What NOT To Do When You Retire ( U S News )

New Retirees: Avoid These Mistakes

Don’t make these errors when transitioning into retirement

By Emily Brandon

September 24, 2012 

It can be difficult to know when you are truly ready to retire. Even if you are relatively certain you have enough savings to last the rest of your life, there is still plenty that could go wrong. Here are some potential mistakes to avoid as you transition into retirement:
Moving to a place where you don't know anyone. Once you're no longer tied to a job, it's tempting to move to a location with better weather or more fun things to do. In some cases, you can even significantly reduce your retirement expenses by moving to a place with more affordable housing and a lower cost of living. But moving away from your friends and family and your support system of associates, including everything from a great dentist to a car mechanic you can trust, can be detrimental to your retirement. It's difficult to start from scratch and can take years to build a network of people who can help when you need it.


Quitting before you are vested in your retirement plan. You may not get to keep all of your employer's 401(k) contributions, stock options, or qualify for traditional pension payouts until you are fully vested in the retirement plan. Before you turn in your letter of resignation, look up the exact date you will become fully vested in the plan. If it's a matter of weeks or months, sticking around until you qualify for more lucrative retirement benefits could significantly improve your retirement finances. "If you are close to an anniversary date or if you have any stock options that are about to vest, you don't want to leave right before you are about to vest and lose out on money," says Laura Barnett Lion, a certified financial planner and president of Barnett Financial in Austin, Texas.

Retiring before you set up health insurance. Medicare coverage begins at age 65. If you want to retire before then, you'll need to find alternative health insurance coverage. Some employers offer retiree health insurance plans to former employees. If your company had at least 20 employees, you can also buy back into your former employer's group health insurance plan using COBRA continuation coverage, typically for up to 18 months. Other health insurance options for early retirees include joining a spouse's health plan, purchasing individual insurance, and seeing if you qualify for state insurance pools. Some organizations you belong to or part-time jobs may also provide health insurance. "If you are younger than 65 and you are retiring from a company plan, you want to pay special attention if you have any health issues," says Christopher Rhim, a certified financial planner for Green View Advisors in Washington, D.C. and Norwich, Vt. "Know what your benefits are and compare this to any new plan under consideration." Beginning in 2014, young retirees will be able to purchase health insurance through insurance exchanges, with tax credits for those with low and moderate incomes.

Thinking your health will hold out forever. Many new retirees are healthy and energetic, but it's important to plan for a day when you may not be. Proximity to medical care becomes increasingly important as you age. You also need to think about the possibility that you might require long-term care or extra household help from caregivers or family members. It's a good idea to put your medical requests in writing, and designate someone to make medical decisions for you if you cannot.

Taking Social Security too soon. You can sign up for Social Security beginning at age 62, but that doesn't necessarily mean you should. If you elect to begin receiving payments at 62, you will receive lower monthly payments than you would if you waited until an older age. "If you are retiring before your full retirement age, which is 66 for most baby boomers, and you are planning on taking Social Security before 66 at a discount, that can have a substantial negative impact on your retirement finances," says Terry Seaton, a certified financial planner for Seaton Financial Advisors in St. Augustine, Fla. "You can wait even after 66 up to 70, and it increases each year." Monthly Social Security payouts grow for each month you delay claiming up until age 70.

Forgetting to take required minimum distributions. Withdrawals from 401(k)s and IRAs become required after age 70½. People who fail to withdraw the correct amount will face a 50 percent tax penalty in additional to the regular income tax due on the amount that should have been withdrawn.


Spending too much on travel and new hobbies. Some expenses will decrease in retirement, such as commuting costs and workplace attire. But new costs may take their place or even surpass them. Travel costs can become a huge new retirement expense, and some new hobbies might also come with significant costs. Some retirees end up spending more on entertainment simply because they now have more time for it. You may find yourself dining out more to get out of the house or connect with other people. "When you have time on your hands, most people are fairly creative in finding ways to spend money. They play more golf and they go see the grandkids more often," says Seaton. "Find out how you want to spend your time in retirement, and find out what it's going to cost you."

