MONEY retirement planning

What Scrooge Can Teach You About Retirement Planning

Scrooge in A Christmas Carol
Scrooge in "A Christmas Carol" © Walt Disney Co.—Courtesy Everett Collection

Sure, he was tight-fisted. But Scrooge's money habits are a useful model for reaching your retirement goals.

I can hear the cries of outrage already. How can A Christmas Carol‘s Scrooge, the character Charles Dickens described as tight-fisted, squeezing, wrenching, grasping, scraping, clutching and covetous, possibly be a paragon of retirement planning? Bah humbug! If anything, he’s a role model for how not to live one’s life!

And I agree, up to a point. But if you’re willing to overlook a few of his, shall we say, flaws, good old Scrooge also possessed some qualities that make him a pretty decent role model for achieving a secure and meaningful retirement. Here are three we may well to emulate, albeit in moderation, to improve our retirement outlook.

1. Scrooge had a phenomenal work ethic. When the novel opens, Scrooge is at work in his counting-house late in the afternoon on Christmas eve. He didn’t duck out early to do some last-minute shopping. He wasn’t posting Happy Holidays photos on Instagram. He was putting in a full day’s work.

Granted, in recent years millions of people who would like to do just that haven’t had the option. Perhaps the recent upbeat employment report signals a more vibrant jobs market ahead. But the fact remains that the commitment to work that Scrooge displays is crucial to a successful retirement for two reasons: you can’t build a nest egg without regular income; and the amount you earn and number of years on the job largely determine the size of a key source of retirement income: your Social Security benefit.

Note too that Scrooge was still working relatively late in life. Dickens doesn’t give Ebenezer’s age, but many people estimate he was in his late 50s or 60s, which is getting up there considering life expectancy in mid-19th century England was about 40. So we can take a cue from Scrooge on this score as well. For example, in their new book Falling Short: The Coming Retirement Crisis and What To Do About It, authors Alicia Munnell, Charles Ellis and Andrew Eschtruth point out that just a few extra years on the job can go a long way toward improving one’s retirement prospects. And if that doesn’t do the trick, you can always supplement your income by working in retirement.

2. The man was a prodigious saver. Scrooge definitely knew a thing or two about saving a buck. And he didn’t resort to gimmicks like apps that round up credit card purchases to the nearest dollar and deposit the difference in an investing account, giving you the impression you’re saving while encouraging spending. He did it the old-fashioned way by keeping his everyday living expenses down.

He went way, way too far, of course, what with living in the dark, keeping a very small fire and eating gruel from a saucepan. But he had the right idea—namely, if you live below your means by not splurging on over-the-top vacations, expensive cars and big houses with mortgage payments to match, you’ll have a better chance of saving the 15% a year that can lead to a comfy retirement. And while Dickens doesn’t get into Scrooge’s investing habits, my guess is that ol’ Ebenezer wouldn’t fall for pitches for dubious or expensive investments. I think he’d be an index-fund kinda guy who realizes that reducing investment fees boosts the size of your nest egg and the amount of income you can draw from it.

3. Scrooge (eventually) understood what really matters. This may very well be the most important lesson we can draw from Scrooge. Sure, it took visits from his dead business partner Marley and a few ghosts to transform him. But by the end of the novel, Scrooge has morphed from a pinched and selfish man into a generous and compassionate person who anonymously sends a turkey to the Cratchit home for Christmas dinner and becomes like a second father to Bob Cratchit’s son, Tiny Tim. In short, he realizes that wealth brings happiness only when we share it with our families and others in ways that improve all our lives.

So while it’s important to focus on making good financial decisions, we should never forget that retirement planning isn’t just about the bucks. Ultimately, it’s about creating a retirement lifestyle that has meaning and purpose as well as financial security.

So if your thoughts happen to stray to your retirement over this holiday season and you find yourself wondering how you might improve your planning, ask yourself WWSD—What Would Scrooge Do? Whether it’s the stingy Ebenezer or the more benevolent version, he just might provide the inspiration you need.

