A Success Story

Earlier this year I wrote a money tip about finding lost pensions.
About a month later my daughter asked me for her dad's expired passports. As I rummaged through old papers I found a letter from one of my late husband's former employers stating that because of his employment of so many years he would be entitled to a monthly pension at age 65.

This letter started a months-long quest for the missing pension. My thinking was to act on my own advice!

The quest began in March by searching for the company that bought the firm my husband had worked for more than 30 years ago. I kept hitting dead ends as there had been several company mergers. Finally I discovered the name and address of the present firm - very different from the original. Also, the company headquarters were in a foreign country!

I emailed the main office, and to my surprise, had a response within three days. Who was I? What did I want? Why did I wait so long?

After a few exchanges they asked for birth, death, and marriage certificates as well as social security numbers. Weeks passed. They eventually responded saying they had no record of my husband ever having been an employee of that company!! I insisted that he had and he was not just an employee but also a corporate officer, at one time the Financial Vice President. Still no records to be found. They then told me to request a Record of Earnings from the Social Security Administration.

The SSA required a form (found online) and a check to pay for the record. Four months later the earnings report arrived showing the years, company names and earnings for my late husband. It was a short walk down memory lane of our early years together.

In the meantime, to back up the earnings report, I found online the company's old annual reports existed on microfische at the 42nd Street Library. (Several of which he oversaw as corporate Treasurer.)

Bottom line - This past week the company agreed to pay me the survivor benefit of half the pension in lifetime, monthly payments.

By law, companies may not just ignore pension obligations and absorb pension money. They must make an effort to find former employees but they give up after mail is returned three times. It is up to us to pursue.

Be $ Smart - take the initiative to find a lost pension. You will reap the rewards.

Below is a link to the brochure issued by the Pension Benefit Guaranty Corporation to help you in your search. Pass it along to friends and family. Good luck!

https://www.pbgc.gov/documents/finding-a-lost-pension.pdf

Another Type of Diversification

Over the past few weeks we have talked about diversification within your portfolio. We use diversification to reduce potential risk. Another kind, tax diversification, occurs with the types of accounts in which you hold your assets and how withdrawals are taxed.

No matter how you make your money, Uncle Sam is waiting to take his share. You can structure withdrawals to be tax efficient and lower your tax burden. This is especially effective during retirement. For you to have income choices you must build these accounts prior to retirement, while you are young and in the "accumulation" phase of your life.

A well diversified portfolio will hold a mixture of assets - stocks, bonds, cash, real estate, precious metals, etc. Creating a tax-diverse portfolio means you hold assets in taxable, tax-deferred and tax-free accounts.

A trained advisor will scrutinize a retirement plan for tax efficiency. You want to minimize taxes by taking income from specific accounts.
Remember, money held in tax-deferred accounts (traditional IRA, 401k,etc.) is fully taxed as ordinary income on withdrawal paying both state and federal taxes.

If all your assets are tax-deferred, every withdrawal will count as income and could push you into a higher tax bracket. For example, say you need $60,000 a year for income, you must withdraw $72,000 to cover the 20% withholding. Add that to Social Security or pension income, you could bet bumped into the next tax bracket. But, if you could take $40,000 ($48,000 less 20%) from the IRA, $10,000 from your taxable account(paying some capital gains tax) and $10,000 from your Roth (tax-free), you maintain a lower taxable income.

Be $ Smart - build your savings in different types of accounts for tax efficiency.

Be sure to consult your tax advisor for specifics.

Third in a series - THE Important Conversation

As you may have guessed, the past two Tips were the primary steps in "putting your financial house in order." Be it your house, your parents' or a friend's, it all makes life easier when you are organized and can find important information quickly and in an emergency.

Other information to have readily available would be a
List of Professionals including their name, address and phone number:
Attorney
Accountant
Financial Advisor
Insurance Agent

A List of Investments including the name of the institution, account number, phone number and online access (User ID and PWD):
Brokerage accounts
Checking and Savings Accounts
Pension
IRA
401k or 403b
529 College Savings Plan
ESOP (employee stock ownership plan)

You may organize all this information in a 3-ring binder. Ideally, update it annually. Or you may buy a book with all the categories organized and separated for you. There are several offered by Amazon or any bookstore. e.g. Putting Things in Order or Get It Together: Organize Your Records so Your Family Won't Have To.

Be $ smart - put your financial house in order to give you quick and easy access as well as peace of mind.

"I'm a very smart person; why can't I understand this?"

Working for many years at TIAA-CREF, I heard this question multiple times. The clients I counseled were all academics, some world renowned.  These truly were very smart people at colleges and universities throughout New York and Connecticut (my territory at that time.)  They would preface our meeting with "I'm a very smart person,.. etc."  alerting me to the fact they were embarrassed at not being able to decipher their monthly statements. Money evokes heavy emotional reactions.  Some people cannot handle the basic needs of daily living, or spend uncontrolably because of the underlying emotions of money.  Others hold onto money tightly denying themselves pleasures money might bring because they feel they don't deserve it or hold fear of another "great depression".  Because personal finance and investing use a different language, we find it difficult to comprehend.  Financial service salespersons use this lack of understanding to their advantage.  They talk fast, they use technical terms, they make us feel as if we should understand in order to emphasize their importance.  As with anything else (doctors, car mechanics, appliance repair) we can submit or we can take the time to learn the terms, search the internet, ask many questions, and get a second opinion before we lay down our hard earned cash. You are a very smart person - it just takes time and a little effort. Allow me to teach you the "language of money".