Retirement Planning

Since the late 1970s, many companies changed retirement plans from traditional pensions to 401(k)s and other plans that don’t guarantee a fixed payout. But many believe that 401(k)s actually fail to help Americans effectively save for retirement.

What good is wealth without health? Too many people don’t realize that taking care of themselves physically leads to better financial tomorrows.

Planning for retirement should start in your early twenties, if not before. Why? Because you develop good health habits early and health governs the quality of life long before retirement, and certainly after.

Target date funds are mutual funds that automatically reset their asset allocation as you age. Typically, the mix shifts from stocks to presumably safer bonds. These funds might be a great investment for you, but they have little-appreciated risks of their own.

The cost of housing, healthcare and other basic necessities rise faster than wages. How can you keep up with price increases and still save for retirement? Plan ahead for rising costs early on and take some risk to combat rising costs.

Last month, President Barack Obama gave retirees a scare with a proposal that reduces pensioners’ income from Social Security. The good news is that his plan was dead on arrival due to Washington’s epic gridlock. We don’t need to fear for Social Security for now, but can’t be safe forever.

Despite the wealth of information and good advice about saving for retirement, too many folks miss their financial goals due to avoidable errors.

Here are five bad habits that all but guarantee a lousy retirement. Do you fall into these traps? If you do, you can avoid them by making a clear financial plan and sticking to it.

Here’s a retirement tip: Use some of your hard-earned money to take your family on trips, particularly the grandchildren.

Sure, conserving the money necessary to sustain income throughout retirement is a valid concern. But some retirees become financially paranoid, unduly tight with spending to the point that they fail to enjoy the fruits of their saving.

Tax deferral allows investors to let their money work for them for longer. But in reality, the potential benefits now can actually trigger higher taxes in the future, and may not be worth the risk given market volatility. In fact, it turns out that in some situations the best approach isn’t to defer taxes, but to harvest capital gains and trigger them.

The Obama Administration’s plan to cap tax-favored retirement accounts puts a ceiling of around $3 million on IRAs and other investment vehicles. If enacted, it likely will curb how well people – not just the ultra-rich – can retire.

It gets harder to live off a Social Security paycheck every year, due to under-reporting of inflation. A proposed revamp of inflation adjustments to benefits is sure to make the situation even worse.

To save the government about $130 billion over a decade, President Barack Obama wants to reduce Social Security's cost-of-living adjustments (COLAs). This is clearly bad news for retirees who depend on Social Security payments.