Why I Can’t Wait to Retire

Good Day,

The word retirement is a word that many would-be retirees fear nowadays, maybe it’s because of their retirement portfolios taking a serious hit during the financial crisis of 2008, and with the negative publicity about retirement that is all over the place. While a big chunk of the information may be true, there are thousands of people who are retiring to a happy retirement life with just enough to cover their annual expenses. Retirement is part of your life that is basically inevitable, and it would for your own good to prepare for it eventually. So for all those who are about to call it quits, think of all the wonderful things that you are going to do while retired, as illustrated by Dave Bernard in the following article on why he can’t wait to retire.

As baby boomers, my wife and I are right in the middle of the 75 million member generation that is rapidly entering the retirement years. We have overcome numerous challenges simply to arrive at this age. But even once we make it to retirement, there is no guarantee of smooth sailing, especially once health concerns enter the picture.

Some people approach retirement with a bit of fear and uncertainty, while others jump in with both feet and go for it. Personally, I can’t wait to retire. Here are a few of the reasons I’m looking forward to my retirement years:


Once retired, I can choose to do absolutely nothing whenever I want to, and for as long as I would like to. I can get up late, enjoy a second cup of coffee at my leisure, read my book for as long as I want to, exercise when it is most convenient, and basically flow into an unstructured day at a pace most comfortable to me. I am in control of the amount of energy I choose to exert on any given thing, if I choose to exert any effort at all. I plan to frequently immerse myself in this wonderful downtime as I travel into my retired years.

Pursuit of new interests.

While mired in the working world my energies were focused on day-to-day performance at my job. When the weekends rolled around I was confronted with a list of things to do that did not get done during the week. If I was lucky enough to get all the way through the list, I was usually too tired to spend time on hobbies or other interests. And then before I could even take a rest, Monday rolled around again. In retirement, I will have that precious time to do the things I have always wanted to do. The list is already under way and growing steadily.

I will decide when and how I work.

After giving some serious thought to what my retired life will look like, I plan to continue working in some capacity. I enjoy the interaction with others as well as the feeling of satisfaction upon successful completion of a project or goal. I want to avoid the stress of a full-time demanding career, but I still want to do something. The good news is that if one particular direction does not work out as hoped, I can quit and try something different.

I can act spontaneously.

While working, supporting a family, and paying the bills, what I did and when I did it was often beyond my control. Monday through Friday were spent at the office, with the hope of recharging a bit over the weekend. Dreams of doing something on short notice were just that: dreams. In retirement, if I discover a special offer for a mid-week hotel on the coast, I can do it. I look forward to doing new and exciting things without too much planning and acting as the opportunities arise.

Spend more time with my wife.

Throughout our lives one or both of us has always been working. Our timing was never quite in sync so that both of us were out of work at the same time, which was probably a good thing considering health insurance costs. In retirement, we will finally be together to do new things. We are fortunate in that over the years we have each developed our own interests and can keep busy via many different avenues. In retired life we can together undertake the spontaneous adventures we have dreamed of. We could head away for an extended visit to a foreign country, perhaps take some formal dance lessons, and maybe wander the countryside in a RV. It is all out there just waiting for us. I can’t wait.

4 Retirement Planning Steps for Gen X, Yers

Good Day,

A lot of negative things have been said about Generation X and Y, and the last thing that people who belong to these groups want to do to improve their image is think about retirement. Retirement planning, as both generations will say, is an activity for the old, but with the way things are going, by the time these folks hit retirement, the government will probably be responsible for very small percentage of their retirement income. With all the cut backs and the strain Baby Boomers  are putting on the Social Security System, the system will most likely be broke in the not so distant future, to cater for the retirement needs of these generations. For the young individuals who may be considering a happy retirement life, instead of you waiting for this time bomb to explode at the worst possible time, ensure security of your retirement by planning for it by taking simple steps as illustrated in the following article by Steve Vernon.

If you’re like many people in their 20s and 30s, you’ve put off thinking about retirement because it seems so far away. And while some Gen X and Gen Yers have started worrying about being prepared for retirement, they aren’t yet following through on solutions.

Maybe it’s time to get serious.

When I give retirement planning workshops to baby boomers, audience members often express one of these two thoughts:

  • I wish I’d heard you 20 years ago
  • My kids need to hear your message

If you’re a member of Gen X or Gen Y, why not get 2013 started on the right track by taking steps to improve the odds that you’ll be able to enjoy your retirement years without the stress of worrying about your finances? It’s never too early to start planning for a long and prosperous life. But don’t try to do everything at once — you’re more likely to succeed by taking just one step at a time. So act on one of these ideas each month, and before half the year has passed you’ll be well on your way to financial freedom in your later years.

