7/28/2011 12:45 PM ET|
5 crucial questions for retirees
The recent recession may have blown a big hole into some of your assumptions. How, now, do you regroup so that your money lasts?
After decades of punching the clock, retirees may be looking forward to a life without the responsibilities of the workaday world. But retirement also brings with it a host of new decisions to make.
For many people, retirement means living off savings with limited prospects of replenishing the nest egg should something go wrong. It involves paying greater attention to the ebbs and flows of the financial markets, interest rates and the details of your investments. And it requires confronting the hard choices and discussions about the final years of life.
Here are five questions or decisions just about every retiree needs to confront.
1. When should I start taking Social Security benefits?
There's a natural inclination to start taking Social Security as soon as the rules allow, at age 62.
But taking Social Security before your full retirement age will result in a permanent reduction in benefits. In contrast, if you delay beyond full retirement age, you get a credit in the form of a larger payout.
The math, needless to say, is complicated. One resource that can help is a new calculator from AARP. With just a few pieces of information, this tool creates an easy-to-read chart on the best time to start taking Social Security. Two other sites to consider: Analyze Now, which offers a Social Security Planner, and Charles Schwab & Co., which has a guide to "timing" benefits. Search for "Social Security." (Are you saving enough for retirement? Check MSN Money's calculator.)
2. Should I get a part-time job?
For many retirees, nest eggs aren't lasting as long as anticipated, thanks to a lousy stock market, low interest rates and falling home values. That's prompting retirees to look for work. But a difficult job market makes it hard to get in the door.
For some workers, a part-time job may be the answer. The longer you can defer tapping savings, the more time your nest egg -- ideally -- has to grow. Plus, says Allan Roth, a financial planner in Colorado Springs, "when you're working, you have less time to spend money."
There also may be a psychological benefit for those who might find it hard to adjust to retiring. Part-time work "gets you to an unstructured lifestyle in an incremental manner rather than all at once," Roth says.
3. Where should I keep my money?
And how should I take it out? For people with a 401k retirement-savings plan, inertia may result in simply leaving the money with the same money manager that runs a former employer's plan. If that plan involves a low-cost fund company with a wide variety of investment options, such as Vanguard Group, it may not be a bad idea.
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Financial advisers began telling clients they'd be better off using their money to invest in stocks and allow rising home prices to reduce the size of a mortgage relative to the equity in the house.
There is something pathetically perverse in the fact that many of these advisors are the same ones who are still in business giving advice to people now. I thank my lucky stars every day that I didn’t follow this advice in 2006 and paid off my mortgage instead. Now that this is becoming the vogue thing to do, perhaps I should play the contra again, take out a home equity line, and invest the money in something with real growth potential. I wonder if there’s an index for wrong forecasts by Wall Street economists that I can buy a call option on?
Wall Street is a black hole money pit for worker drones. You can calculate all you want but get a downturn like in 2008 or now and all your calculations are out the window.
Wall Street only works if one has millions to invest. Someone with 100 million will survive a downturn better than someone who was a pitiful 200k in their 401k.
People have been seduced by slick adds promising wealth upon retirement; that is turning out not the case. With the current economic downturn, many will not recover. Many will be forced to work longer, or work part time.
Why, oh, why do these scary articles never do the math on retiring early??? Sure, your monthly benefit is lower if you retire at 62, but you get it for four additional years. In my case, the break-even point is 12 years. So I would start reaping the benefits of full-age retirement at 78.
For myself, I expect my most richly rewarding years to be those between 62-78 and look forward to the leisure to appreciate them. If you're depending soley on social security to support you in old age, first, good luck to you because you'll need it, and this thinking won't work for you. But if you have done some planning and saving, what could be better than four extra years of the good life when you're young enough to enjoy it?
I am a 43 year member of the IBEW and I worked 35 years with great benefits.
My Union and Contractors Helped me plan for retirement with 4 pension plans. 3 defined Benefit Plans and one Defined contribution plan. Two plans were "Rule of 90" plans that allowed me to retire at age 55 in 2002. When the 2008 financial crisis hit, only the Defined Contribution plan (401K) was affected, but I had just turned 62 and the Contractor's plan and Social Security kicked in and I was able to stop drawing on my Defined contribution plan(401K) plan and allow it to re-grow. Lucky, I guess, for the timing, but the total ,of all my earnings had a 6% deduction from my pay for Social Security and 20% deduction for my other 4 plans. If you can put away 20% of what you make you will survive along with Social Security. Put an additional 5% into your Roth IRA, on top of it, you will thrive.
I do surveys also for cash or certificates, and other misc, lerose 55 referred you. I have been using it for 12 years now. The extra cash is nice. If you are on the computer you might as well make some $$$$
go to Mypoints.com
Here is another option some may like. Me and my retired in-laws take online surveys for more then a year now (I'm stay home mom). There is no hidden costs and no expenses of any kind so it makes these surveys safe and easy way to make some extra money, no matter retired or not. Just don't pay any fancy site for information (there is plenty of scammers trying to sell information that is available online free!). To get free great information you could go to free survey info sites like Surveyjet.net (that's how we started). They have pictures of real money made by taking surveys so we knew it was legitimate." It all checked out and we do get our checks even if sometimes we have to wait a bit. You should see into it.
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