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Everyone dreams of a retirement with dignity and financial security.
Many of us consider moving down after retiring to a one-story home with less maintenance when we reach retirement age. Some folks move to a retirement community like Sun City in Roseville, Trilogy in Rio Vista or even places like Palm Springs, the California Coast or Arizona.
Here are a few tips on how to retire with financial options at 65.
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Mexico captain Rafael Marquez says he wont consider retirement as long as he can maintain a high level of play.
Former Barcelona star Marquez and his Mexico teammates will take on the United States in a Confederations Cup playoff on Saturday in Pasadena, California.
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Call it middle-child syndrome, but the oft-overlooked Generation X is not financially on track for retirement, according to several recent studies. While many Baby Boomers are already retired or getting close, and Millennials are still early in their careers, Gen Xers are caught in a squeeze with time running short to fatten up retirement savings accounts.
Just two-thirds of Gen Xers -- now aged 35 to 50 -- have saved for retirement, and 4 out of 10 are not confident theyll have enough money to live comfortably in retirement, according to the Insured Retirement Institute, an insurance industry trade group.
The predicament of Generation X is largely the product of bad timing, experts say.
Gen X has been hosed, says Patrick Quinn, founder and CEO of Hat Tip Wealth Management LLC in Chicago.
They came out into the workforce in the early 90s, and there was a mild recession in the economy at that time so many didnt get into their careers until the mid-90s, Quinn says. Then they started working and the tech bubble burst, causing a lot of disruption and losses to their personal savings accounts. We got past that and got into saving more money more frequently, and then the Great Recession happened.
By some measures, Generation X was hit the hardest by the Great Recession of 2007-09. From 2007 to 2010, Gen Xers lost nearly half of their wealth at an average of $33,000 per person, according to Pew Charitable Trust. Current projections show that the median Gen X saver will only accumulate enough assets to replace half their pre-retirement income, compared with younger Baby Boomers, who should have enough to replace 60% of their pre-retirement income, according to Pew.
Part of the reason is that even though the typical Gen Xer has a higher family income than their parents did at the same age, this generation has six times more debt, according to Pew. Student loan debt is also higher: Four in 10 college-educated Gen Xers have student debt, and the median amount is $25,000.
The stats paint a grim portrait, but experts say Gen-Xers have one major factor on their side to remedy financial bad habits: time.
Because they have so many years ahead of them before retirement, they have a lot of time to get things turned around, says Tony Drake, certified financial planner and owner of Drake amp; Associates in Waukesha, Wisconsin.
If youre a Gen Xer, its not too late for you to take aggressive steps and improve your financial future. Heres how to start:
Analyze cash flow and build a better budget
Before you can build a retirement plan, you have to start by figuring out where your money is going. Its important to not continue doing the same things youve done because it hasnt worked, Quinn says.
Any solid retirement plan has to start with creating a budget and finding areas to cut back, Drake says. He suggests avoiding small expenses you dont need, such as that daily latte. Finding even an extra $25 a week to put into a retirement account adds up to an extra $1,300 a year, and compounded over time, that can make a big difference.
Saving money can be tough for anyone, and Gen Xers are sandwiched by two responsibilities: taking care of their aging parents and their children, including those who boomerang home after graduating from high school or college. Currently, 22% of Gen Xers provide financial support to a parent or an adult child, around $12,000 a year on average, according to a new study from TD Ameritrade. Half of Gen Xers say they have more financial responsibilities than their parents.
Advisers recommend making saving for retirement a high priority.
Its almost like a bill, Drake says. You have to put yourself first and design your life around it, he says.
Maximize your 401(k) and try to catch up
Generation X is unique in that so few members have ever had the security of a pension. Instead, from the beginning of their careers they have been expected to set aside money in a private retirement account such as a 401(k) or IRA.
For a lot of them it was a completely new thing and a lot werent prepared for it and didnt use it properly or take advantage of it, Quinn says.
If your retirement account isnt on track to where you want it to be, you need to figure out why. Nicole Turosky Smith, a financial planner and founder and CEO of GreenWell Financial in Danbury, Connecticut, says she often sees Gen Xers under-contributing or not contributing at all to their retirement plans.