Step 1: Find ways to spend less money.
The No. 1 reason most people give to explain why they can’t save any money is that they spend their whole paycheck — and then some — in order to afford all the things they need or want now. Instead of that line of thinking, why not think of it this way: You can buy yourself freedom from work in your later years if you’re careful about how you spend your money today. Because if you spend all your wages now, you’ll become a slave to work for the rest of your life.
Over the years, I’ve found many ways to save significant sums of money, including driving my cars into the ground instead of buying a new one before the old one’s dead; not buying the latest electronic gizmo and making do with older versions that work perfectly well; and not taking expensive vacations. And in spite of cutting back, I’ve had a great life!
You can also be careful about how much money you set aside for your children’s college education. Will it really ruin their lives if they go to a good public school instead of an expensive private one? Keep in mind that if you sacrifice your retirement savings to pay for your kids’ college tuition, the “gift” you might end up giving them is the need to move in with them in your later years.Step 2: Make changes to improve your health.

There are simple things you can do now to significantly reduce the odds of developing expensive and debilitating illnesses at any age. And the sooner you get started, the better. Many readers may have innovative wellness programs at work that make it easy and rewarding to make progress. Improving your health doesn’t need to cost anything — all it takes is determination. And another great benefit is that you’ll look and feel better right now and won’t need to wait for your retirement years for the payoff.One simple step to take is to reduce the amount of fatty foods you eat and to increase the amount of fruits, vegetables and grains you consume. The bonus? Cutting out meat and consuming more fresh fruits, vegetables and grains should save you money at the grocery store, since these foods usually cost less than meat. This will allow you to save more for retirement, so you’ll be achieving two goals for the price of one.

Most people would also benefit by increasing the amount of exercise they get every day. If you’re a couch potato but want to be more active, try starting with a brisk, 30- to 45-minute walk around your neighborhood, either first thing in the morning or right after dinner. Take your spouse or partner, too, if you have one, or call up a friend who’s interested in exercising. And if you’re already exercising, good for you! But I bet you can find ways to improve your workouts by making sure you get all the kinds of exercises (stretching, cardio, strength training and balance) that are necessary to keep you fit in your later years.

Step 3: Invest in your career.

You won’t be able to invest much for retirement if you don’t have a job that pays well. If you’re in a dead-end job, maybe it’s time to investigate what type of training or education you need to start a career with more of a future. Or if you’re in a good career already, think about the steps you can take that will make you more valuable, and thus more likely to earn raises and promotions. It might not even cost you anything; maybe it just involves signing up for more training offered by your employer or taking on new responsibilities.Think you’ve been doing well at work but haven’t received a raise lately? Consider asking for one, but do your homework first. If you’re successful and convince your boss you deserve a raise, invest the amount of your raise in your 401(k).

Step 4: Increase your retirement savings.

Yeah, yeah, I know you’ve heard over and over that you should start saving for retirement when you’re young. Well, you’re going to hear it again!If you participate in a 401(k) at work, bump up your savings by just 1 or 2 percent of your pay. Or if your plan has an “auto-escalation” feature that periodically increases your contribution, sign up for it. Saving a little more now won’t ruin your life — you likely won’t even miss the money — and you’ll learn how to get by while spending less (see Step 1 above). Better yet, make sure you’re saving enough money.

If you take charge now, you’ll feel much better about your future! And there’s no better way to get started than by taking these steps during the first half of 2013.

The Middle Class Retirement Delusion By the Numbers

Good Day,

We are fast approaching 2013, and as usual, for some this will be the year they kiss employment goodbye, while for others, it will be their first entrance into the job market. But the one thing that both groups will have in common is retirement. Ok, it’s not funny, I’m trying to be serious. Maybe for those starting employment, this will probably be the last thing on their mind, but as time goes by, it will take center stage. But over the years, what most have done is base their retirement on unrealistic views of what kind of retirement life they will have once they call it quits, and they go ahead and make retirement calculations based on this wrong information. As we approach retirement, reality checks in a little too late for us to take any drastic action. So, as we are about to say goodbye to 2012, lets also make a promise that our retirement will be based on realistic figures and not delusional numbers, as explained in the following article by Jason Hull.

The need to save for retirement is accompanied by plenty of hints. Ads like ING’s from a few years ago have neighbors toting around large orange numbers, or simply the word “gazillion” to demonstrate what they thought that their retirement numbers needed to be. Popular authors and academics like Lee Eisenberg, author of The Number, discussed what you’d need in retirement, while in-depth research from William Bengen came out with the 4 percent drawdown as well as, more recently, Wade Pfau’s research arguing that even a 4 percent withdrawal rate in retirement might be too risky. There’s no shortage of good information.

Yet, as an October study by Wells Fargo shows, most Americans are woefully unprepared to manage their own retirement. It’s not just that people have been hit by the most recent recession and economic downturn, it’s that many middle-class Americans have a picture in their minds of what will be sufficient to retire that falls far short of what they will actually need.

Let’s look at some of the numbers in detail:

Some 30 percent of Americans say they will need to work into their 80s to be comfortable in retirement.

Where is the delusion? The reality is that many people won’t be physically able to work into their 80s. According to the U.S. Administration on Aging’s Aging Integrated Database (AGID), 22.5 percent of Americans aged 60-84 reported employment disability–they were physically unable to work and receive disability payments because of that disability.