Walter Updegrave is the editor of RealDealRetirement.com. If you have a question on retirement or investing that you would like Walter to answer online, send it to him at walter@realdealretirement.com.

More from RealDealRetirement.com:

How To Invest In Today’s Topsy-Turvy Market—And In The Year Ahead

What’s Your “Magic” Retirement Number?

Does Uncle Sam Want To Contribute $2,000 Toward Your Retirement?

MONEY IRAs

The Best Way to Tap Your IRA In Retirement

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I am 72 years old and subject to mandatory IRA withdrawals. I don’t need all the money for my expenses. What should I do with the leftover money? Jay Kahn, Vienna, VA.

A: You’re in a fortunate position. While there is a real retirement savings crisis for many Americans, there are also people with individual retirement accounts (IRAs) like you who don’t need to tap their nest egg—at least not yet.

Nearly four out of every 10 U.S. households own an IRA, holding more than $5.7 trillion in these accounts, according to a study by the Investment Company Institute. At Vanguard, 20% of investors with an IRA who take a distribution after age 70 ½ put it into another taxable investment account with the company.

The government forces you to start withdrawing your IRA money when you turn 70½ because the IRS wants to collect the income taxes you’ve deferred on the contributions. You must take your first required minimum distribution (RMD) by April of the year after you turn 70½ and by December 31 for subsequent withdrawals.

But there’s no requirement to spend it, and many people like you want to continue to keep growing your money for the future. In that case you have several options, says Tom Mingone, founder and managing partner of Capital Management Group of New York.

First, look at your overall asset allocation and risk tolerance. Add the money to investments where you are underweight, Mingone advises. “You’ll get the most bang for your buck doing that with mutual funds or an exchange traded fund.“

For wealthier investors who are charitably inclined, Mingone recommends doing a direct rollover to a charity. The tax provision would allow you to avoid paying taxes on your RMD by moving it directly from your IRA to a charity. The tax provision expired last year but Congress has extended the rule through 2014 and President Obama is expected to sign it.

You can also gift the money. Putting it into a 529 plan for your grandchildren’s education allows it to grow tax free for many years. Another option is to establish an irrevocable life insurance trust and use the money to pay the premiums. With such a trust, the insurance proceeds won’t be considered part of your estate so your heirs don’t pay taxes on it. “It’s a tax-free, efficient way to leave more to your family,” Mingone says.

Stay away from immediate annuities though. “It’s not that I don’t believe in them, but when you’re already into your 70s, the risk you’ll outlive your capital is diminished,” says Mingone. You’ll be locking in a chunk of money at today’s low interest rates and there’s a shorter period of time to collect. “It’s not a good tradeoff for guaranteed income,” says Mingone.

Beyond investing the extra cash, consider just spending it. Some retirees are reluctant to spend the money they’ve saved for retirement out of fear of running out later on. With retirements that can last 30 years or more, it’s a legitimate worry. “Believe it or not, some people have a hard time spending it down,” says Mingone. But failure to enjoy your hard-earned savings, especially while you are still young enough and in good health to use it, can be a sad outcome too.

If you’ve met all your other financial goals, have some fun. “There’s something to be said for knocking things off the bucket list and enjoying spending your money,” says Mingone.

Update: This story was changed to reflect the Senate passing a bill to extend the IRS rule allowing the direct rollover of an IRA’s required minimum distribution to a charity through 2014.

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com

Read next: How Your Earnings Record Affects Your Social Security

MONEY retirement income

Junk Bond Selloff Is a Warning for Retirees Who Reached for Yield

Risky assets have paid off well the past few years. But tremors in the junk bond market signal time for a gut check.

In July, Federal Reserve Chief Janet Yellen warned of the “stretched” values of junk bonds. Few seemed to care, and among the unconcerned were millions of retirees who had reached for these bonds’ higher yields in order to maintain their lifestyle. Now, a reckoning may be at hand.

Yellen’s mid-summer warning on asset prices was reminiscent of the former Fed chief Alan Greenspan’s “irrational exuberance” comment regarding stock prices in 1996. Few listened then, either. It turns out that the Greenspan warning was way early. But the dotcom collapse hit later with devastating results.

