What’s Your Financial IQ?

concernedcouplemedJust last week, results were revealed from a recent RICP® Retirement Income Literacy Survey designed to determine whether people who are nearing or already in retirement have the knowledge they need to successfully plan for a financially secure retirement.

I wasn’t entirely shocked by the results and I feel it’s important to share them with you because the insight to be gained is critically important to your own financial success.

The results were this: Out of 1,019 Americans, aged 60-75 with at least $100,000 in investable assets who took this basic 38-question quiz, a staggering 80% failed.

Why the high failure rate?

It’s actually pretty simple. It’s a matter of financial education. Many people just don’t know what they don’t know. And it’s really not their fault. Financial literacy has never been taught in schools and it’s barely taught in the workplace. To make matters more complicated, the government is constantly changing the tax laws. (If you’ve read any of my books you already know, I’ve been on my soapbox about this for my entire career.) Lastly, the financial services industry has a history of using fear and confusion to market rather than providing solid financial education. Although, I’m happy to say that this is finally changing.

Americans lack basic retirement planning education and this must be fixed or it will have dire consequences — not only for individuals — but for our economy and society.

I don’t say this to scare you. It simply is what it is. Eight thousand baby boomers are going to turn 65 every day for the next 18 years. They’ve got to seek and be provided with simpler tools and financial education that empowers them.

Financial education is the foundation necessary to build a secure financial future.

What I have learned over the many years as a financial educator is that people want to be responsible for their own financial futures. The problem is most of them just don’t know how to get started. Or, if they’ve taken steps in certain areas, they’ve neglected others.

Where do you stand when it comes to your own financial literacy? If you’re reading this newsletter, chances are you’ve read one or more of my books or attended one of my seminars and that’s a great start. If you haven’t, I’d recommend reading Smart Women Finish Rich, Smart Couples Finish Rich, The Truth about Retirement Plans and IRAs, or The Truth about Money for starters. Tune in to Ric Edelman’s radio show or visit either of our sites, FinishRich.com and EdelmanFinancial.com, for lots of free content and resources. And while you’re there, check out the seminars we offer as well. The resources are all there for you — right at your fingertips.

When you know better, you do better.

The survey identifies that to increase retirement income literacy, having a written retirement plan has been found to not only be effective in leading to better planning and financial decisions, but it’s also an effective vehicle for education.

The good news is that the results showed that 63% of those surveyed have a financial planner.

But here’s what’s important to note: Only 27% of that group actually have a formal, comprehensive, written retirement plan. What that really means is that a lot of these people think they have a financial planner but in reality they have a sales person who sold them something, rather than a fiduciary based financial planner.

Financial education plays a huge role here because when you are informed enough to know what questions to ask and know what to look for, you can protect yourself against bad planners and sales people. An educated client is the best type of client for a good financial planner with the fiduciary duty to work in your best interests (as opposed to his own best interests or those of his employer.)

So, my next question for you is — do you have a formal, comprehensive written retirement plan?

If you don’t, my hope is that these survey results are enough to show you that you need one. On the other hand, if you are working with a good financial planner and you have a retirement plan in place, excellent! And keep in mind that just as you go to the doctor each year to assess your health, you must revisit your retirement plan to ensure you’re staying financially fit. I like to think of it as a “financial check-up.”

You’ve got to create a plan, work a plan, then re-evaluate the plan annually, and if needed, start all over again. It’s simply not a once and done process. It’s just like going to the doctor or dentist, you need to meet with your planner annually and review EVERYTHING.

This retirement income literacy survey certainly sheds some light on the work that needs to be done, and I’m confident it can be done. Financial education is the key and where it all begins.

If you need help with planning your retirement, reach out to us at Edelman Financial Services, where our core belief is that everyone deserves great financial advice.

We manage $13.7 billion dollars for more than 26,000 clients1 and have been helping people just like you for more than 25 years. Contact us today for your free, no obligation retirement portfolio review or simply call (855) 215-7171 and tell them David sent you.

1As of September 30, 2014

Are You Taking Control of Your Financial Future?

DavidFITWe wrapped up our 2014 Smart Women Finish Rich® seminar tour just last week, where over 3,000 smart women signed up to attend events in 14 markets over the last 30 days. Our team of instructors had the honor and pleasure of meeting so many of you who took time from your busy personal and professional lives to make it a priority to join us.

The response we received from women across the country only confirmed what we already know — women are stepping up in a big way to take control of their own financial futures and that of their families.

