3/22/2012 10:03 AM ET|
How to finance life to 100
Building a nest egg that will last until a ripe old age demands a disciplined and savvy savings strategy. These steps can help you accomplish that goal.
Living to 100 sounds wonderful -- until you start thinking about how to pay for it. If you retire at age 65 and live until 100, that's 35 years of retirement you'll need to finance. Here are some ways to build a nest egg that will last you until age 100.
Claim retirement saving tax breaks. Your savings will grow faster without the drag of taxes. In 2012, retirement savers can defer paying income tax on up to $17,000 in a 401k, 403b or the federal government's Thrift Savings Plan, and $5,000 in an individual retirement account. For investors age 50 and older, those limits jump to $22,500 in a 401k and $6,000 in an IRA. Low-income workers whose modified adjusted gross incomes are up to $28,750 for singles, $43,125 for heads of households and $57,500 for couples can also claim a tax credit (worth up to $1,000 for individuals and $2,000 for couples) when they save for retirement in a 401k or IRA.
Add tax diversification. While traditional retirement accounts give you a tax break in the year you make contributions, income tax will be due on each withdrawal. Roth IRAs and Roth 401k's allow you to tuck away after-tax dollars for retirement, which means withdrawals after age 59½ from accounts that are at least five years old are tax-free. (Should you convert to a Roth IRA? Find out with MSN Money's calculator.)
To decide which type of retirement account is better for you, compare your current tax rate to your expected tax rate in retirement. Those who expect to be in a higher tax bracket in retirement have the most to gain by paying taxes upfront using a Roth account. Roth accounts also give you easier access to your money before retirement and greater flexibility to time your withdrawals in retirement.
"Having some money in a pretax IRA can give you some options to lower your tax rate later in life," says John Ameriks, the head of the investment counseling and research group at Vanguard. Traditional IRA and 401k account balances can be converted to Roth accounts if you pay income tax on the amount rolled over. The Internal Revenue Service removed a $100,000 income limit in 2010 that previously prohibited high earners from making the switch. (Check MSN Money's calculator to see if your 401k is likely to provide enough for retirement.)
Avoid fees. The costs and fees associated with your investments add up significantly over the course of your career and retirement. An investor paying 1% a year in fees who holds an investment for more than 25 years will pay 25% of what he or she would have earned to a service provider, according to Vanguard calculations.
"The lower you can get that fee, the more money you are going to have in retirement," says Ameriks, who advises choosing funds with expense ratios of 20 basis points or less. Sometimes you can negotiate lower fees by consolidating the bulk of your investments with a single financial institution.
Maximize Social Security. Social Security is your first line of defense against outliving your savings, because the payments will continue for the rest of your life and are adjusted for inflation each year.
"One of the most effective things you can do to protect yourself against both inflation and longevity is to postpone taking Social Security until age 70," says Zvi Bodie, a Boston University professor and co-author of "Risk Less and Prosper." Between ages 62 and 70, Social Security payouts increase for each year you postpone claims. Delaying claiming increases the amount you will receive in your later years, when you are most likely to need the money.
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I can't believe this. You should never wait longer than 66 to apply for Social Security. If you were to get $2000.00 a month ($24,000.00 a year) x 4 yrs that's $96,000.00. (66-70). If you wait to 70 to take Social and die you just lost $96,000.00. It's like a life insurance policy. Why wouldn't you want a free life insurance policy. Social Security isn't going to pay this back to your spouse.
I have to disagree with Michael that people will be "healthy and vital" at the age of 120 in the future. Yes, we're living longer these days, but we are FAR from healthy or vital. Modern medicine is nothing more than "life support" for elderly people who are so disabled that in some cases they are simply in a vegetative state. There are folks in their 90s literally rotting away in nursing homes, doped up, their last breaths sustained by nothing more than dozens of pills each and every day. This is no "life," just existence. To think that this could be prolonged to 120 years is frankly scary, and nothing more than a ploy for big pharma to make more money with the promise of some kind of eternal life. These people would have benefited greatly from just being allowed to die in their 70s when they could still have memories of a life well-lived. I want to die like my grandfather. In his sleep, of a sudden heart attack. To the last day he lived, he walked, talked, showered himself and enjoyed good meals with his family.
Remember Herman Cain's 9/9/9 plan or a national sales tax? You'll pay a tax when you spend the Roth money. Your non-taxable Roth just got taxed.
If you want to start a Roth just to get the 5 year period started, that's fine, but don't put too much money in.
First, fund a regular 401K, up to the max, and take a tax deduction now, while you still can. Then, if you still have more to invest, think about a Roth account.
