Retirement Made Simple for You

Despite what leading analysts and Wall Street prognosticators would have you believe, planning for retirement really isn't rocket science. To the contrary, it can really be quite simple. After all, it's just a matter of planning for the six common risks that you (and everyone else) will face in retirement. Preparing for these six risks helps ensure you don't make the mistake that many investors (and financial planners) make by focusing only on accumulating assets. This approach ensures you protect them as well so they're there when you need them - in retirement . That's "Retirement Made Simple".

Your Personal Finance Questions. Simple Answers.

Question. My father wants to make a large deposit into a 529 Plan for my daughter (his granddaughter). I was told he could deposit $12,000 into a plan. Is this correct?

Answer. You are partially correct. Your father mayinvest $12,000 per year for his granddaughter which equals the annual gift-tax free allowance. However, he could also deposit a $60,000 lump sum for his granddaughter and then make no additional gits to your daughter for the next four years. Your mother has a similar opportunity and may also deposit $60,000 bringing the total contribution to your daughter's 529 Plan to $120,000. Since these moneys are funded from your parents' estate, maximizing these contributions provides excellent tax benefits while still allowing for control over the assets.

Question. I’m now ready to retire. How much may I withdraw each year without running out of money? I was thinking about withdrawing 6% every year.

Answer. This is an excellent question with no easy answer. Our first comment is that planning to withdraw 6% of your retirement assets each year will effectively cause your purchasing power to fall behind a little each year due to the effects of inflation. In other words, withdrawing $20,000 per year today may only be equivalent to $10,000 (adjusted for inflation) in fifteen years. As a result, any withdrawal level above 4% is potentially risky.

Of course, a truly comprehensive answer will greatly depend on several factors including your age, assumed number of years in retirement, assumed rates of return and your asset allocation. Your question regarding a sustainable withdrawal rate in retirement will continue to be a key issue for retirees as the population continues to enjoy ever-increasing longevity. To get an even better answer, call us for a personalized income analysis using a "Monte Carlo" simulation that helps make future projections based on historical market performance.

Question. What is "retirement liability risk management?" What does this refer to?

Answer. This sounds a lot more complicated than it really is. All this really refers to is managing the common liabilities (risks) that we all face as we march down the road to retirement or during retirement.

Many investors (and their financial advisors) make the mistake of focusing on only saving enough money for retirement. Although this is a critical part of retirement planning, it does not take into account the many risks that could wipe out a hard-earned nest-egg. These risks could be as immediate as having an accident and being unable to work (disability) or as far reaching as having a long-term care incident years into retirement.

A truly sound retirement plan needs to address both assets and liabilities and our Financial MRI is designed to help you to this. This comprehensive approach will help you make sure your retirement assets are still there when you need them - in retirement!

Newsworthy Headlines

The Right IRA for you

Many investors are interested in setting up their own IRA, but which one is right for you? A traditional IRA or a Roth IRA? This article from CNNMoney.com helps you sort out the answer. CLICK HERE to read about "The right IRA for you"

Study Says Retirees Need Annuities to Increase Income

According to a new study by the Brookings Institution, baby boomers stretching retirement funds to cover longer lifespans may benefit from annuities funded by their 401(k) plans. CLICK HERE to learn how an annuity may help you ensure you don't outlive your retirement savings.

By The Numbers

72%: The percentage of workers who say they and/or their spouse have saved for retirement.

49%: The number of workers reporting less than $25,000 in total savings and investments (excluding home and defined benefit plans.)

44%: The percentage of workers expecting an employer-sponsored retirement savings plan (like a 401k) to be a major source of income in retirement.

47%: The percentage of workers who have taken the time and effort to complete a retirement needs calculation.

CLICK HERE to view the full report entitled Saving for Retirement in America - a Retirement Confidence Survey 2008 RSC Fact Sheet published by the Employee Benefit Research Institute.

Simply Stated

"Retirement at 65 is ridiculous. When I was 65, I still had pimples." George Burns