Social Security

Prepping for Retirement

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We start the show with Linda from New Jersey who is wondering how she should be investing money once retired but still before she starts receiving Social Security. Great question!

Next up was Bob from the Bay Area with another retirement question regarding Social Security and his overall asset allocation.

In hour two we’ve got David Klein and Kelly Peeler from CommonBond, a company that positions itself as a place for simpler, smarter student loans for a brighter future.

While taking out loans for business school, co-founder David found himself asking a lot of questions: Why is the process so confusing? Why is the customer service so bad? Why are the interest rates so high? Isn’t there a better way for people to borrow for school?

Turns out he wasn’t alone as figures now show that students in the U.S. are struggling to pay down over $1.5 trillion in debt.

CommonBond was founded in 2012 to help relieve that burden, and since then have funded over $2.5 billion in better student loans. Their approach is no big secret: lower rates, simpler options, and a world class experience, all built to support you throughout your student loan journey.

Kelly and David firmly believe that student loans should be for fulfilling your dreams, not emptying your bank account. They’re helping you get there by lowering the cost of school and simplifying the process with no more stressful applications or being treated like an account number.

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Annuities, Medicare and Social Security

This week we’re starting things off with Annamarie in Pennsylvania, who at 63, is planning on retiring in the next few years. She was recently approached by her financial advisor about placing her current 401(k) into an annuity. Good idea or bad?

Next up was Susan from Tennessee who is trying to navigate things after the unexpected passing of her sister. Named as executor of the will, Susan understandably has a lot of questions.

In hour two we brought back Steve Vernon, an old pal of mine from my CBS MoneyWatch days.

Steve joined us to talk about Medicare open enrollment as well as answer some of your Social Security questions.

With Medicare's open enrollment period running through December 7, you have a golden opportunity to make changes that might better serve you in the years to come.  

Many people assume that because Medicare is called "medical insurance," it's similar to their employer's medical insurance that protected them during their working years. But that's wrong.

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Employer-sponsored health care plans typically have one set of deductibles and copayments, and you only need to pay one premium to obtain comprehensive coverage. Not so with Medicare – it's much more complicated than that. Traditional Medicare has three different parts that cover hospital, outpatient, and prescription drugs – called Parts A, B, and D, respectively. Each part has its own set of premiums, deductibles and copayments. 

As a result of having these three different parts, many retirees mistakenly assume hat Medicare provides all the coverage they need. Or they think they're healthy and won't need additional insurance coverage beyond Medicare. Then they're shocked when they experience their first significant medical claim and are forced to pay thousands of dollars out-of-pocket. 

You can guard against these surprises by purchasing either a Medicare Supplement Plan (aka Medigap) or Medicare Advantage Plan. These plans are both designed to reduce Medicare's significant gaps. By one estimate, millions of retirees make the mistake of not purchasing such a plan to help close Medicare's gaps. 

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When to Take Social Security + A Lesson In Global Economics

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When should I take Social Security? That is by far one of the most common questions we get. It's such a tough one to answer because each case is unique. Do you need the money? Are you healthy? Those are just a couple of the questions that need to be asked...and that's what we did when we kicked off the show with David from Minneapolis.

It’s pretty rare that I have a legit economist on the show. It’s even rarer when said legit economist is a woman -- WOOT!

On this episode we check both those boxes with Linda Yueh, an economist who holds senior academic positions at Oxford University, London Business School, and the London School of Economics and Political Science.

Linda joined us to discuss her latest book, What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems.

Since the days of Adam Smith, economists have grappled with a series of familiar problems – but often their ideas are hard to digest, even before we try to apply them to today's issues. In her latest book, Linda explains the key thoughts of history's greatest economists, how our lives have been influenced by their ideas and how they could help us with the policy challenges that we face today.

In the light of the post-Great Recession economy, where growth has not accelerated as fast as in previous expansions, Yueh explores the thoughts of economists from Adam Smith and David Ricardo to contemporary academics Douglass North and Robert Solow.

Along the way, she asks, what do the ideas of Karl Marx tell us about the likely future for the Chinese economy? How do the ideas of John Maynard Keynes, who argued for government spending to create full employment, help us think about state intervention? And with globalization in trouble, what can we learn about handling Brexit and Trumpism?

Linda is also an accomplished journalist, who has spent time as an anchor/correspondent at the BBC and Bloomberg TV. With a strong social media presence, she’s worth a follow so you don’t miss any of her smart blog posts.

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"Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.

How Much do Tariffs Cost Consumers?

How Much do Tariffs Cost Consumers?

