MONEY Social Security

Why Social Security Is More Crucial Than Ever for Your Retirement

Social Security card
Michael Burrell—Alamy

As the program turns 80, it's fast becoming the last source of guaranteed lifetime income for most retirees.

Social Security, the long-embattled entitlement that lifts 15 million seniors out of poverty and is the sole source of income for nearly one in four recipients, turns 80 on Aug. 14. Its future remains tenuous as ever. Yet the program has never served a more vital and widespread need.

Social Security isn’t just a lifeline for the less advantaged; it’s an increasingly rare source of guaranteed lifetime income for just about everyone. Four decades ago, traditional private pensions played much of that role by providing lifetime monthly payments to millions of retired Americans, giving them the ability to live well even if they had little savings. Today, most workers have a 401(k) plan and will have to rely on their own ability to draw down assets at a rate that won’t bankrupt them before they die.

That’s a tall order. Most folks have little ability to properly manage their life savings. Common strategies like the 4% withdrawal rule, while helpful, are oversimplified and do not always work. Efforts are under way to help savers seamlessly and inexpensively convert their nest eggs to a guaranteed lifetime income source. But such policy change takes years, so for many seniors Social Security will stand alone as a reliable means to cover inflation-adjusted fixed living costs until the day they pass.

Social Security benefits have been in peril since even before the first check was cut to Ida May Fuller on Jan. 31, 1940. When the program was enacted in 1935, during the first presidential term of Franklin Delano Roosevelt, critics charged it was redistributionist and should be ended. Those arguments failed to stop the program, but today many see the entitlement as unaffordable. Indeed, the Social Security trust fund is on track to run dry in 2034. At that time, the program would be able to meet only 79% of scheduled benefits; over the following 55 years, payouts would decline to just 73% of benefits.

And yet somehow the program survives. Today the Social Security Administration collects payroll taxes from 210 million workers. It pays out more than $800 billion in annual benefits to 60 million retired and disabled beneficiaries. Despite the fiscal problems, the largest percentage of American workers in 15 years say that Social Security benefits will be a major source of their retirement income.

That’s partly due to many Americans not saving enough. More than half of U.S. adults have not taken any steps to address the risk of outliving their savings, according to the Northwestern Mutual 2015 Planning and Progress study. A third believe there is at least a 50% chance they will outlive their savings, while 12% say they are certain their savings will run out.

Faith in Social Security as a backstop, however, is strongest among Americans 50 and older. More than 80% of those ages 20 to 49 are concerned the program will not be there for them, according to a study from Transamerica Center for Retirement Studies. Reflecting the shift away from traditional pensions, 68% in the study say their 401(k) or IRA will be a significant source of retirement income.

Only now is this shifting income source beginning to be felt on a broad scale. In 1982, 44% of retiree income came from traditional pensions and Social Security, Brookings Institution found. By 2009 that figure had barely changed, rising to 46%. This is because traditional pensions have been phased out slowly and millions of today’s retirees still receive them. But we’ve reached an inflection point—from here on, new retirees will receive increasingly less of a pension benefit. This will make Social Security an ever-larger component of the typical senior’s retirement income.

Even retirees with considerable savings depend to a surprising degree on this program. Payouts from Social Security and pensions account for 35% of income for the wealthiest seniors, according to Brookings researchers. The rest comes from savings withdrawals. If wealthier retirees do not manage their drawdowns well—and as traditional pensions fade away—Social Security will become a vital resource for them, as it is now and long has been for much of America.

Read next: How Reading Your Social Security Statement Can Make You Richer

MONEY 401(k)s

The Hidden Reason Your 401(k) Fund Choices Are So Bad

Martin Poole—Getty Images

When a fund company both manages your 401(k) plan and chooses the investment options, guess who gets the best deal?

It’s common for mutual fund companies to be paid to administer 401(k) plans for employers while also being paid to select and manage investment funds in the plans. It’s also a clear conflict of interest—one that typically gets resolved in the fund company’s favor, new research shows.

