What are you willing to give up now to save for retirement? Principal asked this question of its retirement plan participants who fall into the super saver category those who saved 90% to 100% of the 402(g) IRS max contributions or had a deferral percentage of 15% or higher in 2018.

Last updated: Nov. 1, 2019

The Principal survey found that among super savers, 43% drive older vehicles, 41% own modest homes and 41% travel less than they prefer. Another common sacrifice made by the savers is taking a DIY approach to projects and repairs, with 40% saying they opt to do things themselves instead of hiring outside help.

Just because youre focused on saving for retirement doesnt mean you have to live without little luxuries. Among super savers, 46% subscribed to Netflix, Hulu and other subscription entertainment services; 46% still splurged on travel and 39% said they dine out more than once or twice a week. As for making a daily Starbucks or Dunkin run, only 20% of super savers said they splurged on coffee on the go.

To find out what you should actually give up and whats OK to splurge on GOBankingRates asked financial experts what sacrifices people should be willing to make to save for the future. Here are the expenses they say you should cut out ASAP.

Although financial experts are divided over the issue of giving up your daily latte to save for future costs, some are firm believers that every little bit does count.

You should be willing to give up [having] coffee at the coffee shop instead of at home, said Ed Snyder, president and co-founder at Oaktree Financial Advisors, Inc., who views this expense as an extra. You only need what you need. People today have a difficult time understanding the difference between needs and wants.

Snyder explained why he believes giving up small things like coffee shop drinks, going out to eat regularly and shopping for things you dont need is worth it in the long run.

One dollar of expenses forgone today will grow to $7.60 in 30 years at [a] 7% [return rate], he said. For every dollar you waste today you are costing yourself almost $8 in retirement. Put another way, if these extra things cost you $100 a week, [thats] $5,200 a year. That would grow to over $38,000 at retirement.

You can certainly treat yourself every once in a while, but unnecessary luxuries shouldnt be a regular part of your spending.

Some of my clients get two to three massages per month, said Delano Saporu, founder and financial advisor at New Street Advisors Group. For someone still in a wealth-building phase, letting go of some higher-priced luxuries and supplementing with other items like a low-cost gym membership that has a spa might be a better answer.

Forty-three percent of super savers said they have driven older vehicles to save for retirement this is the most common sacrifice super savers have made to save. Craig Kirsner, author, speaker and president at Stuart Estate Planning Wealth Advisors,believes that this is a smart sacrifice to make.

After the first 12 months of ownership, you can lose more than 20% of the cars value due to depreciation. If you buy a two-year-old car with an extended warranty, you save 30% to 40%; over a lifetime that can add up to having substantially more retirement assets at age 65, Kirsner said.

Not only should you buy used cars, but you should also drive them for longer, saidMark Wilson, founder and president at MILE Wealth Management.

Extending your car ownership from five years to seven years will free up a lot of cash for retirement savings, he said. Lets say your average car payment is $400 a month. If you can go two extra years without that car payment and you stash away those funds for those extra years, that frees up $9,600 towards your nest egg.

If your family has two cars, Holly Andrews, managing director at KIS Finance, recommends getting rid of one to cut auto expenses in half.

The cost of running a car is very expensive when you take fuel, insurance, tax and maintenance into consideration, she said. Work out what the second car would have cost you over the course of the year and save that amount [for retirement].

Andrews acknowledges that this sacrifice might take some adjustment, but the long-term payoff could be worth it.

You will need to sit down and work out who needs to use the car when and for what purposes, and you may need to look into public [transportation] or carpools, but if this is a sacrifice you can make, it will save you a lot of money.

After driving an older car, owning a modest home was the most common sacrifice super savers made to save for retirement, the Principal survey found.

The easiest way to lower your expenses and save more for retirement is to buy a cheaper house, said David Ruedi, financial advisor and vice president at Ruedi Wealth Management. If you buy the biggest house you can afford, the mortgage will eat up most of your income. Frugal home purchases are one-time decisions that will significantly improve your cash flow forever, and will leave room for retirement saving and discretionary spending in other areas.

Ruedi also notes that if you buy a large house, the satisfaction of owning that home wears off quickly.

Research shows that people take their materialistic purchases for granted after some time passes, so youre not actually sacrificing your current happiness by cutting back, he said. If anything, a frugal home purchase will enhance your current happiness because youll have the peace of mind that comes from knowing youre in good financial shape.

When you get an unexpected bonus, your first instinct is probably to spend it on a splurge you wouldnt normally pay for. However,Jamie Hopkins, director of retirement research atCarson Group, said its important to change this mindset to save for retirement. He believes the key to retirement planning is to automate your contributions.

This means implementing strategies like sending bonus monies straight toward retirement and setting up automatic 401(k) contributions at work, said Hopkins. The more we can automate our savings the better off we are because we do not feel the pain of losing out on short-term consumption today. If every time I think about saving for retirement I have to make a conscious decision to forgo a current need, it will be much more difficult.

Nickolas R. Strain, senior wealth advisor and wealth advisory committee chair atHalbert Hargrove,said you dont need to go cold turkey and give up all splurges, but it is important to cut back on these expenses when you can.

Find little ways to save a little more money, he said. Go on vacation, but dont go on an international trip go within the U.S. where youll save on airfare.

If you save $200 a month on travel, youd save $2,400 per year, which would add up to $60,000 over a 25-year period before interest.

These kinds of sacrifices are doable for most people, said Strain.

Among super savers, not traveling as much as I prefer was tied with owning a modest home as the second-most common sacrifice they made in order to save for retirement.

Leslie H. Tayne, founder and head attorney at debt solutions law firm Tayne Law Group, said that buying something or doing something because of fear of missing out can wreck your retirement savings goals.

Whether youre over your fun budget, you catch yourself falling prey to the latest fashion ad or youre feeling the pressure to go out and spend all weekend, learn when to cut yourself off and just say no,' she said. Sometimes you just cant do it all, and saying no could be the best thing you did.

