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Your retirement checklist,
by the decade
By Suze Orman
BASED ON THE questions volleyed to me by
Costco Connection readers, issues related to retirement are what’s front and center for most of them.
So for this column I am going to break with my
standard Q&A format and share my retirement do’s
traded funds (ETFs). Plenty of ETFs charge an
annual expense ratio of less than 0.25 percent a year.
That can be a full percentage point less than what
many mutual funds inside 401(k)s charge. Saving
1 percent or so a year can translate into a retirement
account worth tens of thousands of dollars more
Suze will answer
selected questions in
this bimonthly column.
She regrets that
cannot be answered
Suze Orman’s TV
show airs Saturday
nights on CNBC. Suze
can be contacted at
In your 20s and 30s
Don’t waste time. Right now you possess one of
the biggest investment advantages there is: time.
Money you save today will be able to compound for
decades. Delay saving until you’re in your 40s and
you’ve squandered your time advantage and will
have to save much more than if you diligently start
saving right now.
Pocket the maximum match. If your employer
offers a matching contribution to a 401(k) or other
retirement plan, you are nuts to pass it up. That’s free
money. Always contribute enough to qualify for the
maximum employer match. (And see my next tip
for what to do after that.) If your employer offers a
Roth 401(k), check it out: You don’t get a tax break
on your contributions, but all withdrawals in retirement will be 100 percent tax free.
Fund a Roth IRA. After you’ve contributed
enough to your company plan to get the maximum
match, or if there’s no match, switch your focus to
funding a Roth IRA. This year anyone under the age
of 50 can contribute up to $5,500. Set up an automatic monthly or quarterly transfer from your
checking account into a Roth to ensure you follow
through on your good intentions.
Consider accelerating your mortgage payments. If you plan to live in your current home
through retirement, a smart strategy is to get your
mortgage paid off before you stop working. It’s one
major monthly expense you will be so glad you
don’t have to worry about once you are retired.
No early withdrawals. Reducing your retirement assets in your 50s can be very dangerous if you
live well into your 80s or 90s. And that’s what you
should be planning for, given our expanding life
expectancies: Half of today’s 65-year-olds will be
alive (and needing retirement income) into their
mid-80s, and beyond.
Size up long-term-care (LTC) insurance. I encourage everyone to look into LTC insurance, and,
if you’re interested, to purchase it sooner rather than
later. Wait until your late 50s or 60s and you might
have a preexisting condition that precludes you
from getting a policy, or you may find the premiums
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In your 40s
No kidding around. For those of you with
school-age kids, your 40s are typically when you
start sweating how you’ll pay for their college. If
you truly love your kids, their college planning
should take a backseat to your retirement planning: If you aren’t on track with your retirement
savings, you are not to save a penny for the kids’
college costs. Your kids can borrow for college;
you can’t borrow for retirement.
Keep the pedal to the metal. By now you
should be depositing a minimum of 10 percent of
your annual income into retirement accounts. If
you didn’t start saving in your 20s, push yourself to
get to 15 percent.
Roll over your old 401(k)s. I bet you’ve changed
jobs once or twice, but your 401(k) is still back at
the old job. That can be a costly mistake. You can
likely reduce your investment expenses by doing
what is called a direct 401(k) rollover: Move your
In your 60s
Play the waiting game and get a Social Security
check that is worth 76 percent more. When you turn
62 you are eligible to start collecting your Social
Security retirement check. But you need to understand that the longer you wait to start, the bigger
your benefit will be. Wait until what the Social
Security folks call your full retirement age (
somewhere between age 66 and 67, depending on your
year of birth) and your benefit will be 25 to 30 percent higher than if you start at age 62. And if you
can manage to wait until age 70 to claim your benefit, it will be 76 percent higher than at age 62. Sure,
you could take the benefit early and invest the
money, but you’ll have to take on plenty of risk to
earn those high returns. Social Security’s higher
benefits for delaying are 100 percent guaranteed.
One smart strategy for married couples to consider: Have the higher earner delay while the lower
earner can claim earlier to generate income. You can
learn more about claiming strategies at the AARP
www.aarp.org; search “claiming strategies”).
AARP also offers an on-line calculator to help you
estimate your Social Security benefits, under “Social