Retirement at Risk (page 3 of 3)

Worry is the Rule

Ed and Sherry Beltram worry about Dustin and his brother, Cody, 30. Knowing their children haven't been able to put money aside, in 2001 the Beltrams bought a life insurance policy that will pay the boys a combined $1.5 million when Ed and Sherry die. The annual premium: $21,000.

To afford this and other expenses, the Beltrams budget carefully. They used to love going out to dinner. But when Ed turned 59 last fall, they celebrated with lunch instead at The Cliff House, a four-star inn and restaurant in nearby Manitou Springs. (Lunchtime entrées were about half the price.) They need a new car, but can't afford one right now. "We were hoping for retirement to be a time of comfort and ease," says Sherry. "Not to live high, but not have to worry about what would happen next month or next year."

Worry is the rule in the Beltram family. When it comes to his retirement, Dustin knows he's on his own. "I don't really expect Social Security to be there," he says. "And especially after seeing what happened to my dad, I know I can't count on a company to take care of us." Once the baby is born and the family pays off some of their debt, Dustin hopes to come up with a retirement strategy. For now, his plan is simple: "I'm basically expecting to work until the day I die."



Pension Primer: What you need to know
"Defined contribution" plans -- such as 401(k)s -- that shift most of the responsibility for investing retirement savings to employees are the norm now. But some 23 million U.S. workers and retirees still count on income from traditional, or "defined benefit," plans like the one under which Lucent pays Ed Beltram a fixed monthly sum. If such a plan is available to you, determine how long you must work before you're eligible for vesting in the plan and when you can take those benefits. Keep track of your benefits via two documents available from your employer: the "summary plan description" and "individual benefit statement." You should also review the plan's annual financial statements.

Companies can't cut or end benefits you've already earned under a defined benefit plan, but they can revise the rules for benefits earned in the future. They can also close a plan entirely. To learn more, go to Pension Rights Center, Pension Benefits Guarantee Center, or try a Labor Department site.





All Eyes on IRAs
If you have retirement savings in an IRA -- or might roll 401(k) or pension savings into an IRA -- pay attention to a case before the U.S. Supreme Court.

At issue: Should IRAs be shielded in a bankruptcy as other forms of retirement funds (pensions, 401(k)s, Social Security) are? The question turns on whether IRAs are savings accounts, not protected in bankruptcy, or retirement accounts, which are. IRAs fall into a gray area since they allow withdrawals (subject to tax and a penalty) before age 59 ½. The stakes are high: Over 45 million households have some $3 trillion in IRAs -- and personal bankruptcies have reached record levels.

The case, which the court should rule on by July, involves an Arkansas couple who put $55,000 in pension and 401(k) funds into an IRA and later declared bankruptcy. The justices will decide if IRAs deserve equal protection.

From Reader's Digest - February 2005

 

• • Budgeting
• • Retirement
• • Get Out of Debt
• • Ways to Save

• Retirement Cash: Will You Have Enough?
• It's never too early to start saving for your dream retirement. Take a look at the smart money moves you can make.
• 
• What Will My Expenses Be After I Retire?
• Project your post-retirement living expenses and taxes.
• 
• What Will My Income Be After I Retire?
• Compute your post-retirement fixed, taxable, and tax-deferred income.
• 
• How to Retire When You Want To
• You want to get out of that cubicle, but you think you're too young? Follow these tips to your dream retirement.
• 
• Protect Your Nest
• Nine fail-proof ways to ensure your family's financial well-being.
• 
• Ten 401(k) Warning Signs
• 

“ Tune out noise. Tote an MP3 player while holiday shopping and listen to calming songs to drown out noisy crowds. ”

• See All Tips

We had just received the exciting news that our daughter was pregnant with her first child. So we decided to order a gift from a maternity store near her called Great Expectations. We checked the phone book and located a Great Expectations in our town. But when my wife went to the address, all she found was a storefront office. "Where are the clothes?" she asked the man sitting behind the front desk.With a very puzzled look on his face, the man responded, "Clothes?""Maternity clothes.""I think you're rushing things," he said. "This is a dating service."

-- Tom Smith