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Tuesday November 12th 2019

Three Ways to Stretch Your Retirement Savings Further

It can be difficult to figure out how much you should spend of your retirement funds each year once you are no longer working. You don’t want to run through your retirement too quickly because it would leave you without any money for your final years. On the other hand, you don’t want to draw out less than you could be drawing so that you have to survive on less than you could have. The ideal situation would involve drawing out the maximum amount each year without depleting the account before you are ready.

Following the 4% Rule

Traditional economists have suggested that a retirement income should consist of 4% of the overall savings. If you limit yourself to using 4% of your retirement each year, you should be able to maintain your account throughout your retirement years without sacrificing too much or going broke. This general rule of thumb has been used with varied success for at least 50 years by many retirees.

Problems with 4%

The trouble with the 4% rule is that it is not flexible enough to handle the fluctuations of the stock market and interest rates where most of the retirement fund is being held. If the stock market is down, a retiree will have less money in their account than they expected, and they will receive a smaller amount of spending cash when they withdraw their 4%. If the market is booming, the retiree could accrue more savings than they planned for, which would leave them with a larger account that they did not take advantage of. The volatility of the markets requires a more varied approach toward retirement spending for the best results.

Financial Engines Plan

This retirement plan controls your retirement funds by investing them more precisely. The majority of a 401(k) fund, for example, would be invested in bonds to cover your minimum spending requirements. The stable nature of bonds keeps your retirement fund safe for your basic needs. The rest of the fund is invested heavily into stocks, which can create larger payouts. The possibility of wide shifts in losses and gains through the stock investments are countered by the safer bond investments that guarantee that your savings will always cover your standard budget. If the stock market booms while you are invested, your payouts could increase and you could enjoy additional financial boosts during your retirement years.

GuidedChoice Investing

GuidedChoice is an investment firm that offers a special program for retirement portfolios. The GuidedSpending program allows you to test out several different types of investment packages before you choose one. You can learn for yourself which combination of stocks and bonds will provide the best return for you. This program relies more on stocks than the Financial Engines plan. GuidedSpending is a complicated system that would be difficult to duplicate on your own, so you would need to hire the firm to help you manage your funds if you choose to use this system. The fees are relatively small, however, and GuidedChoice will manage all of your investments for you.

Three Best Place to Retire on the Cheap

Finding the perfect spot to retire is on the mind of many people these days. With the volatility of the stock market and other investments, retirees evaluating practical retirement options are looking for affordable options that suit their lifestyle. Three cities have been named in the media lately as the best places to retire an they are not as far away as you might think.

St. Augustine, Florida

There is a reason we all think about Florida as a retirement capital. In Smart Money’s March, 2011 issue, the city of St. Augustine, Florida was selected as the second most attractive retirement spot for retirees. With an average home price of $115,400, it is hard to beat this quaint old beach town for affordability. To sweeten the picture even more, Floridians do not have to pay state tax.

The St. Augustine beaches are second to none, stretching out over miles of pristine Atlantic white beaches. Located about forty five minues south of Jacksonville Beach, and a major airport, and tugged into the northeast section of Florida, St. Augustine offers moderate temperatures and a summer ocean breeze to cool hot summer days. With a small population of about 13,000, St. Augustine graces retirees with a small town vibe, free from the stress of larger cities.

As the oldest US city, discovered in 1513, St. Augustine’s historic downtown is quaint and memorable with brick streets and Spanish architecture. There is no shortage of shopping and restaurant venues. With Flagler college in the heart of the city, this small college town has a diverse population, filled with tourists, college kids and retirees.

Lexington, Kentucky

While some retirees want the beach, others favor rolling hills and the four distinct seasons offered by a city like Lexington, Kentucky. Boasting an intellectual population, with almost 40% of the residents having a college degree, Lexington promotes the idea of lifetime learning. Citizenas over 65 can audit classes for free, filling any empty seats they find at the University of Kentucky.

Median home prices are an affordable $144,200, as printed in CNN’s article “25 Best Places to Retire”. With 29% of the population over 50, there is plenty of company for outings to great restaurants and equestrian events, or to take in a basketball game.

