Tag Archives: Retirement Living

Three Simple Steps: How to Start Saving for Retirement

By Chuck Saletta

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Saving for your retirement is a big deal. Barring the income you might get from pensions (not what they once were) and Social Security (not likely to stay what it once was) all you’ll have is the money you save to last you the rest of your life. And it’s no secret that if your accounts run dry, it’s incredibly difficult for a retiree to rejoin the workforce a decade or more after leaving it.

Given all that, it’s understandable if you’re a bit worried about coming up with enough money that you’ll be able to retire comfortably on your terms. While building and maintaining that nest egg is a long-term commitment, it’s important to remember that you have the rest of your career to get there. With a solid plan and the flexibility to handle life’s curve balls, you can greatly improve your chances of retiring with a portfolio that can last as long as you do.

3 Steps to Get From Here to Retired

The toughest part of investing for retirement is that you face so many unknowns. How long will you live? What will the market do? Will your Social Security benefits get cut? How tame (or wild) will inflation be? Will your mental and physical health hold out, or will you need the help of a caregiver?

Those are all wise questions to ask, but unfortunately, they can’t be answered with any certainty until it’s too late to do anything about it. The best any of us can really do is develop a reasonable plan based on decent assumptions, and then adjust as life happens. With that in mind, here is a three-step foundation for a solid plan:

1. Set a target. What sort of lifestyle do you want in your retirement? Are you the kind of person who’d be happy rocking away on the stoop, watching the world go by? Or do you picture a retirement filled with world travel, box seats at the symphony, and generous philanthropic gifts to your favorite charities?

Whatever your plans, start by estimating your anticipated monthly expenses. Subtract from that your anticipated net Social Security check and any monthly pension payments you may get, then multiply the remainder by 300. That’s about how large your total portfolio will need to be to cover your costs. At that size, your portfolio should generate enough growth and income that you can take advantage of the 4 percent rule, a solid (if rough) estimate that will help reduce the odds that you’ll outlive your money.

2. Take what help you can get, and ramp up when you can. While that 300-times-monthly-expenses estimate may seem daunting, there are a number programs available to help you build your nest egg faster. Qualified retirement accounts like IRAs, 401(k)s, 403(b)s, and the government’s Thrift Savings …read more

Source: FULL ARTICLE at DailyFinance

5 Tips for Helping Your Aging Parents Retain Their Independence

By Nicole Seghetti

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We all want to help our parents meet the goal of aging in place independently and happily. Evaluating your loved ones’ current living situation and making necessary changes now increases the likelihood they’ll be able to stay in their homes for as long as possible.

Here are five things you can do to ensure your parents can keep their independence in the years ahead.

1. Assess Caregiving Needs.

Determine what your parent needs help with on a daily or weekly basis. For example, would they be better off if they were having the groceries delivered? Can your dad follow his medication schedule? Do your parents need help with housework? Evaluate their needs, and then match up service providers to take care of those needs.

One major factor in an elderly person’s independence is their ability to drive. If they are not capable of doing so without possibly causing injury to themselves or others, then arrange other transportation options. Many municipalities, volunteer groups, and nonprofit organizations offer seniors rides for little to no fee.

2. Make Home Modifications.

Next, assess your parents’ home and determine whether or not it can safely sustain them now and in the future.

Mobility and the ability to monitor their safety is key. If possible, make modifications to their existing home. Consider (where possible) tearing down walls to create a more navigable floor plan, installing easier-to-access showers and sinks, and modifying fixtures so they’re more user-friendly.

Also, look into home monitoring systems, which are becoming more sophisticated every year. Some technologies even have the ability to detect changes in your parents’ activity. For example, if the system senses that Mom took a fall, it can send instant alerts to you and 911 in emergency situations.

If their home cannot be modified to accommodate your parents as they age, then be proactive about looking for a new residence (e.g., a new single-story home in a neighborhood near you or assisted living).

3. Find Community Resources.

Until recently, local resources for seniors mostly consisted of adult day care centers and Meals on Wheels programs. But as the population of adults age 65-plus escalates over the next couple of decades, more resources will become available.

