I want to welcome “America’s financial planner” Jonathan Pond to our Ask The Author series today to discuss his latest book You Can Do It: The Boomer’s Guide to a Great Retirement and answer your retirement and personal finance questions.
In his latest book, Jonathan shows readers how anyone can have a financially safe, happy, and comfortable retirement.
Highlights include:
- Why not to believe the misinformation put forth by the media and the finance industry
- How to get in financial shape for retirement, regardless of your salary level or how early you started saving
- Why beginning to take your Social Security distributions at the earliest possible age may not be the best move
Whether you're worried about getting a late start with planning, concerned about skyrocketing health-care expenses, or stressed about the high cost of your children’s college education, now is your chance to ask Jonathan about his strategies for making sure your retirement is fun and financially secure.
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Welcome Jonathan. We look forward to speaking with you.
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Comments: 48
Thank you for joining us.
What is your advice for this issue with a need to refinance and only predatory lenders willing to talk?
Sorry to hear about your financial travails. Regarding the mortgage: be sure to cast a wide net, including some discusssions with mortgage brokers. Even if you are stuck with a high interest mortgage (assuming you can squeak by with it; otherwise, you'll probably have to sell), as your credit rating improves, you can go back into the mortgage market at a better rate. There's no magic solution here, though, as you know.
"You seem to recoommend retiring later to earn more money, as long as there are no physical reasons to quit. Is it possible to take time off, then return to the workfoce, and still retire securely? At what age would this not be wise any longer?"
An annuity that would provide a $50,000 income with a good chance that the income will rise in the future to help you keep up with inflation, would require a hefty sum - probably around $1 million, although more basic fixed annuities might be available for $700,000 or so. The key thing to do, as with any financial product that you'll have for the rest of your life, is to shop 'til you drop. It's a competitive business.
Regarding taking time off and returning to the workforce: A common event, but one that has financial implications (e.g., lower Social Security income at retirement). You should be able to easily figure out the "cost" of taking time out of the workforce. By the way, several years ago, I examined the benefits of a two earner household with two small children vs. one earner. The conclusion, which I was delighted to see was embraced by women's groups, is that unless both incomes were very high, when daycare and other costs are factored in, the second paycheck didn't add very much money at all to the family coffers - something of the order of 10 to 15% of gross income from the second check.
While rates are low now, you can still get a decent return of 5 to 7% on government agency bonds and decent quality corporate bonds with maturities of 7 years or less.
As with any professional service, word of mouth recommendation is the best source. Don't go to any free seminars nor respond to ads in the paper or Yellow Pages. There are many financial planners out there who will put your interests above their own, but there are also a fair number who don't. Be sure to find out the academic and professional background of a planner that you're considering. Many have little relevant background and are really in a second or third career.
Planners are typically paid either by hourly fees or commissions from insurance and investment products they sell you. If you want to be assured of objectivity, pay by the hour. While I may be biased since my background is as a CPA, I think CPA financial planners may be the ticket, but there are exceptions to that assertion as well. Word-of-mouth recommendation is key. One organization that has a good reputation is NAPFA - the National Association of Personal Financial Advisors. You might check out their web site. Total cost of a fee-only look see at your situation: $1,000 and up.
First, it may cost you a lot less to retire than you have been led to believe.
Second, spending some time making sure your investments are well-diversified and consist of good-performing mutual funds, etc. could result in your enjoying twice as much retirement income from same as your more recalcitrant fellow boomers.
Third, figuring out when and where you want to retire again has enormous financial implications.
Finally, deciding what to do with your home, particularly if you have a lot of money tied up in it, is an important task. If you can have the mortgage paid off by the time you retire - imagine how much that brightens your retirement prospects.
The predominant concern, though, is making sure our parents are receiving the attention and care they need, particularly, as is increasingly the case, they live at a distance. Fortunately, most cities have an agency on aging that is a valuable resource for children and parents alike in making sure our parents are cared for appropriately. We tend to lose sight of how much they sacrificed while raising us, so it's only fair to respond in kind as their needs grow in older age.
Fee-based financail planners are more independent, although even they may have preferences for certain insurance and investment products. When all is said and done, though, it boils down to the individual - his or her experience and objectivity. Since there are virtually no barriers to calling oneself a "financial planner," however, caveat emptor.
Regarding my future endeavors. My current PBS special, sporting the same name as the book, debuted in December and will continue airing through next fall. The program was very popular in December and the next time it will be broadly aired is in March.
I am working on another book, "Get Serious," which, while targeted at all ages, is of particular interest to younger boomers and those under 40, most of whom find themselves dabbling in saving and investing, but they still haven't gotten serious about preparing for the future. There will likely be another PBS special on the same subject next December.
For those tempted by running up credit card bills, particularly at this time of the year, remember the words your parents probably imparted to you when you were an adolescent: "For one moment's pleasure, you could end up paying for the rest of your life." While not evident at the time, your parents were talking about credit card loans.
Paying off the mortgage sooner rather than later is one of the best things you can do for your financial wellbeing. Those who insist on keeping the mortgage - or adding to the mortgage in order to "save more taxes" are delusional. Without getting into a complex discussion, suffice it to say that tax rates are so much lower now than they used to be that the benefit of the mortgage interest deduction is nominal at best. That said, however, you still shouldn't make any extra payments against your mortgage until you have contributed generously to your retirement savings plans. There's always time in the future to pay down the mortgage, but with retirement plans, it's a use it or lose it proposition. Every year you forego making contributions is a year you can't make up for in the future.
And a big thank you to our special guest, Jonathan Pond. Be sure to watch his PBS special in March, and for our younger members, keep an eye out for his new book, "Get Serious."
The reason for the high equity exposure: The best we can count on is past performance, and over 10 year or greater holding periods:
Stocks beat bonds
Bonds beat short-term investments like money market funds.
Since we are likely in a long period of lower interest rates, the case for equities is even stronger. You need growth more than income, because today's retirees, even more so for boomers, are going to see their cost of living double or more during retirement.
I have read through your conversation here with interest, and was please to see that you recommend that consumers look at Traditional IRA to Roth IRA conversions even in their retirement years. Of course, there are tax implications, but I've heard from many consumers that the tax-free income they're then able to take from their IRA a decade later is a wonderful load off!
Now to my question ... Your introduction text mentions that consumers should be warry of "misinformation put forth by the media and the finance industry." Can you give us an idea of what misinformation you're referring to here?
In short, the media and most financial companies would like you to believe that you're in awful financial shape when the facts show the opposite for most baby boomers, 80% of whom are on target to achieve a satisfactory retirement. Don't let their scare tactics discourage you. You Can Do It!