Many in Middle Class ‘Guess’ on Retirement Needs

Many Americans are unwilling to pay for advice on their retirement planning. I believe it is the result of finding objective advice without the pressure of buyng a product. People should sek the advice of a fiduciary adviser, someone who provides advice with the best interest of the client first and foremost.

retirement (Photo credit: 401(K) 2012)

Three-fourths of middle-class Americans say their estimate of what they’ll need to live on in retirement is based on “some sort of guess,” a new survey finds.And those guesses often appear off the mark, according to the annual Wells Fargo Retirement Survey.

For instance, middle-class Americans say they believe the median cost of their out-of-pocket health care costs in retirement will be $47,000. But the Center for Retirement Research estimates a typical couple at age 65 can expect to spend $260,000 or more over the rest of their lives.

Further, when asked what percentage of their nest egg they expect to withdraw annually in retirement, the median — or typical — withdrawal predicted by middle-class Americans is 10 percent. But most experts recommend annual withdrawals of 3 to 4 percent.

In addition, middle-class Americans say they’ll need a median of $300,000 to support themselves in retirement — but to date have saved only $25,000.

The survey also found that 34 percent of middle-class Americans estimate that their retirement income will be half their current annual income, or less. The median household income for Americans was roughly $50,000 last year, so that means many are planning on living on $25,000.

“Clearly, the guessing doesn’t work,” said Laurie Nordquist, a director of institutional retirement and trust services at Wells Fargo. The survey findings suggest that many consumers are too focused on paying day-to-day bills to spend more time on retirement planning, she said, even though that’s clearly warranted.

Harris Interactive Inc. conducted the telephone survey of 1,000 middle-class adults from July 9 through Sept. 12. To aim at the middle class, participants fell within specified income and wealth brackets. For example, those between the ages of 30 and 75 had 2011 household income of $50,000 to $99,999, and assets of $25,000 to $99,999 that could be invested.

Have you done detailed calculations of your financial needs in retirement, or are you, too, playing the guessing game?

Many will guess on their retirement needs. Yet these same people will go to a doctor for a checkup or will not guess on their taxes. They will seek the best advice available. Retirement planning is far too important to guess your needs.

Please comment or call to discuss how this affects you.

Posted via email from Curated 401k Plan Content

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Are Americans ‘Winging’ Their Retirement Plans?

Left unchecked the retirement crisis in America will only worsen. Steps must be taken to control the banks and the other Wall Street bullies. Investors deserve and require a top notch retirement plan no matter what size company they work for. Business owners and managers need to address this or the federal government will be forced to.

retirement (Photo credit: 401(K) 2012)

Savings rates remain very low

The median contribution level for workers in 401(k) or similar plans is 7 percent. This is up from 6 percent in 2011, but still too low a savings rate to fund a comfortable retirement. Think about it: Retirement is likely to last roughly half as many years as a career. How can you expect to replace most or all of your income if you are only setting money aside 7 percent of that income each year? With diminished expectations for the stock market, and bond yields and savings account interest rates approaching zero, most people are not going to be able to grow their way to adequate funding. Saving more is the only way to make it work.

2. Retirement targets are also too low

The reason savings rates are so low is probably that people are underestimating how much they will need in retirement. According to the Transamerica study, the median savings goal of American workers is $500,000 — but how many younger workers understand that inflation is likely to cut the value of that amount by at least half by the time they retire?

3. Too many people are relying on guesswork

It’s no surprise that savings rates and retirement targets seem off-base, because people simply guess at them. The Transamerica Center found that nearly half (47 percent) of respondents chose a retirement target by guessing.

4. Funding levels are off target

While the median retirement target is $500,000, the survey found that 39 percent of workers in their 60s had saved less than $250,000. That leaves them with too much ground to make up in too few years.

5. People seem to be betting on good health

The survey found that most Americans plan to retire after age 65, or not at all. Also, most plan to work after retirement. Working longer may be an inevitability for many people, but it is hardly an ideal retirement planning solution. After all, it means staying healthy enough to work productively, and that is no sure thing for people over 65.