Thank You for Joining Us

If you attended one of the 75 seminars offered, congratulations. If you missed it, take heart! Based on demand and the feedback we received, Edelman Financial Services will be bringing the Smart Women Finish Rich seminars back for 2015. Stay tuned as we’ll be announcing cities and dates very soon. Once we do, clear your schedule, mark your calendar and make the commitment to be there. Why? Read on!

(Men, bear with me here. We have seminars being planned for you, too.)

Ladies, You are an Economic Powerhouse

You can’t pick up a newspaper or magazine lately without reading about the huge breakthroughs and advances women are making when it comes to wealth creation, business and education. The numbers say it all — women are on track to earn $18 trillion this year in America. Women own 10 million businesses and are opening them at a rate of 2:1 vs. men. Women control over $14 trillion in assets and 83% of all purchasing decisions as well. Women are graduating from college at a faster rate than men and now make up over 50% of undergraduates and earn nearly 60% of all graduate degrees. Women even make better investors, consistently outperforming their male counterparts.

What’s the Driving Force?

According to a recent Women, Power and Money study (conducted by Fleishman Hillard and Hearst media), women are motivated by the desire to achieve financial security for themselves and their families.

When I look back over the many years that I’ve been teaching values-based financial planning through my Smart Women Finish Rich books and seminars, security as a value is almost always on the top of everyone’s list. It’s one of several values that can be the driving force behind making smart financial decisions. The key here is to identify what your own personal values are when it comes to money.

What’s Important about Money to You?

Pinpointing exactly what’s important about money to you not only makes it possible to plan your future intelligently, it also makes it easier to stick to your plan. Once you identify what your values are, you will do more to protect them than just about anything else in the world. Values are not tasks or resolutions, like “spend less,” “save more” or “keep the house clean.” Values are not things we get bored with. Values are what we believe in. They are what motivate and shape us — and are the foundation of the holistic approach we take toward financial planning at Edelman Financial Services and in our Smart Women Finish Rich seminars.

So, What (if Anything) is Holding Women Back?

It’s being called “The Confidence Gap.” What we’re seeing happening is that even though women are experiencing huge breakthroughs when it comes to their finances and careers and overall are influencing today’s economy (and our future economy) in a major way, there’s a hesitation to fully step into their power and take complete control of their financial destiny.

Research conducted by Fidelity revealed that 52% of women still think their husband or male partner does a better job overseeing the family finances. An astounding 80% of affluent females consider themselves “beginner investors,” compared to 50% of men. And only one in eight members of Gen Y calls herself the primary decision-maker when it comes to personal finance. It’s time for all that to change.

Through our Smart Women Finish Rich seminars, our goal is to be a catalyst for eliminating “The Confidence Gap” — through education, empowerment and support.

The Time to Take Action is Now

I know from experience that when it comes to financial education, women tend to take action when they are experiencing a life changing event like a divorce, death of a spouse or job loss — because they’re forced to. But consider this. According to the National Center for Women and Retirement Research, there’s a 90% chance that a woman will be the sole decision maker for family finances at some point in her life.

And with an estimated $22 trillion in assets projected to shift to women by 2020, I urge you to be proactive instead of reactive. You can do this — and we’d like to show you how.

If you missed our Smart Women Finish Rich seminar, no problem. Contact us today to have one of our advisors reach out to you or simply call (855) 215-7171. At Edelman Financial Services, we will get you started with a plan to help you take full control of your financial future. We’re here for you!

Have a great weekend everyone!

How to Cut Back on Your Double Latte Factor

Stop being ripped off by what I call the Double Latte Factor. What’s the Double Latte Factor? It’s the stuff we sign up for monthly with a “subscription fee.” You know the stuff…like your phone that you’re on right now, the cable TV that’s playing in the background, the gym membership you’re probably not using anyway. Right now go fix and renegotiate just one thing. It could save you hundreds, if not thousands annually. I called my phone and cable provider this week and in five minutes got a new package that saved me $800 over two years. Pick a monthly fee that drives you crazy and try to renegotiate it now.

Are You Maximizing Your Retirement Plan?

Last week I shared with you the new retirement tax rules for 2015. If you haven’t read about them, take a moment to review my summary here. You may be feeling as excited as I am about the increased contribution limits, but I’ve also heard feedback from readers who feel completely unaffected because they aren’t contributing close to the maximum to begin with.
 
