Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

What financial help is available to American seniors?

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Photo by Alexandre Debiève on Unsplash

By Jessica Walter

Special to the Financial Independence Hub

As we approach retirement, we hope financial strains will be a thing of the past and that we’ll be able to enjoy our senior years by focusing on the things that make us happiest. However, the reality for many of us in North America is quite different.

According to SeniorLiving, nine out of ten Americans who are 65 and older, receive Social Security and the average senior citizen, aged 65-74, has an income of just $36,320 [all figures $US]; a figure that drops to $25,417 for those aged 74 and over. As confirmed by the most recent U.S. Census Bureau, 9.3% of Americans aged 65 and older are living in poverty; an increase from 4.2 million to 4.6 million between 2015 and 2016.

With such worrying circumstances to contend with, many senior citizens will want to find out what kind of financial assistance is available to them in order to better plan for the years ahead.

Housing

Meeting mortgage payments or having enough money to cover rising rental costs can be one of the most pressing financial concerns for senior Americans. The U.S. Department for Housing and Urban Development (HUD) offers financial assistance and resources related to reverse mortgages, federal housing programs, affordable rents and units for the elderly.

Healthcare

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How Millennials can learn from the seniors in Grace & Frankie

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Lily Tomlin, Sam Waterston, Jane Fonda at the Grace & Frankie Season 2 Premiere Screening in Los Angeles.

Can Millennials learn life lessons from seniors? I think so, or at least from TV depictions of them.

As an avid watcher of anything Netflix is showing, I came across Grace and Frankie when the first season came out in 2015.

I wouldn’t usually choose this show for myself, seeing as all the main characters are over 70, I figured I wasn’t exactly in the target market. This was a show geared toward people my parents’ age or more, and what could I possibly gain from watching something made for old people!?

However, it was a slow weekend, and I’d already caught up on Orange Is the New Black, so what did I have to lose? If it was good, I’d find a new show to watch, and if it was too far out of my wheelhouse, I’d email my parents and pass on the ‘new show you’d like’ info to them.

I think a lot of the time people my age tend to take for granted that most media is aimed at us, with characters from all walks of life but generally in the same age range. This has the unfortunate consequence of leading us to believe that:

a) we’re the only generation that matters and

b) we will continue to be young and adventurous and the only generation that matters.

If you haven’t yet marathon-ed Grace & Frankie, allow me to break it down for you. Grace Hanson and Frankie Bernstein’s husbands are law partners, and, as it turns out, life partners. The husbands — played by two veteran actors who are 75 or older, Martin Sheen and Sam Waterston — have decided after 20 years of hiding their love that it’s time they get on with it, which leaves the wives in quite an unfortunate predicament. ‘Grace & Frankie’ revolves around these two women — played by Jane Fonda (79 years young) and Lily Tomlin (77) respectively — rebuilding their lives and learning to live their ‘new normal’.

One of the most important lessons millennials should take away from this show is that no matter how much we plan for our financial futures, nothing is set in stone. It is always important to plan for the un-plan-able. We are not invincible, and we are not immune to hardship.

A Victory Lap for both the 70-ish actors and the characters they play 

Though both the lead characters had successful careers in their pasts, what I find most inspiring about these women is that they aren’t allowing themselves to feel obsolete. They find new relationships, new hobbies, and most interestingly, a new business venture that they’re passionate about pursuing.
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Retired Money: Equities in Retirement — you may need more than you think

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Contrary to what some may feel, equities in retirement is not an oxymoron. If you’re retired or almost so, you may be thinking it’s time to lighten up on your equity exposure.

The problem with rules of thumb is that some of them get quite dated and nowhere is this more relevant than in the maxim that a retiree’s fixed income exposure should equal their age. (So, the guideline goes, 60 year olds would be 40% in stocks and 90 year olds only 10% in them).

My latest MoneySense Retired Money column looks at this in some depth, via reviews of two books that tackle both the looming North American retirement crisis and this topic of how much equity retiree portfolios should hold. You can find the full article by clicking at the highlighted text: How to Boost Your Returns in Retirement.

