Talking Retirement

The Get Rich Slow Tips

Want to get rich? According to Retirement Savings: Five Tips to Catch Up the one way not to do it is to plan on catching up quickly through some miraculous stock pick.

One hint you will not find here: striking it rich thanks to your unparalleled stock-picking genius. It may not sound sexy, but careful planning and a broadly diversified investment portfolio can help you make up for lost time.

For five other tips, read the article.

Ten Percent Is Not Enough

But since 10 percent likely isn’t adequate unless you get a very early start or believe you can count on other generous company perks - like a traditional check-a-month pension or employer-paid retiree health care, both of which are becoming increasingly rare - then I think it’s a good idea to at least try to raise your target to 15 percent.

As for employer matching funds, I would not consider them part of the 10 percent or 15 percent or whatever percentage you save on your own.

Read the article. This is a well worth your time.

Have a Retirement Plan? You Probably Have Twice As Much Saved.

What caught my attention about today’s story was the title, Status quo is status woe in retirement planning. Clever. The article stresses the importance of doing your homework when it comes to retirement planning. One fact jumped out at me that is buried over half way through the story.

Studies show that if you’ve got a complete financial plan, on average, you have twice the savings of your neighbor who doesn’t. That’s a huge leg up on retirement security. So, do yourself a noble deed: find a competent, ethical financial planner.

Interesting. Twice as much is a great incentive to get on the savings train. Read the article.

71% Wish They Would Have Saved in First Job

The article Boomers short on saving echos a familiar story. People nearing retirement are finding they didn’t save enough. It does include some new real information though in the form of a new survey.

A recent national survey by Thrivent Financial for Lutherans in Appleton found that 59 percent of people between 45 and 64 years old have done no formal retirement planning and 71 percent wish they had started saving as soon as they landed their first full-time job.

If you know a young person just starting his or her first full-time job, it might be worth passing that little piece of the article on to them. Read the full article here.

Retirees Expect Less from Social Security

A recent story, Poll: Boomers May Delay Social Security, has several different interesting finding in it. The first is that people who are now nearing retirement will be more likely to delay collecting Social Security benefits. Another interesting finding was “many boomers also do not expect to rely as heavily on the program for income compared with current retirees.” I wonder if this lowered expectation is due to the numerous stories about the state of the Social Security program. Read the full story here.

A Financial Planning Pep Talk?

I had a mixed reaction to The 12 golden rules of successful retirement planning. There is information in the article that I find useful, like encouraging you to know more about your financial state. Here’s rule #1 from the article:

If those complex, technical-sounding words and phrases fail to make good, common sense, something’s wrong - not with you, but in the way your financial adviser delivers an explanation.

That sounds good. If you’ve got a question about something your financial planner wants to do, you should ask for an explanation that makes sense to you. The article goes on from there to offer more strident “rules” for a person to follow, but in total they sounded like they were written by someone who was regularly being ripped off by their financial planner rather than helped. Perhaps that happens more than I think it does though. Read the article here.

Women Should Save 12%

Sometimes it’s nice to get advice that’s unambiguous. If you’re in that mood, try reading Women should save 12% for long lives, retirement, an article from the Detroit Free Press. While the headline only gives part of the story covered in the article, it helps people set a base level to start retirement planning.

While the rule of thumb is that you should save 10% of your gross income each year, Black says that women should save 12%. This is to account for their longer life expectancy and the loss of wages many women face when they raise their children.

What else is covered? Some basic rules for life insurance, and long-term disability coverage. For more information, read the entire article here.

Academics Weigh in 401k Saving Strategies

Here’s the abstract of the paper:

Few previous studies have explored how individuals manage their defined contribution (DC) pension plan assets, though these plans constitute an increasingly important component of retirement wealth. Using a valuable new dataset on over one million active 401(k) plan participants in a wide range of plans, we assess the impact of trading on investment performance in DC plans. We find that, in aggregate, the risk-adjusted returns of traders are no different than those of nontraders. Yet certain types of trading such as periodic rebalancing are beneficial, while high-turnover trading is costly. Interestingly, those who hold only balanced or lifecycle funds, whom we call passive rebalancers, earn the highest risk-adjusted returns. These findings should interest participants in such plans, fiduciaries responsible for designing DC pensions, and regulators of the retirement saving environment.

A big thanks to Rick for pointing out his post. Read his original post here.

Universal 401(k) Accounts

Today The New York Times has a story called Universal 401(k) Accounts Would Bring the Poor Into the Ownership Society. What is a Universal 401(k)? I hadn’t heard of it before. The article quickly defines it.

The core idea is simple. The federal government creates tax-free retirement accounts for lower-income Americans, supplementing private accounts where they already exist, and matching personal contributions to those accounts. The amount of the match would depend on the income of the family and how much they save.

It’s an interesting idea, but later in the NY Times article, the author says that “...the uncomfortable truth is that many of the most effective antipoverty measures leave more than a few people behind.” What are your thoughts?

Read the article.

What You Need To Retire, From a Non-financial Perspective

I realize that I post many financial related things here about retiring. Obviously, it’s an important part of retirement planning, but there are other sides to this story. An oddly-titled story from ABCNews, Working Wounded: Planning for Retirement, offers some perspective on other parts of retiring.

Retirement is not only a financial decision, it’s also a question of how you’ll spend your time. What are your interests? Retirement can be the best time of your life, but only if you have a great way to pass the time.

How will you spend your time that used to be taken by work? How will you socialize without co-workers? Is your spouse or partner in agreement with this life-change? They’re all important to consider in addition to being able to get by financially. Read the story for more on the topic.