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February 24, 2017

Penelope WangFor retirement savers, the long income drought continues. The typical yield on bank savings accounts still hovers at a measly 0.25%, while a 10-year Treasury pays a modest 2.4%. After a small interest-rate hike in December, the Federal Reserve has held off on further increases, though there are hints that more may happen soon. Of course, rate-hike predictions—and market predictions, generally—are frequently off the mark. But if interest rates do rise, the bonds you own now will suffer a price hit. So make sure you are holding a well-diversified portfolio, both in your bond and stock allocations. And don’t ignore the long-term planning issues that can make or break your retirement. To ensure you are on the right path to your goals, check out these three questions.

Best wishes,

Penny

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THIS WEEK’S RETIREMENT NEWS, INSIGHTS AND ADVICE

Ready to Retire? Better Ask Yourself These 3 Questions First

Some 60% of Americans ages 45 to 65 say they feel prepared or very prepared for retirement, a recent survey finds. But when asked how much they had saved, few people had put away enough to be on track, contributor Walter Updegrave points out. To gauge whether you’re headed for a comfortable retirement, here are three key questions to ask yourself. MONEY

Why You Should Think Like a Team When Saving for Retirement

Married couples often keep their finances separate, and frequently the higher earner holds most of the assets, a new study finds. That’s a mistake, says columnist Robert Powell. By coordinating your accounts and using tax-sheltered accounts strategically, couples have a better shot at reaching their retirement goals. MARKETWATCH

Millennials Wonder: “Where’s My Money Going?”

As more young people enter the workforce, they are earning less, yet juggling higher student loans and consumer debts, new research shows. And many borrow from their 401(k)s to pay those bills. Columnist Susan Tompor lays out a better strategy. Pay attention to the part about setting up an emergency fund. DETROIT FREE PRESS

The Best Way to Invest in Bonds Now

After years of sluggish growth, there are signs that the economy is gaining traction. Wages are moving up, and interest rates are...going up eventually? All of which can hurt your fixed-income portfolio, unless you take proactive steps. Contributor Carla Fried outlines several smart moves to make with your bond funds now. MONEY

After-Tax 401(k)s: Why Most Investors Should Walk On By

Some 401(k) participants have the option of putting away money in their plans on an after-tax basis. Such contributions aren’t as helpful as either traditional pretax 401(k) investments or Roth 401(k)s that deliver tax-free income in retirement. So don’t get tripped up. Read Christine Benz’s primer, and you’ll know whether to bother with an after-tax 401(k). MORNINGSTAR

Using IRAs to Reduce Medicare Premiums

If you’re a high-income retiree, you may be charged a Medicare Part B premium surcharge, which can cost you thousands of dollars. But there are strategies that can help you stay under the income limits, says columnist Mary Beth Franklin. Hint: Consider directing a portion of your required minimum distributions to a qualified charity. INVESTMENT NEWS

This Tax Trick Could Be Incredibly Useful in 2017

Roth IRA conversions offer special advantages. By shifting money from a traditional IRA to a Roth—and paying taxes now—you end up with a larger pot of tax-free money. It’s not a strategy for everyone. But Roth conversions come with a do-over option that lasts into the following calendar year, in case you change your mind or the market falls. Check out the details. MONEY

The One Time It’s Okay to Job-Hop in Your 50s

More and more workers in their 50s are switching jobs, a recent study shows, which can greatly improve your financial security. But there’s a catch: The payoff generally comes only when the change is voluntary. As contributor Dan Kadlec reports, making a mid- or late-career change by choice increases the likelihood that you are earning higher pay and finding more enjoyable work. All of which may allow you to work longer and build a larger retirement portfolio. MONEY

How to Make Your Money Last as Long as You Do

The most critical question for retirement planning is also the most unanswerable: How long will you live? You can only make an informed guess, so dig into the numbers. Chances are, you’ll live longer than you think, which means you’ll need to save more. And look into other strategies for hedging your longevity risk—writer Mark Miller outlines some options. THE NEW YORK TIMES

YOUR RETIREMENT QUESTIONS ANSWERED

I Want to Give My Siblings Some Cash. Would Any of Us Have to Pay Taxes?

Q: I received a nontaxable life insurance policy valued at $80,000 and want to share it with another sibling. Will my sibling have to pay taxes on the money?Jeanne, Indiana

A: Your situation raises a good question about gifting to another individual in general, and it highlights a common misconception many people have about the tax ramifications, says Jason Miller, national head of financial planning for BMO Wealth Management. READ MORE

WORDS OF WISDOM

“There is about the mention of any substantial sum of money something that seems to exercise a quickening effect on the human intelligence.”

--Writer P.G. Wodehouse

ABOUT PENNY: Penelope Wang is editor at large at MONEY with a focus on retirement planning. A graduate of Swarthmore College and Columbia University School of International Affairs, she was recently ranked among the "top social influencers in personal finance and wealth." You can email her at retirewithmoney@moneymail.com and follow her on Twitter @PennyWriter.

 
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