Retirement

Love Your Retirement Plan? Take the Quiz

twocents@thestreet.com (Guest Contributor) — Fri, 10 Feb 2012 11:00 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

Richard Schmitt ...

A Plea for Help From 401(k) Land

twocents@thestreet.com (TheStreet Guest Contributor) — Wed, 08 Feb 2012 14:07 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Schmitt

NEW YORK (TheStreet) - Dear Uncle Sam, ...

Future of Retirement: Surprisingly Optimistic

twocents@thestreet.com (Joe Mont) — Tue, 07 Feb 2012 12:25 GMT

BOSTON (TheStreet) -- Americans' perceptions and desires surrounding retirement planning are evolving rapidly.

In response to the recession, many Americans -- in word, if not deed -- have readjusted their expectations for where retirement income will come from. They are planning to live longer, work longer and have more modest expectations about their quality of life. Living longer means new challenges and strategies for your retirement.

A 2010 Gallup survey of nonretired Americans showed more people expect to rely heavily on Social Security and fewer expect 401(k)s or IRAs, home equity and pension plans to be major funding sources. Overall, nonretirees still most commonly say IRAs and 401(k)s will be a major source of retirement income (45%), followed by Social Security (34%), work-sponsored pension plans (23%), saving accounts or CDs (22%), home equity (20%) and individual stock investments (20%). ...

Annuities: The Trojan Horse of Retirement

twocents@thestreet.com (Andrew Tignanelli) — Tue, 07 Feb 2012 12:20 GMT

HUNT VALLEY, Md. (TheStreet) -- I am a fee-only financial adviser, which means I can lead my clients to any investment on the planet if it is best for them. In addition, I am a fiduciary and must lead my clients to the best possible investment -- again, for them. Yet, despite opportunities to invest in some of the cheapest, commission-free annuities, I rarely recommend a client ever invest in them. In fact, I think it's a safe bet none of my colleagues who are also fee-only, fiduciary advisers would consider an annuity a wise investment.

Annuities are little ticking time bombs of taxable income that will either blow up in the hands of the owner or definitely in the hands of the heirs. In only slightly less violent imagery, annuities are like the Trojan horse, rolled inside your camp without understanding what's inside. Annuities are like the Trojan horse, rolled inside your camp without understanding what's inside.

Annuities are typically sold with high fees to compensate for commissions to sell the investment. These commissions normally come with 4- to 15-year deferred sales charges, in essence handcuffing the client into the contract. It's a safe assumption that at least 90% of all annuity sales come with a commission -- the reason people buy them is because they are sold by a seller who is compensated for the sale. ...

When to File for Social Security Benefits

twocents@thestreet.com (Jim Blankenship) — Tue, 07 Feb 2012 12:15 GMT

NEW BERLIN, Ill. (MainStreet) -- All retired future Social Security recipients face this question at some point: When should I file for benefits?

As you are likely aware, 62 is the earliest age you can file. At this age, you will get your benefit at a reduced amount -- perhaps as much as 30% reduced. Social Security balances out retiree benefits whether filing early or late, but there are still factors to think about. ...

Retirement in an Era of Long Life

twocents@thestreet.com (Guest Contributor) — Mon, 06 Feb 2012 11:00 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Laura L. Carstensen, Professor of Psychology and Director of the Center on Longevity at Stanford University

NEW YORK (TheStreet) -- It seems that national discussions about retirement quickly turn to the long-term viability of Social Security. The problem with focusing too closely on Social Security is that the conversation quickly devolves into one about budgets. The problem with retiring in the early 60s isn't just a problem for Social Security. It's much bigger. We are squandering the opportunity to redesign life....

Investing With Dick and Jane

twocents@thestreet.com (TheStreet Guest Contributor) — Thu, 02 Feb 2012 16:10 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Schmitt

NEW YORK (TheStreet) -- One morning Dick went into the woods. Dick found a stick. Then he found another and another . . . . In all, he found and gathered 100 sticks and brought them home. These were no ordinary sticks now. When Dick got back home that morning, he learned he could sell his sticks for $4 a piece. So he set them aside for a rainy day and stashed his sticks in a hole. You could say he set-it-and-forget-it. ...

