Personal E-Newsletter - May 2013

Beware: Fake Boston Marathon Charity Websites

As Americans rush to donate to the victims of the Boston Marathon bombing, watchdog groups are warning of potential online scammers already looking to profit from the tragedy.

Within hours of the bombing, dozens of website domain names referencing the bombing were registered, including, and

It's too early to know what websites like these will be used for, yet nonprofit experts say that charity fraud is often perpetrated in the days and weeks after tragedy hits and are warning consumers to be on guard.

While some scammers solicit donations, others use fake charities to steal credit card numbers or to infect computers with malware, often with a link promising "exclusive" news or video of the incident.

One fraudster already tried to dupe the public by setting up a Twitter account minutes after the bombing that claimed to be associated with the Boston Marathon organization. The @_BostonMarathon account promised to donate $1 for every retweet. After users called it out as a fake, Twitter quickly shut the account down -- but not before it received more than 50,000 retweets.

"Social media, in particular, makes it very easy to reach a lot of people quickly, when emotions are running high and people feel the need to take action, any action, to help," H. Art Taylor, president and chief executive officer of the Better Business Bureau's Wise Giving Alliance said.

Citing the bogus Twitter account, the organization warned Tuesday that more Boston-related scams were "likely" and urged consumers to do their homework before donating to any group or individual soliciting donations.

As Superstorm Sandy approached in late October, more than 1,000 Sandy-related Internet domains had been registered.

The New Jersey Attorney General and Division of Consumer Affairs are currently suing to shut down a website for the Hurricane Sandy Relief Foundation, which they say raised more than $630,000 in cash donations yet gave less than 1% to victims.

The foundation and its attorney did not respond to requests for comment although the organization's attorney has told other news sources that they intended to disburse the funds.

After December's elementary school shooting in Newtown, Conn., a Bronx woman allegedly posed as the aunt of a victim to collect bogus donations through a Facebook campaign and Paypal, according to federal prosecutors.

In the wake of disaster, donors should look first to well-established national or regional charities who are promoting relief efforts, said Ken Berger, president and chief executive officer of Charity Navigator.

In addition, most states require charities to register with a state agency before soliciting for donations. If a purported charity has not registered, that can serve as a major red flag, according to the Better Business Bureau. And for the charitable donations to be tax deductible, the organization also needs to attain tax-exempt status from the IRS. Funds set up to help a specific individual or family will not qualify for tax-exempt status.

"Don't just give on impulse because somebody says they are raising money for victims. Don't assume it's true." Berger said. "The safest approach is known quantities rather than something that just popped up."


10 Things You Must Know About Social Security

For many Americans, Social Security benefits are the bedrock of retirement income. Yet future retirees could find themselves on shaky ground. The Social Security Board of Trustees, in its latest annual report, estimated that the retirement program would only be able to pay out 75% of scheduled benefits starting in 2033, three years earlier than projected last year.

You can't control how the government might fix that problem. But you can educate yourself about Social Security to ensure that you claim the maximum amount of benefits to which you are entitled. Here are ten essentials you need to know.

It's an Age Thing

Your age when you collect Social Security has a big impact on the amount of money you ultimately get from the program. The key age to know is your full retirement age. For people born between 1943 and 1954, full retirement age is 66. It gradually climbs toward 67 if your birthday falls between 1955 and 1959. For those born in 1960 or later, full retirement age is 67. You can collect Social Security as soon as you turn 62, but taking benefits before full retirement age results in a permanent reduction of as much as 25% of your benefit.

Besides avoiding a haircut, waiting until full retirement age to take benefits can open up a variety of claiming strategies for married couples. (More on those strategies later.) Age also comes into play with kids: Minor children of Social Security beneficiaries can be eligible for a benefit. Children up to age 18, or up to age 19 if they are full-time students who haven't graduated from high school, and disabled children older than 18 may be able to receive up to half of a parent's Social Security benefit.

How Benefits Are Factored

To be eligible for Social Security benefits, you must earn at least 40 "credits." You can earn up to four credits a year, so it takes ten years of work to qualify for Social Security. In 2013, you must earn $1,160 to get one Social Security work credit and $4,640 to get the maximum four credits for the year.