When making plan changes, fund companies add more of their own funds and delete more from outside firms, according to the Center for Retirement Research at Boston College. This bias brings more poorly performing funds onto the menu, researchers found. What’s more, these poorly performing funds tend to remain sub-par. That proves to be a long-term drag on participant returns, since few investors take action to avoid or work around the poor choices they are offered.

Fidelity, Vanguard and most other big fund companies serve in a dual 401(k) capacity by setting the investment menu while also managing funds inside the plan. In all, fund companies manage 56% of the $4.7 trillion in defined contribution plan assets. This is a vast storehouse of Americans’ retirement security—one that, given our savings crisis and public pension ills, must be protected.

A similar conflict of interest between investment advisers and clients is getting a thorough airing this week in Washington. The Department of Labor will hold hearings all week, trying to sort out whether financial advisers working with retirement accounts should be held to the standard of fiduciary, meaning the adviser must put the client’s interests first. The Labor Department believes such a law would keep brokers from putting clients into high-fee retirement savings products. The industry argues it would increase their liability risk and regulatory costs, and discourage brokers from serving small accounts.

The conflict over the dual role of fund companies is not about the fiduciary status of advisers. But the problem persists because employers, who do have a fiduciary role, often fail to take action. That leaves many investors stuck with lousy 401(k) funds, which take a bite out of their retirement accounts. For example, plan administrators remove just 13.7% of their own underperforming funds from the menu every year, the research shows. But they remove 25.5% of underperformers from other fund groups—meaning more of their own poor performers remain. Meanwhile, they are far more likely to add their own sub-par funds compared with choices from another fund company.

The upshot is that 401(k) plan investors must look critically at any changes in their investment options. You can’t blindly accept a substitution on the menu. Look carefully at fees and past performance along with how a fund fits into your portfolio. One good place to start is BrightScope, which can show you the fees and choices of 401(k) plans from comparable companies.

If you find that your plan costs are high—1.5% of assets or more—and your options stink, consider a workaround. You almost always want to contribute enough to get any employer match. But once you have done that, you may find that your spouse has a better plan and you can divert more family savings there. You may find that your company offers a self-directed brokerage option in your 401(k), allowing a more hands-on approach and greater ability to watch fees. You may also be better off contributing additional money to an IRA.

Don’t look for the inherent conflict of a fund company that both manages funds and chooses the funds on your menu to disappear anytime soon. Given the fiduciary discussion in D.C. this week, this issue is nowhere near resolution. As ever, your retirement security is mostly up to you.

Read next: Here’s What to Do If Your 401(k) Stinks

MONEY retirement planning

When It’s Time to Cut Financial Support to Your Parents or Adult Kids

A new study finds many households are risking their retirements by spending thousands of dollars to help out other other family members.

Family financial ties grew strong during the Great Recession, and by many measures the bond holds fast. Yet the level of support that working households offer aging parents and adult children may be setting back the retirement plans of millions.

During the depths of the financial crisis in 2009, MONEY reported on the changing nature of family values. Expensive vacations, shopping for sport and big new houses were out; relationships, time together and sharing was in. These shifting values were borne of necessity for many, and it was not clear how long the new values would stick.

But while spending has rebounded, surveys in the years since have confirmed that family financial ties remain strong. A quarter of boomers and a fifth of Gen X and Millennials currently support family members, according to a new survey from TD Ameritrade. This support averages $12,000 a year and comes on top of caregiving chores, which one third of financial supporters also provide.

Read Next: Millennial’s Guide to Moving Out of Your Parent’s House

On average, mothers receive the most support, $13,000 a year while fathers received $8,500 and adult children get $10,000, the survey found. For the most part, this support is offered unconditionally—64% of financial supporters say they are “very glad” to offer help to a parent and 53% feel the same about supporting an adult child.

Financial supporters would offer more if needed. One in three would delay retirement to help an adult child and 69% say they will stay with it until their child finds a decent job. Yet if push came to shove, and there was not enough money to support both, an aging parent would win out over an adult child, the survey found. Financial supporters are twice as likely to say it is more acceptable to support a parent than an adult child and, if forced to choose, four times more likely to support a parent.