8 Travel Tips for Retirees

twocents@thestreet.com (Matt Brownell of MainStreet.com) — Tue, 31 Jan 2012 15:02 GMT

NEW YORK (MainStreet) -- Many people dream of seeing the world once they retire, but sometimes limitations from poor health and a fixed income make finding a perfect trip difficult.

While these problems can sometimes prevent retirees from realizing all of their travel ambitions, there are plenty of safe and fun travel opportunities available to seniors. While poor health or a fixed income can sometimes prevent retirees from realizing travel ambitions, there are plenty of safe and fun travel opportunities available.

"Older people are becoming more active and they want to do more things," says John DiScala, who runs the travel site JohnnyJet.com. "As much it sounds like a cliche, age is just a number." ...

The Non-Deductible IRA Trap -- and the Fix

twocents@thestreet.com (Andrew Tignanelli) — Tue, 31 Jan 2012 12:20 GMT

HUNT VALLEY, Md. (TheStreet) -- If you don't have any nondeductible IRA assets, this article will not be of interest to you. If you have ever made nondeductible IRA contributions, get ready to be shocked!

Nondeductible IRA assets happen when you are ineligible for an IRA deduction but make an IRA deposit. There is no limitation to make a deductible IRA deposit if you and your spouse (if applicable) don't have a pension plan at work. If you or your spouse has a pension, there are income limitations to deducting IRA deposits. In addition, every year after you make a nondeductible IRA contribution you must file a form 8606 to disclose your basis in an IRA. Here's an example: If you have ever made nondeductible IRA contributions, you should start thinking about the lowest-taxed way to get your money out. ...

SAVE Act Great for Small-Business Pre-Retirees

twocents@thestreet.com (Anne Arvia) — Tue, 31 Jan 2012 12:15 GMT

COLUMBUS, Ohio (TheStreet) -- Preparing for retirement is more complicated than ever, especially for the half of U.S. workers identified by the Employee Benefit Research Institute as not having access to a 401(k) plan through their employer. Many employees that don't have a 401(k) work for small businesses that have been unable to offer a plan due to factors such as low revenue, high plan set-up costs and the complexity of administering a plan.

A recent Nationwide Financial survey of small-business owners sheds additional light on the situation, finding that: Half of U.S. workers don't have access to a 401(k) plan through their employers at small businesses. Three out of four small-business owners agree that the lack of retirement preparedness among America's workers has reached crisis levels. Only two in 10 offer a 401(k) or some other employee self-funded retirement plan. The major obstacles keeping small-business owners from offering retirement plans are high costs and the perception their business is too small to offer a plan. ...

Investors Must Keep Time on Their Side

twocents@thestreet.com (Frank Armstrong) — Tue, 31 Jan 2012 12:10 GMT

MIAMI (TheStreet) -- Time is such a valuable commodity that it's a shame when investors squander it. Yet many investors do, wasting a resource that can't ever be recovered.

Time is an investor's most valuable ally because returns increase exponentially over time -- as close to magic as most of us will ever see. Investment returns increase exponentially over time, which is as close to magic as most of us will ever see. ...

NYC Workers Face 'Retirement Crisis'

twocents@thestreet.com (Joe Mont) — Fri, 27 Jan 2012 17:58 GMT

BOSTON (MainStreet) -- The grim prospect for aging New Yorkers: One-third of them won't have enough money to retire comfortably.

That's according to a study released Thursday by New York City Comptroller John C. Liu and the Schwartz Center for Economic Policy Analysis at The New School in Greenwich Village. One-third of New Yorkers won't have enough money to retire comfortably, according to a study released Thursday. ...

Pay Attention!: Safe Driving Tip for the Road to Retirement

twocents@thestreet.com (Guest Contributor) — Fri, 27 Jan 2012 13:43 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Schmitt

NEW YORK (TheStreet) -- Only 12% of retirement savings plan participants made at least one fund exchange in their accounts during 2010, according to a survey by Vanguard*. This same survey showed no more than 20% bothered to make a fund exchange in the each of the last 10 years. In other words, the vast majority of accountholders, perhaps overwhelmed by market uncertainty, watched the world race by as they sat stuck in traffic. ...

