You ever wonder what the meaning of Phil Conner’s(Bill Murray’s) adventure’s in the movie Groundhog Day was all about?

How does financial planning play out in the movie Groundhogs Day.  Take a moment and look at what is happening to Bill Murray’s character. It looks like slow torture. How much would we hate to be stuck in a repeating story for the rest of our lives. But that is not truly what is happening to Bill Murray. What is happening to Bill Murray is an analogy of how economics work.  Think about it for a second.

Bill Murray’s going through life and he really only has one chance to get it right.  However, he can do nothing but get it wrong.  He tries over and over again to get it right.  It takes him a while, but eventually he figures out how to make everything go perfectly.  We know that in life nothing goes perfectly.  In fact, it is painful to watch.

This is why most people’s financial plans are so ineffective. It attempts to do what Bill Murray did in the final scene after many takes.  You try to get it perfect in one try.  It’s rooted in a human trait that likes things to never change.   But everything changes.  Everything!   So, we need a plan that is dynamic and evolving.  We need a plan that can change when things change. We need to plan all the time.

From my experience as a project manager, I know that a plan is only good on the day that I write it. Tomorrow the plan is outdated. If you look at everything that’s going on in our current economy, we can see nothing but change coming. We have changes in things like healthcare, tax law, banks, Federal Reserve money policy, Congress, presidential, and on and on. We have changes in our own lives as well. Marriage, school, kids, jobs, income, retirement, inheritance, death are all things that change our plans. So don’t assume that just because you made a plan once that it’s still good for ever. Review your financial plans regularly and make small adjustments until you get it right or at least closer to right.

Plans don’t stop at retirement.   The world is going to change after you retire.   Get a good financial coach or Atlas to help you navigate all the changes ahead.

Here’s to an early spring!  I added a link to watch the full movie of Groundhog Day below.

Watch Groundhog Day on Crackle!

Value Calculator!  Helps you decide what’s most important for you to spend that chunk of cash on today!

