AARP » Money & Savings

Find Cheap Places to Stay When You Travel

Jeff Yeager — Wed, 22 May 2013 13:20:43 +0000

Planning a summer vacation? Check out my new episode of “The Cheap Life” where I talk about ways to find cheap places to stay when you travel. If you haven’t considered hostels or “couchsurfing,” these alternatives to staying in traditional hotels can save you big bucks.

Debt Is a Taboo Conversation Topic

Jeff Yeager — Mon, 20 May 2013 13:17:35 +0000

As a young adult, my parents taught me to never discuss religion or politics in a social setting, especially if you know and like the other people in the room. I’ve since learned that sex is often included along with religion and politics in the trifecta of taboo polite conversation topics. Trust me, growing up 50 years ago in the farmlands of Ohio it went without saying that sex wasn’t something you talked about in public (or even in private, for that matter).

Remembering my parents’ wise advice, I was fascinated by the results of a poll recently conducted by CreditCards.com. It showed that more Americans would now rather discuss their views on religion, politics, or even their love lives with someone they’ve just met than reveal the amount of credit card debt they are carrying.

In fact discussing money issues in general, like your salary or the amount of your monthly mortgage or rent payment, were generally considered greater taboo topics than sharing one’s views on politics or religion, or even revealing personal information, like the details of health problems, your age or your weight! More than twice as many people said that they’d gladly share their views on religion in a social setting than dare discuss the current balance on their credit cards.

I also found it interesting that people are more reluctant to discuss their indebtedness now, as compared to before the recession (the same survey was conducted pre-recession as well), even though during that time most Americans have actually decreased the amount of credit card debt they owe. Financial experts analyzing the survey data concluded that that is because before the Recession, carrying debt was often encouraged and considered almost a patriotic thing to do in order to stimulate the economy, whereas now indebtedness is commonly viewed as a personal failure.

Don’t get me wrong. When it comes to money matters, I’m not suggesting that people should bare their balance sheets in public. Although, as I’ve written about here before, having an open and honest conversation about money problems with family members — as well as full and ongoing disclosure about financial issues with anyone you’re involved with romantically — is definitely a prudent course of action.

In the meantime, take comfort in the fact that the latest CreditCards.com survey reconfirmed that “the weather” is still the number one most appropriate topic of polite conversation in a social setting. Maybe at the next dinner party, try some schmooze-talk like this: “So, what do you think of this weather? It just makes you want to pay off all of your credit cards, doesn’t it?”

Photo by: Andres Rueda via Flickr.

Also of Interest

Retiring with Debt? Join the Club.
How Much Income Will Your 401(k) Provide?
Join AARP: Savings, resources and news for your well-being

See the AARP home page for deals, savings tips, trivia and more

Recession Will Haunt Us Into Retirement

Carole Fleck — Fri, 17 May 2013 18:20:36 +0000

Older boomers, many at retirement’s doorstep, lost more than quarter of their net worth during the recession. Yet they may be the last demographic to retire with enough savings to live comfortably, according to a new study.

Younger boomers (in their late 40s and 50s), and Gen-Xers (in their late 30s and early 40s) are on track to retire with skimpier savings. Consequently, they’re likely to face a pared-down lifestyle in retirement.

Put another way, they’ll be the first two generations that don’t do better financially than the group that came before.

[Read: Can you count on working until you're 70?]

From 2007 to 2010, older boomers born between 1946 and 1955 lost 28 percent of their median net worth — about $68,000 on average. It could not have come at a worse time for those on the verge of retiring.

Younger boomers born between 1956 and 1965 lost 25 percent of their net worth — about $37,000, the study found. Gen-Xers (born between 1966 and 1975) lost 45 percent of their wealth – about $33,000 on average – during that same time.

The study, Retirement Security Across Generations: Are Americans Prepared for Their Golden Years?, was done by the Pew Charitable Trusts to examine how the recession affected the wealth and retirement security of boomers compared with other age groups.

Though the timing of the recession affected older adults more than others — they have fewer working years in which to build back savings — it seems they weathered the storm fairly well. According to the study, older boomers retired, or are on track to retire, with about 70 to 80 percent of their pre-retirement income.

Here’s where it gets worse: Younger boomers are on track to replace only 60 percent of their pre-retirement income. Gen-Xers are on track to replace just half their income in retirement.

Financial experts generally recommend that you save enough to replace at least 70 percent of your pre-retirement income.

