8/20/2012 2:15 PM ET|
Money in your 60s: 12 steps to take
Let's say you have a $300,000 nest egg and expect your essential expenses in retirement -- shelter, utilities, transportation, food, health insurance, etc. -- to be about $2,300 a month. Your Social Security check might provide $1,600 of that amount. If you're a 66-year-old man, you could buy an immediate annuity from Vanguard for $100,000 that would pay you about $727 a month for life. If you wanted inflation protection -- in other words, a payment that would rise along with the cost of living -- your guaranteed initial check would drop to $554. (You can play with the numbers yourself at Vanguard's annuity website.)
You could use what's left in your retirement accounts to provide the "extras," such as travel or a new car. The annuity would ensure that you could pay your basic living costs even if your investments turned against you or you lived longer than you had expected.
If you opt for the annuity route, you'll want to make sure the insurer you pick has rock-solid finances and low expenses.
10. Stress-test your plan
You now should have enough facts and figures to see if your plan will work. Garrett recommends using a post-retirement return rate of no more than 6% or 7%. That's the historical norm for a relatively conservative portfolio of stocks, bonds and cash.
"You want any surprises to be on the upside," Garrett said.
Then consider checking out T. Rowe Price's retirement income calculator, which can estimate your plan's probability of succeeding.
What if you're falling short? See what would happen if you worked a little longer, or adjust your budget to see whether you could live on a little less. If you're determined to retire and the numbers don't work, consider more-drastic options, such as moving to a cheaper area or a smaller home.
11. Meet with a fee-only financial planner
The decisions you're about to make are too important to your future not to get a second opinion. Look for an objective planner who's experienced with retirement-income calculations.
You can get referrals from Garrett's organization, the Garrett Planning Network, or from the National Association of Personal Financial Advisors.
12. Review your estate plans
Your chances of being incapacitated -- too ill or injured to make your own decisions -- rise as you age. Make sure you have updated durable powers of attorney for finances and for health care (the latter document is known as a health care directive in some states), so that someone you trust can take over for you.
Also consider a living will, which outlines what kind of end-of-life care you'd want if you weren't able to speak for yourself. Though they're not as foolproof as they're often portrayed, they can give your loved ones a road map for what you might have wanted.
Dealing with these issues can be difficult and emotional, Garrett said, so don't try doing it while you're sitting in your attorney's office. She recommends getting a copy of the workbook brochure "5 Wishes," available for $5 from Aging With Dignity, and taking time to review your options. (Another nonprofit group, HELP, has free resources at its website.)
You also should review any wills or trusts and update beneficiaries on retirement, bank and investment accounts and on life insurance, preferably with the guidance of your attorney and financial planner.
"If you haven't updated your will since the kids were born," Garrett said, "now's the time."
Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.
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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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