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The Longevity Paradox: As Americans live longer, they run the risk of outliving their money

August 22, 2016 - Elizabeth MacBride, Investment News

By many measures, Stanley and June Blum have an ideal retirement. He is a retired shoe-industry executive who paints and writes poetry. She is a psychologist who still works part-time. They split their time between an apartment in New York City and a house in the country, about a two-hour drive away, in Rhinebeck, N.Y.

Not bad for a couple married for more than 75 years and approaching the second century of life. Stanley is 97 and June is 96.

But what is perhaps most remarkable about the Blums and others like them is that, well, they are not very remarkable - or at least not as remarkable as they used to be. As of 2014, there were 72,197 Americans 100 years old or older, a 44% increase since 2000, according to the Centers for Disease Control and Prevention.

This is probably just the beginning. By 2050, there are expected to be a million centenarians in the United States. And even those who don't reach 100 have a good chance of living well into their 90s.

That is welcome news, of course. But the Blums are an example of the challenge as well as the promise of longevity. That's because the aging couple are running out of money.

How do financial advisers make sure the same thing doesn't happen to their clients? How do they make sure they are saving enough to enjoy the retirement they have envisioned, and that their nest egg will provide for them not only in their 70s and 80s, but into their 90s and beyond?

Working beyond the normal retirement age of 66 might be an option for those who haven't saved enough, but studies have shown that people overestimate how long they are they are willing – or able – to stay in the workforce.

And in an age of ever-rising medical costs, how do advisers make sure their clients have planned accordingly for "old age" illnesses such as heart disease, cancer and dementia that many of them are sure to face? If they do need long-term care, will their clients be able to afford to live their final days in a nursing home or assisted-living facility without going broke?

The answer is more complicated than simply looking at actuarial tables and advising clients to save more, though most people need to.

Harold Evensky, chairman of the planning firm Evensky & Katz, says the industry so far is not grappling with the issue of aging in a widespread, thoughtful way, beginning with making individual estimates of longevity based on health and family history.

And he says he worries for the future. "I think there are going to be an awful lot of people whose lifestyle is going to be dramatically impacted," he said.


InvestmentNews surveyed 348 advisers about how their firms are adapting to longer life spans and longer retirements. The survey shows an industry that is changing - but perhaps not as quickly or aggressively as it should.

For example, the survey showed that in preparing retirement plans, advisers used an average lifespan of 91 for men and 94 for women. That's reasonable based on life insurance tables. Currently, the average life expectancy once someone reaches 65 is 84 for men and 87 for women, according to the CDC. If they reach 75, men can expect to live, on average, until 86 and women 88.

But the future could be much longer than most people think. It's hard to tell when the next boost will come, or from where, or which group of people it will affect most, but most researchers think there will be one. It may well push average life expectancy for people at 75 into the low 90s, and increase again the number of people living past 100.

Life expectancies have grown in spurts. In the early part of the 20th century they grew because of improvements in infrastructure, such as sewage systems, and a decline in communicable diseases. In the second half of the 20th century, life expectancies grew, especially for people with education and money, because of antibiotics, improvements in surgical interventions and better prevention and treatment of cardiovascular disease, said Dr. Thomas Perls, director of the New England Centenarian Study.

The next advance could be from earlier detection of cancer, or from leaps in behavioral science that teach people healthier habits, said Daniel Kraft, Medicine and Neuroscience chair at Singularity University.

"Technology is just beginning to impact health care. Better detection, and tests that people don't mind getting, may change things. Smart phones will increasingly make things more nuanced and personal," Dr. Kraft said.

These are mainstream predictions. Then there are people like Osman Kibar, a Turkish-born billionaire whose biotech company claims it has invented drugs that could reverse aging. If an advance like that appears in the market, all bets are off, and advisers may find themselves planning to infinity.

Here are some ways advisers are wrestling with the challenges of longevity, trying to make sure their clients are better prepared for a longer life.


The InvestmentNews survey shows that advisers are getting the message that their clients are living longer. As a result, they are urging their clients to save more.

Five to 10 years ago, 51% of advisers made retirement plans assuming their clients would live to between 85 and 94, while 27% planned for lifespans of 95-99. Only 4% planned that their clients would live to between 95 and 99, and 3% beyond 100.

In the next five to 10 years, however, they will be stretching out those timelines. Only 27% of advisers will be planning on clients living to between 85 and 94; 30% will be anticipating lifespans of 95-99 and 23% will be expecting clients to live to between 95 and 99. A full 10% will be planning on their clients living beyond 100.

Consumers, on the other hand, rarely plan with those advanced ages in mind. Survey after survey shows that people are not saving enough money for even the current life expectancy.

In the InvestmentNews survey, 55% of advisers listed "not saving enough" as the No. 1 threat to their clients retirement security, edging out "outliving retirement savings," (35%) and "spending too much in retirement" (30%).

Perhaps, advisers should tell them about the Blums. Neither thought they would live this long, and now they are running out of money.

To maintain their current lifestyle, they need $5,000 to $6,000 a month, an amount not being met by their Social Security benefits and Ms. Blum's income. They have already tapped the home equity in their country house through a reverse mortgage, but they have not been able to find a bank that will give them a reverse mortgage on their apartment because it's a co-op.

"We could have saved more," Mrs. Blum said. "But I always think things will work out."

Unfortunately, hoping things will work out is not advice that financial advisers can give their clients. That's why some advisers are increasing the amount they advise their clients to save.

While 10% of income used to be the standard advice, some advisers now suggest 15%. "It buys you some flexibility," said Bob Litle, senior vice president of Fidelity Institutional Asset Management.

Advisers find themselves having to work harder to communicate with clients about a longer future filled with an increasing number of variables.

One of the keys is reducing the amount of uncertainty, which can cause people to give up on trying to save enough at all. Because they are convinced the problem is insoluble, they don't even try.

Mr. Litle said many advisers have found that segregating assets into three piles - a conservative stack that includes enough to cover two-three years, a second stack invested in a medium-risk investments that is large enough to last for three-10 years and a third bucket of investments invested for the long-term helps anxious clients cope with the uncertainty.

Rick Kagawa, an Orange County, Calif.-based adviser and insurance broker, says he encourages the Japanese practice of living well under your means and saving until it hurts: 30% of income, which he practices himself. "It can never be too much, because of the uncertainty of the market and uncertainty of age," said Mr. Kagawa,

He cited the case of one of his middle-class clients, an electrician in the Army, who made the deliberate choice to live on only the returns of his savings for the first 15 years of his retirement. He and his wife, now about 80, have about $500,000 in their retirement account, but still live mostly on Social Security.

"They will never run out of money," Mr. Kagawa said.

Working longer can be a good strategy, especially for clients who may not have saved enough for retirement. In the InvestmentNews survey, 65% of advisers said they are telling clients to delay claiming Social Security benefits.


A person who delays taking Social Security benefits by eight years, from the minimum of age 62 to the maximum of 70, increases payouts by 76%. A worker who delays retirement also keeps adding to his or her 401(k) or individual retirement account, and doesn't start drawing down any of those savings.

A few years ago, Charles D. Ellis, author of the book "Falling Short," about the retirement crisis, estimated the typical American worker could double his or her retirement savings by following that strategy, from only a little over $100,000 to almost $250,000.

Planning to work longer is a great idea, if clients can actually do it and save money while they are working. Many workers plan to do so: 18% of people over the age of 50 say they will never retire, according to an AARP survey.

But 50% of retirees leave the workforce earlier than they planned, according to the Employee Benefits Research Institute. Reasons include poor health or layoffs.

And some people, unfortunately, use the idea of working longer or forever as a way to avoid saving. Jacquelyn B. James, co-director of the Boston College Center on Aging & Work, said that the belief on the part of some people that they can work forever inhibits saving for retirement. "But people often cannot keep working," she said. "People don't anticipate the way jobs are changing. They don't anticipate losing jobs."


Nearly 60% of advisers in the InvestmentNews survey say they plan for bigger client health care budgets than in the past as a result of longer lifespans. Yet, only 29% consider unexpected medical expenses to be the biggest risk to their clients' retirement.

The contradicton can likely be attributed to the erratic nature of health care expenses: expensive for everyone, catastrophic for some, with no way of predicting which for whom.

A 55-year-old couple planning to retire at age 65 can expect total lifetime health care costs to be $463,849, including premiums and out-of-pocket costs, according to the Retirement Health Care Cost Data Report issued by HealthView Services, a retirement health care planning firm.

Cost of Health Care

But it's difficult for advisers to steer their clients through the risks of a health problem that's worse than average.

Some 42% of people who live to the age of 70 will spend time in a nursing home before they die, according to a 1997 study by researchers in New York. The study found people should expect to spend about one year in a nursing home.

The problem arises if you aren't average. What if you need to spend five years or more in a nursing home, which according to the MetLife Mature Market Institute can cost $80,000 to $90,000 a year?

Long-term care insurance is expensive, with premiums that have been rising. The federal government just approved an 83% rate hike on its policies, sold through John Hancock Life and Health Insurance Co., for instance - and insurers have been abandoning the market.

The responses in InvestmentNews' survey reveal advisers' struggles. "The biggest objection clients have is when we discuss the reality of long term care," writes one. "Clients have the 'Oh, it won't happen to me'" attitude.

But all isn't lost. One bright spot of the longevity revolution is that, so far, evidence suggests the same science that extends life could compress disability, says Dr. Perls, of the Centenarian study. Seventh-Day Adventists, who enjoy long lifespans, have been the subject of a long-running study on their health habits. "They don't smoke or drink, they are vegetarian and they tend not to be obese." Strong family and community ties also help reduce stress.

If, as he and other researchers suspect, the next big jump in longevity comes from better health behaviors that minimize the end-of-life-disability, the fears of most advisers that their clients will be crushed by health costs could be overblown.


Some advisers are looking to changes in withdrawal strategies to help their clients' money last longer. In the InvestmentNews survey, 54% of advisers said they are recommending lower withdrawal rates to their clients as a way of dealing with longer lifespans.

"Yesterday's withdrawal strategies don't work as well for today's retirees," said Scott Hanson of Hanson McLain Independent Investment Advice, in an email. "Many people prefer to spend in chunks, such as paying for a long trip or for a bathroom remodel, yet most withdrawal strategies are simply monthly allotments of savings. What is needed today are robust withdrawal strategies that adjust to the seasonality of one's life."

Annuities can also be a kind of formalized withdrawal strategy. A growing number of retirement plans offer annuity products as an option to to protect people from living longer than expected and outliving their savings. Clients and advisers can find them in the individual market, too.

Clients typically purchase longevity annuities in their 50s and 60s for payouts that don't begin until age 85.

With a longevity annuity, if you die before you start getting payouts, you lose your principal. There's a greater than 50% chance that you will die before getting any payments from the annuity.

But advisers see them as one part of a strategy, not as a panacea. Because annuity payouts are determined in part by interest rates, they may not pay out enough when interest rates are low.

But in a sense, a longevity annuity serves the purpose of insurance: It's not designed to earn returns, but rather to protect owners from a catastrophic risk.A Brookings Institute report found they were a cheaper option than immediate annuities, and they are less complicated than managing withdrawals from a number of different retirement accounts.


Advisers may need to grapple with the question of inheritance. Cash inheritances, which used to be seen as a possibility even a few decades ago, are now off the table given that people need more money in retirement.

Some children of clients may expect an inheritance in the form of the family home. But as reverse mortgages and home equity loans become more popular, especially to finance unexpected health care costs, those real estate windfalls are likely to decline in number.

Karin Davis, loan officer with Evolve Bank & Trust, says she can see the conflict in some of the families she serves, where children are putting subtle - or not so subtle - pressure on their parents.

She recalls a mother-daughter in Queens, N.Y., where an overbearing daughter was trying to pressure her mother, Mary, into not taking out a reverse mortgage. When the younger women left the room, her mother looked at the adviser and said, "Mary's going to do what's good for Mary,'" Ms. Davis recalls.


The longevity revolution is already reshaping financial advice, as forward-thinking advisers adapt. In the InvestmentNews survey, 35% say the biggest impact has been the time spent finding younger clients or retaining aging clients, while 28% say it is the lowered profitability as revenue from aging clients decreases.

But increasing lifespans and the more complicated financial planning that comes along are an advantage for human advisers over algorithms.

"There's more diversity, more variables, and it becomes less formulaic," says Fidelity's Mr. Litle. "We think it's good news for advisers, because of the human-based adaptive work they do. A retirement calculator can't uncover retirees that have teen-age kids, or people who may be supplementing the income of adult children, or the spouses from multiple marriages."

In short, humans are better at handling the variables of old age, including all the emotional uncertainties. The question of how aging clients live with those uncertainties may be the central one that advisers need to deal with.

Understanding the perspective of people like the Blums is also important. As they are approaching 100, they have a different sense of what matters.

They're not as rational or as worried about the future as they were when they were younger. They are freer, and Mr. Blum emphasizes, still living fulfilling lives.

"I object to the word aging," Mr. Blum says. "I would change the emphasis from aging to growing. We are part of nature, and nature's job is to grow things until they die."

In a worst-case scenario, they can sell their co-op, and find a new place to live. But they are not even thinking of doing that.

"I have very little time left," Mrs. Blum says. "I'm going to spend that time packing? We are kids of the Depression, as happy eating a frankfurter as roast beef. We'll be OK no matter what happens."

Elizabeth MacBride is a freelance writer.

Americans Are Missing Out on Trillions in Social Security

June 28, 2019 - The Fiscal Times

Americans will lose out on $3.4 trillion in benefits by claiming Social Security too early, according to a new report from United Income, an investment management and financial planning company.

