Category Archives: Protect Assets

Important Legal Steps to Take After Retirement

Non-financial Aspects of retirement, Protect Assets

This informative post was contributed to Leisure Freak by writer Veronica Baxter. A good reminder that there are necessary and important legal steps we need to include in our retirement plan. 

This article will outline the actions you should take while planning to retire or having just retired to ensure you achieve the financial and medical outcomes you desire.

Make a Will

If you have not done so already, make a will. In most states, this can be done with forms you can obtain online; however, there are likely witness or notary requirements. Be sure to comply with the testamentary requirements in your state so that your will is enforceable.

If your estate is complex in that you own a business, have multiple real estate holdings, have real estate or accounts across state lines, own property or accounts, or have invested internationally, you should consult an experienced wills and estates attorney for guidance.

Important Legal Steps to Take After RetirementImage Source

Update Your Beneficiaries

Your life insurance and bank, investment, pension, and retirement accounts require beneficiary designations. And, of course, you must designate beneficiaries in your will.

Be sure to keep your beneficiary designations up to date. For example, suppose you’ve had more children since the last time you updated your beneficiary designations. In that case, it is time to update again to include a designation to a trust in the name of those minor children. If you’ve divorced and you fail to change your life insurance beneficiary from your ex-spouse to someone else, your ex may benefit from your death. Not ideal.

Name primary and contingent beneficiaries or multiple primary beneficiaries in case a beneficiary cannot be found or has died. In this way, you avoid life insurance not paying out or the proceeds from your bank and investment accounts escheating to the state. Your loved ones should benefit from your hard work if you cannot, not the government.

Last, be sure to designate your beneficiaries by name. Problems can arise between potential beneficiaries if you do not. For example, if a man designates “all of my children” as beneficiaries, who does he mean? His children from his first marriage? His second wife’s children, who he considered his own but never formally adopted? A child he had with a girlfriend in college? You can see the problem.

Set up Durable Power of Attorney and Medical Power of Attorney

These designations appoint someone to make decisions on your behalf should you become incapable of doing so. For these people to be empowered to act for you, your incapacity may be  

temporary or permanent. The person with durable power of attorney will see to your financial affairs. Likewise, the person with medical power of attorney will make medical decisions for you and enforce your wishes regarding the type of treatment you do and do not want.

Be sure to consult the person or people you want taking on these roles – some people don’t want this kind of responsibility, and you need a willing and capable person to act on your behalf when you cannot.

You can set up a DNR order or organ donation in advance, however, the person with medical power of attorney will make sure your medical team complies with your wishes.

Update Your IRA Investment Risk Level

While not a legal step, this is important. If you have not been advised to do so already, be sure to contact the administrator of your retirement account and shift your investments to low-risk investments. This is to ensure the preservation of the corpus of your contributions as well as growth at a more stable and predictable, albeit lower, rate of interest.

Last, be sure to inform your loved ones of your intentions regarding all of this and their responsibilities, if any. Tell someone where all of your legal documents are so that if something happens to you, they can be easily accessed. You will rest easier knowing that you have taken care of all of this in advance.

Thanks to Veronica Baxter for sharing these important legal steps to take after retirement. 

It’s easy to forget about the non-financial aspects of retirement preparation. Especially things that don’t exactly fit into the more exciting aspects of retirement planning.

V Baxter Leisure Freak Contributed PostAbout the Author

Veronica Baxter is a writer at assignyourwriter, blogger, and legal assistant living and working in the great city of Philadelphia. She frequently works with and writes for Boonswang Law, national life insurance beneficiary attorneys based in Philadelphia.

 

3 Must-Have Insurance Policies at Any Age and How They Can Benefit You in the Long-Term

Protect Assets, Term Life Insurance

Whether you’re in your 20s, 30s, or 40s, there are several types of insurance policies that everyone needs—even if you’re young, single, childless, or don’t have many assets to protect. While it may seem redundant to insure your home, life, and health when you’re young, healthy, and occupying your home as a tenant rather than a homeowner, these policies can benefit you in more ways than you’d expect. To explore the many benefits of purchasing health, life, and homeowners insurance policies at just about any age, read on!

3 Must-Have Insurance Policies at Any Age and How They Can Benefit You in the Long-Term

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1. Health Insurance

Health insurance may seem unnecessary if you’re young, single, and healthy, but this type of policy will keep you from paying thousands of dollars in medical bills if you’re in an accident, need surgery, develop a severe health condition, or require ongoing medical care for any reason. Plus, even the most basic health insurance policies cover everything from doctor’s appointments to preventative care services—including screenings for HIV, alcohol misuse, depression, and certain cancers. 

 

Moreover, the dangers of not having health insurance are vast. If you don’t have health insurance and can’t afford to pay for your medical services out of pocket, you may stop seeking medical attention altogether—which could result in a serious illness later in life. If you do receive medical attention, you could end up with thousands of dollars in medical debt—which may harm your credit and affect your ability to buy a home or obtain other types of financing. 

2. Life Insurance

Like health insurance, a good life insurance policy can benefit you at any age—even if you’re young, healthy, single, and expect to live well into your 70s, 80s, or beyond. However, accidents and illnesses can happen at any age—and it’s important to be prepared in the event that you die prematurely. If you support friends or family members, for instance, your life insurance policy will provide your surviving loved ones with the financial support they need in the event of your early death. Once you marry and start raising a family, you can name your spouse and children as life insurance beneficiaries as well. 

 

While the type of policy you purchase will depend on your financial obligations and personal needs, Mint.com recommends the following life insurance policies for singles:

 

  • Term life insurance. 
  • Disability insurance.
  • Long-term care insurance. 

 

Moreover, final expense insurance is another type of life insurance policy that protects your surviving loved ones when you die. While the benefit amount is typically lower than that of a standard life insurance policy, final expense insurance provides your surviving loved ones with an immediate payout in the event of your death. As such, this benefit amount can be used to cover the cost of your burial, memorial service, outstanding bills and debts, and other funeral-related expenses. 

3. Renters or Homeowners Insurance

Whatever your age, it’s also important to have a good renters or homeowners insurance policy in place. Renters and homeowners insurance policies pay for damages to your personal belongings due to theft, vandalism, fire, and water damages, and they offer other benefits such as personal liability protection and medical payments coverage. Unlike renters insurance, however, homeowners insurance also offers dwelling coverage. 

