Looking ahead ... Todd and Karen Eldridge. Photo: Jon Reid

An entire industry has grown around telling you how poor you'll be in retirement. As if you need reminding.

As a rough rule of thumb, $1 million at 65 (or about $1.25 million at 60) will give a comfortable lifestyle, which the Association of Superannuation Funds of Australia (ASFA) retirement standard says is $55,080 a year after tax.

But it depends on what you earned in the meantime because that will determine what you consider comfortable, whether you've paid off the mortgage, expect an inheritance, are going to downsize your home or move interstate, and how long you live.

On course Mark and Erica Kirby may need to salary sacrifice into super. Photo: Simon Alekna

Super is a great tax break but isn't the be-all and end-all of a decent retirement, either.

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Under the seniors and pensioners tax offset (forever destined to be called SAPTO), a retired couple over 65 could earn up to $57,948 a year without paying a single cent in tax.

That's more than twice the ordinary tax-free threshold.

Options ... Dennis Maddock. Photo: Alex Ellinghausen

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Retirement reality check

We asked:

Among the bills that moved through Congress last week is one allowing for phased retirement for federal workers. Would such a program, which would allow employees to work part time after retirement, with their salaries and annuities prorated help or hurt agencies? Would you participate in the program?

You said:

I would consider this option. It seems that it would benefit both the agency and the retiree with the transition. When all you know is to get up and go to work every day, then you do not have that [retirement] focus (unless you are fortunate enough to not be a widow/widower and have plans with your mate in retirement). The finality of retirement would be less.

Plus, knowledge and experience sometimes just cant be written in a continuity book!

I work for the Department of Defense with the Air Force and have for the past 28 years.

Katherine N. Lane

resource adviser

Moody Air Force Base, Ga.

I think this is a great idea. It is a win-win. The individual can prepare for retirement at his own pace. The agency benefits because they can still tap into the knowledge that the individual has. This will help agencies from making mistakes that they solved years ago but there is nobody left to remember that solution. Additionally, the agency can have the part time retiree mentor the new people coming into the agency. The agency has a vacancy and can hire a person to do those duties while the retiree mentors him.

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Federal workers: phased retirement sounds good

As kids, they sat on gas lines in the backs of their parents' cars. As young adults, they saw the stock market crash, and when it finally came time to settle down, they bought a house at the peak of the housing bubble and then were faced with the worst economy since the Great Depression. It's no shock that Generation X - those born from 1965 to 1981 - may get short changed in their golden years.

Though they've watched parents and grandparents nestled with pensions, Social Security and strong economic growth, these are no longer guarantees. On the other hand, longer life spans with more medical bills and greater need for cash are the reality for many.

Gen X is the first generation to deal with the fact that the models of American retirement are changing - and its members are flustered. The generation once called "slackers" has been true to form with retirement planning.

"Gen X is a transition generation," says Carol O'Rourke, a certified financial planner and Executive Director for the Coalition for Debtor Education in New York City. "Gen Xers were young during the tech bubble, and when they came of age, housing was a lot more expensive. With all the talk about whether Social Security is going to survive, there is a sense of not having something to look forward to."

According to a 2012 Insured Retirement Institute , IRI, report, only one-third of Gen Xers are "very confident" about having enough money to live comfortably during retirement, cover their medical expenses, and pay for their children's higher education.

Just 41 percent of the group have tried to figure out how much money they will ultimately need to save for retirement, and among those who have saved, half have amassed less than $100,000.

"Even though they have a longer time horizon toward retirement, there has been a tremendous emotional impact on their confidence in the future. What are they going to do to be sure that they have enough?" adds Cathy Weatherford, IRI president and CEO.

Along the same lines, a November 2011 report from the Guardian Life Insurance Company of found 82 percent of Xers believe the economy is headed in the wrong direction.

Skepticism is one of the defining X characteristics, says Robert Wendover, managing director at the Center for Generational Studies in Littleton, Colo.

"Many of the institutions that they were taught as children didn't play out, whether it was political or social or economic. They just kind of unraveled for a variety of reasons," says Wendover.

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Retirement May Be Mission Impossible for Gen X

COLUMBIA A new law signed last week by Gov. Nikki Haley will cut $2 billion from South Carolinas $15 billion retirement shortfall and eliminate it completely by 2044, according to a recently released analysis.

