The 1-Page Financial Plan: 10 Tips for getting what you want from Life

Carl Richards, author of The One Page Financial Plan, knows the financial mistakes–including the ones he has made–that people make.  Based on his experience as a financial planner, he provides 10 tips to help people get what they want from life.  Note:  An explanation and examples to illustrate each tip are provided in this article.  His tips are:

  1. Ask why money is important to you.
  2. Guess where you want to go.
  3. Know your starting point.
  4. Think of budgeting as a tool for awareness.
  5. Save as much as you reasonably can.
  6. Buy just enough insurance today.
  7. Remember that paying off debt can be a great investment.
  8. Invest like a scientist.
  9. Hire a real financial advisor.
  10. Behave for a really long time.

For more information, click here. 

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Illustrate how each tip provided in this article could affect an individual’s financial plan.
  • Encourage students to read the entire article to help determine what’s really important in their life.

Discussion Questions

  1. It’s often hard (or maybe close to impossible) to determine what you value and where you want to go in the next 20 to 30 years with perfect accuracy. Still, experts recommend that you establish a long-term financial plan.  What steps can you take to make sure your plan will meet your future needs?
  2. Why is it important to evaluate your plan on a regular basis and make changes if necessary?

Financial Security and Longevity

While Americans are living longer and healthier lives, they also are facing more financially fragile situations. Uncertainty related to financial health in the later years of life has become more common. Lower, less predictable incomes among those retiring within 10 years has resulted in difficulty paying their bills. This group also reports a lower net worth. In 2013, the typical 56- to 61-year-old had an average of $17,000 in retirement savings. This lower level of net worth is partially the result of higher levels of debt than the previous generation. This debt is in the form of higher mortgages and education loans, including amounts owed for their children’s education.

To address these concerns, several policy actions are proposed:

  • Requiring and supporting strategies for to build effective financial capability, including coaching and workforce development programs.
  • Tax policies and other incentives that encourage savings and investment among lower-income and lower-wealth families.
  • Policies to increase educational opportunities without excessive debt.
  • Efforts for protection from financial difficulties caused by medical catastrophe.
  • Policies for improved housing stability of both owners and renters.

For additional information on financial security and longevity, click here.

Teaching Suggestions

  • Have students interview people to determine common actions used to save for retirement.
  • Have students create a presentation to suggest action for improved financial security for various income levels.

Discussion Questions 

  1. What are some financial pressures faced by households as people approach retirement age?
  2. What actions might government and business take to reduce the financial pressures of people approaching retirement age?

 

Reporting Changes to Social Security is Your Responsibility

If you receive benefits from Social Security, you have a legal obligation to report changes, which could affect your eligibility for disability, retirement, and Supplemental Security Income (SSI) benefits.  You must report any changes that may affect your benefits immediately, no later than 10 days after the end of the month in which the change occurred.  Changes you need to report range from a change of address to traveling outside the United States for 30 consecutive days.

Life changes affect your benefits.  You may be due additional payments, or you may be overpaid and have to pay Social Security back because you didn’t report the overpayment promptly. The SSI program may apply a penalty that will reduce your benefits if you fail to report a change, or if you reported the change later than 10 days after the end of the month in which the change occurred.  If you fail to report changes promptly, or if you intentionally make a false statement, Social Security may stop your SSI, disability, and retirement benefits.  Social Security may also impose a sanction against your payments.  The first sanction is a loss of all payments for six months.  Subsequent sanctions are for 12 and 24 months.

Report your change online at www.socialsecurity.gov, or by calling toll free at 1-800-772-1213.  If you are deaf or hearing impaired call TTY 1-800-325-0778.  Mail the information to your Social Security office or deliver in person.  If you receive benefits and need to change your address or direct deposit, create a Social Security account at www.socialsecurity.gov/myaccount.

For more information click here.

Teaching Suggestions

  • Ask students to visit http://www.socialsecurity.gov and to create their own online Social Security account. There is no fee to create a “my Social Security” account, but students must have a valid e-mail address.
  • Ask students to sign into their “my Social Security” account and obtain their benefit verification letter.

Discussion Questions

  1. Why is it important to report life changes to Social Security if you receive any benefits from Social Security?
  2. What are the consequences if you fail to report changes promptly?

What are several ways you can report the life changes to Social Security Administration?

New rules for Reverse Mortgages

The most popular reverse mortgage program is the Home Equity Conversion Mortgage (HECM), which is insured by Housing and Urban Development (HUD).

