Planning to Retire
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Quiz: Are You Ready to Sign Up for Social Security?
Continue reading… 13 CommentsSocial Security prevents poverty for millions of older Americans. But the rules about when to sign up and how much you get can be complex. Take this quiz to decide if you know the basics or need to spend more time reading up on your retirement options at the Social Security Administration page online.
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Survey: Economy Causes Workers to Stop Saving for Retirement
Continue reading… 2 CommentsMany Americans have stopped saving for retirement. Completely. A new survey found that 63 percent of Americans say they have given up tucking money into their nest egg. An additional 35 percent say they have reduced their retirement plan contributions.
But curtailed savings aren't due to a fully funded retirement account. Only 21 percent of survey respondents say they currently have $50,000 or more in investable assets, according to an Opinion Research Corp. and TD Ameritrade Holding Corp. telephone survey of 1,005 adults conducted in mid-September.
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Where the Worst Stock Market Declines Occurred
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Survey: Baby Boomers Will Claim Social Security at Age 62
Continue reading… 15 CommentsMany baby boomers plan to sign up for their Social Security checks as soon as possible. A new survey found that 45 percent of those currently 61 years old will begin getting Social Security at age 62, the first year recipients can apply. Boomers cited financial necessity, health and longevity concerns, and a desire to collect as much as possible from the system as their reasons for early claiming.
But collecting your due at age 62 could be a mistake. Social Security benefits will increase by approximately 7 percent each year this group of boomers delays claiming from age 62 to 66 and by 8 percent per year until age 70. That is almost certainly a better return than investors are getting from their investments right now, and it can insure healthy retirees against the possibility of outliving their savings.
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Stephen Hawking, 66, Will Retire
Continue reading… 6 CommentsCosmologist Stephen Hawking plans to retire next year. The 66-year-old author of the popular science bestseller A Brief History of Time became famous for his theories about gravity, black holes, the big bang, and the nature of time.
Hawking, the Lucasian Professor of Mathematics at Cambridge University (a position once held by Isaac Newton), plans to step down at the end of the academic year, in accordance with a University policy of retirement at the end of the academic year in which officeholders turn 67, the Associated Press reports.
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U.S. Pension Insurance Agency Lost $3 Billion in Stock Investments
Continue reading… 2 CommentsThe U.S. Pension Benefit Guaranty Corp. (PBGC), a government agency that insures private-sector pension plans and pays out benefits if the a plan fails, lost at least $3 billion in investments during its fiscal year, which ended in August, U.S. Rep. George Miller announced at a hearing today in San Francisco. Miller, a California Democrat, heads the congressional committee that oversees PBGC.
According to a document containing preliminary, unaudited figures, the losses were caused by the agency's stock holdings. Miller says PBGC invested a significant portion of its funds in mortgage-backed securities.
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Republicans Are More Confident About Retirement Than Democrats and Independents
Continue reading… 2 CommentsRoberta Tim Quan, 74, a retired elementary school educator in San Pablo, Calif., recently sustained a loss of $38,000 in her 403(b) retirement account. "My situation is in shambles, with expenses exceeding income," she said at a congressional hearing about retirement security this morning. "I am retired and unable to re-earn the lost funds."
Quan, like many retirees who have experienced catastrophic losses in their retirement accounts, is looking for the government to provide some answers. But how the government should address the retirement needs of retirees who suffered market losses is hotly debated.
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The Baby Boomer Retirement Game
Continue reading… 3 CommentsIn some ways, it's fun to ponder retirement: where you might live, hobbies you might take up when you're not tied to a job, and how you won't have to deal with a commute or a boss or coworkers. But if you're worried about the financials of retirement—as everyone without a pension is right now—the prospect of running out of money is a less pleasant contemplation.
In financial downturns, people often turn to pleasant distractions to ease their apprehension about real life. The Ashland, Ohio-based company SWL Retirement Inc., thinks one of these happy diversions should be a new board game about retirement: The Baby Boomer Retirement Game.
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Retirement Plans on Hold
Continue reading… 24 CommentsOlder workers are delaying retirement plans indefinitely. A whopping 70 percent of workers plan to work during their retirement years, according to a new AARP survey that confirms a growing body of research indicating that older Americans have no intention to drop out of the workforce.
Part-time work was the top choice in the survey of 1,500 Americans ages 45 to 74 who were working or looking for work in spring 2007. Common motives for post-retirement work were for interest or enjoyment (29 percent) or for needed income (22 percent). The percentage of respondents working for pleasure has decreased since the survey was last conduced in 2002, while the proportion working out of financial necessity has increased. Boomers planning to work primarily for enjoyment typically have post-graduate degrees and household incomes of at least $80,000 a year.
