- Written by The FoolProof Team
- Category: Articles
What is retirement? The day you end your career at "the company"? The day you receive your first Social Security check or take your first IRA/401K withdrawal? Some other event? Probably not. Today's Americans, more than previous generations, view retirement as an active journey filled with new opportunities.
Americans who make it to age 65, for example, have a great chance to live well into their eighties—that's what the census statistics show. That means many people will experience "retirements" that last as long as "working careers." Enjoying those years is just one reason to start planning ahead.
Planning for retirement is about more than making sure that you have enough money, important as the financial foundation is. We offer that Money Matters reminder before sharing recommended online resources because so many "retirement planning" sites and tools on the Web (there are thousands) begin and end with money. Our goal is to offer a selection among many good resources that cover a wide range of issues related to living strong as you plan and enjoy your retirement journey, shaping it to achieve your goals.
Tip: Before you begin checking out these resources, a reminder that our discussion and sites to which we've provided links provide information to help you understand issues related to retirement planning but the information is not intended as investment, tax or legal advice. For advice on your specific questions you may wish to consult a qualified financial, tax, or legal professional.
Overviews of Retirement Planning and Basic Guides
Planning for retirement covers more than just financial planning. Planning for retirement is an activity that you and your spouse or partner do together. Your financial planning for retirement is driven by your retirement goals. Here are the basic steps involved.
The first step is self-assessment. The task is to focus on what your needs and desires are. You'll use the results of your self-assessment to set the goals that you want to achieve. These questions may provide a place to start.
- Do I (we) want to work after retirement? If so, what would I (we) like to do and what are my (our) options?
- What kind of lifestyle do I (we) want?
- Do I (we) want to volunteer?
- Do I (we) want to travel?
- Do I (we) have any particular activities in mind?
- Do I (we) have any hobbies I (we) want to pursue?
- Do I (we) need any additional skills or knowledge to do what I (we) want?
- Where do I (we) want to live?
Gather information. Once you've completed your self-assessment, the next step is to gather any information you might need in order to set your goals.
Set goals. Next comes setting goals so that you'll be prepared when you retire. For each goal, write a goal statement that identifies who will do what by when. Write down all the actions that are needed to reach the goal. For each action, also list who will do what by when. Being very specific will help you to accomplish the goals.
The last step is to regularly review and update your plans. It's not unusual for goals and plans to change. Even after you've retired, a regular review and reassessment can be fruitful.
The bottom line: Only you know what you want out of your retirement so only you can plan for it.
The following tutorials and articles provide more details on these basic steps.
Among the thousands of Web pages devoted to the topic of retirement, few offer sequential tutorials that introduce you to the many basics of retirement planning. These sites offer a good place to begin. (For more tutorials that primarily address money issues, see the section Financial Planning and Saving for Retirement.)
The Pre-Retirement Planning Guide from the New York State Governor's Office of Employee Relations. This interactive tutorial guide hits a homerun in its comprehensiveness. The material starts with self-assessment and goal-setting for your total retirement (not just financial goals.)
Smart About Money's Retirement Plan Course from the National Endowment for Financial Education (NEFE). This course will help you work through various decisions related to retirement planning and steps to prepare for retirement.
The following sites offer numerous articles on various aspects of retirement planning. Generally the articles are grouped by topic. Although presented in some instances as retirement planning "guides," the sites don't really offer tutorials, but with judicious selection you can read more deeply about issues introduced in the tutorials in the previous section or create your own course of study.
Social Security and Retirement Planning from Nolo.com, a legal self-help site, presents varied articles on such aspects of retirement as Social Security, retirement plans, Medicare and related issues, and estate planning. Ads and sponsored links are easily identifiable.
Ultimate Retirement Guide is a selection of articles from CNN/Money." CNN/Money has a wide variety of articles pertinent to retirement, although, in our judgment, you may have to search further for some.
