Chapter 6

Budgeting and
Financial Planning
Overview
This chapter encourages you to set personal financial goals; plan financially for retirement; examine
your financial readiness for retirement; understand the importance of the budgeting process; use budget
worksheets; and understand the method of determining how much you need to save or invest to reach your
retirement goals.

BUDGETING & FINANCIAL PLANNING

In planning for retirement, the first question you probably should ask yourself is, "Can I afford to
retire?" The easy answer is, "Sure, anybody can." The realistic answer depends on how long you will be
retired and on what kind of lifestyle you want.

LIFE EXPECTANCY AND RETIREMENT

Before deciding that the answer is "Yes, I can afford to retire," it's important to think about how long
you need to plan for in retirement. None of us knows how long we will live. But, many people don't
realize their retirement could last 25 years or more. Table 1 is a Life Expectancy Chart to help you make
an educated estimate on the length of your retirement.

Table 1
LIFE EXPECTANCY CHART* Years Remaining at a Given Age

Age Male Female

55 25.50 28.81
60 21.58 24.56
65 17.89 20.45
70 14.39 16.54
75 11.14 12.92
80 8.28 9.68
85 5.89 6.95

*Source: Social Security Administration 2017 (latest version)

Self-Help Guide 6-1

 Individual circumstances can make a difference. How long you live is affected by your lifestyle,
economic status, state of health, and whether you keep physically fit. Genetic factors, race, and family
history can also make a difference.

Planning for retirement means planning for age 85 as well as age 65. In our society people are living
longer. Keep this in mind when you think about your finances as well as leisure, housing, and other
aspects of your plan.

FINANCIAL GOALS

When making decisions about your retirement expenses, you need to figure out what you are going to
do in retirement and how you plan to live. Have you taken some of those necessary self-assessment steps
and set some goals? Have you outlined activities and figured out what you are going to do with your
time? Next, it's important to list those personal goals in dollar terms.

Most people who retire want to be able to live the same way they did before retirement. If you
don't do some financial planning, it is hard to know if that’s possible, or if you will need to make some
changes in your lifestyle.

PLAN FOR WHAT YOU NEED

For most people, it is unrealistic to plan for income equal to what they earned the year before
retirement. Few people have the financial resources to replace their salaries. Depending on your income,
you should be able to keep your standard of living in retirement with an income between 60 percent and
80 percent of your former pre-tax earnings. This is a concept called "Equivalent Retirement Income." The
higher your pre-retirement income, the smaller the percentage you will need, mostly because of lower
taxes in retirement. If in retirement your income is lower, then your tax liability should also drop.

A rule of thumb to follow is that if your gross earnings are $50,999 to $70,000 a year, you should aim
for an equivalent retirement income of 60 percent, while someone grossing $20,000 to $30,000 ought to
aim for 80 percent. Seventy-five percent of your current salary is often used as a guide to determine
retirement income needs.

There are some other changes in expenses you can look forward to in retirement. You should not
have any work-related expenses, which can account for 5 percent of a person's budget. See the worksheet
"How Much Does It Cost You to Go to Work?" to figure out what your savings might be. Unless you
work, you won't owe Social Security payroll taxes anymore. Your housing costs will go down also as
your mortgage, if you have one, is paid off. Look carefully at your life insurance coverage and see if you
can cut back if you have children who are grown. Perhaps you are over-insured, and you can cash in a
policy and buy an annuity to add to your monthly retirement income. Don't overlook the many off-peak
time and senior citizen discounts available. If you are no longer working full-time, you'll have chances to
take advantage of travel and entertainment discounts offered. The qualifying age can range from 55 to 65.
Don't be shy about asking for an age-related discount. The money you save will be your own.

PLANNING YOUR FINANCIAL INDEPENDENCE FOR TOMORROW

Many of us look forward to retirement because of the freedom from work it can give us. But to enjoy
that freedom to its fullest, you need financial security. That requires financial planning.

Self-Help Guide 6-2

WHEN TO RETIRE

When you retire depends on two things: 1) when you want to stop working regularly, and 2) when
you can afford to stop working.

The second question is not simple. But, there are a series of action steps you can take one at a time to
eliminate some of the guesswork. As part of your financial planning, you should build a good base
including:

• An emergency fund of three to six months of your current take-home pay

• Protection in the form of life, health, and property insurance;
• Knowledge of what you’ll receive in retirement income (estimates can be requested for pensions
and Social Security); and
• Home ownership with some equity.

INCOME NEEDED

The most common concern of future retirees is “How much income will I need to maintain my
lifestyle after I retire?” After you decide how you want to live in retirement, you’ll need to figure out
how much money you’ll need.

An important step in planning for financial independence in retirement is to take a look at where
you stand financially. The best way to do this is by preparing a personal balance sheet, or net worth
statement. Net worth is the total value of everything you own – your assets – and all that you owe –
your liabilities. A sample Net Worth Sheet, and other worksheets are included for you at the end of this
chapter. Your completed statement will show you if you have sufficient financial resources to keep up
the retirement lifestyle you want. If you don’t, you can use the statement to help you plan extra savings
and/or investments to meet future needs.

