UNDERSTANDING ANNUITIES

You first step when looking at an annuity is to examine fees carefully before making a purchase. Some people sell misleading or outright fraudulent products to unsuspecting people—so be sure that you ask questions and compare options before buying.

An annuity is a contract between you and an insurance company. Based upon the amount you pay in premiums, the company pays you income on an agreed upon schedule. As a general rule, you can't withdraw funds from the account before age 59 1/2. After that, you're only taxed on the earnings withdrawn.

First, decide how to make investments. Do you want to pay one lump sum or installments? Be aware that if you pay a lump sum—a "single premium annuity"—and later wish to invest more, you will have to buy another annuity. A "flexible payment annuity" allows you to invest more at any time.

If you want payments to begin immediately, you can get an immediate annuity. Otherwise, you could buy a deferred annuity, which will begin payments at a later date. Even with deferred annuities, you can buy one that matures in just a few years (although the payouts will likely be smaller).

• Payment schedule. You can select from a variety of payout options: monthly, quarterly, or annual payments starting immediately or starting some time in the future. Annuities are tax-deferred, not tax-deductible. Your money earns interest without your having to pay taxes. However, when you do start drawing from the annuity, you will pay taxes on the interest so consider the tax implications of your payout choice. For example if you are under 59 1/2 and make a withdrawal, you will pay a 10% penalty.
  
• Length of time. You'll need to determine if you want payments for as long as you live, for as long as both you and a survivor live, or for a fixed time. You will probably hear these options referred to as a "life annuity," "joint and survivor annuity," or a "period certain annuity." The longer the time the insurance company must make payments, the less each payment will be.

The two main categories of annuities are fixed and variable.

• Fixed. If you want pure predictability, buy a fixed annuity. It lets you set a guaranteed schedule of payments for a fixed period of time. Consider products that include cost of living adjustments (COLAs), as a way to keep up with inflation. Be aware that there may be fees, such as mortality and expense charges, deducted. Study so-called "bonus" offers on fixed annuities that make it look like you're getting a higher than usual interest rate. The bonus rate may only be good for a limited time—like a teaser rate on a credit card, the good terms that attracted you to the annuity may expire and you may end up with worse terms.
  
  
• Variable. If you're willing to take some risk in exchange for the opportunity to increase your future income, you can buy a variable annuity. You control how the money is invested from among a variety of mutual funds. Your income, therefore, will be variable, subject to the success of the mutual funds that are in your annuity. There may be a guaranteed minimum you will earn, with an unlimited upside; but there may be no minimum guarantee at all.
  
  Variable annuities are generally not for those already retired or near retirement, because their purpose is to grow retirement savings tax-deferred over an extended period of time. Furthermore, the minimum rate guarantee may be as low or close to as low as what you could earn with a CD—but you'd be paying much higher fees for the annuity.

Pay attention to fees. Before buying an annuity, be sure you know how much you will be paying for the annuity. Here are some things to look for:

• Surrender charge. There's a charge if you want to cash out of the annuity. The amount is clearly stated in the annuity contract and differs from company to company. Usually, the surrender charge will go down each year until it completely disappears. Pay close attention to surrender charges; they can have a big impact on the value of your annuity.
  
  
• Withdrawals. Annuities have different withdrawal rules. Try to find a contract that allows for partial withdrawals. This would allow you a one-time right to take out up to 10% of the accumulated cash value without a fee or penalty (imposed by the contract, not the early withdrawal penalty imposed by the government, explained below). This can be useful if you need to tap the annuity during the years the surrender charge is in effect. In addition to the penalties imposed by the contract, taking money from an annuity may result in taxation and penalties.

As a general rule, if you withdraw money from an annuity prior to age 59 1/2, you'll pay a 10% early withdrawal tax penalty. This applies to earnings, not the amount you deposited. The IRS thinks of your withdrawals as automatically taking your earnings first and the amount you invested last.

So if you withdraw money before you reach the contractual date for receiving income payments, it's likely that the entire amount withdrawn will be taxable. However, once your stream of income begins, the IRS will view each payment as a mix of earnings and the amount you invested. Only the earnings are taxable.

There are independent rating services that examine the financial health of insurance companies, such as A.M. Best, Weiss Research, and others. An annuity bought at a bank is not FDIC insured.

There are many reputable companies selling annuities. But annuities are a fertile area for fraud. One of the most common techniques is the switching, exchange or replacement of one variable annuity for another. A switch to an inappropriate variable annuity can cost you a great deal of money, but gives the salesperson a windfall. Be on the lookout if the proposal to replace the annuity comes from the salesperson, not from your own initiative.

Annuities sales people make very high commissions so there's pressure for them to sometimes force a sale. Be sure the agent is focused on your needs and doesn't simply come in and offer you a particular product without getting to know your situation first. Even so, don't trust too easily; sales training in annuities is intense, and the sales approaches can be tricky.

Long-term care insurance is something that seniors should also think about during retirement planning.

LONG TERM CARE INSURANCE

Long term care insurance is an insurance product sold through a licensed agent or an insurance broker. It helps provide for the cost of long term care of an individual beyond a pre-determined period. Long term care insurance covers care generally not covered by health insurance, Medicare, or Medicaid.

A common misconception about long-term care is that it is just for the elderly. Anyone of any age or occupation may need long-term care at any time. In fact, 45 percent of people receiving long term care are between the ages of 18 and 64.

People who require long term care are generally not sick in the traditional sense, but instead, are unable to perform the basic activities of daily living such as dressing, bathing, eating, toileting, getting in and out of a bed or a chair, and walking.

Also, long term care isn’t necessarily long term. A person may need care for only a few months to recover from surgery or illness.

As individuals age, there is an increased risk of needing long term care. In the United States, Medicare will not cover the expenses of long term care, but Medicaid will for those who cannot afford to pay.

Once a health condition occurs, long term care insurance may not be available as the health problem would be considered a pre-existing condition.

In the Unites States, Medicaid generally does not cover long term care provided in a home setting. Also, in most cases, Medicaid does not pay for assisted living. It will, however, pay for medically necessary services for people with low income or limited resources who “need nursing home care but can stay at home with special community care services.”

People who need long term care traditionally prefer care in their own home or in a private room in an assisted living facility.

If home care coverage is purchased, long term care insurance can pay for home care often from the first day it is needed. It will pay for a live-in caregiver, companion, housekeeper, therapist, or private-duty nurse up to 7 days a week, 24 hours a day.

