Sunday, November 15, 2015

3 Ways to Rescue Your Retirement If You’ve Fallen Behind

By Walter Updegrave

I’m in my late 50s and not as prepared for retirement as I’d like to be. I have the equivalent of about one year’s salary saved in my 401(k) and that’s about it. What can I do improve my retirement prospects?
      —Linda M., Florida
Generally, you should have six to nine times your salary tucked away in a 401(k) or other accounts by your mid-50s to early 60s to have a good shot at maintaining your standard of living in retirement. So you’re definitely short of where you ought to be.

On the bright side, at least you know you have some catching up to do. Not everyone who’s behind does. For example, a February study by researchers from Ohio State and the University of Alabama found that 27% of 55- to-60-year-olds included in the Federal Reserve’s Survey of Consumer Finances hadn’t accumulated the resources they’d need to maintain their standard of living in retirement, yet seemed to think they were doing just fine. The researchers labeled them “unrealistic optimists.”

But even though you’re behind, there’s no need to panic. You’ve got plenty of time to improve your retirement outlook, provided you’re willing to embark on a bold catch-up plan starting right now. Here are the three things you need to do.

1. Ramp up your savings rate. Many people in your situation look for an investing solution to bail them out: a hot stock that will triple in value, maybe a high-octane fund that will generate double-digit annual returns. But that’s a risky strategy that can backfire, leaving you worse off.
A better approach: Maintain a moderate investing stance—keeping, say, 40% to 60% of your savings in stocks, depending on your risk tolerance—and focus on finding ways to save as much as you can. You may be surprised at how much you can grow your nest egg’s value in a relatively short period. For example, let’s say you’re 55 earn $80,000, get 2% annual raises and have $80,000 already saved. If you save 15% annually for the next 10 years and earn 6% a year, you’ll end up with just under $320,000 at age 65. Push your savings rate to 20% a year, and your nest egg would weigh in at almost $380,000. Granted, that’s not going to fund a lavish lifestyle. But you’ll be in much better shape than you would be without taking dramatic action.

If you have the willpower to muster such a savings effort—and it will take willpower to save 15% to 20% if you haven’t been doing so—you shouldn’t have much trouble finding places to stash your savings. The limit for 401(k) contributions these days is a relatively generous $18,000, plus $6,000 in catch-up contributions for anyone 50 or older (although individual plans can set a lower ceiling). You may also be able to set aside another $6,500 ($5,500 plus a $1,000 catch up) in a traditional or Roth IRA. (To see which type of IRA you qualify for and how much you can contribute, check out Morningstar’s IRA calculator.) And, of course, you always have the option of socking money away in taxable accounts, preferably in low-cost tax-efficient options like index funds or ETFs.

2. Put in a few extra years on the job. Working even just a few more years can improve your retirement readiness for several reasons. First, you’ve got more time to save and earn a return on existing and new savings. Another three years of saving plus investment returns on new and existing savings for our hypothetical 55-year-old socking away 20% a year would boost the value of her nest egg by roughly $135,000 to about $515,000. Those three extra years of work are also three fewer years that nest egg has to last in retirement.

But there’s another benefit to delaying your work exit: a higher Social Security benefit. Each year you postpone taking benefits between the age of 62 and 70, your benefit increases by 7% to 8%, possibly more depending on your work history. So, for example, a 65-year-old woman earning $95,000 who delays three years might see her yearly payments increase from $28,500 to $35,500 (before inflation adjustments) and her potential lifetime benefit increase $60,000, according to Financial Engines’ Social Security calculator. Married couples can reap even bigger gains in lifetime benefits by coordinating when each spouse starts collecting. The combination of a boost in savings and larger Social Security benefits can easily mean the difference between merely scraping by and enjoying yourself in retirement.

3. Think outside the box. If you’re willing to be creative and resourceful, you can find even more ways to improve your situation. For example, just as working a few extra years before you retire can enhance your retirement security, so too can taking on occasional or part-time work after retiring.
Let’s say you earn $20,000 a year working part time for the first five years of retirement. Assuming that extra income allows you to reduce withdrawals from savings by the same amount, your nest egg would be worth roughly $116,000 more after five years than it would have been if you hadn’t worked, assuming a 6% return on your savings. Just remember: If you work and collect Social Security benefits when you are below full retirement age, your monthly benefit could be reduced if your earnings exceed certain thresholds (although if it is, Social Security effectively restores those withheld payments by increasing your benefit when you reach full retirement age.) You can check out what sorts of jobs are available for retirees and pre-retirees and what they pay by going to sites like and

If you’ve got a significant amount of equity in your home, you might consider freeing up some of it for spendable cash by downsizing to less-expensive digs. On the other hand, if you prefer staying in your present home, you may be able to convert some of your home equity to income by taking out a reverse mortgage. And if you’re willing to consider a somewhat more radical move, you may be able to stretch your retirement income by relocating to an area with lower living costs. (This calculator can help you compare living expenses in different cities.)
I’m not saying that taking these steps will insure you’ll achieve the same level of financial security in retirement that you would enjoy had you been saving diligently all along. That would be unrealistic. But if you start on a comprehensive catch-up plan now, you should be able to regain considerable lost ground, and you’ll definitely be better off than if you do nothing at all.

