Archive for May, 2008 Page 2 of 3

« Older Entries
Newer Entries »

Shrinking nest eggs: How the ailing economy affects yours

Posted on May 16, 2008 by Jason

USAToday, May 16th, 2008

Patty Stewart of Redlands, Calif., is beginning to think she won’t be able to retire at 65. Or 67. Or possibly ever.

Like millions of other people, Stewart is
counting on her 401(k) and her home equity to pay for retirement. But
since the start of the year, the value of her 401(k) has fallen about
4%, and rising consumer prices have forced her to reduce her
contributions to it. Meantime, home prices in her neighborhood are off
about 25% over the past two years, making it less likely she can rely
on her home equity to supplement her retirement income.

ADVICE: How to tune up your 401(k) plan as economy struggles

“The calculators tell me I’m going to need $1.3
million to $1.5 million” for retirement, says Stewart, 49. “That
doesn’t seem like it’s something that will ever happen.”

She might be right. For years, stock investors
have been led to expect average annual returns of 8% to 10%. Similarly,
many people have assumed that their homes would appreciate by roughly
10% a year.

Both assumptions, though, rest on two decades of
outsize returns — returns that were inflated by low interest rates that
fueled bubbles in the values of stocks and real estate. Now, many
financial analysts are predicting a prolonged period of below-average
returns on both stocks and home equity.

If they’re right, Americans need to face a
sobering fact: They’re not likely to have as much money for retirement
as they’d projected. Which means that many of us will have to save
more, expect less and work longer than we’d planned.

Investors who rely on historical returns for the
past 50 years will “probably overestimate what we’re likely to see in
the future,” says Chris Jones, chief investment officer for Financial
Engines, a retirement-plan consultant.

“As much as we’d like to say history is a good guide to what the future holds, it’s simply not true.”

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Gender Gap in Retirement Savings

Posted on May 14, 2008 by Jason

BusinessWeek, May 13th, 2008

In this roundup of B-school research: why women are better savers,
it’s good to talk up your rivals, and how a logo can spark ideas.

Women are more motivated than men to save for retirement, according to a recent report from the Tuck School of Business
at Dartmouth College. The research, led by Tuck management professor
Punam Anand Keller, found that women are driven to save because of
worries that they’ll have to work longer to maintain a certain
lifestyle and attain medical care and a fear that they’ll lose their
home and be dependent on family.

Men, on the other hand, were more likely to say they would not have
to stop working and believed they would need less money when they
retired. Some also suggested they preferred feeling good now instead of
in the future. This thinking is what prevents some from saving for
retirement, says Keller, whose team conducted surveys, in-depth
interviews, and focus groups for the research.

The goal of the study, says Keller, was to determine how best to
market employee well-being programs, including those related to
financial health. She and her team used the findings, which will appear
in the book Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs
(University of Chicago Press, due out in Fall, 2008), to develop a
program designed to motivate employees of companies to sign up for
retirement saving initiatives.

A Tastier Carrot

Using a social marketing approach to saving for retirement, the
researchers created a program for Dartmouth that targeted groups that
were less likely to save. “I use the power of marketing and persuasion
tactics to devise new savings programs for people who may be aware of
the need to save, but this awareness does not translate into behavior,”
writes Keller in a two-page summary of the findings.

Her team offered a one-sheet explanation of how people could get started with saving, created a Web site that features real people sharing their personal stories about saving,
and did what it could to lower the barriers that were preventing people
from signing up for employee saving programs. For example, people who
do not have a computer at the ready were using that as an excuse not to
sign up, so Keller informed those who attended meetings where laptops
were available nearby. “We wanted to motivate them,” says Keller.

Apparently, the project was successful. As a result of these
efforts, which Keller says are inexpensive for companies to initiate,
the rate of Dartmouth employees electing retirement plans more than
tripled in a 30-day period after the program’s launch. More
organizations are seeking help in this area. Keller is working with the
Financial Industry Regulatory Authority (FINRA), National Endowment for
Financial Education (NEFE), and AARP to help them apply social
marketing to financial planning for their members.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Forced to put retirement on hold

Posted on May 13, 2008 by Jason

CNN Money, May 13th, 2008

Some 27% of American workers aged 45 and older are putting their retirement on hold, according to AARP survey.

The economic downturn is hitting middle-aged and older American
workers hard, forcing more than one in four to postpone retirement,
according to a survey released Tuesday by the AARP.

Twenty-seven
percent of workers aged 45 and older said they had put their retirement
plans on hold because of the slowing economy, AARP reported.

