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The Oldest and Youngest Baby Boomers Have Different Retirement Plans
Tweet Share on Facebook March 17, 2009 Comment (112)The oldest baby boomers have already begun to retire. But retirement is still decades away for the youngest members of this large generation, who seem to be quite distinct from their elders. Many of the youngest members of this cohort don’t even think of themselves as baby boomers, preferring to call themselves generation X, according to a recent study. Here’s a look at how retirement will be different for the oldest and youngest baby boomers.
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Countries With the Longest Life Expectancy
Tweet Share on Facebook March 16, 2009 Comment (6)The population of the United States is certainly graying. But when it comes to living the longest, the mainland U.S. isn’t even in the top twenty. Men who make it to age 60 in Iceland are likely to live an average of 22.5 years more, compared to just 20 years for American men. U.S. men came is 30th just behind Panama and slightly ahead of Belgium. The U.S. women placed 26th internationally between the Republic of Korea and the Netherlands. American women are likely to live 24 years past age 60, well behind Japan’s graying women who are likely to live nearly 28 years. Here’s a look at how the top countries stack up.
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Retirement Accounts Have Now Lost $3.4 Trillion
Tweet Share on Facebook March 13, 2009 Comment (3)In October 2008, the Congressional Budget Office reported that stock market turmoil wiped out roughly $2 trillion of Americans' retirement savings over just 15 months. Since then, the stock market has continued to shudder and retirement savers have lost even more.
A new estimate found that retirement accounts, including 401(k)s and IRAs, have lost $3.4 trillion between September 30, 2007 and March 6, 2009. Assets in retirement accounts were valued at approximately $8.5 trillion on September 30, 2007 (expressed in constant 2009 dollars), according to calculations by Mauricio Soto, a research associate at the Urban Institute, but have since plunged 40 percent to $5.1 trillion. About 70 percent of these assets were invested in stocks. During the same period the stock market overall lost 56 percent of its value, a decline of about $13 trillion.
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Baby Boomers are Changing Their Retirement Plans
Tweet Share on Facebook March 12, 2009 Comment (15)Do you remember 2007? Baby boomers, although they were never prolific savers, were optimistic about their retirement prospects. The stock market was trending upward nicely and home values were inflating fast. Baby boomers have certainly changed their retirement plans since then.
The MetLife Mature Market Institute surveyed 910 1946-born baby boomers in 2007, when they were approximately age 61, about their retirement plans. Then they managed to track down 562 of them again in late 2008 to see if they followed through. Many didn’t. Here’s a look at how one extraordinary year altered baby boomer’s retirement plans.
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How Much Should Retirees Allocate to Equities?
Tweet Share on Facebook March 11, 2009 Comment (13)It’s common investing wisdom that you should reduce your exposure to equities as you age and gradually move your nest egg into less risky investments. But experts disagree about exactly how conservative your portfolio should be in retirement. Retirees need growth because they could live 20 or even 30 years in retirement. But it can also be catastrophic for retirees to lose principal they have no way of replacing. Over the past two weeks I have spoken with a number of investing experts about how much retirees should allocate to equities. Excerpts:
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Most Medicare Part D Enrollees Don’t Choose the Lowest Cost Drug Plan
Tweet Share on Facebook March 10, 2009 Comment (122)Medicare beneficiaries have a choice between over 40 prescription drug plans in each state. Some counties even have over 70 different offerings. Seniors can shop among the plans and choose the one with the best coverage of their prescription drugs. But a new study found that most Medicare Part D enrollees don’t choose the best priced option.
Only 6 percent of seniors chose the lowest cost plan offered in their area in 2006, according to an analysis of 55,000 individuals who had a Part D claim in 2006 by Jonathan Gruber, a Massachusetts Institute of Technology economist, and the Kaiser Family Foundation. Enrollees who didn’t choose the lowest priced plan could have saved an average of $520 on their monthly premiums and out-of-pocket expenses if they had done so. And only 10 percent of seniors chose one of the five percent of plans with the lowest costs, which would typically have resulted in $400 in savings. About half of part D beneficiaries (53 percent) did enroll in one of the lowest cost 25 percent of drug plans. Other seniors could have saved an average of $220 by following suit.
