Last But Not Least

The prevailing sentiment among financial planners for several decades now has been that inflation will run at normal levels over time and that investment returns will outpace the erosion of buying power caused by inflation.

But for those at or near retirement, what was supposed to occur has not. Investment returns over the last decade for the S&P 500 have been just over 3%. Inflation for real people is 6% year over year. Even those that have planned and saved diligently over that period did not plan for such low returns or such high inflation. To be sure the issues facing seniors today are decidedly more complex.

The commonly accepted norms may play out from generation to generation, but today's retirees unfortunately have to deal with the reality that many will not have enough income generation to last through their retirement lives.

This generation can count on Social Security but for 2008, social security payments rose 2.3 percent. Let's see how far that goes when your air conditioning bill arrives. That sinking feeling many will feel is the realization that thay are woefully under prepared even though they saved and invested like they were supposed to do.

Fact: Americans 65 and older represent the fastest growing group seeking bankruptcy protection.

Fact: In the last 15 years, among households 65 and older, the average amount of credit card debt more that doubled.

Fact: Median amount of mortgage debt for households 55 and older rose 63% in the last 15 years.

Fact: Debt is at an all time high and savings is at an all time low.

Unfortunately, in some cases, hard decision will made. Will I eat well? or sleep well.

Outliving your money is not an option.

So what can you do to help extend the income producing life of your assets? There are several things you can do, basic things that can help. Together, they will add up in your favor.

1) Instead of building debt for fear of liquidating assets, begin a systematic withdrawal from your non-income producing mutual funds. I would rather see you keep the high interest off the books which will eat you alive overtime. Your returns through investments may not offset the high cost of debt.

2) If you have individual stock investments, make sure they pay a dividend so you can receive some type of return and income stream while you wait out a bear market.

3) Use tax-efficient withdrawal strategies from your accounts. Make sure you think of the tax consequences of your trading activity. Should that be purchased in my IRA or personal account? Since my tax bracket is low this year, would it be wise to take a larger withdrawal from my IRA? Have I taken advantage of loses to minimize my tax bite? Tactical withdrawal strategies can have the greatest short-term and longer-term effect on your after-tax income and total net worth.

4) Ladder your fixed income investments. Invest some in short-term and some longer-term and some in between. Spreading your investments this way may increase your income stream.

5) Look into guaranteed lifetime income producing annuities. The annuities of today are not as restrictive or as expensive as those in the past and it may help you sleep at night. Don't listen to what others say, examine the benefits and costs for yourself and decide if it is right for you and your family.

Every retiree needs to take a hard look at their assets and understand the risks their asset allocation may have on their income stream later in life. This is not the time to put your head in the sand. Educate yourself and seek help if you need it. If you examine your options now instead of waiting, it could be the difference between living the retirement you dreamed of or living in your son-in-laws basement.

For more information about how to create retirement income and easy to use strategies and links to useful information please visit www.livelongliverich.com

Visit http://www.livelongliverich.com for the latest information on planning your retirement.

AP - Oil prices shot up Wednesday, jumping as much as $5 a barrel and halting a dramatic two-week slide after the government reported a surprise drop in gasoline supplies.

Saving for retirement begins early, and often we can overlook important steps unknowingly. Here's a quick guide for making sure you're getting the most out of your retirement savings.

Analyze your needs sooner than later.

The step most people skip is figuring out just how much money they'll need in retirement. Try to consider your lifestyle. What are you expecting your retirement to be like? International travel? A second home? These are all things to consider when building your savings. You should also keep in mind that, if present trends hold, you may need to pay for much of your own health care because many employers are cutting or reducing the amount of money they spend on retiree health coverage. As you analyze your needs, take into consideration any other resources you may have to tap, such as savings outside a 401(k) or real estate when you do retire.

Don't neglect your 401(k).

The best place to start when it comes to putting money away for retirement is your 401(k). After all, your company's 401(k) retirement plan offers you one thing you'll get few other places: free money. For every dollar the average worker puts into their 401(k), their employer contributes 50 cents.

Many people don't contribute, or don't contribute as much as they could. Be sure to add to your 401(k) as often as possible. For those who do, consider boosting your contribution to the max. The maximum number you can add per year to your retirement savings increases at the rate of inflation. Check with your employee benefits office to make sure you're getting the benefit of your entire match. Government rules try to make sure that retirement programs aren't being run for the benefit of top execs.

Get the allocation right.

Whether you're saving in a 401(k) for the first time, or reassessing your current savings, you'll want to make sure the mix of investments you have is right for your age and the amount of risk you're willing to take on.

Remember, simply being diversified enough has a bigger impact on your returns than which funds you choose. Take time to examine the list of funds offered in your companies plan and toss out the ones that don't fit your asset allocation. Keep in mind that your investment options may be limited, depending on what your employer is offering. If you have a question, check with your Human Resources department. Keep in mind that stellar short-term performance alone isn't a reason to buy.

Try keeping it simple with a six-part approach: One large-cap fund, one mid-cap, a small-cap, an international fund, a bond fund, and a money market fund. For the more advanced investor with multiple savings goals, a well-diversified portfolio typically consists of owning 15 to 20 funds.

Put your finances on automatic.

If your problem is that you find it difficult sticking to a savings plan, then your best bet is to go automatic. This way your employer will take the money out of your paycheck before you have a chance to spend it, and put it directly into your 401(k).

If you don't have a savings plan at work, or you have the ability to save more money than your 401(k) allows, consider investing elsewhere. You can open up an account with a bank or brokerage and instruct them to automatically debit the funds from your bank account.

And if you feel comfortable with this, you may just feel comfortable automating other areas of your financial life such as credit card and utility payments. Log onto your bank's Web site for details.

Jerry Warner writes general finance and loan articles for the Bad Credit Loans Online website at http://www.badcreditloansonline.co.uk

AP - Nearly 50,000 Iraqi police and soldiers were involved in a U.S.-backed operation against al-Qaida in Iraq in one of its last major strongholds near the capital, a senior provincial official said Wednesday.