Getting the Most Out of Your Employer Retirement Plan
March 1, 2012 by Jean Keener, CFP, CRPC, CFDS
I will be presenting a free financial planning workshop at the Keller Public Library on Tuesday, March 20 at 6:30 pm. The topic is How to Get the Most Out of Your Employer Retirement Plan. We will cover:
- How to choose the best funds with the information provided
- Where to get more information if needed
- Getting the most out of employer matching
- How to diversify your investments
- How to coordinate your 401k plan with your other investments
- Making your investing costs as low as possible
As a Certified Financial Planner™ professional, I frequently see individuals missing out on employer matching, picking funds in their 401(k) plans that don’t fully diversify them, paying excessive fees based on the funds selected, and other missed opportunities. There are simple steps you can take to avoid these issues, and this workshop will give you the tools you need to make the most of your 401(k), 403(b), TSP, or other employer retirement plan.
A drawing will also be held for a free copy of The Smartest Retirement Book You’ll Ever Read. RSVP is requested to library@cityofkeller.com for planning purposes.
Social Security and Divorce
February 27, 2012 by Jean Keener, CFP, CRPC, CFDS
If you’re divorced and were married for at least 10 years, you may be entitled to social security benefits based on your former spouse’s earnings record.
If your former spouse is still living
Your divorced spouse benefits are based on 50% of your ex-spouse’s benefit at full retirement age. You are eligible to start this benefit as early as age 62, but it will be permanently reduced if you start before your full retirement age.
If your own PIA is higher than half of your divorced spouse’s PIA, you will receive your own benefit instead of your spousal benefit. If you wait to file until your full retirement age, even if your PIA is higher, you have the option to restrict your application to just divorced spouse benefits. By restricting your application, your personal benefit will continue to earn delayed retirement credits. Then you can reapply for your social security benefits on your own record at age 70 and enjoy the higher benefit with inflation adjustments for life. This can be a great strategy if your PIA is higher than half your divorced spouse’s and you have enough income to offset the reduced social security benefits until age 70.
You filing for benefits based on your former spouse’s earnings record does not reduce your ex-spouse’s benefit, and the ex-spouse is not notified when you file. You will need to have proof of the marriage and divorce when you apply.
If you’re age 62 or older and you’ve been divorced for at least two years, you can receive Social Security benefits based on your former spouse’s earnings as long as your former spouse is eligible for retirement benefits. It doesn’t matter whether your former spouse has chosen to retire or has submitted an application for Social Security benefits.
If you’re age 62 or older and are caring for a dependent child who is entitled to child’s benefits based on a deceased parent’s Social Security record, then your benefits won’t be reduced currently and will remain unreduced later, after you reach your full retirement age. Bear in mind that you can’t receive a spouse’s benefits prior to age 62, even if you have a dependent child.
If your former spouse has died
You may qualify for survivor’s benefits based on 100% of your former spouse’s social security benefit. If you’re under full retirement age, your benefits will be reduced for each month you receive benefits under your full retirement age. Benefits at age 60 will be 71.5 percent of your former spouse’s PIA.
It’s also important to note that a divorced spouse may be entitled to a mother’s or father’s benefit if caring for the dependent child (under age 16 or disabled) of his or her deceased former spouse. Typically, the amount of a mother or father’s benefit is equal to 75 percent of the deceased spouse’s PIA. Unlike a spousal benefit, it isn’t necessary for the marriage to have lasted 10 years.
How does remarriage of the husband and/or the wife impact Social Security benefits?
If your ex-spouse gets remarried and you don’t, your Social Security entitlement will be unaffected. If your ex-spouse is married to a second spouse for at least 10 years and then they get a divorce, you and that second spouse will each be entitled to collect an amount equal to one-half of the former spouse’s benefits (assuming that you each meet the requirements set forth above).