Most say their support is not causing hardship. Only 22% say they are digging into savings while 30% say are making modest lifestyle sacrifices. But they may be doing more damage to their own financial security than they know. On average, financial supporters have a $22,000 balance on their credit cards and $75,000 in outstanding mortgage debt. A third say they have already delayed retirement and half say if they had to retire unexpectedly they could no longer offer the same level of financial support. Only one in five has discussed any of this with an adviser.

Read Next: How to Avoid Paying for Your Kids Forever

Generous financial support can be its own reward, drawing families closer in times of need. But the long-term impact may be difficult to see. Many who plan to work longer may not be able to. Nearly half of retirees left the workforce unexpectedly because of disabilities, other health issues or problems at work, an EBRI survey found. So what seems like an easy fix is anything but certain.

Cutting support for a loved one is not easy or fun. But it may be easiest with adult children because they have a lifetime to recover from college loans or a slow start in their career. With parents, cutting support may be in order if you examine where the money is going and see that not all of it is well spent.

In the end, any support decisions should be made with your own financial security in mind, and that means looking ahead to what you expect from your retirement and whether you have a cushion against unexpected developments like a job loss or health issues.

Read next: How to Avoid Paying for Your Kids Forever

MONEY Health Care

These Are the Cheapest and Most Costly States for Retiree Health Care

Pills and US map
Jill Fromer—Getty Images

California and Hawaii stack up surprisingly well for high-cost states, but retiree medical bills are daunting wherever you live.

Planning for health care costs in retirement is famously difficult. You cannot predict your health, the pace of rising prices, or changes to the national health care system. Yet these costs, which vary state by state, can be so big that you must take them into account—especially if your dreams call for relocating.

Most states fall within a reasonably narrow band for total out-of-pocket health care costs in retirement. But the cheapest and the most expensive states may surprise you, and in certain areas of coverage the differences can be large, according to a recent analysis by HealthView Services, which designs health care cost projection software. For example, Medicare supplemental insurance (covering co-pays and deductibles) in Maryland is 57% higher than in Vermont. Premiums for Medicare Part D (prescription drugs) in Wisconsin are 51% higher than in New York.

Hawaii is the cheapest state for retirees in terms of health care costs, based on an analysis of Medicare Part B (doctor visits and procedures), Part D, and supplemental premiums. For all three coverages, a 65-year-old in Hawaii can expect to pay $2,818 their first year in retirement and $112,528 over 20 years.

But Hawaii is something of an outlier—and note that it is otherwise the most expensive state in the nation. The second cheapest state for retiree health care is Vermont, where first-year expenses total $3,074 and 20-year costs run $124,073. Maine is only slightly more expensive.

Compare those figures to the most expensive states for retirement health care: Michigan, Florida, Nevada, and Maryland. In Michigan, a 65-year-old can expect to pay $3,707 in year one of retirement and $152,175 over 20 years. That’s more than $28,000 above the 20-year costs in Vermont. Michigan’s costs also exceed those in coastal states generally associated with a high cost of living, including New York and California.

The good news for retirees may be that, other than Florida, states favored by snowbirds like New Mexico, Georgia and South Carolina have some of the lowest expected retiree health care costs. In Georgia, for example, first-year costs would be $3,359 and 20-year costs would be $136,663, according to the app.

Three in four pre-retirees express high levels of concern over future health care costs, according to a Bank of America Merrill Lynch report. This is partly because the headline numbers are so daunting. The Employee Benefits Research Institute estimates that a 65-year-old couple with median drug expenses needs $271,000 in savings to have a 90% chance of being able to cover health care expenses in retirement, not counting the costs of long-term care.

The HealthView analysis does little to dispel those fears. In general, the 20-year cost in most states is between $135,000 and $145,000 per person—and these calculations do not include surcharges for retirees who have more than $85,000 (for singles) or $170,000 (for couples) in retirement income. Such surcharges can triple the cost of Medicare parts B and D premiums. The calculations also do not include certain other out-of-pocket costs like vision, dental, and hearing.

