MONEY Investing

The Easy Fix for an Incredibly Common and Costly Retirement Mistake

New proof that just showing up is half the investing game.

Writing about retirement inevitably turns you into the bearer of bad news. But last week brought a positive development: The downward trend in the percentage of workers participating in an employment-based retirement plan reversed course in 2013. The number of workers participating is now at the highest level since 2007, according to the Employee Benefit Research Institute (ERBI).

Which means, unfortunately, that from a wealth-building perspective, the timing of the nation’s workforce is actually pretty terrible.

The ERBI has only been tracking participation rates since 1987, a relatively short window, but still a bad pattern has clearly emerged: Workers are less likely to participate after the stock market drops, so they lose out when the market recovers.

The participation of wage and salary workers peaked in 2000 at 51.6%, right before a 3-year bear market that saw the compound annual growth rate (the CAGR, which includes dividends) of the S & P 500 declining 9.11% in 2000, 11.98% in 2001, and 22.27% in 2002. In 2003 however, the S & P rebounded up 28.72%, but retirement plan participation rates continued to decline, hitting a low of 45.5% in 2006 before finally beginning to rise.

Then the same thing happened again after the financial crisis. Participation rates had peaked at 47.7% in 2007, before declining in 2008 when the S & P 500 dropped a whopping 37.22%. Even though the market began to bounce back immediately in 2009, participation rates continued to decline down to 44.2% until that trend finally reversed in 2013 according to the EBRI data released last week. With each stock market shock, the participation rate fell but never fully reached its previous high, so that the 2013 rate of 45.8% is still lower than the 46.1% participation rate seen in 1987.

This bears repeating: The participation rate in an employment-based retirement plan in 2013 was lower than it was in 1987. I don’t think I need to tell you what has happened to the S&P 500 from 1987 to 2013.

Now of course one could argue that it’s harder to save for retirement if your salary has been frozen, or your bonus was cut, or especially if you were forced to take a lower-paying job, as many who were able to stay employed throughout the recession experienced. Employers have also been scaling back or eliminating entirely company matches, which further disincentives workers from participating. But waiting until you start making more money to save for retirement is a losing game, especially if you subscribe to the new theory put forth by Thomas Piketty in his much-discussed but I suspect less-widely read book Capital in the Twenty-First Century.

Piketty’s thesis is that the return on capital in the twenty-first century will be significantly higher than the growth rate of the economy and more specifically the growth of wages (4% to 5% for return, barely 1.5% for wage growth.) Furthermore, the return on capital has always been greater than economic (and wage) growth, except for an anomalous period during the second half of the twentieth century when there was an exceptionally high rate of growth worldwide. It is the inequality of capital ownership that drives wealth inequality, a phenomenon that cannot be reversed as long as the rate of return continues to exceed the rate of growth, or as Piketty helpfully provides, R>G. (Full disclosure: I only read the introduction and then used the index to find sections that most interested me.)

If you apply R>G to retirement planning, it follows that it’s more important to be in the market than to wait for a raise or to reach the next step on the career ladder to start participating in a plan. The usual caveats apply: First you must get rid of any high-interest debt and create a three-month cushion for emergencies. But once you’re in a plan, if the economy—and your income along with it—hits some major bumps, it’s even more important to continue to contribute lest you miss out on the upside. Just remember: R>G.

Konigsberg is the author of The Truth About Grief, a contributor to the anthology Money Changes Everything, and a director at Arden Asset Management. The views expressed are solely her own.

More on retirement investing:

Should I invest in bonds or bond mutual funds?

What is the right mix of stocks and bonds for me?

How often should I check my retirement investments?

Read next: Why Americans Can’t Answer the Most Basic Retirement Question

MONEY IRAs

Closing the Loophole Behind $10 Million Tax-Free Retirement Accounts

Fewer than 1,100 of 43 million IRA owners have what may be called outsized balances, and the IRS wants to rein them in.