Some 34 percent of Americans think they’ll need less than 50 percent of their retirement income; yet, median household income is approximately $50,000.

Where is the delusion? One-third of middle-class Americans think that they will need $25,000 annually in retirement. For a family of two, since we can assume that the kids will have left the nest by then, this puts them less than $10,000 above the federal poverty line.

Middle-class Americans believe, on average, their retirement healthcare costs will be $47,000.

Where is the delusion? Medicare out-of-pocket costs are expected to be between $240,000 and $430,000 for a 65-year-old couple retiring today.

Middle-class Americans say they will need a median of $300,000 to retire. The same respondents said that, to date, they have saved a median of $25,000.

Where is the delusion? The average age of the interviewees was 50 years old–the ages ranged from 25 to 75 in the interview. This means that, assuming a retirement age of 66 years, they have 16 years to save $275,000. If you assume that the stock market goes up 5 percent per year–perhaps not the safest assumption one could make–then to hit that savings number, they need to save $11,070.69 per year, or 22.1 percent of the median income. However, 68 percent of middle-class Americans who have a 401(k) plan contribute 10 percent or less of their income to retirement.

Middle-class Americans think that a median safe withdrawal rate in retirement is 10 percent.

Where is the delusion? Dr. Wade Pfau, CFA, ran historical simulations for retirees from 1926 to 2000 to see how long retirement savings would last at a 10 percent withdrawal rate. Through 2009, only one year group would still have money–those who retired in 1982. Everyone else ran out of money, with their retirement funds lasting between 8 and 25 years. In more than two-thirds of the cases, retirees ran out of money before reaching the average life expectancy. Most financial planners recommend a 4 percent withdrawal rate, and some, like Dr. Pfau, indicate that 4 percent may be too aggressive.

So how can you snap out of these delusions in time to save your retirement? Here are some suggestions:

  1. Max out retirement plan contributions. There are real benefits to retirement plans, including employer matching and tax-deferred or tax-free growth of contributions. If it means that you have to cut back on going out to restaurants or not buy that 183″ flat screen TV, so be it. You do not want to be a cat food connoisseur when you’re 75.
  2. Start now. If you’re not saving for retirement, get started. Build the habit. Budget. Figure out what you need to do to start socking away money for your retirement.
  3. Envision your future self. Our limbic systems cause us to discount the pain or pleasure of our future selves in exchange for current pleasure; it’s called hyperbolic discounting. It’s why people say they’ll start the diet tomorrow and never do. One way to combat this tendency is to picture yourself doing something in the future, such as retirement, and actively think to yourself, “This is my family.” Studies show that if we think of our future selves as family, we’re less likely to discount that future self’s needs.
  4. Watch fees. Just like inflation, fees and loads are a silent killer. They take away your money that could go to work in funding your retirement, and they line the pockets of salespeople and money managers, which is particularly painful given that actively managed funds usually underperform their benchmarks.
  5. Get a plan and stick to it. The aforementioned Wells Fargo study says that only 36 percent of Americans have a written plan. Meet with a financial planner (preferably an hourly, fee-only planner–see the previous bullet) to discuss where you want to be in the future and what you have to do in the meantime to get there. As Lewis Carroll said, “If you don’t know where you’re going, any road will get you there.” Unfortunately, many middle-class Americans think that they know where they’re going, but they’re using outdated maps. We need to come to grips with the investments and savings we required to create a secure retirement.

Avalanche of Boomers May Bury Social Security

Good Day,

It’s no secret that America’s and probably the rest of the world’s population is rapidly aging fast, and what this means is that the Social Security system of many nations will be strained as they try to keep a balance between the Social Security checks that are due to the current aging population, and also ensuring that enough is invested to cater for the needs of future generations. This calls for a wake up call on all of us, especially those looking forward to relying on the Social Security system to finance their retirement. I’m not dismissing Social Security all together, but what I’m simply saying is that, as governments around the world are forced to meet the needs of retirees, some policies may be implemented to ensure that the funds are enough to satisfy everyone. Theses policies may have positive or negative impacts on the monthly paychecks, and my question to you is this, do you really want to bet your retirement to find out what happens ? In the following article, Robert Powell points the facts about how an avalanche of Baby Boomers may bury Social Security, and hopefully this will get you seriously considering about your own retirement plan.

There are those who like to say that demography is destiny. And if that’s true, then our destiny is becoming increasingly clear. The unclear part may be what to do because of it, particularly as it affects Medicare and Social Security.

Consider, for instance, a recent release from the U.S. Census Bureau.

According to that release, the population in the U.S. is projected to grow much more slowly over the next several decades, but the population age 65 and older is expected to more than double between 2012 and 2060, from 43.1 million to 92.0 million.

What’s more, the older population in the U.S. would represent just over one in five U.S. residents by the end of the period, up from one in seven today, the Census Bureau said.