Among the study’s other findings:

Older boomers approached retirement in better financial shape than previous generations, thanks to the dot-com boom and the housing bubble.
Boomers and Gen-Xers have been accumulating much higher debt-to-asset ratios than the previous generations had at the same ages.
By the end of the recession, the majority of people in each of these demographics were homeowners.

Photo: Ben K Locek/ flickr

Retiring Later? Join the Club

Patrick Kiger — Fri, 17 May 2013 15:27:48 +0000

The brutal economic downturn that began in 2008 and the subsequent sluggish recovery has thrown a cold splash of reality on many Americans’ dreams of a comfortable, stress-free retirement. So it’s probably not much of a surprise that Americans are now retiring at an older age than they did just a few years ago, and that most of us expect to keep working to age 65 or older.

The big surprise, though, according to Gallup’s newly released annual economic and personal finance survey, is that the upward creep in retirement may not have that much to do with short-term economic woes. Instead, it may be an indication of a larger, more fundamental shift in how Americans live, work and age.

Gallup’s survey, conducted in mid-April, shows that the average age at which U.S. workers retire has increased four years over the past two decades: from 57 in 1993 to 61 today. But three-quarters of that upward shift occurred in the 1990s and early 2000s, according to Gallup’s data.

Gallup also found that workers’ predictions of their own retirement age have shifted even more dramatically. In 1995, nearly half of non-retired Americans — 49 percent — believed that they would retire before age 65, while 32 percent expected to retire at 65 and just 14 percent anticipated having to wait past 65. Today, 37 percent of workers say they will retire at age 65, while another 26 percent think they will work beyond that age. Only 26 percent think they will retire before they reach 65.

The closer they are to age 65, the more likely workers are to project a later retirement age. More than half of nonretirees ages 58 to 64 expect to retire after age 65, compared with 36 percent of nonretirees ages 50 to 57, 38 percent of those between 30 and 49, and just 26 percent of those younger than 30.

Those numbers are basically in line with research by the Urban Institute, which shows that the percentage of men between 62 and 74 who work has risen by 11 percentage points over the past couple of decades, from 27.3 percent in 1993 to 38.0 in 2009. The proportion of women in the same age group who are still working increased from 19.9 percent to 28.1 percent, a comparable rise.

One reason that people are envisioning a delayed retirement, of course, is money. Some 61 percent of non-retired workers say they are concerned abut having enough savings to retire comfortably, according to Gallup. But there’s also substantial evidence that many older workers are staying on the job because they get satisfaction from it. Boston College’s Sloan Center on Aging and Work, for example, cites data from the mid-2000s showing that nine of 10 older workers enjoy their jobs.

If you’re thinking about retiring, but not quite ready, how about taking a part-time job, or starting a business?

Also of Interest

Help for 50-Somethings Short on Retirement Funds
Work-Related Age Bias Hits Home for Boomers
Join AARP: Savings, resources and news for your well-being

See the AARP home page for deals, savings tips, trivia and more

Retiring Boomers Driving Sales of Small Businesses

Associated Press — Thu, 16 May 2013 18:23:32 +0000

By Joyce M. Rosenberg, Business Writer, The Associated Press

NEW YORK (AP) — Baby boomers preparing for retirement are driving a surge in small business sales, as they find more and more buyers confident enough in the improving economy to expand their own businesses through acquisitions.

In the first three months of this year, the number of sales that closed jumped 56 percent from the same time in 2012, according to BizBuySell.com, an online marketplace for small businesses. Retirement was the No. 1 contributor to business sales in the fourth quarter of last year and the first quarter of 2013, according to a survey by Pepperdine University and two trade groups, the International Business Brokers Association and M&A Source.

“It was almost like a light switch went on in January,” says Michael Schuster, a broker with World Business Brokers in Miami. “We started getting a lot of activity with sellers who said, ‘I don’t want to go through another downturn or tough time. I want to see if I could sell my business.’”

“Baby boomers are where we’re really seeing the growth.” —Dave Richards

Sales are so strong in Florida that Schuster’s brokerage is opening two more offices in the state. Three-quarters of the sellers or potential sellers that his company sees are baby boomers, most of whom don’t have family members willing to take over their businesses. Some of these owners want to sell just part of their firms, essentially taking on a partner, because they don’t want to keep carrying all the risk themselves.

Honey Rand fits the category. After 17 years of running her Tampa, Fla., public relations firm Environmental PR Group, she’s starting to think about selling. The 55-year-old wants to get away from the administrative work that goes into running a business, and focus on working with clients.