 

Go ahead and enjoy!

How to Retire Rich (from Kiplingers Magazine)

How to retire rich: 6 smart steps at ages 50-66

BY Sandy Block,

Kiplinger's Personal Finance

All Contents © 2012 The Kiplinger Washington Editors

Kiplinger's Personal Finance — 09/19/12

Focus on the finish line. It's time to get serious about saving, and maybe cutting costs.

At this point, retirement isn't a far-off goal you'll worry about someday when you're ready for your second hip replacement. Unless you plan to work until you drop, retirement is staring you in the face.

That means it's time to get deadly serious about saving, especially if you haven't saved enough. And that's true for most people: Nearly a third of Americans age 55 and older have saved less than $10,000 for retirement, according to the Employee Benefit Research Institute. Only 22% have saved $250,000 or more.

With any luck, though, these are still your prime earning years, and some of your major expenses -- such as a down payment on a home and college tui­tion -- are behind you. "With our clients, the last ten years that they work is when they save the most money," says Mark Bass, a certified financial planner in Lubbock, Tex. To make sure you're on track, don't hesitate to seek help from a financial planner or use the many resources available on the Internet.

Take advantage of catch-up contributions. Once you're 50 or over, you can contribute thousands more to your 401(k) plan than your younger colleagues. For 2012, you can contribute an additional $5,500 over the annual limit of $17,000, for a total of $22,500. Any employer contribution on top of that is gravy.

Don't stop there. You can also make a $1,000 catch-up contribution to an IRA, for a total contribution of $6,000 in 2012. Unlike with a traditional IRA, you don't have to take annual minimum withdrawals from a Roth once you turn 70 1/2. There are, however, income limits on Roth contributions. You're eligible if your modified adjusted gross income is less than $125,000 ($183,000 if you're married and file jointly).

Dare to downsize. You may have hoped to move to smaller digs as soon as the kids were grown (and the boomerangers departed). But some homeowners who have seen the value of their homes decline in recent years are reluctant to sell until the real estate market rebounds, says Michael J. Nicolini, a certified financial planner in Elkhart, Ind. Even if your home hasn't returned to its former value, moving to a smaller home could save you thousands of dollars a year in taxes, utility costs and insurance. That's money you can funnel into retirement savings.

Consolidate your orphaned 401(k) plans. You've probably changed jobs several times, and you may still have money in former employers' 401(k) plans. Leaving money in a former employer's 401(k) plan isn't as bad as cashing it out. But as you approach retirement, it's a good idea to consolidate your savings in one IRA with a low-cost financial institution. You'll get a better handle on how much money you have and where it's invested. You'll also have more fund choices, and you may pay lower investment fees, Nicolini says. Once you start taking withdrawals, it will be easier to take them from your IRA than from a former employer's 401(k) plan.

Consider long-term-care insurance. A well-funded retirement savings plan could be decimated in a matter of months if you end up in a nursing home or require round-the-clock home health care. Medicare doesn't cover the cost of long-term care, and Medicaid isn't available until you've spent down most of your savings.

Long-term-care insurance could prevent this from happening, but make sure it fits your budget. You'll have to pay premiums for many years, and the cost of those premiums could increase mightily as insurers are confronted with the cost of providing long-term care to millions of aging baby-boomers, says Steve Robbins, a certified financial planner in St. Louis.

Bass says he typically starts talking to his clients about long-term-care insurance when they're in their early sixties. Instead of a policy that provides lifetime coverage from the day you enter a nursing home, he says, consider a policy that will cover a specific period, such as up to five years. (The average stay in a nursing home is two and a half years.) Adding a waiting period -- for example, 90 to 120 days -- will also lower your premiums. Look for a policy with an inflation rider so your coverage will keep pace with rising medical costs.

Weigh your Social Security options. You're eligible to file for Social Security benefits when you turn 62, but if you do, your monthly check will be reduced for the rest of your life. You may have little choice if you are out of work or in poor health and need the money to pay expenses. But if you have the wherewithal to work a few more years or have other sources of income, delaying checks until at least age 66 will increase your monthly benefits by 33% or more.