Among super savers, 15% reported that they told their friends and/or family no to common expenditures in order to save for retirement.

Although nearly half of the super savers surveyed by Principal said they splurged on entertainment subscriptions,Thanasi Panagiotakopoulos, principal and founder of LifeManaged, said you should be selective about the number of subscriptions youre signed up for and cut any that you can live without.

This day and age it is very easy to get signed up [for many] subscriptions because they are only $14.99 per month Netflix, Amazon, Spotify, gym memberships, food delivery services, apps on Apple devices, iCloud storage, etc., he said.

Panagiotakopoulos said you should take the time to think about each subscription and whether or not you are really using it.

For example, How often do you actually go to your gym? Is it part of your daily routine or do you just walk with your spouse and go on hikes? he said. [This is a] perfect example [of a suscription] that can be eliminated while still enjoying today.

One of the best ways to save money is to avoid spending money wherever you can, saidRyan Guina, founder of The Military Walletand Cash Money Life.

Bringing your lunch to work instead of eating out is one of the easiest ways to avoid spending money, he said. Finding those chances to save money and put it towards your retirement will make you a winner in the retirement game.

Its important to have a social life, but going out drinking can be an expensive habit.

If you get a drink with friends once a month, that can be as much as $100 per night totaling $1,200 in a year, saidChane Steiner, CEO ofCrediful. By cutting out this habit and putting that money in a savings account, you can add significantly to retirement.And it doesnt have to be that you never do these things, but they should be splurges, not regular events.

Get Help With Saving: 14 Completely Free, Easy-To-Use Budget Templates

The Principal survey found that40% of super savers opt to do DIY projects themselves instead of hiring outside help and 37% dont have a housecleaner. Andrews said that this is a good move to make to save more for retirement.

Having a housecleaner or getting your car valeted are luxuries in life and things that you could sacrifice if you really want to make a difference to your retirement savings, she said. Anything that you can do yourself, you shouldnt pay somebody else to do. If you have friends or family with certain skills, consider trading and doing things for each other for free.

Opting for store brands could save you a lot in the long term, said Andrews.

When it comes to grocery shopping, it can be very easy to get stuck in the habit of buying the same products and brands over and over again, she said. However, if you are prepared to do a little bit of experimenting and research, you could probably cut your shopping bill in half by sacrificing your premium brands for those that are half the price, but just as good.

Taking a cab or Uber might be faster than taking the bus or train, but its much more expensive.

Little things like taking a cab when public transport is just as easy or eating out five or more nights a week can add up over the course of the year, said Caleb Silver, editor-in-chief of Investopedia. While its nice to be able to treat yourself every now and then, just cutting those two splurges in half could save you $1,000 or more every year, which is just $83.33 a month. But $1,000 invested in the stock market over 10 years, assuming a 5% average annual return, turns into $1,629 in 10 years. Thats the magic ofcompound interest, and it only costs you $83.33 a month.

If youre not quite ready to buy a house but have enough money to rent your own place, living alone is certainly an appealing option. However, Logan Allec,CPA and owner of personal financesiteMoney Done Right, said that extra rent money is better off going into a retirement fund.

Many of us default to living in a nice place or getting rid of roommates as quickly as possible.While it does wonders for your quality of life, it does serious damage to your wallet, he said. Roommates can certainly be annoying, but they save you thousands of dollars per year.

Designer clothes and shoes are unnecessary luxuries. The money you save from buying lesser brands can be easily funneled into retirement savings instead.

Designer clothing may cost hundreds if not thousands of dollars for a single item, saidRobertGauvreau, CPA and founding partner ofGauvreau& Associates CPA. There are great designer-like options available that could substitute for these purchases, and can save you a significant amount.

Before swiping your credit card (or inputting your credit card number online), make sure your purchase is something thats actually within your budget. Spending above your means will put you into debt, and with the high-interest rates on credit cards, its hard to get out of it.

So many people make excessive purchases on their credit cards that they cant currently afford, forcing them into paying interest on a balance they cant pay off, said Gauvreau.With interest rates in excess of 20% annually, you can quickly put yourself in a costly situation where you are in debt and cant find a way out.

Jill Bradley, a Louisville, Kentucky-based financial advisor with Wells Fargo Advisors, said cutting back on expensive salon services like manicures, pedicures and hair coloring can make a big difference when it comes to retirement savings.

Consider less frequent visits to the nail salon women can spend thousands on this annually and not realize it, she said. As for hair color, Bradley said, To stretch the time between visits to the hair salon, purchase a box of root touch-up color and in 15 minutes, you can delay your salon visit another week or two.

One very important reason to save now and spend later is the time value of money,' saidGauvreau. The time value of money is the idea that money available now is worth more than the same amount in the future due to its potential earning capacity. This means that if you save and invest your money now, you will accumulate greater wealth and retirement savings due to earning investment income and continuing to invest and earn money off of these investments. Thus, saving now and spending later will allow us to create greater retirement savings that can ensure we are prepared for our retirement when that day arrives.

And once you reach that day, your future financial health is going to be completely reliant on your past behaviors.

Keep this in mind the next time you want to splurge on something: You can borrow money to put your kids through college, but you cannot borrow money for retirement, said Bradley. You must have saved those funds yourself over the years. This is precisely why you should get into the practice of saving for retirement versus splurging on unnecessary things.

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This article originally appeared on GOBankingRates.com: 19 Things Youll Need To Sacrifice Now for a Healthy Retirement

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19 Things Youll Need To Sacrifice Now for a Healthy Retirement - Yahoo Finance

What would a stock market crashed during your retirement years do your finances?

While few retirees or soon-to-be retirees ever stop to ask that question, they shouldunless their equity exposure is so low that a crash wouldnt materially impact their retirement financial plan. So for this column, Im using the 32nd anniversary of the 1987 crashwhich was officially celebrated on Oct. 19to ask the question for you.

