Should your 401(k) amount to cash in a flash? #GetAPlan

When times are tight, that money sitting in your 401(k) can look very tempting. If it’s the difference between paying hospital bills, getting out of crushing debt or fixing a hole in the roof, it can be hard not to dip in. But is it always a smart idea? That’s just one of the several most frequently asked questions about 401(k)s. Here’s the answer to that and other common 401(k) questions. For more, head over to today.com.

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Mailbag Monday: Calculating Your Retirement Numbers

Nest Egg with coinsI always read columns on many magazines and financial shows on finding your retirement number. This number is always into the hundred thousand or million dollar amount for your retirement. This number is based on certain criteria so a retiree will live comfortably. For a person who has no mortgage payment, a small amount of debt, no credit card or personal loan. That individual with a pension/401k plan and Social Security would not need the high dollar number that is always brought up. What is your input on that?  That is my position I will be upon retiring in 5 years. Thank you.

–Adrian

 

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Wednesday Welcome: Three Steps to Maximize Your 401(k)

This week we welcome Roger Wohlner, an Illinois fee-only financial advisor and blogger at The Chicago Financial Planner. Since I met Roger at the FINCON blogging conference last year, he’s become a frequent source of mine when I’m reporting a column or television segment. I asked him to bring his wisdom to you today. Below, he offers some tips for making the most of your 401(k) plan.

indexThe financial press carried numerous stories during the financial crisis about the evils of 401(k) plans — in several cases it was referred to as a “201(k).”  There are many lousy 401(k) plans out there, but there are also many excellent ones as well.  Here are a few tips to help you maximize the benefit of your workplace retirement plan.

Get started.  This might seem intuitive, but you can’t benefit from your employer’s 401(k) plan unless you are participating.  If you haven’t started deferring a portion of your salary into the plan, this is great time to start.  Look at your budget, determine how much you can afford to defer each pay period and as the Nike folks say “…just do it…”  Many plans allow you to do everything online. Otherwise, contact the plan administrator at your company. (more…)

Wednesday Welcome: How to Motivate Yourself to Save Money

This week David Ning joins the blog. David is the writer behind MoneyNing, a blog that encourages readers to take action when it comes to their finances. The action he’s encouraging today? Some simple steps you can take to get more money in the bank. You know we love that!

moneyning-headshot-1“Savings is boring, so why do it?” says pretty much everyone around you. Luckily, you know better, but still, stepping on the gas could be difficult to maintain at times. If you are struggling to stay focused on saving money, then you need a few tricks to help ease the perceived sacrifice. Here are a few such suggestions:

Celebrate a milestone generously. Savers know the key to long term success is to keep the fire up. That’s why it’s important to relax for a brief moment every time you reach a mini goal to bring out the bubbly. It’s like resting just so you can actually walk farther. Aside from validating the effort you put behind reaching this milestone, you are also giving the present a bit of a priority. After all, today is just as important as the future.

Look at history. Sometimes, all it takes to remind yourself of the effects of modern day consumerism is looking at everything you bought but no longer use. Open up the closet, dig out the cabinets and check out the garage when you have a chance. Do you even get any enjoyment out of much of that junk taking up space anymore? Now what if you just bought half of those things and saved the rest? (more…)

Mailbag Monday: Finding an Independent Financial Advisor

investingI recently came out from under the mess of the recession but I still have minimal yet manageable credit card debt. I want to start rebuilding my savings and retirement plans so I took your advice and looked up certified financial planners in my area.  Unfortunately, a couple of them never got back to me and the one who did said he deals with wealth management and since I have no wealth, I’m not a candidate for his services.  He recommended that I seek help from companies like Fidelity Investments and TD Ameritrade but aren’t they biased to their own products?  If so, how will I know my money is being invested in the right place?  What should I do?

– Kelly

Hi Kelly.  It sounds as if you’d prefer an advisor not affiliated with a particular firm.  Take a look at the Garrett Planning Network.  Sheryl Garrett, a fine planner in her own right, has built a network of planners willing to work with customers by the hour.  So you can spend just the time you need to get the plan or information you need, then execute the recommendations yourself.  This will save you a considerable amount of money.  Then, once a year, I’d go back to the planner for a check-up to make sure you’re moving in the right direction.

Wednesday Welcome: Boomer Housing

We’re pleased to welcome back Joy Loverde, author of The Complete Eldercare Planner. If you recall, she joined us last year for a post sharing her favorite resources for active aging, and this time, she’s back to talk about boomer housing options. They’re not what they used to be!

