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AARP Article

Get More Out of Your Savings Bonds

Avoid these four mistakes that can cost you money

Are you sitting on a pile of U.S. savings bonds? If not, should you be? For safety-first investors, savings bonds still hold an edge over bank certificates of deposit. Savers put more than $631 million into these bonds last year. Those of you sitting on a pile might find, to your surprise, that some of them currently yield 4 or 5 percent.

Savings bonds come in two flavors — EE bonds, at fixed interest rates, and I bonds, at floating rates that change with inflation every six months. You have to hold them for at least one year. If you sell before five years are up, you pay a penalty equal to three months’ interest. Bonds generally stop paying interest after 30 years.

Almost all savings bonds today are sold electronically, through treasurydirect.gov. You can invest up to $10,000 a year for each type of bond (double that if your spouse buys, too). An additional $5,000 is available in the form of old-fashioned paper I bonds, if you ask that your tax refund be paid that way.

I bonds are the most popular. At this writing, a new bond yields 1.48 percent — and before you turn up your nose, consider the competition. A five-year CD might pay 2 percent, but it offers no inflation protection. You’re taxed on the interest every year unless you buy through a tax-deferred individual retirement account. You also pay taxes at all levels — federal, state and local. The income from savings bonds is tax deferred and then taxed only by the feds.

A quick word about EE Bonds. New bonds are paying (if you can call it “paying”) just 0.1 percent. If you hold them for 20 years, you’ll earn at least 3.5 percent, thanks to a guaranteed catch-up payment. Still, not appealing.

If you’ve owned savings bonds for years and are ready to cash them in, be sure to find out exactly what each bond is worth. Without that information, you might make one of four big mistakes, says Jackie Brahney, marketing director of savingsbonds.com, a service that helps you manage your bond portfolio.

Mistake 1: You cash in the oldest bonds first. They might be your highest earners.

Mistake 2: You look only at the bonds’ face amount when deciding how many to redeem. That might bring you more taxable income than you want. Bonds that add up to $3,000 on their face might be worth $6,000 or more, once the interest is counted.

Mistake 3: You cash in so many bonds at once that the cumulative, taxable interest puts you into a higher bracket.

Mistake 4: You redeem a bond in the day or week before a six-month interest payment is due to be paid.

Free calculators at treasurydirect.gov and savingsbonds.com will tell you what each of your bonds is worth. For as little at $5.95 a year, Brahney’s service will value the bonds and brief you, monthly, on what they currently earn and how much interest they’ve accumulated. Knowing your bonds can save on taxes and raise your earnings, too.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Are You Ready to Retire Early?

Use this checklist to assess your plans

Are you thinking about retiring early? Back when boomers were young they considered it almost a generational perk. Life’s second half should be merry years of play and rest.

Once you slide into your 50s, however, the question of early retirement grows complex. You might still need your paycheck. If so, case closed. And you might love your work and hope to pursue it for many more years.

If you’re ready to quit, however, there’s a lot to consider before casting loose. On the plus side, you’ll be able to take your life in any direction you want. On the downside, early retirement carries financial and emotional risks. Before telling your boss to take that job and shove it, run down this checklist to see if your plan is sound:

Do you really have enough money to finance a long retirement?

Don’t underestimate your longevity. At, say, 55, men have an average of 28 more years to live, and women 31 years. Roughly half of you will live longer than that. During your early years of play, you’ll be living primarily on your savings and investments, plus any special sources of income such as rents, royalties or perhaps a small pension. You’ll have to wait until 62 to qualify for Social Security retirement benefits. But by claiming that early, your benefit will be docked by as much as 30 percent, compared with what you would receive if you waited until your full Social Security retirement age (67 for today’s 55-year-olds). You might come to regret that.

Have you made a retirement budget you can live with?

To make it easy, sketch the budget for only your first retirement year. Start by listing the income that you can realistically expect after your paycheck stops. For budget purposes — and to feel fairly sure that your money will last for the next 30 years — assume that you’ll take only 4 percent out of your savings and investments. The total, from savings and other sources, represents your spending limit.

Now add up your expenses.If they’re higher than your spending limit, you’ll have to cut back — maybe sharply. That might not be hard if your largest budget item is your house and you’re happy to downsize. If not, you’re probably not ready, financially, to make the leap.

In fact, you’re not even ready if your budget just barely breaks even. Inevitably, you’ll run into costs that you didn’t expect. If you cover them by digging too deeply into savings, you might run seriously short of money a couple of decades from now. You might be better off staying at work for a few more years, cutting spending and concentrating on saving more.