Your benefit is based on the 35 years in which you earned the most money. If you have fewer than 35 years of earnings, each year with no earnings will be factored in at zero. You can increase your benefit by replacing those zero years, say, by working longer, even if it's just part-time. But don't worry -- no low-earning year will replace a higher-earning year. The benefit isn't based on 35 consecutive years of work, but the highest-earning 35 years. So if you decide to phase into retirement by going part-time, you won't affect your benefit at all if you have 35 years of higher earnings. But if you make more money, your benefit will be adjusted upward, even if you are still working while taking your benefit.

There is a maximum benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2013, the maximum monthly benefit is $2,533.

COLA Isn't Just a Soft Drink

One of the most attractive features of Social Security benefits is that every year the government adjusts the benefit for inflation. Known as a cost-of-living adjustment, or COLA, this inflation protection can help you keep up with rising living expenses during retirement. The COLA, which is automatic, is quite valuable; buying inflation protection on a private annuity can cost a pretty penny.

Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. For example, in 2009, beneficiaries received a generous COLA of 5.8%. But retirees learned a hard lesson in 2010 and 2011, when prices stagnated as a result of the recession. There was no COLA in either of those years. For 2012, the COLA came back at 3.6%; for 2013, the COLA is 1.7%. The COLA for the following year is announced in October.

The Extra Benefit of Being a Spouse
Marriage brings couples an advantage when it comes to Social Security. Namely, one spouse can take what's called a spousal benefit, worth up to 50% of the other spouse's benefit. Put simply, if your benefit is worth $2,000 but your spouse's is only worth $500, your spouse can switch to a spousal benefit worth $1,000 -- bringing in $500 more in income per month.

The calculation changes, however, if benefits are claimed before full retirement age. If you claim your spousal benefit before your full retirement age, you won't get the full 50%. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.

Note that you cannot apply for a spousal benefit until your spouse has applied for his or her own benefit.

Income for Survivors

If your spouse dies before you, you can take a so-called survivor benefit. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death (or 100% of what your spouse would have been eligible to receive if he or she hadn't yet taken benefits). A widow or widower can start taking a survivor benefit at age 60, but the benefit will be reduced because it's taken before full retirement age.

If you remarry before age 60, you cannot get a survivor benefit. But if you remarry after age 60, you may be eligible to receive a survivor benefit based on your former spouse's earnings record. Eligible children can also receive a survivor benefit, worth up to 75% of the deceased's benefit.

Divorce a Spouse, Not the Benefit

What if you were married, but your spouse is now an ex-spouse? Just because you're divorced doesn't mean you've lost the ability to get a benefit based on your former spouse's earnings record. You can still qualify to receive a benefit based on his or her record if you were married at least ten years and you are 62 or older.

Like a regular spousal benefit, you can get up to 50% of an ex-spouse's benefit -- less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex's record has no effect on his or her benefit or the benefit of your ex's new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still take a benefit on the ex's record if you have been divorced for at least two years.

Note: Ex-spouses can also take a survivor benefit if their ex has died first, and like any survivor benefit, it will be worth 100% of what the ex-spouse received. If you remarry after age 60, you will still be eligible for the survivor benefit.

It Can Pay to Delay

Once you hit full retirement age, you can choose to wait to take your benefit. There's a big bonus to delaying your claim -- your benefit will grow by 8% a year up until age 70. Any cost-of-living adjustments will be included, too, so you don't forgo those by waiting.

While a spousal benefit doesn't include delayed retirement credits, the survivor benefit does. By waiting to take his benefit, a high-earning husband, for example, can ensure that his low-earning wife will receive a much higher benefit in the event he dies before her. That extra 32% of income could make a big difference for a widow who has lost her husband's stream of Social Security income.

One option for a spouse who is delaying his benefit but still wants to bring some Social Security income into the household is to restrict his application to a spousal benefit only. To use this strategy, the spouse restricting his or her application must be at full retirement age. So the lower-earning spouse, say the wife, applies for benefits on her own record. The husband then applies for a spousal benefit only, and he receives half of his wife's benefit while his own benefit continues to grow. When he's 70, he can switch to his own, higher benefit. Exes at full retirement age can use the same strategy -- they can apply to restrict their application to a spousal benefit and let their own benefit grow.

File and Then Suspend

Here's a Social Security claiming strategy that's perfectly legal and potentially lucrative. Let's say a husband decides he wants to delay taking his benefit until age 70 to maximize the amount of his monthly check. But he wants his wife to be able to take a spousal benefit, because it would be higher than her own benefit.