Financial Planning and Saving for Retirement
How much money will you need to have for the retirement you envision? Where will it come from? The recent rocky economy, talk of Social Security reform, and a few high-profile pension fund failures have many Americans thinking more seriously about how they will fund their retirement. For years, financial planners have talked about retirement income as a "three-legged stool" that stands on Social Security, employer-related pension or retirement plans, and personal savings. Healthy and active, more people are adding a fourth leg to that stool—part time work.
Financial planning for retirement is about having a plan for your money. It basically comes down to five questions:
- Where do I (we) want to be?
- How much time do I (we) have to get there?
- Where am I (are we) now?
- What investment vehicles give me (us) a chance to get there?
- How much financial risk am I (are we) willing to take? (See Investments and Risk)
This section provides resources that provide an overview of financial planning and saving for retirement, explore each leg of the retirement income "stool," and that will help you answer those questions.
Overviews of Financial Planning for Retirement
The following resources offer broader overviews of retirement financial planning.
Retirement Planning, in the Money Essentials series from CNN/Money offers a brief guide to the financial basics of planning for retirement. In addition to looking at basic investment strategies such as IRAs and 401(k)s, the article provides tips on what to do when you switch jobs and a Retirement Savings Calculator.
Savings Fitness: A Guide to Your Money and Your Financial Future prepared by the U.S. Department of Labor and the Certified Financial Planner Board of Standards, Inc. profiles the complete planning process.
Retirement Tips from the IRS are articles about planning for retirement and understanding employer retirement plans.
How Much Money Will You Need to Retire?
Every financial service provider on the Web seems to have an answer—and a calculator. But will they give the right answers for you? These articles may help clarify some issues before you use the calculators.
How much will you need to retire? by Robert Brokamp at the Motley Fool uses real consumer spending figures to look at average expenditures by age for such categories as food, housing, health care, transportation and entertainment.
Have I saved enough? by Walter Updegrave on CNN/Money offers an overview of what you need to do to answer this question for your circumstances.
Current vs. retirement income: How much do I need?, another take on the question by Walter Updegrave, on CNN Money.
Each individual or couple's retirement situation is different and the amount of income you require won't be the same as someone else. That said, here's a way to come up with a rough estimate. (You'll also need some if not all of this information to use the calculators listed below.)
Determine the Income You Will Need
A good way to make an accurate estimate of how much income you'll need is to keep track of your current living expenses for at least six months or as much as a year. This can help you project the amount of income you'll need in the future.
You should take into account that certain expenses will probably decrease (or go away entirely) and others will increase. Be sure to estimate these expenses for both you and your spouse. Here are some examples:
- Commuting costs and business travel.
- Union and/or professional dues.
- 401(k) plan contributions and Social Security tax deductions.
- Business clothing.
- Work-related social expenses.
- Certain automobile expenses.
- Income taxes.
- Mortgage payments (depending on the duration or your mortgage).
- Child-rearing expenses.
- Travel, entertainment, and hobbies.
- Medical and dental expenses.
- Medigap health insurance premiums.
- Long-term care insurance.
- Gifts to family members (particularly if you choose to use gifts in your estate planning.)
- Volunteer expenses.
- Care of elderly parents.
After you have a good estimate of all projected expenses, including "discretionary" expenditures, estimate the total amount you (individually or as a couple) will need for annual income.
Next, you need to estimate for how many years you will need that annual income. At what age do you plan to retire? 65? Earlier than 65? Later than 65? When does your spouse plan to retire? Also consider your life expectancies. Do family members routinely live into their 90's? Estimate the number of years you'll need income. Multiply the yearly income by the number of years. This will give you a rough estimate of the total amount you may need.
Tip: Remember that inflation over the years will increase the annual income that you will need to maintain the same standard of living. In recent years inflation has remained fairly low: since 1995, rates of inflation have ranged from 1.6% to 3.4% annually according to the U.S. Bureau of Labor Statistics. But even that range of annual increase in the costs of goods and services increases the total income you need. You can use the FINRA Retirement Calculator to estimate the impact of inflation at various rates. (FINRA is the Financial Industry Regulatory Authority.)
Determine the Income You Will Have
To determine an estimate of the total income you have, given your current situation, you need to gather information from several sources.
