5 Good Minutes: 2019 Updates

2019 Updates: Cost of Living Adjustments, Increased Contribution Limits and More

There are several important changes which can impact your retirement.  Today’s episode of 5 Good Minutes will focus on the 2019 updates to:

  • Social Security Benefits
  • Medicare Part B Premiums
  • IRA Contribution Limits
  • Retirement Plan Contribution Limtis
  • Health Savings Account Contribution Limits

Get A Copy of Your Social Security Benefits Esitmate

If you haven’t received a copy of your Social Security Benefits Estimate and Earnings record, you can obtain a copy by clicking on the button below.  It will tell you your projected benefit at Normal Retirement Age, your benefit at age 62 and at age 70.  The report also shows your earnings record over time.

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Visit the Retirement Learning Center

Take a moment to visit our retirement learning center.  There is plenty of content about Social Security, Investing in retirement, and planning for retirement.

Podcast: Preventing Elder Financial Abuse

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Elder financial abuse is a growing problem in America.  There are some steps you can take to prevent people from taking advantage of you.  In this episode of Your Money: One on One we talk about some of the things you can do to protest yourself.

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Our guest is Jonathan Dehmlow and we discuss:
  • Durable Powers of Attorney
  • Guardianship
  • Conservatorship
  • What we should be telling our kids or asking our parents
If you missed the first episode, please click here

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About our Guest

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Johnathan Dehmlow
Estate Planning Specialist, Fields Dehmlow and Vessels
Jon is an estate planning specialist with Field Dehmlow and Vessels.  He is the “preventative maintence” attorney when it comes to protecting yourself from financial scams and abuse.
Jon graduated from Wheaton College in Illinois and received his law degree from Baylor University.  He also served in the Army National Guard.
Here is how you can get in touch with Jon:
(740) 373-5346

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If you Suspect Elder Financial Abuse, Here is who you can call:

West Virginia Adult Protective Services

Phone:  Toll Free:  (800) 352-6513, Local Office (Wood County):  (304) 420-2560

Website: Click Here

Ohio Adult Protective Services

Phone: (740) 373-5513

Website: Click Here

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Your Money: One on One – Ep 1: Elder Financial Abuse

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We face many financial risks in retirement. One of those which is often overlooked is being taken advantage of by someone else. Elder financial abuse is a growing problem in the United States. Seniors lose an estimated $36.5 Billion every year to fraud.
 
Our guest Ethan Vessels joins us for an in depth discussion on this topic. We will discuss:
 
  • Examples of abuse he has seen.
  • The Types of abuse by strangers.
  • How the people you know and trust take advantage of you.
  • What type of recourse you might have
  • Some steps you can take to limit your risks.
  • And what you can do if you suspect you or someone you know is a victim of financial abuse.

Simply click on the player to listen to our discussion.

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Links and Resources To Help With Elder Financial Abuse

 

West Virginia Adult Protective Services

Phone:  Toll Free:  (800) 352-6513, Local Office (Wood County):  (304) 420-2560

Website: Click Here

Ohio Adult Protective Services

Phone: (740) 373-5513

Website: Click Here

 

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About Our Guest….

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Ethan Vessels

Ethan is a litigation specialist with the firm of Fields, Dehmlow and Vessels.  One of his area’s of specialization is Elder Financial Abuse.  He is a graduate of the United States Military Academy and The Moritz College of Law at The Ohio State University.

To learn more about Ethan, click on the button.

 

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Here’s How To Get In Touch with Ethan

Phone Number:  740-374-5346

Email: ethan@fieldsdehmlow.com

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We’d Love to Hear From You…

If you have a question about today’s episode, or you have a question we can address on a future episode, we would love to hear from you.

Simply fill out the form below.

