The secret to a happy retirement? There are probably many. However, not having to worry if you’ll run out of money is certainly near the top of the list. The problem is, people are living longer today. It is not unusual for people to live well into their late 80s. That is a good thing, except when it comes to retirement savings. Living longer means you’ll need far more dollars for your retirement years. The secret to stretching those dollars is proper management of the money you’ve saved for retirement. The wiser the financial choices you make, the more likely it is that you will not run out of money during your retirement years. The good news? Managing your retirement funds does not have to be complicated. You can either hire a financial advisor to take on this role or you can do it yourself. Going with a pro There are plenty of financial planners who can help you manage your retirement funds. These financial pros can provide you with suggestions on how much money you should withdraw from your savings each year. They can also provide guidance on which investments you should first make your withdrawals from. A financial planner can also spot signs of trouble with your investment portfolio. For instance, you might have a portfolio that’s weighted too heavily toward risky stocks. Alternatively, you might have one that doesn’t have enough risk. Both can cost you a significant amount of dollars during your retirement years. A portfolio weighted too much towards stocks could eat away your savings should those stocks falter. A portfolio that relies too heavily on safer bonds could shut you out of the potentially bigger gains that stocks can generate. The key to having someone else manage your retirement funds is to find the right professional for the job. This means that you’ll have to interview several financial planners or advisors before selecting one to watch over your funds. First, make sure to work with a Certified Financial Planner. Such planners must take regular continuing education courses to maintain their certifications. This means that they are more informed about the latest investment trends, strategies and vehicles. Secondly, only work with a financial planner who is willing to provide you with references of current customers. You want to consult with these references to make sure that they have been satisfied with a particular planner’s advice, service and responsiveness. Finally, make sure that you only work with a financial planner with whom you are comfortable. You will be sharing personal financial information with this professional. You want to be able to trust them. Ideally, you should like them, too. Work with a planner who listens to you, takes your individual needs into account and gives you a say in investment decisions. There should be no “one-size-fits-all” advice. Going it alone You also have the choice of going it alone when it comes to managing your retirement funds. If you choose this route, you’ll need to commit to staying up-to-date on the latest financial news and be willing to conduct regular reviews of your investment portfolio. That latter point is important: Too many retirees who manage their retirement funds review their investment portfolio on a frequent basis. This is a mistake. As you age, your investment needs change. It may make sense to have more risk in your portfolio in the early years of your retirement, especially if you expect to live many years after leaving the workforce. However, as age, you might need to reduce some of that risk. If you do not review your investment portfolio and make the necessary changes, on a regular basis, you could end up costing yourself financially in the latter years of your retirement. Many retirees who manage their retirement portfolio rely on the bucket approach. Under this method, you divvy your investments into several buckets. Those buckets with the least amount of risk, investments that typically include certificates of deposit, money market accounts and short-term annuities, are the ones designed to fund the first five years of your retirement. The bucket of investments that funds your sixth through 10th years of retirement includes investments with a bit more risk, such as longer-term certificates of deposits and short-term treasury notes. The risk gradually increases with the buckets designed for years 11 through 15, 15 through 20 and 21 and beyond. The key, though, is to move your savings from those riskier buckets to the safer buckets as you move through retirement. For instance, in year six of your retirement, the money you previously had in bucket two, with a bit more risk, goes down to bucket 1. You then start withdrawing from this bucket until you move into your 11th year of retirement. At this point, you move your investments down another level of buckets.