Many dismiss the 1987 crash, the worst in U.S. stock market history, as a one-off eventwith no historical relevance. They furthermore add that, even if the market were otherwise wanting to crash, government safeguards that were put in place in recent years would prevent it from doing so. As you will see, I will argue that both of these arguments are wrong.

In making that bold assertion, I rely heavily on a study conducted a number of years ago called Institutional Investors and Stock Market Volatility, by Xavier Gabaix, a finance professor at Harvard University, and three scientists at Boston Universitys Center for Polymer Studies: H. Eugene Stanley; Parameswaran Gopikrishnan, and Vasiliki Plerou. They came up with a formula that predicts the frequency of stock market crashes over long periods of time.

Ill get to their formula in a minute, but notice thatif theyre rightcrashes are inevitable. We therefore are kidding ourselves if we think crashes are one-off events that will never reappear.

To appreciate what the professors found, imagine yourself retiring at age 65 with a life expectancy of 30 years. Using their formula, we can calculate the likelihood of a market crash during your retirement.

The accompanying chart reports the probabilities. Of course, the bigger the crash the lower the probability. But the odds of a huge crash are still high enough that you should expect at least one, and perhaps more, during your retirement.

Consider first a 15% daily drop which, at current levels for the Dow Jones Industrial Average DJIA, +1.11%, translates to a daily decline of around 4,000 points. According to the professors formula, theres a 67% chance that such a drop will occur at some point over your 30-year retirement.

Note carefully that this doesnt mean crashes of this magnitude occur like clockwork every so many years. The formula instead predicts what their average frequency will be over long periods. So its possible that you will see no 15% crash during your retirementor suffer through more than one. But for planning purposes you are on shaky ground if you have arranged your retirement finances on the assumption that such a crash will not occur.

What impact would a 15% daily drop in your stockholdings have on your retirement finances? Theres no one answer, of course, since it depends on the equity exposure of your portfolio and whether you have the flexibility to alter your spending when your portfolio loses significant value.

But the biggest impact of such a drop could very well be psychological, prompting some skittish retirees to go to cash. That could have terrible long-term consequences, of course, since the longer term performance of other asset classes is dismal. In the case of many segments of the bond market, for example, the expected return is negative in inflation-adjusted terms. So getting rid of equities could very well lead to a big drop in retirement spending.

The chart also shows the expected number of smaller crashes. Over the next 30 years, according to the professors formula, you should expect 18 daily drops of at least 5% equivalent to a drop of more than 1,300 Dow points. Thats a little more than one a year. (Over the last 30 years, its interesting to note, there have been 15 such daily dropsslightly lower than the formulas prediction but still remarkably close.)

Many of my clients, when presented with this data, insist that regulations and safeguards instituted by the government and stock exchanges will prevent crashes from occurring in the future. The researchers believe they are kidding themselves.

Thats because of why crashes occur in the first place, according to Professor Gabaix. They take place, he explained to me in an interview, because there inevitably will be occasions when, for any of a number reasons, large institutional investors will simultaneously want to get out of stocks. And when they want to get out, they will find ways of doing so.

Thats because the markets are globally interconnected and U.S. regulations are largely powerless to restrict sales outside the U.S. Take circuit breakers, trading halts and the like, for example. However effective they might be on U.S. exchanges, and many have serious doubts that they are, they in any case will be powerless to prevent the sales of U.S. stocks that are listed on foreign exchanges or via the short sale of stock-index futures contracts or options.

The bottom line? Retirees and soon-to-be retirees need to face squarely not just the possibility, but the probability, of one or more stock market crashes during their retirement years. This realization should in itself be a source of solace, so that you arent surprised when one does occur.

Furthermore, if you are the kind of investor who would be so psychologically scarred by a crash that you would want to go to cash if one did occur, then you should alter your retirement financial plan now so as to reduce and/or hedge your equity exposure.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. Hulbert can be reached at mark@hulbertratings.com.

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What are the odds the market will crash during your retirement years? - MarketWatch

Actor Tony Goldwyn said, "people are pretty chill and respectful on Twitter." And that may be true -- unless those people are millennials discussing retirement. A quick browse of tweets containing #millennialretirementplans reveals anything but a chill mindset. What you will find is a mix of sarcastic and anxiety-ridden predictions like "Work until you are death's door" and "The millennial retirement plan is dying."

A 2019 Wells Fargo retirement study reflects the same attitude. The study indicates that only 13% of millennials expect to rely on Social Security benefits as their primary income in retirement. In the study, 45% of millennials said they planned to rely on a 401(k) or an IRA as their primary source for paying retirement expenses. And without a Social Security cushion or a big savings balance, millennials don't see a clear path to retirement. In fact, just 55% of millennials said they are saving enough for retirement, according to the study. The remaining 45% are left, well, freaking out.

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Chances are, you don't love the idea of working indefinitely. But there is some good news. If you have a few decades left in the workforce, you can use that time to your advantage. And the bad news? You face tough choices today to secure those golden years tomorrow. Here's where to start.

In the simplest terms, the time value of money means that $1 today is worth more than $1 a year from now. The reason it's worth more is that you can invest that $1 and earn interest on it for the next 365 days.

Let's say you have $1,000. You decide to invest that cash in a fund earning 5%. After a year, you'll have earned $50, and your balance will be $1,050. After another year, assuming consistent earnings, you'll be sitting on $1,102 plus some change. The fun part is that $50 you earned in the first year is now earning interest too. Run this math out for 20 years and your nest egg grows to $2,653.30, without adding any more money to the pot. This is called compounding and it's the magic that makes investing work.

What if you forgo saving for a year, instead spending your $1,000 on a luxurious vacation? This hits you in three ways. First, you use your cash. Second, you miss an opportunity to earn an easy $50. And lastly, you miss out on the potential to earn 20 years of interest on that $50.

