of Personal Financial
Advisors, 1-888-333-665 9;
and planning worksheets,
Tiffany Bass Bukow’s e-book, Live Your
Life at Half the Price, can be downloaded at www.MsMoney.com/ebook.
Consumption smoothing software,
developed by Laurence Kotlikoff,
is at www.esplanner.com.
The Costco Connection
Costco offers a suite of personal-finance services for members, including online investing,
insurance, mortgage and refinancing, home
equity loans, real estate agent services, auto
loans, money market accounts, and credit
reports, scores and monitoring. For details,
go to costco.com and click on “Services,” or
look for brochures near the service counter
in your local warehouse.
Tips for all ages
The number-one mistake people make
with money is that they don’t bother. They
wander through life like Gomer Pyle on
Valium and wake up at retirement and
wonder where all their money went. If
one good thing has come out of all the
recession talk it’s that people are starting
to pay attention.
If you are intentional and proactive with
your money you can ride out whatever happens to the economy. Do a written budget
every month, save for emergencies, knock
out your debt and invest for retirement.
These are common-sense steps, but
if you start doing them you can win with
your money at any age.—Dave Ramsey
Eliminate credit-card debt
Set up an account with an automatic
bill-paying system so you don’t miss
payments (and risk having your interest
rate increase). Because budgeting rarely
works, directly deposit part of your weekly
check into this account and stop using
credit until your debt is paid off.
—Tiffany Bass Bukow
Will you outlive
By Liz Pulliam Weston
RUNNING OUT OF CASH before you run
out of years has long been a key concern for
retirees. But worries about outliving a nest
egg have grown more acute lately, thanks to
a volatile stock market, plunging home
prices and mounting inflation.
Such concerns have led to a sharp increase
in people delaying retirement or returning to
work in their later years, economists say.
There were an additional 1. 2 million workers
age 55 and older this spring compared to a
year earlier, according to U.S. Labor Department figures, including 212,000 more folks
65 and older.
Here’s a game plan to consider:
•It’s OK to spend your principal. Some
retirees are overly concerned about leaving
their kids an inheritance, while others
believe that they should never touch their
capital and must spend only the interest.
In reality, most retirees will have to spend
down their principal over time; the important thing is not to do so too fast.
•Know what’s sustainable. You’re unlikely to
run out of money if your withdrawal rate
from an investment portfolio is between 3
and 5 percent. If you’re tapping much
Health Savings Accounts
Health Savings Accounts (HSAs) p rovide
a terrific way to effectively slash your health-care costs. As with many types of retirement
accounts, when you contribute to an HSA you
gain an upfront tax break as the amount contributed reduces your taxable income. Also,
the money then compounds free of tax over
time. If you use the funds to pay health-care
costs, withdrawals are also free of tax. There
are no retirement accounts that offer this triple tax-free feature.—Eric Tyson
Smoothing the ride
Consumption smoothing is a way to see
how different decisions affect your lifetime
standard of living. Using software or working with a professional, you can compare
decisions such as downsizing, moving to
a different state, delaying Social Security
benefits, investing in a Roth IRA instead
of an IRA, paying a mortgage off quickly
or slowly, etc. to see what decisions
make the most financial sense.
Because it focuses on your ability
to sustain a standard of living, consumption smoothing gives you a
direct window on how you use your
money throughout your lifetime.
—Laurence J. Kotlikoff
more than that, you risk running out of
•Try to keep a lid on health-care costs.
Medical bills can quickly wipe out your
savings, so try to eat right, exercise, manage stress and eliminate unhealthy habits.
•Get a review from a fee-only financial
planner. An objective review of your
finances could save your retirement. Fee-only planners don’t accept commissions;
they’re compensated only by fees paid by
their clients. C
Know the score
Credit scores have never been more
important. Here are tips for getting yours
into top shape:
•Pay down your debt and use credit cards
lightly. Don’t use more than 30 percent of
your available credit limits at any given
time; even better, get your credit utilization below 10 percent.
•Don’t let disputes wind up in collections.
Medical providers, phone companies and
other businesses are quick to turn
accounts over to collection agencies,
which can devastate your scores.
•Apply for credit sparingly. Avoid hits to
your scores: Don’t apply for other credit
accounts while you’re in the market for a
mortgage or car loan.—Liz Pulliam Weston