social security http://www.wisebread.com/taxonomy/term/3387/all en-US 4 Reasons Early Retirement Might Be Financially Risky http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-reasons-early-retirement-might-be-financially-risky" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/000017275515.jpg" alt="Learning why early retirement might be a financial risk" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>&quot;The money's no better in retirement &mdash; but the hours are!&quot; So goes a popular saying.</p> <p>Maybe that's why many dream of retiring early. A March 2015 study of Americans with investible assets of $1 million or more found that that most of them planned to <a href="http://money.usnews.com/money/retirement/articles/2015/04/07/tales-of-early-retirement-the-path-3-people-took">retire by age 56</a>, and a whopping 20% of them by age 40.</p> <p>However, early retirement &mdash; even for those with a $1 million nest egg &mdash; might be financially risky. Here are four reasons why.</p> <h2>1. Reduced Social Security Benefits</h2> <p>Nine out of 10 Americans age 65 or older <a href="http://www.ssa.gov/news/press/basicfact.html">receive Social Security benefits</a>. For those that receive Social Security, they count on those payments to cover about 38% of their income during retirement.</p> <p>While you can start receiving your Social Security benefits as early as age 62, you should wait a couple more years. For those born in 1960 or later, you would <a href="http://www.ssa.gov/oact/ProgData/ar_drc.html">receive only 70%</a> of your full retirement benefit by retiring at age 62.</p> <p>To receive your full retirement benefit, you need to retire by your full retirement age (age 67 for those born 1960 or later) as determined by the Social Security Administration. However, by waiting until age 70 to retire, depending on your year of birth, you can receive up to 132.5% of your full retirement benefits. (See also: <a href="http://www.wisebread.com/4-exciting-affordable-american-cities-to-retire-in?ref=seealso">4 Exciting, Affordable American Cities to Retire In</a>)</p> <h2>2. Early 401(k) Withdrawal Penalties</h2> <p>By socking away as much as possible and taking advantage of employer matches, you can build such a strong 401(k) plan, you'll be tempted to retire in your late 50s.</p> <p>Hold that thought.</p> <p>In 2014, 401(k) plans were <a href="https://www.ici.org/policy/retirement/plan/401k/faqs_401k">18% of the $24 trillion</a> in U.S. retirement assets. From 2004 to 2010, penalized 401(k) withdrawals increased from <a href="http://business.time.com/2013/01/23/cash-leaking-out-of-401k-plans-at-alarming-rate/">$36 billion to about $60 billion</a>. If this trend continues, then retirees may not receive the full share of their 401(k) plans.</p> <p>Taking early distributions from your 401(k) before you reach age 59&frac12; is a bad idea for several reasons:</p> <ul> <li>On top of applicable income taxes, you're liable for a 10% additional tax on those early distributions.<br /> &nbsp;</li> <li>To avoid that 10% tax penalty, you would have to take retirement payments under a <a href="http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments">substantially equal periodic payments</a> program, which are not only very complicated to set up, but can also cause cash crunches.<br /> &nbsp;</li> <li>All of your outstanding loans from your 401(k) plan become taxable income and are also subject to the additional 10% early distribution tax.<br /> &nbsp;</li> <li>Outstanding 401(k) loan balances can't be rolled into any eligible retirement plan.</li> </ul> <p>This is just one of the many <a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">dumb 401(k) mistakes</a> smart people make.</p> <h2>3. Subpar Nest Egg</h2> <p>By deciding to retire early, you can say goodbye to a bigger nest egg.</p> <p>Assuming you were contributing $400 every month to your 401(k) with a 5% rate of return compounded annually, here are some examples of how much you would forego by retiring early:</p> <ul> <li>One year earlier: $4,929.03</li> <li>Three years earlier: $15,538.77</li> <li>Five years earlier: $27,236.01</li> <li>Seven years earlier: $40,132.21</li> <li>10 years earlier: $61,996.82</li> </ul> <p>The bigger your monthly contribution and the higher your plan's rate of return, the larger your nest egg&hellip; could have been! And let's not forget that these calculations don't include additional contributions:</p> <ul> <li>Employer matches (average American foregoes $1,336 per year or extra 2.4% in retirement savings);<br /> &nbsp;</li> <li>Potential windfalls (e.g. commissions, end-of-year bonuses); and<br /> &nbsp;</li> <li>Catch-up contributions starting age 50 (<a href="http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Catch-Up-Contributions">$6,000 per year</a> in 2015).</li> </ul> <h2>4. Higher Chance of Empty Retirement Fund</h2> <p>There's good news and bad news.</p> <p>First, the good news: Americans are living longer. In 1990, the life expectancy for men and women were age 71.8 and 78.8, respectively. Nowadays, those number are <a href="http://www.ssa.gov/planners/lifeexpectancy.html">age 84.3 and 86.6</a>, respectively. Our life expectancy is so good that about 10% of current 65-year old Americans will live past age 95!</p> <p>Now, the bad news: a longer life expectancy means that your nest egg may run out. For many years, $1 million used to be the goal for most retirement plans. If you make withdrawals from your nest egg using the suggested 4% annual rate, you will <a href="http://www.bankrate.com/finance/retirement/retirement-statistics-1.aspx">run out of retirement funds</a> within 25 years. Under this scenario, by retiring early by age 55, you could run out of retirement monies by age 80!</p> <p>Adapting to a very thrifty lifestyle (&quot;What? No summer cruise to the Bahamas!&quot;) may not be possible for some early retirees. Especially those who worked really hard to build up those $1 million nest eggs.</p> <p>The reality is that early retirement requires careful planning and persistent saving. To prevent such a retirement catastrophe, many registered investment advisors are recommending Millennials set a goal of <a href="http://money.usnews.com/money/retirement/articles/2011/09/15/gen-ys-2-million-retirement-price-tag">at least $2 million</a> for their retirement savings. (See also: <a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning?ref=seealso">5 Facts Millennials Should Know About Retirement Planning</a>)</p> <p><em>Do you know any stories about people who successfully retired early? Please share them in the comments below</em><strong><em>.</em></strong></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-facts-millennials-should-know-about-retirement-planning">5 Facts Millennials Should Know About Retirement Planning</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-taking-social-security-could-cost-you-thousands">Why Taking Social Security Could Cost You Thousands</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) early retirement millennials nest egg social security Mon, 24 Aug 2015 13:00:26 +0000 Damian Davila 1531825 at http://www.wisebread.com 7 States With the Lowest Taxes for Retirees http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-states-with-the-lowest-taxes-for-retirees" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/island_beach_000022850516.jpg" alt="States with lowest taxes for retirees" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>For retirees living on fixed incomes, taxes can be burdensome and impact quality of life during retirement. Many <a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">financially savvy retirees</a> move to states like Florida, not just for the sunshine, but to reap the economic benefits of low taxation. Florida is one of seven no-income tax states and makes the list of states with a marginal federal and state tax rate of under 25%.</p> <p>Consider these seven states with the lowest retirement tax burden.</p> <h2>1. Alaska</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/bear_alaska_000034056692.jpg" width="605" height="340" alt="" /></p> <p>Sure, Alaska is a little lacking in the sun and warm weather many retirees seem to favor, but the state's lenient tax policies might make you want to pick up and move there, anyhow. State residents are exempt from retirement income tax, and only 24 of its 164 municipalities levy a property tax. And it gets better: Those 65 years and older residing within one of these 24 communities are exempt from property taxes on the first $150,000 of their home's assessed value. To top it all off, there is either no or low sales tax. Of the 107 municipalities reporting sales tax, the rate ranges from a low 1%&ndash;7% (typically 2%&ndash;5%).</p> <h2>2. Florida</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/miami_beach_florida_000037761516.jpg" width="605" height="340" alt="" /></p> <p>While Florida residents enjoy no tax on retirement income, they can't escape the burden of property taxes. Florida ranks 23 out of 50 of states with the highest property tax rates. Miami Dade County, with it's sprawling luxury oceanfront condos that attract wealthy foreign investors, ranks highest with an average 1.02% of median home value, while property taxes in densely populated Dixie County (population: 16,422) are the lowest at .51% of median home value. Residents 65 years and older qualify for a $50,000 property tax exemption on their properties. Sales taxes in Florida aren't astronomical &mdash; at 6% since 1988, but they can swing as high as 7.5%.</p> <h2>3. Nevada</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/nevada_000025827739.jpg" width="605" height="340" alt="" /></p> <p>Far removed in spirit from the glitz and glamor of the Las Vegas Strip, many retirees set their sights on the city's quieter suburbs. The state's tax burden ranks second-lowest in the nation. Nevada has no income or inheritance tax and the cost of living is relatively low compared to neighboring states. Plus, the Nevada housing market has not fully rebounded from the 2008 crisis, which means home buyers can still get a good deals.</p> <h2>4. South Dakota</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/south_dakota_000012547520.jpg" width="605" height="340" alt="" /></p> <p>The tax structure in the Midwestern state of South Dakota is one of the most favorable in the country. South Dakota does not levy a tax on retirement income, inheritances, and estates. Sales taxes are relatively low compared to other areas in the region at 4%, but it can swing as high as 6% in some municipalities. The median home price is roughly $126,000. The only downside to retiring in South Dakota is it's inclement winter weather, but it's great in the summer, especially if you love the outdoors.</p> <h2>5. Texas</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5171/texas_scenery_000038884690.jpg" width="605" height="340" alt="" /></p> <p>Good ole' Texas, the Lone Star State &mdash; and my hometown state. Texas is a great place to live for a number of reasons. But the number one is that there's no tax on personal income. The sales and use tax is a bit on the high-end at roughly 8.25%. Property taxes vary by county and range from $0.24 to $0.50 per $100 valuation with median home prices at $160,000 in Dallas and $158,000 in Houston. Persons 65 and older qualify for a $10,000 homestead exemption for school taxes, in addition to a $15,000 exemption for all homeowners.</p> <h2>6. Washington</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u11/washington_000006960866.jpg" width="605" height="341" alt="" /></p> <p>Washington, with its vast terrain and beautiful landscapes, has no income tax. The sales tax rate is 6.5% &mdash; as high as 9.5% in some areas. Property taxes vary by county with King County residents paying the most &mdash; around $4,507 per year and Lewis County residents paying the least &mdash;around $474 per year. The median home value is $270,400. If you decide to make Washington your primary residence, as a person 65 and up, you could qualify for <a href="http://www.dor.wa.gov/Content/FindTaxesAndRates/PropertyTax/IncentivePrograms.aspx">additional property tax exemptions</a>.