To make that happen, the husband, who must be at full retirement age, can file for his benefits and then immediately suspend them. Because he has applied for benefits, his wife can now take a spousal benefit based on his record. And because he suspended his own benefit, his benefit will earn delayed retirement credits for each year he waits until age 70.

Uncle Sam Wants His Take

Most people know that you pay tax into the Social Security Trust Fund, but did you know that you may also have to pay tax on your Social Security benefits once you start receiving them? Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven't been increased since then.

As a result, it doesn't take a lot of income for your benefits to be pinched by Uncle Sam. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their benefits. Higher earners may have to pay income tax on up to 85% of their benefits.

Passing the Earnings Test

Bringing in too much money can cost you if you take Social Security benefits early while you are still working. With what is commonly known as the earnings test, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2013 is $15,120. Once you are past full retirement age, the earnings test disappears and you can make as much money as you want with no impact on benefits.

But the good news is that any benefits forfeited because earnings exceed the limits are not lost forever. At full retirement age, the Social Security Administration will refigure your benefits going forward to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full year of benefits to the earnings test, at age 66 your benefits will be recomputed -- and increased -- as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits will be 20% rather than 25%.

For questions on social security and retirement planning, call Shari Hopkins (608) 784-3904 or e-mail her today.


7 Things You Should Spend Money on Today

It's important to save where you can, but it's just as critical to spend where you should.

When times are tough, most people think they should spend less and save as much as possible. That's good advice in many situations, but there are exceptions. Here are seven of them:

1. Home improvements

A recession is a great time to do work on your home. Materials will be discounted, since demand will be low. Labor is plentiful and cheap. And if the work increases the value of the house, spending extra money to get the improvements done when times are tough makes financial sense.

2. Your health

Your health is always important, but it is even more crucial during dire economic times. You can't afford to miss work for an extended period without placing your job at risk. Preventive measures, even if they cost extra, are important. In addition, you need to quickly address ailments so they don't turn into something major later on.

3. Quality food

Food tends to be one of the few budget items that can be juggled to save money here and there. The problem is that people often choose to buy poorer quality food, which isn't as healthy. The food you eat will determine your energy level and resistance to colds and illnesses. Also, learn the tricks of the coupon trade so you can get quality food and save money at the same time.

4. Retirement

If you have the money, now's the time to buy stocks and other investments, especially if your timeline for needing the money is decades away. While people feel more secure when the stock market is rising, that's when equities are more expensive. Stocks today are less than half of what they were at their peak -- a bargain.

5. Products that save you money

More than ever, it makes sense to spend money on appliances and gadgets that will save you money in the long run. Price tags and labor are cheaper, and the extra efficiency will pay off in the long run.

6. Costs to relax

When the economy turns sour, it brings on stress. Stress is not only bad for your health, it can ruin relationships, cause a decline in job performance and affect decision-making when it comes to finances. The key is to know what reduces stress and figure out a way to keep or increase that activity in your budget. For example, a gym membership may seem like a luxury when there isn't enough money to go around, but exercise is a known stress reliever. Perhaps painting is your stress relief. Whatever the activity may be, don't scrimp.

7. Repairs and maintenance

Lengthen the life of what you have and avoid spending money on brand-new equipment. The amount you spend may be a fraction of the replacement cost.

5 Money Saving Mistakes People Make

Saving money isn't difficult -- but it's possible to make some big mistakes along the way if you aren't careful.

The rise in both gas and food prices has been taking a toll on people's budgets, but it appears that things will get worse before they get better.

Higher prices all around have many people looking to save money any way they can. While saving money appears to be pretty easy and straightforward on the surface, there are still a large number of people who make fundamental mistakes when they try to save money that actually hurt their finances rather than help them.

These are some of the common mistakes that people make when trying to save money:

Mistake #5: Stopping Spending

One major mistake that people make is that they stop spending, since this seems to be the obvious way to save money.

The problem is, if done without foresight, not spending money can mean additional expenses down the road.

People should stop spending on nonessentials, but not stop spending on preventive maintenance and basic upkeep. You will save money today by skipping a check-up at the dentist, but if doing so leads to dental problems down the line that would have been caught early, the savings actually turns into a longer-term cost.

What to do: Make sure you continue to get your regular check-ups and make repairs in a timely manner, even if this means spending a little bit of money. It's not worth pressing your luck to save a few dollars today on things that are preventable, and risk having to make a major payout later on when there are a lot of other ways to save money.