Written by a team that includes former Social Security officials, the report found that 96% of retirees choose a less-than-optimal time to start claiming their benefits, resulting in an average loss of $68,000 per household for current retirees.

The group says that the optimal retirement age for most retirees is 70, even if workers have to dip into retirement savings to wait that long:

"We find that U.S. retirees would be able to generate an additional $3.4T in income during their retirement if they optimized the decision about when to claim Social Security, or about a 9 percent increase in total expected future income among retirees that made a sub-optimal financial claiming decision. Nearly all of this income is lost because one or more retirees in a household claim Social Security too early, which means their Social Security benefit is lower than it would be if they had waited. For instance, a person that would receive a $725 monthly benefit if they claimed Social Security at 62 would see that benefit increase to $1,280 if they had delayed until their 70th birthday, an increase of 177 percent. Spread out across the population of individuals that are claiming Social Security sub-optimally, those extra dollars add up to a substantial amount of money. In fact, the average household that claims sub-optimally would see their retirement income increase by $110,546, and the median household would see their income in retirement increase by $81,673, or an average annual increase of about $3,400 in income."

The flip side of the analysis is that if more Americans wait longer to receive their benefits, it would end up costing the Social Security system that much more.

Read the report here.

Be informed about FIAs
Complicated annuities deliver less than promised to retirees

By Dennis Wagner - USA TODAY

Each year, Americans pour billions of dollars into a curious financial product that, as it's sometimes advertised, seems too good to be true.

Some companies tout returns of up to 50 percent over five years, with the claim that consumers won't lose their original investment even if the stock market crashes.

The products, known as "fixed-indexed annuities" or FIAs, function like life insurance in reverse: The purchaser sets aside a safe nest egg, accruing interest, and after a waiting period collects regular payments until death.

It's a pitch that appeals to retirees.

Yet Anil Vazirani, a Scottsdale, Arizona, financial adviser who has taken an intense interest in FIAs, says the advertising often misleads consumers. And the contracts they sign are so full of jargon, caveats and options, they are impossible to fathom without legal training or a finance degree.

Vazirani acknowledges some annuities offer stable, guaranteed income and are sound investments. However, he contends that over the past two decades companies have been marketing Exotic hybrids using deceptive sales tactics that prey on older consumers.

A few years ago, there were just six exotic FIAs on the market. Today, according to Wink Inc., a market research

firm, there are more than 50. During 2016, Americans poured $58 billion into FIAs.

That's why Vazirani has since 2008 waged war against a handful of FIA companies. He has condemned their sales practices on his radio show and websites. He has fought them in court. He has begged law enforcement and regulators to do something.

Because FIAs are tied to stocks, Vazirani insists, they should be treated as securities, which cannot be sold by insurance agents. Instead, they should be sold only by licensed professionals obliged to act in the best interest of their clients.

"We have all seen the movie 'Wolf of Wall Street,'" Vazirani warns, "and the sequel will be 'Wolf of Annuity Industry.'"

All his criticism, so far, has apparently had negligible impact.

Of course, there is another side to the story. Industry leaders insist FIAs can be smart investments for consumers who shop prudently.

"More and more people are finding

"We were lured with a risk-free sales pitch about a high rate of return, but that's not what we ended up with. I am coming forward in hopes it will prevent other seniors and retirees from becoming victims."
- Rick Brady

this to be good for them as a long-term, safe place to put their money," says Jim Poolman, former executive director at the national Indexed Annuity Leadership Council.

Critics suggest Vazirani's warnings ring hollow given consumer complaints filed against him in Arizona for allegedly unscrupulous annuity sales.

Fixed-indexed annuities

While many consumers have never heard of FIAs, this isn’t an esoteric debate: FIAs represent nearly a third of annuities purchased, according to some estimates.

Just the phrase "fixed-indexed annuity" sounds bewildering. So let's break it down.

Fixed: This means you cannot lose your original investment, or principal.

Indexed: Profits on the investment are linked to a select group of securities known as an "index." If the index rises, the annuity grows, increasing future payouts.

Annuity: An insurance product that requires cash up front. That money is invested and, after an agreed-upon period, the purchaser receives regular payments.

FIAs often contain provisions allowing insurance companies to limit and reduce the profits that an annuity holder receives.

Consumers may also be charged for special provisions, known as riders, that increase their benefits. And, if they cash out early, there are stiff penalties.

Caveat emptor

For many, including Rick and Debra Brady, it began with a free dinner. As the Peoria, Arizona, health care workers neared retirement, they worried about outliving finances - especially after their 401(k)s were hit by the stock market crash of 2008.

A flyer offered dinner and a seminar at a local restaurant. The speaker, a financial adviser, recommended FIAs to about 20 prospective investors and set up a meeting later with the Bradys.

In 2011 and 2014, they invested a total of $275,000.

Rick, 65, says contract signings were a blur, much like when real estate agents flash page after page of escrow papers, just glossing over dense, legal verbiage. Even today, he says, he would struggle to explain a fixed-indexed annuity.

In a complaint letter this year to Arizona Attorney General Mark Brnovich, Rick says the adviser "dazzled us with illustrations that reflected 9 to 10 percent returns" and failed to disclose fees. The letter also says they were not told that, despite the purchase of a death-benefit rider, if they died the insurance company would keep most of the remaining funds, rather than family members.

By 2018, the Bradys say, their FIAs had earned just a 2 percent profit.

The Bradys say they lost $50,000, plus interest they could have realized elsewhere.

In his letter to Brnovich, Brady concludes: "We were lured with a risk-free sales pitch about a high rate of return, but that's not what we ended up with."

"I am coming forward in hopes it will prevent other seniors and retirees from becoming victims."

'No way is anyone going to lose money'

After a career in customer service with British Airways, Tony Laurita and his wife retired to Mesa, Arizona. They had a small pension, Social Security benefits and modest savings.

For years, Laurita's son - an investment manager - directed their cash into stocks and bonds. Then the son died, the market plunged, and Laurita, a 74 year-old military veteran, began looking for a safe financial harbor.

In 2015, after seeing an ad for fixed-indexed annuities, he attended a seminar and sat down with an insurance agent. Some illustrations showed interest accruing at up to 9 percent annually for a decade, Laurita says.

"Their message was, 'No way is anyone going to lose money,'" Laurita said.

He invested $152,000. In 12 months, he says, the index value fell $11,000. He wanted out so bad he paid a $14,000 penalty. Then he went to another FIA company, which said he could recoup the losses. Laurita invested the remaining $127,000. After a year, that index lost another $3,500 in value.

Laurita says he decided to quit FIAs entirely, paying another surrender fee.

"I'm going to say 80 percent was getting ripped off and 20 percent I didn't do my homework," Laurita says.

'Ultimate industry insider'

At his office, Vazirani pulls out sample ads for fixed-indexed annuities.

One features a chart showing how a $100,000 investment can grow to $400,000 in 20 years. It is listed as a "hypothetical illustration" and, upon closer inspection, contains this notice: "The values in this illustration are not guarantees or even estimates of the amounts you can expect from your annuity. Not to be used for illustrations of in-force contracts."

While FIA terms are spelled out in brochures or contracts, Vazirani contends key information often appears in footnotes, fine print or legal language that even experts would struggle to comprehend.

Meanwhile, he asserts, the consumer gets a spiel from an insurance agent who has no fiduciary duty and is looking to score a commission.

"All of it is there in fine print, but that doesn't make it right," Vazirani says.

While a customer's principal is guaranteed, that does not mean it is entirely safe, he adds. Fees can eat into the total. And FIAs have no backing by the Federal Deposit Insurance Corporation. If the insurance company goes broke, clients lose.

'We trusted them'

Vazirani's integrity quest is complicated by complaints filed with the Arizona Department of Insurance accusing him of the very conduct he criticizes.

In 2013, an elderly Phoenix widow named Patricia Bell alleged that Vazirani and associates made false marketing claims, fraudulently misrepresented annuities and churned her business, collecting commissions while she lost money via surrender penalties.

Bell's son-in-law, Paul Yamashita, asked the agency to revoke licenses of those involved. He also asked for sanctions against annuity companies whose products are "wildly inappropriate for seniors."

"Consequently," Yamashita concluded, "I am requesting you investigate whether the sale of such products to senior citizens should be legal in Arizona."

In written filings, attorneys for Vazirani and other agents stated that Yamashita's complaint was meritless - based on factual errors and his misunderstanding of annuities or law.

Files released to The Arizona Republic indicate the complaint was "referred for disciplinary action" but contain no record showing a referral or otherwise indicating how the case was resolved.

'A long-term investment'

While exotic FIAs have many critics, Poolman, a former state insurance commissioner for North Dakota, insists they can be smart, safe investments.

"The only way to lose is if you take the money out early," he explains. "But we consider the FIA a long-term investment."

Perhaps more importantly, Poolman says, complaints about annuities nationwide are "the lowest across the spectrum of products to put your money in."

Number of Baby Boomers Going Bankrupt in Retirement Skyrockets

By JT Crowe - Money and Markets

Retirement and relaxation is the dream most Americans have for their golden years.

But instead, according to a recent study, baby boomers are going bankrupt at an increasingly alarming rate.

The study, conducted by the Consumer Bankruptcy Project, says people 65 and older are filing for bankruptcy at a rate three times what it was in 1991.

Older Americans are increasingly likely to file consumer bankruptcy, and their representation among those in bankruptcy has never been higher. Using data from the Consumer Bankruptcy Project, we find more than a two-fold increase in the rate at which older Americans (age 65 and over) file for bankruptcy and an almost five-fold increase in the percentage of older persons in the U.S. bankruptcy system. The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect.

A number of factors play into the problem, including a shift from government and employers to individuals to take care of their retirement, largely from a three-decade-long shift from pensions to 401(k) retirement plans.

Rising medical costs also is a major factor, in addition to people not saving enough, declining incomes and many having to wait longer to collect Social Security benefits.

Social Security benefits replaced about 40 percent of pre-retirement income for the average worker, the age for full benefits was 65... Medicare covered most healthcare spending; for the typical beneficiary in 1997, out-of-pocket health costs were only 12 percent of income.

As a result of the increased financial burdens, the median amount of negative wealth for a baby boomer entering bankruptcy is $17,390, compared to more than $250,000 in total wealth for their non-bankrupt counterparts.

As the study notes, older people often have few places to turn when they run into financial trouble.

"When the costs of aging are off-loaded onto a population that simply does not have access to adequate resources, something has to give, and older Americans turn to what little is left of the social safety net - bankruptcy court," the study says.

And older people are far less equipped to weather the storm. There are few work places that are eager to hire someone in their 60s and 70s who might have been out of the job market entirely for years.

Unstable employment is particularly problematic for older people. When they lose jobs, it takes them significantly longer to find new ones and when they do, they typically earn less than what they earned before. Retirement is a particularly precarious time of life. Full Social Security benefits now begin at 70, rather than 65.

Along with the shrinking social safety net for older Americans is how much debt they carry. According to the study, 50.2 percent of households headed by someone 60 or older had some debt in 2001. That number rose to 61.3 percent by 2013.

Among these older adult households with debt, the median amount they owed more than doubled from $18,385 in 2001 to $40,900 in 2013.

Bankruptcy offers some relief, and more and more people over 65 are turning to it. In fact, 12.2 percent of filers are 65 and up, which is 10 times the number of people since 1991, when it was just 2.1 percent.

The overall trend is clear. Bankruptcy filers in the youngest cohorts (18-24, 25-34, and 35-44) now comprise a much smaller segment of the bankrupt population than they did twenty-five years ago. During that same period, there has been a marked increase in the percent of filers among the older cohorts (55-64, 65-74, and 75 and above), those people who are approaching or are in their retirement years.

By comparison, in 2007 the mean age for bankruptcy filers was 44.4 years old. Just 10 years later, the mean age was 48.5.

That is a staggering change in such a short period of time, and it signals bad times ahead for many who are ill-prepared for retirement.

South Dakota is best overall for retirement? New survey thinks so

By Dalvin Brown - USA Today

There's a lot to consider when selecting the best place to spend your golden years. But have you considered going South?

South Dakota, that is.

A new report from analyzed factors like cost of living, tax burden, weather, crime and health care quality that people must weigh when determining a place to retire.

South Dakota came out on top with the best overall score. The landlocked state that's home to Mount Rushmore placed first in well-being, second in taxes, 10th in cultural vitality and 12th in health care quality. Weather was the only category it didn't fare well in (38th).

"Yes, South Dakotans enjoy a low tax burden, but they are also more satisfied with their lives than anyone else," said Taylor Tepper, an analyst at

Faring the worst was New York, landing in the bottom 10 in three categories: cost of living, taxes and health care quality. New Mexico and Maryland rounded out the bottom three states.

Traditionally popular retirement destination Florida managed fifth place. It was dinged in scoring for its relatively high crime rate and poor health care rating. Arizona (29th) and Nevada (42nd) did not score as well. The main culprits in Arizona's case were low ratings for cultural vitality and crime. Nevada was dragged down by health care quality, well-being and crime.