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One such resource is the “village” concept. Villages connect members with resources they need to live at home safely and comfortably. Many villages are neighborhood organizations that rely on volunteers to provide services. For an annual fee, these communities help senior members manage household tasks they can no longer handle. When volunteers aren’t able to provide services, villages refer members to discounted and vetted vendors. Look for a village close to your parent’s home.

4. Enlist Local Support and Companionship.

Many adult children live hundreds or even thousands …read more

Source: FULL ARTICLE at DailyFinance

How 'Chained CPI' Will Hit Your Pocketbook

By Chuck Saletta

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President Obama’s new budget proposal includes changing a couple of key inflation calculations to something called a “chained CPI.” The shift is getting a lot of attention right now because of the expected effect it will have on individuals.

There are two key places where a chained CPI — short for consumer price index — will have a direct impact on your pocketbook: income taxes and Social Security benefits. All else being equal, over time, your income taxes will be higher and your Social Security benefits will be lower than they are under current inflation calculations.

The key difference between the chained CPI and the traditional consumer price index is how the index measures consumer behavior. The chained CPI assumes that as prices rise on one product, some portion of consumers will be willing to substitute less expensive alternatives for what they used to buy.

That changes the product weightings used in the inflation calculation. By incorporating information from those new product weightings, the chained CPI typically produces a lower inflation level.

Here’s how it works.

The Impact on Income Taxes

If you pay income taxes, your tax bracket is determined by the amount of taxable income you make. The cutoffs for each bracket generally rise over time with inflation.

The two charts below show the IRS “Schedule X” brackets for single taxpayers; the first is for 2012, and the second is what’s currently expected for 2013:

Chart for 2012 from the U.S. Internal Revenue Service
Chart for 2013 from the U.S. Internal Revenue Service

While the 39.6 percent tax rate is new for 2013, note that the other brackets have higher cutoffs for 2013 than they did for 2012. That’s thanks to the inflation adjustment made to the tax brackets.

If the law is changed so that the chained CPI is used, the tops of those brackets are expected to rise more slowly, exposing more of your income to higher tax rates than under current law.

The Effect on Social Security Benefits

Similarly, Social Security benefits are increased based on the inflation rate. By tying the payment increases to the chained CPI — an inflation rate that grows more slowly than the current measure — those benefit payments will grow less quickly as well. As a result, over time your Social Security checks will be smaller than they would have been under the old inflation calculation.

The annual changes aren’t too extreme — they’re estimated to be somewhere in the vicinity of 0.1 percent to 0.3 percent per year, depending on what the future brings. But …read more

Source: FULL ARTICLE at DailyFinance

Why Long-Term-Care Insurance Premiums Are Soaring

By Dan Caplinger

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With nearly 70 percent of Americans aged 65 or older expected to need long-term medical care at some point, millions of Americans have turned to long-term-care insurance to help them cover its high costs.

But rate hikes on long-term-care premiums are coming, meaning many of those who prudently planned for their long-term-care needs may not be able to afford to keep their coverage.

The largest public pension fund in the country, the California Public Employees’ Pension Fund, runs one of the biggest long-term-care benefit programs in the country. But CalPERS now expects it will need to raise premiums by 85 percent within the next two years. Private insurance companies are seeing many of the same issues, with CNA Financial (CNA) and Manulife Financial (MFC) both having sought or gotten approval from the California Insurance Department to raise their long-term-care premiums by 40 percent to 45 percent.

What’s Behind the Increases?

Insurance companies have faced a triple-whammy that has hit them especially hard in recent years.

Low interest rates and weak investment returns have hampered their ability to build up the loss reserves they need in order to pay out claims. And with long-term-care insurance often extending for decades, the assumptions that insurance companies make about what returns they’ll be able to earn are even more important than on other types of policies, such as homeowners’ insurance.

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At the same time, health-care costs have continued to rise. The same factors that are making it problematic for the federal government to ensure Medicare’s continued stability are hitting long-term-care insurance providers. Private insurers face the added handicap of having a smaller pool of available revenue and financial reserves to draw from.

Finally, insurance companies made poor assumptions about policyholder behavior, overestimating the number of people who would let their insurance policies lapse over the years. Ironically, that suggests that insurance companies did their jobs too well, convincing their customers of just how important long-term-care coverage is for their financial prospects in retirement.