And debt works the opposite way. By charging living expenses to a high-interest credit card, you are tying up your future funds to pay off that primary debt plus the interest it racks up. This is part of why debt can get out of control quickly.

The takeaway is this: Save early and save often. It's just easier.

If monitoring your spending is among your least favorite things to do, you're not alone. Studies show that millennials make $411 in unbudgeted purchases each month. While that's not ideal, it is a potential goldmine for your retirement savings plan.

Set aside some free time to review your bank statements for the last two months. Highlight any purchases that were non-essentials, as these will point you to savings opportunities. Perhaps you could skip every other Food Truck Friday or take one fewer weekend trip every six months. Redirect that cash into your savings or investment account, and get it earning for you now.

There are plenty of budgeting apps to help get you started tracking your expenses.

It's also important to take a realistic look at your future income potential. If you're on a great career track at work and expect raises going forward, you'll have an easier time stashing money away. You should plan on increasing your savings deposits every time you get a raise.

But if your future income potential is less certain, it's crucial to be disciplined about your savings today. You might think about skipping Food Truck Fridays altogether or picking up a side gig on to pad your savings account.

If you have access to an employer-sponsored plan like a 401(k), make the most of it. Usually, the money you contribute to your 401(k) is both automatic and pre-tax -- meaning the money is taken straight from your paycheck and you don't pay income or payroll taxes on those contributions. Unless it's a Roth 401(k), you also aren't taxed on the earnings in the account until retirement.

Your regular, automatic deposits into the 401(k) will grow to a nice sum over 20 years. But you can earn even more by maxing out any employer-match. Employer-matching means your employer puts money in your account based on your own contribution activity. Some employers will match your contributions up to a certain percentage of your salary, and others will match up to a specific dollar amount. Either way, it's free money. Make it work for you by contributing at least enough to your 401(k) to max out those employer contributions. If you don't get your full match, you're leaving free money on the table.

Don't let those gloomy #millennialretirementplans tweets get you down. You have time on your side, and the sooner you start saving for retirement, the more fruitful the process will be.

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Freaking Out About Retirement? Do These 4 Things Now - Motley Fool

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Think people want government out of their lives? Heres a counterexample: Most Americans want the government to force them to save and to force employers to provide a retirement plan. The polling behind this view is so clear that I dont know why more politicians arent talking about it.

Part of the growing mountain of evidence that Americans want retirement mandates is the regular Natixis Investment Managers survey of retirement plan participants. Over half of those surveyed53%said it is the government's responsibility to provide universal access to a retirement savings plans. And 54% believe personal retirement plan contributions should be mandatory. Three-quarters of these workers want big government to force employers to provide pensions.

I am not surprised mandates are so popular. We are headed for a retirement disaster. Over half of Americans workers have no retirement plans and most will get to retirement with nothing but Social Security.

Workers seem to know they are in trouble and want the government to force them to save. One possible reason is that 401(k)-type plans are prone to early withdrawals that erode savings. A Natixis survey in 2015 found that more than a third of respondents admitted taking money out of their accounts before retirement and almost half took the money out when they changed jobs. A mandate helps preserve retirement security.

Surveys are not the only kind of evidence that suggests Americans want savings mandates.First, Social Security is a well-beloved government program. It is also a big government saving mandate. Proposals to expand Social Security are very popular among people of all ages and both political parties.

Second, when workers are unionizedand thus have a chance to tell employers how they want to be paidthey choose to have employers force them to divert cash wages to insurance and retirement plans. Union members rates of coverage in pension plans are three to six times higher than other workers.

Third, identifying as a saver helps form a positive identity. According to Gallup, Americans view themselves as being fiscally prudent: 59% say they view themselves as the type of person who enjoys saving more than spending. Another survey found that Americans understood the importance of savings, yet had significant stress over their ability to save. Fifty-one percent responded that saving money was their biggest cause of financial stress.

Fourth, psychologists show that certainty about having a stream of income for life diminishes anxiety and enhances well-being.

Fifth, additional polling suggests savings mandates in the U.S. would be popular. A global survey from 2006 found that, when given the choice, respondents in almost all of the 20 countries surveyed chose enforcement of additional private savings. Respondents chose mandates over options like increasing the retirement age, reducing pensions, and raising taxes.

Younger Americans especially appreciate mandates. The 2016 Natixis poll showed that 69% of Millennials, compared to 55% of Baby Boomers, believe individuals should be required to contribute toward retirement savings. And 82% of Millennials, compared to 77% of Generation X members, agree that employers should have to offer retirement plans.

This is no surprise. We give hardly anything to youth but they do have time. Young people would benefit most from mandates because a smallish contribution yields big returnsthe power of compound interest over time.A 30-year-old can save 5% of her income for 40 years to yield the same retirement replacement rate at 65 as does a 50 year-old saving over half of their income.

It is time for employers and policymakers to take action to help improve the odds that American workers are able to reach their retirement goals. Thankfully, U.S. policymakers have examples to look to abroad.

In the Melbourne Mercer Global Pension Index, a recent survey of global pension funds, the ones that came out best had mandated plans: Denmark and the Netherlands. Australias Superannuation program and New Zealands Kiwi Saver both require employer and employee contributions. Australia, Finland, Sweden, Norway, Canada, Switzerland, and Germany also ranked above the U.S.

It is no surprise the U.S. often does worse than Western Europe. But other countries that do better than the U.S. include Singapore, Ireland and Chile (the latter of which is currently witnessing massive protests over its pension system, among other issues). Why do so many countries beat the U.S.? You guessed it. Most of these nations have a mandatory second tier after a pay-as-you-go Social Security system. Many also have robust occupational pensions.

In short, we know what needs to be done, and we know that its popular. The only question is when policymakers will take the baton.