&nbsp;</p> <h2>7. Wyoming</h2> <p><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u11/wyoming_000026149821.jpg" width="605" height="340" alt="" /></p> <p>Wyoming ranks first on the Tax Foundation's 2015 Business Tax Climate Index because of no tax on personal or corporate income, low sales tax of 4%, and low property tax. Median home prices are $103,000. And though the cost of living is already low, the state of Wyoming has no excise tax, which means you won't pay an additional levy on items like food and gasoline.</p> <p>Two other states worth considering are New Hampshire and Tennessee. The state of New Hampshire has no income tax and 0% sales tax, but there's a 5% tax on dividend and interest income and property taxes are the third highest in the nation. Tennessee does not impose income tax but has what's called a &quot;hall tax&quot; of 6% on dividend and interest income. And its sales tax of 7%, as high as 9.75% in some municipalities, ranks highest in the nation due to the complexity of local and special purpose taxes that are levied in addition to the sales and use tax.</p> <p><em>What low-tax retirement destinations are you considering?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/if-you-want-your-401k-to-grow-stop-doing-these-6-things">If You Want Your 401K to Grow, Stop Doing These 6 Things</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) cost of living fixed incomes moving social security taxes Tue, 23 Jun 2015 13:00:18 +0000 Qiana Chavaia 1460740 at http://www.wisebread.com 6 Retirement Rules You Should Be Breaking http://www.wisebread.com/6-retirement-rules-you-should-be-breaking <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-retirement-rules-you-should-be-breaking" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_gardening_000022104123.jpg" alt="Woman breaking common retirement rules" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are there right and wrong ways to retire? While that's a relative question, there are retirement rules that are in your best interest to follow &mdash; and those you might want to break. Consider these six <a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">retirement rules</a> you might be better off ignoring.</p> <h2>1. Depending on a Pension or Social Security</h2> <p>Counting on a pension or Social Security to help you ride out your retirement years? That's probably not the best strategy to have, considering that very few companies still offer pensions (though you'd know if yours does) and Social Security is still in crisis (so much so that it might be bankrupt and not even exist by the time you retire). That's not to mention that inflation is likely to outpace your per-month payouts in the off chance that you do receive these income sources.</p> <p>You may need to think of other ways to fund your retirement &mdash; and it's in your best interest to start planning for it now (or better yet, <em>yesterday</em>).</p> <p>Brent Cumberford, founder of the personal-finance blog&nbsp;<a href="http://www.vosa.com">VOSA</a>, offers a few suggestions.</p> <p>&quot;Start your own retirement accounts; invest in business to generate a second &mdash; and third and fourth &mdash; stream of income; and hustle to make some extra money on the side to kick start your retirement savings,&quot; he says.</p> <p>Putting in the extra time and effort early on to pad your retirement account for later means you might actually be able to enjoy those golden years.</p> <h2>2. Withdrawing From Your Retirement Fund or Social Security Right Away</h2> <p>Even if you have plenty of money in your retirement fund (or think you do, as is the likelier scenario), that doesn't mean you should start withdrawing from it the day after your retirement party. Proceed with caution in this case and remember that you still have a long life ahead of you.</p> <p>&quot;One retirement rule that no longer makes sense is the one that suggests a 4% annual withdrawal rate on your retirement portfolio,&quot; observes personal finance expert David Bakke of MoneyCrashers. &quot;Americans are living longer these days, and if you go by that rule you might outlive your money. Your best bet is to withdraw as little as possible in the beginning and adjust your strategy as you see how things are progressing as you get acclimated to living off of your retirement money.&quot;</p> <p>Bakke says that waiting to withdrawal money from Social Security has its benefits too, as you may receive a larger annual Social Security benefit when you wait.</p> <h2>3. Going Full Retirement Because You Think You Have To</h2> <p>Just because the government says you can retire at age 65 doesn't mean that you have to resign the rest of your life to whiling away the hours. Instead &mdash; if you're still willing and able &mdash; consider semi-retirement. It's the best of both worlds really: You can still contribute to society as a part-time member of the workforce, and you can enjoy more leisure time as a result of your shorter work schedule.</p> <p>More and more older Americans are opting for semi-retirement, in fact. Some are even opting for a new career path altogether. Continuing to work at least part-time past retirement age will not only help you feel like you still have something to offer the world, but it also helps you to continue to actively build your retirement fund &mdash; or at least maintain it at its current level.</p> <p>Elle Kaplan, CEO and founder of an asset management firm, touches a bit more on the financial benefits of semi-retirement.</p> <p>&quot;How would a semi-retirement change your financial reality?&quot; she asks. &quot;Take two months and track the money coming in and going out. Keep track of what you spend and all your bills. This will give you a clear sense of where you stand. Next, figure out what your Social Security payment is going to be each month in retirement. The Social Security Administration will provide this information and tell you how much you'll get based on what age you retire. Working even a few more years can have a huge impact.&quot;</p> <h2>4. Waiting Until You're 65 to Retire</h2> <p>Retirement age is typically specified at 65 years old in the United States. But to heck with that! Wouldn't you like to retire earlier?</p> <p>Of course, you'll probably need to strike it rich &mdash; or live <em>very</em> meagerly &mdash; in order to hang up your work boots in advance of the government-issued go-ahead. But maybe not. Have you ever thought about short-term mini-retirements? Ever even heard of the concept?</p> <p>&quot;Obviously it would be awesome if everyone could earn a fortune, retire young, and travel the world, but it's not going to happen for everyone,&quot; Cumberford says. &quot;What can happen for almost everyone is short-term mini-retirements, a concept spoken about in greater detail by Tim Ferriss in&nbsp;<a href="http://www.amazon.com/gp/product/0307465357/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=0307465357&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=YIR4QCCLJFO4ATW3">The 4-Hour Workweek</a>. Saving money specifically for a short sabbatical, or even just an extended vacation while keeping your current employment can typically be negotiated. Think five weeks in Southeast Asia, or a summer backpacking across Europe. With the virtually endless amount of airline and hotel points that can be earned through travel hacking, even far away places can be very affordable.&quot;</p> <p>As someone who has hosted lots of Australian guests who are allotted at least six weeks vacation every year, I'm not only envious, but also in favor of the idea of short-term mini-retirements. While they're working to live, we Americans are living to work (well into our golden years), and that's an outlook that could use some rethinking. Shouldn't we enjoy a high-quality lifestyle throughout our lifetime instead of when we're darn near dead?</p> <h2>5. Clinging to the Family Home</h2> <p>For many of us, our homes hold a lot of memories that make it hard to part with the house &mdash; even after the kids are grown and gone. But as you enter retirement, it's not a great idea to hang on to a large space with high utilities or even a mortgage that will become more and more difficult to manage as you age. The alternative is to downsize, of course, such as a smaller house or apartment, or even alternative-living situations that may suit you even more &mdash; like an RV, for instance.</p> <p>Janet Groene, author of&nbsp;<a href="http://www.amazon.com/gp/product/007178473X/ref=as_li_tl?ie=UTF8&amp;camp=1789&amp;creative=390957&amp;creativeASIN=007178473X&amp;linkCode=as2&amp;tag=wisbre03-20&amp;linkId=P2WLK6WDV5V7MKUB">Living Aboard Your RV, 4th Edition</a>, lived in an RV for 10 years before settling in Florida, and she's a staunch advocate for the nomad lifestyle.</p> <p>&quot;By selling out and moving into an RV, retirees fulfill their dreams of travel and at the same time live comfortably in a fully equipped home on wheels while scouting for the right place to settle down in retirement,&quot; she encourages.</p> <h2>6. Heading South for the Winter</h2> <p>Snowbirding &mdash; the practice of northerners spending the winter in warmer climates and summers at home &mdash; is common among retirees. But isn't that just a little too passé for today's generation of leisure seekers? Mark Koep, founder of CampgroundViews.com, thinks so. Like Groene, he wants retirees to think about their living options and arrangements more in depth so they don't automatically relegate themselves to a lifestyle that isn't necessarily fulfilling.</p> <p>&quot;The old idea of snowbirding ignores the freedom and adventure that modern retirees seek,&quot; he says. &quot;Instead retirees should consider boondocking &mdash; camping in Bureau of Land Management and Forest Service lands for free &mdash; and discount membership clubs to travel and explore more destinations.&quot;</p> <p><em>Do you have other retirement rules we should be breaking? Let us know in the comments below.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">12 Surprising Things Women Should Know About Retirement Planning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) pensions rules savings social security Wed, 17 Jun 2015 11:00:11 +0000 Mikey Rox 1454606 at http://www.wisebread.com 8 Reasons Why Your Retirement Cost Calculations May Be Wrong http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-reasons-why-your-retirement-cost-calculations-may-be-wrong" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement_piggy_bank_000018686866.jpg" alt="retirement cost calculations that might be wrong" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Saving for retirement is tricky, in part because you don't really have a clear idea of how much money you'll need when you stop working. There are many variables to consider, and a lot of our assumptions about the <a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">cost of retired life</a> may also be incorrect.</p> <p>The best way to deal with this uncertainty is to simply save and invest as early and as much as you can. But in the meantime, be aware of these reasons why your retirement cost calculations may be off.</p> <h2>1. Your Overall Expenses May Be Less Than You Think</h2> <p>There's a common assumption that people should save enough to &quot;maintain their current lifestyle.&quot; But the reality is that most people start to spend less as they get older. The Bureau of Labor Statistics reports that a <a href="http://www.bls.gov/cex/22014/midyear/age.pdf">person's expenses</a> peak between ages 45 and 54 at about $62,000 annually. Then, expenses start to decline. Those older than 65 spend about $42,000 a year, on average. And those older than 75 spend just $35,000 annually.</p> <h2>2. Your Might Pay Off Your Mortgage</h2> <p>When calculating your future living expenses, are you assuming that you'll eventually own your home free and clear? BLS statistics show that while only 19% of homeowners between ages 45 and 54 live mortgage-free, that figure jumps to 35% among people aged 55 to 64. Meanwhile, two-thirds of all homeowners over 75 are living free of house debt.