The former presidential hopeful Mitt Romney lit a fuse three years ago when he disclosed his IRA was valued at as much as $102 million. Now the federal government wants to keep the issue from exploding, and is weighing actions that would prevent rich people from accumulating so much in a tax-advantaged account.

Last week, the General Accounting Office recommended that the IRS either restrict the types of investments held in IRAs or set a ceiling for IRA account balances. The idea is to give all taxpayers equal ability to save while making certain the amounts put away tax-advantaged do not go beyond what is generally regarded as sufficient savings to secure a comfortable retirement.

Romney’s campaign disclosure caught almost everyone by surprise. How could one person build such a large IRA balance when yearly allowable contributions — up to $5,500 a year in 2014 and $6,500 if you’re age 50 or older — have always been comparatively low? The answer lies in the types of investments he and privileged others were able to put in their IRA: extremely low-priced and often non-public securities that later soared in value.

One such security might be the shares of a privately owned business. These can reasonably be expected to take flight if the business does well and later goes public. That produces a wealth of tax-advantaged savings to company founders, investment bankers and venture capitalists. But these gains are not generally available to any other investor. Once an asset is inside an IRA there is no limit to how valuable it may become and still remain in the tax-advantaged account.

Restricting eligible IRA holdings to publicly available securities is one way to level the field and rein in the accumulation of tax-advantaged wealth. Another way is to cap IRA balances at, say, $5 million and require IRA holders to take an immediate taxable distribution anytime their combined IRA holdings exceed that threshold.

The GAO found that the federal government stands to forego $17 billion of 2014 tax revenue through the IRA contributions of individuals. That’s not a high price to pay for added retirement security for the masses. The problem is that under current rules only a select few will ever be able to put together multi-million-dollar IRAs. There are 43 million IRA owners in the U.S. with total assets of $5.2 trillion. Fewer than 10,000 have more than $5 million, and the GAO seems to have little quarrel with even this group. They tend to be above-average earners past age 65 who had been contributing to their IRA for many years—pretty much exactly as designed.

But just over 1,100 have account values greater than $10 million and only 300 have account values greater than $25 million, the GAO found. “The accumulation of these large IRA balances by a small number of investors stands in contrast to Congress’s aim to prevent the tax-favored accumulation of balances exceeding what is needed for retirement,” the report states.

Officials are now gathering data on the types of assets held in IRAs, including the so-called “carried interest” stake that private equity managers have in the investment funds they run. These stakes, which give them a percentage of a fund’s gain, are another way that a select few manage to sock away multiple millions of dollars in IRAs. No one doubts the data will illustrate that only a privileged few have access to outsized IRA savings. The Romney campaign showed us that three years ago.

Read next: 3 Ways to Have a Happier, Healthier Retirement

MONEY retirement planning

Money Makeover: 30 Years Old, and Already Falling Behind

When she turned 30, Chianti Lomax had an epiphany: Her salary and savings weren't enough to buy a home or start a family. MONEY paired her with a financial expert for help with a plan.

Chianti Lomax grew up poor in Greenville, S.C., raised by a single mother who supported her four children by holding several jobs at once. Inspired by her mom, Lomax worked her way through high school and college; today, the Alexandria, Va., resident makes $83,000 plus bonuses as a management consultant.

But turning 30 last December, Lomax had an epi­phany: Her career and her 401(k)—now worth $35,000 —weren’t enough to achieve her long-term goals: raising a family and buying a house in the rural South.

Her biggest problem, she realized, was her spending. So she downsized from the $1,200-a-month one-bedroom apartment she rented to a $950 studio, canceled her cable, got a free gym membership by teaching a Zumba class, and gave up the 2010 Honda she leased in favor of a 2004 Acura she paid for in cash. With those savings, she doubled her 401(k) contribution to 6% to get her full employer match.

