When it comes to retirement, there are many things to consider: taxes rates, vacations, and maybe where you plan on living.  But experts are saying that there are 2 major obstacles that must be factored into your plans: the old notion that, “hey, I can work later in life” and make up for my savings then, and the diagnosis, either by you or a loved one, with Alzheimer’s disease.  Research has indicated that many Americans plan to keep working as a way to make up for not having saved enough or invested wisely enough for retirement, or as a way to keep health insurance.  These are both good reasons to continue working, however, many companies, according to the unemployment reports, are still laying off, specifically, 55 years and older employees.  No assumptions can be made that a job will be there for you when you reach that age or are coming up to that age, so you should look at other options now.  You should speak with a financial adviser, as it is never too late to plan for your retirement, but not doing it at all can prove problematic to your future well-being.

The second possible obstacle is Alzheimer’s disease, either suffered by you or a loved one.  It is estimated that around 5.3 million people now suffer from this disease.  And the prevalence of Alzheimer’s is supposed to grow by at least 80%  by 2025.  You don’t have to go on facebook to realize that there is only one degree of separation between you and someone with Alzheimer’s or dementia; and you may also realize that those most affected by this terrible disease are women.  When families are faced with this diagnosis, they are often left scrambling and are subject to fall victim to any one or all of these fraudulent practices: medical, financial, and legal.  Because of this, understanding that there is a 3-20 yr. lifespan for this disease, and speaking with an estate planner or financial adviser about how to plan for 20 years of dependent care (just in case) is the most responsible financial move you can make.  The second most important decision you must make is choosing your beneficiaries and power of attorney(s).  The more decisions you take control of now, the less worrying you will have later.

Other than claiming your child as a dependent on your taxes, the two biggest tax breaks that children can provide are the dependent-care credit and the child tax credit.  If you pay for babysitting or daycare for a child under 13, you can claim a tax credit if you and your spouse both work or if one parent is a full-time student or disabled.  A single parent with earned income is also eligible.

A few other things to make sure you document before you turn your taxes over to your accountant, are that nursery school and kindergarten costs are usually eligible, but private school expenses in first grade or higher are not; overnight camp expenses are not eligible, but day camp expenses are (with some cost restrictions, see your CPA).

Then there is the kiddie tax:  Your children are inevitably going to fall into a lower tax bracket, so they will pay less on investments.  The kiddie tax enables the first $700 of unearned income for children under 14 years to be considered tax free; the next $700 will only be taxed at his/her rate.  All additional income above that will be taxed at the parents’ rate.  After age 14, the kiddie tax disappears and all investment income is taxed at the child’s rate.  Just remember, when applying for financial aid for college rolls around, investments in your child’s name may make him or her ineligible.  Deciding the best ways to invest to provide maximum return and tax breaks can be discussed with your financial adviser.

Options are one the most versatile trading instruments ever invented.  Since options cost less than stocks, they provide a high leverage approach to trading that can significantly limit the risk of a trade.  Simply, option buyers have rights and option sellers have obligations to the buyers.  Option buyers have the right to buy or sell the underlying stock at a specified price until the third Friday of their expiration month.

There are types of options: calls and puts.  Call options give you the right to buy the underlying asset, whereas put options give you the right to sell the underlying asset.  Before stepping away from  your financial manager, it is important that you get to know the inner workings of both.  Every investment strategy you will have or be given by investment advisers will require your working knowledge of both types of options.

There are no margin requirements if you want to purchase and option because your risk is limited to the price of the option.  In contrast, option sellers receive a credit in their account for selling an option and get to keep this amount if the option expires worthless.  However, option sellers also have an obligation to buy or sell the underlying instrument if their option is exercised by an assigned option holder; therefor selling an option requires a healthy margin.

The price of the option is called the premium.  An option premium is priced on a per share basis and each option on a stock corresponds to 100 shares.  Therefor, if an option premium is priced at 2, that corresponds to 200 shares in the company’s stock.  Yes, this all does sound a bit confusing at first, but if you sit down with a financial adviser and educate yourself with reference material on the subject, you will be better able to make financial decisions on your own.

Annuities, reverse mortgages, life insurance pools, principal-protected notes… the options being offered to senior citizens hoping to ensure a comfortable retirement are innumerable. And in a growing number of cases, that may be the intention as more scammers, often the elderly themselves, try to con retirees. Though hard numbers are difficult to come by, many lawyers and advocates for the elderly say more seniors than ever are being lured into investment schemes that are unsuitable for people of their age or are outright swindles.

One out of five Americans over the age of 65 has been the victim of a financial scam. That means more than 7.3 million seniors have been taken advantage of financially through inappropriate investments, high fees, or fraud. Many of today’s scam artists have a particularly good understanding of their victims, this being because the fraudsters themselves are of retirement age, if not exactly retired. More elderly con artists than ever seem to be preying on retirees, perhaps because senior citizens put more confidence in someone their age.

