Retire Worry-Free: Money-Smart Ways to Build the Next Egg You'll Need

274 Pages·2016·1.24 MB·English

by  Kiplingers Personal Finance Magazine Editors

12 STEPS TO FINANCIAL FREEDOM
Money-smart ways
to build the nest
egg you’ll need
Retire
Worry-
Free
n IRAs, 401(k)s & Keoghs
n Profit sharing
n Life & long-term care insurance
n Annuities & pensions
n Social Security & Medicare
n Find the lowest-rate loans
By the Editors of
KIPLINGER’S PERSONAL FINANCE
Retire
Worry-Free
KIPLINGER BOOKS:
Kiplinger’s Practical Guide to Your Money
Kiplinger’s Practical Guide to Investing
But Which Mutual Funds?
Making Money in Real Estate
Buying & Selling a Home
Retire Worry-Free
Retire & Thrive
Dollars & Sense for Kids
Next Step: The Real World
Home•ology
Taming the Paper Tiger at Home
The Consumer’s Guide to Experts
Know Your Legal Rights
Switching Careers
Financing College
KIPLINGER’S BUSINESS MANAGEMENT LIBRARY:
Business 2010
Customer Once, Client Forever
Raising Capital
Taming the Paper Tiger at Work
Cash Rules
Hunting Heads
Parting Company
You Can’t Fire Me, I’m Your Father
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Retire
Worry-Free
Money-smart ways to
build the nest egg you’ll need
By the Editors of
KIPLINGER’S
PERSONAL FINANCE
KIPLINGER BOOKS
Washington, DC
Published by
The Kiplinger Washington Editors, Inc.
1729 H Street, N.W.
Washington, DC 20006
Library of Congress Cataloging-in-Publication Data
Retire worry-free / by the editors of Kiplinger’s personal
finance.-- 4th ed.
p. cm.
Rev. ed. of: Kiplinger’s retire worry-free. c1998.
Includes index.
ISBN 0-938721-90-9 (pbk. )
1. Retirement income--United States--Planning. I. Kiplinger’s
personal finance magazine. II. Kiplinger’s retire worry-free.
HG179 .R3946 2001
332.024'01--dc21
2001050479
© 2001 by The Kiplinger Washington Editors, Inc. All rights reserved. No part of this book may
be reproduced or transmitted in any form or by any means, electronic or mechanical, including
photocopying, recording or by an information storage and retrieval system, without the written
permission of the Publisher, except where permitted by law.
This publication is intended to provide guidance in regard to the subject matter covered. It is
sold with the understanding that the author and publisher are not herein engaged in rendering
legal, accounting, tax or other professional services. If such services are required, professional
assistance should be sought.
Third edition. Printed in the United States of America.
9 8 7 6 5 4 3 2 1
Cover design by Heather Waugh
Introduction ix
CHAPTER 1: Redefining “Retirement” 1
Reassessing retirement • Living and working longer • Serious
planning a must • Piecing together your puzzle • Overcoming
financial worries
CHAPTER 2: Estimate How Much You’ll Need 9
Your numbers are unique • Start Here: Figuring your future
income • How long you—and your nest egg—will last • Toting
your own retirement tab • Worry-free retirement worksheet •
Filling the retirement-income gap • The power of compounding:
Big gun in your corner
CHAPTER 3: Manage Your Spending and Debts 29
It’s not what you earn, it’s what you save • Consider retirement
savings a fixed monthly expense • Money-tracking worksheets •
Get serious about saving • Good debt, bad debt: Be a sensible
borrower • Four ways to keep your debt costs down
CHAPTER 4: Size Up Your
Retirement Plan at Work 51
Take a look at three plans • Trend toward “self directed”
programs • How does your employer’s plan work? • What
you should know about cash-balance or hybrid plans • What
you should know about defined-benefit pensions • Defined-
contribution and self-directed plans • Fitting a profit-sharing
plan or ESOP into your program • Vesting: Your pension plan’s
golden handcuffs • When two pensions are not better than
one • Where to find details on your pension plan
Contents
RETIRE WORRY-FREE
CHAPTER 5: Discover the Real Deal
From Social Security 73
What will you get? • Your personalized benefits estimate •
Unheralded social security features • The taxing side of
social security • When to Start Collecting: It’s Your Choice
CHAPTER 6: Pack an Insurance Parachute 95
