I have just finished reading Jane Bryant Quinn's new book for retirees and for those about to retire. Ms. Quinn goes into nitty-gritty detail about Social Security, life insurance, health insurance, annuities, reverse mortgages, safe retirement rates and taxes on investments to help us make the choices that will provide the highest lifetime income in our retirement. These are comprehensive subjects (the S.S Handbook has 2,728 separate rules and the IRS Tax Code has 2,652 pages) so my quotes only touch on the edges of what's inside Jane's book. At my age (92) I look back and only wish I had read it earlier.
Thank you, Jane.
You'll need to own investments that grow. When you do this, we can share in that growth without breaking a sweat by buying and holding just two or three well-diversified stock-owning mutual funds.
I developed a new respect for immediate-pay annuities that convert a lump sum of savings into an income for life.
Freedom of mind and action is having an income that we're sure will last for life.
Even if retirement seems far away, steps you take now--to save and invest--can greatly improve your standard of living when your paycheck eventually stops.
Put something useful or interesting into your schedule every day. -- Something you have to do (or want to do)that gets you up in the morning.
You're never afraid to open your bank statement when you're living within your means.
Good rules exist for the young and middle-aged: live on less than you earn, increase the amount of money you save every year, stay out of debt, use tax-favored retirement account and invest for the long term.
Few pleasures are greater than feeling financially safe.
A house is a money pit, even if there's no mortgage. By slashing those costs and moving to a condo or rental apartment, you'll probably be able to keep up your spending on all the smaller things that give spice to life.
People on Medicare spend, on average, about $2,000 a year for routine doctor and dental visits and commonplace prescription drugs.
Debt is a killer for retirees. Cleaning up an 18% credit card give you an 18% return on your money, guaranteed. By contrast, savings accounts are paying zip.
Only about half of older people now enter retirement with a paid-up home.
With as little as 2.5% inflation, you will need 28% more income, 10 years from now, to buy the same things you are buying now. Where will that extra income come from?
Fortunately, God is making more fee-only Certified Financial Planners (CFPs).
An adviser who works for a brokerage firm or insurance company is never a fee-only planner.
If your financial adviser won't say, in writing, that he or she is a fiduciary, find someone else.
I love Social Security. It's America's finest retirement plan. Nothing else gives you the same combination of income for life, inflation protection, tax benefits, government-backed payment guarantees, and built-in spouse protection, with no annual investment fee and no market risk.
If I can give you just one word of advice about when to sign up for Social Security, it would be WAIT.
If a married couple reaches 65, the chance that one of you will live until 90 is better than 40%..
Peace of mind is knowing that you can see a doctor when you're sick.
Check your medical bills. Odds are there's a mistake and -- I promise--it won't be in your favor.
Just a few unlucky days without health insurance could cost you your life savings. To find an individual policy, start with HealthCare.gov and click on "See Plans & Prices."
To be sure you don't miss out on any (Medicare) reimbursements, start the sign-up process three months before your 65th birthday.
I know of only three companies that have never raised long-term care policies on existing customers.
Most private pension plans and some government plans offer you two ways to take retirement. You can take monthly payments for life or lump sum (Ms. Quinn gives 11 reasons for taking monthly payments for life and 11 reasons for taking a lump sum).
A financial adviser or insurance agent might present you with what sounds like a fabulous idea -- "pension maximization." As you've probably guessed, there's a worm in this apple.
Lifetime annuities, the Rodney Dangerfield of investments, don't get no respect--except from me.
Immediate-pay fixed annuities are easy to shop for. Just go to ImmediateAnnuities.com and enter the sum you want to commit. -- Vanguard customers can get a quote online immediately. If you're not an existing customer, call 800-357-4720.
Your window for buying fixed and inflation-adjusted annuities is age 70 to 80, most experts say.
Annuities can be cash cows for financial advisers who choose to put their own interest ahead of yours. Do not fall for the variable annuity with lifetime withdrawal benefits.
A fixed-index annuity has nothing to do with simple immediate-pay annuities.
Stay out of expensive investments that tout "no loss, all gain." It's a snakepit.
When retirees are asked if there's anything they'd have done differently in their lives financially, the number one answer is "save more money."
The nation's greatest gift to savers: The tax-favored retirement plan.
To make it easier to keep track, consolidate your retirement accounts. Your 401k, 401b, and 457 can all be rolled into a single IRA.
If you put $5,000 into a Roth today and suddenly find that you need the money, you can take it right out again, no muss, no fuss.
There's nothing like automatic payroll deductions to build up a retirement account.
If you're lucky, you company menu will include "index funds."
You might also be offered managed funds invested in particular sectors of the stock market. But you don't need to buy these sectors separately. Your index funds own them all.
By all means, consider target-date mutual funds if your plan offers them. It's one-stop shopping.
If your plan offers stock in your company, avoid buying anything more than a small amount of it.
The government Thrift Savings Plan is the simplest, finest, and lowest cost retirement plan on the planet.
In general, 403b and 457 annuities are lousy deals. They're larded with fees that chop your investment returns.
Almost without exception, the university-based economists, professors, and financial researchers are invested entirely in index funds.
An IRA plan at a brokerage firm lets you buy almost any of the firm's products--not only individual stocks, but also various structured notes, annuities, partnerships and other exotics on offer; usually at high cost. Awful stuff. Personally, I wouldn't touch 'em.
