Question: I am considering adding an immediate annuity to my retirement portfolio. My research suggests these annuities make sense, but I wonder whether it would be better to purchase it from my 401(k) or my Roth IRA. What would you suggest? More
A generation ago, retirees could rely on workplace pensions, along with Social Security payments, to provide guaranteed income that would meet most, or perhaps all, of their living expenses.
That doesn’t happen anymore. When you plan your retirement, you must take responsibility yourself to create a pension substitute from a mix of options that you can combine and customize to meet your needs. Often advisors unfortunately limit those options to investments like stock and bond mutual funds – combined with a “withdraw until it runs out” strategy. That’s very far from a pension. More
Sarah loves the house she has lived in for 35 years. She and her husband bought it together and after the couple divorced, Sarah raised her two daughters there. The years have passed quickly and at the age of 72 she wants to downsize. Happily her girls still live nearby with their families so she is going to stay in the area.
Now Sarah is tackling the classic question:
Should she rent or buy her next home?
Sarah will have to consider how her money will serve her better. Can she sell her house and buy another for a lower price, which would help her finance the rest of her living expenses? Or would renting free up more of her capital?
Last month, the Wall Street Journal’s Letters to the Editor was on the topic of retirement.
The letter was titled: “We’ll All Rethink Our Retirement One Way or Another”.
Among several scholars, industry experts and other opinionated people with well articulated arguments, I submitted a proposal, which was published in the Wall Street Journal on March 17. Below is my submission, which argues that with added flexibility to Social Security, we could in turn save billions of dollars in the process.
Along with greater work flexibility, America needs to offer retirees greater flexibility for their Social Security benefit choices by allowing Social Security beneficiaries to delay starting benefits beyond age 70, and to gradually opt into Social Security benefits as part of a “staged” retirement.
In the process, according to my analysis, $200 billion to $400 billion in Social Security outlays could be saved over the next 20 years.
The pitfalls of our Social Security system don’t have to be as dire as they’ve been constructed. A little flexibility can go a long way.
The start of the New Year signifies a time of change in our lives, where we resolve to better ourselves after the knowledge and experience gained from the previous one.. Apart from the resolutions of self-betterment that we all seem to make, I would hope to see changes to retirement related laws and regulations, which could benefit us all.
Due to more pressing matters in Washington; I do not foresee any specific reforms to retirement, unless it is part of a “grand bargain” that addresses long term debt and fiscal issues. However, there are several changes that I would like to see, which could ultimately better the current state of retirement.
- Reform Social Security that would take long term financing issues off the table. There are many reasonable approaches that could work, including my proposal of updating Social Security to the new realities of older American workers.
- Change the taxation of income annuities to encourage middle market retirees to reduce investment risk and increase cash flow by electing lifetime payouts.
- Limit the excessive accumulation in Rollover IRA’s. Require faster and earlier distribution rather than restricting the types of investment or contributions.
- Improve the disclosure for complex annuity products. Requires better coordination between State insurance and Federal securities regulators.
- Define the fiduciary responsibility of anyone advising investors regarding retirement matters.
Whether or not these changes will come to fruition in 2014, I believe these five alterations to retirement laws and regulations could largely benefit any current or future retirees.
On behalf of the Golden Retirement team, we would like to wish you all a safe and happy New Year.