If you’re the one who remarries, you would no longer be entitled to divorced spouse benefits under your ex-spouse’s earnings record. However, if you don’t remarry until after age 60, you can still claim survivor’s benefits on your ex-spouse’s record if your former spouse dies before you.
This is a complicated area and this article covers many situations that may occur, but not all. Getting advice specific to you is the best way to explore these benefits for your situation!
February 2012 Personal Finance Newsletter
February 23, 2012 by Jean Keener, CFP, CRPC, CFDS
The February 2012 personal finance newsletter is now available. In the newsletter, we have financial planning inspiration from Keller High School seniors to refocus on paying yourself first. For investing, it includes an investment market update and information on the new cost basis rules. For retirement planning, we look at how social security works for those who are divorced. On the tax planning front, we have an update on the law that extends the payroll tax cut and an overview of the tax proposals included in the President’s budget. Click here to read the newsletter.
Pay Yourself First
February 12, 2012 by Jean Keener, CFP, CRPC, CFDS
For the past three years, I’ve taught the Junior Achievement personal finance course to one of Ms. Turner’s economics classes at Keller High School. In the very first session each semester we talk about the concept of Pay Yourself First. It’s an idea the high school seniors easily embrace as they plan their mock monthly budgets with savings, rent, transportation, groceries, and other expenses. They “get” the concept of putting their savings aside first before they pay any other bills or spend any other money.
But paying yourself first is something that sometimes as adults we tend to forget. For many of us, we have some retirement savings on auto-pilot through an employer retirement plan. But additional savings toward retirement or other goals is often an after-thought with anything that’s left over at the end of the month. And so we fall into patterns where we have lists of things we’d like to do “some day” or “when we have some extra money.” The lists may include starting to save for children’s college, finding out if the money going into the 401(k) is enough, setting aside funds for that bucket-list vacation with the grandkids, or something else. And months or years can go by with “some day” never arriving.
If we remind ourselves of the advice the Keller high school seniors so easily adopt – pay yourself first — our goals can come to fruition quickly.
So, where to start? There’s one necessity for everyone – a cash reserve. If you already have one, great. If not, this should be your first pay-yourself-first project. Pick an amount to set aside first whenever you receive monthly income — whether it’s a paycheck, a draw from a business, social security, or any other source of income. Make it enough to be substantial in progress toward your goal, but not so much that it will choke the rest of your monthly budget.
The second necessity for everyone is retirement. If you’re not on track with your retirement savings (or you’re not sure), defining this goal and beginning and/or expanding your regular savings towards it is a must. There are lots of tax efficient ways to make your savings dollars go far with retirement.
After the cash reserve and retirement goals, I would suggest adding at least one other goal that’s important to you to the pay-yourself-first list. Pick a goal that matches your priorities and reflects something or someone important to you – this will give you that feeling of happiness and satisfaction each month as you set the funds aside. And it will make is easier later in the month when you may need to forego another expenditure because the funds are already spoken for.
And then take pride in your progress toward your goals, and celebrate when you reach one of your pay-yourself-first milestones.
Helping individuals and families set and achieve goals that are important to them is one of the ways Keener Financial Planning helps clients. We bring the analytical tools, financial planning knowledge, and a goal-oriented framework to support clients in making smart decisions confidently and achieving goals consistently. If you’d like to discuss how we might be able to help you, please call us at 817-993-0401 to schedule a complimentary initial consultation.
January 2012 Personal Finance Newsletter
January 17, 2012 by Jean Keener, CFP, CRPC, CFDS
The January 2012 personal finance newsletter is now available. It includes a 2011 investment market recap from Dimensional Fund Advisors with data on all the major indices and a summary of the major investing themes of 2011. In addition, there’s a comparison between the dividend rates of the S&P 500 and interest rate on treasuries and commentary of what this means to your portfolio. Plus, the newsletter announces the first half of 2012 schedule for Keller Financial Planning Workshops at the Keller Public Library. To read the newsletter, click here.