8/20/2012 2:15 PM ET|
Money in your 60s: 12 steps to take
The National Association of Insurance Commissioners, a group that represents state insurance regulators, offers information on this coverage, including a free brochure, "A Shopper's Guide to Long-Term Care Insurance," that you can order.
4. Don't forget to include medical costs
Paying for health insurance before age 65, when you qualify for Medicare coverage, can be extremely costly.
But even once you qualify for Medicare, your expenses aren't over. Those age 65 and older spent an average of $4,888 per capita for deductibles, co-payments, premiums and other health care expenses not covered by insurance, according to the 2004 National Health Expenditure Survey. That's more than twice as much as the typical nonelderly adult, the survey found.
It's not unusual for a couple, even in relatively good health, to spend $1,000 or more a month on these costs.
The average expenditure climbs with age: $3,851 for those 65 to 74, $5,066 for those 75 to 84 and $8,304 for those 85 and older.
5. Deal with your debt
Ideally, you'll enter retirement with no debt, but you definitely want to blitz any credit card balances or other consumer loans before you get there.
If you're having trouble paying off this toxic debt, contact a legitimate credit counselor (one affiliated with the National Foundation for Credit Counseling) or a bankruptcy attorney to discuss your options.
6. Draw up a retirement budget
Now that you're almost at the finish line, you can replace the usual retirement rules of thumb ("plan on spending 70% to 80% of your pre-retirement income") with concrete figures.
Not sure if your budget will work? You might take it on a trial run for a few months by living with it as if you really were retired (just keep showing up for work).
7. Review your Social Security and pension options
You can draw on Social Security as early as age 62, but the longer you wait to start taking payments, the bigger your benefit checks will be.
Signing up at 62 basically means locking in a lower benefit for the rest of your life. If you don't expect to live very long or you can't work and need the money, then by all means, sign up. Otherwise, think twice.
If you'll continue working, definitely hold off on Social Security payments unless you won't be making much. If you sign up before full retirement age and earn more than a certain amount -- $14,640 for 2012 -- you'll have to give up $1 in Social Security benefits for every $2 you earn.
You also should check with current and former employers to see if you qualify for any traditional pension benefits and, if so, how much you can expect. You may have a choice on how to take the money: as a lump sum, as a lifelong string of monthly checks or as a string of monthly checks that lasts for your lifetime plus that of your spouse.
If you're thinking of taking the lump-sum option, talk to your human-resources department about how it would calculate the amount. You also might want to schedule an appointment with a fee-only financial planner who's experienced in handling pension payouts for some advice on your situation.
8. Check your withdrawal rate
The consensus among financial planners has been that you shouldn't withdraw more than 3% to 4% of your retirement savings the first year, though that has its critics.
The earlier you retire and the longer you expect to live, the more conservative you'll want to be about tapping your savings.
9. Consider an immediate annuity
For clients who don't have traditional pensions and who can swing the cost, financial planner Sheryl Garrett, the author of "Just Give Me the Answers," recommends taking a portion of their nest eggs and buying an immediate annuity. This is an insurance product that promises you a lifetime stream of income in exchange for a lump-sum investment.
When combined with Social Security checks, an immediate annuity can help guarantee that you're able to pay your basic expenses regardless of how your other investments perform.
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Pretty good list. I would not consider an immediate annuity at retirement. The largest consideration about retiring before 65 is probably health care costs.
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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