“The
current economic downturn is forcing millions of Americans to make very
difficult decisions on their immediate survival and long-term financial
security,” Tom Nelson, AARP’s chief operating officer, said in a
statement.

Baby boomers and retirees agree that the economy is
in bad or fairly bad condition and that the government should be doing
more to help, the survey of Americans 45 and over showed.

Eighty-one
percent said the economy is weak, and 74% said their elected officials
were not doing enough to help people who are being squeezed by the
slowdown.

Boomers hurting more than their parents. Boomers
- those between the ages of 45 and 64 – are feeling the impact of the
slowdown more than their parents and are reacting in ways that have
risky implications for the future, the AARP said.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

1 in 10 boomers borrow for everyday expenses

Posted on May 13, 2008 by Jason

MSNBC, May 13th, 2008

AARP survey shows 40 percent are helping children with bills

The economic downturn is hitting roughly one
in 10 middle-aged and older Americans especially hard, compelling them
to borrow money for everyday living expenses and to seek help from
family, friends or charities, according to a survey released Tuesday by
the AARP.

In the
telephone survey of 1,002 adults 45 and older, nearly four in 10 said
they had helped a child pay bills or expenses. Among retirees,
one-third said they’d helped their children pay bills. Eight percent
said they’d helped a parent pay bills or expenses. The survey’s margin
of sampling error was plus or minus 3 percentage points.

One-third of survey participants said they stopped putting money into their 401(k) or retirement account and 14 percent said they had cut back on their medications.

“We have patients coming in fewer times,” said
registered nurse Tucky Franz of Salisbury, Md. “They’ll cut back
because of the copay.”

The majority of baby boomers
said they were finding it more difficult to pay for essentials and
utilities, and six in 10 said they had cut back on eating out and
entertainment.

James
Dyas, 75, of Sherman, Conn., said he and his wife go to their favorite
Mexican restaurant about half as frequently as they used to. “About all
the money we have goes to buying gasoline,” he said.

While the survey doesn’t show large numbers of people making radical changes — taking second jobs or moving to a smaller home — it did find that more than one-quarter of those surveyed are having trouble paying their mortgage or rent.

Compared
with older people, a greater percentage of younger baby boomers, those
45 to 54, said they were cutting back on medications, prematurely
withdrawing retirement funds and postponing paying bills.

“For
the younger boomers, it’s been an especially rude wake-up call,” said
Jim Dau, a spokesman for the AARP, a nonprofit that advocates Americans
50 and older.

Debra
Koziol, a 48-year-old hospital finance worker in Rhode Island, said
she’s started carpooling to work with her sister a few times a week and
packing lunch every day.

“The food is better,” she said. “Some of this is creating better habits, not so much waste.”

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Reverse mortgages aren’t the only option for seniors

Posted on May 12, 2008 by Jason

Los Angeles Times, May 11th, 2008

Reverse mortgages are one way for house-rich but cash-poor seniors to
tap into their equity without having to sell. But there are other
options to consider as well.

A reverse loan is intended to
enable people 62 or older to convert part of the equity they have built
up in their homes into tax-free income. The name is appropriate because
it works backward. Instead of paying the lender every month, the lender
pays the senior homeowner — monthly, in one lump sum, in amounts as
the need arises for cash or in a combination of these choices.

The amount of money is based on current interest rates, lending limits,
the equity in the home, age and how long the owner can be expected to
live.

No payments are due while the reverse mortgage is outstanding. It is
repaid when the borrower (or, in the case of couples, the last
remaining spouse) dies, sells the house or no longer occupies it as a
principal residence.

The borrower can never owe more than the
house is worth, no matter when he or she gives it up or whether its
value has gone down. If the owner dies and the place sells for more
than what is owed on the loan, the excess (after sales commissions and
other selling expenses, of course) goes to the borrower’s heirs or
estate.

The knock on reverse mortgages is that they are
expensive. But some state and local governments offer less costly
versions called deferred payment loans. Generally, there are no
origination fees, and insurance premiums and closing costs, if any, are
very low.

The rate on these loans is low as well, if interest is charged at all.
When charged, it is often on a fixed basis, meaning the rate never
changes. Better yet, many programs charge simple, rather than compound,
so interest isn’t charged on interest. Some even forgive part or all of
the loan if the borrower remains in the house for a specified period.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Look before slamming it into reverse

Posted on May 12, 2008 by Jason

Chicago Tribune, May 11th, 2008

Reverse mortgages are held out as an excellent way for house-rich,
cash-poor seniors to tap into their equity without having to sell and
move. And they may well be a good choice for some people. But they are
not the only option.

