Archive for the ‘Retirement’ Category

What is hiding in your 401k?

New rules from the labor department require employers to tell you exactly how much your 401K plan is costing you in fees over and beyond the costs for investment management.

Until now, even employers as plan sponsors have found it difficult to know how much they are charged for administrative services by investment providers, often mutual fund companies. These fees – legal, accounting, recordkeeping – are usually paid for with employees’ funds.

Most employees aren’t even aware of these costs, but they range from .28% to 1.38% annually, according to a survey by Deloitte/Investment Company Institute cited in the New York Times article, The Curtain Opens on 401k Fees.

With such information readily available, employers can now try to renegotiate their401K contracts, and employees can select the lowest cost investment choices.

The drip-drip-drip of fees adds up. According to the U.S. News and World Report article, How to Take Advantage of 401k Fee Disclosures:

“A Towers Watson analysis of target-date funds, the most common default 401K investment, found that most target date fund owners lose 30 percent or more of their potential retirement income to fees.  That works out to be between five and 15 years’ worth of retirement income that is deducted from a 401k account over a worker’s lifetime.”

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The College-Retirement Dilemma

It’s a year-round issue, but with the season of college acceptance upon us, the subject really has our attention.  I am talking about how to finance your child’s education while still saving enough for your own upcoming retirement.

Here are highlights of several articles on this dual savings challenge.

First of all from SavingforCollege.com, you may need to cut back on both goals, says  Tough Choices: Retirement versus College.

“You should…expect some trade-offs as you try to balance these goals. You may have to work longer than you would like or your children may have to borrow more money than they would like.”

Your priority for retirement savings should be to fund your 401K and 403B sufficiently enough to get the employer match.  Remember that your assets in these accounts are not counted in assessing your child’s prospects for federal financial aid.

To lower the cost of college, consider a 2-plus-2 plan where your child goes to community college (lower tuition) for the first two years, then transfers to a more prestigious 4-year institution for the diploma.

Bankrate.com advises in the article Retirement Coming But So Are College Costs  to take another tact by requiring your children to pay for part of their college costs.  For example, they can take out federal direct loans.

And yahoo.com believes it is possible to achieve both goals if you start early, save aggressively, and spend wisely.  See  Five Ways to Balance Retirement savings with cost of Kids’ College.

“Put retirement first…don’t give in to the temptation to pitch in heavily for college without making sure your retirement savings are on track.”  Start early on college savings, and also contribute 11-15% of your salary into 401K and 403Bs.  Cut college costs by having your child do four years in just six or seven semesters.

Make a Million Bucks

Wonder how long it would take to make your first million?  Young Money has created a savings calculator to help you with your financial planning.

Just plug in your current age, targeted retirement age, savings amount and anticipated rate of return and the calculator will do the rest.

For more calculators, visit our Resources page.

Medicare Guide

The April 2011 AARP Bulletin published a practical Medicare Starter Kit with lots of helpful clarifications on:

  • what Medicare covers
  • the difference between Parts A, B, C and D
  • how and when to apply
  • how much does it cost
  • lots more!

It is easy to get confused by the requirements and benefits of this complex government-funded health insurance program.  Here are some useful tips:

  • Enroll at age 65 (unless you are working and covered under your employer’s plan).
  • You will not be notified unless you are already receiving Social Security.  The onus is on you.
  • Medicare is not free unless you qualify for a low-income program.
  • Coverage cannot be denied due to current or past health issues.
  • Mind the gaps: Medicare does not cover everything. Know where your loop holes lie.
  • Seniors only.  Family members/dependents are not eligible for coverage other than due to a disability.

For more information read the full article or contact  SHINE (Serving the Health Needs of Elders)  at 1-800-243-4636. For non-native English speakers, contact the Massachusetts Medicare/Medicaid Outreach and Education Program (MORE) at 978-683-7747.

A Gift for Mother

This Mother’s Day, you may want to follow the advice of Jason Alderman in his recent post on practicalmoneyskills.com.

Rather than the traditional flowers, card or phone call, spend some time with Mom and her finances.  Help her sort out important records so both of you know what they are and where they are.  A thorough review of documents will reveal any missing items and raise questions that can be answered now rather than during a potential crisis when you may need information quickly.

Alderman suggests dividing documents into categories:

Retirement Income 

  • Social Security
  • Pension Plans
  • IRAs and 401(k)
  • Bank Accounts: checking, savings, money market, CDs
  • Stocks, Bonds and Mutual Funds

Outstanding Debts

  • Mortgages, Equity lines of credit and other property loans
  • Car loans or leases
  • Credit Cards
  • Medical Bills
  • Personal loans

Other

  • Insurance Polices: medical, real property, auto, health, long term care
  • Will or Trust
  • Health Care Proxy or Durable Power of Attorney
  • Birth Certificate, Marriage license, Social Security card, Funeral plans, Safe Deposit Box information
  • Contact Information : Lawyer, Doctors, Dentist, Pharmacist, Insurance Agent, Financial Advisor, Banker (All of these Professionals should have your contact information as well).

Resolve to make this an annual review so that all documents are up to date and reflect your Mother’s wishes.

Give yourself the same gift.  Straighten out all your own account information and keep it in a safe place.  Let a family member or someone else you trust know where all your important papers are kept.

Read the full article here.

Social Security ABCs

Do you feel confident in your knowledge of  Social Security programs and benefits?

The Top 25  Social Security Questions are answered in this article from the AARP Bulletin.

Better yet, come to the Newton Free Library on Wednesday, April 20 at 7 pm to hear directly from the expert. Francine Kollias, Metropolitan Affairs Specialist with the Social Security Administration will present a seminar on Social Security Basics.  After the talk, Ms. Kollias will take questions from the audience.

This is a Special Event sponsored by Financial Literacy at the Library, an initiative supported by a grant from  Smart Investing @ your library®, a partnership between the American Library Association and the FINRA Investor Education Foundation.

Optimize your Retirement

Looking for ways to make your retirement check last longer?  Wondering when is the best time to begin collecting Social Security?  Do you know the steps to take to achieve financial security?

The National Endowment for Financial Education (NEFE) has created the MyRetirementPaycheck.org website with lots of helpful information on how best to position yourself for a more financially secure retirement.  Topics ranging from debt to pensions to insurance to fraud prevention are covered, plus the basics on social security and retirement planning.

Whether you are of retirement age or just planning for the future,  the site offers lots of useful suggestions and links.