Walter Updegrave is the editor of If you have a question on retirement or investing that you would like Walter to answer online, send it to him at

Monday, October 26, 2015

3 Ways To Be Sure You’re Not Fooling Yourself About Your Retirement Readiness

By Walter Updegrave

Are you on track toward a secure retirement? Before you answer, consider this: A new study shows that many people who aren’t preparing well for retirement apparently think they are—while others who actually are on track may erroneously believe they’re not. Here are three things you can do to make sure you’re being realistic about your retirement readiness.

In a recent study titled “Do U.S. Households Perceive Their Retirement Preparedness Realistically?” researchers from the University of Alabama and Ohio State found that 58% of the nearly 2,300 full-time workers aged 35-to-60 polled in the Federal Reserve’s Survey of Consumer Finances weren’t on a path to a secure retirement. They also concluded that just under half of those who are unprepared didn’t realize that they were falling short. No surprises there. Plenty of studies show that lots of people are woefully unprepared for retirement, while other research finds that many are overconfident about their prospects.

But the study also revealed some counter-intuitive twists. For example, the researchers found that just over half of those who are actually preparing decently for retirement don’t view themselves as being on track. And among workers who weren’t prepared, those who had a traditional defined benefit pension were more likely to be unrealistic about where they stood than those who lack a pension.

These sorts of surprising disconnects could be the result of people simply not knowing how to evaluate their retirement preparedness or , in the case of pensions, mistakenly thinking that the mere fact that they have a pension means they’ll have sufficient retirement income to maintain their standard of living.

Clearly,  you’re better off being on track for retirement than not. But either way, it’s also important that your outlook be accurate, so you have a more realistic notion of what you must do to have a decent shot at a secure retirement. Here are three ways you can get a true fix on where you stand on your retirement planning efforts.

1. Crunch the numbers—and I mean really crunch them. If you’ve been socking away money diligently in a 401(k) or other retirement plan and investing in a broadly diversified portfolio, chances are you’re making decent headway toward a secure retirement. But the only way to know for sure is to do a full-fledged assessment of your progress.

Specifically, you need go to a retirement calculator that uses Monte Carlo analysis and plug in such information as the amount you currently have saved, the percentage of salary you’re contributing to retirement accounts each year, how you’re investing your savings, when you plan to retire and how much you expect to spend annually in retirement. Based on that information, the calculator can estimate the probability that you’re on track toward accumulating the resources necessary to generate the income you’ll need to sustain you throughout retirement. If you’re not comfortable doing this sort of exercise on your own, you should consider having a financial adviser run the numbers for you.

2. Fine-tune your plan, if necessary. There’s no official standard of what constitutes “being on track.” Generally, though, if the type of analysis I recommend shows that you have less than an 80% or so chance of generating the lifetime income you’ll need once you retire, that’s a sign you need to step up your efforts. If that’s the case—and the study cited above suggests it will be for most people—you can see what steps might tilt the odds of success more in your favor.

Typically, the single best way to improve your retirement outlook is to increase the amount you contribute to a 401(k), IRA or other retirement savings plan. Contributing even an extra couple of percentage points of pay each year can fatten the size of your nest egg by 20% over the course of a career. Revising your investing strategy may also help, but be careful: Taking a more aggressive stance by loading up with more stocks may boost returns, but it also makes your portfolio more vulnerable to market setbacks. A more effective tweak: Look for ways to cut investment fees.

Reducing annual costs by even a half a percentage point a year can have the same effect as saving roughly an extra 1% of pay throughout your career. Postponing retirement a few years, claiming Social Security at a later age and downsizing or relocating can also increase your chances of retirement success.

3. Re-assess your readiness periodically. Bumps and detours along the road to retirement are the rule, not the exception. Indeed, a recent TD Ameritrade survey found that two-thirds of Americans have had their retirement planning disrupted by a job loss, illness or other problem. And even if you’re fortunate enough to sail through your career without such a setback, there’s always the possibility that a market downturn will devastate your nest egg and seriously damage your retirement outlook.