 

While a renters or homeowners insurance policy is vital whenever you rent or own property, it’s important to select the right deductible for your policy. In most cases, a high-deductible policy will be best for lowering your coverage costs and helping you to save money in the long term. 

 

Even if you’re young, unmarried, and child-free, these three insurance policies can save you money now, in the near future, and once you do get married or start raising a family. However, it’s important to consider your options carefully and take the time to find the right policy for your current budget and lifestyle. As time goes on and you become a parent, spouse, or homeowner, you can always modify your insurance coverages to fit your evolving needs.

 

This informative post was contributed to Leisure Freak by Brittany Fisher-

Brittany Fisher has spent more than 20 years as a CPA. She runs her own site, Financiallywell.info where she shares her knowledge about taxes, personal finance and general financial literacy hoping to help anyone who may benefit from it.

The Common Post-Retirement Risk That Bit Me, Medical Scare  

Health, Protect Assets, Retirement Shock, ,

When planning our retirement we have to consider many financial and non-financial aspects. But retirement planning must be flexible because there are a lot of unknowns when it comes to the future. Knowing that and experiencing it are two different things. A lesson I learned when recently bitten by a common post-retirement risk, having a major medical scare. Ten years into early retirement and now my plan and the way I think about retirement may go through major changes. 

The Common Post-Retirement Risk That Bit Me, Medical Scare  

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Medical Scare – Probably The Most Common Post-Retirement Risk

There are a few post-retirement risks that we can encounter. Unlike inflation or a recession that can impact our retirement finances, a health threat can dig deep into finances, lifestyle, and sometimes even our life expectancy. Although we do our best to avoid long-term harm from any post-retirement risk, sometimes our best isn’t enough. Especially a sudden and serious medical scare that can hit anyone at anytime. 

This is a cautionary tale about how little things can get overlooked and written off when something silently lurks but needs immediate attention before it’s too late. Something we should avoid for both financial and non-financial aspects of retirement. Sometimes a sequence of seemingly random little things are interconnected, turning into something large and dangerous to our lives and plans.

Making Health A Retirement Priority

I have made my health a priority in my early retirement. I hike, bike, weight train 3 days a week, and do cardio workouts on an elliptical 5 days a week. Basically with everything else I do I’m pretty active. I have never smoked, have my medical physical every year, bi-annual dental cleaning, and take my prescribed medications along with several vitamins and supplements. Moderation is used for alcohol, red meat, fatty foods, and sweets. Even so, I recognize now there are areas of improvement needed.

A Minor Injury, Just Like Hundreds Of Times Before 

It was more of an inconvenience or annoyance than an injury. While working on my car I slightly strained my knee by hyper-extending it. It was sore for a couple of days like any similar injury we casually write-off in life. The only thing remarkable about it was that my leg also felt tight. It eventually felt better other than a slight pain in my calf. It didn’t slow me down and it too passed after a couple of weeks. I was over it and never gave it another thought.

Ten Weeks Later Something Else Odd and Discounted

My wife and I were talking and walking through our Art Festival when I had to stop to catch my breath. It lasted all but 5 or 10 seconds and then everything was fine. The next day another few second episode while exercising on the elliptical. Odd, but I still just powered through it and went on with life. A few days later I wake up to that same leg injured many weeks before being swollen with pounding pain. I called my doctor’s office and it was recommended that I immediately visit the emergency room. 

Big Bad DVT and Right Lung PE

Once in the ER, blood work, ultrasound, and CT scan eventually found I was lucky to be walking the earth. My right lung was plugged up with clots from top to bottom and basically offline. I was living on one lung at 6,200 feet elevation’s oxygen levels. Fortunately my left lung was clot spared and up to the task. All of this because I hyper-extended my knee causing a bleed and clot many weeks before. Something I would have never considered happening to me.

Treatment and Surgery

Life has since revolved around heavy doses of blood thinner that included 25 days of miserable stomach injections every 12 hours. There was also a two day surgical procedure to clear the large clot in my leg and spending three days in the ICU. My retirement life at this time still revolves around blood thinner medication, compression socks, and avoiding any chance of getting scratched, cut, or bumping my head. The long-term treatment verdict is still out for a few months. There’s a 50/50 chance I will be on one of those expensive blood thinners for life. 

Will My Medical Scare Change My Retirement?

It certainly has opened my eyes to my mortality. I have had a lot to think about while taking it easy as directed to me the past 3 months. I was cursed in one way and blessed in many others. Cursed because the clot didn’t present itself as a clot for so long. Blessed because when it finally did I still had a chance. I also felt blessed to be retired and have the time to concentrate on recovery. 

Things will and have changed in my retirement lifestyle and potentially even some financial aspects 

At this time long-term treatment decisions are still months away as we await evaluation of my healing. If it’s determined that I need to stay on one of those new safer and effective blood thinners for life then my retirement budget will need to be addressed. It will need to cover a new expense of over $400 a month until deductibles are met for the medication once the manufacturer $10 co-pay coupon I got expires.  

I will also have to rethink some of my lifestyle activities if on the medication. I have taken many minor bumps and falls while mountain biking. That could cause serious problems if on blood thinning medication. Possibly limit biking to my slow lane beach cruiser bike. All the things I do that I have found it impossible to never bruise myself or bleed because of a cut or scrape to my hands or arms will have to be rethought. Including working on my car, major landscape, and house maintenance or improvements. That will bring another adjustment to my budget to cover paying for work done that I used to do myself. Much earlier than my previous old age budget plan.

Things that will definitely change –

More than ever I see that we kid ourselves into thinking we can control everything. Life is finite, my retirement freedom is valuable, and I want it to last with quality as long as possible. It was a real bummer when this all happened. There’s a slight feeling of loss because I really loved the early retirement lifestyle I’ve created. But having to make changes and even sacrifices is part of countering any post-retirement risk that we encounter. I think I have moved past lamenting any loss, kicking myself for ignoring little things that grew into a giant threat, and I’m now looking toward my future. 

I’m not as tough as I used to think I was 

When something doesn’t feel right I can’t just power through it. I’ll need to change the way I approach my health and do a lot better about seeing my Doctor. I shouldn’t ignore any kind of lingering pain or odd events like a quick bout of shortness of breath.

