Top Ten Stupid Retirement Tricks

I couldn’t resist.  In honor of David Letterman’s retirement I had to weigh in with a Top Ten list of my own.

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 #10.  Putting all your retirement money into equity-indexed annuities. Granted, if you do this, you just made your annuity salesperson very happy because you may have helped them earn enough to make The President’s Trip. But, before you sign up, do your homework and read up on them. Here’s what has to say: Equity Indexed Annuities.

#9. Quitting your job before you have enough quarters for Social Security.   Learn more here: Social Security Guidelines 

#8. Quitting your job before you have enough quarters for Medicare.  Use this calculator to verify you have worked enough to qualify:  Medicare Eligibility

#7. Quitting your job before you verified your pension benefits.  If you are one of the lucky ones who still qualifies for a pension at work, make sure you know what you’re getting.  For some people, taking the lump sum distribution is best while for others, the annuity payment makes the most sense.  Be sure to evaluate all your options before submitting that final paperwork.

#6.  Forgetting to sign up for Medicare.  Within 3 months of turning age 65 you need to sign up unless you are part of a group plan.  If you don’t sign up on time you may have to pay an enrollment penalty of 10% per month for twice the number of years you could have had Medicare but didn’t sign up.  Certain restrictions apply; learn more about them here:  More Medicare Information

#5.  Holding on to the distribution check from your 401(k) rollover for more than 60 days.  You need to deposit the distribution in a qualified account, like an IRA or another 401(k) plan sooner than that to avoid paying taxes on the entire amount.

#4.  Spending the lump sum distribution from your retirement plan on a timeshare while on vacation in Mexico.   Yes, the warm sun, sparkling waters, and colorful drinks inspire many people to do silly things.  I also know many people who own and love their timeshares but don’t buy new, while under pressure, on vacation.  There are thousands of timeshares for sale online that are available for a fraction of the cost of a new one.  But don’t use your retirement plan distribution to pay for it; invest that money in a tax-deferred account so it can continue to grow to support you through your retirement.   If you don’t have separate savings available, skip the timeshare altogether.

#3. Waiting until you’ve given notice at your job to figure out how much money you need in retirement.  Your desired lifestyle may cost more than you think and it is difficult to get a do-over on that final job departure.

#2. Making investment decisions on what you heard yesterday on CNBC or FOX News.  Retirement is a phase of life, not an event. You need a plan, not a hot tip.

And, finally,

#1. Not verifying your financial advisor is a fiduciary.  You need to make sure the person you are working places your interests before his or her own.  The CFP Board lays it out pretty clearly: CFP Board Fiduciary Standard.  

Happy Retirement, David Letterman!

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Readers, if you have any retirement tips of your own, please share.


Year of the Dentist

We smile, we chew. We grit and we grind.  Day in and day out we use our teeth. If you think about it, they never get a day off. Many of us go to the dentist regularly for check-ups, teeth cleaning, and the occasional cavity.  At some point, though, the fillings we got in our youth have been at work for decades and they’re unstable.  They’re in danger of cracking the teeth they were put in place to preserve and, let’s face it, those years of Jolly Ranchers had to catch up to us at some point. Good dental hygiene can only go so far and there comes a time when we need major dental work done.  I call this the Year of the Dentist.  Crowns, bridges, and implants become part of our daily conversations because in the Year of the Dentist, we’re spending a lot of time in the chair. It’s not just time either.  We’ll be spending a lot of money, too. Most dental insurance covers only a portion of what is needed to tackle all that deferred maintenance so restoring our smile to its proper glory usually involves money out of pocket as well. On the bright side, where there is expense, there is also opportunity.  With just the right planning you can save money.

Dr. Dawn Wehking, DDS, is the owner of Complete Family & Aesthetic Dentistry located in Lafayette, Colorado.  According to Dr. Wehking, there is a number of situations where patients require significant dental work.  Auto accident victims, hockey players, and the occasional loser of a bar fight need dental work in a hurry just to be able to eat and drink without pain. In other instances, major dental work is needed to help a patient recover from years of neglecting their teeth. Over time, though, even patients who have taken care of their teeth may need some major tooth repairs. “The cement used in old fillings breaks down and this can lead to cavities under the teeth,” Dr. Wehking says, “Sometimes teeth crack and need to be replaced with crowns. We also see patients who grind their teeth so severely we need to replace many of those as well.” Insurance only covers a portion of the cost and the expense can be substantial. You can’t minimize the amount of work that needs to be done but there are steps you can take to use these dental expenses to minimize something else: your taxes.