The law makes it difficult for public employees to retire early, forcing them to work longer, and means less money will be withdrawn from the states $25 billion retirement fund. Without changes, taxpayers would have had to increase their annual contributions to the system by nearly 4percent, or about $337 million, according to the most current payroll information. Because the changes make the retirement system stronger financially, taxpayers will have to increase their contributions by 0.42 percent, or about $39.4 million. The state can spend that $300 million difference on other things.

Thats huge, said Rep. Brian White, R-Anderson and chairman of the House Ways and Means Committee. Thats what we were after.

Accountants estimate that the states $25 billion retirement fund will run out of money over the next 30 years, falling about $15billion short. The retirement fund has three sources: investment returns, employee contributions and taxpayer contributions. The funds shortfall was increasing every year for two reasons: poor investment returns and people retiring earlier while living longer.

Lawmakers have now addressed those issues. Last summer, the State Budget and Control Board lowered the projected investment return on the retirement fund to 7.5 percent from 8percent. The new law limits some popular retirement incentives that encouraged public employees to retire early, including:

Eliminating the TERI program: TERI, short for Teacher and Employee Retirement Incentive, allowed workers to retire and continue working for up to five years, receiving a retirement check and a paycheck at the same time. The program will be phased out gradually, closing for good on June 30, 2018.

Restricting the states return-to-work program:. Beginning in January, if employees retire and return to work at their same job, they will have to forfeit their retirement checks once they earn $10,000 in salary in one year.

Making it tougher to retire early because of a disability: The law adopts the federal Social Security standards, which are more difficult to meet than the state standards. This does not take effect until Dec. 31, 2013.

Police officers and firefighters are upset about the disability changes. They have more dangerous jobs than the average state employee and have a higher rate of disability retirements. That is why lawmakers delayed the disability changes for 17 months, allowing time to come up with another solution during the next legislative session, which starts in January.

We focused so much on the retirement aspect of it weve not really ... had the time to devote to that (disability) issue, said Sen. Thomas Alexander, R-Oconee and one of the authors of the retirement bill. I think what weve done is given the directive to the (retirement) department to study for these next six months and bring us back some recommendations by January.

Excerpt from:
Analysis: S.C. retirement reform will make fund solvent

Investing wisdom sometimes comes from unlikely sources. Tess Wilkinson-Ryan and Jill Fisch are both law professors at the University of Pennsylvania Law School. Their recently published paper, An Experiment on Mutual Fund Fees in Retirement Investing, attempts to answer a vexing question: Why do investors ignore the impact of fund fees when making investment decisions?

With the decline of defined-benefit plans and the rise of 401(k) plans, investment decisions are being made more by individuals and less by professional investment managers. The SEC requires that investors in mutual funds be given a staggering amount of information. Unfortunately, many investors are confused and overwhelmed. This is one reason why the authors of this study accurately refer to "the phenomenon of systematic under-attention to mutual fund fees".

This is a "phenomenon" because, as the study notes, everyone from the director of mutual fund research at Morningstar to former SEC Chair Arthur Levitt agrees that the management fees charged by mutual funds (expressed as expense ratios) can dramatically affect the returns of the fund.

Expense ratios are expressed as a percentage of assets (as low as 0.1 percent up to 2.5 percent) which makes them seem less consequential. This is misleading. An investment of $10,000 with an average annualized gain of 10 percent would grow to $152,203 if the fund had an expense ratio of 0.5 percent. If the expense ratio was 1 percent, the fund would be worth $132,677--a difference of $41,817.

The study found that investors routinely underestimate the effect of fees on their returns. In a series of experiments, the authors were able to change this behavior by explicitly explaining to the subjects the importance of fees. This information caused those in the study to incorporate fee information into their investment choices. The study concludes that presenting fee information "simply and transparently" and educating investors about the impact of fees has the desired effect of helping investors make decisions likely to yield higher returns.

The typical expense ratio for an actively managed fund (where the fund manager attempts to beat a designated benchmark, like the S&P 500 index) is 1.5 percent. Compare this cost to the typical index fund (where the fund manager attempts to replicate the performance of an index, minus fees) cost of approximately 0.25 percent. If you pay attention to the conclusion in this study, you would select index funds over comparable actively-managed funds, based on the difference in cost.

Is this analysis too simplistic? Not according to Standard & Poors. It compares the performance of actively-managed funds to index funds in a scorecard published twice a year. At the end of 2011, it found the majority of active stock and bond managers underperformed comparable benchmark indexes over a five-year horizon.