Managing Your Retirement Funds

View Resource Managing Your Retirement Funds
You’ve worked hard all your life. You do not want to enter retirement worrying about how you are going to pay for medical costs, insurance, groceries and your other bills. The key to living a comfortable and stress-free retirement is to draft a realistic budget and to cut out unnecessary expenses. If you do this, you’ll greatly increase the odds that your retirement years will truly be your “golden” years. Reduce your spending Financial experts say that you’ll need 70 percent to 80 percent of your pre-retirement income to live happily during your retirement years. However, that is just a general statement. Only you can determine exactly how much money you’ll need during retirement. That is why you have to set your budget. For instance, you’ll need more money if you plan to spend your retirement years traveling the globe or booking cruises. You’ll need less if your retirement plans involve spending time with your grandchildren, playing golf with your friends or fishing on a nearby river. Your health plays a role in your retirement budget, too. If you are already suffering serious health conditions, the odds are high that your medical costs will be significant during your retirement years. No matter what kind of retirement you’d like to live, though, you’ll have an easier time reaching your goals if you reduce some of your expenses. Remember, the lower your expenses, the more dollars you’ll have to do what you want during your retirement years. First, consider your home. You might no longer need all that indoor and outdoor space. Maintaining a large home takes much work. Larger homes also often come with higher property taxes and homeowners insurance bills. Consider downsizing to a smaller home, one that comes with lower property taxes, as a way to cut your monthly living expenses. You might also consider moving to a less expensive community in which to live. With your children grown and out of the house, top-notch schools and busy parks might no longer be a consideration. This frees you up to consider moving to a part of town in which consumer goods and property taxes are both lower. It is not always easy to leave the community in which you’ve spent decades, but sometimes moving to a cheaper town makes good economic sense. Look at your existing insurance policies, too, as a potential source for savings. Now that you’ve hit retirement age, you might no longer need to invest in life or disability insurance. You might not have children that depend on you financially, and your spouse might be able to survive on his or her own financially without life insurance payments. Ditching those insurance payments can add up to significant savings. Speaking of children, be wary of providing them too much financial assistance as you age. Yes, you want your children to be happy. You do not want them to struggle to pay their bills or provide for their families. However, if you spend too much money supporting your adult children, you could accidentally eat away at your savings, leaving you and your spouse in a financial bind. As you hit retirement age, your priority is to make sure that you and your spouse are financially secure. Working longer can pay off You can stretch your retirement savings, too, by working longer, either on a part- or full-time basis. This extra income that you earn during your retirement years can help you cover your basic living expenses, allowing you to leave more of your savings untouched. It is important, too, to understand the possible drawbacks of collecting Social Security benefits too early. You can begin collecting your monthly Social Security payments at the age of 62. When you do this, though, your payments will be reduced. In fact, your payments will be lower if you begin taking them before your full retirement age. Your full retirement age depends on your year of birth but will fall somewhere between the ages of 66 or 67. There are times when it makes sense to begin collecting your benefits as early as possible. However, most financial experts agree that it is better if you are relatively healthy and expect to live past 78 to wait until at least 66 or 67 to begin collecting your monthly Social Security payments.

Stretch Your Retirement Budget

View Resource Stretch Your Retirement Budget
When you are moving out on your own, the first place you live will probably end up being an apartment. They are generally inexpensive, readily available, small, and are often densely concentrated in the places where young people most like to live. Starting the process may seem nerve-wracking at first, especially if you do not know what to expect. A little bit of planning and preparation can go a long way in helping you get into the best apartment for your needs. Setting a budget The rule of thumb is that your rent should be no more than 30 percent of your income, ideally more like 20 to 25 percent. Perhaps more important than the percentage is whether you will have enough money leftover after paying your rent to cover your other obligations. Consider your costs for transportation, food, insurance, debt payments, and other necessities and calculate how much you can afford to spend on an apartment. If your budget is not enough for an apartment in your area, consider finding one or more roommates to divide the cost. However, keep in mind the complications they bring, especially as you figure out how to divide chore responsibilities, handle joint costs, and share the space with each of your guests. Additional costs of renting As you are looking for apartments within your budget, remember some additional costs that may or may not be included in the rent. The big one is utilities, including electricity, heat, water, and cable. If your rent does not cover these, you may be able to call the utility company with the apartment address to get an estimate of what the recent bill amounts have been for that unit. Consider other added costs like a garage or parking space and fees for having a pet in your apartment. On the flip side though, make sure also to factor in perks, like a fitness center and pool, which may allow you to skip paying for a separate gym membership. Signing a lease You’ll need to go through several steps before you sign a lease. The application will include an employment check, calling your personal references, and checking your credit history. If you do not have good credit history or solid employment, the landlord may require you to have a guarantor or co-signer on the lease with you. Your parents are the best candidates for this role. When you sign a lease, be ready to put down some money. This will include a security deposit, the first month’s rent, and sometimes the last month’s rent as well. Find out what you need to do to get your security deposit back in full when you move out. The last major thing to consider is the length of the lease. You are committing to live there for the entire lease term, and it is worth finding out what the penalties are for breaking the lease if you need to move. Some apartments will let you sublet to another tenant to finish out your lease, which can be helpful if you are not confident you’ll stay at your current job.