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Americans Want The Government To Force Them To Save - Forbes

Workers face many concerns as they prepare for retirement, but one of the most pressing is regarding Social Security. Nearly three-quarters (71%) of workers say they're worried Social Security won't be available to them once it's time to retire, a recent survey from Wells Fargo discovered.

With no shortage of gloom-and-doom headlines promising the program's demise, it's understandable to worry about the future. Especially if you're going to be depending on your benefits to help make ends meet in retirement, you may be concerned that you won't be able to afford to retire if Social Security is no longer around.

However, although the Social Security program has its fair share of troubles, there's no need to worry about its future. Here's why.

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You've likely heard that Social Security is bankrupt and that your future benefits are at risk. The good news, though, is that the program itself isn't going anywhere.

When you pay your Social Security taxes as an employee,that money isn't stored in an individual account just for you, which you can tap once you're ready to start claiming benefits. Rather, it's paid out to current retirees in the form of monthly benefit checks. Then once you're ready to retire, the checks you'll receive will be funded by younger workers' taxes.

That means that as long as workers continue paying their taxes, there will always be cash that can be paid out as benefits. In other words, the program is not on the verge of collapse, as many soon-to-be retirees are concerned about.

The not-so-good news, however, is that the program is facing a slight hiccup: There's currently not enough cash to go around. With baby boomers retiring en masse (to the tune of around 10,000 workers every day, according to Pew Research Center), a lot of money needs to be paid out as benefits. And with retirees living longer than ever, today's seniors are receiving more monthly checks than generations past.

As a result there's more money flowing out of the system than coming back in. To cover the shortage, the Social Security Administration has been dipping into its trust funds. However, those funds are expected to run dry by 2035, the most recent report from the Social Security Administration Board of Trustees revealed. Once those trust funds are depleted, the only money that will be available to pay out in benefits will be what comes in from taxes -- and it's currently estimated that future taxes will be enough to cover only around three-quarters of scheduled benefits.

There are a couple of potential solutions to the cash shortage plaguing the Social Security Administration. Congress could raise taxes, for instance, which would provide more money that can be paid out as benefits. Or the Social Security Administration could cut benefits because there's not enough money to go around.

Nobody knows exactly what will happen in the future, but if you're nearing retirement age, it's a good idea to be prepared for any possible scenario. If you're banking on being able to survive primarily on Social Security benefits and then realize your checks are going to be slashed by 25%, that could wreck your entire retirement plan.

One way to prepare for potential cuts is to bulk up your savings so you won't be forced to rely too heavily on Social Security. Your benefits are designed to replace only around 40% of your preretirement income anyway, so if you play it even more conservatively and assume they may make up only a small portion of your income once you retire, you won't be left in the lurch if your checks are reduced.

Another option is to take advantage of delayed retirement credits. If you claim benefits at your full retirement age (FRA), you'll receive the full benefit amount you're theoretically entitled to. But the Social Security Administration rewards those who delay claiming benefits until after their FRA, up until age 70. If you have a FRA of age 67 and you wait until age 70 to claim, for instance, you'll receive an additional 24% each month on top of your full amount. In the event that benefits are reduced, the boost you'd receive by waiting to claim can take the sting out of the cuts.

It can be frightening to think about the future of Social Security, but the positive news is that you'll still have some form of benefits to depend on once you retire. It may not be quite as much as you'd anticipated, but if you start adjusting your plan now to account for potential reductions, you can prepare yourself for any obstacles life throws your way.

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71% of Workers Are Worried About Social Security. Here's Why You Shouldn't Be - The Motley Fool

Having a sense of your retirement expenses is essential for crafting an accurate retirement plan, but it's not always easy to figure out. Who knows what kind of medical expenses you might incur or how much you'll spend on entertainment? You don't know how your lifestyle or interests might change between now and then.

There really is no way to solve that problem, but looking at averages can give you a jumping-off point for crafting your own retirement budget. A recent Employee Benefit Research Institute (EBRI) study looked at how households with adults in three age ranges -- 50 to 64, 65 to 74, and 75 and older -- spent their money over one year. Here's what it found.

Image source: Getty Images.

Housing costs tend to decrease over time. Individuals in the 50 to 64 range, many of whom are likely still working, spent $25,000 on average on housing in 2017, while those 65 to 74, many of whom have likely retired, spent just $21,000. Adults 75 and older spent the least on housing, at just $18,000. This could reflect an increasing number of adults paying off their mortgages over time or possibly downsizing to a more affordable living situation in retirement. The EBRI study found that while only 40% of 2016 homeowners aged 50 to 64 did not have a mortgage, that number rises to 60% for adults aged 65 to 74 and 79% for adults 75 and older.

Interestingly, housing costs still made up about 45% of household expenditures for all age ranges. This makes sense when you consider that total household expenditures tend to drop as people age, so while individuals are spending less on housing, it still takes up a similar proportion of their smaller overall budgets.

You would think that food spending would remain roughly the same for every group because regardless of your age, you still need to eat. But the EBRI survey found that food expenditures decrease as people age. Households with adults 50 to 64 spent an average of $5,100 on food in 2017, while those with adults 75 and older spent just $3,800. Those 65 to 74 fell in the middle at $4,400.

Healthcare is the one cost that people expect to rise in retirement, but interestingly, the EBRI survey found that average healthcare expenditures remained pretty constant for each age group -- around $4,000 in 2017. But median household healthcare expenditures do rise over time, as does the percentage of average annual spending on healthcare.

When you consider that the average household size decreases as people age yet healthcare spending remains constant, this fits in with our thinking that healthcare costs rise as we age. The Center for Medicare & Medicaid Services found that adults 65 and older spent nearly three times as much as working-age adults on healthcare in 2014, and while medical inflation hurts everyone, it hits those who require the most medical care the hardest.