I will definitely limit time sitting or standing still for too long. 

I’ve always limited extended sitting because of back pain. But now I will get up even more. Standing still waiting in long lines will also end. I also have a new appreciation for limiting anything that I don’t want around me or don’t want to waste time with. The top of the list are rude, pushy, and bullying people. I also have an even lower tolerance towards traffic, unwanted obligation, and manipulation. Life is too short to put up with crap.

Other lifestyle and health change on tap that have been put off or half-assed

I am really motivated to hit my long made weight loss goals. I hope this will also reduce the chances of a repeat DVT. Since this all started I am 40% towards my overall goal. Without exercise it’s all been about portion control and food choices. Once I can start doing more physically I should be able to hit my target. 

I’ll also pay better attention to my hydration. Something that slips past me when I am busy or playing hard. I think I will find many other little adjustments that will add up to big health benefits. 

It’s Easier To Miss Signs Of A Post-Retirement Risk Than We Think

Mixed signals and overlooked or discounted negative events can lead us to miss threats to our retirement and life. Occasional budget overruns, a poor investment return, cloudy economic signs, and issues associated with our health can sneak up on us. 

Optimism and confidence are welcome attributes but not when we let it blind us. I can’t help but remember how we all took a big hit with the market collapse in 2008-2009 and the recession. That is how it felt when the post-retirement risk of a health crisis hit me. There were mixed signals and overconfidence that had me power through it on my own when I should have had professional assistance to possibly catch what was coming my way. 

It’s a reminder that even with the best of plans and proactive retirement sustainability countermeasures, things can happen and throw everything into question. There are no guarantees, so we should do everything we can to enjoy what we have and to keep it.

Face It, We Are All Expendable: Financial Viability Countermeasures That Matter 

Career, Protect Assets

Our whole life is spent doing the best we can. We work to improve our careers, create meaningful relationships, and try to build a better financial future for ourselves and our family. But sometimes that isn’t enough and without warning it can all be crushed. I hate to burst anyone’s bubble, but we are all expendable. Face it, all of our efforts can become meaningless in a world where someone is constantly picking winners and losers. It’s hard enough watching our own steps. But the actions of others can undo everything no matter how well we are doing. Knowing that matters because we can stay open to the possibility within our plans and include financial viability countermeasures. Instead of blindly leaving our fate to chance, we should plan and act to counter our expendability.  

Face It, We Are All Expendable: Financial Viability Countermeasures That Matter 

There Are Many Ways Where We Are All Expendable

The economy and employment conditions are doing pretty good right now. However, there are signs warning that it might slow. For some it has already started. We’re all conditioned to believe that hard work, education, skills, reliability, preparation, and a positive attitude will keep us in the success zone. When things are going well it’s easy to be content, believing it will roll on forever. And it just might. Unfortunately that isn’t always the case when the fickle finger of fate selects us to lose. Sometimes our expendiablity is framed as part of a noble cause, for the better of many, or simply it just sucks to be you. 

My first memory of expendability

It seems unthinkable today. Having your life and chosen future plans made expendable solely on gender and date of birth. As a young teenager I was fully aware what hitting age 18 meant. My poor working class keister could get a draft notification for the jungles of Vietnam. 

Unable to get deferment through college or dodging the draft with wealth and connections, or having either to get a less lethal non front-line jungle assignment where us poor boys were sent, meant being expendable. 

It’s not personal, it’s just business 

A downturn in the economy, business, or just a change in direction and the picking of winners and losers begin. When that happens a variation of the same statement is told to thousands of the laid off, it’s not personal, it’s just business.  

Sometimes we can see this notification of our expendability coming when it’s based on last hired – first fired or by merit when we know we rank lower on the merit bell curve. Other times we can be blindsided. Especially when we are expendable in this picking of winners and losers and laid off for what we are, not what we do or how well we do it.  

Technical advances, innovation, and shifting trends 

We can become obsolete or replaceable by lower cost employees, innovation, or even shifting trends. We can be the best at what we do, but we can be left behind if we aren’t paying attention. Our expendable threat can come from companies chasing lower employee cost through offshoring, automation, and insourcing, to shifting consumer trends that our careers rely on.

I experienced this in my first career and many talented hard working people were dismissed. Advances in technology and consumer trends started to crush the century old landline telephone industry. The same thing happens from manufacturing to retail. 

Politics, policy shifts, big money lobbying, and ……..

There’s always someone of authority picking winners and losers that can cost us financially. And it isn’t limited to the corporate executives and managers that rule our paychecks. There are also our elected officials who decide who among us is expendable so they can apply favor somewhere else.  We adjust to stay relevant and financially viable by playing by the rules and then they change them. Through no fault of our own someone makes decisions that upends years, even decades of hard work and plan execution.

They can spin rationalizations all they want. But it’s just another form of “it’s not personal” but with a different flavor of “it’s business”, and in some cases it’s a dirty business. Policy shifts can make us expendable, from those toiling in the rat race to the retired. Here are a couple of the latest examples- 

Financial Viability Countermeasures to Mitigate Expendability

There’s no way to completely avoid being deemed expendable and having our finances and lives tossed out the window. What we can do is mitigate the damage when we are chosen to lose. 

Set goals and don’t be complacent

When things are going well it’s easy to be complacent, believing it will continue forever. But with the many ways winners and losers are chosen in the workplace, our best may not be enough once the tide turns. When we are needing paychecks to meet our financial goals, we need to constantly set work related goals to improve our personal brand to make ourselves professionally attractive. Not only to help avoid expendability, but to have the chance to recover quicker if we are made expendable. 

Being good at what we do is a great benefit and we should enjoy being where we are. But we should always be looking for opportunities to move forward, in our field or another and evolve. Stay in front of shifting trends and innovation to mitigate expendability.

I have decades of experience surviving a never ending layoff environment brought on by everything under the sun. Government ordered breakup, company merger, mismanagement and executive corruption, tech bubble burst, economic slowdown, shifting consumer trends driven by innovation, and the great recession. Even when I was part of the expendability target group for “what” I was. The same attributes that are attractive to our employer to help avoid our expendability would also be attractive to a new opportunity if the need arises.