Watch What You Pay at the Pump: Safe Driving Tip for the Road to Retirement

twocents@thestreet.com (Guest Contributor) — Fri, 27 Jan 2012 11:00 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Schmitt

NEW YORK (TheStreet) -- Penny pinching gets a bad rap. Sometimes you may feel that salesmen get offended by customers who ask questions about a product's pricing. Sure they deserve to be paid a fair price. But then what is fair when it comes to the price you pay for gas, or for that matter of investing your retirement savings? ...

5 Personality Traits That Lose You Money

twocents@thestreet.com (Joe Mont) — Thu, 26 Jan 2012 13:30 GMT

BOSTON (MainStreet) -- Financial advisers are looking more at "behavioral finance" -- how people's thinking affects their money management.

Successful saving and investing often comes down to having the right approach. But the right moves to make, on paper, often don't translate into the actual steps we take. Emotions and personality traits can help or hinder investing and financial planning. How you think about money can have lead to poor financial planning and investments.

"It is incredibly important, especially if you are a financial adviser, because so much of our industry looks at the really obvious things like age and income and demographics," says Katie Libbe, vice president of consumer insights for Allianz Life Insurance Co. of North America, of understanding the role habits and personality play. "However, there can be a big difference between a 60-year-old that has a pension but maybe was petty frugal versus a 60-year-old that may have gotten there via day trading and things like that. For financial advisers, it is really important for them to know the differences between emotional traits, values and things that aren't so easy to discover by just looking at a fact sheet on your client." ...

Hog the Road: Safety Driving Tip for the Road to Retirement

twocents@thestreet.com (Guest Contributor) — Wed, 25 Jan 2012 12:00 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Schmitt

NEW YORK (TheStreet) -- "As a matter of fact, I do own the road," is what you might see on the bumper sticker of the car driving erratically in front of you. Although hogging the road may be a dangerous driving tactic in any type of traffic, knowing and using your options is always a good idea when it comes to investing, especially when done with due consideration for the risks involved. ...

Starting, Maintaining a 401(k) Made Easy

twocents@thestreet.com (Lindsey Bell ) — Tue, 24 Jan 2012 19:27 GMT

NEW YORK (TheStreet) -- Investing in a 401(k) plan can be stressful because there's a lot to consider -- stock or bond funds, time horizon, appetite for risk. But it doesn't have to be.

The No. 1 thing to remember, as financial professionals remind us, is to diversify. That helps mitigate risk, which can erode investment returns.

Diversification in a 401(k) account has become increasingly important as those defined-contribution accounts will be the key source of retirement income for many. Nearly gone are the days that pension plans and Social Security could be relied on for income during the golden years. ...

Save Fuel: Safety Driving Tip for the Road to Retirement

twocents@thestreet.com (Guest Contributor) — Tue, 24 Jan 2012 14:34 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Schmitt

NEW YORK (TheStreet) -- "You can't get there from here." Although not normally the response -- except when driving in New England -- you might hear someone say that when asked for directions for the way to retirement. ...

Safety Driving Tips for the Road to Retirement

twocents@thestreet.com (Guest Contributor) — Tue, 24 Jan 2012 14:19 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Schmitt ...

Banks Grab at Bigger Retirement Share

twocents@thestreet.com (Joe Mont) — Tue, 24 Jan 2012 12:25 GMT

BOSTON (TheStreet) -- Despite widespread complaints -- and considerable outrage -- directed at the nation's "big banks," Americans increasingly turn to them for investment advice.

Research by Hearts & Wallets, a firm that analyzes retirement market trends for the financial services industry, shows that banks now serve as the primary source of retirement advice for 43% of Americans, an increase of two percentage points from a year ago, with gains across all investment product categories. Despite anger at "big banks," more pre-retirees are turning to them for their nest egg needs.

