Straight Facts about Retirement in the USA (Morningstar)

Improving Your Finances

25 Shocking but True Statistics About RetirementBy Christine Benz | 07-28-11 | 06:00 AM |

It's summer. Much of the country has been coping with scorching heat. But you still might not welcome this bucket of cold water: a passel of statistics about how many retirees are woefully underprepared for the financial challenges of retirement.


The goal of aggregating these numbers isn't to send you lurching to your closest bar cabinet. After all, you personally might be in much better financial shape during retirement than the following averages suggest. And even if you're not, you still might have time to make some adjustments to your plan so that you can avoid coming up short.


Herewith, 25 shocking but true statistics about the state of retirement in the United States.


19: Percentage of U.S. workers participating in a defined-contribution plan, such as a 401(k), in 1980.


52: Percentage of workers participating in a defined-contribution plan in 2004.


$71,500: Average balance of Fidelity 401(k) account holders at the end of 2010, based on 11 million accounts.


$740,000: The amount of assets needed to deliver an annual income of $50,000 per year for 25 years, assuming a 5% rate of return and no inflation.


$1 million: The amount of assets needed to deliver an annual income of $50,000 per year for 25 years, assuming a 5% rate of return and a 3% inflation rate.


$1.25 million: The amount of assets needed to deliver an annual income of $50,000 per year for 25 years, assuming a 5% rate of return and a 5% inflation rate.


45: Percentage of retirees who don't factor inflation into their retirement planning.


13: Percentage of retirees who look at least 20 or more years into the future when planning for retirement.


21 and 17: Average number of years, respectively, that women and men in the U.S. will be retired.


25: Percentage of 401(k) participants ages 56-65 who had more than 90% of their accounts in equities at year-end 2007.


42: Percentage of the target equity weighting for those retiring in 2010 according to Morningstar's Lifetime Allocation Indexes.


$1,000: Monthly Social Security benefit a retiree would receive if he begins collecting benefits this year, at age 62, assuming an annual income of $50,000.


$1,951: Monthly Social Security benefit if same retiree delays receipt of Social Security benefits until age 70.


72: Percentage of Social Security recipients who begin collecting benefits at age 62.


34: Percentage of retirees who rely on Social Security for 90% or more of their income needs during retirement.


40: Percentage of average wage earners' income that Social Security replaces.


80: Percentage rule of thumb for how much of one's pre-retirement income will be needed during retirement.


$230,000: Amount that a 65-year-old couple retiring in 2011 will need to pay for medical care throughout retirement.


40: Estimate of the average percentage increase in 2011 premiums on long-term care insurance policies issued by John Hancock.


45: Percentage of Americans ages 40-64 who believe the government will pick up the tab for their long-term-care needs.


$2,000: Amount of countable assets to be eligible for Medicaid to cover long-term-care costs in most states.


70: Percentage of Americans over age 65 who will need some form of long-term-care services during their lifetimes.


$162,000: Average annual costs for private-room nursing home care in Manhattan in 2011.


$60,000: Average annual costs for private-room nursing home care in St. Louis in 2011.


2.4 years: Average length of stay in a long-term care facility.

How to Get Started with Estate Planning (from New York Life)

Introduction to Estate Planning

There is a widespread misconception that "estate planning" is of importance only to the wealthy. This is due, in part, to the emphasis of the financial service industry on planning for estate taxes, which only concern larger estate owners. This tutorial, above all, should help you recognize a number of other significant issues that deserve everyone's attention. Other tutorials explore the legal concepts and procedures, as well as the tools and methods of estate planning, probate, wills, and trusts.

What Is Estate Planning?
Although one's "estate" is adequately defined as his or her property, there is no precise definition of estate planning. Your estate plan can be viewed as a series of steps to be taken so that, after you die, your property will be handled in a way that recognizes your values and wishes regarding your survivors and any charitable interests you may have. When people start thinking about these things, some important lifetime concerns often come to mind, too, such as preparing for possible physical or mental disability. So, those issues are frequently addressed as well when one plans his or her estate.

Where to start? The prospect of estate planning can be intimidating because there is usually no single clear answer to that question-there can be so many interrelated human and financial factors to consider. Perhaps your thinking should focus on these two questions:

First, if you died tomorrow, what would you want to happen?
Second, what, most likely, actually would happen?