Mistake #4: Buying Cheap, Not Buying Value

People often think the best way to save is to go with whatever is the lowest price.

While this will work some of the time, the real key to saving money is learning to buy whatever is the best value. Buying the cheapest tools that will only last a year or two, rather than paying twice as much for tools that will last a lifetime, ends up costing you more in the long run since they have to be replaced time and again.

Another example: Buy a nutritional cereal that costs a little more, but will keep you healthier -- not a cheap cereal with lots of sugar and little nutrition.

What to do: The key to saving money on a consistent basis is to learn how to shop for value. Price is just one factor that you need to consider when making a purchase. Other important factors include how long the item will last, what type of warranties it comes with and how often it will be used. Learning to shop value rather than price will save you a lot of money in the long run.

Mistake #3: Assuming There Is a Quick Fix

When people need to save money, they usually look for a quick fix to reduce their costs. They want to do something that will immediately solve the problem so they begin cutting out expenses one by one assuming that making each one will solve the problem.

When it doesn't, they cut another hoping it will resolve the issue, which it also won't. They keep trying to make quick fixes not realizing that there is usually no quick fix when it comes to saving money.

What to do: The reason most people find themselves in need of saving money is not because they made a single money mistake that can easily be corrected. It's usually ongoing issues over a long period of time.

It's important to realize from the start that the process of saving money isn't going to instantly resolve itself, but will take time and effort to succeed. Once you are committed for the long haul, you will avoid getting frustrated when things don't instantly get better and have the patience needed to be successful.

Mistake #2: Assuming You Must Deny Yourself

Many feel that saving money requires denying the things that are enjoyed, which makes the entire process painful. In order to avoid this pain, they wait as long as possible to take the steps they need to lower their expenses and save money. The longer they wait, the worse the problem gets, meaning the harder it will be to get their finances back in order.

What to do: The truth is that saving money doesn't have to be painful, although it will take a change in lifestyle related to how you purchase goods and services. You are probably paying more than you need to for a lot of the services and items you currently buy.

Learning how to reduce the costs associated with them without giving them up is the best way to start saving money from your current budget.

Mistake #1: Believing There Is No Need to Make Fundamental Changes

Much like dieting, learning to save money is more than knowing what you need to do.

Many people think that they can learn to save money without making a fundamental change in the way they currently do things and approach savings as a short-term problem. When done this way, a plan for reducing costs and saving money never becomes a long-term priority, which results in not being able to save money the way they had assumed they could.

What to do: You need to make fundamental changes by incorporating the money saving methods that you learn into your lifestyle.

Understanding that the changes are part of the way you will deal with money from now on rather than a stop-gap for a current problem will make the likelihood of success much greater. This usually includes changes on how you spend your money and changes to reduce the current ongoing expenses you have.

By learning to make changes that save money, you can help ensure that you save enough for all your financial needs in the future.


Declutter Your Life

If your home is starting to feel like the “before” scene from an episode of Hoarders, it’s time to declutter. Think about what you’ll gain by getting rid of stuff you no longer need, want or love: more space and less stress about the mess or about how much money you’ve spent on impulse purchases. Decluttering will make moving or downsizing easier. You’ll rediscover what you already own so you don’t waste money buying duplicates, and if you’re really ambitious, you may even be able to clean out a storage unit and eliminate the monthly fee. You can make money by reselling your stuff, or do good by recycling or donating it (and maybe take a tax deduction). But first you need to decide what to throw away.


Whether it’s piles of old receipts, cans of paint that no longer match your walls or your first two cell phones, some things just have to go. If you don’t have a use for it now, you likely never will.

Paper. It can be the toughest beast to slay, but once you’re done, you can create a system to make sure it doesn’t rear its ugly head again. Nanette Duffey, a professional organizer and the owner of Organized Instincts, in Atlanta, tells her clients to gather all their papers in one place and sort them into three piles: action, keep and toss. Bills to pay, wedding invitations to answer and permission slips to return to your kid’s school all go in the action pile.

Tackle this pile first, and knock out whatever you can right away. Next, create a space in your home for new paper -- a basket by the door for mail and bills to be sorted ensures that incoming paper has a place to land -- and commit to cleaning it out once a week. File (or toss) papers as soon as you’ve taken action to keep a multitude of piles from accumulating.