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How Much Longer Will You Need to Work to Recoup 2008 Losses?
Tweet Share on Facebook March 9, 2009 Comment (20)Even before the recession began, Americans should have been considering working past the average retirement age, 63, because of increasing life expectancy. But the 18 percent hit the average 401(k) participant took in 2008 has made retirement prospects even worse.
The average 40-year-old with a 401(k) savings rate of 7 percent must work one more year or save an additional 1 percent of pay per year until age 65 to recoup 2008 market losses, according to recent calculations by human resources consulting firm Hewitt Associates. People closer to retirement age will have an even tougher time replenishing depleted retirement accounts. A typical 55-year-old employee with a 401(k) savings rate averaging 10 percent of pay will need to save an additional 12 percent each year until age 65, or work for two more years.
Other research has found similarly large numbers. The Employee Benefit Research Institute calculated in December that employees with between 20 and 29 years on the job will have to work an extra 1 year and 9 months to recoup stock market losses. If workers pull their remaining cash out of the stock market it will take even longer to recover: 2 years and 1 month, EBRI calculated.
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6 Ways to Make Your Retirement Accounts Last Longer
Tweet Share on Facebook March 6, 2009 Comment (17)Once you retire, you have to make sure your nest egg lasts the rest of your life. It takes shrewd calculations and a even bit of luck to fund your own 30-year retirement in the best of times. But the stock market dive has thrown the delicate balance of managing your own retirement accounts off kilter. If market losses or an unexpected expense has bruised your nest egg, here are some ways to make it last longer.
Postpone withdrawals. Seniors over age 70 1/2 will not be required to take distributions from 401(k)s, IRAs, and 403(b)s in 2009. This will allow retirees who don’t need immediate access to their retirement accounts an opportunity to avoid selling low.
[See House Passes Bill to Change 401(k) Requirements for Retirees]
Reexamine withdrawal rates. If you withdrew 4 percent for your portfolio last year, the same amount of money could be a significantly bigger chunk of this year’s account balance. For example, a 67-year-old recently retired couple with $750,000 could have withdrawn $30,000 annually, which is generally considered sustainable over the long term. But if their account balance dropped to $630,000, the same $30,000 in income now requires almost a 5 percent withdrawal rate, which means their nest egg won’t last as long. Consider withdrawing 4 percent of the new account balance this year. “Your withdrawals should be 4 percent, and that is designed to have a high probably of making your money last over a 20 to 30 year retirement,” says Rande Spiegelman, senior vice president of the Schwab Center for Financial Research.
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Putting Faith But Not Money in Stocks
Tweet Share on Facebook March 5, 2009 Comment (10)It’s easy to pay lip service to stocks being a good long-term investment, but few investors plan to actually buy them during a month when the Dow Jones Industrial Average plunged below 7,000. About half of Americans (53 percent) and 67 percent of stock owners agree that stocks remain a sound long-term investment, according to a Gallup Poll conducted March 4.
But that doesn’t mean Americans intend to scoop up more stocks while many are bargain priced. Only 21 percent of stock owners plan to continue to acquire more equities in the next month, Gallup found. Another 73 percent plan to hold their stocks, but not buy any more. Only 4 percent of investors plan to take all their money out of the market.
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After a 401(k) Match is Cut, Do Workers Stop Saving For Retirement?
Tweet Share on Facebook March 4, 2009 Comment (8)A company match to your 401(k) contributions is a valuable incentive to save for retirement. New research confirms that employees are more likely to participate in a 401(k) plan when a match is offered.
An employer contribution of at least 50 cents for each dollar a worker saves up to 6 percent of pay increases employee participation in plans by as much as 9 percentage points, according to an analysis of 7,000 Fidelity retirement plans. Immediate vesting, which means workers get to keep the employer 401(k) contribution as soon as it is deposited, was found to increase worker participation by another 2 percentage points. “This research shows that the very existence of any company match, even a small one, incents employees to participate more in their workplace plans, and those participation rates increase further in plans with more generous match programs,” says Scott David, president of workplace investing for Fidelity Investments. About 30 percent of employees enrolled in their workplace retirement plan deferred exactly the amount necessary to get the full employer match.