Yellen’s remarks may be timelier. High-risk, high-yield corporate bond prices have been falling amid the strongest selling in 18 months. Since June, investors have pulled $22 billion out of the market and prices have dropped 8%. The pace of the decline has quickened since October.

The junk bond selloff began in the energy sector, where oil prices recently hitting a five-year low set off alarms about the future profits—and ability to make bond payments—of some energy companies. In the past month, the selling has spread throughout the junk-bond universe, as mutual fund managers have had to sell to meet redemptions and as worries about further losses in a possibly stalling global economy have gathered steam.

The broad decline means that junk bond investors have little or no gain to show for the risks they have been taking this year. Investors may have collected generous interest payments, and so not really felt the sting of the selloff. But the value of their bonds has fallen from, say, $1,000 to $920. The risk is that prices fall further and, in a period of global economic weakness, that issuers default on their interest payments.

Retirees have been reaching for yield in junk bonds and other relatively risky assets since the financial crisis, which presumably is partly what prompted Yellen’s warning last summer. It’s hard to place blame with retirees. The 10-year Treasury bond yield fell below 2% for a while and remains deeply depressed by historical standards. By stepping up to the higher risks of junk bonds, retirees could get 5% or more and live like it was 10 years ago. Many also flocked to dividend-paying stocks.

So far, taking these risks has generally worked out. Junk bonds returned 7.44% last year and 15.8% in 2012, according to Barclays, as reported in The Wall Street Journal. Meanwhile, stocks have been on a tear. But the backup in junk bond prices this fall should serve as a warning: Companies that pay a high yield on their bonds—and many that pay a fat stock dividend—do so because they are at greater risk of defaulting or going bust. That’s the downside of reaching for yield, and it doesn’t go away even in a diversified mutual fund.

 

MONEY

6 Simple Projects To Make Your Home More Retirement-Friendly

open kitchen with multi-level island
James Brey—Getty Images

Hoping to stay in your house for the long haul? These manageable changes will make your place more comfortable now—and for years to come.

Houses—especially prewar houses—can be tough places to navigate as you get older. Steep stairs, deep tubs, and narrow doorways, once just petty annoyances, can become serious obstacles.

Remodeling your home to remove those impediments is a major undertaking, likely to cost tens of thousands of dollars, says Louis Tenenbaum, an independent living strategist based in Potomac, Md. Plus, by the time these changes become a necessity, you probably won’t want to get involved in an expensive and inconvenient construction project.

A smarter strategy? Tackle these jobs early on, when you’re already planning a renovation. Whether you’re updating a fixer-upper, expanding a starter home for a growing family, or remodeling for your empty-nest years, making a few simple design choices now will help you live comfortably in your home for decades to come. Even better: Most will add little or nothing to the cost of your current project.

Making your home more retirement-friendly doesn’t have to mean sacrificing good looks. “We’re not talking about grab bars in the shower or a ramp by the front door,” says Columbus, Ohio, contractor Bill Owens, a National Association of Home Builders’ expert in so-called universal design. “The idea of universal design is that good design is people-centered and works for all ages and body types,” he says. Sought-after features like spacious bathrooms, farmhouse-table style kitchen islands, and freezer-on-the-bottom refrigerators are all examples of universal design.

Make it clear to your project designer and contractor that universal design is a priority whenever you renovate. Doing so will not only help you age-in-place gracefully, but will also increase the value of your home by making it more attractive and comfortable, says home designer and builder Mark Mackmiller, of Eden Prairie, Minn.

Ready to get started? Here are six changes to consider, as well as an estimate of what they’ll add to the total cost of your renovation project.

Open Floorplans

Removing walls between the living and dining rooms, kitchen, family room, and/or entry halls makes a house feel bigger, more modern, and more comfortable—and makes the space easier to negotiate in old age.

Cost: $3,000 to $5,000 per removed wall

Curb-Free Showers

Visit any high-end resort or flip through a glossy design magazine and you’ll notice that every shower has glass doors that go all the way to the floor, with no lip to step over. Aside from being a sleek and sophisticated look, this eliminates a major tripping hazard.

