Financial Planning

Generation X millionaires give nearly twice as much to charity on average compared to older generations, according to a new survey.

Investment research firm Glass Lewis has named former Comptroller General Charles A. Bowsher as chairman of its advisory council.

There might be a new, ready supply of seasoned CPAs for the busiest time of year. Staffing is still a problem for many firms, and it is particularly felt during the tax prep season when many accountants have to work extra hours because firms often aren’t able or can’t afford to hire additional full-time staff. The results of a recent Charles Schwab and Age Wave study, entitled ”Rethinking Retirement,” point to a possible solution. Surprisingly, 71 percent of the pre-retirees surveyed want to work in retirement. Even more fascinating is that 40 percent want to cycle back and forth between periods of work and leisure. In the write-up to the study, there is the observation that this is “a new style of work with which most employer policies are unaligned.” These numbers indicates there will be a ready supply of seasoned retired CPAs, which can supplement a firm during its busiest times, say February to April 15th, and maybe a month before tax return extensions are due. Firms benefit, as they only have to pay for these individuals when they are needed, they are employing experts at tax preparation, and those individuals are used to working during the pressured tax season. The retirees are happy because they are working on a limited basis, and, rather than working part-time, they have the desirable cycle of back and forth between periods of work and leisure. And with remote access, firms can tap into retired CPAs all across the country. Initially, firms will be using retirees from their firms, but I would expect that would extend quickly to other retired CPAs, and the AICPA and state CPA societies will help by publicizing best practices with regard to cycling back and forth. And like bike riding, which might have been difficult to learn but natural when mastered, this type of cycling will become another readily available staffing solution for firms.

The American Institute of CPAs has written a letter to the Labor Department supporting a proposal to require retirement plan sponsors and administrators to annually disclose fees and expenses to participants.

Howard Hook, CPA, CFP, is a retirement distribution planning expert with Access Wealth Planning. the wealth management firm with offices in Roseland and Princeton, New Jersey. He maintains that with the coming shift from employment to retirement, many Baby Boomers will be on their own when it comes to making decisions that could have a major effect on their retirement lifestyles. He points out that in talking to a goodly number of clients who are happily retired as well as counseling those who are thinking about packing it in, he has found that those who have worked through three specific issues prior to departing their full-time jobs have achieved the most post-retirement satisfaction. So, what are the three things to think about before you hand in your retirement paper? First of all, do you know how you are going to pay your bills when you are no longer receiving a salary? It seems rather obvious on the surface, but Hook says that many people kind of ignore the matter of how much income will actually be needed without that salary. In other words, it’s not as obvious as it sounds. He suggests that people should prepare a detailed list of exactly the expenses that are being paid and then a separate column on how much income is being received. He cautions that all expenses should be included. For example, consider income taxes. That’s going to come out of your revenue base; the employer is no longer paying or deducting it from your paycheck. And consider medical insurance. Who’s paying for that and what’s it cost? Hook points out that all income must be listed. For instance, consider Social Security. He says that many people don’t realize that a portion of Social Security is subject to federal income tax and that a spouse who is still working can cause up to 85 percent of the retired spouse’s Social Security income to be subject to income tax. Next, go back to those medical expenses. How you going to pay for them? Upon retirement, decisions and responsibilities will fall on the retiree. A break in coverage could result in extended waiting periods for those with certain pre-existing conditions. You don’t want coverage to lapse even for a moment. One has to consider when Medicare comes into play or if not, what are the options? Also, what about COBRA which requires most employers who offer group health plans to provide temporary continuation of such coverage to employees who do qualify? And what about a spouse’s medical plan at their place of employment for the retiring spouse? Each medical plan has unique advantages and disadvantages. In fact, some plans require a supplemental drug plan to be purchased to cover prescription medication, while other plans include drug coverage. And again, watch those waiting periods carefully! Finally, and perhaps most importantly, how are you going to spend your free time? All this free time certainly changes the parameters of your life. With people living longer, the average retiree could live upwards of 25 years or longer. Do you have a game plan? Keep in mind that in many instances more free time can also lead to increased spending. Having a plan for keeping busy, says Hook, can help ensure a smooth transition and ease the difficulty of managing large blocks of free time. He says that the idea is not to take out a calendar and full out each day with a different planned activity but rather to make a list of the things you would like to do and an approximate time frame for doing them. Naturally, Hook says that answers to these questions may differ because people are different. The key, he concludes, is to make appropriate decisions now that will allow you the flexibility to adjust those decisions in the future without compromising your lifestyle. Howard Hook can be reached at hhook@awplan.com.

According to recent surveys, Americans are lacking in preparation for retirement. In fact, many have little or absolutely no idea of how to achieve certain goals. To the rescue comes WealthRidge which is offering a free retirement planning White Paper to help people get on track to financial well-being in retirement. "Facts You Need To Know About Retirement Planning" can be obtained via www.wealthridge.com. Wealthridge points out that more than 65 percent of all retirees have saved less than $100,000, and they find that is nowhere near enough money for retirement. Michael Snowdon, CFP®, financial planning partner in WealthRidge says, "It's not uncommon to live in retirement for 20 or 30 years. Finding the funding to support those years has become, for many, an exercise in futility." Why? Here's an example he cites. An individual who wants to have an income of $75,000 per year in retirement, plans to retire in 15 years, and to live for 30 more years, may need as much as $2 million to fund the desired retirement income. How so? Because health care expenses represent a significant factor. A recent study suggests that a couple who reaches age 65 will need more than $200,000 to pay for their retirement health care expenses. With fewer company pensions, and living expenses at all-time highs, saving enough money for retirement can seem to be an almost impossible task. There are solutions, notes Wealthridge, and people can achieve their goals. They say that the retirement planning White Paper provides answers to how much money will be needed for retirement, how much healthcare will cost, and how much retirees can safely withdraw from their retirement portfolio to make sure it lasts as long as they do. The White Paper also identifies the tools that are available to save for retirement, along with some cautions about what not to do. For additional information, feel free to contact Michael Snowdon at (888) 326-5557. WealthRidge is an independent fee-based financial planning firm in the Denver metro area.

The American Institute of CPAs is helping to promote a movie on the financial challenges facing the U.S. today.

The Securities and Exchange Commission unveiled its next-generation system for online financial filings, IDEA, the successor to its EDGAR database.

The Securities and Exchange Commission said it would distribute millions of dollars to investors harmed by market-timing trading violations in mutual funds managed by Putnam Investment Management and Janus Capital Management.

Will health issues force your clients to retire earlier or spend their nest eggs quicker than they planned?Four in 10 Americans retire sooner than they expected. Of those, 40 percent do so because of health issues or disability, according to the Employee Benefits Research Institute.