Want to know where your retirement destination state ranked? Read on:

Best states to retire:
  • 1. South Dakota

  • 2. Utah

  • 3. Idaho

  • 4. New Hampshire

  • 5. Florida

  • 6. Montana

  • 6. North Carolina

  • 8. Wyoming

  • 9. Nebraska

  • 10. Mississippi

  • 11. Hawaii

  • 12. Massachusetts

  • 13. Virginia

  • 14. Michigan

  • 15. Missouri

  • 16. Iowa

  • 17. Colorado

  • 18. Texas

  • 19. Delaware

  • 20. North Dakota

  • 21. Tennessee

  • 22. Maine

  • 23. Indiana

  • 24. Alabama

  • 25. Kansas

  • 26. Vermont

  • 27. Wisconsin

  • 28. Minnesota

  • 29. Arizona

  • 30. Kentucky

  • 31. Pennsylvania

  • 32. New Jersey

  • 33. West Virginia

  • 34. Rhode Island

  • 35. Connecticut

  • 36. Alaska

  • 37. Georgia

  • 38. Ohio

  • 39. Oregon

  • 40. Oklahoma

  • 41. South Carolina

  • 42. Nevada

  • 43. Washington

  • 44. Illinois

  • 45. California

  • 46. Arkansas

  • 47. Louisiana

  • 48. Maryland

  • 49. New Mexico

  • 50. New York

Claiming Social Security at 70 can be valuable - but it isn't easy

By Kelli B. Grant- CNBC

  • In 2016, just 4.6 percent of women and 2.9 percent of men first claiming Social Security benefits were age 70 or older, according to the Social Security Administration.
  • Wait until age 70, and you're entitled to 132 percent of your full monthly benefit.
  • But delaying your claim isn't always easy - and it may not be the best option for some consumers.
Earlier this month, Mary Kittle joined the ranks of an elite few older Americans to achieve a particular financial feat.

Kittle, a Henderson, Nevada resident, applied in time to start receiving Social Security benefits on her 70th birthday.

In 2016, just 4.6 percent of women and 2.9 percent of men first claiming Social Security benefits were age 70 or older, according to the latest data from the Social Security Administration. A decade earlier, those rates were 2 percent and 0.8 percent, respectively.

Those claiming their benefits as soon as they become eligible to file at age 62 still represent the largest group, at 36.9 percent of women and 31.9 percent of men in 2016. But that cohort is down from 50.4 percent and 45.7 percent in 2006.

"You can see a bit of a trend that people are starting to wait longer," said chartered financial analyst Wade D. Pfau, a professor of retirement income at The American College of Financial Services.

Potential reasons for the shift could include more people working into their retirement years, and becoming better educated about the value of delaying their claim, he said. (See details below.)

"Today because of the low interest rates and the fact that people are living longer, they are much more likely to benefit [from delaying]," Pfau said.

Social Security benefits math

Claim at your full retirement age - which depends on when you were born, and would be somewhere between age 66 and 67 for those born in 1943 or later- and you get 100 percent of the benefit available to you, based on your personal work record.

If you claim any earlier, your benefits will be permanently reduced - to what extent varies by your birth year and how much earlier you're claiming. For example, SSA estimates someone born in 1955 would receive 74.2 percent of their full monthly benefit by claiming at age 62, and 92.2 percent by claiming at age 65. (That cohort's full retirement age is 66 and two months.)

Hold out past your full retirement age, and you'll receive delayed retirement credits of 8 percent per year until age 70, when your monthly benefit stops increasing. Claim at 70 or later, and you'd be entitled to 132 percent of your full monthly benefit.

Kittle's initial plan was to file at or near her full retirement age, and invest the benefit while she continued to work. (A Southwest Airlines flight attendant, she currently has no plans to retire.) By Kittle's estimates, she'd break even by age 80 regardless of when she claimed.

Her son, Sean, made the case that she was better off waiting.

"I remember saying to him, 'What's the difference if I start collecting at 67 and put that money away?" Kittle recalls. "He said, 'OK Mom, but what if you live past 80?'"

Given that likelihood of longevity, the maxed-out benefit would provide a bigger guaranteed income, they reasoned. And additional years of work ahead of claiming would help Kittle replace zero- and low-income years on her record from when she was a young mother.

The combined benefits of delaying and adding higher-income years to the calculation boosted Kittle's monthly benefit by roughly $1,000.

"For somebody who hasn't worked their whole life and didn't have a job that had substantial income for most of their life ... you need to take every opportunity to make it the best you can," she said.

Deciding: Should you delay?

Despite the benefits, waiting until age 70 to start taking Social Security isn't always the best option - or even, a feasible course.

"There are people who can't do anything else, whose savings haven't been such that they can wait," said certified financial planner David Mendels, director of planning at Creative Financial Concepts. "Sadly, that's not an insignificant amount of people."

Here's how to assess if delaying is workable:

  • Cast a wide net.
    To make sure waiting is a good option, work through all the potential claiming strategies available to you (and your spouse), said certified financial planner Megan Olson, a wealth manager at Accredited Investors Wealth Management. For example, if you have a minor child at home, he or she could be eligible for a payment of up to half your benefit - which could make it more valuable to claim sooner than later, she said. Or you may be eligible to claim widow or widower's benefits while delaying your own, to let that money grow. But on the other side, even consumers who anticipate claiming early due to a terminal illness might find they would benefit from delaying, to boost survivors benefits available to a spouse.
  • Factor in funding.
    If you're aiming to wait, there's a key question to answer, Mendels said: "How are you going to keep eating until you reach 70?" You could keep working, which offers the quadruple advantages of continued income and additional opportunities to add to and grow retirement savings, while letting your Social Security benefit increase and potentially replacing a zero- or low-income year in your record.

    Just keep in mind that "work longer" strategy may not be feasible, he said. (Nearly half of retirees leave the workforce earlier than planned, for reasons including work layoffs, health problems and caregiving for a family member, according to the 2017 Retirement Confidence Survey from the Employee Benefit Research Institute.)

    Or you might plan to draw from other assets, with the idea that you will take smaller distributions after you start drawing Social Security, Pfau said. Strategize with your financial advisor to assess how workable that idea is, and how best to approach it.

    One strategy might be to create a "Social Security delay bridge" such as a certificate of deposit or bond ladder to span those eight years from ages 62 to 70, he said. That helps you generate income to replace the missing Social Security payout, and reduce exposure to market volatility.
  • Consider the end aim. Think about the timing of Social Security claiming in the context of your longevity risk, Mendels said.

    If you claim early and die early, you got more money out of the system, he said - but if you live longer than anticipated, you may be at greater risk of a reduced standard of living. (By Social Security Administration estimates, that benefit represents at least 90 percent of income for 23 percent of married couples and 43 percent of single individuals.)

    On the other hand, if you claim late and die early, your heirs stand to inherit less because you've spent down other assets to fund that delay. But if you live longer than expected, the bigger benefit means you've reduced the risk of outliving your money. "

    You don't know when you're going to die, but you do know what's more important to you," he said. "Is it that your heirs get more money, or that you and your spouse have a reduced chance of outliving your money?"

25 questions for a potential financial adviser
Retirement columnist Glenn Ruffenach also answers a reader's question on
charitable contributions and IRAs

By Henry K. Hebeler - MarketWatch

After just a couple of meetings, a professional adviser gave me suggestions that increased my savings many fold in the following 40 years.

I thought I knew all I had to know after listening to "professionals" who gave free presentations - thinly disguised events to sell their services or products. On the other hand, the few hours with a Certified Financial Planner (CFP) revised my thoughts on investments dramatically. He got a flat fee and would make nothing from my investments. He also gave good advice on insurance and estate planning.

Finding a good financial adviser

It isn't easy to find a truly low-cost, competent and honest financial adviser. People usually ask friends or business associates who they use. Some use a CFP; others use a broker, insurance sales person, or tax accountant. People usually like their adviser, but often for the wrong reasons. Their advisers may have great personalities, can be very attentive and always remember their birthdays. However, they may put their clients into high cost investments that benefit the adviser more than the client. Unfortunately, clients aren't aware of this.

If possible, it's important to compare several professional adviser candidates. There are a number of Internet sites such as or that offer professional names for people within or near your ZIP Code. Most of these planners will have websites from which you can get an initial impression.

It is harder is to select one than to find candidates. Below are some questions I recently gave to friends to ask potential advisers. The feedback I got was that the candidates weren't used to this type of questioning - but the advisers responded to almost all of the questions. The tone and quality of the responses made it relatively easy to determine which candidate to select. On behalf of a recently widowed friend, I asked these questions of an adviser she was considering. I did this by email and got sufficient answers to make a judgment.

It's important to know what you want from an adviser. Do you want the adviser to be responsible for all of your financial affairs such as managing your investments, preparing an estate plan and its associated documents (wills, living wills, trusts, durable power of attorney, etc.), handle your insurance, or even do your income tax? At the other extreme, do you just want to hear a different perspective and get some suggestions?

It's also important to remember that the kind of service you want may mean a very longtime association from which it may be difficult to extract yourself, particularly if the adviser has invested your money in funds not available to the general public or if the adviser retains virtually all of your records. If you have some amount of financial knowledge, you might choose to use an adviser as a consultant only. In that case, your questions can be simpler with a focus on the responses you get from the adviser's references using a similar service. You'll also find what you may get for the adviser's charges.

It is a good idea to begin an interview with a brief description of your personal situation including the ages of family members and a summary of your income, savings and debts. Often the advisers will give you a questionnaire to answer before the meeting. That done, you might ask the following questions and take notes. Some of the questions may not apply to your situation.

Personal questions

1. How old are you?

If you are older, you may want a younger adviser who will outlive you. If you are young, you may want an older adviser who has been through difficult economic times.

2. What is your educational background?

Look for a Certified Financial Planner (CFP), likely with Registered Investor Advisor (RIA) credentials. Some Certified Public Accountants (CPA) with Personal Financial Assistant (PFS) degrees have suitable qualifications as well. Avoid brokers, insurance agents, real-estate promoters, business associates, relatives, golfing partners and hairdressers.

3. How long have you been an adviser?

Experience counts a lot in the financial field, especially the experience gained in periods with plunging markets.

4. Do you accept fiduciary responsibility?

This is a legal term meaning they have a fundamental obligation to provide suitable investment advice and always act in your best interests, not theirs. They should also be willing to give you a written statement that they accept this responsibility.

5. Have you been sued or have any reported legal actions?

This useful page on the Financial Planning Standards Council site reports recent disciplinary actions.

6. What is the smallest, average and largest portfolio you manage?

Some advisers only take high-net-worth clients. That may not be suitable for you.

7. Could you give me three clients' names, phone numbers and email addresses as references?

It's important to call these references. Ask them how they found the adviser, the length of time they have been served, what kind of help they get, what they believe are the adviser's strong and weak points and whether they would recommend that adviser to someone in your situation.

Questions about the financial firm

8. Describe your firm.

You will want to know the number and skills of associates, whether this is a stand-alone firm or part of a large company, the amount of money they have under their control, the kind of clients they serve, and who will help when the person you are interviewing isn't available.

9. Exactly what services do you perform?

Services could include retirement planning, manage securities, estate planning, tax planning, insurance, long-term-care advice, newsletters, and so forth.

10. If you use specific individuals or firms to assist such as an estate attorney, accountant, or broker, who are they?

Ask the personal questions above about them too.

11. What investment firms do you use in your practice?

Vanguard, Fidelity, T. Rowe Price, and Schwab are among the better choices. Dimensional Fund Advisors funds are low costs but may make it difficult to extract yourself. Be cautious if the answer for investments is an insurance company.

12. How much do you charge for your service? Do you offer different levels of service?

Fee-only advisers are best for most clients. Professionals usually charge about 1% of investments managed each year. A fee of 1% is neither a small charge for what may be limited effort on the adviser's part nor a small percentage of your annual growth. It can easily be a third or more of your annual returns which can translate to a loss of more than half of your nest egg at retirement or even more when elderly.

It's very important to understand what you are getting if you decide to turn your investment management over to someone for a fee. Investments compound at the return rate which is interest plus dividends plus appreciation less investment costs and less professional fees, each as a percent of investments. You need net returns greater than inflation for true growth.

An important reason to consider turning your investments over to a professional is a failure to do well on your own. You can get a good idea of your own performance over the years with the free, Excel based, Annual and Compound Return History program.

To check out your own performance with this program, it's good to have several years of investment annual deposits, annual withdrawals and end-of-year balances as well as a computer with Excel. Many people use it just to track the history of their savings balance.

13. What are the total costs and fees for typical stock and bond funds you would recommend?

Costs are likely to be the lowest from fee-only advisers who don't take commissions, don't get rewards for selling particular funds, don't receive 12b-1 kickbacks, don't sell funds with front-end or back-end loads. They also advocate low cost providers like Vanguard, Fidelity TIAA-CREF, or T. Rowe Price, recommend broad market index funds or exchange-traded funds (ETFs), and have low turnover to minimize trading and brokerage costs.

The average mutual fund cost is 1.25%. Low cost funds have costs less than 0.5% of the investment balance each year. Broad index funds, based on major market indexes like the Standard & Poor's 500 Index SPX, +1.74% which has stock in 500 of the largest U.S. companies, and the Russell 2000 Index RUT, +1.60% which has stock in 2000 of smaller companies, bought from low-cost financial firms can be significantly lower. Costs are in addition to an adviser's fee.

Questions about investments

14. Do you have different models or investment pools dependent on client's risk tolerance?

Risk usually relates to the decisions you would make in a volatile security market and the amount of money you might be willing to lose in a market downturn. It's usually measured with a series of standard questions, but it's important to know the degree to which the adviser tailors your investments.

15. What allocation guidelines do you use? For a person of my age and what you observe about the things I have told you, what rough percent of equities (stocks and real estate) would you allocate in a portfolio?

The more equities, the higher the risk. Younger people can employ a higher percentage of equities because they usually have higher long-term returns but comes with more volatility.

16. Do you count home equity as part of an allocation?

I personally don't think they should because I believe a home is an investment of last resort, perhaps convertible to a reverse mortgage when elderly at which point it is a debt, not an investment.

17. Do you count capitalized future payments from Social Security, Pensions, or Annuity payments as part of an allocation?

