Planning to Retire
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5 Reasons to Avoid 401(k) Debit Cards
Continue reading… 4 CommentsNew 401(k) debit cards make it even easier to flunk do-it-yourself retirement. Investors should be wary of the potential pitfalls of 401(k) debit cards, according to an investor alert from the Financial Industry Regulatory Authority (FINRA), a nongovernmental securities industry regulator.
With a 401(k) debit card, you can generally borrow $50,000 or 50 percent of your vested account balance, whichever is less, the IRS says. Your employer must approve the loan. The amount you borrow is set aside in a separate money market fund and will generally earn income on a tax-deferred basis until you draw it down with the debit card or write a check on the account.
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Who's Got Your Number?
Continue reading… 2 CommentsHow many times have you given out your Social Security number in the past year? You've probably shared it with your employer, bank, health insurer, and landlord or mortgage agent. Even employees at your local gym and utility company sometimes ask you to hand over your number. Nearly 90 percent of Americans have been asked to divulge their full or partial Social Security number in the past year, often to businesses with no clear need for that information, according to a Consumers Union telephone poll.
Americans have been asked to share their Social Security numbers with financial institutions and retailers issuing credit (60 percent), healthcare providers (49 percent), cable TV or cellphone carriers (26 percent), utilities (17 percent), and retailers (16 percent). Many of these companies have no obvious need to collect Social Security numbers.
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Employees With 401(k)'s Retire Later
Continue reading… 0 CommentsIf you want to retire young, you'd be well advised to find a job that still comes with a traditional pension and health benefits for retirees. Employees entitled to defined-benefit retirement plans that guarantee income for life are more likely to retire at any age than employees who have only defined-contribution retirement plans like IRAs and 401(k)'s, according to an analysis of workers over age 50 by consulting firm Watson Wyatt.
Stock market booms and busts also influence the timing of retirement among workers with defined-contribution plans. Employees are more likely to retire at market peaks and delay retirement during downturns. This phenomenon often puts employees' goals at odds with those of their employers. "When the market booms, defined-contribution plan participants might retire just when companies need to add workers, and when there are market busts, defined-contribution plan participants might stay at work just when companies want to reduce the size of their workforce," says Mark Warshawsky, director of retirement research at Watson Wyatt.
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Economy Has Boomers Rethinking Retirement
Continue reading… 1 CommentAs gas and grocery prices rise, some cash-strapped older workers are rethinking plans to retire. Some 27 percent of older workers say they are putting off retirement because of the recent economic slowdown, according to a recent AARP telephone survey of 1,002 workers over age 45. Almost 25 percent of people between the ages of 45 and 64 are taking money out of their 401(k)'s and other investments. And younger baby boomers between the ages of 45 and 54 say they are even postponing paying bills (27 percent) and cutting back on medications (17 percent).
"Taking money out of your retirement savings has a compounding effect, because that money is not allowed to grow at a time when you have fewer working years to replace the losses," says Tom Nelson, AARP's chief operating officer. "Even more troubling, shortchanging your healthcare can lead to higher healthcare costs down the road."
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Revealed! Cushy Retirement Plans at Fortune 100 Companies
Continue reading… 4 CommentsOnly about half of Fortune 100 companies still offer their employees defined benefit pension plans. An analysis by consulting firm Watson Wyatt found that 54 firms had a defined benefit pension plan for newly hired salaried workers last year. Of those 54 firms, 28 offered a traditional pension that guarantees income for life. The remaining 26 offered hybrid pension plans like cash balance plans, an account that the employer deposits a set amount of money into (such as 5 percent of pay) and also deposits interest (which can be a fixed rate or a variable rate linked to an index such as a one-year treasury bill). But increases or decreases in the market don't directly affect the account, because the employer bears all the investment risks and rewards.
When it comes time to retire, the employee can choose to receive annuity payments until the account balance is used up or take a lump sum equal to the account balance. Sometimes vested employees can also cash out the lump sum when they leave an employer.
Here's how retirement plans at Fortune 100 companies have stacked up over the years.
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'Safe' Target-Date Retirement Funds Have Hidden Risks
Continue reading… 12 CommentsTarget-date retirement funds are designed to automatically shift investors' portfolios to less risky assets as they age. You name your retirement year, and the fund managers change the stock and bond allocation inside the fund to an appropriate risk level for your age, in theory getting a bit more conservative as you approach your ideal retirement date.
Almost 80 percent of large U.S. plan sponsors offered target funds as an investment option through their 401(k) plans in 2007, up from 60 percent in 2006, according to research by consulting firm Greenwich Associates. And even if you don't sign up, you could find yourself automatically enrolled in them unless you specifically opt out. "About 40 percent of funds that have adopted automatic enrollment use target retirement date funds as their default, compared with about a third using money market funds," says Greenwich Associates consultant Rodger Smith.
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5 Retirement Risks and How to Manage Them
Continue reading… 7 CommentsRetiring can be risky business. The Society of Actuaries, a group of professionals who evaluate risk for a living, recently named inflation the top retirement concern among both retirees and people nearing retirement age, according to a survey released this week.