Renting Your First Apartment

View Resource Renting Your First Apartment
When you get married, you tie the knot in more ways than one. In addition to committing to one another, you are also committing to a life of managing your money together. Regardless of whether you plan to manage your finances separately or jointly, you need to create a game plan before your wedding day. Reviewing accounts and debts It is not uncommon for couples to come together and realize that one has a lot more debt than the other. Whether it is credit card debt, student loans or a mortgage, you’ll need to talk about it. Start by sitting down together and taking a comprehensive look at what each of you owes. If you feel tension because one of you has more debt than the other, discuss what you want to do about it. For example, some couples decide to manage their money separately, so each one continues paying pre-marriage debts out of his or her paychecks. You’ll also want to take a look at each of your credit reports because your credit history will affect your ability to qualify for joint accounts, especially a mortgage. If your spouse has a lower score, lenders will use that on a joint application. The sooner you know about credit problems, the sooner you can start working together to improve your credit and build a strong financial future. Setting financial goals Once you know where you stand, talk about where you want to go. Do you want to focus on paying off debt? Saving money for a down payment on a home? Catching up on retirement savings? Going on lots of vacations while you are still young? In the areas where your goals differ, talk through your reasoning with each other until you are on the same page and in agreement on your priorities as a couple. Deciding between joint or separate accounts It is just as common for couples to maintain some separate accounts as it is to join their finances completely, so you should feel free to decide what makes the most sense for your situation and relationship. Maintaining separate accounts can be wise if one of you has child support or alimony responsibilities or if one of you has gotten a large inheritance. However, joint accounts are helpful for managing shared expenses. If you both have both joint and separate accounts, decide where each other’s money initially gets deposited. Some couples deposit their paychecks into a joint account and then transfer allowances into separate accounts for their discretionary spending needs. Others choose to deposit their pay into separate accounts, with each transferring a specific amount each month into a joint account to cover shared expenses. Agreeing on money management rules The last step is to agree on your rules going forward. Talk about who will be in charge of paying the bills, how you’ll manage conflicts over money, and what types of financial decisions you need to discuss together. For example, some couples set a specific price point above which they have to agree on a purchase before making it. Studies show that a great deal of marital discord occurs because of disagreements over money. In that regard, it is not as important the specific choices that you make, rather that you are in agreement on those decisions.

Getting Married

View Resource Getting Married
After they spent at least 18 years taking care of you at the beginning of your life, there’s a good chance you’ll end up helping take care of your parents at the end of their lives. They may need a little bit of help keeping track of when bills are due, or in planning how to tap into their retirement accounts. Towards the end of their life, they might need you to take full control over the management of their personal finances. Even if your parents have not yet reached the point when they need help, it is never too early to start having conversations about their financial fitness as they head into retirement. That way, you have plenty of time to plan how you will take care of your parents as they get older. Costs of elder care If your parents were on an especially tight budget during their working lives and in the early years of their retirement, they might not have the funds available to handle their long-term care needs financially. That might be left to you to fund, and it can be expensive. For example, receiving long-term care in a nursing home or assisted-living facility usually costs between $3,000 and $5,000 per month. Those costs will vary depending on the type of facility and where you live. If the cost of paying someone to care for your parents seems too high, the alternative is for you to take on the task yourself. If you have space in your home, invite your parents to move in with you so you can keep a closer eye on them and care for them as they age. Another option is for you to move in with them or near them so you can provide care while minimizing expenses. The other major expense to consider is health care. Although Medicare provides for their basic health expenses, they will need to be ready to pay for additional costs. Supplemental insurance is one option, or if they have substantial savings, they can self-insure and be ready to pay for costs Medicare does not cover out of their savings. Financial resources for elder care Ideally, your parents will have saved enough money to pay for their eldercare. Between Social Security checks, their pensions, and withdrawals from other types of retirement accounts, some elderly parents have plenty of money to cover their expenses. If your parents do not have enough income from typical sources of retirement savings, another option is for them to sell their home when they need to transition into an assisted living or nursing home. The income from the sale can play a large part in taking care of their financial needs. If they are not ready to move yet, a reverse mortgage is another alternative. It is similar to a home equity line of credit, but they will not need to make payments on it until they move out of the home. Medicaid provides another way to pay for basic nursing home costs. Your parents will need to qualify based on their means, and they will have to spend down nearly all of their assets before they can qualify. They cannot give away assets to you or others to qualify because the government looks back five years in financial records. If your parents are still working and healthy, you may want to consider long-term care insurance. This is difficult to obtain, but if they can qualify early and start making payments, it will cover the cost of long-term care when they are unable to care for themselves. Managing your parents finances Now is the time to start talking with your parents about where they stand financially and how they want their money managed. It is a sensitive topic, but your conversations now will allow you to understand what their needs may be in the future. In addition, in the event that you need to manage their finances for them, you will be more confident that you are following through with their wishes. As far as the legal side goes, have them create a power of attorney for you as soon as you know you will be in charge of managing their finances. This is a simple document that needs to be signed and notarized, and it allows you to stand in for them in a legal sense when they are no longer able. Getting this done now helps you avoid lengthy court proceedings if something happens to them before they designate a power of attorney.