6. Many start planning too late

It’s only natural that older workers are more focused on retirement planning than younger ones, but that is also unfortunate. The younger you are, the more powerfully you can impact your retirement savings, because you have that many more years to contribute money and benefit from investment returns. The survey found that people in their 60s are more likely to have a retirement plan and work with a financial planner than people in their 20s. The problem is that by the time you are in your 60s, your options for significantly improving your retirement funding are very limited.

Procrastination is the American way. Many ask the question why save now for something that is 30 or 40 years away. The answer is the sooner you start the less painful it is and the less RISK you need to take to reach your goals. Remember planners usually win.

Please comment or call to discuss how this affects you.

Posted via email from Curated 401k Plan Content

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What’s your retirement number?

The secret to proper retirement planning is to start as early as possible. Just like you mortgage the longer the time to save the less per month you have to save. You are the one who must decide how you want to live after you are no longer able to work.

Save Money
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— Inflation assumption: 4.5 percent (higher than where we are today, but most economists believe that inflation is headed up in the coming years).– Rate of investment return both before and after retirement: Consider your risk tolerance and err on the side of being conservative. If you’re stuck, use 4-5 percent. Obviously, if you use a higher rate of return, the calculator will ultimately determine that you have to save a smaller amount. After our Great Recessionand financial crash, I probably don’t have to tell you that higher return assumptions may not always work out as planned.– Life Expectancy — if you are younger than 50, use 95; if you’re older than 50, use 90. If you want a closer estimate, go to and use their Life Expectancy Calculator.

Saving for retirement is just the opposite of paying your mortgage, The longer the mortgage the lower the payment, obvious right? When saving for retirement the longer the savings time the lower the required savings rate. Many saving for retirement delay the start of their savings plan and then try to make up for it by taking additional risk. It might work but it’s doubtful.

Please comment or call to discuss how this affects you and your employees.

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Retirement Ranks High among Financial Goals

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We are transitioning from a nation of spenders to a nation of savers. Many younger workers are seeing their parents unable to retire because they overspent. Many looking to retire hold mortgages on their homes with little savings.

Financial goals cited include:

  • Maintaining a comfortable standard of living during retirement (78% reporting 7 or higher on a scale of 1-10);
  • Not falling below your current standard of living (73%);
  • Protecting your income in the event of a disability (60%);
  • Protecting your family’s standard of living in the event that the household breadwinner passes way unexpectedly (55%);
  • Building a sizable investment portfolio (47%);
  • Making a major purchase such a car, boat or furniture (30%); and
  • Financing your children’s college education (29%).


Three out of four Americans (74%) said the pace of today’s society is making it harder for them to focus and remain on track toward achieving long-term goals. However, the research – called the Stick With It study – also reveals how some people are successfully remaining focused over time. 

The number one strategy that works is “setting small interim goals,” with nearly seven out of 10 people (67%) reporting this as a key step to ensure a long-term goal is achieved. The two next most common strategies are “allowing yourself to make mistakes” (62%) and “holding yourself accountable” (60%).

Americans attitude toward retirement is changing. The boomers believed they would just as they always had throughout their lives. They believed that since times were good they would always be good. Besides the government would protect them. Recent events has dramatically changed these thoughts. We must be accountable for our own future.

Please or call to discuss how this affects you and your company.

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8 Toughest Retirement Decisions

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What do you do now that you are retired. It may seem great to no longer have anyplace to go until you realize there is no place to go. Plan ahead.

For past generations, planning for retirement was a relatively simple process. When someone reached retirement age, they threw a party, turned the job over to someone else and went home to live on their company pension. Retirement planning nowadays is a radically different proposition that involves asset allocation, retirement plan rollovers, transfers and distributions and a series of life choices. There are several tough decisions that most people must make when they stop working. The most difficult of these choices includes:

1. When to Retire
Those who are willing to work a few more years can usually enjoy a considerably better standard of living than those who retire early. But deciding when to retire can also be complicated by the possibility of layoff, early retirement incentive packages, personal health and other factors.