And the increase in the number of the “oldest old” would be even more dramatic—those 85 and older are projected to more than triple from 5.9 million to 18.2 million, reaching 4.3% of the total population,” according to the release.

Read the report: U.S. Census Bureau Projections Show a Slower Growing, Older, More Diverse Nation a Half Century from Now.

The Census Bureau also said baby boomers, defined as persons born between 1946 and 1964, number 76.4 million in 2012 and account for about one-quarter of the population. In 2060, when the youngest of them would be 96 years old, they are projected to number around 2.4 million and represent 0.6% of the total population.

In addition, the Census Bureau said projections show the older population would continue to be predominately non-Hispanic white, while younger ages are increasingly minority. Of those age 65 and older in 2060, 56% are expected to be non-Hispanic white, 21.2% Hispanic and 12.5% non-Hispanic black.

Other highlights from the release:

The nation’s total population would cross the 400 million mark in 2051, reaching 420.3 million in 2060.

In 2056, for the first time, the older population, age 65 and over, is projected to outnumber the young, age under 18.

The working-age population (18 to 64) is expected to increase by 42 million between 2012 and 2060, from 197 million to 239 million, while its share of the total population declines from 62.7% to 56.9%.

So what to make of all this? What might policy makers and retirees and those planning to retire do in light our destiny?

A crisis brewing for Social Security and Medicare

Timothy Harris, a principal at Milliman and author of “Living to 100 and Beyond,” had this to say: “We’ve seen the economic and social turmoil in Europe where countries have promised more to their populations than they can deliver,” he said, making reference to a recent article in The Atlantic. “As I was doing research for my “Living to 100 and Beyond” book, I kept wondering how European countries were able to afford the retirement and health programs that were on their books. Apparently they weren’t.”

In the U.S., he said, we’re starting to grapple with the impact of our aging population on state and municipal retirement programs, but have yet to face the impact of these demographic changes on Social Security and Medicare. “Politicians have a short-term focus, the next election, and the voters that elect them are aging,” he said. “Given that short-term focus and an aging electorate, we’re headed for gradually increasing crises in these programs.”

Growing population will strain resources

Harris also said projections such as those from the Census Bureau fail to consider the impact of limited resources on long-term population growth.

He noted, for instance, that he’s member of a committee of the Society of Actuaries that is looking at not just population growth and demographic changes, but also the resources needed to support future populations and what our country, and the world, must do in order to manage these limited resources.

His advice, though it might sound trite, for those struggling to make sense of a world with limited resources was this: “Think long term and plan for the future, the same thing that we should all be doing.”

Of note, the issue of managing limited resources in light of population growth and demographic changes will be addressed at the next Living to 100 Symposium, which will take place in early 2014.

Issues that need revisiting

Despite the news that population growth might slowing, Anna Rappaport, who is the head of a consulting firm bearing her name, doesn’t think the latest Census Bureau report contains much that we haven’t known for a long time already. “From the perspective of the individual, there is not a lot new to say about this, except that it reinforces the need to think about a society with a different age balance,” she said. “It is important to think about the different balance and that leads us to the need to keep people engaged as long as possible.”

Rappaport said the report does serve, however, to remind us of the issues that require revisiting, such as the retirement age, innovative work options, better management of health care, long-term care, and innovative housing.

For instance, she said laws that permit phased retirement and later retirements are definitely needed given the aging of America. “Work options to help people work longer, particularly if they can do so on a more limited basis will be important. “This should be a focus of policy, employers and individuals,” said Rappaport. “From a policy point of view, removing barriers to phased retirement is a help. Maybe some tax credits or incentives to support innovation would also be a good idea.”

Rappaport said retirement ages should gradually rise and disability programs need to be adjusted at the same time. “More focus on implementing programs to help people with disabilities work is also important,” she said. “Disability is a huge area of concern in several different ways.”

The Census Bureau report also highlights the need for creating livable communities and affordable housing. “We need to create good options and making them affordable,” she said. “Continuing Care Retirement Communities or CCRCs are very nice but involve a lot of risk and are too expensive for most people.” Rappaport estimated that just 5% to 10% of the population can afford to live in a CCRC.

Rappaport said the “village” movement, which creates networks of people to help each other in their communities, holds a lot of promise. Her advice to retirees and would-be retirees: “Think about village options and support integration,” Rappaport said. “Build and maintain a good support network and put a lot of thought into where you want to live and remember it can change.”

Specifically, for pre-retirees, Rappaport recommends working as long possible and not forgetting risk protection. “Plan with a long-planning horizon,” she said. “Focus on paycheck replacement and don’t spend too much.

And finally, she offered these thoughts in light of the Census Bureau report. “Think a lot about what is important to you,” she said.

What you need to know before refinancing

Good Day,

When things become tougher by the day, sometimes you’re forced to look for alternative ways to get the job done. When repaying the mortgage becomes unbearable at the rate determined by the financier when you entered the contract, it is worthwhile to consider refinancing to a cheaper mortgage that will be beneficial to both parties. And that is exactly what is happening with the current low-rate environment, refinancing has become the order of the day, but the easier way out is not always the best option for everyone. As Diana Bocco explains in the following article, it is always advisable to know all the facts before signing the deal with the first company that offers a refinance arrangement for you.

