Thursday, December 17, 2015

5 Tips for Charting Your Retirement Lifestyle

By Walter Updegrave
RealDealRetirement @RealDealRetire

You probably already devote considerable attention to the financial side of retirement planning: how much to save, how to invest, different ways of turning your nest egg into a reliable retirement income, etc. But have you done any retirement lifestyle planning?

Unlike financial planning, lifestyle planning focuses less on money and more on how you’ll actually live your life once you retire.

And just as it’s essential to know whether you’ve got the financial resources to call it a career, it’s equally important to be sure you’re ready to make the lifestyle transition from the work-a-day world to post-career life. You’re going to be spending a good part of your life in retirement. Without the framework of a job to provide structure each day, you’re going to have to find new ways of spending your time that will be satisfying, meaningful and fulfilling.

Of course, the lifestyle you’ll live in retirement is also linked to your finances. You’ll need a much larger nest egg if you expect to travel frequently than if you plan to live a laid-back lifestyle close to home. Ditto if you go into retirement with a mortgage or other debt.
In short, financial planning and lifestyle planning really complement each other. You can’t really do either justice without considering the other.

Here are five tips for getting a start on this crucial aspect of retirement planning:

1. Think Big: One of the most important questions you’ll face in retirement is where you want to live. Will you stay in the same city and neighborhood you’re living in now, or relocate for a change of pace or perhaps to save some money? And whether you stay where you are or move, you’ll also want to consider whether to downsize to a smaller place that requires less maintenance and upkeep.
On the relocation issue, you can check out any number the of “Best Places To Retire”  lists that abound on the Net. If nothing else, you’ll get a good sense of the options available. You can then assess living costs at a site like Sperling’s Best Places. As for downsizing, you can scout out real estate prices in different areas by going to a site like Zillow, and then following up with a local real estate agent to get a more detailed assessment of housing and living costs.

2. And Then Think Small: Wherever you choose to live during retirement, you’ll also need to put some thought into how you’ll spend those years. Here, I’m talking about the small-picture issue of what you’ll actually do day-to-day now that a job won’t be soaking up eight or more hours of your time and attention each day.

Going to a tool like Ready-2-Retire, which you’ll find in Real Deal Retirement’s Retirement Toolbox, can help you sharpen your retirement vision. Ready-2-Retire offers icons representing 24 different retirement activities (travel, returning to school, hobbies and creative interests, etc.) that you then drag and drop into three different baskets—Very Important, Moderately Important or Trash—based on how important each is to you. This exercise doesn’t necessary provide actual structure, but it can help you replace vague musing about how you might spend your time with some actual activities.
For a more in-depth and nuanced assessment of what your post-career life might involve, you may want to check out one of the growing number of pre-retirement seminars. One example is the Paths to Creative Retirement workshops offered by the Osher Lifelong Learning Institute at the University of North Carolina-Asheville, where participants explore retirement options and receive guidance on managing the transition to retirement.

3. Do a Trial Run: Don’t stop at a tool or workshop. The only way you can realty tell whether your vision of retirement is realistic is to give it a test drive. Thinking of moving to Key West and starting a small business selling those terrific photos you took of the sunset when you vacationed there for a week last year? Try renting a house in the Keys for a few months and setting up shop to find out if there’s actually a demand for those pictures, not to mention whether the laid-back vibe will lose its appeal after a few weeks. Better to find out whether your vision of an ideal retirement jibes with reality before you relocate than after.

4. Crunch Some Numbers: Once you’ve decided how you want to live in retirement, you’ve got to make sure you can afford that lifestyle. Can the combination of Social Security payments, your pension and reasonable draws from your 401(k) or IRA really support your condo in the city, that mountaintop retreat you want to buy and all the traveling you plan to do?
The only way to really know is to estimate the cost and compare it to the income your nest egg and other sources will generate. If the outlays for your dream retirement exceed your likely income, you can either dial back your “must-have” list a bit, or put in a few more years on the job so a larger nest egg and higher Social Security payments can give you the cash flow to do the Full Monty.

5. Assess Your Social Connections: As important as financial security is in retirement, a Merrill Lynch study  found that, after retiring, people missed the social connections they had through work even more than they missed the regular paychecks. Indeed, other research  also shows that retirees who felt satisfied with the number of friends they had were almost three times more likely to be happy than those who felt they came up short on the friendship front. Along the same lines, retirees who volunteered or attended some form of worship were likely to feel more content than those who rarely or never volunteered or attended religious services.