A reverse loan is meant to let people 62
or older convert equity in their homes into tax-free income without
having to sell, give up the title or move.

Instead of you
paying the lender every month, the lender pays you—monthly, in a lump
sum or as you need cash —ostensibly so seniors can live their golden
years in relative comfort.

The amount of money available is
based on current interest rates, lending limits, your equity, your age
and how long you can be expected to live.

No payments are due
while the mortgage is outstanding. It is repaid when the borrower (or,
in the case of couples, the remaining spouse) dies, sells or no longer
occupies the house as a principal residence.

The borrower can
never owe more than the house is worth. And if the place sells for more
than what is owed, the excess goes to the borrower’s heirs or estate.

But reverse mortgages are expensive.

Some
local governments offer less-costly versions called deferred-payment
loans. Generally, there are no origination fees; insurance premiums and
closing costs, if any, are very low.

The interest rate on DPLs
is fixed, if it’s charged at all. And many programs charge simple
rather than compound interest, so interest isn’t charged on interest.
Some even forgive part or all of the loan if you remain in the house
for a specified period of time.

Typically, seniors can use only
deferred-payment loans to make specific types of repairs or home
improvements such as roofing and heating. But many will cover
accessibility modifications such as ramps, rails, grab bars and
energy-efficiency improvements like storm windows, insulation and
weatherstripping.

Read more of this article

About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com

NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Study: Retirement savers make costly 401(k) mistakes

Posted on May 12, 2008 by Jason

Los Angeles Times, May 11th, 2008


Despite extensive efforts to educate workers about saving for retirement, many employees are not doing a good job of managing their company-sponsored 401(k) accounts, a new study indicates.

The analysis of nearly 1 million retirement portfolios found that 69 percent have inappropriate risk or diversification of holdings and 36 percent have worrisome concentrations of company stock. In addition, one-third of savers aren’t putting enough aside to qualify for the full company matching contribution.

The problems are especially pronounced among young and low-paid workers, according to the study by Financial Engines, a Palo Alto, Calif.-based firm that provides investment advice and managed accounts for defined contribution plans like 401(k)s.

“Unfortunately, our study found that those who need their 401(k) the most look to be benefiting the least,” Jeff Maggioncalda, Financial Engines’ president and chief executive, said in an interview.

Maggioncalda said that some of the performance problems will dissipate as companies adopt automatic enrollment programs for workers, as authorized by the Pension Protection Act two years ago.

Still, he said, the data should help plan sponsors and other industry professionals “figure out who needs help and how to get it to them.”

The study released Monday found that when looking at risk and diversification of investments, 38 percent of the portfolios had very inefficient or very inappropriate investments. That could range from a young participant with a portfolio that’s too conservative to an older worker with one that’s too aggressive. An additional 31 percent had somewhat inefficient or risk-inappropriate holdings. The remaining 32 percent had good balance in their portfolios.

Financial Engines said that investing mistakes could be costly. It calculated that a well-balanced portfolio of $30,000 would grow to $74,315 over the next 20 years, even if there were no further contributions, while a poorly constructed portfolio would yield $57,857.


Read more of this article


About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com


NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

‘Soul Surfers’ Rekindle the Love of the Longboard

Posted on May 9, 2008 by Jason

NYTimes, May 9th, 2008


MATT Micuda was 12 in 1973 when he surfed for the first time. It was on a board that had come from a friend of the family — a Barry Kanaiaupuni model from Rick Surfboards that was made in 1968.


“I loved it immediately,” he said. “Even when I started surfing on shortboards and eventually went pro, I always had a bunch of longboards around. We always met up when the surf got small on the old boards. That was the time when we’d hang with our friends, get the gossip, talk about girls and enjoy the ocean.”


Mr. Micuda, a sign fabricator from Santa Cruz, Calif., still surfs on the old boards and claims that it’s his way of staying in touch with his love of the sport.


Staying in touch with the feelings that surfing evokes is important, because the surfing world has changed. Competitive surfing has become bigger and more exclusive, and boards and gear have become more expensive and higher tech. Prices of modern competitive boards today range from $800 to $1,200.


Luckily for Mr. Micuda, a surfing subculture that has been around for years is beginning to grow. So-called soul surfers, more concerned with the individuality of the sport, and less with the commercial aspects, are picking up the old boards in an effort to retain the original spirit of surfing.


And they gather for events like the Big Stick Logjam, one of the longest running longboard surf contests in the world, which was held April 26 and 27. This year the contest attracted more than 100 competitors, who came from all up and down the West Coast.


