5 New Investing Rules For Retirement

Many of the old rules for retirement investing no longer apply. Facing longer life spans, increasing healthcare costs, and a market in crisis, retirees will need more growth in their portfolios during the coming years and decades. At the same time, they need the assurance that a 37 percent market drop--as we saw in 2008--won't completely devastate their remaining nest egg. A growing number of financial planners are rethinking the conventional wisdom. (Remember the old adage that you should subtract your age from 100, and devote that percentage of your portfolio to stocks?) Here are five new rules to consider:

Separate your investments into different pots. Often, investors in retirement lump all of their money together, with which they pursue one strategy, says Eric Bailey, managing principal of Captrust Advisers in Tampa. His firm, which works with pensions, endowments, and high net-worth individuals, takes an approach ripped straight from the institutional investors' playbook. Clients' money is separated into three categories: Short-term funds reside in very low-risk investments, such as high-quality bonds; intermediate-term money goes in a balanced mix of stocks and bonds--such as a 50-50 or 60-40 split; and long-term investments starting with five-year time horizons are heavier on stocks. "This way, you can take advantage of a market sell-off with your long-term investments and you'll avoid needing to liquidate investments when stocks are down," Bailey says.


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Written By Lee Ruth

Plan for Retirement Home

By: Jeffrey Kam

Planning for retirement soon? I might be a good idea to start shopping for the house you want to retire in. Houses are lower than using in today’s market, property that are 20% below than usual, some places like Las Vegas, Naples, Fla. And Phoenix hot spots for retirement, houses have tumbled more than 30% since 2006 when those prices rise. Prices will remain constant during 2009 as some forecast reports. One of the issues that concern retirement buyers is will the house be what is worth in a decade, or more?

First, you have to understand the buying power, and the economy that affects you during this year. Fix any damages your current property or re-pay any debt with your extra cash. Understanding and re-evaluating your personal finance first, before purchasing a 2^nd property. Find a new home isn’t hard here are some tips. Pick a location that has a good chance to sustain the current value or appreciate in a couple years. These places can be found near growing industry like technology, fuel expansions, new airports or health care. Start the negotiation with a lower price (10%) since most 2^nd property owners’ faces financial trouble and will accept a lower price deals.

http://money.cnn.com/2009/02/11/retirement/retirement_home.moneymag/?postversion=2009021106

http://money.cnn.com/2009/01/26/pf/expert/diversification.moneymag/index.htm?postversion=2009012817

http://money.cnn.com/2009/02/04/retirement/retirement_saving.moneymag/index.htm?postversion=2009020511

Rethinking retirement: More boomers choosing to work

By Taylor Gandossy

Posted By: Jeffrey Kam

(CNN) -- As a high tech executive, Jean Dibner managed people and money. Now, instead of supervising employees, she controls clay and bronze, drawing in details instead of dollars.

Jean Dibner, a former high tech executive, is now an award-winning sculptor.

"I had accidentally stumbled upon sculpture when I was taking a pottery class," Dibner said, explaining her leap from the high tech world to art. "It didn't matter if I was good at it or not, I really did want to try it."

A decade later, after voluntarily retiring from the high-tech world, her sculptures are award-winning and mostly commissioned.

As companies pare away pension plans and the future of Social Security seems increasingly precarious, more and more baby boomers are choosing to work beyond the age of traditional retirement.

But others, like Dibner, see a prolonged career as a way to explore new interests or test untried talents.

Nearly six in 10 baby boomers who intend to work after retirement say they want a job that gives them a greater sense of purpose, according to a 2005 MetLife Foundation/Civic Ventures New Face of Work Survey.

"The baby boomers were the first generation to have a lot more career freedom, but it seems like [for] at least some of them, that ended up not being the case," Randall Hansen, a career advice writer for the Web site Quintessential Careers, said.

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Franklin Roosevelt on Social Security

Posted by Amina Isakovic

Invest Now for your Retirement, in a 401k!

Post By: Dana Sunderlin

In today’s economy, it is more important than ever that you plan ahead for your retirement. Traditional pensions are becoming increasingly rare and social security, which represents 80 percent or more of the income for retirees, has decreased to less than $13,000 a year. As a result, your best way to initiate your retirement plan is to start saving and investing now, in accounts such as a 401(k).

A 401(k) is a plan established by your employers, which allows you to make salary reduction contributions on a post-tax or pretax basis. These plans often allow employees to direct their own investments, but often contain restrictions on when they can withdraw the money and implement penalties if the money is taken out before they reach “retirement age.”

