A Neat Calculator

Thinking about downsizing and moving when you retire?  Wondering about the different cost of living across states and for different cities?  Here's a neat calculator from Sperling's Best Places that can answer some of your questions.

Source: Sperling's Best Places

CLICK IMAGE TO ENLARGE Note that you have just 3 inputs: the two cities and the dollar amount.  The dollar amount, shown here as $70,000, would be the amount you have figured as your retirement income.  Next, just hit the compare button.

CLICK IMAGE TO ENLARGE As you can see, from a "cost of living" viewpoint, $70,000 in Silver Spring is equivalent to $45,627 in Murfreesboro, N.C. - useful info for the retiree contemplating such a move.

The calculator indicates that, in Murfreesboro, you will likely be able to get a much nicer house for the same money.  Interestingly, the calculator indicates that medical care is pretty much the same if not a bit pricier in Murfreesboro.  Those looking at the two areas would want to investigate further.

Keep in mind, as you play around with the calculator, that it represents averages.  All cost-of-living indices as well as consumer price indices need to be taken with a grain of salt.  A particular individual's situation could be completely different from the results implied by an index.  The last thing I would want is for you to come after me because it costs more than you figured ;)

Are You Saving Enough for Retirement?

A quick 10-question quiz on some  essential retirement basics from Mary Beth Franklin at Kiplinger.  People in their 50s should know these basics.  For example, you don't want to get to 65 and find out you had the opportunity to catch-up on retirement saving in your 401(k) that you didn't exploit.  Most people reading this blog will be familiar with the basics.  The challenge is to get the info to people who don't read personal finance blogs and don't pay attention to their retirement needs. Take the quiz and then send it to your friends.
http://portal.kiplinger.com/quiz/are_you_saving_enough_for_retirement/

Managing Retirement Savings - A Couples Study (Con't.)

Yesterday I looked at the first 5 questions suggested by Fidelity for couples thinking about retirement.  Here are the final 5 questions.  The study is the result of a poll showing that less than half of potential retirees discuss this major life change with their partners.  The list is useful for closing this communications gap.  Continuing yesteday's approach, I put my comments in bold.

6. Have we created a retirement plan?  This, of course, is the roadmap to seeing if you can achieve your lifestyle as specified in question 3.  This brings together all of the other questions and lists contingencies - what if you can't work until 65, etc.?

7, Have we factored in future health care costs?  Health care, of course, can upset the whole apple cart.  Having a stroke, suffering from dementia, and just generally requiring long-term care can change the whole financial plan.  In addition, health care costs can be a major issue for those retiring early.


8. Do we know where all your assets and important documents are?  One of the first steps many financial planners take is to seek ways to consolidate finances and get the number of accounts and statements under control.  Having 14 accounts at 5 different brokers makes the whole process unwieldy. 

9. Have we named beneficiaries?  Assets pass first by beneficiary designation, then by wills, trusts, etc.  Typically the spouse is the beneficiary.  Problems sometimes arise with contingency beneficiaries.   For those who have been married before, have had children recently, etc., beneficiary designations may not be as intended.  Easy to check and fix.

10. Do we understand how your Social Security and Medicare benefits will work?  On Medicare, sad to say, many people believe that all their health care expenses will be taken care of by Medicare once they turn 65.  Not true.  Be prepared to learn how Medicare works before age 65.  On Social Security, many take Social Security as soon as they can, at age 62 without considering the need, taxes, and likely life expectancy.  Take some time and learn about the options.  It can make a huge difference in the later years.

Managing Retirement Savings - A Couples Study

 

Quick: What percentage of couples make joint decisions on retirement savings?  According to a study by Fidelity Investments reported on in the September 2011 issue of AAII Journal, it is just 41%.

Furthermore, only 17% of couples feel that either spouse could assume responsibility for managing the assets. 35% of wives and 72% of husbands believe they could manage the assets.  37% of husbands say they are the primary decision maker on retirement assets and 8% of wives.

62% don't agree on when to retire, and 47% disagree on whether to work in retirement.  33% don't agree on where to retire or simply don't know.

Fidelity recommends the following questions to remedy this lack of communication.  So, go to your honey, pour a couple of glasses of wine, and say "Babe, I've got some questions to go over with you."  It wouldn't be the worst way to spend a Friday evening.

Questions (my comments in bold)

1. At what age do we want to retire?  Yesterday is not acceptable. If you get past this one then...

2.  Do either of us want to work in retirement?  The questions are obviously inter-related and that's the beauty of them.  Working in retirement is one option to make up for a lack of sufficient funds (see question #5), etc.

3. What type of lifestyle do we envision in retirement?  Retirement specialists say that retirement should be towards something rather than away from something.  It is hard for the stressed-out worker with the long commute and the long hours to appreciate that, after a while, even vegging out gets unbearably boring; but it will happen.  You'll enjoy listening to the early morning radio report on the backup on 95 North because of last night's snow, but it'll get old after a while. Think through what you will do in retirement - you'll be glad you did.  This may change your answer to question 2.



4. Where do we want to live?  This can be a show stopper.  Couples sometimes are very surprised when this question is raised.  You didn't know that all along she was planning to move closer to her sister?  Oops!


5. What does our financial picture currently look like for retirement?  This can be painful (some people view this as akin to doing their taxes), I know, but this is where you start to discuss if you are on the right path - are you taking the right steps?  This is trickier than it looks.  Not long ago people said they would sell their house for a zillion dollars and downsize big time.  The downsizing is still feasible, but it has reached the point where people would rather open their financial statements than go on Zillow.

TO BE CONTINUED.