Bellingham, Washington

For retirees looking west, Bellingham, Washington is a city that should not be overlooked. The average price of a home is $$258,450, which is a real bargain for the west coast. The fact that there is not state income tax makes this city even more attractive. Located geographically close to both Seattle and Vancouver, this community is home to an international airport and a picturesque downtown harbor.

A state college and nationally acclaimed hospital also call Bellingham home. A farmers market located in the downtown area hosts local vendors offering a quaint shopping experience. The beneficiary of moderate temperatures, Bellingham offers residents a break from the heat, and the extreme cold weather that many other parts of the country claim.

Seven Retirement Basics

Everyone wants to retire, and everyone wants to have enough money to live comfortably when they finally leave the corporate world behind. How do you know if you’ve saved enough? How do you save more? Here are seven retirement basics to help you plan.

First, you need to know how much money you will need. For this you need a plan. How do you intend to live in retirement? Do you want to retire to a simple existence in your current home? Do you want to move to the beach? Don’t forget to factor in your expected health care costs and lifespan. All of these will determine how much money you will need.

Secondly, determine how much income you will receive from social security and any pensions you may have coming. The difference will have to be covered out of your retirement savings.

Third, set up a 401(k) or an IRA if you haven’t already done so. Both of these are excellent vehicles to help you save for retirement. Both have significant tax advantages. In a 401(k) or traditional IRA, taxes are deferred on contributions. You will not pay taxes until the money is taken out. In addition, many employers match workers contributions into a 401(k), up to a certain amount. IRAs offer more options for tax-free withdrawals.

Fourth, decide how to invest the money in your accounts. Most advisors recommend you keep the majority in stocks if you are 20 or more years from retirement, and then gradually shift most of your money into bonds as you near retirement age. Keeping all of your money in one kind of investment also has it risks, however, so the best plan is to keep your portfolio at least somewhat diversified.
Fifth, don’t keep all of your savings in your retirement accounts. If all of your money is tied up in your 401(k) or IRA this increases the likelihood that you will have to break into the account –thus paying taxes and penalties –should there be an emergency in your life, such as a job loss or a major medical bill.

Sixth, eliminate as much debt as possible before you retire. This will allow you to live on less income and use your income for other things, like that long delayed trip to Jamaica.
Finally, consider other ways to boot your income or reduce your expenses when you hit retirement. Consider moving to a less-expensive area or taking on a part-time job.

Finally, consider other ways to boot your income or reduce your expenses when you hit retirement. Consider moving to a less-expensive area or taking on a part-time job.

What is a Thrift Savings Plan?

A thrift savings plan is part of the retirement package offered to federal government employees. The plan is offered by the Federal Retirement Thrift Investment Board, and is basically a federal version of the 401(k) plans that private businesses offer their employees. The contributions that employees make toward a thrift savings plan can be applied before taxes, and taxes are deferred on the payouts from the plan if they are paid out after retirement age. Anyone who is eligible for the Federal Employees Retirement System or the Civil Service Retirement System can take advantage of a thrift savings plan.

Additional Savings Option

The thrift savings plan is a retirement plan option that is separate from the package already offered through the Federal Employees Retirement System or the Civil Service Retirement System. The contributions that employees put toward a thrift savings plan are not considered as a normal part of their annuity contributions toward the Federal Employees Retirement System or the Civil Service Retirement System. Federal employees are allowed to contribute up to 11% of their salary toward the thrift savings plan, and they are eligible to begin saving as soon as they begin employment.

Required for Some, Supplemental for Others

Employees who are using the Civil Service Retirement System are not required to participate in the thrift savings plan program. They can use a thrift savings plan as a supplement to their regular retirement plan. Those who use the Federal Employees Retirement System are required to utilize the thrift savings plan option as part of their standard retirement package, along with the basic annuity and social security plans. Both types of plan participants can enjoy the privilege of immediate contributions toward retirement, without any waiting periods or deferment of payments.

Contributions Drive the Savings

The way the thrift savings plan works is that the amount of money saved toward retirement is based entirely on the amount of money that the employee contributes to the plan. Employers may also contribute to the plans with matching funds or other savings program options. Earnings accumulate as employees continue to contribute during their standard working years. Federal Employees Retirement System members also enjoy agency matching contributions and immediate vesting in the contribution as soon as they begin employment. Civil Service Retirement System members are allowed to contribute up to 6% of their salary toward a thrift savings plan, but they are not eligible for any matching contributions or immediate vestment plans.