A good estate plan is designed to bring reality in line with your desires to the greatest extent possible, given the practical problems and limitations you face. The steps in the plan may include candid family discussions, drafting a will and trust, changing the beneficiary designations on some accounts, buying life insurance, etc. As for "problems," experience shows that the most common ones are insufficient money to fund all of one's goals, and survivors who do not act as hoped or expected.

The most important element of an estate plan is giving it the thought it deserves. Taken step by step, the process is not nearly as daunting as many people fear.


Assessing the Need for an Estate Plan: What Would Happen if You Died Tomorrow?

The answer to that big question is a composite of your responses to a range of smaller questions. Mull over the following questions, and if the answers or implications are not clear, or if they trouble you, make a note of them-a real note, not just a mental one. You will then have a list of issues on which to focus, and the simple act of writing things down will be invaluable in clarifying the thought process. Many people who have been uneasy for years thinking about this find it improves their peace of mind just to make themselves spell out exactly what bothers them.

Look over this list. Of course, not all questions will be pertinent to everyone.

Would there be mistrust, uncertainty, and bickering among your survivors in deciding how to handle your property and wrap up your affairs? Is there anybody who, if not prevented, might actually take your property or funds without authority?
Do you have a will that reflects your current wishes? If so, is all your property actually subject to probate court and the terms of the will-or is it instead set up to pass another way at death, e.g., through a beneficiary designation form, as with a 401(k) account, or to a co-owner, as with a joint savings or checking account?
If you do have property subject to probate (e.g., furniture, a house, or an account in your name alone), but do not have a will, what does your state's law of intestacy say about who takes property after a person's death?
What are the needs, abilities, and weaknesses of your survivors, especially your spouse and children, if any?
Are your survivors responsible individuals, capable of managing and using an inheritance wisely if they receive it outright? Or will they need protection from their own youth, financial inexperience, or bad habits? What about the influence of others? Would your bequest to a child need protection from his or her spouse or creditors?
If your current spouse is not the parent of your children, how—and when—will your estate be divided among them?
What kinds of property do you own, e.g., real estate, mutual funds, a family business, etc.? Can your property get along without your active management, at least for a while? How much of it could be converted to cash easily and quickly, if necessary, at reasonably good prices?
Is the net worth of all your property—or of the combined property of you and your spouse—more than the amount at which the federal estate tax begins to bite and tax planning is called for ?
What are your responsibilities to your survivors? Would you be leaving young children and the surviving parent, for example, with sufficient assets to maintain the family's standard of living? Or, in contrast, do you have grown children with good jobs, and a spouse with his or her own adequate retirement plan account?
If your children are under age eighteen, have you found a suitable guardian for them in case their other parent also dies?
Do you have a disabled child or family member who must be provided for separately, for life?
If you have an IRA or retirement plan account, have you selected the appropriate beneficiary and distribution options?


When people get around to reflecting upon these kinds of questions, problematic scenarios and "what if"s often come to mind. It is then that the need for an estate plan typically becomes apparent. Recognizing that need is the all-important first planning step. Unless your situation is very simple, the second step may be to consult with a qualified estate planning attorney.

Assessing the Need for an Estate Plan: What Would You Want to Happen if You Died Tomorrow?

What would you want to happen if you died tomorrow?

The more immediate issue may be what you do NOT want to happen.

If you have made a troubling realization or two after considering the above question, the more immediate issue may be what you do not want to happen. The top priorities are probably the potential situation you have identified and how to correct it. Frequently, an easy solution will suggest itself simply by you thinking through the problem. (If not, be smart and see an attorney experienced in estate planning. He or she has most likely dealt with many situations much like yours.)

Some peoples' values, wishes, and survivors' needs, however, really are very simple. So, too, should be their estate plans—perhaps just a two-page will saying, for example, "Everything to my three children, in equal shares." Other people have various contingencies for which to plan. Some form of charitable contribution—during life or at death—may be part of their plans. There may be a need for life insurance. Many want to keep one or more "strings attached" to payments made to their chosen beneficiaries. These strings come in infinite varieties, but almost always, keeping strings attached requires a trust.

A trust document can be drafted to set forth a personalized combination of specific instructions, with or without discretionary judgments allowed to your trustee, so that money is given to whom you want, when, and for the purposes you specify. This cannot be done with a will alone. A practical example of this point is the use of a trust by parents, in case they both die prematurely, to avoid the immediate distribution of assets to their children upon turning eighteen.

The first step in designing it properly is a realistic assessment of where you currently stand.


What Would You Want To Happen, If You Died Tomorrow?

