Judging from the headlines, California is on the cusp of collapse. The state of California certainly has a sizable budget gap, just like they do every year. There are also a number of people leaving the state to escape the taxes and companies that are fleeing regulation. The news coverage leaves little doubt that California faces a grim future. Yet, the state somehow continues to function and keep millions of its residents. The budget problem is the latest crisis. However, budget shortfalls are a problem that other states face every year and hundreds of cities and countries across the nation also face. The current problems are most likely worsened by the impact of the deep recession. Unemployment in the state has decreased the amount of income taxes collected at the same time the governmen...

When Facebook sold stock to the public, a number of millionaires and a few billionaires were minted in the initial public offering. While others debate whether the stock is worth the price investors are paying, we can look at the IPO for lessons that apply to our financial situations and find ways to make our retirement planning more comfortable. Facebook’s founders are young and rich, the perfect overnight success stories. However, the reality is that they didn’t acquire their wealth overnight. Facebook is a social networking site that was launched in early 2004. Overnight success and billion-dollar fortunes took eight years to accumulate. Lesson #1: don’t anticipate overnight success Granted, eight years is pretty fast, but it shows that hard work and at least some amount of ti...

Finding the right age to retire is a complex question that doesn’t offer a single right answer that can be applied in all cases. Most financial planners answer almost every question with a phrase like “it depends” because the right answers to any financial question is based on your personal circumstances. Deciding on the age that you will retire is a financial question in many ways and that makes the answer to this question difficult to define precisely. US News and World Report recently found that, “The age the typical worker expects to retire is no longer 65. For the first time this year, Americans expect to retire at an average age of 67, up from 66 in 2011, according to a recent Gallup poll of 1,016 adults. The average expected retirement age and been gradually increasing over ...

A recently issued report highlighted the growing problem of poverty among senior citizens. The Employee Benefit Research Institute (EBRI) provided a detailed look at poverty rates among people who are at least 50 years old. The changes in those rates from 2001 to 2009 are surprising. Among those aged 50 to 64, poverty increased from 9.1 percent in 2001 to 12.3 percent in 2009. This is the time when many are getting serious about retirement planning and if one in eight people of this age are facing poverty, they will be unable to prepare for a secure retirement. The impact of Social Security benefits seems to help those who do retire to meet minimal financial concerns. The poverty rate among those who are between the ages of 65 to 74 also rose over that time frame, from 8.4 percent to 9.4 p...

Bloomberg recently published an article called “The Worst Deal in Mutual Funds Faces a Reckoning.” The article begins, “Imagine an investment that is guaranteed — at least initially — to lose you money. Such an investment was once quite common and still exists: the front-loaded mutual fund. To buy into such funds, investors pay as much as 5.75 percent of their initial investment in a load charge. That $40,000 you wanted to invest? It instantly shrinks by $2,300.” What is a “load fund”? Load funds have long been a staple of the financial planning industry. The rationale to support the immediate loss is that the planner deserves to be compensated for their advice. The truth is that they receive trailing commissions for as long as you hold your funds, and that ...

The best time to start taking Social Security benefits is one of those questions with no right answer. Even if you can do the difficult math required to understand the differences between the net present values of all available options, you can not predict accurately how long you will receive the benefits. Social Security offers some level of inflation-protected income for life, but no one truly knows how long they will live. That makes even the most complex calculations only an estimate of what is really best, and then your specific circumstances could change everything. Is there a benefit to delaying your Social Security benefits? According to a recent article in The Wall Street Journal, if you are healthy, you can enjoy a large benefit from delaying the start of your benefits. In “How...

First, the good news is that you can expect to enjoy two decades of retirement if you start retirement when you’re 65. Life expectancy of men at the age of 65 is about 20 years and woman of the same age can look forward to an average life expectancy of about 22 years. Life expectancy is really just a table that shows odds. So what it actually means is that the odds of a 65 year-old man living to the age of 90 are about 1 in 3, while a woman has about a 1 in 2.5 chance of reaching 90. About 60 percent of the time, at least one spouse will live to 90. There may be a number of reasons why you might not live to 90, of course, but when it comes to planning for your financial future, it makes sense to assume that you will reach that age. If you are enjoying life in your 90s, having to worry ab...

Inflation has been present in almost all countries for most of the last century – certainly Japan is without exception. The amount of inflation has varied, as periods of double-digit inflation briefly hit us, while slow but steady price increases are considered normal. If you look solely at official price indexes, inflation seems to be an almost unavoidable part of life in the United States. Social Security payments are indexed to these official indexes, but that offers little comfort to most retirees. How inflation is measured, and why it matters Official inflation is measured by comparing the prices paid by a family for a typical basket of goods each month. The typical basket weights the price of each item, using the percentage of income a typical family spends on each item each mo...

Interest is the cost you pay on a loan. Mortgages have been available with fixed rates or adjustable rates for a number of years. Fixed rates carry the same interest rate for the life of the loan. The interest rate can change with an adjustable rate mortgage based on what happens in the financial markets. Fixed rates are often thought of as the more conservative option because they eliminate the risk of higher monthly payments if interest rates rise. Rates have been falling since about 1981, however, and many people believe that they will eventually reverse course and rise for several decades. Many of these people have believed that for at least ten years now and rates are still near record lows. Many home owners have benefitted from low payments over that time with adjustable rate mortg...

Reverse mortgages can be secured with one of two (or a combination of the two) faciltiies: With fixed interest rate that never change over the life of the loan, or With adjustable rates that could change as frequently as monthly Adjustable rate reverse mortgages usually charge a current interest rate that is based on LIBOR. The rate could be quoted as something like “LIBOR + 2%” or some other margin. The London Interbank Offer Rate is defined as the average interest rate that leading banks in London charge each other when making short term loans. Banks often borrow money from other banks so this rate is updated daily and it is widely available. Reasons we base our reverse mortgage interest rates on LIBOR Loans are actually made based upon LIBOR rates so the rates are available for se...