Cost: $500 to $1,000 for lowered plumbing and shower floor

Multiple Height Counters

When you redo the kitchen, include some counters at standard height (36 inches), some at breakfast bar height (42 inches), and some at table height (30 inches) with knee space for sitting. Having a range of counters will give you more options for prepping or cooking while standing or seated, all without requiring that you to bend over.

Cost: Nothing more than what you’re already spending on the renovation

Wide Doorways

Anytime you’re reconfiguring doorways, make sure the new openings are at least 32 inches wide. This makes your home feel more spacious, and will allow for wheelchair access should you ever need it later.

Cost: $50 to $400 per door

Lever-Style Doorknobs

Just as lever-style faucets have become the norm for kitchens and showers because they’re attractive and easy to operate, lever doorknobs are more ergonomic than standard round versions. They’re easier to grab and manipulate if you’re carrying a load of groceries or laundry—or if you’re aging in place.

Cost: No additional cost.

High Outlets

Left to their own devices, most electricians will install new outlets at 12 to 18 inches off the floor. But that requires bending over every time you need to plug in the vacuum. Ask for outlets 24 inches high instead, and you’ll make your house easier to use now, when you get older, and if you’re ever fighting a bad back.

Cost: No added cost.

 

MONEY retirement income

Why Workers Undervalue Traditional Pension Plans

Gold egg in nest in dark
Simon Katzer—Getty Images

Lifetime income is the hottest button in the retirement industry. So why do workers prefer a 401(k) to a traditional pension?

Despite many drawbacks, the 401(k) plan is our most prized employee benefit other than health care, new research shows. More than half of workers value this savings plan even above a traditional pension that guarantees income for life.

Some 61% of workers with at least $10,000 in investments say that, after health care, an employer-sponsored savings plan is their most important benefit, according to a Wells Fargo/Gallup Investor poll. This is followed by 23% of workers naming paid time off, 5% naming life insurance, and 4% naming stock options. Some 52% say they prefer a 401(k) plan to a traditional pension.

These findings come as new flaws in our 401(k)-based retirement system surface on a regular basis. Plans are still riddled with expenses and hidden fees, though in general expenses have been going down. Too many workers don’t contribute enough and lose out by borrowing from their plans or taking early distributions. Most people don’t know how to make a lump sum last through 20 or 30 years of retirement. And the common rule of withdrawing 4% a year is an imperfect strategy.

The biggest flaw of all may be that most 401(k) plans do not provide a guaranteed lifetime income stream. This issue has gotten loads of attention since the financial crisis, which laid waste to the dreams of millions of folks that had planned to retire at just the wrong moment. Many were forced to sell shares when the market was hitting bottom and suffered permanent, devastating losses.

Policymakers are now feverishly looking for seamless and cost-effective ways for retirees to convert part of their 401(k) plan to an insurance product like an immediate annuity, which would provide guaranteed lifetime income in addition to Social Security and give retirees a stable base to meet monthly expenses for as long as they live. Such a conversion feature would fill the income hole left by employers that have been all but eliminating traditional pensions since the 1980s.

With growing acknowledgement that lifetime income is critical, and largely missing from most workers’ plans, it seems odd that so many workers would value a 401(k) over a traditional pension. This may be because guaranteed income doesn’t seem so important while you are still at work or, as has lately been the case, the stock market is rising at a rapid pace. It may also be that the 401(k) is the only savings plan many young workers have ever known, and they value having control over their assets.

Seven in 10 workers have access to a 401(k) plan and 96% of those contribute regularly, the poll found. Some 86% enjoy an employer match and 81% say the match is very important in helping to save for retirement. The 401(k) is now so ingrained that 77% in the poll favor automatic enrollment and 66% favor automatic escalation of contributions. Four in 10 even want their employer to make age-appropriate investments for them, which speaks to the soaring popularity of automatically adjusting target-date mutual funds.

