Fraud Prevention: How To Protect Yourself

According to the SEC, an estimated 1 in 5 Americans aged 65 or older have already been victims of financial fraud.

 

Follow these steps to keep your information protected.

 

  1. Never provide payment or sensitive information on a call that you did not initiate.

    If you get a voicemail from your credit card company that asks you to call back, only call back using the number listed on the back of your card.  Never respond directly to the contact number in the message.

  2. Store your Social Security car, financial documents, and unused credits cards in a secure location.

    If you are discarding documents that contain personal or financial information make sure you shred them before disposal.

  3. Report lost or stolen checks and debit or credit cards immediately.

    The faster your financial institution knows about a potential issue, the faster they can lock the account and prevent any losses.

  4. Monitor your transactions online regularly and report suspicious charges promptly.

    One way to protect yourself is to create account alerts so you will be notified of withdrawals and deposits to your account and suspicious card activity.

  5. Identify impostors.

    Scammers often pretend to be someone you trust, like a family member, a charity, or your financial institution.  Don’t send money or give out personal information unless it is a planned event, especially if they are asking for a wire transfer.  These transfer make it nearly impossible to get your money back in the case you were the victim of fraud.

Equifax Data Breach: What happened and what you should do now

Credit monitoring giant, Equifax, revealed last week that a massive data breach occurred on or before July 29th.  They are still investigating the cause of the breach to prevent any further damage or future attacks, but the security gap that allowed the intrusion is still unknown.

The data exposed in this attack was massive and sensitive.  143 million consumers, mainly from the U.S., were potentially impacted by the breach.  The hackers accessed names, Social Security numbers, birth dates, addresses, as well as credit card numbers.

So what can you do to protect yourself?

At this point it is best to assume your information has been compromised and take proactive steps in protecting your accounts.  Follow these steps to get ahead of the risk:

  1. Check your credit reports.

You can do this or free by visiting www.annualcreditreport.com.  Accounts or activity that you don’t recognize could indicate identity theft.  If you see suspicious activity visit IdentityTheft.gov to find out what to do.

  1. Monitor your existing credit cards and bank accounts closely.

Look for charges you don’t recognize and notify your bank immediately if you spot any discrepancies.  You should check your accounts in detail at least once a week.

  1. Consider placing a credit freeze on your files.

A credit freeze makes it harder for someone to open a new account in your name. Keep in mind that a credit freeze won’t prevent a thief from making charges to your existing accounts. If you plan to shop for a car loan or a home loan any time soon, you probably shouldn’t do this, because security freezes lock credit report files so no one — not even you — can open a new credit account in your name.

  1. Place fraud alerts on your files.

If you decide against a credit freeze, consider placing a fraud alert on your files. A fraud alert warns creditors that you may be an identity theft victim and that they should verify that anyone seeking credit in your name really is you.

 

With a data breach of this magnitude it is important to look after yourself.  Being proactive and safeguarding your information to the best of your ability is more important now than ever.

Healthcare: The Basics

Healthcare is one of the chief variables in the retirement equation. It’s also one of the most confusing and misunderstood costs in retirement. We’ve summarized some of the need-to-know information.

1. Lifestyle choices.

Of course exercise and diet are quite important for your health.  Tobacco use and alcohol consumption are additional factors to consider.  Studies have shown that a healthy lifestyle will significantly lower your overall healthcare costs, especially during your retirement years.

2. Family history.

Many diseases are genetic, meaning if your relatives have a disease you may be more likely to encounter the same issues at some point in life.  Heart disease, diabetes, and mental illness are a few examples.  Understanding your family history and taking steps to lower your risk for genetic disorders is an important step in lowering your financial risk relating to healthcare.

3. Location makes a difference.

Healthcare costs can vary wildly from zip code to zip code.  Costs generally fluctuate by location for various reasons including drug and crime rates, quality of care available and population.

4. Your employer’s healthcare plan.

Employer sponsored plans vary significantly in coverage and cost.  It is important to understand the nuances of your choices to ensure you have the optimal coverage.  Discuss your plan with your Human Resources manager if you are confused about your options.

 

Ultimately, you need to be aware that there can be significant variances in costs for two people of similar health. Your location, employment, income and genetics all play a role in your healthcare. Maintaining healthy behaviors is the best way to combat negative influences.