Again, I don't think they should because the discounted value of all future payments is huge in comparison to the size of most people's savings. Since financial advisers are prone to classify such "investments" as fixed-income, that means your savings would have to be 100% equities, a decidedly risky position.

18. What are the important economic risks you think we need to be concerned about, and do you suggest some investments that might alleviate these?

Answers could be about inflation, taxes, health and death.

19. What kind of investments do you recommend?

Good responses include index funds, real-estate investment trusts (REITs), highly rated bonds, certificate of deposits (CDs) and a portion of money markets. Be cautious when the replies seem to promote managed funds, individual stocks, a directly owned real-estate property, reverse mortgages, commodities, long short funds, partnerships of any kind including master limited partnerships (MLP), options, hedge funds, investments with limited withdrawal privileges, collectibles, thinly held securities, and annuities with high costs and lots of fine print that provide flexibility for the insurer but not you.

Also be VERY cautious about replies that imply the adviser can do much better than the S&P 500 index with the adviser's selection of equities. Very few professional beat the index, and it's rare when they beat it for several years in succession.

If you believe you wouldn't understand the responses, take someone with you or try to remember the responses and talk to a knowledgeable person later.

20. On a scale of one to 10 where one represents a pure buy-and-hold investor and 10 represents a market-timer, where do you put your clients?

1 through 4 would be a satisfactory answer while a number 5 through 10 implies that the adviser thinks he can foretell the future and even its timing.

Questions about planning

21. How often do you evaluate my situation and provide an up-to-date forecast?

A satisfactory answer is yearly.

22. Does your retirement forecasting include discrete financial events like a real-estate purchase or sale, death of a spouse and subsequent survivor benefits or other large financial events?

If it doesn't, it isn't a very complete analysis.

23. Is your planning model based on a constant return and inflation assumptions or does it include the effects of variable returns and inflation?

Neither will give you a perfect answer. Constant returns and inflation in forecasts don't include the effects of a retiree having to make a withdrawal in a down market year. In contrast, Monte Carlo computer models vary returns every year using statistics of the past in numerous iterations. Some vary inflation too. Monte Carlo analysis gives a "success probability" assuming that the statistics of the future will be the same as the past, something that many forecasters believe doubtful.

William Bernstein, a highly respected analyst and author, suggests using no more than a 6.5% return for equities and 3% for bonds. With results from my own programs, I lean toward using the actual returns and inflation for each year starting with 1965 because I feel we will face similar conditions with periods of high inflation and serious volatility.

Since none of us can really forecast the future, what's important is to do a new forecast each year using the most recent balances and future events as you see them at the time to adjust your savings or spending accordingly. Future events should include the need for some long-term-care and death of a spouse with consideration to survivor benefits.

24. Does your retirement forecasting account for federal and state income tax and taxes on interest, dividends and capital gains?

Again, if tax rates aren't considered, it isn't a very compete analysis.

Final question

25. Do you think you would be a good adviser to me? Why?

You ought to think about what kind of answers you would want before the interview. Then, as you get responses from the advisers, you'll have a better idea whether this adviser is suitable for you and may be a better fit than the others you are considering.

Your first visit should be free. You may want to make a phone call or two afterward to clarify a point or cover something you forgot. If you are corresponding by email, make sure that you set up a personal, face-to-face meeting at the adviser's place of business as well. If you feel quite uncertain about making an adviser decision, perhaps you can bring a trusted friend, relation or associate with you.

It really pays to do due diligence to find an adviser. It's much like a marriage in which separation or divorce may be difficult. That's particularly true when the adviser has control of your account (instead of requiring your approval before any buy or sell action), provides multiple services in addition to financial planning such as estate planning or income taxes, invests in funds available only to his firm or gives you scanty periodic information. The easiest relationship to sever is one where the adviser gets together with you periodically to look at your investments and tax return, recommend changes and answer questions. So instead of being like a spouse, the adviser is more like a marriage counselor.

Finding a good financial adviser is more difficult than finding a good doctor but will be truly rewarding. I can attest to that from my own experience from just several hours of financial conferences about forty years ago.

Questions to Ask When Picking a Financial Adviser
Retirement columnist Glenn Ruffenach also answers a reader's question on
charitable contributions and IRAs

By GLENN RUFFENACH - The Wall Street Journal

In a recent column you talked about the value of working with a financial planner. What are the most important questions I should ask when sizing up a prospective adviser? Can you recommend a good list of questions?

Ideally, you want more than a list of questions; you also want a sense of what makes for good, or better, answers.

A common question, for instance, involves asking about an adviser's credentials or experience. But if you don't know which credentials are more valuable than others, the question won't help much. (By the way, some of the best credentials are certified financial planner, or CFP; chartered financial analyst, or CFA; and certified public accountant, or CPA.)

With that in mind, here are two of my favorite lists:

  • Henry K. "Bud" Hebeler started and wrote the Analyze Now website and contributed hundreds of articles about retirement finances to numerous publications, including The Wall Street Journal. This generous and thoughtful man died last year, but much of his work is still available online. For our purposes, check out "25 Questions for a Potential Financial Adviser."

    As noted above, I like this list because Bud explained the thinking behind each question and why each is important. It's a smart way of looking at this exercise (as Bud was wont to do).
  • Jason Zweig, who writes The Intelligent Investor column in the Journal, devoted two pieces last year to finding a financial adviser. Both columns - "The 19 Questions to Ask Your Financial Adviser" and "The Special Trick to Find the Right Financial Adviser" - are available at

    Jason provides a list of questions, as well as thoughts about possible answers. Example: "How often do you trade?" A good answer, according to Jason, would be something along the lines of: "As seldom as possible, ideally once or twice a year at most."
More questions worth considering can be found at the Certified Financial Planner Board of Standards website, which features a Consumer Guide to Financial Planning) and at, which offers a helpful brochure.

Finally, if you're approaching retirement (or already retired) and interviewing a prospective adviser, I have a question of my own that I would add to your list: "What do we do when the sky falls?"

A good adviser, naturally, will have a plan for tapping your nest egg in the most tax-efficient way possible. But what if the S&P 500 falls 50% or so? (As it has done twice in just the past 16 years.) What will your sources of income be, or how might they change, in an economic calamity?

Ideally, an adviser (before you hire her/him) will be able to walk you through such a scenario-pointing out guaranteed streams of revenue that are (or should be) built into your finances, discussing when to tap your cash reserve and just how large that reserve should be. (Some advisers like to see a year or two of cash on hand; others like to see three or four.)

The recent volatility in the markets helps explain why this question is crucial. The answers aren't something you want to learn after the fact.

My question is about individual retirement accounts and charitable contributions. My wife and I are required to withdraw money from our IRAs each year. If we send all or part of these required withdrawals to one or more charities, may we use these gifts to reduce our taxable income in 2018 instead of listing the gifts as charitable contributions on our tax return?

Yes, you may. And you could have lots of company.

To start, IRA-to-charity transfers - known as "qualified charitable distributions," or QCDs-still work. The new tax law made no changes in these rules. To be specific, individuals over age 70 1/2 can transfer as much as $100,000 annually from their IRA directly to most types of charities. That transfer is excluded from your income and, if done correctly, counts toward the IRA owner's required minimum distribution for the year.

What the new tax law has changed are the standard deduction (it's going up) and some itemized deductions (they're being capped or eliminated). All of which will make QCDs more attractive for some, says Natalie Choate, a lawyer specializing in retirement benefits at Nutter McClennen & Fish in Boston. She offers the following example:

A single woman, over age 70 1/2, lives in a low-tax state and has no mortgage. Her only significant deduction in 2018 will be her $13,000 charitable contribution. In the past, this woman likely would have itemized her deductions, obtaining (in the process) a tax benefit for her charitable gifts. In 2018, though, she will be better off, in all likelihood, using the new standard deduction: $13,600 ($12,000 for a single individual, plus $1,600 for being over age 65). But in doing so, she gets no tax benefit from donating $13,000 to charity.

What to do? Enter the QCD

If this woman pays out $13,000 directly from her IRA as a qualified charitable distribution, she benefits twice, Ms. Choate explains. First, she gets an income exclusion for the $13,000 IRA distribution (she won't need to include these funds as income on her tax return) and she gets the $13,600 standard deduction against her other income.

Says Ms. Choate: "Basically the new tax law heightens the attractiveness of QCDs for those eligible to use them and who are charitably inclined."

Mr. Ruffenach is a former reporter and editor for The Wall Street Journal. His column examines financial issues for those thinking about, planning and living their retirement

Corrections & Amplifications
An unmarried taxpayer who has reached age 65 can add $1,600 to his or her standard deduction when filing taxes for 2018 (making the overall standard deduction $13,600). An earlier version of this article incorrectly used the figure $1,250, understating the standard deduction as $13,250. (March 5, 2018)

Appeared in the March 5, 2018, print edition as 'What to Ask Before Picking a Financial Adviser.'

Goodbye 4%, hello age divided by 20

By Robert Powell Special to USA Today

Experts say nest eggs are more fragile than in the good old days, but a new withdrawal rate can prolong their lifespan

How much can you safely withdraw from your retirement account each year without running out?

Well, in the good old days, you could withdraw 4% per year from your nest egg and it would last 30 years. Or at least that's what financial planner Bill Bengen famously wrote some 22 years ago. But now, in a world where interest rates float around 0% and where investment returns are likely to be low for some time to come, blindly withdrawing 4% per year would be a disaster for your nest egg and ultimately your standard of living.

So how might you determine a safe percentage of savings to spend in today's world?

THE 'FEEL-FREE' RETIREMENT SPENDING STRATEGY. The latest in a long history of research on the subject comes from Evan Inglis, a senior vice president at Nuveen Asset Management and a fellow of the Society of Actuaries. Inglis' recommendation: Simply divide your age by 20 (for couples, use the younger spouse's age).

So, for example, someone who is 70 could safely spend 3.5% (70 divided by 20 equals 3.5) of their savings, while someone who is 80 could withdraw 4% (80 divided by 20 equals 4) and someone 65 could withdraw 3.25%.

"That is the amount one can spend over and above the amount of Social Security, pension, employment or other annuity-type income," Ingalls wrote in his paper. "I call this the 'feel-free' spending level because one can feel free to spend at this level with little worry about significantly depleting one's savings."

What's so great about this strategy? According to Inglis, it's "an easy-to-determine and remember guideline for those who do not have the time, expertise or inclination to do a lot of analysis."

Other strategies, by contrast, require too much thinking. For instance, the original 4% rule of thumb had you adjusting the amount you withdrew each year for inflation. (Good luck with that.) And the income-replacement ratio rule of thumb, where you try to replace 70% to 80% of pre-retirement income from a variety of sources, was an exercise in futility as well.

THE 3% RULE. Truth be told, there's an even easier strategy to use to make sure you don't outlive your assets. Simply withdraw 3% year in and year out.

"Three percent could be viewed as a more conservative and simpler version of the wellknown 4% rule," Inglis wrote.

NOT ALL AGREE. Some experts take issue with Inglis' age-divided-by-20 strategy.

"I agree that the proposed guidelines are a simple and conservative rule of thumb," says Dirk Cotton, a financial planner and author of the Retirement Cafe blog. "As with all rules of thumb, this one has issues."

While 3% is probably a good conservative starting point at age 65, age divided by 20 becomes far too conservative in late retirement, Cotton says.

Moshe Milevsky, a York University professor, suggests 5% is a more reasonable withdrawal for a man age 80 than 4% and that 10% is more reasonable than 4.5% at age 90.

"So (Inglis') approach is likely to result in a lower standard of living than might be achievable," Cotton says.

Inglis doesn't disagree that a higher withdrawal rate might be more appropriate later in life. But he says his strategy balances the need for simplicity with the need to be accurate. Plus, he says, it's unlikely that people will want to spend more as they age.

OTHER CONSIDERATIONS. Of course there are all sorts of things to consider before you just adopt the age-divided-by-20 strategy. Here are some of the questions Inglis suggests asking when applying this rule (or other similar rules):

Do you have long-term care insurance? If you do, you can spend a little more. If you don't, you may want to reduce your spending a bit.

Will you lose a significant amount of annuity income when your spouse dies?

Will you pay significant income taxes?

What if interest rates go up? First of all, you can't expect that they will. You can probably spend a little more if they do, but if rates go up by 2 percentage points, you can't increase your feel-free rate by 2% of your savings. The best advice is to stick to the divide-by-20 rule for the foreseeable future.

Do you want to pass on a certain amount to your kids or charity? Adjust your spending accordingly.

Truth be told, there's an even easier strategy to use to make sure you don't outlive your assets. Simply withdraw 3% year in and year out.

Ups and Downs of Retirement Expenses: What Do You Need?

By Joanna & Johnny - Daily Finance

We loathe calculators in our household -- because we only use them when we have to figure out what large sum of money we need to save to accomplish a goal. And when we recently decided to calculate how much we'd need to save for retirement, we thought our trusty electronic device was broken when it spit out a seven-digit number. We ran the numbers a second time and sure enough, the result still topped $1 million.

After collecting ourselves and analyzing the numbers a little more closely, reality began to set in. Living for 25 years with only your only outside income being a small stipend from Social Security requires a huge chunk of savings.

When it comes to understanding why retirement is so costly, my husband and I like to think of it this way: How much money do we need to get by in a month? Then we take that number and multiply it by 12, which is how much we'll need over a year. Finally, we multiply that number by 25 (supposing our retirement lasts from age 65 to age 90), and that's roughly how much we'll need for retirement -- without factoring in inflation on the one hand, or investment growth on the other.

Some Expenses Will Decline

While there's no question we'll need a large nest egg to survive (let alone thrive) in retirement, some of the expenses we have today may no longer be a factor once age 65 rolls around for us. It's important to keep these in mind so we don't overestimate how much we'll need come retirement age.