I’ve put together the following example for you to see how it’s possible for you to save more, without it hurting as much as you think it will — all with magic of pretax investing. (And just as a reminder, this is not tax advice. Before you take any action concerning your retirement in 2015, consult your tax advisor or meet with a financial advisor.)
 
MoneyNest.jpg

How to Save $750 a Month at a Cost of Only $350
 
I hear your protests, “But, David, I can’t afford to put away more than I do.” Here’s why I know that you can: If you are investing using a retirement plan like a 401(k) or an IRA, then every dollar you invest actually costs you less than 70 cents.
 
How is that possible? It’s the magic of pretax investing. As we know all too well, every time we earn a dollar, before that dollar ever makes it into our paycheck, the government grabs something like 27 cents in federal income withholding taxes (often more — and before very long, probably a lot more). On top of that, local governments may grab another five cents in city and state withholding (exactly how much depends on where you live). And then there are Social Security taxes, Medicaid and unemployment. But it doesn’t have to be that way. If you are contributing to a pretax retirement account — like a 401(k) plan or an IRA — the money you put in is entirely tax-deductible (up to certain limits). In other words, it comes in off the top, before Uncle Sam takes his bite. You get to keep the whole dollar for you and your future.
 
What this means is that if you decided to start saving an extra $50 per paycheck in your 401(k) or IRA, you would not see your take-home pay go down by $50. In fact, it would go down only by $35. The $15 that normally would have gone to the taxman goes to your future instead.
 
And if your employer has a matching program, you may be able to add another $25 to that $50. In other words, a $75 investment is costing you only $35. If you have ever shopped a sale, how can you refuse a bargain like this? The bottom line is that you can save much more than you think, easier than you think.
 
It’s called ‘Pay Yourself First’
What I’m talking about here, of course, is the tried-and-true concept known as “paying yourself first” — putting some of your hard-earned wages into your retirement account before the taxman takes his cut. I’m going to be blunt here. If you want to be financially secure and ultimately finish rich, you have to do this. There is absolutely no other way to do it if you allow the government to continue muscling in ahead of you. I mean, think about it — how can you possibly expect to get anywhere if you’re willing to give up 30 to 40 cents out of every dollar you make before you ever have a chance to spend — or invest — a penny of it? There’s no getting around it. You must pay yourself first. Not doing it is simply not an option.
 
If You Are Not in the Game, Get in the Game
 
By now, I hope you are convinced that there has never been a better time to be saving for your future. Even if you have to start small. So if your employer offers a 401(k) plan and you are not already enrolled, call your benefits office today and find out how to sign up. If your company doesn’t have a 401(k) plan, you will need to set up your own Individual Retirement Account (IRA). You can contact us at Edelman Financial Services and we can help you do just that.
 
Depend on Your Younger Self Now
 
No one is going to take care of you or me the way we would like to live when it comes time to retire. There are simply not enough taxable dollars to go around to support the 150 million Americans who will reach retirement age over the next 50 years. You know it and I know it. All we can count on is ourselves.
 
There’s only one real way to guarantee yourself a comfortable and secure retirement: You need to depend on your younger self now. You will save yourself tomorrow by deciding to save yourself today.
 
The time to take action is now. Increase the amount you are saving for retirement. Decide to pay yourself first. Review what you are invested in and fix it if it needs fixing. I promise you — your older self will thank you later.
 
If You Need Help, Get It
 
If you have retirement planning questions or need help, there’s no reason not to get it. I’m now the Vice Chairman of Edelman Financial Services, where our core belief is that everyone deserves great financial advice. We manage $13.7 billion dollars for more than 26,000 clients1and have been helping people just like you for more than 25 years.
 
Contact us today for your free, no obligation retirement portfolio review or simply call (855) 215-7171. 
 

New Retirement Tax Rules for 2015

Have you heard about the new tax retirement rules for 2015 that allow you to save MORE MONEY? Hip hip, hooray! Okay, so maybe I am being a little bit over excited about tax laws and retirement accounts, but hey, I do love this stuff. And candidly, you should too because every dollar you save for retirement is “a dollar saved for retirement.” And every dollar you save in a tax deductible retirement account is a dollar you don’t pay taxes on now.

That’s a dollar you get to keep for as long as you keep it in the retirement account. I know, call me crazy, but I get totally excited about delaying paying taxes for as long as possible.

For years I rallied and complained that the government wasn’t doing enough to make it easy for us to save in tax-favored retirement accounts. I went on Fox’s The O’Reilly Factor and specifically talked with Mr. O’Reilly (who always calls me “Mr. Bach”) about how the IRA tax deductible rules haven’t changed and were stuck at $2,000 a year…FOREVER.

