Retirement Planning: Just Tell Me What to Do!      

by Steve Vernon, FSA

I constantly urge people to take the necessary time to plan for retirement, and I encourage people to hang in there. While it can take many hours to do the job right, it really will be worth it in the end.

In spite of my encouraging words, however, a common response I hear is, "Steve, just tell me what to do! I just don't have the time to figure it out. It's all Greek to me, and I don't want to screw it up."

This typical response has inspired me to create a new series of blog posts, where I'll describe some strategies you can use to generate a retirement paycheck that are simple to understand and implement. If you follow these strategies, you'll enjoy a retirement income that you can't outlive, while protecting a large part of your savings against inflation.  

The first post kicks off the series and describes simple strategies for getting the most out of Social Security and pension benefits. The second post explains my overall strategy for turning your IRA and 401(k) balances into a lifetime retirement paycheck; subsequent posts provide details on using managed payouts and immediate annuities to generate a retirement income.

Please keep reading for this month's selections of helpful blog posts and articles on retirement. And by the way, you didn't miss the May issue of my newsletter: I was distracted -- in a good way -- by the two-week vacation I spent visiting my daughter, who now lives and works in Europe, and a one-week business trip to the East Coast. This newsletter contains more articles than my usual newsletter, so hopefully I've made up for my absence!

My wife and I recently had dinner with my 91-year-old mother, who has now been retired for 31 years (more than one-third of her life!). She retired from her teaching job in 1981 when my father also retired from his career as a professor at the University of Southern California (he passed away in 2005). Since my mother retired, she has lived through four major blowups in the U.S. economy: the stock market crash in 1987, the savings and loan meltdowns in the early 1990s, the tech bubble that burst at the beginning of this century, and the 2008 - 2009 stock market crash and ensuing Great Recession.

At dinner, we discussed the latest economic headlines and wondered if my mother just might experience her fifth economic meltdown. We also reviewed her finances to make sure they would weather another storm. I'm confident she'll do just fine, but there's plenty we can all learn from her experience. Read here for details.

Three Ways to Boost Your Retirement Income

It's been widely accepted as retirement planning gospel that your retirement income needs to increase to account for inflation. Indeed, many experts say the natural rise in the cost of living means that the monthly income you collect early on may not be enough to cover your living expenses in your later years. But is that necessarily so? Is it prudent or irresponsible to spend more in your early years of retirement -- your sixties and seventies -- assuming that you'll actually spend less in your eighties and nineties? Read here to find out.

Now that 401(k) and other defined contribution plans are the primary type of retirement plans in the U.S., the big challenge for financial planners is helping employees generate a reliable, lifetime income from their retirement savings. According to a recent survey of more than 500 large employers by HR consulting firm Aon Hewitt, help might be on the way in the form of your 401(k) plan. This post explores the slow-moving trend of employers adding retirement income options to their 401(k) plans. A subsequent post reviews Hueler's Income Solutions, a cost-effective annuity shopping service that enables you to construct a "do it yourself" pension.

Twice each year, Standard & Poor's puts out its active vs. passive investor scorecard, reporting on how actively managed funds have done against their respective benchmark indexes. Every time, the results are pretty much the same, demonstrating that active management is a loser's game. For details, see this blog post from fellow CBS MoneyWatch blogger Larry Swedroe.

Americans now view age 67 as the age at which they expect to retire, according to a recent poll by Gallup. This is up from age 66 a year ago, age 63 a decade ago, and age 60 in the mid-1990s. Yet many Americans feel stuck at their jobs, unable to retire, and grouse that "Work sucks, but I need the bucks." This phrase gives you a two-step strategy for retirement satisfaction:

1. Don't do work that sucks

2. Need fewer bucks

While that's easier said than done, of course, it vividly tells you what you need to focus on. So let's see how you might actually make this two-step strategy work with my recent posts (the links are included above).

Rolling Your 401(k) to an IRA? Think  

Twice      

Drive through town these days, and you're almost certain to see ads and billboards advising the following: If you quit your job, take that 401(k) balance and roll it over to an IRA. So is it really a good idea to roll over your 401(k)? Better think twice: Your best bet may be to leave that money with your employer.