Assisted living is paid for by long term care insurance as in adult day care, respite care, hospice care and more. This insurance can also help pay expenses for caring for an individual who suffers from Alzheimer’s disease or other forms of dementia.

Other benefits of long-term care insurance include:

· Many old people may feel uncomfortable relying on their children or family members for support and find that long term care insurance could help cover these expenses. Without the insurance, the cost of providing these services may quickly deplete the saving of the individual and/or their family.

· Premiums paid on a long term care insurance product may be eligible for an income tax deduction. The amount of the deduction depends on the age of the covered person. Benefits paid from a long term care contract are excluded from income.

· Business deductions of premiums are determined by the type of business. Generally, corporations paying premiums for an employee are 100 percent deductible if not included in an employee’s taxable income.

In the U.S., two types of long term care policies are currently being sold: Tax Qualified and Non-Tax Qualified.

The Non-Tax Qualified policy was formerly called Traditional Long Term Care insurance. This type has been sold for over 30 years. It often includes a “trigger” called a medical necessity trigger.

This means that the patients own doctor or that doctor in conjunction with someone from the insurance company can state that the patient needs care for any medical reason and the policy will pay. All benefits are taxable.

The Tax Qualified long term care insurance policies do not have a medical necessity trigger. In addition, they require that a person be expected to require care for at least 90 days and be unable to perform two or more activities of daily living without substantial assistance and that a doctor provides a Plan of Care.

The other part is that for at least 90 days, the person needs substantial assistance due to a severe cognitive impairment and a doctor provide a Plan of Care. Benefits are non-taxable with this type of policy.

Fewer and few non-tax qualified policies are available for sale these days. One reason is because consumers want to be eligible for the tax deductions available when buying a tax-qualified policy.

The tax issues can be more complex than the issue of deductions alone and it is advisable to seek good counsel on all of the prods and cons of a tax-qualified policy versus a non-tax-qualified policy. This is because the benefit triggers on a good non-tax qualified policy are better.

Once a person purchases a policy, the language cannot be changed by the insurance company. If the policy is an individual policy, it is guaranteed renewable for life. It can never be cancelled by the insurance company.

Most benefits are paid on a reimbursement basis and a few companies offer per-diem benefits at a higher rate. Most policies cover care only in the continental United States. Policies that cover care in select foreign countries do so at a rated benefit.

Group long term care policies may or may not be guaranteed renewable. Most group policies are non-tax qualified and the benefits are taxable. Many group plans include language allowing the insurance company to replace the policy with a similar policy but allowing the insurance company to change the premiums at that time. Some group plans can be cancelled by the insurance company. Those types of policies are not recommended.

Retirement systems or funds sometimes offer long-term care insurance. These organizations are not regulated by state insurance departments. They can increase rates and make changes to policies without state scrutiny and approval.

Long term care insurance rates are determined by four factors:

1. The person’s age

2. The daily or monthly benefit

3. How long the benefits are for

4. The health rating (preferred, standard, or sub-standard)

Most companies will give spousal discounts of ten to twenty-five percent.

Many companies offer multiple premium modes: annual, semi-annual, quarterly, and monthly with automatic money transfer. Companies add a percentage for more frequent payment than annual. Options such as non-forfeiture, restoration of benefits, ad return of premium are expensive and generally not recommended.

Some states, such as California, have a program called the Partnership for Long Term Care. This program contains, among other benefits, a lifetime asset protection feature in long term care policies. The Deficit Reduction Act of 2005 makes the Partnership program available to all who states who want to participate.

Many policies have a waiting period – also called deductible period – or elimination days that may differ from 20 to 120 actual calendar days. Many policies also required intended claimants to provide proof of 20 to 120 service days of paid care before any benefits can be paid.

In some cases, the option may be available to select “zero” elimination days when covered services are provided in accordance with a plan of care. Some may even require that the policy for long term care be paid up to one year before you become eligible to collect benefits. The reason to choose a higher deductible period is for a low cost premium.

Long term care insurance, just as with any other insurance, is a way to protect yourself in the event of an emergency. And, just like any other insurance policy, you can pay premiums for years and never have to use the policy. What you need to do is gauge how valuable a policy like this will be to you and go from there!

As you review each possible policy, ask yourself these questions:

• Do I need this policy?
  
  
• Is the maximum coverage adequate for my situation? For example, many people find that they never increase the replacement cost coverage on their house, even as the value of the house rises dramatically.
  
  
• Am I getting the best value for the premium I'm paying? For example, would I save money and still keep adequate coverage if I raised my deductible (which will lower your premium)? Should I spend a little time searching for the same coverage at a lower price with another insurance company?
  
  
• Are there gaps in my coverage? In other words, are there situations that very possibly could occur but that my policy wouldn't cover?
  
  
• How much of a discount would I get if I bought all of my policies from the same insurance company (assuming I could get coverage as good as or better than I have now)?
  
  
• Does my current insurance agent understand my needs and provide good service? If I don't have an agent, is the insurer's customer service helpful when I need them?

There are some great websites that can help you with your retirement planning. So much so, that they get a whole chapter devoted just to them!

MONEY MANAGEMENT

It’s something we’ve, hopefully, been taught since we were small children. What is the best way to maximize the money that you have? The issue becomes especially important as we start to save for the things that we want and need – namely in this situation retirement.

Consider implementing the following tips to help you with your money management skills.

1. Have a financial record-keeping system in place at home to track income and expenses. This can be as simple as a green ledger form or as complicated as money management software. Just so long as you know where your money is coming from and going.

2. Have a household spending plan or budget and use it. Sure, things do arise that you can’t control, but stay with your budget as much as possible for effective money management.

3. Regularly reconcile your checks and ATM withdrawals. With the advent of online banking, many people don’t always receive a paper bank statement. However, you must be sure that your money is being accurately tracked and debited from your account.

4. Pay your bills on time. When you pay late, the extra fees charged can wreak havoc with the best of budget systems. Plus, late payments can adversely affect your credit report – something you never want to happen!

5. Compare offers from credit card companies before you apply for credit. There are some cards that charge a small interest rate on purchases with no annual fees. Those are the ones you should be looking for!

6. When you have credit card debt, you should do everything you possibly can to pay off the balance each month. If it is not possible to do that, at the very least, pay more than the minimum each month.

7. Request and review a copy of your credit report at least once every year. There are three credit reporting agencies that you can choose from. Take note of the information included in the report and take steps to correct any discrepancies.