When budgeting future withdrawals from your savings and investments, follow the classic 4 Percent Rule: Take 4 percent of your financial assets in Year 1. Take the same dollar amount plus an inflation increase in Year 2. In Year 3, take last year’s dollar amount plus another increase to cover inflation, and continue on that track. When you eventually sign up for Social Security (later, not sooner, I hope), that income will be inflation indexed, too.

Are you out of debt?

Giving up a paycheck when you’re carrying credit card debt is nothing short of madness.

Do you have health insurance?

Some corporations provide early retirees with health insurance until they reach 65 and qualify for Medicare. If you’re not that lucky, survey the private marketplace carefully to see what’s available at a price you can afford. Going bare can wreck your finances overnight.

Do you have a sustainable investment plan?

At today’s interest rates, you’d need a two-ton truck full of money to live off the interest paid by high-quality bonds or certificates of deposit. Low-quality bonds yield more but carry market risk. If you switch your savings into dividend-paying stocks, you’re facing market risk plus a lack of diversification. That’s because you’ll have too much money in financials, consumer staples and utility company stocks and not enough in the growth stocks that typically don’t pay dividends.

Financial planners might advise early retirees to hold 60 to 70 percent of their money in an index mutual fund that follows the total stock market (both large and small stocks), for 20- and 30-year growth. The balance would go into intermediate-term Treasury bond funds. They’re a good cushion because their prices usually rise when the stock market falls. Research shows that following this strategy in conjunction with the 4 Percent Rule gives you very high odds of making your money last for 30 years. Put an extra 5 percent into stocks if you need the money to last for 40 years.

If you’re married, how well do you and your spouse get along?

Retirement at any age throws you continually into each other’s company. Doing the 50 states in an RV will become a misery if you’re arguing all the time.

How flexible are you?

If your early retirement doesn’t work out because you’re bored or you’re spending money faster than you expected, be prepared to go back to work — part time, at least. That means keeping up your skills or finding new ways of deploying the natural talents you have. If you’re choosing a new place to live, you might consider its employment opportunities, just in case.

Who succeeds at early retirement?

People who have enough money (with “enough” depending on how high on the hog you want to live), plenty of personal interests and an adventurous disposition. Have a happy second half of your life!

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Maximize Your Social Security Benefits

Jane Bryant Quinn answers to your most common Social Security questions

Are you wringing all the money you can out of Social Security?

Based on my reader mail, I worry that some of you are losing out. Here are quick answers to the questions I get the most.

What can you apply for?

Retirement benefits, based on your own lifetime earnings. Spousal benefits, based on a living spouse’s lifetime earnings. Survivor’s benefits, payable after a spouse’s death.

You can effectively collect only one of these benefits at a time. Social Security automatically gives you the largest check you’re entitled to. Children might get benefits, too.

What’s the best age to claim?

This varies a lot. In general, your check is always reduced for life if you file for any benefit before what Social Security calls your “normal retirement age.” That’s 66 for people born from 1943 to 1954 and rises gradually for every birth year through 1959.

For those born in 1960 or later, normal retirement age is 67. There’s a fat bonus for collecting your benefits late: Social Security pays you an extra 8 percent for every year past “normal” that you delay your claim, up to age 70.

Can you claim a benefit as a spouse and later switch to benefits based on your own earnings record?

Yes, provided you wait to file for spousal benefits until you reach “normal” (or “full”) retirement age. You might collect a spousal benefit check from, say, age 66 to 70, then put in for your personal retirement benefit, which will have grown.

This strategy does not work, however, if you file before you reach your normal retirement age. Early filers receive a benefit amount equal to the spousal benefit or their own retirement benefit, whichever is higher. Never both.

Does it ever pay to collect benefits early?

For many married couples, yes. A wife, for example, might retire early on a reduced benefit. When her husband reaches normal retirement age, he can file for spousal benefits on her account. When he reaches 70, he can switch to his own, larger retirement account. How well this strategy works will depend on your ages and which of you is the higher earner.

What if you’re divorced?

You can claim spousal and survivor’s benefits on your ex’s earnings record if you were married for at least 10 years and are not currently married. (Exception: You can keep the survivor’s benefits if you remarry after you pass 60.) Your ex has to be eligible for Social Security, even if he or she has not yet retired.

What if your spouse dies?

If you’ve been collecting a spousal benefit, you can step up to the larger survivor’s benefit. To get the maximum amount, consider putting off your claim until you reach normal retirement age.