I’m not at all suggesting that you’re doomed to a life of misery if you’re not a social extrovert or you’re not particularly religious or spiritual. But having a social network of friends and family that can provide companionship and support in times of need can be as important as having financial reserves that you can fall back on.

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

Thursday, December 3, 2015

4 Tips for Finding The Right Financial Adviser

By Walter Updegrave
RealDealRetirement @RealDealRetire
For years the Securities and Exchange Commission and Department of Labor have been yakking about coming up with ways to better protect investors from adviser conflicts of conflicts. And who knows, maybe they’ll get around to doing so in our lifetime. In the meantime, here are four tips to help you find a pro who’s competent, honest and willing to work for a reasonable fee.

1. Start with questions to yourself. 
The adviser that’s the right fit for you can depend a lot on what kind of assistance you need. So before you begin your search for financial help, take a little time to ask yourself exactly what it is you want an adviser to do for you.
For example, are looking someone who can do a comprehensive evaluation of your finances, assisting you with everything from developing a retirement plan to assuring you’re saving enough and making sure you have sufficient life and disability insurance? Than in that case you probably want to deal with a certified financial planner, a pro who can take a comprehensive look at all of your financial needs.

If, on the other hand, you’re primarily looking for investing advice, say, someone who can create a portfolio of mutual funds or ETFs and manage it for you, then the portfolio advisory services that large investment firms like Vanguard, Fidelity, Schwab and T. Rowe Price may be a better fit. Or, for that matter, if you’re looking to keep costs way down and you’re okay getting your investing advice mostly online, you might want to consider a robo-adviser, one of the new breed of investment management services that use algorithms to create and monitor portfolios.
The point is that just as you would think of how you’re going to use a car before you go shopping for one, so too should you know what sort of financial help you need before you start looking for it.

2. Do some due diligence.
Don’t be awed just because some adviser hands you a business card that has a long string of professional credentials. Fact is, so many organizations have issued so many titles and designations over the years—The Financial Industry Regulatory Authority alone lists 157 on its site—that it’s become a virtual mission impossible to separate the bona fide ones (such as the CFP and ChFC) from ones that are mere marketing gimmicks, or worse.

So do a little digging. A good way to begin is by going to the Check Out A Broker or Adviser section of the Securities and Exchange Commission site. There, you’ll find detailed information on how to research the background of brokers, planners and investment advisers, as well as links to regulators’ sites and other resources. But don’t stop there. Before signing on with an adviser, ask him to be more specific about the products and services he’ll offer. Can he mix and match investments from many funds or is he restricted to a limited menu? Even if he can choose from a large roster, does he primarily sell one type of investment? The more you can find out about how an adviser makes his living, the better you’ll be able to evaluate whether that adviser is right for you.

3. Get details on fees and charges—in writing.
  Advisers are usually compensated in one of three ways: they charge a fee for the advice they give (typically a percentage of assets under management that’s paid each year); they collect commissions for the investment products and services they sell; or they get a combination of fees and commissions. A minority of advisers are willing to charge by the hour or work for a flat fee for specific projects, such as deciding whether to convert to a Roth IRA.

Each arrangement has advantages and disadvantages. But whichever method the adviser uses, he should be willing to estimate in writing the total amount you’ll pay and give a detailed breakdown of that cost (initial and annual fees, upfront commissions and “trails,” or commissions you pay on an annual basis and any underlying costs of the investments themselves, such as investment management or administrative fees).  Any exit fees or surrender charges you’ll pay if you sell an investment should also also be disclosed. After you get this fee disclosure, ask the adviser whether there are comparable investments or services available for a lower cost—as there almost always are—and why he didn’t choose those instead.

4. Ask the adviser how he’ll manage conflicts of interest.
There’s been a lot in the press recently about the move to hold all financial advisers to a fiduciary standard—that is, require advisers to put clients’ interests first. That sounds nice. But in the real world there’s always some way that an adviser’s interests may not completely square with yours.

For example, advisers who charge commissions may have an incentive to steer you to products or services that provide them with the fattest payout. Those who eschew commissions in favor of an annual percentage fee based on the value of assets they oversee may be tempted to keep that percentage fixed  as the value of your portfolio climbs even if they’re doing the same amount of work for you. Or they might be reluctant to put you into investments that may not be covered by their arrangement, such as CDs or annuities, and thus reduce the fee you pay.

So before signing on with an adviser, ask him to explain the potential conflicts and how he plans to manage them. If the adviser balks at this request or says your interests and his are perfectly aligned, move on to another adviser. There are more than enough out there.

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

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

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