Here’s the thing: Refinancing a mortgage could save you a lot of money. But, it’s no walk in the park, and it definitely is not for everybody. In fact, there are multiple factors to consider before determining if refinancing is right for you.

“People should always look at the big picture when they are refinancing,” says Keaton Hutto, branch manager for Hometown Lenders in Lubbock, TX. Hutto says more often than not people are concerned with how much refinancing is going to save them monthly, and that’s a mistake.

Instead, says Hutto, people considering a refinance should ask themselves two questions: “How much is this going to save me yearly?” and “How much is this going to save me over the life of my loan?”

Here are five more questions to ask yourself before you decide to refinance…

Question #1: Is My Credit Score Good Enough for Refinancing?

Remember your credit score? It’s that thing you worried about when you bought your first car and home. News flash: It’s just as important when you refinance your mortgage.
And the better your score, the better your chance at scoring a low interest rate.

“Any borrower with a credit score of 740 and above can potentially qualify for the best rates,” says Dean Vlamis, a mortgage expert at Perl Mortgage, an independent Chicago-based correspondent lender. “There is a price hit to the interest rate at every level, so the lower the credit score, the higher the interest rate.”

What if you don’t have a soaring credit score? It’s not the end of your refinancing road. Your debt-to-income ratio, which looks at your housing payment and other monthly debts, versus your gross monthly income, could be your way out.

“If the ratios fall in line; preferably under 45 percent, then the borrower can get a preliminary approval,” says Vlamis.

Question #2: How Much Equity Do I Have?

Before you shell out thousands of dollars to refinance, you should first consider how much equity you have in your home. Equity is calculated by subtracting the total balance of your mortgages from the appraised value of your home.

And the more equity you have, the better your chance of saving money when you refinance. In fact, with higher equity, you’ll likely qualify for lower interest rates and fewer additional fees.

“Ideal amount of equity is of course 100 percent [your home is paid off], but what you really want to look at when taking out a loan is hopefully having at least a 20 percent equity position,” explains Barry Habib, vice president and chief market strategist of Residential Finance Corporation.

If your equity is poor, don’t despair. Habib points out that federal programs such as the Home Affordable Refinance Program (HARP), allows you to refinance with zero equity (or if you owe more than the house is appraised for).

Question #3: Is the Current Rate Climate Good For Refinancing?

If you’re looking to refinance today, the answer to this question is “yes.”

“Today’s rates are close to an all-time historic low,” says Malcolm Hollensteiner, director of retail lending sales at TD Bank. “It’s easy to second guess ourselves, but rates are so attractive today that it may not make sense to wait for a ‘better’ future opportunity.”

If you purchased a home in the past five years and have not looked into refinancing, Hutto says now is the perfect time to do so.

“You could easily shave off as much as 3 to 4 percent or more off your current interest rate, which will translate nicely to extra cash in your pocket every month,” says Hutto.

Question #4: Can I Afford to Refinance?

Refinancing isn’t cheap. That’s why potential refinancers should consider all costs before deciding to refinance, says Mike Ward, vice president of mortgage lending at Guaranteed Rate, Inc.

According to the Federal Reserve, which oversees national monetary policy and the banks, refinancing costs could include appraisal fees, loan origination fees, application fees, inspection fees, and much more.

“While these fees may seem small separately, they really can add up to a large amount that can alter when you’ll actually begin to experience savings from your refinance, commonly called the break-even point,” says Ward.

And knowing your break-even point is key to determining if refinancing is worthwhile. To figure out your break-even point, Ward recommends adding up all refinancing fees and dividing the result by the monthly savings you’re expecting from your refinance.

“This number will show you the amount of months it will take to break even,” he says.

Question #5: How Long Do I Want to Stay in This House?

Thinking about moving soon? Or do you see a job relocation in your near future? If so, refinancing might not be in your best interest.

“The industry rule of thumb is that if the cost of the refinance (closing costs and points) are made up with the monthly savings within five years, then it is considered to be worthwhile to refinance,” says Amy Tierce, a regional vice president for Fairway Independent Mortgage.

“Of course, the borrower needs to know that they will be staying in the house beyond five years for this formula to make sense,” adds Tierce.

However, Tierce explains that if the savings are immediate (because your closing costs are very low, for example), it can be worthwhile to refinance even if you have your heart set on moving out within a short period of time.

10 Numbers That Can Change Your Life

Good Day,

For one to achieve the plans you may want to fulfill within a certain time line, it is always advisable that you break down the bigger plan into smaller ones. The same principle applies with regards to retirement planning. To achieve the goals you have set for yourself, ensure that you have broken down your retirement plan into manageable task that will be easier to implement and follow-up to make sure that it is going according to plan. The following article by Paul Merriman contains ten numbers that can change your life on how to implement your retirement plan.