Combine those three factors together, and it’s no wonder why insurance companies are feeling burned.

Several companies, including MetLife (MET) and Prudential (PRU), have decided simply to stop selling long-term-care policies. They have likely found the challenges of getting regulators to approve the big premium increases that would be necessary to make them economically viable outweigh the potential profits from offering the coverage.

Looking at Your Limited Options

The worst thing about the rate increases is that long-term-care policyholders are essentially stuck without good alternatives.

Given the low priority that most insurance companies have given to offering long-term-care insurance, it’s tough to shop around for better deals. If your health has gotten worse since you opened your policy, you may not even be able to get long-term-care coverage from …read more

Source: FULL ARTICLE at DailyFinance

United States Ranks as 19th Best Country for Retirees

By Business Insider

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By MANDI WOODRUFF

For retirees hoping to live long and prosper in their golden years, the U.S. is only the 19th best place to be, according to a new index by the NGAM Durable Portfolio Research Center.

The humbling report, called the Natixis Global Retirement Index, places Western European countries far ahead of the U.S. in areas like health, finances, quality of life, and material well-being.

“The message is clear: You will be called on to finance more of your retirement,” John Hailer, NGAM‘s president and chief executive officer, said in a statement.

“Citizens of other industrialized nations can rely on strong social safety nets in old age, at least for now. In the U.S., we encourage workers to plan, save and invest, and promote policies that help them meet their future needs.”

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Norway ranked the best out of 150 nations studied, followed by Switzerland, Luxembourg, Sweden and Austria.

The U.S. was also overshadowed by its neighbor to the North, Canada (No. 13), Japan (No. 15), and came in just one spot ahead of the United Kingdom (No. 20).

Here’s where the U.S. falls behind:

A costly health care system. Although the U.S. spends more on health care per capita than any other country in the world, consumers are still left to cover a big portion of those costs on their own. For retirees, those costs only increase with age. On average, a 65-year-old couple will shell out more than $250,000 for out-of-pocket health care spending needs, according to U.S. News and World Report. Nearly all the high-ranking countries in the NGAM index have universal health care systems in place.

Aging boomers. Americans are living longer than ever, but federally-sponsored social programs that so many older consumers rely on today may not be able to sustain future retirees. According to NGAM, the number of people aged 65 or older is on track to triple by 2050. There’s no telling how long Social Security will last as a viable income option, and as it stands, more than half of married couples and 74 percent of unmarried persons receive 50 percent or more of their income from Social Security. It’s more vital than ever for consumers to re-estimate how much they’ll need to support themselves in retirement.

Retirement savings deficit. It should come as no surprise that more consumers are relying on social programs to supplement their income in old age. The Great Recession played its roll in pummeling nest eggs for millions of workers, but U.S. workers aren’t exactly known for their savvy savings strategy to begin with. More than 53 percent of American workers 30 and older are on a path that will leave them unprepared for retirement, according to a recent U.S. Senate Report. And as it stands, only one-third of eligible workers …read more
Source: FULL ARTICLE at DailyFinance

Wealthy Workers Are Seriously Underestimating Their Retirement Needs

By Business Insider

Wealthy Workers underestimate

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By MANDI WOODRUFF

A lot of wealthy workers could be missing a vital flaw in their plans for retirement, a new survey shows.

More than 80 percent of workers earning $115,000 say they are prepared for retirement — but they think they’ll only need $66,000 per year to live on, Charles Schwab (SCHW) found.

Sure, it’s possible to survive on $66,000 a year — plenty of people would be glad to earn half that much in a year — but chances are high-earners won’t be prepared for that kind of lifestyle change, let alone unexpected costs that could come up down the road.

Most experts agree consumers should plan on at least saving enough of a nest egg to maintain their current lifestyle in retirement. Otherwise, the only answer is to find ways to minimize costs and trim household budgets.

That starts with figuring out what age you plan to retire, and these days, workers are planning on working well past the typical 65th-birthday benchmark.

Couple that with the fact that we’re living longer than ever as well, and retirees could wind up spending 15 to 20 years living off just their nest egg alone.

