Do You Fear Retirement? Most Women in the USA Do…

homeless womanMost women in the USA are afraid they’ll end up a bag lady (homeless and destitute) in old age.


A recent survey of women, across all economic classes, revealed that 76% of all middle-aged women fear becoming destitute in retirement. 

WHY??

Because we don’t know how to deal with several key variables that can help us plan for a long and prosperous retirement.

But, we can make a plan that protects us from poverty – if we don’t make some very common errors like:

Counting on Working Past Your Typical Retirement Age

Conventional wisdom says you can always earn more income. Most professionals don’t have mandatory retirement ages and the service based economy is always looking for people eager to work (at low wages) during surges.

So why wouldn’t you plan to keep working or return to the paid workforce as you age?

Health problems are the biggest reason.

Every survey done over the last few decades has shown that fewer than half the people who planned to continue working past typical retirement ages actually do continue to work. Even fewer keep their high paid professional level jobs.

Companies continue to downsize and merge and older, more expensive workers get laid off first (one of the joys of no union protections). Agism in the workplace is real – just ask any 58 year old woman who has had to look for a new job recently.

Retirement Survey While, as the surveys shown here prove, you are not alone, you are responsible for finding a solution to your retirement problems!

The average age of retirement for women in the United States is still 62 years old. Filing for your Social Security benefits at 62 will reduce your monthly benefits for the rest of your life by 25%.

So, if you’ve earned a $2,000 benefit at full retirement age (typically about 66 ½ for baby boomers), expect to collect only $1500 starting at age 62.

In addition, you’re not eligible for medicare until age 65 so you’ll need to buy your own policy. Thanks to the Affordable Care Act, at least you can get health insurance but it will still eat up $400 – $500 or more of your monthly income (and you should factor in a minimum 3% cost increase each year).

Also, remember that most medicare participants need a supplemental (Medigap) policy to cover some standard costs excluded by Medicare.

Another big mistake is:financial ratios

Underestimating Your Income Replacement Ratio (IRR) for Retirement

Many planners promote using a 70% – 80% income replacement goal.

This is based on dated statistics. Unless you plan to retire like your parents did including:

  • No Mortgage,
  • No Credit Card or Consumer Debt,
  • No Dependent Children (or those who depend on your unofficial financial assistance),
  • Reduced Travel and Entertainment Expenses, and
  • Employer Paid Health Insurance,

you’re going to need to replace all your pre-tax income less your retirement savings and your employment taxes. That means 80% is definitely the low end of your IRR and 90% or more is safer.

The best way to reduce your income needs in retirement is to save a large percentage of your current income. If you save 30% and have an employment tax rate of 15%, you’re living on only 55% of your current income. If that describes you now (or you reduce your expenses before retirement to a smaller percentage of your income), you could realistically plan on replacing only 60% – 70% of your earned income during retirement.

Remember too, you need to budget for rising medical costs, income taxes (that will most likely continue to increase) and your Long-Term or End-of-Life care. 

If you’d like to start with a realistic Income Replacement Ratio, click on the following link and work through the ratio calculations in my Money Diva special report: Your Fabulous Retirement… Step #1 

Live long and prosper, Leah the MoneyDiva.com

How the Heck Can We Plan Health Care Expenses as We Age??

sick woman For many of us, the fear of being too old and too sick weighs heavy on our retirement planning. We want to enjoy our golden years! We feel we’ve earned some time off!

But, the second, and potentially most expensive, unknown financial planning variable is what decent and potentially lifesaving healthcare will cost us in the future. The first vexing element of your long term plans for financial freedom and retirement is: how long you’ll live; and the two are obviously interrelated.

Standard retirement planning uses a Monte Carlo simulation to estimate how long our nest egg will last. To start with, I recommend using Vanguard’s free (and very conservative) calculator at https://retirementplans.vanguard.com/VGApp/pe/pubeducation/calculators/RetirementNestEggCalc.jsf  

Play around with portfolio mixes, withdrawal years and rates to see how they affect the projected outcomes.

