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 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 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

MONEY retirement planning

3 Predictions for 2015 You’re Sure to Hear—and Why You Should Ignore Them

Crystal ball predictions
Len DeLessio—Getty Images

Now's the time when market pundits pull out their crystal balls for the year ahead. Gaze if you must, but don't lose sight of your long-term goals.

Tis the season for…predictions! As the year draws to a close, pundits, journalists, and other gazers into the future will be spouting prognostications of what lies ahead for the economy and the financial markets. Should you act on them?

The short answer is no.

Although there are exceptions, most year-ahead forecasts and predictions are, well, the polite word is hogwash. But since now is the time when all upstanding financial journalists are expected to tell readers what’s in store for next year, I’ll oblige with my tongue-somewhat-in-cheek predictions of three predictions you’re likely to hear, if you haven’t already. I’ll then explain why you shouldn’t factor these or any other prognostications into your retirement planning, and recommend what you should do instead.

Prediction #1: Dozens of surveys will sound the alarm that Americans are headed for a retirement castastrophe, or worse. You know the type of surveys I’m talking about, the ones typically issued by financial services companies warning that Americans are woefully unprepared for post-career life and/or have no idea of the right way to plan for retirement. They’ve become a staple of the retirement-planning landscape, designed less to inform than grab headlines and send you scurrying into the arms of a financial adviser who, for a price, will help you avert the coming disaster.

Don’t waste your time reading this pap. Spend it instead on practical steps to improve your retirement prospects, starting with a year-end retirement-planning check-up. You can do that in about 15 minutes or so by plugging info about your income, savings, and investments into this retirement income calculator. You’ll immediately get an estimate of your chances of being able to maintain your standard of living if you continue along your current path. If the odds look uncomfortably slim, you can easily see how saving more, investing differently, or putting off retirement a few years might improve them.

Prediction #2: Wall Street sages will predict that stock prices will climb to new highs in 2015…and other market seers will assure us that prices will fall. Such predictions are already coming in. For example, go to Research Magazine‘s December issue and you’ll find First Pacific Advisors’ Bob Rodriguez warning that the market could easily be 20% or 30% lower next year and AFAM Capital’s John Buckingham saying stocks will be higher, perhaps 10% to 12%, if not more. Who’ll be right? Who knows? Maybe the market will collapse and rebound sharply and they’ll both be right. Or perhaps it will remain flat and they’ll both be wrong.

The point is that such forecasts should not figure into your retirement investing strategy. Rather, you should create a mix of stocks and bonds based on your risk tolerance and goals and, aside from periodic rebalancing, largely stick to it regardless of what the market is doing or what investment advisers are saying it will do.

Prediction #3: The bond market will flop. No, seriously, this time for real. Pundits and investment pros alike have been predicting a bond-market crash since at least 2010. And, on the face of it, the gloomy outlook makes sense. Yields have been extraordinarily low for years and remain depressed, with 10-year Treasurys recently yielding just 2.3%. When yields rise, bond prices will fall.

The problem is we don’t know when yields will climb, nor how high. Past predictions of bond bubble trouble haven’t panned out very well. With the exception of last year, when the broad bond market lost 2%, bonds have posted 4%-or-better gains every calendar year since 2009. As of early December, the broad bond market was up nearly 6% year to date. If recent strong job gains kick the economy into overdrive, we could see higher rates next year. But as a recent Vanguard analysis shows, despite their low yields, bonds remain an effective way to diversify and hedge against stock-market risk.

So by all means check out what the various seers, sages, and soothsayers have to say about the year ahead. You might glean the stray insight or at least get a few laughs. But don’t take them too seriously—or, most important, let them divert you from your long-term plan.

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

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MONEY retirement planning

You’ll Never Guess Who’s Saving the Most For Retirement

rhinestone studded piggy bank
Robert George Young—Getty Images

As Americans delay retirement, they are saving more for their later years.

Americans with investment accounts grew a lot richer last year thanks to the booming stock market—but the 65-plus crowd enjoyed the biggest increase in savings for retirement of any age group.

Total U.S. household investable assets (liquid net worth, not including housing wealth) surged 16% to $41.2 trillion in 2013, according to a report published Wednesday by financial research firm Hearts & Wallets. That far exceeded annual gains that ranged from 5% to 12% in the post-Recession years of 2009 to 2012.

But when it came to retirement savings, older investors saw the biggest gains in IRA and 401(k) assets: Retirement assets for people age 65-74 rose from $2.3 trillion to $3.5 trillion in 2014, a new high.

What’s fueling the growth? Well, a lot of people 65 and older aren’t retiring. So they’re still socking away money for their nonworking years. Meanwhile, others who have quit work are finding they don’t need as much as they thought, so they continue to save, according to Lynn Walters from Hearts & Wallets.