That's not the only way working longer could boost your payouts. Your benefits are based on your highest 35 years of earnings. If you're a highly paid employee, working longer could displace some of your lower-earning years.

Earlier this year, the Social Security Administration introduced an online tool that allows you to review your earnings record and get an estimate of your benefits. You should review this record annually, because unreported or underreported earnings could reduce your monthly payments.

Reassess what you'll spend in retirement. Robbins recently met with a couple who earn more than $300,000 a year but who believed they'd need only $50,000 a year to live on when they stopped working. The couple, like most boomers, greatly underestimated how much they'll spend when they retire. While you may save on dry-cleaning and commuting costs, you'll still need to pay for groceries, utilities and gas.

If you refinanced to take cash out of your home, you may still have mortgage payments. And even after you're eligible for Medicare, you'll spend a lot of money on health care costs. Fidelity Investments estimates that the average 65-year-old couple will spend $240,000 on health care in retirement.

Still convinced you can live on less? Try living on your projected retirement income while you're still working. This exercise will force you to cut back on spending, which means you'll be able to save more. And at this point in your life, saving is one of the few things you can control. "As we often tell our clients," says Bass, "a good saver will beat a good investor every time."

Paying for Long Term Care (Wall St Journal)

 

WEEKEND INVESTOR

April 9, 2012, 6:45 p.m. ET

Don't Grow Old Without It

By KELLY GREENE

Long-term-care insurance: It can make the difference between living out your life the way you want and becoming a burden to your family or a ward of the state.
But it is becoming significantly more expensive, more complicated and harder to get with each passing year.
Average premiums on new policies—which help pay for nursing-home, assisted-living and home care—have risen some 6% to 17% in the past year alone, according to the American Association for Long-Term Care Insurance, a trade group. Some insurers have even doubled their premiums on existing policies. The increases come as the industry grapples with low interest rates and policyholders who are living a lot longer than the actuaries said they would.
At the same time, big companies like Prudential Financial and MetLife have stopped selling new policies in the individual market, continuing a trend that began several years ago. Ten of the top 20 writers of individual coverage five years ago have announced their exit, according to Limra International, an industry-funded research firm.

 

 

Ken Kacenga, a 65-year-old doctor in Sierra Vista, Ariz., who plans to retire later this year, got hit with a 23% premium increase recently on the long-term-care insurance he and his wife bought several years ago. The couple struggled with whether to drop the coverage, he says, before finally deciding to keep it for another year while shopping around for other options.
"My fear is…it could become unaffordable as I get into the fixed-income stage of my life," Dr. Kacenga says.
Costs vary widely, even for coverage that is basically identical, according to a March study by the long-term-care insurance group. For example, a $150 daily benefit, lasting three years for a married couple aged 65 in "standard" health, ranges in price from $3,815 a year to $7,129.
That means you could pay nearly twice as much for the same benefits as someone insured by a different carrier.
Unfortunately for consumers, shopping around is difficult. Policies from different carriers are packaged with a proliferating number of bells and whistles. Life-insurance policies and annuities that include long-term-care benefits are introducing more options, but also making the selection process that much more involved.
So how can you figure out how to get the best deal on long-term-care insurance, whether you are buying it for the first time or being hammered with rate increases?
Here are the essentials.
Learn the three moving parts.

 

Close

 