Read next: How Your Earnings Record Affects Your Social Security

MONEY

How Your Earnings Record Affects Your Social Security

Q: I took my Social Security in Jan 2011 at age 65 1/2 and have continued to work full time. By the end of this year, I figure I will have contributed around $5,500 into Social Security in each of the past four years. Knowing I made more money in recent years than I did in the prior years—the years on which my Social Security was based—I expected a readjustment, but my benefits didn’t change. My local Social Security office told me that any readjusting would have been done automatically in January. Then last month I got a letter stating that my check will increase by $1 per month, attributed to the 2013 year. What about 2011 and 2012? Nice return on $5,500! Do I have any recourse? Don

A: First off, I agree that it is very hard to keep paying into Social Security after you’ve started receiving benefits and not feel like you’re getting anything out of it. I think payroll taxes should be reduced for people who have reached full retirement age (it’s 66 now and will rise to 67 for people born in 1960 and later). Doing this would benefit workers and also give employers an incentive to hire older workers. To say the least, I am not holding my breath waiting for such changes to be enacted.

The specifics of how your future benefits are affected by your recent earnings is all about how Social Security calculates your earnings base. Social Security keeps track of all your covered earnings (earnings on which you paid Social Security payroll taxes) during your working life. Each year, it applies an index factor to your earnings to adjust them for the wage inflation that has occurred since that year.

In this way, money earned during 1985, for example, carries the same weight in calculating your Social Security benefits as money earned in 2005 or 2010 or 2014. This indexing stops when you turn 60; any earnings after that age are included in your earnings record on an unadjusted basis. Because of wage inflation, it’s quite likely these later-age earnings will raise your benefits.

The agency uses your highest 35 years of earnings to determine what it calls your Primary Insurance Amount (PIA), the benefit you’d get if you began collecting benefits at your full retirement age, which in your case is 66. If you do not have 35 years of eligible covered earnings, the agency enters a zero for each “missing” year. So, for example, if you had only 20 years of covered earnings, Social Security would calculate your benefit by using the earnings for those 20 years, adding 15 zeroes, and using this average to determine your PIA. (The PIA is also used in determining benefits to your spouse or former spouse that are based on your earnings record.)

Now, even though your earnings have been increasing, it’s possible they would not become one of your new top 35 earnings years. And even if they did, they might not raise your earnings base very much.

Perhaps you already have obtained your earnings record from Social Security. If not, you can get your earnings record at the Social Security website. It’s also possible, but a lot of work, to use this record to compute your earnings base.

The only recourse I can suggest is to take your earnings record to a Social Security office and ask a representative to walk you through it to make sure you’re being properly credited for your recent work history.

I hope this helps—though I realize my suggested remedy may only lead to more frustration for you. Best of luck.

Philip Moeller is an expert on retirement, aging, and health. His book, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” will be published in February by Simon & Schuster. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: Why Workers Undervalue Traditional Pension Plans

MONEY Retirement

How to Make the Tricky Switch to Nonprofit Work

Coming from the corporate world might not be seen as a plus.

When I was researching my book, Unretirement, I was struck by how many boomers wanted to connect their passion to a paycheck by doing nonprofit work. People with long careers in the private sector often told me that they were eager to do things like help tackle homelessness or address recidivism or educate at-risk children.

The late historian Daniel Boorstin called nonprofits “monuments to community.” And it’s little wonder that growing numbers of boomers are acting on their desire to give back through this incredibly diverse sector, rich with opportunities. Nonprofits range from huge institutions with the trappings of big business to mom-and-pops with a cadre of dedicated employees and volunteers.

Making the leap from the for-profit world to the nonprofit one isn’t always easy, though.

(MORE: Mistakes to Avoid If You Want a Nonprofit Job)

How Not to Do It

When I gave a talk last August at Verrado, a multigenerational planned community in Arizona, a man in the audience had everyone in stitches relaying his tale of self-inflicted woe as he tried making the switch.

When he retired from a corporate career in IT management, he said, he hoped to take his skills to a nonprofit and make a difference. But after getting a job at one and loudly telling his new colleagues they were doing IT all wrong, he was soon thanked for his insights and shown the door. The same thing happened at another nonprofit. These days, he told me, he’s driving a car to make some money while rethinking his approach toward working at a nonprofit — still his goal.