At some point, every investor who is planning to retire must confront his or her financial future. For most people, basic retirement planning can be distilled into 10 numbers.

As I worked with thousands of people over the years, and I saw over and over that when these numbers come into focus, the future starts looking clearer and less mysterious.

As you work to nail down these numbers, I suggest you regard the process as an exercise in discovery. Some items are easy to determine, while others may require some digging and careful thought. I think you will do a much better job if you use a competent financial adviser to help you get the right numbers and see what they mean for you.


Your current cost of living. This is the foundation of everything that follows. You could go into great detail on this, but a quick-and-dirty approach may be enough to get the process started: Identify your current gross income and subtract whatever you are saving for the future, including contributions to any IRA and employee retirement accounts. That’s your cost of living, including taxes.


The rate of future inflation. You will have to estimate this, of course. We all know that $100 isn’t what it used to be, and inflation isn’t likely to go away. Since 1926, inflation has been 3%. Over the years, that can do much more damage to your finances than you might think.


The number of years before you will retire. This isn’t as simple as it seems. We can’t always control when we stop working. And baby boomers increasingly retire in stages. But getting a useful financial snapshot requires a number here. So for this exercise, choose a future date when you want to be financially ready to leave the workforce “cold turkey.”


Your inflation-adjusted cost of living in your first year of retirement. While you can crunch the number yourself with a financial calculator, this item can have lots of moving parts.

How will your taxes change? Will you spend more money on travel and hobbies? Less on commuting and clothes but more on health care? Will you move in search of lower housing costs, a better climate or to be closer to your kids? I suggest you use an adviser to help make sure you have not overlooked something important.


The non-investment retirement income you can count on. Probably this will include Social Security. It might also include a pension or rental income. Don’t include interest, dividends and capital gains; they come into play next.


The retirement income you will need from your portfolio. If you have the first five answers, this one requires only simple math. You know how much you’ll need in that first year of retirement, and you know how much you can count on. The difference must come from somewhere else, most likely your portfolio.


The size of the portfolio you’ll need when you retire. If your investments are properly balanced between well-diversified stock funds and low-cost bond funds, you should be able to withdraw 4% of your portfolio annually without much risk of running out of money.

Multiply the result you obtained in the previous step by 25. That’s how big your portfolio should be on Day 1 of retirement. If this number seems impossibly large, don’t panic. There are lots of things you can do about it.


The current size of your portfolio, excluding real estate and other non-liquid assets. For most pre-retirees, this number will be less than what you will need when you retire. The next items will help you build it up.


The amount you’re saving for retirement every year. You should already know this from the very first calculation. If your annual savings plus your present portfolio will equal the result from Item seven, then you’re in fine shape. More likely, these savings alone won’t be enough. That’s why you need some growth in your portfolio.


The annual return you need from now until you retire. While you can make this computation with a financial calculator, I suggest you discuss this point with an adviser to make sure you have reached a reasonable result.

The point of this exercise is to get a snapshot of your retirement readiness. I found an online calculator that, while it doesn’t cover all the information I have described, will give you a quick idea of whether or not you are on the right track.

Several times I have recommended using a financial adviser to help you through these calculations, and you can do that without establishing a long-term relationship. You can hire one by the hour to check your work and make sure you have an action plan to get you where you want to go.

If you do that, these 10 numbers can change your life.

8 Surprising Truths About Retirement

Good Day,

Even with all the wealth of information that is available for free, there is still a percentage of the population that is still ignorant of their retirement. Some of the questions people are asking, and the ignorance of noting how your retirement account is performing has reached a new high. C’mon people. this is money you are going to rely on to sustain your lifestyle in retirement, so ensure that it is adequate to meet your needs. The following article by Renee Morad gives illustrations of the 5 surprising about retirement when a survey recently on this topic.

This week is “National Save for Retirement Week,” an educational campaign to raise public awareness about the importance of long-term retirement planning.

The program, created by bipartisan Congressional action, encourages Americans to utilize retirement savings and investment plan strategies. The week also encourages individuals to reflect on their current financial situations and their potential for a secure retirement in the future.

Below, some surprising statistics and insights on where Americans stand today, as well as their expectations, fears, and hopes about retiring:

1. How much money do we need to retire? There’s no real rule of thumb

There are varying estimates of how much money an individual needs to retire. One guideline suggests $1 million, while another recommends you save 10 times your last annual salary. But there’s no one-size-fits-all approach, and you’ll have to consider a variety of factors to determine what’s best for you and your family – like your age and current annual income, desired retirement age and income, and expected annual pension and Social Security. Then, of course, your personal spending habits weigh in.

There are plenty of retirement calculators available, such as CNNMoney’s calculator, AARP’s retirement predictor, and SmartMoney’s retirement planner. Working with a financial adviser can also help determine how much money you’ll need.

2. Half of Americans aren’t saving for retirement

According to a Life Insurance and Market Research Association study, 49 percent of Americans say they aren’t contributing to any retirement plan. Those least likely to save for retirement: individuals between ages 18 and 34.

