With some bank CDs paying more than a 5% APY and some savings and money market accounts yielding around that figure too (as of June 2023), no one can blame investors if they’ve become tempted to keep a healthy chunk of their retirement savings in cash and cash equivalents. But if you’re not careful those high interest rates could end up losing your money in retirement.
Do you have questions about how to allocate the assets in your portfolio according to your goals? Speak with a financial advisor today.
Risks of Holding Cash
Keeping significant cash allocations can make sense to meet your short-term retirement income goals for a year or two, writes Amy Arnott, a certified financial analyst (CFA) and portfolio strategist for Morningstar Research Services. Beyond that time horizon, “Cash can be particularly detrimental to long-term investment goals such as retirement.”
Arnott gives this example: “A retiree who started saving $10,000 per year in 1993 and stashed everything in cash would have ended up with about $380,000 by the end of 2022, compared with about $1.5 million if the savings were invested in an all-equity portfolio or $1 million if invested in a balanced fund.”
One reason to be wary of higher-rate cash accounts is that those interest rates tend to move higher during periods of higher inflation. In today’s case, rates have been pushed up by the Federal Reserve’s decision to hike rates 10 times during the past 16 months to tamp down rising inflation. As the Fed raised its benchmark federal funds rate from 0.25% in early 2022 to 5.25% as of May 2023, it’s important to remember that inflation was running at an annual rate of 8.54% when the Fed got started.
Now that inflation has dropped to about 4%, bank savers can make a small bit of profit on high-yielding accounts – but that won’t last for long. In addition, the rates banks pay typically lag the rates set by the Fed, as they’ve done for most of the post-pandemic period, making any real gains after inflation a brief occurrence, at best. With inflation dropping, one-year CD rates are now higher than five-year rates, an indication that bankers expect the Fed to pause or even cut rates as the cost of living falls.
Reasons for Holding Cash
The reason financial planners advise their clients to invest in the stock market is because it’s nearly impossible to beat long-term inflation with cash. Historically, only stocks have demonstrated the capability to generate gains after inflation over any long period. As rates fall, cash is likely to return to its position as one of the least-loved types of assets in its traditional role as a financial “parking lot.” That is, a vehicle where investors stash cash for immediate or short-term needs. However, cash accounts can shine when used for the right purposes, including:
Emergency Funds
Whether it’s the minimum three-months of spending or a year or more, an emergency fund needs to be safe and readily available. Often CDs, savings and and money market accounts are ideal for this purpose.
Short-Term Needs
In the bucket approach to retirement investing, assets are separated into long-term, medium-term and short-term buckets that align with when retirees will need that money. A year or two of living expenses in cash insulates them from market shocks and allows investors to ride out periods of stock volatility. It also mitigates sequence-of-returns risk, a problem that occurs when a period of poor market performance early in retirement creates larger-than-average portfolio losses, making future retirement withdrawals difficult to sustain.
Anticipated Spending
Savings for the down payment on a home, wedding costs or to pay upcoming college tuition bills shouldn’t be stuck in stocks. This is particularly true if that money will be needed in the next few years, when a market decline could leave money invested in stocks coming up short.
Buying Time to Think
An inheritance, lottery winnings, unexpected bonus or other unexpected windfall can be parked in an FDIC-insured bank CD or money market account. This throws off a bit of interest, while the recipient decides just how to invest or spend their bounty.
Bottom Line
Investors who need to hold some amount of their assets in cash should enjoy the temporarily higher-than-usual rates on bank CDs and money market accounts. Just remember that, as an investment, cash is strictly for covering anticipated short-term needs.
Tips on Investing
How much money to keep in cash, bonds and stocks can be a complicated balancing act that shifts widely from your working years to retirement. A financial advisor can help answer how to structure your holdings. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Fidelity recommends that you have 10 times your annual income saved for retirement by age 67. To find out if you’re on track, try SmartAsset’s retirement calculator. This will estimate how much you’ll have when the time comes to retire.
Symetra Life Insurance Company boasts more than half a century of offering life insurance coverage to valued clients. Over time, this insurer has exceeded $35 billion in assets and 2 million clients throughout the United States.
Symetra has its headquarters in Bellevue, Washington, while the company sells its products in all states excluding New York.
Established in 1957, the insurer has made many strides in the insurance and financial industry. For example, in 1976, Symetra pioneered the medical stop-loss product – which today is a key product in the medical insurance marketplace.
In 1987, Symetra started selling its annuity products through the banking channel, and in 1999, exceeded the $30 billion mark of life insurance in force. In 2004, the insurer transitioned into an independent company – Symetra Financial Corporation, and in 2016, it joined Sumitomo Life, a global life insurer.
The products sold by Symetra Life Insurance Company are offered through brokers and financial advisors, banks, and a network of independent insurance agents.
The primary products provided through Symetra include life insurance protection, along with annuities, retirement, employee benefits, and medical stop-loss insurance coverage.
Symetra Life Insurance Company Review
Today, Symetra is owned by parent company Sumitomo Life – which is considered to be one of the most prominent life insurance companies in Japan. The parent company has been in operation for over 100 years. Both Symetra and Sumitomo Life have total assets surpassing $250 billion.
Symetra Life Insurance is currently recognized as a Top 3 seller of fixed deferred and fixed indexed annuities through banks. It is also a Top 40 U.S. life insurance company, based on admitted assets. In 2015, the company brought in roughly $2.2 billion in total revenues and nearly $147 million in net income.
In addition to offering insurance and financial products, Symetra is committed to the community. In 2015, Symetra contributed to nearly 900 charitable organizations, and its employees invested roughly 8,500 hours of volunteer service.
The company also does a great deal of advertising and sponsorship – including its Sports Illustrated Rising Stars campaign, The Symetra Tour – Road to the LPGA, the Symetra Heroes in the Classroom, and the “I Just Want to Fly,” highlighting the insurer’s commitment to helping people and businesses with reaching higher and flying further to attain their financial goals.
Symetra Life Insurance Company Ratings and Grades
A (Excellent) from A.M. Best. This is the 3rd highest rating out of a possible 16.
A (Strong) from Standard & Poor’s. This is the 6th highest rating out of a possible 21.
A2 (Good) from Moody’s Investor Services. This is the 6th highest rating out of a possible 21 and puts them in good company with Globe Life Insurance.
A (Strong) from Fitch. This is the 6th highest rating out of a possible 19.