</p> <h2>3. You Eat Less as You Age</h2> <p>While it's nice to assume that you'll be dining on lobster tail and caviar in retirement, the truth is that older Americans decrease their food expenditure as they age. A typical person at age 50 spends roughly $8,000 annually on food, according to BLS, dropping to $5,400 by age 65. Older people also dine out less. An average 50-year old will spend $3,279 on food away from home. That will drop to just over $1,300 by age 75.</p> <h2>4. You'll Drive Less</h2> <p>Think you'll be going on a plethora of road trips in retirement? Statistics show that older people actually drive less over time and spend far less on car purchases and automotive maintenance. An American's average expenditure on transportation peaks between ages 35&ndash;44 at just under $11,000 annually. That drops to $6,700 by age 65 and $4,800 by age 75.</p> <h2>5. You're Calculating Your Social Security Payments Incorrectly</h2> <p>When you use the Social Security calculator provided by the Social Security Administration's website, you will usually receive three numbers. The first is based on age 62, or early retirement. Another is based on age 66 (full retirement), and a third number is based on age 70 (maximum benefit.) To calculate your payments correctly, you must be honest about when you think you'll need to begin collecting. It's also worth noting that some observers don't even <a href="http://www.forbes.com/sites/johnwasik/2014/06/11/why-you-shouldnt-trust-social-securitys-lowball-estimate/">trust the government's calculations</a> in the first place.</p> <h2>6. Social Security Payments May Be Adjusted in the Future</h2> <p>Younger Americans may be faced with the reality that Social Security benefits may change by the time they reach retirement age. The government openly states that by 2033, payroll taxes will only cover 77 cents for every dollar of scheduled benefits. Rest assured that whatever we <em>think</em> we'll be getting in benefits by the time we retire, the reality will change between now and then.</p> <h2>7. Your Investment Returns Won't Be as High as You Assume</h2> <p>Younger investors tend to assume that the stock market will grow at an average of about 9% per year, but may forget that investment returns could be less in later years as they move to more conservative investments. As you approach retirement age, it makes sense to put more of your money in bonds, cash, and other stable vehicles. But it's important to remember that this may impact the total amount you save.</p> <h2>8. You Are Not Calculating the Correct Length of Retirement</h2> <p>There's a rule of thumb that assumes each person should plan for a 30-year retirement. But this number is based on an average, not each individual. If you have many family members that lived into their late 90s, you may need to save more to make your money last. It's also important to extend the length of your retirement if you retire at a relatively young age. Someone who retires at age 50, for instance, could see a retirement of 40 years or more.</p> <p><em>How are you calculating your retirement needs?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tim-lemke">Tim Lemke</a> of <a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don&#039;t Despair Over Small Retirement Savings</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">12 Surprising Things Women Should Know About Retirement Planning</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) expenses savings social security Mon, 08 Jun 2015 11:00:12 +0000 Tim Lemke 1444656 at http://www.wisebread.com Follow These 5 Steps to Full Health Care Coverage in Retirement http://www.wisebread.com/follow-these-5-steps-to-full-health-care-coverage-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/follow-these-5-steps-to-full-health-care-coverage-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_medicine_000044118320.jpg" alt="How to avoid healthcare shortage in retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you sure you'll be able to afford healthcare in retirement? Positive?</p> <p>Consider this: A recent report analyzing the rising <a href="http://www.hvsfinancial.com/PublicFiles/Data_Release.pdf">out-of-pocket Medicare costs</a> estimated that people retiring 10 years from now will spend $9 of every $10 they receive from Social Security on health care, in the form of copays, supplemental insurance premiums, prescription drugs, and things not covered by Medicare such as visits to the dentist.</p> <p>This means that the cost of medical care is something everyone should factor into their <a href="http://www.wisebread.com/12-surprising-things-women-should-know-about-retirement-planning">retirement saving plan</a>. But this is no ordinary expense &mdash; there are specific strategies for saving for health care that can put you in a much better position in your golden years.</p> <h2>1. Maximize Your Social Security Benefits</h2> <p>&quot;The number one thing people should do &mdash; most people aren't aware of this &mdash; is optimize Social Security,&quot; says Ron Mastrogiovanni, founder of HealthView Services, which issued the alarming report.</p> <p>The main way to maximize benefits is to wait as long as possible to start receiving Social Security. A couple retiring 10 years from now at age 65 will receive $142,000 less in lifetime benefits than they would if they worked until age 67, he said.</p> <p>&quot;If you're capable of working, why would you throw away $142,000?&quot; Mastrogiovanni says.</p> <h2>2. Start a Roth IRA</h2> <p>&quot;Under Medicare, they have something called means testing; the more you earn, the more you pay,&quot; Mastrogiovanni says. &quot;Here's the kicker: Those income brackets are not indexed to inflation.&quot; That means that if the government doesn't adjust the income at which retirees are considered affluent, many middle earners of today will end up paying more once they retire.</p> <p>But not all retirement income is counted in this calculation. Money drawn from a traditional 401(k) counts, but money drawn from a Roth IRA or a Roth 401(k) doesn't. So if your regular 401(k) is building up towards a high income in retirement, you might want to divert some of your contributions to a Roth, or convert the account to a Roth, to keep your income below the level where you'll be considered an affluent retiree.</p> <h2>3. Consider a Health Savings Account</h2> <p>Health savings accounts are not generally considered a retirement savings vehicle &mdash; they are meant to help people pay high medical care deductibles with certain insurance plans. But Medicare expert Katy Votava advocates saving excess contributions to HSAs for retirement health care needs.</p> <p>&quot;You can put in significant money and it grows tax free. Most people don't need to spend their full health savings account every year to meet their full health insurance needs,&quot; Votava says.</p> <h2>4. Consider Long-Term Care Insurance</h2> <p>The high out-of-pocket costs outlined in the HealthView report do not include the cost of nursing homes or other long-term care, but those are obviously a major concern when looking at lifetime health care costs. Some advisors recommend purchasing insurance that would protect your savings if you go to a nursing home, while others warn against it. This Wall Street Journal report explores both sides of the <a href="http://www.wsj.com/articles/SB10001424052702303425504577352031401783756">long-term care insurance issue</a>.</p> <h2>5. Purchase the Right Supplemental Plan</h2> <p>Your parents or grandparents may not have had to pay anything out of pocket once they qualified for Medicare, but people retiring now and in the future need <a href="http://www.medicare.gov/supplement-other-insurance/medigap/whats-medigap.html">supplemental insurance</a> to cover the copayments, coinsurance, and deductibles that Medicare doesn't cover. You'll also have to pay for a <a href="http://www.medicare.gov/supplement-other-insurance/medigap/medigap-and-part-d/medigap-plans-and-part-d.html">prescription drug plan</a>. Choosing the right plan can be so complicated that many people turn to consultants like Votava to help them figure out which to pick. Before signing up for a plan, make sure it covers your doctors and your medications, because not all plans cover everything, Votava warns.</p> <p><em>What are you doing to ensure sufficient health care coverage in retirement?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/carrie-kirby">Carrie Kirby</a> of <a href="http://www.wisebread.com/follow-these-5-steps-to-full-health-care-coverage-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">12 Things You Didn&#039;t Know About Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance Retirement 401(k) healthcare HSA medical social security Thu, 14 May 2015 15:00:09 +0000 Carrie Kirby 1416618 at http://www.wisebread.com How to Enjoy Retirement If You Haven't Saved Enough http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-enjoy-retirement-if-you-havent-saved-enough" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_couple_vacation_000038250840.jpg" alt="Retired couple taking cheap vacation" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Are you ready to retire, but haven't managed to save enough yet?</p> <p>In fact, the U.S. Census Bureau of Labor Statistics says that although the average retirement age is 62, many seniors are retiring at age 65 or older, and a large percentage &mdash; roughly 80% &mdash; still will not have saved enough by then. Of them, about a third will depend entirely on Social Security benefits. If you're within five years of calling it quits but haven't saved enough to retire, here are a few steps that may bring retirement closer within reach.</p> <h2>1. Wait Until You're 65</h2> <p>Wait until you're age 65 or older before you start collecting Social Security benefits, as the longer you wait, the larger your benefit. Use Bankrate's Social Security <a href="http://www.bankrate.com/calculators/retirement/social-security-benefits-calculator.aspx">benefit calculator</a> to estimate your future payments.</p> <h2>2. Don't Wait to Downsize</h2> <p>Consider selling your home and investing the profits. Downsize to a lower-cost senior living community or condominium in an area where your property taxes will be affordable. You can also inquire about school parcel tax exemptions that allow seniors to apply for tax exemption from taxes imposed by local school districts.</p> <h2>3. Move to a No Tax State</h2> <p>Move to a state with no income tax on pension, Social Security, or dividend income. Florida, Nevada, New Hampshire, Pennsylvania, Washington, and Wyoming are among the states that do not tax that income.</p> <h2>4. Accept Government-Sponsored Medical Insurance</h2> <p>Medicare provides adequate health insurance coverage for doctor's visits, emergency care, assisted living, etc., but does not cover prescription drugs, dental, or vision care. For this, you will need add-on coverage like those offered by Medicare Advantage and Supplemental Insurance (Medigap). Consult with your insurance provider prior to retirement to ensure you can afford proper health insurance coverage. If you can't, inquire about government subsidies or senior plans offered by the likes of <a href="http://www.aarp.org/">AARP</a>.</p> <h2>5. Max-Out Retirement Accounts</h2> <p>By now you should be fully funding all of your retirement accounts and making any catch-up contributions. The 2015 catch-up contributions for IRAs total an additional $1,000 ($6,500) and $6,000 ($24,000) for your 401(k). As they are the most tax advantageous, make sure you are fully funding these accounts over the next few years preceding your retirement.</p> <h2>6. Diversify Using Bonds and ETFs</h2> <p>As you are nearing retirement age, you will want to gradually rebalance your portfolio so that it has less of volatile investments like stocks, and more of safer investments such as bonds and exchange-traded funds, or ETFs.</p> <h2>7. Join AARP</h2> <p>The benefits of joining AARP are endless. For those unfamiliar, AARP is the popular senior citizens advocacy group. The annual membership fee is only $16 and is discounted even further when years are bought in bulk. Members receive invaluable discounts on dining, travel, roadside assistance, auto insurance, health benefits, and more. This is a program that's definitely well worth signing up for.</p> <p><em>Are you prepared for retirement? What are you doing to get ready?