When I relayed his story to Kate Barr, executive director of the Nonprofits Assistance Fund — a Minneapolis-based group that offers capital and expertise to Minnesota nonprofits — she didn’t find it surprising. “It’s a myth that nonprofits don’t know what they’re doing,” says Barr. “Most of them do.”

Start On a Board

Barr, who made the transition from the corporate world with aplomb, has some smart advice for midlifers who’d like to do it. She started her career as a dancer at small dance companies, pirouetted into banking and after 22 years of that (eventually becoming a senior vice president), landed her Nonprofits Assistance Fund job in 2000.

When professionals ask Barr how to make a similar shift, her first question to them is: “Do you serve on any nonprofit boards?” If not, she says, get on some before jumping careers. Board membership, Barr says, offers an opportunity to understand the dynamics of nonprofits.

If you think joining a board is just for the uber-rich who can write big checks, Barr says you’re mistaken. While some nonprofit boards recruit solely from the wealthy and the well-connected (think big-city orchestras and major nonprofit hospitals), many of the nation’s roughly 1.44 million nonprofits don’t (think local food banks and small arts groups).

(MORE: 7 Top Websites for Nonprofit Jobs)

As a board member, you’ll be expected to make an annual contribution to the cause. But often, the sums are relatively small. “There are lots of boards to choose from,” Barr says.

Volunteer to Be a Volunteer

Another way in, says Charles McLimans, “volunteer your services” at a nonprofit. “Ask, ‘what do you need me to do?,’” he advises. Like Barr, McLimans, 49, speaks from experience.

He began his career in the corporate sector, including work at REFCO, the commodities trading firm. In 2006, when he moved to Naperville, Ill., to be closer to his family, his sister suggested he volunteer at Loaves and Fishes, a food pantry. In 2008, he became its executive director and only full-time employee.

He’ll soon move to Milwaukee, Wisc. to be President and Chief Executive of Feeding America, Eastern Wisconsin, a 45-person employee hunger-relief organization. “It’s a great opportunity,” says McLimans.

Crosby Kemper III, Executive Director of the Kansas City Public Library, has a few other questions to think deeply about before making the leap to nonprofits. “I’d say the first thing you have to do is ask yourself, ‘What do you want to do with your life? What gifts do you have to give to the world? What do you want to do with the last part of your life?’”

(MORE: Find a Nonprofit Job Matched to Your Passions)

Kemper asked himself those questions before taking the library position in 2005.

Like Barr, Kemper had been a long-time banker (although he took some major career breaks, including a year teaching English in China). He became Chairman and Chief Executive of UMB Financial in 2000, based in Kansas City, Mo., and retired five years later. When the possibility of the library job came up, he talked it over with close friends and met with patrons of the library. Although he enjoyed his business career, Kemper says, “ultimately it didn’t fulfill everything I wanted to do. The life of the mind and the civic role are important, too.”

How to Do a Nonprofit Job Search

No matter what mission or cause attracts you, some of the keys to finding rewarding work at a nonprofit are the same as with any thoughtful job search: Figuring out what do you really want to do, understanding your skillset, knowing what you have to offer and tapping into your network for job leads.

What’s different about the job search at a nonprofit is the opportunity to experiment — to test-drive the combination of your talents and an organization’s needs through volunteering. By learning about a group from the bottom rung of its career ladder, you can understand the intricacies of the nonprofit without romanticizing working there.

After all, even with the most noble vision, every nonprofit is like any other business, with plenty of shortcomings and frustrations. But through volunteering, you’ll live with them and can then decide whether to try to convert your free labor into a part-time or full-time paid position that’ll add meaning to your life.

More from Next Avenue:

Why Professional Men Over 60 Keep Working
The Good News About Women Working After 60
What Older Workers Want, But Aren’t Getting

MONEY Pensions

Congress’ No-Bailout Pension Plan Is No Solution for Retirees

The cuts to promised benefits for current retirees would roll back a landmark law protecting pensions—and opens the door to further cutbacks.