What we really want to create is a self-perpetuating annuity. By using a withdrawal rate that I can continue – even if we live to be 103. How? With investment return projections about double your withdrawal rate, your portfolio can outpace inflation indefinitely.

But, future health care costs can dramatically affect the amount of passive income we need to sustain a high quality of life as we age. So, how to plan for long term costs based on your unique needs?

Start With the Basics

First, we know that certain healthful lifestyle choices produce better quality of life and lower costs. I know you know that smoking, remaining sedentary and excessive drug use (legal or not) can be counted on to decrease your life expectancy (you’ll need less savings!) and increase your healthcare costs (you’ll need more savings!).  rp_money-finance-economy-savings-save-bank-150x150.jpg

It’s never too late to improve your physical, mental and social habits towards a healthier lifestyle. Use the fitness trackers, trainers and community services now readily available to help live a happier and healthier lifestyle into your golden years.

Then factor in your genetic heritage, cutting edge medical therapies and the impact of advances in Biotech, Nanotech and Robotics will bring in the next few decades and you may be tempted to give up trying to come up with any kind of a plan! But, it’s NOT hopeless and the old axiom:

“Failing to plan is planning for failure”

still applies.

The best free resource to start with is still http://Livingto100.com. Visit when you have some time to answer the diet, activity, statistical and family history questions to get started on your personal planning. That’s where I got my “high-end” estimate of 103 years old. I’m pretty confident that if my money lasts that long there will be some left to pass on to my great grand kids!

Out of Your Control

In the United States, the medical billing and insurance system will drive us all nuts (so it’s good mental health coverage is now required). The rules change annually and sometimes in between policy years too. All you can do is educate yourself on what’s currently available and resolve to keep abreast of the changes as they occur.

By being your own healthcare advocate, you can decide what level of intervention you want and what you’re willing to pay for.

You can start by joining the ranks of the proactive (about ¼ of American adults) by executing and maintaining a healthcare directive that’s valid in your primary state of residence. Find yours here: http://www.caringinfo.org/i4a/pages/index.cfm?pageid=3289

You’ll also need a durable power of attorney giving a trusted relative or close friend (a proxy or attorney-in-fact) the legal authority to inform medical providers of your preferences if and when you become incapacitated.

Make sure your directive and your designated proxies know how you want to be treated for conditions that require:

  • Respiration Machines
  • Dialysis and other invasive organ support options
  • Feeding tubes
  • Resuscitation efforts for heart failure (a Do Not Resuscitate or DNR order)
  • Donation of tissue or organs after your death

To insure your wishes are followed, keep the signed and witnessed original document within easy access (not in a bank safety deposit box), make a copy and give it to your proxies, your primary care physician, the local hospital or nursing home and close family or friends.

Ask your doctor or hospital to enter it into your electronic medical records  (EMR) and make a wallet sized card (http://www.aha.org/content/13/piiw-walletcard.pdf) to carry with your I.D.

Budget Busters

Even when you pass 65 and are eligible for Medicare, your co-pays, deductibles and supplemental care costs can escalate rapidly. Remember that most dental and vision costs are extra, too.

stethoscope money orgSchedule some time each year during the annual enrollment periods (usually in the fall) to review your coverages, any changes in your health or legal status and your year-to-date expenses. Make a revised budget for the upcoming year and adjust your income sources to match.

My rule-of-thumb is to double the projected general inflation rate and add any individual needs to project medical expenses. A separate medical savings account can help keep funds on hand for an emergency. It should always have enough to cover your annual out-of-pocket maximum.

Rise to the Challenge

We still can’t tell the future but we can take actions that put us in position to control both our healthcare costs and services. Unless you really want to depend on the kindness (and the wallets) of strangers to safeguard your finances and your health, go now and start taking control with a well thought out and executed plan. It’s your life and future at stake.