List an estimate of what you'll receive from Social Security. You can get an estimate of what you'll receive from Social Security at any time through your My Social Security Account. You can also use the Retirement Estimator on the Social Security web site. Once you have a benefit estimate—either from your statement or from the Retirement Estimator—you can use other calculators on the Social Security web site to see how different retirement dates and situations might effect your benefits. For example, the Retirement Age Calculator shows how retiring early reduces your monthly benefit.
List the estimated amounts of any assured income—pensions, disability benefits, annuities, etc—you will receive.
List the current amount of money you already have saved. Because you desire only a rough estimate, use the total of current balances in IRAs, 401(k)s, mutual funds, and other investments.
What's the total of these potential sources of income? Note that for the purposes of this rough estimate, you need just the sum of the estimated amounts you've listed.
Determine How Much More You Will Need
You now have two figures: 1) how much you will need and 2) how much you potentially and reasonably will have on hand. The difference between the two figures is how much more you will need to save.
Retirement Savings Calculators
A number of websites have retirement savings calculators that let you plug in various figures to predict approximate future income based on the factors you provide. You may wish to run the numbers on several in order to compare.
Ballpark Estimate from the American Savings Education Council. This one-sheet calculator "offers users a way to obtain a rough first estimate of what Americans need for retirement. It is available as an interactive form, mobile app, and a web app. The interactive form is also available in spanish.
Retirement Planner from CNN/Money
Retirement Calculator from FINRA, the leading private-sector provider of financial regulatory services (overseeing brokerage firms and brokerage agents).
Building a Nest Egg: Savings and Investment Options
Under the general term "retirement plans" fall many options for saving and investing money for retirement. Such financial retirement plans may be either individual plans or employer-related plans, and typically they have certain tax benefits over other savings and investment strategies. The most familiar individual plans are IRAs, Individual Retirement Accounts. Employer-related plans may be "defined benefit plans," which are traditional company pension plans that promise a specific monthly benefit upon retirement, or "defined contribution plans," such as 401(k)s or profit-sharing plans, in which contributions by employees and employers are defined but the benefit to be paid is not.
In some cases, you can have both a 401(k) or other employer-sponsored retirement plan and an IRA. Many financial planners recommend this approach.
What You Should Know About Your Retirement Plan from the Employee Benefits Security Administration provides an excellent overview of the types of employee-related retirement plans and information to help you use them effectively.
Retirement Planning: Everything You Need to Know from Motley Fool provides steps for planning retirement and numerous tools to help you run the numbers.
You may review a variety of articles on retirement investment strategies at CNN/Money, Kiplinger, and Forbes. If you have configured your browser to reject cookies, then you may not be able to access some of these articles.
IRAs - Individual Retirement Accounts
IRAs are a personal retirement savings plan that you can open at a credit union, bank, brokerage or other IRS-approved entity.
All About IRAs from the Motley Fool covers all the basics about IRAs, defines the eleven types of IRAs, and is particular strong in its discussion of Roth IRAs (where your contributions are not tax-deductible but your withdrawals at retirement including earnings are not subject to tax).
An IRA Owner's Manual from Kiplinger.com covers criteria for qualification, regular IRA vs. Roth, moving your IRA, tapping an IRA early, withdrawing funds for retirement.
Publication 590: Individual Retirement Arrangements from the IRS offers the facts from the source. After you've checked out the primers above you may wish to access the official word. Our link is to the 2006 (the latest) edition.
A 401(k) plan is similar to an IRA except that it is established by an employer. It is funded with your pre-tax salary contributions and possibly with matching contributions from your employer. Typically, larger contributions can be made to 401(k)s than to most IRAs. The money in your 401(k) account is tax-deferred until you withdraw the money.
A Look At 401(k) Plan Fees from the Employee Benefits Security Administration (EBSA), Department of Labor discusses the impact on potential earnings of the fees associated with 401(k) plans and how to understand them and manage them. Also from EBSA, Warning Signs That 401(k) Contributions Are Being Misused flags ten dangers to watch for.