In November, William Kirshner, 84, a financial adviser in Corpus Christi, Tex., was sentenced to five years in prison for stealing more than $100,000 from senior citizens and other clients who invested in promissory notes issued by his company. Ronald Keith Owens, 74, was sentenced to 60 years in prison in January 2009 for persuading investors, including retirees, to put more than $2.6 million into nonexistent bank-related investments. And William Walter Spencer, 68, a Franklin (Tenn.) financial adviser, sold elderly members of his church promissory notes that turned out to be bogus.

Veterans are one of the biggest targets. Several groups offer to help former soldiers sign up for a $2,000-a-month benefit from the Veterans Affairs Dept. in Washington. While the program is real, some groups are telling seniors they can only qualify if they liquidate their assets and purchase an annuity, which usually comes with a hefty sales commission.

Reverse mortgages, which let people aged 62 and older get cash out of their homes and are repaid when the borrower dies or moves, are a big part of many scams. One popular ruse is urging the elderly to finance annuity purchases with a reverse mortgage, despite a ban on cross-selling them with other financial products. Other unsuitable investments being pushed on seniors are pools of life insurance policies, similar to the bundles of home mortgages that helped fuel the financial crisis. Some of these have turned out to include policies that don’t exist, and it’s unclear whether they’re supposed to be overseen by state insurance regulators or the Securities & Exchange Commission.

Principal-protected notes are another investment being pushed on the elderly. Seniors tend to fall for these because the name makes it sound as if they’re risk-free; in fact the principal isn’t always protected, as holders of notes backed by Lehman Brothers learned when the firm collapsed.

The new financial regulatory reform bill would crack down on advisers who market themselves as specialists in investments for seniors, and another measure would include harsher penalties for anyone committing securities fraud against the elderly. “We need better regulation of this industry,” says 75-year-old Senator Herb Kohl (D-Wis.), who heads the Senate’s Special Committee on Aging, “so seniors can tell the difference between professionals who offer clear and unbiased financial advice and bad actors… who steer them toward inappropriate financial products.”

Have you ever given much thought to the real cost of an item, compared to the listed retail price?  A perfect example is if you chose to buy a new electronic gadget on credit.  The real cost of the item would be the purchase price and the interest that you have to pay.  The true cost of an item can often go unnoticed and consumers end up paying much more than they bargained for.  Here are a few things that are more expensive than you might think.

Active Trading
You might believe that it would be exciting to become a day-trader because you can get rich by aggressively buying and selling stocks.  All you have to do is buy an investment and sell it for more than you paid.  That sounds pretty easy!  There are even television shows, software and blogs devoted to helping you with your day-trading.  So, should you start actively trading your account in hopes of getting rich?  Not if you want to hold onto your hard-earned money.

The only person who is guaranteed to get rich from your constant buying and selling is your stockbroker.  Brokerage firms absolutely love customers that actively trade their account.  The brokerage firm makes money regardless of whether a stock increases in value or decreases because they charge commissions on every buy and sell order.  You could end up paying thousands of dollars a month in commissions, just for the privilege of trading stocks.  Once you see how quickly these commissions eat up your investment return, you won’t be in such a rush to quit your day job.  This is of course not to say that some don’t realize significant profits through day trading, but commissions build up quickly.

Refinancing
Do you remember the refinancing boom of the 2000s?  Lots of realtors and loan officers were advising clients to take money out of their homes by refinancing.  The theory is that you can get some extra cash by taking the available equity out of your house by extending the years on your payments.  Sounds great right?!  Who couldn’t use some extra cash to pay off credit card debt or refinish the basement?

Not so fast!  Refinancing can cost you more than you think.  Not only are you extending your mortgage obligation for more years; you are also draining the equity out of your home.  As the recent financial crisis showed, housing prices are not guaranteed to increase.  When housing prices drop precipitously as they have over the past few years, you could find yourself owing more money on your new loan than your house is even worth.  There is nothing worse than paying a mortgage on a home that you are upside-down in.

Late Fees
Late fees are like little pests that drain your finances and rob you of financial freedom.  Creditors are famous for adding late fees to any bill paid after the due date.  Late fees may be added to a bill that is one hour late, one day late or one week late.  Credit card companies can charge fees up to $35 for late payments, in addition to the interest.  Most utility companies charge late fees of $5-10.  Cell phone providers, internet carriers, cable and satellite providers will all hit you with at least $5 late fees.  Too many people ignore the detrimental effects of late fees by thinking it is only $5 or $10 bucks.  Add these little late charges together, and you could be losing hundreds of dollars a year.  Over a 30-year time period, you could easily be losing thousands of dollars to late fees.  Imagine what that money could be doing for you if you had placed it in your 401(k).

