Are the Odds Against Us?

Asking that questions seems odd in and of itself.  Of course they are you might answer.  And any Baby Boomer would be correct in this assessment.

But somehow, we seem okay with this. We seek retirement or at least profess we do, often making it seem like some scalable mountain we are in training to ascend. Advice on how to do this, a feat we would rather not attempt, instead taking the paved route with the rest of the tourists, comes from all angles. Invest more, take some risks, approach the effort with no emotion, live frugally, budget, diversify, and the take fewer risks, get healthy, worry, and finally try to outlive your money in retirement by taking no risks.

And lurking in the background, not caring one whit about you in the long-term and perhaps, if it is possible, caring less about your future in the short-term. As I said, when it comes to Wall Street, the odds are against us.

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Retirement Planning for the Next Generation

Most of us are barely able to accumulate enough wealth for own retirement let alone thinking about providing for generations far removed from the event.  But if you could, would you?

The assumptions you make about how much money you will need in retirement are probably the most difficult exercise in the whole of retirement planning. The unknowns are so numerous that simply thinking too much about it gives many people the incentive to simply ignore the question. Taxes and inflation play a role in how much money we will need along with the condition of our health, our portfolios and our living arrangements. Who could possibly guess with any accuracy what those costs will be?

Yet, some of us can with certain investments. If you can wait until you are 70 1/2 years-old to begin taking your distributions from an IRA, and you take only the minimum amount needed, you may be in a position to make that IRA last much longer, across generations. Called a Stretch IRA, the sort of planning can create untold wealth for a child or grandchild.

More on the Stretch IRA from Paul Petillo, managing editor of Target 2025.com

The High Cost of Good Health in Retirement

The High Cost of Good Health in Retirement
The oddest item of all, being healthy in retirement, while less painful and more convenient than the being unhealthy, is more costly in the long run. This may have been something you have already considered had you run the numbers the way Boston College did in a recent report for the Center for Retirement Research. You may have said that health care is going to cost something and if you were typical, you went with the averages of about $220,000 per couple over the remaining years in retirement.

But good health could point to longevity. And longevity means additional years of costs and the real probability that during those added years, you will get something you hadn’t bargained on getting.

Now the knee jerk reaction would be to ask yourself: “why bother?” And this would be reasonable. If you can’t come close to estimating this cost (it is tough enough trying to figure out tax liabilities, inflation’s impact and the future of the investments you hold in your retirement accounts), what should you do?

Can You Invest Enough to Cover those Costs
You could try to add to your investments and hope that you have added enough. The problem with trying to offset insurance costs is you may never know whether you need it. But if you don’t have it, the costs can be very difficult to absorb and doubly so if you are in the fixed income world of retirement.

More here.