It was the physicist Rosalyn S. Yalow who said, “The excitement of learning separates youth from old age. As long as you're learning you're not old.”
A July/August 2006 story in AARP Magazine by noted workplace and career expert Rosabeth Moss Kanter pointed out that retirement-phobic mid- or late-career types might retreat to college campuses instead of the golf course to prepare for the next phase of their life. Why? They want to train for completely new careers in all-new professional fields or public service. According to the piece, “Traditional volunteering is not what leading-edge boomers have in mind. They want to be leaders and to help improve the world.” Education will be a part of that movement.
The back-to-school movement for older Americans is an interesting one, but it goes beyond purely financial considerations. It makes sense to discuss your ideas with a tax professional and a financial expert such as a Certified Financial Planner™ professional before you make a move:
Do you really need the degree? Depending on the field, many employers will look at an experienced worker and take their particular work and life accomplishments into consideration when hiring. An MBA or other advanced degree may be personally fulfilling, but you have to consider whether your future plans really require it and whether the degree will pay for itself in the end in salary, opportunity or both.
Are you planning to attend school while working or will you take time off? Going for an aggressive degree program while working full-time can be financially, mentally and physically draining. Obviously, if you plan to take a sabbatical and go to school full-time, that’s a more complex set of financial issues you need to consider well in advance, and you should get help planning for it. Beyond finance, you need to be prepared for the demands of school on your time with family, friends and your personal relaxation. Time is an opportunity cost you can’t get back.
Check your qualifications for federal and state tax credits: Both the federal Hope Credit and the Lifetime Learning Credit are among options you may consider to help cushion the tuition blow if you qualify – discuss these credits and other ways to afford college with your tax expert as well as your planner.
How prepared are you to take on debt? It would be wonderful to pay cash for a college degree, and with time and planning you might be able to do it. But if you need to take out debt to pay for your coursework, make sure your credit cards and other debt are paid off first. You’ll put yourself in the best position to afford any student debt you take on.
Will your company pay? Take advantage of every educational break you can take before you leave your company. If they require you to stay a certain amount of time after attaining your degree, work that into your plan.
Check scholarships and grants: See if there are sources of grants and scholarships not only in your community, but also within your industry. Go online and do a general search for such aid.
How’s your retirement and health plan? It might seem like a good idea to raid the retirement plan or milk the home equity to go back to school, you need to research whether that makes sense for you. Despite your current energy and determination, no one has a guarantee of perfect health through the last half or third of their lives. You can’t forego retirement or healthcare planning simply because you need the money for school.
Consider a functional degree. All sorts of colleges – even the nation’s most prestigious schools – are considering abbreviated graduate and post-graduate programs that give students exactly the amount of education to upgrade their skills and head back into the workforce. If one year of college will do, why pay for three or four?
Are your school choices friendly to older students? It’s your money. Make sure you’re attending an institution that considers its older students a valuable addition to its campus and makes you welcome.
June 2008 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by, a local member of FPA.
Tuesday, June 10, 2008
Friday, June 6, 2008
Don’t Make These Retirement Planning Mistakes
It really doesn’t take much to derail a retirement plan. Most of the errors in planning for retirement are those of neglect, omission or panic. If you don’t know exactly where your retirement plan stands, get some advice – a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional is a good start – to review your overall retirement options and give you some ideas where to start.
Here are some common mistakes people make:
Failing to start: It is amazing how many people find so many excuses never to start retirement savings. But no matter how daunting debt or other spending priorities seem, you have to save for retirement on a regular basis, even if it’s only a cursory amount. Over time, those small assets will grow to something considerably larger.
Failing to link planning for your at-work and personal retirement portfolios: One of the critical problems in retirement planning comes from failing to treat the investments you make at work versus the ones you make independently as a unified whole. Working with a financial planner can help you look at every place you’re putting your money and finding out if you’re implementing those assets in the right way.
Failing to evaluate a prospective employer’s retirement options: Benefits can be worth as much as a nice paycheck. It’s possible you might be working for a company that still offers a traditional defined pension benefit plan in addition to a 401(k) plan. If you think you’re going to get an offer, it’s wise to interview prospective employers on the benefits side of what they’re offering you – particularly the timeframes on when those various benefits kick in. Above all, company matching of any assets you place in your retirement funds is key as well as the vesting period for making those assets your own.
Failing to consider both kinds of IRAs: The biggest difference between a traditional IRA and a Roth IRA is the way Uncle Sam treats taxes on both types of IRA investments. If you put money in a traditional IRA, you’ll be able to deduct that contribution on your income taxes. In a Roth, you don’t receive the tax deduction for those contributions, but when it’s time to take the money out, you won’t have to pay taxes on it. If you and your spouse are not covered in workplace plans, you may be able to fund fully deductible IRAs. Talk to a tax professional or a financial planner about which options are best for you.