“Like most people who end up starting a business, I’m really good at the work I do and I’d love the opportunity to wallow around in it,” says Rand. She’s optimistic that she’d be able to sell, because she was approached twice by prospective buyers in the last 10 years. And Rand expects that she would remain with the company for a period following a sale to help with the transition to new management — something that many business owners do.

While she hasn’t definitely decided to sell just yet, she plans to talk to a broker soon.

“I like to think ahead, to understand the process and the things that could affect a sale or sale price. When the time comes, or if it comes, I want to be ready. I don’t want to feel like it’s a fire sale,” she says.

In California, the pace of sales is more of a “slow pickup, not a huge spike,” says Dave Richards, owner of Keystone Business Advisors, a brokerage in Westlake Village, Calif.

“Baby boomers are where we’re really seeing the growth. It’s pent-up demand,” Richards says.

One of those boomers is Walt Pocock. In late 2011, Pocock met with a broker to discuss possibly selling his Chino, Calif., business, Palo Verde Landscape Management Co. But he and his wife Dee, who also worked with the company, weren’t quite ready to let it go. However, selling became “something we were thinking about from then on,” Pocock said.

Within a year, the 70-year-old decided he was ready to retire and Dee, 78, agreed. The difficult business climate was a factor in their decision.

“The economy had not been good and it had been a struggle and we got tired of the struggle,” he said.

The put the company on the market in January, and quickly had several bidders. Pocock got his full asking price, and the deal closed April 1. Now he and his wife are looking forward to traveling around the country in their motor home.

Sellers like Pocock are going to keep the market for small businesses thriving for years to come.

“Trillions of dollars of business value are going to change hands in the next 10 to 20 years,” says Bob Balaban, managing director at Headwaters MB, an investment bank based in Denver. He believes so-called ‘strategic acquisitions’ — purchases by companies looking to expand — will be a key factor in that trend. In a tight economy, companies looking to grow feel that it would take years to build up their businesses.

“They have to do acquisitions to continue to grow and grow quickly,” Balaban says.

Buyers appear to be ready to step up and are looking for companies that will be good fit with their existing operations. Health-care related businesses like medical billing firms, pharmacies and even medical and dental practices are particularly in demand, says Keystone’s Richards. He’s seeing less interest in restaurants and retailers, industries where profit margins are thinner and where many companies are still struggling. Schuster, the Miami broker, says he sees people who were waiting for the economy to pick up, and they’ve decided that business is good enough for them to take the plunge.

“There’s a lot of people who were sitting the sidelines and could not do that anymore — the election’s over and things are getting better,” he says.

Sellers are benefiting from this trend because buyers are willing to pay more money if a deal will quickly get them into the markets they want to serve, says Mike Carter, CEO of BizEquity, a company that helps businesses calculate their sales price.

“For a growth company, we’re seeing them getting almost 15 percent more than what they were getting four years ago (during the recession),” he says.

Creative Kidstuff, a toy retailer based in Minneapolis, just expanded by buying a 26-year-old online and catalog toy retailer, Sensational Beginnings. Roberta Bonoff, CEO of Creative Kidstuff, said the owner was tired and ready to sell. Bonoff declined to disclose the purchase price, but said “everybody walked away from the purchase with their needs met.”

Both companies serve similar markets, but 87 percent of Creative Kidstuff’s revenue comes from its six traditional brick-and-mortar stores. Buying Sensational Beginnings will allow it to expand its online operations.

“We just found this as an opportunity to grow our online business and theirs and have more people get to know who we are,” Bonoff says.

She has her ear to the ground for more opportunities to expand.

“When the opportunity looks like the right fit, we’ll do it,” she says.

BCER, an engineering firm in Arvada, Colo., bought another engineering business, Rimrock Group, which specializes in designing technological systems for new buildings and renovations. The purchase allowed BCER to immediately expand into an area of expertise it didn’t have — and that would have taken it years to develop by putting a staff together one by one.

“Growing things organically is very difficult,” says Marc Espinosa, president of BCER. “I had been discussing seriously for two years, how could we develop this specialty in our company?”

Some buyers are looking to expand into a new geographic area. Jodi Hamilton now owns both of the Dream Dinners franchises in Chicago, giving her the entire territory for the stores where customers assemble ingredients for dinners that they can pack up and take home to cook. Hamilton opened a store two years ago in the city’s Ukrainian Village neighborhood, and hoped to expand at some point. Then earlier this year, the owner of a Dream Dinners in the Roscoe Village neighborhood approached Hamilton and asked if she wanted to buy her store.

It took Hamilton only about a week to say yes. She nailed down a private loan, and closed the deal.