8. Identify immediate and long-term savings goals and how you will achieve those goals.

9. Make it a habit to save some money on a regular basis. A special favorite of mine is to pay for items with paper money and at the end of the day, deposit all change into a savings jar. It’s something small, but it can really add up!

10. It’s a good idea to have an emergency fund that will cover three to six months of living expenses in the event that something happens and you cannot work.

11. Put money into low-risk savings products. These can include savings accounts, money market accounts, or certificates of deposit (CDs).

12. When purchasing a vehicle, shop around for the best interest rates. Finance for 24 or 36 months while avoiding the ever popular 60 months. If you pay off your vehicle early, you won’t run the risk of being “upside down” or owing more money than what the car is worth.

13. You will get an annual Social Security statement from the Social Security Administration. Pay attention to what it says and what information is contained inside.

14. Calculate how much money you will need to retire comfortably.

15. As we have said before, you should join your employer-funded pension plan. Once you become vested, this is a great savings vehicle.

16. Contribute regularly to an employer-sponsored retirement savings plan such as a 401 (k).

17. Save money in a tax-advantaged Individual Retirement Account (IRA).

18. Put money in different types of investments to boost returns and reduce risk.

19. Have a mutual fund.

20. DO NOT dip into retirement savings to cover other expenses. That’s what your emergency fund is for.

21. Search around to find the lowest interest rates and fees on a home mortgage.

22. Be sure you have a will.

23. Invest in disability insurance to cover emergency situations and make sure the coverage meets your specific needs.

24. For piece of mind, be sure to have adequate life insurance. This will cover not only your funeral expenses, but it can also leave your dependents with a little extra money to help after you’re gone.

25. Have adequate health insurance.

26. Explore the pros and cons of long-term care insurance.

27. Educate yourself about financial issues and keep learning. You never know what may eventually affect you and your money!

In retirement, it’s especially necessary to manage your money wisely. Sometimes people think so much about how to save for retirement that they give little to no thought towards how they will be managing the money that they have saved.

There are a lot of things to think about: health, age, hobbies, etc. when you think about making your money last. While you may not have enough money to do everything you want, you sure can make the most of what you do have!

To make your money last in retirement requires some thought and planning. There are things you can do to make your dollars stretch.

According to the 2006 Social Security Trustees Report, in 2006, a 65-year-old man is expected to live to 82.1 years and a 65-year-old woman is expected to live to 84.7 years.

The Retirement Confidence Survey (RCS), which is conducted by the Employee Benefit Research Institute (EBRI), found that 6% of workers expect their retirement to last ten years or less. Another 25% believe it will last 10 to 19 years.

In reality, a 65-year old man can expect to live to 82. A 65-year old woman is expected to live to 85. An increasing number of Americans are living to be 100.

As we’ve said throughout this book, you first, you need to figure out how much money you will need in retirement. Experts say that retirees typically need at least 70 to 80 percent of their pre-retirement income.

Your money must last as long as you do. You may outlive your money because:

• You didn't save enough
• Your investments don't keep up with inflation
• You withdraw too much
• You don't invest wisely
• You don't have a pension that pays income for life

Financial experts say that you can take out somewhere between 3-6 % (most recommend 4%) of your assets each year in retirement, and not outlast your money. Most caution that if you withdraw more than 5%, the chances of going broke during retirement increase.

While it makes sense to take less investment risks when you reach retirement, some people go too far. With people living longer and longer in retirement, having some investments in stocks along with more stable bonds and cash may help your money last.

You should also think about the order in which you withdraw money from your different accounts. Generally, a good tip is to start taking money from your regular taxable accounts first and let your tax-deferred accounts grow as long as possible. Dip into your Roth IRA last. This may not work best for everyone, so check with a financial professional to be sure.

Health is an unpredictable factor. Even if you're putting much younger people to shame in the workout room, good health comes with no guarantees. Healthcare expenses can alter the amount you'll need in retirement, and medical problems can put a damper on all of your retirement dreams. The health of your spouse or life partner can also change the course of your retirement. Consider getting long-term care insurance. See our section on long-term care insurance to help you with your decision.

Social Security provides a strong base for retirement security. It is the largest source of income for older Americans. For most people, however, Social Security benefits will replace only about 40% of your paycheck. So they—and possibly you too—will need other sources of retirement income.

Deciding when to begin getting your Social Security benefits is important. You can get a reduced benefit beginning at age 62. But if you wait until your full retirement age (sometime between age 65 and 67), you'll get your full benefit. If you can wait even longer, your benefit will be even higher.

There is no clear cut answer on the best course of action. But if you can afford to wait, your benefit amount will be higher.

More and more older people are deciding to continue working in retirement. AARP research has found that about 70% of mid-life and older workers expect to continue to work in some way in retirement. While financial need is the major reason, many continue working because they like their work and enjoy being productive.

Many mature workers seek balance in their work and personal life. They want flexibility in the workplace. Options such as flextime, compressed work schedules, compensatory time off, telecommuting, job sharing and phased retirement are becoming more common.

You can give away as much as $12,000 to anyone without paying taxes. They don't have to be related to you. The gifts are nontaxable. Amounts vary from year to year so keep apprised of the rates with the IRS.

Gifts can help you reduce your taxable estate to a level that is free of federal estate taxes. However, don't give away this money if it will leave you short of funds.

How and where you live can greatly impact your financial security in retirement.

Location is everything. Do you want to stay in your present home for as long as possible or would you be happy somewhere else?

Maybe, it's time for a smaller house. You may get a great tax break if you sell your home. A married couple, filing jointly, can earn up to $500,000 on the sale of their primary dwelling and pay no federal income taxes on the gain ($250,000 for individuals).

The great part about this tax break is that you don't have to be 55 or older as was once the case. It's no longer a once-in-a-lifetime tax break and you can take advantage of it every two years.

If you are thinking about moving, consider:

• Cost of living
• Taxes
• Climate
• Family and friend support
• Work opportunities

Cut your spending. People often spend more in retirement than they expected. A miscalculation of 10% is to be expected, because you have:

• More time to spend money and shop;
• More leisure time and will be involved in more activities that cost money;
• More time to travel;
• A greater tendency to splurge.

If you're worried about running out of money, you may need to pull in the reins with steps like these:

• Luxuries/necessities. Distinguish between items you must buy and things it would be nice to own.
  
• Stop credit cards. Put away your credit cards to help curb impulse spending. Only carry your credit cards for a planned purchase.
  