Maximizing your health benefits • Fitting life insurance into
your retirement plan • Term life: Biggest bang for your insurance
buck • The case for cash-value coverage • Don’t overlook
disability coverage • Your long-term-care insurance choices
CHAPTER 7: Get a Turbocharged
Earnings Edge With IRAs 113
The Power of Tax-Free Growth • Traditional versus Roth:
The new rules of IRAs • Getting your money out • Choosing
between a Roth and a regular IRA • Convert an Old-Style IRA
to a Roth? • The power of the IRA—traditional or Roth •
Extra IRA blessings • Get maximum action from your IRA •
Moving your IRA money
CHAPTER 8: Set Up Your Own Pension Plan 141
The Keogh plan: A sweet deal • Different kinds of Keoghs •
The age-weighted plan opportunity • The simplicity of a
business IRA • The SIMPLE plan for small business • Write
your own retirement income ticket • The right plan for you
CHAPTER 9: Make the Best
Investment Choices 157
Three fundamental truths • Investment speak: 66 key
investment terms you should know • Stocks promise the best
long-term gains • The role of bonds and GICs • Variable
annuities • Your house as a retirement piggy bank • The REIT
way to invest in real estate • A place for gold?
CHAPTER 10: Use These Money-Wise
Strategies 189
Strategy #1: Set the stage • Strategy #2: Plug into the
mutual fund miracle • Strategy #3: Add an annuity advantage •
Strategy #4: Pick your own stocks • Strategy #5: Use five
bond-buying tactics • Strategy #6: Dip into dollar-cost averaging •
vi
Contents
Strategy #7: Avoid these investment potholes • Portfolio
tracker: How are your investments deployed?
CHAPTER 11: Make the Right Moves
With a Pension Payout 231
“Stop me before I spend!’’ • Avoid the pension-payout trap •
Transfer the money directly to a “rollover’’ IRA • Tap the Keogh
advantage • Planning for change • Investing the payout cash •
The golden handshake: Sizing up an early-payout offer
CHAPTER 12: Monitor Your
Retirement Plan’s Pulse 245
Watch out for inflation • Reassess your plan when changes
occur • Go for some high-tech help • Track your investment
performance • Keep tabs on your debt and savings schedule •
Check your social security record • Review your insurance
coverage • Monitor your company’s pulse, too • Try for an
early exit • Look at living costs where you plan to retire • Resist
retirement money myths • Consider a post-job job • Start your
own business • If you work and collect social security • Tap
your house for retirement income • Need more help? Hire a
financial-planning professional
Index 261
vii
few generations ago, the very idea of
retirement was foreign to the vast ma-
jority of Americans. Retirement was
for the well-to-do. Most people
Aworked until they couldn’t physically
(or legally) work any longer. They lived a few more
years in greatly reduced circumstances—often with
their adult children—and then they died. Social secu-
rity was in its infancy, and anyhow, it was just a mini-
mal safety net for the last couple of years of life.
Company-paid health insurance and pensions were
uncommon. Most people’s lifetime earnings didn’t
allow for much retirement savings, and the elderly
were the poorest age group in America.
In the last 30 years or so, all of this has been turned
topsy-turvy by simultaneous revolutions in health care,
employment rights, pensions and government policies
that encourage tax-deferred saving. Today most work-
ers are protected from mandatory retirement by the
Age Discrimination in Employment Act (ADEA) that
covers workplaces of more than 20 employees and most
occupations other than some such as highly paid execu-
tives in policy-making positions, tenured university fac-
ulty, fire fighting and law-enforcement personnel.
On the other hand, many people who saved aggres-
sively while they were young are able to retire much
earlier than age 65.
Today millions of elderly Americans now live com-
fortably in retirement, with income from a combina-
tion of social security, private pensions and their own
savings. Many retirees have significant health care
coverage from their previous employees.
ix
Introduction