Taking Care of Elderly Parents

View Resource Taking Care of Elderly Parents
Even if you are a smart spender, your kids will not necessarily pick up this habit unless you make it a point to teach them. Plenty of kids from frugal households get out on their own and rack up tons of unnecessary debt because they do not understand the principles behind smart spending. Therefore, from an early age, start training your kids in the techniques they’ll need to spend their money wisely and avoid debt whenever possible. Saving before you buy Kids need to understand that they cannot buy something unless they have already saved the money they need for it. When they ask for items that they cannot afford to purchase just yet, it is the perfect opportunity to help them develop a savings plan to make the purchase happen. Sit down with your son or daughter to discuss how much the item costs, how much they want to save for it each week, and how many weeks it will take to have enough money. Help your child walk through the process of saving, at least the first time or two. Younger kids do best with tangible methods, like putting coins or bills in a jar with a picture of the item taped to it. Older kids saving for a bigger purchase may prefer to deposit money into a savings account each week and work toward the purchase that way. Learning to shop Another principle of smart spending your kids need to learn is purchasing items at the right price. It may not be intuitive for them that the most expensive items are not actually the best, or that you do not always want the least expensive items. You’ll also need to get across the idea that items on sale are not necessarily “saving” them any money, just giving them a lower price to consider. Start at the grocery store on your household shopping trips. Let your kids look over the weekly advertisement with you to pick out the items to put on your list. When you need items that aren’t on sale, have them help you find the best deal among the available brands when you get to the aisle. Setting a good example Whether you like it or not, your kids are watching you and being shaped by your actions. Therefore, when you are trying to teach them smart spending habits, you also need to be a smart spender yourself. Don’t be afraid to talk about your budget, especially when you are not buying things your kids want because you are saving money for more important priorities. It is also helpful, especially when your kids are younger, to make purchases in cash instead of using credit cards or debit cards. This allows them to see the exchange of money happening, so they more clearly link the fact that you need to have money to be able to buy things. As your kids grow into teens, you can start talking about credit cards and how to use them wisely for emergencies or purchases you’ll pay for in full when the bill comes.