Which is why it’s crucial that every year or so you plug updated information up that retirement calculator and get a fresh evaluation of where you stand, and take corrective measures, if necessary. In periods of market turmoil, you may also want to give your retirement plan a “crash test” just to be sure a severe market correction won’t irretrievably damage your retirement prospects.

Bottom line: If you want a secure retirement, you’ve got to plan for it during your career. But it’s also a good idea to have an accurate sense of whether that planning is actually panning out.

Walter Updegrave is the editor of If you have a question on retirement or investing that you would like Walter to answer online, send it to him at

Tuesday, September 29, 2015

Grief and Loss Support

Older Americans are often faced with the loss of a friend or loved one.
Grief is a very individual process and no two people experience it in the same way. Therefore it follows that there is no right or wrong way to grieve. Instead of thinking of grief as a linear process, it is better to consider it a roller coaster of highs and lows where each high and low becomes less intense.
Grieving the loss of a loved one is a stressful, as well as debilitating, experience. For grief and loss support information and help click here .

For pet loss support
click here

The poem below has been sent many times to people who have lost a friend or family member and most have found it to be comforting.  We hope you will find it comforting as well and perhaps pass it on when appropriate.

The Ship
I am standing upon the sea-shore.
A ship at my side spreads it white sails to the morning
breeze and starts for the blue ocean. It is an object
of beauty and strength, and I stand and watch it until
at length it hangs like a speck of white cloud just where
the sea and the sky come down to mingle with each other.
Then someone at my side says
"There! She's gone".
Gone where? Gone from my sight—that is all.
She is just as large in mast and hull and spar as she was
when she left my side and just as able to bear her load
of living freight to her place of destination.
Her diminished size is in me—not in her; and just at the
moment when someone at my side says
"There she's gone".
There are other eyes watching and other voices ready to
take up the glad shout.
"There she comes!"

Sunday, September 13, 2015

Best Reason to Delay Retirement

Most people are thinking of delaying their retirement in order to work longer, save more money, add to their investment portfolio and avoid having to dip into retirement savings until a bit later in life.

There is, however, another major reason you should consider delaying your retirement.

Those who delay retiring are more likely to live longer
Studies and research by actuaries — the professional mathematicians who advise pension funds — show that working longer and retiring later improves life expectancy. Andrew Gaches, a longevity consultant said that "retiring at age 70 rather than 60 adds around 13 months to men's life expectancy — and 12 months to women's longevity — even after allowing for differences in individuals' health, wealth and lifestyle.”

The Stanford Center on Longevity, quoted a study that indicates "the death rates of those who were still working were roughly half that of the death rates of men the same age who were fully retired.”
Living longer is certainly of major interest to most people, but living longer is important only if your quality of life is a good one and you have enough capital or income to live somewhere near the lifestyle you had planned.

Some areas to check out regarding maximizing income for “retirees” who continue to work in some capacity:

1. Receiving Social Security benefits: If you are receiving Social Security benefits and also work but aren't yet at full retirement age, $1 in benefits will be deducted for each $2 in your earnings. For the year you reach full retirement age, these benefits are reduced $1 for every $3 earned until the month you reach full retirement age. Note the amounts you can earn continues to increase each year.

2. Delay Social Security benefits if at all possible
  Unless it is likely you won't live the average longer projected life, if you are in your early 60s you should not tap into your Social Security benefits. By starting at 62, rather than at the government’s “full retirement age” of 66 for people born from 1943 to 1954, you would cut your monthly benefits substantially. If you wait until age 70 you would get 132% of the monthly benefit you would collect at your full retirement age.

Read the “
Working & Social Security Benefits” section at RetiredBrains for more information on this subject.

Also check the
Social Security Benefits Estimator and Calculator. The information on this page of the Social Security website provides all kinds of information as well as links to where you can find answers to many of your questions.

3. The costs of health care and how you pay for them during your retirement years should be a major consideration. If you continue to work full-time, employer paid health care benefits, whether they are paid in full or contributory, are relatively reasonable. If you stop working before you are eligible for Medicare these costs are likely to be substantial.

Once you are on Medicare, and if you also take out a supplemental insurance policy, the costs even with copays, in most instances, is affordable. For more information click here.

Additional links where you can find information of interest regarding continuing to work well into your retirement years:

Temporary & Part-Time Jobs and project assignments as these are the kinds of employment more available to boomers and older job seekers.
Search seasonal jobs. includes a section devoted to seasonal jobs for what they call “older and bolder” job seekers.

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If you're looking for a job, caring for an aging parent, are worried about memory loss, have arthitis pain, planning a vacation or even want to continue your education, the information you need is at