  
• Avoid ATM withdrawals. Decide how much cash you need and don't spend a penny more.
  
  
• Buy right. With the right planning, you can buy most of the things you want at a more reasonable price. Thoroughly investigating each purchase can help you get the best value or you may decide that the purchase isn't worth the money.
  
  
• Balance spending. Don't overspend in one budget area without cutting corners in another. If you take an expensive trip, you may want to cut corners by eating out less often or by waiting for movies to come to the bargain theater.
  
  
• Downsize. It may be time to move to a smaller house or sell that second car.
  
  
• Coordinate. Work with your life partner to keep you spending habits in line. Agree on a budget both of you can live with without feeling deprived. And stick with it!
  
  
• Prepare. Leave room in your budget for unexpected expenses. You never know when the furnace will stop or your car will need an expensive repair.

There are ways that your home can help you meet your financial needs in retirement. But be careful, because you don't want to lose your home in the process.

The equity in your home can be a source of cash in retirement.

• Loans. You might refinance your first mortgage and ask for a larger loan. This is called "taking out cash" and it allows you to have cash for any use you wish. If, however, you have a low mortgage rate and don't want to lose it, you could simply get a home equity loan. This is essentially a second mortgage that gives you a lump sum to use.
  
  
• Line of credit. You could choose to open a home equity line of credit. This essentially works like a revolving credit card: You borrow when you need the money and repay it on your own schedule, as long as you make the minimum monthly payments.
  
  Some benefits. Borrowing against your home's value has several advantages:
• Tax break. The interest you pay may be tax deductible. Ask your tax advisor.
• Low rates. Because the loan is secured by your home, the rate is typically lower than other types of loans.
• Less risk. You can use the loan instead of cashing in stocks at the wrong time or withdrawing from an IRA prematurely. Both of those may trigger income tax payments.
  
  
• Reverse mortgages. AARP has an entire section devoted to guiding you through the pros and cons of reverse mortgages. In short, these loans allow you to borrow money and only repay it when you sell the home.

Annuities offer a tax-sheltered way to guarantee an income for life, or in the alternative, a set amount of income for a specific number of years. It all depends on what you need. Consider annuities only if you plan on investing for the longer term; otherwise, it might not be worth it. Annuities can be complicated and difficult to understand.

REVIEWING YOUR RETIREMENT PLAN

A comprehensive review of your retirement plan every few years is almost as important as having a retirement plan. What you save for retirement is one of the most important financial challenges you might face in your lifetime so make sure you review and monitor it often.

Retirement Goals--Do the goals you originally set still apply? Do you still plan to retire at the age you first decided upon? Has an illness or other life event changed your retirement goals? Are your investments growing in a manner to finance your retirement goals? You might need to reevaluate your goals or set some now ones periodically because changes are constantly being made in our lives.

Personal Finances--Is your income more or less than when you originally set up your retirement plan? Do you have additional income to invest from a second job or your spouse's job?

Have you had a bankruptcy or had to make major purchases in the past few years that might affect your retirement plan? Do you have children in college that might dip into your retirement funds? Have you had to withdraw some of your retirement investments for personal use? Your circumstances at any given time will dictate what you can put back for your retirement.

Spending Habits--Have your spending habits changed significantly since you last reviewed your retirement plan? Maybe you got married or divorced, had a child, changed jobs, bought a home, made a large purchase, went middle-age crazy (yes, it happens to the best of us), or just don't seem to get around to saving regularly for your retirement.

Look at your budget and see if there are ways you can free up some extra money to put aside for your retirement. If you see you are putting too much aside, you might use the extra for a much needed vacation.

Investment Portfolio--Here is where you really need to closely scrutinize how your portfolio is balanced to get the most for your investment dollar. Depending on your age and how close you are to retirement will dictate whether your portfolio will consist of investments for growth, income, or a combination of both. Now is a good time to look at the companies you have invested in to be sure they are performing satisfactorily.

Social Security--If you haven't already done so, you should get a statement of earnings from the Social Security Administration to tell you what you can expect to earn when you retire. This statement is also a good way to make sure there are no mistakes in your account. Look over the figures and if you have questions or find a mistake, call the SSA immediately.

Health and Life Insurance--If you are working, chances are you have both health and life insurance but will these still be available when you retire? Some companies offer both to retirees but what will happen if you leave employment before retirement age? Have you made provisions for health and life insurance coverage or at least discussed these with an insurance agent?

Pension Plans--If your company offers a pension plan, do you know what type of plan it is? Does your company offer matching funds? Are you contributing all you can to the plan? Can you choose the investments and do you know how well they are doing?

How long does it take to be vested? What happens to your retirement plan if you leave the company? How much is your plan worth right now and how much can you expect it to grow between now and next year?

IRAs--If you have an IRA, would it be more beneficial to roll it over into a Roth IRA? Is your IRA earning you the best possible return? When can you roll it over to another fund?

Your retirement plan should be reviewed periodically to be sure it is performing the way you need it to for your retirement. The closer you get to retirement age, the more often you will want to review your plan.

Make sure any changes you make will benefit your end goals and carefully research every facet of your plan. Sometimes it is beneficial to run the numbers by a financial planner occasionally to be sure you have the best plan for your circumstances and goals.

You must have a certain amount of money management skills in order to fully maximize on the plan that you put into place. Here are a few suggestions on how to best manage your money

