11/29/2013 8:30 PM ET|
6 key retirement planning steps
The earlier you take proactive steps, the greater your odds will be of having a successful retirement.
Coming to terms with the realities of your later years can be one of the toughest challenges of aging. America is obsessed with youth, and even acknowledging the inevitability of aging may be considered a form of cultural disloyalty.
So let's accept and applaud that 80 can be the new 60, that millions of baby boomers will reinvent themselves during their 60s and 70s and that stereotypes about being old in America will be tossed out in favor of more positive images of vibrant old age.
Even so, we will still get old. After all, isn't that the goal of today's enhanced emphasis on taking better care of ourselves? To age successfully, however, we will also need to contemplate important aspects of our later years, up to and including plans for our death.
Here are six planning needs that nearly everyone will face as they age and retire. Some are practical and financial; others are subjective but no less important. In every case, the sooner you begin to build these plans, the better off you'll be in the future. How many of these life "boxes" have you checked off?
No. 1: Achieve retirement self-sufficiency
Generating the largest possible retirement income often seems to be the only financial goal of retirement planning. But it's really just a visible element of a more complex set of calculations, many of which are emotional, not financial.
The goal of all this work is to produce self-sufficiency in retirement. We don't want to worry about making ends meet every month, and we certainly don't want to be a burden on our families. Reaching self-sufficiency is a process that should begin well before you turn 65. It can often require some difficult and perhaps uncomfortable admissions about how much money you will have to live on in retirement.
While we're balancing future expenses and income, we're also adjusting our dreams to reflect the reality of our likely future circumstances. It is hard work, but ignoring it doesn't make it easier or lead to better outcomes.
No. 2: Do worst-case planning
Unless you're really wealthy, there are adverse life events that can devastate your finances. Take suitable precautions. I recently bought an additional life insurance policy that will be in force until I'm 80 years old. Its sole purpose is to help my wife (and me) sleep better at night knowing she will have an extra cushion if something happens to me.
For the same reason -- sleeping well at night -- we also have long-term care insurance. If you go this route, be aware that some insurers are raising rates. Make sure you have enough coverage for in-home care, which is increasingly where care will take place. And you should explore getting what's called a state "partnership" policy. Under this policy, if you require extensive care – most likely for Alzheimer's – you would seek Medicaid coverage after exhausting your long-term care insurance policy benefits and, most likely, a good portion of your wealth. If this happened, you would not have to deplete your assets totally to qualify for Medicaid. Instead, you'd be able to shield an amount equal to the total of your private insurance benefit payments.
No. 3: Decide where to live
Most people want to age in peace in their homes. If this applies to you, take a careful and hard look around your house, and imagine how well it would suit you if you were in a wheelchair. That's the reality you need to consider.
Also ask yourself: Is your home in a supportive neighborhood? Once you can no longer drive, how would you get out to shops and doctors' offices? If, instead, you opt for a seniors-only retirement community, what's your geographic preference and why? What kind of community can you afford?
No. 4: Keep solid records.
If you died tomorrow, how hard would it be for your loved ones to get access to your key legal documents (will, trusts and the like) and financial accounts? Do you even have the basic legal documents drawn up?
You should have multiple copies of key documents plus account information and online access passwords. Increasingly, these are going to be computer files. Keep one set on your home computer, and back it up either on an external hard drive or on a cloud computing backup service. Provide access information to the appropriate family members. Then -- and this is much easier said than done -- regularly update these files so they are always current.
No. 5: Consider your legacy
There is no common yardstick to use in measuring the impact we've had on the world during our lives. Most likely, however, you have your own yardstick. What does it tell you? How do you measure up to your own standards? Are there things you still believe you should be doing to satisfy your expectations? Believe me, this is not something you want to wait until your final days to do. Maybe a frank look in the mirror will cause you to make some major changes in your life. Maybe it will reaffirm you've been on the right path all along.
No. 6: Determine your final wishes
Social scientists who have studied people in their final days report how helpful it is when a person has made the key decisions about the end of their life well in advance. Often, people are not able to make sound decisions as they near death because they have physical and mental impairments that make such work impossible. Their families may have to make these calls for them, which adds a lot of stress to what is already a difficult situation.
So, would you like to die at home, in a hospital or perhaps in a hospice facility (you can have hospice at home or in a hospital)? Have you executed the proper documents providing your spouse or a family member with the authority to make medical decisions should you become incapacitated? Does this person know your preferences for end-of-life care? Do you want to be buried or cremated, or perhaps donate your body to science? Is there a final resting place you have in mind? Who's going to provide an obituary to your hometown newspaper, and what do you want it to say?