Range of Investment Opportunities

The federal government offers five different investment funds for federal employees to choose from for the thrift savings plans. The Government Securities Investment Fund, Common Stock Index Investment Fund, Fixed Income Index Investment Fund, International Stock Index Investment Fund, and Small Capitalization Stock Index Investment Fund are all solidly performing funds that provide reasonable returns on investments. Thrift savings plan members are offered high quality investment opportunities with low administrative and investment costs. Before tax savings and tax-deferred earnings also provide a better return on a federal employee’s retirement earnings.

Don’t Retire Early If It Means Going Without Health Insurance

Early retirement used to be a sign of prosperity, but nowadays, it seems almost foolish to try. There are no guarantees that the retirement income you have established today will be available tomorrow. Rates of return on investments are low. Add to that the difficulty of managing health care, and the outlook for early retirement looks bleak indeed.

Generally, we do not qualify for Medicare until age 65. That leaves a big gap for anyone wanting to retire at age 55. It’s important to look at all of your options and plan accordingly. If you have your heart set on retiring early, here’s what you need to know about making the most of health benefits available to you.

Piggy Back on Your Spouse

If your spouse has health insurance benefits through work and continues working, you may secure benefits that way. Generally, this works best if your spouse is a few years younger than you are. Otherwise, you may be in line for a spot of jealousy as your spouse comes home from the grueling grind every day only to find you relaxing in the sunshine. If your spouse just hasn’t reached retirement age, there is less chance of conflict.


If your employer offers a good pension plan, you may be able to secure private health insurance cheaply until Medicare takes over. Such plans are becoming rare, as companies have begun scaling back benefits to meet ever-increasing demands for profits. Don’t assume the option isn’t there for you. Check into your pension plan and read it carefully. Some employers have been hoping to get away with denying promised benefits.


Even if your pension does not include health insurance benefits, you can stretch those employer benefits out when you retire. Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the typical employer must allow you to pay them to continue your health insurance coverage for at least 18 months. You benefit from the employer’s group insurance rate. Be sure to sign up within 60 days of separation or you may lose this option.

Individual Health Insurance

Once your COBRA eligibility period is over, you’re on your own until age 65. Under the Health Insurance Portability and Accountability Act (HIPAA), those who receive COBRA benefits can secure a certificate that allows them to bypass coverage problems that arise because of a preexisting condition. If your health is good, you might be able to get special coverage that is designed only for catastrophic illnesses. You pay for your annual checkups, prescriptions and routine care. The insurance kicks in for large expenses only after they exceed the deductible.

Going Without

You really shouldn’t consider this an option at all, even if that means paying for our own health insurance. Going uninsured, hoping you make it to age 65 when you can afford that life-saving surgery, is no one’s idea of a relaxing retirement. You’d be better of working and knowing you’re protected if you get sick.

Seven Steps – Retirement Planning Simplified

Planning for retirement is like setting any goal. In order to meet any goal, individuals must determine what required steps will achieve the result. The process may seem tedious, but breaking it down into seven steps will simplify retirement planning.

Determine Net Worth

The first step in retirement planning requires calculating net worth. How much cash accumulates if one sold everything of value? Consider a home, vehicles, recreation vehicles, a business, jewelry, precious metals, collections, etc. Homes are more than likely the most valuable asset people own. Property has multiple means of supplying income.

Besides selling a home, individuals might consider renting a room, renting the basement, buildings on the property, or the entire residence. Use the property to obtain a home equity loan or a reverse mortgage. Consider how anything of value could increase financial status.

Evaluate Hazard Coverage

Individuals should take stock of various insurance policies including homeowner’s, automobile, health, disability and life insurance policies. It is not a pleasant thought to consider, but in the event of illness or disability are there enough assets to cover the costs of medical expenses or long-term care?

Experts suggest individuals accumulating over $2 million dollars will have enough cash flow to afford these expenses. However, persons with a net worth of $200,000 or less, must eliminate assets in order to qualify for government assistance, or individuals could consider long-term care insurance.