Take control of debt

What’s worse than losing your income? Losing your income and having debt payments. When it comes to financial viability countermeasures, becoming debt free ranks high. Our chances of mitigating financial harm and beginning recovery increases because we have more options. We can stretch our financial resources like severance pay, unemployment insurance, or savings farther. We can also accept a lower paying position until we can transition to something closer in earnings to what we had.

There was a big stress difference between the layoff years when I had debt and the ones after I became debt free. Being debt free I knew we could weather the storm with less money needed. That allowed me to concentrate on my work to maintain employment viability instead of worrying about financial survival after any expendiblity event.  

Have an emergency fund

We benefit from having an emergency fund for many situations. One of those emergency situations is the loss of our income. Decide on how much to sock away. Most suggest a minimum of 3 months basic living expenses. 

When doing this calculation it’s also a great time to look at where your money is going. This is the perfect opportunity to set a budget and cut wasteful spending. Doing that will not only decrease the amount needed in the emergency fund but it’s another beneficial aspect added to our financial viability countermeasures. It frees up income to pay off debt and increase saving for both our emergency fund and retirement. 

Have a diversified investment portfolio

When it comes to investing, everything has been done to make stock investments winners and bonds, saving accounts, and CDs losers. With that being the story for years now, it’s easy to jump on the index fund investment bandwagon and go all in. But having a diversified investment portfolio that matches our long-term goals and short-term needs is another key part of our financial viability countermeasures. Because one day the expendability formula may change. 

History shows that a diversified portfolio will lose less and recover faster during any economic downturn. Claims that this time it’s different and ignoring history is easy to do when stocks are high flying. But by doing so we can be placing ourselves on the financial expendability list down the road when we can least afford it. Near retirees and retirees need diversification as a primary part of their deployed financial viability countermeasures.

Question government policy changes, investigate, and vote

Many times there is nothing we can do about avoiding government caused expendability pain. What we can do is get in front of it to soften the blow. I’m sure that many farmers today wish they could have had a way to get ahead of what’s happening to farming now. 

Another example is when the 2018 tax reform was passed. There was plenty of hype and people saw a bump on their paychecks. With only minimal working class tax cuts, what caused the bump was mostly about how payroll tax withholding tables where quietly changed. Blindly trusting the change left many with either a smaller tax refund than expected or owing money. Some owing a lot of money due to new deduction restrictions. It upended personal financial situations across the country. 

Question policy changes to see exactly what it really does. It’s always a game of picking winners and losers with a dose of unintended consequences. Investigate and keep your eyes open to possible impacts. That way you may have a chance to make adjustments to beat it or at least prepare in advance for any hits. 

Prioritize maintaining your relationships

It’s easy to get lost in our work and professional identity. But we all need relationships both professionally and personally. Once made expendable, having strong relationships is one of the key financial viability countermeasures we can rely on. Our network and personal relationships can help us to get a foot in the door of opportunity and begin our recovery. They also can keep our spirits up or offer a hand. Isolation is the last thing needed when tossed aside as expendable. 

Last but far from least, be sure to care for your relationship with your spouse. Nothing is worse than the surprise of being deemed expendable at home. Devastating both on a personal level and a financial one. 

Don’t Live Paranoid, Just Live Aware 

Face it, we are all expendable. Some live a charmed life and never taste or even recognize it. But we should all be aware that it’s always there. We all accept that we need to be aware of our surroundings and what we are doing to stay safe while out and about in this world. The same is true in our careers, retirement, and personal finances. We either leave everything to fate or take countermeasures to improve our odds.

The picking of winners and losers by those in power swings wildly. The trick is living and working in a way that makes the best of everything we have while never allowing complacency and a false sense of security add to our expendability risk.

5 Tips on Saving More Money with Annual Travel Insurance

Early Retirement Lifestyle, Protect Assets, Saving Money, Vacationing in Retirement,

When it comes to travel insurance, one of the most common questions is, ‘Isn’t single trip insurance cheaper than annual travel insurance? Then why would I sign up for the latter, when a single trip cover is saving me a few bucks?’ Not all of it is true, especially if you are a frequent traveler. Opting for  travel insurance entirely depends on the kind of traveler you are – a frequent traveler or an ordinary traveler.

Either way, getting  travel insurance is necessary, just to make sure you and your family are protected in case of an accident, loss of personal belongings, travel inconvenience, etc.

Annual travel insurance might come up as an expensive venture, however, for frequent travellers, it’s probably the most viable option out there.

Before delving deep into the art of saving money, let’s first see what annual travel insurance actually is.

5 Tips on Saving More Money with Annual Travel Insurance

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Annual travel insurance in a nutshell

In short, you make a one-time investment to purchase an annual travel policy instead of putting your money at work before every trip in a given year. It is a more convenient and feasible option for both business and leisure travelers.

An annual insurance policy usually offers the following:

  • Trip cancellation coverage
  • Covers medical expenses
  • Coverage for loss of luggage
  • Delay in flights and other flight related inconvenience coverage
  • Flight reroute expenses
  • Travel inconvenience coverage
  • 24-hour hotline for emergency situations

Certain insurance policy providers also offer the following:

  • Cover for aadventurous sports like bungee jumping, scuba diving, rafting, etc.
  • Identity theft cover
  • Rental-car collision cover

Apart from these, insurance providers might offer you other additional benefits, which you need to check with the service provider before signing up.

How to save money with yearly travel insurance

Did you know that you can save a lot more money with an annual trip cover? Most frequent travellers are opting for it, and it’s time you should consider it too! Here are 5 essential tips on how you can save more with a yearly insurance policy.

  1. Pay low premium: For multiple trips in a year, signing up for annual travel insurance is the best option. You will eventually end up paying substantially lower premium compared to a single trip policy!
  2. Choose your insurance plan wisely: Make sure that you are opting for the best plan. Do you want independent travel cover for each member of your family or a single plan for the adults? Individual insurance plans are generally more expensive, so choose as per your requirement.
  3. Know your travel duration: You have to pay more for longer duration stays. So, make sure you are clear about your travel plans and have all the itineraries set. Also, how many days of insurance cover do you need in a calendar year? If you have all these in place, you can save more money while purchasing the insurance.
  4. Compare deals and benefits: In Malaysia, you will find a host of travel insurance policy providers, including and not limited to, Allianz, AIG, RHB, Maybank, MSIG, etc. Compare the deals, offers, and rates offered by the insurance service providers and choose the plan that suits you best. In this way you will be able to save a few extra bucks.
  5. Geographical area: Know the areas that fall under the insurance policy. You don’t want to fall sick, meet with an accident or lose your money in a place that’s not covered under the policy, right?