When you add up your net worth, you may be pleasantly surprised at the value of your assets.
However, not all assets can be used as retirement income. For example, assets such as a car and home
furnishings cannot be considered a possible source of retirement income.

A house or other property is an asset which could be used for future income. It is important your
net worth statement show the amount of your assets available for retirement income.

As you fill in the asset side of the form, be sure to use actual market value or the amount you
would receive if you sold that item.

BUDGETING PROCESS

When thinking about your financial readiness for retirement, it’s best not to make it a guessing
game. Part of your process should include planning a household budget. The word “budgeting” may
sound as unpleasant as “dieting” to some. Most of us live on a cash flow system from paycheck to
paycheck, not keeping track of where the money goes. It may be challenging to create a budget, but the
result will be worthwhile.

Self-Help Guide 6-3

 To prepare for your retirement years, you must know and be in control of your monthly
expenses. You must know whether you can meet these expenses on your retirement income or
whether you must put more money in the bank right now.

The first step in budgeting is to determine your total current income. In addition to salary or
wages of family members, include interest or dividends from savings and investments, and any other
income such as that from rental property.

Now, you need to figure out where your money goes. Therefore, you need to determine your
current expenses. Worksheet 1, “Estimated Monthly Cost of Living,” will help you do this on a
monthly basis. A good time to complete this step is when you’re figuring out your income taxes and
have all your financial records on hand. Major monthly expenses such as housing, utilities, and
installment payments are easy to track. However, what about those unrecorded out-of-pocket
expenses? Before you get started, it might be a good idea to begin saving receipts and marking
down all cash spent. Do this for a month or two. Look at your spending and see if there are patterns.
The only way to know where to cut back on expenses is to know exactly where all your money is
going.

You will notice there are two columns in Worksheet 1. The first one is for you to calculate your
current monthly expenses. The second is for you to forecast as if you were retired. Don't deal with
future dollars just yet. Think ahead to the retirement goals you are setting and assign a cost to them.
If you were to retire tomorrow or next week, how would things change? Would you be moving and
making changes in your housing costs? How about transportation? Perhaps these expenses will go
down if you are no longer going back and forth to work or paying for parking. Food costs can go
down if you have more time at home to cook and use fewer expensive convenience foods. Clothing
expenses may change if you no longer have to dress for work. Medical expenses, however, may go
up as health insurance rates increase. Some long-term care costs are not paid for by Medicare or
state health insurance. You will need to pay for these out of your budget or through private policies
(See pages later in this section for information on Long-Term Care Insurance). Your recreation costs
may increase depending on what you do with your leisure time. So, the second column involves an
important step in the budgeting process, preparing a preliminary retirement budget.

There are no right or wrong amounts of money to spend on these categories. You should set up
your spending on a pattern that shows what is important to you and will allow you to meet your
goals.

Now fill out Worksheet 2, Estimated Annual Cost of Living, by using your monthly figures in
the After-Retirement column on Worksheet 1. Add them up by category, multiply each by 12 and
round off to the nearest hundred. Write these figures in the first column.

Unfortunately, these expenses will not stay the same from now until you retire, or during your
retirement. The expenses on these two worksheets are based on today's prices. We all know that a
dollar today may not be worth as much 10 or 20 years from now. This leads us to the next step in
the budgeting process which is to adjust for cost of living increases.

Self-Help Guide 6-4

 To estimate your income needs at retirement, you need to predict what inflation will be. To do
this, you need to determine when you'll retire and how long you may expect to live. Worksheet 3,
Inflation Factors, can be used to estimate the inflation adjustment you need to make.

You can estimate future budget needs by using one inflation rate to adjust your total expenses
for five years into the future, and another rate for 10 to 15 years.

The impact of inflation cannot be ignored. While Social Security benefits are currently tied to
inflation rates, New York State retirement allowances are not, and do not go up unless the Legislature
passes a specific law providing an increase. Inflation can seriously lower the purchasing power of a
fixed income. The key is to plan for retirement income with inflation in mind. If your savings interest
rates can beat inflation over the long run, you are ahead of the game.

As inflation goes up, so do interest rates and vice versa. Basically, your savings should earn
enough interest at least to keep their buying power. For example, if it will take $1,100 two years from
now to buy what $1,000 buys today; your investment should earn a rate of return that will give you $100
in interest over two years.

SOURCES OF RETIREMENT INCOME

To complete the steps in the budgeting process, you need to project sources and amounts of your
retirement income. There are basically four sources of retirement income for retired New York State
employees: Employee’s Retirement System’s retirement allowance (your pension), Social Security
benefits, personal savings and investments, and earnings from post-retirement work. Each will be
discussed in this Guide in more detail.
On Worksheet 4, Estimated Annual Income After Retirement, record the amounts of your
retirement income from various sources. You can ask for benefit estimates from the New York State
and Local Employees’ Retirement System ( www.osc.state.ny.us/retire/) and Social Security
(www.ssa.gov) if you haven’t already done so. Compare these figures to the annual expenses you
estimated on Worksheet 2.
This completes the process of pulling together your financial profile or budget. It should help you
to see whether you have spending or income gaps. If there are gaps, you can look at your savings and
investment plans for solutions.