And yet, nearly a year later, Lomax has only $400 in the bank, along with $12,000 in student loans. Having gone as far as she can by herself, Lomax wants advice. As she puts it, “How can I find more ways to save and make my money grow?”

Marcio Silveira of Pavlov Financial Planning in Arlington, Va., says Lomax is doing many things right, including avoiding credit card debt. Spending, however, remains her weakness. Lomax estimates that she spends $500 a month on extras like weekend meals with friends and $5 nonfat caramel macchiatos, but Silveira, studying her cash flow, says it’s probably more like $700. “That money could be put to far better use,” he says.

The Advice

Track the cash: Silveira says Lomax should log her spending with a free online service like Mint (also available as a smartphone app). That will make her more careful about flashing her debit card, he says, and give her the hard data she needs to create a budget. Lomax should cut her discretionary spending, he thinks, by $500 a month. Can a young, single person really socialize on $50 a week? Silveira says yes, given that Lomax cooks for herself most evenings and is busy with volunteer work. Lomax thinks $75 is more doable. “But I’d like to shoot for $50,” she says. “I like challenging myself.”

Setting More Aside infographic
MONEY

Automate savings: Saving money is easier when it’s not in front of you, says Silveira. He advises Lomax to open a Roth IRA and set up an automatic transfer of $200 a month from her checking account, adding in any year-end bonus to reach the current annual Roth contribution limit of $5,500, and putting all the cash into a low-risk short-term Treasury bond fund.

Initially, says Silveira, the Roth will be an emergency fund. Lomax can withdraw contributions tax-free, but will be less tempted to pull money out for everyday expenses than if the money were in a bank account. Once Lomax has $12,000 in the Roth, she should continue saving in a bank account and gradually reallocate the Roth to a stock- heavy retirement mix. Starting the emergency fund in a Roth, says Silveira, has the bonus of getting Lomax in the habit of saving for retirement outside of her 401(k).

Ramp it up: Lomax should increase her 401(k) contribution to 8% immediately and then again to 10% in January—a $140-a-month increase each time. Doing this in two steps, says Silveira, will make the transition easier. Under Silveira’s plan, Lomax will be setting aside 23% of her salary. She won’t be able to save that much upon starting a family or buying a house, he says, but setting aside so much right now will give her retirement savings many years to compound.

Read next:
12 Ways to Stop Wasting Money and Take Control of Your Stuff
Retirement Makeover: 4 Kids, 2 Jobs, No Time to Plan

MONEY Financial Planning

How Families Can Talk About Money Over Thanksgiving

Family Thanksgiving dinner
Lisa Peardon—Getty Images

Holiday get-togethers are a great time for extended family members to discuss topics like estate planning and eldercare. Here's how to get started.

While most Americans are focused on turkey dinners and Black Friday sales, some financial advisers look to Thanksgiving as a good time for families to bond in an unlikely way: by talking about money.

The holiday spirit and together-time can make it easier for families to discuss important financial matters such as parents’ wills, how family money is managed, retirement plans, charity and eldercare issues, advisers say.

While most parents and adult children believe these discussions are important, few actually have them, according to a study conducted last spring by Fidelity Investments. Family members may avoid broaching these sensitive subjects for fear of offending each other.

That is where advisers can shine.

“When you help different generations communicate and cooperate on topics that may keep them up at night, it bonds them as a family,” says Doug Liptak, an Atlanta-based adviser who facilitates family meetings for his clients. It can also help the adviser gain the next generation’s trust.

Advisers can encourage their clients to call family meetings. They can also offer to facilitate those meetings or suggest useful tips to families that would rather meet privately.

Talking Turkey

Family meetings should not be held over the holiday table after everyone has had a few drinks, but at another convenient time.

“That may mean in the living room the next afternoon, over dinner at a fun restaurant, or at a ski lodge,” says Morristown, N.J.-based adviser Stewart Massey, who has vacationed with clients’ families to help them hold such mini-summits.