“Yes, it’s a competition,” said Gioni Pasquinelli, a former president of the Big Stick Surfing Association, which puts on the event. “But it’s really just a gathering of people who love old boards.”


He said the contest started about 20 years ago when some surfers began to feel that the sport had become overly dominated by new board technology. “This is an opportunity for people to share old boards, try out boards you’ve never surfed on and truly appreciate how the boards are made,” Mr. Pasquinelli said. “The cool thing about the whole event is that it really feels like another era. And that’s important for everyone to experience.”


Read more of this article


About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com


NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

Empty Nest Egg

Posted on May 9, 2008 by Jason

NYtimes, May 4th, 2008


The future of Americans’ pensions has not become a serious campaign issue so far this election season. It’s hard to get retirement issues to the front of the line when the nation faces soaring health care costs, global warming, $100-a-barrel oil, a likely recession and collapsing housing prices. There is also the little matter of the worst credit crisis since the 1930s.


That is too bad, because, as Roger Lowenstein nicely illustrates in “While America Aged,” the country “is sitting on a retirement time bomb.” He is not talking about Social Security, which, he writes, is among the more manageable of future concerns. He is addressing the large-scale failure of America’s once-enviable private pension system.


Lowenstein is one of the nation’s most talented business writers, with a particular ability to make obscure financial issues clear as the morning light. He tells three disturbing tales.


The first is about General Motors and the United Auto Workers. In the 1950s, the U.A.W., under the redoubtable Walter Reuther, won generous pension and health care benefits from G.M., eventually even securing medical coverage for retirees.


Back then, of course, no one thought the world’s premier manufacturing company would ever lose its pre-eminence. But beginning in the 1970s, market share declined inexorably while retiree rolls expanded dramatically. By the late 1990s, G.M. had 400,000 retirees compared with 180,000 workers.


With stock prices generating high returns on investments in the bullish 1990s, G.M. decided to underfund its obligations. It also perhaps too cleverly spun off its parts operations, and a lot of its pension burden, into a company called Delphi. It didn’t work. Delphi foundered, and the U.A.W. has taken over management of its own health fund, hoping to keep most of the promises made to workers. We shall see.


Lowenstein’s second example is New York City’s public transit system. Over time, the Transport Workers Union won subway workers benefits so generous they could retire by age 55. New York, however, failed to fund its pension benefits adequately, while being buffeted by economic crosswinds itself. The subway workers, despite a 2005 strike, were forced into concessions, but the city still faces huge liabilities.


The final example is the most egregious. San Diego’s municipal workers were also granted generous pension benefits. The city management then deliberately skimped on the annual contributions, hiding the underfunding from the public while the union knowingly looked the other way. The result was near bankruptcy for the once thriving metropolis.


Read more of this article


About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com


NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

A Better Way to Live in Retirement

Posted on May 7, 2008 by Jason

The Motley Fool, May 7th, 2008


We each have a vision of what we want from our retirement years. Mine involves a lot of travel, maybe on my own by sailboat or small plane, but always starting out from a friendly community of caring neighbors who swap stories over coffee, share fun projects, and help each other out when needed.


Whether or not the travel in my vision fits into yours — it doesn’t fit into my wife’s, which will no doubt make for some lively debates in 20 or 30 years — the idea of settling into a rich, close-knit community in your post-working years appeals to many folks contemplating retirement.


Such a community can be hard to find under the best of circumstances. As you age — and as you or your old friends move to warmer climes or to downsized houses in different neighborhoods, grown children disperse, and interests long shared with friends start to diverge — community can be a downright scarce resource.


Many developers and community leaders have tried various approaches to help older adults recapture the close-knit neighborhood feel that is increasingly hard to find in American life. Over-55 “adults only” developments suit the needs of some, and some of those developments have seen great success. But others say those neighborhoods feel sterile, with stilted “community activities” that few attend and a general sense of isolation — exactly what they moved into the neighborhood to avoid.


In recent years, a few other developers and groups have taken a different path. Using an idea conceived in Denmark in the early 1970s, these groups have been building brand-new close-knit neighborhoods from scratch. The idea is called cohousing, and it’s quickly gathering steam in the United States.


Read more of this article


About Reverse Mortgages:  Learn all about reverse mortgages at NewRetirement.com

Annuity Advice for Retirement:   Evaluate and compare annuities at NewRetirement.com


NewRetirement Retirement Calculator:   Assess your retirement plan with the NewRetirement Retirement Calculator.

« Older Entries
Newer Entries »
NewRetirement Blogs Home