Posts Tagged With: retirement planning

Annuity or Lump Sum?

Posted on March 18, 2023 by Melissa Hart

Many people with a retirement plan are asked to choose between receiving lifetime income (also called an annuity) and a lump-sum payment to pay for their day-to-day life after they stop working. An annuity provides a lifetime steady stream of income while a lump sum is a one-time payment.

Deciding which option works best for you takes careful consideration because there are many factors to think about, such as your health, cost of living, assets and savings, and any other income you may have.

Why is this important?

Your employer may ask you to choose between an annuity and lump sum. For example, your employer may ask you to make this choice (1) if you change jobs, (2) when you stop working, or (3) even after you have begun to receive monthly annuity payments.

When making this decision, explore the benefits and risks because whichever option you choose will affect your financial future.

What are the benefits and risks?

 AnnuityLump Sum
BenefitsYou will receive a steady income for the rest of your life, like keeping a part of your paycheck for life You may be able to provide a lifetime income to your spouse or to another beneficiaryYou can use the money to pay off large debts If you don’t spend all of the lump sum, you can pass it on as an inheritance
RisksAnnuities may give you less financial flexibility and may not pay benefits to your survivors If you are in poor health, an annuity may not provide enough money to cover medical billsYou may outlive your retirement funds It’s your responsibility to manage the money to provide you with future income

Factors you should consider:

  • Your health (and your spouse’s)
  • Your investment skills (and your spouse’s), and how they may change as you age
  • Your living expenses (now and future)
  • Your savings (and your spouse’s)
  • Other steady income (Social Security, pensions from other employers)
  • Debt (mortgage, car, credit cards, student loans, child support payments)
  • Taxes on the annuity or lump sum
  •  

Are there online tools that can help me calculate my lifetime income?

Yes. The Department of Labor has a lifetime income calculator that allows you to estimate the amount of monthly income you will receive when you stop working and start receiving monthly payments.

The results shown are estimates, not guarantees, of the level of the account balance or of the lifetime income streams of payments.

For more information, click here.

Teaching Suggestions:

  • Ask students to make a list of benefits that an annuity may provide.
  • Ask students to interview their parents or relatives if they had to make a choice between an annuity or a lump sum option.  If so, which option did they choose and why?

Discussion Questions:

  1. What are the benefits and risks of choosing an annuity or a lump sum payment?
  2. What sources are available if you need assistance in making a decision to choose annuity or lump sum option?
  3. Why is it important to discuss all of the possible options with a financial advisor or an insurance agent?
Categories: Chapter_10, Chapter_14, Retirement Planning | Tags: , | Leave a comment

Are Americans Financially Educated on Retirement Savings?

Posted on March 4, 2023 by Melissa Hart

Financial education helps people learn about savings, credit, and loans. It also helps prepare people for life changes and to face the unexpected. This knowledge is essential when planning for retirement. So, how prepared are U.S. adults for their future retirement? According to a recent poll conducted by the National Endowment for Financial Education:

  • Eighty-five percent of respondents confirmed some part of their personal finances was causing them stress. For 31% of respondents, that concern was “having enough saved for retirement.”
  • In that same poll, 70% said they made financial adjustments due to the COVID-19 pandemic. Of that group, 27% increased contributions to their emergency savings, retirement savings, or other savings or investments. In comparison, 21% tapped into emergency savings—or borrowed against retirement savings.
  • About financial education mandates, 80% of U.S. adults said they wish they were required to complete a semester- or yearlong course focused on personal finance education during high school and 88% think their state should require a semester- or year-long course for high school graduation.
  • In that same poll, 84% of those approaching retirement age (60+ years old) said “spending and budgeting” should be taught in schools.

People who champion financial education typically live by the mantra “the earlier, the better.” It’s also important, though, that people keep learning throughout their lives to ensure they have the knowledge they need to make the best financial decisions.

Lifetime financial education can be a helpful tool in preparing for retirement. This includes understanding Social Security retirement benefits and making the most of retirement income.

For More Information, click here.

Teaching Suggestions:

  • Have students discuss the statement, “Financial education in high schools should be mandatory for graduation.”
  • Ask students how a financial literacy course is helping them to better manage their finances?

Discussion Questions:

  1. Why is financial literacy knowledge essential when preparing for retirement?
  2. Do students feel more prepared for financial challenges of adult life after taking a personal finance course? Explain.
Categories: Chapter_14, Retirement Planning | Tags: , | Leave a comment

Digital Investments in Retirement?