Types of Life Insurance Available
Symetra Life Insurance Company brings a variety of life insurance products to the table.
This can be helpful for clients when fitting coverage to meet their specific protection needs.
The company offers term and permanent life insurance plans.
Term Life
Term life insurance provides pure death benefit coverage only. Because term does not include cash value, these policies are typically more financially feasible than comparable permanent coverage – all other factors being equal.
Term life insurance policies are purchased for a set period of time, such as ten years, 15 years, 20 years, or even for 30 years. The term plans offered through Symetra Life Insurance Company offer level premiums throughout the initial period. This can make these plans easy to budget for because the premium won’t budge during the initial policy’s term.
With these term policies, the policyholder may also have the option to convert the coverage over to a permanent life insurance policy without the need to prove insurability – or even having to answer any medical questions. Doing so can extend life insurance protection for the remainder of the insured’s lifetime – provided that premiums continue to be paid.
If the insured is diagnosed with a terminal disease, he or she may also be eligible to receive no more than 75% of the death benefit from their policy while still living – up to $500,000. This can allow the insured to pay for medical expenses or other outstanding bills and puts them ahead of Primerica life insurance for an all-encompassing term policy.
Symetra Life Insurance Company’s term life insurance policies also offer some additional riders that may be added to better meet an insured’s protection needs.
These riders are:
Insured Children’s Benefit
Additional Term Rider
Waiver of Premium
Accidental Death Benefit
Permanent Life
The permanent life insurance policies offered through Symetra Life Insurance Company provide an insured with a guaranteed death benefit, in addition to a cash value element. In other words, loved ones will be protected, while at the same time allowing tax-deferred build-up of savings within the policy.
There are a number of different permanent policies offered by Symetra:
Symetra UL-G Universal Life Insurance – The UL-G policy is a universal life plan. In other words, the policyholder has some flexibility when it comes to how much of the premium payment will go toward the death benefit, and how much will go toward the cash value component. Individuals who are between the age of 16 and 85 can apply for this plan, and it has a minimum death benefit of $50,000. There are also a number of optional riders available that may be added to fit the insured’s protection needs. Also, the amount of the premium may be reduced if the insured is between the age of 20 and 70, and he or she qualifies for Symetra’s GoodLife Rewards program.
Symetra SUL-G Survivorship Universal Life Insurance – The SUL-G is also a universal insurance policy that offers a guaranteed death benefit, in addition to ensuring that legacy planning goals are being met. This policy can also be a good option for estate planning and wealth transfer, as well as for business protection needs. It includes a lapse protection benefit so the policyholder can ensure the policy will be in force for as long as he or she would like.
Symetra CAUL Universal Life Insurance – This type of policy offers lifetime protection that can be tailored to an insured’s objectives, no matter if it is lifetime insurance protection or primarily cash value accumulation. This policy offers flexible premium payments and death benefit options, including the ability to use cash value as a future financial cushion for things like retirement income and/or paying off debts.
Symetra Universal Life Insurance (2008) – With Symetra Life Insurance (2008), an insured will get lifetime insurance coverage at a fixed cost. As a result, loved ones are now financially secure. This policy also offers several additional riders that can help with further customizing the insurance policy. It also offers an initial interest rate guarantee for 12 months from the date that the premium is received. In addition, this rate is guaranteed to be no less than 3%.
Symetra Successor Single Premium Life Insurance – With this form of coverage, the policyholder can designate a certain amount of money to his or her beneficiary exempt from federal income taxation. Plus, the financial worth of the insured’s estate will essentially go up the minute they purchase the insurance policy. With this plan, there is no need to worry about the policy expiring in the future. This is because it has a guaranteed death benefit that won’t terminate before the first policy anniversary following the insured’s 120th birthday. This policy also allows free annual withdrawals of no more than 10% of the accumulation value each policy year without a surrender charge.
Other Products Sold
In addition to just life insurance coverage, Symetra offers other products, too.
These include:
Annuities
Symetra offers a number of different annuity products. These can help individuals with saving for retirement, as well as ensuring they have an ongoing income that will last them throughout their retirement years.
Annuities offered by Symetra include the following:
Fixed Deferred Annuities
Fixed Indexed Annuities
Variable Deferred Annuities
Income Annuities
Employee Benefits
Symetra also offers employee benefits. The company’s knowledge of the marketplace, as well as its flexible policy designs, can help companies develop an employee benefit plan that best fits their business.
Stop Loss Insurance
Symetra is a pioneer in the stop-loss insurance arena. The company introduced the product to the market back in 1976, and it has worked to build one of the very best and largest medical stop-loss entities in the United States.
Annuities can help solve the biggest challenge of retirement.
When you save up for retirement, the two largest risks are intertwined. First, you risk not being able to pay your bills if you don’t properly calculate your annual spending. Second, you risk running out of money late in life if you don’t properly anticipate your lifespan.
A financial advisor can help you calculate how much retirement income you’ll need to generate once you stop working. Find an advisor today.
To help address these issues in tandem, insurance companies sell a product called fixed-index annuities or FIAs. These are designed to provide a baseline of growth-oriented income for the rest of your life. But, as Morningstar researchers recently pointed out, FIAs only work if you use them properly. Otherwise, they turn into money losers compared with more standard options such as fixed-income annuities or index fund portfolios.
What Is a Fixed-Index Annuity?
A fixed-index annuity is a contract you make with an insurance company. In exchange for money upfront the company will give you structured payments over time. Some contracts specify a duration for these payments, making them each month for 10 or 20 years, for example. More often people buy retirement assets called “lifetime annuities,” which start payments when you retire and continue for the rest of your life.
Fixed-income annuities make this payment based on a guarantee. When you buy the contract, the company agrees up front to a certain monthly payment. For example, you might buy a contract for $2,500 per month for the rest of your life beginning in retirement.
A fixed-index annuity is less determined. These contracts guarantee payment, but the amount is not static. Instead, the payments are based on the performance of an underlying index such as the S&P 500 or the Russell 2000. You cannot lose the underlying principal in your contract, and most will come with a guaranteed minimum monthly payment. Otherwise, your income from a fixed-index annuity will increase or decrease based on the performance of its index.
This makes fixed-index annuities a risk/reward tradeoff. If the index does well, this product can pay significantly more than fixed-income annuities, and can even act as a hedge against inflation. If the underlying index does poorly, however, you can potentially make much less money in the long run. This risk is significantly mitigated if you invest in a mainstream index like the S&P 500, but is not trivial if you invest in a higher-risk field.