As attitudes about working later in life change, so does the terminology of what people are saving for, Walters says. Rather than retirement, Americans are saving for a “lifestyle choice” in their later years. According to the study, most households ages 55-64 do not consider retirement a near-term option. Four out of five have not stopped full-time work. Says Walters: “The goal is to have enough money for the lifestyle you want when you’re older, not just quitting work.”

Read next: Woulda, Coulda, Shoulda: What You Can Learn From the Top 3 Pre-Retirement Mistakes

MONEY Student Loans

Help! I Owe $37K for My Kids’ College But I Make Only $28K a Year

knife cutting dollar bill
David Franklin Hedge fund managers take a big cut of returns

A student loan expert explains why there's hope for a parent saddled with student loan debt from two kids.

Brent Strine, 65, sent a blog comment to us describing what he thought was probably an impossible situation, and he despaired of ever being able to get out of debt. He wasn’t asking for help so much as describing a sense of hopelessness. Here’s what he told us:

I have 45k in parent loans from two children who cannot help me pay on them. Every time I defer them it costs over 1k added to the principal. I am 65, our (total household income) is 28k . . . (We have) no savings, no retirement plans or funds. Seems the only way out of debt is through the grave.

When we contacted him, he quickly noted that he feels grateful for his home and family, “and I am not in any way a ‘victim.’” He had deferred the loans when his wife was hospitalized after a serious car accident and when he had cancer surgery. He continues to work full time as a custodial supervisor, though he plans to retire in May 2015 because of some physical limitations. At that point, he wants to find part-time work. He was clearly worried about his debt, though.

He gave us the balances of his loans, down to the penny. And though he knew exactly how much he owes, he hadn’t a clue about how he could possibly repay it. He wondered if there’s some way he can get lower interest rates — he has several loans, $37K total, with rates of 8% or 8.5%. (The rest of the loans have much lower interest rates.)

We spoke with Joshua Cohen, “The Student Loan Lawyer,” on Strine’s behalf. The good news is Strine probably need not worry about unaffordable payments or high interest rates. Because he has federal Parent PLUS loans, he — and not his children — is on the hook for the debts, Cohen noted. And although Strine won’t be able to get lower interest rates, it won’t matter, said Cohen.

That’s because Strine’s $28K income should make him eligible for a repayment plan based on the borrower’s income. Cohen said a family of two with an adjusted gross income (reported on federal tax return) of $28K would have a monthly payment of $205. However, when we reached out to Strine, he told us his most recent tax return had an AGI well under $20K. That would result in a payment of just $71 per month, and possibly even less, Cohen said.

“The plan I’m talking about is called Income-Contingent Repayment (ICR) — the only income-based plan allowed for Parent PLUS loans,” Cohen wrote in an email. He had more good news for Strine: “It comes with 25-year forgiveness, which means if you live to 90, your loans will be forgiven. If you pass away before then, the loan goes with you — it will not attach to your estate.

“Bottom line, you can survive this loan,” Cohen said. “It would have been nice if the servicer gave you this information. After all, that’s what us taxpayers are paying for — to help borrowers stay out of default and continue paying.”

Student loans have an impact on your credit, for better or worse. Making arrangements with the servicer for payments you can afford can help you stay afloat financially, as well as help your credit standing — by making the payments on time and as agreed. You can see how your student loans are affecting your credit for free on Credit.com, where you can get two free scores updated monthly.

More from Credit.com

This article originally appeared on Credit.com.

MONEY 401(k)s

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

Employers are providing more and better choices and driving down fees as they come to grips with their place in the retirement equation.

As 401(k) plans have emerged as most people’s primary retirement savings account, the employers who sponsor these plans generally have beefed up investment choices and driven down fees, new research shows. Small plans remain the most inefficient by a wide margin.

The typical 401(k) plan has 25 investment options, up from 20 in 2006, and the average worker in a plan has annual plan costs equal to 0.53% of assets, down from 0.65% of assets in 2009, according to a study from BrightScope and the Investment Company Institute.

These findings suggest that after years of dumping traditional pensions and trying to avoid the role of retirement planner for workers, companies have on some level accepted their critical place in the retirement security equation. Change has come slowly. But the BrightScope/ICI study shows positive momentum in key areas.

Expense ratios are down by every measure: total plan cost, average participant cost, and average cost of invested dollars. Volumes of research show that costs are a key variable in long-term rates of return. That is why low-cost index funds, most often championed by Vanguard’s John Bogle, have become investor favorites and 401(k) plan staples. These funds account for a quarter of all 401(k) plan assets, the study shows.