A well-known insurance policy provider will always tell you the benefits of an annual travel plan before you take it up.

So, are you a frequent traveller? What kind of travel insurance plan are you exactly looking for?

 

This informative article was contributed to Leisure Freak by Syed Faraz

Syed is a Financial content analyst/adviser of bbazaar.my, an online platform that provides information and advice on personal finance and money management.

Creating A Recession Hardened Retirement: You Know Another Will Come

Protect Assets, Retirement Doubt, Retirement Plan, ,

We love to run our numbers through Monte Carlo retirement calculators because nothing causes a retirement bummer like money trouble. Who doesn’t like the feeling of using historical investment cycles to validate our retirement plans? But another historically repeating economic cycle is often forgotten, especially when things are looking so good. It’s the dreaded “R” word- Recession. Chances are that we will have the displeasure of going through some recessionary periods during our retirement. They come in different flavors and can strain both our portfolio and well-being regardless of what the calculator results said. It’s a common retiree fear. That’s why I have thought lately about what it takes to have a recession hardened retirement. I believe it’s impossible to be totally recession-proof because anything can happen. But hardening our retirement to resist a recession’s damaging effects to our overall retirement into the future is worthy of looking at.     

Creating A Recession Hardened Retirement: You Know Another Will Come

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What We Can Do For A Recession Hardened Retirement

There were plenty of lessons learned after the Great Recession that is officially listed as lasting 1.5 years from December 2007 to June 2009. All I can say about that is the Great Recession’s official end was nowhere near the breakeven point for our portfolios, the job market, or anything else.

A quick look at Dow Jones Industrial numbers shows it at 13264.82 on December 1, 2007 before going into an extended free-fall and didn’t get close to that number again until December 1, 2012 at 13101.14.

The S&P 500 in December 2007 was 1468.36 and didn’t approach that number again until January 2013 with 1426.18.

Stock Market recovery took 5 years before reaching breakeven. That’s 3.5 years after the recession’s official end of June 2009.

List of recent history’s recessions and their official lengths:

By looking at our history of other recessions we also get a quick glance at recession frequency. I’m sure if we took a deep dive into investment loss to recovery, it took much longer to reach portfolio breakeven than the recorded official recession timeframes.

  • Roosevelt Recession 13 months: (May 1937 – June 1938)
  • Union Recession 9 months: (February 1945 – October 1945)
  • Post-War Recession 11 months: (November 1948 – October 1949)
  • Post-Korean War Recession 10 months: (July 1953 – May 1954)
  • Eisenhower Recession 8 months: (August 1957 – April 1958)
  • Rolling Adjustment Recession 10 months: (April 1960 – February 1961)
  • Nixon Recession 11 months: (December 1969 – November 1970)
  • Oil Crisis Recession 16 months: (November 1973 – March 1975)
  • Energy Crisis Recession 6 months: (January 1980 – July 1980)
  • Iran/Energy Crisis Recession 16 months: (July 1981 – November 1982)
  • Gulf War Recession 8 months: (July 1990 – March 1991)
  • 9/11 – Dotcom Recession 8 months: (March 2001 – November 2001)

These lessons play a part in a recession hardening retirement strategy.

Lesson #1- Investments can fall for a long time and take even longer to recover. When it comes to retirement, portfolio recovery is what really matters to retirees.

Lesson #2- Stay invested no matter how bad things look, and by March 2009 of the Great Recession it looked really bad. Markets do eventually recover and those who fought the urge to run eventually ended up whole.

Lesson #3- When income and portfolios get slammed, debt still needs to be paid. Thinking you can sell leveraged assets during a recession to cover your keister is near impossible when nobody is buying anything that isn’t extremely discounted.

Lesson #4- Investment diversification reduces risk but won’t eliminate risk. Every asset class – stocks, bonds, housing and commodities all took massive hits. But not all at the same severity.

Lesson #5- Experts really don’t know everything. Most dropped the ball in calling the Great Recession. Recessions seem to come from some financially linked dirty corner that isn’t regarded as being economically dangerous until it’s too late.

Recession Hardened Retirement- defense wins championships

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Preparing For The Best WHEN The Worst Happens

Defense Wins Championships

Everyone loves to score. Having investments gain in value gets all the attention and makes us cheer. But a recession can also score big numbers against us if we don’t have a good defense. Concentrating some of our resources on defense may lower what we score during good offensive runs, but it prevents the opposition, in this case a recession, from out scoring us. The goal is to win.

The Need For Cash

Having a portfolio full of cash isn’t going to earn enough to keep up with inflation. But having enough cash to get through a recession and spare us from selling too many stocks or bonds at a big loss is a good defensive move. If Social Security and other guaranteed income like a pension or annuity pays all or most essential retirement living expenses, then less cash is needed for a recession hardened retirement. For retired people like myself with several years to go before Social Security, the portfolio carries the entire load. Having enough cash to play portfolio defense is a hardening move and is also an important element of a retirement bucket strategy.

How much cash to hold depends on your portfolio size, the amount of your retirement budget that depends on the portfolio, your age, and your risk tolerance guided investment allocations. You do not want to over play your cash defense. You still have to score points by investing to win the long game. I recently increased my portfolio cash holdings for various reasons. I took it to an amount that still allowed overall portfolio performance to meet my retirement funding needs. As it turns out, it also recession hardened my retirement portfolio. Always run your numbers through a good retirement calculator. Adjust your cash holdings for the right balance of defense and offence to meet your long-term and recession hardening strategy.  