Wall Street banks, automakers and insurance giants got bailouts during the economic meltdown that started in 2008. But when it comes to the pensions of retired truck drivers, construction workers and mine workers, it seems that enough is enough.

The $1.1 trillion omnibus spending bill moving through Congress this week adopts “Solutions Not Bailouts,” a plan to shore up struggling multiemployer pension funds—traditional defined benefit plans jointly funded by groups of employers in industries like construction, trucking, mining and food retailing.

A bailout, it is not. The centerpiece is a provision that would open the door to cutting current beneficiaries’ benefits, a retirement policy taboo and a potential disaster for retirees on fixed incomes.

Developed by the National Coordinating Committee for Multiemployer Plans (NCCMP), a coalition of multiemployer pension plan sponsors and some major unions, the plan addresses a looming implosion of multiemployer pension plans. Ten million workers are covered by these plans, with 1.5 million of them in roughly 200 plans that are in danger of failing over the next two decades. Two large plans are believed to be much closer to failure—the Teamsters’ Central States fund and the United Mine Workers of America fund.

The central premise is that Congress won’t—and shouldn’t—prop up the multiemployer system.

“The bottom line is, we’ve been told since the start of this process that there isn’t going to be a bailout—Congress is tired of bailouts,” says Randy DeFrehn, executive director of the National Coordinating Committee for Multiemployer Plans (NCCMP).

The problem is partly structural. Multiemployer pension plans were thought to be safer than single employer plans, owing to the pooling of risk. As a result, the level of Pension Benefit Guaranty Corporation (PBGC) insurance protection behind the multiemployer plans is lower. But many industries in the system have seen declining employment and have a growing proportion of retirees to workers paying into the pension funds. And many of the pension funds still have not fully recovered from the hits they took in the 2008-2009 market meltdown.

These problems pose a major threat to the PBGC. The agency reported recently that the deficit in its multiemployer program rose to $42.2 billion in the fiscal year ending Sept. 30, up from $8.3 billion the previous year. If big plans fail, the entire multiemployer system would be at risk of collapse.

The fix moving through Congress would revise the Employee Retirement Income Security Act (ERISA) to grant plan trustees broad powers to cut retired workers’ benefits if they can show that would prolong the life of the plan. That would mark a major change from current law, which calls for retirees to be paid full benefits unless plan assets are exhausted; then, the PBGC steps in to pay benefits, albeit at a much lower level. The bill also would increase PBGC premiums paid by sponsors, from $13 to $26 per year.

The legislation does prohibit benefit cuts for vested retirees over 80, and limited protections for retirees over 75—but that leaves plenty of younger retirees vulnerable to cuts. And although workers and retirees would get to vote on the changes, pension advocates worry that the interests of workers would overwhelm those of retirees. (Active workers rightly worry about the future of their plans, and many already are sacrificing through higher contributions and benefit cuts.)

The big problem here is that the plan fails to put retirees at the head of the line for protection. When changes of this type must be made, they should be phased in over a long period of time, giving workers time to adjust their plans before retirement. For example, the Social Security benefit cuts eneacted in 1983 were phased in over 20 years and didn’t start kicking in until 1990.

“It’s a cruel irony that in the year we’re celebrating the 40th anniversary year of ERISA, Congress is trying to reverse its most significant protections,” said Karen Friedman, executive vice president of the Pension Rights Center (PRC), an advocacy group that has been battling with NCCMP on some of the proposed changes to retired workers’ benefits.

Friedman’s organization, AARP and other advocates reject the idea that solvency problems 10 to 15 years away require such severe measures. They have pushed alternative approaches to the problem; one that is included in the deal, DeFrehn says, is an increase in PBGC premiums paid by sponsors, from $13 to $26 per year. Advocates also have called for other new revenue sources, such as low-interest loans to PBGC by the once-bailed-out big banks and investment firms.

There are no easy answers here. But cutting the benefits of today’s retirees should be the last solution we try—not the first.

Read next: 401(k)s Are Still a Problem, But They’re Getting Better

MONEY retirement planning

Retirement Calculators Are Wrong—But You Need One Anyway

child's hand moving an abacus
Cliff Parnell—Getty Images

To get the most from retirement calculators, it helps to understand their limitations.