Vanguard reports that women, well aware of their longevity, save a larger percentage of their pay than men at the same income level.
Those who want to be mostly in stock should be able to live without touching that money during bear market cycles.
You can create a regular retirement income using the 4 or 4.5% rule with as few as two mutual funds--a U.S. Total Market Fund and a Total Bond Fund.
I prefer the rule of 110. It says that the percentage you hold in stocks should equal 110 minus your age. At 50, you'd be 60% in stocks with the rest in bonds.
If you're selling some shares at a gain, see if there are others that you can sell at a loss.
Nothing endangers your lifestyle more than to pile into "income investments."
Any interest-rate investment claiming to pay a fabulous annual return has a catch in it somewhere.
The future is unknowable. Trying to follow "timing" advice is a loser's game.
For simplicity, your money should be consolidated at a single financial institution.
Choose a bond allocation that minimizes risk. You do this by dividing your money between high-quality short-term and intermediate-term bond mutual funds.
After bear markets, the broad stock market has always recovered. Individual stocks might not, which is why it is so risky to be a stock picker: But the price of a broad-based mutual fund will go back up.
When you look in the mirror; you'll probably have to concede --unless you're a deeply experienced investment analyst--that you know very little about any of the the individual stocks you own.
If you aren't sure that you have enough money to cover your bills for life, consider switching part of your saving that you're holding in bond funds into an immediate-pay annuity.
Financial advisors who earn commissions sneer at index funds and have a patented method for talking you out of them. "Why would you want average returns?" they ask with a superior smirk.
A common piece of advice is to buy a total market fund, then add a couple of other funds that you imagine will beat the market. That's called "tilting" your portfolio. I don't tilt, myself. I'm not smart enough to know which particular industry will do the best.
My inclination is always to make things easier. I'd vote for holding one or two broadly diversified stock funds rather than a large collection. You might add an international stock fund. That's three funds.
Rick Ferri and Alex Benke tested a three-index-fund portfolio against 5,000 simulations of similar and randomly chosen managed portfolios. -- The index-fund portfolio outperformed the stock picker's portfolios more than 80% of the time.
Morningstar's research identifies cost as the only--repeat, only--dependable predictor of mutual fund's future performance.
Everything in a retirement portfolio has a specific job to do. For stocks, it's growth. For bonds, it's ballast. Even when quality bond markets fall, they never lose anywhere close to as much as you can lose in stocks.
International bond funds provide you with currency diversification against the dollar: But they cost more to own and complicate your investment plan. The simpler your bond bucket, the easier it is to rebalance.-- Stick with high quality.
Wealth managers create million-dollar bond ladders for clients with a super-high net worth at a minimal mark-up. For the rest of us, ladders waste our time and interfere with sensible withdrawal plans. Use mutual funds instead.
Target-date mutual funds are a terrific invention for people building wealth.
You can manage a retirement account yourself if you keep it really simple--say, just two or three low-cost index funds. The more funds you have, the more complicated your withdrawal math.
Vanguard Personal Advisor Services provides money management, portfolio rebalancing and ongoing personal finance advice to its customer for just 0.3% a year on portfolios of $50,000 or more.
You will not earn the net income you expect if you pay high sales commissions to a financial adviser, including the commissions hidden in high-cost variable annuities. The more famous the firm and the fancier the offices, the more they will extract from you in fees. They have no conscience. Trust me on this.
Willie Sutton robbed banks because that's where the money was. For the same reason, greedy financial salespeople go after the retirement accounts of people in midlife and later. You're on their list if you're rolling over a 401k into new investments, choosing a lump sum pension payout instead of a monthly lifetime income, or looking for higher returns on your savings than you're getting from banks and bonds.
Your house is not only a piggy bank, it's a tax shelter; too. If you're married and sell it, you can take up to $500,000 in profits tax free.
A rising trend among boomers is the two-step retirement--first, downsizing to a smaller place, then, later; moving to a full-service retirement community.
New federal regulations make reverse mortgages safer for people in their late 70s and 80s who need extra money to help them stay in their homes. Go to the website mtgprofessor.com for the best package of information and guidance I have found.
Warning! If you have a variable-rate mortgage, prepayments don't automatically shorten the term of the loan. Any prepayments on a fixed-rate loan automatically shortens its term.
Of all the overblown and misleading sales pitches in the insurance world, those for indexed universal life might be the worst.
If you no longer need life insurance, there's no point paying for it.
Whether to keep a policy, ditch it, or restructure it is a huge decision. Trying to make a good decision about existing and complicated cash-value policies can drive you nuts. I strongly recommend that you get specific advice from a fee-only insurance adviser. For the names of fee-only advisers, go to GlennDaily.com and click on "links."
Simplify your financial life. -- I've seen widows shocked by the mess their husbands left behind.
Update your will (you have one, of course). This isn't a book about estate planning, I'm just checking to make sure you have a will, a living will that explains the extent of medical treatment you'd want if you can't decide for yourself, a health-care agent to be sure that your wishes are carried out, and a durable power of attorney. The power gives someone the right to manage your money if (dread thought) your mind turns dim.
What gives us freedom of mind and action is having an income that we're sure will last for life. This book was written to help you build it. After that, adventure calls.
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Taylor