Calculate Expenses against Income

Determine the monthly or annual amount of money necessary to live. Usually, persons have eliminated mortgage expenses by retirement, but calculate taxes, insurance and upkeep. Consider food, vehicle upkeep, health insurance and recreational or other out of pocket expenses.

Evaluate the amount of guaranteed income including annuities, pension, social security, and investment accounts. Now look at other sources of income, which may include capital gains, dividends, interest, rentals, and wages.

Compare Amounts Acquired with Amounts Required

Persons desiring retirement at age 65 need enough money to live for 20 to 30 years. Individuals must compare the amount of accumulated assets with the amount of money necessary to sustain living. At this point persons may decide to postpone retirement, continue working full-time or consider working part time. Decide what expenses can be eliminated or devise methods of acquiring other sources of income.

Categorize Income

Divide all the sources of income into three categories: early, middle and late retirement. Early retirement includes immediate liquefied assets or the money individuals can use right away. Middle retirement income should be comprised of assets continuing to grow, which may include bonds, TIPS and various annuities. Likewise, late phase retirement funds might include life insurance, balanced and growth portfolios, and various annuities.


When considering investing, determine the capacity and size of the portfolio. Implement the assistance of an advisor. Never take unnecessary financial risks for quick, large dividends. Avoid venturing into territories unknown or beyond the skill of an advisor.

Maintain a Current Plan

Experts suggest reevaluating a retirement plan annually. Various life-changing experiences may necessitate adjustments or revisions. Unexpectedly caring for dependents, divorce or death of a spouse, economic changes, and illness or injury, may all be reasons to revise retirement goals.

The Bucket Strategy for Retirement

Do you have enough money to live on without sacrificing a comfortable lifestyle once your working days are done? Have you started thinking about it yet? As retirement looms, it brings along a suitcase loaded with questions, such as: how long are you going to live, how much of the money you have managed to save up to this point will be gobbled up by inflation, and just what is the money you’ve already got in your various investments doing?

The 4% Rule Doesn’t Work Anymore

Since you can’t just go out and work for a long enough period of time to make up the deficit if you miscalculate, it’s important to estimate right the first time. For a long time, people who gave advice on financial matters suggested something called the “4 percent rule.” This strategy advises you to take out an amount equal to 4 percent of the total invested during the first year that you are no longer working; then the next year, withdraw the same amount as the previous year, and add enough to account for inflation. This method, experts previously suggested, provided most people with better than average odds of making it through at least 30 years at their current lifestyle.

Get a Bucket

In light of the recent stock market roller coaster, however, those in the fiscal know have decided that this method is a bit too oversimplified. Currently, more than half of those who provide investment advice are now recommending that their customers divide their rainy day cache into sections, or buckets, to carry them through with funds they can count on to remain stable.

Filling Your Bucket

Here’s how it works: first, you need to decide on a safe amount of money to remove during your first retired year, then, multiply your designated figure by however long you want a definite amount of income- the average is usually between five and seven years, including a secured amount that takes inflation into account. Once that is done, the funds are placed into a money market account, in order to make sure that you always have a pull-from rate that will sustain you during those years.

When your vat gets close to being empty, or every year, depending on what happens with the stock market, refill it with other prudent investments that will provide enough money to live on throughout the next cycle. This process is then repeated for the remainder of your retirement.

Try Two Buckets, or Even Three

There are two suggested types of bucket strategy: 2-bucket and 3-bucket. The 2-bucket model encourages golden-agers to squirrel away roughly five years of savings in bonds issued by the Treasury Department. Every year, take a set amount from the bonds to live on and then use the remaining funds to invest in stocks. When the year ends, any income earned from the stock growth gets shifted into the bonds for a little boost to next year’s income. If the stocks don’t earn money, the money should be left in the investment, giving it a chance to bounce back. The withdrawals can be adjusted as needed, in case of unforeseen shortfalls or poor stock performance.

Those seeking a bit more cushion might prefer to split their funds among 3 kettles. Into the first vat would go sufficient resources for the first seven years of retired life, including enough extra to account for any economic intensification, which is then placed in a secure investment such as a Treasury bond. The second container would account for the next eight years, from 8 to 15, and would consist of either annuities that would provide secure assets, or a mixture of stocks and bonds. The final bucket, which would cover the remaining years, would hold the most high-risk items, such as real estate. A full year’s worth of income is moved among the buckets annually, depending on what the stock market does. Obviously, this is an intricate set of plans, but it will certainly make your retirement funds safer.

