Talking Retirement

Happy Holidays

I’m off celebrating Christmas and hope you’re able to be with your family and friends too. Be well. Talk with you next week.

Creative Ideas for Retirement Income

Business Week (via MSNBC) has an decent story about non-traditional ways to generate income during retirement, Retirement Income: Think Creatively.

The first suggestion was the one I found most interesting.

...the client paid off his son’s home mortgage and now has his son making mortgage payments to him instead of the bank. This way, the father earns 6%—the interest rate on the son’s mortgage—compared with the 4% gain [he had earned with his investments] this year.

Want more ideas? Read the story.

Playing Catch-up When Starting Late and Retiring Early

The article gives them several suggestions, from lowering their investing fees to making a budget to find out where they can save more money. Read the article.

Fortune Advises Avoiding a 401(k) Trap.

So what’s the problem? It’s all about your overall investment strategy and where you put your tax-efficient investments versus less tax-efficient ones. What does tax-efficient mean? “Most large-cap and index funds have low turnover (i.e., they don’t trade very often) and throw off little income - as financial advisors say, they are tax-efficient.”

Read the article for more information.

Worried About Your Savings? One Authors Says “Don’t Worry.”

Stop the hand-wringing, says Pond. The “number” is largely a creation of members of the financial services industry, who have a vested interest in scaring you into sending them more money.

The article does mention that Pond “offers precious few specifics to back that up.” The USA Today review does give a brief rundown of Pond’s formula for saving the money you need for retirement though. Read the article.

Out sick today

Sorry for no post today. I’m out sick. Back tomorrow.

25% of Boomers Will Work 2+ Extra Years

Read the article here.

The Lump-sum Illusion of Retirement Savings

You look at your retirement account and you see some figure that seems pretty substantial. Are you suffering from “the lump-sum illusion?” In Retirement’s ‘unexpected marathon’, a Gannett News Service story from Pacific Daily News, that situation is examined.

“People look at their 401(k) sum and think, ‘I have $100,000 or $1 million; I’m rich,’’’ Mitchell says. “The danger of the lump-sum illusion is that people don’t understand how expensive it is to get old, and they withdraw too much.’’

The story continues from there to offer thoughts on how to deal with ways of managing your money during retirement. Also, check out the side bar story on 5 things to consider before buying an annuity.

Read the story.

How safe are your 401(k) savings? The answer might surprise you.

Are you ready for a scary story? If so, read So you think your 401(k) money is safe from the LA Times. It’s about theft from 401(k) plans and how little money can be recovered for those whose money has been stolen.

By law, all assets in 401(k) plans must be covered by private insurance policies known as fidelity bonds. But the bonds are required to cover just 10% of the retirement plan’s assets or $1 million, whichever is less.

At companies with fewer than 100 employees… the plans are not subject to annual independent audits that could deter embezzlement.

The story does say that theft from the 401(k) plans of “large companies” is rare. It’s in smaller companies, when an employer directly manages his or her employee’s retirement funds that the risk is most prevalent.

We’ve talked before here about the Pension Benefit Guaranty Corp. that guarantees pensions, but that doesn’t cover a 401(k) plan at all. If it’s gone, the PBGC can’t do a thing for you.

Want to know more? Read the story for more shocking details.

A Proposed Social Security Reform Plan

Democrats get chance to fix Social Security, an article from the Detroit Free Press, outlines a proposal floating around Washington called the LMS plan, named for the people who’ve worked on the plan. Here are the details:

• Change benefit formulas to reduce payments to future retirees, especially wealthy people.
• Increase to 68 the age at which full Social Security retirement benefits would become available and reduce early retirement benefits.
• Create mandatory personal retirement accounts funded through a combination of new payroll deductions and contributions from Social Security trust-fund surpluses.
• Let people invest the accounts in any of 15 private fund companies certified by the government.
• Make 90% of a worker’s earnings subject to the FICA payroll tax—that’s where it was in 1982—and do away with the current annual cap ($94,200 in 2006 and $97,500 for 2007).
• Create a minimum benefit for workers who spend many years earning low wages.

The article also has an interesting side bar called “Options for Social Security” that gives 3 basics of what Social Security reform might look like. Read the article here.