Besides your age and health, three factors have the biggest impact on determining your premium: the daily benefit, the length of coverage and the inflation protection you choose.
To get a sense of your future daily costs where you expect to live in retirement, go to Genworth.com/costofcare. Home care can cost much less than more-intensive institutional care. In Wilmington, N.C., for example, a home-health aide working 44 hours a week costs $40,566 a year, compared with $68,438 for a private nursing-home room with round-the-clock coverage.
You need to decide whether you want a policy to cover the bulk of your exposure, or if you would rather rely on other savings to supplement it, says Natalie Karp, a long-term-care insurance broker in Roslyn, N.Y.
"The new reality is, something is better than nothing," she says. "Get what's affordable and sustainable."
You also will need to select a coverage period, typically ranging from two to six years. If you select $250 a day for three years, for example, you would have a "pool" of $273,750 (multiply 250 by 365 and then by three). If you use less than $250 each day, your benefits would typically stretch longer than three years.
A decade ago, the conventional advice was to spring for unlimited lifetime coverage. That option has become so expensive and so unpredictable for insurers that some have dropped it altogether. Instead, for most people, it is best to choose a "short and fat" policy, with fewer years' coverage and a larger daily benefit. Most people buy three years' coverage, as the average nursing-home stay lasts about that long—though that could follow years of other care.
Many experts consider the level of inflation protection you choose to be the most crucial piece of the policy. Since people typically make their first claims around age 80, those buying policies in their 50s and 60s need to make sure their coverage keeps up with rising medical costs. (Home-health-care expenses remained flat this year, compared with 2011, but skilled nursing-care costs increased 4%, according to Genworth Financial.)
The most expensive—and widely recommended—option is 5% compound inflation protection, meaning your benefits increase in value by 5% each year. For example, your pool of $273,750 would be worth $726,343 in 20 years.
Then there are other inflation hedges meant for older buyers priced out of that option, including 3% or 4% compound, 3% or 5% simple (meaning a $100,000 benefit would simply get $3,000 or $5,000 tacked onto it each year), 5% compounded for 20 years only or one linked to the consumer-price index.
Brace yourself for a rate increase.
Insurers can't raise rates on individuals, but they can do so on a defined group of policyholders if they get state approval. Benny Stansbury, a 70-year-old retired engineer in West Monroe, La., dropped a policy he bought from a smaller carrier after being hit with a 105% rate increase.
The lesson: It pays to look for insurers that have strong financial statements and conduct significant business in your state.
The majority of rate increases should be over, now that insurers have factored in the impact of low interest rates on their ability to generate income to pay claims and lengthening life expectancies, says Dawn Helwig, a principal with actuarial firm Milliman in Chicago.
But many insurance brokers tell their clients to expect at least one increase in the 20% range at some point. If that happens, most insurers will allow you to reduce the increases in exchange for trims in benefits.
Insurance agent Nancy Courser helped Rob Deane, a 75-year-old retired Navy surgeon in Grand Rapids, Mich., lower the 77% rate increase on his 70-year-old wife's John Hancock policy to 46% this month by reducing her 10 years of coverage to six years. Rather than seeing premiums rise from $3,619 a year to $6,406, they will go up to $5,269.
Insurers are getting pickier.
Medical underwriting is getting "more conservative," says Buck Stinson, Genworth's president of U.S. insurance products, and rejection levels are growing.
Eleven percent of applicants under age 50 were denied in 2010, up from 7% in 2007; 17% of applicants in their 50s were denied, up from 14%; and 24% of those in their 60s were denied, up from 23%, according to the American Association for Long-Term Care Insurance.
Evidence of chronic conditions often knocks out applicants. People with diagnosed memory loss or arthritis are almost always denied, and insurers are getting tougher on osteoporosis and diabetes, experts say. Ms. Karp has even had clients rejected for being too thin.
Surprisingly, insurers approve survivors of some conditions, if they can show resolution and stability, including cancer, bypass surgery, Crohn's disease, congestive heart failure and forms of hepatitis, Ms. Karp says.