Most financial documents can be tossed after three years. The one exception is tax returns, which you should keep for life. You can ditch the supporting documents after three years (six if you’re self-employed). Hold on to year-end investment statements and documents showing your purchase price for stocks and mutual funds so that you can calculate the cost basis when you sell. Also keep home-purchase and home-improvement documents. Most people no longer need to pay taxes on their profits on a home sale, but if you live in the house for less than two of the five years leading up to the sale, your gains may be taxable. In that case, your home-improvement records can substantiate an increase in your tax basis and a lower gain, if you’re audited.

Keep other financial documents for a year. You can permanently cut down on the paper pileup by signing up for paperless billing or online bill pay. Utility, credit card and loan statements should be available online for at least a year, and you can save a PDF copy on your computer. Back up your files to a cloud service such as Windows SkyDrive or Apple iCloud.

When it comes time to toss, invest in a quality shredder. Look for a cross-cut model -- such as the Fellowes Powershred DS-2 (about $100 online) -- to make sure your account numbers can’t be re-created. You can ditch receipts for anything that’s not tax-deductible, pitch pay stubs after you get your Form W-2, and toss bills older than 12 months—unless you can find them online, in which case you don’t need to keep them at all.

Appliances and electronics. Your local government or your electric utility may offer a “bounty” program for old refrigerators and freezers, providing free pickup and sometimes an incentive payment too. To find the nearest steel recycling center, use the Steel Recycling Locator at Most manufacturers and some big-box stores offer recycling for electronic products. See the EPA’s eCycling list.

Hazardous waste. Check with your county or municipality or visit to locate a facility where you can drop off automotive and home-improvement detritus (such as paint and solvents), cleaning products, and pesticides for disposal or recycling. You can find locations to drop off rechargeable batteries at Take compact fluorescent bulbs to retailers such as Home Depot, Ikea and Lowe’s.


Many of your castoffs could find great second homes and net you some cash in the process.

EBay. Go to and register for an account. Then click “Sell” and select “Sell an item”; the site walks you through options for categorizing, pricing and shipping. (For more help in pricing your item, check completed listings to see actual sales prices.) Focus on small items that are easy to price and pack, such as designer clothes, baseball cards and jewelry. It costs nothing to list up to 50 auction items each month and add “Buy It Now” pricing; you’ll pay 9% of the total sale amount (up to $250) for each item.

You can download the eBay mobile app (available for Apple and Android devices) and use your phone or tablet’s camera to scan the bar code and import details on items, such as DVDs, that are still in their original boxes.

Craigslist. Larger items, such as furniture and appliances, are perfect for Craigslist because buyers come to you to haul them away. The listings are free for a week in big cities (45 days in smaller cities). Insist on payment in cash to avoid bounced checks.

Specialty sites. For books, log on to and enter the ISBN number (located over the bar code) of the books you'd like to sell. You'll receive price quotes from online booksellers who want them.

Sell designer clothing and accessories at The Snob and Snobswap. For vintage clothing, try Etsy and Fashiondig.

Sell your smart phones and other tech products on sites such as,, and Just log on, get an offer and mail in your item. You will receive a check or a deposit to your PayPal account.

Consignment shops. Shop owners will sell your clothing or household furnishings for you. They’ll price your items based on their experience and will reduce the price over time. They typically take one-third to one-half of the final sale price. You may need an appointment for the shops to review your stuff, or the owners may ask you to send photos by e-mail.

Yard sale. For stuff that’s not worth the trouble of listing, try a one-day-only yard sale. For extra appeal, get your whole block to participate. Not into pricing everything? That’s okay. Aaron LaPedis, author of The Garage Sale Millionaire, recommends that you put a price tag on anything you want to sell for more than $25 (so people don’t waste your time with lowball offers), but let people make an offer for anything else. “There’s a 50-50 chance they’ll offer you more than you were looking for,” says LaPedis. Attract more visitors by listing your sale at Tag Sell It. And when the day is done, donate what’s left to Goodwill.

Estate liquidators. Call a “clean-out” company if you have a lot of stuff that you need to get rid of quickly -- say, because you’re downsizing, divorcing or disposing of an estate. Some liquidators will conduct a “tag sale” in your home or off-site; they generally take 25% to 40% of the proceeds. Others buy your stuff outright, haul it away and sell it.