What are Americans doing instead? In another survey by Wells Fargo, planning a home remodel and planning a vacation ranked higher on the list of priorities within the past year than planning for retirement (which ranked third).

3. Eighty is the new retirement age?

Apparently 80 is the new 65 for many middle-class Americans when it comes to retirement. One-third of survey respondents plan to delay retirement till age 80 or older, according to a Wells Fargo study of 1,000 adults with income less than $100,000. That’s up from 25 percent who planned to retire at age 80 during last year’s survey.

Another study by My New Financial Advisor, a service that connects clients with advisers, suggests the average baby boomer will retire at age 75. Some of the top issues preventing an earlier retirement: loss of income, insufficient savings, low returns, higher than expected current expenses, past-due taxes, and low wage growth.

4. The majority of middle-class Americans aren’t confident in the stock market

According to a Wells Fargo study, 70 percent of middle-class Americans aren’t comfortable investing retirement money in the stock market. When survey respondents were asked what they’d do if given $5,000 to invest for retirement, only 24 percent said they’d invest in stocks – compared to 40 percent who would choose a CD or savings account and another 22 percent who would invest in gold or precious metals.

5. Women are less engaged in retirement planning

Women are more concerned about retirement risks than men, according to a Life Insurance and Market Research Association study – but they’re less likely to do anything about it.

Only one-third of women are actively involved in their family’s retirement planning, compared to nearly half of men. Meanwhile, 32 percent of women admit they do no retirement planning at all.

6. More Americans are tapping retirement funds

More than 20 percent of Americans have borrowed against their 401(k), the highest percentage since 1996, according to the Employee Benefit Research Institute. The average loan size is 14 percent of the remaining account balance.

7. Employers are more willing to offer 401(k) plans, but many employees don’t care

About 95 percent of companies are back to matching 401(k) contributions, but only 30 percent of employees are taking advantage of this, according to a survey by the nonprofit Plan Sponsor Council of America.

The reality: Many individuals need their current income for living expenses and can’t afford to put it away.

8. Forty percent of Americans fear lack of retirement funds

Nearly 4 in 10 Americans are worried that they won’t have enough money saved to retire, according to a Pew Research Center survey. The fear is more prevalent today than it was at the end of the Great Recession in 2009.

Thirty-somethings are among the most worried: Half of adults aged 36 to 40 are worried that they won’t be able to save enough to sustain a comfortable retirement, noted the Pew survey. This age group was reportedly more concerned than those near or at retirement age.

The good news: There’s a wealth of valuable retirement advice and tips out there. Are you looking for ways to boost your nest egg? Hoping to improve your outlook on retirement planning?

How Retirement Expectations Differ From Reality

Good Day,

We all have this vision of the prefect retirement, where life will be one big fiesta, OH! you can’t wait for that day. Then, we go ahead and make plans on how to achieve the ‘perfect vision’ we have in our mind, Ok, the planning bit is very commendable on your part, but the problem comes in when we fail to separate fact from ‘fiction.’ The reason most retirees, after making the big change, often get disappointed when things don’t go as they had planned, is often due to unrealistic expectations about their future, and when in retirement, the world around them seems to be falling apart when reality checks-in. To avoid being in this situation, ensure that when coming up with your retirement plan, keep is as realistic as possible, and as Emily Brandon points out in the following article, current workers are placing too much expectations concerning their retirement.

Current workers who are planning for retirement often envision retirement as something very different from what current retirees are actually experiencing. A recent BlackRock and Boston Research Group poll of 1,002 workers with retirement accounts at work and 1,035 retirees who previously participated in a 401(k) or similar type of retirement plan found that workers are expecting to pay for and experience retirement in a way that contrasts with the lifestyle of current retirees. Here’s a look at how current workers are planning to remake retirement:

Aiming for a later retirement age.

Many current workers plan to stay on the job until their mid or late 60s. Some 48 percent of workers think they will retire at age 64 or later. Another 17 percent of workers surveyed think they will never retire due to their finances or personal preferences. “They are much less confident of their ability to actually amass the dollars they need to retire,” says Warren Cormier, president of Boston Research Group. “I don’t know if its pessimism or realism. They are not as far along in the path toward retirement as they had hoped.” Only 19 percent of current retirees were able and willing to work until age 64 or later. Job loss, health problems, or family circumstances often push people into retirement ahead of schedule. While only 11 percent of current workers plan to retire before age 60, 42 percent of current retirees left their jobs before reaching their 60s.

Planning on working in retirement.

Only 15 percent of current workers envision a retirement that involves not working at all. Most workers would like their retirement to include volunteer work (36 percent), paid employment even though they won’t need the money (34 percent), or working out of necessity (15 percent). “Working a few more years really lessens the amount you will need in retirement,” says Chip Castille, head of BlackRock’s U.S. and Canada Defined Contribution Group. “As we move into a retirement system that relies more on defined-contribution than defined-benefit plans, people are realizing they may need to work a little bit longer.” Most of the retirees surveyed (86 percent) don’t receive any income from employment. And planning to work in retirement doesn’t mean you will be able to find a job or will still want to work or be able to work in your late 60s.