401khelpcenter.com provides an archive of articles related to 401(k) plans on such topics as managing your 401(k) assets, rollovers, and pros and cons of loans from 401(k) assets.
SEP Retirement Plans
A SEP plan—simplified employee pension—is an IRA (SEP_IRA) that has been set up to receive contributions from your employer. You may also have a SEP-IRA if you are self-employed. The SEP-IRA is owned and controlled by you. The maximum amount an employer can contribute to your SEP-IRA is the smaller of 25% of your compensation or $44,000 (for 2006 and subject to cost-of-living adjustments for later years).
SEP Retirement Plans for Small Business from the EBSA describes the advantages of a SEP plan and how to establish and maintain a plan.
Publication 560: Retirement Plans for Small Business from the IRS details retirement plans, including SEP plans, that you can set up and maintain for yourself (if self-employed) and your employees.
SIMPLE Retirement Plans
A SIMPLE—Savings Incentive Match Plan for Employees—is established by a small employer (including self-employed persons). This type of plan allows an employee to reduce their salary and have their employer contribute the salary reduction to a SIMPLE retirement account. The employer must also make contributions to the account. The SIMPLE retirement account can be either a SIMPLE IRA or as part of a 401(k) plan.
SIMPLE IRA Plans for Small Businesses from the EBSA describes the advantages of a SIMPLE plan and how to establish and operate a plan. You'll need Acrobat Reader to open this file.
Publication 560: Retirement Plans for Small Business from the IRS details retirement plans, including SEP plans, that you can set up and maintain for yourself (if self-employed) and your employees.
Publication 590: Individual Retirement Arrangements from the IRS offers the facts from the source. Chapter 3 discusses SIMPLE plans.
Employer Pension Plans
A Predictable, Secure Pension for Life: Defined Benefit Pensions (PDF)
This publication from the Pension Benefit Guaranty Corporation (PBGC) provides "a handy explanation of traditional defined benefit pension plans insured by PBGC: what they are, how they operate, and the rights and options of the workers covered by them."
Your Guaranteed Pension covers frequently asked questions on traditional pensions that are guaranteed by the Pension Benefit Guaranty Corporation (PBGC). Questions relate specifically to how PBGC insurance works, how you can find out if your pension is insured, and what that guarantee may mean for your pension.
Cash Balance Pension Plans: Questions and Answers from the EBSA provides an overview of this type of defined benefit plan that operates more like a "defined contribution" plan and defines its benefits on the basis of a "stated account balance"—think of it as a kind of hybrid plan. The questions answered include how cash balance plans differ from traditional pension plans and from "defined contribution" plans, such as 401(k) or profit-sharing plans.
Social Security Benefits
The Social Security Administration is the place to start for information on Social Security benefits, your personal statement, how the timing of your retirement will affect benefits, and how to apply for benefits.
Working in Retirement
How Work Affects Your Benefits from the Social Security Administration enables you to see what impact earnings from a job might have on the amount of your monthly check and other benefits.
Choosing When and How to Receive Retirement Benefits
With many retirement plans you can choose when to start receiving benefits and how those benefits are paid.
- In most traditional pension plans you receive a specific monthly benefit for your lifetime. If you have chosen the "joint survivor" payout option, upon your death, your spouse will continue to receive a monthly benefit for the rest of his or her life. Your benefits begin at the retirement age specified in the plan documents. Your pension plan may allow for early retirement if certain criteria are met.
- Some pension plans define the benefit in terms of an account balance. These plans are called cash balance plans. In these plans (and in some traditional plans) you may choose to receive the benefit all at once as a lump sum (with consent of your spouse) or as an annuity (monthly payment).
- With a 401(k), in general, when you retire, the entire balance in the account is paid in a lump sum or by regular periodic payments (if your plan allows these). Distribution from your 401(k) must begin by April 1 of the year following the later of a) the calendar year that you retired or b) reached age 70 and 1/2.