Investing does not have to be complex. If you focus on fees and purchase a globally diversified portfolio of low management fee stock and bond index funds in an asset allocation suitable for you, you will have made a decision likely to improve your returns. In stark contrast, owning actively managed mutual funds is likely to lessen your returns and make your retirement goals more difficult to attain.

Dan Solin is a senior vice president of Index Funds Advisors. He is the New York Times bestselling author of The Smartest Investment Book You'll Ever Read, The Smartest 401(k) Book You'll Ever Read, The Smartest Retirement Book You'll Ever Read, and The Smartest Portfolio You'll Ever Own. His new book, The Smartest Money Book You'll Ever Read, was published on December 27, 2011.

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

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These Mutual Funds Can Ruin Your Retirement Plans

A new law signed last week by Gov. Nikki Haley will cut $2 billion from South Carolinas $15 billion retirement shortfall and eliminate it completely by 2044, according to a recently released analysis.

The new law makes it difficult for public employees to retire early, which forces them to work longer and means less money will be withdrawn from the states $25 billion retirement fund. Without the changes, taxpayers would have had to increase their annual contributions to the system by nearly 4 percent, or about $337 million, according to the most current payroll information. But because the changes make the retirement system more financially strong, taxpayers will have to increase their contributions by 0.42 percent, or about $39.4 million. That means they can spend that $300 million difference on other things.

Thats huge, said Rep. Brian White, R-Anderson and chairman of the House Ways and Means Committee. Thats what we were after.

Video from around the world

Accountants estimate the states $25 billion retirement fund will run out of money sometime over the next 30 years, falling about $15 billion short. The retirement fund has three sources: investment returns, employee contributions and taxpayer contributions. The funds shortfall was getting larger every year because of two problems: poor investment returns and people retiring earlier while living longer.

Lawmakers have now addressed those issues. Last summer, the State Budget and Control Board lowered the projected investment return on the retirement fund to 7.5 percent from 8 percent. And the new law eliminates some popular retirement incentives that encouraged public employees to retire early, including:

Eliminating the TERI program. TERI, short for Teacher and Employee Retirement Incentive, allowed workers to retire and continue working for up to five years, receiving a retirement check and a paycheck at the same time. The program will be phased out gradually, closing for good on June 30, 2018.

Restricting the states return-to-work program. Beginning in January, if employees retire and return to work at their same job, they will have to forfeit their retirement checks once they earn $10,000 in salary in one year.

Making it tougher to retire early because of a disability. The law adopts the federal Social Security standards, which are more difficult to meet than the existing state standards. This does not take effect until Dec. 31, 2013.

Police officers and firefighters are upset about the disability changes. They have more dangerous jobs than the average state employe and have a higher rate of disability retirements. That is why lawmakers delayed the disability changes for nearly two years.

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Retirement bill to save billions, end shortfall

Fears that baby boomers havent saved enough for retirement are constantly dominating headlines, but theres also the flipside of that problem that can also be a financial disaster: outliving our savings.

According to a recent study by Ernst & Young, almost three out of five new middle-class retirees will outlive their financial assets if they attempt to maintain their pre-retirement standard of living. Finding the right spending balance and developing a financial plan leading up to and in retirement is an arduous process and often requires assistance from a professional.

When choosing a financial expert, its important to check their credentialsbut where do we begin looking? To help boomers find a pro to help evaluate and plan their retirement picture, The American College launched The Retirement Income Certified Professional (RICP) credential will help advisors master retirement income planning. I had a chance to speak with Director of the New York Life Center for Retirement Income at The American College David Littell, who is in charge of designing the program curriculum. Here is what he had to say:

Boomer: What is the Retirement Income Certified Professional (RICP) credential and how will it help advisors with retirement income planning?

Littell: The RICP is an advanced professional designation for financial advisors who assist clients with retirement income planning. It helps advisors address the specific tasks, such as when to retire, choosing a claiming age for Social Security benefits, how to elect company sponsored retirement benefits and how to convert assets into sustainable income during retirement. The program provides advisors with a comprehensive planning process, to help them create customized plans to meet their clients specific retirement goals.

Boomer. Whats included in the coursework consist and who is getting this designation?

Littell: Students are required to take three, college-level courses. The courses are online, self-study courses, followed by completion of a final exam at a testing center.

The first course (HS 353 Retirement Income Process, Strategies and Solutions) focuses on how to build a retirement income planwhat has to be considered, what steps are involved and what are some of the strategies and solutions to solve client problems. This course addresses new retirement risks like tax and legal issues that can undermine a plan, and some of the common approaches being used to generate income from assets.