Address the Cost of Your Funeral Now

The thought of planning for the end of a loved one’s life is certainly not one that appeals to many individuals, but the simple fact of the matter is that failure to prepare will only result in higher expenses and an increased amount of stressin an already tough time.


Wills and Executors – Need to Know Tips

Wills receive a lot of attention. Even though the number of people who actually follow-though on the creation of a will is still small, everyone knows the role a will plays in an estate and why it’s a good idea to have one. Receiving less attention is the role of the executor in the successful implementation of wills. Your choice for the executor of your estate is one of the most important decisions you will make. It is the decision that will have the greatest impact on your loved ones after your death, and it’s the decision that, if poorly made, will be impossible for you to fix when it is most crucial.


How to Double Your Retirement Nest Egg

If you’re over 50 now and the retirement nest egg you had planned while you were younger was sidetracked by life, fear not. Although parental responsibilities, less than expected raises and higher than anticipated living expenses can cut into your retirement savings, you can still retire comfortably. If you begin now, there are a number of tools that can help boost your retirement account before the boss hands you that gold watch for all your years of service.

Increase Your 401k Contributions

If your 401k contribution does not equal the maximum amount of your employer matching contribution (up to 6% of your salary, depending on the plan specifications), you might consider increasing your contribution. There are few investments that will double your investment immediately and none that will do it on a tax deferred basis like the 401k does.

If you’re making $50,000 per year and your employer will match up to 6% of your salary, you are putting an extra $6,000 in your account annually, $3,000 of which comes from your employer. Making a contribution like this can add up quickly.

Even if you are already maxed on your employer matching contributions, you might consider contributing more into your account, since it is a tax deferred investment. The IRS permits you to contribute up to $16,500 into your account, depending on the plan limits. After 2010, the contribution limits will fluctuate depending on inflation. And if you are over 50, you can contribute an additional $5,500.00 annually as a “catch up provision.” This too will fluctuate in future years, depending on inflation.

Increase Your IRA Contributions

If you have a Roth IRA or traditional IRA, both are good retirement tools to use. With a traditional IRA, you receive a tax deduction up to the maximum allowable amount of your contribution. The interest earned on the account is also tax deferred, meaning you do not pay tax on interest earned until you withdraw the money. Plus there’s no reason you can’t have both on top of your 401k.

On a Roth IRA, you receive no tax deduction for your contribution. However, when you withdraw the money at retirement, you are not taxed on the interest earned. This can become important at retirement, when you will have less income to live on.

Both IRA and Roth IRA contribution limits have been increased in recent years. Contribution limits are now $5,000. If you are over 50, the limit is $6,000. Over 15-20 years, this investment will certainly add up, especially considering the interest accruing on the account.

For instance, if you are 50, and plan on retiring at 70, and invest $5,000 per year, and earn 5% on your investment, you balance at age 70 will be $185,542.21. If you have a traditional IRA, you have not paid tax on any of this money for the past 20 years. If you have a Roth IRA, you won’t pay tax as you withdraw it.

Use the Equity in Your Home

A house is still usually the biggest investment a typical person makes in their lifetime. In years past, most people had their mortgages paid down or paid off as they approached retirement years. This is not as true anymore, as many people will carry their mortgages into retirement.

If you are becoming an empty nester, you might consider downsizing. If you no longer need the room of a 4 or 5 bedroom home, consider moving down to a 2 or 3 bedroom home. You will not only most likely reduce your mortgage payment, but will also reduce your utility costs and real estate taxes. Consider these monthly savings as income, and use it to fund an IRA or increase the contribution to your 401k.

Consider a Second Job to Fund Your Retirement

This might be in the form of a second job or a small, home based business. Even a few hundred extra dollars per month will go a long way to increasing your retirement account. The internet has created reach to people on a world wide basis like never before. Use the web as your tool to increase your income, and use that income to increase your retirement portfolio. Better to work it now than be forced to keep working at retirement age.