Five days after implementing tariffs on $34 billion worth of imported Chinese goods, the Trump administration released a list of an additional $200 billion worth of Chinese imports that will be subject to a 10 percent tariff. On the day of the announcement, stocks slid, but only by about a half of a percent. By the end of the week, it seemed like investors had forgotten about the announcement and instead were focusing on corporate earnings and the strength of the economy.

Social Security, Medicare and Medicaid Q&A

Social Security, Medicare and Medicaid Q&A

Just in time for the upcoming anniversary of The 1935 Social Security (SS) Act, the 2017 Annual Report of the Board of the Social Security Trustees is out and once again, the news is sobering. “Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing.” Additionally, the debate over health care has put Medicaid in the spotlight, so it’s time for a Q&A on three of the largest components of the federal budget, which account for about $2.4 trillion of spending.How is SS funded? It’s a pay as you go system, funded by payroll taxes (the FICA line item you see on your pay stub). Every employee (and employer) pays a 6.2 percent tax on earnings up to a limit, which is currently $127,200. If you are self-employed, you have to pay as both the employer and the employee, for a total of 12.4 percent.

#295 Clinton vs Trump, By the Numbers

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With just over a week until the election, it's time to take measure of Clinton vs. Trump, by the numbers. Thankfully our guest Jeffrey Levine, Chief Retirement Strategist and Director of Retirement Education with Ed Slott’s Elite IRA Advisor GroupSM as well as CEO and Wealth Advisor with BluePrint Wealth Alliance, helped us sort through the candidates' plans.

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Medicare/Social Security: Both candidates want to slow the pace of health care costs by allowing Medicare to negotiate with drug manufacturers, but similarities stop there.

Although Trump called for privatizing Social Security in the past, he recently said he wants to keep the government plan in place because he believes it would be “honoring a deal.” He plans to address “the tremendous waste, fraud, and abuse in the program. But we’re not going to hurt the people who have been paying into Social Security their whole life and then all of a sudden they’re supposed to get less.” Trump's stance has generally been that he will do everything in his power to avoid touching Social Security – a position that doesn’t actually jive with that of many other Republicans – but he postulates that he will be able to do this my merely cutting waste and growing the economy. This would seem to be an incredibly difficult, if not impossible task, even using the most optimistic of projections.

Clinton wants to create a caregiver credit “that prevents penalizing those who are out of the workforce due to caring for others,” which sounds great in theory, but Levine has some serious questions as to how it would actually work in the real world. To beef up the SS retirement system, Clinton “opposes raising the full retirement age, privatization of Social Security, and any reduction in benefits or cost-of-living adjustments (COLAs)."  Levine notes that when Social Security was established, the average life expectancy was far less than what it is today, and yet the full retirement age has only increased by one year over that time. Consider that in 1940, roughly 54 percent of men and 61 percent of women surviving to age 21 lived to reach age 65. Fast forward 50 years and, by 1990, about 72 percent of men and nearly 84 percent of women could expect the same results. Under a Clinton administration, the Social Security Wage Base (currently $118,500 in taxable earnings), would increase.

Historically speaking, roughly 90 percent of earned income was subject to Social Security taxes. As the wealth and income gaps have widened in recent years though, that number has dropped closer to 83 percent. To restore that mark closer to historical norms, Clinton would need to raise the Social Security earnings cap to about $250,000 – a massive increase from where we stand today. It should be noted that even with no cap whatsoever, other changes would still have to be made to keep Social Security solvent over the long run. Clinton also seeks to make income other than earnings subject to Social Security taxation. This too, would represent a major change.

Taxes The following are tax plans to date according to the candidate’s websites and the Associated Press.

Under a Trump administration, the following tax changes have been suggested:

  • Reduce the seven tax brackets to just three, at 12 percent, 25 percent and 33 percent, and cut the top income tax bracket to 33 percent from its current level of 39.6 percent.
  • Cut the corporate rate from 35 percent to 15 percent, also cutting taxes on “pass-through” business income for small businesses to 15 percent.
  • Eliminate the estate tax, which, as of 2016, has a $5.45 million exemption ($10.9 million for married couples) and a 40 percent tax.
  • Steepen the phase-out of itemized deductions under the existing Pease limitation, which currently phases out deductions at 3 percent for every dollar that adjusted gross income exceeds $300,000 ($250,000 if single).
  • According to the Tax Policy Center, Trump’s tax proposals would add a $11.2 trillion to the national debt over the next decade. Trump has largely disputed such estimates, citing that under his leadership, economic growth would double to about 4 percent, leading to more workers,. better paying jobs, and thus, more revenue.