SAVINGS TIPS

If you do not have a savings program, it’s never too late to start. Don’t forget about the magic of
interest over a longer period. Table 2 can help you figure how much to save monthly at a given interest
rate so you will have money ready when you want it.
If you feel you need to cut back on expenses and put more money away for your retirement nest
egg, you may want to take advantage of payroll deduction plans available to you as a New York State
employee. You can arrange to have a set amount deducted from your pay and deposited to the Credit
Union or Deferred Compensation Plan or used to buy U.S. Savings Bonds.

Self-Help Guide 6-5

 Table 2 -Monthly Savings to Reach a Goal
Years to Achieve Goal
Total $ Needed 3 5 10 15 20
At 6% Rate of Return
$ 5,000 $120 $ 74 $ 31 $ 17 $ 11
10,000 240 149 63 36 23
15,000 360 223 96 54 34
20,000 480 297 126 72 45
At 9% Rate of Return
$ 5,000 $115 $ 66 $ 26 $ 13 $ 7
10,000 230 132 51 26 15
15,000 345 197 77 39 22
20,000 460 263 102 52 30
At 12% Rate of Return
$ 5,000 $110 $ 60 $ 21 $ 10 $ 5
10,000 220 121 43 20 10
15,000 330 182 64 30 15
20,000 440 242 86 40 20

DEFERRED COMPENSATION PLAN

By joining the Deferred Compensation Plan, you can benefit from saving before-tax dollars. You
pay no federal or state income taxes on your contribution, or on interest earned, until you withdraw
money during retirement.

Additional features of the Deferred Compensation Plan such as the “catch-up” provision,
investment option specifics, fees, and other detailed information can be found in Chapter 8 of this
Guide. You may contact a representative by calling toll free at 1-800-422-8463.

Self-Help Guide 6-6

 Table 3 - How Long Will Your Money Last?

This chart shows how long your money will last if you withdraw a fixed amount each year. An * means it will last
indefinitely at that rate.

% of capital Years money will last if invested at these rates:

5% 6% 7% 8% 9% 10% 11% 12%

8% 21 24 31 * * * * *

10% 15 16 18 21 27 * * *

12% 11 12 13 15 17 19 24 *

14% 10 10 11 12 12 14 15 18

16% 8 9 9 10 10 11 12 13

18% 7 7 8 8 9 9 10 10

20% 6 7 7 7 7 8 8 9

SAVINGS ROUTINES THAT WORK

• Pay yourself first. Make savings part of your fixed expenses in your budget, much like your rent,
mortgage, or utility payment.
• Save windfall income. Try to save tax refunds, bonuses, overtime pay, gift money, refunds, rebates,
and money saved by using cents-off coupons.
• Pay installments to yourself. After you pay off an installment debt (car loan, furniture or appliance
loan, etc.) continue to budget the loan payment, but put it in your savings account.
• Collect loose change. Every week (or more often) empty out your pocket or wallet and put the
change in a savings jar. Every other week or once a month deposit the change in your savings
account.
• Try frugality. Eliminate or cut back on something and put the money you don't spend in your
savings.
• Break a habit. Every time you don't buy a bagel on break, or you don't spend money in the
vending machine, save the money you didn't spend.
• How long will my resources last? In these first steps figuring your assets and projected income
requirements, the question heard most is "How long will my money last?" Many retirees fear
outliving their savings. The chart in Table 3 may help in figuring how long your money will last if
you start drawing it out.

Self-Help Guide 6-7

WILL MY ASSETS PRODUCE THE REQUIRED INCOME?

The action question becomes "What must I do with my finances to make my retirement a reality?”
The further you are from retirement, the less exact is the process, but you can start by looking over your
assets (from your net worth sheet) and change your planning as you go. You may have saved or
invested in the past. For future planning though, a clear distinction must be made between savings and
investments. With savings, the first deposit (often all capital) stays the same and earns either fixed or
variable interest. Some credit unions refer to the interest on savings as dividends.

On the other hand, the first capital of investments can go up or down in value and may or may not
pay interest or dividends depending on current type, and on the economic and market condition.

Look carefully at the pyramid shown in Figure 1 as your guide for a good financial plan. Assets in
Level 1 are used for meeting daily expenses and those in Level 2 can be used to give you a regular
source of income. If you have assets in Level 3 or 4, you could be in greater danger of losing capital.

FIGURE 1 – DISTRIBUTION OF RETIREMENT ASSETS

LEVEL 4
Risk

Growth
LEVEL 3 Future Income
Assets

Income Producing
LEVEL 2 Assets

Cash or
LEVEL 1 Easy to Convert to Cash

Place your own assets on the pyramid to figure your present use of savings or investments. A
checklist follows of the assets making up the four levels of the pyramid, and general statements on
income tax results.