It is critical to have an agenda “and be as transparent as possible,” he says. Discussion points should be written out and distributed to family members a few weeks ahead to avoid surprises. Massey also suggests asking clients which topics are taboo.

Liptak likes to meet one-on-one with family members before the meeting. If you can get to know the personalities and viewpoints of each family member and make everyone feel included and understood, you will be more effective, he says.

“You might have two siblings who are terrible with or ambivalent about money, while the youngest is financially savvy, but you can’t give one person more say,” says Liptak.

It also helps to get everyone motivated if the adviser brings in the client’s children or other family members ahead of time to teach them about money management topics, like how to invest, says Karen Ramsey, founder of RamseyInvesting.com, a Web-based advisory service.

Sometimes the clients are the adult children who are afraid to ask how the parents are set up financially or where documents are, she says.

Ramsey says advisers can help by letting clients and their families know that a little discomfort may come with the territory. She will say, and encourages her clients to say: “There’s something we need to talk about and we’ll all be a little uncomfortable, but it’s okay.”

The adviser can kick off a family meeting by asking leading questions, such as “What one thing would you like to accomplish as a family in 2015?” says Liptak. Then the adviser can take notes and continue to facilitate the discussion by making sure everyone gets heard and pulling out prepared charts and data when necessary.

Massey suggests families build some fun around the meetings. His clients often schedule them around the holidays and in the summer, often tucked into a vacation or weekend retreat. It is a good practice to have them regularly, like board meetings, he says.

And if the family has never had a meeting before?

“Don’t start with the heavy stuff,” says Liptak. “It’s a good time to focus on giving and generosity, like charities the family can contribute to.

“You can collaborate on an agenda for later for the bigger issues.”

MONEY Retirement

The Surprising Reason Employers Want You to Save for Retirement

man fails to make a putt
PM Images—Getty Images

Companies have stepped up their game with better options and features. Still, savings lag.

Employers have come a long way in terms of helping workers save for retirement. They have beefed up financial education efforts, embraced automatic savings features, and moved toward relatively safe one-decision investment options like target-date mutual funds. Yet our retirement savings crisis persists and may be taking a toll on the economy.

Three in four large or mid-sized employers with a 401(k) plan say that insufficient personal savings is a top concern for their workforce, according to a report from Towers Watson. Four in five say poor savings will become an even bigger issue for their employees in the next three years, the report concludes.

Personal money problems are a big and growing distraction at the office. The Society for Human Resources Management found that 83% of HR professionals report that workers’ money issues are having a negative impact on productivity, showing up in absenteeism rates, stress, and diminished ability to focus.

This fallout is one reason more employers are stepping up their game and making it easier to save smart. Today, 25% of 401(k) plans have an automatic enrollment feature, up from 17% five years ago, Fidelity found. And about a third of annual employee contribution hikes come from auto increase. Meanwhile, Fidelity clients with all their savings in a target-date mutual fund have soared to 35% of plan participants from just 3% a decade ago.

Yet companies know they must do more. Only 12% in the Towers report said their employees know how much they need for a secure retirement; only 20% said employees are comfortable making investment decisions. In addition, 53% of employers are concerned that older workers will have to delay retirement. That presents its own set of workplace challenges as employers are left with fewer slots to reward and retain their best younger workers.

Further innovation in investment options may help. The big missing piece today is a plan choice that converts into simple and cost-efficient guaranteed lifetime income. For a lot of reasons, annuities and other potential solutions have been slow to catch on inside of defined-contribution plans. But the push is on.

Another approach may be educational efforts that reach employees where they want to be found. The vast majority of employers continue to lean on traditional and passive methods of education, including sending out confusing account statements and newsletters, holding boring group meetings, and hosting webcasts. Less than 10% of employers incorporate mobile technology or have tried games designed to motivate employees to save.

These approaches have proved especially useful among young workers, who as a group have begun to save far earlier than previous generations. Still, some important lessons are not getting through. About half of all employers offer tax-free growth through a Roth savings option in their plan, yet only 11% of workers take advantage of the feature, Towers found. This is where better financial education could help.