Live long and prosper, Leah the MoneyDiva.com

Earn Extra Money in Retirement or Quickly Boost Your Retirement Savings

elderly working at mcdonaldsIf the thought of working until you’re 70 or 75 isn’t appealing, how about doing more NOW so you can enjoy it later?

If you’re already in your 50s or 60s, you’ve probably got a wealth of skills and knowledge to capitalize on plus, your children don’t need 24 hour supervision so a second, part-time job, changing jobs or a side business are more doable.

Consider which of these options will work for you:

  1. Get out of your comfort job – look for a new employer who will pay more for your skill set.

It’s a well documented fact that changing employers, even in a lateral move, can increase your salary by 15, 20 even 25 percent or more.

If you have skills that can transfer to a variety of businesses (human resource management, finance, marketing), seek out employers in growing sectors. For example, if the oil business is a down cycle with prices and production falling, the car manufactures and sellers tend to benefit because drivers buy bigger more expensive and profitable vehicles.

The longer you’ve been with your current employer, the more underpaid you’re likely to be. Find out what you could be earning by browse sites like Payscale.com, Glassdoor.com, and Salary.com.

Shopping around while holding down a full-time job isn’t always easy but it’s a whole lot less stressful than job hunting when you really need a job. Make a list of requirements and of perks you’d like to acquire and be sure you brush up on your negotiation skills to get the most bang for your job change. When you get up-to-speed on social media and online networking in your field, you may find a great new job comes knocking at your in-box!

In addition, you may have a sizable 401k you can roll over into an IRA and reduce the fees you’re paying the custodian so you keep more of what you’ve already saved.

  1. Ask your current employer for a raise.

If you have an offer from your job search, or your research reveals that you’re severely underpaid, you may be able to leverage that into more money (as salary or deferred compensation) at your current employer.

You’ll want to prepare a convincing presentation based on your productivity and your market research. By boning up on your negotiating skills, you may be able to take home a bigger paycheck without making a drastic change.

  1. Add freelancing to your routine. 

Here’s another way to use your existing skills without changing your day job. Use your off hours to help other businesses or individuals (but avoid direct competitors of your employer) and increase your earnings.

Freelance opportunities, online and off, are almost endless. You can work through an established site like upwork.com (formerly odesk) or elance or directly with clients you find via networking online at sites like LinkedIn or in-person at industry events and associations.

Remember that you will receive a 1099 Misc. Income form and will be responsible for paying all the taxes including the employer portion of social security and medicare taxes. A  good rule-of-thumb is your freelance rates need to be at least 25% higher than your salaried rates to cover the taxes.

You’ll also want a simple contract to clarify what your duties are and how you’ll be paid.

  1. Start a side business. 

Are you free on the weekends or evenings?

  • If you like animals, start a pet sitting business.
  • If you prefer young children, start a nanny (babysitting) business.
  • Like to garden? Offer to design and set-up a backyard garden for your brown-thumbed neighbors!

These are just a couple possibilities. Almost any skill or aptitude you have developed over your lifetime can be parlayed into a small side business. 

  1. Teach what you know.

Do you have knowledge others will pay for? Quite probably. work-woman-tutoring

  • Maybe you’ve successfully obtained a certification or entry into a prestigious program.
  • Maybe you successfully negotiated a tricky personal or career transition.
  • Maybe you know how to teach people to trim a poodle. Or,
  • Maybe you are an expert at handmade arts?

These are all things others will pay you to show them how to do!

You can leverage your knowledge by becoming a coach, a tutor or by producing informational products (books, videos, courses) to sell. Sites such as Udemy, Linda.com and Skillshare host and sell hundreds of training programs for independent instructors. Publishing a Kindle ebook on Amazon is quick and almost free. 

You can also sell finished products without spending your weekends at craft fairs. Sites like Etsy.com and Amazon’s Craft Marketplace get your handmade items in front of a worldwide audience at reasonable cost.

  1. Become part of the Gig economy.

If you’ve got more time, you can set yourself up to lead tours of local tourist attractions, or become a driver for hire via Uber or Lyft.