New rules from HUD add protections for certain surviving spouses after the death of a reverse mortgage borrower.   Until recently, if the non-borrower spouse was not on the loan, he or she was not entitled to remain in the property following the death of the borrower.  But under HUD’s new rules, non-borrowing, surviving spouse can remain in the home if specific conditions are met.  These changes apply to reverse mortgage loans in which the borrowing spouse applied for a reverse mortgage before August 2014.  In addition, the couple must have resided in the property as their principal residence throughout the duration of the HECM, and taxes, property insurance and any other special assessments that may be required by local or state law must have been paid.

The concern regarding non-borrowing spouses has been a source of many reverse mortgage issues.  Here’s why: The amount of money a reverse mortgage borrower can draw is based in part on the age of the youngest borrower—and unless all borrowers are 62 or over, they would not qualify for a reverse mortgage.

For more information:

Consumer Advisory

Reverse Mortgage Information

Teaching Suggestions

  • Ask students to comment on the statement: “While a reverse mortgage can be used to supplement monthly income, some borrowers may face unintended obstacles and consequences”. What might be those consequences?
  • Are the new rules from HUD effective in protecting senior citizens? Why or why not?

Discussion Questions

  1. Why should you talk to a qualified professional before deciding to get a reverse mortgage?
  2. Where can you find HUD-approved HECM Counseling Agencies near you?

A Look at Reverse Mortgages

Every day, approximately 10,000 people in the United States turn age 62, according to the Census Bureau.  And if they are homeowners, they may be eligible to borrow against a portion of the equity in their house by using a loan called a “reverse mortgage.”

The Consumer Financial Protection Bureau (CFPB) is warning consumers about potentially misleading reverse mortgage advertising.  In June 2015, the CFPB issued a consumer advisory stating that many television, radio, print and Internet advertisements for reverse mortgages had “incomplete and inaccurate statements used to describe the loans”.  In addition, most of the important loan requirements were often buried in fine print if they were even mentioned at all.  These advertisements may leave older homeowners with the false impression that reverse mortgage loans are a risk-free solution to financial gaps in retirement.” For example, the CFPB said, “After looking at a variety of ads, many homeowners we spoke to didn’t realize reverse mortgage loans need to be repaid.”

For more information, click here.

Teaching Suggestions

  • Visit the website of the American Association of Retired Person (AARP) at aarp.org. Locate the AARP Home Equity Information Center, which presents facts about reverse mortgages.  Then prepare a report on how reverse mortgages work.
  • Ask students to visit Fannie Mae’s website at fanniemae.com/homebuyer to find out who is eligible for reverse mortgages, and what other choices are available to borrowers.

Discussion Questions

  1. Why should you consult a qualified professional before you decide to get a reverse mortgage?
  2. Where can you find Housing and Urban Development-approved Home Equity Conversion Mortgage counseling agencies near you?

Retirement Can’t Wait

A few decades ago, Americans had a pretty solid three-legged retirement stool.  Social Security and personal savings combined with traditional pensions led to good middle-class retirements for millions.  But today’s stool is a little too wobbly to support that lifestyle for coming generations of workers and retirees.  The Great Recession shows all of us just how vulnerable 401(k) type plans and IRAs can be, and with the savings rates dangerously low, the need to strengthen the system is clear.  Today, workers are largely responsible for their own retirement investments.  The days of a defined benefit pension that you couldn’t outlive are a thing of the past.  Today, we have to take greater ownership for starting our savings, managing and then figuring out how much to draw in retirement.

Most workers need advice on how to invest their 401(k) and IRA savings.  Too often, that advice is not delivered in the customer’s best interest.  The Labor Department is working with the financial services industry, consumer groups and Members of Congress to come up with a plan that protects retirement savings from financial conflicts of interest.

For more information, click here.

Teaching Suggestions

  • Ask students to analyze their current assets and liabilities for retirement planning.
  • Will your students’ spending patterns change during retirement?
  • What are the basic steps in retirement planning?

Discussion Questions

  1. Why is retirement planning so important for today’s workers?
  2. Can you depend on Social Security and your company pension to pay for your basic living expenses in retirement? Why or why not?
  3. Why is it important to start early for a secure retirement?

The Retirement Number Secret No One Wants to Tell You

There’s a substantial gulf between the amount of money Americans have actually saved for retirement and what they might need to last throughout their golden years.”

This article reports the results of a survey conducted by the Employee Benefits Research Institute which discovered that nearly three in five people surveyed had saved $25,000 or less for their retirement.  Even worse—more than a quarter of those surveyed had saved less than $1,000.