The findings come from a survey of more than 4,500 households nationally and statistics based on 9,000 responses on specific financial firms. ...

New Rules of Charity From Your IRA

twocents@thestreet.com (Jim Blankenship) — Tue, 24 Jan 2012 12:20 GMT

NEW BERLIN, Ill. (MainStreet) -- At the end of December, the provision for Qualified Charitable Distributions expired. That provision allowed taxpayers 70.5 or older to make direct distributions from an IRA account to a qualified charity, bypassing recognition of the distribution as income.

With the expiration of this provision, you can still make charitable contributions of money from your IRA. The difference is that these contributions are no different from a contribution you've made from your savings account or regular income. To achieve a tax advantage from the contribution, you will itemize the charitable contribution on your tax return. (Of course, if the money is from your IRA you'll also have to recognize the distribution as income.) You can still make charitable contributions of money from your IRA, but the new year brought new rules.

Let's look at both ways to understand what's different. ...

Never Spend Your Pension

twocents@thestreet.com (Frank Armstrong) — Tue, 24 Jan 2012 12:15 GMT

MIAMI (TheStreet) -- If you are changing jobs, one of the many big decisions you will face is what to do with your pension plan. You may be tempted to take the money and run. Bad choice!

Taking the money and spending it is not a smart choice. The most important reason: You shouldn't be systematically looting your retirement account. Keeping the money growing in a tax-deferred environment until you actually need it for retirement is an enormous benefit. The IRS gives you this huge advantage in the hopes we won't have to support you on welfare tomorrow. When you're changing jobs, you'll be tempted to cash out your pension plan, maybe for a splurge. Don't.

Just in case you didn't get the hint, the IRS has devised some pretty draconian treatments for those withdrawing funds before normal retirement age. They really don't want you to finance your next car or vacation with your pension distribution. ...

Time to Rethink Risk Management

twocents@thestreet.com (Andrew Tignanelli) — Tue, 24 Jan 2012 12:10 GMT

HUNT VALLEY, Md. (TheStreet) -- Most people buy insurance, but very few actually do risk management. Risk management is when you assess the statistical likelihood of an event happening, the potential cost of that event, the ways to reduce the risk of the event occurring and, lastly, the ways to finance the cost of the event.

If you have analyzed these four issues, then you have actually done "risk management." If you have called an agent and talked about some concerns, then you probably just bought insurance. True risk management is important for everyone, but vital to the retiree.

True risk management is important for everyone, but vital to retirees, because their risks are experiencing a tectonic shift. ...

Morgan Stanley May Ditch 'Mass Affluent': Reports

twocents@thestreet.com (Antoine Gara) — Mon, 23 Jan 2012 17:16 GMT

NEW YORK (TheStreet) -- As it looks at increasing its stake in a brokerage joint venture with Citigroup , Morgan Stanley is putting the unit's British wealth management Quilter division up for sale to private equity buyers, according the Reuters and Sky News reports citing unnamed sources.

If Morgan Stanley were to cut a Quilter sale -- and increase in its Morgan Stanley Smith Barney (MSSB) venture stake started in 2009 with Citigroup -- the moves would signal a further focus on ultra-high net worth clients and away from the affluent with portfolio's less than $250,000. Morgan Stanley CEO James Gorman

Recently, Morgan Stanley highlighted its interest in adding to its stake in MSSB, while it also cutting low performing brokers. ...

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Roth or Regular? Don't Waste the Advantage

twocents@thestreet.com (Frank Armstrong) — Sat, 21 Jan 2012 15:00 GMT

MIAMI (TheStreet) -- If you are qualified for either a Roth or Regular IRA, or your 401(k) plan offers a Roth and a regular, which should you choose? Unfortunately, no one can give you an absolute answer, but here are some of the considerations:

First, always remember that our government could change the tax laws at any time. Changing to a flat tax, for instance, would probably be a disaster for Roth economics. What Uncle gives, he can take at any time. But, still, it's highly unlikely the government would change Roth tax-free distributions for existing plans. No one can give you an absolute answer which is better, but there are some IRA details to consider.