WHAT NOT TO DO

Just because you invest in a retirement plan doesn't mean you will be financially secure when you decide to retire. If you are making these retirement planning mistakes, you could be in for a sad surprise.
• Not taking full advantage of your company retirement benefits
You should invest as much money into your company retirement plan as you can afford. At the very minimum, you should invest enough to get your company matching funds if they are offered.
• Withdrawing money from your retirement plan
By withdrawing money from your retirement plan, you lose valuable interest that is extremely difficult to replace. Some plans allow for hardship withdrawals and/or loans but you must be careful when taking advantage of these withdrawals.
In addition to losing interest, you could face penalties or early withdrawal fees.
• Not actively monitoring your investments
Monitoring your investments makes sense so that you are aware of any discrepancies. Monitoring also alerts you to how well your investments are performing or not performing. If you are carefully tracking your investments, you will be better equipped to know when to switch to a different strategy.
• Relying on Social Security for your retirement income
While social security might provide a substantial portion of your retirement income, you should have other means of income as a back up. It's best to have a company pension or retirement plan and personal savings in addition to social security when you retire.
• Relying on your spouse's retirement plan
If one spouse relies on his/her spouse's retirement plan for his/her retirement, he/she could be in for a very sad surprise. The spouse with the retirement plan could die leaving the other spouse with no income. There could be a divorce or even illness that could compromise the single spouse retirement plan. Each person must have a separate retirement plan for the best retirement security.
• Forgetting to review your plan regularly
If you forget or ignore reviewing your retirement plan on a regular basis, you might be losing a portion of your retirement income. You need to periodically review your asset allocation, your balances, your goals, and so on to insure you are making the most of your plan.
• Practicing poor asset allocation
Poor asset allocation can be financial suicide. What if all your investments are in one stock and the company goes bankrupt? The secret is to diversify so that if one investment decreases in value, another will hopefully increase.
• Not checking out your broker/financial advisor
There are lots of reputable brokers and financial advisors who are knowledgeable about how your portfolio should be set up and maintained. There are also quite a few brokers and financial advisors who are not so reputable or are simply ill informed. If you are going to trust your retirement savings to someone, you owe it to yourself to check credentials and track records.
• Relying too heavily on your company stock
Your company stock is a very good way to save for your retirement especially in your company retirement plan. This can be dangerous though if your portfolio consists of mostly company stock. All companies have lean times and some could have mismanaged finances that could result in bankruptcy. It's best to have a good investment mix in your retirement account.
• Not taking retirement planning seriously
This very well could be the worse mistake a person can make about his/her retirement plan. Even if you are a very young person, your retirement plan should be a serious priority. By starting early, you can grow quite a large nest egg and might just be able to retire early.

A lot of people feel they have plenty of time to worry about retirement planning once they have their home, children through college, the new Hummer, and so on. My answer to these people is to think about the life style they might want to keep once the paycheck stops.
Bottom line is to take your retirement planning efforts seriously, diversify your investments, save regularly, and keep your goals in mind.
Once you have a plan in place, you think you’re done – right? Sorry, but nope.

JOINING AARP

Back in 1958, Dr. Ethel Andrus founded AARP. The organization was her way to promote productive aging and to help fellow retired school teachers find affordable health insurance. Medicare wasn’t enacted until 1965 to give seniors over the age of 65 health care, so her work gave a lot of seniors the health coverage that they needed.

The organization grew progressively over the years into what it is today. AARP remains true to its founding principles even now:

• To promote independence, dignity, and purpose for older persons

• To enhance the quality of life for older persons

• To encourage older people to “serve” not “be served”

The services that AARP provide to its members are far-reaching and very valuable to many people over 50.

Here are just a few that they list on their website: www.aarp.org

• Discounted travel services

• Special senior cruises

• Money off a home security system

• Discounts at many major retailers and restaurants

• Medical prescription drug plans

• Financial planning

• Driver safety courses

• Computer courses including how to get connected and online

• Car insurance

• Dental Insurance

• Long term care insurance

• Life insurance

• Legal services

And those are just a few of the services they offer. They also give seniors information about legislation that affects them and gives helpful advice on how to deal with the special things that seniors have to live with.

Membership fees are easily manageable:

For retirees in the United States, you can join for:

5 years $39.95
3 years $29.50
2 years $21.00
1 year $12.50

Canada

1 year $17.00

Mexico

1 year $17.00

Other Countries

1 year $28.00

Joining is easy by going to their website and filling out a short form. The server is secure and you’ll be a member, just like that!

Just as with any type of budgeting and planning, there are some common mistakes that people make.

YOUR WILL

It's unfortunate, but accidents do happen. One moment we're enjoying life to the fullest, and the next we're in another world. We never know when that mysterious moment will arrive, but savvy people know to prepare for that eventuality.
You've seen an experienced estate-planning attorney to ensure all your affairs are in order. The will is done and necessary trusts have been established. You've anticipated everything to include potential estate and/or inheritance taxes, so the family should have no problem. They will get to keep the bulk of what you leave behind and the taxman gets nothing. Easy as pie, right?
Let's face it, there are certain things we must do to protect our family and our wealth, if we have any. We don't like thinking about it very often, but think about it we must. We will die.
When we do, unless we have prepared for that inevitable result, we may create needless heartache and loss for those we leave behind. Estate planning is appropriate at any stage of life. It's particularly appropriate as we prepare for retirement. Therefore, let's take a quick look at things we must consider.
It's no secret that every adult needs a will. Die without one, and the state decides what happens to your property. Rarely will the state's mandate follow what you would do if you had the opportunity to act. You have that opportunity through a will. Use it. See an attorney to complete one.
It isn't that expensive to prepare and it ensures your property will be distributed in accordance with your wishes. In general, you should not use a preprinted, fill-in-the-blanks form will bought from a stationery shop or created through some of the software programs available for this purpose. These are often out-of-date and may not conform to the laws of your state. That penny saved may be thousands of dollars wasted after you die.
Do see an attorney. After you complete the will, ensure you review it every five years, at a minimum, to verify its validity and conformance with state law.
Be aware of what counts as an estate asset for tax purposes when you die. Basically, that's everything you own, including the face value of life insurance policies and the current value of all your retirement plans.
You may pass an estate of unlimited value to your spouse at death with no unfavorable tax consequences. When that spouse dies, though, there may be some heavy taxes that cause your children to receive far less than they should. Know that is possible and prepare for it.
In 2004 and 2005, you may leave up to $1.5 million tax-free to heirs who are not your spouse. If you leave those heirs anything above that amount, the excess will be taxed. Those rates start at 37% and quickly escalate to 55% from there. Sounds like a lot, doesn't it?
But count the value of your retirement plans, your home, the face value of life insurance you own, and everything else, and that amount is readily reachable by many. Couples must begin to worry about the possibility of estate tax when their combined assets approach this figure.
In today's world, with two workers in the family, this level can and will be reached with some frequency. Is it time to see the lawyer? If you want to protect the kids from Uncle Sam, the answer must be a resounding yes!
What if you become incapacitated, either mentally or physically? You might want to look into a durable power of attorney granted to someone you trust, such as your spouse or an adult child. You may also want to add a medical power of attorney. Both will allow the person you select to make decisions on your behalf.
Without those documents, your family will be forced to hire an attorney, go to court, and have someone appointed as your conservator and/or guardian to make decisions and conduct business on your behalf. That's a needless, time-consuming, and costly process that can be avoided with one or two inexpensive documents that an attorney can prepare today.
Lastly, you may want to execute a living will. It's a silly name for a document that really says you want the right to die a natural death free of all costly, extraordinary efforts to maintain your life when that life can only be sustained by artificial means. This document is free in virtually every hospital in the nation.
It makes such decisions easier on the doctor, the hospital, and your family. Used in conjunction with a medical power of attorney, this tool can spare your family a painful, drawn-out, and costly process. If you agree with this concept, then visit your local hospital, pick up the form, complete it, and let your loved ones know where it can be found.
Estate planning encompasses much more than a will. It may be true that you can't live with lawyers, but you certainly can't die without them. Use their talents to ensure things work the way you want. Estate planning isn’t a barrel of fun, but it sure is necessary. And it's definitely a heck of a lot better than a poke in the eye with a sharp stick.
You can make your own will if you want. There are plenty of pre-made forms on the Internet that can walk you through making a will. However, if you have a great deal of wealth or belongings, it might be best if you consult an attorney or will specialist to complete your will.