Financial Wellness Solutions Don’t Work if Employees Don’t Use Them

Many employers are looking for employee financial wellness tools.  Yet, no matter how great the solution, they will not get value if their people don’t use it.

At Votaire, we pay special attention to getting users engaged with our financial planning platform.  This effort pays off.  Plan sponsors know that usually no more than 5% of employees utilize the financial wellness tools made available to them.

Plan sponsors with Votaire get a much higher rate.  Take for example National Bank of Indianapolis.  This employer recently on-boarded Votaire.  In just three months, 30% of all employees entering the retirement plan website, created Votaire accounts.  And that’s just a start!

It’s clear that our user-friendly design and personalized rollout (which includes in-person, on-site education) works.

With four out of five employers reporting that employees’ personal finance issues impact their job performance in a noticeably negative manner, why not learn about our solution?

Contact us at contact@votaire.com.

Understanding Long-Term Care

Once you turn 65, there is a 70% chance that you will need some form of long-term care.  Long-term care refers to the help individuals with chronic illnesses or disabilities need to cover their daily activities over a long period.  (Think nursing home or adult day care).

This type of care is extremely expensive.  A quick calculation shows that it can easily cost you more than $200,000.

Many retirees wrongly believe that Medicare will provide assistance with these costs.  But it only does so if you require skilled services or rehabilitation from a specific injury.  Even then, Medicare rarely covers more than 22 days of nursing home care. 1

Medicaid does pay for long-term care services, but in order to qualify, your income must be below a certain level and you must meet minimum state eligibility requirements.  These requirements vary from state to state.  Regardless, the ugly truth is that you often must be broke before Medicaid steps in to help.

So what should you do?

Long-term care insurance is one potential solution.  There are various forms of coverage that range from home services-only to full nursing home care.  Policy costs differ based on age at the time of purchase, policy type and coverage.  The policy will provide a daily benefit amount that covers your costs up to a specified lifetime maximum amount, unless your policy includes lifetime guaranteed coverage.

Currently, a 55-year-old male can purchase a policy that covers $200 per day for 3 years of coverage and will pay an annual premium of $2,070.  The maximum benefit under this policy is $219,000.

Since females typically live longer, the equivalent policy for a woman would cost $2,536 annually.2

Regrettably, the cost and care of aging retirees often falls to a spouse, children or other relatives.  Understanding potential long-term care risk is vital to creating a proper retirement plan.  And by preparing today you can avoid wiping out your retirement assets and leaving a financial and emotional weight on family members.

 

 

 

1 U.S. Department of Health and Human Services, https://longtermcare.acl.gov/

2 Genworth, https://www.genworth.com/about-us/industry-expertise/cost-of-care.html

3 Reasons Retiring in Your 30s Won’t Pay Off

The 4% Rule
Yet another couple has realized their goal of retiring in their 30s.  In his blog, Root of Good, Justin McCurry discusses how he and his wife Kaisorn afforded such an early retirement, despite raising 3 kids, by saving 70% of their income (congrats to them on that feat) because the 4% rule supposedly said they could.  To the McCurry’s…good luck; you’re going to need it.  Take a look at these three reasons why relying on rules of thumb for such an abnormal retirement situation is a terrible idea.

  1. The 4% Rule is made for 30 years of retirement, not 55+.
  2. William Bengen’s 4% Rule is out-of-date and isn’t applicable to today’s investment environment.
  3. Unexpected and unavoidable expenses can quickly erode wealth.

 

  1. The 4% Rule isn’t Suited for 55+ Years of Retirement.

In William Bengen’s original article, he notes that a 4% asset withdrawal should be sustainable over 30 years.  Beyond 30 years, however, that’s not true.  Assuming Justin and Kaisorn are both 37 years old, their joint life expectancy is over 55 years, effectively meaning we can expect at least one of them to live past age 92!

In Justin’s defense, he does mention in one comment that Bengen found a 3% withdrawal rate (which is closer to what they’re withdrawing) to be sufficient for 50+ years.  However, as mentioned below, that’s not applicable to today’s investment environment, and it’s far from a perfect calculation.  Furthermore, the McCurry’s won’t be receiving much of a Social Security check even once they reach eligibility since they’ve worked so few years.  This means they’re stretching their investments without much of a backup plan.