I also see them sitting on cash or the allocation isnt what it needs to be to reach their goals, Smith says. A lot of people are spooked because of the  market crash and are playing it a little too safe.
Recent China-related market volatility is also frightening, but advisers recommend that retirement savers stick with their plan, keeping in mind their long horizon and avoiding checking their account balances too often.
If youre behind on your retirement savings, make sure youre maximizing your contributions and take advantage of employer matches.
Commit to increasing your savings as much as you can, says Marcy Keckler, a financial planner and vice president of advice strategy and programs for Ameriprise Financial. One great way to do that is if your 401(k) offers an auto-increase, it will increase year over year. If you get a raise, it can be great to save that raise before you get used to spending it. It makes the process of increasing your savings a little less painful.
Once you hit age 50, you can also use the catch-up provision of your 401(k), 403(b) or IRA account, which allows you to make additional contributions beyond standard annual limits.
Eliminate debt and avoid building it up further
To avoid dealing with high debt in retirement, target what balance to start with first. While choosing the one with the highest interest rate might makes sense for you, paying off your smallest balance first can also create a snowball effect with other smaller debts.
As you begin chipping away at your debt, make sure youre not adding to it, either. This is especially important if youre in the position of caring for your parents while also taking care of your childrens college planning.
Your kids can get a student loan for college, but you cant get a loan for retirement, Keckler says.
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According to data from the National Institute on Retirement Security, two thirds of working households age 55-64 with at least one earner have retirement savings that are less than one times their annual income. Given the shrinking share of households covered by pensions, its no wonder that 72% of people age 50-64 believe they will have to delay retirement, according to an AARP poll, and half dont think they will ever be able to retire.
Working longer is a win-win-win from a financial standpoint, but it may not be an option for some older workers. Rather, a combination of tactics--working longer (if you can), deferring Social Security (if you can), and continuing to save (again, if you can)--will give you the best shot at making retirement work if youre getting a late start on the savings component.
If you count yourself among the late bloomers who are saving and investing for retirement, here are some tactics to consider, as well as some pitfalls to avoid.
Do: Be prepared to take some risk.
The key attraction of cash and high-quality bonds is that theyre less volatile than stocks. Whereas stocks lost more than a third of their value during the financial crisis, for example, such losses are unthinkable for bond investors. Meanwhile, investors in true cash instruments guarantee principal stability.
But that peace of mind comes at the cost of lower returns: Bond yields have historically been a good predictor of the asset class return over the subsequent decade, and theyre right around 2% right now. Cash returns are even lower, making them a guaranteed loser when you factor in inflation. Thus, accumulators who need their retirement assets to grow have no choice but to steer a healthy share of their portfolios toward stocks, letting their time horizons determine how aggressive they go. For example, the Moderate version of Morningstars Lifetime Allocation Indexes, for someone aiming to retire in 2025, features a hefty 60% stock weighting. Investors who are nervous about the volatility that such a large portion of stocks entails might consider buying an all-in-one fund, such as a target-date vehicle. By mixing both stocks and bonds and reporting their combined performance, such funds help camouflage the visible performance bumps that inevitably accompany a stock investment.
Dont: Go too aggressive.
Yet, even as pre-retirees playing catch-up absolutely should emphasize stocks, its a mistake for older workers to swing for the fences in an effort to make up for a shortfall. Even if you plan to keep working for the foreseeable future and think you can tolerate the downturns that are apt to accompany stocks, theres a chance that you may need your money sooner than you expected. And if all of your money is parked in stocks, you run the real risk of needing to tap your principal while stocks are way down. That could permanently impair your retirement plan.
Thats why even risk-tolerant investors in their 50s and 60s should prioritize an emergency fund to help stave off portfolio withdrawals, as well as allocate a reasonable share of their retirement portfolios to safer securities like bonds. In a worst-case scenario in which they needed to tap their retirement assets earlier than they expected, they could sell the safe stuff while leaving any stock assets intact.
Do: Take advantage of catch-up contributions.
