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Flipping a Switch and COVID-19-60 minutes

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Webinar for the NJ Coalition for Financial Education

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Flipping a Switch and COVID-19-60 minutes

  1. 1. Flipping a Switch: Navigating Later Life Transitions and COVID-19 Dr. Barbara O’Neill, CFP® Owner/CEO, Money Talk moneytalk1@juno.com boneill@njaes.rutgers.edu https://www.moneytalkbmo.com/ https://moneytalk1.blogspot.com/ @moneytalk1
  2. 2. My Post-Rutgers Life: Financial Education Entrepreneurship in Florida
  3. 3. Flipping a Switch is About 35 Later Life Transitions Amazon Ordering Page: https://www.amazon.com/gp/product/1620236869
  4. 4. Inspiration #1 to Delve Into This Topic Personal experience: Rutgers Cooperative Extension and New Jersey is in my “rear view mirror” after 41 years
  5. 5. Inspiration #2 to Delve Into This Topic Research presentation at the 7/18 ASEC meeting about Spending in Retirement (Lori Lucas) Described a subset of retirees with a unique “problem”: they saved their whole life, are not comfortable spending, and assets keep growing Speaker quote: “We need financial education to teach people how to ‘flip a switch’ from saving to spending”
  6. 6. Inspiration #3 to Delve Into This Topic Grasshoppers and Ants in Retirement article (Finke, Guo, & Johnson, AAII Journal, 6/18): https://www.aaii.com/journal/article/grasshoppers-and-ants-in- retirement Describes thrifty “ants” who spend less in retirement than they are financially able to Excessive thrift puzzle: why did they save all their money if they’re not going to spend more? “Habit formation hypothesis”: people get accustomed to a certain lifestyle and spending habits are hard to break
  7. 7. I Then Realized… There are Multiple “Switches” That Need to Be Flipped in Later Life (Not Just For Spending)
  8. 8. Some Transitions Are Like “Dimmer Switches” and Change Over Time Working Spending Investment asset allocation Downsizing Disengagement/engagement activities Simplification
  9. 9. Three Book Sections  Financial Transitions  Social Transitions  Lifestyle Transitions Amazon Link: https://www.amazon.com/gp/pr oduct/1620236869
  10. 10. Written From “A Place of Privilege” One-third of workers have saved nothing for retirement 35% of workers have < $25,000 saved, including 18% with < $1,000 saved Source: 2020 Retirement Confidence Survey: https://www.ebri.org/docs/defa ult-source/rcs/2020-rcs/rcs_20-fs- 3_prep.pdf?sfvrsn=f0bc3d2f_6
  11. 11. Flipping a Switch Podcasts and Webinars Podcast Interviews  The Military Money Expert - March 2, 2020  Money Mammals - July 10, 2020  Wine and Dime- July 17, 2020 Print Media Interviews  How to Mentally Prepare for Retirement- July 9, 2020  With Remote Work Flexibility, Some People Opt to Relocate Ahead of Their Retirement-September 21, 2020 Webinars  Flipping a Switch (University of Arkansas)-4/22/20  Navigating the Two Financial Faces of COVID-19 (Rutgers Cooperative Extension)- 8/31/20
  12. 12. COVID-19 Bifurcated Financial Impacts: Major Trauma and “Financially Unscathed”
  13. 13. COVID-19 Trauma Impact Loss of income Food Insecurity Depletion of savings End of moratoriums (e.g., utilities, evictions) Benefit access issues (e.g., unemployment) Inability to access social support networks Travel and COVID-19 quarantine restrictions Multi-generational health concerns
  14. 14. The “Financially Unscathed” Little or no asset value loss Increased savings rate Decreased expenses (e.g., commuting) Continued or even increased income Spending freely on home improvements Other impacts, however…. (Boredom, “survivor’s guilt,” anxiety, sadness about missed opportunities, mental health)
  15. 15. What Many Experts Are Predicting NOT a “V” shaped recovery NOT a “W” shaped recovery NOT a “U” shaped recovery But… a “K” shaped recovery Source: COVID-19 is Dividing the American Worker, The Wall Street Journal, https://www.wsj.com/articles/covi d-19-is-dividing-the-american- worker-11598068859
  16. 16. Covid-19 Financial Resources Coronavirus Anxiety Workbook (The Wellness Society): https://thewellnesssociety.org/wp-content/uploads/2020/04/Coronavirus- Anxiety-Workbook-1 Financial Reality Coping eBook (Center for Financial Social Work): https://financialsocialwork.com/downloads/financial-reality-coping-ebook Money Talk Blog (Dr. Barbara O’Neill): https://moneytalk1.blogspot.com/ (many COVID posts) Your Money: A Hub for Help During the Coronavirus Storm (The New York Times): https://www.nytimes.com/article/coronavirus-money-unemployment.html