2. When to Begin Drawing Social Security
Like retirement itself, knowing when to begin collecting Social Security can befuddle even financially sophisticated retirees. There are pros and cons to early, normal and late payouts, and the right choice for a given person is dependent upon many things, such as whether the person intends to retire, whether the benefits will be invested for a period of time or spent immediately and the level of retirement savings that has been accumulated.


This is a great article on the importance of planning for retirement well before your last day. For many this will be ab extremely traumatic and stressful time. Please consider how your next stage of life will change for you and your family.

Please comment or call to discuss how this affects you and your employees.

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Why stocks will save your retirement

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Many have fled stocks for the safety of bonds or cash. In the long runthis panic will cost you in returns and hurt your long term retirment goals. Remain calm and believe in your academiccally proven strategy.

Despite the bleaker outlook going forward, the stock market is still about your only hope of overcoming the bite that inflation and taxes will take out of your retirement savings.“The future real [after-inflation] return of a traditional mix of stocks and bonds may be closer to 2% than the 5% average of the past,” said Chris Brightman, a chartered financial analyst and head of investment management at Research Affiliates LLC in Newport Beach, Calif.

And the ride will be bumpier. Brightman said the annualized standard deviation of monthly stock-market returns was 15% for the past decade, up from about 10% in the 1990s and 1960s. Still, he said, “the average recent volatility of 14% to 15% is only slightly higher than the 13% to 14% level during the 1970s and 1980s.” Since 1831, the average is 14.5%.

But despite the weak — and volatile — outlook, people investing for retirement need stocks.

To succeed in reaching your retirement goals you must own equities. You must have a disciplined and academically proven strategy. Trying to market time or picking the hot asset class will inevitably lead to failure.

Please comment or call to discuss.

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On 401(k) plans, the less choice the better

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The 401(k) plan of today is the main source of retirement for most employees. We must begin treating it as such and offer a ‘pension fund’ type plan. This will maximize everyone’s outcome. Following a disciplined, strategic plan leads to success.

But inertia can work to our advantage. To coax greater participation, many firms automatically enroll new hires in the 401(k) plan at a low level — say, 3 percent of their salary. Employees are given the choice to opt out, but most don’t. Studies show that automatic enrollment increases the number of people in a plan by 20 percent.Some critics say automatic enrollment smacks of paternalism. Frank Satterthwaite, an executive with Vanguard who works with institutional clients on retirement plans, disagrees. “To me, paternalism would be I’m putting you in the plan and I’m not letting you out,” he says.

He advises his corporate clients to turn human behavior to their advantage. As behavioral studies show, we tend to make the best choices when presented with fewer options. We also tend to prefer simpler choices and to accept the first ones we’re presented with. So Satterthwaite recommends that the first choice in a 401(k) plan should be a one-stop, target-date retirement fund.

Remember the only goal of your company sponsored retirement plan is to help your employees and yourself successfully retire. By offering a limited amount of managed portfolios everyone will benefit.

Please comment or call to discuss how this would help your company plan.

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Plan sponsors to rely more on advisors

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Many investment professionals see the 401k business as a lead generation tool. Once implemented they focus on selling additional products to the plan participants. This will be controlled when the fiduciary standard becomes effective. Your company retirment plan is far too important to your employees and you.

“The emergence and organization of professional retirement plan advisors will have a profound impact on our business over the next five years,” said Joe Masterson, Diversified senior vice president. “These professionals are dedicated to the retirement plans business, and therefore are well-suited to understanding plan compliance, designing appropriate fund arrays, positively impacting plan design and helping participants achieve funded retirements.”Professional retirement plan advisors will be influential in provider searches. Among plan sponsors switching providers, 35 percent will use the services of a professional retirement plan advisor. However, only 10 percent of plan sponsors will actually change service providers annually through 2015, while more than one-third of plan sponsors will perform due diligence of their service provider and 17 percent will add or replace at least one investment option.

The retirement plan (401k) professional will be dedicated and specialize in the management of the retirement plans. Gone are the days of giving the company retirement plan to any “adviser” or “broker”. We must of a better job of providing a prudent plan for employees. Risk management must be a factor when implementing the retirement plan benefit.

Please comment or call to discuss how this applies to you.

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