Setting aside time to make these decisions will hardly rank among your happiest memories. But you will provide your family an invaluable gift -- allowing them to focus on the loving aspects of your life, not the hassles of wondering how you'd like things handled when you die.
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No matter what your age, do your best and save as much money as you can. Even a small retirement nest egg is better than no money at all.
Don't worry about what others have and what you do have. Enjoy your life and don't listen to all the people who say it can be done.
I am looking forward to a simple retirement of doing what I want, when I want. My garden, the grand kids and time spent with my wife.
I am lucky. I had parents who taught me the importance of living within your mean, having a budget, working hard, and putting some money away for a rainy day. I started saving when I was a teenager. When I was young I put my money into savings and checking accounts, CD's, government bonds, and money market funds. The interest rates were much higher then and I made good income on my investments.
When I was in my thirties I learned to invest in stock, bonds, mutual funds, annuities, and other investment vehicles. I took advantage on my companies 401K plan match and also funded my IRA account. Like my parents I lived through recessions, political upheaval, government instability, and corporate downsizing. I lost my job several times and had to start over.
Through all of life's ups and downs I stuck to my budget and to my financial and retirement plan. I am in my fifties and I plan on working another ten years. I am on track to reach all of my financial and investment goals and to have a comfortable retirement.
I learned it is easier to attain your retirement goals if you start planning early in life, to live within your means, have a budget and rainy day fund, and have a retirement plan. The sooner you invest in yourself the easier it will be when you get to retirement age.
Fisher Investments, Incorporated manages over $41 billion in assets for some 40,000 accounts for primarily individual investors and is run by the Forbes magazine columnist Kenneth Fisher. The firm was ordered to pay a retiree $376,075 in compensatory damages for breaching its fiduciary duties, according to a release by Bloomberg. The case was arbitrated through JAMS in Dallas, TX. JAMS is a private forum for arbitration and mediation, which is based out of Irvine, CA. Apparently, Fisher Investments had a clause in its agreement with the customer that required any disputes between the parties to be resolved through private arbitration, since it is a an adviser firm and not a brokerage firm registered with the Financial Industry Regulatory Authority (FINRA).
Interestingly, Sharyn Silverstein the Claimant, who was a 64 year old retiree, had called up Fisher’s firm simply to get a free copy of his book that was advertised in USA Today, with no intention whatsoever of doing business with the firm. After multiple calls and visits from a Fisher representative, she was pressured into turning over all of her fixed income investments to be invested into equities. This occurred despite vigorous objection from Ms. Silverstein and her husband, Seth. According to the recommendation of the arbitrator, the Claimant is entitled to her losses she incurred as a result of Fisher Investments liquidating her bond portfolio and putting her proceeds 100% into equities. According to testimony at the hearing by Fisher Vice Chairman Andrew Teufel, 80% of the Fisher investors are invested 100% in equities.
Ms. Silverstein placed $876,357 in bonds with Fisher in September 2007. After liquidating the bonds and investing her 100% in equities, her initial investment lost $376,075 by October 2008. According to the award recommendations, the retiree and her husband made it clear that they were going to be taking withdrawals out after he retired at the end of 2007. However, the investment adviser for Fisher used the “Suitability Wizard” to determine her recommended portfolio stating that she had no income needs from the portfolio and her only investment objective was growth until her death. The arbitrator said that the Silversteins had no children and “therefore have no need to leave an inheritance”; that Fisher failed to make reasonable inquiry into the financial situation, investment experience and investment objectives of the Claimant or ignored that information and rubber stamped her for the “one shoe fits all” recommendation of all other Fisher clients: 100% equities benchmarked to the MSCI World (MXWO) Index. Over the time frame she was invested, the MSCI World Index lost about 35% and the Merrill Lynch U.S. Broad Market Index of bonds, which mirrored her investments prior to liquidation, made 2.4%.
When the Silversteins saw they were 100% in equities, they expressed their concern and unhappiness only to be told they would have to pay a fee if they quit, so they stayed. In the summer of 2008, after registering their complaints and concerns of not owning any bonds they were assured that Fisher knew how to predict the market and would take appropriate steps to protect their investments. The arbitrator wrote a 25 page award going over the facts and concluding that Ms. Silverstein is entitled to all of her losses sustained because of the actions of Fisher Investments.
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