Smart Spending

View Resource Smart Spending
The person on the other end of the phone has exciting news: You’ve won first place in the sweepstakes. A new car will soon be yours. The catch? To claim your prize, you have to send a small payment to cover its delivery, maybe $100 or $200. Be careful. The non-existent sweepstake is one of the most common telephone scams. Once you send in your prize-recovery fee, your money disappears. And that new car you’ve won? It never shows up. In this age of the Internet, it’s easy to forget that con artists have been using the phone for decades to scam victims out of their money. And if you don’t recognize the warning signs of a phone scam, you, too, can fall prey. Here are some of the more common phone scams and how to recognize them. For the ‘sweepstakes scam’ mentioned above, the red flag to watch for is a request for a fee to claim your prize. No legitimate sweepstakes or lottery will ask you to send money upfront to claim the prize. If the person on the other end of the phone asks for a credit card number to verify your identity, immediately hang up. That’s another sure sign of the sweepstakes phone scam. The fake check: Are you advertising an item for sale on Craigslist? Be wary of the fake check phone scam. In this scam, a crook calls to buy your item. The catch? This scammer wants to write you a check for more than the amount of the item. Say you’re selling a patio furniture set for $200. The scammer will send you a check for $300, requesting that you deposit the check in your bank and wire the extra $100 back to the scammer. What happens next? Three days later your bank calls: That $300 check is a fake. The lesson here? Never wire money to someone you don’t know, for whatever reason. Phishing: We all know of phishing scams in the online world. But it can happen by phone, too. A crook will call you claiming to be a representative of your bank, credit-card company or phone company. The caller will ask for a piece of important information, maybe your bank account number or perhaps a PIN. Don’t provide this information. The scammer will use it to empty your bank accounts or run up fraudulent purchases with your credit card. The rule here is a simple one: Never provide account numbers or PINs to someone who calls you on the phone. Your real bank or credit-card company will never ask for this information if they call you; they already have it on file. Expiring warranty: The expiring warranty is a phone scam that doesn’t even require a live caller on the other end of your phone. Instead, an automated message will click on when you answer the phone. The message will tell you that the warranty on your car is about to expire. After the recording ends — if you haven’t hung up — a live operator comes on the line and requests a payment for a new warranty. If you pay? You’ll never receive any paperwork, and you’ll never receive a payout should you damage your car. Avoid falling for this phone scam by demanding that any company selling you a warranty send you the paperwork explaining the policies before you make any payments. Most times, the voice on the other end of the line will disappear, and you’ll receive no documents in the mail. To protect yourself from phone scams, follow certain rules: Never feel pressured to make a quick decision. Always ask for paperwork or documentation before sending money. Never give out your credit card, bank account or Social Security numbers to a telemarketer who has called you. And never pay for what is being touted as a “gift.” For further protection, sign up for the National Do Not Call Registry. Registering should prevent most unwanted calls from reaching you. And if you think that you’ve fallen for a scam, even if you’ve already sent money, contact the Federal Trade Commission at 877-FTC-HELP.

Common Phone Scams

View Resource Common Phone Scams
As if you did not have enough bills to pay in your life, your kids are likely to reach a point when they start asking for an allowance. Although you may think that you are already spending plenty of money on your kids, it can be very helpful to give them an allowance as well. After all, if kids never have money of their own, they’ll never have the opportunity for hands-on learning of how to manage it. Teaching your children about money management should be an important part of any decisions you make about giving them an allowance. When to start giving an allowance Decisions as to when to begin to start giving your child an allowance may vary depending on their maturity level, but, you should not even think about starting allowances until they are in elementary school. At that point, kids understand what money is, how much it is worth, and what they can do with it. Some kids may not be interested in money yet, in which case, it’s fine to wait until later in elementary school, or even once they start middle school. If you have more than one child, consider how the allowance will affect the siblings. You may want to wait longer to start giving the oldest child an allowance so you can start your first two kids at the same time. Alternately, you may set a family rule that all children start receiving an allowance at a specific age, sort of as a rite of passage. Determining the appropriate allowance amount You may have heard the rule of thumb that kids should get $1 per week per year of age. However, in many cases, this is too much money. The right amount depends a little bit on your budget, but mostly on what you expect your kids to be doing with their allowance money. They should have enough for some little luxuries, but not so much that they do not have to save for bigger purchases. If your kids do need to be purchasing all of their non-necessities with allowance money, they’ll need more than if you buy the occasional toy or candy bar for them while you are out. In addition, if you expect them to save a portion of their allowance for future, high-ticket expenditures, you might give them more than if they just make impulse purchases. Helping your children manage their allowance Before starting an allowance, set ground rules about how the allowance will work. Tell your child how much he or she will get and how often, and stick to that schedule to develop consistency. Clearly outline what your child should be doing with the money, and include requirements that you both agree to, such as giving some of it to charitable causes or saving some for future purposes. Besides that, though, give your child freedom to do what they want with the money, which will help them learn money management skills for later in life.

