself, "Can I afford to lose the money I am investing?" If the answer is no, find out what alternatives are available for you. I have seen far too many people I know who were close to retirement who are now in a position where they’ll have to continue working long past their expectations because their retirement money went down the drain with the market. Make sure you are saving money and build an emergency fund of six to eight months of living expenses.

2. Eliminate your consumer debt

Want you pay in interest on consumer debt will vaporize any rate of return you are hoping for on your investment. The average American spends 34.5 cents of every dollar to service debt. About 5 cents of their dollar goes toward saving. The other 30.5 cents goes toward living expenses. It would take a whopping 690% rate of return on those savings to equal what you are losing in interest. If any is getting a 690% rate of return PLEASE let me and the rest of us know! If not, let’s focus on getting rid of the debt.

A retirement you will enjoy in comfort takes planning and action now. It is a combination of saving, managing your expenses wisely, and preparing for the unexpected as well as your future goals and dreams. Make the reality of your retirement lifestyle as beautiful as your expectations!

For a list of questions you should ask yourself and answer now, email me at bonnie@rocksolidwealthdesigns.com

I think Ben Stein is a really smart guy most of the time. So much so that I read his book, “Yes, You Can Still Retire Comfortably! The baby-boom retirement crisis and how to beat it.” So what is my beef? It seems to me Ben contradicted himself.

Ben Stein lists 21 basic rules of retirement. #5 is “consider the tax implications of everything you do.”  Loved it as that rule seems more important to consider in your financial planning than ever.  BUT it seems he contradicts himself with his rule #4 which he says is to max out your retirement plans every year.

When talking about how much income you will need to retirement, Ben makes the statement…”the income from your tax-deferred savings accounts (except for ROTH IRAs) will be taxed as ordinary income as it is withdrawn—even if it consists of reinvested dividends and capital gains—and who knows how high future tax rates will be? Over the course of the 20^th century, they ranged from zero to MORE THAN 90 PERCENT, so even if you could predict your future investment returns to three decimal places, the unknown rate at which you may be taxed would be enough to make you throw up your pencil in despair.”

His book also states “while you were growing your nest egg, we assumed that most of your personal savings were captive in your 401k account. These have notoriously poor choices and high expenses.” TIME magazine seems to back Mr. Stein in an article of theirs which states the 401k is “a lousy vehicle and a financial flop.”

As I speak at financial education workshops, I ask the question of my audience, “Do you think taxes will be lower, the same, or higher when you retire?” In each group of people the vast majority of the group, if not the entire group, respond that they believe taxes will be higher when they retire.  Experts such as Ed Slott, Harry Dent, and Patrick Kelly agree with my attendees!

So here’s my beef. If I am to consider the tax implications of everything I do financially and I believe tax rates will be higher in the future, then maxing out my 401k is probably not a wise choice. The free money I have access to through matching is something I should consider taking advantage of, weighing that against the “poor choices and high expenses” of my company’s particular plan. Maybe my company offers great options?

Another question I ask in our educational forums is “Why is contributing to a 401k your primary means of retirement planning?” The answer I frequently get is “to save taxes.” But we are not SAVING taxes, we are putting off taxes. What else are we putting off? We are putting off the tax calculation!

If you are like most people and believe tax rates must rise to pay the piper in this country, if you believe that income tax rates are still low looking at history, then do you think building a bigger retirement to share with your silent partner Uncle Sam by maxing out your 401k is in your best interest or should you be looking for other options and alternatives that may be more beneficial in regard to it’s tax implications for you?

According to studies, among younger families, with children under the age of 18, saving for their children's college education is one of their most important financial goals. Of course the sooner you start planning for college the better. But there is hope for procrastinators as well. There are certain things that can be done to reduce the out of pocket expense of college dramatically and the sooner you can plan for them the more you can save.  You make be counting on some combination of these options to pay for your children's or grandchildren's college costs. 

• Grants
• Scholarships
• 529 plans
• Coverdell ESA
• Custodial accounts
• Personal savings accounts

 We will discuss these options in more detail in future posts and some alternatives you may not be aware.

Are you in Southern CA? Come to one our free college planning workshops and get a $500 scholarship. http://rocksolidwealthdesigns.com/college-planning

_{Visit Bonnie Clark at  Making the Most of your Hard Earned Money}