RSS FeedIn honor of 2010, the Wall Street Journal provides a year-long guide to fixing your finances. (See article). While I would normally enjoy pontificating over these common sense steps, I have very little to add here…but..oh wait, I do feel the need to put in a word here about retirement savings.
The past couple of years have been rough for retirement savings. While most will likely stay the course in 2010 and continue saving, some may be tempted to cash out and play to lottery or try a Madoff-style investment in order to get rich quick. The fact of the matter is nobody gets rich quick. There is no magic bullet. If monthly retirement saving seems boring, well, that’s because it often is. If the quarterly 401(k) or IRA statement is not jumping out at you with a 25 percent rate of return, that is to be expected.
Let 2010 be the year of common sense…save regularly, don’t time the market, and as Warren Buffet once said, “Beware of geeks bearing formulas.”
When it’s time to retire, will you have enough in savings? If you have made and are making wise personal investment decisions, the answer is likely yes. But, if you were automatically enrolled into your employer’s retirement plan and are letting that employer make your investment decisions for you, the answer could be no.
It’s about time…the good news about 401(k)s has finally surfaced, thanks to an article from the Wall Street Journal. After all the hand-wringing over 401(k) balances that took a tumble last fall, and ideas proposed by some in Congress over what to do about it (mainly nanny-state schemes of allowing the government to manage retirement accounts), it has been noticed that balances are bouncing back. (Thank you to WSJ’s Karen Blumenthal) Read the rest of this entry »
The terms “filial responsibility” and “filial support” refer to an adult child’s obligation to render care to aging parents. Before Medicare and Social Security, children were obliged to meet their filial responsibilities by filial support laws. These laws gave children the primary responsibility in caring for elderly parents – neglecting to do so could yield financial consequences.
Over the past several days, I have read some articles about the fact that next year's Social Security benefit payments will not be increasing as they normally do to keep up with inflation. This is what is known as the cost of living adjustment (COLA). According to some politicians and advocates, with rising health care costs, seniors are getting the short end of the stick unless an increase is in order.
“Retirement Readiness” is All About Income, Not Age
posted by Pam Villarreal @ 14:16 PM "The question isn't at what age I want to retire, it's at what income." ~George Foreman
I came across an informative article in Monday's Dallas Morning News, "Retirement Readiness." (This article is also available in the New York Times). Two financial advisors in North Carolina put their pre-retiree clients through a "boot camp" designed to prepare them for what it will feel like when they retire. It helps people determine if they will truly be ready to retire at the age they plan to do so. It got me to thinking about what retirement is really all about.
As if the Democrats' proposed health care bill is not enough to send a person to the urgent care clinic, there is a lesser-known move that has garnered attention among those concerned about the growing entitlement burden: the House voted this week to approve a package which would eliminate the "Medicare trigger."
A recent New York Times article discusses whether the best time to retire is at 62 (early retirement) or at 70. Its conclusion: hold out as long as you can. This must, however, be taken with a grain of salt. Getting the timing of retirement right depends on several factors, and no two families are exactly alike.
For a single person, probably the most important question is how long do you plan to live? If you are "in poor health and probably won't live past 78," you might want to take benefits at early retirement, says the Times. Ideally, if you expect to live a long time and can work past retirement, then 70 is the best time to take benefits.
If long life is the expectation, but you can't work till 70, then 66 seems to be the magic number. This option is best even if a retiree has to use retirement savings to make it to 66 to file for Social Security benefits. That's because the increase in benefits gained by retiring at 66 instead of 62, eventually makes up for the savings used to make it to 66. Waiting any longer than 66, seems to exhaust savings too much to make up for higher Social Security benefits.
Do you want to pay the piper now, or later? Currently, only households making less than $100,000 a year or spouses filing jointly can convert their traditional Individual Retirement Account (IRA) into a Roth IRA. But as noted in a recent Wall Street Journal article those restrictions will be lifted in 2010, so that workers of any income level can convert their traditional accounts to a Roth. Traditional IRAs allow workers to save money tax free now and pay taxes when they withdraw their money during retirement. Roth IRAs, on the other hand, allow workers to pay taxes on retirement savings now and withdraw it tax free later. If you're not sure whether a Roth IRA is right for you, check out the NCPA publications "To Roth or Not" and "Would You Benefit from a Roth IRA?"
Much attention has been given to the out-of-pocket health care costs seniors will likely incur during their retirement years. (See our recently published Brief Analysis on this topic.) A Fidelity study found that the average senior retiring this year at age 65 will need $240,000 during his or her lifetime to pay Medicare premiums, out-of-pocket costs, and the like.
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