Some older adults might also spend more on healthcare than their working-age counterparts because Medicare doesn't cover some of the services their workplace health insurance plan provided. Things like prescription drugs, hearing aids, and dental and vision coverage aren't included in Original Medicare, so seniors must either pay for these costs out of pocket or purchase supplemental coverage, which means another monthly healthcare payment.

Making efforts to remain healthy while you're young can help keep your healthcare costs lower, but you never know when an unexpected injury might sideline you, so it's best to plan for increased healthcare spending in retirement, even if you believe you're a healthy person.

Transportation expenses also decline as people age. Adults 50 to 64 spent the most at $7,600 on average, which makes sense when you consider that those who are still working have to travel back and forth to their office every day. Adults 65 to 74 spent just $5,300 on transportation, and adults 75 and older spent a mere $3,600, on average.

Clothing expenditures decrease slightly by age but remain fairly level when you consider that household size also tends to decrease with age. Adults 50 to 64 spent about $1,400, on average, on clothing while adults 75 or older spent just $1,100. Those in the middle spent $1,300. This makes sense because clothing is a necessity, regardless of your age.

Entertainment spending remained relatively constant for adults in the 50 to 64 and 65 to 74 age groups, with both spending about $5,400 on entertainment. If we assume that household size declines over this period, that indicates slightly increased spending on entertainment for 65- to 74-year-olds. This makes sense because new retirees have more time to devote to hobbies.

Entertainment costs declined among adults 75 and older. The EBRI survey found they spent just $3,600 on entertainment, on average. But the percentage of household expenditures on entertainment remained pretty close to the other age groups, dipping down to just 8.3% from 10.5% for 65- to 74-year-olds and 10.2% for the 50- to 64-year-olds.

The money people spend on gifts and charitable contributions actually increases as they age. The difference is slight. Adults 50 to 64 spent just $2,900 on this while adults 65 to 74 spent $3,000, and adults 75 and older spent $3,100. But when you consider that overall expenses tend to decline with age, the proportion of income spent on giving rises significantly.

The above figures can give you a baseline to gauge your basic expenses in retirement -- but remember, these are just averages. If you live in an expensive city, you might have to figure in more for housing. If you plan to enjoy a quiet retirement at home, you might not need to spend as much on entertainment. Use the above figures as a starting point, but adjust them up or down based on how you envision your senior years.

Once you have your estimates, you have to consider inflation, which will drive up the cost of all living expenses over time. The inflation rate varies from year to year, but 3% per year is a safe estimate. The above figures are all in 2017 dollars, and inflation in 2018 and 2019 to date has driven up costs by approximately 4.2%, so if you're using the above estimates, add 4.2% to get your estimated costs in 2019 dollars. Then add 3% for each year between now and your retirement to estimate how much your living expenses might cost you by the time you're ready to leave the workforce.

Keep in mind that your annual expenditures will probably decrease over the course of your retirement. You might use the above figures for the 65 to 74 age group to estimate costs in the early years of your retirement and the 75 and older estimates to plan for costs later on in your retirement. Then, add the two together to figure out your total retirement expenses.

You won't need to save all this money on your own because Social Security will cover some of it and your employer may offer a pension or a 401(k) match. If you're saving for retirement, your investments are also likely to grow between now and then, which will relieve some of the savings burden on you.

So don't panic if your total retirement expenses seem like more money than you can save on your own. Just focus on getting the most accurate estimate you can first and then go from there.

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How Will My Expenses Change Between Now and Retirement? - The Motley Fool

Do Texas legislators read what they vote for? Do they do their homework?

The passage of House Bill 2820 gives us reason to doubt.

Written by Rep. Dan Flynn, R-Van, and sponsored by Sen. Bryan Hughes, R-Mineola, the bill repealed the requirement for financial product sellers to register with the Teachers Retirement System. It also eliminated the already catastrophic 2.75% annual expense ceiling on products sold to teachers in their 403(b) accounts.

Basically, the new law declared open season in Texas. It put a target on the backs of 635,000 public school teachers and employees. It made Texas safe for investment predators. The likely result will be poorer retirements for teachers and a multitude of lawsuits that may eventually cost Texas taxpayers hundreds of millions.

Isnt this odd?

Nope. Its business as usual.

This isnt the first time Texas has refused to regulate financial products offered to Texas teachers. Seventeen years ago, another bill attempted to rein in the high expenses for teacher 403(b) products. An early version of that bill put limits on expenses and charges.

The limits never made it to the final bill. At the last minute, the Texas State Teachers Association objected to the changes. Hard to believe, but the organization did.

So vendors had to register, but expense charges werent reduced. Front- and back-end commissions werent eliminated. Surrender charges werent eliminated on most options. The only limit was a sky-high annual expense of 2.75%.

Now the requirement to register products has been removed. Even the very rich limitation of 2.75% in annual charges has been removed. The only good news is that teachers arent required to save through a 403(b) plan. They can invest elsewhere with better results.

Has something happened to make offering punitively high-cost retirement products in 403(b) plans (or anywhere) a good idea?

No. If anything, tolerance for consumer abuse has been disappearing everywhere but Texas. Beyond that, workers with 401(k) plans have enjoyed major improvement in plan menus and a long trend to lower expenses. We might ask, for instance, how Exxon Mobils 17,000 employees enjoy a 401(k) plan with expenses of 0.01% to 0.04%, while 635,000 Texas teachers and school employees must choose between thousands of options, many priced over 2% a year?

Beyond the 403(b) plans of Texas, the entire securities industry competes to lower costs. And I mean really lower them. It is now possible for consumers to buy exchange-traded index funds commission-free on platforms like Vanguard, Schwab and Fidelity. So while savers are in a new age of no-commissions and 0.05 percent annual cost IRAs, Texas teachers are corralled in 403(b) plans dominated by high-cost choices.

Some readers may be skeptical of reduced tolerance for consumer abuse. So consider this: Earlier this month, the Securities and Exchange Commission began an investigation into the sales practices for 403(b) plans in school districts. AFTER a recent SEC meeting, Dan Otter, the founder of 403bwise.org, told me: The SEC is really on this issue.