Under a Clinton administration, the following tax changes have been suggested:

  • Increase several taxes on wealthier Americans, including a 4 percent surcharge on incomes above $5 million, effectively creating a new top bracket of 43.6 percent.
  • Imppose a minimum 30 percent tax rate on income above $1 million a year
  • Cap deductions for wealthier taxpayers.
  • Increase the estate tax exemption to former 2009 parameters of 3.5 million ($7 million for married couples), with the tax rate of 45 percent.
  • Maintain current tax levels for the bottom 95 percent of taxpayers, which according to the Tax Policy Center and the most recent income and tax data released by the IRS and reported by the Tax Foundation, would mean those who earn income of $179,760 or less annually. That said, the Clinton campaign has said taxes would not rise for those making less than $250,000.
  • Clinton has proposed expanding the child tax credit by doubling the credit to $2,000 per child.
  • Clinton's tax proposals – when viewed in isolation – are estimated to reduce the national debt by $1.2 trillion over the next decade. However, when adding in other proposals, the national debt would increase by more than $10 trillion.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

#286: "Equity" and Women on Wall Street

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It's official: "Equity" is a now my new favorite movie about Wall Street. Sure, "Trading Places" was a classic, but there has never been a film about Wall Street where not only are women the main characters, but they also populate every role behind the camera. Guest Alysia Reiner (she plays Fig on "Orange is the New Black" and starred in the movie "Sideways") is the co-star and co-producer (with Sarah Megan Thomas) of "Equity" and explained why the movie felt so real: they spoke to REAL women who worked on Wall Street, some of whom became investors in the film.

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"Equity," which takes place in the post-financial crisis era, explores both gender and generational roles in finance in an entertaining and provocative way. As the financial thriller unfolds, we see ambitious women trying to walk the tightrope between being too nice or being accused of "having sharp elbows" or "rubbing people the wrong way."

There is also an interesting take on mentorship, which can be tricky in a male dominated field. Naomi, the main character played by Anna Gunn of "Breaking Bad" fame, advises young professional women, "Don't let money be a dirty word" -- a sentiment that we wholeheartedly embrace on this show!

Women also adapt by using what they have to their advantage. Alysia plays "Sam," the assistant US attorney who is a college acquaintance of Naomi. Sam uses her sexuality to her advantage as she investigates Naomi's firm for insider trading. Meanwhile, Naomi's associate Erin (played by Sarah Megan Thomas), who is juggling her husband and recent pregnancy with the desire to advance her career, finds herself asked to treat a twenty-something tech entrepreneur "very, very gently."

I don't want to give too much away--just listen to the interview and GO SEE THE MOVIE!

Here are some of the articles that I mentioned earlier in the show:

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

Social Security Refresher

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I like to write about Social Security around its anniversary date (President Franklin D. Roosevelt signed The Social Security Act into law on August 14, 1935). I have written a considerable amount about Social Security, some of which I used to compose this annual refresher. Social Security is a pay as you go system, which is funded by payroll taxes (the FICA line item you see on your pay stub). Every employee (and employer) pays a 6.2 percent tax on earnings up to a limit, which changes each year with changes in the national average wage index. This year, the Social Security wage base is $118,500. If you are self-employed, you have to pay as both the employer and the employee, for a total of 12.4 percent.

In 1977, Congress enacted a change in Social Security, whereby a planned 2011 rate hike became effective in 1990. As a result of the change, the government received more money from taxes than was necessary to fund the Social Security obligations, creating a surplus. According to The 2016 Annual Report of the Board of the SS Trustees, over the program's 80-year history, it has collected roughly $19 trillion and paid out $16.1 trillion, leaving asset reserves of more than $2.8 trillion at the end of 2015 for the Old-Age and Survivors and Disability Insurance trust funds.

With thousands of Baby Boomers retiring every day, the combined surpluses are now shrinking and are scheduled to be exhausted in 2034, the same year projected in last year's report. When the Trustees separate the two programs, they project the old-age fund (OASI) will be exhausted by 2035, after which it would be able to pay just 77 percent of benefits, while the disability fund (DI) is likely to be spent down in less than a decade--in 2023, at which point it could only pay out 89 percent of promised benefits.

The Trustees note that there are plenty of options available that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. “Lawmakers should address these financial challenges as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”

Some of the options include increasing the Social Security wage base or the amount of payroll tax; means-testing benefits (tough to enforce); cutting benefits (highly unpopular); and slowly increasing full retirement age. This would likely phase in for younger Americans and it would occur over a long time horizon.