If you have made a troubling realization or two after considering the above questions, the more immediate issue might be what you do not want to happen. The top priority is probably the potential situation you have identified, and how to correct it. Frequently, an easy solution will suggest itself, simply as a result of thinking through the problem. (If not, be smart and see an attorney experienced in estate planning. He or she has most likely dealt with many situations much like yours.)

Some peoples' values, wishes and survivors' needs, however, really are very simple. So, too, should be their estate plans - perhaps just a two page will saying, for example, "Everything to my three children, in equal shares." Other people have various contingencies to plan for. Some form of charitable contribution - during life or at death - might be part of their plans. There might be a need for life insurance. Many want to keep one or more "strings attached" to payments made to their chosen beneficiaries. These "strings" come in infinite varieties, but almost always, keeping strings attached requires a trust. (Trusts are examined in detail in other tutorials.)

A trust document can be drafted to set forth a personalized combination of specific instructions, with or without discretionary judgments allowed to your trustee, so that money is given to whom you want, when, and for the purposes you specify. This cannot be done with a will alone. A practical example of this point is the use of a trust by parents, in case they both die prematurely, to avoid the immediate distribution of assets to their kids, upon turning eighteen.


The Anatomy of a Simple Will, and Why You May Need One

Everyone should have a will. Even people of modest means should at least have a simple will, for two reasons:

To name an executor (sometimes also referred to as a "personal representative") to wrap up their affairs, and

To specify "who gets what" from their property, to avoid family squabbles.
In the absence of a will, the state law of intestacy determines how the decedent's (the deceased person's) property is to be distributed. In many situations, the law dictates exactly what the decedent would have wanted anyway if he or she had taken time to write a will. But many times the law does just the opposite.

Too often, one mistakenly thinks that one's heirs know what they are "supposed" to do, know what they're to get, or will act appropriately. Family squabbles regularly occur because siblings cannot agree on how to distribute mom's candlesticks, ashtrays, or microwave oven. When big-ticket items are involved, things can get bitter and ugly. A will, therefore, should be used to either name a particular person to receive each item of property or to set out a procedure for making the distribution, e.g., alternating selections by the two children, beginning with a coin flip.

Although some states include a form for a simple will in their statute books, there is no particular format required. The design of the document is usually straightforward, even if the language used by lawyers is a bit stilted. The text generally runs 2–5 pages. Keeping in mind that such a "simple" will may not be what you need at all, look over this description of a typical simple will structure just for reference purposes:

A paragraph stating that the will-maker is of sound mind and intends this document to be his or her "last will and testament."
A paragraph naming the executor—there should be an alternate, too.
Nomination of guardians for any minor children in the event both parents die prematurely. A guardian should be named for the person and for the property of each child. (These roles can be filled by the same person.) Note that whoever is nominated still must be approved and appointed by the court.
A provision that the executor first pay all the decedent's debts and taxes.
Specific bequests—if any—to named individuals, e.g., "Daughter Sally gets my wedding ring; daughter Jane gets my gold necklace."
Disposition of the remainder (residue) of property, which consists of everything that remains after taxes, bills, and bequests.
Married people with children often write wills that are "mirror images" of each other: "If I die first, everything goes to my spouse. If my spouse has already died, I give everything to my children, in equal shares, per stripes." Wills of this type are sometimes referred to as "I love you" wills.

The will can set out an alternating selection process, to be supervised by the executor. If no procedure is specified, it is the executor's job to conduct the property distribution as he or she sees fit—as long as it is completely fair to all beneficiaries. Too often, the executor is an adult child who is also a beneficiary and who abuses the position by giving himself or herself preference in some way. This is strictly prohibited by law, but it is the basis of many probate horror stories.

The "pay all my debts and taxes" clause seems straightforward, but it frequently leads to an unsuspected problem: since many transfers of property at death take place completely outside the probate system (e.g., joint property, retirement accounts, life insurance, etc.), this clause sometimes results in one beneficiary being singled out for these expenses. The decedent's "debts and taxes" all must come out of the "hide" of the beneficiary (e.g., a child) who inherits probate property, while other property, which may pass outside of probate to another child, is free and clear. This is one of many scenarios that make it wise at least to consult an attorney about your will.

People find that preparing a will provides great peace of mind, but they often fear that preparing one is complex. A simple will, however, is often merely a structured list of straightforward tasks designed to wrap up their affairs.


Choosing the Right Personal Representative (Executor and Trustee) for Your Estate

Choosing a personal representative may be the most important estate planning decision of all if you want to maximize the likelihood that your wishes get followed.