Meanwhile, investment options have increased in a way that makes sense. The broadened choice is largely the result of adding target-date mutual funds, possibly the most innovative financial product for individuals in the past 20 years. These are one-stop investments that provide diversification and automatically shift to a more conservative asset allocation as you near retirement. Nearly 70% of plans now offer them, up from less than 30% in 2006, and in many plans they are the default option.

For those in small plans, though, the news isn’t so good. Expenses remain high: In plans with fewer than $1 million in assets, the average expense ratio for domestic equity mutual funds is 0.95%, versus 0.48% for plans with more than $1 billion in assets. Small plans are also far less likely to include an employer matching contribution: Just 75% of plans with fewer than $10 million in assets provide a match, vs. 97% of plans with more than $100 million in assets. Small plans are also less likely to automatically enroll new employees.

The most common match is 50 cents on the dollar up to 6% of annual pay, followed closely by a dollar-for-dollar match on up to 6% of pay.

One area with clear room for improvement is the default contribution rate in plans that automatically enroll new hires. Nearly 60% of these plans set the rate at just 3% of pay and 14% set it at 2% of pay. Only 12% had a default contribution rate of at least 5% of pay. Most advisers say you should contribute at least enough to get the full company match, which is often 6% of pay, and contribute even more if possible. Your savings goal, including the company match, should be 10% to 15% of pay.

The venerable 401(k) still has many problems as a primary retirement savings vehicle. Too many people don’t contribute enough, don’t diversify, and don’t repay loans from the plans; too many take early distributions and try to time the market. 401(k) plans don’t readily provide guaranteed retirement income, though that is changing, and because you don’t know how long you’ll live you have to err on the conservative side and save like crazy.

But we are headed the right direction, which is good, because for better or worse the 401(k) is how America saves.

Get answers to your 401(k) questions in the Ultimate Retirement Guide:
How Should I Invest My 401(k)?
Which Is Better for Me, Roth or Regular?
What If I Need My 401(k) Money Before I Retire?

 

MONEY Retirement

Don’t Choose These 10 Cities If You Want to Retire Comfortably

These spots fall short when it comes to housing costs, taxes, health care, and activities.

Retirement is a time to enjoy hobbies, move a little slower in daily life, travel, and after decades of hard work, just rest. All of which is tough if you pick the wrong retirement city. (See also: 10 Unexpected Things You Should Consider When Picking Where You Retire)

When looking at locations, you’ll generally want to weigh six categories: cost of living, housing costs, taxes, the health care system, activities for seniors, and, yes, the weather. And with those in mind, you’ll likely want to steer clear of these 10 cities that fall short in one or two or more of those categories.

 

  • 10. Providence, RI

    Providence Performing Arts Center in Providence, Rhode Island, USA.
    Sean Pavone—Alamy

    Across numerous rating scales out there, Providence almost always appears at the top of the worst lists. This is due to a high cost of living, high tax rates, and one of the highest unemployment rates in the nation (currently at a rate of 10% for the city and 3rd highest for the entire state.) If you are hoping to supplement your income or kill some boredom during your retired years, finding a part-time job in Providence may be impossible.

  • 9. Washington, D.C.

    Georgetown, Washington, DC
    Glowimages—Getty Images

    In addition to brutally cold winters, economics continues to be a problem for our nation’s capital, with the numbers of those under the poverty line increasing — despite a rise in median income. With seniors living on a fixed income, the high cost of real estate can also cause concern.

  • 8. Philadelphia, PA

    House of James Madison on Spruce Street.
    Franz Marc Frei—Getty Images/Lonely Planet Images

    While it’s not as expensive to live in as New York City, there are some issues that may keep the 65 and older crowd away from the city of brotherly love. A higher-than-average sales tax and poor air quality may be of concern to retirees. Throw in the high rate of crime (it ranks 5th nationwide), and you have a few good reasons to shop around for your retirement abode.

  • 7. Chicago, IL

    El train crossing North Clark Street, The Loop, Chicago, Illinois, United States of America, North America
    Amanda Hall—Getty Images/Robert Harding Worl

    Illinois as a whole gets a low approval rating from its own residents, with one in four saying the state is the worst place to live. Why? It could possibly be because of the high income tax hikes and lower bond rates, both signs of a troubled economy. Add in the fact that many Chicago residents have decided to leave the city altogether, making Chi-town the 6th most-abandoned large city in the U.S. and it’s a less appealing option to live out the rest of your years.

  • 6. New York, NY

    Brownstone townhouses, Brooklyn, New York City
    Antenna—Getty Images

    The Big Apple requires a big budget, as real estate is pricey and hard to afford on a fixed income. By taking your current retirement budget and adjusting it to the high cost of living for any of the more popular parts of NYC via this calculator, you can see that the real estate isn’t the only thing that will cost you. Even retirees who own their own homes will feel the pinch of higher utility bills and transportation fees.