You might make a different choice, however, if you have a substantial Social Security earnings record of your own. You might take the survivor’s benefit early, then switch to your own, larger benefit at a later age. Play with the numbers until you get it right.

Helpful resources

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Should You Exit the Stock Market?

Ask yourself these four questions before moving your money

Should the portfolios of older investors include stocks, and if so, what percentage? The issue comes up every time stock prices wobble or fall. If you’re in your 70s or 80s, how safe does your money have to be?

In part, the answer depends on your circumstances and temperament. But there’s one rock-bottom rule: You need to feel sure that, whatever happens to stock prices, you’ll be able to pay your basic bills. Assuming that you have savings to invest, there are several things you might consider.

If it does, forget about it and use some savings to buy immediate-pay annuities. You’ll get a guaranteed income for life and will never have to think about stock prices again. To see how much an annuity would pay, go to immediateannuities.com. The monthly amount will almost certainly exceed what you’d get from high-quality bond funds. Money that is not in the annuity could go into bank savings or CDs so you’d have extra cash on hand.

Do you have enough money from other reliable sources to cover your lifetime needs?

If you’ve got enough money from your pension, Social Security and other investments, owning stocks is optional. “You’ve won the game, so you don’t have to play anymore,” says Larry Swedroe, director of research for the BAM Alliance of wealth managers and author of many personal-investment books. You might want to keep a high percentage of your savings in stocks for the benefit of the next generation, or a low percentage in case your circumstances change. Either way, the investment needs to pass the “stomach-acid” test, Swedroe says. You have to feel safe enough to not feel sick in years that prices plunge.

Do you have savings but need to grow them to provide for your later age?

Well, if so, that’s what stock investments are for, says Judith Ward, a senior financial planner for the mutual fund group T. Rowe Price. At 75, you could live another 15 or 20-plus years, which historically gives the market time to rise in price. The firm recommends at least 20 percent in stocks, with the rest in bonds. Over the past 15 years, that mix of investments lost money in only one year (the loss was just 3 percent), measured by standard stock and bond indexes. For more growth, you might go to 40 percent stocks.

How do you stay “safe” when you have money in stocks?

“Put aside some money for now and other money for later,” says financial planner Judith Lau of Lau Associates in Greenville, Del. “Now” means cash — enough to pay your bills for two years. For example, say that Social Security pays you $1,300 a month and you’re spending $2,300. The difference is $1,000 a month or $12,000 a year. You buy two years of safety with $24,000 in the bank.

“Money for later” comes in two parts. The first part holds reasonably safe investments, such as short-term bond funds, that could pay your bills for three years. You’re now safe for five years, no matter what happens to stocks. The second part comprises stocks and stock funds for longer-term growth. Every year, you sell some of your stock funds to replenish your two-year cash reserve.

That’s the theory, anyway. Stress-test your choice by asking if you’d be OK if stocks fell 50 percent before rising again. That’s the stomach-acid part.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Dealing With Credit Card and Time-Share Companies

Financial expert Jane Bryant Quinn answers readers’ questions

Q: My husband died this year. Our credit cards are jointly held. Do I have to contact the card companies to have his name taken off the account?

A: You’re named on the cards, so you’re still entitled to use them. But yes, tell the issuers. They’ll find out anyway, during routine checks of Social Security numbers. Your husband is listed as “deceased.” As a result, any account with his name on it will no longer receive a credit score, says John Ulzheimer of CreditSesame.com. By law, lenders are not supposed to pull the credit of a surviving spouse unless there’s evidence of inability or unwillingness to pay, says Gerri Detweiler of Credit.com. Some of them will simply ship you a new card. But others will make you reapply, based on your own income. If they think it’s insufficient, they can raise the card’s interest rate or even refuse to reissue it. To me, that flies in the face of the spirit of a law intended to protect spouses. But what’s new about that?

Q: How do I get rid of a time-share I no longer need and can’t afford?

A: Unwanted time-shares are a glut on the market. Most of them have little or no resale value. Here’s great advice from Brian Rogers of the Timeshare Users Group (TUG):

1. Lower the price of your share to $1 and list it on TUG, Craigslist, eBay and similar sites. To attract buyers, offer to pay the closing costs and perhaps a year of maintenance fees.

2. Write (don’t call) your time-share’s homeowners association, asking it to take the property back. It might, if you give good reasons (poor health, don’t travel anymore, retired and can’t afford the fees). You might have to write several times.

