One of the most difficult things about the internet is the constant deluge of information. I heard it said very recently that one of the new responsibilities of financial experts will be very much like that of a curator—separating valuable information and insights from the worthless content online. You see, for the most part, there is no scarcity of information available now. In fact, there is an entirely new industry of online businesspeople who do nothing but create content that’s packaged and ready for consumption at all times. If you have the time, resources, and perseverance, there isn’t much that cannot be discovered on your own. However, with doing the research comes a price—sometimes it’s financial, sometimes it’s your time, and sometimes it’s the price of placing value in the wrong information. To put it another way—just because you can find an online flight manual doesn’t mean that reading it will equip you with enough facts or experience to go fly a plane (unless you already are a pilot, of course).
I’ve discovered that much of the information that’s readily available for consumers today is pretty much worthless. Financial fundamentals are well-known—even simple to understand. They just aren’t easy for some people. (Think: spend less than you earn.) Yet, as we move into more advanced financial topics, or more specific issues, seekers often discover more opinionated articles or biased research than pure objectivity. Unfortunately, some readers don’t recognize the bias because they lack the experience or understanding to separate truth from fiction. This is where the role of an objective, credentialed financial advisor can be extremely valuable.
To give you some examples, I decided to grab a few headlines from October and couple them with a little commentary. As you can imagine, there were hundreds of financial topics placed into the ether this past month, but here were a few that I found to be relevant:
In this article from Accenture, they take aim at the relentless push for lower and lower pricing for goods and services. In this research, they found that price is now the top priority for consumers when making a buying decision, and no industry is safe. However, when asked directly about purchasing decisions, they found that the majority of consumers would not choose a low-price deal if knew it would be less safe, less durable, or come with poor levels of customer service.
This is quite important as it relates to how some people seek and receive financial advice today. There are many financial professionals who offer free dinner seminars and free financial reviews—many even offer free financial planning services.
The question you must ask is: “If everything is free—where do the real costs come into play?”
The next article I wanted to share is an extreme example of a trend I’m beginning to see with retiring clients—they have student loan debt. That’s right—there are quite a few Baby Boomers who have co-signed student loans with their kids to assist in the financing of their children’s education. Now, I do want to tread carefully here because I have children of my own, so I have empathy for this situation. Unfortunately, student loans are arguably the worst kind of debt you can take into retirement simply because you can’t get rid of it until it’s been paid. If you’re considering co-signing a loan with your child, please make sure you’ve exhausted all other options…and only do so if you have a clear plan of action on how to eliminate the debt. As much as you love your kids, you must understand that if they can’t pay the debt—you are on the hook. It’s that ugly…and that simple.
The 3rd article I’m sharing with you covers a topic that, in my opinion, is going to become more prominent in the years ahead—Medicare Part B premium increases. I’ll most likely be writing or doing a video about this topic very soon, so I won’t spend too much time on it here other than to mention a few highlights.
Earlier this month, it was officially announced that there would be no Social Security cost of living adjustment for 2016. How does this impact Medicare? Well, there is a provision in the rules regarding Social Security and Medicare that protects benefit recipients from having their Social Security checks reduced by an increase in Medicare Part B premiums. For most years, Social Security recipients are given a cost of living adjustment (COLA), and the COLA will at least absorb any increases in Medicare Part B. In years like 2015, where there is no adjustment upward, these people are in effect “held harmless” from any increases in their Medicare Part B premiums.
What does this mean exactly?
It means that any increases in Medicare Part B premiums must be spread out among those who aren’t protected by the “hold harmless” provision. For instance, someone who is delaying their social security checks to earn delayed retirement credits and paying their Medicare Part B premiums out of pocket will have to absorb the increased Part B costs.
Ok, so now what?
If this impacts you, the first thing you need to do is not panic. This doesn’t mean you need to run and file for social security and throw your claiming strategy out the window. It simply means that Medicare Part B will be a little more expensive for you in 2016—and then this game will play out again next year. If we do see a COLA in 2016, then no one is held harmless—and there will be a much larger pool of beneficiaries to absorb any cost increases. What will likely happen is the costs will then be revised downward, as there will be millions more people to help absorb the cost.
If this concerns you, please reach out to our team, and we can help review your current situation in more detail.
Day after day, we have more and more information readily available at our fingertips. However, wisdom and expertise will always be invaluable for those looking to design and create their financial future. Hopefully, you are already working with our team to reach your financial goals. If you haven’t taken that step, then I encourage you to reach out and get started. Nothing great is built overnight—the same is true in our finances. The best thing you can do is get started today!