 

  1. The 4% Rule is out-of-date.

William Bengen’s Four Percent Rule was published in October of 1994.  Though it was much better than the leading research at the time, today’s environment isn’t the same.  In fact, retirement researchers Wade Pfau and Wade Dokken put a more relevant withdrawal rate at 1.26%, and that’s for only 40 years!

The 1.26% withdrawal rate assumes a 5% failure rate and a 60/40 stock/bond allocation.  As risk level rises and percent of one’s portfolio invested in stocks rises, the sustainable withdrawal rate rises but never nearly as high as 3%.

 

  1. Unexpected and Unavoidable Expenses can Quickly Erode Wealth.

The research upon which the McCurry’s based their retirement strategy doesn’t say anything about expenses; it focuses solely on account balance.  Let’s say (God forbid) a family medical emergency forces large expenditures over a few years.  The silver level ACA plan they elected may not prevent them from dishing out some large sums.  The McCurry’s also have three kids—what about college?  Suppose a client of Justin sues over bad advice he received—what then?  Rules of thumb don’t account for any of these.

Finally, healthcare is expensive.  Justin mentions the 94% “discount” the family will receive on their healthcare premium, but that could all change within the next four years.  Even once Medicare hits, out-of-pocket costs, MediGap or Medicare Advantage plans can quickly get expensive.

 

The savings strategies the McCurry’s follow may be good advice, but following a rule of thumb to retire in one’s early 30s certainly isn’t.

Votaire In Action

Votaire is a powerful platform that provides a personalized retirement outlook based on your own unique situation.  Our proprietary algorithms are designed to handle vital variables including longevity risk, healthcare exposure, as well as market turmoil.

Watch our quick intro video to see Votaire in action.

What is an annuity?

An annuity is simply a contract between an individual and an insurance company.  In its simplest form an annuity consists of two steps:

  1. An individual agrees to pay an insurance company an up-front premium, and
  2. The individual begins receiving regular payments from the insurance company for the rest of their life.

There are countless variations to the above stated example.  As such, annuities are often stigmatized as complicated and difficult to understand.  Many are.  But at its core this is how an annuity functions and for many people incorporating an annuity into their retirement plan makes a lot of sense.

As retirement approaches people are forced to face complicated questions.  One of those usually goes something like this:

“How do I turn this pile of money I saved during my 30+ year career into a reliable income stream that will last the rest of my lifetime?”

One answer is via an annuity.  By providing a one-time lump sum payment to an insurance company, you can erase the possibility of ever running out of money during your lifetime and benefit from the security of a predictable income stream, free from market volatility.

This guaranteed income stream and protection from risk create the foundation for why you should include an annuity in your retirement strategy.

Sorry, Dr. Pfau—We’re with Steiner on This One

In his December 21 blog, Ken Steiner proposes an “Actuaries’ warning label” on systematic withdrawal plans (SWPs).  While disclaiming that his opinions don’t represent the entire actuarial profession, he does call for some support from his fellow actuaries.  Here at Votaire, our actuaries are 100% behind Mr. Steiner in his opposition to SWPs.

Generalized withdrawal principles and SWPs just aren’t relevant, anymore.  To Steiner’s point, they certainly don’t classify as “retirement spending strategies,” as Dr. Wade Pfau hinted at in his December 20 article.  To accurately plan your retirement, you’ll need a truly holistic retirement spending plan.

As Steiner mentions in his blog, other assets and income streams should be considered in any retiree’s spending strategy, be it Social Security, an annuity, or a reverse mortgage.  Not only do the amounts of these cash flows affect your spending budget, but when they occur also plays a big role.

For example, if you retire at age 65 and can delay your Social Security benefits until age 70, you may be able to withdraw more from savings during those first five years to cover the deficit and smooth out your income streams.

Negative cash flows play a big role, too.  Your SWP isn’t going to account for the high healthcare costs you could easily accrue 20 years into retirement.  You’ll need a holistic look at your personal situation to determine how much you can afford to spend each year and how much you need to reserve for the future.

Votaire’s dynamic and holistic financial planning platform looks at your specific situation.  We use your known and unknown assets and liabilities to come up with actuarial projections for your income and expenses throughout retirement.  Forget the SWPs—we have the know-how and the power to help you plan along the way.