Three questions help you gauge where you stand.
Retiring super early can be a downright dangerous idea, says Mike Lynch, vice president of strategic markets at Hartford Funds. "If you stop funding your retirement and start using it 30 years ahead of schedule," says Lynch, "it is therefore unlikely that you will receive Social Security benefits.
WASHINGTON (AP) — THE ISSUE: More than 60 million retirees, disabled workers, spouses and children rely on monthly Social Security benefits. That's nearly one in five Americans. The trustees who oversee Social Security say the program has enough money to pay full benefits until 2034. But at that point, Social Security will collect only enough taxes to pay 79 percent of benefits. Unless Congress acts, millions of people on fixed incomes would get an automatic 21 percent cut in benefits.
Saving for retirement is especially difficult when you earn a small salary. Here's how to begin building wealth for retirement when you have a modest income. Find out how much you need to save to get the maximum possible 401(k) match, and then make every effort to deposit that amount in your retirement account.
Asset allocation, time horizons, and taxes can complicate withdrawal-rate planning.
Living off of current yields is just one way to extract the cash flow you need.
Note: This article is part of Morningstar’s September 2016 Retirement Matters Week special report. While retirees are often counseled to estimate that they’ll spend 75% to 80% of their working incomes in retirement, a paper by Morningstar’s head of retirement research, David Blanchett, demonstrated that there can be huge variations in income-replacement rates among retirees–with factors such as pre-retirement income and savings rates serving as key swing factors. Based on Blanchett’s findings, higher-income, higher-saving households may well need just 60% (or even less) of their pre-retirement income during retirement, while lower-earning, lower-saving households may need closer to 90%.
The complexity of the system, its evolution and a shift in demographics that threatens its solvency have created confusion over what Social Security can and will deliver . Social Security benefits are primarily based on two variables: your highest earnings over 35 years and your age when you file for benefits. The maximum benefit for someone retiring at full retirement age (66 for people born in 1943 through 1954) in 2016 is $2,639 a month.
It’s surprisingly easy to lose track of your retirement savings, leaving them to be eaten up by inflation and fees—or even seized by the state. Employers don’t try to find missing retirement plan participants, or businesses are bought and sold or restructured so many times that they lose the records. In the haphazard U.S. retirement system, there’s no easy way to make sure your assets follow you throughout your career. Just rolling over an old 401(k) into a new one, or into an individual retirement account (IRA), can mean weeks of hassles.
For many people, retirement — never mind early retirement — seems out of reach. Social Security alone isn’t enough to have you living the good life during your golden years, and as we’ll discuss later, you’ll want to put off taking that money as long as you can. Once your rainy-day fund is full, put that 10 percent you’re not spending into a dedicated retirement fund.
The average interest rate on a six-month certificate of deposit was 9.1% in 1970 and 13.4% in 1980. But two decades worth of declining interest rates have dragged yields way down, dramatically compounding the challenge for retirees. The bucket approach to retirement-portfolio management, pioneered by financial-planning guru Harold Evensky, aims to meet those challenges, effectively helping retirees create a paycheck from their investment assets.
While Robert doesn’t say where his interest in flipping houses comes from, I hope it’s not from one of the many reality shows on the subject. Can you make money flipping houses? You can make big money in real estate.
The typical investor has two long-term goals: retirement and kids' college expenses. "Retirement savings needs to outweigh college savings," says David Hryck, a tax attorney and personal finance expert with the Reed Smith law firm in New York. "The biggest issue is the fact that you can borrow for college, whereas you can't borrow for retirement," says Oscar Vives Ortiz, a planner with First Home Investment Services in Tampa Bay/St. Petersburg.
Involuntary retirement—or the possibility that you may be forced to exit the workforce sooner than you wanted—is a more common problem than you may think, and one that can wreak significant havoc with your post-career lifestyle. Some 46% of retirees polled for the Employee Benefit Research Institute’s 2016 Retirement Confidence Survey said they left their jobs before they had planned, usually because of a health issue or company downsizing or restructuring. One practical and effective way to minimize the effect of having to retire prematurely is to make a concerted effort to boost the size of your nest egg while you’re still working.
The following six steps tie together portfolio maintenance and rebalancing, RMDs, and more.
After a big financial loss, are people going to be more or less willing to take a big risk? “A person who hasn’t made peace with his losses is likely to accept gambles that would be unacceptable to him otherwise,” psychologist Daniel Kahneman, a Nobel laureate, and Amos Tversky wrote in a 1979 paper. “Losses that come on the heels of prior losses may be more painful than average…after a prior loss, the person becomes more loss-averse,” Nicholas Barberis, Ming Huang, and Tano Santos wrote in a 2001 paper in the Quarterly Journal of Economics.