On average, a healthy 65-year-old couple will have $266,589 in lifetime costs for Medicare parts B and D and supplemental coverage, HealthView finds in a separate report. When other typical out-of-pocket costs are included that figure rises to $394,954. No matter where you live, that’s a significant chunk of money and must be taken into account in your retirement plan.

To make an informed estimate of those expenses, run the numbers on a retirement health care cost calculator, like this tool offered by Health View, or sit down with a financial adviser. And consider making moves now to control your expenses and stay healthy and active throughout retirement. There’s reason to be optimistic: recent research shows that the act of retiring itself can do a lot to immediately improve your health as well as your happiness.

Read next: How to Tame the Unexpected Costs of Medicare

MONEY 401(k)s

This Is the Single Biggest Threat to Boomers’ Retirement Savings

Roulette Wheel with ball on "0"
Alexander Kozachok—Getty Images

401(k) balances for longtime savers soared to $250,000, but many are taking big risks in the stock market.

IRA and 401(k) balances are holding steady near record levels. But certain risks have been creeping into the typical plan portfolio, which after a long bull market may be overexposed to stocks and otherwise burdened by a rising loan balance, new research shows.

The average balance in both IRA and 401(k) accounts dipped slightly in the second quarter, but continues to hover above $91,000 for the past year, according to new data from Fidelity Investments. Savers who have participated in a 401(k) for at least 10 years, and those who have both an IRA and a 401(k), now have balances that top $250,000.

Much of this growth owes to the stock market, which has more than doubled since the recession. But individual savers are stepping up as well. For the first time, the average 401(k) participant socked away more than $10,000 (including company match) in a 12-month period, Fidelity found. That occurred in the second quarter, when the total contribution rose to $10,180, up from $9,840 the previous quarter.

Yet bulging savings have tempted some workers to dig a little deeper into the 401(k) piggy bank. New plan loans and participants with a loan outstanding held constant in the second quarter, at 10.1% and 21.9% respectively. But the average outstanding plan loan balance climbed to $9,720, compared to $9,500 a year earlier. This leaves borrowers at greater risk of losing tax-advantaged savings and growth.

Plan loans are a primary source of retirement account leakage—money that “leaks” out of savings and never gets replaced. This may occur when a worker switches jobs and cannot repay the loan, which becomes an early distribution and may be subject to taxes and penalties.

Meanwhile, savers who are not invested in a target-date fund or managed account, and who have not rebalanced to maintain their target allocation, may find that the brisk rise in stock prices has left them with too much exposure to stocks. Baby boomers especially are at risk, Fidelity found. Pre-retirees should be lightening up on stocks, while adding bonds to reduce risk. But unless they regularly rebalance—and few people do—boomers have been riding the recent market gains, so they are holding an ever larger allocation in stocks than they originally intended.

That inertia could hurt boomers just as they move into retirement. During the last recession, 27% of those ages 56 to 65 had 90% or more of their 401(k) assets in stocks, which fell some 50% from the market peak in 2007. Those kinds of losses could wreck a retirement.

Could this scenario repeat? Very possibly. Nearly one in five of those ages 50-54 had a stock allocation at least 10 percentage points or higher than recommended, Fidelity found. For those ages 55-59, some 27% of savers exceed the recommended equity allocation. One in 10 in both age groups are 100% invested in stocks in their 401(k). It’s possible that these investors are holding a significant stake in safe assets, such as bonds or cash, outside their plans, which would cushion their risk. But that often is not the case.

Whether you’re approaching retirement, or you’re just starting out, it’s crucial to hold the right allocation in your 401(k) plan. Younger investors, who have decades of investing ahead, can ride out market downturn, so a 80% or higher allocation to stocks may be fine. But a 60-year-old would do better to keep only 50% invested equities, with the rest in a mix of bonds, real estate, cash and other alternatives. To get a suggested portfolio mix, try this asset allocation tool. And for tips on how to change your portfolio as you age, click here.

Read next: Americans Left $24 Billion in Retirement Money on the Table Last Year

MONEY 401(k)s

Americans Left $24 Billion in Retirement Money on the Table Last Year

stacks of cash on table
Sarina Finkelstein (photo illustration)—Getty Images (2)

The average worker is missing out on more than $1,300 a year. Make sure to get your share.