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/how-to-enjoy-retirement-if-you-havent-saved-enough">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-start-saving-for-retirement-at-40">How to Start Saving for Retirement at 40+</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-things-millennials-should-do-today-to-prepare-for-retirement">4 Things Millennials Should Do Today to Prepare for Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) aarp investments IRAs saving money social security Fri, 01 May 2015 15:00:25 +0000 Qiana Chavaia 1400950 at http://www.wisebread.com 4 More Exciting, Affordable American Cities to Retire In http://www.wisebread.com/4-more-exciting-affordable-american-cities-to-retire-in <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-more-exciting-affordable-american-cities-to-retire-in" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retired_couple_beach_000038686710.jpg" alt="Happy retired couple settling in affordable American city" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>As of February 2015, the average <a href="http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/#table2">monthly Social Security benefit</a> of a retired American worker was $1,331.44.</p> <p>This means that a couple of retirees would have about $31,954 available in annual Social Security benefits. While some people have additional savings, 26% of Americans are planning to <a href="https://www.transamericacenter.org/docs/default-source/resources/center-research/tcrs2014_sr_15th_annual_compendium.pdf">rely on Social Security</a> as their primary source of income during retirement.</p> <p>Savvy folks know that they need to plan ahead and find affordable cities to make the most out of their nest eggs. Here are four more exciting, affordable U.S. cities to retire in. (See also: <a href="http://www.wisebread.com/4-exciting-affordable-american-cities-to-retire-in?ref=seealso">4 Exciting Affordable American Cities to Retire In</a>)</p> <h2>1. Pittsburgh, Pennsylvania</h2> <p>Financial advice website Nerdwallet put Pittsburgh at the top of its 2013 list of best places for baby boomers. Since over 25% of the city's population is between the ages of 50 and 70, and 13.8% is 65 years or older, retirees can enjoy an active social life.</p> <p>Senior citizens can find affordable housing options in Pittsburgh, as the <a href="http://money.usnews.com/money/retirement/slideshows/10-best-places-to-retire-on-social-security-alone/8">median monthly mortgage payment</a> is $1,023 and the median monthly rent is $614. Getting around the city by bus, light rail (The T), or Mon Incline is free at all times for senior citizens age 65 or over that present a Pennsylvania Senior Citizen ID Card or a Medicare card at the time of fare payment.</p> <p>Pittsburgh is a great retirement destination for sports fans, because the city is home to the Pittsburgh Panthers (college athletics), Pittsburgh Penguins (hockey), and Pittsburgh Pirates (baseball), and of course, the Pittsburgh Steelers. If sports isn't your thing, you still have the 14-block Cultural District, which offers opera, theater, ballet, and live music events.</p> <h2>2. Tucson, Arizona</h2> <p>If you're part of the 26% of U.S. retirees planning to rely primarily on your Social Security check, then take a good look at the state of Arizona. The Grand Canyon State doesn't tax Social Security income.</p> <p>And it gets even better. Up to $2,500 total of military, civil-service, and Arizona state and local government pensions are also <a href="http://www.kiplinger.com/tool/retirement/T055-S001-state-by-state-guide-to-taxes-on-retirees/index.php?map=&amp;state_id=3&amp;state=Arizona">exempt from taxes</a>. Plus, Arizona has no inheritance or estate taxes. Combine these tax breaks with the fact that Tucson's <a href="http://www.forbes.com/pictures/mjf45hfje/tucson-az/">cost of living</a> is 4% below the national average and you can quickly see how Tucson is one of the most affordable American cities to retire in.</p> <p>But it isn't just about the tax savings, since there's also plenty of local fun year-round. Since 1986, this city has been home to the Tucson Folk Festival, which attracts more than 10,000 folk music lovers every year with more than 20 hours of free, live bluegrass, Irish, and old country and western music. Other popular annual events are the Tucson Rodeo (a 90-year old rodeo, also known as La Fiesta de los Vaqueros), the Tucson Meet Yourself (a celebration of folk and ethnic communities of the multinational Arizona-Sonora region), and the 4th Avenue Street Fair (taking place twice a year).</p> <p>But I think it's all about the <a href="http://www.nytimes.com/2009/08/26/dining/26unit.html?_r=0">Sonoran hot dog</a>, which people believe to have been invented in Tucson.</p> <h2>3. St. Louis, Missouri</h2> <p>In St. Louis, retirees with an annual adjusted gross income of less than $85,000 (less than $100,000 for married couples) enjoy a <a href="http://www.kiplinger.com/tool/retirement/T055-S001-state-by-state-guide-to-taxes-on-retirees/index.php?map=&amp;state_id=26&amp;state=Missouri">tax exemption</a> on their Social Security benefits. For tax purposes, residential property is assessed at 19% of fair market value, and some retirees may qualify for a property tax credit. There is no inheritance tax or estate tax.</p> <p>Baby boomers comprise about 28% of the St. Louis population for three reasons. First, the city has a low cost of living &mdash; about 16.30% lower than that of the U.S. average. Second, <a href="http://money.usnews.com/money/retirement/articles/2012/10/15/best-places-to-retire-for-under-40000?page=2">housing costs for retirees</a> are affordable, at a median of $1,186 per month for those with a mortgage, $442 for seniors with a paid-off house, and $657 monthly for senior renters. Third, St. Louis is home to the Barnes-Jewish Hospital/Washington University, a <a href="http://health.usnews.com/best-hospitals/area/mo/barnes-jewish-hospitalwashington-university-6630930">nationally-ranked hospital</a> by U.S. News in several specialities.</p> <p>But St. Louis is an exciting city for several other reasons:</p> <ul> <li>Bud Selig, baseball's outgoing commish, proclaimed St. Louis as the <a href="http://sports.yahoo.com/blogs/mlb-big-league-stew/bud-selig-proclaims-st--louis--the-best-baseball-city-193010313.html">best baseball city</a> in 2015.<br /> &nbsp;</li> <li>With the highest concentration of sports bars in the country, St. Louis stands at #6 in the list of <a href="http://www.bestplaces.net/docs/studies/manliest_cities.aspx">manliest U.S. cities</a>.<br /> &nbsp;</li> <li>St. Louis ranks #4 in a list of America's <a href="http://www.bestplaces.net/docs/studies/blockparties.aspx">best places for block parties</a>.<br /> &nbsp;</li> <li>The city operates more than 100 parks, including the Citygarden, the Tower Grove Park, and the Carondelet Park.<br /> &nbsp;</li> <li>The city is within driving distance of more than 100 wineries and more than 6,000 caves.</li> </ul> <h2>4. Cleveland, Ohio</h2> <p>Located in the Buckeye State, Cleveland provides four tax breaks to retirees:</p> <ul> <li>No state taxes on Social Security benefits;</li> <li>No inheritance tax or estate tax;</li> <li>Four tax credits for retirees; and</li> <li>Homestead exemption for qualifying homeowners at least 65 years old.</li> </ul> <p>A big draw for Cleveland retirees is the state-of-the-art Cleveland Clinic, which ranks within the <a href="http://health.usnews.com/best-hospitals/area/oh/cleveland-clinic-6410670">top 10 U.S. hospitals</a> for several specialties, including geriatrics, cardiology, rheumatology, and urology. According to the latest U.S. Census, Cleveland has 476 physicians per 100,000 residents, a number much higher than the national average.</p> <p>Playhouse Square Center is the second largest performing arts center in the country, housing four theaters and attracting over one million guests every year to its more than 1,000 annual events. The Cleveland Orchestra is considered among the &quot;Big Five&quot; symphony orchestras leading the field in musical excellence and calibre of musicianship.</p> <p>Due to all these reasons (and more), Cleveland often ranks among one of the best <a href="http://www.cleveland.com/business/index.ssf/2013/06/cleveland_ranks_no_2_as_one_of.html">U.S. cities to retire in</a>.</p> <p>Planning for retirement is a two-step process. Not only do you have to maximize your nest egg, but also you have to minimize your living expenses during your golden years. In order to achieve both objectives, consider these four American cities when you're looking at retirement destinations. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-boost-an-underperforming-401k?ref=seealso">5 Simple Ways to Boost an Underperforming 401(k)</a>)</p> <p><em>In what U.S. city are you planning to retire &mdash; and why?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/4-more-exciting-affordable-american-cities-to-retire-in">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tiny-nestegg-retire-abroad">Tiny Nestegg? Retire abroad!</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/social-security-is-not-a-ponzi-scheme">Social Security Is Not a Ponzi Scheme</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-taking-social-security-could-cost-you-thousands">Why Taking Social Security Could Cost You Thousands</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement affordable living baby boomers social security tax exemptions u.s. cities Mon, 20 Apr 2015 13:00:09 +0000 Damian Davila 1392146 at http://www.wisebread.com Why Taking Social Security Could Cost You Thousands http://www.wisebread.com/why-taking-social-security-could-cost-you-thousands <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-taking-social-security-could-cost-you-thousands" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/social-security-finance-Dollarphotoclub_37675746.jpg" alt="social security" title="social security" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>I recently attended a weekend barbecue with some neighbors, and at one point the conversation shifted from the usual topics &mdash; family updates, local news, sports, and politics &mdash; to retirement. Strangely enough, it was raised by a friend's daughter, Barbara, who is in her early 30s. I was a little surprised (but encouraged) that she was already doing some retirement planning at that age.</p> <p>Barbara is a bright, hard-working human resources manager with a promising future, but after 10 years in a challenging work environment, she said she was beginning to feel a little fatigued. That's certainly understandable. She and another 80 million Millennials have had the misfortune of joining a workforce that's experiencing some major disruptions. For most workers, America's recent economic restructuring has led to less job security, lower wages, fewer benefits, and longer hours. That's not exactly a recipe for long-term optimism if you're a thirty-something.</p> <p>With this in mind, it didn't take long for me to realize that Barbara raised the issue of retirement not because she was interested in long term financial planning, but instead out of sheer frustration. Barbara's question was, &quot;What is the earliest age I can begin receiving my Social Security retirement benefit?&quot; Age 62 was the answer. &quot;Then that's when I'll take it,&quot; she said.</p> <p><a href="http://www.socialsecurity.gov/planners/benefitcalculators.htm"><img width="605" height="340" src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5123/Whelan%20Blog%20Table%20-%20Social%20Security%20Benefit%20Reductions.jpg" alt="" /></a></p> <p>What Barbara didn't realize is that by doing so, she'd forfeit 30% of her full benefit amount. If her full amount was, say, $2,000 per month, then she would be giving up $600. So I said to her, &quot;What if you needed $2,000 a month from Social Security just to break even financially? And what if, by taking your Social Security benefit at age 62 instead of age 67, your benefit amount is reduced by $600 a month, to $1,400?&quot; Barbara's reply: &quot;I'd still take the lower amount.&quot;</p> <p>Of course I couldn't just let the issue end there, so I asked a follow-up question: &quot;But that would put you $7,200 in the hole each year. By your mid 70s your debt would add up to $100,000. How would you pay for it?