Retirement Divorce

Divorce during or just prior to retirement can have a traumatic impact on one’s financial landscape. According to a Canadian report, the expenses a single person incurs are not 50% of those of a couple. They are at least 75%. If a marriage splits up when the couple is in their thirties, they have more emotional and financial recovery time than if they split up in their sixties.

Going against the Grain

Investment advisors so vehemently disagree with Zvi Bodie, a Boston University management professor and specialist in retirement investing, that the Professor jokingly admits to wearing a disguise in self-defense.

Most of the nation's investment advisers promote stocks, even to individuals approaching retirement, by insisting that the market risk of stocks moderates over time. Bodie contends that “equities are as risky in the long run as they are in the short run." Bodie advises near-retirees to avoid buying stocks, set uip their savings, and expect to work longer.

Tips for Financial Peace of Mind

Canadian retirement planning expert Douglas Nelson has identified the Top 10 Tips for creating financial peace of mind in retirement. Some of the most pertinent are:

• Clearly Identify What's Most Important
• Differentiate Between Needs and Wants
• Create Multiple Sources of Income
• Take full advantage of all tax savings opportunities.
• Understand Your Comfort with Risk
• Your personal comfort with risk will influence your overall retirement  plan. You should review your risk profile every 12 to 24 months.
• Prepare well in advance for each phase of retirement.
• Focus on a tactical income allocation strategy that's projected three to five years into the future and updated annually.
• Rely on Your Portfolio As Little As Possible For Income—limit your reliance to 10% to 30% of your annual income.

Prudential Prudence 

Today’s challenging economic environment has forced many Americans to review their retirement planning goals with a more critical eye. To help navigate through these turbulent times, Robert Fishbein, Vice President and Corporate Counsel with Prudential, offers another series of tips on planning for retirement.

• Think about retirement in terms of income needs. The accumulation of, say, $300,000 is not meaningful for living in retirement unless you can translate that figure into a yearly or monthly income stream.
• View your retirement assets through a “tax lens” so you can see their true economic value. Focus on your after-tax dollars in financial planning.
• Determine whether your living expenses will likely decrease or increase throughout your retirement years.
• Know that health-care costs can be the most difficult retirement expense to estimate.
• Ensure a guaranteed annual income at least equal to the amount needed to cover basic expenses.
• The bottom line is retirement planning should always consider income needs,” Fishbein concluded. “And once those income needs are properly identified, you should look for ways to ensure that your basic retirement needs are covered in a manner that minimizes risk—or maybe even eliminates it altogether.”

64% of Americans Unprepared for Retirement

The Boston College Center for Retirement Research (CRR) has released its biannual National Retirement Risk Index (NRRI) report. For the first time, the report adds long-term care expenses to the Index calculation. This addition uncovers an increase in the number of working Americans who may not be financially prepared to retire. Just this factor alone increased the Index number to 64% from 61% reported one year ago.

Medical Expenses in Retirement

A 65-year-old couple retiring in 2009 will need approximately $240,000 to cover medical expenses in retirement even with Medicare insurance coverage, according to Fidelity Investments’ latest health care cost estimate. This figure is a 6.7% increase over the 2008 estimate of $225,000.

Average Retirement Age Moves Up in Years

For many years, the average retirement age for men had fallen through much of the twentieth century. By the mid-1980s, it had dropped down to sixty-two and stayed there for twenty years. The average age is defined as the youngest age at which at least 50% of men have left the labor force.

Growth of the Sixty-Five-Plus Workforce

The U.S. Bureau of Labor Statistics has reported that the sixty-five-plus workforce increased more than 101%  between 1977 and 2007.

Senate Committee Targets Target-Date Funds

The U.S. Senate Special Committee on Aging has held a hearing on the economic downturn's effect on retirement security, particularly for those who are on the brink of retirement. Witnesses at the hearing offered insight into the myriad factors that are affecting the ability of baby boomers to retire, including the weakened performance of 401(k) funds, the instability of housing values, and the challenges of the labor market for older workers, all of which are contributing to diminished prospects for a secure retirement.

The panel took a particularly close look 401(k) target date funds, which are designed to gradually shift to more conservative investments as workers approach retirement. Yet, many of these funds entail excessive risk. The results of excessive risk can be devastating for those on the brink of retirement. For example, one 2010 target date fund lost 41% in 2008. In conjunction with the hearing, The Committee Chairperson is sending letters today to U.S. Secretary of Labor Hilda Solis and U.S. Securities and Exchange Commission Chairwoman Mary Schapiro, urging them to immediately commence a review of target date funds and begin work on regulations to protect plan participants.

A Job Poorly Done

In good times, when markets are rising and retirement security is a given, very few workers question or care whether their 401(k) plan's fiduciary is doing their job or not. But these days, it's a valid question and concern, especially in light of a distressing survey.

Just 58% of some 275 plan sponsors maintain minutes of retirement plan meetings, according to A recent survey conducted by accounting firm Grant Thornton, has found that many 401(k) plan’s fiduciaries are not doing a good job. For example, only 58% of 275 plan sponsors keep minutes of their meetings. Only 27% use an independent party to analyze plan fees while no more than 29% have established a clear chain of authority for their plan's governance committee.

Grant Thornton has concluded that the retirement plans surveyed would have a tough time "supporting the prudence of their fiduciary decisions in the face of a Department of Labor audit."