Personal representative is a generic term, referring to the executor named in a will or a trustee who is named in a trust to carry out its terms.

In most cases, your personal representative is going to have—by necessity—extensive or total access to your property.

An administrator is also a personal representative and is court-appointed to perform the executor's duties when a decedent has no will. Unfortunately, the person appointed may be a family member whom the decedent would not have wanted. Alternatively, the court may find it appropriate to choose a neutral third party—usually a lawyer—to serve as administrator. In the latter case, the estate is responsible for paying the administrator an hourly fee for all services performed.

Any of these personal representative roles can be filled by an institution, such as a bank, as well as by an individual. Obviously, however, whoever serves should be capable of doing the job, and this is a matter that often deserves much more thought than it is given. In many cases, relations among the surviving family are harmonious, there is little to be done, and everything works smoothly—no matter who is running the show.

When disputes arise or there is bickering, however, family diplomacy may be called for. Remember that some of us are better at this than others. Occasionally, on the other hand, someone must be ready, willing, and authorized to lay down the law and get things done. The selection of this person (or institution) should not be left to chance; he or she should be named by the decedent in a will or trust.

In most cases, your personal representative is going to have—by necessity—extensive or total access to your property. Very bluntly, a trustee, executor, or administrator is in a position to rob you (or your heirs) blind or to ruin your plan through inaction if somebody else acts improperly. Indeed, misconduct is probably the most common factor in estate and probate horror stories.

Of course, objections or complaints can be filed in court. But these can be difficult moves, and they are made after the damage is at least partially done. There is no close court supervision to prevent the misconduct. Therefore, you should not move forward with any plan unless you feel comfortable with the person or institution you have chosen.

The role of personal representative is crucial. Be sure to give ample thought to your choice of executor and/or trustee.

Do You Need an Attorney to Help You with Estate Planning?

Many people engage attorneys to help articulate and implement your plans, including the drafting of appropriate documents. In almost all cases, it is a good idea at least to consult with a lawyer at some point, even if only to review the plan and documents you might have prepared for yourself to be sure they comply with the laws of the state in which you live.

Most people do not know exactly how to put into legal effect the general desires that seem so very clear and uncomplicated in their own minds. Often, when laymen draft legal documents, they employ language that might, indeed, be clear to them, but ambiguous to others. Unfortunately, people tend to ignore (or be unaware of) limitations in their knowledge, and make financial and estate planning decisions in spite of it. Experience shows that many bitter moments occur in the probate courtroom, between members of the same family, engaged in a battle that could have been avoided with a little help.

This is not to say that all "do-it-yourselfers" are doomed to failure, especially if their situations are truly uncomplicated. Often, however, they fail to consider better options, tax pitfalls, related issues, etc. This, as opposed to total disaster, is the more likely danger to the "do-it-yourselfer," and the consequences vary from barely significant to very much so.

Will and trust preparation software can, in many but by no means all situations, produce quite adequate results. This type of software, however, often does not fully deal with particular details, contingencies, and very specific issues that may be important to a given family. If your circumstances have any kind of "twist" to them—and most people's do—there is no good substitute for individualized, professional guidance. Some people use will or trust software just to learn what these documents look like and to "get something on paper" before consulting a lawyer. This is an excellent idea, and these products offer quite a few educational tips and help screens.

The person who makes the estate plan is never there to see how well it works. Everything that can be done needs to be done—correctly—before death. While an attorney is not absolutely required for a good result in every case, using one is the best way to ensure that your plan is the very best possible for your circumstances.


Summary of Estate Planning

Keep in mind that estate planning should not occur in a vacuum. It should be seen as but one step in a process of comprehensive financial planning. This should include risk management and insurance of several types, as well as investment and retirement planning. As with any lifetime planning, merely having an estate plan is not enough to ensure it will work. Indeed, it is likely to fail if your financial and other personal affairs are not properly arranged at the time of your death.

Copyright (c) 2009, Precision Information, LLC. All Rights Reserved


This material is for informational purposes only. Neither New York Life Insurance Company nor its agents render tax, legal or accounting advice. Please consult your professional advisors regarding your particular situation before determining any appropriate course of action.