Credit Card Purchases

Credit card purchases should come with the following cautionary warning: This purchase will cost you more than the price advertised!  Most credit card users end up paying way more than the stated purchase price.  The only exceptions are people that pay their bill in full each month.  Let’s say you bought the new Droid Incredible for $200 on your credit card and your annual interest rate is 18%.  If you don’t pay the balance off immediately than you are going to be paying interest on your phone purchase.  Your awesome new $200 phone purchase can cost you well over $300 if payments are delayed.  Most likely you will not even have the same phone a few years later. You could end up owing hundreds of dollars on a $200 item that you don’t even use anymore.  Small purchases may not appear to be a big deal initially, but over time these little items will end up costing you a whole lot more than you think.

The markets can be very fickle and uncontrollable, but what you can control is cost.  Keeping your costs down is crucial to your success as an investor.  The first step is to cut your fund fees.  I’m sure by now that you have already learned to avoid sales fees, but do you know how much your mutual funds really cost you every year?  Morningstar’s “Instant X-Ray” feature will break down your funds’ fees into hard dollar figures and compare them with the average costs of similar funds.  From there, you need to get rid of any funds with above-average expenses and are poor performing.  Replace them with low-cost index funds or exchange traded funds.

Next, you need to find a bargain broker.  The widely used online broker Fidelity does not have rock bottom commissions, but has a wide range of investment options.  They also supply a lot of research on their investments.  If you are looking to do a lot of the work yourself, you can go with bare bones operations like WellsTrade, which offers 100 free trades per year as long as you maintain a balance of at least $25,000.

And, finally, you need to haggle with your financial adviser.  The best time to negotiate your adviser’s fees is when  you are still shopping around.  But, if you have already settled, ask for a dollar-by-dollar breakdown of the exact fees you are paying.  At that point you can politely ask, “Is there anything we can do to lower the price tag”.  Now, if you pay by the hour, I would suggest doing a lot more research at home, have all of your questions thought out and written down, and come in with much of your paperwork done so that you will spend less time and money with your financial adviser.

Retirement often signifies the end to certain forms of income; but it also signifies the cessation of certain types of expenses.  For example, the best thing about a mortgage is that it eventually gets paid off.  The removal of this expense is a huge weight lifted off of your shoulders, and can mean the difference between positive and negative cash flow in your retirement.  Of all debts, this is a big one; you should speak with a financial adviser about devising a realistic plan to have your mortgage paid off before you retire.

Houses aren’t the only thing that are eventually paid off.  If you aren’t one of those people who trades their car in every couple years or leases, this debt will also eventually be eliminated from your budget.  Upon entering retirement, you will have to determine if your savings and income will allow for you to continue to make car payments or lease payments throughout your retirement or if you must buy a car and hang onto it throughout.

During your working years you probably will either opt to put 15% of your earnings away in some sort of employee sponsored retirement plan, such as a 401(k), or allocate your money each month into a traditional or Roth IRA, whether it be through an investment manager or yourself.   All of these qualified plan contributions will cease upon retirement, although you can continue to contribute to an IRA to age 70 1/2 and beyond.  All of your income from retirement forward will be entirely yours and you will no longer be expected to take a portion of it out for saving.

Another key savings you will see in retirement is life insurance.  For those of you that have cash value policies, there is a very good chance that you will have it paid off by the time you retire.  For those of you with term policies, you may no longer need them and it may become too expensive to continue the coverage.  In either case, it means an end to monthly payments and/or annual premiums.  This can free up thousands of dollars, depending on the amount of coverage involved.

The biggest goal you and your financial adviser should have prior to retirement is to pay off any and all miscellaneous debts.  Student loans, credit cards, and other consumer debts constitute  a large portion of most household budgets.  The removal of credit card debt in particular allows retirees to get out from under obscene interest rates and direct their monthly payments toward other obligations.

So what’s the bottom line?  The elimination of some or all of the debts listed above can make a huge difference in the amount of income that is required to make ends meet.  Many retirees are able to live on Social Security plus their retirement savings with relative ease if their major debts are paid off.  Make sure you are one of these people and Happy Retirement!

