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Take These 5 Steps Now So You Don’t Become A Financial Burden On Your Kids





Aging is a beautiful, natural and necessary part of life. But the last thing you want as you grow older is for your children to bear the burden of your poor financial planning.

The longer we live, the more expenses we rack up, and the further our retirement dollars need to stretch. Married couples have the longest life expectancy, with a 72 percent chance that one person will live to age 85 and a 45 percent chance that one will live to age 90.

So to ensure you have enough money in your golden years to cover those costs and not pass on the responsibility to your children, take these five steps now.

1. Don’t sacrifice your retirement funds to help your kids (or grandkids).

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Parents spend twice as much supporting their adult children as they do saving for their own retirement.

The student loan debt crisis isn’t just affecting young adults fresh out of college. According to Marketwatch, families who took out parent PLUS loans and had with a student who earned a bachelor’s degree in 2016 owed about $32,596 in parent PLUS debt. That’s close to a 20 percent increase over the class of 2012. And people can be carrying the burden of student loans even as they hope to head into retirement: A whopping 2.8 million borrowers over the age of 60 owed student debt in 2015.

The problem with parent PLUS loans, in particular, is that they don’t offer borrowers the same protections as federal student loans, such as income-driven repayment plans and loan forgiveness tied to public service. The same goes for private loans, which are notoriously inflexible when it comes to assistance for borrowers who struggle to make their payments. And parents don’t enjoy the return on investment of their child’s degree ― they’re simply saddled with debt that bites into their retirement income.

Taking out educational loans is just one way parents overextend themselves to help out their children. A study by Merrill Lynch found that parents in the U.S. spend $500 billion every year on their adult children, twice what they put away for their own retirement.

“Some parents just want to be super generous to their children or grandchildren and they start wanting to make gifts, whether it’s funding a grandchild’s 529 plan or helping a child become a doctor or a lawyer,” said Quentara Costa, a certified financial planner and founder of Powwow LLC.

Though such generosity is understandable, “there’s not a lot of time to recoup that money if they’re thinking they’re retiring soon or they’ve already retired,” Costa said.

2. Prepare for the major cost of medical care.

“Health care is a bigger expense than just about anybody plans for,” said Sean Gillespie, a fee-only financial advisor with Redeployment Wealth Strategies. In fact, Fidelity estimates that the average couple who retires today at age 65 will need $280,000 to cover health care and medical costs in retirement.

Many people count on shifting over to Medicare at age 65. But what they don’t understand is “you’re going to pay for your Medicare ― it’s not something that you just pay for out of your paycheck all your life along with Social Security and then stop paying for,” said Gillespie. “You actually have Medicare premiums when you hit 65.” And there’s no real benefit to not signing up for Medicare until you really need it because there are penalties for that.

The $280,000 figure also includes out-of-pocket costs such as deductibles, cost-sharing requirements for drugs and certain services, and devices that Medicare doesn’t cover, such as hearing aids.

“It’s not uncommon to spend more on medical care in the last year of your life than you did in every year of your life combined [before that].”

– Sean Gillespie, a financial planner

Worst of all, that estimate doesn’t include long-term care, which is another major expense that older people should be ready to shoulder.

“We tend to do a great deal of our spending on medical care in the last year of our lives. And for a lot of people, it’s not uncommon to spend more on medical care in the last year of your life than you did in every year of your life combined [before that],” Gillespie said.

3. Consider a long-term care insurance policy.

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Long-term care costs a total of $140,000 on average.

You don’t buy home insurance expecting your house to burn down. But you know that’s a possibility ― and if something like that did happen, you’d be in a pretty bad place financially without the policy.

The same goes for long-term care insurance. Research shows that after age 65, there’s a 50-50 chance you’ll require long-term care at some point. And in most cases, Medicare won’t cover it. Considering that average long-term care costs amount to about $140,000, failing to insure yourself is like heading to Vegas and plunking down your life savings on black. It’s a gamble you really shouldn’t take if you can help it.

“If you don’t have some sort of insurance policy to help cover those costs, it’s coming out of your pocket,” Gillespie said.