My July Appearance on The Brashenomics Radio Show

Most people are aware of the financial risks that can negatively impact their retirement. They understand how inflation, rising interest rates and the poor performance of investments can erode their savings. 
What they often fail to realize is that non-financial
events, such as widowhood, unexpected
illness or living longer than anticipated, can also
pose a risk to their retirement security. In fact,
these hard-to-predict events can devastate an
otherwise well-thought-out plan.
However, understanding these risks, can help
you to better prepared for them.
Pre-Retirement Shocks
Pre-retirement refers to the 10-year period
before retirement. This is a busy time of life
from a financial perspective. College expenses
and home mortgages are being paid, income is
peaking, and consumers are beginning to focus
on saving for retirement.
But things often go wrong during late middle
age. During the decade leading up to retirement,
three out of four married couples who are
college graduates experience an event that could
derail their retirement plans. The most common
event (35% of couples) is the onset of a major
medical condition (in the husband or wife), such
as cancer, heart problems, a stroke or diabetes.
Other shocks include a frail parent or in-law
who requires physical and/or financial support
(34%), health-related work limitation (24%), job
loss (19%) and widowhood (5%).1
Job loss is especially noteworthy given today’s
difficult economic climate. A 2011 study by the
Urban Institute reported that of workers aged
50-61 who lost their job in 2009, only one in
four found a new job within a year. When they
did, they often had to accept deep pay cuts that
averaged 20% less than their prior salary.2
Further evidence of the frequency of these
shocks was provided by a report from the
Society of Actuaries. Four of 10 people retired
before they expected to, often because of poor
health, job loss or to care for a spouse or other
family members.3
Health Care Costs
Most people are surprised to learn that many
healthy couples spend more money on medical
care during their retirement than unhealthy
couples. The reason is because healthy people
live longer, eventually develop health problems,
survive longer after an illness develops, and are
more likely to need chronic care.4
These costs can be very high. Fidelity
Investments estimates that an average 65-yearold
couple retiring in 2011 will need $230,000 to
pay for out-of-pocket medical expenses
throughout retirement, not including nursing
home care. And since medical costs are
increasing faster than the rate of inflation, they
will consume a larger percentage of retirement
income in the future.5
One other uncertainty is Medicare. If federal
governmental policy decisions are made that
decrease reimbursement for medical care during
retirement, out-of-pocket medical expenses
might be considerably higher than today.
Chronic Care Costs
Chronic care is care provided for those who
cannot perform some or all activities of daily
living, such as bathing, continence, dressing,
eating, toileting and transferring. For people age
65 and older, six in 10 men and eight in 10
women will need chronic care during their
lifetime,6 mainly for Alzheimer’s disease, stroke,
crippling arthritis, Parkinson’s disease, serious
accidents and degenerative neurologic diseases.
A March 2011 report from the Alzheimer’s
Association highlighted the impact of
Alzheimer’s in our lives.7 There are 5.4 million
Americans with Alzheimer’s disease, and 15
million unpaid caregivers providing 17 billion
hours of unpaid care to them. Over half (55%)
of unpaid caregivers are the primary
breadwinners of the household, 60% are
women, and one in four family caregivers have
children under 18 years old living with them.
A majority of people (73%) who need chronic
care are cared for at home by a family member,
not in an assisted living facility or a nursing
home.8 And this percentage might be even
higher if people could stay at home. Sadly, many
people enter a nursing home not because they
are severely disabled, but because they no
longer have a caregiver at home.
Longevity
Most people are more worried about outliving
their money than dying,9 and for good reason.
The number of Americans age 65 and older in
2030 is projected to be twice as large as in
2000, growing from 35 million to 72 million,10
and representing nearly 20% of the
population.11 America’s population of
centenarians (already the largest in the world)
has roughly doubled in the past 20 years, to
around 72,000, and is projected to at least
double again by 2020.12 Some demographers
predict that if the pace of increase in life
expectancy continues through the 21st century,
sources say, most babies born since 2000 will
live to the age of 100.13
Here’s a real world example of the need to
address longevity risk. Imagine a couple of 65-
year-olds, both of whom were approved for life
insurance at standard rates. The husband has a
projected life expectancy of age 87 and the wife