Allowances and Children

View Resource Allowances and Children
Coins, bills, dollar signs, checkbooks, and credit cards all seem commonplace to you, but imagine how confusing they are for children. If you have ever had a conversation with an articulate preschooler about money, you may be surprised to hear all of the outlandish things they believe. Some think you can print money when you run out, and most kids have a hard time with the idea that you’d be better off trading 20 pennies for a quarter. As a parent, it is your job to help your children understand money in several key ways. Getting practice handling money Even before kids can truly understand how much money is worth or what it does, they can practice handling it. When you take your kids to the store with you, let them hand over the cash and get change for the purchase. This helps tie together the idea of money being spent to get items in return. You can also give your kids a small piggy bank and coins they can play with as soon as they are old enough for the coins to not be choking hazards. Sorting the coins into groups of the same type is the perfect activity for gaining familiarity with the types of coins, even if they do not yet know what they do. Learning the value of money The idea that coins and bills are “worth” a certain amount is something kids can start to grasp late in preschool. Start by teaching your kids that 100 pennies make one dollar, and then start introducing the other coins and bills. Have kids sort coins into piles that all have the same value to help them understand the equivalencies. You can even challenge them to figure out how many different ways they can make a pile that contains a specific value of money. Balancing spending and saving Once your kids know how to tell how much money they have, they’ll be able to start saving for things they want to buy. Explain that they need to have saved money so they will have the money to spend. You can even talk to them about some of the things you save money to buy and help them brainstorm ideas of what they may want to save to buy. Your kids should have a place to save their money. A piggy bank may be fine for young children, but if they are holding onto more than about $20 at a time, they should have a savings account at a bank or credit union. This also helps develop healthy habits of depositing money into a savings account. Managing money wisely Your kids are going to make some mistakes with spending money, but it is important to let them. Mistakes are opportunities for discussion about how they can manage their money more wisely in the future. You can talk about buying items on sale, distinguishing between needs and wants, and saying no to short-term wants in favor of a long-term one they want even more.

Understanding Money

View Resource Understanding Money
Those cute little faces and loud voices are hard to resist when it comes to spending. Research shows that the average parents spend over $245,000 per child from birth to their 18th birthday. Whether you will fall above or below this average largely depends on how you approach spending money on your children. Keep an eye out for these spending mistakes many parents make that can lead to financial trouble down the road because there’s not enough money left in the household budget for other priorities. Impulse purchases It is tough to take kids into any store without the words “I want that” or the question “Can I have that?” coming out of their mouths. However, these impulse buys add up quickly. Even just a $3 purchase twice a week for a single child adds up to $312 per year! If the purchases are pricier, you will spend even more. One of the best ways to avoid impulse purchases is to set expectations adequately before you go shopping. Tell your kids what is on your shopping list and make sure they understand that you will not be going home with anything that’s not on the list. Spending outside your means Although you may know what you would like to be able to buy for your kids, the truth is that your financial circumstances may not make that level of spending possible. It is critical to let your budget dictate how much you can spend on your kids rather than being taken over by your ideals or what your friends and neighbors are doing. Before making any purchase for your kids, ask yourself if it is something you can actually afford. Buying expensive brands Whether you are looking at food, clothing or toys, the prices on name brands are often going to be double what you would pay for the generic alternative. However, these companies do everything they can to push their products on you and your kids. You’ll find your kids asking for all sorts of brand name products that they hear about outside of your earshot. The truth is that your kids do not need the name brand products. Make a habit of buying generic whenever you can to save money while getting basically the same thing. Generic cereals are often just as tasty, and if your kids are not convinced, try having them do a taste test and guess which one is the name brand. Buying off-brand clothes can also save you tons of money. Overspending on special items Even if you are good at keeping spending under control on a day-to-day basis, special items can still trip you up. Because of their higher overall price tags, what feels like a small upgrade can amount to hundreds or even thousands, of dollars. Therefore, shop carefully on those big special items, which include computers, cars, and birthday and Christmas gifts. Discuss your budget in detail with your kids before spending on even larger expenses like college tuition or a wedding.

Spending on Your Child

View Resource Spending on Your Child