There are many options in long-term care policies and the devil is in the details. For instance, most plans have a 90-day elimination period, which means you pay out-of-pocket for the first 90 days before the benefits kick in. You can find others with no elimination period, but prepare to pay a higher premium. And if you encounter a policy that doesn’t offer any inflation protection, “walk away,” Gillespie said.

4. Have a Social Security strategy in place.

It can be tempting to grab your Social Security benefits as soon as you become eligible. After all, you paid into the system for decades and who knows if you’ll be around tomorrow. Why wait any longer to get your money?

The fact is that waiting as long as possible to claim Social Security benefits can pay off in the long run. First, the system credits you for delaying retirement (up to a point). Second, Social Security payments are based on mortality tables that haven’t been updated since 1983, according to CNBC, but Americans have longer life expectancies today. So the system actually credits you for delaying retirement more than it probably should. “The difference between age 62 and age 70 is remarkable,” Gillespie said.

For example, if you wait until your full retirement age of 66 (or 67, depending on when you were born), your benefit will be 25 percent higher than if you claimed it as early as possible. And if you wait even longer, that benefit increases by an additional 8 percent each year until you reach 70. On the other hand, if you claim Social Security benefits at age 62, “you are accepting a permanent reduction to those benefits,” Gillespie said.

But what if you’re not around much longer than that?

You can play all kinds of math games with this: If somebody who was born the same day as you were and had earned identical Social Security benefits began claiming them at age 62, and you waited until you were 70, that person would pull more dollars out of the system until you both reached age 82. After that point, you would come out ahead.

The bigger issue is what happens to you if you reach 82, need Social Security to meet your bills and didn’t hold off to get the larger benefit.

“At that age, our biggest financial risk is not if we do die, but if we don’t,” Gillespie said.

5. Plan for the possibility of divorce.

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Divorce rates among older Americans are on the rise.

Thanks to longer lifespans, shifting attitudes and diminishing stigma around the idea of divorce, older adults are splitting up more than ever. In fact, over the last 25 years, the divorce rate among those age 50 and older has about doubled. And those 50 and older who are married for the second time are twice as likely to divorce as those who’ve only been married once.

“I’m seeing that more often, people at an older age are getting a divorce because they stay together for the kids. And now that the kids are off to college or through college, they’re saying, ‘Hey, this is my time,’” said Costa.

The problem? Their combined income remains the same and their assets remain the same, but now they have to fund two separate sets of living costs. “So now it’s cable times two and electric times two. What was affordable when they were together as a couple may now not be affordable,” she said.

So if divorce could be a possibility in the future, you may want to set aside savings for the added expenses.

When’s the right time to start planning?

According to Costa, the best time to plan for your elder years is around age 50.

“You’re through a lot of the initial milestones that may be coming your way,” she explained. “There’s not as much short-term goal planning where you’re just trying to get through the next month. You’re at a point where you’ve reached a kind of stasis for your mortgage payment, your career, etc.”

Plus, Costa warned, your 50s are often the last call to purchase things like long-term care or life insurance. If you wait too long, those options come off the table.

“If you choose not to do it, that’s perfectly fine, but allow that to be your decision, not the decision because you waited a month too long and now it’s become unaffordable,” Costa said.


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4 things kids need to know about money





(NC) Responsible spending includes knowing the difference between wants and needs. Back-to-school season, with added expenses and expectations around spending, is the perfect time to not only build your own budget for the year ahead, but also to introduce your own children to the concept of budgeting.

The experts at Capital One break down four basic things that every child should know about money, along with tips for bringing real-life examples into the conversation.

What money is. There’s no need for a full economic lesson,but knowing that money can be exchanged for goods and services, and that the government backs its value, is a great start.
How to earn money. Once your child understands what money is, use this foundational knowledge to connect the concepts of money and work. Start with the simple concept that people go to work in exchange for an income, and explain how it may take time (and work) to save for that new pair of sneakers or backpack. This can help kids develop patience and alleviate the pressure to purchase new items right away that might not be in your budget.
The many ways to pay. While there is a myriad of methods to pay for something in today’s digital age, you can start by explaining the difference between cash, debit and credit. When teaching your kids about credit, real examples help. For instance, if your child insists on a grocery store treat, offer to buy it for them as long as they pay you back from their allowance in a timely manner. If you need a refresher, tools like Capital One’s Credit Keeper can help you better understand your own credit score and the importance of that score to overall financial health.
How to build and follow a budget. This is where earning, spending, saving and sharing all come together. Build a budget that is realistic based on your income and spending needs and take advantage of banking apps to keep tabs on your spending in real-time. Have your kids think about how they might split their allowance into saving, spending and giving back to help them better understand money management.