3. Don’t get sucked in by a middleman who promises — for a mere $2,000 to $5,000 — to help you donate the time-share to charity and deduct its “value” on your tax return. Taking a big write-off for a property that can sell for only $1 amounts to fraud.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

‘The Talk’: Your Kids and Your Money

Families should keep all members in the loop, financial planners say

What should you tell your adult children about your money? That’s a question all of us confront. Some people think it’s none of the children’s business. A few tell all. Most of us are probably somewhere in the middle, revealing some things and reserving others, depending on our own feelings about money and whether the facts might cause anyone distress.

I put the disclosure question to members of the National Association of Personal Financial Advisors, who are all fee-only financial planners. They lean strongly toward having “the talk.”

Start by telling the children where to find your will, health care directive, financial records and any life insurance policies (small policies sometimes get lost). If the will leaves them uneven shares, explain your decision. Often, the children will understand. If you can’t bring yourself to discuss their shares in person, at least leave a thoughtful, explanatory letter so that the siblings won’t start blaming each other for secretly currying your favor. Tell them, too, if one of your children has power of attorney or is the executor of your will. “They should hear this from the parents,” says Marc Roland of Dean Roland Russell Family Wealth Management in San Diego. “If they learn only after your death, they might think that Mom and Dad loved one kid over another.”

You might not want to tell your children exactly what you’re worth, in case your assets get depleted later in life. The kids shouldn’t be planning on an inheritance they might not get. On the other hand, upfront disclosure about your intentions can help prevent one sibling’s dishonesty in handling family assets, if that’s a risk, says Daniel Johnson of Parsec Financial Wealth Management in Asheville, N.C.

It becomes more important to talk to the children as you get older. You might become ill or incapacitated and need help with your finances. Children also might wonder, and worry, about whether you have enough income and savings to last for life. If so, it’s a kindness to let them know that you’ll be OK. If not … well, it’s hard to face this yourself, let alone discuss it with a child, says Rob O’Dell of Wheaton Wealth Partners in Naples, Fla. But the sooner they learn about the problem, the better.

In any situation, “the talk” lets you put your wishes into words that your children will understand, says Dan Fitzgerald of Aequus Wealth Management Resources in Chicago. It can even result in useful changes to your plan. I’ve had personal experience with improving a financial decision because my kids were in the loop. Families manage better when you leave no big surprises behind.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Making Sound End of Life Decisions

A living will and health care proxy can be crucial for you and your loved ones

Most of us have probably said to a relative or friend, “If I’m in a coma and living on tubes, just pull the plug.” But decision-making toward the end of life isn’t that simple. Maybe another few days might bring you around — how long should your family wait? Often, the medical issue isn’t even the “plug.” What if you have advanced Alzheimer’s and a doctor says you need triple-bypass heart surgery? Would you want your children to say yes or no?

If you’re of sound mind when difficult medical questions arise, you can deal with them yourself. You’re always in charge of your own treatment.

But if you’re in a mental haze, even if only temporarily, someone will have to make decisions on your behalf. That “someone” will be glad for all the advance guidance you can give.

Good medical planning starts with a conversation, among family or friends, to help you clarify your thinking about care. How far do you want any treatments to go, and what minimal quality of life are you willing to accept? Free workbooks are now available online to help with the process, says Charles Sabatino, head of the American Bar Association’s Commission on Law and Aging. A few to try: the Conversation Starter Kit, developed by the columnist Ellen Goodman; End-of-Life Decisions from Caring Connections, a national hospice organization; the ABA’s comprehensive Consumer’s Toolkit for Health Care Advance Planning; and AARP’s Caregiving Resource Center.

To turn your preferences into a legal document, set them down in a properly witnessed living will (a type of advance directive). Your doctors are supposed to act in accordance with what you’ve said. AARP provides state-specific forms at aarp.org/advancedirectives. Caring Connections also provides the forms, as does the American Bar Association. In many states, forms can also be found on the website of the attorney general.

Read any online forms carefully. Some deal mainly with the “easy” questions, such as whether you want treatment ended if you’re being kept alive mechanically. The better forms leave space for expressing your personal values. For example, what kinds of handicaps are you willing to live with? Would you want surgery if there’s a high risk of brain damage? Are you okay with life in a nursing home?

It’s especially helpful to say whether you’d want to be fed intravenously if your conditional is terminal. Medically, the answer may be “no.” Dying people lose their ability to process nutrients, according to the National Hospice and Palliative Care Organization. Even providing water might add to discomfort by creating bloat. Well-meaning relatives need to know these things.