Workers over 50 have the opportunity to give their retirement plans an extra shot in the arm by making so-called catch-up contributions: an additional $1,000 annually to their IRAs and an additional $6,000 for 401(k)s, 403(b)s, and 457 plans. Thus, savers over 50 can contribute $6,500 to their IRAs for the 2015 tax year and a full $24,000 to their company retirement plans. Its also important to note that retirement savers are eligible for those catch-up contributions on Jan. 1 of the year in which they turn 50; Vanguard research indicates that many savers miss out on catch-up contributions when they initially become available.
Dont: Stop with IRA and 401(k) contributions.
Although making the maximum allowable contributions to IRAs and 401(k)s is a worthwhile goal and an enviable achievement, higher-earning, late-blooming accumulators shouldnt stop with maxing out those accounts. Health savings accounts, aftertax 401(k)s, and spousal IRAs serve as additional receptacles for tax-sheltered retirement savings.
And while investing inside of a taxable account doesnt provide you any shelter from year-to-year taxes on dividends and capital gains distributions, building nonretirement/taxable assets is also a worthy goal. Taxable accounts enjoy more favorable tax treatment on withdrawals than tax-deferred accounts like traditional IRAs and 401(k)s; youll owe long-term capital gains tax on securities youve held more than one year, whereas youll pay your ordinary income tax rate on anything you withdraw from a traditional tax-deferred account. Moreover, retirees can also benefit from tax diversification in retirement; maintaining assets in various account types can give them greater discretion over their tax bills each year.
Do: Count on your own contributions, rather than market returns, to do the heavy lifting.
Stocks have returned 7% on an annualized basis in the past decade, and twice that much during the past five years. But those sorts of returns are far from guaranteed. Heightening contributions can help offset the risk that market performance is lackluster in the years leading up to retirement. For example, say you were adding $15,000 a year to your $100,000 portfolio for 15 years and you earned a reasonable 5% rate of return. Youd have $531,000 at the end of the period, more than if you had saved $10,000 for 15 years and earned a robust (but arguably less realistic) 7% return on your money.
Dont: Forget to play small ball.
Yet, even as bumping up your savings rate is a surer way to improve your portfolios viability than is gunning for a better investment return, small-bore factors can help move the needle, too. Morningstar frequently evangelizes about the benefits of limiting your portfolios total costs by opting for low-expense investments and limiting transaction fees, as well as keeping an eye on tax costs by maximizing tax-sheltered investments and paying attention to asset location and tax-efficient withdrawal sequencing. Minding such costs is a guaranteed way to improve your portfolios take-home returns.
Do: Factor in taxes when determining portfolio sufficiency.
After a six-year bull market, retirement-account balances are, in many cases, looking comfortingly plump. But its important to take any taxes into account when determining the sufficiency of your nest egg. If most of your assets are in tax-deferred accounts like traditional 401(k)s and IRAs, youll pay ordinary income taxes on those balances, provided you havent put in any aftertax money. Someone in the 15% tax bracket would see her $300,000 401(k) portfolio balance shrivel to $255,000 once taxes are factored in, for example. The best retirement calculators, such as the T. Rowe Price Retirement Income Calculator, factor in the role of taxes for you. But if youre calculating your retirement readiness on your own, be sure to give your portfolio a tax haircut.
Dont: Reflexively reach for Roth accounts.
Knowing that traditional IRA and 401(k) assets will be taxed upon withdrawal might seem to burnish the appeal of Roth accounts, which allow tax-free withdrawals. And for many investors, getting at least some assets over into the Roth column is a worthy goal. But paying taxes on your contributions--as Roths require you to do--isnt advisable if you think your tax bracket may be lower in retirement than it is during your working years. Youre better off taking that tax break on your contribution to traditional 401(k)s and IRAs (if youre eligible for a deduction) instead of getting that tax break later on, when its worth less. Moreover, if youre playing catch-up on your retirement nest egg, you probably wont benefit from one of the chief advantages of Roth IRAs--the ability to avoid required minimum distributions--because youll need to tap your IRA for ongoing living expenses.
Do: Consider working longer as part of your retirement plan.