As we said previously, AARP is more than just an organization for retired people. It’s an organization that helps seniors with their needs in so many ways.

HEALTH INSURANCE

Health insurance is a major concern for retired folks. Once a person reaches 65, he/she is eligible for Medicare which can be quite costly.
In addition to Medicare, one needs supplemental insurance for whatever isn’t covered with Medicare. This supplemental insurance can also be quite costly.
Some companies provide health care insurance to its retirees but this is becoming very rare. If you are under 65 and have no bad habits or health conditions, you can find affordable health insurance but be aware that the premiums rise as you grow older.
If you plan to retire before reaching 65 and know that you will have to provide your own health insurance, you should try to get as healthy as possible. Lose weight, exercise, stop any bad habits and so on so that your premiums will be as low as possible in the beginning.
Access to affordable health insurance is crucial for maintaining the retirement income security of many retirees. In examining four groups of people age 55 and older—near-elderly employees (people between the ages of 55 and 64 who are still in the workforce); near-elderly retirees (those between 55 and 64 who have retired from the workforce); elderly employees (people 65 and older who are still in the workforce); and elderly retirees (those age 65 and older who have retired)—some trends in health coverage for these groups begin to emerge.

• People age 55 and older are disproportionate users of health care because they have more frequent and more severe health problems than younger, healthier people.

Deteriorating health is often a powerful incentive for older workers to retire. However, in recent decades, health care costs have risen two to three times faster than inflation. Inadequate health insurance coverage puts working families at risk of going without the health care they need in retirement.

• Prescription drug coverage is declining for most of the 55-and-over population, and the gap between health insurance and prescription drug coverage increases with age and retirement.

Because early retirees do not qualify for Medicare, and because Medicare does not include certain benefits such as prescription drugs, many retirees must turn to private health insurance. Although private health insurance can be accessed either through an employer or by purchasing a non-group plan in the private market, the latter option is likely to be prohibitively expensive or simply not available.

This leaves retirees to a large degree dependent on their former employers offering retiree health insurance. The share of retirees 55 and older who had part or all of their prescription drugs covered by insurance declined systematically and substantially from 1996 to 2000. The evidence suggests that older workers may stay in the labor force longer in order to maintain prescription drug coverage.

• Fewer employers are offering retiree health insurance.

Firms are reducing access to retiree health care because employers are looking to limit rising health care costs. In 1988, 66% of large firms (those with more than 200 employees) offered health coverage to retirees, compared to 34% in 2002. Among small firms with less than 200 employees, only 5% offered employer-sponsored health insurance (ESI) in 2002.

The coverage is out there, you just need to explore all of your options and then go from there.
When you retire – even before you retire – you should join AARP, American Association of Retired Persons. AARP provides countless benefits for its members including low-cost health insurance. They also offer discounts on dental insurance as well as vision coverage.

AARP has a small membership fee that is well worth the annual investment. We’ll cover AARP more in-depth at the end of the book, but when it comes to health insurance and you can’t get Medicare coverage or you want additional coverage, AARP is one of the best ways to go.

Finally, you need to start thinking about a will.

YOUR HOME

Your home is more than four walls and a roof. (Yes! We forgot the floor!) For owners, it's much more than that. Your house is a money tree. Shake it, and the cash will rain down. The trick is in deciding whether, when, and how to tap into that honey pot.
Do we do it early in retirement, later, or never? As you'll recognize by now, that, too, is a personal decision. The home, especially when it's paid for, represents security. It's also one of the biggest investments we make. As such, it represents an asset from which we may obtain needed capital if and when that becomes necessary.
In retirement, we still have to reside somewhere. Wherever that somewhere is, we will either rent or own. At retirement, most folks own their homes. Many of them have either totally paid off or are close to paying off their mortgages.
Some will sell out and trade down to a smaller home. Some will sell out; keep the sale's proceeds and rent. Some will stay right where they are and enjoy the benefits of not having to pay a mortgage or rent. And a few will sell to buy a larger, more costly home.
Each of these decisions may be fine. Conversely, unless we know how our decision affects our own retirement life, each may also just be foolish. That means we need to look at the issues and plan accordingly.
Long-time homeowners know that their homes have increased in value since their original purchase. Often, that equity represents a princely sum that, if accessed, could yield an even greater return invested elsewhere. One way to get at that cash is to sell.
With the Taxpayer Relief Act of 1997, Congress has made that an even more attractive option than it once was. Now, we can sell our homes and receive gains of up to $250,000 ($500,000 for a couple) totally tax-free. That may be a great way to free up capital that can be better employed in retirement.
One scenario would be to sell and purchase a new, smaller home by making a minimum down payment on a 30-year mortgage. Lenders love to carry retiree mortgages because they have a very low default rate.
Then you could invest the cash left from the sale. As long as that investment throws off what we need for the mortgage, we'll be sitting in clover. We've freed the cash tied up in our present home so it can work much harder for us. Will it work for you? The only way to tell for sure is to run the numbers and see.
Maybe you don't want the hassle of home ownership again. Instead, you plan to sell, invest the cash, and rent. Will that work? It could. It depends on how much rent you will pay in retirement.
A home mortgage tends to be relatively stable through the years. Rent, though, has a nasty habit of increasing every twelve months. If you can invest your money to pay for those ever-increasing rent payments, then a lease may be an option worth considering.
Many retirees want the security of not having to pay rent or a mortgage. There is nothing wrong with that. Instead of the scenarios outlined above, you could just stay where you are. Alternatively, you could sell and pay all cash for a cheaper home. Cash left over from the sale could then be invested to throw off additional retirement income for your use.
In either event, when needed you can still get at the equity tied up in your home through one of two ways in most states. The first method is through a home equity loan (HEL) line of credit, and the other is through a reverse mortgage.
A HEL is nothing more than a loan secured by using your home as collateral. Because it's a loan, it must be repaid with interest. Repayment starts immediately, usually in the form of a monthly payment based on a 15-year amortization schedule.
For emergency cash, a HEL is a good vehicle. As a means of regular income, it is not the route to take. If you need the loan as income, then chances are you can't repay it. Failure to repay the debt will result in a foreclosure on your home.
A reverse mortgage is a means of receiving a regular, untaxed income as a loan against the equity you have in your home. The total loan amount is usually fixed, and may be paid as a lump sum or in monthly installments over a fixed period or for life.
Unlike the HEL, though, this loan doesn't have to be repaid until you die or sell your home. Then you or your estate repays all loan proceeds with interest. The beauty of this loan is that it doesn't have to be repaid until the house is sold and your legal obligation for repayment is limited to the value of the home at that time.
If the home declines in value, you will never owe more than your equity in the home on its sale. For elderly people living alone who are in need of cash, a reverse mortgage is definitely an option to consider.
Whether you own or rent, sell or stay, recognize that your house is more than a home. A home is a place of heartwarming memories, love, dreams, and good feelings. But "home" is a mental concept, and we can have a home virtually anywhere.
A house is a structure of sticks and bricks, of walls and beams. As such, it has a monetary value. That value can and should be used when needed. Your task is to determine if and when it is appropriate to do so.
Health insurance is another concern for retirees.