&quot; &quot;I don't care,&quot; she said. &quot;I just want to stop working the moment I first qualify for a monthly retirement check.&quot;</p> <p>At that point I sensed I was stepping on a nerve, so I let it go. But, I'm glad she raised the topic and I give her credit for starting the conversation. Now that the issue has been framed with real numbers and dates, she is in a better position to make a sound decision when the time comes.</p> <p>For some, the loss of $600 each month for the duration of their retirement would be difficult to absorb. For others, it would be less of an issue. And for others still, there might be health-related concerns or other extenuating circumstances that make early distribution a reasonable choice.</p> <p>The point is, before choosing to give away so much of what you earned and accumulated over many decades, be sure to consider the trade-offs. Let reason, not emotion, drive your decision.</p> <p><em>At what age are you planning on taking Social Security?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/keith-whelan">Keith Whelan</a> of <a href="http://www.wisebread.com/why-taking-social-security-could-cost-you-thousands">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tiny-nestegg-retire-abroad">Tiny Nestegg? Retire abroad!</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-do-i-need-to-retire-how-much-can-i-spend">How much do I need to retire? How much can I spend?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-one-woman-retired-at-60-and-traveled-the-world">How One Woman Retired at 60 and Traveled the World</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement early retirement pension social security Fri, 23 Jan 2015 14:00:06 +0000 Keith Whelan 1282530 at http://www.wisebread.com 12 Things You Didn't Know About Retirement http://www.wisebread.com/12-things-you-didnt-know-about-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/12-things-you-didnt-know-about-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/retirement-86490853-small.jpg" alt="retirement" title="retirement" class="imagecache imagecache-250w" width="250" height="145" /></a> </div> </div> </div> <p>It's nice to get out of the rat race.</p> <p>However, once you hit retirement you have to learn to get along with way less &quot;cheese.&quot; With <a href="http://www.ebri.org/pdf/FF.276.Ests.10Apr14.pdf">less than half of Americans</a> having ever thought about how much money they need for retirement, it is clear that several people are still clueless about retirement. (See also: <a href="http://www.wisebread.com/this-is-the-basic-intro-to-having-a-retirement-fund-that-everyone-needs-to-read?ref=seealso">This Is the Basic Intro to Having a Retirement Fund That Everyone Needs to Read</a>)</p> <p>If you consider yourself a know-it-all in retirement matters, here is a list of 12 things about retirement that may shock you.</p> <h2>1. Some May Not Retire At All</h2> <p>If you think that most people retire at age 65, think again. Back in 1991, only about 11% of workers expected to retire after age 65. Fast forward to 2014 and 33% of workers expect to retire after age 65 and <a href="http://www.ebri.org/pdf/FF.273.RetAge.20Mar14.pdf">10% don't plan to retire at all</a>. Attitudes are changing and more Americans are considering semi-retirement during their golden years.</p> <h2>2. $1 Million Is Not Enough</h2> <p>For several years, financial advisors have used $1 million as a rule of thumb for your target retirement fund. As life expectancy improves, this target may be too low. With men and women reaching ages <a href="http://www.ssa.gov/planners/lifeexpectancy.htm">84 and 86</a> respectively, $1 million nest eggs may run out. Considering a 4% annual withdrawal, a $1 million retirement fund may last you only <a href="http://www.bankrate.com/finance/retirement/retirement-statistics-1.aspx">about 25 years</a>. The Social Security Administration projects that about 10% of 65 year olds will even live beyond 95.</p> <h2>3. Gen Y Needs to Save $2 Million</h2> <p>Here is some bad news for those born in the early 1980's and later. <a href="http://money.usnews.com/money/retirement/articles/2011/09/15/gen-ys-2-million-retirement-price-tag">Many registered investment advisors</a> recommend members of Gen Y have a retirement savings goal of at least $2 million. Inflation, higher student debt, more expensive health care, and longer life expectancy are major causes for this radical increase. The key to saving $2 million for retirement is starting early. Assuming a 7% average annual return, you'll need to save $510 per month if you start at age 20. If you start age 40, you'll need to put away $2,270 every month. (See also: <a href="http://www.wisebread.com/retirement-planning-if-you-re-under-30?ref=seealso">Retirement Planning If You're Under 30</a>)</p> <h2>4. Full Retirement Age Is 67</h2> <p>When reading the fine print from your retirement accounts, an age that appears a lot is 59 &frac12;. This is the age at which most retirement accounts allow you to start taking withdrawals without any penalty. This is not the case for social security benefits. The <a href="http://www.ssa.gov/retire2/retirechart.htm">full retirement age</a> for those born 1960 and later is 67.</p> <p>This means that if you decide to retire before age 67, you are entitled to reduced social security retirement benefits. For example, if you retire at 65, you get about 13.3% less than you would at age 67. On the other hand, if you decide to retire past age 67 you are entitled to <a href="http://www.ssa.gov/retire2/delayret.htm">delayed retirement credits</a>, which boost your benefits slightly. Delayed retirement credits reach a cap at age 70.</p> <h2>5. Almost Half of Americans Have Less Than $10,000 Saved for Retirement</h2> <p><a href="http://www.ebri.org/files/Final-FS.RCS-13.FS_3.Saving.FINAL.pdf">46% of all American workers</a> have less than $10,000 saved for retirement and 29% of all American workers have less than $1,000 saved for retirement. If you fall under either of these categories, get your retirement strategy together. (See also: <a href="http://www.wisebread.com/10-easy-ways-to-supercharge-your-retirement?ref=seealso">10 Easy Ways to Supercharge Your Retirement</a>)</p> <h2>6. Employer-Sponsored Plans Increase the Likelihood You'll Save</h2> <p>Here is some good news: Those workers that participate in retirement plans at work are 45% more likely to save than those that don't. According to data from the Employee Benefit Research Institute, those saving for retirement at work are more likely to have saved at least $50,000.</p> <h2>7. Self-Employed Can Save for Retirement</h2> <p>Freelancers, independent contractors, and small business owners can save for retirement, too. The best options are <a href="http://www.irs.gov/Retirement-Plans/One-Participant-401(k)-Plans">one participant 401(k)'s</a> and <a href="http://www.irs.gov/Retirement-Plans/Plan-Sponsor/Simplified-Employee-Pension-Plan-(SEP)">Simplified Employee Pensions</a> (SEP's), which both have higher caps than Roth or Traditional IRAs. Under both retirement accounts, you can put away up to 20% of your net self-employment earnings with a cap at $51,000, as of 2013. Most financial firms can offer a SEP, but fewer can offer a one participant 401(k). Contact your financial institution for more details for eligibility requirements and rules.</p> <h2>8. Older Workers Can Save $5,500 Extra for Retirement</h2> <p>It is never too late to start saving for retirement. The IRS gives all workers age 50 or older the chance to make catch-up contributions of <a href="http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Catch-Up-Contributions">$5,500 every year</a> to their retirement accounts. These catch-up contributions are the best way to give your nest egg a much needed boost.</p> <h2>9. Married Couples Save More</h2> <p>When it comes to retirement planning, married couples are doing better than singles. Unmarried men and women are just as likely to have ever saved for retirement and to be currently contributing to a retirement account. However, those <a href="http://www.ebri.org/pdf/FF.275.Svrs.3Apr141.pdf">probabilities double for married workers</a> and their spouses. Nearly 75% of married of married couples are currently saving for retirement. These statistics prove that two heads think better than one.</p> <h2>10. Children Can Contribute to an IRA</h2> <p>That's not a typo. Little Jimmy can start putting away that lemonade stand money into a traditional IRA, even if he's just age 10. You can open a traditional IRA, a Roth IRA, or an Education IRA for your children and they can <a href="http://www.fool.com/money/investingforkids/investingforkids03.htm">contribute up to $2,000 per year</a> from their income. While you will have custodial control over your kid's account until she reaches legal age, you have to eventually turn over the rights to her. Make sure to discuss with her the implications of early withdrawals.</p> <h2>11. Non-Working Spouses Can Have Retirement Funds, Too</h2> <p>If you file taxes jointly with your spouse and have non-working spouse, you can fund your spouse's traditional or Roth IRA. The working spouse can contribute up to $5,500 per year to the non-working spouse's account, and up to $6,500 when over age 50.</p> <h2>12. IRAs Are Protected From Bankruptcy Proceedings</h2> <p>Under the <a href="http://www.gpo.gov/fdsys/pkg/PLAW-109publ8/html/PLAW-109publ8.htm">Bankruptcy Abuse Prevention and Consumer Protection Act</a> (BAPCPA) of 2005, the first $1 million of traditional IRAs and Roth IRAs are protected in case of bankruptcy. The amount protected is adjusted every 3 years to current cost of livings standards and, as of 2013, it stands at $1,245,475. There is no protection cap for employer-sponsored retirement plans, such as 401(k)s, 403(b) profit sharing plans, and 457(b) deferred compensation plans.</p> <p><em>Did anything here surprise you? Please share in comments!</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/12-things-you-didnt-know-about-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-step-by-step-guide-to-rolling-over-your-401k">The Step-by-Step Guide to Rolling Over Your 401(k)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-retirement-rules-you-should-be-breaking">6 Retirement Rules You Should Be Breaking</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) IRA retirement facts social security Wed, 25 Jun 2014 21:00:04 +0000 Damian Davila 1147194 at http://www.wisebread.com 10 Investing Concepts to Ignore and 10 to Follow http://www.wisebread.com/10-investing-concepts-to-ignore-and-10-to-follow <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/10-investing-concepts-to-ignore-and-10-to-follow" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/cash-2296346-small.jpg" alt="cash" title="cash" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>So you're ready to invest. Awesome! Investing is one of the simplest &mdash; although not easiest &mdash; ways to build wealth. To help you on your road to success, here are 10 things to ignore, and 10 to keep in mind. (See also: <a href="http://www.wisebread.com/7-investing-lessons-from-the-two-comma-club" target="_blank">7 Investing Lessons From the Two Comma Club</a>)</p> <h2>Ignore This Stuff</h2> <p>Let's start with what you should ignore.</p> <p><strong>1. Hot Managers</strong></p> <p>A fund manager may be able to pick the right investments once in a while. But can he do it over the long term? The answer is likely no.</p> <p><strong>2. Hot Stocks</strong></p> <p>Sure, you could pick the next Apple and strike it rich. But you could also pick the next Enron and go broke. It's much safer to diversify.</p> <p><strong>3. Hot Sectors</strong></p> <p>Should you focus on the financial sector? How about the technology sector? The answer to either question is no. Remember the financial crisis of 2008? The dot-com bubble back in 2001? Instead, by investing in a broad market, this won't matter, because you'll be owning all sectors.</p> <p><strong>4. Daily Performance</strong></p> <p>In the short-term, the market is moody. Prices go up and down all the time. Stay focused on the long term.</p> <p><strong>5. Financial News</strong></p> <p>A lot of the news out there is useless, and sometimes even used to scare you. Ignore the news.