“It was too good an opportunity to pass up, knowing that we would have the entire Chicago market,” Hamilton says.

Also of Interest

Need Extra Cash? Start Your Own Business
The #1 Topic to Talk About After 50 (Even If They Say We Shouldn’t)
Join AARP: Savings, resources and news for your well-being

See the AARP home page for deals, savings tips, trivia and more

What’s Happened to Housing Affordability?

Rodney Harrell — Thu, 16 May 2013 13:00:30 +0000

The National Association of Realtors announced earlier this year that its Housing Affordability Index shows 2012 was a record year for housing affordability. Subsequently, articles appeared in the media with titles such as “Housing Today Is More Affordable Than at Any Time in History” and “2012 a Banner Year for Housing Affordability, Industry Group Says.” In addition, I’ve seen TV reports that continue to note how affordable housing has become.

All of these are at odds with study findings presented this year by AARP’s Public Policy Institute. ”Loss of Housing Affordability Threatens Older Middle Class Adults,” analysis conducted for AARP’s Middle Class Security Project, describes a decline in housing affordability for much of the middle class.

It’s true that AARP and NAR did not use the same data, so we can expect results not to match perfectly. Our paper, for example, focused on the 50+ middle class only, looked at a different time frame, and used different data sets than the NAR study. But results of the two studies are starkly divergent, reflecting basic differences in what we mean by “affordability.”

When the NAR and others in the real estate industry evaluate affordability, they focus on home sales. Their index compares home prices to income at a single point in time: the time of purchase of a home.

Get in on the discussion: Health insurance rates remain largely steady this year

When I investigate housing affordability, I want to know whether people can afford to stay in their homes on an ongoing basis. I look to see if families are dealing with stagnant incomes, increasing taxes and fees, along with higher utility bills and other costs of housing. Can they keep their homes? That is the key affordability question.

Affordability is not simply about the ability to purchase a home. It is an ongoing concern every month for a large number of families. If a health care emergency or another unexpected and costly event hits these families, they are increasingly in danger of not being able to pay next month’s mortgage or rent.

Our latest AARP Public Policy Institute study on housing shows that many older adults (and younger adults) are facing more difficult circumstances today than they were at the turn of the century. It’s an issue that we can’t afford to ignore.

For more on the AARP Middle Class project, go to aarp.org/middleclass and read all of the reports at aarp.org/security

Rodney Harrell, PhD, is a Senior Strategic Policy Advisor with the AARP Public Policy Institute and is responsible for AARP’s housing research agenda. His expertise includes housing affordability and accessibility, transit-oriented development, community redevelopment and sustainable community initiatives.

Follow Dr. Harrell on Facebook, Twitter, Pinterest, LinkedIn and Google+

Photo credit: 401k 2012 via flickr.com

Laundry Tips That Can Save You Money

Jeff Yeager — Wed, 15 May 2013 17:58:25 +0000

Who knew I could sing the blues, and who knew doing the wash could be so much fun?

This week’s episode of “The Cheap Life” is all about how to cut the cost of doing laundry and make your clothes last longer, too. You’ll also find instructions in the show for making your own laundry and cleaning supplies as well as some repurposing tips for used fabric softener sheets.

Plus, if you leave me your favorite “clean” joke or laundry tip on the show’s YouTube page, you might even win a $50 gift card and a rather unusual — and truly “priceless” — bonus gift I mention at the end of the video. Check it out!

How Much Income Will Your 401(k) Provide?

Carole Fleck — Mon, 13 May 2013 15:57:51 +0000

You may be throwing money into your employer-sponsored retirement plan — let’s hope you are — but do you know how much estimated monthly income your plan will provide over your lifetime?

Employers are required by law to provide an outline of what workers can expect to get in estimated monthly retirement income from their traditional pension plans. But that’s not the case for 401(k) and 403(b) plans.

[Find out if you're saving enough for retirement with AARP's calculator].

Maybe your 401(k) balance is at $200,000, for instance, and you’re less than a decade from retirement. If your plan doesn’t break down for you how much you’ll likely accumulate at your current savings rate in a given number of years, or how much that balance is estimated to provide on a monthly basis over the course of your retirement, based on current market conditions, then how do you know if you’re saving enough to meet your goals — even with other sources of income?

The government wants to take the guess work out of that scenario.

The Department of Labor is developing rules that would require workers to get estimated income illustrations from their defined contribution pension plans so they can understand more thoroughly how long their retirement savings might last.

The department is asking for input from retirement planning specialists, employers, workers and others as it looks for ways to educate people and help them save more effectively for retirement. [Click here for instructions on how to provide input].