More recently, the New York State Department of Financial Services announced that it, too, is going to investigate sales of annuities to 403(b) accounts.

In fact, two research studies demonstrate that Texas legislation favoring unregulated vendors is exactly what should not be done. Both studies are public information. They are readily available as quick downloads, even to Texas legislators.

In 2010, the TIAA-CREF Institute published a paper comparing what it called open-access states (like Texas) to controlled-access states. In controlled-access states, providers must bid for access. The researchers found that expenses in the controlled-access states were half as high as in open-access states. They also said that long-term outcomes for teachers were likely to be massively better.

While open-access Texas had 54 providers, 172 products and 3,367 investment options in 2009, controlled-access Arizona had one provider, three products and 22 investment options. Iowa, another controlled-access state, had five providers, 10 products and 135 investment options.

Texas had an average expense of 1.75% a year. Thats double the 0.88% average expense in Arizona and the 0.85% average expense in Iowa.

The TIAA-CREF researchers calculated that the difference would materially improve the retirement income for teachers in lower-expense states.

Aon Hewitt, an investment-consulting firm, came to similar conclusions in a 2016 study, How 403(b) Plans are Wasting Nearly $10 Billion Annually, and What Can Be Done to Fix It. Its study suggested using controlled access and avoiding choice overload by having a limited menu of options in the plan. It also suggested an emphasis on target date and low-cost core index funds.

Texas is a poster child for choice overload, confusion and deceptive sales practices. The TIAA-CREF Institute found 3,367 investment options in 2010. Today the number of options is three times larger at 10,112.

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Bill declares open season on Texas teachers' retirement funds - The Dallas Morning News

Though retirement is an exciting milestone, it can be a major source of uncertainty. Living on a fixed income can introduce financial challenges, while declining health can cause not just money-related upheaval, but logistical trials as well.

It's not surprising, then, that 50% of older Americans worry about becoming a burden to their families as they age, according to a recently published Nationwide survey. If you share similar concerns, here are a few critical steps to take.

You need a plan for how you'll receive care should you require it to function as you get older. To this end, it helps to have honest conversations with loved ones in advance. Even if you have family members who live close by, you can't assume that they'll be willing to step up and offer the type of in-home support you might eventually need. Setting proper expectations can help you and your loved ones handle that transition once it comes to be.

IMAGE SOURCE: GETTY IMAGES.

If you don't have family members who are able or willing to become caregivers for you when you're older, then you'll need to outsource that task. Unfortunately, the costs involved could prove astronomical.

Here's what annual long-term care costs look like today, according to Genworth's 2019 Cost of Care Survey:

It's for this reason that long-term care insurance can serve as a lifeline when you're older. But if you wait too long to apply, you'll risk getting stuck with prohibitively expensive premiums, or getting denied altogether.

The best time to apply for a long-term care policy is during your early to-mid-50s. If you're relatively healthy at that point, you'll likely manage to not only get approved, but also snag a reasonable rate on your premiums.

Even with long-term care insurance, it pays to have extra money on hand to cover some of the expenses that aging might bring about. It's a good idea to boost your retirement savings as much as possible, and you can do so by taking advantage of catch-up contributions in your IRA or 401(k). Currently, workers 50 and older can set aside up to $7,000 a year in the former, and $25,000 a year in the latter. These limits are $1,000 and $6,000 higher, respectively, than the limits assigned to workers under the age of 50.

Here's how maxing out a retirement plan later in life might help you: If you're 60 years old with the intent of retiring at 67, maxing out an IRA for seven years will give you an additional $53,600 to work with in retirement, assuming your investments generate a conservative average annual 3% return during that time. Do the same for a 401(k), and you'll be sitting on an additional $191,600, assuming that same investment window and return.

If you're worried about burdening loved ones as you age, you're in good company. But if you make an effort to secure long-term care insurance and pad your savings, you'll be less reliant on family to take on the demands of caregiving.

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50% of Older Americans Share This Retirement Fear - The Motley Fool

If you've stashed most of your nest egg in your 401(k), the last thing you want is for taxes to blow up in your face when the time comes to start taking withdrawals.

Remember when you first started earning a decent salary, and it seemed as if everybody your parents, your boss, the nice lady in HR and, of course, your tax preparer all told you to put as much money as you could into your employers 401(k) plan?

Grab the employer match, they said. Get the growth that the market has to offer. And take advantage of the tax break, for crying out loud. Why not avoid paying taxes on that money now, while youre in a higher tax bracket, and worry about it later, when youre in retirement?

But what they didnt tell you then (because they probably didnt know) is that as you kept stuffing money into that tax-deferred account, you were chaining yourself to a ticking tax time bomb.

Because theres a good chance your tax rate wont be lower when you retire. And if you dont do something to help defuse the situation before you start withdrawing money from that 401(k) (or SEP IRA or 403(b)) for retirement income, you could be sending a sizable chunk of your nest egg to the IRS every year.

Dont think so? Here are just a few points to consider:

So, you basically have two choices. You can ignore the data, the trends and the experts, and see what happens. Or you can incorporate some tax strategies into your retirement plan now, bring some balance to your portfolio and maybe even get yourself to a tax rate of 0% with these steps:

As with most investment decisions, the right strategy for you will be based on your personal situation.

One option is to do a Roth IRA conversion moving money from a traditional IRA or 401(k), paying taxes on it at todays rates, then letting the funds grow inside the Roth knowing the principal and earnings will never be taxed again. You can do this all at once or, to keep the tax bite lower as you go, convert the funds over a period of years.

Another option is to take the money out of your tax-deferred account and put it into a cash value life insurance policy from which you can take policy loans tax-free. (This is a more complex strategy, however, with some risks, so its best done with the help of an experienced financial professional.)