Mortgage: Most Americans have paid off their mortgages by age 65. If you haven't kissed your mortgage goodbye and don't own your home outright, then you'll want to factor in more money to help you get to that point. But if your countdown until tear-up-the-mortgage day is on track to arrive before your retirement date, that's a big monthly bill you can cross off your planned expense list.

Child-related expenses: From the cost of back-to-school shopping to keeping a growing teenager clothed and fed, the costs of raising children will likely no longer be a part of your budget.

Food and entertainment: Although you'll still be out and about, the rate at which you go and do is likely to slow down some as your retirement progresses. You'll have fewer mouths to feed, and extravagant nights out may also lessen. And if you're still living on a budget, this is an easy category to put on the chopping block when times get tight.

Taxes: Because of your retirement status, your tax bill could dip significantly. While a large chunk of your earnings go to taxes right now, you'll probably be giving substantially less to Uncle Sam once you leave the workforce, especially if you've been putting money into investments that have tax-free disbursements in retirement, such as a Roth IRA or Roth 401(k).

Other Expenses Will Go Up

Overall, your day-to-day lifestyle will likely cost less than it currently does. Your life should be more settled and simplified, and fewer unexpected expenses should pop up. And while most of your spending will continue going to everyday living expenses, as mentioned above, there are a few new things you'll want to save for in retirement.

Health care: One major expense worth factoring into your budget is the possibility you'll need long-term care in-home care, or assisted living. At some point in retirement, those possibilities have a strong likelihood of becoming your expensive reality. According to a recent study, half of all people who buy a long-term care policy at age 60 (of the type that pays out immediately for eligible claims) will at some point use that policy.

Adult children needing financial help: You'll want to decide in advance what to do in the case that your adult offspring need help financially. If you do have some extra retirement savings, you may have opportunities to help them when they're in a financial pinch.

Retirement is no small expense, and it's important to start saving now, and investing that money in ways that will grow our money over time -- hopefully, faster than inflation eats away at it. When it comes down to it, we can't know the exact number we're going to need for retirement. But we do know that we're going to try to save as much as we can.

What the rich know that you don't: 5 secret saving tips

By Robert Powell, - USA TODAY

The rich, it bears repeating, are different from you and me. They, for instance, get to learn about little-known, but highly effective ways to boost their savings for retirement from high-end financial advisers.

But that information isn't necessarily a secret; it's just hard to find. Or at least it was. We asked advisers who are familiar with these little-known tactics and strategies to share what average (and not-so average) Americans should consider when saving for or living in retirement. Here's what they had to say.

Deposit and withdraw

Are you over age 591/2 and able to contribute to a 401(k) or similar retirement plan where your employer matches your contribution, say 50 cents on the dollar up to 6%? Are you contributing enough to get the employer's full match? If so, great.

If not, you might be missing out an "unexploited arbitrage opportunity," according to a recent paper by James Choi, a Yale University professor.

Because employees over 591/2 can often withdraw their 401(k) balances without restrictions or penalties, it makes sense to contribute enough to get the company match and then immediately withdraw some of that money if you need it, Choi wrote in his paper, "Contributions to Defined Contribution Pension Plans." You'll pay taxes on the withdrawal, but you've increased your after-tax current income courtesy of your company's match.

But many older plan participants don't take advantage this arbitrage opportunity, Choi wrote.

Consider: According to one study, some 36% of match-eligible employees over 591/2 left arbitrage profits on the table, often because they fail to contribute anything at all to the 401(k), wrote Choi. And another study found that practically none of the customers in their experiment executed a similar "deposit-and-immediately-withdraw" strategy.

Of course, clients of advisers are aware of this strategy and are using it. "That one is on my checklist," said Joseph Clark, a managing partner with the Financial Enhancement Group, which has offices in Anderson and Lafayette, Ind. "Most of my clients are astute enough to always take the match. The key is knowing the plan document to find out when you are eligible for in-service non-hardship distributions. It is usually at 60 but can be as early as 50."

Use the 60-day rollover strategy

Most advisers typically don't recommend using what's called the 60-day IRA rollover strategy. Usually, when moving money from a 401(k) to an IRA or from one IRA to another you would use a direct trustee-to-trustee transfer.

But you can take the money out of your IRA and, in some cases, your 401(k). And if you put the money back into the account by the 60th day following the day on which you received the distribution you won't have to pay a tax or penalty on the distribution.

When might you do this? When you need a short-term loan. "There are weird times when a person can transfer from the 401(k) to an IRA and then use the 60-day provision," says Clark. "It is a workaround when the 401(k) plan doesn't allow for loans."

To make this tactic work, first read your plan's "Summary Plan Descriptions" or SPD. That document should detail what's allowed and not allowed in your plan. "People presume that if the Labor Department says it can be in a plan that it is, and that is far from the case," says Clark. "The Labor Department provides the big picture, and the plan has to exist inside the lines."

Backdoor Roth

The rich and even not-so rich would benefit greatly from having many different types of retirement accounts in place, including a traditional IRA and Roth IRA, a traditional 401(k) and Roth 401(k) and taxable accounts.

But not everyone can open a Roth IRA. For instance, high-income taxpayers - those married filing jointly with modified adjusted gross income (MAGI) of $193,000 or more and individuals with MAGI of $131,000 or more - can't contribute to a Roth IRA.

But they can contribute after-tax money into non-deductible IRA. "And then, with the stroke of a pen, they can convert the (non-deductible) IRA to a Roth IRA," says Hal Rogers, a senior adviser with Gold Tree Financial in Jacksonville. "Since the original contribution was non-deductible and there have been no earnings yet, there is no tax on the conversion. They have 'in effect' contributed to their Roth IRA, all perfectly legal, no raised eyebrows at the IRS."

Others like this strategy, too, especially if taxpayers might find themselves in a higher tax bracket in retirement. "I am really concerned that taxes will be going up in the future, so I am a big proponent of tax-efficient investment strategies," says Phillis Sax Pilvinis, president of PSP Financial Services in Surprise, Ariz.

Mega-backdoor Roth

A version of the backdoor Roth IRA is the mega-backdoor Roth IRA. Instead of funding a non-deductible IRA, contribute after-tax money to your 401(k). Then transfer that money (the after-tax money) into a Roth IRA and any earnings on that money into a traditional IRA.

For this to work, three conditions must be met, according to Christian Koch, the founder and owner of KAM South in Atlanta. One, your plan must allow you to make after-tax contributions to the plan; two, you must have enough disposable income to make an after-tax contribution to your plan; and three, your plan must allow for periodic in-service distributions for your after-tax money and your earnings.

"All these pieces have to fall into place for this strategy to work," says Koch, who added one note of a caution to this tactic. Some plans won't let you make after-tax contributions or won't let you take in-service distributions.

Fund a no-lapse last-to-die insurance policy

Another trick of the trade is for those who own an IRA and are required to take minimum distributions (RMD), but don't need that income. Take the RMD and pay the taxes due as you would anyway. Then, take the after-tax amount and systematically fund a no-lapse last-to-die life insurance policy. You would do this even if you don't need a traditional "widows and orphans" life insurance policy, says Rogers.

"Then, at second death of the two spouses, the life insurance will pay the (beneficiaries) the death benefit, tax-free, no probate, guaranteed," he says.

"Will College Pay Off?" A Surprising Cost-benefit Analysis

By Peter Cappelli, - The Wharton School, University of Pennsylvania

Powell: How to fix America's retirement problems

By Robert Powell, - USA TODAY

When it comes to retirement in the U.S., there's no shortage of problems. People haven't saved enough money for their golden years. They're going to outlive their assets. They won't be able to afford health care in retirement. And the list goes on and on and on.

But these problems are not without solutions. Here's a look at what experts say are the biggest problems facing those saving for and/or living in retirement, and how to solve those problems.

Social Security needs fixing. "The first pillar of old-age support, namely our national Social Security system, is running into the red," says Olivia Mitchell, a professor at The Wharton School at the University of Pennsylvania and executive director of the Pension Research Council. "This represents big trouble."

Mitchell says "serious reform must be implemented ASAP to ensure that those workers in the bottom half of the wage distribution will receive Social Security benefits that will be critical to them in retirement."

Her solution: Reduce the growth rate of benefits by pegging it to price inflation, not wages. When you're working, the Social Security Administration calculates your future benefit based how fast wages rise. But your actual benefit, when you claim it, is based on inflation (CPI). Wages tend to grow faster than inflation, so switching from wages to inflation would reduce the overall benefits to be paid out.

"This in and of itself will return the system to balance, albeit with some transition financing," says Mitchell.

No one thinks thoughtfully about when to claim Social Security. "The biggest problem is that (Americans) don't consider the importance of choosing the age at which they retire," says Alicia Munnell, director of the Center for Retirement Research at Boston College. "If they can postpone retirement from 62 to 70, their monthly Social Security benefit goes up by 76%, their 401(k) assets nearly double, and they reduce by eight years the length of the period over which they need to stretch their retirement nest egg."

Longevity risk is real. Most Americans face the real possibility of longevity risk, the risk of living longer than they can afford given their assets, says Mitchell. Her solution: New insurance products are needed to help convert retirement savings into lifetime income, ideally with deferred participating annuity products, which pool longevity risk. At the moment, investors can purchase such products as deferred-income annuities, single-premium immediate annuities as well as qualified longevity annuity contracts (QLACs) to manage longevity risk.

Others share that point of view. "Couples beginning retirement have a problem previous generations would have envied," said John Laitner, a professor at the University of Michigan and director of the Michigan Retirement Research Center. "Individuals of retirement age can now expect to live many years."

And to cope with such longevity, Laitner says individuals should think about annuitizing at least part of their pension equity, which would provide protection against outliving their resources.

Access to employer-sponsored retirement plans. Experts say that only one-half of American workers have retirement plans, such as a 401(k), at work. And that lack of access is a problem, particularly for part-time workers and those at small employers, says Jeffrey Brown, a professor at the University of Illinois at Urbana-Champaign.

No retirement plan equals no retirement savings, according to research from the Employee Benefit Research Institute.

To address this problem, Brown wants the Labor Department to 1) make it simple and low-cost for small employers to offer plans, 2) make sure that non-discrimination testing is not accidentally leading employers to leave part-timers out of the plan, 3) promote multiple-employer plans, and 4) establish auto-IRAs at the federal level.

Not enough annuity options in 401(k) plans. Workers who have access to an employer-sponsored retirement plan have plenty of investment options, but hardly any annuity options, say Brown. Having annuity options could help workers convert some of their retirement assets into guaranteed lifetime income.

To address this, Brown says the Labor Department must go "much further in providing fiduciary comfort to plan sponsors so that they feel comfortable offering lifetime income products inside 401(k) plans."

What's more, Brown says he liked to see the lifetime income-disclosure rules become finalized "so that we can start to change the conversation from a focus on wealth accumulation and toward a focus on income."

Don't forget your home equity. Home equity can help solve retirement problems as well. "Maintaining equity in one's primary residence provides a place to live and a degree of hedging against inflation," says Laitner. "Equity in one's residence tends to be protected against some government means-tested assistance. And, the equity can provide cash in the event of a surviving spouse's illness."

Divorce and money: Six costly mistakes

By Veronica Dagher, - Yahoo! Finance

Divorce can be hazardous to your financial health.

Splitting up is expensive, and your cost of living is likely to go up when it is all over.

Experts say anecdotal evidence suggests an improving economy and long-running bull market in U.S. stocks are making the costs of getting divorced look more manageable to many couples who might have tried to stick it out in leaner years.

"People have a greater sense of freedom. They gain more confidence that they could live an independent life," says John Slowiaczek, vice president of the American Academy of Matrimonial Lawyers.

Still, you should understand the risks, which can be considerable-whether you are a stay-at-home parent, the main breadwinner or in a marriage of financial equals. The stakes can be high, particularly for homeowners in some of the nation's hottest housing markets.

"Divorce generally results in a significant financial setback for all those involved," says Mark Zandi, chief economist at Moody's Analytics in West Chester, Pa., who has researched divorce and other demographic trends.

If you are considering seeking a divorce, plan carefully in advance so that you can make rational decisions at a time when emotions may be running high. Here are six common mistakes to avoid.

Overlooking assets

Many happy couples maintain a division of labor in which one spouse keeps an eye on the finances.

But when the marriage falters, the importance of being able to see the whole picture becomes clear.

It is crucial to know what your family's assets and liabilities are, financial advisers say. Make sure you have access to tax returns, statements from investment and retirement accounts, household bills and any other important records, Mr. Slowiaczek says.

Make sure you also have an inventory of valuable property. You probably know about any shared real estate, but don't overlook collectibles, furniture and the like.

Make sure you obtain a qualified domestic relations order, or QDRO, a legal document that spells out how you and your spouse have decided to divide certain retirement assets such as 401(k) accounts, says Page Harty, a financial planner at SignatureFD, a wealth-management firm in Atlanta.

If there are any hard-to-value assets in the family, such as a privately held business, a share of a professional partnership or stock options, you may need the assistance of a valuation expert or a forensic accountant. The help can be costly, but if the assets are valuable enough, it could be money well spent.

If you overlook something valuable, you may end up getting less than your fair share when the time comes to divide the assets. In extreme cases, your spouse may even try to hide from you something that should be considered joint property.

Keep track of shared debts, too. If you and your spouse have joint loans or credit cards, you still are responsible for paying them off when you are single again, says Ben Barzideh, a financial adviser in Crystal Lake, Ill.

"Lenders don't let you off the hook just because your divorce settlement states that your ex-spouse will pay them off," he says. "The best thing to do is pay off all shared debts before the divorce becomes final."

