Jerry Golden on Retirement

New Year’s Wishes for Retirement Regulations

January 8, 2014 By Jerry Golden in Interesting Articles, Social Security Tags: IRA, retirement, Rollover IRA, Social Security, Social Security Reform

The start of the New Year signifies a time of change in our lives, where we resolve to better ourselves after the knowledge and experience gained from the previous one.. Apart from the resolutions of self-betterment that we all seem to make, I would hope to see changes to retirement related laws and regulations, which could benefit us all.

Due to more pressing matters in Washington; I do not foresee any specific reforms to retirement, unless it is part of a “grand bargain” that addresses long term debt and fiscal issues. However, there are several changes that I would like to see, which could ultimately better the current state of retirement.

Reform Social Security that would take long term financing issues off the table. There are many reasonable approaches that could work, including my proposal of updating Social Security to the new realities of older American workers.
Change the taxation of income annuities to encourage middle market retirees to reduce investment risk and increase cash flow by electing lifetime payouts.
Limit the excessive accumulation in Rollover IRA’s. Require faster and earlier distribution rather than restricting the types of investment or contributions.
Improve the disclosure for complex annuity products. Requires better coordination between State insurance and Federal securities regulators.
Define the fiduciary responsibility of anyone advising investors regarding retirement matters.

Whether or not these changes will come to fruition in 2014, I believe these five alterations to retirement laws and regulations could largely benefit any current or future retirees.

On behalf of the Golden Retirement team, we would like to wish you all a safe and happy New Year.

Social Security Reform – Solving the Annuity Puzzle

December 28, 2011 By Jerry Golden in Interesting Articles, Social Security

In my Op-ed published on December 8 by Bloomberg News (at http://bloom.bg/v2UCRq ), I suggested that the Social Security System could be made financially stronger while giving Social Security beneficiaries more choices about how and when their benefits are distributed.

In last week’s blog I outlined the advantages of a strategy of staging the election of Social Security benefits.

To realize those advantages, we may have to solve a puzzle that, if not one for the ages, has caused academics and marketers to scratch their collective heads – why don’t more individuals elect lifetime annuities.

Well, the same issues apply to Social Security in its current form, as well as under the reforms I am proposing. Rather than being a question of whether or not to purchase a lifetime annuity with personal retirement savings, the Social Security decision is whether or not to delay election even when any such deferred payment has a fair market-based adjustment to the current payment available. In both cases the individual is exchanging the current value for a future value fairly determined.

Of course, there are any numbers of reasons, rational or not, for Social Security beneficiaries not to defer: (1) they absolutely need 100% of their Social Security payments to meet current expenses, or (2) they have no faith in the future of Social Security. However, current experience suggests that beneficiaries are electing Social Security earlier for the same reason that individuals don’t purchase lifetime annuities. It’s about somehow giving up the accrued value to the issuer (life insurance company or Social Security) at death before they “break even”.

In both of these instances, individuals for the most part don’t “get” the concept of risk pooling for lifetime annuity payments, while they do get it for life insurance, health insurance, and property and casualty insurance.

My proposed Social Security reform would address this puzzle by permitting beneficiaries to stage deferrals, elect survivor benefits, and select caregiver benefits – all on a fair market value basis.

Bottom line, rather than focusing on the same pieces in the puzzle over and over again, changing the offering would give individual beneficiaries more choices.

The same can be said for commercial payout annuities – there are a wide range of annuities that can help solve the retirement puzzle so many individuals now face. We just need to better educate the public and offer greater annuity flexibility to improve retirees’income plans.

Jerry Golden
CEO, GoldenRetirement.com
Social Security reform that benefits retirees.

How Social Security Reform Can Improve Retiree Finances: Jerome Golden

December 22, 2011 By Jerry Golden in Interesting Articles, Social Security

Staging Retirement Benefits – Some Comparisons for the New Age of Retirement

One of the questions I received was that if so few beneficiaries elect to defer their payments today, why do you expect them to stage their elections under your reform proposal?

First, there’s a big difference between deferring 100% of your Social Security benefit payments than staging your elections. The 100% election is an old view of retirement that occurs at a fixed point in time. Staging is the new view where retirement itself might be gradual, as well as how one’s Social Security benefits are paid out.

Set out below is a comparison between the traditional approach of electing 100% of the Social Security benefit of say $2,000 per month at age 65 vs. staging the timing as to when Social Security benefits commence. Note in this example, after six years the staged benefit exceeds the benefit elected upfront. In both approaches, we’ve assumed cost of living increases of 3% per year. By age 75 the staged payments are 20% higher than the payments elected upfront.

There are numerous ways to fill in the income gap between the budgeted amount of essential expenses and the staged Social Security payments. It could be from part-time work, income from a spouse or a drawdown from personal savings. Let’s explore the third option.

Assume that the individual has $200,000 in personal retirement savings, not including any home equity, cash or money market savings, or any funds dedicated for a special purpose. These savings constitute the “Investment Account” in this discussion – a “Social Security Privatized Account” is not proposed.

While objectives may differ, most individuals will want to achieve the highest level of retirement income with the least amount of risk. The risk is that the retiree runs out of money later in life, and has to cut back on essential living expenses.