Personal savings rose last year, as conscientious workers reined in their spending. But a smaller portion of those savings were stashed in employer-sponsored retirement plans, new research shows. This and other recent findings suggest that the much-vaunted 401(k) match may not be the silver bullet for retirement savings that is widely presumed.

Personal savings jumped to 5.5% last year from 4.6% in 2013, according to data from Hearts and Wallets, a financial research firm. In the same period, average household savings allotted to employer-sponsored retirement plans fell to 22% from 29%. Among households eligible for a plan, only 56% participated, down from 60% the previous year.

Partly due to such behavior, Americans leave a staggering $24 billion on the table every year simply by not contributing enough to get their full employer match, according to a study by Financial Engines, a 401(k) advisory firm. Last year about a quarter of employees failed to collect their full match. The average worker missed out on $1,336 a year in free money—over 20 years, that can add up to $43,000.

The matching contribution is so ineffective at boosting savings that one third of eligible workers past the age of 59 ½ fail to take full advantage, research out of Yale and Harvard shows. That’s an especially dismal showing because these older workers can make penalty-free withdrawals from their plans.

If a 401(k) plan match is free money, why don’t more people take advantage? Inertia explains a lot. That’s why so many employers are switching their plans to automatically enroll new workers and automatically escalate their contribution rate. Another issue is that some workers don’t believe they can get by on less than their full take-home salary, and so they do not enroll or opt out of the plan if they have been automatically enrolled.

Typically, those who miss out on the match tend to be low- and middle-income workers. Ironically, this group would benefit the most from participation because the match would represent a bigger percentage of their income. A typical middle-income worker would more than double his or her annual savings just by raising the contribution rate to get the full match, Hearts and Wallets found.

In the end, the biggest beneficiaries of the 401(k) match are highly motivated savers, who tend be the most highly compensated. That’s why some policy experts and academics have raised questions about the fairness of corporate tax policies that encourage employers to offer a match. Maybe better public policy would be to redirect those tax dollars toward fixing Social Security, which benefits the low-income households least likely to save on their own and who need help the most.

Of course, any changes to tax policy aren’t likely to happen soon. All the more reason to make sure you are saving enough to get your full 401(k) match. Chances are, you won’t notice the difference in your take home pay—it helps that you get a tax break on the amount you sock away. To see how stepping up your savings will get you closer to your retirement goals, try this calculator.

Read next: When $1.5 Million Isn’t Enough for Retirement

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MONEY buying a home

Why Millennials Are Better Off Waiting 10 Years to Buy a Home

Millennial in front of house for rent
Daniel Grill—Getty Images

A new Fed study finds most young adults require years of saving before they can afford home ownership.

In a report sure to make the real estate industry cringe, researchers at the St. Louis Federal Reserve suggest most young adults postpone home ownership for years, if not a decade or longer. This comes as the housing market is beginning to boom again and older Millennials, a group that generally has eschewed homeownership, shows signs of wanting to take the plunge.

Can this be sound advice? Home ownership has been a reliable long-term wealth builder for generations. Often home equity is retirees’ largest asset and, along with Social Security, enough for them to live out their days financially secure.

The housing bust changed the calculus. Flipping and other short-term strategies, and risky nothing-down and no-documentation mortgages, contributed mightily to the bust. Yet short-term moves have always been dicey. Properly considered, a home is less an investment than a forced savings plan and place to live. Over time, real estate keeps pace with inflation and a stable, affordable mortgage provides a valuable tax deduction.

The Fed study does not dispute that. It is an examination of age and wealth, and finds that younger families are on track for a lower net worth than all previous living generations. Adjusted for inflation, the median wealth of families headed by someone at least age 62 rose 40% between 1989 and 2013—to $210,000 from $150,000. Meanwhile, median wealth of households headed by someone age 40 to 61 fell 31% to $106,000 and median wealth for younger families fell 28% to $14,000.