The Key To Fixed-Index Annuities Is Proper Use
Risk and reward is a very delicate balance in retirement. On the one hand, you want your money to keep growing during these years. On the other hand, you don’t have new income to replace losses, so you want your money to remain safe.
Recently, Morningstar examined where fixed-index annuities fall in that balance. They compared the overall performance of an FIA with a guaranteed lifetime withdrawal benefit rider (GLWB) against standard fixed-income annuities and portfolio investments.
“Overall,” wrote analyst Spencer Look, “I found that FIAs with a GLWB improve projected retirement outcomes, but only if they are used properly.” Specifically, this product can result in stronger payments, fewer shortfalls and more money left over in your estate for the right investor.
But what constitutes proper use? Morningstar found two critical elements:
1. Early Investment
More than anything else, Look found that investors need to buy their FIA at least 10 years before they begin to make withdrawals. For a typical retiree, this means investing by or before age 55.
Why? The annuity needs time to grow. The more time the index has for cumulative growth, the more it will pay. Investors who need income more quickly than this typically see better results with single premium immediate annuities, meaning a fixed-income annuity that you purchase with a lump-sum upfront.
2. Lifetime Investment
This asset also is best for retirees who will hold it throughout their lives.
Exiting an annuity early is known as “lapsing.” When that happens, you collect back the money you put in (often minus a penalty fee) and the contract stops making payments.
Much of the reason to buy this product is that it makes payments for the rest of your life. Over those years and decades, Morningstar found that you will often make more money with an FIA than if you had invested in a fixed-income annuity or a simple stock portfolio.
But if you exit early, you miss out on those future gains. In this case, you often make less money overall than if you had invested in a lump-sum annuity or a stock portfolio.
Longevity Risk Protection
In particular, Morningstar found that a fixed-index annuity can help protect people from running out of money in retirement. “This is because,” wrote Look in his analysis, “an FIA with a GLWB is an insurance product that mitigates against market risk and longevity risk.”
Retirement savers who put their money into portfolios, such as stocks, bonds or index funds, can often get stronger growth than with more careful products like an annuity. But that money is finite, so they risk running out of it.
A fixed-index annuity offers a best-of-both-worlds approach. While FIAs don’t give the full return of their underlying index, they do tend to post stronger returns than a standard fixed-income annuity. Yet, they also come with lifetime payments and a minimum benefit guarantee, mitigating the risk of running out of cash in old age.
Bottom Line
Based on Morningstar’s analysis, investors who are looking for a lifetime retirement product should consider fixed-index annuities. They can offer a strong middle ground between the lower-return/higher-security of a fixed-income annuity and the higher-return/lower-security of a portfolio, but only if you use them correctly. Exiting the contract early can decrease or eliminate the benefits altogether.
Annuity Investing Tips
Annuities can be a strong product for the right investor, but they can often seem complicated. Don’t sweat it. With our step-by-step guide, you can learn the fundamentals of annuities so you can feel more confident about these financial products.
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Representatives Donald Norcross (D-NJ) and Tim Walberg (R-MI) have introduced a bill in Congress to allow the default inclusion of annuities in 401(k) plans. If signed into law, it would functionally raise the profile of annuities, allowing individuals to hold large investments in this asset class based on the overall contributions to their 401(k) plans. Here’s what you should know about the bill and whether it’s an option to consider.
Consider working with a financial advisor as you plan out your retirement.
What the Bill Would Do
Currently entitled a bill “[t]o amend the Employee Retirement Income Security Act of 1974 to permit default investment arrangements in annuities, and for other purposes,” it is an updated version of a substantially similar bill from 2022 known as the Lifetime Income For Employees (LIFE) Act. If passed, it would allow employers to include annuities as a default investment option in employer-sponsored retirement plans such as 401(k)s.
Specifically, the bill would classify a certain type of annuity contract as a QDIA, or “qualified defined investment alternative.” In practical terms, this means that employer-sponsored retirement plans could automatically invest a participant’s money in a qualified annuity contract as well as more well-known assets like a stock portfolio. This would expand on steps already taken in last year’s SECURE 2.0 Act, which increased the overall footprint that annuities can have in a retirement portfolio by raising the cap on how much individuals can contribute to annuities with their tax-advantaged retirement accounts.
How This Bill Would Work
This bill limits plan contributions to 50%. This means that, if an employer does choose an annuity contract as their 401(k) plan’s default option, the plan can only invest up to half of a participant’s contributions in that contract. The rest must be invested in other assets such as stocks, bonds and funds. This is meant to ensure diversification in a participant’s portfolio.
Plan participants also must be allowed to opt out of the annuity contract within six months of being opted in, and the plan must explain their investment alternatives. This would apply both to new enrollees, such as a new hire, and to plan changes, such as if the employer restructures the company’s retirement plan in favor of annuities. In either case, each employee will have 180 days in which they can withdraw from the annuity without fees, penalties or any other charges. After that window, the plan can include delays and even surrender penalties if an employee chooses to withdraw from annuity investments.
This opt-out provision is where the updated LIFE Act particularly mirrors SECURE 2.0. That law allows employers to make retirement plan participation the default, giving employees the option to opt out of making contributions if they choose. That changed the current system, in which employees are left out of workplace retirement plans by default and must opt-in. Finance experts have found that opt-out systems increase participation substantially, as employees are much more likely to stay in a plan than they are to seek out participation.
The newly introduced bill would expand on that, allowing employers to automatically enroll their workers in a retirement plan that uses annuities as a default investment, with those participants then given the option to select another investment or stop contributing to the plan as a whole.
Pros and Cons The Bill
If this bill passes, individuals should make sure to carefully consider the potential benefits and drawbacks of annuity investments. The main benefit to annuity investments is its certainty. A standard lifetime annuity is an insurance policy that guarantees fixed payments, typically issued every month, starting in retirement and lasting for the rest of the participant’s life. As a result, it is not subject to the vagaries of market volatility, and it allows for confident financial planning. Participants know what they will receive, when they will receive it and for how long.
Annuities have their risks, though. In particular, they tend to post lower returns than the market at large, meaning that investors usually get a lower return on investment off an annuity contract than an S&P 500 index fund. They can also be fairly expensive, often charging high administrative fees. And, of course, there is always the edge-case risk that the company issuing the annuity contract might go out of business, forcing a risky question of who will hold up their end of the bargain in your retirement.