Keeping the house

Fighting for your fair share makes financial sense. Fighting to keep the family home, on the other hand, could cost you money in the long run.

Staying put is tempting, particularly if it seems like the easiest way to make sure that school-age children remain in the same school district. A house also may stir fond memories or symbolize a lifestyle that is difficult to let go.

But a household that took two people to run may be far too expensive for one. Trying to maintain the illusion that nothing has changed can drain your cash flow and eat into your savings, and may end up merely postponing an inevitable move.

The smarter strategy may be to sell the house and split the proceeds in the course of the divorce proceedings, when both parties would be sharing in the risk and cost associated with selling the home, says Matt Mikula, a financial planner in Itasca, Ill.

Mr. Mikula worked with a mother of four who got the family's $1.5 million home as part of a divorce settlement, as well as $500,000 in other assets. The woman wanted to keep the house because she had custody of the couple's four children and didn't want to disrupt their lifestyle.

But taxes, utilities, maintenance and other expenses amounted to about $50,000 a year, and the client had little in the way of other assets or income to cover those costs in the long run, Mr. Mikula says. "She was going to run out of money," he says.

His client ended up selling the house six years after the divorce and received about 20% less than it was valued at around the time of the divorce, he says.

Underestimating expenses

It also is key to get a firm handle on your other expenses, beyond housing.

Take careful note of how much your family spends on food, clothes and other essentials, as well as discretionary purchases that can be cut back in a pinch. Figure out how a divorce may change the cost of health insurance, which can be steep, financial planners say.

Make sure you can cover the postdivorce expenses on your own, without relying on your ex. "Always plan for the 'what ifs.' What if someone loses a job, doesn't pay off debts as promised, disappears off your radar?" says Lili Vasileff, a financial planner in Greenwich, Conn., who works with divorcing clients.

Expect the unexpected. After Shelly Church got divorced, her daughter was invited to play on a volleyball team that traveled extensively. Ms. Church, a financial adviser at Raymond James Financial in Naples, Fla., suddenly needed to come up with about $400 to $500 a month to cover hotel rooms, meals and other expenses.

Ms. Church advises clients to be aggressive when they project their postdivorce cost of living, especially if they have children. Be sure to include the impact of inflation, she says.

One thing is almost certain: "There will be unforeseen expenses," Ms. Church says.

Seeking revenge

The less you spend, the more you keep.

That is the financially savvy principle behind investing in a low-cost mutual fund and waiting for a sale at your favorite store-and it applies to negotiations with your soon-to-be-ex, as well.

Think carefully before hiring costly experts who advocate aggressive tactics in an effort to boost your share of the settlement-and try to curb your own impulse to do the same if the aim is to punish the other person. Even if the strategy works, you could merely end up with a larger slice of a smaller pie.

A woman who was married for more than 20 years to a surgeon sought advice from Rose Swanger, a financial planner in Knoxville, Tenn. Her husband had cheated on her and they were getting divorced.

The surgeon earned a seven-figure income, and the woman wanted to get at least $300,000 a year in alimony. But that turned out to be unrealistic because the couple owned two houses that were in affluent neighborhoods and heavily mortgaged, and they were paying private-school tuition for their children, according to Ms. Swanger.

The woman already had gone through two lawyers and run up tens of thousands of dollars in legal fees by the time she consulted Ms. Swanger, and her husband had done the same. As the woman's legal bills grew, her credit score suffered, says Ms. Swanger, who ultimately dropped her as a client.

"I don't blame her for trying to retaliate, but I warned her that a calm divorce is the best divorce," Ms. Swanger says.

Keep in mind that every dollar you or your spouse spends on winning the divorce is a dollar you can't agree to split 50-50. Couples are better off approaching divorce as an opportunity to strike a favorable business deal rather than a chance to settle scores.

Forgetting about taxes

Be careful not to divide assets in a way that looks fair on the surface-but which sticks one spouse with a larger tax bill.

Before you complete the divorce papers, for example, consider how different accounts might be treated by the tax collector.

Monica Garver, a financial planner in Johnstown, Pa., says she worked on a case where the husband proposed a division of assets that amounted to a nearly even split of their face value. He proposed keeping $2 million that was in an after-tax investment account and giving his wife $2 million that was in tax-deferred retirement accounts.

"Each and every dollar [in the retirement accounts] had to pass through the hands of the taxman before the spouse could put it in her pocket," says Ms. Garver, who pushed to increase her client's share of the couple's assets to compensate.

Similarly, Ms. Garver worked on a case where the husband wanted to give his wife-Ms. Garver's client-investments worth $500,000 that had cost $150,000 to purchase and to keep $500,000 in investments that had cost $480,000.

That would have left the wife facing a much bigger tax bill on $350,000 in capital gains, while the husband would have owed taxes on only $20,000 in gains.

Thinking the work is done

Divorcing couples often put so much time and energy into dividing up assets that they believe everything is taken care of when the papers are signed.

But there are other important financial matters that former spouses should attend to on their own.

For example, be sure to update your will, says Ms. Vasileff, the Connecticut financial planner. Many people make the mistake of forgetting to do that, which can put your intended heirs in a difficult situation, she says.

If you have a health-care proxy or a power of attorney that names your former spouse, you may need to update that document as well, Ms. Vasileff says.

Make sure you transfer the titles for any real estate, cars, investment accounts or other assets that were held jointly into your name, says Ms. Harty, of SignatureFD. Change the passwords on your accounts, too, she says.

Don't forget about the future. If a divorce settlement requires your former spouse to purchase a life-insurance policy and name you as the beneficiary, for example, you should make sure that the premiums are being paid and that you remain the beneficiary, Ms. Harty says. One option: Ask for periodic confirmation from the insurance company.

Study looks at millionaires-in-the-making: Are You One?

By Nanci Hellmich, - USA TODAY

Investors who are millionaires-in-the-making are different in several ways from people who are already millionaires, a new study reveals.

The millionaires-in-the-making include more women and minorities than today's millionaires, according to the survey of 1,064 investors with $50,000 to more than $10 million in total investable assets. The survey was conducted by Bellomy Research for Fidelity Investments to try to pinpoint affluent investors' attitudes and behaviors.

"More women are on track to become millionaires in the future," says Fidelity Executive Vice President John Sweeney.

The survey divides affluent investors into four categories: emerging affluent investors (the millionaires-in-the-making) with a median of $250,000 in investable and retirement assets; mass affluent, with a median of $800,000 in investable assets; millionaires, $2.5 million; deca-millionaires, $11.75 million.

The findings show that:
  • 68% of the emerging affluent investors are women, vs. 40% of those who are currently millionaires.

  • 75% of the emerging affluent are white, vs. 91% of current millionaires.

  • The emerging affluent are an average of 40 years old; millionaires, 62.

  • Only 1% of the emerging affluent are retired, compared with 51% of current millionaires.

  • Emerging affluent investors have a median annual household income of $125,000, which is 21/2 times the median household income in the USA. Millionaires who are employed have a median annual household income of $200,000.

  • The emerging affluent have similar careers, such as information technology, medical fields, finance and accounting, to many of today's millionaires.

  • 48% of the emerging affluent use a financial adviser; 70% of millionaires do.

  • 56% of emerging affluent feel confident that their investment strategies are aligned with their long-term financial goals; 88% of millionaires feel that way.
To be a millionaire-in-the-making, investors should get in the game early and have a plan that will enable them to achieve their goals, Sweeney says.

He points out that about 43% of emerging affluent investors own individual domestic stocks, compared with 75% of current millionaires.

Many people aren't millionaires-in-the making and haven't saved enough for retirement. About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000, according to a study from the non-profit Employee Benefit Research Institute.

If you're worried about your retirement savings, Sweeney says it's never too late to get started. "There are always steps you can take," he says.

Some folks who are behind may need to save more and "they may not be investing in equities, so their money isn't working hard for them. You should have a substantial portion of your portfolio in stocks. You really need that earnings growth to have a substantial nest egg over time."

Avoid the shock: How to ease into retirement

By Nanci Hellmich, - USA TODAY

Some people make a smooth transition to retirement, jumping into their new lifestyles with gusto, but others have more trouble adjusting.

There are several steps you can take to make it easier, and one of them is to consider retiring in phases, says gerontologist Ken Dychtwald, 64, the CEO of Age Wave, a research think tank on aging issues.

"Most people assume that in retirement they have to go from working full time for 40 years to stopping cold turkey one day, but there is some benefit to doing it in phases," he says.

Some companies are letting people cut back to three or four days a week, says Dychtwald, who is a psychologist and the author of 16 books on aging, health and retirement issues. That makes the transition "kind of a glide path instead of a hard stop."

Norman Abeles, professor emeritus of psychology at Michigan State University in East Lansing, suggests discussing retirement plans with people who care about you to get their perspective.

And begin planning for the transition a year or two in advance, says psychologist Kris Ludwigsen, 69, of Martinez, Calif. "Start thinking about what activities are important to you - hiking, traveling, cultural events, family events. This could include what you've been doing and/or what you've always wanted to do."

Here are some other suggestions for making the transition easier:

  • Do some homework. Don't just think of this time as the end of your work career, but think of it as the beginning of your retirement life, Dychtwald says. Read articles about it, and visit websites. Talk to people who are retired. Talk to your partner. Sign up for classes, workshops or volunteer work. "It's really a new beginning. With our longer lives, there are ample opportunities for both new activities and new purpose."

  • Make a list of things you have always wanted to do. Select those activities that rank highest on your list and assess which ones are possible, Abeles says

  • Work on replacing your social network. Retirees often say what they miss the most is the social interactions from work, Dychtwald says. Before retiring, it's helpful to get some replacement social networks through classes, workshops, your fitness center, church, volunteering. If you don't, you may spend a lot of time sitting around at home watching TV, which the average retiree does for 48 hours a week, he says.

    Abeles also suggests maintaining contact with friends and with people who are involved in the activities that you value. Invite them to lunch.

    You have to keep making new friends, because there are "inevitable losses" as some friends move and others pass away, Ludwigsen says.

  • Consider volunteering. Many people get a sense of personal pride from being productive at work, Dychtwald says. "Pulling the plug on that and going dark for the rest of your life and not feeling useful can be stressful," he says. Volunteer activities can help fill that void and make the transition "more comfortable and nourishing."

    Retirees have a lot of knowledge, skills and ability, and there are many activities in communities that could use their wisdom and perspective, he says. Volunteer activities help fill your day and give you a sense of self-worth, he says. "Giving back is good for the soul, and it's good for the mind."

  • Come up with a new structure for your days and be prepared to revise it. This could include church and volunteer activities that fit your values, Ludwigsen says. Identify your top five priorities and then allocate 95% of your time to them, she says. "It simplifies the decisions you have to make and is more satisfying in the long run."

  • Do things you've put off doing. This might include medical tests, home remodeling or visiting family or friends in different parts of the country, Ludwigsen says.

  • Contemplate getting a new job. "It might be part time, or it might be something you've never done before," Dychtwald says. "It might be less about the money and more about the chance to keep your mind active and your life productive. Retirement doesn't have to mean a complete full stop from work."

    He says some people find that after a year or two of not working, they want a job but they don't want to work full time or the pressure of their old job. Some people decide to sit on a board or help someone start a business. Or they might think, "I am going to work at Home Depot and have some fun helping people get the supplies they need."

  • Get fit. Make your health a priority, Dychtwald says. "Retirement can be a great time to focus on your own well-being."

  • Stay mentally alert by keeping up with the news and sports, Abeles says. If you can afford it, travel for short periods to see places that you might enjoy. And challenge your memory by reading, doing puzzles and reminiscing.

  • Consider retirement as a period of trial and error. You may not get it right on your first try, Dychtwald says. You have time to try out different activities, different social activities, different ways to organize your day. "There's a whole world of opportunities sitting in front of you and now you have the time to poke around," he says. "What is particularly traumatic is thinking that everything is final, and all your decisions are permanent. They need not be."

  • Think of your retirement as "an adventure. It is an exploration."

12 easy ways to save for retirement

By Nanci Hellmich, - USA TODAY

Saving aggressively for retirement doesn't mean you have to live on canned beans and sawdust.

Lynnette Khalfani-Cox It's easy to make small changes that will make a big difference in your retirement savings, say financial experts Lynnette Khalfani-Cox, founder of and author of Zero Debt: The Ultimate Guide to Financial Freedom, and Elli Dai, director of participant services for Wells Fargo Institutional Retirement and Trust.

Recent statistics highlight the need for some changes: Middle-class people in the USA have a median of $20,000 saved for retirement, far short of the $250,000 they think they'll need during that time of their lives, according to a new Wells Fargo survey of 1,001 adults, ages 25 to 75, with a median household income of $63,000. (Median means half earn more, half less.)

Khalfani-Cox and Dai offer these suggestions for boosting your savings:

> Create a budget. Most people think creating a budget means they'll be in a "financial straitjacket. They think a budget means deprivation," says Khalfani-Cox says. "But instead of thinking of a budget as a list of what they can't buy, they should look at it as a spending plan of action."

A budget helps you set priorities so you can become more focused and save for your goals, she says. Some people are overwhelmed by the idea of trying to save more because they have so many bills and other expenses, Khalfani-Cox says. "Sometimes people tell me they can't afford to save, and I say, 'You can't afford not to save.' "

> Cut spending without feeling deprived. Eliminate the things you won't really miss so you don't feel like you're going into "severe restriction mode," Khalfani-Cox says. You might stop eating lunch out daily or cancel some cable TV channels that you don't watch.

Dai adds that if you make one change in how you spend your money today, however small it may seem, you can make a difference in your retirement savings. "When you combine several seemingly small changes, they can add up to make a big difference in your retirement savings over time."