If you want to try everything that might keep you alive, it’s also important to say so. Doctors generally won’t provide treatment they think is futile but will go the last mile if that is your written wish and your family insists.

A living will is just the start. You also need to appoint someone as your health care proxy, to stand up for your wishes and make medical decisions that your will doesn’t cover. If you have no close family members, choose a trustworthy friend. You also should sign what’s known as a HIPAA release, giving your advocate access to your medical records.

You need to be especially careful in your planning if you have a degenerative disease, says Martin Shenkman, an attorney in Paramus, N.J., and author of Estate Planning for People with a Chronic Condition or Disability. Living will forms should be modified to include such things as experimental treatments outside the United States, if you want them. Breathing tubes might be fine if they help you maintain an acceptable life at home.

As the disease progresses, your choices might change, which you should also indicate in your living will. Be sure that your health care advocate has a deep understanding of your disease. He or she should live nearby, in case you have an attack and quick decisions are called for.

Religious people should talk with their family about anything in the will that might contravene their beliefs, Shenkman says. For example, some faiths expect doctors to take heroic measures that you might not want, or prohibit organ donation even if it helps advance research into your disease. Warn your family if you’re taking these steps, and be sure that your health care advocate is on your side.

Most end-of-life decisions are made peaceably, without living wills being invoked, says elder-care attorney Gregory French of Cincinnati. They’re invaluable, however, if siblings fight about “what Mom would want” (and the doctors duck).

When you make a regular will for your heirs, your attorney may provide his or her own versions of a living will and health care proxy. Modify them to suit your situation, then sign. As a last act, it’s a classy one.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Is Marriage a Good Financial Move for Older Couples?

It’s not as clear as you might think

Thousands of same-sex couples flocked to say “I do” as soon as their right to marry became the law of the land. Thousands of others, however, considered their options, yawned and stayed home. The case for marriage isn’t as solid as it often sounds, especially for older couples of any sex. Sometimes it pays to live together in unwedded bliss.

Those who tie the knot summon traditional values and romance — flowers, rings and a whale of a party. Financially, marriage provides access to state and federal spousal and survivor benefits, including Social Security. You’ll get Medicare if you didn’t qualify on your own. Spouses have a right to inherit if their mate dies without a will (but surely, nobody reading this column lacks a will!). You can generally make medical decisions for each other even though you neglected to sign an official health care proxy. You get better tax benefits when inheriting an individual retirement account and might even save some money by filing a joint income-tax return.

Sometimes, however, marriage comes at a cost. Widows and widowers of public employees who receive a pension might lose it if they remarry. That’s also true of certain veterans benefits. Before marrying, check your plan’s rules, taking nothing for granted. If you’re collecting survivor benefits on a late spouse’s Social Security account, you’ll lose them if you remarry before you reach 60 (50 if disabled). You can keep them if you remarry at a later age, but you might become eligible for better benefits on your new spouse’s account at age 62 or older. Ask Social Security what your options are and which choice will produce the higher check.

You don’t have to walk down the aisle to get many of the protections of marriage. A “living together” agreement, legally signed and notarized, provides for the division of property if you break up. A will can provide a partner with financial support. You can designate your partner as your health care advocate, if that’s your choice. Marriage might not even improve your financial security if you both have adequate pensions and Social Security earnings. In some cases, filing jointly might drive your tax bill up.

Here’s another reason not to marry: In many states, spouses are responsible for each other’s medical bills — potentially including bills for long-term care. These laws generally trump any prenuptial agreement. So how is your beloved’s health? Does he or she have long-term care insurance? Unless one of you lost a previous spouse after a long illness, these potential expenses probably aren’t on your radar screen.

State Medicaid programs cover most or all of the nursing-home expenses for people of modest incomes and assets. The spouse who is well keeps the house, car and a certain amount of income and other assets, but might have to surrender property of higher value to help pay the bills. A live-in partner would not be liable but would lose the use of the ill partner’s income and assets, including possibly the home. Meet with an elder-care attorney to see what your options are. To find one locally, try the National Academy of Elder Law Attorneys.

In relationships, feelings ultimately rule. Marriage confers social approval and a sense of security. Living together reflects the trust built up over many companionable years. But it is best to know how that choice affects your finances.

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Risky Pension Bets

You might be making one if you take a lump sum early

Would you rather have a monthly pension guaranteed for life or a lump sum of money now? Before I address that question, let me say that you’re lucky if you have the choice. Private pensions are on the way out, even among old-line companies. In older age, there’s nothing more comfortable than a check in the mail every month.