Posted on May 21, 2022 by Melissa Hart

Your retirement savings represent years of hard work and sacrifice. The assets held in retirement plans, such as 401(k) plans, are essential to financial security in old age – covering living expenses, medical bills and so much more – and must be carefully protected.  That’s why plan fiduciaries, including plan sponsors and investment managers, have a strong legal obligation under the Employee Retirement Income Security Act to protect retirement savings.  These fiduciaries must act solely in the financial interests of plan participants and adhere to a high standard of care when managing plan participants’ retirement holdings.

In recent months, some financial services firms have started marketing investments in cryptocurrencies as potential investment options for participants in 401(k)s.  At this early stage in the history of cryptocurrencies, however, the U.S. Department of Labor has serious concerns about plans’ decisions to expose participants to direct investments in cryptocurrencies or related products, such as NFTs, coins, and crypto assets.

President Biden’s recent executive order on ensuring responsible development of digital assets highlights the significant financial risks digital assets can pose to consumers, investors and businesses in the absence of appropriate protections. 

Cryptocurrencies can present serious risks to retirement savings, including: 

  • Valuation concerns.
  • Obstacles to making informed decisions.  
  • Prices can change quickly and dramatically. 
  •  Evolving regulatory landscape.

Based on these concerns, the United States Department of Labor has issued a compliance assistance release for plan fiduciaries focused on 401(k) plan investments in cryptocurrencies.

For more information, click here.

Teaching Suggestions

  • Ask students if they, their friends or relatives have 401(k) plans.  If so, has anyone invested in Cryptocurriencies in their retirement plans and what have been their experiences?
  • Ask students to prepare a list of potential dangers in investing in cryptocurrencies or other digital investments.

Discussion Questions

  1. Why is the U.S. Department of Labor concerned about people investing in digital assets for their retirement plans at this time?
  2. Should the federal government prohibit 401(k) plan providers from investing in cryptocurrencies in participant’s retirement plans?  Why or why not?
Categories: Chapter_14, Retirement Planning | Tags: | Leave a comment

Lost Your Social Security Card?

Posted on April 9, 2022 by Melissa Hart

Consider whether you really need to get a replacement card. Knowing your number is what’s important, after all. You’ll rarely need the card itself — perhaps only when you get a new job and have to show it to your employer. If you really must replace your card, go to www.socialsecurity.gov/ssnumber before visiting your local Social Security office.

The first step is to learn what documents you need. The Social Security Administration requires a U.S. driver’s license, a state issued non-driver identification card, or a U.S. passport to prove your identity. Sometimes you may also need to prove your current U.S. citizenship or lawful noncitizen status with a birth certificate or passport.

All documents must be either originals or copies certified by the issuing agency. The Social Security office won’t accept photocopies or notarized copies of documents. They also can’t accept a receipt showing you applied for the document.

Once you’re clear on what documents you’ll need, the second step is to print and fill out the Application for a Social Security Card.  Finally, the third step is to bring or mail your application and original documents to a Social Security office. Then, the online process will take you to a screen where you can find the address of your local office.

In some areas, you can request a replacement Social Security card using your online my Social Security account if you meet certain requirements. Simply access your account and follow the instructions to replace your Social Security card. It’s safe, convenient and secure.

You can replace your Social Security card for free if it’s lost or stolen. Avoid service providers who charge you a fee to get your replacement card. You’re limited to three replacement cards in a year, and 10 during your lifetime. Legal name changes and other exceptions don’t count toward these limits. Changes in immigration status that require card updates may not count toward these limits. Also, you aren’t affected by these limits if you can prove you need the card to prevent a significant hardship.

The Social Security office will mail your card as soon as all of your information has been verified. Your replacement card will have the same name and number as your previous card.

For more information, go to:

So You’ve Lost Your Social Security Card

Teaching Suggestions

  • Ask students if anyone has lost his/her Social Security card.  If so, did they replace it?  Why or why not?
  • Under what circumstances should you replace your lost Social Security card?  Explain.

Discussion Questions

  1. What steps must be taken to replace a Social Security card?
  2. Why must all documents be original to be submitted to Social Security?
Categories: Chapter_14, Retirement Planning, Uncategorized | Tags: , | Leave a comment

What You Should Know About Applying For Retirement

Posted on May 30, 2020 by Melissa Hart

Approaching and preparing for retirement can be a daunting task, but Social Security makes it as easy as possible. Social Security has eliminated the forms, signatures, wait time, and appointments. The agency has now made it easy, convenient and secure to apply. You can complete online retirement application in as little as 15 minutes from your preferred location, at a time most convenient for you.  However, before you apply, consider how you’ll like to receive benefits, your health, and whether anyone else in your family can get benefits on your record.