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Survey: Race Plays a Role in Retirement Savings Behavior
Continue reading… 0 CommentsAfrican-Americans and whites who make at least $50,000 annually are equally likely to have access to 401(k)'s and contribute regularly. But blacks save less each month and have smaller nest eggs, according to a new survey.
Blacks contribute a median amount of $169 monthly to their 401(k) plan, while whites contribute about $249, according to a telephone survey of 503 African-Americans and 506 whites with household incomes of at least $50,000. These disparities quickly compound over time. The median household savings for retirement reported by black respondents is $53,000, while whites say they have more than double that amount in $114,000.
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Social Security Recipients Will Get Bigger Checks Next Year
Continue reading… 25 CommentsSeniors who have recently seen their nest eggs tank are finally getting a small break. Social Security benefits will increase 5.8 percent next year, the largest cost-of-living increase in more than 25 years.
The estimated average check next year will be $1,153, up $63 from last year. The maximum benefit will be $2,323 monthly. The average couple both receiving benefits will get about $1,876. Delaying claiming Social Security until age 70 produces higher payouts.
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How Obama and McCain Want to Change Your Retirement Accounts
Continue reading… 12 CommentsThe subject of retirement accounts was briefly mentioned in the first question of last night's presidential debate. Barack Obama proposed penalty-free hardship withdrawals from IRAs and 401(k)'s, which are currently subject to a 10 percent early withdrawal penalty for those younger than age 59½ who need access to their retirement stash. Fifteen percent of the account—up to $10,000—may be withdrawn in 2008 (including retroactively) and 2009 but will still be subject to normal taxes.
Both Obama and John McCain's recently proposed economic plans will also allow retirees to avoid selling off their retirement assets while the market is at historic lows. Currently, annual withdrawals from traditional IRAs are required for everyone age 70½ or older. These required minimum distributions are taxed as income. Both senators have circulated proposals to temporarily suspend the required withdrawals for seniors over age 70½. This will allow flailing nest eggs more time to recover from recent market turbulence.
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Kodak Retirees Protest Benefit Cuts
Continue reading… 6 CommentsCompanies don't always deliver on the retirement benefits promised to their employees. Kodak announced in August that it would no longer pay for dental coverage or life insurance for retirees beginning in 2009. The camera company also plans to shift more health insurance premium costs to retirees and phase out employer-paid medical coverage for dependents over the next 10 years.
The retired Kodak workers decided to stage a protest. About 70 retirees picketed outside the company's corporate headquarters last week to protest the cuts, the Rochester Democrat and Chronicle reports. Rochester-based TV station R News captured a video of the former workers marching with signs lamenting the loss of their promised benefits. More than 200 Kodak retirees held a similar protest outside Kodak Tower in September.
Kodak spent $44 million on postretirement benefits in the second quarter of 2008, according to an earnings report filed in July with the Securities and Exchange Commission, and the company expects to spend an additional $112 million this year. "We feel that our approach strikes the right balance between individual and company interests," Kodak said in a statement about the benefit cuts. "Keeping Kodak competitive is the best thing we can do for employees and retirees."
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How Low Can Your 401(k) Go?
Continue reading… 5 CommentsStock market losses can be heartbreaking. But sharing your stories of nest egg decline can be cathartic. Here are a few personal finance bloggers to commiserate with or pick up some money tips from.
- 2 Million's 401(k) is down 33 percent.
- AllFinancialMatters says his wife's 401(k) is down 39 percent this year.
- My Money Blog lost nearly $12,000 in retirement and brokerage accounts.
- Get Rich Slowly offers tips for investing in a bear market.
- Consumerism Commentary is buying while the market is down.
- Five Cent Nickel discusses recovering from a stock market decline.
- I Will Teach You to Be Rich shares his take on the financial crisis.
- ShAARP Session compares 401(k)'s to fried eggs.
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Stock Market Gains From Past Three Years Wiped Out
Continue reading… 6 CommentsThe financial turbulence of the past year has swallowed the gains from the 2005 to 2007 stock market boom for the typical investor approaching retirement age. Today, those age 50 and older with a retirement account have around $89,300, down from a high of $105,800 last year, according to calculations by Richard Johnson, Mauricio Soto, and Sheila Zedlewski of the Urban Institute.
