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Use Online Retirement Calculators to Check Your Work
Welcome back! If you’ve read my blog posts up to this point, you should have a pretty fair idea of your financial fitness for retirement: Do you (or will you) have enough money to retire (see this post); How should you manage your money once you stop working (see this post); When should you begin taking social security retirement benefits (see this post and this one); and How can you protect yourself from things that might go wrong (read this post)? You may have reassured yourself that you’re financially on track, or perhaps you’ve identified some weaknesses in your plan that need shoring up. But how do you know you…
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What Could Go Wrong – Part II
Welcome back! In this post, we continue talking about the financial shocks that could derail your retirement – and what you can do to protect yourself. Read the first post here. Long-term care We left off the last post with a discussion of the importance of good health insurance – fortunately largely covered by Medicare for most people over 65 (and by Obamacare for those under). But what about long-term care? If you’re 65, there’s a 50/50 chance you’ll need it someday. It’s not cheap; the median cost is $85,800 per year for care in a nursing home, although there’s significant variation by state (average cost in Texas is $54,800,…
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Retirement – What Could Go Wrong?
You’ve worked hard for 30 or 40 years, raised a bunch of kids and launched them into adulthood, and now you’re excited to embark on the next phase in your life – stepping back from the daily grind, traveling to far-off lands, having time to enjoy your hobbies, and trying new things. You’ve managed to accumulate a tidy nest egg and, with Social Security, don’t anticipate needing to withdraw more than 4% of it per year. (Bill Bengen would be proud!) Your mortgage is paid off, you have a plan for the future, and you’re still in love with your spouse. Things look good. What could possibly go wrong? Unfortunately,…
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Social Security for Couples – It’s Complicated
Welcome back to Retirement Hangout! I recently turned 66 – Full Retirement Age for receiving Social Security retirement benefits. Inspired by this milestone, I decided to check out several free social security calculators even though I plan to defer benefits until I’m 70. Today’s post explores some of the thought-provoking results I found. As we all know, a successful relationship requires hard work; it turns out that this includes financial decision-making about when to take social security. Couples need to coordinate their social security retirement benefits to optimize their joint financial welfare. Exactly how they do this and what they decide will vary according to each couple’s circumstances, health, aversion…
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Should I Use a Bucket Strategy in Retirement?
When you hear the term “bucket,” do you get a far-away look and daydream about climbing Mt. Kilimanjaro, learning to play the flamenco guitar, or communing with century-old Galapagos tortoises? Or do you furrow your brow and try to recall what that financial adviser you met with a year or so ago was talking about? While it behooves us all to consider what we’d like to do while on this earthly realm, this post focuses on the second, more prosaic question – the use of buckets as a way to manage a retirement portfolio. What exactly is a bucket strategy? There are many variations on the bucket theme (approximately as…
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How Should I Invest Now That I’m Retired?
What’s the best way to invest your savings once you’re no longer drawing a paycheck? Should you keep a high proportion of your investments in stocks, as you probably did while saving for retirement? Should the rest be in bonds (wait — aren’t they losing money right now)? And how big an emergency fund do you need? Read on, dear reader, for answers to these important questions. Timeless Advice from Investment Giants Let’s begin with a Warren Buffet tale. (It’s fortunate he exists; if he didn’t, we would have to invent an apocryphal Warren-like character to illustrate financial truths in a folksy style.) In 2007, he made a bet with…
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Managing Money in Retirement IV: A Simple Withdrawal Strategy Works Best
This is the fourth of a series of posts on retirement withdrawal strategies. If you haven’t read Managing Money in Retirement I, II and III, you may want to read them first. In previous posts, we reviewed the sustainable withdrawal rate (SWR) and safety first schools of retirement planning, one focusing on portfolio withdrawals that will work through thick and thin, the other on establishing reliable income for essential needs. We worked our way through the options for building a fail-safe source of lifetime income – perhaps the floor of a floor-and-upside retirement strategy. Delayed social security and pensions fit the bill, other mechanisms have their pluses and minuses. Is…
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Managing Money in Retirement III: One Annuity You Should Buy
This is the third of a series of posts on retirement withdrawal strategies. If you haven’t read Managing Money in Retirement I and II, please read them first! In the last post, we explored the options for generating a lifetime income, something most retirees would find desirable and reassuring. Social security fits the bill, but may not be sufficient to cover essential expenses. Most people today don’t receive pensions, and the other options – bond ladders and annuities – have significant disadvantages (as well as some attractive features). But there is one source of lifetime income that stands out from the pack. An annuity that is a good deal Most…
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Managing Money in Retirement II: Income for a Lifetime
This is the second of a series of posts on retirement withdrawal strategies. If you haven’t read Managing Money in Retirement I, please read it first! Most of us would feel more comfortable having a reliable source of income in retirement — at least enough to cover our essential needs – rather than being completely at the mercy of uncertain investments in stocks, bonds, real estate or more exotic things. As a practical matter, though, how can we go about building the floor of a floor-and-upside strategy? First, let’s define what we’d like in the ideal world. The best source of income would be an inflation-indexed payment, lasting for…
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Managing Money in Retirement I: How Much Can I Withdraw?
Welcome back, and Happy New Year! My first posts covered how much to save for retirement. In the next several posts, I explore how to manage savings and withdrawals once you’re in retirement. OK, so you’ve made the break, attended your last office party, and are no longer punching a clock. How should you handle your savings? How much can you withdraw and spend every year? Wait a minute, you say – didn’t the last couple of blogs already answer that question? Why not withdraw 4% of your savings in the first year, then increase that with inflation each year to keep the purchasing power the same? Well, you would…