EOE M/F/D/V
Last updated date Mar. 25, 2010

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Beware those low-priced stocks (South Florida Business Journal)

Task force continues penny stock crackdown

Florida Business Journal - by Kevin Gale
Date: Thursday, June 30, 2011, 4:33pm EDT


Eric Bustillo, the SEC's regional director in Miami, said agencies are combining their limited resources to fight fraud.
Government agencies in South Florida are continuing a crackdown against penny stock promoters with undercover work that resulted in a flurry of conspiracy charges and an SEC action on Thursday.

Those charged live in Coconut Creek, California, Texas and Nevada – an indication of the broad geographic reach of the multi-agency effort.

The investigation is targeting what Eric Bustillo, director of the SEC’s Miami regional office, calls the "securities fraud underworld. Unfortunately, it has many of the players located down here."

In a telephone interview, Bustillo said investigators follow the trail of evidence as it unfolds.

It's not unusual for promoters and consultants to reach out to others for help raising money or fraudulently manipulating the price of stock, he said.

Historically, penny stock cases often involve promoters and telephone sales boiler rooms that make inflated claims. Cases are getting new twists these days through the use of websites and social media.

Most of the schemes listed Thursday involved kickbacks to a purportedly corrupt pension fund trustee in exchange for having the fund buy stock in microcap companies, the SEC said in a news release.

Another scheme involved a bribe that was to be paid to a purportedly corrupt broker who agreed to buy microcap shares on behalf of investors with discretionary accounts, the SEC said.

A final scheme involved a stock promoter who created a website to tout a penny stock company through a volley of e-mail blasts, and who posted phony testimonials from fake investors, the SEC said.

What the insiders and promoters did not know was that the people who were counterparties to the illegal transactions were actually undercover FBI agents or confidential sources participating in an undercover operation, the SEC said.

The latest charges follow a series of cases, filed in October and December 2010, in which the SEC sued more than a dozen companies and penny stock promoters with similar stock manipulation schemes.

On Thursday, Brian Gibson, 63, of Coconut Creek, was charged with one count of conspiracy to commit securities fraud in connection with a scheme to defraud the investing public by engaging in deceptive and manipulative trading practices in connection with Xtreme Motorsports International stock, according to a news release from Wifredo A. Ferrer, U.S. attorney for the Southern District of Florida, and John V. Gillies, special agent in charge for the FBI in Miami.

Gibson was a marketing consultant for Xtreme Motorsports International who conspired with others to create a promotional website that encouraged investor interest in the company, the U.S. attorney’s press release said.

The website contained false and fraudulent statements, including false testimonials, the U.S. attorney said. Gibson faces up to five years in prison, three years of supervised release and substantial monetary fines, as do the others charged, according to the U.S. attorney:

Donald W. Klein, 40, of Frisco, Texas, who faces a count of conspiracy to commit securities fraud by engaging in deceptive and manipulative trading practices in connection with KCM Holdings, of which he was president and CEO. Klein is charged with engaging in a “pay-to-play” scheme to cause a stockbroker to purchase company stock in return for a kickback payment.
Douglas Newton, 66, of Rancho Mirage, Calif., who was charged with one count of conspiracy to commit securities fraud in connection with a scheme to defraud the investing public by engaging in deceptive and manipulative trading practices in connection with Real American Brands, of which he was president. Newton is charged with engaging in a “pay-to-play” scheme to cause a pension fund fiduciary to purchase shares in return for a kickback.
Charles Fuentes, 66, of Dana Point, Calif., and Thomas Schroepfer, 54, of Las Vegas, who were charged with one count of conspiracy to commit securities fraud in connection with a scheme to defraud the investing public by engaging in deceptive and manipulative trading practices in connection with Smoke Free Innotec Inc. stock. Fuentes was a consultant and Schroepfer was the president. Fuentes and Schroepfer are charged with engaging in a “pay-to-play” scheme to cause a pension fund fiduciary to purchase shares in return for a kickback.
Ferrer said the case show the risks associated with thinly traded microcap stocks.

"The defendants charged today abused their knowledge of the capital markets hoping to misappropriate money held in pension fund and brokerage accounts to enrich themselves and their co-conspirators,” he said in a news release.

“Investors deserve better than secret investment strategies based on kickbacks and bribes,” said Robert Khuzami, director of the SEC’s Division of Enforcement, in a news release. “As our charges make clear, these CEOs got more than they bargained for, but exactly what they deserved, for making illicit payments to manipulate microcap stocks.”

Bustillo said the federal agencies are combining their limited resources to bring the microcap cases, and more are likely down the road.

kgale@bizjournals.com | (954) 949-7520 On Twitter: @kevingale