Week 11 - When to retire?

Week of April 9, 2009

Wall Street Journal did a survey of people's retirement expectations, and only 13% think they have enough to live comfortably during retirment. We can apply what we've learned in the finance chapter to planning for retirement. We could use present value to determine how much we will need on the day of retirement to live comfortable for an average life span, and we can use present value to determine how much we need to save each year until then to make that much for retirement. Also, we could use the various capital investment decision making tools to determine which investements will get us the best return for retirement. Things like NPV, and IRR can apply to various mutual funds and other investment ventures.

The only problem, according to the WSJ, is that people are not adjusting the amount they put into their retirement funds to compensate for the money lost recently in the stock market. Instead, their plan is to just retire later. The average age is up 3 years to 65. Although this concept works according to the laws of math, it is not necessarily the best solution. Another depressing solution is that more and more people plan to work some during retirement.
http://online.wsj.com/article/SB123967208769515763.html

Wall Street Journal also has a very interesting video about taking your investment broker to arbitration....
http://online.wsj.com/video/lost-money-take-your-broker-to-arbitration/3BD21C1E-00E1-4B65-99D9-27E4D6582E47.html
That may be another option for retirees to recover some of their lost funds.

However, some people are having trouble making the same contributions to retirement, so in the future we could see the average retirement age go up even more, and a higher percentage of people still working in retirement. Looks like Wal Mart will have no shortage of greeters :)

But advisors recommend thinking of your retirement contribution like you do your rent. It is something you have to do to survive...so cut out the cable, internet and cell phone first. Skipping contributions causing you to miss out on employer matches as well as the interest your money could have earned during that time.
http://blogs.wsj.com/wallet/2009/04/14/extreme-finance-cutting-out-401k-contributions/?mod=rss_WSJBlog?mod=personalFinance