It’s not a moment too soon to ask for such feedback. With each passing decade, workers increasingly are asked to shoulder the responsibility for their retirement as the share of employers offering traditional pension plans shrinks.

According to the DOL, the number of defined contribution plans such as 401(k)s has more than tripled over the last 35 years. At the same time, the number of traditional pension plans, which guarantee monthly income, declined by half.

Clearly, we could benefit from retirement planning guidance.

So what’s the best way for employers to illustrate how much workers can count on at retirement from their 401(k) plan since there are so many variables between now and then? The Washington Post’s Michelle Singletary says one idea being considered involves a statement showing estimated payments based on your current plan balance.

Another idea, she says, might consider these variables:

You’d make contributions until you retire at age 65, increasing the savings amount by 3 percent a year.
You’d get an annual return of 7 percent, an assumption based on historical market returns in 401(k) plans.
You’d get a return of 3 percent annually to account for projected future inflation (what your dollars will be worth, say, 15 years from now).

The DOL offers a calculator to help you with projections. Go to www.dol.gov/ebsa/ and search for “Lifetime Income Calculator.”

Photo: Ivan Kmit/Alamy

Make Your Own Cleaning Products and Save

Jeff Yeager — Mon, 13 May 2013 15:16:45 +0000

I’ve often wondered when and why Americans went so crazy over household cleaning products. Growing up 50 years ago I recall my Mom having only three or four different cleaning products around the house, at most. I also recall that nothing awful ever happened because of her minimalist cleaning cupboard.

The #1 Topic to Talk About After 50 (Even If They Say We Shouldn’t!)

Barbara Hannah Grufferman — Thu, 09 May 2013 20:48:05 +0000

Okay, I know that money is one of those topics we’re not supposed to discuss at cocktail parties (along with religion and politics and so on and so forth) … but … we’re not at a cocktail party.

We’re in real life. Midlife, in fact. And we need money.

If you don’t have a plan… it’s time to think about creating one. We don’t want to be in our 50s, 60s and beyond without enough money to take care of ourselves.

Where to start?

First, understand that even the most savvy, well-respected financial gurus don’t know what the future holds. Will real estate values go back up to their prior levels? Some think so, most think not . . . but, really we don’t know. And the stock market? It will continue to go up and down as it always has, according to Jason Zweig, one of the experts I consulted for my book, The Best of Everything After 50, and a Wall Street Journal columnist. To keep from going totally bonkers, Jason also strongly urged us to consider working with a money pro — a financial planner.

Do you need a financial planner?

Jason and AARP’s Money Expert, Jane Bryant Quinn (another financial expert I interviewed for The Best of Everything After 50) strongly urge us to find a trusted financial planner we can work with for the long term. A financial planner can help us with our “life plan” and make sure we stick with one. Don’t have one, and not sure how to find one? Jason and Jane suggest asking friends and family for suggestions. If that doesn’t pan out, contact one of the fee-only financial advisers who offer their services on an hourly, as-needed basis, which will keep your costs way down.

You can do your own planning, but I urge you to get a professional to help — at least in the beginning – especially if there have been recent changes in your financial status (job loss or change, illness, divorce or marriage, and so on).

Whether you work with a planner or take the DIY route, having a plan will bring financial clarity to your life, and peace of mind. To help you get started, here are a few ”back to basic” tips that Jane Bryant Quinn strongly urges us to follow and which she follows herself. (And check out Jane’s latest column for AARP by clicking here). They are:

Tighten your belt — stop spending and don’t live above your means
Stash it away — Put as much money as you can into your 401K and other retirement plans
Hands off the house — Stop yourself from tapping into your home equity for cash
Cut the cord — Stop helping your adult kids. Put money into your retirement fund first, and then the college fund
Stay healthy – This generation of “after 50s” will most likely have to work many more years than we had expected, so we want to get and stay healthy

And remember this: We can’t control getting older . . . but . . . we can control how we do it.

I want to hear from you! Leave your questions and ideas for living your best life after 50 in the comments section below. Connect with me on Facebook, Twitter and, of course, my blogs on AARP.org and www.bestofeverythingafter50.com. And please let me know what you’d like to see in future episodes of “The Best of Everything After 50″! Thanks for reading and watching!

Photo Credits: thisismoney.co.uk, faboverfifty.com

Also of Interest

Help for 50-Somethings Short on Retirement Funds
Age Wave Brings New Career Opportunities for Boomers
Join AARP: Savings, resources and news for your well-being

See the AARP home page for deals, savings tips, trivia and more