What’s more, despite its name, the updated LIFE Act does not require employers to select a lifetime annuity. Per the legislative text of the 2023 bill, the selected contract must make payments “for a fixed term or for the remainder of the life of the participant [and spouses or beneficiaries].” Retirement savers should review any plan carefully to make sure that the annuity their employer selects is a lifetime asset, or at least one with appropriate duration.
Annuities can be an excellent retirement vehicle, but make sure they meet your long term goals and needs.
Bottom Line
Recently proposed legislation would allow employers to use annuity plans as a default investment in 401(k) and other employer-sponsored retirement accounts. The goal is to create a functional system of private pension accounts for workers. Whether it makes sense for you depends on the specific terms of your 401(k) and what your particular retirement needs are.
Retirement Planning Tips
A financial advisor can help you build a comprehensive retirement plan. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Are annuities the right investment for you? If your employer is going to start making this hybrid pension product the default choice in your 401(k), it might be time to learn all about how this investment class works and whether it’s a good fit for your plans.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
Hammered by inflation, recession fears and doubts about the future of Social Security, an increasing number of working Americans say they plan to claim their Social Security benefits early while staying on the job. Here are the factors driving this trend and the pros and cons of following suit.
Consider working with a financial advisor to create a retirement plan that fits your goals, risk profile and timeline.
More People Claim Social Security Early
42% of Americans said they plan to file for Social Security before their full retirement age while also continuing to work, according to a 2022 survey by the Nationwide Retirement Institute – up from 36% in 2021.
Workers who’ve paid into the retirement system can claim their Social Security benefits as early as age 62, but that decision can result in a monthly benefit check that’s as much as 30% less than the payment they’d receive at full retirement age, which is between ages 66 and 67 depending on what year you were born. By waiting beyond longer to file, a retiree can increase their Social Security payment by 8% each year beyond the full retirement age they wait to file, topping out at 70 years.
As of February 2023, the average monthly Social Security check among all retirees is $1,693.88, according to the agency. Meanwhile, the average check for a 62-year-old retiring this year would be $1,247.40, while the average payment at the full retirement age of 67 would be $1,782.
Over a 20-year retirement, the monthly difference of $534.6 would add up to more than $128,000 in retirement income, not counting any cost-of-living increases. These adjustments increase benefits by a set percentage calculated each year to keep retirement income paced with inflation.
Collecting benefits early isn’t always wrong, planners note. Many workers start taking Social Security benefits when they’re forced to retire because of corporate downsizing, age discrimination in hiring, illness or the need to care for a sick family member.
The Break-Even Point
Waiting to collect a higher benefit check later means the recipient is foregoing some cash flow. The “break-even” point – where the total benefits collected at full retirement are more than all the cash that could have been collected by starting early – usually comes somewhere around age 80, financial planners say.
Using this year’s average benefit amounts, someone who starts collecting benefits at 62 would collect a total of more than $254,000 over 17 years before they would have collected slightly more by waiting to claim the higher full-retirement benefit. By the year 2040, the higher benefit amount for waiting would produce slightly more than $2,000 in additional total cash (unadjusted for inflation).
Tax Considerations
Social Security benefits themselves aren’t taxable, but a downside of receiving Social Security payments early is that many of the beneficiaries will continue to work, which can make some or even much of their benefits taxable. In fact, that tax can apply to anyone collecting benefits who receives additional income.
A single tax filer receiving Social Security payments who makes more than $25,000 of what the IRS calls “combined income” will be taxed on 50% of his or her benefits, up to a limit of $34,000 in income. At that point, the tax apply to 85% of their benefits. The limits for joint tax filers are $32,000 and $44,000, respectively. Combined income is a taxpayer’s adjusted gross income, plus nontaxable interest income from bonds and half of their Social Security benefits.
Bottom line
The number of workers claiming Social Security early in their 60s is increasing, which may be due to a multitude of reasons. Everyone’s retirement path is different, so it’s important to calculate your needs and apply your Social Security accordingly. And if you continue to work while receiving benefits remember to estimate your tax penalty.
Tips on Retirement Planning
Deciding when to claim Social Security is only one part of retirement planning. A financial advisor can help you see and understand all the variables that go into a retirement plan. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Use our no-cost retirement calculator to get a quick estimate of what your net worth will be when you retire.
At a certain age, the future becomes more uncertain than it has ever been and there arises a need to provide for the well being of your family after you are gone.
An inexpensive $250,000 term life insurance policy can go a long way for both young people and for seniors.
No matter your age, having life insurance coverage goes quite a long way in providing for the financial security of your family.
Seniors are an essential market for many insurance providers. Most providers are developing customizable policies to match the specific needs of seniors. The prices for these policies are decreasing every year making them extremely inexpensive.
Because of their low cost, these policies can be more than just a financial back-up. In fact, that could be one of the most important decisions that you could make for you and your family. Here is a list of benefits these policies provide.
Low Cost
Term life policies are extremely inexpensive. Although the most common reason that people don’t take out a life insurance policy is that they think it costs too much.
As the table will show below, life insurance is cheap! There is no reason why any family with dependents should not have some sort of life insurance coverage.
The majority of applicants are surprised to see just how affordable a life insurance policy is.
20-year $250,000 Term Rates
Age
Male
Female
30
$13.05/mo
$11.96/mo
40
$17.84/mo
$15.88/mo
50
$43.28/mo
$32.41/mo
60
$113.32/mo
$77.87/mo
70
$418.35/mo
$269/28/mo
As you can see, having a $250,000 term life policy for a healthy 30 years-old will only cost around $11-$13 per month with one of the top life insurers in the country. Even for someone that isn’t in perfect health, a life insurance policy is well worth what you’ll pay
Buying Future Money
The final thing anyone wants is to become a burden on their own family. A term life policy keeps that from happening.
When you purchase a term life policy, you are really buying money that your family can use later. This money can be used for household bills, medical expenses or anything else they might need.
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Estate Planning
Term life policies for seniors are popular because they can be used as part of an estate plan. They can be used to pay estate taxes to insure that the property stays in the family instead of being sold to pay the government.
Term life insurance helps to ensure that your property and the value of your estate is not drained by taxes imposed after your death.
After you pass away, you want your heirs to be able to enjoy all of the funds that you’ve set aside. You don’t want all of those savings to be eaten alive by taxes and fees.