The best way to know what choices your specific retirement plan offers is the plan's summary plan description or SPD. The SPD describes when participation begins in the plan, how service and benefits are calculated, when benefits become vested, when benefits start and in what form, and how to file a claim for benefits. If you don't have a copy of the SPD, you can request one from the plan administrator.
How you receive you benefits also may have specific tax consequences to consider. For example, if you receive your benefits as a lump sum, you may be subject to higher income tax on the amount unless you take steps to minimize the tax burden such as the possibility of "rolling over" the payout into an IRA or other tax-deferred account within 60 days. Consult your plan administrator and tax or financial planning advisor about these issues.
Late Starter? Retirement Savings Strategies after Age 50
Over 50 and just starting to save for retirement? It's not too late. Remember that you aren't just saving to get to your retirement data but for the rest of your life. These resources offer helpful insights and suggestions for making the most of the time and opportunities you have.
8 Ways to Start Saving for Retirement After 50 from Next Avenue provide tips to help you make up for lost time.
Catch Up on Retirement Saving After 50 from U.S. News provides more tips.
It's Never to late to Save (pdf) from the Employee Benefit Research Institute offers several tips on how you can catch-up.
What About Reverse Mortgages for Financing Retirement?
For many people approaching retirement, their major financial asset is the equity in the home they own. One way to tap that equity if needed is to sell the home and downsize to a smaller home or rent. When individuals wish to stay in their home but need to tap their equity without having monthly loan payments, a reverse mortgage may be a sound option in the right circumstances.
To help you make an informed decision about reverse mortgages and other alternatives, the AARP Foundation has produced the booklet Reverse Mortgage Loans: Borrowing Against Your Home. You can download the booklet in PDF form from the AARP site.
A reverse mortgage is a loan in which you receive money from a lender that doesn't have to be paid back until you sell your home, you move out permanently, or you die.
There are 3 types of reverse mortgage:
Federally-insured reverse mortgages, also know as Home Equity Conversion Mortgages (HECMs), are backed by the U.S. Department of Housing and Urban Development (HUD).
Proprietary reverse mortgages are private loans that are backed by the companies that develop them.
Single-purpose reverse mortgages are offered by some state and local government agencies and non-profit organizations. These are not available everywhere. They can only be used for the one specific purpose specified by the lender. Examples of such specific purposes include to pay property taxes or to finance home repairs or improvements. This type of reverse mortgage is primarily for low or moderate income homeowners.
You may have a choice in how you receive the money from a reverse mortgage. Generally speaking, you will have one or more of the following choices:
Receive it all at once in a single lump sum of cash.
Receive it as a fixed monthly cash advance for a specific amount of time or for as long as you live in your home.
Receive is as a line of credit which allows you to decide how much you need and withdraw it when you need it.
Receive it as a combination of these.
Here are some of the other things you need to know about reverse mortgages. Be sure to check them out thoroughly before agreeing to terms.
Reverse mortgages can have origination fees and other closing fees. There may also be servicing fees during the term of the mortgage. These fees and costs are usually set by the lender.
The amount of the reverse mortgage grows. Interest is charged monthly on the outstanding balance and is added to what is owed.
Most interest rates are variable and will likely change.
You are still responsible for property taxes, insurance, maintenance, and any other expenses. If you don't keep up with these the loan may become due and have to be repaid.
The interest is not deductible on income tax returns until the loan is paid off.
The loan advances are not taxable.
Even though most reverse mortgages don't affect your Social Security or Medicare benefits, it may affect your eligibility for certain "need based" benefits such as Medicaid.
Reverse mortgages can cost more to set up than other types of loans.
Additional Information About Reverse Mortgages
The following resources provide additional information about reverse mortgages.
The Reverse Mortgages pages from AARP present a series of articles that cover the basics and many other issues related to reverse mortgages. This is a good place to begin educating yourself. For more in-depth information, download AARP's booklet, Reverse Mortgage Loans: Borrowing Against Your Home (a pdf file).
Reverse Mortgages from the Federal Trade Commission provides some tips and cautions for what's sound and what may be potential dangers to your finances in reverse mortgage options.