If this is your Year of the Dentist you may be able to save thousands of dollars through strategic tax planning. Dental and medical expenses are tax deductible so tax planning can help you reduce your tax bill for the year.  Of course, there are rules and restrictions that apply but the earlier in the year you begin planning, the larger your potential tax savings can be.  Let’s walk through the rules so you understand what you’re eligible to deduct.

1. The expenses are deducted through Schedule A: Itemized Deductions. If you pay state income taxes, mortgage interest, or make charitable donations, chances are you’re itemizing your deductions.


2. You’ll notice on the example above that there is a threshold. In order to deduct dental and medical expenses they have to add up to more than 10%* of your Adjusted Gross Income (AGI).  That’s why your Year of the Dentist can pay off.  In a normal year, you might not have enough medical bills to qualify and that’s okay because it means you were healthy!

*If you or your spouse is age 65 or older, the AGI threshold is only 7.5% through December 31, 2016.

3. Eligible expenses are only for what you paid; not for bills that were reimbursed by insurance or paid by others.  Expenses paid with Flexible Spending Account (FSA) or Health Savings Account (HSA) dollars are not eligible.

With the general rules in hand, let’s take a look at the strategy.  In the Year of the Dentist, you probably have dental bills that exceed what your insurance coverage allows.  Start a file or a folder and save all your medical and dental receipts – prescriptions, medicines, acupuncture treatments, chiropractic care, therapy, health insurance premiums you are paying (not your employer), and even a portion of your long term care insurance premiums. Make this the year you take care of all your physical and mental ‘deferred maintenance’ – not just your teeth.  Get that new pair of eyeglasses or LASIK eye surgery. The list of eligible expenses is lengthy so the IRS has detailed explanations in Publication 502 Medical and Dental Expenses .  Look through the list and make note of all the expenses that apply to you.   Track your mileage to and from the dentist’s office and doctors’ offices.  This, too, is deductible at a rate of 23 cents a mile.  Short trips add up so it’s worth tracking.  If you are married and/or have dependents, save receipts and track miles for all. You might be surprised at how they add up.

Here is an example to illustrate.  Let’s assume we have a married couple with a teen-aged son.

Combined Salaries:                                                       $120,000

Other income (Interest, Ordinary Dividends) :                  $5,000

Adjusted Gross Income:                                               $125,000

Dental/Medical Threshold (10%):                                $12,500

Year of The Dentist

Dental expenses (all 3)             $20,000

Prescriptions                               $1,600

Chiropractic payments                $2,500

Eyeglasses & contacts                  $750

Mileage (100 miles @ .23/mille          $23

Total:                                           $24,873

$24,873 – $12,500 = $13,373

Our example family can deduct dental and medical expenses above $12,500 so lumping expenses, as much as possible, into one calendar year gives them a larger tax deduction than if they spread the expenses out across multiple years.  In the example above, the family can deduct $13,373 in dental and medical expenses.  In the 25% tax bracket, this saves them approximately $3,000 in income taxes. The IRS has an Interactive Tax Assistant to help you see what can be deducted in your personal situation. It hasn’t been updated for 2015 yet but not much has changed so it is still useful.

Your Year of the Dentist may be two years away or ten but when it happens, plan to make the most of it.  By coordinating a year of substantial dental work with other medical expenses you may be eligible to deduct some of the cost on your income tax return.  Saving on taxes gives you the perfect reason to use that brand new smile!


NewRetirement.Com Article on Questions to Ask a Financial Advisor

Throughout life we face different transition points. At each transition it is important to review options and understand the trade-offs between them.  Recently I was one of several financial planners and advisors who were asked to provide input on an article for New Retirement about selecting a financial advisor.  If you are at or nearing a transition point for retirement, I think you might find some useful information here:

New Retirement: Questions to Ask a Financial Advisor

Happy Reading and, let me know what you think!


8 Four-Letter Words You’ll Love for Financial Health

8 Four-Letter Words You’ll Love for Financial Health


Why is it that a few 4-letter words have given thousands of perfectly good four-letter words such a bad rap? It doesn’t seem fair, does it? I took it upon myself to give them a break. Make a habit of putting these 8 words into use and 2014 will be the strongest financial year you’ve ever had. They won’t offend anybody. You can even say them in front of your parents – how great is that?


Why 8? Well, I was reading an article about how we can be pretty hardheaded when it comes to making changes. The author suggested sometimes we need to get hit over the head with a (figurative) 2-by-4 to get a message.  Multiply 2 by 4 and you get 8.