Self-Help Guide 6-8

Level 1 Level 3
Cash or Easy to Convert Cash Growth Assets
Amount Amount

$ Savings and Checking Accounts $ Real Estate Limited Partnership

Credit Union Growth Stock

Money Market Accounts Growth Mutual Funds

Certificates of Deposit Real Estate Investment Trusts

Government Securities (savings Other

bonds, treasury bills, notes and
bonds) $ Total

Life Insurance (with cash value) Growth in value can be reinvested and deferred
until earnings are taken. Interest, rent, and
Other dividends are currently taxable each year. Real
estate limited partnerships allow individuals
$ Total depreciation for tax purposes.

Interest on these assets is taxable each year

with the exception of interest on savings bonds
and life insurance which is deferred until
earnings are taken. Level 4
High Risk Assets
Level 2 Amount
Income Producing Assets
Amount $ Commodities Futures

$ Investment Real Estate Speculative Stocks

Low Grade Bonds

High Grade Corporate and
Municipal Bonds Collectibles

Government National Mortgage $ Total

Association (Ginnie Mae)
Growth in value can be reinvested and deferred
Income Mutual Funds until earnings are taken. Interest, rent, and
dividends are currently taxable each year.
Blue Chip and Preferred Stocks

Other

$ Total
Self-Help Guide 6-9
TWO OTHER ASSETS NOT LISTED ARE:

1. Individual Retirement Account (IRA): A retirement option which could use any of the above
categories for saving or investment. In 2021, if you are covered by a qualified pension plan
(including New York State Systems), an IRA contribution still can be made if your salary is under
$65,000 and you’re single, or under $104,000 if you’re married. Over these income amounts, the
contribution deduction is pro-rated. The remaining tax advantage is that the interest and dividends,
etc., can defer tax until capital is received.
Note: Contributions for IRA’s are subject to change in the coming years and should be
checked with financial institutions.
2. Owning Your Home: This investment gives service - a free place to live - rather than earnings.
However, a home as an asset can be used, if necessary. It can be sold to gain money to invest; used
as collateral for a loan to gain money to invest; used to apply for a reverse mortgage that allows a
bank to make monthly payments to the owner in exchange for future ownership of the property.

As you look over your assets in the pyramid, two important questions about your retirement planning
are: Which of these assets are available for your retirement income? Are the assets going up in value to
give good working capital in the future?

SHOULD I BE INVESTING?
After you have figured how much you have, the next question is where to put those assets. The
following conditions will probably have an impact on your decision.

Time is a very steady worker and you can use it to help increase your income. You have worked for
your money and now your money should work for you. How long you keep it invested is an important
factor. Table 4 shows the difference that time can make.

Inflation has already been discussed. Fixed rate savings by themselves cannot fight purchasing
power that's going down. Your financial plan should be carefully balanced with some growth-oriented
assets to give steady income that can grow to cover inflation.

You should not depend on any one source to provide all the income you will need during your
retirement years. The more your income sources are diversified, or spread among different kinds of
investments, the better your protection against inflation, the ups and down of the investment markets,
and the legislative and regulatory changes affecting your pension and Social Security.

Table 4
Value of $1,000 investment for Specified Number of Years at Various Rates of Return
Annual Net Rate of Return Number of Years $1,000 is Invested
(Compounded)

5 8 10 12
4% $1,217 $1,369 $1,480 $1,601
6% 1,338 1,594 1,791 2,012
8% 1,469 1,851 2,159 2,518
10% 1,611 2,144 2,594 3,138

Self-Help Guide 6-10

 How Much Does It Cost You to Go to Work?
I spend the following amounts each year on these work expenses:

1. Lunches $ 10. Picking up the tab

(The times you say
2. Coffee breaks $ "This one's on me.") $

3. Transportation $ 11. Impulse buying

(When you pass shops on
4. Union dues $ your way home, or to work,
or during lunch hour, how
5. "Salary" taxes and often do you buy
deductions $ something you really
don't need?) $
6. Work clothing or
uniforms 12. Home repairs (How
(This is only the beginning. much do you spend
You know of many other on work you could
office and work expenses – do yourself if
they add up. Now find out you had time?) $
these "hidden"
expenses.) $ 13. Personal grooming
(How much extra does
7. Collections it cost you to look
(When a fellow worker good five days a
gets engaged, married, has week?) $
a baby, gets a pro- motion,
gets sick, gets well, 14. Domestic help (When
celebrates a birthday, your job pre- vents you
retires - isn't someone from doing all the
always taking a laundry and
collection?) $ housework yourself.) $

8. Laundry and dry 15. Shopping

cleaning $ (You may lack time to
comparison shop and take
9. Holidays advantage of sales and
(Cards and gifts for specials, so your outlay for
fellow workers) $ food, clothes, and household
products are higher. How
much higher?) $

Self-Help Guide 6-11

 Net Worth Sheet
Assets Liabilities
What You Own What You Owe

Cash: Current Bills:

Cash on hand $ Rent $
Checking accounts Utilities
Savings accounts Charge accounts
Money-market funds Credit cards
Life insurance cash value Insurance premiums
Money owed you Alimony
Child support
Marketable Securities: Other bills
Stocks
Bonds Taxes:
Government securities Federal
Mutual funds State
Other investments Local
Taxes on investments
Personal Property: Other
Automobiles
Household furnishings Mortgages:
Art, antiques, other collectibles Homes
Clothing, furs Other properties
Jewelry
Other possessions Debts to Individual Loans:
Auto
Real Estate: Education
Homes Improvement
Other properties Life insurance
Other
Pension:
Vested portion of company plan
Vested benefits
IRA
Keogh