Researchers conclude that younger families would be better served by maintaining a personal asset mix that more closely resembles the asset mix of older families—less debt and less real estate relative to their other assets. In other words, stretching for that first home when you have no other savings and little ability to save going forward is a huge mistake.

This “mistake,” by the way, is one plenty of families in previous generations made—and for many it paid off well. What seems to have changed is a greater degree of speculation that leads to a boom-bust pattern in the housing market, one that can wipe you out in the short term if your timing stinks. The Fed researchers write that young people should “delay purchase of a home with its attendant debt burden until it was possible to buy a house that did not make the family’s balance sheet dangerously undiversified and highly leveraged.”

John Bucsek, managing partner of MetLife Solutions Group, finds merit in the Fed’s argument, saying that young families should rent for years for less money than a mortgage would cost. That preserves career flexibility and cuts monthly costs. They should begin saving in a Roth IRA to build long-term wealth through a diversified portfolio. They should also pay down student loans and other debts. Later, when they have more assets, if need be they may withdraw their original Roth IRA investment plus up to $10,000 penalty free for a first-time home purchase.

That is sound strategy, and would have been especially valuable advice before the housing collapse. Today the housing market is on firmer footing. Banks remain careful about extending credit, and in June the median price for an existing home rose 6.5% to a record $236,400, at last topping the previous high of $230,400 set in July 2006—before the bust. The pace of homes being sold is the strongest since 2007. All this suggests the market is in full recovery, though the prominent economist Robert Shiller, as ever, is raising red flags about a bubble.

At the same time, Millennials, a generation that pioneered the sharing economy and many of whom have claimed to never want to own anything, are poised to enter the housing market. A Digital Risk survey found that 70% of 18-to-34 year olds are interested in purchasing a home in the next five years. If they act on that interest, it will further boost the housing recovery—and if they commit to staying their house and saving a bit on the side, they will begin to build long-term wealth much like their parents and grandparents.

Read next: These States Offer the Most Help for Buying a Home

MONEY Social Security

How Reading Your Social Security Statement Can Make You Richer

senior reading bills
Getty Images

Making smart use of the information in your benefits statement can save your retirement.

The Social Security Administration is learning what financial educators have known for decades: good information is helpful but does not always lead to useful action. Now, in a bid to help individuals make smarter decisions about their benefits and retirement income overall, a push is on to broaden the regular Social Security statements that all taxpayers receive.

Social Security is the nation’s most important source of retirement security, providing half the monthly income of half of all retirees. Yet the system is so complicated that many puzzle over when to take monthly benefits, which may vary widely depending on the age at which you begin. You can start at age 62. But your check is about 8% higher for each year you delay until age 70.

As traditional pensions disappear, Social Security is the only source of guaranteed lifetime income that many future retirees will have. Making the most of it is critical—and it may be as simple as just reading your statement, now available online, in order to understand your options. (To find yours, go to

The government began mailing a regular benefits statement in 1995, but stopped in 2011 as a cost-cutting measure and tried to direct people to the Social Security website instead. Last fall, however, the agency began mailing out paper statements again to recipients every few years.

This statement shows your expected monthly Social Security benefit at various retirement dates. Studies show that 40% of taxpayers use these calculations in their planning, according to a new study from the Center for Retirement Research at Boston College. But individuals do not use this information as a prod to change the date that they intend to start taking benefits, the CRR’s researchers found.

This is a familiar disconnect that lurks in money behavior at many levels. Proponents of financial education have had a difficult time proving that kids or adults who are taught about things like budgets and retirement saving put this knowledge to good use and make smarter money decisions because of the knowledge they have gained. They understand. They can pass a test. But does this knowledge change behavior for the better? Some encouraging signs are surfacing. But the lasting impact of financial education remains an open question.

Looking at a set of studies centered on awareness of the regular Social Security statements, researchers at CRR found that more Americans have been delaying benefits since the statements began arriving in mailboxes 20 years ago. But they attribute this entirely to outside forces, including a higher rate of college graduates, greater longevity and longer careers. “The information contained in the statement is not sufficient to improve their retirement behavior,” the authors note.