  • 5. Bridgeport, CT

    Bridgeport, CT
    iStock

    High taxes are a major concern for retirees, and some states tax retirement income much more than other states. (Florida’s low rate is what makes it one of the most desirable states for retirees, for example.) But Connecticut is one of those states that taxes both Social Security and pension income. Bridgeport, more specifically, has expensive housing costs and even more expensive health care costs. Assisted living facilities in this area of the country can charge over over $400 a day — almost twice the national average for long-term care, which will deplete your nest egg very quickly should you require assistance at some point.

  • 4. Louisville, KY

    Louisville, KY
    GoToLouisville

    The low cost of living, modest housing costs, and picturesque mountains may make it appear to be a good choice for retirement, but Louisville has been named as the “worst place for allergy sufferers to live,” making it an easy destination to avoid by retirees with respiratory or other health issues.

  • 3. Oklahoma City, OK

    Downtown Oklahoma City skyline, Oklahoma.
    Gary Cralle—Getty Images Healthcare is a concern for all seniors, and it will be a real concern if you retire to Oklahoma, which ranks among one of the worst in the country for health care (trailed only by West Virginia). Crime is also a problem here, with the city ranking 7th in the nation for crime among large cities.

    Healthcare is a concern for all seniors, and it will be a real concern if you retire to Oklahoma, which ranks among one of the worst in the country for health care (trailed only by West Virginia). Crime is also a problem here, with the city ranking 7th in the nation for crime among large cities.

  • 2. Honolulu, HI

    Honolulu, HI
    iStock

    While the location is beautiful and the weather gorgeous year round, Honolulu will require you to have quite a large nest egg. According to a recent study done by WalletHub, cost of living in the city are among the highest in the country. It’s also very expensive to travel to and from Hawaii, making family gatherings more difficult.

  • 1. San Francisco, CA

    San Francisco, CA
    Scott Chernis

    The weather is very mild — it doesn’t get hot in the summer and winters are usually rainy. However, the cost of housing in this area is so high that most retirees are not going to be able to find it within their budget. Retirement income is taxed heavily in the state of California, unlike many other states. The cost of living is also very high. In fact, Kiplinger ranked California as the worst state to retire.

     

    Read more articles from Wise Bread:

    -The Five Types of People Who Never Retire (Are You One of Them?)
    Book review: Cash-Rich Retirement
    -Tiny Nestegg? Retire abroad!

MONEY IRA

How to Use Your Roth IRA to Buy Foreign Stocks

Investing illustration
Robert A. Di Ieso, Jr.

Q: I would like to invest in foreign stocks and LLPs within my Roth IRA. Do I need to file any special forms at the end of the year? Are there any type of investments within the Roth that would not require a special filing? — Tom

A: Depending on what’s available in your Roth IRA or whether you have a self-directed Roth, there are any number of investments you can own beyond the usual stocks, bonds and funds. But just because you can, doesn’t mean you should.

Let’s start with the question of foreign securities. Assuming you’re able to buy stocks listed on foreign exchanges in your Roth — policies vary from brokerage to brokerage — you will need to file IRS Form 8938 to report these foreign assets, says David Lyon, CEO of Main Street Financial in Chicago.

One way to avoid having to file this paper work, among other headaches, is to stick with foreign stocks that are available to U.S. investors as American Depository Receipts, or ADRs. Most of the largest foreign companies have ADRs, which trade on U.S. exchanges and in U.S. dollars, and don’t require the additional paperwork, though there may be other tax considerations.

As always, consider how any such holdings fit into the bigger picture of your portfolio. By all means, you want exposure abroad, but buying individual securities on your own, a la carte, may not yield the best results over the long run.

To wit, a much easier way to gain exposure to foreign companies is via an exchange-traded fund or mutual fund that invests in foreign stocks on your behalf, says Lyon. For broad market exposure, he likes the Vanguard FTSE All-World ex-U.S. ETF (ticker: VEU). As the name indicates, this low-cost fund gives you broad, diversified global exposure, ranging from the developed markets of Europe and Japan to emerging markets in Asia, Latin America and the Middle East.

If you’re looking for a more targeted approach, you can find ETFs that specialize in just one sector of the global economy, or one region of the world, or even one country.

Similarly, if you hold a limited liability partnership (LLP) in your Roth IRA you will need to fill out Form 990-T for unrelated business taxable income.

That said, you probably don’t want to invest Roth IRA assets in an LLP. The reason: “Essentially you’ll be taxed twice,” says Lyon. In addition to first paying tax on the contributions you make to the Roth, he says, you will be taxed on LLP income above $1,000 a year. He adds: “Investors are typically better off focusing their investable assets in traditional investments that allow them to take full advantage of the tax deferred growth and tax free distributions.”

 

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