Here you go:


  1. PLAN – let 2014 be the year you outgrow impulse spending. If you’ve got some exciting goals – and I hope you do – planning before spending will make those goals happen sooner. Whether it’s clothes, groceries, or basic household matter, make a list before you head out to spend. You’ll get everything you need and you’ll be less likely to end up with 3 jumbo jars of peanut butter in the cupboard!
  2. COOK – sure, you’re busy, you’re tired. You come home and the last thing you feel like doing is cooking a meal from scratch. I get that. Take baby steps and make it fun.  When you’ve got a little downtime, check out a few online cookbooks and find a new recipe to try.  There are millions of recipes that don’t take long, don’t take many ingredients, and make great leftovers.  Aim for eating one less meal out and cooking one more meal each week.
  3. SWAP – tired of wearing the same scarves and belts over and over?  Tempted to go out and buy a bunch of new ones? Host a swap party instead. Start simple. Invite a few friends to each bring 5 accessories they’re willing to give up for a while and exchange.  It can be temporary or permanent – you decide.  Everyone will feel like they got something new to freshen up their wardrobes but nobody spent a dime. This doesn’t have to be just clothing, either. Sporting goods, furnishings, kitchen items, tools, and electronic gadgets are great candidates for swap sessions.
  4. SAFE – do what you need to do to keep what you’ve got.  If all your electronic accounts still use the same password you’ve had since seventh grade, it’s time to change.  No matter how fond you are of CheetosRgr8t you need to come up with something new and tougher to crack.  Don’t use just one password, either.  Set up different passwords for different accounts.
  5. SAVE – you know I was going to put this in here, right? I am sure you are already saving, so bump up your saving percentage by 1%. Go ahead, you’ll be glad you did. Little increases add up to big results.
  6. ROTH – start now. Open a Roth IRA and set up automatic transfers from your checking or savings account into it.  You will be so glad you did. I promise. Ever wonder why it’s a Roth?  That’s because the legislation was introduced by Senator Roth of Delaware. Just think, if you ran for Congress you could introduce a bill and have something named for you for ever after.  Pretty cool.
  7. DEBT – yes, this can be a good 4-letter word. If you’ve got debt of any sort, the good news is you are building a credit history. Make sure it’s a good one by paying your bills on time. At some point or another, you need to have a credit history in order to qualify for (more) debt.  I know, that sounds a little strange but if you want to buy a house someday, you get a better rate if you’ve got a higher credit score. The score is based on how well you’ve done in the past with paying off debt so show those financial institutions you’ve got it together.
  8. GIVE – almost all the healthiest, wealthiest folks all give time, money, or both to help make the world a better place. If you haven’t done this before try it, you’ll like it. Start giving just a little bit and you’ll be hooked. And if you’re already a giver pat yourself on the back and keep on keepin’ on.

Take these 8 four-letter words and make them a part of your life.  By the end of 2014 you will be in a stronger financial place than you are right now. Want to learn more?  Read Coin! A great 4-letter word and a book that is guaranteed to make you the very picture of perfect financial health. Learn more at

Let me hear from you –what changes are you making for 2014?

Coin: Making it Easy for College Grads to Manage Their Money Well

Coin (koin) n.



1. flat round chunk of metal used to buy stuff

2. slang term for money

3. the personal finance book used by successful college graduates

Introducing “Coin: The Irreverent Yet Practical Guide to Money Management for Recent College Graduates.”

It’s about time!  Many of you know I have been working on this book for years.  But it’s ready now and if you see it I think you’ll agree that it turned out well.  Full of fantastic illustrations by the talented Jenna Kusmierek, Coin is the perfect book for anyone just graduating from college as well as folks who, perhaps, missed the money management lecture the first time around. It’s funny, it’s short, and it’s jargon-free.  What more could you ask for? In less than two hours the book walks you through what you need to know to be on the right path, financially.  And, I promise I’m not lying, you’ll laugh and have fun reading it.  So if you know someone who might need a nudge in the right financial direction, let them know about Coin.





Financial Planning Week 2012

October 22nd-29th is Financial Planning week.  Conveniently positioned before the big holiday shopping season, there are many ways you can celebrate Financial Planning week to make the rest of your year (and the year after that) a lot less stressful.