Failing to update your beneficiaries: Starting in 2007, a direct transfer from a deceased employee’s IRA, qualified pension, profit-sharing or stock bonus plan, annuity plan, tax-sheltered annuity, 403(b) plan or a governmental deferred compensation plan to any qualified IRA can be treated as an eligible rollover distribution if the beneficiary is not the deceased’s spouse. That means your kids or any other designated recipient can inherit your IRAs without negative tax consequences at that time. Non-spouse beneficiaries need to check with a tax expert when they must begin distributions from an inherited IRA. Of course, no matter what the investment, make sure your beneficiaries are always current.
Failing to reinvest your tax refunds: Did you know you could deposit your tax refund directly into your IRA? It works for a health or education savings account as well. While many people use their tax refund as a bonus to buy a treat or pay off bills, consider filing your taxes a bit early and arrange to e-file a direct deposit to your IRA so you can note that deposit for the 2007 tax year by next April 15.
Withdrawing money early from an IRA or blowing a rollover: Money taken out of an IRA is subject to income taxes and a penalty if you are under 59 ½ years of age and do not put it back into an IRA within 60 days. When moving assets, most of the time a trustee-to-trustee transfer can be more efficient and with less margin for error. If the IRA distribution check is made payable to you, there is a greater chance you’ll miss the 60-day deadline and you’ll face taxes and penalties.
Failing to contribute the maximum: Not every employee can afford to contribute the maximum allowed by their respective work retirement plans or individual retirement investments, but it should be a goal.
May 2008 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by, a local member of FPA.
Here are some common mistakes people make:
Failing to start: It is amazing how many people find so many excuses never to start retirement savings. But no matter how daunting debt or other spending priorities seem, you have to save for retirement on a regular basis, even if it’s only a cursory amount. Over time, those small assets will grow to something considerably larger.
Failing to link planning for your at-work and personal retirement portfolios: One of the critical problems in retirement planning comes from failing to treat the investments you make at work versus the ones you make independently as a unified whole. Working with a financial planner can help you look at every place you’re putting your money and finding out if you’re implementing those assets in the right way.
Failing to evaluate a prospective employer’s retirement options: Benefits can be worth as much as a nice paycheck. It’s possible you might be working for a company that still offers a traditional defined pension benefit plan in addition to a 401(k) plan. If you think you’re going to get an offer, it’s wise to interview prospective employers on the benefits side of what they’re offering you – particularly the timeframes on when those various benefits kick in. Above all, company matching of any assets you place in your retirement funds is key as well as the vesting period for making those assets your own.
Failing to consider both kinds of IRAs: The biggest difference between a traditional IRA and a Roth IRA is the way Uncle Sam treats taxes on both types of IRA investments. If you put money in a traditional IRA, you’ll be able to deduct that contribution on your income taxes. In a Roth, you don’t receive the tax deduction for those contributions, but when it’s time to take the money out, you won’t have to pay taxes on it. If you and your spouse are not covered in workplace plans, you may be able to fund fully deductible IRAs. Talk to a tax professional or a financial planner about which options are best for you.
Failing to update your beneficiaries: Starting in 2007, a direct transfer from a deceased employee’s IRA, qualified pension, profit-sharing or stock bonus plan, annuity plan, tax-sheltered annuity, 403(b) plan or a governmental deferred compensation plan to any qualified IRA can be treated as an eligible rollover distribution if the beneficiary is not the deceased’s spouse. That means your kids or any other designated recipient can inherit your IRAs without negative tax consequences at that time. Non-spouse beneficiaries need to check with a tax expert when they must begin distributions from an inherited IRA. Of course, no matter what the investment, make sure your beneficiaries are always current.
Failing to reinvest your tax refunds: Did you know you could deposit your tax refund directly into your IRA? It works for a health or education savings account as well. While many people use their tax refund as a bonus to buy a treat or pay off bills, consider filing your taxes a bit early and arrange to e-file a direct deposit to your IRA so you can note that deposit for the 2007 tax year by next April 15.
Withdrawing money early from an IRA or blowing a rollover: Money taken out of an IRA is subject to income taxes and a penalty if you are under 59 ½ years of age and do not put it back into an IRA within 60 days. When moving assets, most of the time a trustee-to-trustee transfer can be more efficient and with less margin for error. If the IRA distribution check is made payable to you, there is a greater chance you’ll miss the 60-day deadline and you’ll face taxes and penalties.
Failing to contribute the maximum: Not every employee can afford to contribute the maximum allowed by their respective work retirement plans or individual retirement investments, but it should be a goal.
May 2008 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by, a local member of FPA.
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