  17. 17. Later Life and COVID-19 Action Steps: 20 Similarities Source: In Quarantine, a Glimpse of What retirement Might Look Like, Wall Street Journal: https://www.wsj.com/arti cles/in-quarantine-a- glimpse-of-what- retirement-might-look- like-11587135637
  18. 18. 1. If You Don’t Spend Your Money, Someone Else Will  Step outside of your spending comfort zone  Automate savings withdrawals  Answer some hard questions:  Why did you amass savings if you aren’t going to spend it?  If you don’t spend your money, who will?  What are you waiting for?
  19. 19. 2. Deciding When You Have “Enough”  Do some savings calculations FINRA Retirement Calculator: https://tools.finra.org/retirement_calculator/  Hire a financial advisor Try a Monte Carlo Calculator
  20. 20. 3. Creating a “Paycheck”  Set up automatic withdrawal plans (mutual funds)  Create a bond or CD “ladder’  Purchase an annuity Amend the “4% Rule”
  21. 21. 4. Later Life Investing  Assess your risk tolerance http://pfp.missouri.edu/research_IRTA.html  Rebalance asset class weights regularly Beware of “free meal” seminars
  22. 22. 5. Adjusting to Changes in Income and Expenses  Work longer and/or spend less Consider geographic arbitrage Tap home equity Reverse mortgage Sale-Leaseback
  23. 23. 6. Tax Withholding: It’s What You Get to Keep  Request income tax withholding services  Determine your new marginal tax rate  Time elective cash withdrawals Consider hiring a tax professional
  24. 24. 7. Becoming a Social Security Beneficiary  Get a Social Security benefit estimate  Make estimated payments for Social Security taxes Beware of the earnings limit Take care of your spouse
  25. 25. 8. Health Care Transitions  Take care of yourself (2,500 extra hours)  Earmark part of nest egg for health care Learn about Medicare and supplements Expect “sticker shock” if transitioning from an ACA plan with premium subsidies
  26. 26. 9. Setting New Financial Goals  Set “through retirement” financial goals  Go “first class” with upgrades if you can afford it  Develop spending action plans Automate spending and gifting
  27. 27. 10. You Can’t Take It With You (Philanthropy)  Check out potential charities  Specify a purpose  Plan your donations (gifting budget) Use tax-advantaged strategies (bunching, QCDs, donor advised funds, trusts)
  28. 28. 11. Financial Organization and Simplification  Create a financial inventory  Consolidate “like” financial assets  Cull automated payments  Gym Newspapers Satellite radio
  29. 29. 12. Becoming “Fraud Bait”  Use caution with “free meal” seminars  Recognize “red flag language  Power down on tech scams Never sign forms with blank spaces
  30. 30. 13. Answering the “What Do You Do?” Question  Dodge the “R words”; don’t let other people impose their social clocks on you  Practice “identity bridging” Continue valued commitments Develop a new “elevator speech”
  31. 31. 14. Changed Relationships With Family and Friends  Identify separate and “together’ activities  Create a personal space Define your boundaries Share your future vision with family/friends
  32. 32. 15. FINDing Fulfillment After Full-Time Work  Leave work with a plan Don’t disappear for long Cherry-pick work that you like Expect Ageism, OK Boomer?
  33. 33. 16. Getting Help, When Needed  Find free local financial education resources Hire a financial planner Interview services and go with your gut Lock down your house
  34. 34. 17. A New Definition of “Busy”  Schedule around “Big Rocks”  Redefine “productivity”  Set goals as “guardrails”  Stay connected with others
  35. 35. 18. Should I Stay (Put) or Should I Go?  Do pre-move research Consider family implications and expectations Consider SALT (taxes) Build strong relationships
  36. 36. 19. Invincible to Vulnerable  Accept your vulnerability Stave off disease and delay Follow healthy lifestyle recommendations Get recommended vaccines and screening tests
  37. 37. 20. Planning a Good Ending  Envision your “good ending”  Take action on your vision  Tie up loose ends (personal & financial)  Prepare an “after I’m gone” list Organize financial records
  38. 38. Positive COVID-19 Related Changes That Should Continue “On the Other Side”  Hand-washing, wipes to clean surfaces, and plexi-glass use  Addressing “underlying conditions”  Increased savings rate  Formal budgeting  Attention to estate planning  Carving out time for physical activity  Time savings from reduced commuting and WFH  Slower-paced life and more family meals together  Increased philanthropy  More online learning opportunities
  39. 39. Best Wishes With All of the “Flipped Switches” in Your Life
  40. 40. Questions and Comments? @moneytalk1 moneytalk1@juno.com https://www.moneytalkbmo.com

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