At reversemortgage.org you'll find consumer material on different types of reverse mortgages prepared by the National Reverse Mortgage Lenders Association, an industry trade group. The site is informative, but keep in mind that it is presented from the lenders' point-of-view and with marketing as one objective.
Scams and Risky Ventures to Avoid
Retirement savings and investments are an enticing target for scam artists. The pickings are all too easy, as millions of victims have discovered. Late starters may be eager to boost their nest egg. Retirees who must roll their IRAs or other retirement savings plans into new investments are often looking for investments that are low-risk but high-yield. With such wishes, it's all too easy to fall victim to the scam artists' golden promises. Here are some handy general resources and then some articles on several of the most common rip-offs that target retirement investments.
Guide to Identifying and Avoiding Securities Fraud: Online Publications at the SEC from the Securities and Exchange Commission and Senior News & Alerts from the North American Securities Administrators Association offer brief articles that show investors how to recognize and avoid a variety of investment frauds.
Ask Questions from the SEC describes questions you should ask about your investments and what you should do if you run into problems.
Protect Your Money: Check Out Brokers and Investment Advisors from the SEC describes how you can determine the validity of your broker's credentials, whether your broker has had any problems, and more.
SEC Center for Complaints and Enforcement Tips provides a way for you to file a complaint or provide the SEC with tips on potential securities law violations.
Be Alert for Telltale Signs of Online Investment Fraud from the Securities and Exchange Commission provides tips for spotting investment scams.
Internet Fraud: How to Avoid Internet Investment Scams from the Securities and Exchange Commission outlines frauds related to e-newsletters, bulletin boards/newsgroups, and spam and how to avoid them.
Investing Online from the Federal Trade Commission Online has tips to help you avoid online investment scams.
Affinity investment fraud targets the members of a specific group, such as religious or ethnic groups, work or social groups. The fraudster is often a member of the group or dupes leaders in the group into promoting the scheme. Victims trust friendship rather than check the proposed "investments" out thoroughly. Most affinity scams feature some sort of pyramid or "Ponzi" scam that uses money from recent victims to pay partial "dividends" to earlier "investors," stringing them along too.
Affinity Fraud: How to Avoid Investment Scams that Target Groups, an Investor Alert from the Securities and Exchange Commission, provides tips on how to recognize and avoid such schemes.
Affinity Fraud: Beware of Swindlers Who Claim Loyalty to Your Group, an Investor Alert from the North American Securities Administrators Association, describes these schemes and how to avoid them.
Promissory Note Fraud
Promissory notes are one legitimate way that companies raise money. A promissory note is a loan of money from an investor to a company for a set period of time. In return, the company promises to pay the investor a fixed return on the amount loaned. The catch is that "promissory notes" marketed widely to individuals are usually fraudulent. The promoter is typically an independent life insurance agent to whom the fraudster has promised large commissions.
Broken Promises: Promissory Note Fraud from the Securities and Exchange Commission details the fraud and how to properly and thoroughly check out any promissory note you may be considering.
"IRA Approved" Scams
Some hucksters try to sell their pie-in-the-sky but fraudulent investment scams as "IRA-approved," "IRA-sanctioned," or "IRS-approved"—there's no such thing. The IRS doesn't review or approve investments nor does it endorse any investments. The IRS also doesn't issue any statements that an investment in an IRA is protected because a particular custodian or trustee has been approved by the IRS.
In the past, most of these scams were promoted through high-pressure telemarketing calls. Newer schemes have been promoted through television "infomercials" and radio ads. Don't buy an investment based only on the "infomercial." Always check out an investment before purchasing.
"Lottery" and "Sweepstakes" Scams
Strictly speaking, these are not "investment" scams, but the scam artists often specifically target seniors and their retirement savings. These scammers may contact you by phone, mail, or email and indicate that you have won a large sum of money (possibly hundreds of thousands) in a foreign sweepstakes such as the Canadian or Australian lottery. Here are the two main ploys the scam uses to steal your money:
The "lottery representative" (scam operator) says that you must send money to "pay taxes on the winnings." If you pay once, they will come back an ask for more "taxes."