Long-term assets:
Equity in business
Life insurance
Annuities

Total Assets: $ Total Liabilities: $

Total Assets minus Total Liabilities equals Net Worth $______________

Date____________

Self-Help Guide 6-12

 Worksheet 1
Estimated Monthly Cost of Living
Monthly Average Shelter Now After Retirement
Rent $ $
Mortgage payments $ $
Real estate taxes $ $
Insurance $ $

Household Expenses and Maintenance

House repair, yard care $ $
Water, electric, gas, fuel oil $ $
Cell phone, $ $
Waste, disposal, other $ $
TV, cable, Internet $ $

Home Improvement and Upkeep

Furniture, fixtures $ $
Floor coverings $ $
Laundry supplies, equipment $ $
Kitchen equipment $ $
Garden, yard equipment, supplies $ $

Auto and Transport

Monthly portion of purchase price $ $
Repairs $ $
Gas and oil $ $
License and driver registration $ $
Insurance $ $
$ $
Other transportation

Food
Food at home $ $
Food away from home $ $
Liquor and food for entertaining $ $

Clothing
New clothing for all in household $ $
Laundry not done at home $ $
Dry cleaning $ $
Shoe repair $ $

Self-Help Guide 6-13

 Monthly Average
Now After Retirement

Cosmetics and toiletries $ $

Barber and beauty shop $ $
Stationery, postage $ $

Medical and Health

Medicine and drugs $ $
Doctor, dentist, eye specialist $ $
Eyeglasses, hearing aides $ $
Health insurance premiums $ $

Recreation and Other

Books, newspapers, magazines $ $
Club memberships, dues $ $
Movies, sports events, concerts $ $
Sports and hobby equipment, supplies $ $
Vacations, celebrations, weekend trips $ $
Adult continuing education $ $
Pets: cost, food, license $ $
Contributions $ $
Gifts $ $

Taxes, Interest, Insurance

U.S., State and local income tax $ $
Personal property tax $ $
Interest on loans $ $
Life insurance premiums $ $
Property insurance (not house) $ $

Savings, Investments
Banks, savings, and loan $ $
Company pension, profit sharing plans $ $
Stocks, bonds, real estate $ $
Retirement: Keogh, IRA Deferred Compensation $ $

Total Monthly Costs Now $

Total Monthly Costs After Retirement $

Self-Help Guide 6-14

 Worksheet 2
Estimated Annual Cost of Living
Now multiply by 12 the totals of monthly cost after retirement (Worksheet 1) to get your annual cost of
living if you were retired.

Totals, if you
were retired
now (Round off Inflation Your
to even hundreds) Factor Budget

Shelter $ $

Household expenses and maintenance $ $

Home improvement and upkeep $ $

Automobile and upkeep $ $

Food $ $

Clothing $ $

Personal $ $

Medical and health $ $

Recreation and other $ $

Taxes, interest, insurance $ $

Savings, investments $ $

Any future irregular expense (new roof, $ $

new car, new furnace)

Total $ $ ________

Worksheets 1, 2, 3 & 4 from CEH Topics, Dept. of Consumer Economics and Housing, NYS College
of Human Ecology, Cornell University, Ithaca, NY 14853

Self-Help Guide 6-15

 Worksheet 3 Inflation
Factors
1. Choose from the left-hand column the number of years into the future you want to project.

2. Choose a rate of inflation from the top row. This cannot be predicted accurately and will vary from
year to year.

3. Find the appropriate inflation factor that matches your assumed inflation rate and years into the future.
For example, 5 years and 4 percent inflation yields a factor of 1.2.

4. Write this factor in the second column Inflation Factor on Worksheet 2, under "Total." Multiply your
total estimated retirement expenses by the inflation factor to get your inflated retirement expenses.
For example: $18,000 X 1.2 = $21,600

YEARS PERCENT RATE OF INFLATION

3% 4% 5% 6% 7% 8% 10% 12%
2 1.1 1.1 1.1 1.1 1.1 1.2 1.2 1.3
3 1.1 1.1 1.2 1.2 1.2 1.3 1.3 1.4
4 1.1 1.2 1.2 1.3 1.3 1.4 1.5 1.6
5 1.2 1.2 1.3 1.3 1.4 1.5 1.6 1.8
8 1.3 1.4 1.5 1.6 1.7 1.9 2.1 2.5
10 1.3 1.5 1.6 1.8 2.0 2.2 2.6 3.1
12 1.4 1.6 1.8 2.0 2.3 2.5 3.1 3.9
15 1.5 1.8 2.1 2.4 2.8 3.2 4.2 5.5
18 1.7 2.0 2.4 2.9 3.4 4.0 5.6 7.7
20 1.8 2.2 2.6 3.2 3.9 4.6 6.7 9.6
25 2.1 2.5 3.4 4.3 5.2 6.8 10.8 17.0

Self-Help Guide 6-16

 Worksheet 4
Estimated Annual Income After Retirement

1. Social Security 4. Earnings

Man's at age $ Salary, wages $

Woman's at age ________ Commissions, royalties, fees

2. Pensions and Employer Benefits Partnership income

Company $ 5. Assets which could be

liquidated Profits would then be
State or Federal government invested in interest/dividend earning
instruments. Interest then becomes
Veteran’s part of income. Alternatively, a
portion of the principal could be
Union or other spent per year.