has a projected life expectancy of 89.
This means that approximately 38 of 100 men
(almost four in 10) and 50 of 100 women (half) will
reach age 90.14 More amazing still is that 14 of the
100 men (one in seven) and 25 of the 100 women
(one in four) will live to at least age 95.
Widowhood
In the example above, there is a two-year
difference in the life expectancy of a 65-year-old
man and woman (87 versus 89). This would lead
most people to conclude that widowhood is
usually relatively short. But this is not true.
Widowhood often lasts for many years or even
decades.
First, the good news: People are living longer and
living longer together. According to the 2000
Individual Annuity Mortality Basic Table, half of
65-year-old couples will reach age 80 together.
The bad news is that after one spouse dies, the
survivor is often left alone for a long time. For
65-year-old couples, almost three in four (71%)
will be widowed for five years or more, and nearly
half (46%) will be widowed for ten years or more.
If the surviving spouse is the wife, as is often the
case, she may have less savings (especially if the
couple’s retirement nest egg was depleted by the
illness of the partner who died), lower Social
Security benefits and smaller pensions. To make
matters worse, she no longer has a spouse to care
for her when she becomes ill at a later age.
While we may not be able to prevent non-financial
events, you have financial options that can change
how these events affect you and your family.
Although you may not be able to save enough
money to protect yourself financially from the
potential costs of all of life’s unforeseen events,
there are new and developing insurance products
that can help you access income from your policy’s
death benefit when it is needed most.
This means that approximately 38 of 100 men
(almost four in 10) and 50 of 100 women (half) will
reach age 90.14 More amazing still is that 14 of the
100 men (one in seven) and 25 of the 100 women
(one in four) will live to at least age 95.
Widowhood
In the example above, there is a two-year
difference in the life expectancy of a 65-year-old
man and woman (87 versus 89). This would lead
most people to conclude that widowhood is
usually relatively short. But this is not true.
Widowhood often lasts for many years or even
decades.
First, the good news: People are living longer and
living longer together. According to the 2000
Individual Annuity Mortality Basic Table, half of
65-year-old couples will reach age 80 together.
The bad news is that after one spouse dies, the
survivor is often left alone for a long time. For
65-year-old couples, almost three in four (71%)
will be widowed for five years or more, and nearly
half (46%) will be widowed for ten years or more.
If the surviving spouse is the wife, as is often the
case, she may have less savings (especially if the
couple’s retirement nest egg was depleted by the
illness of the partner who died), lower Social
Security benefits and smaller pensions. To make
matters worse, she no longer has a spouse to care
for her when she becomes ill at a later age.
While we may not be able to prevent non-financial
events, you have financial options that can change
how these events affect you and your family.
Although you may not be able to save enough
money to protect yourself financially from the
potential costs of all of life’s unforeseen events,
there are new and developing insurance products
that can help you access income from your policy’s
death benefit when it is needed most.
Dr. Robert Pokorski is chief medical strategist in The Hartford’s Individual Life Insurance business.
1. Richard W. Johnson. When the nest egg cracks. Urban Institute, 2006.
2. Richard W. Johnson, Janice S. Park. Can unemployed older workers find work? Urban Institute, 2006.
3. Billings MB, Rappaport AM. Living to 100 – Challenges and opportunities for employers. October 25, 2010.
4. Sun W, et al. Does staying healthy reduce your lifetime health care costs? Center for Retirement Research. May 2010,
Number 10-8.
5. Johnson RW, Mommaerts C. Will health care costs bankrupt aging boomers? The Urban Institute.
February 2010.
6. Kemper P, et al. Inquiry. Winter 2005/2006;42:335-50
7. 2011 Alzheimer’s Disease Facts and Figures. Alzheimer’s Association.
8. National Care Planning Council, 2011.
9. Anne R. Carey and Sam Ward, USA Today, February 16, 2011. Source: Allianz survey of adults ages 44-75.
10. Federal Interagency Forum on Aging-Related Statistics. Older Americans 2010: Key Indicators of Well-Being.
Washington, DC: U.S. Government Printing Office. July 2010.
11. U.S. Department of Health and Human Services: National Clearinghouse for Long-Term Care Information, 2010.
12. Number of 100-year-olds is booming in US. Associated Press (AP), April 27, 2011.
13. Christensen K, Doblhammer G, Rau R, et al. Ageing populations: The challenges ahead. Lancet 2009;374:1196-208/
14. The 2008 Valuation Basic Table, Select and Ultimate Nonsmoker, which is based on U.S. insurance company
individually underwritten mortality experience.