Its easy for our emotions to take over and force us, or rather convince us to make irrational decisions.  Our money is not exempt from these decisions.  But, you have to remember, from here on out, that you need to only use logic when it comes to finances.  Some people can make a go of it on their own, others employ the assistance of a financial adviser.  One of the biggest mistakes people make is coming to the conclusion that because its on sale, its a good deal.  If you are going stereo shopping and you see two marked at $400, but one is $300 off, which would you buy?  If you use your logic and reasoning, you would buy the one that got a better rating from consumer reports; but if you react like most people, you buy the one that is on sale because its a bargain.  In fact, research has found that people who wouldn’t normally spend that kind of money on a stereo before will buy the discounted stereo based on the fact that it is discounted.  The reality is, $400 is $400, and if you normally wouldn’t spend that kind of money on a stereo in the first place, you shouldn’t do it now.  Before you splurge, evaluate whether the product is worth that in enjoyment.  Also, consider how often you will use the product and if there is a cheaper product of similar quality out there.

The number of people who have money in savings accounts, earning less than 2% I might add, while carrying credit card debt, usually with interest rates above 12%, is mind boggling.  People tend to use what is called “mental accounting” and compartmentalize their funds.  Often people have the money to pay off their entire debt, but choose not to do so because they are afraid to dip into their savings.  The reality is, you are not earning enough interest on your money in savings to justify not paying off your debt.  You are losing money everyday in interest.  If you have the money to pay off your credit card debt and still pay your bills, do it. Worse case scenario, if there is an emergency, use your now zero balance credit cards to help and then pay them off as soon as you can.

Finally, people have begun hoarding money again as a result of the economic climate.  People are so afraid of running out of money, they don’t enjoy the money they have.  If you are legitimately worried about running out of money, you should sit down with a financial planner and work out the math.  Make sure you consider worst case investment scenarios, not just the averages.  That should make you more comfortable about weathering a bad patch in the future.  Then, if you still have more than enough, make a plan that will allow you to enjoy your wealth by either spending the excess or giving it away.  Money, after all, is a means to an end, not the end.  You save it to make you and the people you love calm, comfortable, and happy.  Enjoy it!

Options are one the most versatile trading instruments ever invented.  Since options cost less than stocks, they provide a high leverage approach to trading that can significantly limit the risk of a trade.  Simply, option buyers have rights and option sellers have obligations to the buyers.  Option buyers have the right to buy or sell the underlying stock at a specified price until the third Friday of their expiration month.

There are types of options: calls and puts.  Call options give you the right to buy the underlying asset, whereas put options give you the right to sell the underlying asset.  Before stepping away from  your financial manager, it is important that you get to know the inner workings of both.  Every investment strategy you will have or be given by investment advisers will require your working knowledge of both types of options.

There are no margin requirements if you want to purchase and option because your risk is limited to the price of the option.  In contrast, option sellers receive a credit in their account for selling an option and get to keep this amount if the option expires worthless.  However, option sellers also have an obligation to buy or sell the underlying instrument if their option is exercised by an assigned option holder; therefor selling an option requires a healthy margin.

The price of the option is called the premium.  An option premium is priced on a per share basis and each option on a stock corresponds to 100 shares.  Therefor, if an option premium is priced at 2, that corresponds to 200 shares in the company’s stock.  Yes, this all does sound a bit confusing at first, but if you sit down with a financial adviser and educate yourself with reference material on the subject, you will be better able to make financial decisions on your own.

Your credit score is that pesky three digit number that represents your credit-worthiness and how reliably you will pay back money you borrow.  This may seem simple enough, but credit scores are not always intuitive.  Even when you think you are doing the right thing, financially speaking, you could still be hurting your score.  People assume that once a debt is paid off it will drop off their credit score, when in fact this is far from the truth.  Late payments and other negative blemishes stay on your credit report for 7 years from the date of the initial late payment.  Bankruptcies will stick around for 10 years from the date you file.  Although these things are on the report for many years, the effect they have on  your credit report will lessen over time.

It is very important for you to keep an eye on your credit report, as the reporting bureaus do make mistakes.  It has been estimated that 8 out of 10credit reports contain a serious error or some sort of mistake.  To take a look at your credit report for free, and dispute errors online, check out Quizzle.com.  When you pull your own credit for educational purposes, it will not effect your score, as many have said, because it is a “soft inquiry”.  Your credit is however effected when your credit is pulled by a creditor or lender for the purpose of giving you a loan or issuing you credit.  So, check your credit report yourself regularly.

Also, if you have credit or can get credit, you should.  Yes, using all cash sounds like the responsible thing to do and you can easily track your spending, but that doesn’t help your credit report.  If you are not using credit ever, you have not demonstrated that you are capable of using credit responsibly, therefor your score will be lower than someone who does.

And finally, beware of credit repair companies claiming they can get negative information removed from your credit report.  This practice is illegal and generally scams.  Its better to discuss with a financial adviser what to do about cleaning up your credit report and paying off debts if that is your goal.  To have inaccurate information removed from your report, file a dispute with the credit bureau and they have 30 days to conduct an investigation.  If the dispute is valid, they will immediately remove the false information from your credit report.