You are asked provide your account information so that they can deposit the winnings in your account. Instead, the scam operator will steal your money from your account.
To protect yourself, never respond to foreign lottery solicitations and notifications. If you respond to one, even an email to ask for more information, you'll get on the databases that scammers share and you will receive many more "offers" for lottery and other "investment" opportunities.
Investments and Risk
The goal of investing money is to produce a profit (a positive return) on the money invested. That positive return may be composed of cash income or capital growth or both. But there is always the possibility that investments will produce a loss or won't produce the expected return or rate of return. To varying degrees, the future value of all investments is always uncertain or unpredictable. The possibility that an investment might under-perform or lose value is called "risk."
Different degrees and sources of risk. Different types of investment options, however, have different degrees of risk, generally quantified as low-risk, medium risk, and high-risk. Risk also comes from several different sources, not all of which affect every type investment equally. For example, while inflation risk will decrease the value in purchasing power of every type of investment from a "low-risk" passbook savings account to a "high risk" futures vehicle, the market risk associated with a sharp loss of value on the stock market does not decrease the value of the principal placed in the saving account while it very well may decrease the value of the principal invested in individual stocks or in mutual funds. The more common types of investment risk include inflation risk, market risk, interest-rate risk, credit risk (the potential for nonpayment on investments offering fixed income such as corporate bonds), business risk (the potential for business invested in to decline or fail), and liquidity risk.
The reward/risk tradeoff. The risk of loss and the potential reward of return have a direct relationship for investments: in general, the higher the risk to the principal invested, the greater the potential return. Conversely, investments that have lower risks typically offer smaller returns. The differential exists because investors are not likely to put their money in riskier ventures unless they know there's the possibility of a greater reward.
Individual investors such as those saving for retirement should carefully consider the amount of risk that is appropriate for their situation in choosing investment options.
Beyond the Money: Planning Other Aspects of Retirement
Planning for retirement shouldn't focus only on the financial aspects. You also have to plan what you are going to do during your retirement. Research has shown that those persons who keep busy tend to have a happier and more fulfilling retirement.
It's important to plan ahead instead of putting it off. Those who don't have or don't develop interests and community involvements prior to retirement usually don't development them after retirement.
That said, here are just a few articles that discuss broader aspects of planning for enjoyable retirement years.
The Retirement of the Future, from U.S. News discusses how boomers are redefining retirement.
Eye on America: Retirement from CBS News, has numerous articles that explore the changing nature of retirement and preparing for the future.
Medicare and Health Insurance Issues related to Retirement
What kinds of insurance—and how much do you need now? What kinds and amounts will you need in ten years or twenty? Financial planning experts recommend assessing your insurance needs and reviewing your coverage on a regular basis, particularly as changes take place in life.
Resources for Medicare, Medicare Supplement Insurance, Long-Term Care Insurance and Life Insurance will be found in the section on Insurance.
Taking Early Retirement
Is early retirement something you've dreamed of? Or is early retirement on offer as an option in a downsizing company? Whatever the reasons for early retirement, actually doing it successfully takes more than adequate financial resources, as you may imagine. The following articles and sites cover the basics that need to be considered if leaving the workaday rat race is your goal.
Considering Early Retirement Options from the University of Iowa Extension offers a step-by-step handbook for considering an employer's offer of early retirement. Also useful if early retirement is your idea.
10 Tips for Evaluating an Early Retirement Offer from U.S. News.
On Surfing the Internet for Planning Advice
There are numerous sites on the Internet that offer myriads of planning tools such as savings calculators, online advice planners and planning software. Experts recommend the following:
- Use tools from non-profits and those not sponsored by a particular investment company first.
- Use more than one tool.
- Evaluate the tools and resources by asking these questions:
- Who is responsible for the information on the site?
- What's the purpose of the information? For example, is it to sell you something?
- Compare it with other sources. Are they similar or very different?
- How old is the information?
Just remember that the output of a calculator or other interactive tool is only as good as the information that you put into it.