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Older Populations Soar as Age Trend Accelerates
Tweet Share on Facebook June 28, 2011 Comment (2)The aging of America is hitting home with a vengeance. According to a report by the Brookings Institution based on U.S. Census data, the nation's 45-plus population grew 18 times faster than younger populations from 2000 to 2010. The impact of aging baby boomers and the follow-on "baby bust" generations fueled the disparity, according to William Frey, a demographer at the Washington think tank that wrote the report.
"The specter of a rapidly aging society is now a front-and-center issue for policymakers, politicians, and boomers themselves," the report said. "All are concerned with the future costs of medical care, retirement programs, and a host of public and private services that must be adapted to an older population."
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Debt Ceiling and Budget Cuts Take Center Stage
Tweet Share on Facebook June 27, 2011 Comment (3)Congress and the White House are negotiating down to the wire about raising the nation's debt ceiling. At the center of the discussions are big budget cuts and the prospect of serious reductions to key senior entitlement programs. Virtually all independent experts agree that such cuts must be part of any successful effort to get enormous federal deficits under control. But there the agreement and often the discussion end.
[See 10 Steps to Fine-Tune Your Retirement Plan.]
AARP and literally hundreds of other senior groups have turned up the volume and the heat to oppose either any cuts to Social Security or Medicare, or any "unfair" cuts. The definition of a "fair" cut is very much in the eye of the beholder. When AARP recently opened the door to the possibility of future reductions to Social Security, smaller senior support groups began attacking it like a school of piranhas.
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How to Tune Up Your Retirement Plan
Tweet Share on Facebook June 24, 2011 CommentDeveloping a solid retirement plan is hard work, so congratulations if you've put together the elements of a plan. Surveys show that most Americans do not have a well-conceived idea of their retirement years: when they will retire, how they will afford it, how they will achieve life goals, and the like.
Instead, we all too often fall into accidental retirements. It may be a health problem that takes us there, dramatically affecting our activities, including pulling in a paycheck. Or we may lose a job and find ourselves effectively forced into retirement. Even if we're not exposed to these problems, they may befall a spouse, parent, or other loved one, making our own retirement the best solution to a bad situation.
[In Pictures: 10 Steps to Fine-Tune Your Retirement Plan.]
Here are the major elements of a tune-up for your retirement plan. You should review these items regularly as your situation changes, but it's a good idea to formally update your plan at least annually, and more often as your retirement date nears. The two primary elements of your retirement that need attention are your money and your home.
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Reverse Mortgage Problems Raising Red Flags
Tweet Share on Facebook June 22, 2011 Comment (10)The government-insured reverse mortgage program is struggling with a host of serious problems. The loans, available only to homeowners at least 62 years old, are designed to help people use the equity in their home to pay off any mortgage debt, tap a portion of any remaining equity, and live mortgage-free in their home for the rest of their life, should they choose.
Reverse mortgages have been controversial, however, due to high loan and insurance fees and because some lenders convinced seniors several years ago to spend loan proceeds on inappropriate investments.
[See the Top 10 Individual Tax Breaks.]
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When Downsizing, Renting Often Beats Buying
Tweet Share on Facebook June 20, 2011 Comment (6)One of the financial cornerstones of many successful retirements is paying off mortgage debt before leaving the workforce. Life on a fixed income is a lot easier if you're not making that big payment every month to a bank or other home lender.
That's easier said than done in today's market. Still, many people with mortgages seek to sell their homes and live mortgage-free in a smaller, less expensive home during their retirement years. If this transition might be in your future, it makes sense to carefully consider whether you should buy or rent your new home. Renting looks better than you might think.
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Protecting Senior Benefits Puts Medicaid at Risk
Tweet Share on Facebook June 16, 2011 Comment (13)Medicaid cuts are reportedly under serious consideration to help reduce federal budget deficits and win enough Congressional support to raise the nation's debt ceiling. According to news accounts of negotiations with Congressional leaders being led by Vice President Joe Biden, cutting Medicaid healthcare benefits is considered more politically feasible than going after Social Security or Medicare.
The political equation is simple. A high percentage of older Americans turn out to vote, and the numbers of voters who receive Social Security and Medicare is soaring. By contrast, Medicaid recipients, who are poor and include many children, tend not to vote. Medicaid is also at risk because the state-federal funding rules for the program are contributing to big budget problems in statehouses throughout the country.
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ETFs Slowly Moving Into 401(k) Plans
Tweet Share on Facebook June 15, 2011 CommentExchange-traded funds are slowly making their way into 401(k) offerings, according to a new report from BrightScope, a firm that evaluates 401(k) plans. ETFs are still a very small presence in the huge retirement-fund business. But Brightscope predicted dramatic growth for the low-fee funds in retirement plans as it released its first list of the 20 ETFs most prevalent in 401(k) plans. ETFs from Vanguard and iShares, a unit of Black Rock, dominate the group.
[See 50 Best Funds for the Everyday Investor.]
ETFs have become increasingly popular among investors. Like index mutual funds, ETFs tend to be passively managed funds that track major market indexes. Both ETFs and index funds have very low fees, and ETFs also are favored by many active investors because they can be bought and sold like stocks throughout the trading day. Index mutual funds, by contrast, can only be bought or sold once each trading day after markets have closed.
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When to Convert Your Savings Into an Annuity
Tweet Share on Facebook June 13, 2011 Comment (1)The stock market remains the most attractive place for most investors over the long term, beating out bonds and other low-risk investments. However, to earn those higher returns, investors face more volatility. Last week's string of losses is a case in point, lest anyone has forgotten the market plunge of 2007 and 2008.
Many older investors simply didn't have enough time before retirement to risk a big loss. Even investors who are confident they can earn superior returns from stocks may reach a point where they want to lock in some of their gains in case the markets turn fickle.
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Why Working Longer Won't Close Retirement Shortfalls
Tweet Share on Facebook June 10, 2011 Comment (5)Deferring retirement, even for several years, won't guarantee even a bare-bones retirement for millions of older Americans, according to a detailed study by the Employee Benefit and Research Institute (EBRI). In fact, the lowest-earning 25 percent of Americans would have to work until age 84 so that 90 percent of them would have even a 50-50 chance of having enough money to afford basic living expenses and out-of-pocket medical care.
As Congress wrestles with enormous budget deficits and possible cuts to big safety-net programs, the shaky state of retirement finances shows that millions of people near retirement age have no cushion to absorb even modest benefit cuts.
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The Secret to Sharply Cutting 401(k) Fees
Tweet Share on Facebook June 8, 2011 CommentAverage 401(k) plan participants currently pay more than 1.5 percent of their accounts' asset values in fees each year to the companies that provide the plans with investment management, record keeping, and advisory services.
That number comes from industry data cited by Jim McCool, executive vice president of institutional services for Charles Schwab. Compared with firms like Fidelity and Vanguard, Schwab is not a big player in 401(k) plans. But it would like to be, and McCool believes the path to success will come from cutting that 1.5 percent (it's actually 155 basis points, or 1.55 percent) to about 0.6 percent, or 60 basis points.