In this example, the individual figures he needs $2,600 per month for his essential expenses – or 30% more than his regular Social Security check. If he elects Social Security upfront he must make up the difference (plus cost of living increases) out of his Investment Account for the rest of his life. If he elects to stage the election of Social Security over a 10 year period he can secure nearly the full amount of expenses, leaving a much smaller amount to be withdrawn each year from his Investment Account.

The chart below assumes the Investment Account is invested in Treasury securities earning the same long term interest rate of 4% underlying the calculation of the staged Social Security payments. (The example assumes the individual is in the 15% marginal Federal tax bracket.) Under the staged approach the Investment Account at age 85 is $120,291 vs. $99,671 under the upfront approach.

If we assume that the individual invests more conservatively in short term investments and earns just 2%, the staged election holds up and the upfront election runs out of money at age 88.

Bottom line: The staged approach may represent a lower risk strategy for the Social Security beneficiary, and in the end may create a greater Investment Account later in life. Staging benefits is likely a better fit for the new age of retirement that eases individuals into full retirement at a later age.

Finally, under the reform proposal, staging is simply another option available to beneficiaries, and not a substitute for the options available today.

Jerry Golden
advocating sound Social Security reform…www.GoldenRetirement.com

How Social Security Reform Can Improve Retiree Finances: Jerome Golden

December 19, 2011 By Jerry Golden in Interesting Articles, Social Security Tags: retirement, retirement income, Social Security, Social Security Reform

Understanding the Monetary Value of Social Security Benefits

I indicated in last week’s blog that I would show the advantages of a strategy of staging the election of Social Security benefits.

Before doing that, it’s important to establish a principal not well understood – the monetary value of the right to receive income for the rest of your life from a trusted source such as Social Security, a pension plan, or insurance company. Just because this right may terminate at your death (which can be ameliorated with a surviving spouse or beneficiary option) doesn’t mean it has no value. As long you are of average health, that value can be calculated quite readily – and even if you are not of average health, there is still value.

For example, the value of a Social Security benefit of $2,000 per month for a male 66 in average health could be worth $400,000 or more. That’s the personal store of value referred to in my Op-ed piece. What are the implications of that number?

It’s large and can represent a significant part of your retirement savings.
You should have options on how best to utilize that $400,000 of value.
Delaying the election of benefits in whole or in part (under the reform proposal) can grow that value for future consumption.

Certain commentators described my Social Security reform proposal as overly complex. My responses are: (a) it’s a mistake not to provide the beneficiary more choices with so much at stake;(b) Social Security policymakers and administrators can determine how many choices they offer to individual beneficiaries; and (c) there’s a cottage industry today providing Social Security advice, and with this reform they’ll simply expand their tool set.

Jerry Golden
Your Retirement Advisor
www.GoldenRetirement.com

Retiree Choices Could Keep Social Security Afloat: Jerome Golden

December 14, 2011 By Jerry Golden in Interesting Articles, Social Security Tags: retirement, Social Security

In my Op-ed published on December 8 by Bloomberg News (at http://bloom.bg/v2UCRq) I suggested that the Social Security System could be made financially stronger while giving Social Security beneficiaries more choices about how and when their benefits are distributed.

Having already received questions about how this may be possible, this is the first of several blogs to provide more detail about elements of my reform proposal. Let me start with answering some of the critical questions.

Does my proposal represent a privatization of Social Security and turning over $12 to $15 trillion to Wall Street? Definitely not! It simply involves giving beneficiaries more options with their promised benefits. When the article refers to a personal retirement program, it’s not about a private investment account, but how you could customize your Social Security benefits to meet your personal circumstances.
Is the source of the projected savings the result of beneficiaries deferring the election of benefits until, say, age 75 and having Social Security recover their personal store of value at their death? Again, the answer is No, but requires a three-part answer:

While the headline writer changed the original headline above to “Cash in at Age 75 and Help Save Social Security”, there is nothing sinister about deferral. Under current Social Security rules, you can defer from age 66 to 70 and get a 40% increase in benefits. My proposal simply extends that concept.
The article states that any increase in the deferred payments reflects both interest and longevity credits. Thus deferred payments give you credit for the expected recovery to the System from deceased beneficiaries. To illustrate, deferral from age 70 to 75 might produce as much as a 70% increase in benefits.
While some few individuals will elect a 100% deferral, the more likely scenario under this reform is to stage retirement and coordinate the deferral with a savings drawdown and/or other income. A subsequent blog will show the advantages of such a strategy.

Will the future demographics of the country really help when the ratio of active workers to retired workers seems to be decreasing, creating greater pressure on the Social Security system? The answer is yes, but you need to look far enough into the future. While there’s a period with baby boomers retiring when that ratio is decreasing, that phenomenon eventually begins to reverse itself, in quite a dramatic fashion, according to US Census projections. This is particularly true using the Census Bureau’s “high immigration” scenario.

As I wrote to one individual with serious doubts about the proposal, I’m used to some initial skepticism, and I’ve always had confidence in the often predictable stages of any new idea:

*Ridicule
*Resist
*Embrace
*Self-evident

Hopefully, the information in this and future blog will help in beginning the path to the “self-evident” stage.

Jerry Golden

www.GoldenRetirement.com

«< 35 36 37 38 39 >