</p> <p><strong>6. Stockbrokers</strong></p> <p>Often, these people will want you to buy and sell with great frequency. But not for the reason you may think. Since you pay commissions for every trade you make, frequent trading makes brokers rich, not investors.</p> <p><strong>7. Market Timing</strong></p> <p>Trying to predict when to buy and sell is a waste of time. No one can accurately predict the future.</p> <p><strong>8. Morningstar Ratings</strong></p> <p>A <a href="http://www.nerdwallet.com/blog/investing/2013/morningstar-best-mutual-funds/" target="_blank">study of the funds rated</a> &quot;five stars&quot; by Morningstar failed to find evidence that these funds did any better than the four star, or even three star funds.</p> <p><strong>9. Past Performance</strong></p> <p>As the saying goes, &quot;Past performance should not be used to predict future performance.&quot;</p> <p><strong>10. Social Security</strong></p> <p>I'm not counting on Social Security in my retirement. In fact, <a href="http://www.socialsecurity.gov/mobile/content/en/news.html#news-1" target="_blank">according to the Social Security Administration,</a> the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds are expected to become depleted in 2033. So it helps to plan not to have it. Anything you do get will be icing on the cake.</p> <h2>Pay Attention to This Stuff</h2> <p>Now, let's dig in to the things you must get right.</p> <p><strong>1. Asset Allocation</strong></p> <p>There are two main types of assets: Stocks and bonds. Stock prices move up and down more wildly than bonds. But they also have the chance to make you more money. Asset allocation is how you'll divide your money between the two.</p> <p>&quot;Why is this important?&quot; you ask?</p> <p>Studies have shown that your asset allocation makes up 90% of the expected returns you'll achieve.</p> <p><strong>2. Diversification</strong></p> <p>Related to asset allocation is diversification. This is about how deep you go into stocks and bonds. It's risky to own just one stock or one bond. The more you own, the more diversified you are. This leads to more safety, helping you sleep better at night while your money still grows.</p> <p>If you'd like to see how I allocate and diversify my assets, check out the <a href="http://moneytobless.com/simplify-your-investing-with-the-core-four-portfolio/" target="_blank">Core Four Portfolio</a>.</p> <p><strong>3. Rebalance</strong></p> <p>Since stock and bond prices will go up and down, you'll need to make sure your asset allocation stays on track. This is what rebalancing does.</p> <p><strong>4. Time Horizon</strong></p> <p>Investing isn't a get-rich-quick scheme. <a href="http://www.wisebread.com/using-time-horizons-to-make-smarter-investments" target="_blank">To win the game,</a> you need patience and lots of time in order for your money to grow.</p> <p><strong>5. Fees</strong></p> <p>If you're going to invest in mutual funds, the most important fee to be aware of is the expense ratio. All funds have them. It's crucial to make sure that you're paying the lowest fees possible. The more they charge, the less you keep.</p> <p><strong>6. Dollar Cost Averaging</strong></p> <p>This is all about the consistency you bring to investing with regular purchases, which tends to average out the highs and lows. So, if prices are down, there's a sale, and you're buying in preparation for when prices rise again. If prices are up, you're still buying, and your portfolio is growing as well. A win-win situation.</p> <p><strong>7. Contribution Limits</strong></p> <p>The more money you contribute, the faster you build wealth. In 2013, you can contribute a maximum of $17,500 to your 401(k) and $5,500 to your IRA.</p> <p><strong>8. Employer Match</strong></p> <p>If your employer provides a retirement plan with matching contributions, invest at least enough to get the match. As part of your compensation package, this is money you're entitled to. It'd be unwise to pass up <a href="http://www.wisebread.com/6-ways-to-get-paid-for-saving-money" target="_blank">this extra money</a>.</p> <p><strong>9. Risk Tolerance</strong></p> <p>How much risk can you take? If you're young, you can usually take on more risk by investing in a greater amount of stocks. But as you get closer to retirement, you'll probably want to decrease risk by having <a href="http://www.wisebread.com/intro-to-5-super-safe-investments" target="_blank">more of your money in bonds</a>.</p> <p><strong>10. Beneficiary</strong></p> <p>Lastly, lots of people don't like to think about death, even though it's inevitable. Choosing your beneficiary will ensure that the person whom you want to receive your money will actually get it.</p> <p>Ignore the first 10 things above, and follow the second 10, and you'll be on the road to investing success.</p> <p><em>Anything I've forgotten in these twin lists? What investment advice do you ignore? What advice do you stick with?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darren-wu">Darren Wu</a> of <a href="http://www.wisebread.com/10-investing-concepts-to-ignore-and-10-to-follow">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-dumb-401k-mistakes-smart-people-make">5 Dumb 401(k) Mistakes Smart People Make</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-boost-your-odds-of-retiring-early">5 Ways to Boost Your Odds of Retiring Early</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment 401(k) bad advice broker social security Thu, 11 Jul 2013 10:36:30 +0000 Darren Wu 980403 at http://www.wisebread.com To Stay on Financial Track, Perform a Yearly Earnings Review http://www.wisebread.com/to-stay-on-financial-track-perfom-a-yearly-earnings-review <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/to-stay-on-financial-track-perfom-a-yearly-earnings-review" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/5857728038_a70232596a_z.jpg" alt="calculator and cash" title="calculator and cash" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>You probably have an excellent idea of how much money you make, perhaps down to the exact dollar in each paycheck. In your mind's eye, you may think of that number as trending upward each year you gain experience &mdash; with the exception of the times that you spent unemployed, attending college as a full-time student, or taking a family leave of absence.</p> <p>But this imagined trajectory may or may not represent reality. The upward mobility may not be rising as quickly as you had hoped when you bought your house, committed to a car payment, signed on to send your kids to private school, or dreamed about your retirement. Or, you may be making plenty of moneybut your net worth is not increasing as rapidly as your income. (See also:&nbsp;<a href="http://www.wisebread.com/perform-a-credit-card-rewards-annual-review">Perform a Credit Card Rewards Annual&nbsp;Review</a>)</p> <h2>Why You Should Check Your Earnings</h2> <p>Taking a look at your annual earnings gives you the unfiltered truth about where your career and compensation are headed. Although there are more factors in achieving happiness and building wealth than increasing take-home pay, considering your annual earnings over time is a worthwhile endeavor.</p> <p>You may have a spreadsheet detailing your income, spending plan, and assets to measure their progression, stagnation, or decline. If not, you can access annual earnings online at the federal government's <a href="http://ssa.gov/" target="_blank">Social Security Administration (SSA) website</a>. Rod Griffin, director of public education for Experian (a credit reporting company), recommends that you consider adding this habit to your financial routine at least once a year, just as you might <a href="http://www.experian.com/blogs/news/2012/12/14/check-credit-reports/" target="_blank">check your credit report</a>. Here's why:</p> <p><strong>Trends in Earnings Can Guide Decisions About Next Steps Professionally</strong></p> <p>This financial snapshot of your career may prompt you to reconsider direction or give you the impetus to make changes that you have been mulling over. For example, you may decide to pursue a position with another company; <a href="http://www.wisebread.com/earn-more-money-by-demanding-it" target="_blank">negotiate a better salary or hourly rate</a> with your employer; drop a part-time job because its value isn't worth the extra cost of commuting, eating out, etc.; find higher-paying freelance clients; or <a href="http://www.wisebread.com/how-to-make-a-major-career-switch-without-going-back-to-school" target="_blank">switch careers</a>.</p> <p><strong>Verify the Accuracy of Your Records</strong></p> <p>You'll want to check the accuracy of your earnings. A byproduct of verifying accuracy is making sure that no one is tampering with your information. Checking your Social Security info is similar to looking at your credit report each year to note anything unusual and make corrections as quickly as possible. Such habits can help prevent identity theft.</p> <p><strong>Earnings Information Is Needed for Financial Planning Purposes</strong></p> <p>Even if you are happy with your income trends, an earnings report is useful for financial planning. A financial advisor should want to get this information to help you <a href="http://thechicagofinancialplanner.com/2012/07/25/financial-planning-really-does-make-a-difference/" target="_blank">develop a financial plan</a>. At the same time, you can access estimated benefits in retirement, which may be a factor in <a href="http://www.wisebread.com/7-essential-truths-for-a-successful-retirement" target="_blank">determining how much you need to retire</a>.</p> <p>Note that your regular earnings may differ from your Social Security wages for various reasons, including tax-deferred contributions to employer-sponsored <a href="http://www.wisebread.com/choosing-a-retirement-account-whats-available-and-what-s-best-for-you" target="_blank">retirement accounts</a> that lower your taxable wages for federal tax purposes. Mike Piper, CPA and author of &quot;Social Security Made Simple&quot; and the Oblivious Investor blog, explains that <a href="http://www.obliviousinvestor.com/do-401k-and-ira-contributions-reduce-my-social-security-benefits/" target="_blank">pre-tax 401(k) contributions reduce federal income taxes but not Social Security taxes</a>. So, refer to your W-2 (specifically Box 3 &mdash; Social Security wages) and other tax statements when checking your earnings on the SSA website.</p> <p>During your visit, you can also <a href="http://ssa.gov/onlineservices/#a0=5" target="_blank">take care of tasks</a> like these:</p> <ul> <li>Learn how to change your name on your Social Security records and get a new card after getting married</li> <li>Determine estimated Social Security benefits for your surviving children and spouse if something happened to you</li> <li>Change your address if you are currently receiving benefits</li> </ul> <h2>How to Check Your Earnings</h2> <p>To check your earnings, you'll need to set up an online &quot;<a href="http://ssa.gov/myaccount/" target="_blank">my Social Security</a>&quot; account on the SSA website. There are just a few starting requirements. You must:</p> <ul> <li>Be 18 years old or older</li> <li>Have a valid email address and U.S. mailing address</li> <li>Have a Social Security number</li> </ul> <p>When you create the account, you'll need to answer some security questions that Sal Guariano, vice president of government services at Experian, describes as the authentication process. The credit reporting firm developed this process in collaboration with the SSA to make sure that your information is secure.</p> <p>You'll be asked a series of questions to which only you should know the answers. Sal mentions that even if <a href="http://www.wisebread.com/5-things-to-never-keep-in-your-wallet" target="_blank">someone stole your wallet</a>, the thief couldn't extract the answers based on your driver's license and plastic cards.</p> <p>Note, however, if you have placed a <a href="https://www.experian.com/fraud/center.html" target="_blank">fraud alert</a> or a <a href="http://www.experian.com/consumer/security_freeze.html" target="_blank">freeze on your credit report</a>, then you will need to take some extra steps to create an online account. Lift these restrictions temporarily because the SSA works with the credit agency to verify information as part of its security precautions.