The age you choose to retire affects the amount of benefits you receive and when you can start receiving them. If you start them any time before your full retirement age, Social Security reduces your monthly benefit. Depending on your year of birth, your full retirement age is likely between age 66 and 67. You may start receiving benefits as early as age 62 or as late as age 70.

If you elect to receive benefits before you reach full retirement age, and continue to work, it can affect your benefits. The Retirement Estimator  calculates a personal estimate of how much your benefit will be at different ages and “stop work” dates. You can use it to find the best combination for your situation.  You can read about other things to consider before you make your decision about when to begin your benefits. If you’re ready to apply, you can do it online.

For more information, click here.

Teaching Suggestions

  • Ask students to debate the statement, “It is never too early to begin planning for retirement”.
  • What information will you need when you apply for retirement?

Discussion Questions

  1. Why is it important to start retirement planning when you are still young?
  2. Would it be better for you to start getting benefits early with a smaller monthly payments for more years, or wait for a larger monthly payment over a shorter time period?
Categories: Chapter_14, Retirement Planning | Tags: , | Leave a comment

Medicare Supplement Insurance (Medigap) policies

Posted on March 7, 2020 by Melissa Hart

Original Medicare pays for much, but not all, of the cost for covered health care services and supplies. Medicare Supplement Insurance policies, sold by private companies, can help pay some of the remaining health care costs for covered services and supplies, such as copayments, coinsurance, and deductibles. Medicare Supplement Insurance policies are also called Medigap policies.

Some Medigap policies also offer coverage for services that Original Medicare doesn’t cover, such as medical care when you travel outside the U.S. Generally, Medigap policies don’t cover long-term care (such as care in a nursing home), vision or dental care, hearing aids, eyeglasses, or private-duty nursing.

Every Medigap policy must follow federal and state laws designed to protect you, and they must be clearly identified as “Medicare Supplement Insurance.” Insurance companies can sell you only a “standardized” policy identified in most states by letters A through D, F, G, and K through N. All policies offer the same basic benefits, but some offer additional benefits so you can choose which one meets your needs. In Massachusetts, Minnesota, and Wisconsin, Medigap policies are standardized differently.

For more information, click here.

Teaching Suggestions

  • Ask students to read about different types of Medigap policies, what they cover, and which insurance companies sell Medigap policies in their area.
  • Ask students to find and compare drug plans, health plans, and Medigap policies offered in their state.

Discussion Questions

  1. What are the differences between a Medigap policy and a Medicare Advantage Plan?
  2. What types of services are not generally covered by Medigap policies?
Categories: Chapter 9, Retirement Planning | Tags: , , | Leave a comment

Time to Start Preparing for Retirement

Posted on November 30, 2019 by Melissa Hart

Even if you just started working, now is the time to start preparing for retirement. Achieving the dream of a secure, comfortable retirement is much easier with a strong financial plan.

Tip 1: Start Early

Social security Administration’s retirement planning resources are helpful to you at any stage of your career. Their calculators, Benefit Eligibility Screening Tool, and disability resources are all available on our benefit planners website.

Tip 2: Be Informed

What’s the best age to start receiving retirement benefits? The answer is that there’s no single “best age” for everyone and, ultimately, it’s your choice. The most important thing is to make an informed decision, based on your individual and family circumstances.

Tip 3: Estimate the Benefits You Might Get

Knowing the amount of money you could get is pivotal in planning your finances.  With the Retirement Estimator, you can plug in some basic information to get an instant, personalized estimate of your future benefits. Try out different scenarios, such as higher or lower future earnings amounts and various retirement dates to see the various potential effects on your future benefit amounts.

For more information, click here.

Teaching Suggestions

  • Ask students to prepare a list of several retirement planning sources available from various governmental and private organizations.
  • What actions you can take to prepare for retirement right now? Share your list with colleagues, friends, and relatives.

Discussion Questions

  1. Why is it important to start planning for retirement as early as possible?
  2. Why should you save now for retirement? Isn’t Social Security enough during retirement years?
  3. What are some ways to invest to reach your retirement goals and never outlive your savings?
Categories: Chapter_14, Retirement Planning | Tags: , , | Leave a comment

Financial Regrets

Posted on October 5, 2019 by Melissa Hart

Most people would like to be able to go back and do some things differently related to their personal finances. A study by bankrate.com revealed that 76 percent of those surveyed have at least one financial regret. The largest concern, over half (56 percent), involved not starting to save sooner for retirement, an emergency fund, or their children’s education.  Other financial regrets reported in the study include: living above one’s means; taking on too much credit card debt; and the burden of student loans.