Well, the government listened. Okay, probably not to Mr. O’Reilly and me debate, but they did FINALLY act and began to increase the contribution limits for retirement plans. And millions of Americans took advantage of the changes. Hopefully, you did too.

AND NOW WE’VE GOT INCREASES AND CHANGES FOR 2015 RETIREMENT ACCOUNTS 

The IRS just announced the new 2015 Pension Plan Limitations and Rules. Not only have contribution and income limits increased, but a brand new retirement account option is being introduced as well.

Here’s a quick summary for you. Just keep in mind that it’s just a quick summary (not tax advice), so in order to make an informed decision on any action you may want to take concerning your retirement plan in 2015, you’ve got to be thorough in your research, consult your tax advisor or meet with a financial advisor (which I talk more about below.) Sound good? Great, here we go:

- 401(k), 403 (b) and most 457 plans have now increased from $17,500 to $18,000. If you’re 50 or older, the catch-up contribution has also increased by $500, bringing it to $6,000 in 2015.

- IRA income limits have now been increased. Although the limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500, the tax deduction for making a traditional IRA contribution is phased out for investors who have a workplace retirement plan and a modified adjusted gross income between $61,000 and $71,000 for individuals (or $98,000 to $118,000 for couples). That’s up $1,000 and $2,000 respectively from 2014. For individuals who don’t have a workplace retirement plan but are married to someone who does, the tax deduction for an IRA contribution is phased out if the couple’s income is between $183,000 and $193,000 in 2015.

- Introducing myRA. President Obama announced this in the beginning of the year and details are supposed to be forthcoming in December. According to the Treasury’s website, beginning in late 2014, the U.S. Department of the Treasury will offer myRA (“My Retirement Account”), which is a Roth IRA account available to anyone who doesn’t have access to an employer sponsored retirement savings plan and is earning less than $129,000 per year (or $191,000 per year for couples). Plans are portable and contributions can be made through direct deposit. Contributions can be withdrawn tax free and earnings can be withdrawn tax free after five years and the saver is age 59½. After 30 years or $15,000 in savings, the saver must transfer the balance to a private sector retirement account. What’s more, myRA accounts are backed by the U.S. Treasury and are guaranteed not to lose value — and there are no fees. To explore this new option in more detail, click here.

Additional changes include increased Roth IRA income cutoffs and a larger saver’s credit threshold. For more detail, check out the new tax deductible rules for 2015 by clicking here.

GOT RETIREMENT PLANNING QUESTIONS? WE’VE GOT ANSWERS

While I know you can tell by now I’m excited about the new increases to the retirement rules for 2015, I also know by just re-reading what I wrote, that it can easily be confusing. If you have retirement planning questions or need help, remember I now have a team of fee-based financial advisors (the kind I always recommend in my books) available to do financial planning for you and your family. At Edelman Financial Services, we manage $13.7 billion dollars for more than 26,000 clients,1 and have been helping people just like you for more than 25 years.

If you have questions or want to take advantage of a free retirement portfolio review before the year end, you can make an appointment by clicking here or by calling (855) 215-7171. Again, the call is free and the first appointment to review your financial situation and have a portfolio review is also FREE. The end of the year is when I review how my portfolio is doing and make plans for next year, and you should too.

1As of September 30, 2014

How to Stop Fighting With Your Partner About Money

I was interviewed recently by Forbes.com contributor, Kathy Caprino on the subject of couples and money.  

When I researched and wrote Smart Couples Finish Rich®, I found that money was consistently ranked the number one source of marital fighting and unhappiness.

SCFR book cover

Usually it happens because we marry our financial opposite. I often joke in my Smart Couples Finish Rich Seminars that people are born one of two ways.  You’re either “born to spend” or “born to save,” and inevitably you fall in love with your opposite.

Couples always laugh when I say this but that’s because they know it’s true.  The question then becomes, well what do you do about it?  And most importantly, how do you resolve your financial fights without more fights?

Continue reading this post in its entirety, here.

 

 

Join Me on National TV

Be on TV with me! Calling all couples in the NY/NJ/CT tri-state area: Are you currently fighting with your spouse over a family financial decision that needs to be made? I’m looking for couples in the tri-state area to come on national television with me to share their story and get coaching to resolve their disagreement. Send me an email today at davidbach@finishrich.com to be considered for this opportunity.