</p> <p>After you set up your account and log in, viewing your earnings is easy. You can also locate your estimated benefits at full retirement age as well as earlier and later retirement ages. Precisely what will happen in the future with your retirement benefits is not predictable. But seeing what has happened with your earnings in the past can be useful as you plot next steps.</p> <p><em>Have you found that viewing your income and net worth over time is useful? What changes did you make to have a better future?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/to-stay-on-financial-track-perfom-a-yearly-earnings-review">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-11"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-more-exciting-affordable-american-cities-to-retire-in">4 More Exciting, Affordable American Cities to Retire In</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-start-saving-for-retirement-at-40">How to Start Saving for Retirement at 40+</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-taking-social-security-could-cost-you-thousands">Why Taking Social Security Could Cost You Thousands</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Organization Retirement financial planning social security statement of earnings Thu, 14 Mar 2013 10:48:30 +0000 Julie Rains 969765 at http://www.wisebread.com Capital Substitutes for Labor — and Vice Versa http://www.wisebread.com/capital-substitutes-for-labor-and-vice-versa <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/capital-substitutes-for-labor-and-vice-versa" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/factory_worker.jpg" alt="Woman working in a factory" title="Woman working in a factory" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>Whether you're hoping to retire early or worried that you won't be able to retire at all, this is something you need to understand. (See also: <a href="http://www.wisebread.com/can-you-buy-your-way-out-of-the-rat-race">Can You Buy Your Way Out of the Rat Race?</a>)</p> <p>Did you know there used to be a return on capital? Sorry, a little joke there. With interest rates down near zero, it's starting to seem like a safe income on capital is an old-fashioned concept. Dividend rates had been low for some time &mdash; meaning that even the risky income was low &mdash; and then the stock market lost 40%, wiping out a couple decades of that low income. All in all, it's been a bad few years for income from capital.</p> <p>It used to be easy. You could talk about the 4% rule, which said if you had a diversified portfolio, you could spend 4% of your capital this year &mdash; and increase that spending with inflation &mdash; and reasonably expect that your portfolio to grow enough to keep up.</p> <h2>Planning Purposes</h2> <p>Even though <a href="http://www.wisebread.com/the-end-of-the-4-rule">the 4% rule is looking a little iffy</a>, I think the principle remains sound. At some ratio, capital substitutes for income from labor, and vice versa. For planning purposes, I think 4% is as good a ratio as any.</p> <p>If that's the right ratio, you need about $25 of capital to support every $1 of spending that you're not going to earn from your labor (because 4% of $25 is $1).</p> <p>On the one hand, this calculation can be pretty discouraging. If you see retirement age bearing down on you like an express train and your retirement savings has barely reached five figures...well, a $10,000 portfolio can be expected to support annual spending of around $400. Not the sort of dream retirement that most people had in mind when they first started putting money in their 401(k).</p> <p>In fact, the reality is much brighter, because the calculation also works in reverse.</p> <p>Let's say that your financial advisor has told you that, to supplement what you're expecting from social security (and maybe a pension, if you're getting one), you need to have retirement savings of $X. And let's further say that you're coming up short. And not just a little short. Let's finally say that even if you work a few extra years and save as hard as you can, you're going to be short by $100,000.</p> <p>There's going to be a gap, and using the 4% rule, we can estimate just how big that gap will be. In this case, the gap is going to be $4,000 a year.</p> <p>My point here is that filling a $4,000 gap isn't so very hard. One option would be to earn that much money. Another option would be to cut spending by that much. Neither option will be what you'd expected when you made your retirement plan, but neither option is necessarily a great burden. Lots of people choose to work in retirement. Lots of people find that they need to cut back on spending to stretch their retirement savings.</p> <p>Of course, there's every option in between &mdash; for every $100 you can cut spending, that's $100 you don't need to earn in retirement.</p> <h2>Tradeoffs</h2> <p>There's nothing new in these tradeoffs &mdash; you're already making them. Every economic decision you make has its roots in this sort of thinking: Which college to go to (indeed whether to go to college), which jobs to apply for (and which job offers to accept), where to live, what car to buy (or whether to go car-free), how often to eat out, how often to eat rice and beans, what brand of coffee to buy.</p> <p>The key takeaway here is that you can, within rough limits, make long-term plans based on these tradeoffs.</p> <h2>Insight</h2> <p>Without this tool, if your financial advisor (or some retirement planning website) tells you you need to triple your contributions to your 401(k), or else you're not going to be able to retire, you have no idea what that really means.</p> <p>With this tool, you can make a good, albeit inexact calculation. For each $1,000 you don't save, your spending in retirement will have to fall by about $40 a year.</p> <p>It is, of course, entirely up to you how you act on that insight. Maybe looking at an impoverished retirement will inspire a bit of frugality now. Maybe you'll try to work extra hours or find a second job. Maybe you'll look to a new career that pays better &mdash; or a new career with better options for continuing to earn some money in retirement.</p> <p>Do remember that it's just a rough calculation. The return on capital is so low right now, anyone spending 4% of their capital this year is probably spending at unsustainable levels. The 4% rule is a planning tool, not a guarantee &mdash; but it's a very useful planning tool.</p> <p>Knowing how you can swap labor for capital or capital for labor can help you <a href="http://www.wisebread.com/designing-your-life">design your life</a> to meet your goals.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/capital-substitutes-for-labor-and-vice-versa">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-12"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-do-i-need-to-retire-how-much-can-i-spend">How much do I need to retire? How much can I spend?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tiny-nestegg-retire-abroad">Tiny Nestegg? Retire abroad!</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-for-stay-at-home-parents">Retirement for Stay-at-Home Parents</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/retirement-on-the-installment-plan">Retirement on the installment plan</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/understand-capital-costs">Understand Capital Costs</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance capital labor retirement accounts social security Fri, 21 Dec 2012 10:48:38 +0000 Philip Brewer 955721 at http://www.wisebread.com Deciding What You Want Out of Retirement http://www.wisebread.com/deciding-what-you-want-out-of-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/deciding-what-you-want-out-of-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/grandparents2.jpg" alt="Grandparents" title="Grandparents" class="imagecache imagecache-250w" width="250" height="138" /></a> </div> </div> </div> <p>My father is counting the days.</p> <p>After about four decades of mostly back-breaking work, he&rsquo;s set to retire this winter. Just typing that makes me feel old, so I can imagine how my father feels, at least in part.</p> <p>I know he&rsquo;s excited for the change, but there&rsquo;s some trepidation there, too. Thankfully, he&rsquo;s in solid shape financially and has mapped out his lifestyle plans for when those Golden Years officially start.</p> <p>That makes him part of a well-prepared minority. A staggering 29% of workers ages 55 and older have saved less than $10,000 for retirement, according to a 2010 survey from the <a href="http://www.ebri.org/surveys/rcs/2010/">Employee Benefit Research Institute</a>. Overall, the survey suggests that about 4 in 10 Americans have less than $10,000 in retirement savings. (See also:&nbsp;<a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don't Despair Over Small Retirement Savings</a>)</p> <p>Today, it&rsquo;s increasingly important for workers to step back and assess what they really want out of retirement. Here&rsquo;s a look at five key initial considerations.</p> <h3>Save the Date</h3> <p>Decide when the special day should come. Do you place importance on retiring at a young age, or would you like to stay working for a while? While making this work decision, you will need to reflect on <a href="http://www.socialsecurity.gov/retire2/agereduction.htm">Social Security benefits</a>. Social Security eligibility starts at 62, and monthly payments are impacted by your withdrawal timeline.</p> <p>You will also have to calculate savings for this projected date. My decidedly non-tech-savvy father started looking at a simple <a href="http://www.retirementcalculator.com/">retirement calculator</a> to get a better feel for what awaits. There has to be enough funding stocked up for your retirement adventures. Your goals may need a specific financial plan.</p> <h3>Frugal or Fancy Free</h3> <p>What financial freedoms do you want in retirement? Maybe it's the ability to travel or take the whole family on vacation without obsessing over your budget. Or maybe it's finally leaving those bitter Northeastern winters behind for a November-February home in Florida. It could just be making sure you're able to stay retired and not have to return to the workforce at some later date.</p> <p>After calculating your projected savings, you may find that living inexpensively now will help you in the long run. Money you save in a company-backed 401(k) or in an IRA will always be there for you in the end. Make your decision and stick with it. Having a concrete, no-excuses budget will allow you to get what you want when you are an official retiree.</p> <h3>Address Retirement</h3> <p>Do you wish to stay put, or would you like a change of scenery? According to a <a href="http://dwboomersurvey.com/">2010 Del Webb retirement survey</a>, retirees are less concerned about the weather at their retirement location; cost of living and health care are the top concerns for deciding on where to nest. Some states and cities meet those needs differently. The housing market should also be on your radar. It may be a buyer's market, but that also means selling your old pre-retirement pad may be more difficult.</p> <h3>Take Care</h3> <p>With retirement comes aging. Before you retire, make a long-term care plan. This will require you to sit down with your benefactors and discuss future decision-making. If you do not have someone legally appointed to make medical and financial decisions on your behalf, make these arrangements as soon as possible. Your long-term care and living situation should be an ongoing discussion. You may need assisted living some day, or your family may want to take responsibility for your care. Long-term care insurance is a great investment tool to help with these retirement costs.</p> <h3>Get on the Same Page</h3> <p>Make sure your spouse and family know what you expect from this time. Get their input on what they think you will enjoy best in retirement. They may recommend that you buy the motorcycle of your dreams or plan an annual <a href="http://www.wisebread.com/5-cheap-international-vacation-destinations">vacation</a>. You and your loved ones probably don&rsquo;t want your retirement to be full of regrets. Decide what is best now, so you have goals and objectives throughout this new, exciting chapter.