Briefly Noted

    Investors Need More Survival Skills

    The vast majority of American investors do not possess important “investor survival skills” needed to build their savings into a retirement nest egg, according to a Securities Investor Protection Corporation (SIPC)/Investor Protection Trust (IPT) survey.

    The survey was designed to focus only on the most active U.S. investors. Nonetheless, only 21% of those surveyed said they practice all four of the desirable behavioral traits focused on in the survey: reading prospectuses, regularly reviewing account statements, checking out the disciplinary backgrounds of brokers/financial planners, and having a financial plan in place.

    More disturbingly, only 8% of investors understand that NO agency or organization “insures you against losing money as the result of fraud in your investment portfolio.” A total of four out five investors incorrectly identified one or more of the following entities as providing such insurance: the SEC (42%); FDIC (41%); and SIPC (23%).

    Other findings include:

    • Only 36% of investors have checked out the disciplinary backgrounds of their stockbroker and/or financial planner. Those who did not indicated that they failed to do so because either they trusted the individual in question (61%) or the individual had assured them that there was nothing to be concerned about (9%).
    • Only 39% understand how sales fees and commissions work in the no-load mutual fund context.
    • Only 41% understand the bond investing basic rule that as interest rates go up, bond prices tend to fall.
    Source: SIPC and InvestorProtection Trust.

    First Retirement,Then Back to Work

    A new study of Americans who retired and then returned to work reveals major changes in traditional retirement patterns. The research, sponsored by Putnam Investments, was based on a national survey of individuals over age 40 who are retired from full-time employment and are now working or looking for work. The average age was 61.

    The study estimated that almost one-third of all American retirees are ‘working retired.’ It found a dichotomy in the working retired population, with about two-thirds returning to the workforce because they “wanted to,” but the remaining one-third returning out of economic necessity. Other survey findings include:

    • The “working retired” represent an estimated 10% of the U.S. workforce age 40 or over

    • There was a 1½-year average pause following retirement before re-entering the workforce

    • 67% planned to return to work following their first retirement

    • The average paid work week is 29 hours

    • 54% work part time, 36% work full time, and 10% were looking for work

    • 45% work at a job requiring education, skill and experience levels similar to their pre-retirement job; 12% work at jobs requiring higher levels

    • The average income was $86,800, 60% higher than that of traditional non-working retirees

    • 70% make less per hour worked than in job prior to retirement

    • 60% still carry a mortgage

    • On average they save 11% of their total household income

    • 44% have college degree or more, 36% have some college
    Source: Putnam Investments.

    The Biggest Divorce Mistakes (Other Than the Marriage)

    At best, divorce is a time when emotional and family concerns take center stage and financial issues often take a back seat. Yet it is also one of the biggest triggers of bankruptcy. That means that financial planning is crucial when a marriage breaks up. Of course, anyone filing for divorce should seek the help of financial and tax advisers as well as attorneys skilled in divorce. But here are some ways to avoid a money debacle on the other end:

    • Start with a budget.

    • Find experienced divorce advisers: Good divorce attorneys cost money, but they pay for themselves when talking with financial advisers in advocating for their clients. Some financial planning professionals are also certified in divorce planning and can help your team with financial discovery, analysis and long-term projections.

    • Properly value your assets: Hiring a valuation expert may be necessary. Divorcing spouses need to make sure they have enough money to finance repairs and replacement of assets that they’ll be paying for as a single person.

    • Kids have rights: In many states, college-age children have the right to demand financial support or college funding at the state level so their education isn’t interrupted. While both parents should advocate in their kids’ best interest, this isn’t always the case. Be aware of your state’s divorce laws with respect to secondary child support.

    • File taxes wisely: There are always special situations in a divorce that will determine whether a couple will need to file jointly or separately during the last year that the marriage exists. This is definitely worth discussion since tax fraud can be a liability issue for the spouse who had no involvement or awareness of the fraud taking place.

    • Get help documenting child support: Child support guidelines vary from state to state, but generally the criteria for establishing child support amounts are typical throughout the United States and these guidelines are established by each state’s legislature. If your state has a special program that allows a spouse to pay into a special account so child support is recorded every month, consider it. It provides a paper trail and enforcement system for assuring that kids get the money they need. Federal law requires all child support payments be made by wage assignment and health insurance by Health Insurance Orders.

    • Once the divorce is over—watch the spending: Budgeting early in the process may cut down on the risk of overspending.
    Source: The Financial Planning Association, the membership organization for the financial planning community.