The Need For Investment Diversification

While stocks score all the points when they have opportunities to score, not all stocks are the same nor move in the same lockstep. Broad diversification in stock asset classes across different industry sectors reduces risk. Bonds also play a huge role for portfolio diversification. Not only for their fixed income (although usually unable to outpace inflation), but they offer lower volatility than stocks. Bonds were still hit during the Great Recession but not as severely as stocks. According to the Allegiant: Minimizing Portfolio Losses: Lessons of Diversification July 2017 study, diversified stock and bond portfolios recovered faster after the Great Recession than an all stock portfolio. Since having a diversified portfolio should recover faster it reduces the amount of portfolio defensive cash needed to wait out post recession portfolio recovery in our recession hardened retirement plan.

Great Recession Diversified Portfolio Recovery Details

Stocks/Bonds Maximum Loss Time to Breakeven
20/80 9% 22 months
40/60 23% 25 months
60/40 35% 37 months
80/20 46% 42 months
100% Stock 55% 59 months
Stick To Your Investment Strategy and Stay Invested

One of the biggest investment risks we face during a recession is behavioral risk. Everyone behaves differently in a crisis. A recessionary financial free-fall certainly triggers crisis behavior. Trust in your plan and stick with it. Don’t allow your emotions about current events dump it. Selling low is a sure way to feel the pain of a recession for years to come.

Whatever your plan’s stocks/bonds/cash asset allocation was set for, make sure to rebalance on a regular basis. During the Great Recession, stock vs bond allocations required rebalancing. This not only maintained our plan’s allocation positions but we benefited for the long run by moving our higher flying bond assets into the depressed price stock market.

Avoid Debt and That Other Debt, Service Contracts

In a booming economy when everything looks so good it’s easy, even for retirees, to take on easy money. Taking a defensive mindset thinks first that borrowing money that looks affordable now may not be if a recession hits. Debt limits our budgeting options and can be difficult to clear. It isn’t just the standard new car loans or charging a vacation that should be avoided. But also those 2 year interest free home window replacement, kitchen update, or flooring deals you want to go with.

There’s also those internet, cellular, and cable/satellite TV contracts that will still be binding if a recession hits. It’s ok to grab these deals, but only if you have the cash reserves to clear them or could have paid cash for whatever it is you feel you need in the first place. It’s easier on our portfolio and our mental state to get through a recession when all we have to concentrate on is our day-to-day living costs instead of paying debts from yesterday.

Create A Rescission Hardened Retirement Plan during the Good Times

The time to rebalance to get the diversification and cash allocation to fulfill our recession hardened retirement plan is before the feces hits the fan. Experts won’t tell you with any advance when a recession is coming. Take profits and make your portfolio rebalance before you need to. Once the experts admit we are headed into, or already in a recession it will probably be too late.

Stacking An Offensive Bench

Anything can happen and recessions are seldom the same. Since their severity can be anything from mild to “OMG” the worst in history, having some additional offensive plays is something to consider. If our defense begins to struggle against a recession onslaught we can do things to add a little more scoring power to our offence.

Additional Income Streams

Picking up extra income through a retirement job should be on the table. As we learned in the Great Recession, when companies were dumping employees left and right, finding a job was difficult. It took great time and effort. It’s important to maintain our professional network and connections. I landed my encore career during the Great Recession’s recovery through LinkedIn. Staying in contact and active within our professional/social circle can be a huge advantage. We should also gain and maintain payable skills we wish to use. Another option is starting a side hustle working for ourselves. Starting a small business or contracting is another way to make and offensive move, from Lyft/Uber to handy-person services. Passive income can also come from renting out a room in our home.

Make Adjustments To Our Cost Of Living

Most retirees I know have already cut waste from their lifestyle. However, there is always places to scale back to reduce our living costs to better match our recessionary income needs. Choosing to make temporary budget cuts to our hobbies and other perks of retirement should be on our offensive bench. We can always add them back in once a recession and financial recovery is complete.

 

Everything here are things retirees should consider doing regardless if there’s a recession threat or not. In using a recession as a way to visualize and test for the worst economic situation that will happen during our retirements, we can see how our retirement plan holds up. It’s all about creating a retirement plan that we can be confident will last as long as we do.

How Much Cash Is In Your Portfolio? Why I Increased Retirement Cash Holdings

Bucket Strategy, Funding Retirement, Investment Strategy, Protect Assets, Risk Tolerance, Saving Money,

I decided I wanted to cash in a few chips and take some of my profits off of the table. I sold off investments and increased retirement cash holdings in my portfolio. Not just a little bit either. I’m on my way to 20% of my portfolio being cash. My decision had nothing to do with in-depth analysis of the yield curve or stock price to earnings (PE) ratios. Nor inflation threats or claims a lack of available workers may drag down this country’s latest economic growth predictions. Not to mention the possible negative economical impact of trade wars. Nope, it’s simply because of the convergence of my age, life expectancy, and the numbers to cover my nut with less on the table. It’s personal.

Increased Retirement Cash Holdings

Increasing Retirement Cash Holdings – What’s the Right Portfolio Percentage?

We all know we have to accept investment risk if we want decent returns. You have to play to win. Nobody can exactly predict or time the market. Major drops happen when they happen. That means we have to stay in through thick and thin.

Investment history suggests that over the long-term the balance of risk vs returns is generally favorable to the investor. Especially when we are practicing dollar cost average investing through both good and bad markets. But that all turns more into a gamble as the investor’s age vs longevity ratio tightens and we are no longer feeding the portfolio with earned income but instead depending on the portfolio to fund our retirement lifestyle. Market recovery time becomes more critical. A 5 year recovery period is a bigger percentage of your remaining life when you’re 60 than when you’re 45.

Portfolio Rebalance and Re-Running the Numbers

When I retired at the age of 51 I kept a small amount of my net worth in cash. I have different expectations now that I will hit the age of 60 later this year and can almost see my Social Security full retirement age ahead of me. I know how fast my years in early retirement have flown by thus far and will soon no longer be considered an early retiree.

For the most part I use the 110 minus age declining equity glidepath approach to rebalancing my portfolio. Subtract your age from 110 and that is the equity portfolio percentage to consider having. Logically that leaves the rest to bonds and cash. I use 110 instead of 100 for my declining equity glidepath rebalance calculation because Social Security will eventually play a role in the non-equity side of retirement funding. The calculation doesn’t explain how much cash is appropriate in the non equity side of the portfolio. Opinions seem to always be critical of holding too much cash. As far as I am concerned, when you have experienced a good run and have enough, it’s time to set aside some of your winnings.