Depending on a 401(k) to fund retirement.

Almost half of workers (48 percent) expect their 401(k) or 403(b) plan to be their largest source of monthly income in retirement. Most workers (75 percent) expect to begin drawing down their 401(k) at age 65 or later. But only 15 percent of retirees get 25 percent or more of their retirement income from their 401(k) and similar types of savings and investment accounts, even though all the retirees in the survey participated in a retirement account while they were working. “The current retirees take a vast portion of their income from secure income sources such as Social Security and legacy defined-benefit plans and they are secure in their concept of receiving Social Security,” says Cormier. “People who are actively working today don’t have a defined-benefit plan available to them. The only thing they have left to expect is a defined-contribution plan. It’s a completely different mix of what is available to them to pay expenses in retirement.” The more retirement income sources you have, the better protected you will be if something goes wrong with any one of them.

Saving for a shorter period of retirement.

Most workers (61 percent) think their savings or investments will need to last for between 20 and 29 years. Only a quarter of the employees surveyed think their retirement savings and investments will need to last for 30 or more years. But what if you end up living until 100? Most retirees (52 percent) think their savings needs to last for 30 or more years after retirement. “Current workers tend to underestimate how long they are going to live and retirees have a better idea,” says Castille. “Retirees have actually gone through the exercise of creating a budget.”

You’ve retired! Now put your plan to the test

Good Day,

You’ve done all that is required for one to have a successful retirement, and the time has now come for you to enjoy the fruits of your labor. Time and time again, retirees have been known to go overboard with their spending plans, and most end up messing up what was once a good plan. As you put your retirement plan to the test, it is always advisable to remember that even during retirement, you’ll still need to plan to ensure the worst case scenario doesn’t happen to you, that is, running out of money during retirement. So, as you put your retirement plan to the test, ensure that you that you observe the following points as advised by Donna Rosato and Susie Poppick in the following article.

Throughout retirement, check your financial plan and your spending periodically.

Welcome to your first year of retirement. You made it! Hard work and diligent saving have paid off. Your financial plan should practically run itself at this point. Still, aim to check in periodically.

What to do

Don’t go chasing yield.

As you age, the fixed-income portion of your portfolio becomes more important. The goal isn’t maximum income, but maximum preservation — by way of diversification. So put the majority of these holdings into a total bond market index fund. For inflation protection, add TIPS, keeping them to less than 30% of your bond share.

Anyone who has substantial money outside tax-deferred accounts and is in a high tax bracket should consider munis too. Initially, you’ll also keep 12 months of expenses, plus your emergency fund, in cash.

Every couple of years, trim a few percentage points from your stockholdings and stick the money in bonds and cash. By 75, you should have two to three years’ expenses in a money-market or short-term bond fund.

“At that point, you don’t need as much growth to keep up with inflation,” says Greg Carroll, managing partner at Sterling Wealth Management in Carlsbad, Calif.

Do a yearly spending checkup.

Before you quit working, you gave yourself a budget. Expect to blow it.

“Retiring is like going on a long vacation, and you always spend more on vacation,” says wealth adviser Jeff Townsend. Besides, your costs of living will naturally vary, as will your portfolio’s value.

Townsend suggests tracking your spending once annually to keep yourself honest. Go back to the budget worksheet on Fidelity’s Retirement Income Planner. Then plug-in your assets to see if your spending is sustainable.

Chronically going over a 4% inflation-adjusted draw could cause your money to run out, but even if you’ve gone off the rails in a few years, dialing back can make a difference.

Take from all baskets.

As you spend down your cash account, you’ll need to replenish it. Minimizing the taxes you incur on portfolio withdrawals will maximize the life span of your savings.

Generally, retirees have been advised to tap taxable assets first, because the long-term capital gains rate on them is lower than the income tax rate owed on traditional 401(k) and IRA withdrawals, and because this method allows tax-deferred accounts to continue to grow without a tax bite. Whether or not the strategy works, however, depends on many variables.

Another failing: Once you do transition to drawing solely on tax-deferred accounts, you may be bumped into a higher tax bracket, says Colorado Springs financial planner and CPA Allan Roth. Not to mention that “all this becomes even more complicated with possible tax-rate changes for 2013,” says Roth.

While there’s no one perfect system, Roth suggests being more egalitarian with your drawdown. Start by balancing any tax deductions you have with withdrawals from tax-deferred accounts, then take the rest of the money you need from taxable accounts.

Never retire your resume.

Keep in mind that a worst-case scenario may necessitate your returning to work. Submitting a CV that hasn’t been dusted off since Y2K won’t do you any favors.

So update your résumé now while recent accomplishments are fresh in your mind, says New York City executive recruiter Steve Viscusi. Then revisit it once a year to add something, even if it’s volunteer work or leadership in a social club.

5 years from retirement? Do this now

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