Everyone knows it’s impossible to predict the future, but we seem to forget that truth when it comes to our personal finances. We save too little and hope there will be no emergency expenses. We look to financial advisers or media pundits to pick the most profitable stocks. And we think there is some magic formula or equation that will compute exactly when we can afford to retire.

But there just isn’t a precise answer to the question of whether or not you have enough money to retire. And that’s because retirement calculators aren’t evaluating a simple mathematical equation. Rather, they’re attempting to model the future. And that’s a very tough assignment.

You may have perfect knowledge of your personal situation: how much you’ll make, how much you’ll need to spend, how long your good health will last. But the world won’t stand still for you. How much will stocks and bonds return in the years ahead? What will inflation run? How will tax rates change? No person or tool can predict the trajectory of the economy, the markets, and government policy decades into the future.

When I used a simple retirement scenario to compare prominent free retirement calculators, I found a difference of nearly a factor of two in the final portfolio size between the most pessimistic and optimistic outcomes. That’s right, the answers varied by nearly 100%!

Given slight changes in input, even the same calculator can report vastly different results, ranging from going broke to dying a multimillionaire. So we can’t approach retirement calculators with a “pass/fail” mindset. All a retirement calculator really provides is an opinion as to how long your assets would last, given current conditions and a certain set of guesses about the future.

Can you get more accuracy by choosing a “better” calculator? It depends on what you need. A more powerful calculator can guide you on tax moves, claiming Social Security, and sequencing retirement withdrawals. But don’t bother searching for a calculator that is somehow inherently better at predicting your future wealth. The major variables of market returns, inflation rate, and life expectancy will always preclude a perfect answer to that question.

Still, a retirement calculator can be invaluable for making one of the most important decisions of your life. So even if it’s impossible to find the one that will perfectly predict the future, how should you go about choosing one that’s good enough?

For starters, understand the calculator’s pedigree: Where is it coming from and why? Who is the individual or company behind it? Will they be available to support their tool now, and later? Beware calculators geared to computing your insurance or investment needs if the people behind it are standing ready to sell you those same products. You can also sidestep tools designed for professional advisers or researchers; there are plenty of other easy-to-use general-purpose retirement calculators available.

Next, consider the “fidelity” of the calculator, or how closely it can simulate reality. This will impact how much data it collects from you and how much time you need to spend on inputs. If you’re younger and just need a rough check on whether you’re saving enough, a quick, easy-to-use, low-fidelity calculator will be adequate. But if you’re older and want to analyze specific financial events in your future, or fine-tune a tax, income, or withdrawal strategy, you’ll need to choose a higher-fidelity calculator and invest more of your time.

The single most important variable in a retirement calculation is usually the real rate of return: how much your investments will grow above inflation. Broadly speaking, there are three methods for modeling return rates: average return, random Monte Carlo, and historical sequence. Experts argue over which is best, but most of the rest of us aren’t in a position to choose sides. My suggestion: Pick a calculator, or calculators, that cover all three approaches, then compare the results for yourself.

Fortunately, cost doesn’t need to be a factor when you’re selecting a retirement calculator. There are free offerings in all the major categories. But you may be able to winnow the field by platform. The easiest and friendliest calculators are generally web-based. But if you aren’t comfortable with sending your financial data across the Internet, there are good options that will run locally on your desktop, laptop, or tablet instead.

Finally, when you’re ready to choose a retirement calculator, check out my list of The Best Retirement Calculators. Out of a field of more than 75 tools, I’ve hand-picked solid choices in each category. You can sort and search by most of the parameters I’ve discussed above, plus other features. And there are links to each of the calculators, so you can try them out personally.

Darrow Kirkpatrick is a software engineer and author who lived frugally, invested successfully, and retired in 2011 at age 50. He writes regularly about saving, investing and retiring on his blog CanIRetireYet.com.

For more help calculating your needs in retirement:
The One Retirement Question You Must Get Right
How to Figure Out Your Real Cost of Living in Retirement
4 Secrets of Financial Freedom

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