 

 

MONEY housing

How to Cut Your Single Biggest Expense in Retirement

bouncy castle in suburbia
Sian Kennedy—Getty Images An age-proof home is one where you can live safely, comfortably, and conveniently in your older years.

You're going to spend a lot on housing in retirement. Here's how to make sure your home serves your needs as you age.

The single biggest expense you face in retirement is housing, which accounts for more than 40% of spending for people 65 and older, according to the Employee Benefit Research Institute. Yet all too often, you end up shelling out those bucks for places that don’t serve your needs well as you age.

By age 85, for example, two-thirds of people have some type of disability. If you can’t get around your house or community or you don’t have easy access to the medical and social services you need, you could land in a costly nursing home prematurely, according to a Harvard Center for Joint Housing and AARP study.

“People don’t think about how their home will support their needs until they face a health issue,” says Amy Levner, manager of the Livable Communities initiative at AARP. “It doesn’t have to be a catastrophe either. Even something as simple as a knee replacement could make it difficult to stay in your home or drive, at least short term.”

Here are 3 ways to make sure you’ll stay comfortable in your home as you get older.

1. Get your house in shape: Three-quarters of people would prefer to stay in their current home as long as possible in retirement, according to AARP. Yet just 20% live in a house with features to help them live safely and comfortably there in their older years. Among them: a first-floor bedroom and bath so you can live on the main level if stairs become hard to climb, wider doorways that make getting around easier if you need a walker or wheelchair, and covered entrances so you don’t slip in rain or snow.

Those can be pricey renovations, so the best time to do the work is while you are still employed so that you can use current income to pay the bill instead of tapping savings, says Levner. But many adaptations that make a big difference when you’re older are inexpensive. Those include raising electrical outlets to make them easier to reach, putting grab bars and a shower chair in the bathroom, and installing nonslip gripper mats under area rugs. (A list of the most important steps to take and their typical cost is below.)

2. Take it down a notch: To save money without necessarily moving far away—two-thirds of people want to remain in their hometown when they retire, AARP says—you can downsize to a less expensive, more manageable house. You could use the proceeds from the sale of your current home to add to your retirement savings, while significantly cutting maintenance costs.

The potential savings, based on estimates from the Center for Retirement Research, are compelling. If you move from a $250,000 house to a $150,000 one, for instance, you could net $75,000 to add to your savings, after paying moving and closing costs (typically 10% of the sale price). Meanwhile, your annual bill for upkeep would probably fall from around $8,125 to $4,875, assuming typical property taxes, insurance, and maintenance of about 3.25% of the home’s value. These calculations assume that you own your home outright; if you still have a mortgage, the savings you would reap from downsizing might be even bigger.

141118_ret_ageproof_1

Move in step with your peers: Relocating can also help you cut expenses if you move to an area with lower taxes and a cheaper cost of living. Look for places that have good public transit, transportation services for seniors, and walkable, bike-friendly neighborhoods that are a short distance to stores and entertainment and close to medical facilities.

Where should you go? AARP is now working with dozens of places to create age-friendly communities. They include Birmingham, Denver, Des Moines, and Westchester County in New York (find the list at aarp.org/agefriendly). Next spring AARP will launch an online index with livability data about every community in the U.S. For more inspiration, check out MONEY’s Best Places to Retire.

MONEY financial advice

Tony Robbins Wants To Teach You To Be a Better Investor

Tony Robbins vists at SiriusXM Studios on November 18, 2014 in New York City.
Robin Marchant—Getty Images Tony Robbins with his new book, Money: Master the Game.

With his new book, the motivational guru is on a new mission: educate the average investor about the many pitfalls in the financial system.

It might seem odd taking serious financial advice from someone long associated with infomercials and fire walks.