Normally, you’re not offered the choice of a pension or lump sum until you retire. Rising numbers of companies, however, are extending this offer to former employees who haven’t taken their vested pensions yet. They want to shift the burden of retirement investing over to you.

In fact, they’d like to get rid of you in the next 12 months.

That’s because the size of your pension or lump sum depends, in part, on how long the people in your age group are expected to live. Currently, pension plans are using outdated life expectancy tables. Starting in 2017, however, they’ll have to use newer tables, which show that people are living longer. That will require them to pay you more. Hence the rush.

If you take a lump sum in place of a lifetime monthly pension, you’re making at least one of three risky bets.

Bet 1: You are betting that you can provide yourself (and your spouse) with a guaranteed monthly income for life that’s at least as high as you’d get from your pension. To check this, go to a website such as immediateannuities.com, which shows you what insurance company annuities pay. Enter the lump sum you’re being offered, your age and when you want the payments to start, then choose the type of annuity you want. Compare that payment with your vested monthly pension amount. Odds are, the pension will pay you substantially more, especially if you’re a woman, says Tony Webb, senior economist at the Center for Retirement Research at Boston College.

Bet 2: That your life span will be shorter than average. The lump sum is intended to last your expected lifetime, not your actual lifetime. If you live longer, you’ll need extra money in reserve.

Bet 3: That you can invest the lump sum in stocks and bonds and earn even more than the pension will pay. To check this, look at the “interest rate” in the fine print of your lump sum offer. (If it’s not there, ask the company for it.) Your investments have to grow by at least that percentage annually, after fees, to equal a pension that covers an average lifetime and much more, if you live longer than that.

Lump sums make sense if you’re terminally ill, if you have so much in other savings that you’ll never have to worry about running out of money or if the amount is small. To avoid taxes, roll the money into an individual retirement account.

But to assure yourself of an income for life, without taking stock market risk, pensions are hard to beat.

If the lump sum offer confuses you or leaves you anxious, don’t take it, says Ari Jacobs, senior retirement solutions leader at the benefits consultant Aon Hewitt. “You’ll be in the same spot you were before.”

For more information, go to pensionrights.org. In the search box, type in “Should you take your pension as a lump sum?”

(Originally published in The AARP Monthly Bulletin.)

AARP Article

Personal Financial Planning 101

How to take those first steps in dealing with your money issues

How do you learn about personal finance? This question came from a reader tussling with money issues that were new to her. You can pay the bills and manage a checking account for years without ever having to confront planning and investment issues.

From a distance, those issues look mysterious, even impenetrable. Anyone with math anxiety shies away. But personal finance is not — not! — about math. If it were, I’d be in a different line of work. I’m terrible even at arithmetic (embarrassing but true).

Successful personal planning depends on old-fashioned common sense. That means listing your priorities in life and using super-simple financial strategies to get you there. You don’t even have to think about investing your savings until you’ve figured out the basics. And forget about the complex stuff, like variable annuities. You never, ever have to consider an investment that’s complex. Believe me, it will cost too much and won’t accomplish what the salesperson says. I have relied almost entirely on bank accounts and the low-cost mutual funds called index funds — and I’ve done just fine, thank you very much.

To get started on your financial plan, get your records together. Create separate files for bank statements; insurance policies; the latest reports from your mutual fund company or brokerage firm; statements from your pension, annuity or retirement plan; records of any other source of income you receive; and a list of your debts.

People who have been single for a long time usually have a handle on their money. The problems arise when you’re married and your spouse has always managed the money. Sit down with him (sadly, it’s almost always a him) and go through the files one by one. He can tell you what he’s been up to. If you have consumer debt, what’s the plan for paying it off? How has he been investing the retirement savings, and why? If your spouse isn’t organized himself, now is the time to find out. You especially need to know how much income you’ll have from Social Security and savings if he dies first, and what kind of lifestyle it will support. If he has life insurance, check the annual statement to learn how long the policy will last (not all insurance lasts for life).

If you’re widowed, you can leave his arrangements in place while you figure out what you want to do. While you’re learning, put any life insurance proceeds in the bank. For higher interest rates, check online banks such as Ally and Synchrony, both FDIC insured.

While you’re at it, find out where your money goes. If you don’t have a working budget already, go over your bank statements and bills to see how much money is coming in and going out. This will take time, but without this information it’s not possible to plan. If too much money is going out, well, you know what to do.

(Originally published in The AARP Monthly Bulletin.)