Donating your stuff to charity is all good: You get a warm, fuzzy feeling and possibly a tax deduction (see below). Plus, someone else benefits from your castoffs, and less stuff ends up in a landfill.

The easy solution. The easiest way to donate clothing, housewares and furniture is to contact an organization that will send a truck to pick up your stuff from your home (the driver will leave a tax receipt) and put it to work in its thrift stores. Two major players are Goodwill and the Salvation Army. Veterans organizations that provide a similar service include Amvets, the Military Order of the Purple Heart and Vietnam Veterans of America. Check the charity’s Web site, or call to verify what items it is willing to take -- especially if the items are large.

Electronics. Before you donate tech gear, erase any personal data. For devices using digital rights management software (for example, products connected to iTunes, which limits files to five devices), first “deauthorize” the device. With smart phones, simply reset to the factory settings and erase the SD card. For computers, you’ll need software that rewrites data.

You can donate your cell phone to a victim of domestic violence through Verizon’s HopeLine program or to support troops overseas at The National Cristina Foundation will connect you with local nonprofits that will take your computer and tech accessories, including scanners, digital cameras and modems.

Clothing. If you would like your clothing to be given to people in need, look for a “free clothing closet” in your community. Soles4Souls collects new and gently used shoes for people around the world.

Books. Some public libraries accept donations. Or look for charities that accept books at the American Library Association’s Web site.

Collections. If you have collectors’ items that you would like to donate to a historical society or museum, visit the organization’s website or call to ask for its guidelines for donation. Most organizations pick and choose items that have local significance, fill gaps in their inventory or are unique.

Take a tax break

If your stuff is in good condition, you can donate it to a charity and claim it as a charitable contribution -- as long as you itemize deductions on your federal income taxes. Most tax-preparation software will help you value your donated items. With TurboTax’s, you can track contributions throughout the year so that the information is ready come tax time. The Salvation Army and Goodwill offer valuation guidance on their Web sites. Or you can assign value based on what items would sell for at a local thrift store (not the price you paid when they were new). Make a list of everything you donate, and be sure to get a receipt from the charity.

For you to claim a deduction, the charity must be nonprofit and exempt from federal income taxes -- a 501(c)(3) organization. If your noncash contributions total more than $500, you must complete Form 8283 and attach it to your tax return. Single items valued at $5,000 or more require a written appraisal. But you can deduct the appraisal fee as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit.

Donated vehicles have stricter rules for write-offs. In most cases, your deduction is limited to the amount the charity receives from the sale of the vehicle.


Retiree Challenge: Making Your Money Last

The ultimate goal for most retirees is making sure their assets last as long as they live. And because of increased longevity, managing cash flow is more critical than ever. While many variables come into play, there are a number of planning moves that can help retirees live within their means and make appropriate adjustments in response to changes in income and expenses.

Tools for the Task

If you are retired or about to retire, you will need to clarify your current financial situation, as well as any significant changes you expect. Two sources will provide this information:

  • A net-worth statement, which provides a snapshot of your assets, debt, and cash reserves.
  • Your monthly or annual budget, with itemized breakdowns of your income and expenses. If you haven't retired yet, it's a good idea to prepare a projected budget of your retirement income and expenses.

Even with reasonable assumptions about investment returns, inflation, and retirement living costs, it is likely you will encounter numerous changes to your cash flow over time. Experts often recommend a monthly review of your budget, as well as a comprehensive annual review of your financial situation and goals.

What to Look For

What should you look for as you monitor your finances? Following are potential developments that could affect your cash flow and require adjustments to your plan.

  • Interest rate trends and market moves may result in an increase or decrease in income from your savings and investments.
  • You may also encounter changes in federal, state, and local tax rates and regulations. Watch for changes in Social Security or Medicare benefits or eligibility, as well as new rules affecting employer-sponsored retirement benefits and private insurance coverage.
  • Inflation and health care costs are two other variables that can have an impact on living costs and, hence, your retirement planning assumptions.
  • Life events such as marriage, the death of a spouse, and the addition or loss of a dependent may also affect your cash flow. In addition, cash flow is impacted by both small and significant choices you make over the course of your retirement, such as how much you spend on travel and entertainment and whether you live in a lower-cost or a higher-cost locale.

It is worth paying close attention to cash flow, making sure you budget carefully, monitor income and expenses frequently, and take action whenever you believe that significant changes may be necessary.

© 2011 McGraw-Hill Financial Communications. All rights reserved.