The upshot: a more “comprehensive” Social Security statement would lead more taxpayers to better optimize their benefit, CRR asserts. That might mean including instruction on how to place Social Security benefits in context with other assets and income sources, and how to determine the amount of monthly income you are likely to need.

Meanwhile, to make sure you are making the right claiming decision, gather the information in your statements and plug those numbers into one or more Social Security calculators; you can find several listed here. As a study last year by Financial Engines found, many individuals are leaving $100,000 or more in income on the table—as much as $250,000 for married couples—by choosing the wrong claiming strategy. That money could make your retirement a whole lot more comfortable.

Read next: This Is the Maximum Benefit You Can Get from Social Security

MONEY Personal Finance

6 Crucial Life (and Money) Lessons I Learned Playing in the World Series of Poker

Players compete during the main event at the World Series of Poker Wednesday, July 8, 2015, in Las Vegas.
John Locher—AP Players compete during the main event at the World Series of Poker Wednesday, July 8, 2015, in Las Vegas.

Add these poker lessons to a long list of tips for personal and professional success, thanks to the biggest game of all.

I’m not the kind of person that can’t sleep. But at the World Series of Poker last week I found myself up both early and late, a nervous energy stealing my natural sense of calm. That’s ok. My adrenaline would sustain me—and this is just one of the things I learned playing in the biggest game of them all.

Much has been written about the life, business, and investing lessons you can learn at a poker table. The game trains you to read body language and spot opportunity; to lose with grace and focus on decisions, not outcomes; to choose battles wisely and be aware of what others see when they look at you.

It’s all true, valuable, and widely applicable. I’ve even suggested that kids take up poker (with age appropriate stakes, of course). It can help youngsters strengthen memory, improve math skills, learn to consider risks, and practice money management. Playing for the first time in the Main Event in Las Vegas, an elimination tournament with more than 6,400 entrants, I discovered still more ways this game teaches success.

  1. Passion is everything Isaac Newton’s mother had to remind him to eat because he was so busy discovering the laws of gravity that he might go days forgetting he was hungry. Newton did pretty well for himself. For me, losing sleep to thoughts of strategy and analysis reinforced that I was doing something I find exhilarating. Sleep is important. The mind must rest. But in the short run the thrill of passion more than compensates. Tournament poker is just a game, and because I enjoy it I am consumed by improvement. But the same principle applies in other endeavors. I apply it in my day job too. When you love what you do, you keep doing it better—an important ingredient of success. So do what you love, not what others expect of you.
  2. Nice guys finish last…or first You meet all kinds of people around a poker table. Some yak incessantly and others remain stone faced for hours; some are unassuming and engaging and others snarl and trash talk. None of it matters. What counts is focus. The two nicest guys at my first table went opposite ways, one to an early exit and the other to the next stage as a chip leader. Heck, I’d have a beer with either of them, and both were solid players. The only real difference was that one paid attention to the table all the time; the other only while in a hand. Guess who advanced? In life, career, or at the poker table, the things you learn while others are taking it easy give you an edge. Smiles and snarls are immaterial if you stay focused.
  3. Down is not out In 1997, a little computer company named Apple was floundering, having lost money for 12 consecutive years. But Steve Jobs returned to the company he had founded, struck gold with the iPod and by 2011 Apple had become the most valuable company in the world. At my table on the second day, the guy that started with the fewest chips kept fighting. He didn’t panic. He kept his wits. Like Jobs, he never gave up. This player, after hours on the brink, finally began to rake some pots and later advanced deep into the tournament. In any pursuit, you may fail or get bested. So you try again. You are only out when you quit.
  4. Your comfort zone should make you uncomfortable People who challenge themselves tend to rise to the occasion, psychologists have found. Children are fearless. They try anything. That’s how they grow. But most adults have tasted enough failure that they tend to avoid difficult situations, which leaves them trapped within personal and professional boundaries. Fear of failure is a powerful obstacle to growth. “There is no learning without some difficulty and fumbling,” John Gardner writes in Self-Renewal. “If you want to keep on learning, you must keep on risking failure—all your life. It’s as simple as that.” At the poker table, you can play safe a long time before your chips run out. But they will run out—unless you get out of your comfort zone and make the occasional bet that scares you half to death.
  5. There is no such thing as house money The economist Richard Thaler pioneered the notion of mental accounting, where individuals treat money gained in different ways with more or less care. You are more likely to spend $20 that you found on the sidewalk than $20 you earned at your job. Why is that? Simple: The money you stumbled into on the sidewalk was found money; you are no worse off when it is gone. Similarly, a gambler on a roll might raise the stakes, reasoning that since he is wagering only money he has won—house money—he can’t really lose. And yet $20 is $20, no matter how you got it. When you spend or lose it, you have less money than before and have missed a chance to improve your financial security. The most impressive player at my table on the second day was a guy with a bunch of chips who remained true to his game. Despite his bountiful resources, he kept methodically building a bigger pile, avoiding the trap of taking unnecessary risks with his “house” money.
  6. Sometimes you have to wing it Most information is imperfect. When you invest in a stock, you know what the company has done in the past. You think you understand how it will do in the future. But you cannot be sure. You gather as much information as possible and buy when you sense opportunity. You might be wrong. Warren Buffett bought shares of ConocoPhillips just before oil prices unexpectedly tanked a few years ago and he lost $1 billion. My tournament ended late on the second day—after 21 hours of card playing—when I bet all my chips at a time when, using the best table information I could gather, I sensed opportunity. It turned out the guy to my left was holding two aces and, alas, I had essentially bought ConocoPhillips ahead of plunging oil prices. That really hurt. But I can live with the Buffett comparison.