Profit-sharing Real estate $

Deferred pay Mutual funds

Other Stocks

Bonds
3. Savings and Investments
Antiques, collectibles
IRA $
Farm/business
Keogh
Anticipated gifts or inheritance
Savings account (interest)
TOTAL for 1 to 5 $
Money market (interest)
6. Possible deductions from income
Treasury securities (interest)
Federal income tax
Mutual funds (dividends,
capital gains) State/city income tax

Stocks (dividends) Social security tax

Bonds (interest) TOTAL for 1-6 $

Real estate (rent)

Total Net Income $
Farm/business rent or (1 to 5 minus 6)
installment payments (1 to 5 minus 6)

Home equity conversion

Annuities

Other

Self-Help Guide 6-17

IS LONG-TERM CARE INSURANCE FOR YOU?

This question should be addressed by employees as they plan for the possibility of a long-term
stay in a nursing home, assisted living facility, or extended home care. Medicare does not pay for
custodial care and many people who can’t afford the cost will have to resort to spending down their
assets. Each state has different requirements for spend down so before making any spend down
plans, consult with an elder law attorney. If one spouse is in a nursing home, however, Medicaid
allows the other to keep much more in monthly income and assets. Check with your attorney. To
protect your assets, you could obtain Long-Term Care (LTC) insurance that will partially or fully
reimburse you for the cost of such care. Is the purchase of such insurance worth it for you? Here
are some guidelines to make the right choice for your situation.

Do you have enough assets to protect to make the cost of the insurance worth it and do you
have enough income to pay the cost of the insurance indefinitely without impacting your lifestyle?
More importantly, do you have someone or an organization you would like to leave these assets to
upon your death?

The second question is the easy part. If you have no need to pass on assets, it’s probably safe
to pass up the insurance and pay the cost of LTC out of your income and savings. After these are
depleted, you can go on Medicaid. If you have assets you would like to pass on to others, how
valuable should the assets be before you consider insurance? Experts are not in
agreement on this issue but we can provide some guidelines.

First add up your assets that would be used to pay for LTC. These would include bank
accounts, CDs, stocks, and bonds, mutual funds, market value of real estate (except your home),
insurance policies (with cash value) IRAs, deferred compensation accounts, and valuable personal
property. Then take the monthly cost of a nursing home and (the statewide monthly average for a
shared room in a nursing home in 2021 is $382.00 per day *) add to this monthly cost any other
costs for support of a spouse or maintenance of a home, less your expected monthly income from
all sources. This result will be the monthly amount you will have to pay from your assets. Then
divide this amount into the total assets available. You will then know how long your assets will pay
for a nursing home stay. If you have enough assets to last more than 29 months, you may wish to
self-insure. If you have less than 10 months of assets, don’t bother with the insurance, there are
other ways to transfer the assets to your heirs. In this situation, rely on Medicaid to pay for your
long-term care.

Everyone’s financial situation is unique, and experts do not always agree on the best way to
determine if LTC insurance is worthwhile. However, financial experts have several ways of
determining if you should consider LTC insurance. One guideline is not to pay more than 5% of
your yearly income for the insurance or 1% of the value of your assets. Another is to total your
assets without counting the value of your house. If this does not exceed $100,000, it’s probably not
worth purchasing insurance.

To obtain information about protecting your assets, talk to your financial planner, elder law
attorney, or county Office for the Aging before making a decision. Be advised some of these
experts may be biased toward solutions that will result in them earning money over and above any
consulting fee. Veterans should contact the V.A. concerning LTC benefits.

Self-Help Guide 6-18

 So, you must weigh the cost of LTC insurance against the value of the assets you wish to
protect and the chance you will require a long stay in a nursing home, assisted living facility, or
extensive home care. One way to evaluate this is to review your health status and your family
history. Have you or your parents or siblings experienced the types of afflictions that lead to the
need for long-term care? Some of these conditions are arthritis, Alzheimer’s disease, stroke,
dementia, Parkinson’s disease, diabetes, and obesity.

(The information above has been adapted/updated from the article on Long-Term Care by Tom Lally from
the Retired Public Employees Association, Inc. (RPEA Newsletter., Vol. 34, Issue 4 November 2010)

*(Data taken from the American Council on Aging)

Self-Help Guide 6-19

 RETIREMENT CHECKLIST
Budgeting & Financial Planning
As you approach retirement it is useful to determine what you know, what you've done, and what
you still need to find out or do.
Read each of the questions below and circle your answer, “Yes or No.” Next, for each “No”
answer you gave, write down a few words in the space "I need to..." that will help you find the answers.
You may want to use the same space to record other personal questions about this topic.

