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

274 Pages·2016·1.24 MB·English
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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 Kiplinger offers excerpts and tables of contents for all of our books on our Web site (www.kiplinger.com) For information about volume discounts contact: Cindy Greene Kiplinger Books & Tapes 1729 H Street, N.W. Washington, DC 20006 e-mail: 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

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