Working longer is one of the most powerful things you can do to help make a save if youre hurtling toward retirement but havent yet amassed much in assets. While many individuals may not relish working past the usual 65, delaying retirement offers a valuable financial three-fer: continued investment contributions, delayed portfolio withdrawals (which can greatly improve a portfolios longevity), and the potential to claim Social Security later, thereby enlarging the benefit. Putting in even a few extra years, combined with some of the measures outlined above, can tip the scales of success in your favor. This article does a deeper dive into the financial benefits of working longer. Yet, working longer isnt always viable for a host of reasons, so this strategy is best used in conjunction with--rather than instead of--some of the saving and investing strategies discussed above.
Dont: Assume that youll necessarily be working in the same capacity.
When people hear that working longer is one of the best ways to make retirement finances work, they no doubt visualize slogging it out, full time, in their current industry, or even in their current position. But that neednt be the case. While your current career path may be the most remunerative, you may be able to find a pleasing middle ground later in life, working part time, on a consultative basis, or in a position that provides more personal gratification than your current career path. Morningstar contributor Mark Miller has written extensively about career paths for older workers; heres his latest dispatch.
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Planning for retirement is complicated, no matter what your situation. But if you have a severely disabled child for whom adulthood wont necessarily mean financial independence, its even more complex.
If your child will never be completely independent, you need to plan for not only your own retirement, but for your child during your retirement years and after. Your best bet is to consult with an experienced financial planner who can give you advice specific to your situation. But here are a few general tips for preparing for retirement when you have a disabled child.
1. Understand disability benefits. Perhaps the most important piece of this puzzle to understand is Social Security disability benefits. If your child is found to be legally disabled by the Social Security Administration, he or she may qualify for some benefits, which could last for the remainder of your childs life. As an adult, your disabled child can still receive benefits while working, so long as his or her income doesnt exceed that years substantial earnings limit. For 2015, that limit is $1,090 per month. This allows adult disabled children to contribute to society, while also receiving the financial stability that disability benefits can help provide.
Sometimes disabled children will qualify for additional Social Security retirement benefits based on your work record or your spouses. Qualified children in your family can receive up to half of your full retirement benefit amount, though there is a limit to the amount that can be paid to the family as a whole. If you have multiple children with disabilities, you will need to pay close attention to the family limit. Also consider how your retirement age will affect your childs potential income from your retirement benefits. This is something to talk over with a qualified financial planner.
2. Consider additional costs. Many online retirement savings calculators assume that you will live on a fraction of your current income in retirement. For example, they might estimate that you could live on 80 percent of your current salary in retirement, adjusted for inflation. For many retirees, its possible to restrict expenses after you leave your job, especially if youll have all your major debts paid off by the time you retire. But when you have a disabled child at home, your retirement costs might not decline. Be sure to take into account any additional expenses you will incur during retirement.
3. Consider life insurance options. Many parents choose affordableterm life insurance policies to provide benefits for family members in the event of their death. However, when you have a disabled child, permanent life insurance may be a better option. You can maintain permanent life insurance throughout your career and into your retirement years without fear of premiums rising exponentially as you age. Whole life insurance can be one way to ensure that your child is provided for after you and your spouse pass away. However, you need to be absolutely sure that your retirement income is enough to cover the insurance premiums. Missing premium payments can result in the cancellation of your policy and the loss of benefits.
4. Look into trusts. You can often put your property into a trust, even while youre still working and using the property. This can help protect your disabled child from legal issues if you should pass away unexpectedly. Leaving your home, car and other property in a trust for your child can give you assurance that your child will be amply provided for upon your death. A trust doesnt affect your retirement planning directly, but knowing that your child will have access to all of your assets upon your death can ease the burden of saving more cash for your childs benefit.
5. Dont neglect your will. As you work through the retirement planning process, make sure your will stays up to date. Its easy to neglect updating your will when you change caregivers. But always be sure that you have an appropriate caregiver and trustee in place for your child at all times.
When planning for retirement with a disabled child, you will have to consider some additional issues. Its particularly important to figure out how your retirement age will affect your childs potential draw from Social Security. Understanding these issues and talking them over with a financial planner can help you to enjoy a comfortable retirement while still providing for your child.
Rob Berger is the founder of the personal finance blog the Dough Roller.