Tax deferred saving has much uncertainty incluing not knowing the age you can access the funds without penalty(currently59.5), not knowing future tax rates (currently lowest rates in 70 years),planning for poverty during retirment to pay lower a tax rate. also restrictions on investments inside tax deferred accounts prevent investing in your number one asset(you). Best advice do what you love, invest in yourself, regularly save and invest after tax dollars and work with an atty. to make sure you protect assets as best possible. Live your life today and not hope someday retirement happens and then you can be happy!
social security is the best retirement plan that anyone could ever hope for. it is a defined benefit pension program. IT IS NOT AN ENTITLEMENT PROGRAM! like the right wingnuts like to call it. it is not welfare. you pay 6.2 % of your gross into it. your employer pays the same. the value of the soc. sec. system is over 2 trillion dollars. yes, bunky, on paper it is worth 2 trillion dollars. without touching the percentages, it will pay out every dollar as promised until the year 2037. between now and then, we have plenty of time to adjust the contributions to meet the proposed deficit after 2037. the reason you hear doom and gloom about soc. sec. is because the politicians have raided the soc. sec. trust fund to pay for their earmarks and fund their pork barrel projects and help to balance the budget. the fund is full of hundreds of billions of dollars of I.O.U.'s from the federal government. soc. sec. is a federal law, it can't be touched unless you, the public are stupid enough to let your politicians screw with it. please, wake up and smell the coffee. now is the time to make the politicians payback the money they stole from s.s.....I paid 66000 into my social sec. and i am going to collect 1465. a month starting at age 62. That is what is called a defined benefit plan just like the steel companies, halliburton, a t & t, verizon, GM, etc. IT IS NOT AN ENTITLEMENT PROGRAM. the only difference is it is run by the government.
GREED by the health insurance industry and the providers have created a crisis situation in this country. THAT IS WHY IT NEEDS TO BE CONTROLLED BY THE GOVERNMENT. anything controlled by corporations that is designed to provide for the masses is destined to fail. the endless desire for more profit trumps the rights and wellbeing of citizens anytime.
My Job went to Mexico in Jan of 2010, I was over 62 so I Retired. I live on my small Pension and still manage to savemy Social Security.. During my working days I made double house payments, and paid muy house off before Retiremend and Ididn't buy a bunchof Stupid toys.
I bought Mutual funds.......Bonds and an Annuity...
not taking soc. sec. til 70 is bad bad bad advice. this is another right wing agenda designed to keep social security money in washington so that they can raid it and spend it on their own agendas. soc. sec. is designed to pay out the same amt. to you regardless of whether you take it at 62, 65, 66, 67, or 70. if you take a 25% reduction at 62, it would take 11 years to amortize what you lost by not taking it until 66. that would be 77 years old before you break even. do you plan to be around at 77. sure, we all hope to. but who knows, the mortality tables say otherwise. everyone would like to retire at age 70 with the top amount and live to age 100. how many people actually do that? don't listen to them, take your money at 62. take a pen and paper and figure it out, go on the website and estimate your benefit. let's say you get 1465 a month at 62 and 2565 at age 70. you would collect 140,640 by the time u hit age 70. take 1465 from 2565 and you get 1100. then divide 1100 into 140,640. you get 127. take 127 and divide it by 12. you get 10.5......that's right folks, it would take 10.5 years or age 80.5 until you would break even by not taking your s.s. at age 62. DO YOU STILL THINK IT'S WORTH THE GAMBLE?
The way things go these days the "retirement plan" is "you work until you die". My dad is 68 and still works (in Germany), because the retirement would be 1/8 of the salary. Right next to me works a 69 olds dude (here in USA), because there is no chance in the world he could get the kind of healthcare he needs on Medicare as compared to what our company offers.
With the Social Security all but gone by the time I am ready to retire I can only hope somebody will still want to hire a 70 yrs old for a professional job...
Under the Obama health plan he wants all the seniros who are over 65 to die so social security benefits don't have to be paid out. The longer seniors live the more they become a liability. That's because all ther retireries are not longer an asset because they are not contributing to social security. So all the seniors who are working better stay working and stay on their company health plan. If not Obama wants you to die.
It all comes down to one thing...are you tired of the rich getting all the bailouts and us working men getting nothing? Take a look at what I found and see why the rich are trying to hide this for themselves. G00GLE the term ' FAST MARKET CASH ' all one term and click the first site. Go right to the 'PENNY STOCK' page to see what the rich don't want you to know. It is time your family lives the good life and this will help.
how long you live it's the quality of life. For some reason most people are afraid of dying. Why I don't have a clue maybe they feel the world can't go on with out them. Who wants' to live for ten years with someone taking you to the bathroom or giving you a bath. Who wants to live with out a mind and someone else making all decisions for you. Yes save that money so you can lay in a bed or set in a chair not knowing who you are or
This is the STUPIDEST Promotional Rip-off I have ever heard of! Who in the HELL wants to live to be a hundred years old? You have to retire at 65 or 70 now so that the compay you've (theoretically) worked for for 45+ years can put you out to pasture and hire some young punk at half of what you cost them; and you're now goig to enjoy the life of Riley for the next 30 years? ON WHAT PLANET??
Have you ever seen someone who's in their mid to late 90's lately? They can't hardly SEE; They can't hardly PEE; and all they do al day is take medication to last untill the NEXT day. OH YEAH: I really WANT to live to 100!!! N O T !!!
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