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20 Percent Of Americans In Relationships Are Committing Financial Infidelity





Nearly 30 million Americans are hiding a checking, savings, or credit card account from their spouse or live in partner, according to a new survey from That’s roughly 1 in 5 that currently have a live in partner or a spouse.

Around 5 million people — or 3 percent — used to commit “financial infidelity,” but no longer do.

Of all the respondents, millennials were more likely than other age groups to hide financial information from their partner. While 15 percent of older generations hid accounts from their partner, 28 percent of millennials were financially dishonest.

Regionally, Americans living in the South and the West were more likely to financially “cheat” than those living in the Northeast and Midwest.

Insecurity about earning and spending could drive some of this infidelity, according to industry analyst Ted Rossman.

When it comes to millennials, witnessing divorce could have caused those aged 18-37 to try and squirrel away from Rossman calls a “freedom fund”.

“They’ve got this safety net,” Rossman said. They’re asking: “What if this relationship doesn’t work out?”

As bad as physical infidelity

More than half (55 percent) of those surveyed believed that financial infidelity was just as bad as physically cheating. That’s including some 20 percent who believed that financially cheating was worse.

But despite this, most didn’t find this to be a deal breaker.

Over 80 percent surveyed said they would be upset, but wouldn’t end the relationship. Only 2 percent of those asked would end the relationship if they discovered their spouse or partner was hiding $5,000 or more in credit card debt. That number however is highest among those lower middle class households ($30,000-$49,999 income bracket): Nearly 10 percent would break things off as a result.

Roughly 15 percent said they wouldn’t care at all. Studies do show however that money troubles is the leading cause of stress in a relationship.

That’s why, Rossman says, it’s important to share that information with your partner.

“Talking about money with your spouse isn’t always easy, but it has to be done,” he said. “You can still maintain some privacy over your finances, and even keep separate accounts if you and your spouse agree, but you need to get on the same page regarding your general direction, otherwise your financial union is doomed to fail.”

With credit card rates hovering at an average of 19.24 percent APR, hiding financial information from a partner could be financially devastating.

But, Rossman adds, it’s not just about the economic impact but also the erosion of trust.

“More than the dollars and cents is that trust factor,” he said. “I think losing that trust is so hard to regain. That could be a long lasting wedge.”

Kristin Myers is a reporter at Yahoo Finance. Follow her on Twitter.

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7 Examples Of Terrible Financial Advice We’ve Heard





Between television, radio, the internet and well-meaning but presumptuous friends and family, we’re inundated with unsolicited advice on a daily basis. And when it comes to money, there’s a ton of terrible advice out there. Even so-called experts can lead us astray sometimes.

Have you been duped? Here are a few examples of the worst money advice advisers, bloggers and other personal finance pros have heard.

1. Carry a balance to increase your credit score.

Ben Luthi, a money and travel writer, said that a friend once told him that his mortgage loan officer advised him to carry a balance on his credit card in order to improve his credit score. In fact, the loan officer recommended keeping the balance at around 50 percent of his credit limit.

“This is the absolute worst financial advice I’ve ever heard for several reasons,” Luthi said. For one, carrying a credit card balance doesn’t have any effect on your credit at all. “What it does do is ensure that you pay a high interest rate on your balance every month, neutralizing any other benefits you might get from the card,” Luthi explained. “Also, keeping a 50 percent credit utilization is a surefire way to hurt your credit score, not help it.”

Some credit experts recommend keeping your balance below 30 percent of the card limit, but even that’s not a hard-and-fast rule. Keeping your balance as low as possible and paying the bill on time each month is how you improve your score.

2. Avoid credit cards ― period.

Credit cards can be a slippery slope for some people; overspending can lead to a cycle of debt that’s tough to escape.