> Don't make minimum payments on credit card debt. "It's a complete financial trap," says Khalfani-Cox, who once had $100,000 in credit card debt and paid it off in three years. "Minimum payments in the short run mean maximum payments in the long run. It means so much more money in interest." Instead, double and triple the minimum payments.

> Negotiate better interest rates on your credit cards. Don't be afraid to call your credit card company, she says. It's a competitive market, which means you have leverage.

> Don't dig yourself deeper into debt. Change whatever financial behavior got you into debt in the first place, Khalfani-Cox says. This is something to keep in mind during the holidays. If you spent too much last year and had to dig out of a hole, try not to do it this year.

Many people end up in debt through no fault of their own, but they have been hit by what she calls "the dreaded D's - downsizing, divorce, death of the main breadwinner, disability and disease. These are five personal pitfalls that can throw people into debt and limit their ability to save money."

In this case, it may take time and patience to dig out of debt, she says.

> Turbocharge your savings. Contribute to your 401(k) plan or other type of employer-sponsored savings plan, especially if you are getting a match, which is essentially free money, Khalfani-Cox says. "You are getting Uncle Sam's help, too, because you're not getting taxed on those contributions."

> Consider another turbocharged option. Look into getting an Individual Development Account (, Khalfani-Cox says. This program is available to low- to moderate-income people who want to save toward a specific goal, such as a down payment on a home, college costs or job training. These accounts are supported by non-profit groups, companies and government agencies and provide matching funds. The savings may be matched 2-to-1, 3-to-1 or even more.

> Sell things you aren't using. Take a look in your basement, attic, garage and drawers and get rid of things you're not using. Sell them on websites or have a yard sale. This money should be earmarked for savings.

> Adjust your withholding. If you think you're going to get a tax refund, you may want to adjust your withholding now so your tax refund isn't as large in the spring, says Dai of Wells Fargo. Be sure to increase your savings at the same time so you don't end up spending the extra money in your paycheck.

> Take advantage of pretax savings accounts through your employer. These may include flexible savings accounts, health savings accounts, dependent day care flex savings accounts and transportation flexible spending accounts, Dai says. If you're going to pay for those things, anyway, you might as well use pretax dollars.

> Plan for the unexpected. Have an emergency savings account so that if you have an unexpected house or car repair or medical expense, you don't have to stop saving for retirement or dip into your retirement savings, Dai says.

> Learn to cook. "One of my favorite non-traditional savings tips for people is to learn to cook," Dai says. The savings come in many ways: less eating out, buying fewer packaged (more expensive) groceries and possibly eating a healthier diet, which could lead to lower long-term health care costs, she says.

11 Simple Ways You Can Boost Your Credit Score

By Drew Trachtenberg - DAILYFINANCE.COM

Knowing your credit score and knowing how to improve it are two of the most important things consumers can do ensure they reach their long-term goals. The three major credit rating agencies -- Experian (EXPN), TransUnion and Equifax -- collect information on all of us, looking at how we spend our money, pay our debts and mess up. They use that boatload of data to create your FICO score, which in turn is used by lenders to determine your credit risk. And that credit score can determine whether you will be turned down for a car loan -- or if you'll get the 0 percent interest incentive rate or if you'll have pay 18 percent.

Here are 11 steps you can take -- and they may take a few months -- to repair any damage you've done.

1. Get Going

The first thing is to review your credit report for accuracy. Mistakes can and do happen. Sometimes the information given to the credit agencies is simply wrong, and they don't fact-check unless you request it. Sometimes you're a victim of misidentification; perhaps someone with the same name fell behind on payments, and it ends up on your record. Each of the three credit agencies is obligated to provide you with a free report once a year. It's best to cycle through them every four months so you can regularly monitor the accuracy of the information.

2. React

If you find an error on your credit report, immediately file a free dispute form with the credit agency. It is then required by federal law to attempt to validate the information by checking with the creditor who reported it in the first place. That creditor has 30 days to respond, and if it cannot do so, the matter should be resolved in your favor. And while you can remove wrong items from your credit report, don't expect to game the system and erase mistakes that you really did make.

3. Be Responsible

This one is a no-brainer, but it may be the most important thing you can do: pay your bills on time. Greg McBride, chief financial analyst at, calls it "the low-hanging fruit." Paying your bills on time and demonstrating responsible debt management over time accounts for two-thirds of your credit score. "If you're not doing that, it doesn't matter what else you do," said McBride. If you can't do that, at least make the minimum payment and preferably pay as much as you can. Missing a payment is a real black mark.

4. Avoid Deadly Sins

Some mistakes will ding your credit score -- but others will demolish it. Bankruptcies, defaults on a mortgage, some unpaid tax liens and defaults on student loans stay on your record for 10 years or longer. Most other mistakes get erased in seven years, and they tend to fade in importance over time. McBride says "the passage of time works to your benefit. Recent events count more and carry more weight than the missteps" you made in years past. He adds that "a credit rating is like a reputation: it takes a long to build, but it's easy to destroy."

5. Manage Credit Cards

If you are doing everything else right, think about card management. "Don't focus on the number of cards you have," says John Ulzheimer, credit expert at "Focus on how you manage them." Your credit score is partly determined by what's known as the utilization rate. That's determined by dividing your outstanding balance by your credit limit. Ideally if you can keep that below 10 percent, it can boost your credit score, but letting it rise above 30 percent can work against you. Above all, don't max out on any cards. That is, don't spend 90 percent or more of your credit limit. Lenders tend to view this as irresponsible spending.

6. Get More Than One

Lenders like to see two or more cards on your credit report. It shows that you are able to manage your spending responsibly. Ulzheimer says having multiple cards is like having credit score insurance because it can help to lower your utilization ratio -- but only if you're still able to pay them off in full each month. However, "if you use credit cards as a supplement to your income," he says "then you're not doing yourself any favors." If you have cards that you're no longer using, don't cancel them; just shred them. Closing an account reduces your utilization rate.

7. Ignore Store Come-Ons

Chain stores lure you on with discounts (like 20 percent off your first purchase) if you apply for their store credit cards. Don't do it. It temporarily lowers your credit score each time you apply to open a new account. However, you're not punished for shopping around for a mortgage or car loan. McBride says the credit agencies assume that you're buying one home or one car if you submit more than one application within a 30-day period.

8. Ask, and You Shall Receive

If your account is in good standing for at least six consecutive months, you can usually request a hike of $500 to $1,000 in your credit limit. This is a good way for young people who are starting to establish a credit history by improving their utilization ratio. Again, this comes with a warning: it only helps if you don't use the extra credit as a signal to spend more -- but it's there if you really need it.

9. Do the Math

If your credit score is above 750, you're considered an elite borrower and usually eligible for a lender's best deal. But if your score is in the 600s, you may get the loan, but pay through the nose. Here's the difference: on a five-year car loan, a elite borrower might get a 0 percent deal, while the lower-rated borrower could pay as much as 18 percent. The difference adds up to thousands of dollars saved or lost. On credit cards, people with solid credit scores usually pay about 16 percent, while those with poor credit scores can be saddled with onerous annual percentage rates in the high 20s. There's a colossal difference in how much you'll pay in the long term.

10. Establish Credit

Young people are often in a Catch-22 situation: you need a credit history to get a lender to extend you credit. But there are some things you can do. The first option is to become an authorized user on the credit card of your parents or a really, really good friend. This establishes a baseline credit history that will help when you apply for your own credit card. The credit card company holds the other person (parent or friend) responsible for the payment. If you mess this up by charging too much, it can hurt their' score. On the other hand, if you're responsible, you get the benefit of their good credit history. Another option is to get a secured card. You deposit as little as $300 with a bank that issues a card that has that much money available to spend. You can "refill" the card, and once you've established that you can handle your money, you can apply for a real credit card.

11. Plan

If you're planning a big purchase -- a home or a car, for example -- work on these points three to six months ahead. "Every basis point of interest that you pay is real money," said Ulzheimer, suggesting that you also go on a credit hiatus by paying down cards as much as possible and avoiding any new debt.

A third of people have nothing saved for retirement

By Nanci Hellmich - USA TODAY

A third of people (36%) in the U.S. have nothing saved for retirement, a new survey shows.

In fact, 14% of people ages 65 and older have no retirement savings; 26% of those 50 to 64; 33%, 30 to 49; and 69%,18 to 29, according to the survey of 1,003 adults, conducted for, a personal finance website.

"These numbers are very troubling because the burden for retirement savings is increasingly on us as individuals with each passing day," says Greg McBride, chief financial analyst for "Regardless of your age, there is no better time than the present to start saving for your retirement. The key to a successful retirement is to save early and aggressively."

Other recent research confirms that many people aren't saving enough for their golden years. About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000, according to a survey of 1,000 workers from the non-profit Employee Benefit Research Institute and Greenwald & Associates.

Many people realize that they are not on track in saving for retirement, and the two most important reasons they give are cost of living and day-to-day expenses, says Jack VanDerhei, the institute's research director.

He advises people to join the 401(k) plan if their employer offers one and to make sure to contribute at least enough to receive the maximum employer match. "Contributing anything less than that is leaving free money on the table," he says.

Other findings from the survey:

- Some people are starting to tuck away retirement savings at an earlier age. About 32% of people ages 30 to 49 started saving for retirement in their 20s compared with 16% who began in their 30s. About 24% of people 50 to 64 started saving for retirement in their 20s, vs. 21% who began in their 30s. About 16% of people 65 and older started saving for retirement in their 20s; 15% in their 30s; 17% in their 40s.

- 24% are less comfortable with their debt than they were a year ago; 23% are more comfortable.

- Job security, net worth and overall financial situation are areas in which people have seen improvement over one year ago.

- 32% of people are less comfortable with their overall savings now than they were a year ago; 16% are more comfortable.

"Month in and month out, consumers sound a dour tone about how they feel about their overall level of savings," McBride says. "Many people know they are undersaved whether it's for emergencies, retirement or both."

$245,340: Cost of raising a child born in 2013

By Christopher Doering - USA TODAY
WASHINGTON - New parents beware: Your little angel is going to cost you a bundle.

A middle-income family with a child born in 2013 can expect to spend about $245,340 for food, shelter and other expenses up to age 18, an increase of 1.8% from 2012, the Agriculture Department said Monday.

The report, issued annually by the USDA since 1960, found housing was the single-biggest expense, averaging about $73,600 or 30% of the total cost of raising a child, followed by child care/education at 18%.

Raising Child Costs
The remainder went to food, transportation, health care, clothing and miscellaneous expenses during the same period.

"In today's economy, it's important to be prepared with as much information as possible when planning for the future," Kevin Concannon, USDA's food, nutrition and consumer services undersecretary, said in a statement.

The report found geographic variations in the cost of raising a child. They were the highest in the urban Northeast at $282,480, followed by the urban West at $261,330 and the urban Midwest at $240,570, which includes Iowa and South Dakota. The urban South came in the lowest at $230,610 for each child.

Child care costs have soared dramatically since the first report 53 years ago. Back then, a middle-income family could have expected to spend $25,230 ($198,560 in 2013 dollars) to raise a child until the age of 18. Housing was the top cost for parents back then, too.

The USDA report said that as families have more children, their costs decline.

A family with three or more children can spend 22% less per child than those with two children, a result of kids sharing toys and clothes and parents purchasing food in larger and more economical amounts.

The study noted that families can expect to spend more as their income increases. A family earning less than $61,530 can expect to spend $176,550 on a child while homes earning more than $106,540 can expect to spend $407,820. Households in the lowest group spent 25% of their before-tax income on a child, the middle 16% and those in the highest group 12%.

Five tips for boosting your savings for retirement


If you are woefully behind on saving for retirement, then try to delay gratification on purchases, save your raises and pay off credit cards, financial experts say.

A national survey out Tuesday shows that about 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000.

Like workers, many retirees are also short on funds, with 29% of them having less than $1,000 in savings and investments, and 58% of them having less than $25,000, according to a telephone survey of 1,000 workers and 501 retirees from the non-profit Employee Benefit Research Institute and Greenwald and Associates.

USA TODAY asked financial experts for their five best tips for boosting savings and income now and during retirement:

Β• Delay gratification. Don't buy everything you see, says Gary Schatsky, a New York City financial planner and president of People have to take stock of their needs vs. their wants. "Needs must be met. Wants can be delayed. One of the things you need is a good retirement plan, some savings for emergencies and a plan for the future."

You have to make a priority list of what you need and want, he says. "You can enjoy lattes, dinners out and vacations as long as you are saving. You have to decide what's important to you and start saying no to the things that are not."

Β• Save 10% to 15% of your annual income. "While that may seem like a daunting amount, if you set it up early, you can learn to live on the amount that's left," says Fidelity Investments Executive Vice President John Sweeney. "We recommend putting 10% to 15% right into retirement accounts, because a lot of our retirement savings is going to be up to us."

By investing in a 401(k) or 403(b), or an Individual Retirement Account (IRA), you can reduce your taxable income, he says. "You are saving money because you are paying taxes on the lower income level."

Β• Take advantage of matching contributions. If your employer offers matching contributions in your workplace savings plan, take it, Sweeney says. Many employers offer a 3% match on an employee's first 3% contribution.

Β• Save your raise. "If you get a raise, bank it," Sweeney says. Consider investing all or a portion of your raises each year, he says. You can do the same with bonuses or tax refunds.

Β• Pay off high-interest-rate credit card debt. If you are paying 18% interest on credit card debt, "that's eating a hole in your pocket," Sweeney says. It's important to pay it off, if you can, or the second choice is to think about ways to reduce the interest payment, such as getting a home equity loan that has a lower interest rate.