As politicians grapple with those tough choices, there is something retirees can do to help bolster their future income: wait as long as possible to claim Social Security retirement benefits. Although you can claim benefits as early as age 62, if you do so, your benefit will be permanently lower - for some as much as 25 percent less. This may not only be bad news for you, but if your spouse plans to claim one-half of your benefit, he or she also will face a lifetime of lower benefits. For those who need income, claiming early is not a choice, it is essential for monthly cash flow, but if possible it is so much better to wait.

If the system penalizes you for claiming early, it rewards you for waiting to claim benefits beyond your FRA. For every month you delay, you are entitled to Delayed Retirement Credits, which are worth 0.66 percent per month, for a total of 8 percent per year, until age 70.

Financial Threats You CAN Control

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Earlier this month, the Economist Intelligence Unit updated its list of the Top Ten Global Threats. They are:

  1. China experiences a hard landing
  2. Currency volatility and persistent commodity prices weakness culminates in an emerging markets corpo
  3. Donald Trump wins the US presidential election
  4. Beset by external and internal pressures, the EU begins to fracture
  5. "Grexit" is followed by a euro zone break-up
  6. The rising threat of jihadi terrorism destabilizes the global economy
  7. Global growth surges in 2017 as emerging markets rally
  8. The UK votes to leave the EU
  9. Chinese expansionism prompts a clash of arms in the South China Sea
  10. A collapse in investment in the oil sector prompts a future oil price shock

While any one of these events could throw the world’s economy into a tailspin, they are out of our control, so it may be smarter to concentrate on the Top Ten Financial Threats that are within our ability to manage.

  1. Ignoring your Cash Flow: It is hard to live within your means if you have no idea where the money is going. Regardless of your income level, the key to reaching your financial goals starts with a simple task: tracking your income and expenses.
  1. Borrowing too much: Whether it’s for a house or for your child’s education, carrying too much debt can prevent you from addressing important financial goals and may also create a huge emotion burden.
  1. Not establishing an emergency reserve fund: Bad luck can occur at any time, so it is vital to save an easily accessible, liquid cushion of 6 to 12 months of expenses if you are still working - 12 to 24 months if you are retired.
  1. Carrying No/Insufficient Life Insurance Coverage: If you have dependents, prepare for the worst-case scenario by purchasing adequate life insurance coverage. In most cases, term life will do the job.
  1. Not Contributing to Retirement as Early as Possible: Ask any retiree about the biggest mistake he or she made and it will likely be “I should have started saving sooner!” Establishing the automatic saving habit early pays huge dividends in the future.
  1. Tapping Retirement Funds Early: While the IRS allows for hardship withdrawals in certain instances, too many workers who leave their jobs, cash out plan assets and pay a tax penalty, instead of rolling over the funds into another retirement account.
  1. Failing to Properly and Efficiently Manage Retirement Funds: Whether it’s not rebalancing, owning too much company stock or using high-fee funds, retirement savers are costing themselves money with easy-to-rectify oversights.
  1. Claiming Social Security Early: You can claim SS retirement benefits as early as age 62, but doing so will permanently reduce your (and your spouse's, if he or she plans to claim one-half of your benefit) monthly income by as much as 25 percent.
  1. Not drafting a will/power of attorney/health care proxy: Don’t create a mess for your heirs-draft the necessary estate documents NOW.
  1. Not Seeking Help When You Need It: There is no shame in admitting that you need help with your financial life. If you want customized services,work with a professional who has earned the CFP® certification or is a CPA Personal Financial Specialist. You can ask for referrals from friends or colleagues or use the search tools offered by the Certified Financial Planner Board of Standards, the Financial Planning Association, or for fee only advisors, go to the National Association of Personal Financial Advisors.

#278 Retirement, Fiduciary, Social Security Expansion with Mark Miller

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Mark Miller, the editor and publisher of RetirementRevised and nationally recognized expert on trends in retirement and aging, returns to the show to offer his unique perspective. Mark offers a holistic view of retirement security, including healthcare and Medicare, Social Security, retirement investing, midlife careers and housing.  He also writes frequently about retirement-related public policy issues, including Social Security, Medicare and workplace retirement plans.

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We started the conversation discussing Mark's next book, “Jolt: From Trauma to Transformation,” which examines what makes some of us able to bounce back from trauma and others not so much.

Mark weighed in on the Department of Labor's Fiduciary rule and completely dismissed the industry's push back against the changes. (Check out his post: Is the fiduciary rule fight really about the little guy?) With trillions of dollars in assets set to leave big firms, it's no wonder they fought so hard against putting clients' interests first. We finished up with tips on Social Security and Mark's take on the possibility of Social Security expansion.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Here's how to contact us:

  • Call 855-411-JILL and we'll schedule time to get you on the show LIVE