Insurers scrutinize two to three years' worth of medical records, including those kept by specialists, test results and prescription-drug databases. They also may require phone interviews and face-to-face meetings.
Rest up beforehand: Much of what your interviewer asks is designed to screen for cognitive problems. "They ask you to count down from 100 backwards, or you have to name as many fruits as you can," says David Hays, president of Comprehensive Financial Consultants in Bloomington, Ind.
Go for cash and flexibility.
A few insurers offer cash benefits of up to half your monthly allowance and require no receipts. You still have to meet the threshold for needing care that most insurers require: Documentation from your doctor that you require help with at least two "activities of daily living," which include bathing, dressing, eating, getting in and out of bed and to the bathroom, continence, and walking, or that you need care due to cognitive impairment.
With the cash option, the insurer cuts you a check with no other questions asked, which you can use to buy care however you wish, from hiring a family member to moving to a resort. This also can be useful if you plan to retire overseas, says Rona Loshak, Ms. Karp's business partner, though some policies limit how much cash can be used for international expenses.
Make sure your policy includes an "alternate care benefit," which generally features language recognizing that new trends in long-term care are emerging, and coverage could be provided in the future for those not specifically spelled out now. Today's more popular options—home care and assisted living—weren't even covered under many insurance policies issued two decades ago.
Also consider a "shared care" rider that gives you and your spouse access to each other's benefits if you use up your own.
Make the government your partner.
The Long-Term Care Partnership, a federal and state program now available in about 40 states through 30 insurers, lets people preserve some of their assets and still qualify for Medicaid if they have purchased a long-term-care insurance policy.
In most states, it works like this: You buy, say, $250,000 in coverage. If you use it up, you can qualify for Medicaid while protecting up to $250,000 in assets.
The catch: States generally require that you buy an inflation-protection rider and a specific amount of coverage. Depending on your age and health, that may not be affordable. If you were going to buy the coverage level that the state requires anyway, "there's no additional cost to buying a Partnership plan versus one that's not, so why not buy it?" says Mr. Hays.
Exploit tax breaks.
Depending on where you live, tax breaks could ease your payments significantly. New York, for example, offers a 20% income-tax credit for annual premiums. And if your spouse has medical bills steep enough to itemize on your federal tax return, you might reach the threshold to deduct premiums as a medical expense.
If you are a business owner or partner, the firm can deduct specified premium payments for you and your spouse, depending on your age, from your federal taxes owed. And if your business is a "C" corporation, it can deduct the entire bill. In that case, you may want to consider a policy with higher premiums that are due for only 10 years, or until you turn 65.
Consider a hybrid.
The biggest stumbling block for buyers of long-term-care policies: Writing a big check for a product you hope you never have to use. Increasingly, retirees are turning to permanent life-insurance policies and deferred fixed annuities packaged with long-term-care benefits to cover the risk of spending much of their savings on nursing care.
The appeal: You or your heirs get a payout even if you don't use long-term care, though it often is more costly to buy combined coverage than to buy separate policies, experts say.
In most cases, people buy these products with a single lump-sum payment, effectively removing the risk that they could get hit with future premium increases.
There are other tax perks as well: Payouts used for long-term care generally aren't taxable, and funds can be transferred directly from an annuity or life-insurance policy to buy such a "hybrid" without being taxed, either.
But there also is a big unknown: Most hybrid products have been around for only a few years, so very few people selling them have any clients who have tried to collect the benefits yet.
"We have no way of knowing if these policies will self-destruct in the future or not," says Mary Ahearn, a financial planner in Cochise, Ariz. "But they are offering to lock in our risk."
Write to Kelly Greene at kelly.greene@wsj.com
 

Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved

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Fastest Growing Companies (Fortune magazine) 2012

FORBES FASTEST GROWING COMPANIES 2012

 

Top 100

Rank 6 Company Earnings growth Revenue growth Total return 1 Silver Wheaton 340% 76% 49% 2 Cirrus Logic 450% 39% 88% 3 Baidu 99% 72% 56% 4 HollyFrontier 93% 51% 64% 5 HFF 341% 41% 53% 6 lululemon athletica 81% 45% 109% 7 Northern Oil and Gas 122% 237% 36% 8 Apple 70% 52% 60% 9 IPG Photonics 100% 37% 58% 10 RPC 121% 38% 50% 11 Catamaran 52% 72% 98% 12 3D Systems 272% 26% 112% 13 Impax Laboratories 85% 43% 40% 14 priceline.com 66% 33% 81% 15 Coinstar 74% 43% 37% 16 Bridgepoint Education 187% 57% 9% 17 Alexion Pharmaceuticals 34% 43% 69% 18 American Equity Investment Life 87% 42% 27% 19 Epoch Holding 53% 41% 45% 20 51job 89% 25% 57% 21 Warner Chilcott 72% 51% 23% 22 Hi-Tech Pharmacal 69% 29% 54% 23 Pan American Silver 241% 44% -2% 24 ZAGG 71% 104% 17% 25 United Therapeutics 195% 42% 6% 26 Wynn Resorts 81% 26% 53% 27 Gulfport Energy 89% 26% 44% 28 Questcor Pharmaceuticals 32% 34% 120% 29 Pioneer Natural Resources 95% 23% 51% 30 TransGlobe Energy 40% 38% 50% 31 OYO Geospace 98% 22% 52% 32 Concho Resources 25% 63% 44% 33 MarketAxess Holdings 79% 27% 43% 34 Cliffs Natural Resources 71% 35% 28% 35 Green Mountain Coffee Roasters 78% 78% 3% 36 TPC Group 60% 24% 111% 37 Acme Packet 65% 43% 23% 38 TTM Technologies 105% 40% 6% 39 SciClone Pharmaceuticals 60% 32% 40% 40 Darling International 52% 37% 36% 41 MercadoLibre 59% 30% 42% 42 Hollysys Automation Technologies 110% 32% 14% 43 Opentable 81% 40% 14% 44 Triumph Group 28% 50% 42% 45 Netgear 131% 23% 34% 46 Medifast 59% 40% 20% 47 IAMGOLD 421% 28% 7% 48 Silvercorp Metals 48% 47% 18% 49 Ultratech 84% 25% 37% 50 Intuitive Surgical 41% 28% 50% 51 Under Armour 37% 27% 62% 52 VMware 37% 30% 49% 53 F5 Networks 54% 27% 42% 54 Gentex 83% 28% 24% 55 Coherent 325% 21% 28% 56 Steven Madden 45% 29% 41% 57 Riverbed Technology 85% 32% 12% 58 Ascena Retail Group 38% 33% 38% 59 Materion 86% 30% 0% 60 AmTrust Financial Services 28% 34% 40% 61 ExlService Holdings 53% 30% 30% 62 EZchip Semiconductor 43% 31% 35% 63 Grand Canyon Education 68% 37% 8% 64 BorgWarner 189% 20% 24% 65 Internet Initiative Japan 55% 25% 40% 66 Titan Machinery 33% 34% 34% 67 Rackspace Hosting 45% 25% 47% 68 Cymer 99% 21% 26% 69 Clean Harbors 43% 31% 28% 70 Whiting Petroleum 66% 25% 33% 71 Investors Bancorp 42% 38% 18% 72 NetApp 102% 24% 17% 73 Chipotle Mexican Grill 41% 20% 68% 74 Buenaventura Mining 53% 32% 18% 75 Lam Research 47% 37% 13% 76 SolarWinds 31% 30% 38% 77 Barrick Gold 90% 27% 5% 78 Broadcom 126% 23% 11% 79 East West Bancorp 31% 24% 55% 80 MWI Veterinary Supply 29% 28% 43% 81 NetEase 29% 41% 19% 82 IMAX 22% 28% 44% 83 SVB Financial 70% 23% 29% 84 AsiaInfo-Linkage 34% 51% -12% 85 Cognizant Technology Solutions 27% 32% 31% 86 Fossil 42% 21% 47% 87 Ebix 33% 32% 24% 88 Semtech 78% 25% 15% 89 3SBio 36% 33% 18% 90 Encore Capital Group 56% 23% 31% 91 Celgene 47% 30% 10% 92 HMS Holdings 25% 27% 35% 93 Tempur-Pedic International 62% 21% 21% 94 Southern Copper 49% 24% 23% 95 Rush Enterprises 63% 24% 11% 96 Affiliated Managers Group 40% 26% 0% 97 Vale 45% 29% 7% 98 Super Micro Computer 29% 28% 27% 99 Electro Rent 32% 26% 25% 100 Portfolio Recovery 31% 23% 33%

From the September 24, 2012 issue.