The biggest hurdle retirees will almost certainly face is the rising cost of health care.

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“Even with Medicare benefits, a 65-year-old couple could need nearly $400,000 to cover out-of-pocket health care costs during retirement, according to research by the Employee Benefit Research Institute,” noted Carrie Schwab-Pomerantz, Charles Schwab senior vice president. “The bottom line for everyone is that health care costs need to be carefully factored into retirement plans.”

No one can predict whether they’ll need long-term medical care in the future, but there are steps people should take now to mitigate those issues as early as possible.

First, review your retirement goals with your spouse or partner and think about running it over with a financial advisor. Fee-only financial planners have a fiduciary duty to work in the best interest of clients, and you won’t have to worry about commissions or other hidden fees that could sneak up on you.

Just half of Americans said they’re saving through a retirement plan like a 401(k) or IRA, according to a recent survey by the EBRI. While not everyone might be able to max out a retirement plan contribution each year, even contributing a small portion of each paycheck to a retirement account could be a big difference in the long run.

“Especially for those looking to catch up on savings, we recommend maximizing contributions in a 401(k) at least up to the employer match, considering other tax-advantaged retirement accounts such as an IRA, and finding ways to automate savings,” Schwab-Pomerantz says.

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Source: FULL ARTICLE at DailyFinance

Despite Stock Market Gains, Workers Worry About Retirement

By The Associated Press

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The stock market has climbed back to a record high, but workers remain pessimistic about having enough money for retirement. The Employee Benefit Research Institute’s annual retirement confidence survey shows nearly half of workers have little or no confidence that they’ll have a financially comfortable retirement.

Here’s a look at some of the findings from the 23rd annual survey released Tuesday:

Respondents who are very confident about having enough money for a comfortable retirement: 13 percent

  • Somewhat confident: 38 percent
  • Not too confident: 21 percent
  • Not at all confident: 28 percent

Percentage of workers identifying the following issues as the most pressing concerns that most Americans face, followed by the percentage of retirees identifying that issue:

  • Job uncertainty: 30 percent, 27 percent
  • Making ends meet: 12 percent for both groups
  • The budget deficit and government spending: 8 percent, 14 percent
  • Paying for health insurance and medical expenses: 9 percent, 10 percent
  • The economy: 8 percent, 6 percent
  • Taxes: 8 percent, 5 percent
  • Making mortgage payments: 8 percent, 4 percent
  • Saving for retirement: 2 percent, 4 percent

Percentage of workers reporting that they could definitely come up with $2,000 if an unexpected need arose within the next month, followed by the percentage of retirees:

  • 50 percent, 52 percent

Percentage who could probably come up with $2,000:

  • 20 percent, 17 percent

Percentage who could probably or definitely not come up with $2,000:

  • 28 percent for each group

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Source: FULL ARTICLE at DailyFinance

3 Simple Ways to Increase Your Retirement Income

By Dan Caplinger

Retirement Income

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A soon-to-be-released report from the Deloitte Center for Financial Services reveals the nation’s dire state of retirement readiness — and, on top of that, how deflated so many people feel about the prospects of their future getting better:

  • Although saving for retirement is a top priority, 58 percent of those surveyed said they don’t actually have a retirement plan.
  • One in five say they will rely entirely on Social Security to provide their retirement income.
  • Nearly 40 percent believe that no matter what they do with their money, they won’t be able to generate the income they want when they retire.

Yet despite people’s grim outlook for their retirement prospects, few trust financial professionals to help them, instead preferring to handle their money on their own.

Don’t give up just yet: You can take charge of your finances in ways that can make a big difference in retirement. Here are the three key areas where you can squeeze out more money to cover your retirement living expenses.

1. Make The Most of Social Security. Social Security seems simple on its face, but choosing the best strategy for taking advantage of the entitlement is complicated, especially if you have other family members depending on your benefits. In general, the longer you wait, the bigger your monthly checks will be. Moreover, waiting can boost not only your income but also the benefits your spouse can receive, both in spousal benefits during your lifetime and after your death in survivors’ benefits.

To do: Visit the My Social Security website where you’ll get good information about what your benefits will look like, along with information to help you choose the best time to start taking your benefits. (Here are other strategies to follow to get maximum value from Social Security.)

