Complete Financial Solutions, Inc.

Workers are now retiring at older ages because the incentives to retire have changed. Since the mid-1990s, the average retirement age has risen from 62 to 64 for men and from 60 to 62 for women, according to a new Center for Retirement Research at Boston College analysis of Census Bureau data. The trend toward later retirement has been driven by declines in traditional pensions and retiree health benefits offered by employers, changes in the way Social Security benefits are calculated, better education and health, and less strenuous jobs that people are able to perform at older ages.

Fewer workplace benefits. The shift from traditional pensions to 401(k)s made retirement a more risky prospect because retirees must manage their investments and control spending on their own. The decline of employer-provided retiree health insurance gives employees an additional incentive to keep working until they qualify for Medicare at age 65.

Greater longevity. Individuals are now living longer, which is more years of retirement that need to be financed. Working a few years longer gives workers more time to save and shortens the period of time they need to pay for. Many people in their 60s are also healthy and able to work, especially now that many American jobs are knowledge-based rather than manufacturing positions. People with more
education tend to work longer. Recent studies show in 2011, nursing home care topped more than $87,000 per year and home health care was even more. Thankfully there are alternatives to traditional long term care policies that bundles this coverage with annuities.  If you’re at the point in your life and you’re unable to qualify for long term care insurance, annuities with a built in long term care option are probably a great option for you.

Social Security changes. The Social Security formula has been changed to make working longer a better deal. The earnings test, which temporarily withholds Social Security payments for people who earn above certain limits, was removed for workers above full retirement age. For most current workers, the full
retirement age is 66 or 67. There is also now a delayed retirement credit, which increases benefits for each year of delayed claiming between the full retirement age and age 70. A recent report of the social security system show that the funds will be exhausted by 2033, three years earlier than previously
forecasted.  Medicare trust funds is set to run out of money in 2024, after which they will be able to pay only 87% of scheduled hospital benefits to retirees. Even if Medicare is repaired, an average couple retiring at 65 will need to set aside from $230,000 to $271,000 just to pay for medical costs (this includes Medicare and MedSupp premiums). This is assuming a life expectancy of 85 for women and 82 for men.

How does one make up for that possible loss of retirement income? What type of plan do you need to ensure you have enough to cover your expenses?  These are important questions to consider, no matter what age you are.  With defined benefit pension plans falling by the wayside, more investors are turning to products that act as pension substitutes. We have products, similar to pension plans, which provide a lifetime of income or death benefit to your heirs, depending on your goals.

Contact us today to learn how you can take control of finances for a worry-free retirement.

If you need further assistance my firm, Complete Financial Solutions, Inc. specializes in retirement planning. We have locations in Raleigh, Charlotte, Fuquay-Varina, and Wilmington. Give us a call @ 1-888-316-6232 or email us at  valerie@completefinancialsolutions.org

As a Financial Advisor I have an obligation to confront this and tell you the truth. If you are a Dave Ramsey follower please read the whole blog and don’t jump to conclusions. I have met some of his followers and their attitude is if Dave says it then it’s always the truth and the only truth. This becomes a problem for me. Having said that I have no problem with Dave Ramsey the person and much of his advice is great. However there is some of his advice that I believe is off base.

Dave’s business and marketing plan has been a great success. If you think of all the people that sign up for his Financial Peace University every single month I think we can agree it’s a very profitable business plan. This does not count the books, tapes and live events that he sells out all the time. I think we can agree he has done a great job marketing his business. I admire him for this success.

Let’s take a look at what Dave teaches and break it down. His advice for getting out of debt is right on and he is great at motivating people to get out of debt and stay out of debt.  He calls his teachings the 7 baby steps.

1. Build a $1000 emergency fund

2. Pay of non-mortgage debt

3.Build a full emergency fund

4. Save 15% into tax advantaged accounts

5. College Funding for Children

6.Pay off  Home

7. Build Wealth and Give

This is all good advice. My problem with his advice is that it’s general advice and everyone has different circumstances. For example he says that you should payoff student loans before contributing to a retirement fund with a match. So if your student loan rate is 4% and you have an employer that matches 50% of 6% of your contributions then you are leaving money on the table. This makes no sense at all.

My next problem is with credit cards. He says everyone should not use credit cards. Again you cannot just give out general advice because it does not apply to everyone the same. Some people payoff their credit cards each month and get all kinds of benefits and cash back.

Then there’s the advice about investing. This is where Dave’s advice really makes no sense and is can be a recipe for disaster. First of all he says that you should invest into growth stock mutual funds and you will earn 12% on average. If you look at that category there are over 700 funds in that category and over the last 10 years only 1 is above 10% which is CGM Focus Fund. After loads come out this fund is below 10%. The 2nd best drops down to a little over 7%. Then it drops to 4%. The category average is a negative return over the last 10 years. Worst than the 12% return that Dave says you can get, is that he says you can draw out 8% at retirement. This is the most ridiculous advice he gives and it is just plain dangerous. Based upon the history of the stock market you have an 83% chance of failure using this advice of pulling out 8%.

Finally Dave advises to use loaded funs which usually charge a 5-6% load or commission the 1st year you buy the fund. Dave says “Instead of investing by himself he chooses to go with a pro.” These are called ELP’s. Endorsed Local Providers. This is another place Dave’s business makes money. ELP’s pay Dave to be listed and in return get referrals from Dave.

The last thing I will talk about is Dave saying to always buy term life insurance. Life Insurance is one of the best estate planning tools available to heirs of  large estates. Life Insurance and Roth IRAs are the only thing left to put money into that is paid out income TAX FREE. Most people do not understand the true power of using Advanced Strategy Life Insurance for their estate. Obviously Dave does not understand these strategies either. Dave endorses certain companies that sell term insurance and guess what this is another way Dave makes money. I wonder how many estate plans have been blown up because people cashed in their Tax Free Life Insurance plan because they heard Dave mention that permanent life insurance is not good.This is sad and since Dave himself  or Lampo Group his company is not licensed as an investment advisor (that I can find after much research) then the advice is not regulated.

In summary Dave is a great motivational speaker, radio host and helps people everyday get out of debt. However Dave’s advice is very general at times and does not apply to everyone. Then his investment advice is just plain dangerous and makes no sense at all. Finally Dave owns a great business and continues to market that business very well thru churches, radio, books and live events. In addition his name is so powerful that companies and ELP’s can have him endorse them and people will buy because Dave put his stamp of approval on it.

I hope everyone that reads this blog will consider the whole blog and not just pick out the things that I have a problem with. My advice is to be smart and remember every single person is unique and has different goals and plans for the future. Get advice from someone that knows your individual situation and will take the time to listen to your concerns. If you are a Dave Ramsey follower, remember much of his advice is really good so NO need to bash what I’m saying just because I have a problem with a few of the things that Dave says.