Employees who choose to participate in these plans do so for many reasons, including that they receive “immediate tax savings on contributions, tax-deferral of any investment earnings, in-service loans and withdrawals, and free money.” As good as all of those incentives sound, free money is clearly the most appealing. The way that a 401(k) can get you free money is that many employers who participate in these plans match a portion of the money deferred by their employee. If your employer is matching contributions dollar for dollar, then you are doubling the amount of money being put away for your retirement. It’s as easy as that!

The most important thing about investing in a 401(k) for your future is that you start now! If you begin investing early enough, such as at the age of 25, you can easily have a million dollars, if not more, in the account by the time you are ready to retire.

Sources:

http://www.investopedia.com/terms/1/401kplan.asp

http://money.howstuffworks.com/personal-finance/financial-planning/401k.htm

http://www.fool.com/retirement/401k/401k-step-1-the-birds-n-bees-of-your-401k.aspx

The Best Place to Retire

By Amina Isakovic

Before I start saving up for my retirement, I was thinking, maybe it would be good to plan out what I want my retirement to be. I need a goal, a timeline, a place, etc. I started my research on the best places to retire to see if any of them fit my picture of being old and healthy while having a good supply of money. I categorized my search into three main points: Health, Cost, and Most Desirable.

Starting out with Health, my definition for that is a place that promotes healthy lifestyles by having accessible exercise places (Yoga, Pilates, outdoor activities, etc.), promoting social activities in the community, easy accessibility to hospitals and doctors, and of course beautiful scenery for the mind as well. According to U.S. News America’s Best Healthy Places to Retire, one place in the U.S. that fits this description is Bella Vista, Arkansas, offering many outdoor activities such as golf and tennis. I don’t pay golf, and I can’t see myself playing tennis everyday, so using their search tool, my number one spot in the U.S. is Folsom, California. Folsom not only offers great recreational activities including art studios and hiking, but the weather is perfect with an average January low temperature of 37°F and July high of 88°F.

Next on the list is Cost. I used the search tool here as well, but I prioritized the cost of an average $200,000 mortgage. In case I end up with hardly any money at the end of my career by some wonder, I don’t really want to be worrying about cost. This time my city turned out to be Concord, Missouri. The median house price is $182,000, a reasonable amount. The recreation activities are lacking but it is surrounded by wildlife. I’m not sure if I’m too fond of that.

Lastly I’ll take a look at the Most Desirable. According to AARP’s 15 Best Places to Reinvent your Life, the best place to reinvent yourself is Loveland, Colorado. With “pretty, sandy shores,” the Rocky Mountains, plenty restaurants and art galleries, and a medium house price of only $198,655, it seems almost perfect. I have been to Colorado, and it is a beautiful place, but it just doesn’t seem right.

With all the different options it’s hard to choose where to live out the rest of my life. Thinking about this at age 22 felt a little strange, but it’s always good to have a plan and goal. In the end I hope that I have enough finances so that my retirement consists of many travels, seeing the world and all the different cultures it offers, only to go home to my apartment in Monaco. That’d be the life!

Annuities no longer a sure thing

by Boyce Watkins


Retirement investors have long viewed annuities as an effective way to protect their nest egg. But the recent financial crisis has highlighted an inherent paradox: While annuities offer safety and guarantees, their benefits are tied to the financial strength of an insurer. If the company fails, you could be looking at a loss in the very part of your portfolio that you were counting on to be rock solid.


So at a time when one of the world's largest insurers, AIG, has needed government help to stay solvent and other insurers have seen their stocks drop 70% or more in just a few months, should you still consider putting a portion of your retirement assets in an annuity?

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Apprehensive Retirement Planning

It seems that in today’s economic state, retirement is slipping away into oblivion, being pushed back further and further into Americans golden years. It has brought to our attention the importance of saving our income so that we may draw from it when we need it most. In this day in age, it pays off to be more conservative with your money, especially when the economic climate is so bleak.
Today, many young Americans are apprehensive about investing into a retirement account because of the economic climate and the rates they will be receiving. This is understandable, but a representative from TIAA-CREF would submit that that apprehension is a short-term way of thinking. (watch video) He, along with other speculators, is confident that our current economic condition is only temporary, merely part of the ups and downs of our economy. To anticipate the economies eventual rebound from this downturn is to think in a different way about retirement investments. Instead of being apprehensive, one should invest confidently into retirement plans, and may end up paying less now for them than they would have if the economy was healthier.
Today, people are feeling more apprehensive, however, rather than confident. “Only 28 percent say that they will be able to retire comfortably. One-third (33 percent) say they'll have just enough finances to get by when retired. Nineteen percent say they are afraid they’ll never be able to retire” (Bankrate Survey). The international foundation recommends to young retirement planners to save two percent more than originally planned in order to retire comfortably in this economic state. (international foundation)

