Consumer Advice amid Losses

In Consumer Reports latest retirement survey, the watchdog found that 51% of retired readers and 55% of those just short of retirement have faced investment losses of at least 20% over the past twelve months. The magazine then offers the following advice to those who have been suffering losses:

Retirees:

“Consider your withdrawal rate. In general, financial planners say an

annual withdrawal rate of about 4 percent from your total investments is

optimal to ensure the money lasts as long as you do.  However, when your

assets fall in value, you'll have to withdraw at a higher rate to

have the same income. The alternative is to withdraw and live on less or

invest more conservatively, risking that you will run out of money

sooner.

“Pick up extra money by working. For those with the ability, working even

part-time can help mitigate a financial burden. Twenty-two percent of

CR's respondents said they're working part-time, and 22 percent

of those who are fully retired said they wish they could work again.

Employers might be willing to hire experienced older workers.

“Don't abandon moving plans. Your $400,000 home may have lost

$100,000 in value, leaving you with less to spend on housing elsewhere.

But values are down in many areas, and moving to a lower-cost area might

still be worth that trade-off.”

Pre-retirees:

“Reset your retirement clock. If you're eligible for a pension, and

assuming your employer's plan is healthy, working more years can add

to your payout, which is often based on salary and number of years

worked. Even those without a traditional pension can use that time to

shore up the nest egg. If you're 50 or older, you can contribute up

to $22,000 this year to tax-deferred accounts such as 401(k) plans.

“Keep on contributing. At the least, put enough in to get the full

employer match. If your employer no longer matches, try to contribute at

least as much as before. If you're able, make up for the match with

a higher contribution.

“Borrow with caution. If you are eligible for a reverse mortgage, proceed

with caution are even stronger for younger eligible homeowners. If you

live long enough to spend the loan--a possibility if you're in your

60s--you could be back at square one but with far less home equity.

“Another option, borrowing from your 401(k), if possible, also has

pitfalls. For one, if you leave your job or lose it, the loan must be

repaid in full or it becomes a taxable distribution.”

Younger workers:

“Start early and diversify.  Survey respondents who said they started

saving in their 20s and 30s were far more satisfied with their retirement

prospects than were those who started later. They also reported higher

net worth. Diversifying savings vehicles also affected satisfaction with

retirement plans. Those who used six or more--401(k)s, IRAs, taxable

accounts, home equity, CDs, and real estate, for instance--were more

satisfied than those who used three or fewer ways to save.

“Stay in the market. With time on their side, young workers can afford to

allocate stocks more heavily, ratcheting slowly downward as they age.

Indeed, with stocks at their lowest levels in years, long-term investors

with guts can bag some bargains now.

“Fund retirement before college. It's never too early to begin saving

for your children's education, but you shouldn't put all

available cash there. Experts recommend giving priority to retirement

saving. You can always borrow to pay for college, but not for retirement.”

Phased Retirement

More and more companies are considering phased retirement programs to address skills shortages as 25% of the American workforce approaches retirement age.  Human resources consulting firm Hewitt Associates has conducted a survey that shows that  just under half of American have some type of phased retirement arrangement available while 40% express interest in establishing a phased retirement program in the future.

Delays in Retirement

AARP reports that almost one in four people from age forty-five to fifty-four plan to delay retirement. One in five people ages fifty-five to sixty-four are thinking the same largely because of the recent economic downturn.

A Housing Shortfall

One in six with a mortgage now owe the bank more than their homes are worth, according to Moody's economy.com. Most of these are property owners who purchased their homes within the past few years or refinanced their properties and siphoned off too much equity.

The 403(b)

Similar to 401(k) plans, 403(b) retirement plans serve employees of tax-exempt organizations. The employers offering such plans include public school systems, hospitals and other health care organizations, universities, certain ministers, and tax-exempt groups. Currently, 403(b) plans hold nearly $670 billion in assets A more detailed breakdown is as follows:

• Colleges and Universities: $323.8 billion
• Other tax exempt nonprofit groups: $132.4 billion
• Hospitals and Health Care: $120.2 billion
• K-12 schools: $92.9 billion

Gratitude for a 401(k)

The most recent issue of Money magazine underscores your debt of gratitude to your 401(k) even during these troubling times. After all, in most cases, your employer has been matching your contributions, a boon missing from most other investment vehicles. Your losses would have been much deeper without that cushion.

But There Are Exceptions

FedEx, Motorola, and General Motors are some of the large American companies that have recently announced they are suspending contributions to employees' 401(k) plans.

Mandatory Retirement: A Detriment to the Courts

During the past fifty years, nineteen judges, including six chief judges, have been forced to retire from one New York Appeals Court due to mandatory retirement at age seventy. Chief Judge Judith Kaye, among them, has made occasional negative references brandishing the mandatory retirement requirement a "great detriment" of the courts.

Crashing in Lewisville, Texas

An 81-year-old man has been taken to the hospital with minor injuries after authorities say the van he was driving crashed into a Lewisville, Texas, retirement center. No other injuries were reported.

Lewisville police reported that the man's van crashed into a stone wall after he put the vehicle in reverse. Then the van crashed into the office area of the retirement center when the driver put the vehicle in drive.

Georgia’s Growing Retirement Systems

The U.S. Census Bureau has released figures showing that the financial picture of the State of Georgia’s public employees retirement systems for the 2006-2007 fiscal year. The state's retirement systems grew during that time period.

The systems count nearly 600,000 members with nearly 150,00 beneficiaries.