As the piece notes, the single biggest fear retirees face is the prospect of outliving your money. Unfortunately, retiring in this second decade of the 21st century poses challenges for just about any healthy person who lacks an inflation-indexed employer-sponsored Defined Benefit (DB) pension plan. We’re living longer and interest rates are still mired near historic lows after nine long years.

The two books surveyed are Falling Short, by Charles Ellis, and Chris Cook’s Slash Your Retirement Risk. I might add that regular Hub contributor Adrian Mastracci twigged me to the Ellis book when he compared and contrasted it to my own co-authored book, Victory Lap Retirement. See Adrian’s review here: Two notable books to guide your “Retirement” journey. Continue Reading…

Why are boomers slow to embrace DIY online investing?

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My latest Financial Post column has just been published, which you can retrieve  by clicking on the highlighted headline: Boomers slow to embrace online investing but, surprise, it’s not a technology thing.

(Added Thursday: The article has also been published in the print edition of Thursday’s paper, on page FP8, under the headline Boomers ‘fearful’ of online investing: advisor. This Hub version of the column elaborates on a few points, adding the important distinction that newer online do-it-yourself [DIY] investors do NOT have to go without human advice or guidance, which they can get through fee-for-service planners, fee-only money coaches or investment coaches.)

According to a TD Bank Group survey titled Too shy to DIY, 79% of Canadian baby boomers use the Internet for banking but only a paltry 16% are DIY online investors.  The poll of 2,000 Canadian adults was conducted late in July.

Since the Boomers have embraced most aspects of the Internet and are just as addicted to smartphones as Millennials and Generation X, it’s clear (as the headline notes) that “it’s not a technology thing.”

Rather, the main reason for low Boomer use of online investing is lack of investment knowledge: TD says 79% of those surveyed don’t manage their money online because they simply don’t know enough about investing, while 22% say they don’t have enough time to invest on their own.

When I asked Jeff Beck, Associate Vice President at TD Direct Investing, why the disparity he replied with this email:

“The gap between Boomers who bank online and those who invest online can be attributed to the fact that many say they are unfamiliar or uncomfortable with online investing tools. There’s a misperception that online investing is a complicated, time-consuming activity. That’s why TD Direct Investing offers a range of educational resources, tools and support to help investors get off to a great start, whether their goal is active trading, long-term investing, or both.”

So too do the other major discount brokerages as far as I’m aware: TD is one of the discount brokerages our family uses and there’s certainly no dearth of information on investing there or indeed most other major financial institutions.

As a boomer myself I was a tad surprised by the findings. Continue Reading…

Loss avoidance: The power of long-term thinking

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By John WIlson

Special to the Financial Independence Hub

A friend of mine was planning a long trip outside of Canada and didn’t really have a definite date as to when he’d be back. He was thinking a good six months to a year. I remember asking him about what he would do with his car; where he planned to park it. He thought it would cost too much to put it in long-term parking, somewhere around $200 to $300 a month. He was, as he saw it, just going to park it on the street.

You may detect where this story is heading.

A few months into the trip his car was impounded. As he wasn’t back in the country yet, he asked me if I could go to the lot on his behalf. About $2,500 in fees and several (not so enjoyable) hours later, his car was finally retrieved.

By choosing not to pay long-term parking up front, my friend may have enjoyed the short-term benefit of not having to put effort into making arrangements or paying any money. But the inherent risk in that decision played out; the car ended up in the impound lot and he had to pay quite a significant amount of money: not to mention the embarrassment of asking a friend to go for a long, impromptu visit to the lot on his behalf.

Short-term gratification can hurt in the long run

This story reminds me of how some of the highest-return investments in life are investments of time, where the payoff comes from the avoidance of loss.

We often see the tradeoff between short-term and long-term thinking in our interactions with management teams. For example, a company can really inflate its current earnings and make the latest report or annual release look a lot better by under-investing in intangibles, such as marketing.

Marketing is an expense that will hit the income statement every quarter, but often doesn’t provide a benefit until two, three, four or ten years down the road. The same thing goes with investments in R&D. The management team that focuses too much on optimizing current period earnings will often do so to the detriment of future profitability and competitive positioning. This is one of the reasons we encourage managers to adopt incentive plans that are based on long-term performance rather than short-term earnings targets or share price movements.

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