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[et_pb_contact_field field_id=”Name” field_title=”Name” field_type=”input” required_mark=”on” fullwidth_field=”on” input_border_radius=”0″ form_field_font_select=”Arial” form_field_font=”Arial||||” form_field_font_size=”18″ form_field_font_size_tablet=”18″ form_field_font_size_phone=”18″ use_border_color=”on” border_color=”#000000″ border_style=”solid” /][et_pb_contact_field field_title=”Email Address” field_type=”email” field_id=”Email” required_mark=”on” fullwidth_field=”on” input_border_radius=”0″ form_field_font_select=”Arial” form_field_font=”Arial||||” form_field_font_size=”18″ form_field_font_size_tablet=”18″ form_field_font_size_phone=”18″ use_border_color=”on” border_style=”solid”] [/et_pb_contact_field][et_pb_contact_field field_id=”Question” field_title=”Enter Your Question Here, We’ll answer it on a Future Episode” field_type=”text” required_mark=”on” fullwidth_field=”on” input_border_radius=”0″ form_field_font_select=”Arial” form_field_font=”Arial||||” use_border_color=”on” border_width=”4″ border_style=”solid” form_field_font_size=”18″ form_field_font_size_tablet=”18″ form_field_font_size_phone=”18″ /]

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Visit Our Retirement Learning Center

Are you planning for your retirement? Be sure to visit our retirement learning center. We have several videos on a variety of subjects which will help you plan. We cover topics like Social Security. And we talk about investing in retirement.
Click on the button to get started.

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Volatility

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In our last video, we talked about the first correction we had experienced in over two years.  In this video we will discuss the increased  Volatility and how it compares to previous years.

Video:  Stock Market Volatility 2018

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Click Here to watch on YouTube

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Stock prices fluctuate.  Volatility measures how much prices change from one day to the next.  The majority of the trading days over the past fifty years moved less than 1%.  Sometimes prices change in more extreme ways.  Price moves of between 1 and 2% happen with some regularity.  Bigger moves happen too, but those occur less frequently.

Today a 1% move in the Dow Jones Industrial average is approximately 250 points.

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Volatility has increased in 2018.  Last year there were only 10 total days when stock prices moved more than 1 %.  That has changed in 2018.  How does this compare to the historical averages?

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But how does 2018 compare to other years?  The volatility we have seen so far would rank 2018 the 12th most volatile year of the last half century.  One third of the days this year have experienced a price change of 1% or more.  Compare that to 2008.  In 2008, more than half of the trading days experienced a price change of over 1%.

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The Issues With Maximizing Social Security

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The Issues with Trying to Maximize Social Security

A lot of planning effort focuses on maximizing Social Security. One website claims there are 567 ways to claim you Social Security benefits. Maximizing Social Security generally requires delaying benefits until you are older. Each year you wait, the more you receive.

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Determining Factors

The eventual success of maximizing your Social Security hinges on these two things:

  • First, will you live long enough for it to work?
  • Secondly, how will delaying your benefits impact your retirement savings?

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Living Long Enough…

 
Each year you delay filing for benefits means you receive a larger monthly income. However, it also means you don’t receive any Social Security during those months. Over time this can be a significant amount. To illustrate our point, consider the following example of John and Jane Doe.

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John and Jane Doe

John and Jane Doe were born in 1960.  Social Security estimates they will receive $2,000 per month at full retirement age (age 67).  John and Jane are going to retire at age 65, and they want to determine if they should start their benefits now or wait until they are 67.  In addition, they also wonder if they should wait until age 70 to claim their benefits.

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65 vs 67

Full retirement age for both spouses is 67 years old. Because they are retiring early, they receive reduced benefits at age 65. The monthly income at age 67 is larger. However, they will also not receive income for 24 months. They could receive greater lifetime benefits by delaying their Social Security benefits. But this only works if they live long enough. In this situation, they have to live to be older than 83 years old for this strategy to make sense.

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65 vs 70

The decision to delay benefits to age 70 must consider the same factors. Age 70 provides the largest possible income payment. However, not receiving benefits for 60 months is significant. The “break-even” point for this decision is age 85.  What are the chances either reaches 85?  

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This illustration represents a simplified and hypothetical example.  Your situation will differ, and should be evaluated based on all factors involved.