Another option for some people is to continue working during their retirement years, says Nick Ventura, CEO of Ventura Wealth Management in Ewing, N.J. "Many part-time jobs exist in retail, health care and other businesses. Helping people and bringing life experience to these jobs can be very rewarding for many retirees."

Exactly how much you will need for retirement is complicated because there are so many variables, including your essential expenses (food, housing, health care) and discretionary expenses (travel, clothes, entertainment, dining out), Sweeney says. "Everybody's situation is going to be a little different."

People often underestimate how long they are going to live, he says. "A quarter of us will live into our early 90s, so we are really planning for a retirement that could last 30 years."

All that said, Fidelity offers this rule of thumb: Save at least eight times your final salary to help increase the odds that you won't outlive your savings during 30 years in retirement. This amount assumes that you'll get some money from Social Security and that your expenses after you retire will be lower than when you were working, Sweeney says. Higher net-worth folks usually need to save more than eight times their final salary, he says.

Retirement: A third have less than $1,000 put away


Most people aren't trying to figure out how much they'll need in their golden years.

Most people have very little tucked away for retirement, and many aren't even trying to figure out how much they'll need later in life, a new national survey reveals.

About 36% of workers have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions, and 60% of workers have less than $25,000, according to a telephone survey of 1,000 workers and 501 retirees from the non-profit Employee Benefit Research Institute and Greenwald and Associates.

Only 44% say they or their spouses have tried to calculate how much money they'll need to save by the time they retire so that they can live comfortably in their golden years, the survey shows. Workers who have done calculations on what they need to save tend to have higher levels of savings than those who haven't crunched the numbers.

"There's an incredible difference between those lucky enough to have a retirement plan and those who don't," says Jack VanDerhei, the institute's research director and co-author of the 2014 Retirement Confidence Survey. "What's really striking is that 73% of those without a retirement plan, such as an IRA, 401(k) or 403(b), have less than $1,000 in savings and investments."

The reason defined benefits weren't included in the total is most people don't know how much those are worth, he says.

Many people realize that they are not on track in saving for retirement, and the two most important reasons they give for not saving more are cost of living and day-to-day expenses, VanDerhei says.

People's confidence that they'll have a comfortable retirement has risen slightly after record lows of the last five years, with 18% of workers in 2014 saying they are very confident they can retire comfortably, up from 13% who were very confident in 2013. Meanwhile, 24% are not at all confident they have enough saved for a comfortable retirement, about the same as 2013.

Retirement confidence is present mostly in people with higher incomes and in those with retirement plans, VanDerhei says.

The survey "highlights the impending retirement crisis that we will face over the next 20 years," says Mark Fried, president of TFG Wealth Management in Newtown, Pa. "When I see these numbers I have ask the question: How did we get here? We need more financial education in the schools, in the media, in the workplace."

If possible, people 40 and older should try to save up to 20% of their income, he says. "If you can't afford to do that right now then set this as a target, and as you get annual raises put aside part of each raise until you reach the 20% number," Fried says.

Invest in your company's retirement account up to the match. One of the best ways to increase your retirement savings is to take advantage of your employer match if you have one, he says.

John Piershale, a certified financial planner at Piershale Financial Group of Crystal Lake, Ill., says: "Try to imagine how much you are going to need to have saved up to last you 20 to 30 years during retirement. The only way you can figure that out is do some retirement calculations. We help clients figure this out."

If people are way behind in saving for retirement, they may need to work longer at their current job or get a second job to help fill the savings gap. Piershale says. "If you had the idea that you were going to retire at 62 or 65, and you don't have enough saved up, then you have to keep working."

Other survey findings:

  • Debt is weighing heavily on many people, with 58% of workers and 44% of retirees saying they have a problem with their level of debt.

  • Like workers, many retirees are also short on funds, with 58% of them having less than $25,000 in savings and investments, not counting their primary residence or defined benefits plans (traditional pensions); and 29% having less than $1,000.

  • Although 65% of workers plan to work for pay in retirement, only 27% of retirees say they are working for pay during their golden years.

Total savings and investments reported by workers, not including value of primary residence or defined benefit plans such as a traditional pension.

Less than $1,000, 36%

$1,000 to $9,999, 16%

$10,000 to $24,999, 8%

$25,000 to $49,999, 9%

$50,000 to $99,999, 9%

$100,000 to $249,999, 11%

$250,000 or more, 11%

Total savings and investments reported by retirees, not including value of primary residence or defined benefit plans such as traditional pensions:

Less than $1,000, 29%

$1,000 to $9,999, 17%

$10,000 to $24,999, 12%

$25,000 to $49,999, 8%

$50,000 to $99,999, 7%

$100,000 to $249,999, 11%

$250,000 or more, 17%

Source: Employee Benefit Research Institute

Retirement Living: Biggest retirement regrets


There are few things in life that let you do a do-over. Retirement is not one of them.

So, if retirees had an opportunity to do something differently to prepare for their golden years, which mistakes would they correct?

Financial advisers, asked about their clients' biggest regrets, had a bunch.

"Over the years I've certainly had to have difficult conversations with my own clients," says Tash Elwyn, president of Raymond James & Associates. "There are two or three key mistakes Β— people planning for too early a retirement or too lavish a retirement.

"And, unless you have someone who can counsel you, they can get off track and live to regret in years down the line," he says.

Elwyn says he sees living too lavishly most often among business executives.

"I've worked with many successful business executives and business owners," says Elwyn. "Naturally, they envision a life in retirement that is just as lavish as when they were employed Β— business trips that include five-star hotels Β— whereas, in the real life of retirement, to fit their financial resources, retirement may require that they change their standards and change expectations. That adjustment can oftentimes be challenging for successful business people."

Elwyn says another key mistake people make is that they fail to make provisions for catastrophic events. "Whether it's a major medical issue or a debilitating illness, those that find they are not only financing their own retirement, but an adult child who has returned after a job loss aren't accounting for real life. Planning can't just be for best-case scenarios, and far too often it is."

"A well-constructed plan, whether with advice of a professional or not, needs to account for success, as well as challenges and failures," he says.

Pete Lang, President of Lang Capital, in Hilton Head and Charlotte, N.C., says the regrets he sees most among his well-to-do clients don't generally involve catastrophic money mistakes. Lack of proper planning is generally the biggest issue, he says.

"The top one is, in general, the failure to have a financial plan," he says. "That includes a tax plan, an income plan and an investment plan. I left out an estate plan because you don't need an estate plan to retire. But I'm not saying you shouldn't have one."

The top tax regrets are failure to use a tax-forward plan, such as whether to defer Social Security to minimize taxes and increase annual payouts.

Other tax regrets:

  • Premature IRA withdrawals. You want to take out the least amount possible, because IRAs are tax deferred. Defer taxes as long as possible, unless you need the money, Lang says.

  • Botched Roth roll-out strategy. Biggest regret is when they failed to make a Roth conversion in a down year. When the market tumbles, you pay less in taxes to convert a traditional IRA to a Roth.

  • Not getting out of Dodge. Not moving to a new city or state as a tax-reduction strategy. "You have to consider state taxes, local taxes, property taxes and even federal taxes," Lang says. "Clients say, 'I paid way too much in taxes on all these different levels.' A move to a tax-friendly jurisdiction for retirees would have been better."

Clarence Kehoe, executive partner in accounting firm Anchin, Block & Anchin, says he sees six big regrets from clients.

1. I didn't save enough for retirement, and I spent more than I should have in my peak years. "You should be saving significant amounts in those peak earning years as you get closer to retirement. People see their salaries go up, and they continue to spend instead of save. People have been living beyond their means, and their retirement expectations are not realistic."

2. I leveraged myself too much during my peak earnings year. "People go out and live on credit cards," says Kehoe. "It's a terrible way to spend and live." Those who use home equity to buy a car or take a vacation often regret it, he says. "People are losing focus in that they should be saving. They over-leverage themselves and borrow too much. I teach this to all my kids. If you can't afford to pay a card off at the end of the month, you can't afford to be buying on the credit card."

3. I retired too early. The two problems with retiring too early: "You have less (time) to save, and you have a longer period of retirement that you have to provide yourself for with an inflow of income," Kehoe says.

4. Why did I take that money out of my IRA or 401(k)? "To take money out of your plan at an early age is a real killer, because that dollar you take out in your 20s compounded over 30 or 40 years, could grow into a significant amount. It's in your plan; leave it there."

5. I thought Social Security was supposed to provide for me. "A lot of people have the perception that Social Security would take care of them," Kehoe says. "It was originally part of a three-legged stool Β— your pension, your own savings and Social Security. People put their stock and faith in the Social Security system. Even if you believe in the Social Security system, demographically it's a bad time. When it was put in place, it was supposed to pay people at just about the expected age of death. More and more people are counting on it more and more. Ten employees were supporting every one retiree; now it's three employees supporting every one retiree. There are more people on retirement and less people to pay for the system."

6. I was a picture of health in my middle age. "As we get older, the strain on our bodies increases," Kehoe says. "You can't keep up with things. It surprises a lot of people what the cost of good medical care can be. We do rely on government to take care of us, but there are outside expenses the government won't pay for. Consider long-term care insurance or some sort of supplementary insurance."

Why Increased Revenues Won't Solve Fiscal Cliff
McClellan Financial Publications

(McClellan Financial Publications,

Meeting With a Financial Adviser? Read This First.
The first get-together is usually free. Make the most of it.

By APARNA NARAYANAN - The Wall Street Journal

Thinking of taking your muddled finances to a financial adviser for some professional assistance? Many advisers offer prospective clients an initial free meeting. You should consider meeting with two or three people to compare their approaches and your comfort level with each of them.

Here are pointers from people in the business on preparing for these meetings and then making the most of them:


Decide what help you are seeking. "Do you want financial planning or investment management?" asks Alan Moore, founder of Serenity Financial Consulting LLC in Milwaukee, Wis. The former can involve advice and recommendations on one or two questions—or comprehensive attention to your entire financial picture; the latter involves turning over one's investment portfolio to a professional. Some advisers provide both services, but others don't.

Your needs will help determine appropriate professionals to interview. Advisers' websites should give you an idea if that provider is a potential fit for your needs. "Good sites will explain what [planners] do, who their target client is, and how much their services cost," says Frank Boucher, founder of Boucher Financial Planning Services in Reston, Va.

Understand how each adviser is paid. You want to fully understand each person's compensation arrangements and possible conflicts of interest. Some advisers get paid only by their clients, in fees that are hourly or a flat sum or a percentage of assets under management. Others get commissions from financial-services companies for selling products, or a combination of fees and commissions.

An adviser whose compensation is strictly tied to the sale of products may be susceptible to bias. Product sellers, unlike most fee-paid advisers, may not be operating as fiduciaries who legally must put your interests first.

Lillian Meyers, president and founder of Meyers Financial in Sonoma, Calif., describes commissions as an alternative form of payment. Ms. Meyers, a hybrid fee-and-commission planner, says she may collect a commission for selling an annuity or life-insurance policy in lieu of getting paid a fee for her time.

Get organized. Some advisers ask to see pay stubs, tax returns, investment records, pension statements, even monthly budgets at an initial meeting. Others seek to keep the first meeting as casual and painless as possible by not requiring any documents at all. Still, reviewing key documents could make you better prepared for your conversation and for subsequent meetings with the adviser you select.

Ms. Meyers insists on three years' tax forms at the first meeting. "When people don't show me their tax returns, it really shows me that they are not serious," she says. She adds that the intended use of a tax refund—say, to clear credit-card debt, or to pay property taxes—can shed light on how clients approach their finances.


Be realistic. Don't expect immediate answers to your financial-planning need or concern, says Leslie Corcoran, founder of Family First Financial Planning in Stuart, Fla. "We have just met you, and we have only glanced at your information." A good planner tries to get to know a client and to read their documents in full before making a personalized recommendation, she adds. "We don't have the answer in the desk drawer ready for you in most cases."

Susan John, president of Financial Focus Inc., a firm based in Wolfeboro, N.H., and a past chair of the National Association of Personal Financial Advisors, describes a pet peeve: clients who bring to the introductory meeting a copy of an online newsletter or investment advisory that touts extraordinary returns without regard to risk, and who ask "Can you do better than that for me?" On the flip side, experts say, be wary of any adviser who promises to deliver superhigh returns; there are no guarantees in financial markets.

Listen to your instincts. Relax, ask questions and get a sense of the adviser's communication style, says John Belluardo, founder of Stewardship Financial Services Inc. in Dobbs Ferry, N.Y. Clients "need to feel comfortable with the person because…they'll be working through very personal financial issues."

Mr. Moore says that, as advisers, "we're asking clients to financially undress for us." The first meeting is a chance for prospective clients to decide if they are comfortable with an adviser. You are looking to have your questions answered in simple, jargon-free terms, he adds.

Be aware that you are also being assessed. While the planners may be interviewing to get your business, they are also trying to gauge whether you are the right fit for them. An adviser may decide that your personality or your finances aren't right for his or her practice.

From the first meeting, a good adviser is also trying to get a deeper understanding of prospective clients, including issues or concerns that aren't stated.

In the case of spouses, many planners prefer—but don't require—that both be present for the first meeting. "My preference is to see them both in the room," says Mr. Moore. "My focus is always to find out what's going on underneath the surface."

Know that an initial meeting might turn into two. The first meeting with a planner may not be enough to judge whether he or she is the right match, says Ms. Meyers. If that is the case, she recommends that prospective clients give the planner at least one more shot—even if it means paying for the second meeting.

"If they pay, they feel a lot freer to say, 'Now, give me something today that I can walk home with and do something about.' "

Ms. Narayanan is a writer in London. Email her at

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