But avoiding credit cards on principle, something personal finance gurus like Dave Ramsey push hard, robs you of all their potential benefits.

“Credit cards are a good tool for building credit and earning rewards,” explained personal finance writer Kim Porter. “Plus, there are lots of ways to avoid debt, like using the card only for monthly bills, paying off the card every month and tracking your spending.”

If you struggle with debt, a credit card is probably not for you. At least not right now. But if you are on top of your finances and want to leverage debt in a strategic way, a credit card can help you do just that.

3. The mortgage you’re approved for is what you can afford.

“The worst financial advice I hear is to buy as much house as you can afford,” said R.J. Weiss, a certified financial planner who founded the blog The Ways to Wealth. He explained that most lenders use the 28/36 rule to determine how much you can afford to borrow: Up to 28 percent of your monthly gross income can go toward your home, as long as the payments don’t exceed 36 percent of your total monthly debt payments. For example, if you had a credit card, student loan and car loan payment that together totaled $640 a month, your mortgage payment should be no more than $360 (36 percent of $1,000 in total debt payments).

“What homeowners don’t realize is this rule was invented by banks to maximize their bottom line ― not the homeowner’s financial well-being,” Weiss said. “Banks have figured out that this is the largest amount of debt one can take on with a reasonable chance of paying it back, even if that means you have to forego saving for retirement, college or short-term goals.”

4. An expensive house is worth it because of the tax write-off.

Scott Vance, owner of, said a real estate agent told him when he was younger that it made sense to buy a more expensive house because he had the advantage of writing off the mortgage interest on his taxes.

But let’s stop and think about that for a moment. A deduction simply decreases your taxable income ― it’s not a dollar-for-dollar reduction of your tax bill. So committing to a larger mortgage payment to take a bigger tax deduction still means paying more in the long run. And if that high mortgage payment compromises your ability to keep up on other bills or save money, it’s definitely not worth it.

“Now, as a financial planner focusing on taxes, I see the folly in such advice,” he said, noting that he always advises his client to consider the source of advice before following it. ”Taking tax advice from a Realtor is … like taking medical procedure advice from your hairdresser.”

5. You need a six-month emergency fund.

One thing is true: You need an emergency fund. But when it comes to how much you should save in that fund, it’s different for each person. There’s no cookie-cutter answer that applies to everyone. And yet many experts claim that six months’ worth of expenses is exactly how much you should have socked away in a savings account.

“I work with a lot of Hollywood actors, and six months won’t cut it for these folks,” said Eric D. Matthews, CEO and wealth adviser at EDM Capital. “I also work with executives in the same industry where six months is overkill. You need to strike a balance for your work, industry and craft.”

If you have too little saved, a major financial blow can leave you in debt regardless. And if you set aside too much, you lose returns by leaving the money in a liquid, low-interest savings account. “The generic six months is a nice catch-all, but nowhere near the specific need of the individual’s unique situation… and aren’t we all unique?”

6. You should accept your entire student loan package.

Aside from a house, a college education is often one of the biggest purchases people make in their lifetimes. Often loans are needed to bridge the gap between college savings and that final tuition bill. But just because you’re offered a certain amount doesn’t mean you need to take it all.

“The worst financial advice I received was that I had to accept my entire student loan package and that I had no other options,” said Gina Zakaria, founder of The Frugal Convert. “It cost me a lot in student loan debt. Now I tell everyone that you never have to accept any part of a college financial package that you don’t want to accept.” There are always other options, she said.

7. Only invest in what you know.

Even the great Warren Buffett, considered by many to be the best investor of all time, gets it wrong sometimes. One of his most famous pieces of advice is to only invest in what you know, but that might not be the right guidance for the average investor.

In theory, it makes sense. After all, you don’t want to tie up your money in overly complicated investments you don’t understand. The problem is, most of us are not business experts, and it’s nearly impossible to have deep knowledge of hundreds of securities. “Diversification is key to a good portfolio, and investing in what you know leads to a very un-diversified portfolio,” said Britton Gregory, a certified financial planner and principal of Seaborn Financial. “Instead, invest in a well-diversified portfolio that includes many companies, even ones you’ve never heard of.”

That might mean enlisting the help of a professional, so make sure it’s one who has your best interests at heart.

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