1. Do I figure out my net worth annually? YES NO

I need to…

2. Have I figured out my current income and expenses to YES NO

work out a budget?
I need to…

3. Have I tried to figure out what my living expenses will be YES NO

after retirement?
I need to…

4. Is my spouse/partner familiar with our financial situation? YES NO

I need to…

5. Will I try to live on my projected retirement income to see how I YES NO

can keep my standard of living?
I need to…

6. Have I reviewed my insurance policies to see whether they fit my YES NO

current and future needs?
I need to…

7. Do I understand the various methods available to make my money YES NO

earn more?

I need to…

8. Do I understand how long-term care insurance could protect my YES NO

assets?
I need to…

Self-Help Guide 6-20

RESOURCES
Budgeting and Financial Planning
WEBSITES:

Q&A session on durable powers of attorney Glover, Ryan, CFP., Preparing for
and revocable living trusts. From the Family Retirement: A Comprehensive Guide to
Caregiver Alliance. Financial Planning, (1st edition), Tarheel
www.caregiver.org Advisors LLC, 2013.

The American Savings Education Council web Hinden, Stan, How to Retire Happy:
site features “Saving Tools” with a variety of Everything You Need to Know About the
worksheets to help with retirement planning 12 Most Important Decisions You Must
and saving.www.choosetosave.org/asec/ Make Before You Retire,
McGraw-Hill Co., Dec. 2013.
Making a Living Trust: Can You Do It
Yourself? https://www.nolo.com/legal- Ramsey, Dave, The Total Money Makeover,
encyclopedia/making-living-trust-yourself- Nelson Books, 2013.
29736.html

Find FAQs on wills and estate planning issues, OTHER RESOURCES:

read overviews of living trusts and probate, and
peruse news updates on related issues. For information on the NYS Deferred
https://www.nolo.com/legal-encyclopedia/new- Compensation Plan, contact them at the
york-estate-planning number below or refer to Chapter 8 in this
Guide.
PUBLICATIONS:
NYS Deferred Compensation Plan
Alford, Ted, Charting an Early Retirement: 1520 Crescent Road
Simple Planning & Investing Strategies, Clifton Park, NY 12065
Retirement Planning Press, 2017. 1-800-422-8463
www.nysdcp.com
Bryant Quinn, Jane
How to Make Your Money Last: The
Indispensable Retirement Guide, Simon and
Shuster, January 2017.

Clifford, Denis, Plan Your Estate, (14th

edition), Quicken WillMaker, 2018.

FC&A, Sitting Pretty On a Fixed Income,

Personal Finance for Seniors, FC&A
Publishing, 2016.

Gitman, Lawrence J., Personal Financial

Planning, South-Western Thomson
Learning, January 2013.

Self-Help Guide 6-21

 WHAT YOU SHOULD KNOW
ABOUT FINANCIAL PLANNERS
New York State Department of Law

Whether saving for the purchase of a home, the future educational needs of children, or for
retirement, more and more Americans are consulting financial planners in order to realize their
financial goals. It’s estimated that well over 10 million Americans consult financial planners today
and that 400,000 firms and individuals now claim to offer financial planning services in the United
States.

New York State does have an “investment advisor” law which provides that those giving
securities investment advice for compensation – in other words those advising clients which
securities they should buy, sell, or hold – register with the Attorney General. Information
concerning the “advisor’s” background, experience, and how securities are recommended to clients
is on file with the Attorney General’s office. These people must also register with the Securities
and Exchange Commission (SEC). While some people calling themselves “financial planners” do
register under this law, many do not.

Under New York State’s Martin Act, the Attorney General has the power to regulate and
prohibit fraud in the offer and sale of securities and commodities within New York State and
originating from the State, and to put fraudulent financial planners out of business.

BE INFORMED
When considering a financial planner, the best defense against fraud and mismanagement is
education. Know answers to the following questions:

What is a financial planner?

A financial planner is someone trained to design short-or long-term financial strategies for
clients including plans for taxes, retirement, savings, tuition, estates, family budgets, and, often,
investments. Financial planners may come from diverse backgrounds and include accountants,
lawyers, insurance brokers, bankers, and securities brokers. Several colleges now offer accredited
training in the financial planning field, requiring the completion of a course on investment planning
and leading to a title of Certified Financial Planner (CFP) or a degree as a Chartered Financial
Consultant (ChFC). Several trade associations keep lists of those who have completed such
courses.

Self-Help Guide 6-22

How do I know whether I need a financial planner?

You may wish to hire a financial planner if you have doubts about your own ability to make
financial decisions, manage debt, or plan for your short-or long-term goals such as retirement or
education costs.

How do I choose a financial planner?

In simple terms, choose a financial planner the way you would choose a doctor, a lawyer, or any
other professional specialist. Get recommendations from friends or other professional advisers you
use. Then ask the financial planner these questions:

• What is the financial planner’s training and how long has the individual been working in the
community? Beware of planners who operate out of small offices with post office box addresses.
They may be fly-by-night operators running “boiler rooms” or Ponzi schemes—-paying one
investor with the investment money of another.