To help plan for retirement, many financial experts suggest that you need between 70 and 85 percent of whatever yearly income you had during your career in order to sustain the lifestyle you enjoyed prior to retiring.  While these calculations provide a recommended dollar amount to provide retirement income, the same calculations often create two problems.  First, there is often a big gap between what people have saved and what they need for retirement.  Second, the amount of money you need in retirement is based on what’s important to you and the standard of living you want in retirement.  And the you may be the most important part of retirement planning.

For more information, click here.

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Explain why you should plan for retirement early in your career rather than waiting until you are about to retire.
  • Reinforce the concepts of the time value of money and a long-term saving and investing program.

Discussion Questions

  1. Many financial experts suggest you begin retirement planning as soon as you begin your career. What are the benefits of planning for retirement planning sooner rather than later?
  2. How is the time value of money related to a long-term investment program and retirement planning?

Are You Saving Enough for Retirement?

For many, the answer is “no” even when you think it is “yes.”  Options to save include workplace retirement plans, Individual Retirement Accounts (IRAs) offered by many banks and investment companies, and the U.S. Treasury Department’s new “myRA” (My Retirement Account) program.

The myRA account is simple, safe and affordable retirement savings program that is backed by the U.S. government.  Savers can open an account with as little as $25, there are no fees, the account will earn interest at a variable rate, and the investment is protected so the account balance will never go down.

Many working people can save considerably on their taxes through qualified retirement savings.  And, if your employer offers a retirement savings program of any kind, find out whether it will match your investment contributions, and then don’t lose out any matches.

For Additional Information, click here.

Discussion Questions

  1. Why is planning and saving for retirement important at any age?
  2. What are the several methods of saving for retirement?
  3. Is developing the habit of saving for retirement easier when you are young?

Teaching Suggestions

  1. Ask students if they have started a savings plan for retirement.
  2. How is MyRA different than a traditional and a Roth IRA?

Treasury’s myRA To Debut in Late 2014

New Retirement Savings Program Will Provide Safe, No-Fee Starter Accounts

According to the Federal Reserve Board’s recent publication, Report on the Economic Well-Being of U.S. Households in 2013, 31 percent of respondents in a national study reported having no retirement savings or pension, and more than half (54 percent) of those with income with incomes under $25,000 reported the same.  Compounding this lack of preparedness is the reality that many employees (35 percent) in the United States who work for private companies also lack access to an employer-sponsored retirement plan, according to the U.S. Bureau of Labor Statistics.  What’s more, access isn’t provided evenly across all wage-earners.  While 85 percent of those in the highest wage-earning quartile had access to retirement plans, only 38 percent of those in the lowest quartile had access in 2014.

For more information, go to:

www.treasurydirect.gov/readysavegrow; or www.myra.treasury.gov

Teaching Suggestions

  • Ask students if the myRA program is available to them whether they are full-time or part-time employees.
  • What are the eligibility requirements for myRA and what is the sign-up process?
  • Can employees who change jobs continue to add savings to an existing myRA account?

Discussion Questions

  1. Why must many individuals, especially those from low-and moderate income households, make reluctant but deliberate choices to meet short-term needs at the expense of long-term goals?
  2. Will the new myRA program be particularly attractive to low-and moderate income households?
  3. What are expected key features of the myRA programs?

 

Retirement Catch Up: Saving After 50

“. . .more than a third of people 55 and older have saved less than $10,000.”

According to Carrie Schwab-Pomerantz, President of the Charles Schwab Foundation and daughter of Charles Schwab, there are a number of steps anyone can take to get their financial house in order.

For example, Ms. Schwab-Pomerantz suggests that savings should be non-negotiable–it’s that important.  To increase the amount saved, people should take a hard look at where they are spending their money.  For example, do you really need cable television or that new car?

She also suggests that a person in their 20s should save 10 percent of income in order to save the money needed for a comfortable retirement.  If the same person waits until she or he is in their 30s, the percentage for savings increases to 20 percent while someone in their 40s will need to save 30 percent of their income.  Finally, a person in their 50s will need to save 40 percent of income to provide for retirement.   The Bottom Line:  The percentage a person must save for a comfortable retirement increases if they wait to begin a savings and investment program.

For more information go to http://finance.yahoo.com/news/retirement-catch-up–saving-after-50-043631641.html

Teaching Suggestions

You may want to use the information in this blog post and the original article to

  • Remind students how small changes in how they manage their financial affairs can change their lives both now and when they reach retirement age.
  • Stress the importance of beginning a savings and investment program sooner rather than later.
  • Use a Time Value of Money calculation to show how regular savings can increase over time.

Discussion Questions

  1. Why is it important to begin a savings and investment program when you are in your 20s?
  2. Where does the money come from to begin a savings and investment program?