Which perhaps is why Tony Robbins, one of America’s foremost motivational gurus and performance coaches, has loaded his new book Money: Master The Game with interviews from people like Berkshire Hathaway’s Warren Buffett, investor Carl Icahn, Yale University endowment guru David Swensen, Vanguard Group founder Jack Bogle, and hedge-fund manager Ray Dalio of Bridgewater Associates.

Robbins has a particularly close relationship with hedge-fund manager Paul Tudor Jones of Tudor Investment Corporation.

“I really wanted to blow up some financial myths. What you don’t know will hurt you, and this book will arm you so you don’t get taken advantage of,” Robbins says.

One key takeaway from Robbins’ first book in 20 years: the “All-Weather” asset allocation he has needled out of Dalio, who is somewhat of a recluse. When back-tested, the investment mix lost money only six times over the past 40 years, with a maximum loss of 3.93% in a single year.

That “secret sauce,” by the way: 40% long-term U.S. bonds, 30% stocks, 15% intermediate U.S. bonds, 7.5% gold, and 7.5% commodities.

Tony’s Takes

For someone whose net worth is estimated in the hundreds of millions of dollars and who reigned on TV for years as a near-constant infomercial presence, Robbins—whose personality is so big it seemingly transcends his 6’7″ frame—obviously knows a thing or two about making money himself.

Here’s what you might not expect: The book is a surprisingly aggressive indictment of today’s financial system, which often acts as a machine devoted to enriching itself rather than enriching investors.

To wit, Robbins relishes in trashing the fictions that average investors have been sold over the years. For instance, the implicit promise of every active fund manager: “We’ll beat the market!”

The reality, of course, is that the vast majority of active fund managers lag their benchmarks over extended periods—and it’s costing investors big time.

“Active managers might beat the market for a year or two, but not over the long-term, and long-term is what matters,” he says. “So you’re underperforming, and they look you in the eye and say they have your best interests in mind, and then charge you all these fees.

“The system is based on corporations trying to maximize profit, not maximizing benefit to the investor.”

Hold tight—there’s more: Fund fees are much higher than you likely realize, and are taking a heavy axe to your retirement prospects. The stated returns of your fund might not be what you’re actually seeing in your investment account, because of clever accounting.

Your broker might not have your best interests at heart. The 401(k) has fallen far short as the nation’s premier retirement vehicle. As for target-date funds, they aren’t the magic bullets they claim to be, with their own fees and questionable investment mixes.

Another of the book’s contrarian takes: Don’t dismiss annuities. They have acquired a bad rap in recent years, either for being stodgy investment vehicles that appeal to grandmothers, or for being products that sometimes put gigantic fees in brokers’ pockets.

But there’s no denying that one of investors’ primary fears in life is outlasting their money. With a well-chosen annuity, you can help allay that fear by creating a guaranteed lifetime income. When combined with Social Security, you then have two income streams to help prevent a penniless future.

Robbins’ core message: As a mom-and-pop investor, you’re being played. But at least you can recognize that fact, and use that knowledge to redirect your resources toward a more secure retirement.

“I don’t want people to be pawns in someone else’s game anymore,” he says. “I want them to be the chess players.”

MONEY retirement planning

The 3 Best Ways to Boost Your Spending Power In Retirement

Location, location, location

You’ve heard the old saw that the three most important things in real estate are location, location, location. Well, that truism can apply to retirement too. Depending on where you retire, you may be able to dramatically boost the spending power of your Social Security check and your retirement nest egg, not to mention improve the quality of your post-career life.

Relocating in retirement isn’t the right strategy for everyone. If you like and can afford your house, have a solid network of family and friends to socialize with, and you enjoy your neighborhood and all it has to offer, you may not want to consider a change.

But if you’re looking to stretch your retirement resources—or rewrite the script a bit in the retirement phase of your life—then relocating may be just the right move. If nothing else, lowering your living costs will give you more flexibility in withdrawing money from your nest egg and reduce your chances of going through your savings too soon.