• Will the planner provide you with references of three or more clients counseled for at least 2
years? A relatively new customer may be able to offer glowing recommendations but may not
have been with the planner long enough to offer a balanced assessment of the planner’s
performance.
• If the planner will be giving you investment advice, will the planner provide a sample investment
plan for someone like you? Will you be provided with a written plan stating an investment
strategy for you, and will the planner review the plan with you on a regular basis? If not, the
planner may be investing your money in ways more beneficial to the planner’s financial interest
than to yours, and the plan may be the same for everybody, regardless of individual needs.

• If the planner offers investment advice, is he or she (or their firm) registered with the Attorney
General and the United States Securities and Exchange Commission as an investment advisor.
Obtain a copy of the planner/advisor’s “ADV” filing. Most important, how does the financial
planner charge for services? Does the planner receive hourly or flat fees, or does the planner
make money from commissions on the sale of investment products, stocks, bonds, commodities,
art, coins, real estate, etc.? Many investors incorrectly assume financial planners are offering
objective investment advice. You should know whether or not your financial planner will be
making money from commissions on investments you make.

Self-Help Guide 6-23

FOR MORE INFORMATION
If you have questions about a financial planner or investment advisor, including details of any
background information or enforcement actions relating to the advisor, please contact the Investor
Bureau and Securities Bureau of the Attorney General (see listing last page). For additional
information, you may also contact your local Better Business Bureau.

Other Resources:
American College of Financial Services Financial Planning Association of
270 S. Bryn Mawr Avenue Central NY
Bryn Mawr, Pennsylvania 19010 209 Second St
888-263-7265 Liverpool, NY 13088
http://www.theamericancollege.edu/ 315-513-8901
http://www.fpacny.org/
Certified Financial Planner Board of
Standards, Inc. Financial Planning Association of
1425 K Street NW #800 Northeastern NY
Washington, DC 20005 P.O. Box 11565
800-487-1497 Loudonville, NY 12211-0565
www.cfp.net 518-458-7774
https://www.fpa-neny.org/
Financial Planning Association
7535 E Hampden Avenue, Ste. 600 The National Association of
Denver, CO 80231 Personal Financial Advisors
800-322-4237 8700 W. Bryn Mawr Avenue, Ste. 700N
www.plannersearch.org Chicago, IL 60631
888-333-6659
Financial Planning Association of https://www.napfa.org/
Metro NY
535 Fifth Avenue, 4th Floor U.S. Securities and Exchange Commission
New York, NY 10017 Office of Investor Education & Advocacy
800-322-4237 ext. 7187 100 F Street, NE
https://www.financialplanningassociation. Washington, DC 20549
org/chapter/fpa-metro-new-york 800-732-0330
https://www.sec.gov/investor

Self-Help Guide 6-24

 OFFICE OF THE ATTORNEY GENERAL
INFORMATION & COMPLAINT LINE:
1-800-771-7755
www.ag.ny.gov

EXECUTIVE OFFICES
The Capitol
Albany, New York 12224-0341 ----------------------------------------------------------------------------------- 518-776-2000

New York City Office

28 Liberty Street
New York, New York 10271-0332 ------------------------------------------------------------------------------- 212-416-8000

REGIONAL OFFICES
44 Hawley Street, 17th Floor
Binghamton, New York 13901-4433------------------------------------------------------------------------------- 607-251-2764

55 Hanson Place, Suite 1080

Brooklyn, New York 11217-1523 -------------------------------------------------------------------------------- 718-560-2040

Main Place Tower, Suite 300A, 350 Main Street

Buffalo, New York 14202-3473 ---------------------------------------------------------------------------------- 716-853-8400

300 Motor Parkway, Suite 230

Hauppauge, New York 11788 ------------------------------------------------------------------------------------- 631-231-2424

200 Old Country Road, Ste. 240

Mineola, New York 11501-4241----------------------------------------------------------------------------------- 516-248-3302

163 West 125th Street, Suite 1324

New York, New York 10027-8201 -------------------------------------------------------------------------------- 212-364-6010

43 Durkee Street, Suite 700

Plattsburgh, New York 12901-2818 -------------------------------------------------------------------------------- 518-562-3288

One Civic Center Plaza, Suite 401

Poughkeepsie, New York 12601-3157----------------------------------------------------------------------------- 845-485-3900

144 Exchange Boulevard

Rochester, New York 14614-2176---------------------------------------------------------------------------------- 585-546-7430

615 Erie Boulevard W. Suite 102

Syracuse, New York 13204 ------------------------------------------------------------------------------------------ 315-448-4800

207 Genesee Street, Room 508

Utica, New York 13501-2812 ------------------------------------------------------------------------------------- 315-864-2000

Dulles State Office Building 317

Washington Street
Watertown, New York 13601-3744 ------------------------------------------------------------------------------ 315-523-6080

440 South Broadway

White Plains, New York 10601-5008 ---------------------------------------------------------------------------- 914-422-8755

Self-Help Guide 6-25

 NOTES

Self-Help Guide 6-26