Things you can do before and for the New Year.

The end of the year is a good time to review your personal finances. What are your financial, business or life priorities for 2012? Try to specify the goals you want to accomplish. Think about the consistent investing, saving or budgeting methods you could use to realize them. Also, consider these year-end moves.

Think about adjusting or timing your income and tax deductions. If you earn a lot of money and have the option of postponing a portion of the taxable income you will make in 2011 until 2012, this decision can bring you some tax savings. You might also consider accelerating payment of deductible expenses if you are close to the line on itemized deductions – another way to potentially save some bucks.

Think about putting more in your 401(k) or 403(b). The IRS hasn’t announced the contribution limit for 2012 yet. Given the moderate inflation of late, we might see the annual limit rise to $17,000 from the present $16,500, or not. In 2011, you can contribute up to $16,500 per year to these accounts with a $5,500 catch-up contribution also allowed if you are age 50 or older. Has your 2011 contribution reached the annual limit? There is still time to put more into your employer-sponsored retirement plan.1

Can you max out your IRA contribution at the start of 2012? If you can do it, do it early – the sooner you make your contribution, the more interest those assets will earn. (If you haven’t yet made your 2011 IRA contribution, you can still do so through April 17, 2012.)1

We don’t yet know if the 2012 contribution limits on traditional and Roth IRAs will rise from 2011 levels. If the IRS leaves limits where they are now, you will be able to contribute up to $5,000 to your IRA next year if you are age 49 or younger, and up to $6,000 if you are age 50 and older.2

Should you go Roth between now and the end of 2012? While you can no longer divide the income from a Roth IRA conversion across two years of federal tax returns, converting a traditional IRA into a Roth before 2013 may make sense for another reason: federal taxes might be higher in 2013. Congress extended the Bush-era tax cuts through the end of 2012; their sunset may not be delayed any further.3

Some MAGI phase-out limits affect Roth IRA contributions. If the phase-out limits aren’t adjusted north for 2012, phase-outs will kick in at $169,000 for joint filers and $107,000 for single filers. Should your MAGI exceed those limits, you still have a chance to contribute to a traditional IRA in 2012 and then roll those IRA assets over into a Roth.4

Consult a tax or financial professional before you make any IRA moves. You will want see how it may affect your overall financial picture. The tax consequences of a Roth conversion can get sticky if you own multiple traditional IRAs.

If you are retired and older than 70½, don’t forget an RMD. Retirees over age 70½ must take Required Minimum Distributions from traditional IRAs and 401(k)s by December 31, 2012. Remember that the IRS penalty for failing to take an RMD equals 50% of the RMD amount.5

If you have turned or will turn 70½ in 2011, you can postpone your first IRA RMD until April 1, 2012. The downside of that is that you will have to take two IRA RMDs next year, both taxable events – you will have to make your 2011 tax year withdrawal by April 1, 2012 and your 2012 tax year withdrawal by December 31, 2012.5

Plan your RMDs wisely. If you do so, you may end up limiting or avoiding possible taxes on your Social Security income. Some Social Security recipients don’t know about the “provisional income” rule – if your modified AGI plus 50% of your Social Security benefits surpasses a certain level, then a portion of your Social Security benefits become taxable. For tax year 2011, Social Security benefits start to be taxed at provisional income levels of $32,000 for joint filers and $25,000 for single filers.6

Consider the tax impact of any 2011 transactions. Did you sell any real property this year – or do you plan to before the year ends? Did you start a business? Are you thinking about exercising a stock option? Could any large commissions or bonuses come your way before the end of the year? Did you sell an investment that was held outside of a tax-deferred account? Any of these moves might have a big impact on your taxes.

You may wish to make a charitable gift before New Year’s Day. Make a charitable contribution this year and you can claim the deduction on your 2011 return.

You could make December the “13th month”. Can you make a January mortgage payment in December, or make a lump sum payment on your mortgage balance? If you have a fixed-rate mortgage, a lump sum payment can reduce the home loan amount and the total interest paid on the loan by that much more. In a sense, paying down a debt is almost like getting a risk-free return.

Are you marrying next year, or do you know someone who is? The top of 2012 is a good time to review (and possibly change) beneficiaries to your 401(k) or 403(b) account, your IRA, your insurance policy and other assets. You may want to change beneficiaries in your will. It is also wise to take a look at your insurance coverage. If your last name is changing, you will need a new Social Security card. Lastly, assess your debts and the merits of your existing financial plans.

Are you returning from active duty? If so, go ahead and check the status of your credit, and the state of any tax and legal proceedings that might have been preempted by your orders. Review the status of your employee health insurance, and revoke any power of attorney you may have granted to another person.

Don’t delay – get it done. Talk with a qualified financial or tax professional today, so you can focus on being healthy and wealthy in the New Year.