Having said that, if tax advantage is a driving factor for you, here are some tax guidelines: If you expect to be in a lower bracket after you retire than when you make the contribution, go for a regular IRA or 401(k). If your tax bracket will be higher during withdrawal, a Roth will end up with a higher value for you. If your tax bracket will be the same, there won't be a penny's worth of difference to you. ...

The Why of Retirement

twocents@thestreet.com (Andrew Tignanelli) — Fri, 20 Jan 2012 12:15 GMT

HUNT VALLEY, Md. (TheStreet) -- Before you retire ask yourself why.

First and foremost, if you're unhappy, burned out, frustrated ... figure out a plan to retire even if you don't think you have the funds to retire fully in the lifestyle you desire. These negative emotions will leave you disabled or worse if left unchecked, so you likely need at least a sabbatical to regroup. (A sabbatical is like a mini-retirement to refresh, which will provide time to develop a plan to start anew.) A great book that will help you decide if a sabbatical is right for you, and more importantly how to do it, is Reboot Your Life: Energize Your Career and Life by Taking a Break (Beaufort Books, 2011).

Don't just entertain yourself until you die. Thinking about true joy, fulfillment and a legacy. ...

Occupy 401(k)?

twocents@thestreet.com (Guest Contributor) — Thu, 19 Jan 2012 15:58 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Schmitt

NEW YORK (TheStreet) -- With all of the heated hubbub about how the top 1% of earners control a third of the wealth in the U.S., perhaps you may be wondering how prominently 401(k) wealth figures into the dismay felt by the other 99% in the Occupy Wall Street movement. Past and current economic policies promoting capitalism -- and yes, bailouts too -- get a lot of the blame for the current clash of the classes. ...

401(k) Contributions Are Not Always Good

twocents@thestreet.com (Don Martin) — Thu, 19 Jan 2012 14:00 GMT

LOS ALTOS, Calif. (TheStreet) -- Someone asked why a friend of theirs who is a 401(k) participant has stayed auto-enrolled at 3% instead of maxing out their contributions.

The stereotype is that everyone should max out their 401(k) contributions, and they certainly have benefits: Generally the reasons against a 401(k) are applicable only to the wealthy, but the middle class should take note now. Asset protect from lawsuits, depending on complex rules. Encouragement to avoid spending savings. Encouragement to save for retirement. Shifting income into future years, when retirees are likely in a lower tax bracket.

But hear the other side of the story. There are reasons against 401(k) contributions: Retirement accounts create problems, including double taxation at up to 85% for people wealthy enough to have to pay estate tax. People who want to start a business or buy a home -- for which large down payments may be required in today's tight lending environment -- need access to their funds. If long-term capital gains or U.S. Treasury income (U.S. Treasury interest is free of state income tax) is generated in a tax-deferred retirement account, they lose their special tax status and, when withdrawn from the account, are taxed as ordinary income. Capital gains taxes are waived by using basis step-up at death for assets in a taxable account, but not in a retirement account. ...

The New Retirement Rulebook

twocents@thestreet.com (Joe Mont) — Tue, 17 Jan 2012 13:00 GMT

BOSTON (MainStreet) -- The rules of retirement are in need of a rewrite.

The loss of company pensions, longer lifespans, concerns over Social Security and a volatile investing world are among the forces that have made planning for a financially secure retirement more challenging than ever. Longevity and market volatility mean that retirement goals and how to reach them have changed.

Retirement strategy has long been almost entirely focused on the accumulation of assets, but study after study has continually moved the goal post for what is needed in savings -- $500,000, $1 million, $3 million. ...

How to Keep Your Job When You're Over 50

twocents@thestreet.com (Kathleen Brush) — Tue, 17 Jan 2012 12:00 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Need to work longer before retiring? Older worker, beware! A bull's-eye is being stenciled on your back. This can put a crimp in the best-laid plans.

Fifteen percent of the unemployed are over 55. Of those out of work for more than a year, the over 55 represent 45%. This means only about 10% have found another job. These lucky workers though may not be dancing in the streets because most have taken wage cuts. ...