2. Get Better Investing Returns. In the current environment of rock-bottom interest rates, you can’t expect no-risk bank products like CDs to give you the income you need in retirement. These days, you have to understand how different investments provide income, including bonds, stocks, and specialty investments like real-estate investment trusts and master limited partnerships.

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To do: Understanding portfolio income doesn’t mean you have to invest in all of these different things. Often, a simple combination of stock and bond index mutual funds or exchange-traded funds is all you need to produce both the income you need and the growth to meet rising costs.

3. Take Advantage of Other Financial Resources. Beyond Social Security and your investments, many retirees have few or no financial resources to tap into after they quit their jobs. Having to go back to work during retirement is not only unpalatable to most retirees but also difficult to do in this economy, in which millions of underemployed and unemployed individuals are fighting for job opening.

To do: You may not even have thought about …read more
Source: FULL ARTICLE at DailyFinance

Could Slowing Health Care Costs Save Medicare?

By Dan Caplinger

Medicaid

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Among all the budget concerns facing the U.S., few pose as big a threat to the government‘s balance sheet as our growing health care bill. The rise in health care costs has significantly outpaced both inflation and economic growth for decades, leading to increasingly dire projections about Medicare’s long-term solvency in recent years.

Yet even as policymakers debate about ways to shore up Medicare, some promising trends suggest the government program may get a new lease on life.

Although the Medicare program’s trustees’ report says the program will remain solvent until 2024, its projections are based on assumptions that haven’t been borne out in the past.
For instance, Congress has traditionally kept reimbursement-rate cuts from taking effect, with the latest reversal overriding what would have been a 31 percent cut effective Jan. 1.

With Medicare’s expansion to include prescription-drug coverage, the program has become exposed to a new set of health costs. And as the Baby Boom generation gradually reaches Medicare age, it’ll be tougher than ever to keep costs in line.

Cutting Back

Yet past predictions about financial trouble haven’t resulted in Medicare’s failure. Back in 1997, the Medicare Trustees‘ report set 2001 as the program’s insolvency date. But shortly thereafter, a new law was passed that cut back on the expansion of health care expenditures, extending Medicare’s viability for years.

And recently, we’ve started to see a favorable trend arise: Growth in health care spending has slowed to its lowest level in 50 years.

According to the newest data from Centers for Medicare and Medicaid Services, health-related spending rose 3.9 percent in 2011. That was the first time in more than 10 years that it rose more slowly than the overall economy grew.

What’s less clear is whether spending growth will stay subdued.

Can the Good Times Last?

Some economists believe that the slow recovery from the deep recession of 2008 and 2009 has forced many would-be patients to forgo necessary medical care due to job loss and the loss of insurance coverage. As the Washington Post reported, the number of Americans covered by private insurance fell by 8 million from 2005 to 2011 even as Medicare enrollment soared 12 million over the same period, and many of those formerly covered by employer-provided health insurance fell back on Medicaid.

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Since government programs tend to pay less than private insurance for health care, a reversal of the trend away from private insurance — as the Affordable Care Act envisions — could send costs growing more quickly again.

Others, though, point to spending trends among hospitals and other health-care institutions. Knowing that reimbursement rates will be held in check, these institutions are reining in their own costs to stay profitable, suggesting that slower growth in spending could be more lasting.

What to Watch For

Projections aside, the …read more
Source: FULL ARTICLE at DailyFinance

3 Social Security Shockers From the CBO's Latest Report

By Chuck Saletta, The Motley Fool

Social Security Trust Fund

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On Tuesday, The Congressional Budget Office updated its annual projections on the health of Social Security and its Trust Funds. In essence, if you’re still working and you’re depending on that program to cover your retirement — you’ll be in for a shock. Or three.

Shocker No. 1: It’s failing faster than even last year’s dire projection.

The table below shows the CBO‘s projections for combined Social Security Old Age, Survivors, and Disability Insurance Trust Fund balances, with the 2012…

3 Social Security Shockers From the CBO’s Latest Report originally appeared on DailyFinance.com on 2013-02-08T06:00:00Z.

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Source: FULL ARTICLE at DailyFinance