A simple life insurance policy can counterbalance those taxes and ensure that your family gets to use your estate in a way that benefits them, not Uncle Sam.
Survivor Benefits
Your spouse and minor children can receive survivor benefits for a specified period of time. These benefits will replace your pension or retirement income after your death.
This gives your family the time and ability to adjust to life without you. The bills will be paid and they won’t have to deal with financial insecurity in an already grievous time.
More than likely, if you were to pass away tomorrow, you would leave behind A LOT of debt. Most people have a mortgage, car payment, student loans, credit card bills, and other debts that they would pass on to family members if something tragic were to happen.
For a grieving family, all of these bills can be difficult or even impossible to pay for. Instead of leaving this financial strain on your loved ones, a $250,000 policy can relieve that stress and give your family the funds they need to pay off any final expenses.
Continue Providing
Everybody always wants to do more for their families but we can’t always get everything done in one lifetime.
A $250,000 term life insurance policy will allow you to continue to take care of your family after you are gone. You can still pay off the house, send the kids the college and take care of whatever else needs to be done.
Getting Cheaper Insurance Rates
As we mentioned earlier, a $250,000 policy is much more affordable than you might think, but that doesn’t mean you can’t save money on monthly premiums. There are a couple of things that you can do to keep a couple of extra bucks in your wallet every month.
The best way to save money is to shop around with different insurance companies before you purchase a plan. Each company has different rates and looks at each applicant’s health differently, which can translate into drastically different premiums.
We suggest getting AT LEAST five different quotes before you pick the one that works best for you.
Aside from shopping around for a policy, there are a few lifestyle changes that you can make to save money. The best way to keep more money in your bank account is to quit smoking.
Being categorized as a smoker on your insurance application will make your premiums double or even triple, even if you’re in perfect health. Using tobacco products is the worst thing you can do. It’s worth it to take several months to kick the bad habit. Not only will your doctor thank you, but your wallet will too.
Aside from quitting smoking, losing weight by getting regular exercise and a healthy diet can have a huge impact on your waistline and your insurance premiums. One of the other factors that the company will look at is your weight.
Being overweight or obese greatly increases your risk of having severe health complications, which means you pose more of a risk to the insurance company. Losing a couple of pounds can also save you money, it’s a win-win.
The Importance of Life Insurance
Earlier we gave several examples of why most applicants purchase a life insurance policy, but one of the most important is to provide protection for your loved ones.
There are millions of families every year that lose a family member and find themselves with thousands of extra dollars in debt
$250,000 Life Insurance Policy
For most people, a $250,000 plan won’t be enough, but there are a lot of people that can benefit from a policy this size.
Because these life insurance policies are so affordable, they are a great purchase. You can’t put a price tag on the peace of mind knowing that your family will be covered if you were to pass away.
Looking for an effective way to improve the chances that you won’t run out of money in retirement? It’s easy: Just delay retirement.
That may not be the solution you wanted to hear. But by working just a few years more, you can greatly enhance your portfolio’s longevity, as well as have a higher Social Security benefit to rely on in the event that your money runs out. To illustrate these benefits, consider a 62-year-old who has saved $250,000 for retirement. In the past year, she earned $75,000 at her job, and contributed 15% of her salary, or $11,250, to her 401(k). She figures she could live on 75% of her pre-retirement income.
How long would her money last if she retired today as compared to later ages? We fired up the “Am I saving enough? What can I change?” calculator (found among the retirement calculators at The Motley Fool) to analyze her situation. Here are the results.
Retirement Age
62
64
66
68
70
Number of Years Portfolio Will Last
5.2
6.3
7.8
9.8
12.8
Portfolio Will Last Until Age…
67.2
70.3
73.8
77.8
82.8
% of Expenses Covered by Social Security
34.2%
39.5%
45.5%
52.8%
59.9%
With all those pretty numbers in mind, let’s discuss the benefits of working a few years longer.
Your portfolio will have more years to grow Our hypothetical retiree’s portfolio will last an estimated 5.2 years if she retires today, but its longevity increases with every year she puts off retirement, thanks to a combination of additional contributions and delaying the point at which assets are sold to pay for retirement. In fact, her $250,000 could almost double to $483,087 by age 70, assuming a 5% investment return and continued annual contributions of $11,250.
You’ll get a larger Social Security benefit A bigger portfolio isn’t the only reason our retiree’s prospects improve the longer she works. Her portfolio will also last longer because of bigger Social Security checks, which means she’ll need to withdraw less from her portfolio to cover expenses. According to the benefits calculator on the Social Security website, our retiree will receive $16,032 in her first year of retirement if she applies for benefits at age 62. However, the calculator estimates that her benefit would more than double to $36,096 if she can wait until age 70.
That increased benefit is due to two factors. First, for every year you delay taking Social Security, the benefit increases approximately 8% plus inflation. Secondly, the benefit is calculated using the 35 years in which you earned the most money (adjusted for average wage inflation); if you are earning a high income in your 60s relative to what you earned previously in your career, then the more years you work, the more the higher-income years replace the lower-income years in the benefits calculation, resulting in a bigger monthly check.
Finally, delaying Social Security benefits also provides a larger safety net in case your portfolio does get fully depleted. If our retiree stopped working at age 62 and later ran out of money, Social Security would cover just 34.2% of her expenses. However, had she waited until age 70 and her portfolio went kaput, Social Security would cover 59.9% of her bills. Not ideal, of course, but better than 34.2%.
Your portfolio’s potential expiration will be closer to your own The length of your retirement is the number of years between the day you quit work and the day life quits you. The older you are when you retire, the fewer number of years your money needs to last.
Of course, you don’t know exactly when you’ll exceed life’s mortal debt ceiling, but according to the Social Security Administration, the average 62-year-old male will live another 19.4 years and the average 62-year-old female will live another 22.3 years (apparently, pulling fingers reduces longevity). As you can see from the above table, if our retiree quits work at age 62, the calculator estimates she’ll run out of money at age 67. If she retires at age 70, her money is estimated to last into her 80s. This is still not ideal; most financial advisors recommend that retirees plan to reach age 90 to 95. But retiring later does result in her portfolio running out at an age closer to the average life expectancy.