No matter which strategy you choose, if youre concerned about the money thats piling up in your tax-deferred accounts, dont delay. Help defuse the ticking tax bomb before it can blow up your retirement plan.

Investing involves risk, including the potential loss of principal. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Policy loans and withdrawals will reduce available cash values and death benefits and may cause the policy to lapse or affect guarantees against lapse. In the event of a lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. Tax laws are subject to change and you should consult a tax professional. All withdrawals from qualified accounts are subject to ordinary income tax and, if taken prior to age 59, may be subject to a 10% federal additional tax.

Kim Franke-Folstad contributed to this article.

John Creekmur is the senior wealth adviser and co-founder of Creekmur Wealth Advisors (www.creekmurwealth.com). He is a CERTIFIED FINANCIAL PLANNER professional (CFP).

Comments are suppressed in compliance with industry guidelines. Click here to learn more and read more articles from the author.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Are Your Taxes Set to Explode in Retirement? (Strategies to Help Defuse the Problem) - Kiplinger's Personal Finance

When Jimmy Burrow decided to retire after three decades coaching football, he figured it would be worth it to watch his youngest son play football for LSU in person.

Like LSU itself, Jimmy Burrow got more than he could have ever imagined.

Joe Burrow is the nations No. 1 Heisman Trophy candidate on the nations No. 1-ranked college football team. And Jimmy Burrow, who grew up in neighboring Mississippi, is having no retirement remorse.

Obviously the only reason I retired was to be able to go watch Joe play and be with my wife, Robin, because she goes to every game, Jimmy Burrow said Thursday. I would have been happy and content to do that.

But there is so much more to this whole thing due to Joe and LSUs success that has all added to the fun for us.

Some of the media spotlight glaring on Joe has splintered off to his parents. Jimmy Burrow, who spent the past 14 seasons as defensive coordinator at Ohio University, is a weekly regular on the morning drive Off the Bench sports talk show on WNXX-FM 104.5 in Baton Rouge. Robin Burrow, an elementary school principal, was interviewed this week by Sports Illustrated.

We appreciate all the interest and support Joe is getting, Jimmy Burrow said.

The support extends to the small town of The Plains, Ohio, where the Burrows live. Right outside of Athens, where the Ohio University campus is, The Plains is about the same distance from Ohio States campus in Columbus as Tiger Stadium is from the Mercedes-Benz Superdome.

Though its Ohio U. and Ohio State country, Jimmy Burrow said LSU yard flags have sprouted up in their town like autumn mushrooms. A local restaurant is giving discounts to customers wearing purple.

That makes us feel good, Jimmy said. People come up to us at games in Baton Rouge and say theyre from such and such in Ohio, but they just wanted to see him play.

If Joe and the Tigers keep playing like this, they will wind up in the College Football Playoff. And there is an excellent chance they could play Ohio State, Joes former team ranked No. 3 behind LSU and Alabama in The Associated Press poll.

Such a matchup might put the LSU yard signs in Ohio to the test.

Joe would probably never admit it, but thats probably his dream matchup, Jimmy Burrow said. And mine. And the entire state of Ohio. Were hoping that can happen.

Meanwhile, this concurrent Heisman Trophy thread is running through the season. LSU has three national championships in the modern or wire service era 1958, 2003 and 2007 but only one Heisman winner: Billy Cannon in 1959.

Right now, Joe Burrow is better than even money to join Cannon in that super-exclusive LSU club. For someone who has spent his entire life in football Jimmy Burrow was a defensive back at Nebraska when Johnny Rodgers won the Heisman in 1972 and a coach there when Eric Crouch won in 2001 what is it like for your youngest child to be this close to college footballs most prestigious prize?

Its a little overwhelming to turn on the TV and see theyre talking about it nonstop on the sports channels, Jimmy Burrow said. Its a little scary, too.

Jimmy Burrows son is the Heisman favorite because his team is winning and hes completing passes at a record clip. Joe Burrow is connecting on 78.8 percent of his passes 80 percent against AP Top 25 opponents. Hes on a pace to break the FBS record of 76.7 percent set in 2008 by Texas Colt McCoy.

Jimmy Burrow isnt about to divulge what he would do as a defensive coach to try to slow Joe down. But he does know what has made his son so effective.

There are a lot of different options with the development of their wide receivers, Burrow said. Actually, he has four or more good choices with their top three wide receivers and (tight end) Thad Moss turning into a very dependable receiver. And Clyde (Edwards-Helaire) has developed as a runner and pass catcher.

Then add the improvement of the offensive line. Those guys have played great. Add to that a new scheme and a quarterback who has done it his whole life, and its kind of a perfect storm for a quick turnaround.

Of course, none of this was so a year and a half ago when Joe decided to transfer to LSU from Ohio State, choosing the Tigers over in-state Cincinnati.

Jimmy Burrow said his son relished the bigger challenge.

(Cincinnati) was probably the natural choice, Jimmy Burrow said. That was probably the easiest. But Joe ended up choosing LSU because he wanted to play at the highest level. He always wanted a chance to play for a national championship. Ultimately, thats why he chose LSU.

I wondered how Jimmy thought Joe was dealing with all the adulation and praise. He said his son self-insulates himself from that.

He doesnt read the clippings, Jimmy said. He doesnt look at the internet to read about himself. A few times I sent him things about him on the internet but he said, Dad, I dont want to read that. It makes me feel good hes focusing on whats at hand.

Whats at hand next is LSUs Nov. 9 showdown with No. 2 Alabama in Tuscaloosa. Jimmy and Robin Burrow will be there, cheering on their youngest boy.

At some point, Jimmy will probably think about a coverage or a blitz or a short-yardage package he would call. But then hell think how much he has enjoyed the journey of this season, and what may still be to come.

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Rabalais: Joe Burrow's dad Jimmy is loving retirement ... it isn't hard to figure out why - The Advocate