You can do seasonal work at businesses that experience big surges during certain times of year (i.e. the end-of-year holidays for retailers and etailers), do household chores through sites like taskrabbit.com or run your own classified ads on Craigslist.

Do you know how to cook? Start a personal chef business or do the cooking for working families via www.kitchensurfing.com.

There must be something in this list that could help you increase your income to supplement your retirement accounts. Give one or two a try and see how much extra you can add to your savings now so you can enjoy your golden years even more later. 

Live long and prosper, Leah the MoneyDiva.com

Crowdfunding – A Modern Day Investment Scam?

Crowdfunding has exploded onto the financial scene. Since the “qualified investor” requirement for funding small businesses was modified in 2013 we are all allowed (or pretend) to become venture capitalist or angel investors via crowdfunding.

crowdfunding names

It’s easy to find lists of over 100 sites that crowdfund everything from cutting edge new businesses to credit card refinancing.

I periodically end up on one or two of the crowdfunding sites. Checking out a friend’s GoFundMe campaign or funding the initial building of a revolutionary standing desk for grade schoolers are a couple I’ve visited recently. I also participate as a lender at Lending Club and by adding my two cents to the occasional political fundraiser I believe in.

But, I’m always careful to delay making any financial commitments until further research – both of the site and the offer – can be completed. That’s because crowdfunding is a scam artist’s newest way to separate a fool and his money. Even well established sites like Kickstarter, Indigogo and GoFundMe can unknowingly host scammers.

They even tell you so, as Kickstarter clearly states on its website:

“Kickstarter does not guarantee projects or investigate a creator’s ability to complete their project. On Kickstarter, backers (you!) ultimately decide the validity and worthiness of a project by whether they decide to fund it.”

So, why not join the party (as a lender or funder)? IF you use discretionary spending money and don’t think of it as a traditional investment; well, go for it. But use some common sense. crowdfunding piggybank

Apply these criteria when considering a crowdfunding opportunity:

You can’t expect the crowdfunding platforms to protect your “investment”

As we noted above, the platforms that make money from connecting start-up businesses, proposed books and software applications. They explicitly state they cannot be relied on to protect you from fraudulent offers or funders who fail to deliver on their promises.

They TRY, because their reputations are tarnished by fraud and failures but they come with NO guarantees.

In most cases, it’s a donation – NOT an investment.

Unless you are offered an ownership interest, don’t expect a return outside the “gift” in the listing. Peer-to-Peer lending is an exception. You act as a lender, not as a donor, and your losses (defaulted loans) offset earnings.

Also, almost none of the businesses looking for crowdfunding are legal non-profits so you won’t be getting a tax deduction either. But, if you believe in the cause or product, and your donation helps bring it to market, you can pat yourself on the back!

Many crowdfunding campaigns fail – and that doesn’t guarantee the donors will get their money back.

This policy varies by platform. Kickstarter refunds the money, Indigogo doesn’t. So, read the fine print for both the campaign and the platform before you give.

Vendors often over promise (and under deliver). A few are outright scams.

A guy gets an idea, his buddies tell him it’s great, and he decides to get crowdfunding and make it into a business – what could possibly go wrong??

You must do some due diligence (investigation). Click here for a good article from CrowdCrux.com on how to look into a campaign to see if it’s A) legit and B) worth your money.

One way is to use social media to leverage other people’s knowledge via a platform like Reddit (here’s the Kickstarter subreddit link).

And, I’ll echo the CrowdCrux.com the call to report scams. It’s a quick way to shut down scammers and clean up the crowdfunding space (and makes you a good web citizen). The list of scam reporting sites includes:

It sounds scary but I find spending a little time perusing (and donating a few dollars) inspiring. Seeing all the great ideas for products that can improve our lives gives me a little lift! Just don’t bet your lifesavings (or the rent money) on any one of them changing the world!

Live long and prosper, Leah the MoneyDiva.com