-Matt Smith

Recent Doubts towards Annuities and Retirement

Post By: Dana Sunderlin

For a long time, retirement investors have considered annuities to be the ideal route towards protection and security. An annuity is essentially a contract between you and a particular insurance company. It involves making a lump-sum payment, or series of payments, which the insurer agrees to pay to you at some point in the future. Annuities can be either fixed or variable and generally offer a tax-deferred growth of earnings.

Despite the fact that annuities are thought to offer safety and guarantees, they are ultimately tied to the financial strength of the insurer. If the insurance company failed, you would face a large loss towards your investment. For this reason, in light of the recent financial crisis that has ensued, many people are concerned with whether they should continue to put a portion of their retirement money and assets into an annuity. Many critics believe that annuities do indeed continue to play a crucial and valuable role in retirement, based on their unique features that give them the ability to turn a person’s savings into a lifetime of payments. However, it is more important than ever to shop around when purchasing an annuity and ensuring its security.

On the other hand, many potential problems have been found with the use of annuities. The first is that early withdraws can result in a double penalty. When money is taken from a premium, you are charged for penalties to both the government and the insurance company. Other problems involve the way that funds are taxed and also whether or not it is actually a cheaper way to save.

Although the importance of annuities in retirement planning is debated, it is clear that if you do plan on investing in an annuity for the future, it is important to look into and truly know what you are buying.


Sources:
http://money.cnn.com/2009/01/22/pf/expert/annuity_safety.moneymag/index.htm?postversion=2009012606
http://stockinvesting101.net/the-4-potential-problems-with-variable-annuities/
http://www.sec.gov/answers/annuity.htm

Avoid these Retirement Planning Mistakes

Post by: Dana Sunderlin

The turmoil in the economy today is enough to make us want to avoid putting money away for retirement for fear of needing it now. That's natural. Most Americans feel they need to have all of their money available now.

We often are scared of locking up our money, or we have the attitude that putting away even a little won't be enough to build a decent retirement - so why bother? But those who do let go now and invest for the future understand that a little can go a long way, thanks to the power of compounding. For example, saving $100 a month for 10 years at 4 percent interest will build to almost $15,000.

For longer time frames, more monthly savings and higher returns, that not only can build up a retirement fund, but may create a longer and happier life. Research in the Journal of Financial Service Professionals found evidence that financial strain in retirees is accompanied by depression and negative feelings, while financial security exudes improved health and contentment.

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Retirement Savings? What savings?

By: Jeremy Radnor

With the current economic conditions, many people (especially baby boomers nearing retirement) are becoming increasingly more concerned with their retirement savings and 401(k).  In general, saving and adding to your 401(k) is always a good idea.  Unfortunately, in the past year alone, investors with the most saved have lost the most.  Investors with at least $200,000 in savings have lost over 20% while investors with $50,000-$100,000 lost 13%-15%. The losses are significant but investors can find some comfort in knowing that since 2000, savings portfolios have seen an average increase in their value by 161%.  However, when the market is facing such turmoil one is left to question what to invest in? 

 Upon contemplating what to invest in, one must take two sets of two very important questions into consideration.  The first set of questions would be, “How much risk am I willing to take?” and “How much risk do I need?”  The set of questions to follow should consist of, “What are my financial goals?” and “How far am I from accomplishing these goals?”  Once an investor has answered the second set of questions, the answers to the first set should become obvious. 

 If an investor is far from retirement and distant from their financial goals, the investor most likely choose to invest in riskier ventures such as stock.  If the investor is near retirement and near their financial goals, they will most likely choose to place their money in safe investments such as bonds.  Ultimately, every investor is different and each investor needs to find the balance which suits them best.  This will lead to a successful and happy retirement.  

Links:

http://en.wikipedia.org/wiki/401(k)

http://www.nytimes.com/2009/01/25/business/25count.html

http://money.cnn.com/2009/01/20/pf/Mole_rebalancing.moneymag/index.htm?postversion=2009012108