The second course (HS 354 Sources of Retirement Income) reviews things like the Social Security claiming issue, distribution options from retirement plans, annuity products used in retirement income planning and building a retirement portfolio. The third course, (HS 355 Managing the Retirement Income Plan) begins with important retirement decisions including choosing appropriate Medicare and other health insurance options, addressing long-term-care needs and housing decisions. It also addresses retirement portfolio management and issues that arise as clients age.

To earn the designation students must also satisfy a three-year experience requirement, ongoing CE requirements and abide by the Colleges ethic pledge.

The rest is here:
Why Planning for Retirement is So Hard, and What to Do About It

By Susan Tompor

Many Baby Boomers head to work each day and wonder, "So what's the number?"

How many more years do they need to keep working? It turns out that if many of us could just keep working until age 70, we could be OK in retirement, according to a new study.

Sure, 70 isn't the magic number that most people want to hear. Even so, knowing any number might be reassuring, if you're worried that you'd never be able to stop working.

"My intention was to make people feel better," said Alicia Munnell, director of the Center for Retirement Research at Boston College.

After the Great Recession, more people fear the idea of retirement. But Munnell said many people will be able to retire - if they work a bit longer. "It's better to stay with your full-time job if you can," she said.

The trick is to delay dipping into savings as long as possible.

Munnell, a retirement expert, spoke to me by phone. I had to bring up a topic that's near and dear to many salaried auto retirees. What about those lump-sum offers?

A lump-sum payment in retirement is being offered to salaried retirees at General Motors and as early as August to many salaried retirees at Ford. (Not yet to hourly folks, but some say that could happen one day, too.)

She didn't mince words, calling the idea "terrible." She said she's hoping that retirees "don't fall for the trick" of accepting a lump sum.

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Working until 70 could ease retirement finances

Video Link: https://www.youtube.com/watch?v=32gOfOQcXNc

04-07-2012 14:15 - Cornwall Ontario Councilor Andre Rivette on Fitzpatrick Retirement PT 2

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Cornwall Ontario Councilor Andre Rivette on Fitzpatrick Retirement PT 2 - Video

Working a second, part-time job is a common way to pay down credit card debt or address unexpected bills. But today some middle-age savers are taking a second job for a different reason: to help boost lackluster retirement accounts.

"I see that more and more," says Mike Sena, a certified financial planner in Canton, GA. Sena has multiple clients who are putting the money from a second job into their retirement account because they feel they haven't saved enough to this point.

"For many people, retirement is still ages away and they say, 'I'll have time to take care of it,'" Sena says. But his clients with second jobs are opting to play catch-up in their 40s and 50s in hopes of not having to work past their retirement age.

David Bakke, 45, began working part-time at a restaurant nine months ago with a straightforward savings goal: $500,000 for retirement. Bakke makes $48,000 in his full-time job in the financial services sector, and earns about $1,000 a month after taxes from his restaurant job, which he invests in a mutual fund.

He also contributes 7 percent of his salary to a 401(k) plan and opened a Roth IRA five years ago. He tries to max out his annual contributions to both accounts.

"Working a side job is important to me because my previous level of contributions to my retirement savings would have left me short when I reached retirement age," Bakke says. "I used to simply set aside what I could for my retirement savings and hope that I would have enough money. However, after investigating my situation, I've realized that such an approach was not viable."

Last year he saved $12,000 for retirement. His goal this year is $20,000, which he expects to reach with his current contributions to the Roth, 401(k) and mutual fund. Without the extra job, he calculates that he'd only have about 65 percent of what he needed to enjoy a "decent" retirement.

A divorced father of a 5-year-old son, Bakke says that taking on another job caused other areas of his life to suffer at first, as he was able to spend with less time with his son and almost no time with friends. But he says he's since learned new time-management techniques that give him more free time, which he's written about as a contributor to the site MoneyCrashers.com.

Before retiring, Sena recommends to his clients that they have no consumer debt. He also suggests that they set aside 10 to 15 percent of their income for retirement annually before they consider paying down their mortgage or funding their children's college tuition.

While many retirement savers may be behind on their goals, only a fraction will have the work ethic needed to take on a second job to make up the gap. But for Bakke and others, the peace of mind that comes with a healthy nest egg is enough to make the extra hours worth it.

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Working a second job to save for retirement