I settled on 4 years retirement funding in cash plus a $25K emergency fund. My retirement withdrawal strategy uses a bucket approach and the cash is in my IRA’s bucket #1 and a savings account. My portfolio allocation looks like this:

  • 18.5% Cash/Cash Investments
  • 29.5% Bonds Fixed Income
  • 48% Equities
  • 4% Alternatives

To determine how much cash I wanted I simply understood my overall goals.

  1. Not have to worry or sell equities during a rotten market.
  2. Have my portfolio last as long as I do.

Increased Retirement Cash Holdings looks good

I then ran the numbers through the retirement calculator-FireCalc. I used 35 years of funding, 45% equity investment position, social security provided estimate amount, bumped up my yearly spending amount by $10K to counter higher cash holdings with its lower returns, and let her rip. The results looked great!

Full Proof? Hardly

Cash doesn’t offer anything in earning interest today and I have no idea how hard inflation will hit. Will interest earnings climb enough to offset inflation? Who knows. I also don’t know what will happen with social security, the markets, or the price of tweets in the White House. However, I am comfortable with this level of cash holdings even going to 20%. This is a decent time to take profits and I will continue rebalancing as long as the market continues to climb. I feel that the FireCalc calculation padding I used in my income numbers and longevity (I seriously doubt I will live to 95) that my odds look really good. Aside from all the financial considerations there is also the mental benefits to my increased cash move.  

High Retirement Cash Holdings – Cowardly or Courageous?

I do have a healthy fear of another market crash and multi-year recovery. There have been enough of them in my years of investing to know there will be more. I am making some optimistic assumptions when there are plenty of unknowns going forward. But what’s new there, there’s always unknowns when it comes to investing and retirement. I do count on adjusting things as needed.

I don’t see pulling a higher amount of cash to the side as either cowardly or courageous. This is simply wanting to hedge my bets and have options. I can cease selling any assets or taking IRA withdrawals in a down market and take advantage of opportunities to buy investments when they arise.

 

As far as I can see, taking profits after a historically long running Bull Market to have higher retirement cash holdings provides both downside protection and upside opportunity. At least in my personal situation. What is the perfect percentage of cash holdings to have in one’s retirement portfolio? How much cash is in your portfolio?

Holiday Season: Time To Think About Home Security

Protect Assets, Protect Your Home, ,

The fast approaching holiday season means many wonderful things, celebration, good food, and most importantly time with loved ones. However, this oncoming season for many people often means time spent away from home, visiting family or vacationing. Especially for retirees who are able to be away for extended lengths of time. While this is wonderful, this also means our homes are left vulnerable to theft and damage. Don’t let burglary ruin your holiday season, prepare yourself and your home now by thinking about your home security.

Know the home burglary facts –

Break-ins can happen year round but we should be especially careful around the holiday season. Many of us go out of town and leave clear signs we are away this time of year. Many break-ins happen because of things like piling up newspapers or lights not going on or off.

Even for those of us who stay close to home during the holidays there is still burglary risk. Most of us will be away from our homes for what can be many hours doing everything wonderfully holiday related. Of course burglars know this so it’s crucial to know the facts so that you can prepare for the worst-case scenarios.

Be proactive to reduce burglary risks –

We can do simple things like set up automatic light timers, trim our landscaping for unobstructed views from the street or neighbors, properly install deadbolt locks, and when away overnight setting vacation holds on our mail and newspaper deliveries.

When expecting deliveries from Amazon or other online retailers we should be careful to be home or have a neighbor remove packages quickly. Not only are those porch sitting packages a huge attractant to thieves for the items themselves, it’s also a clear sign to burglars that we aren’t home.

We can also move our valuables out of our master bedrooms where thieves go first and put them in a floor bolted safe. At least move valuables to a less likely place in our homes hoping that their need to be in and out quickly means they don’t find them.

But will it be enough?

These things may give thieves pause in targeting our home or cause them enough time delay to at least lessen the loss from theft. However, that may not be enough as there is no guarantee it will work. For some of us, having additional home security should be considered. Not only to reduce any loss from theft but to provide additional peace of mind. There are a lot of home security system providers out there to choose from with varying levels of price, options, and service.

Know your home security needs –

Many people want a home security system that is pretty hands-free. If this is true for you then look for a system that is based around home automation. A good system should be easy to install, easy to use, and easy to understand.

It should cover:

  • Intrusion – Broken windows, doors, glass, etc.
  • Environmental – Fire, flood, etc.
  • Surveillance – Cameras
  • Life safety – Life alert and panic buttons

All of these should be covered to be a well-rounded home security system. If you need help identifying your needs or want more information this resource can be very helpful.

Know what to look for in a home security provider –

When it comes to protecting our homes we want transparency and clarity. When dealing with a service provider make sure to watch for things like transparent pricing and good customer support. Aside from the system itself, that should be another top priority in choosing the right home security provider for you. Since you will be trusting this system and these providers with the safety of your home and your family, they should check every box on your wish list.

Cross the Line and Pay the Price

Financial Independence, Protect Assets

Lawsuits are an epidemic. All you have to do is watch TV during certain times of day. You will see various lawyer advertisements parading their client’s smiling faces. All with their tales of suing and getting paid six and seven figures. I don’t have to tell you that staged accidents are also part of this nasty business.

Once you reach financial independence or at least have built up a nice portfolio. Even just having a paid-off home. It is important to protect your assets from legal grabs due to legitimate accidents and the staged ones.

Aside from that, there is another threat to your hard-won financial life to beware of. You spend your life busting your hump to reach financial independence and in an emotionally charged moment you make a mistake. One where you Cross the Line and Pay the Price.

Recent Case: Someone I know made a mistake and now knows –  Cross the Line and Pay the Price

The Close Encounter

Last week a friend of mine that I will call Bill described his long day in court. It turns out that last year he found himself involved with a scamming stager of accidents. When it didn’t go down as planned the low-life went to Plan-B on Bill.

Bill was taking an Interstate off-ramp headed to a big box type retail store when he came to the green light signal where you have to either turn left or right. There was a slow-moving Van without a turn signal on. Bill signaled his intent to turn left. The Van’s driver tried his best to have Bill hit it. Bill was able to avoid contact using an evasive move. He muttered a few comments to himself while continuing to his destination where he then parked his car. His initial response wasn’t about that near miss being staged but instead thinking WOW, what an idiot driver that was. I sure dodged a bullet. Wrong!