As a financial professional, I get a lot of questions. Deciding the right age to take your Social Security benefits can be tricky. Although conventional wisdom says to delay taking your benefits for as long as possible, according to the Center for Retirement Research, nearly 40% of retirees file for Social Security as soon as they turn 62, the earliest age at which the Social Security Administration (SSA) allows you to claim your benefits.
Two-thirds of 401(k) participants polled for a recent J.P. Morgan Asset Management report said they could better plan for retirement if their employers helped them “understand their numbers”—that is, get a handle on such specifics as how much they should be saving and how much money they should have in retirement accounts to ensure a secure post-career life. Here are four key numbers that can make retirement planning less daunting and at the very least get you going in the right direction until you come up with a more customized plan. Indeed, this report from the Boston College Center for Retirement Research estimates that’s how much the typical U.S. household should save each year in order to maintain its pre-retirement living standard in retirement.
New federal rules governing how people save for retirement may limit the guidance that investors managing their own individual accounts can get from providers. Rules handed down by the Obama administration in April, requiring brokers to put the interests of retirement savers ahead of their own, mostly will leave investors who manage their own individual retirement accounts untouched.
WASHINGTON—The Obama administration on Thursday finalized a new regulation to encourage states to set up retirement savings plans with automatic enrollment features for private-sector employees, part of its push to promote Americans to build their own nest eggs to supplement social security. The rule, announced by Labor Secretary Thomas Perez and the White House, gives states a road map for establishing the retirement plans. Several states already have passed legislation to create their own vehicles to enroll workers who don’t have access to pension or retirement savings plans in the workplace.
The risks of oversaving and underspending are real, too.
While nearly all of the major cash and cashlike instruments have done a good job of protecting investors’ capital over time, investors seeking an ironclad guarantee of principal preservation will want to focus on FDIC-insured investments. Building on 2010 rules passed in the wake of a large money market fund breaking the buck–or letting its net asset value drop below $1–during the financial crisis, the money market fund rules going into effect this year specifically aim to address the risk of heavy investor redemptions from a portfolio with constrained liquidity. Specifically, the rules require certain types of money market funds to use a “floating” net asset value, as well as to impose fees or install “gates” to stem outflows in periods of constrained liquidity.
Three well-known U.S. universities, MIT, New York University and Yale, have been accused of charging millions of dollars in excessive fees to participants in their retirement plans, according to federal civil lawsuits filed on Tuesday. The complaints against the three universities accuse them of breaching their fiduciary duties by causing the plan participants to pay millions of dollars in unreasonable and excessive fees for record keeping, administrative and investment services. In the Massachusetts Institute of Technology complaint, Fidelity Chief Executive Officer Abigail Johnson is singled out because she sits on the school's board of trustees.
For people with many years left to work, the retirement goal line looks way off in the gloom. In real life, retirees are likely to go through several stages, each requiring its own preparation. Financial advisors have labeled them the "go-go," "slow-go" and "no-go" years.
As life transitions go, retirement ranks way up there among the most challenging, both financially and emotionally. After a lifetime of work, you may have mixed emotions about retirement -- looking forward to not working but nervous about leaving your work identity behind. Because retirement can be so stressful, Jeff Vollmer, a financial adviser with Hyde Park Wealth Management in Cincinnati, advises clients to begin planning 5 years in advance.
While assessing retirement calculators this past week, I plugged in my own information to see how much money I should sock away when one of the scariest things I’ve ever seen appeared on my computer screen. “To make a projection, you have to make lot of assumptions about past and future income based on current information,” said Anek Belbase, a research fellow at the Center for Retirement Research at Boston College. Online calculators rely on information provided by users that typically includes age, income, savings, monthly contributions and the age the person expects to stop working.
As more and more baby boomers start eyeing the coastline of retirement, thoughts turn from the daily worry over the Monday-through-Friday commute to concerns about how to fund the golden years. How about your 401(k), IRA and other retirement accounts that make up your nest egg? Do you have a good handle on when to claim Social Security benefits?
For many 401(k) retirement-plan participants, choosing the right fund can be hard enough. It gets even harder when they don’t have the best funds to choose from in the first place. New academic research shows that mutual-fund companies tend to favor their own funds when setting the menus for the 401(k) plans they administer.
When a worker becomes eligible for social Security, other family members may qualify for benefits on that worker’s record, too. Although the family maximum can range from about 150% to 180% of a worker’s full retirement age benefit, the cap is typically 175%, says Jim Blair, a former district manager for an Ohio Social Security office and a partner at Premier Social Security Consulting, in Sharonville, Ohio. If you have two or more benefits coming off your record, the family maximum will apply, he says.
The Supreme Court ruled Monday that Puerto Rico can’t restructure more than $20 billion in public debt as it tries to overcome a decade-long economic crisis. The 5-2 ruling said that federal bankruptcy law bars Puerto Rico from enacting its own law to restructure the debt of its financially ailing public utilities. The decision means the U.S. territory must wait for Congress to pass debt-relief legislation that would address its fiscal woes.