WORKING IN RETIREMENT

So now you've done it. You've retired from the rat race, and you're enjoying the good life. You're sipping on your Mai Tai and contemplating the mysteries of your navel. You're on the verge of developing that One True Theory of Lint.
Working again is the farthest thing from your mind. Who needs that routine when there's so much more to do? Suddenly, a wild thought intrudes on your meditations. Is it possible that you could (gasp!) reenter the workforce? But why would you want to?
You might -- particularly if you retired before you became eligible for Social Security payments. As you recall, that check can't come until you are at least age 62. Even if you're already drawing Social Security, you may decide to resume work simply because you enjoy the personal contact with others.
Maybe you want to feel more productive, desire some "mad" money, or just want to have time away from your life's partner. Many retirees do. Further, they work because they want to, not because they have to. They just enjoy it. But what does it mean financially when they return to work?
The financial impact of a second career depends largely on the age at which you resume work. For those younger than age 62, a job serves to increase the ultimate benefit they will receive when they take Social Security.
In computing that benefit, the system looks at a person's entire working life. The computations are complicated, and use the best 35 of the 40 highest years' earnings. If you have a lot of zero-income years, that will lessen your ultimate benefit. Retire early, and you're bound to have a lot of those zero-income years. They will cause your Social Security check to be smaller than it could be. Resume work, and you'll pay into the Social Security system again, thus offsetting those zero-income years and increasing your benefit.
Is that a reason to go back to work? It might be. Then again, it might not. It's entirely up to you. If you've done a good job in planning for retirement, increasing your ultimate Social Security payment may not be an important factor to you. But be aware that an early retirement may come at a higher cost than you might have otherwise thought.
For those who do go back to work, at ages 65 and older there is no worry. Younger retirees, though, may see a reduction in their Social Security checks, depending on how much they earn in wages during the year. From ages 62 through 64, if you receive a Social Security check, you must forfeit one dollar of that check for every two dollars you earn above a certain maximum earnings limit.
That limit moves upward each year with inflation. In 2001, the limit is $10,680. Thus, a Social Security recipient who was age 63 and who receives $11,680 in wages in 2001 will be over the maximum earnings limit by $1,000. That excess will cause a $500 reduction in the Social Security benefits that person receives in 2001.
If you are under age 65 and return to work after you begin receiving your Social Security benefit, estimate what you will earn for the year and compare that amount to that year's maximum earnings limit. If you see you will exceed that limit, tell Social Security immediately. The agency will reduce your monthly check accordingly.
Fail to do so and those earnings will be reported to Social Security anyway when you file your income tax return for the year. The Social Security Administration (SSA) will then notify you of an overpayment because of excess earnings. It will recoup that overpayment from the following year's checks. You might not be working that year and may need your full Social Security payment.
What if your estimate was wrong and you didn't earn as much as you thought you would? In that instance, the SSA will restore the previously withheld benefit. You won't have lost a penny, but you will have avoided an overpayment.
Working after retirement has its good points and its bad points. Each of us must evaluate both. The point to remember here is to recognize the impact such work has on our Social Security benefits. Our endeavors may increase what we get from the system and -- possibly at the same time -- reduce the check we currently receive.
At this point, let’s take into consideration a few issues that need to be addressed.