MONEY retirement income

This Is the Top Secret of Wealthy Retirees

yacht in front of Miami mansions
Barry Winiker—Getty Images

Successful retirees still save nearly a third of income from their pension and 401(k) distributions.

Individuals that have saved successfully for retirement evidently cannot kick the habit. Even after they have reached retirement age they continue to save, on average, 31% of income, new research shows.

In many cases this continued saving comes from income streams guaranteed for life, such as a traditional pension, certain annuities, or Social Security. So further saving may have little to do with financial security—and much to do with a routine that has served them well over the years. If you are looking for the top secret of affluent retirees, it may be just that simple.

Retiree income flows from five primary sources, according to the research from fund company Vanguard. Guaranteed lifetime income is the biggest cut at 42%. Withdrawals from tax-advantaged accounts like IRAs and 401(k) plans are the second biggest source (20%), followed by pay from a part-time job (12%), withdrawals from savings accounts (7%) and from specialty accounts like a cash-value life insurance policy (4%).

The income source matters. Those who mainly get by on withdrawals from a 401(k) or other financial accounts reinvest about a third of what they take out due, say, to required minimum distribution rules. Those collecting guaranteed monthly income save only 25%.

This makes perfect sense. Lifetime income, by definition, never runs out. Those who get most of their income this way are under far less pressure to save anything at all. Meanwhile, those living off withdrawals from financial accounts, which can run dry, show a predictable concern with that possibility.

These are findings worthy of some study in government and pension circles. In coming years, a greater share of retirees will rely more heavily on their own savings, which could undermine spending in general and take a bite out of economic growth. On the other hand, those who get most of their income from withdrawals from financial accounts are more likely to work longer or part-time in retirement, which contributes to the economy and probably the individual health of those doing so.

The Vanguard study looked at households where the head was 60 to 79 years old, had at least $100,000 of investable assets, and at least one member of the household was fully or partially retired. This is an affluent, though not rich, group that continues to save and, in some ways may be doing so inappropriately.

Two-thirds of the money saved from income that comes from financial accounts goes into low-yielding savings vehicles. That might be by design—a desire to lower risk or save for a big purchase. But it might also be the result of inertia—required distributions left unattended. If such distributions are not needed for spending they might be better reinvested in growth or higher income accounts.

It’s tempting to assume that affluent retirees keep saving simply because they have the means to live as they wish and still have income left over. But that probably sells them short. They had to save or work hard for their pension to get there. It’s the habit that made it happen—and once established it’s tough to kick.

Read next: How Being a Boring Investor Can Make You Rich

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