A recommended action to address these financial regrets include breaking down large goals into smaller, easier ones can help put individuals on a path to success. A “save-first” mindset instead of “spend-first” is also suggested. In addition, consider opening an online savings account with higher returns, and set up direct deposits for regular saving.

For additional information on financial regrets, click here.

Teaching Suggestions

  • Have students conduct online research to determine various financial regrets of people in different age categories and life situations.
  • Have students conduct an interview with a person about actions that might be taken to avoid financial regrets.

Discussion Questions 

  1. What factors might create situations that result in a financial regret?
  2. Describe possible financial regrets and corrective actions a person might take.
Categories: Chapter 1, Chapter 2, Financial Planning, Savings | Tags: , , | Leave a comment

National Social Security Month

Posted on May 11, 2019 by Melissa Hart

In April, the Social Security Administration celebrated National Social Security Month, and highlighted the agency’s mission and purpose.

The agency is constantly expanding its online services to give you freedom and control in how you wish to explore it.

For example, you can go online to:

  1. Find out if you qualify for benefits;
  2. Use benefit planners to help you better understand your Social Security protection;
  3. Estimate your future retirement benefits to help you plan for your financial future;
  4. Retire online, or apply for Medicare quickly and easily; and
  5. Open your personal my Social Security to help you stay in control of your Social Security record.

If you currently receive benefits, you can:

  1. Change your address and phone number;
  2. Get a benefit verification letter to prove you receive Social Security benefits, Supplemental Security Income (SSI), or Medicare;
  3. Start deposits or change your direct deposit information at any time;
  4. Get a replacement Medicare card; and
  5. Get a replacement Benefit Statement (SSA-1099 or SSA-1042S) for tax purposes

For more information, click here.

Teaching Suggestions

  • Ask students if they have a Social Security account. If not, encourage them to establish their account, regardless of their age.
  • Make students understand that Social Security is not just for people over 65. The program provides benefits to retirees, survivors, and disabled persons.

Discussion Questions

  1. Why is it important to open a mySocial Security account, even if you are in your teens?
  2. What are the pros and cons of collecting Social Security at age 62? Under what circumstances would you choose to collect benefits before full retirement age?
Categories: Chapter_14, Retirement Planning, Savings | Tags: , , | Leave a comment

Monitor Your Earnings

Posted on April 27, 2019 by Melissa Hart

You work hard for your money. You’re saving and planning for a secure retirement. Now you need to make sure you’re going to get all the money you deserve. Regularly reviewing your Social Security earnings record can really pay off, especially when every dollar counts in retirement.  If an employer did not properly report just one year of your work earnings to Social Security, your future benefit payments from Social Security could be nearly $100 per month less than they should be. Over the course of a lifetime, that could cost you tens of thousands of dollars in retirement or other benefits to which you are entitled.

It’s ultimately the responsibility of your employers — past and present — to provide accurate earnings information to Social Security so you get credit for the contributions you’ve made through payroll taxes. But you can inform Social Security of any errors or omissions. You’re the only person who can look at your lifetime earnings record and verify that it’s complete and correct.

So, what’s the easiest and most efficient way to validate your earnings record?

  • Visit Social Security websiteto set up or sign in to your own my Social Security account;
  • Under the “My Home” tab, select “Earnings Record” to view your online Social Security Statement and taxed Social Security earnings;
  • Carefully review each year of listed earnings and use your own records, such as W-2s and tax returns, to confirm them;
  • Keep in mind that earnings from this current year and last year may not be listed yet; and
  • Notify Social Security Administration right away if you spot errors by calling 1-800-772-1213.

For More information, click here.

Teaching Suggestions

  • Ask your students if they regularly monitor their earnings with Social Security Administration. If they don’t, encourage them to review their earnings every year.
  • Help students understand that because of longer expectancies, the full retirement age is being increased in gradual steps until it reaches 67.

Discussion Questions

  1. What can you do if an employer did not properly report your earnings to Social Security?
  2. Why is it important to create a mySocial Security account if you are 18 or older and have a Social Security number, valid e-mail, and U.S. mail address?
Categories: Chapter_14, Retirement Planning | Tags: , | Leave a comment

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