SOCIAL SECURITY

"Social security? Fahgeddaboutit! There'll be no Social Security by the time we need it. The system is broke, and it ain't gonna be fixed. It'll be all used up before you and I ever get there."
Do you really believe that? Many of those under the age of 50 do, and the younger the age, the more prevalent that belief. We don't think so -- we know who votes and that our fearless leaders can count.
We accept the fact that Social Security is here to stay, but we also recognize that the system will almost assuredly give future recipients less than it does today. Therefore, because it will continue to play an important part in how we plan for retirement, we seek to understand today's system and will closely watch how it evolves in the future. By doing so, we know we can plan for retirement with more precision than we could by ignoring it.
With few exceptions, wage earners today see a payroll deduction for FICA (Federal Insurance Contributions Act) that reduces each paycheck by 7.65%. Those who are self-employed see twice that shrinkage from their gross pay.
These involuntary "contributions" are really taxes that go toward Social Security (6.2%) and Medicare (1.45%). For now, let's concentrate on that part of your earnings that goes to Social Security. What does this "contribution" get you?
Basically, the taxes you pay for Social Security buy you three things: income in retirement, income for survivors, and income in case you become disabled before you are eligible to retire. You must work and pay into the system to be eligible to receive these benefits.
Generally, to qualify for full benefits you need to work at least ten years. The size of the benefit is based on your earnings and the number of years you have paid into the system. You may receive retirement benefits on or after age 62 and the longer you wait to do so, the higher that income will be.
Your spouse and, in some cases, your dependent children may also receive a benefit when you retire. If you die before or after retirement, a survivor's benefit may provide income to your spouse and dependent children depending on their age and work status. Become disabled and you, your spouse, and your dependent children may receive disability income based on your work record up to the point of disability.
In and of themselves, each of these benefits is a valuable asset to us all. They provide income protection to the family during and after our working careers. But do you know how much protection? Not unless you ask. And you should do so at least every three years.
If you do, you will receive something called a Social Security Statement (SSS), which is a great tool in helping you determine how much you need to set aside today to supplement Social Security in retirement. Remember, the system was designed to provide for minimum income needs in retirement, not all. Your own savings must add to that income so you can retire with the living standard you desire.
If you don't know how much you can expect from Social Security, you may devote more than you need to retirement savings, thus needlessly decreasing amounts available for other areas of your life today. The SSS will show you how much you can expect to receive if you elect to retire at age 62, your normal retirement age (65 or older depending on birth date), or 70.
Additionally, it will show you the earnings credited to your Social Security account for each year you have paid into the system; how much you would receive if you became disabled; and how much survivors would receive if you died. All that information is very important data on which to base your plans.
How do you get this data? Call the Social Security Administration at (800) 772-1213 and ask for Form SSA-7004, Request for Social Security Statement. When you get it in the mail, fill it out and return it. In about four weeks, you will have your SSS for review.
In a hurry, you say? Then visit The Social Security Administrations website and make your request online. Either way, just do it.
Then, when it arrives, look at the statement closely. See an error in your reported earnings? It happens, and it could affect your benefit. If there is an error, contact the SSA immediately to see how it can be corrected. Often, all that's required is for you to send in a copy of the Form W-2 you received for the year in question to get the error fixed. Sometimes it takes more effort to fix the mistake. Regardless, you want to ensure all data is correct, and the only way to do so is to take action now.
Most people just want to enjoy their retirement and not have to worry about working anymore. Still others find that the sedentary lifestyle just isn’t for them and they decide to delve into a second career.

STOCKS AND BONDS

We start this discussion with a quote from James Bryant Conant, American diplomat:
Behold the turtle. He makes progress only when he sticks his neck out.
He knew that cracks along the sidewalk would trip up the turtle from time to time. But the one who finds a comfortable pace and keeps his eye on the horizon will go places.
In our investing analogy, those cracks represent market risk. When it comes to retirement planning, you’re going to have to cross those cracks in order to get anywhere.
Market risk (the chance you will lose money) and reward (the chance that your investments will head skyward) travel hand-in-hand in the daily marketplace. The greater the risk, the greater will be the potential return for taking that risk.
Equally true is the potential for loss, which quite handily explains why taking that risk should pay a greater reward. By and large, however, risk is pretty much a short-term phenomenon. That's particularly true in the stock market, which many regard as a quite risky investment.
Let's take a look at what various investments have returned over time.
Since 1926, U.S. Treasury Bills, which serve as a pretty efficient proxy for money market accounts, have yielded roughly 3.8% annually on average as of December 31, 2000, according to Ibbotson Associates.
While this may not seem like a lot today, remember that for much of this century, inflation was nonexistent, making a 3.8% average return very attractive until the 1960s. Had you put one dollar into T-Bills in 1926, you would have amassed $16.40 as of December 31, 2000.
Long-term government bonds have returned around 5.3% per year since 1926. The best 10-year holding period for bonds since then was that ending on December 31, 1991, when bonds returned 15.56% annually. The worst was that ending on December 31, 1959, when bonds had a negative return of 0.07% per year. Had you invested one dollar in long-term bonds in 1926, you would have $48.10 as of December 31, 2000.
Stocks have also been very good to investors. The Standard & Poor’s 500 composed of 500 international corporations, has returned an average of 11.1% per year since 1926 -- quite a bit higher than bonds. Surprisingly, the range of the returns for stocks is not that much larger than the range for bonds over the same period.
The worst 10-year holding period was that ending on December 31, 1938 when stocks declined 0.89% per year, including dividends. The best 10-year holding period for stocks since 1926 was that period ending on December 31, 1958, when stocks increased by 20.06% annually. Had you put one dollar into stocks in 1926, you would have seen it rise to $2,682.59 as of December 31, 2000.
The long-term odds are overwhelmingly in your favor. We know the market shifts everyday, sometimes sharply downward. That can be absolutely gut wrenching when it occurs, but history shows us that the inexorable pressure on the stock market is upward. The biggest bang for our buck will be found in stocks.
When you are looking for a vehicle for growth over the long-term, stocks are excellent choices. Of course, there is some risk, bu there is great reward to be made on the stock market.
Think now about your retirement. When will it occur -- 20 years from now, five years, tomorrow? If you're close to it, or are already retired, how long must the money last? Now think about your retirement investments. Is the bulk of your money positioned for long-term growth (read: stocks) or short-term stability and income (read: bonds and bills)?
The mix you have in these instruments is something you must decide for yourself. After all, you're the one that has to sleep at night. Recognize, though, that investing for retirement is a long-term goal. Hence, you truly want to shoot for the best growth in your investments that you can get. That won't be found in bonds or bills over the long haul. If you elect to keep most of your money there, almost assuredly in retirement you will be eating franks and beans for dinner because you have to, not because you want to.
Recognize, too, that you probably still have many years of productive life ahead of you after you finally do retire. While bonds and bills may appear appealing for the income and safety they provide, half or more of your portfolio must still be invested for growth to ensure you can maintain purchasing power.
Average inflation for the 10-year period ending December 31, 2000, has been 2.71% per year. At that rate, the cost of all we buy doubles every 26 years. To a retiree living on a fixed income, that can be nothing short of devastating. That’s why you see the need for growth in a retiree's portfolio.
The lesson here is to avoid overly conservative investing, both now and after you retire. Too much safety can be costly to your financial health in retirement. If you are a mutual fund investor (and most 401(k) or 403(b) plan participants are), focus your attention on stock funds.
Compare their records over time to that of the S&P 500 index and each other. For 5- and 10-year periods, most funds will be below the market. In a company plan, though, you won't have much choice. Use the fund that comes closest to the S&P 500 average.
If your plan offers a stock index fund, that will probably be your best choice. Outside of a company plan, an S & P 500 index fund invariably is better than a managed stock fund for the long haul.
If your company plan allows you to purchase your own securities or if you are investing outside of a plan, you have many more options.
Of course, you’ve been paying into social security for years. This, too, can provide you with some income.