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The Impact on Your Retirement Savings

This decision reaches beyond how long you need to live to break even. It also needs to include a review of how it will impact your retirement savings. Most people rely on Social Security and their savings to produce retirement income. Delaying Social Security benefits means you have to rely more on your nest egg. This also has some pitfalls.
The biggest risk retirees face with their nest egg is overspending. Taking too much income from your savings increases the chances you will run out of money. Raising your withdrawal rate to replace Social Security increases this risk.
In addition, your retirement savings can last beyond your lifetime. Social Security does not. Are greater Social Security benefits more important that your potential legacy?

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Is maximizing Social Security worth it?

You can compute the optimal solution to the Social Security equation. However, you cannot isolate it from the other unpredictable parts of life. Sometimes, trying to be precise in an imperfect world leads to poor decisions.
 
You need to understand how delaying Social Security improves your benefits. In addition, you need to comprehend how it also impacts survivor benefits. However, you also need to see how it impacts the other financial aspects of your life. In the end, Social Security is only part of the picture. You should view it within the proper context.

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Do You Have Any Questions?

We are happy to answer any questions you have about Social Security and Retirement Income.  Simply type in your questions  in the form to the right, and we will get back to you with an answer as soon as we can.

Thanks!

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Realistic Expectations for the Future

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Realistic expectations about the future improves the planning process. And, it helps you make better decisions.
 
The planning process involves computing future values of your retirement savings.  To do these computations, we have to make assumptions about the future.  We plug in numbers for your savings rate, your withdrawal rate, a period of time, and a future rate of return. Unrealistic optimism about any of these items leads to less useful output.
 
You control some of these elements.  You determine how much you save and how much you withdraw.  In addition, you can also decide how long you intend to accumulate retirement assets.  However, future rates of return are completely unpredictable.

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Creating Realistic Expectations

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History doesn’t always repeat, but it often rhymes.  The data tells us stocks have generated a 10% average annual return for more than 92 years.  The next nine decades may show similar results.  But what about the next five to 10 years? Should we expect an average annual return of 10% per year?

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The basics of  stock market valuation

Think of a used car.  Kelley’s Blue Book gives people an idea of the fair value of a particular make and model.  This makes it easy for you to determine if the same car offered locally is over priced or listed for a bargain.

 

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You can also describe individual companies or the stock market as a whole as expensive or cheap. Dividing the price you pay by the profits tells us the price-to-earnings ratio. PE ratios above a certain level tell us when something is expensive. While lower levels describe it as cheap.
 
The average PE ratio for the US stock market since 1950 is 17.65 (the red line on the chart). Many people would consider the market fairly valued at this level. At year’s end, the PE ratio measured over 23, which indicates a more expensive environment.

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How Has Valuation Impacted Future Returns?

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We used data provided by Yale professor Robert Shiller from 1950 through the end of 2016.  We wanted to see how valuations influenced future returns.  So, we looked at the PE ratio at the end of each calendar year.  Then we computed the compounded returns for the next five and ten calendar years.

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When valuations were below average, stocks generated above average returns in the future.  Conversely, when valuations were above average, future returns lagged well below their averages.

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The Impact To Long Term Plans

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Historical data does not pinpoint future returns.  But, it can shape our expectations.  Current PE ratios show equities could deliver below average results in the next 5 to 10 years.
 

The impact on savers…

Remember, lower returns change the math, and make it more difficult to achieve your goals.  To achieve similar results, you can do two things. First, you can delay your retirement. Second, you can try to save more. Both of these steps will help you offset the impact from lower returns.

 

The impact on retirees…

Lower future returns also increase the challenges when you rely on your nest egg for income. Ideally, you try to spend less than your accounts earn over time. If future returns are lower, it creates challenges. It becomes harder to increase your income in the future.  Also, it makes it harder to maintain a reasonable withdrawal rate.  Your withdrawal rate impacts how long your money will last.  
 
The value of the planning process lies in the quality of the assumptions used. You shouldn’t expect your plan to be a precise prediction of the future. But, realistic expectations can improve the information you receive. Then, you can then make better decisions about your future.

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