Too many balls to juggle?
By Eric Tyson
COSTCO HAS five sets of
books to give away. Each set
includes The Total Money
Makeover, by Dave
Ramsey; Spend ’Til The
End, by Laurence Kotlikoff
and Scott Burns; Let’s Get
Real About Money!, by Eric
Tyson; and Easy Money, by
Liz Pulliam Weston. To
enter, print your name,
address and daytime phone
number on a postcard or
letter and send it to:
Personal Finance, The
P.O. Box 34088, Seattle, WA
98124-1088. Or send an
e-mail to giveaway@costco.
com, with “Personal
Finance” in the subject line.
No purchase is necessary. Open to legal
residents of the U. S. (except Puerto Rico)
who are age 18 or older at the time of
entry and who are current Costco members. One entry per household. Entries
must be received or postmarked by July
1, 2008. Winners will be randomly selected and notified by mail on or before
August 1, 2008. The value of the prize is
$88.97. Void where prohibited. Winners
are responsible for all applicable federal,
state and local taxes. Odds of winning
depend on the number of eligible entries
received. Employees of Costco, Thomas
Nelson, Simon & Schuster or F T Press
and their families are not eligible.
BY THEIR 40s and early 50s, most folks find themselves juggling many different balls financially and
personally. Here are some key issues to keep in mind
during these important years.
If you’re behind on your retirement goals, you
can make up for lost time. Complete a retirement-planning worksheet that tells you where you
stand. If you find that you need to save
more per month to meet your retirement goals, you can:
•Question your spending. There
are almost certainly expenses
you can cut down without
feeling too much pain.
•Be more realistic about your
retirement age—retire later.
You’ll earn and save for more
years and spend your nest egg
over fewer years.
•Use your home equity in retirement.
You can sell your home and move to a
lower-cost property, or rent, or consider
a reverse mortgage.
• Turn a hobby into supplemental retirement
income. Pick something you enjoy and are
good at, develop a business plan and get
smart about marketing. Sock your profits
away in retirement accounts.
Be smart about new
investment vehicles. Mutual
funds aren’t the only game in
town when it comes to hiring a professional money
manager, but they are still the best choice for most
investors. Alternatives increasingly promoted to
individual investors include exchange-traded funds,
hedge funds and managed accounts.
Also take advantage of education
tax breaks. Money invested in
Education Savings Accounts (ESAs)
and in Section 529 plans is sheltered
from taxation and is not taxed
upon withdrawal so long as the
money is used to pay for eligible
education expenses. Subject to eligibility requirements, you may
contribute up to $2,000 annually to
ESAs. 529 plans allow you to sock
away much more. (Note: These
accounts may have an adverse affect on
Not feeling in control of your financial
destiny takes an emotional toll. When you
don’t master your money, you experience
increased stress and anxiety. Put yourself
in charge of your finances and you are certain to have greater peace of mind. C
The sandwich generation
By Laurence J. Kotlikof
AGE 55 –
I’M WITH YOU. I’m 57, face two college tuitions,
spend time and money helping an older parent
and worry, particularly of late, where my investments are heading. But I’m also an economist with
all the answers, right? Wrong. But I can suggest a
• The goal is not to work like crazy, save
every penny and drop dead at 65. So forget the astronomical saving targets your
planner is setting and the high-fee, high-risk securities he’s peddling. The goal is a
stable living standard.
•Maximize your spending power. Get paid
what you’re worth. Move to a low-tax
state. Buy inflation-indexed annuities.
Move in together (two live cheaper than
one). Fire your broker, and buy low-cost
index funds. And pay off your mortgage—
the safest and cheapest way to invest.
•Beat Uncle Sam at his own game. Take
Social Security at age 70, use Roth savings
accounts to avoid tax hikes and time your
401(k) retirement account withdrawals to
•Inflation is coming! Dump your long-term
bonds, and make sure your mortgage is fixed.
•Price your passions. Understand the living-standard costs of retiring early, redecorating
your house, buying your dream boat, getting
divorced, etc. Then make the lifestyle choices
with the biggest bang for the buck.
• Protect your living standard. Switch to a low-stress
job that lasts longer. Don’t count on dying on
time; plan to live and spend to 100. Make sure you
have enough life insurance to sustain survivors’
living standards. Plan for huge Medicare premiums and out-of-pocket medical costs. Take a careful look at long-term-care policies. If you invest
aggressively, spend defensively. Stocks can be very
risky, as we’ve seen. And holding stocks longer
does not guarantee higher returns. Treasury infla-tion-protected bonds can help you play it safe.
•Focus on what really counts—your overall living-standard risk, not your portfolio risk.
•Ignore conventional financial advice. It’s geared
to pick your pocket and is the direct opposite of
what economics recommends. C