The Bottom Line There several ways to improve the chances that you won’t run out of money in retirement, such as save more while you’re working, earn higher investment returns (though never guaranteed, of course), downsize your home, reduce your expenses (as exemplified by Akaisha and Billy Kaderli, whom I interviewed a few weeks ago), or marry Warren Buffett.
Delaying retirement is not the only option, but it’s likely the most impactful option for those approaching their 60s with insufficient savings. It can also benefit those who have already retired but are willing and able to return to work, even part-time. (If it’s been less than 12 months since you received your first Social Security check, you can withdraw your application for benefits, return any money you received, and then take a larger benefit later.) Whatever you do, run your own numbers to determine what will best improve your retirement security. Many people retire too early, only to figure that out too late.
The Federal Reserve is pressing pause on its series of interest rate hikes designed to tame inflation – for now at least.
The Federal Reserve Open Market Committee announced Wednesday that it would leave the federal funds rate unchanged, forgoing what would have been an 11th consecutive rate hike. Those increases, which began in March 2022, have brought the federal funds rate from near zero to its current target range of 5-5.25%.
A financial advisor can help you protect your money from the effects of inflation. Find an advisor today.
The increases have been the central bank’s primary weapon in its fight against inflation, which crested at 9.1% in June 2022 but has since receded to 4%. Despite inflation’s recent downward trajectory, it remains well above the Fed’s long-term target of 2%. In fact, officials signaled they expect to see two more quarter-point increases.
What It Means for Retirees
While inflation’s downward trend feels encouraging, retirees and those on fixed incomes remain vulnerable as inflation is still double the Fed’s target range.
“It’s like saying, ‘He’s getting much better because he only robs four people a week and he used to rob 20 people a week.’ Inflation is a kind of robber which steals the value from retirees’ savings accounts and monthly pensions,” said Christopher Manske, founder and president of Manske Wealth Management in Houston.
“The fact that inflation is now stealing a bit less is still too much theft.”
Here are a few things retirees should be thinking about related to inflation and current interest rates:
Put Interest Rates in the Proper Context
High interest rates have made various savings vehicles, including certificates of deposit (CDs) and money market funds, more attractive. But Hao Dang, an accredited investment fiduciary at Consilio Wealth Advisors in Bellevue, Washington, says retirees should remember that the net return on their savings is barely outpacing inflation.
Yet, there is still a benefit to holding more cash at higher rates.
“Safe money can help them sleep better at night and help withstand any future sell-offs in the stock and bond markets,” he said. “If a retiree typically holds six months’ worth of expenses in cash, it could help to increase that to nine months to a year.”
And while a traditional portfolio of stocks and bonds benefits from diversification, savers can also stand to benefit from diversifying their cash position with an eye toward the future.
“Bonds are sensitive to rate hikes so if there are more rate increases down the line, there could be some losses in even the safest bonds,” Dang added.
“Enjoy higher rates while they can but start anticipating where to place cash for two to three years down the line.”
Good News for Pensions?
High interest rates not only mean better yields on bonds, they can also boost the investment returns of public pensions. In fact, a 2019 study conducted by the Federal Reserve Bank of Boston found that low interest rates often lead public pensions to assume more investment risk in an attempt to generate higher yields. This was especially true for funds that were underfunded or affiliated with states that had weaker public finances, the researchers found.
When Will the Fed Lower Rates?
If you’re expecting the Fed to lower interest rates this year, at least one heavyweight in the financial services industry says you may be setting yourself up for disappointment.
Vanguard economists say it’s far more likely that the Fed will either raise interest rates or leave them at their current target as opposed to cutting them this year. In fact, Vanguard’s model predicts that the Fed won’t start to lower rates until the middle of 2024.
“Our model suggests that it’s nearly three times as likely that the Fed will raise its target for the federal funds rate or keep it on hold this year than that it will cut rates,” Asawari Sathe, a Vanguard senior economist, said in a recent edition of Vanguard Perspective. “Our model’s output underscores our conviction that the Fed’s fight against inflation hasn’t yet reached an inflection point.”
As a result, if a saver is looking to open a new savings account or lock in a long-term CD, they’ll want to do so in the next six to 12 months, says Mark Hayes, a certified financial planner (CFP) and founder of Infinitive Wealth Advisory in Fishers, Indiana.
“Savers should consider taking action soon to lock in rates while borrowers might want to hold off,” he said.
Bottom Line
The Federal Reserve chose to leave interest rates untouched at the June meeting of the central bank’s Federal Open Market Committee. The pause comes after 10 consecutive interest rate hikes that brought the federal funds rate from near zero to its current target range of 5-5.25%. With more rate hikes potentially on the way, retirees may want to reevaluate their debt and even consider refinancing, as well as diversify their cash positions.
Retirement Planning Tips
A financial advisor can help you navigate the complexities of retirement planning. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Social Security and portfolio withdrawals are two vital components of a retirement income plan. But how much income do you expect to generate in retirement? SmartAsset’s retirement calculator can help you estimate how much money your portfolio
Patrick Villanova, CEPF®
Patrick Villanova is a writer for SmartAsset, covering a variety of personal finance topics, including retirement and investing. Before joining SmartAsset, Patrick worked as an editor at The Jersey Journal. His work has also appeared on NJ.com and in The Star-Ledger. Patrick is a graduate of the University of New Hampshire, where he studied English and developed his love of writing. In his free time, he enjoys hiking, trying out new recipes in the kitchen and watching his beloved New York sports teams. A New Jersey native, he currently lives in Jersey City.
I’ve been saving for retirement since my mid-20s, and I write a retirement-planning newsletter every month. Yet here’s the thing: I don’t plan to ever fully retire. And while most people list “retirement” as their number one investing goal, I don’t think most other people should retire, either — at least not at age 64 for men and 62 for women, which are the average retirement ages these days, according to the Center for Retirement Research at Boston College.
I question the value and wisdom of retirement for financial reasons, for health reasons, and for “why should we encourage people to sit on their butts all day” reasons. However, in this post, I’ll question retirement from a risk perspective: Can anyone really be sure that their savings and benefits will last for a few decades? Let’s take a closer look.
1. Social Security has “issues.” I’ve written before that all the talk of people getting nothing from Social Security is overblown; everyone will get something. But there are enough problems to suggest that younger and wealthier people should expect to get much less than their currently projected benefit. Not that the current benefits are enough to buy beachfront property; the average annual Social Security benefit is just $14,172. If that weren’t scary enough, according to the Social Security Administration, more than half of elderly beneficiaries receive 50% or more of their incomes from Social Security; for 22% of married couples and 43% of unmarried beneficiaries, Social Security provides 90% or more of their incomes. The fact is, most Americans do not do a good job of planning for retirement.