The main reason that a change in venue can allow you to get a bigger bang for your buck in retirement is that housing costs are the single largest expense you’ll face in retirement. That’s right, even though health care gets all the attention—and health care is definitely a major expense, not to mention one that typically grows as you age—the costs of owning a home or renting eat up the largest share of most retirees’ budgets.

Indeed, a recent Employee Benefit Research Institute study shows that for 65-to-74 year-olds, housing expenses accounted for 38% of total spending, a figure that grew to 42% for those 85 and older. Health expenses, conversely, represented just 12% of the spending of the 65-to-74-year-old group, although that percentage was almost double, 21%, for those 85 and older.

Combine the fact that retirees devote such a large part of their budgets to housing with the fact that house and condo prices vary significantly from one part of the country to another—the median home price is $692,000 in Anaheim, Calif., vs. $91,000 in Decatur, Ill.—and that means moving to an area with lower housing costs may allow you to cut your spending significantly, or divert much of what you had been devoting to housing to other activities like travel, entertainment, hobbies, whatever.

Lowering your housing costs isn’t the only way you may be able to reduce your outlays by relocating. You may also be able to benefit by paying less for the cost of other items and services that can vary widely from one city another, such as health care, food, transportation and (another biggie) taxes.

The gains you can achieve by relocating will be limited if you already live in a low-cost area. But to get a sense of how far your resources might go in different states and metro areas, you can check out the Cost-of-living Calculator in RDR’s Retirement Toolbox. You may also want to take a look at the Regional Price Parity figures published by the Bureau of Economic Analysis. These “RPPs,” as they’re known, measure the differences in price levels between different states and metro areas. If you want to see how the tax bite might vary from state to state, you can check out the info on state taxes at the Tax Foundation and CCH sites.

You don’t want to base your choice of where to live on livings costs alone, however. After all, you also want to be able to enjoy yourself with any extra money you might free up. So if you’re considering relocating—whether for financial or other reasons—you’ll also want to check out the lifestyle and living conditions different places have to offer. Are you okay with the area’s climate? Will you have access to the health care you’ll need? Is there a vibrant sports or arts scene? Are there work opportunities for retirees? These are just a few of the questions you’ll want to ask yourself before making any move.

Fortunately, you can narrow down the number of candidates that meet your criteria fairly easily by consulting one or more of the lists that highlight the most attractive retirement spots. Earlier this week, for example, MONEY Magazine unveiled its annual Best Places To Retire feature. This year’s list profiles nine cities and towns around the country that retirees should find particularly appealing, including three that offer low living costs, three that provide opportunities for an encore career and three that are a good choice for a well-rounded retirement. In addition to highlighting the pros and cons of each area, MONEY also provides pertinent stats for each, which in some cases may be the median home price or cost-of-living index, in others the state income tax or unemployment rate.

For a decision as momentous as relocating, you don’t want to limit yourself to just one source of information. And you don’t have to, as there are plenty of other compilations of retirement spots out there—including ones that focus on cheap places to live in retirement, the best places if you’re living on Social Security alone, and the best places to retire abroad.

Ideally, in the five to 10 years before calling it a career, you’ll want to do what I call “lifestyle planning“—essentially, thinking hard about how you actually intend to live in retirement and assuring you have the resources to realize that vision.

If after going through that exercise you find that there’s a gap between the income your resources can generate and the lifestyle you’d like to lead—or you just want to begin your new life in retirement with a new place to live—think relocation, relocation, relocation.

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TIME movies

Quentin Tarantino Reveals Plan to Retire After Movie No. 10

Director Quentin Tarantino arrives to attend the closing ceremony of the 67th Cannes Film Festival in Cannes
Yves Herman—Reuters Director Quentin Tarantino reacts as he arrives to attend the closing ceremony of the 67th Cannes Film Festival in Cannes May 24, 2014.