Followed and Screamed At

Bill had no idea that the Van’s driver followed him to the parking lot. Not until it parked nose first to Bills door. The Van’s driver immediately began screaming at Bill calling him everything under the sun. Bill exited his car and asked what his problem was because he avoided an accident and didn’t hit him. The low-life began screaming repeatedly that he was an off-duty cop and that Bill was under arrest. He screamed he needed to drop to his knees right now with his hands behind his head.

Simple Reach and Contact

Bill asked to see his badge which was ignored. The low-life continued with his screamed claims. Bill was standing near the Van’s driver’s door where the window was open. Then low-life using his hand nearest the window went to reach into a bag that was on the dashboard. All the while screaming that Bill get on his knees. Bill fearing this screaming lunatic may have a gun reached and grabbed his wrist telling him to not pull anything out of the bag. Low-life who was considerably larger than Bill then grabbed Bill by his jacket with his other hand pulling Bill farther into the window. Bill pulled away and the screaming inside the Van continued.

Arrested and Charged

Cross the Line and Pay the PriceThe police eventually came and Bill was arrested for felony assault. The Van driver was cited with a road rage associated charge for following Bill to the parking lot. A charge supported by the position of his Van. The Van driver certainly spun an entirely different story than Bill’s.

Bill did at least 2 things wrong that now has his financial scrotum in a death grasp.

  • First, he shouldn’t have taken the bait and left his car to talk to this idiot. He should have stayed in his car and called the police. It’s human nature if you aren’t afraid to find out what is going on and talk to someone. But the legal system is based on the lowest courage denominator so always tuck-it and call the police.
  • Second, he should have never reached into low-life’s space inside his Van and touched him.  It was exactly what Plan-B was supposed to cause. If you are truly afraid for your life then get the hell out of there and call the police. If you can’t retreat and decide to go the physical route (not recommended unless there is absolutely no other way out) then all I can say is you treat it like a life and death situation but know that whatever happens your judgment will be challenged and scrutinized in an expensive and not always Just legal process.

The Costs

After already spending $12,000 in attorney fees Bill plead the equivalent to No-Contest to a lesser assault charge. Because he reached into the Van instead of immediately retreating and calling the police there was little or no hope of acquittal. Continuing to fight this would result at best with the same plea deal charge and spending another $25,000 in legal fees. At worst being found guilty of the original charge and Jail time along with the legal fees.

Low-life made a claim for victim’s restitution based on what he said was a sprained wrist and other injuries. He was granted a possible $28,000 restitution that Bill will have to pay if the court agrees to it. After the court date last week was over Bill was then served with a civil lawsuit suing him for $100,000. Low-life picked an amount he is probably used to getting a quick settlement with.

Insurance Won’t Cover It

Because Bill was not in his car at the time of the incident his Homeowners liability insurance will not cover him. The fact that he is now on record as convicted of a crime associated to the incident also would negate coverage had it qualified anyway. This is definitely a case of Cross the Line and Pay the Price. In this case the line was the threshold of the Van’s window.

Bill’s lawyer’s investigator has uncovered that the low-life has several other similar lawsuits in his recent past. Bill will have to fight the Civil Suit and possibly try to counter sue. But low-life scum like this seldom have assets of their own. Bill is trying to accept that he has no choice but to be spending a lot of money.

All of this financial devastation for coming across a highway predator while innocently on his way to a retail store and then not just calmly sitting back and calling the police.

What You Should Do and Know

  • Always know your surroundings and avoid trouble if at all possible. That includes staying alert when driving, especially in traffic where accident stagers look for distracted drivers. They may be working with a team consisting of one or more cars.
  • Always keep your cool when encountering a violent or screaming person who is targeting you for whatever it is that has got their goat. Call the police.
  • If you can get video of what is happening DO SO. If something goes down, look for witnesses and call for help. Then once you are safe call the police.
  • Even if someone physically assaults you first and you defend yourself and injure them (real or otherwise) they can still sue you and you can still be charged with a crime. Just get away the best you can and call the police.
  • Know and remember that in all altercations, right or wrong, the justice system isn’t going to try to decide anything without an expensive court and legal process.
  • Make sure you have good Homeowners and Automobile Liability insurance and not just your State’s minimum required coverage.
  • If you have assets that exceed the Liability coverage available you can buy an Umbrella Policy to payout on anything that exceeds your Liability coverage. It is usually only a few hundred dollars a year for this and depending on your asset size should be considered.
  • If you are charged and convicted of a crime that is said to have occurred for the damages that would normally be covered by your insurance company then your insurance company will most likely not cover you.
Consider Getting Liability coverage

The time to have the proper amount of Liability coverage based on the assets you wish to protect is long before something you can’t predict happening happens to you.

  • There are those without assets who know how to use the laws to bully their way into your portfolio. What once was yours is now theirs and they have nothing to lose.
  • Self Defense Laws and assets subject to civil lawsuit vary by State. Check with your State and insurance company to understand your possible liability and the assets that can be seized. Also verify your local self-defense laws.
  • For those who have a large amount of assets they may want to consider mounting a dashboard camera for protection from staged accidents or predatory scam artist.
  • If you are ever in an accident take lots of photos and if the other party offers driving away if you would pay them a cash deal, never accept or pay and know you are in a scam. Be prepared for everything that is coming your way.
Conclusion.

I have been angry about Bill’s story since hearing about it. Without having this chance and benefit to now ponder and think long and hard through what happened to him and what should be done based on the current legal environment I may have done the same thing he did. Anyone can succumb to a manipulative button pusher. They are pros and know exactly what to do to get a rise out of people. When you think this A-Hole is just begging for a beating know that they really are begging for one, with dollar signs in their eyes.

Have you or anyone you know been the victim of a staged auto accident or altercation for profit?

Legal Disclaimer Note: The information contained in this article is provided as an informational service to visitors and readers of LeisureFreak.com and does not constitute legal advice. LeisureFreak.com and Leisure Freak Tommy makes no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information and advice contained in this article. Nothing provided herein should be used as a substitute for the advice of your own counsel.