2. Some people have pensions, but they have their own problems. According to the Employee Benefit Research Institute, approximately 20% of the over-50 crowd receives income from a defined-benefit pension, with an average benefit of almost $18,000. However, the percentage of Americans who will receive a pension is shrinking. Plus, many of these plans don’t have enough money to pay future benefits. (In fact, the massive underfunding of pension plans — particularly state and local plans — is one of the most underappreciated risks facing our country.) And when a company goes bankrupt, as retirees from Kodak recently learned, benefits can be reduced or eliminated. Most private plans are insured by the Pension Benefit Guaranty Corporation (PBGC), which has the power to take over underfunded plans or those of bankrupt or distressed companies. However, pensioners may not receive their full benefits. Furthermore, the PBGC is on the hook for $107 billion in payments yet has just $81 billion in assets. Government plans are not insured, but their sponsors can always raise taxes — though that’s generally not very popular.
3. Savings to the rescue…or not. I won’t trot out all the stats about how people don’t save enough, or how the baby boomers, as a group, are entering their golden years with too little gold (that is, net worth — I’m not suggesting that every retiree hoard the shiny metal). That’s bad enough. My concern is that for these (often-too-meager) savings to last, investment markets have to cooperate, and, as we’ve seen over the past decade or so, they often don’t. I’m not predicting Armageddon or anything like that; most of my longterm savings are in the stock market. But investing can be risky; we just don’t know for sure how much a certain stock or even a bond will be worth a decade or two from now. Yes, you can play it safer with CDs or Treasuries, but only if your money will last as long as you do — and keep up with inflation — while earning 2%. 4. Or maybe my home equity will save me…oh, wait. Several years ago, homeowners could take consolation in the rising value of their homes. Now, with prices down nationwide an average 30%, it’s much more difficult to turn a nest into a nest egg. Of course, this wasn’t supposed to happen. In 2005, Ben Bernanke, then an adviser to President Bush, said on CNBC, “We’ve never had a decline in housing prices on a nationwide basis. What I think is more likely is that house prices will slow, maybe stabilize…I don’t think it’s going to drive the economy too far from its full-employment path, though.” This just goes to show that even smart, well-connected people can get things very wrong, and that just because something hasn’t happened before doesn’t mean it can’t happen.
5. Health care is unpredictable and expensive. The big wild card in anyone’s finances is health care — what illnesses or accidents will befall them, and how much of the costs will not be paid by insurance. Yes, most folks age 65 or older are eligible for Medicare, and approximately 25% of retirees also get help from former employers. But basic Medicare, by itself, does not provide comprehensive medical and dental care; that costs extra. Plus, the financial challenges facing the Medicare system dwarf any problems Social Security has. As for employer-provided retiree health care, that — like a pension — is a disappearing perk.
6. If I only knew when I’ll die. From a financial perspective, retirement is a mathematical equation that answers the question: Will I run out of money before I run out of life? You’ll need a lot more money if you die a centenarian than if you die an octogenarian (which is how long the average person lasts, once she or he has made it to age 65). There are plenty of longevity calculators that will factor in your health, family history, and upholstery-potato habits to come up with an estimate of when you’ll join that Great Spa in the Sky (I sure hope there are massages in heaven.). The standard financial-planning advice is that you should assume you’ll live to 90 or 95. But the truth is, no one really knows their date of death, yet it’s a very important variable in the calculus of retirement.
A caboodle of question marks The bottom line is, no one can say for certain what their various sources of retirement income will provide a decade or three hence, or whether that income (whatever it is) will be enough to cover the income they’ll need at that point. That said, there are plenty of ways to mitigate all the risks of retirement, which I write about in my newsletter and in my GRS posts. But for now, I’ll just put the question to you: Do you think retirement is too risky? How do you plan to address any potential problems?
Finally, the message of this post is most definitely not “stop saving for retirement.” I continue to max out my 401(k), despite my hope that I’ll be able to work forever. Nevertheless, many people are forced to retire due to bad health or a bad economy. Plus, I’m just 42. By the time I’m 72, I may have changed my mind — or my body has changed it for me — and I’ll actually be ready to sit on my butt all day.
Elvira Rincon never loved the small apartment that sits between Sunset Boulevard and Dodger Stadium. Even 30 years ago, shortly after she arrived from a small town in Queretaro, Mexico, and moved in with her husband and five children, the one-bedroom unit built in the 1920s felt cramped.
But over the decades she made it a home, planting a sprawling container garden of flowers, fruits and medicinal herbs to cure her family of stomach pains and colds. Her husband poured concrete to make a small patio in the courtyard, where they hosted birthday parties nearly every month. At $495 a month the rent-controlled apartment allowed Rincon, her children and now grandchildren to build a life in the heart of Los Angeles.
That made it easy for Rincon, 59, to dismiss the first buyout offer. A developer who bought the complex and a neighboring one last year proposed paying her and her neighbors $22,000 to leave. She did the math and figured the money would be gone in about one year in a county where the median rent for a one-bedroom is $1,600.
The second offer to Rincon and her neighbors came in February: $55,000. It was more money than she and her husband, who works in a local nursery, could ever save on their own — and still not enough to stay in her neighborhood for long.
Soon after, the ownerssent workersto tear apart a storage shed she’d had for years and haul it away, along with a barbecue and many of her plants, saying they were health and safety violations. Rincon saw it as harassment meant to pressure her to go so the landlord could jack up the rent.
Like so many others, she and her family had one shaky foothold keeping them in a rental market that was otherwise soaring out of reach, and they felt that people with more power than them were trying to shake them off of it.
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The company says it was simply making changes requested by its insurance company and that it is listening to the concerns of residents, not trying to force them out.
Even so, Rincon and her neighbors are on edge, unsure what to expect next and asking themselves whether they still have a place in L.A.
“There are times when I feel desperate,” she said. “I get frustrated. And I tell my husband, ‘Let’s just go. Let’s just go.’ ”
In a city faced with a housing and homelessness crisis, where many renters pay more than half their income to live in overcrowded, aging homes, tenants like Rincon have what many others long for: low-cost housing.
