These strategies can help recover lost income and/or assets following one or more of the life events described above. These strategies can also be used by late savers to make up for lost time and to prepare for a comfortable retirement.

Increase Contributions to Tax-Deferred Retirement Savings Plans. The 2001 tax law increased annual contribution limits for IRAs and employer 401(k), 403(b), and Section 457 plans, at least through 2010. Just a 1% increase in the amount of pay diverted to savings can result in thousands of additional dollars at retirement. Americans contributed an average of $3,514 to 401(k) plans in 2001 (Opdyke and Higgins 2002). The maximum plan contribution limits are $12,000 in 2003, $13,000 in 2004, $14,000 in 2005, $15,000 in 2006, and higher amounts adjusted for inflation thereafter. (more…)

The treatment of investment risk probably is the least satisfactory area in the establishment of investment objectives. In spite of all the work published on risk in the investment literature of the past several years, risk tolerance often is not specified in setting investment objectives and investment performance measurement. Sometimes, statements of risk are made in general terms (e.g., the fund should not suffer a loss in any designated period) or a maximum tolerable decline in asset value is specified. Such specifications of risk are very difficult for an investment manager to deal with. (more…)

Once the cash flows to be financed are determined, whether via a detailed version of the determination of planned expenditures or the simpler “rule of thumb approach,” the question of how each $1 of assets will be turned into an income flow must be addressed. How much income will each dollar generate, and for how long? This is the basic issue of longevity risk (the risk that a person will live either beyond, or not until, their “life expectancy”). This source of uncertainty presents perhaps the most significant challenge for cash flow planning in retirement. (more…)

This question arises with the greatest frequency, and it ranks, as one would expect, as one of the most difficult to answer. We can only suggest general guidelines because your investment risk tolerance may differ from the next person’s. Also, investment choices should reflect one’s overall economic situation, and advertisements for online brokerage houses notwithstanding, not every form or method of investment suits every situation. In an age when most of us are at least aware of general movements in the market, if not actually participating in some way, most of us wish for a formula to provide the optimal investment mix for our particular situation. (more…)

The “ideal product,” then, may be a diversified asset allocation program. By selecting a proportion of assets from each category, you can tailor an overall portfolio retirement to suit your risk tolerance, time frame, and goals. Although there is no guarantee of performance, selecting asset classes based on your personal retirement profile may help insulate you from the worst effects of inflation, market, and interest rate risks, while positioning you for potential account growth. (more…)

If you’re one of the “Baby Boomers,” you’re probably giving serious thought to retiring and become a full time retiring baby boomers, if you haven’t already retired - and if you have already retired, you may be wondering if you’re going to be able to afford to stay retired.

Today’s economic crisis complicates the situation considerably by increasing the following retirement risks: (more…)

When you retire, are you going to have enough money to meet all your expenses and keep up with inflation? If you are like the vast majority of us, your answer will be a resounding, “NO”!

Statistically, 95% of people retire with too few financial resources. (more…)

Are you the type of person who only pay attention on chasing interest rate in choosing investing vehicle for your retirement plan? You better think again. In investing for your retirement, many novice investors only run after interest rate, but missing the point of inflation and tax. You may not realize, but after you take into after-inflation and after-tax, you might be losing your money. At the end, when you should reap the fruit of your saving on retirement days, you may realize the hard fact that it is not enough. Inflation really taking stroll in your retirement planning goal. (more…)