The Kill Bill director said the next two films after his latest release may well be his last

Quentin Tarantino revealed this week that he plans to call it quits after making his 10th film.

“It’s not etched in stone, but that is the plan,” the director of cult classics such as Reservoir Dogs, Pulp Fiction and Kill Bill told an audience at the American Film Market conference in Santa Monica, according to Deadline. “If I get to the 10th, do a good job and don’t screw it up, well that sounds like a good way to end the old career.”

The filmmaker was at a session with the cast-members of his latest release, a Western called The Hateful Eight. The film, which centers around a group of outlaws stranded in a blizzard, also happens to be his eighth. “I like that I will leave a 10-film filmography,” he said, “and so I’ve got two more to go after this.”

Read more at Deadline

MONEY retirement income

Retirees Risk Blowing IRA Deadline and Paying Huge Penalties

Egg timer
Esben Emborg—Getty Images

With just seven weeks left in the year, most IRA owners required to pull money out have not yet done so.

Two-thirds of IRA owners required to take money out of their account by Dec. 31 have yet to fulfill the obligation, new research by Fidelity shows. Now, with the year-end in sight, and thoughts pivoting to holiday shopping and get-togethers, legions of senior savers risk getting distracted–and socked with a punishing tax penalty.

IRA owners often wait until late in the year to pull out their required minimum distributions. Especially at a time when interest rates are low and the stock market has been rising, leaving your money in an IRA as long as possible makes sense. Some retirees may also be reluctant to take distributions for fear of spending the money and running short over time.

But blowing the annual deadline can be costly. The IRS sets a schedule of required minimum distributions, or RMDs, to keep savers from deferring taxes indefinitely. After reaching age 70 1/2, IRA owners must begin to take money out of their account each year and pay income tax on the amount. Failure to pull money out triggers a hefty penalty equal to 50% of the amount you were supposed to take out of the account.

Among 750,000 IRA accounts where distributions are required, 68% have yet to take the full amount and 56% have yet to take anything at all, Fidelity found. These IRA owners should begin the process now to avoid end-of-year distractions and potential mistakes like using the wrong form or providing the wrong mailing address, which can take weeks to find and correct.

A report by the Treasury Inspector General estimated that as many as 250,000 IRA owners each year miss the deadline, failing to take required minimum distributions totaling about $350 million. That generates potential tax penalties totaling $175 million. The vast majority of those who fail to take their minimum distributions are thought to do so as part of an honest mistake, and previously the IRS hasn’t always been eager to sock seniors with a penalty. But the IRS began a crackdown on missed distributions a few years ago. Don’t look for leniency if you miss the deadline without a good reason, like protracted illness or a natural disaster.

Early each year, your financial institution should notify you of any required distributions you must take by year-end. If this is the first year you are taking a required distribution, you have until April 1 to do so, but then only until Dec. 31 every subsequent year. Once notified, you still need to initiate a distribution. A lot of people simply do not read their mail and fail to initiate action in time.

Among other reasons IRA owners miss the deadline:

  • Switching their account Institutions that open an account during the year are not required to notify new account holders of required minimum distributions until the following year.
  • Death Often there is confusion about inherited IRAs. The beneficiary must complete the deceased IRA owner’s distributions in the year of death. Non-spousal beneficiaries of any age must begin taking distributions in the year following the year that the IRA owner died—and no notice of this is required.

With the penalties so stiff and the IRS cracking down on missed mandatory distributions, this is a subject that seniors and their adult children should talk about. In general, financial talk between the generations makes seniors feel less anxious and more prepared anyway. Required distributions can be especially confusing, and the penalties may have the effect of taking away money that heirs stand to receive. So it’s in everyone’s interest to get it right. Consider putting mandatory distributions on autopilot with a firm that will make the calculation and send you the money on a schedule you choose.

Related:

How will my IRAs be taxed in retirement?

Are there any exceptions to the traditional IRA withdrawal rules?

When can I take money out of my IRA without penalty?

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