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/chris-birk">Chris Birk</a> of <a href="http://www.wisebread.com/deciding-what-you-want-out-of-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-13"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-more-exciting-affordable-american-cities-to-retire-in">4 More Exciting, Affordable American Cities to Retire In</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-taking-social-security-could-cost-you-thousands">Why Taking Social Security Could Cost You Thousands</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-reasons-why-your-retirement-cost-calculations-may-be-wrong">8 Reasons Why Your Retirement Cost Calculations May Be Wrong</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Budgeting Retirement life insurance retirement lifestyle social security Tue, 25 Oct 2011 10:24:18 +0000 Chris Birk 763011 at http://www.wisebread.com Social Security Is Not a Ponzi Scheme http://www.wisebread.com/social-security-is-not-a-ponzi-scheme <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/social-security-is-not-a-ponzi-scheme" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/old_and_young.jpg" alt="Elderly woman with baby" title="Elderly woman with baby" class="imagecache imagecache-250w" width="250" height="147" /></a> </div> </div> </div> <p>Once again, people are comparing Social Security to a Ponzi scheme. That's a bogus comparison. (See also:&nbsp;<a href="http://www.wisebread.com/dont-despair-over-small-retirement-savings">Don't Despair Over Small Retirement Savings</a>)</p> <p>A Ponzi scheme is a lie. Named after Charles Ponzi, it's a fraudulent investment where the operators report fake profits &mdash; and then support those illusory profits by paying out cash from new investors. Ponzi schemes always collapse eventually, because they depend on an ever-increasing number of new investors to provide enough cash to make payments to the old investors.</p> <p>The reason that Social Security isn't a Ponzi scheme is that it isn't a lie. It keeps accurate books, attested to by a board of trustees and an actuary.</p> <p>What Social Security is, is an <em>inter-generational transfer</em>. To solve a problem (old-age poverty), we as a society decided to transfer some income from workers to the elderly.</p> <p>That worked pretty well for several decades. Then, in the early 1980s, the trustees realized that the baby boomers presented a problem. They were going to expect to receive a lot of money in two or three decades, but the workforce was going to be shrinking and there wouldn't be enough.</p> <p>That problem was fixed in 1983. Benefits for younger folks were cut slightly, Social Security taxes were increased slightly, and for the next three decades money was set aside, with a plan to pay it out when the baby boomers retired. That money will have all have been paid out in just a few decades &mdash; but that's fine, because the next generation doesn't have the same kind of bulge of retirees.</p> <p>See the difference? The Social Security Administration never pretended that investment returns were going to fund everyone's pension. They never lied and said that your contributions were waiting to pay your pension when you retired.</p> <p>The issue keeps getting raised &mdash; usually by people who object to the whole idea and say &quot;Ponzi scheme&quot; to inflame emotions. But anyone willing to do a little research comes up with the same answer every time &mdash; as, for example, our own Xin Lu did in her 2008 post <a href="http://www.wisebread.com/is-social-security-just-a-grand-ponzi-scheme">Is Social Security is Just a Grand Ponzi Scheme?</a></p> <p>Social Security: Not a Ponzi scheme; an inter-generational transfer.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/philip-brewer">Philip Brewer</a> of <a href="http://www.wisebread.com/social-security-is-not-a-ponzi-scheme">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-14"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-more-exciting-affordable-american-cities-to-retire-in">4 More Exciting, Affordable American Cities to Retire In</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/tiny-nestegg-retire-abroad">Tiny Nestegg? Retire abroad!</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-states-with-the-lowest-taxes-for-retirees">7 States With the Lowest Taxes for Retirees</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-taking-social-security-could-cost-you-thousands">Why Taking Social Security Could Cost You Thousands</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Financial News Retirement baby boomers scams social security Thu, 15 Sep 2011 10:24:17 +0000 Philip Brewer 701502 at http://www.wisebread.com Why Retirees Are Using Annuities Instead of Early Social Security http://www.wisebread.com/why-retirees-are-using-annuities-instead-of-early-social-security <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-retirees-are-using-annuities-instead-of-early-social-security" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/2083310389_c5a9cc4998.jpg" alt="senior woman" title="senior woman" class="imagecache imagecache-250w" width="250" height="168" /></a> </div> </div> </div> <p>As some Baby Boomers reach retirement age, they have postponed taking Social Security until later in their lives. <a href="http://www.socialsecurity.gov/estimator">Social Security</a> attempts to average benefits over the expected lifetime remaining for its participants. Taken in concert with recent economic problems &mdash; which have caused some senior citizens to return to work &mdash; many senior citizens have become more interested in how annuities can fulfill their retirement investment goals.</p> <h3>How has the recession impacted retiree investment choices?</h3> <p>Many responsible senior citizens (who own stock) have calculated their retirement income based on an expected rate of return. When the subprime mortgage crisis surfaced, the Dow Jones Industrial Average (DJIA) declined by 46.22% from a near-term high of 14,164.53 on October 9, 2007 to a near-term low of 6,547.05 on March 9, 2009. This stock decline destroyed much of the value in investment portfolios, which had been saved for retirement purposes.</p> <p>Stock investments can require years before they return profits. Unfortunately, many senior citizens don't have a lot of time to wait for their stock portfolios to regain their value. Some have &quot;unretired&quot; and returned to work; others are considering different investment options, like annuities.</p> <h3>Postponing Social Security</h3> <p>Social Security check amounts are calculated using an average of health, life expectancy, and wealth for beneficiaries based on a &quot;normal&quot; retirement age according to their birth dates. If you retire &quot;before&quot; your &quot;normal&quot; retirement age, then Social Security reduces your benefits by five-ninths of 1% for each month before your &quot;normal&quot; retirement age (up to 36 months). For example, if you retire nine months before your &quot;normal&quot; retirement age, then your Social Security benefits would be reduced by 5%.</p> <p>Therefore, if you retire at age 62, then the government calculates that you will have a longer period of time to enjoy the benefits, so it reduces your benefits. Generally, if your health and wealth are better than average, it makes sense to retire later; if your health and wealth are worse than average, it makes sense to retire earlier.</p> <p><strong>These are the most common reasons to wait to draw on Social Security:</strong></p> <ul> <li>You have good health.</li> <li>You have ample savings.</li> <li>You are single.</li> <li>You are working.</li> </ul> <p>If you work, Social Security benefits are reduced when you make more than the &quot;annual earnings limit&quot; (AEL) &mdash; the government deducts $1 for every $2 earned above the AEL. Thus, some seniors must carefully estimate whether continuing to work while receiving Social Security benefits makes economic sense.</p> <h3>What are the different types of annuities?</h3> <p>An annuity is an investment whereby an investor deposits a lump sum with an insurance company, which guarantees a retirement income stream.</p> <ul> <li>Deferred Annuity: Payments begin at later date<br /> &nbsp;</li> <li><a href="http://www.onlineannuityrates.com/annuities/fixed-indexed-annuity/equity-indexed-annuities-income-riders-crediting-methods">Equity Indexed Annuity</a>: Rate of income stream depends on market index (i.e., the Standards &amp; Poor 500)<br /> &nbsp;</li> <li>Fixed Annuity: Fixed income stream for fixed period of time<br /> &nbsp;</li> <li>Immediate Annuity: Payments begin immediately<br /> &nbsp;</li> <li>Variable Annuity: Rate of income stream depends on value of underlying securities.</li> </ul> <h3>How do annuities help retirees with monthly income?</h3> <p>Retirement can be a shock if preparations were not made ahead of time to ease the transition. While you work you maximize your income; once you retire, you conserve your wealth to make it last the rest of your life. An annuity helps retirees ration wealth by replacing the former working income with a retirement income. Retirees can adjust more easily to retirement knowing that they are generating annuity income that covers their expenses.</p> <p>In a certain sense, an annuity is a reverse life insurance policy. While a traditional <a href="http://www.termlifecentre.com/">life insurance policy</a> provides a lump sum payment for premature death, an annuity provides retirement income for a long life.</p> <h3>How can annuities help retirees with lifetime income?</h3> <p>Actuaries calculate that the average person who is aged 65 has an average life expectancy of 20 years. With an annuity, retirees can designate the time frame that this investment covers in order to provide a &quot;guaranteed income for life.&quot; An annuity ensures that invested money is working for the retiree; it can be purchased in conjunction with other investments &mdash; stocks, bonds, and real estate &mdash; to provide liquidity and security.</p> <h3>Basic procedures for annuity investing</h3> <p>After carefully researching annuities and determining which type of annuity provides the desired monthly income &mdash; &quot;Fixed&quot; versus &quot;Variable&quot; rate of returns, and &quot;Immediate&quot; versus &quot;Deferred&quot; payment schedules &mdash; a retiree should decide on a specific company and product to invest in. Finally, the senior will be required to pay a fixed lump sum to an insurance company for the benefit of receiving the annuity's guaranteed income stream for a designated period of time. It is that easy.</p> <div class="field field-type-text field-field-guestpost-blurb"> <div class="field-label">Guest Post Blurb:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <p>This is a guest post by Lisa Cintron. Lisa is Executive Vice President at AdvisorWorld.com, a social community of consumers and <a href="http://www.advisorworld.com/">financial advisor</a> who engage in conversation to help you research financial topics.</p> </div> </div> </div> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/lisa-cintron">Lisa Cintron</a> of <a href="http://www.wisebread.com/why-retirees-are-using-annuities-instead-of-early-social-security">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-15"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-do-i-need-to-retire-how-much-can-i-spend">How much do I need to retire? How much can I spend?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-know-what-annuities-are-you-might-be-missing-out">Don&#039;t Know What Annuities Are? You Might Be Missing Out</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-the-most-of-your-401K">How to Make the Most of Your 401K</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-choose-a-roth-401k-or-a-regular-401k">Should You Choose a Roth 401k or a Regular 401k?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement annuities social security Wed, 20 Oct 2010 12:00:12 +0000 Lisa Cintron 262528 at http://www.wisebread.com