About 57 percent of those already retired and 63 percent of those near retirement age said they were concerned that the value of their savings wouldn't keep pace with inflation, the telephone survey of 801 adults ages 45 to 80 found.
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The Government's Role in Retirement
Continue reading… 0 CommentsAmericans like to think that we can pull ourselves up by our bootstraps to create our own wealth. And this image usually includes financing our own retirement to a large degree. But that's not true everywhere in the world, at least according to a massive survey of 21,000 people in 21 countries by HSBC Insurance and the Oxford Institute of Ageing.
Fewer than a quarter of those surveyed (all between 40 and 69 years of age) in the United States, Japan, Mexico, India, Malaysia, Singapore, Hong Kong, and Saudi Arabia believe that their government should bear most of the financial costs of supporting them in retirement. But in other areas of the world, folks wouldn't mind government help, as in Scandinavia (almost 65 percent), Europe (45 percent), Brazil (50 percent), and China (around 40 percent). You can see the numbers broken down by country and other interesting statistics here.
Tell us, should the government step in by mandating additional private savings, raising taxes, or increasing the retirement age? Or should diligent savers and frivolous spenders alike be left to their own devices in retirement?
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Parents Say Money Isn't the Most Valuable Inheritance
Continue reading… 4 CommentsWould you prefer that your children inherit an unmortgaged house or your jocular sense of humor? Most people might say their children could use the laughter more than the house, suggests an international survey by HSBC Insurance and Oxford University's Institute of Ageing. Both employees nearing retirement (between 40 and 60 years old) and retirees (between 60 and 69 years of age) say they would rather pass on their personality traits than money.
Some 81 percent of respondents in the United States said they want their heirs to inherit personal values like spirit/sense of humor (38 percent), knowledge (20 percent), religion (16 percent), and commitment to supporting the community (7 percent), according to an HSBC Insurance press release. Just 19 percent of Americans surveyed want to leave heirs property (13 percent) or money (6 percent), the release said.
This inclination to distribute values rather than cash or property also is characteristic of Europe, Asia, Africa, and Latin America. "We want to pass on our perspective on life and our knowledge from generation to generation," says Stephen Green, group chairman of HSBC.
Tell us, what do you plan to bequeath to your loved ones?
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The Million-Dollar Question
Continue reading… 0 CommentsMy last post said many millionaires don't think $1 million is enough for a comfortable retirement. But most employees think they will need to save far less. The Employee Benefit Research Institute asked 1,057 workers how much in savings they thought was needed for retirement. Their answers:
Amount of Savings Needed for Retirement
All Workers Men Women Under $250,000 25 percent 22 percent 28 percent $250,000-$499,999 16 17 16 $500,000-$999,999 23 25 21 $1 million-$1.49 million 9 11 7 $1.5 million or more 9 13 6 Don't know/Don't remember 12 6 18 Refused 2 1 3 Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, 2008
Interestingly, men were much more likely than women to say they needed $1 million or more to retire (24 percent versus 13 percent). And many more women admitted they didn't really know how much they need to save for retirement.
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When $1 Million Isn't Enough
Continue reading… 2 CommentsIs a million dollars enough to retire comfortably on? Many baby boomer millionaires don't think so, especially once recession fears come into play. Almost 30 percent of 60-year-old baby boomers with investable assets of $1 million or more say they feel more financial stress now than six months ago, according to a new survey from Bell Investment Advisors and Opinion Research Corp.
The admittedly small survey of 500 boomers born in 1948 found that 40 percent are "downsizing" their lifestyles this year by contributing less to charity (22 percent), canceling, shortening, or postponing vacation plans (21 percent), reducing retirement savings (18 percent), or putting off retirement altogether (11 percent).
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Older Patients Want Specialized Medical Care
Continue reading… 2 CommentsYoung and old people use healthcare differently. While a young person might go to a doctor to get a prescription for new contact lenses or to seek antibiotics for a sinus infection, older people are more likely to see a doctor regularly to help manage and treat chronic conditions like high cholesterol or hypertension. The average 75-year-old American has three chronic conditions and uses four or more prescription medications, according to an April 2008 report by the Institute of Medicine.
A new survey found that baby boomers want medical care specifically geared toward older patients. Both 55- to 64-year-olds (83 percent) and those over age 65 (87 percent) say it is important to see a healthcare provider with specialized training for adults in their respective age ranges, according to the online survey of 3,110 adults over age 55 by Zogby International and the American System for Advancing Senior Health.
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The Greatest Retirement Expense of All
Continue reading… 8 CommentsYou've probably heard the quip: Be nice to your kids because they'll pick your nursing home. But unless your kids do quite well for themselves, they may not be able to afford one. The average U.S. household pulled in $48,201 in 2006, according to the Census Bureau. The average annual cost of a private room in a nursing home: $76,460, or $209 a day.
A new survey of 10,000 nursing homes, assisted living facilities, and home care providers by Genworth Financial found that costs of long-term care have jumped by as much as 25 percent in some areas since 2004. A one-bedroom unit in an assisted living facility costs $36,090 a year. Care by a non-Medicare-licensed home health aide will set you back $19.18 an hour, or $43,884 a year for 44 hours each week. Even the least expensive option, adult day healthcare, will lighten your bank account by $15,236 a year.