Screen Shot 2014-04-09 at 9.05.35 AMJust as the 76 million Baby Boomers have redefined every other stage of life from college to careers, we are now redefining and remaking the concept of living arrangements.  Developers take note.  No cookie-cutter “senior” housing approach for us.

While many Boomers will simply downsize, others will go straight to some flavor of housing that appeals to their lifestyle. This shift in how we think about living spaces has everything to do with the mindset that we have places to go and things to do no matter what physical shape our bodies are in.

We have proven over a lifetime that we are a generation that expects to stay involved in living. With that in mind, here are a few housing and lifestyle options to consider:

Age-in-Place

The ever-popular concept of staying put may require remodeling the home. Ground-level laundry rooms and walk-in showers, for example, help keep aging residents mobile and safe. National Association of Home Builders offers access to Certified Aging-in Place Specialists. When in-home caregiving services are needed contact The Eldercare Locator.

Shared Housing

Some people love living alone. If you’re not one of them, consider a home-mate. Sharing space with others solves a multitude of problems financially and otherwise, and may make it easier to go through difficult life stages together. Check out Sharing Housing and the National Shared Housing Resource Center.

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Money Sense on Fortune

jobreportIf you’ve been following me for a while now, then you might already know my take on target-date funds (TDFs). I’m a proponent — especially if you’re aiming to rebalance your portfolio — and need some help along the way. In this week’s column, I take you through what you need to know about TDFs when it comes to retirement.

FORTUNE – More than 51 million Americans have an active 401(k) retirement account, according to the Investment Company Institute.  And if recent statistics from Vanguard hold across the category – more than half have at least some of their money in a target-date fund. That’s a lot of dough and it’s growing fast.  According to BrightScope, target-date fund balances overall hit $500 billion in assets in 2012.  The company is estimating them to reach $2 trillion by 2020.

In many ways, that’s a good thing.  That shift has tempered the bi-polar tendencies of many 401(k) investors.   According to Vanguard, 10 years ago, 13% of their self-directed 401(k) investors held no stocks and 22% held only stocks.   No matter how you slice it, those investors were taking too little or too much risk.  Last year those numbers dropped to 10% and 13%, respectively – a result, at least in part, of making TDFs the default option on many retirement plans.

I’ve been a proponent of TDFs over the years.  I like the way they help humans who say they are going to rebalance their portfolios but never seem to get around to it stay at least in the vicinity of the track. Which is not to say I think they’re perfect.

For the full column, head over to Fortune.com

Mailbag Monday: IRA Income Requirements

retirementI want to open up an IRA, however I do not have any earned income from employment.  I am on disability. Could I qualify for an IRA?

– Dave

Hi Dave.  Generally, no.  There are a few exceptions — alimony and scholarships, for example.  But perhaps the biggest is spousal income.  If you have a spouse who works, you (and your spouse) can both make contributions based on that income.

Not being able to qualify for an IRA, however, doesn’t mean you shouldn’t save.  Invest your money in a discretionary account just as you would an IRA, based on your age and your risk tolerance – and let the time value of money work on your behalf.

You can open a discretionary account at any major brokerage.

Today’s Money: Helping Aging Parents Manage Their Finances

When it comes to aging parents and money management, 70% families find it difficult to handle. How do you know when your parents need help with their money? It’s a tough question, and an even tougher conversation to have. This morning on Today, I offered my tips on how to get the ball rolling, while keeping emotions at bay. To see what I had to say, check out the clip below:

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Mailbag Monday: How Does My Pension Factor Into Retirement Savings?

retirementIs there a rule of thumb that a monthly pension payment should equal a certain amount of dollars of savings? We hear that we need X dollars for retirement, but with a pension, what might that equate to? Some of us will have pensions from previous employers and wonder what it means in terms of the amount we need to save. (For example, does $1,000 in a monthly pension = $125,000 in savings?) What are good numbers to use in planning? Thank you.

– Kathie

Kathie, it really all boils down to how much of your pre-retirement income you’re trying to replace. That’s what you should focus on. Recent research has shown that spending in retirement isn’t linear as previously thought. You were often told you should plan on spending 70 to 80% of your pre-retirement income in retirement. In fact, spending usually tails off after the kids go to college and leave the house and, eventually, you stop working full time. Then life gets really expensive when you hit uber old age and healthcare expenses ramp up.

That said, on average, aiming for that 80% replacement rate is probably a pretty good move. You need to head to a retirement calculator that allows you to input how much you’re expecting from Social Security and your pension as well as how much you’ve saved.  The AARP’s retirement calculator – which you’ll find here – will let you do just that. It’ll run the numbers and help you figure out how much more you need to save to meet your goals.

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