Though city and state officials are desperate to create more of it, developers are simultaneously reducing affordable units by buying out longtime rent-controlled tenants with cash-for-keys offers and renovating old buildings into pricey new apartments or condos. Many residents quietly accept the offers and leave. Others try to hold out, knowing that taking the money probably means leaving their communities or facing rent that’s double, triple or more what they currently pay. Sometimes, tenants say, that leads to harassment or pressure campaigns.
The city has adopted policies meant to protect tenants of rent-controlled buildings from being forced to accept buyout offers or being evicted for not accepting.
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In some cases, landlords are required to offer to tenants a base amount for relocation — which ranges from about $12,000 to $23,000 for long-term renters. At times, owners offer more than that. But for tenants with very little income or credit, the money may not go very far once the sky-high rent of their next apartment is factored in.
City leaders have passed rules against harassment. But advocates say the rules lack enforcement, and plenty of tenants say harassment happens anywaywith little recourse.
Rincon arrived in Echo Park in the mid-1990s, fleeing a severe recession in Mexico that left her family’s farm deeply in debt.
Her first home in the U.S. was in the same apartment complex where she lives now, just across the common area, in a unit she shared with her brother-in-law, Pedro Villegas, her husband and others. Three decades later, Villegas still lives in that apartment, paying monthly rent similar to Rincon’s, whose monthly payments have increased twice over the years to $640.
Despite language barriers, Rincon became close with her neighbors, who include an 80-year-old retiree, a nursing student, her mom and brother, and a Cambodian refugee.Their kids often served as translators.
They’ve watched out for each other’s children and grandchildren, fed each other’s pets and shared lemongrass and guavas from their gardens. Though Rincon doesn’t care for the loquat tree that grows in a corner of the property, she keeps watering it because her neighbors love the fruit.
“We’re more like a community. We have been for years,” said Virginia Watson, 80. “We all know each other. We talk. We watch out for each other. It’s very unusual for L.A. because in other places I’ve lived everybody’s kind of anonymous, in their own little cubicle.”
Once Watson retired and began living on a fixed income, she was able to stay in her home because the rent was manageable. The same was true for Rincon and her family when she injured her back and stopped working.
Villegas’ four children have lived their entire lives in the complex, roaming the hills of Elysian Park and riding their bikes to Echo Park. He works at a laundromat on Sunset Boulevard, a short walk away. His youngest is now a junior at Ramon C. Cortines school downtown.
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Like Rincon, heknew the $55,000 offer wouldn’t last long in his community.
“The cost of rent is just too difficult,” he said. “The money doesn’t go far.”
Watson lives in a studio apartment adjacent to Rincon’s. She’s been there for 20 years, lives on Social Security and a small retirement income and pays $529 a month. When she’s looked online for other studios in the neighborhood, the most affordable cost isnearly $1,500 a month, an amount that she said would take about three-quarters of her income.
She might have considered the offer to leave if it was affordable to move in the city, she said.
But “rent is really, really high in L.A. I don’t know how you would manage for any length of time,” she said.
On Nov. 8, a few months afterWatson, Rincon and their neighbors decided not to take the initial $22,000 offer to leave, the property owners, Lilac Development LLC, served Watson with a three-day notice to pay or leave, saying she had not paid her rent for the month, though she says it was paid.
Watson reported the incident to the housing department, which investigated and found the notice in violation of city code for failing to provide proper information under COVID-era tenant protections, according to public records.
One month earlier, the owners served another resident with a three-day notice to pay or vacate the property, saying they owed $86.
In that case, the housing department found a “potential violation of the Tenant Anti-Harassment Ordinance,” records show.
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In both cases, housing officials wrote letters to the owners, explaining the law.
Watson and her neighbors see this and other actions, including the workers who went to the complex twice in March, tore down Rincon’s shed and hauled away her plants, as a pattern of harassment meant to pushthem out of their homes.
“I wake up after dreaming that I’m in a battle with landlords, big companies,” Watson said.
Recently, she packed up many of her belongings, assuming she would soon be out of a home, and she has kept them that way.
“I don’t unpack them because I don’t know how long I’m gonna be able to be here,” Watson said.
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Rory Anglin and his girlfriend, Jenna Loredo, are the newest residents of the two complexes, having moved in four years ago. They pay $1,236 a month for their one-bedroom, which Anglin sees as “the last of the good rents in L.A.”
When he told his mom in Mississippi about the $22,000 offer to leave, she was stunned at the amount.
“In Mississippi, that does sound like a lot,” Anglin said. In L.A. it most certainly does not.
Even so, Anglin said they were willing to consider taking a buyout until they felt a harassment campaign against his neighbors had begun.
“The end game for me is ‘leave us alone,’ ” Anglin said. “If we decide we want to move, we’ll move. But before we do, I gotta make sure all this stuff stops. It has to stop.”
If there’s a silver lining, Anglin said, it’s that the neighbors have become even closer in the last few months, forming a tenants’ association and strategizing together to push back against any harassment.
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Sara Rose, a property manager for Lilac Development LLC, told The Times that although the company initially offered cash for keys in order to “try to get tenants paying market value,” the company was no longer pursuing that strategy and would focus on “making the property habitable for current tenants.”
The company is not trying to evict anyone, Rose said.
“It’s not something we would take further action on if it wasn’t appropriate to do so,” she said.
Rose also said Lilac Development sent workers to haul away Rincon’s shed, barbecue and plants after its insurance company “advised there was certain work that needed to be done” to get the property insured.
They plan to inspect each property to figure out what needs to be fixed. In April, a city housing inspector found several conditions affecting the “health and safety of the occupants” in Rincon’s building and issued an order to fix the problems, which include damaged plumbing, fences and paint, by May 11.
Residents say there is a long list of problems beyond what that inspection revealed: leaking ceilings, mold, broken heaters and damagedflooring.
“I think based on the feedback we’ve received so far there’s no interest from the residents” in cash for keys, Rose said. “If they are interested and they approach us, it would be something we’d be willing to discuss. We don’t want to continue reaching out on something they’ve made clear they’re not interested in.”
Rincon said the first she heard about the change in plans was from The Times.
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For a long time now, she and her neighbors have felt as if they were in a state of limbo, waiting for an eviction notice or the return of workers tasked with hauling away more of their things. Like Villegas, she has seriously considered returning to Mexico, but her husband tells her they could never leave their children and grandchildren.
There was some relief hearing that the company would focus on making their home more livable rather than on getting them to leave. But she was also skeptical.