RSS FeedMuch 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.
In my recent study, Ten Ways to Wreck Your Retirement, I pointed out that relying too much on home equity for retirement income can spell trouble. A Wall Street Journal article has reiterated the potential pitfalls of relying on a mortgage to make you rich.
A recent article in the Wall Street Journal confirms what I pointed out in a recent NCPA study, "Ten Ways to Wreck Your Retirement." Tapping into retirement accounts is not the best option! Certainly, desperate times can call for desperate measures, but it's important to bear in mind the true cost: penalties, taxes and the lost opportunity of reaping a market comeback.
A recent article on Forbes online discusses the benefits of "pensionizing" one's 401(k) as a way to dam up the flood of money leaching from the ever downward-spiraling market:
"Seeing how well most 401(k) plans have done in the past year, the answer still seems to be that for many, added flexibility is no replacement for steady, guaranteed returns. But those days are long gone for many. But that doesn't mean that even in a down market that you can't try to trim your losses. How? Do like the pensions do and re-balance your portfolio ever six months or so, selling off your winners and bumping up your losers. This way you're always selling high and buying when things are cheap. "The only way that the investor is going to be able to respond accordingly is if they are aware of what is happening in their portfolio," says Roseman."
Fresh from the Employee Benefit Research Institute, a new survey found that many people plan on postponing retirement and working longer than they originally anticipated. The reasons? A bear market, economic worries, and less confidence in how much they have saved for retirement.
An interesting article appeared in the Wall Street Journal entitled, "What Do I Do Now?" The article lists five Do's and 5 Don'ts to help readers keep their heads during the recession. Similarly, the NCPA released a study two weeks earlier called "Ten Ways To Wreck Your Retirement" giving the same sort of recommendations.
"Don't stop saving" seems to be the name of the game when it comes to staying on top of the downward slope. Of course, this goes along with other practices as well, such as reigning in excess spending, living within your means, taking advantage of employer's matching funds and staying in the market if you're already in so that you don't incur more losses by selling off your stocks. Whether or not the bottom is near, the advice echoing from all corners of the financial sector is the same: Protect your retirement– don't stop saving!
See NCPA Senior Policy Analyst discuss, "Ten Ways to Wreck Your Retirement."
It is bad enough that the federal cigarette tax will more than double under the Obama Administration, disproportionately affecting the poor. But now low-income seniors may pay more for their health insurance. The Centers for Medicare and Medicaid Services is reducing payments to insurers for Medicare Advantage plans. Medicare Advantage is a private plan in which the government reimburses insurers rather than physicians. It allows seniors to buy into plans that provide more benefits than traditional Medicare at a lesser cost. These plans are particularly appealing to low-income seniors. However, reducing payments to insurers will force insurers to recoup the payments elsewhere, most likely by increasing seniors' premiums. (Read more here in the Wall Street Journal)
An estimated 9 million seniors are covered on Medicare Advantage. In 2004, America's Health Insurance Plans (AHIP) estimated that almost half of Medicare Advantage enrollees had incomes of less than $20,000 a year. Lower costs was the primary reason that enrollees chose Medicare Advantage. If the new administration truly wants to provide health insurance for all, it could start by not chipping away at a program that already provides coverage to 9 million.
To readers who are having misgivings about the stock market, the bond market, your 401(k) or IRA accounts and retirement savings in general: Take a look at the new NCPA policy report, "Ten Ways to Wreck Your Retirement." While some of the ways seem obvious, the recent economic turmoil have left some savers tossing common sense out the window. So think carefully before you cash out and stick your money under the mattress or invest in ostrich farms of dubious value (remember those from the 1980s?).
Whether because of his slow, steady pace or the big hard shell on his back, the turtle is a reptile we should all consider emulating during a market downturn. This economic landslide in particular has caused hysteria among investors looking to build their retirement nest eggs and has prompted many to leave the market all together opting for the cookie jar or the sock under the mattress instead. The prolonged contraction we are facing has many wondering whether or not we’ve even hit the bottom yet. But take heart! The clouds will soon break. It’s all in the approach.
Many 401(k) plan participants are likely familiar with target date funds. Target date funds, also known as lifecycle funds, shift allocations of bonds, stocks and cash based on the expected year the plan participant will retire. For instance, those who are decades away from retirement will have a greater allocation of stocks in their target date fund than those who are fast approaching retirement. But a recent article in the Wall Street Journal argues that since target date funds are based on years until retirement and not individual levels of risk, they may not be the best investment choice for everybody. Read more here.
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