Median Retirement Account Accumulation for Households Ages 50 and Older:
- 2004: $80,900
- 2005: $88,300
- 2006: $93,300
- 2007: $105,800
- 2008: $89,300
Source: Urban Institute calculations, 2008 -
Picking a Retirement Community Based on Political Views
Continue reading… 2 CommentsChoosing neighbors you can get along with is important at any stage of life, but especially in retirement. While researching an article about places to retire that might appeal to Democrats and Republicans, I had an interesting conversation with Diana Mutz, a political science and communication professor at the University of Pennsylvania and author of Hearing the Other Side: Deliberative Versus Participatory Democracy.
Her research indicates that people who live in diverse communities have more political tolerance because they are exposed to multiple perspectives on issues. But being exposed to a range of political views actually decreases political participation, in part because publicly taking a stand that associates may oppose can be socially awkward. Political activism, on the other hand, often appears in social environments where like-minded people spur one another to action with their collective energy and enthusiasm but can also lead to extreme thinking. "People talking to no one but other like-minded people have no one questioning their views, so they become more and more extreme," says Mutz.
Tell us, would you prefer to retire in a community of people who share your political views or be exposed to a range of viewpoints?
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Retirement Savers Lost $2 Trillion in the Stock Market
Continue reading… 12 CommentsStock market turmoil has wiped out roughly $2 trillion of Americans' retirement savings over the past 15 months, according to the Congressional Budget Office.
The value of pension funds and retirement accounts dropped by roughly $1 trillion, or almost 10 percent, in the year ending June 30, the CBO told the House Education and Labor Committee Tuesday, citing Federal Reserve data. Since then, asset prices have dropped even further. The CBO says that retirement assets may have declined by as much as $2 trillion over the past 15 months.
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Survey: Americans Changing Their Retirement Plans Because of the Economy
Continue reading… 17 CommentsAmericans are changing their retirement plans because of recent changes in the economy. A new AARP survey of workers age 45 and up found that if the economy does not improve significantly, most will probably spend less in retirement (69 percent) and delay retirement and work longer (65 percent). Fewer Americans (37 percent) said they will save more for retirement.
Saving more is considered out of the question for many families who are already strapped for cash. The telephone survey of 1,628 workers in September by AARP and International Communications Research showed that many older Americans have found it more difficult to pay for necessities like food, gas, and medicine (56 percent), helped a family member pay bills (47 percent), and found it hard to pay for utilities like heating, cooling, and phone services (45 percent) in the past year. To cope with rising costs, some workers have increased the number of hours they work (20 percent) and stopped contributing to their retirement accounts (20 percent).
Tell us: Have you changed your retirement plans?
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The Bailout Versus Your Retirement Dollars
Continue reading… 2 CommentsSeven hundred billion is a massive number that we’re all grappling to put into some sort of context. Collectively, Americans have almost seven times that amount stashed in IRAs, the most popular retirement savings vehicle besides Social Security. Total assets in IRAs grew 12.5 percent in 2007, reaching a record $4.75 trillion, according to recent research by the Employee Benefit Research Institute. In contrast, 401(k)-type plans held $3.49 trillion and traditional pensions contained $2.33 trillion in 2007.
The phenomenal growth in IRA wealth is fueled by approximately $200 billion in rollovers, not new contributions, which only accounted for about $40 billion. Most IRA assets are invested in mutual funds (47 percent), followed by brokerage accounts (38 percent), life insurance companies (8 percent), and banks/thrifts (7 percent), EBRI found. About 90 percent of all IRA wealth is in traditional IRAs that are taxable upon withdrawal, but most new contributions go into Roth IRAs, where you pay the taxes now and get your withdrawals tax free in retirement.
When IRA contribution limits were increased in 2002, the average amount tucked away increased, but a larger percentage of workers did not participate. Only about 10 percent of eligible taxpayers contribute to an IRA to save for retirement.
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Reader: What Will Happen to My WaMu Pension Plan?
Continue reading… 14 CommentsDear Planning to Retire,
I used to work for WaMu and was fully vested in a pension program. Do you know if I will receive my benefit when I become eligible, or did I just lose some retirement income?
The government seized Washington Mutual's banking operations and sold parts of the company to JPMorgan Chase on September 25. But the jurisdiction of employee pension benefits was a point of contention during a tumultuous week that left current employees and retirees nervously awaiting an announcement that could affect their financial future. An unnamed WaMu human resources employee fueled the fire by telling Seattle Times business reporter Melissa Allison that payments to current or former Washington Mutual employees from the company's deferred compensation and supplemental retirement plans have been indefinitely suspended. But people in WaMu's 401(k) and pension plans will continue to be paid because those funds are held in trust, the employee said.