Here are a dozen suggestions from the Financial Planning Association:

1.  Balance your checkbook

2.  Make a monetary contribution to your favorite charity

3.  Start a savings account for a child, vacation, or a gift for yourself

4.  Help teach your children how to save and spend wisely

5.  Get your estate in order: Create or revise your will & other estate-planning documents

6.  Call your financial planner and share your appreciation for their service

7.  Pay off a credit card

8.  Get a head start on college – investigate collegiate planning options

9.  Establish an emergency fund

10.  Evaluate your employee benefits and begin planning for open enrollment

11.  Develop your holiday spending budget

12.  Plan for year-end tax strategies

A Delightfully Savage Experience

I just returned from the annual conference for the Alliance of Cambridge Advisors, the leading organization of fee-only financial planners.  Three packed days of sessions were terrific, as always, but one session was a special treat.  Terry Savage, the Chicago Sun-Times columnist and well-known author of The Savage Number and The Savage Truth on Money, was a featured speaker.  She’s currently on a nationwide tour with financial literacy as her mission.

She was genuinely delighted to find a conference full of like-minded souls and spent just as much time asking us questions about fee-only financial planning as she did sharing wisdom.  If you get the chance to hear her speak, I recommend going.  She motivates and inspires while explaining financial concepts in ways anyone can understand.

Her website has a nice collection of useful calculators as well as archived columns she’s written for the Chicago Sun-Times. Check it out here:

What’s in Your Wallet?

Following up on the last newsletter article about cataloguing your home inventory, there is another step that you can take to reduce the significance of a lost wallet.  Although you may lose your punch card to the local sandwich shop, you will have already given yourself a big head start on the road to recovering what you hold in your wallet.

 I highly recommend taking the time to go through your wallet and scan (double-sided) everything in there that you consider to be valuable. This gives you a record of all the contact information you need to replace the contents as well as makes things much simpler when you are fighting against potential identity theft.   Update the scan once a year – make it a habit to do during Financial Planning Week!

Gold: a Smart Security or a Hefty Gamble?

If all of the world’s gold were squished together, it would form a cube just 68 feet on each side.  That’s a very small amount of gold in a very big world.  No wonder it’s so expensive.  In times of economic uncertainty people often rally around what they see to be smart, safe investments.  For some people this is treasury bonds and low-risk stocks, for others it is physical assets like gold.  Although gold does have substantial value, ($1,567.90 per ounce as of May 25th) nothing can be produced from it and thus the only value gained from it is having it when others do not.  This is also a quandary because the price of gold can only rise when it is highly sought after, meaning that many people must buy gold in order to keep the price of gold up.

There are tangible benefits to owning gold, such as fiscal security in the event of an extreme economic downturn or global disaster. However, the astute financial mind of Warren Buffet likens it to building a bomb-shelter in your basement.  If you ever end up needing the bomb shelter than you have made a terrific purchase. However if no crisis occurs where a bomb shelter is necessary, you will be stuck with the sunk cost of a bomb shelter.  I suppose it could make a decent man-cave.

The uncertainty in economies and markets has helped feed a frenzy in gold-buying.  GLD, the exchange-traded fund introduced by State Street in 2004 is the second-largest ETF measured by assets under management.  But with an average daily trading volume of over 10 million shares it seems that buyers aren’t  ‘investing’ as much as they are placing a bet.  Nothing wrong with trying to win a bet but with gold trading at historical highs maybe there are better bets to place.

Students and their Mountains of Debt

Student debt as become so commonplace in today’s society that it might as well be labeled the “student debt crisis”.  Over two thirds of recent college graduates leave the school with some form of debt, and the $870 billion of total student debt right now is enough to equivocate to nearly $2,800 per American.  Student debt has become such a problem that it has even surpassed credit card debt in terms of both money owed and delinquency rates.  What is truly staggering about this is that the United States citizens’ credit card debt of $697 billion comes from 80% of the population who own credit cards, compared to only 15% who have student loans.

The student debt crisis can largely be traced to the almost disgusting increase of college tuition over the last 30 years.  Since 1982, the cost of a 4-year college tuition has risen by 400%, which really causes problems when taken into account that the Median Household Income over this time has only risen by 150%.  Many prospective college students of today are also under-informed or misinformed when they are making their decision on where to go to school as well as how to fund it.  Most students go into college with the expectation that they will be able to get a job relevant to their degree right out of college, and thus will not need to worry about their expensive student loans.  This has not been the case, and as the economy continues to twist and turn, more and more recent college graduates are finding themselves in a bind.  Student default rates rose from 11.6% to 15% in the last fiscal year as over 9% of recent college graduates find themselves unemployed.

Fortunately there are a few things that can help with the payment of loans, such as loan consolidation or forgiveness.  If you know someone who is saddled with student debt and unsure of their options,  and  are loaded with information on student loans as well as ideas on how to lower your debt.